EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of October 31, 2013 by Solar United Network, Inc., a California
corporation ("SUN"), which has a mailing address at 0000 Xxxx Xxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx 00000, Xxxx Xxxxxxxxxx, an individual
shareholder holding 30% of the outstanding shares of SUN, Xxx Xxxxx, an
individual shareholder holding 30% of the outstanding shares of SUN, Xxxxxxx
Xxxxx, an individual shareholder holding 20% of the outstanding shares of SUN,
and Xxxxxxx Podnesbesnyy, an individual shareholder holding 20% of the
outstanding shares of SUN (collectively, the "Sellers" or "SUN Shareholders"),
and Solar3D, Inc., a Delaware corporation (the "Buyer" or "Company"), with
respect to the following facts:
R E C I T A L S
A. Sellers own 100% of the total issued and outstanding capital
stock of SUN.
B. SUN is engaged in the business of the sale, installation and
maintenance of commercial and residential solar systems.
C. The Company desires to acquire from Sellers and Sellers desire
to sell to the Company 100% of the total issued and
outstanding stock of SUN in consideration for $2,794,500,
$1,044,500 of which is payable in cash at the Closing, as
defined in Section 4.1 of this Agreement, and $1,750,000 of
which is payable in installments over a period of five years
after the Closing pursuant to convertible promissory notes
bearing simple interest the rate of 4% per annum.
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged by the parties to this Agreement,
and in light of the above recitals to this Agreement, the parties to this
Agreement hereby agree as follows:
1. SALE AND PURCHASE.
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1.1 SALE AND PURCHASE OF STOCK. In consideration for the Purchase Price
(as defined in Section 1.2 of this Agreement) and the other covenants of the
Company in this Agreement, Sellers agree to sell to the Buyer, and the Buyer
agrees to purchase from Sellers, on the Closing Date (as defined in Section 4.1
of this Agreement) all issued and outstanding shares of the common stock of SUN,
representing 100% of the total issued and outstanding capital stock and
ownership interest in SUN (the "SUN Stock").
1.2 PURCHASE PRICE. As consideration for the sale by Sellers of the
shares of SUN Stock to the Company on the Closing Date, the Company will pay to
Sellers $2,794,500 (the "Purchase Price"), $1,044,500 of which is payable in
cash at the Closing, as defined in Section 4.1 of this Agreement (the "Cash
Payment"), and $1,750,000 of which is payable in installments over a period of
five years after the Closing Date, as defined in Section 4.1 of this Agreement,
pursuant to convertible promissory notes bearing simple interest the rate of 4%
per annum (the "Note" or collectively, the "Notes") in the form of the
promissory notes attached to this Agreement as Exhibit A. The Notes will be
unsecured. The Cash Payment will be made to Sellers by wire transfer or cashiers
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or certified check made payable to the Sellers at the Closing. Furthermore, net
working capital will be evaluated and adjusted as outlined in Section 5.7v. At
the Closing, the Buyer will deliver an executed Note to each Seller in the
appropriate original outstanding principal amount.
2. COVENANT TO REMAIN EMPLOYEES OF SUN.
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As an inducement to Buyer to enter into and to perform its obligations
under this Agreement, Sellers, with the exception of Xxxxxxx Xxxxx, covenant to
continue to be employees of SUN for a period of three (3) years from the Closing
Date ("End of Term"), as Closing Date is defined in Section 4.1 of this
Agreement, exclusively providing services only to SUN during such employment. In
the event that a Seller ("Terminating Seller") voluntarily resigns as an
employee of SUN, unless the Terminating Seller resigns or terminates his
employment with SUN due to death, disability rendering the Terminating Seller
unable to work, or a constructive termination of the Terminating Seller's
employment by the Buyer, or is involuntarily terminated as an employee of SUN
for cause, in either case prior to the End of Term, then the Buyer will have the
sole right, exercisable at any time within one year after such termination, to
cause an immediate conversion of the outstanding balance of the Terminating
Seller's Note into shares of the Buyer's common stock in accordance with the
terms and conditions of the Note; provided, that all common stock issued to the
Terminating Seller pursuant to such a conversion will be subject to a two year
lock-up whereby the Terminating Seller will not be able to transfer,
hypothecate, assign or sell any of those shares for two years after receipt of
them. In any event, all of the Sellers will, with respect to the resale by any
of them of any of the shares of Buyer's common stock issued to them at any time
pursuant to any conversion of any portion of the outstanding balance of their
Notes, be subject to the restrictions, conditions and requirements applicable to
an affiliate of the Buyer under Rule 144 of the Securities Act of 1933, as
amended, even if the Sellers are no longer technical affiliates of the Buyer.
3. OTHER COVENANTS.
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3.1 SUN AND BUYER BOARDS OF DIRECTORS. At or prior to the Closing, to
be effective on the Closing, the parties will execute all documents,
resolutions, resignations, appointments and acceptances in order to cause the
SUN Board of Directors to consist of three members at the Closing, one of whom
will be Xxxxx X. Xxxxxx and a second of whom will be Xxxx X. Xxxxxxxxxx. One
designee of SUN reasonably acceptable to Buyer, initially Xxx Xxxxx, will be
appointed to the Buyer's Board of Directors. Other directors of SUN will be
invited to be observers at meetings of the Buyer's Board of Directors.
3.2 EXTINGUISHMENT OF DEBT. At or prior to the Closing, to be effective
on the Closing, SUN will pay off all shareholder notes, inter-company debt, and
other notes and liabilities, except those incurred in the ordinary course of its
business as described in Section 7.1(d) of this Agreement. SUN and Sellers
covenant that only liabilities incurred in the ordinary course of SUN's
business, as described in Section 7.1(d) herein, will be outstanding on the
Closing Date.
3.3 COVENANT NOT TO COMPETE. As a material inducement for Buyer to
enter into this Agreement, the Sellers agree that during the term of their
employment or directorship or consultancy with SUN or the Company (collectively,
their "Engagement"), and for a period of three (3) years after the termination
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of their Engagement (the "Non-Competition Period"), they covenant and agree that
each of them shall not, directly or indirectly own, manage, operate, participate
in, produce, represent, distribute and/or otherwise act on behalf of any person,
firm, corporation, partnership or other entity which involves designing,
manufacturing, distributing, installing, maintaining or selling solar power
software or hardware (the "Competitive Business") anywhere within the United
States, its possessions and territories, Canada or Mexico (collectively, the
"Territory"); or hire any employee or former employee of Buyer or SUN to perform
services in or involving the Competitive Business, unless the individual hired
shall have departed Buyer's or SUN's employment at least twelve (12) months
prior to the hiring. The Non-Competition Period will, however, be one year
instead of three years with respect to a Terminating Seller if that Seller's
employment is involuntarily terminated (i.e., by the Company) without "cause."
For the purpose of this Agreement, "cause" means the Seller commits a material
breach of this Agreement or his Engagement agreement with the Company, or fraud,
willful misconduct, gross negligence, a felony criminal act, bad faith or a
breach of his fiduciary duty to the Company during the term of his Engagement
with the Company. The Sellers further covenant and agree that during the
Non-Competition Period, they will not directly or indirectly solicit or agree to
service for their benefit or the benefit of any third-party, any of Buyer's or
SUN's customers. Notwithstanding the foregoing, nothing in this Section 3.3
shall prohibit them from owning, managing, operating, participating in the
operation of, or advising, consulting or being employed by any entity that is
not involved in the Competitive Business. Sellers acknowledge and agree that
Buyer will expend substantial time, talent, effort and money in marketing,
promoting, managing, selling and otherwise exploiting the businesses Buyer and
SUN operate, in part by virtue of Buyer's acquisition of the SUN Stock pursuant
to this Agreement, that Sellers were all of the shareholders of SUN, that they
are receiving a substantial benefit from the transaction contemplated hereunder
and that the benefit received by Buyer and them in agreeing to be bound by this
Section 3.3 are a material part of the consideration for the transactions
contemplated by this Agreement. The parties recognize that this Section 3.3
contains conditions, covenants, and time limitations that are reasonably
required for the protection of the business of SUN and the Buyer. If any
limitation, covenant or condition shall be deemed to be unreasonable and
unenforceable by a court or arbitrator of competent jurisdiction, then this
Section 3.3 shall thereupon be deemed to be amended to provide for modification
of such limitation, covenant and/or condition to such extent as the court or
arbitrator shall find to be reasonable and such modification shall not affect
the remainder of this Agreement. Sellers acknowledge that, in the event a Seller
breaches this Agreement, money damages will not be adequate to compensate Buyer
for the loss occasioned by such breach. Sellers therefore consent, in the event
of such a breach, to the granting of injunctive relief against Sellers by any
court of competent jurisdiction.
3.4 RIGHT OF FIRST REFUSAL TO REPURCHASE SUN. In the event that the
Buyer proposes to sell all of the SUN Stock or cause SUN to sell all or
substantially all of its assets in the future in one or a series of
predetermined transactions in consideration for only cash or notes and not for
any securities (the "SUN Sale Proposal"), with the intent of exiting the type of
business in which SUN is then engaged, then each Seller will have the right,
exerciseable in his sole discretion for a period of seven (7) days from the date
of receipt of written notice from the Buyer containing the price, terms and
conditions of the SUN Sale Proposal in reasonable detail (the "Proposal
Notice"), to elect to purchase up to his pro rata share of the SUN Stock or SUN
assets proposed for sale, as the case may be, based on the relative outstanding
balances of their Notes on the date of the first delivery of the Proposal Notice
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by the Buyer, on the terms and conditions described in the Proposal Notice, by
delivery of a written election notice to the Buyer. If the Sellers in the
aggregate elect to purchase less than 100% of the SUN Sale Proposal, then each
of the electing Sellers will have the right for an additional five (5) days from
the date of delivery of written notice of the shortfall by the Buyer to the
electing Sellers, to elect on a pro rata basis, based on the relative amount of
their first election, to purchase the balance of the SUN Sale Proposal by
delivery of a second written election notice to the Buyer indicating the amount
of their second election. If the Sellers in the aggregate elect to purchase less
than 100% of the SUN Sale Proposal after the second round, then the right of
first refusal of all Sellers will immediately terminate with respect to that SUN
Sale Proposal. If the Sellers make a valid election to purchase 100% of the SUN
Sale Proposal, they must close such purchase within the closing schedule set
forth in the Proposal Notice, or within sixty (60) days of receipt of the
Proposal Notice by any of the electing Sellers from the Buyer, if no closing
schedule is discloseable in the Proposal Notice. If the Sellers do not make a
valid election to purchase 100% of the SUN Sale Proposal within the above
referenced seven (7) and five (5) day periods, then the Buyer may proceed to
close the SUN Sale Proposal without further obligation to the Sellers. If more
than one Seller participates in purchasing a SUN Sale Proposal, then they will
do so joint and severally unless otherwise agreed in writing by the Buyer and
the participating Sellers. Notwithstanding anything else herein to the contrary,
the Sellers' right of first refusal under Section 3.4 of this Agreement will
terminate entirely on the earlier of (a) the date by which all Notes are paid or
otherwise satisfied in full either in cash, by conversion or otherwise, or (b)
three (3) years from the Closing Date.
4. CLOSING AND FURTHER ACTS.
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4.1 TIME AND PLACE OF CLOSING. Upon satisfaction or waiver of the
conditions set forth in this Agreement, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place in Santa Barbara,
California at 11:00 a.m. (local time) on the date that the parties may mutually
agree in writing, but in no event later than February 15, 2014 (the "Closing
Date"), unless extended by mutual written agreement of the parties.
