Item
1.01. Entry into a Material Definitive Agreement.
Merger
Agreement
On
August 10, 2020, The Peck Company Holdings, Inc., a Delaware corporation (the “Parent”), entered into an Agreement
and Plan of Merger dated August 10, 2020 by among the Parent, Sunworks, Inc., a Delaware corporation (the “Company”),
and Peck Mercury, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”) (the “Merger
Agreement”). All capitalized terms have the meanings ascribed in the Merger Agreement.
The
Merger Agreement provides that upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and
into the Company (the “Merger”), with the Company as the surviving corporation in the Merger and becoming a wholly-owned
subsidiary of Parent (the “Surviving Corporation”). At the effective time of the Merger (the “Effective Time”),
each outstanding share of Company common stock, par value $0.001 per share (the “Company Common Stock”), will be converted
into the right to receive 0.185171 (the “Exchange Ratio”) shares of Parent common stock, par value $0.0001 per share
(the “Parent Common Stock”), as may be adjusted pursuant to the terms of the Merger Agreement, and,
if applicable, an amount in cash, without interest, rounded to the nearest whole cent, in lieu of any fractional share interest
in Parent Common Stock to which such stockholder otherwise would have been entitled. The shares of Parent Common Stock to be issued
in connection with the Merger will be listed on the NASDAQ Stock Market. The Merger is intended to qualify as a reorganization
for U.S. federal income tax purposes.
At
the Effective Time, each outstanding option granted by the Company to purchase shares of Company Common Stock under the Company’s
stock incentive plans (the “Company Stock Options”), whether vested or unvested, will automatically be terminated,
in accordance with the terms of the Company’s stock incentive plans.
As
of August 6, 2020, Mr. Douglas Rose resigned as a Member of the Board of Directors of Parent. Four
Directors are serving on the Parent Board of Directors as at the date of the Merger Agreement. The Merger Agreement provides that
at the Effective Time Parent will increase the number of Directors that comprise the Parent Board of Directors to seven, and fill
vacancies with three Directors designated by the Company’s Board of Directors.
The
Merger Agreement contains customary representations and warranties from each of Parent and the Company, and each party has agreed
to customary covenants, including, among others, covenants relating to the conduct of the Company’s and Parent’s businesses
during the interim period between the execution of the Merger Agreement and the Effective Time and the Company’s and Parent’s
respective obligations to call a meeting of their stockholders to approve the Merger Agreement and the transactions contemplated
thereby, their obligations to, subject to certain exceptions, recommend that their stockholders approve the Merger Agreement and
the transactions contemplated thereby, and their non-solicitation obligations relating to alternative acquisition proposals.
The
completion of the Merger is subject to customary conditions, including, among others, (1) the approval of the Merger Agreement
and the transactions contemplated thereby, as applicable, by the Company’s stockholders and Parent’s stockholders,
(2) authorization for listing on the Nasdaq Stock Market of the shares of Parent Common Stock to be issued in the Merger, (3)
the effectiveness of the Registration Statement on Form S-4 (the “Registration Statement”) to be filed with the Securities
and Exchange Commission (the “SEC”) to register the Parent Common Stock to be issued in the Merger, and (4) the absence
of any order, decree or injunction preventing the completion of the Merger. Each party’s obligation to complete the Merger
is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations
and warranties of the other party, unless such inaccuracy would not reasonably be expected to have, individually or in the aggregate,
a material adverse effect, (ii) performance in all material respects by the other party of its obligations under the Merger Agreement
and (iii) the absence of a material adverse effect of the other party.
The
Merger Agreement provides certain termination rights for both Parent and the Company and further provides that a termination fee
of $375,000 will be payable by the Company to Parent, or by Parent to the Company, upon termination of the Merger Agreement under
certain circumstances.
Pursuant
to the terms of the Merger Agreement, Parent entered into Stockholder Lockup Agreements with certain stockholders of Parent, Mr.
Jeffrey Peck and the Mykilore Trust (Frederick A. Myrick, Jr., Trustee), which restrict the ability of such stockholders to dispose
of certain Parent Common Stock held by such stockholders for a period of 180 days after the Merger without the prior written consent
of Parent (subject to certain exceptions set forth in the Lockup Agreements). The foregoing description of the Lockup Agreements
does not purport to be complete, and is qualified in its entirety by reference to the full text of the Lockup Agreements. Mr.
Peck’s Lockup Agreement is attached hereto as Exhibit 10.3 and is incorporated herein by reference. The Mykilore Trust (Frederick
A. Myrick, Jr., Trustee) Lockup Agreement is attached hereto as Exhibit 10.4 and is incorporated herein by reference.
The
Merger Agreement was unanimously approved by the Board of Directors of both Parent and the Company.
The
foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to
the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The representations,
warranties and covenants of each party set forth in the Merger Agreement have been made only for purposes of, and were and are
solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties,
including being qualified by confidential disclosures made for purposes of allocating contractual risk between Parent and the
Company instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual
state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact.
In addition, such representations and warranties (1) will not survive consummation of the Merger, unless otherwise specified therein,
and (2) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover,
information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger
Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement,
and not to provide investors with any other factual information regarding Parent or the Company, their respective affiliates or
their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the
other information regarding Parent, the Company, their respective affiliates and their respective businesses, that will be contained
in, or incorporated by reference into, the Registration Statement that will include a joint proxy statement of the Company and
Parent and a prospectus of Parent, as well as in the Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and other filings
that each of Parent and the Company makes with the SEC.
Voting
Agreements
In
connection with the Merger Agreement, Mr. Jeffrey Peck, a stockholder of Parent, entered into a Voting Agreement with the Company
(the “Peck Voting Agreement”). Mr. Peck beneficially owns or can direct the vote (pursuant to a voting agreement)
of approximately 46.69% of the outstanding shares of Parent Common Stock. The Peck Voting Agreement requires, among other obligations,
that Mr. Peck vote the shares of Parent Common Stock in which he controls voting rights in favor of the Merger and the other transactions
contemplated by the Merger Agreement. Mr. Peck is further prohibited from voting the shares in which he controls voting rights
for alternative acquisition proposals and from, directly or indirectly, assigning, selling, transferring or otherwise disposing
of his shares of Parent Common Stock, subject to certain exceptions.
In
connection with the Merger Agreement, the Mykilore Trust (Frederick A. Myrick, Jr., Trustee), a stockholder of Parent, entered
into a Voting Agreement with the Company (the “Mykilore Voting Agreement”). The Mykilore Trust beneficially owns approximately
13.28% of the outstanding shares of Parent Common Stock. The Voting Agreement requires, among other obligations, that the Mykilore
Trust vote the shares of Parent Common Stock in which it has voting rights in favor of the Merger and the other transactions contemplated
by the Merger Agreement. The Mykilore Trust is further prohibited from voting its shares for alternative acquisition proposals
and from, directly or indirectly, assigning, selling, transferring or otherwise disposing of its shares of Parent Common Stock,
subject to certain exceptions.
The
foregoing description of the Voting Agreements does not purport to be complete and is qualified in its entirety by reference to
the full text of the Voting Agreements. The Peck Voting Agreement is attached hereto as Exhibit 10.1 and is incorporated herein
by reference. The Mykilore Trust Voting Agreement is attached hereto as Exhibit 10.2.