Item 1.01
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Entry into a Material Definitive Agreement.
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On February 23, 2021, CleanSpark, Inc., a Nevada corporation (the
“Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Solar Watt
Solutions, Inc., a California corporation (“SWS”), the Company, CLSK SWS Merger Sub, Inc., a Nevada corporation and
a wholly-owned subsidiary of the Company (“Merger Sub”), and the owners of SWS (collectively, the “Sellers”)
(the “Merger”). The Merger closed on February 24, 2021.
At the closing, Merger Sub merged with and into SWS, and SWS survived
the Merger, continuing its existence as a wholly-owned subsidiary of the Company. In exchange, at closing, the Company issued (i)
477,703 shares of restricted common stock, par value $0.001 per share of the Company (the “Shares”), valued at $15,640,000
based on the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding
the date of the Merger Agreement or $32.74 per share, to Sellers, of which: (a) 167,685 Shares valued at $5,490,000 would be fully
earned on closing, and (b) an additional 310,018 Shares (the “Holdback Shares”) valued at $10,150,000 being issued
to escrow and subject to holdback pending Sellers’ satisfaction of certain future milestones (collectively, the “Stock
Merger Consideration”), with all such Holdback Shares subject to a lock up of no less than 180 days and a leak out of no
more than 10% of average daily trading value of the prior 30 days for a period of 36 months following the closing, and (ii) up
to $3,850,000 in cash (the “Cash Merger Consideration” and together with the Stock Merger Consideration, the “Merger
Consideration”) was remitted to the Sellers, of which: (c) $1,350,000 was remitted to Sellers on a pro rata basis at closing,
less payment of $500,000 in Sellers’ debt at closing, (d) $200,000 in cash was held back by the Company for a period of nine
months to satisfy potential damages from indemnification claims and any amounts owed pursuant to post-closing adjustments, (e)
an additional $100,000 in cash was held back by the Company for a period of 90 days to satisfy any amounts owed pursuant to post-closing
adjustments, and (f) up to $2,500,000 in cash was held back by the Company pending the Sellers’ satisfaction of certain future
milestones.
The Merger Consideration is subject to downward adjustment based
on post-closing adjustments to closing cash, indebtedness, and transaction expenses of SWS within 90 days of closing.
The Merger Agreement contains standard representations, warranties,
covenants, indemnification and other terms customary in similar transactions.
The foregoing description of the Merger Agreement and the transactions
contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement,
a copy of which is attached hereto as Exhibit 10.1, and is incorporated herein by reference.