4.2 ACTIONS AT CLOSING. At the Closing, the following actions will take
place:
(a) Buyer will pay to Sellers the Purchase Price as provided
in Section 1.2 of this Agreement by delivery of (i) cash in the amount
of the Cash Payment which will be deposited in a single account
designated by Sellers in writing delivered to the Buyer prior to the
Closing, and (ii) an executed Note to each Seller in the appropriate
original outstanding principal amount.
(b) Sellers will tender to the Company certificates and any
other documents (including all historical records up to the Closing
Date) evidencing the SUN Stock.
(c) SUN will deliver to Buyer copies of necessary resolutions
of the Board of Directors of SUN authorizing the execution, delivery,
and performance of this Agreement and the other agreements contemplated
by this Agreement, which resolutions have been certified by an officer
of SUN as being valid and in full force and effect.
(d) Buyer will deliver to SUN copies of corporate resolutions
of the Board of Directors of Buyer authorizing the execution, delivery
and performance of this Agreement and the other agreements contemplated
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by this Agreement, which resolutions have been certified by an officer
of Buyer as being valid and in full force and effect.
(e) SUN will deliver to the Buyer true and complete copies of
SUN's Certificate of Incorporation and a Certificate of Good Standing
from the appropriate official of SUN's jurisdiction of incorporation,
which certificates and certificates of good standing are dated not more
than 30 days prior to the Closing Date.
(f) SUN will deliver to the Buyer a report from the
appropriate agency or agencies in the State of California showing the
existence or absence of all liens, financing statements, mortgages and
other encumbrances recorded against any assets of SUN, dated not more
than five (5) days prior to the date of the Closing (the "Lien
Report").
(g) Delivery of appropriate resignations, appointments,
acceptances and resolutions relating to the SUN Board of Directors as
contemplated in Section 3.1 of this Agreement.
(h) Delivery of any additional documents or instruments as a
party may reasonably request or as may be necessary to evidence and
effect the sale, assignment, transfer and delivery of the SUN Stock to
the Buyer.
4.3 ACTIONS PRE-CLOSING. The Sellers and SUN will at all times prior to
and after the Closing cooperate fully with the Buyer and the Buyer's officers,
directors, representatives, accountants and lawyers to enable the Buyer to
conduct thorough due diligence of SUN and to enable SUN to prepare and have
audited all financial statements deemed necessary by the Buyer to comply with
all of its reporting obligations with the Securities and Exchange Commission,
including without limitation the preparation and filing of its Reports on Form
8-K within four (4) business days after the Closing, without audited financial
statements, and with audited financial statements within seventy-one (71) days
after the Closing, subject to the provisions of Section 4.5 of this Agreement.
4.4 ACTIONS POST CLOSING. After the Closing the Buyer will have the
authority to exercise management control and oversight of SUN, and to have
originals and copies of all SUN books and records promptly delivered to it. The
Sellers and SUN will at all times after the Closing cooperate fully with the
Buyer and the Buyer's officers, directors, representatives, accountants and
lawyers to complete the preparation and audit of all financial statements of the
Buyer and SUN deemed necessary or appropriate by the Buyer, and to enable the
Buyer to comply with all of its reporting obligations with the Securities and
Exchange Commission.
4.5 COSTS OF FINANCIAL AUDIT OF SUN. The Buyer will bear the costs of
the 2011 and 2012 audit of SUN financial statements, except that the Sellers
will reimburse the Buyer for the total cost of the audit (not to exceed
$50,000), as invoiced by the auditor, if any of the following events occur: (i)
the audit cannot be completed due to the lack of reasonable cooperation from the
Sellers or SUN's personnel, or (ii) the audited financials and records of SUN
are in the opinion of the certified auditors, materially different than those
presented to the Buyer prior to the date of this Agreement, or (iii) the Sellers
or SUN refuse to proceed with the Closing and the Buyer is ready, willing and
able to proceed with the Closing, or the Sellers or SUN otherwise materially
breach this Agreement. With the exception of possible audit fee reimbursement,
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under no circumstances will either the Buyer or the Sellers or SUN be due any
termination expenses in connection with this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF SUN, AND SELLERS.
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SUN and Sellers represent and warrant to Buyer as follows, subject to
the delivery of written disclosure schedules by SUN and the Sellers to the Buyer
that qualify the following representations and warranties, and that are
acknowledged by the Buyer in writing, including but not limited to the document
binders attached to this Agreement as Exhibit B:
5.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. SUN and Sellers
have full power and authority to enter into this Agreement and to perform their
obligations hereunder. The execution, delivery, and performance of this
Agreement by SUN have been duly authorized by all necessary action on its part.
Assuming that this Agreement is a valid and binding obligation of each of the
other parties hereto, this Agreement is a valid and binding obligation of SUN,
and Sellers.
5.2 SUBSIDIARIES. There is no corporation, general partnership limited
partnership, joint venture, association, trust or other entity or organization
that SUN directly or indirectly control or in which SUN directly or indirectly
owns any equity or other interest.
5.3 GOOD STANDING. SUN (i) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is incorporated,
(ii) has all necessary power and authority to own its assets and to conduct its
business as it is currently being conducted, and (iii) is duly qualified or
licensed to do business and is in good standing in every jurisdiction (both
domestic and foreign) where such qualification or licensing is required.
5.4 CHARTER DOCUMENTS AND CORPORATE RECORDS. SUN has delivered to Buyer
complete and correct copies or provided Buyer with the right to inspect true and
complete copies of all (i) the articles of incorporation, bylaws and other
charter or organizational documents of SUN, including all amendments thereto,
(ii) the stock records of SUN, and (iii) the minutes and other records of the
meetings and other proceedings of the shareholders and directors of SUN. SUN is
not in violation or breach of (i) any of the provisions of its articles of
incorporation, bylaws or other charter or organizational documents, or (ii) any
resolution adopted by its shareholders or directors. There have been no meetings
or other proceedings of the shareholders or directors of SUN that are not fully
reflected in the appropriate minute books or other written records of SUN.
5.5 FINANCIAL STATEMENTS. SUN has delivered to Buyer the following
unaudited financial statements and will cooperate with Buyer to prepare the
following audited financial statements relating to SUN prior to the Closing (the
"SUN Financial Statements"): (i) the unaudited balance sheets of SUN as of
December 31, 2012, 2011 and 2010 and the unaudited balance sheet as of June 30,
2013, (ii) the audited balance sheets of SUN as of December 31, 2012 and 2011,
and the unaudited balance sheet as of September 30, 2013, (iii) the unaudited
statements of income for the years ended December 31, 2012, 2011 and 2010, the
unaudited statements of income for the six months ended June 30, 2013 and the
unaudited statements of retained earnings and shareholders' equity as of June
30, 2013, and (iv) the audited statements of income for the years ended December
31, 2012 and 2011, the audited statements of retained earnings and shareholders'
equity as of those year end dates, and the unaudited statements of retained
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earnings and shareholders' equity as of September 30, 2013. Except as stated
therein or in the notes thereto, the SUN Financial Statements: (a) present
fairly the financial position of SUN as of the respective dates thereof and the
results of operations and changes in financial position of SUN for the
respective periods covered thereby; and (b) have been prepared in accordance
with SUN's normal business practices applied on a consistent basis throughout
the periods covered, and in the case of the audited financial statements, have
been prepared in accordance with generally accepted accounting principles
consistently applied.
5.6 CAPITALIZATION. The authorized capital stock of SUN consists of
1,000 shares of common stock for SUN, par value $10.00 per share, of which 1,000
shares are issued and outstanding, and no shares of preferred stock. All of the
outstanding shares of the capital stock of SUN are validly issued, fully paid
and nonassessable, and have been issued in full compliance with all applicable
federal, state, local and foreign securities laws and other laws.
5.7 ABSENCE OF CHANGES. Except as otherwise set forth on Schedule 5.7
hereto or otherwise disclosed to and acknowledged by Buyer in writing prior to
the Closing, since June 30, 2013:
(a) There has not been any material adverse change in the
business, condition, assets, operations or prospects of SUN and no
event has occurred or, to SUN's knowledge, is expected to occur after
the Closing that might have a material adverse effect on the business,
condition, assets, operations or prospects of SUN.
(b) SUN has not (i) declared, set aside or paid any dividend
or made any other distribution in respect of any shares of capital
stock, nor (ii) repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities.
(c) SUN has not sold or otherwise issued any shares of capital
stock or any other securities.
(d) SUN has not amended its articles of incorporation, bylaws
or other charter or organizational documents, nor has it effected or
been a party to any merger, recapitalization, reclassification of
shares, stock split, reverse stock split, reorganization or similar
transaction.
(e) SUN has not formed any subsidiary or contributed any funds
or other assets to any subsidiary.
(f) SUN has not purchased or otherwise acquired any assets,
nor has it leased any assets from any other person, except in the
ordinary course of business consistent with past practice.
(g) SUN has not made any capital expenditure outside the
ordinary course of business or inconsistent with past practice, or in
an amount exceeding five thousand dollars ($5,000) singly or in excess
of ten thousand dollars ($10,000) in the aggregate, without Buyer's
consent.
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(h) SUN has not sold or otherwise transferred any assets to
any other person, except in the ordinary course of business consistent
with past practice and at a price equal to the fair market value of the
assets transferred.
(i) There has not been any loss, damage or destruction to any
of the properties or assets of SUN (whether or not covered by
insurance).
(j) SUN has not written off as uncollectible any indebtedness
or accounts receivable, except for write offs that were made in the
ordinary course of business consistent with past practice and that
involved less than $5,000 singly and less than $10,000 in the
aggregate.
(k) SUN has not leased any assets to any other person except
in the ordinary course of business consistent with past practice and at
a rental rate equal to the fair rental value of the leased assets.
(l) SUN has not mortgaged, pledged, hypothecated or otherwise
encumbered any assets, except in the ordinary course of business
consistent with past practice.
(m) SUN has not entered into any contract, or incurred any
debt, liability or other obligation (whether absolute, accrued,
contingent or otherwise), except for (i) contracts that were entered
into in the ordinary course of business consistent with past practice
and that have terms of less than six months and do not contemplate
payments by or to SUN which will exceed, over the term of the contract,
ten thousand dollars ($10,000) in the aggregate, and (ii) current
liabilities incurred in the ordinary course of business consistent with
the past practice.
(n) SUN has not made any loan or advance to any other person,
except for advances that have been made to customers in the ordinary
course of business consistent with past practice and that have been
properly reflected as "accounts receivables."
(o) Other than annual raises or bonuses paid or provided
consistent with past business practices, SUN has not paid any bonus to,
or increased the amount of the salary, fringe benefits or other
compensation or remuneration payable to, any of the directors, officers
or employees of SUN.
(p) No contract or other instrument to which SUN is or was a
party or by which SUN or any of its assets are or were bound has been
amended or terminated, except in the ordinary course of business
consistent with past practice.
(q) SUN has not discharged any lien or discharged or paid any
indebtedness, liability or other obligation, except for current
liabilities that (i) are reflected in the SUN Financial Statements as
of June 30, 2013 or have been incurred since June 30, 2013 in the
ordinary course of business consistent with past practice, and (ii)
have been discharged or paid in the ordinary course of business
consistent with past practice.
(r) SUN has not forgiven any debt or otherwise released or
waived any right or claim, except in the ordinary course of business
consistent with past practice.
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(s) SUN has not changed its methods of accounting or its
accounting practices in any respect.
(t) SUN has not entered into any transaction outside the
ordinary course of business or inconsistent with past practice.
(u) SUN has not agreed or committed (orally or in writing) to
do any of the things described in clauses (b) through (t) of this
Section 5.7.
(v) SUN and the Sellers covenant not to do any of the things
described above in clauses (b) through (u) of this Section 5.7 at any
time before or after the Closing without the express prior written
approval of the Buyer's Board of Directors; provided, however, that SUN
and the Sellers may cause a one-time distribution (the "Tax
Distribution") to be made by SUN to the Sellers immediately prior to
the Closing equal to 45% of the net taxable income (i.e. phantom
income) allocable to the Sellers from SUN for the period from the end
of the last fiscal year for which a SUN tax return was filed until the
Closing Date, less prior quarterly tax payments made, subject to the
requirement that at the Closing SUN has at least $200,000 of net
working capital. To the extent that the Tax Distribution would cause
net working capital to be less than $200,000, SUN will reduce the Tax
Distribution. To the extent that net working capital would be greater
than $200,000 after the Tax Distribution, SUN may distribute the excess
to the Sellers prior to the Closing, provided that there is at least
$100,000 of cash in SUN at the Closing. The amount of the Tax
Distribution is subject to reasonable verification and approval by the
Buyer before it is made. For the purpose of calculating "net working
capital" under Section 5.7 of this Agreement, current liabilities will
be subtracted from current assets, and customer deposits will not be
included in current assets.
5.8 ABSENCE OF UNDISCLOSED LIABILITIES. SUN has no debt, liability or
other obligation of any nature (whether due or to become due and whether
absolute, accrued, contingent or otherwise) that is not reflected or reserved
against in the SUN Financial Statements as of June 30, 2013, except for
obligations incurred since June 30, 2013 in the ordinary and usual course of
business consistent with past practice.
5.9 SUN ASSETS.
(a) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in
a breach of the terms and conditions of, or result in a loss of rights
under, or result in the creation of any lien, charge or encumbrance
upon, any of the assets of SUN.
(b) SUN has good and marketable title to all of its assets,
free and clear of all mortgages, liens, leases, pledges, charges,
encumbrances, equities or claims, except as expressly disclosed in
writing by SUN to Buyer prior to the Closing Date.
(c) SUN's assets are not subject to any material liability,
absolute or contingent, which has not been disclosed by SUN to and
acknowledged by Buyer in writing prior to the Closing Date nor is SUN
subject to any liability, absolute or contingent, which has not been
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disclosed to and acknowledged by Buyer in writing prior to the Closing
Date.
(d) SUN has provided to Buyer in writing an accurate
description of all of the assets of SUN or used in the business of SUN.
(e) SUN has provided to Buyer in writing a list of all
contracts, agreements, licenses, leases, arrangements, commitments and
other undertakings to which SUN is a party or by which it or its
property is bound. Except as specified by SUN to and acknowledged by
Buyer in writing prior to the Closing Date, all of such contracts,
agreements, leases, licenses and commitments are valid, binding and in
full force and effect. As soon as practicable after the execution of
this Agreement by all parties, SUN will provide Buyer with copies of
all such documents for Buyer's review.
5.10 COMPLIANCE WITH LAWS; LICENSES AND PERMITS. SUN is not in
violation of, nor has it failed to conduct its business in material compliance
with, any applicable federal, state, local or foreign laws, regulations, rules,
treaties, rulings, orders, directives or decrees. SUN has delivered to Buyer a
complete and accurate list and provided Buyer with the right to inspect true and
complete copies of all of the licenses, permits, authorizations and franchises
to which SUN is subject and all said licenses, permits, authorizations and
franchises are valid and in full force and effect. Said licenses, permits,
authorizations and franchises constitute all of the licenses, permits,
authorizations and franchises reasonably necessary to permit SUN to conduct its
business in the manner in which it is now being conducted, and SUN is not in
violation or breach of any of the terms, requirements or conditions of any of
said licenses, permits, authorizations or franchises.
5.11 TAXES. Except as disclosed herein, SUN has accurately and
completely filed with the appropriate United States state, local and foreign
governmental agencies all tax returns and reports required to be filed (subject
to permitted extensions applicable to such filings), and has paid or accrued in
full all taxes, duties, charges, withholding obligations and other governmental
liabilities as well as any interest, penalties, assessments or deficiencies, if
any, due to, or claimed to be due by, any governmental authority (including
taxes on properties, income, franchises, licenses, sales and payroll). (All such
items are collectively referred to herein as "Taxes"). The SUN Financial
Statements fully accrue or reserve all current and deferred taxes. SUN is not a
party to any pending action or proceeding, nor is any such action or proceeding
threatened by any governmental authority for the assessment or collection of
Taxes. No liability for taxes has been incurred other than in the ordinary
course of business. There are no liens for Taxes except for liens for property
taxes not yet delinquent. SUN is not a party to any Tax sharing, Tax allocation,
Tax indemnity or statute of limitations extension or waiver agreement and in the
past year has not been included on any consolidated combined or unitary return
with any entity other than SUN. SUN has duly withheld from each payment made to
each person from whom such withholding is required by law the amount of all
Taxes or other sums (including but not limited to United States federal income
taxes, any applicable state or municipal income tax, disability tax,
unemployment insurance contribution and Federal Insurance Contribution Act
taxes) required to be withheld therefore and has paid the same to the proper tax
authorities prior to the due date thereof. To the extent any Taxes withheld by
SUN have not been paid as of the Closing Date because such Taxes were not yet
due, such Taxes will be paid to the proper tax authorities in a timely manner.
All Tax returns filed by the SUN are accurate and comply with and were prepared
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in accordance with applicable statutes and regulations. Sellers will cause SUN
to prepare and file all Tax returns and pay all Taxes required prior to the
Closing. Such Tax returns will be subject to review and approval by the Buyer,
which approval will not be unreasonably withheld.
5.12 ENVIRONMENTAL COMPLIANCE MATTERS. To the best of the knowledge of
SUN, SUN has at all relevant times with respect to the Business been in material
compliance with all environmental laws, and has received no potentially
responsible party notices or similar notices from any governmental agencies or
private parties concerning releases or threatened releases of any "hazardous
substance" as that term is defined under 42 U.S.C. 960(1) (14).
5.13 COMPENSATION. Since June 30, 2013, SUN has not paid or committed
to pay to or for the benefit of any of its officers or directors any
compensation of any kind other than wages, salaries and benefits at times and
rates in effect on June 30, 2013, except as provided in Section 5.7(v) of this
Agreement. SUN does not have any bonus plan or obligations with respect to any
bonus plan. SUN has provided Buyer with a full and complete list of all
officers, directors, employees and consultants of SUN as of the date hereof,
specifying their names and job designations, their dates of hire, the total
amount paid or payable as wages, salaries or other forms of direct compensation,
and the basis of such compensation, whether fixed or commission or a combination
thereof.
5.14 NO DEFAULT.
(a) Each of the contracts, agreements or other instruments of
SUN and each of the standard Customer Agreements or contracts of SUN is
a legal, binding and enforceable obligation by or against SUN, subject
to the effect of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar federal or state laws affecting the rights
of creditors and the effect or availability of rules of law governing
specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at
law or in equity). No party with whom SUN has an agreement or contract
is in default there under or has breached any terms or provisions
thereof which is material to the conduct of SUN's business.
(b) SUN has performed, or is now performing, the obligations
of, and SUN is not in material default (or would by the late of time
and/or the giving of notice be in material default) in respect of, any
contract, agreement or commitment binding upon it or its assets or
properties and material to the conduct of its business. No third party
has raised any claim, dispute or controversy with respect to any of the
executed contracts of SUN, nor has SUN received notice of warning of
alleged nonperformance, delay in delivery or other noncompliance by SUN
with respect to its obligations under any of those contracts, nor are
there any facts which exist indicating that any of those contracts may
be totally or partially terminated or suspended by the other parties
thereto.
5.15 PRODUCT WARRANTIES. Except as otherwise disclosed to and
acknowledged by Buyer in the form of a written disclosure schedule prior to the
Closing and for warranties under applicable law, (a) there are no warranties,
express or implied, written or oral, with respect to the products of SUN, (b)
there are no pending or threatened claims with respect to any such warranty, and
(c) SUN has no, and after the Closing Date, will have no, liability with respect
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to any such warranty, whether known or unknown, absolute, accrued, contingent,
or otherwise and whether due or to become due, other than customary returns in
the ordinary course of business that are fully reserved against in the SUN
Financial Statements. In the event that warranty claims arise after the Closing,
the Sellers shall have the right to settle those claims through SUN, subject
only to a cost of labor and materials charge without any xxxx up.
5.16 PROPRIETARY RIGHTS.
------------------
(a) SUN has provided Buyer in writing a complete and accurate
list and provided Buyer with the right to inspect true and complete
copies of all software, patents and applications for patents,
trademarks, trade names, service marks, and copyrights, and
applications therefore, owned or used by SUN or in which it has any
rights or licenses, except for software used by SUN and generally
available on the commercial market. SUN has provided Buyer with a
complete and accurate description of all agreements or provided Buyer
with the right to inspect true and complete copies of all agreements of
SUN with each officer, employee or consultant of SUN providing SUN with
title and ownership to patents, patent applications, trade secrets and
inventions developed or used by SUN in its business. To the best of
SUN's knowledge, all of such agreements are valid, enforceable and
legally binding, subject to the effect or availability of rules of law
governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a
proceeding at law or in equity).
(b) SUN owns or possesses licenses or other rights to use all
computer software, software programs, patents, patent applications,
trademarks, trademark applications, trade secrets, service marks, trade
names, copyrights, inventions, drawings, designs, customer lists,
propriety know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the
business of SUN, and the same are sufficient to conduct SUN's business
as it has been and is now being conducted.
(c) To the best of SUN's knowledge, the operations of SUN do
not conflict with or infringe, and no one has asserted to SUN that such
operations conflict with or infringe on any Proprietary Rights owned,
possessed or used by any third party. There are no claims, disputes,
actions, proceedings, suits or appeal pending against SUN with respect
to any Proprietary Rights, and to the knowledge of the management of
SUN none has been threatened against SUN. To the best knowledge of the
management of SUN there are no facts or alleged fact which would
reasonably serve as a basis for any claim that SUN does not have the
right to use, free of any rights or claims of others, all Proprietary
Rights in the development, manufacture, use, sale or other disposition
of any or all products or services presently being used, furnished or
sold in the conduct of the business of SUN as it has been and is now
being conducted.
(d) No employee of SUN is in violation of any term of any
employment contract, proprietary information and inventions agreement,
non-competition agreement, or any other contract or agreement relating
to the relationship of any such employee with SUN or any previous
employer.
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5.17 INSURANCE. SUN has provided Buyer with complete and accurate
copies of all policies of insurance and provided Buyer with the right to inspect
true and complete copies of all policies of insurance to which SUN is a party or
is a beneficiary or named insured as of the Closing Date. SUN has in full force
and effect, with all premiums due thereon paid the policies of insurance set
forth therein. All the insurable properties of SUN are insured in amounts and
coverage and against risks and losses which are adequate and usually insured
against by persons holding or operating similar properties in similar
businesses. There were no claims in excess of $10,000 asserted or currently
outstanding under any of the insurance policies of SUN in respect of all motor
vehicle, general liability, errors and omissions, workers compensation, and
medical claims during the calendar year ending on December 31, 2012 or the six
months ending June 30, 2013.
5.18 LABOR RELATIONS. None of the employees of SUN are represented by
any union or are parties to any collective bargaining arrangement, and no
attempts are being made to organize or unionize any of SUN's employees. Except
as disclosed in writing to Buyer prior to the Closing, there is not presently
pending or existing, and there is not presently threatened, any material (a)
strike, slowdown, picketing, work stoppage or employee grievance process, or (b)
action, arbitration, audit, hearing, investigation, litigation, or suit (whether
civil, criminal, administrative, investigative, or informal) against or
affecting SUN relating to the alleged violation of any legal requirement
pertaining to labor relations or employment matters. SUN is in compliance with
all applicable laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, occupational safety and health and is
not engaged in any unfair labor practices. SUN is in compliance with the
Immigration Reform and Control Act of 1986. SUN has no employment agreements
except with some of its employees, which shall be disclosed in the form of a
written disclosure schedule delivered by the Sellers and SUN to the Buyer and
acknowledged by the Buyer in writing prior to the Closing.
5.19 CORPORATION STATUS. SUN is identified as an "S" corporation prior
to Closing.
5.20 CONDITION OF PREMISES. All real property leased by SUN is in good
condition and repair, ordinary wear and tear excepted.
5.21 NO DISTRIBUTOR AGREEMENTS. Except as disclosed to and acknowledged
by Buyer in writing prior to the Closing, SUN is not a party to, nor is the
property of SUN bound by, any distributors' or manufacturer's representative or
agency agreement.
5.22 CONFLICT OF INTEREST TRANSACTIONS. No past or present shareholder,
director, officer or employee of SUN or any of their affiliates (i) is indebted
to, or has any financial, business or contractual relationship or arrangement
with SUN, or (ii) has any direct or indirect interest in any property, asset or
right which is owned or used by SUN or pertains to the business of SUN with the
exception of outstanding shareholder loans which will be satisfied and
discharged in fullprior to the Closing Date.
5.23 LITIGATION. There is no action, suit, proceeding, dispute,
litigation, claim, complaint or investigation by or before any court, tribunal,
governmental body, governmental agency or arbitrator pending or threatened
against or with respect to SUN which (i) if adversely determined would have an
adverse effect on the business, condition, assets, operations or prospects of
SUN, or (ii) challenges or would challenge any of the actions required to be
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taken by SUN under this Agreement. To the best knowledge of Sellers, there
exists no basis for any such action, suit, proceeding, dispute, litigation,
claim, complaint or investigation.
5.24 NON-CONTRAVENTION. Neither (a) the execution and delivery of this
Agreement, nor (b) the performance of this Agreement will: (i) contravene or
result in a violation of any of the provisions of the organizational documents
of SUN; (ii) contravene or result in a violation of any resolution adopted by
the shareholders or directors of SUN; (iii) result in a violation or breach of,
or give any person the right to declare (whether with or without notice or lapse
of time) a default under or to terminate, any agreement or other instrument to
which SUN is a party or by which SUN or any of its assets are bound; (iv) give
any person the right to accelerate the maturity of any indebtedness or other
obligation of SUN; (v) result in the loss of any license or other contractual
right of SUN; (vi) result in the loss of, or in a violation of any of the terms,
provisions or conditions of, any governmental license, permit, authorization or
franchise of SUN; (vii) result in the creation or imposition of any lien,
charge, encumbrance or restriction on any of the assets of SUN; (viii) result in
the reassessment or revaluation of any property of SUN by any taxing authority
or other governmental authority; (ix) result in the imposition of, or subject
SUN to any liability for, any conveyance or transfer tax or any similar tax; or
(x) result in a violation of any law, rule, regulation, treaty, ruling,
directive, order, arbitration award, judgment or decree to which SUN or any of
its assets or any limited liability interests are subject.
5.25 APPROVALS. SUN has provided Buyer with a complete and accurate
list of all jurisdictions in which SUN is authorized to do business along with
the documentation evidencing such authorization. No authorization, consent or
approval of, or registration or filing with, any governmental authority is
required to be obtained or made by SUN in connection with the execution,
delivery or performance of this Agreement, including the conveyance to Buyer of
the Business.
5.26 BROKERS. SUN has not agreed to pay any brokerage fees, finder's
fees or other fees or commissions with respect to the transactions contemplated
by this Agreement, and, to SUN's knowledge, no person is entitled, or intends to
claim that it is entitled, to receive any such fees or commissions in connection
with such transaction: except that to the extent Generational Equity is owed any
fees for this transaction, the Buyer, at the Closing, will pay such fees in
their entirety, not to exceed $205,500.
5.27 SPECIAL GOVERNMENT LIABILITIES. SUN has no existing or pending
liabilities, obligations or deferred payments due to any federal, state or local
government agency or entity in connection with its business or with any program
sponsored or funded in whole or in part by any federal, state or local
government agency or entity, nor is SUN or Sellers aware of any threatened
action or claim or any condition that could support an action or claim against
SUN or the SUN Business for any of said liabilities, obligations or deferred
payments.
5.28 SALES AND EBIDA. SUN's total sales for the year ended December 31,
2012 were in excess of $3,800,000 and EBITDA was in excess of $450,000. SUN
estimates that its total sales for the year ended December 31, 2013 will be in
excess of $7,500,000 and EBITDA will be in excess of $900,000.
5.29 FULL DISCLOSURE. Neither this Agreement (including the exhibits
hereto) nor any statement, certificate or other document delivered to Buyer by
or on behalf of SUN contains any untrue statement of a material fact or omits to
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state a material fact necessary to make the representations and other statements
contained herein and therein not misleading.
5.30 REPRESENTATIONS TRUE ON CLOSING DATE. The representations and
warranties of SUN set forth in this Agreement are true and correct on the date
hereof, and will be true and correct on the Closing Date as though such
representations and warranties were made as of the Closing Date. Buyer's
knowledge will not act as a waiver of any breach of the representations and
warranties contained herein by SUN or Seller.
5.31 TAX ADVICE. SUN and Sellers hereby represent and warrant that they
have sought their own independent tax advice regarding the transactions
contemplated by this Agreement and neither SUN nor Sellers have relied on any
representation or statement made by Buyer, the Company, or their representatives
regarding the tax implications of such transactions.
5.32 ACKNOWLEDGEMENT OF RISKS. The Sellers hereby represent and warrant
that they have conducted a thorough review of the Buyer's public reports and
financial statements filed by it with the Securities and Exchange Commission,
and have had an opportunity to ask questions of and to receive additional
information from representatives of the Buyer. The Sellers acknowledge that
there are substantial risks associated with owning the Note and the Buyer's
common stock into which it is convertible, including but not limited to (i)
those risk factors specifically disclosed to Sellers in writing by the Buyer, a
copy of which has been delivered to the Sellers, (ii) the Buyer may default on
the Note and the price of its common stock may decline, (iii) the Note is not
assignable and the transferability of the Buyer's common stock is restricted by
applicable federal and state securities laws as well as by the terms of this
Agreement and the Note, and may be impaired by a lack of trading volume, and
(iv) those additional risks described in public reports filed by the Buyer with
the Securities and Exchange Commission. Sellers represent and warrant that they
are sophisticated, knowledgeable and experienced in making investments of this
kind and are capable of evaluating the risks and merits of acquiring the Note.
6. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer represents and warrants to SUN as follows:
6.1 POWER AND AUTHORITY; BINDING NATURE OF AGREEMENT. Buyer has full
power and authority to enter into this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by Buyer
have been duly authorized by all necessary action on its part. Assuming that
this Agreement is a valid and binding obligation of the other party hereto, this
Agreement is a valid and binding obligation of Buyer.
6.2 APPROVALS. To Buyer's knowledge, no authorization, consent or
approval of, or registration or filing with, any governmental authority or any
other person is required to be obtained or made by Buyer in connection with the
execution, delivery or performance of this Agreement.
6.3 REPRESENTATIONS TRUE ON CLOSING DATE. To the Buyer's knowledge, the
representations and warranties of Buyer set forth in this Agreement are true and
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correct on the date hereof, and will be true and correct on the Closing Date as
though such representations and warranties were made as of the Closing Date.
6.4 NON-DISTRIBUTIVE INTENT. The shares of SUN Stock being purchased by
the Company pursuant to this Agreement are not being acquired by the Company
with a view to the public distribution of them.
6.5 NON CONTRAVENTION. To the Company's knowledge neither the execution
nor delivery of this Agreement, nor the performance of this Agreement will
contravene or result in a material violation of any of the provisions of any
other agreement or obligation of the Company.
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to close the stock purchase as contemplated in this Agreement is
conditioned upon the occurrence or waiver by Buyer of the following:
(a) Sellers shall have delivered to the Company all
certificates evidencing the SUN Stock and ownership of 100% of the
capital stock of SUN.
(b) All representations and warranties of SUN and Sellers made
in this Agreement or in any exhibit or schedule hereto delivered by SUN
and Sellers must be true and correct as of the Closing Date with the
same force and effect as if made on and as of that date.
(c) SUN must have performed and complied with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by SUN prior to or at the Closing Date.
(d) SUN covenants to extinguish all loans and pay off all debt
prior to the Closing, other than trade payables to third parties
incurred in the ordinary course of its business that arise from work in
progress and that are not past due. Sellers severally, based on their
pro rata ownership of SUN immediately prior the Closing Date, agree to
indemnify and hold harmless the Company and SUN from all claims which
may be brought by the designated creditors of SUN before and after the
Closing, including reasonable attorneys fees and costs and all claims,
liabilities, losses, or damages which SUN may suffer as a result of any
and all claims, demands, costs, attorneys fees, and/or judgments
against them arising out of any violation of this provision of this
Agreement. This paragraph shall cover the period beginning upon the
date of the execution of this Agreement and continue through and
including the last date upon which any statute of limitations effecting
Buyer's right(s) to pursue damages of any kind against Sellers shall
have expired. The provisions of Section 9.3 of this Agreement shall
govern the procedure for indemnification claims under this Section
7.1(d) of this Agreement.
(e) Buyer must be satisfied in its sole and absolute
discretion, with its due diligence of SUN and the Sellers.
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7.2 CONDITIONS PRECEDENT TO SUN'S AND SELLERS' OBLIGATION TO CLOSE.
SUN's and Sellers' obligation to close the stock purchase as contemplated in
this Agreement is conditioned upon the occurrence or waiver by SUN and the
Sellers of the following:
(a) All representations and warranties of Buyer made in this
Agreement or in any exhibit hereto delivered by Buyer must be true and
correct on and as of the Closing Date with the same force and effect as
if made on and as of that date.
(b) Buyer must have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied
with by Buyer prior to or at the Closing Date.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
------------------------------------------
All representations and warranties made by each of the parties hereto
will survive the Closing for three (3) years after the Closing Date. Sellers
will have joint and several liability under this Agreement, except for the
covenant not to compete in Section 3.3 of this Agreement or where otherwise
expressly and specifically provided in this Agreement.
9. INDEMNIFICATION.
---------------
9.1 INDEMNIFICATION BY SUN AND SELLERS. SUN and Sellers agree
severally, based on their pro rata ownership of SUN immediately prior the
Closing Date and in an amount not to exceed the respective purchase price paid
to each Seller pursuant to Section 1.2 of this Agreement, to indemnify, defend
and hold harmless Buyer and its affiliates against any and all claims, demands,
losses, costs, expenses, obligations, liabilities and damages, including
interest, penalties and reasonable attorney's fees and costs, incurred by Buyer
or any of its affiliates arising, resulting from, or relating to any and all
liabilities of SUN incurred prior to the Closing Date or relating to the SUN
Stock prior the Closing Date, any misrepresentation of a material fact or
omission to disclose a material fact made by SUN or Sellers in this Agreement,
in any exhibits to this Agreement or in any other document furnished or to be
furnished by SUN or Sellers under this Agreement, or any breach of, or failure
by SUN or Sellers to perform, any of their representations, warranties,
covenants or agreements in this Agreement or in any exhibit or other document
furnished or to be furnished by SUN or Sellers under this Agreement.
9.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify, defend and
hold harmless SUN and Sellers against any and all claims, demands, losses,
costs, expenses, obligations, liabilities and damages, including interest,
penalties and reasonable attorneys' fees and costs incurred by SUN or the
Sellers arising after the Closing Date, resulting from or relating to any breach
of, or failure by Buyer to perform, any of its representations, warranties,
covenants or agreements in this Agreement or in any exhibit or other document
furnished or to be furnished by Buyer under this Agreement.
9.3 PROCEDURE FOR INDEMNIFICATION CLAIMS.
(a) Whenever any parties become aware that a claim (an
"Underlying Claim") has arisen entitling them to seek indemnification
under Section 3.2, 7.1(d) or 9 of this Agreement, such parties (the
"Indemnified Parties") shall promptly send a notice ("Notice") to the
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parties liable for such indemnification (the "Indemnifying Parties") of
the right to indemnification (the "Indemnity Claim"); provided,
however, that the failure to so notify the Indemnifying Parties will
relieve the Indemnifying Parties from liability under this Agreement
with respect to such Indemnity Claim only if, and only to the extent
that, such failure to notify the Indemnifying Parties results in the
forfeiture by the Indemnifying Parties of rights and defenses otherwise
available to the Indemnifying Parties with respect to the Underlying
Claim. Any Notice pursuant to this Section 9.3(a) shall set forth in
reasonable detail, to the extent then available, the basis for such
Indemnity Claim and an estimate of the amount of damages arising
therefore.
(b) If an Indemnity Claim does NOT result from or arise in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties will have thirty (30) calendar days
following receipt of the Notice to issue a written response to the
Indemnified Parties, indicating the Indemnifying Parties' intention to
either (i) contest the Indemnity Claim or (ii) accept the Indemnity
Claim as valid. The Indemnifying Parties' failure to provide such a
written response within such thirty (30) day period shall be deemed to
be an acceptance of the Indemnity Claim as valid. In the event that an
Indemnity Claim is accepted as valid, the Indemnifying Parties shall,
within fifteen (15) Business Days thereafter, pay the damages incurred
by the Indemnified Parties in respect of the Underlying Claim in cash
by wire transfer of immediately available funds to the account or
accounts specified by the Indemnified Parties. To the extent
appropriate, payments for indemnifiable damages made pursuant to
Section 7 of the Agreement will be treated as adjustments to the
Purchase Price.
(c) In the event an Indemnity Claim results from or arises in
connection with any Underlying Claim or legal proceedings by a third
party, the Indemnifying Parties shall have fifteen (15) calendar days
following receipt of the Notice to send a Notice to the Indemnified
Parties of their election to, at their sole cost and expense, assume
the defense of any such Underlying Claim or legal proceeding; provided
that such Notice of election shall contain a confirmation by the
Indemnifying Parties of their obligation to hold harmless the
Indemnified Parties with respect to damages arising from such
Underlying Claim. The failure by the Indemnifying Parties to elect to
assume the defense of any such Underlying Claim within such fifteen
(15) day period shall entitle the Indemnified Parties to undertake
control of the defense of the Underlying Claim on behalf of and for the
account and risk of the Indemnifying Parties in such manner as the
Indemnified Parties may deem appropriate, including, but not limited
to, settling the Underlying Claim. The parties controlling the defense
of the Underlying Claim shall not, however, settle or compromise such
Underlying Claim without the prior written consent of the other
parties, which consent shall not be unreasonably withheld or delayed.
The non-controlling parties shall be entitled to participate in (but
not control) the defense of any such action, with their own counsel and
at their own expense.
(d) The Indemnifying Parties and the Indemnified Parties will
cooperate reasonably, fully and in good faith with each other, at the
sole expense of the Indemnifying Parties subject to the last sentence
of Section 9.3(c) of this Agreement, in connection with the defense,
compromise or settlement of any Underlying Claim including, without
limitation, by making available to the other parties all pertinent
information and witnesses within their reasonable control.
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10. INJUNCTIVE RELIEF.
-----------------
10.1 DAMAGES INADEQUATE. Each party acknowledges that it would be
impossible to measure in money the damages to the other party if there is a
failure to comply with any covenants and provisions of this Agreement, and
agrees that in the event of any breach of any covenant or provision, the other
party to this Agreement will not have an adequate remedy at law.
10.2 INJUNCTIVE RELIEF. It is therefore agreed that the other party to
this Agreement who is entitled to the benefit of the covenants and provisions of
this Agreement which have been breached, in addition to any other rights or
remedies which they may have, will be entitled to immediate injunctive relief to
enforce such covenants and provisions, and that in the event that any such
action or proceeding is brought in equity to enforce them, the defaulting or
breaching party will not urge a defense that there is an adequate remedy at law.
11. FURTHER ASSURANCES.
------------------
Following the Closing, Sellers shall furnish to Buyer such instruments
and other documents as Buyer may reasonably request for the purpose of carrying
out or evidencing the transactions contemplated hereby.
12. FEES AND EXPENSES.
-----------------
Each party hereto shall pay all fees, costs and expenses that it incurs
in connection with the negotiation and preparation of this Agreement and in
carrying out the transactions contemplated hereby (including, without
limitation, all fees and expenses of its counsel and accountant).
13. WAIVERS.
-------
If any party at any time waives any rights hereunder resulting from any
breach by the other party of any of the provisions of this Agreement, such
waiver is not to be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement. Resort to any remedies referred to
herein will not be construed as a waiver of any other rights and remedies to
which such party is entitled under this Agreement or otherwise.
14. SUCCESSORS AND ASSIGNS.
----------------------
Each covenant and representation of this Agreement will inure to the
benefit of and be binding upon each of the parties, their personal
representatives, assigns and other successors in interest.
15. ENTIRE AND SOLE AGREEMENT.
-------------------------
This Agreement constitutes the entire agreement between the parties and
supersedes all other agreements, representations, warranties, statements,
promises and undertakings, whether oral or written, with respect to the subject
matter of this Agreement. This Agreement may be modified or amended only by a
written agreement signed by the parties against whom the amendment is sought to
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be enforced. The parties acknowledge that as of the date of the execution of
this Agreement, that any and all other agreements either written or verbal will
be terminated and be of no further force or effect.
16. GOVERNING LAW.
-------------
This Agreement will be governed by the laws of California without
giving effect to applicable conflict of law provisions. With respect to any
litigation arising out of or relating to this Agreement, each party agrees that
it will be filed in and heard by the state or federal courts with jurisdiction
to hear such suits located in Santa Xxxxxxx County, California.
17. COUNTERPARTS.
------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts will be deemed to be an original, and
such counterparts will constitute but one and the same instrument.
18. ASSIGNMENT.
----------
Except in the case of an affiliate of the Buyer, this Agreement may not
be assignable by any party without prior written consent of the other parties.
19. REMEDIES.
--------
Except as otherwise expressly provided herein, none of the remedies set
forth in this Agreement are intended to be exclusive, and each party will have
all other remedies now or hereafter existing at law, in equity, by statute or
otherwise. The election of any one or more remedies will not constitute a waiver
of the right to pursue other available remedies.
20. SECTION HEADINGS.
----------------
The section headings in this Agreement are included for convenience
only, are not a part of this Agreement and will not be used in construing it.
21. SEVERABILITY.
------------
In the event that any provision or any part of this Agreement is held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability will not affect the validity or enforceability of any other
provision or part of this Agreement.
22. NOTICES.
-------
Each notice or other communication hereunder must be in writing and
will be deemed to have been duly given on the earlier of (i) the date on which
such notice or other communication is actually received by the intended
recipient thereof, or (ii) the date five (5) days after the date such notice or
other communication is mailed by registered or certified mail (postage prepaid)
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to the intended recipient at the following address (or at such other address as
the intended recipient will have specified in a written notice given to the
other parties hereto):
IF TO SUN AND SELLERS:
Solar United Network, Inc.
0000 Xxxx Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (916) 057-1740
IF TO BUYER:
Solar3D, Inc.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx, Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
23. PUBLICITY.
---------
Except as may be required in order for a party to comply with
applicable laws, rules, or regulations or to enable a party to comply with this
Agreement, or necessary for the Buyer to prepare and disseminate any private or
public placements of its securities or to communicate with its shareholders, no
press release, notice to any third party or other publicity concerning the
transactions contemplated by this Agreement will be issued, given or otherwise
disseminated without the prior approval of each of the parties hereto; provided,
however, that such approval will not be unreasonably withheld.
[SIGNATURES ON FOLLOWING PAGE.]
-21-
IN WITNESS WHEREOF, this Agreement has been entered into as of the date
first above written.
SUN: Solar United Network Inc., a California Corporation
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------------------------
Xxxx Xxxxxxxxxx, Chief Executive Officer
SELLERS:
/s/ Xxxx Xxxxxxxxxx
-----------------------------------------------------
Xxxx Xxxxxxxxxx, Individually
/s/ Xxx Xxxxx
-----------------------------------------------------
Xxx Xxxxx, Individually
/s/ Xxxxxxx Xxxxx
-----------------------------------------------------
Xxxxxxx Xxxxx, Individually
/s/ Xxxxxxx Podnesbesnyy
-----------------------------------------------------
Xxxxxxx Podnesbesnyy, Individually
COMPANY/BUYER: SOLAR3D, INC., a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
-22-
EXHIBIT A
PROMISSORY NOTES
CONVERTIBLE PROMISSORY NOTE
$525,000 January __, 2014
Santa Barbara, California
FOR VALUE RECEIVED, Solar3D, Inc., a Delaware corporation (the
"Borrower") hereby promises to pay to the order of Xxxx Xxxxxxxxxx, an
individual, (the "Lender"), at 0000 Xxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxxx 00000, the principal sum of Five Hundred Twenty-Five Thousand Dollars
U.S. ($525,000) plus simple interest at the rate of 4% per annum commencing to
accrue on the date first above written, payable principal and all accrued
interest in accordance with the terms and conditions of this Note.
1. PAYMENT ON NOTE. Commencing on March 31, 2014, the due date of the
first payment on this Note, and on the last day of each quarter thereafter
during the first year of this Note, Borrower will make quarterly interest only
payments to Lender for interest accrued on the Note during the prior quarter,
after which, commencing on March 31, 2015 and on the last day of each quarter
thereafter until the quarter ending on December 31, 2017, Borrower will make
quarterly payments of interest accrued on the Note during the prior quarter plus
$13,125 of principal to Lender, after which, commencing on March 31, 2018 and on
the last day of each quarter thereafter, Borrower will make quarterly payments
of interest accrued on the Note during the prior quarter plus $91,875 of
principal to Lender with the final payment due and payable on December 31, 2018
(the "Maturity Date"). No later than fifteen (15) days after each payment due
date, Borrower will pay each payment to the Lender by depositing the appropriate
payment amount into an account designated by the Lender in writing delivered to
the Borrower prior to the execution of this Note.
2. RIGHT OF PREPAYMENT. Borrower has the right to prepay all or any
portion of this Note at any time without penalty upon at least ten days prior
written notice to Lender, provided, that Borrower must apply any prepayment
proposed for this Note among all four convertible promissory notes issued by the
Borrower pursuant to Section 1.2 of that certain Stock Purchase Agreement, dated
October 31, 2013 by and between Solar United Networks, Inc., a California
corporation ("SUN"), the Borrower, as buyer, and the four above referenced
convertible promissory note holders, as sellers (the "Stock Purchase
Agreement"), each on a pro rata basis in a ratio, the numerator of which is the
outstanding balance of each of those notes on the date of delivery of written
notice by the Borrower to the Lender of its proposed prepayment, and the
denominator of which is the total aggregate outstanding balance of all four
notes combined. Such prepayments shall be applied first to interest and then to
principal.
3. CONVERSION. Lender has the right, at any time after the Effective
Date, to convert all or part of the outstanding balance of the Note into shares
of fully paid and non-assessable common stock of the Borrower (the "Common
Stock"). The conversion price shall be $0.02 per share (the "Initial Conversion
Price") until March 30, 2015, and thereafter the conversion price shall be the
greater of (a) the Initial Conversion Price or (b) Fifty Percent (50%) of the
average closing price of the Common Stock as reported by Bloomberg for the ten
(10) consecutive trading days following the submission of a notice in writing
signed by the Lender of his intent to convert. The Initial Conversion Price
-1-
shall be subject to equitable adjustments for stock splits, combinations,
recapitalizations, reclassifications, and similar events of the Borrower. With
respect to the public resale of the Common Stock, the Lender shall at all times
be subject to the restrictions, conditions and requirements applicable to an
affiliate of the Borrower, as described in Rule 144 of the Securities Act of
1933, as amended, even if the Lender is no longer a technical affiliate of the
Borrower.
4. BORROWER RIGHT TO FORCE CONVERSION AND RIGHT OF OFFSET. In the event
of any material breach by the Lender of the Stock Purchase Agreement, Borrower
will have the right to offset the amount of damages incurred by the Borrower as
a result of such breach against the amounts owed by it on this Note, subject to
customary dispute resolution available at law or in equity. In the event that
the Lender (a) voluntarily resigns as an employee of the Borrower, unless the
Lender's employment with SUN is terminated by Lender due to death, disability
rendering the Lender unable to work, or a constructive termination of the
Lender's employment by the Borrower, or (b) is involuntarily terminated as an
employee of the Borrower for "cause" ("Terminating Lender"), in either case
prior to the "End of Term" as defined in Section 2 of the Stock Purchase
Agreement, then the Borrower will have the right, exercisable at any time for a
period of one year after such termination, to cause an immediate conversion of
up to the entire outstanding balance of the Terminating Lender's Note into
shares of the Borrower's common stock in accordance with the terms and
conditions of this Note; provided, that all common stock issued to the
Terminating Lender pursuant to such a conversion will be subject to a two year
lock-up whereby the Terminating Lender will not be able to transfer,
hypothecate, assign or sell any of those shares for two years after receipt of
them. For the purpose of this Note, "cause" has the meaning ascribed to it in
Section 3.3 of the Stock Purchase Agreement. This Note is not secured.
5. DEFAULT. Any of the following shall constitute a default ("Event of
Default") by Borrower hereunder:
(a) The failure of Borrower to make any payment of principal or
interest required hereunder within fifteen (15) days of the due date
for such payment; or
(b) The failure of Borrower to fully perform any other material
covenants and agreements under this Note and continuance of such
failure for a period of forty-five (45) days after written notice of
the default by Lender to the Borrower.
Upon the occurrence of (a) an Event of Default under Section 5(a) of
this Note that is not cured within forty five (45) days of the due date for the
defaulted payment, (b) an Event of Default under Section 5(b) of this Note, (c)
a sale for cash or notes and no other securities of all or substantially all of
the assets of the Borrower or of SUN, or (d) a sale for cash or notes and no
other securities of all or substantially all of the issued and outstanding
voting capital stock of the Borrower or SUN resulting in a change of control of
the Borrower or SUN, or (e) the filing of bankruptcy proceedings for the
Borrower that is not dismissed within sixty (60) days of the filing, Lender may,
at his option, declare immediately due and payable the entire unpaid principal
sum of this Note together with all accrued and unpaid interest owing at the time
-2-
of such declaration pursuant to this Note. Furthermore, in the Event of Default
under Section 5(a) of this Note, Lender will have the right at any time to
convert the entire amount of the defaulted payment into Borrower's Common Stock
at the Initial Conversion Price, if the conversion is voluntary but not if it is
forced under Section 4 of this Note.
6. COSTS OF COLLECTIONS. Lender shall be entitled to collect reasonable
attorney's fees and costs from Borrower, as well as other costs and expenses
reasonably incurred, in curing any default or attempting collection of any
payment due on this Note.
7. INSPECTION RIGHTS. The Lender, individually or through his agent,
shall have the right, upon reasonable notice and at his expense, to review and
inspect the books and records of the Borrower at Borrower's office during
reasonable business hours.
8. PAYMENT AND PLACE OF PAYMENT. This Note shall be payable in lawful
money of the United States. All payments on this Note are to be made or given to
Lender at the address provided to Borrower or to such other place as Lender may
from time to time direct by written notice to Borrower.
9. WAIVER. Borrower, for itself and its successors, transferors and
assigns, waives presentment, dishonor, protest, notice of protest, demand for
payment and dishonor in nonpayment of this Note, bringing of suit or diligence
of taking any action to collect any sums owing hereunder or in proceeding
against any of the rights and properties securing payment hereunder.
10. SEVERABILITY. If any provision of this Note or the application
thereof to any persons or entities or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Note shall not be deemed
affected thereby and every provision of this Note shall be valid and enforceable
to the fullest extent permitted by law.
11. NO PARTNER. Lender shall not become or be deemed to be a partner or
joint venturer with Borrower by reason of any provision of this Note. Nothing
herein shall constitute Borrower and Lender as partners or joint venturers or
require Lender to participate in or be responsible or liable for any costs,
liabilities, expenses or losses of Borrower.
12. NO WAIVER. The failure to exercise any rights herein shall not
constitute a waiver of the right to exercise the same or any other right at any
subsequent time in respect of the same event or any other event.
13. NONRECOURSE. In the event that the Borrower defaults on this Note,
Lender shall look solely to the Borrower for repayment and none of the members,
officers, directors or affiliates of the Borrower shall have any personal
liability for payment hereunder.
14. ASSIGNABILITY. The Lender may not assign this Note without the
express prior written approval of the Borrower, which it may grant or withhold
in its sole and absolute discretion. This Note shall be binding upon the
Borrower and its successors and shall inure to the benefit of the Lender and his
successors and assigns, if any.
-3-
15. GOVERNING LAW AND VENUE. This Note shall be governed by and
construed solely in accordance with the laws of the State of California without
giving effect to applicable conflict of laws provisions. Borrower and Lender
agree that the sole jurisdiction and venue for any litigation arising out of the
Note involving Borrower or Lender shall be in the appropriate federal or state
court located in Santa Xxxxxxx County, California.
16. ENTIRE AGREEMENT. This Note and the Stock Purchase Agreement
contain the entire understanding and agreement between the parties with respect
to the subject matter herein and may not be altered or amended except by the
written agreement of the parties.
17. COUNTERPARTS. This Note may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile executions of
this Note shall be deemed original.
[SIGNATURES ON FOLLOWING PAGE.]
-4-
IN WITNESS WHEREOF, Borrower and Lender have executed this Note on
October 31, 2013, to be effective as of the date first hereinabove written.
BORROWER: SOLAR3D, INC., a Delaware corporation
By:
--------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
LENDER:
-----------------------------------------------
Xxxx Xxxxxxxxxx, Individually
-5-
CONVERTIBLE PROMISSORY NOTE
$525,000 January __, 2014
Santa Barbara, California
FOR VALUE RECEIVED, Solar3D, Inc., a Delaware corporation (the
"Borrower") hereby promises to pay to the order of Xxx Xxxxx, an individual,
(the "Lender"), at 0000 Xxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx
00000, the principal sum of Five Hundred Twenty-Five Thousand Dollars U.S.
($525,000) plus simple interest at the rate of 4% per annum commencing to accrue
on the date first above written, payable principal and all accrued interest in
accordance with the terms and conditions of this Note.
1. PAYMENT ON NOTE. Commencing on March 31, 2014, the due date of the
first payment on this Note, and on the last day of each quarter thereafter
during the first year of this Note, Borrower will make quarterly interest only
payments to Lender for interest accrued on the Note during the prior quarter,
after which, commencing on March 31, 2015 and on the last day of each quarter
thereafter until the quarter ending on December 31, 2017, Borrower will make
quarterly payments of interest accrued on the Note during the prior quarter plus
$13,125 of principal to Lender, after which, commencing on March 31, 2018 and on
the last day of each quarter thereafter, Borrower will make quarterly payments
of interest accrued on the Note during the prior quarter plus $91,875 of
principal to Lender with the final payment due and payable on December 31, 2018
(the "Maturity Date"). No later than fifteen (15) days after each payment due
date, Borrower will pay each payment to the Lender by depositing the appropriate
payment amount into an account designated by the Lender in writing delivered to
the Borrower prior to the execution of this Note.
2. RIGHT OF PREPAYMENT. Borrower has the right to prepay all or any
portion of this Note at any time without penalty upon at least ten days prior
written notice to Lender, provided, that Borrower must apply any prepayment
proposed for this Note among all four convertible promissory notes issued by the
Borrower pursuant to Section 1.2 of that certain Stock Purchase Agreement, dated
October 31, 2013 by and between Solar United Networks, Inc., a California
corporation ("SUN"), the Borrower, as buyer, and the four above referenced
convertible promissory note holders, as sellers (the "Stock Purchase
Agreement"), each on a pro rata basis in a ratio, the numerator of which is the
outstanding balance of each of those notes on the date of delivery of written
notice by the Borrower to the Lender of its proposed prepayment, and the
denominator of which is the total aggregate outstanding balance of all four
notes combined. Such prepayments shall be applied first to interest and then to
principal.
3. CONVERSION. Lender has the right, at any time after the Effective
Date, to convert all or part of the outstanding balance of the Note into shares
of fully paid and non-assessable common stock of the Borrower (the "Common
Stock"). The conversion price shall be $0.02 per share (the "Initial Conversion
Price") until March 30, 2015, and thereafter the conversion price shall be the
greater of (a) the Initial Conversion Price or (b) Fifty Percent (50%) of the
average closing price of the Common Stock as reported by Bloomberg for the ten
(10) consecutive trading days following the submission of a notice in writing
signed by the Lender of his intent to convert. The Initial Conversion Price
-1-
shall be subject to equitable adjustments for stock splits, combinations,
recapitalizations, reclassifications, and similar events of the Borrower. With
respect to the public resale of the Common Stock, the Lender shall at all times
be subject to the restrictions, conditions and requirements applicable to an
affiliate of the Borrower, as described in Rule 144 of the Securities Act of
1933, as amended, even if the Lender is no longer a technical affiliate of the
Borrower.
4. BORROWER RIGHT TO FORCE CONVERSION AND RIGHT OF OFFSET. In the event
of any material breach by the Lender of the Stock Purchase Agreement, Borrower
will have the right to offset the amount of damages incurred by the Borrower as
a result of such breach against the amounts owed by it on this Note, subject to
customary dispute resolution available at law or in equity. In the event that
the Lender (a) voluntarily resigns as an employee of the Borrower, unless the
Lender's employment with SUN is terminated by Lender due to death, disability
rendering the Lender unable to work, or a constructive termination of the
Lender's employment by the Borrower, or (b) is involuntarily terminated as an
employee of the Borrower for "cause" ("Terminating Lender"), in either case
prior to the "End of Term" as defined in Section 2 of the Stock Purchase
Agreement, then the Borrower will have the right, exercisable at any time for a
period of one year after such termination, to cause an immediate conversion of
up to the entire outstanding balance of the Terminating Lender's Note into
shares of the Borrower's common stock in accordance with the terms and
conditions of this Note; provided, that all common stock issued to the
Terminating Lender pursuant to such a conversion will be subject to a two year
lock-up whereby the Terminating Lender will not be able to transfer,
hypothecate, assign or sell any of those shares for two years after receipt of
them. For the purpose of this Note, "cause" has the meaning ascribed to it in
Section 3.3 of the Stock Purchase Agreement. This Note is not secured.
5. DEFAULT. Any of the following shall constitute a default ("Event of
Default") by Borrower hereunder:
(a) The failure of Borrower to make any payment of principal or
interest required hereunder within fifteen (15) days of the due date
for such payment; or
(b) The failure of Borrower to fully perform any other material
covenants and agreements under this Note and continuance of such
failure for a period of forty five (45) days after written notice of
the default by Lender to the Borrower.
Upon the occurrence of (a) an Event of Default under Section 5(a) of
this Note that is not cured within forty five (45) days of the due date for the
defaulted payment, (b) an Event of Default under Section 5(b) of this Note, (c)
a sale for cash or notes and no other securities of all or substantially all of
the assets of the Borrower or of SUN, or (d) a sale for cash or notes and no
other securities of all or substantially all of the issued and outstanding
voting capital stock of the Borrower or SUN resulting in a change of control of
the Borrower or SUN, or (e) the filing of bankruptcy proceedings for the
Borrower that is not dismissed within sixty (60) days of the filing, Lender may,
at his option, declare immediately due and payable the entire unpaid principal
sum of this Note together with all accrued and unpaid interest owing at the time
-2-
of such declaration pursuant to this Note. Furthermore, in the Event of Default
under Section 5(a) of this Note, Lender will have the right at any time to
convert the entire amount of the defaulted payment into Borrower's Common Stock
at the Initial Conversion Price, if the conversion is voluntary but not if it is
forced under Section 4 of this Note.
6. COSTS OF COLLECTIONS. Lender shall be entitled to collect reasonable
attorney's fees and costs from Borrower, as well as other costs and expenses
reasonably incurred, in curing any default or attempting collection of any
payment due on this Note.
7. INSPECTION RIGHTS. The Lender, individually or through his agent,
shall have the right, upon reasonable notice and at his expense, to review and
inspect the books and records of the Borrower at Borrower's office during
reasonable business hours.
8. PAYMENT AND PLACE OF PAYMENT. This Note shall be payable in lawful
money of the United States. All payments on this Note are to be made or given to
Lender at the address provided to Borrower or to such other place as Lender may
from time to time direct by written notice to Borrower.
9. WAIVER. Borrower, for itself and its successors, transferors and
assigns, waives presentment, dishonor, protest, notice of protest, demand for
payment and dishonor in nonpayment of this Note, bringing of suit or diligence
of taking any action to collect any sums owing hereunder or in proceeding
against any of the rights and properties securing payment hereunder.
10. SEVERABILITY. If any provision of this Note or the application
thereof to any persons or entities or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Note shall not be deemed
affected thereby and every provision of this Note shall be valid and enforceable
to the fullest extent permitted by law.
11. NO PARTNER. Lender shall not become or be deemed to be a partner or
joint venturer with Borrower by reason of any provision of this Note. Nothing
herein shall constitute Borrower and Lender as partners or joint venturers or
require Lender to participate in or be responsible or liable for any costs,
liabilities, expenses or losses of Borrower.
12. NO WAIVER. The failure to exercise any rights herein shall not
constitute a waiver of the right to exercise the same or any other right at any
subsequent time in respect of the same event or any other event.
13. NONRECOURSE. In the event that the Borrower defaults on this Note,
Lender shall look solely to the Borrower for repayment and none of the members,
officers, directors or affiliates of the Borrower shall have any personal
liability for payment hereunder.
14. ASSIGNABILITY. The Lender may not assign this Note without the
express prior written approval of the Borrower, which it may grant or withhold
in its sole and absolute discretion. This Note shall be binding upon the
Borrower and its successors and shall inure to the benefit of the Lender and his
successors and assigns, if any.
-3-
15. GOVERNING LAW AND VENUE. This Note shall be governed by and
construed solely in accordance with the laws of the State of California without
giving effect to applicable conflict of laws provisions. Borrower and Lender
agree that the sole jurisdiction and venue for any litigation arising out of the
Note involving Borrower or Lender shall be in the appropriate federal or state
court located in Santa Xxxxxxx County, California.
16. ENTIRE AGREEMENT. This Note and the Stock Purchase Agreement
contain the entire understanding and agreement between the parties with respect
to the subject matter herein and may not be altered or amended except by the
written agreement of the parties.
17. COUNTERPARTS. This Note may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile executions of
this Note shall be deemed original.
[SIGNATURES ON FOLLOWING PAGE.]
-4-
IN WITNESS WHEREOF, Borrower and Lender have executed this Note on
October 31, 2013, to be effective as of the date first hereinabove written.
BORROWER: SOLAR3D, INC., a Delaware corporation
By:
------------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
LENDER:
----------------------------------------------------
Xxx Xxxxx, Individually
-5-
CONVERTIBLE PROMISSORY NOTE
$350,000 January __, 2014
Santa Barbara, California
FOR VALUE RECEIVED, Solar3D, Inc., a Delaware corporation (the
"Borrower") hereby promises to pay to the order of Xxxxxxx Xxxxx, an individual
(the "Lender"), at 0000 Xxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxxx
00000, the principal sum of Three Hundred Fifty Thousand Dollars U.S. ($350,000)
plus simple interest at the rate of 4% per annum commencing to accrue on the
date first above written, payable principal and all accrued interest in
accordance with the terms and conditions of this Note.
1. PAYMENT ON NOTE. Commencing on March 31, 2014, the due date of the
first payment on this Note, and on the last day of each quarter thereafter
during the first year of this Note, Borrower will make quarterly interest only
payments to Lender for interest accrued on the Note during the prior quarter,
after which, commencing on March 31, 2015 and on the last day of each quarter
thereafter until the quarter ending on December 31, 2017, Borrower will make
quarterly payments of interest accrued on the Note during the prior quarter plus
$8,750 of principal to Lender, after which, commencing on March 31, 2018 and on
the last day of each quarter thereafter, Borrower will make quarterly payments
of interest accrued on the Note during the prior quarter plus $61,250 of
principal to Lender with the final payment due and payable on December 31, 2018
(the "Maturity Date"). No later than fifteen (15) days after each payment due
date, Borrower will pay each payment to the Lender by depositing the appropriate
payment amount into an account designated by the Lender in writing delivered to
the Borrower prior to the execution of this Note.
2. RIGHT OF PREPAYMENT. Borrower has the right to prepay all or any
portion of this Note at any time without penalty upon at least ten days prior
written notice to Lender, provided, that Borrower must apply any prepayment
proposed for this Note among all four convertible promissory notes issued by the
Borrower pursuant to Section 1.2 of that certain Stock Purchase Agreement, dated
October 31, 2013 by and between Solar United Networks, Inc., a California
corporation ("SUN"), the Borrower, as buyer, and the four above referenced
convertible promissory note holders, as sellers (the "Stock Purchase
Agreement"), each on a pro rata basis in a ratio, the numerator of which is the
outstanding balance of each of those notes on the date of delivery of written
notice by the Borrower to the Lender of its proposed prepayment, and the
denominator of which is the total aggregate outstanding balance of all four
notes combined. Such prepayments shall be applied first to interest and then to
principal.
3. CONVERSION. Lender has the right, at any time after the Effective
Date, to convert all or part of the outstanding balance of the Note into shares
of fully paid and non-assessable common stock of the Borrower (the "Common
Stock"). The conversion price shall be $0.02 per share (the "Initial Conversion
Price") until March 30, 2015, and thereafter the conversion price shall be the
greater of (a) the Initial Conversion Price or (b) Fifty Percent (50%) of the
average closing price of the Common Stock as reported by Bloomberg for the ten
(10) consecutive trading days following the submission of a notice in writing
-1-
signed by the Lender of his intent to convert. The Initial Conversion Price
shall be subject to equitable adjustments for stock splits, combinations,
recapitalizations, reclassifications, and similar events of the Borrower. With
respect to the public resale of the Common Stock, the Lender shall at all times
be subject to the restrictions, conditions and requirements applicable to an
affiliate of the Borrower, as described in Rule 144 of the Securities Act of
1933, as amended, even if the Lender is no longer a technical affiliate of the
Borrower.
4. BORROWER RIGHT TO FORCE CONVERSION AND RIGHT OF OFFSET. In the event
of any material breach by the Lender of the Stock Purchase Agreement, Borrower
will have the right to offset the amount of damages incurred by the Borrower as
a result of such breach against the amounts owed by it on this Note, subject to
customary dispute resolution available at law or in equity. This Note is not
secured.
5. DEFAULT. Any of the following shall constitute a default ("Event of
Default") by Borrower hereunder:
(a) The failure of Borrower to make any payment of principal or
interest required hereunder within fifteen (15) days of the due date
for such payment; or
(c) The failure of Borrower to fully perform any other material
covenants and agreements under this Note and continuance of such
failure for a period of forty-five (45) days after written notice of
the default by Lender to the Borrower.
Upon the occurrence of (a) an Event of Default under Section 5(a) of
this Note that is not cured within forty five (45) days of the due date for the
defaulted payment, (b) an Event of Default under Section 5(b) of this Note, (c)
a sale for cash or notes and no other securities of all or substantially all of
the assets of the Borrower or of SUN, or (d) a sale for cash or notes and no
other securities of all or substantially all of the issued and outstanding
voting capital stock of the Borrower or SUN resulting in a change of control of
the Borrower or SUN, or (e) the filing of bankruptcy proceedings for the
Borrower that is not dismissed within sixty (60) days of the filing, Lender may,
at his option, declare immediately due and payable the entire unpaid principal
sum of this Note together with all accrued and unpaid interest owing at the time
of such declaration pursuant to this Note. Furthermore, in the Event of Default
under Section 5(a) of this Note, Lender will have the right at any time to
convert the entire amount of the defaulted payment into Borrower's Common Stock
at the Initial Conversion Price, if the conversion is voluntary but not if it is
forced under Section 4 of this Note.
6. COSTS OF COLLECTIONS. Lender shall be entitled to collect reasonable
attorney's fees and costs from Borrower, as well as other costs and expenses
reasonably incurred, in curing any default or attempting collection of any
payment due on this Note.
7. INSPECTION RIGHTS. The Lender, individually or through his agent,
shall have the right, upon reasonable notice and at his expense, to review and
inspect the books and records of the Borrower at Borrower's office during
reasonable business hours.
-2-
8. PAYMENT AND PLACE OF PAYMENT. This Note shall be payable in lawful
money of the United States. All payments on this Note are to be made or given to
Lender at the address provided to Borrower or to such other place as Lender may
from time to time direct by written notice to Borrower.
9. WAIVER. Borrower, for itself and its successors, transferors and
assigns, waives presentment, dishonor, protest, notice of protest, demand for
payment and dishonor in nonpayment of this Note, bringing of suit or diligence
of taking any action to collect any sums owing hereunder or in proceeding
against any of the rights and properties securing payment hereunder.
10. SEVERABILITY. If any provision of this Note or the application
thereof to any persons or entities or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Note shall not be deemed
affected thereby and every provision of this Note shall be valid and enforceable
to the fullest extent permitted by law.
11. NO PARTNER. Lender shall not become or be deemed to be a partner or
joint venturer with Borrower by reason of any provision of this Note. Nothing
herein shall constitute Borrower and Lender as partners or joint venturers or
require Lender to participate in or be responsible or liable for any costs,
liabilities, expenses or losses of Borrower.
12. NO WAIVER. The failure to exercise any rights herein shall not
constitute a waiver of the right to exercise the same or any other right at any
subsequent time in respect of the same event or any other event.
13. NONRECOURSE. In the event that the Borrower defaults on this Note,
Lender shall look solely to the Borrower for repayment and none of the members,
officers, directors or affiliates of the Borrower shall have any personal
liability for payment hereunder.
14. ASSIGNABILITY. The Lender may not assign this Note without the
express prior written approval of the Borrower, which it may grant or withhold
in its sole and absolute discretion. This Note shall be binding upon the
Borrower and its successors and shall inure to the benefit of the Lender and his
successors and assigns, if any.
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15. GOVERNING LAW AND VENUE. This Note shall be governed by and
construed solely in accordance with the laws of the State of California without
giving effect to applicable conflict of laws provisions. Borrower and Lender
agree that the sole jurisdiction and venue for any litigation arising out of the
Note involving Borrower or Lender shall be in the appropriate federal or state
court located in Santa Xxxxxxx County, California.
16. ENTIRE AGREEMENT. This Note and the Stock Purchase Agreement
contain the entire understanding and agreement between the parties with respect
to the subject matter herein and may not be altered or amended except by the
written agreement of the parties.
17. COUNTERPARTS. This Note may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile executions of
this Note shall be deemed original.
[SIGNATURES ON FOLLOWING PAGE.]
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IN WITNESS WHEREOF, Borrower and Lender have executed this Note on
___________, 2013, to be effective as of the date first hereinabove written.
BORROWER: SOLAR3D, INC., a Delaware corporation
By:
--------------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
LENDER:
-----------------------------------------------------
Xxxxxxx Xxxxx, Individually
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CONVERTIBLE PROMISSORY NOTE
$350,000 January __, 2014
Santa Barbara, California
FOR VALUE RECEIVED, Solar3D, Inc., a Delaware corporation (the
"Borrower") hereby promises to pay to the order of Xxxxxxx Podnesbesnyy, an
individual, (the "Lender"), at 0000 Xxxx Xxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx,
Xxxxxxxxxx 00000, the principal sum of Three Hundred Fifty Thousand Dollars U.S.
($350,000) plus simple interest at the rate of 4% per annum commencing to accrue
on the date first above written, payable principal and all accrued interest in
accordance with the terms and conditions of this Note.
1. PAYMENT ON NOTE. Commencing on March 31, 2014, the due date of the
first payment on this Note, and on the last day of each quarter thereafter
during the first year of this Note, Borrower will make quarterly interest only
payments to Lender for interest accrued on the Note during the prior quarter,
after which, commencing on March 31, 2015 and on the last day of each quarter
thereafter until the quarter ending on December 31, 2017, Borrower will make
quarterly payments of interest accrued on the Note during the prior quarter plus
$8,750 of principal to Lender, after which, commencing on March 31, 2018 and on
the last day of each quarter thereafter, Borrower will make quarterly payments
of interest accrued on the Note during the prior quarter plus $61,250 of
principal to Lender with the final payment due and payable on December 31, 2018
(the "Maturity Date"). No later than fifteen (15) days after each payment due
date, Borrower will pay each payment to the Lender by depositing the appropriate
payment amount into an account designated by the Lender in writing delivered to
the Borrower prior to the execution of this Note.
2. RIGHT OF PREPAYMENT. Borrower has the right to prepay all or any
portion of this Note at any time without penalty upon at least ten days prior
written notice to Lender, provided, that Borrower must apply any prepayment
proposed for this Note among all four convertible promissory notes issued by the
Borrower pursuant to Section 1.2 of that certain Stock Purchase Agreement, dated
October 31, 2013 by and between Solar United Networks, Inc., a California
corporation ("SUN"), the Borrower, as buyer, and the four above referenced
convertible promissory note holders, as sellers (the "Stock Purchase
Agreement"), each on a pro rata basis in a ratio, the numerator of which is the
outstanding balance of each of those notes on the date of delivery of written
notice by the Borrower to the Lender of its proposed prepayment, and the
denominator of which is the total aggregate outstanding balance of all four
notes combined. Such prepayments shall be applied first to interest and then to
principal.
3. CONVERSION. Lender has the right, at any time after the Effective
Date, to convert all or part of the outstanding balance of the Note into shares
of fully paid and non-assessable common stock of the Borrower (the "Common
Stock"). The conversion price shall be $0.02 per share (the "Initial Conversion
Price") until March 30, 2015, and thereafter the conversion price shall be the
greater of (a) the Initial Conversion Price or (b) Fifty Percent (50%) of the
average closing price of the Common Stock as reported by Bloomberg for the ten
(10) consecutive trading days following the submission of a notice in writing
signed by the Lender of his intent to convert. The Initial Conversion Price
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recapitalizations, reclassifications, and similar events of the Borrower. With
respect to the public resale of the Common Stock, the Lender shall at all times
be subject to the restrictions, conditions and requirements applicable to an
affiliate of the Borrower, as described in Rule 144 of the Securities Act of
1933, as amended, even if the Lender is no longer a technical affiliate of the
Borrower.
4. BORROWER RIGHT TO FORCE CONVERSION AND RIGHT OF OFFSET. In the event
of any material breach by the Lender of the Stock Purchase Agreement, Borrower
will have the right to offset the amount of damages incurred by the Borrower as
a result of such breach against the amounts owed by it on this Note, subject to
customary dispute resolution available at law or in equity. In the event that
the Lender (a) voluntarily resigns as an employee of the Borrower, unless the
Lender's employment with SUN is terminated by Lender due to death, disability
rendering the Lender unable to work, or a constructive termination of the
Lender's employment by the Borrower, or (b) is involuntarily terminated as an
employee of the Borrower for "cause" ("Terminating Lender"), in either case
prior to the "End of Term" as defined in Section 2 of the Stock Purchase
Agreement, then the Borrower will have the right, exercisable at any time for a
period of one year after such termination, to cause an immediate conversion of
up to the entire outstanding balance of the Terminating Lender's Note into
shares of the Borrower's common stock in accordance with the terms and
conditions of this Note; provided, that all common stock issued to the
Terminating Lender pursuant to such a conversion will be subject to a two year
lock-up whereby the Terminating Lender will not be able to transfer,
hypothecate, assign or sell any of those shares for two years after receipt of
them. For the purpose of this Note, "cause" has the meaning ascribed to it in
Section 3.3 of the Stock Purchase Agreement. This Note is not secured.
5. DEFAULT. Any of the following shall constitute a default ("Event of
Default") by Borrower hereunder:
(a) The failure of Borrower to make any payment of principal or
interest required hereunder within fifteen (15) days of the due date
for such payment; or
(d) The failure of Borrower to fully perform any other material
covenants and agreements under this Note and continuance of such
failure for a period of forty-five (45) days after written notice of
the default by Lender to the Borrower.
Upon the occurrence of (a) an Event of Default under Section 5(a) of
this Note that is not cured within forty five (45) days of the due date for the
defaulted payment, (b) an Event of Default under Section 5(b) of this Note, (c)
a sale for cash or notes and no other securities of all or substantially all of
the assets of the Borrower or of SUN, or (d) a sale for cash or notes and no
other securities of all or substantially all of the issued and outstanding
voting capital stock of the Borrower or SUN resulting in a change of control of
the Borrower or SUN, or (e) the filing of bankruptcy proceedings for the
Borrower that is not dismissed within sixty (60) days of the filing, Lender may,
at his option, declare immediately due and payable the entire unpaid principal
sum of this Note together with all accrued and unpaid interest owing at the time
-2-
of such declaration pursuant to this Note. Furthermore, in the Event of Default
under Section 5(a) of this Note, Lender will have the right at any time to
convert the entire amount of the defaulted payment into Borrower's Common Stock
at the Initial Conversion Price, if the conversion is voluntary but not if it is
forced under Section 4 of this Note.
6. COSTS OF COLLECTIONS. Lender shall be entitled to collect reasonable
attorney's fees and costs from Borrower, as well as other costs and expenses
reasonably incurred, in curing any default or attempting collection of any
payment due on this Note.
7. INSPECTION RIGHTS. The Lender, individually or through his agent,
shall have the right, upon reasonable notice and at his expense, to review and
inspect the books and records of the Borrower at Borrower's office during
reasonable business hours.
8. PAYMENT AND PLACE OF PAYMENT. This Note shall be payable in lawful
money of the United States. All payments on this Note are to be made or given to
Lender at the address provided to Borrower or to such other place as Lender may
from time to time direct by written notice to Borrower.
9. WAIVER. Borrower, for itself and its successors, transferors and
assigns, waives presentment, dishonor, protest, notice of protest, demand for
payment and dishonor in nonpayment of this Note, bringing of suit or diligence
of taking any action to collect any sums owing hereunder or in proceeding
against any of the rights and properties securing payment hereunder.
10. SEVERABILITY. If any provision of this Note or the application
thereof to any persons or entities or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Note shall not be deemed
affected thereby and every provision of this Note shall be valid and enforceable
to the fullest extent permitted by law.
11. NO PARTNER. Lender shall not become or be deemed to be a partner or
joint venturer with Borrower by reason of any provision of this Note. Nothing
herein shall constitute Borrower and Lender as partners or joint venturers or
require Lender to participate in or be responsible or liable for any costs,
liabilities, expenses or losses of Borrower.
12. NO WAIVER. The failure to exercise any rights herein shall not
constitute a waiver of the right to exercise the same or any other right at any
subsequent time in respect of the same event or any other event.
13. NONRECOURSE. In the event that the Borrower defaults on this Note,
Lender shall look solely to the Borrower for repayment and none of the members,
officers, directors or affiliates of the Borrower shall have any personal
liability for payment hereunder.
14. ASSIGNABILITY. The Lender may not assign this Note without the
express prior written approval of the Borrower, which it may grant or withhold
in its sole and absolute discretion. This Note shall be binding upon the
Borrower and its successors and shall inure to the benefit of the Lender and his
successors and assigns, if any.
-3-
15. GOVERNING LAW AND VENUE. This Note shall be governed by and
construed solely in accordance with the laws of the State of California without
giving effect to applicable conflict of laws provisions. Borrower and Lender
agree that the sole jurisdiction and venue for any litigation arising out of the
Note involving Borrower or Lender shall be in the appropriate federal or state
court located in Santa Xxxxxxx County, California.
16. ENTIRE AGREEMENT. This Note and the Stock Purchase Agreement
contain the entire understanding and agreement between the parties with respect
to the subject matter herein and may not be altered or amended except by the
written agreement of the parties.
17. COUNTERPARTS. This Note may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile executions of
this Note shall be deemed original.
[SIGNATURES ON FOLLOWING PAGE.]
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IN WITNESS WHEREOF, Borrower and Lender have executed this Note on
October 31, 2013, to be effective as of the date first hereinabove written.
BORROWER: SOLAR3D, INC., a Delaware corporation
By:
------------------------------------------------
Xxxxx X. Xxxxxx, Chief Executive Officer
LENDER:
----------------------------------------------------
Xxxxxxx Podnesbesnyy, Individually
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EXHIBIT B
DISCLOSURE SCHEDULES
