Exhibit 10.3

 

EXECUTION VERSION

 

 

 

INVESTMENT AGREEMENT

 

by and between

 

EACH INVESTOR IDENTIFIED ON THE SIGNATURE PAGES HERETO (THE

 

“INVESTOR”),

 

AND

 

rcs capital corporation

 

Dated as of August 6, 2015

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page       ARTICLE I TRANSACTION 5 1.1 Issuance 5 1.2 Purchase 5 1.3 The
Closing 5 1.4 Closing Deliveries 5 1.5 Reorganization 6       ARTICLE II
REPRESENTATIONS AND WARRANTIES PERTAINING TO THE BUSINESS 6 2.1 Organization,
Power 6 2.2 Authority 7 2.3 Non-Contravention 7 2.4 Consents 8 2.5
Capitalization 8 2.6 Company SEC Documents; Internal Controls 9 2.7 Litigation
11 2.8 Compliance with Laws; Permits and Licenses 12 2.9 Absence of Certain
Changes; No Undisclosed Liabilities 13 2.10 Personnel and Employee Benefits
Matters 14 2.11 Taxes 16 2.12 Properties and Assets 17 2.13 Material Agreements
18 2.14 Intellectual Property and IT Systems 18 2.15 Data Protection and Privacy
19 2.16 Broker-Dealer Matters 19 2.17 Municipal Advisor Matters 21 2.18
Investment Adviser Compliance Matters 22 2.19 Funds 25 2.20 Insurance 27 2.21
Affiliate Arrangements 27 2.22 Information Supplied 28 2.23 Brokers 28 2.24
Compliance with Environmental Law 28 2.25 No Other Representations and
Warranties 28       ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
28 3.1 Organization 28 3.2 Authority 29 3.3 Non-Contravention 29

 

 

 

 

3.4 Consents, etc 29 3.5 Available Funds 30 3.6 Investment Intent 30 3.7 No
Other Representations and Warranties 30       Article IV Covenants 30 4.1
Conduct of Business 30 4.2 Access; Confidentiality 31 4.3 Reasonable Best
Efforts; Regulatory Approvals; Client Consents 32 4.4 Public Announcements;
Confidentiality 32 4.5 Supplemental Disclosure 33 4.6 Listing Undertaking 33 4.7
Certificate of Designation 35 4.8 Board of Directors 35 4.9 NYSE Rules;
Reservation of Shares of Common Stock 35 4.10 Investor Undertaking 35 4.12
Expenses; Transfer Taxes 35 4.13 Further Assurances 35       Article V
Conditions to the Closing 36 5.1 Mutual Conditions 36 5.2 Additional Conditions
to the Obligations of the Investors 36 5.3 Additional Conditions to the
Obligations of the Company 37       Article VI Termination 38 6.1 Termination 38
6.2 Termination Right 39 6.3 Effect of Termination 40       Article VII
Indemnification 40 7.1 Indemnification by the Company 40 7.2 Indemnification by
the Investor 41 7.3 Indemnification Procedures 43 7.4 General 44       Article
VIII General Provisions 45 8.1 Survival 45 8.2 Notices 46 8.3 Interpretation 47
8.4 Amendment and Modification; Waiver 47 8.5 Entire Agreement 48 8.6 Disclosure
Letters 48 8.7 Third Party Beneficiaries 48 8.8 Specific Performance 48 8.9
Assignment; Binding Effect 49

 

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8.10 Governing Law 49 8.11 Jurisdiction; Waiver of Jury Trial 49 8.12
Severability 49 8.13 Counterparts 50       ARTICLE IX DEFINITIONS 50

 

EXHIBITS

 

Exhibit A – Form of Certificate of Designation

Exhibit B – Purchased Shares

 

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INVESTMENT AGREEMENT

 

This INVESTMENT AGREEMENT, dated as of August 6, 2015 (this “Agreement”), is
made by and between each investor identified on the signature pages hereto (the
“Investor”), and RCS Capital Corporation, a Delaware corporation (the
“Company”). Capitalized terms used and not otherwise defined in this Agreement
have the meanings specified in Article IX.

 

RECITALS

 

A. The Company has (i) 300,000,000shares of authorized Class A common shares,
$0.001 par value per share (the “Class A Common Stock”), of which, at the close
of business on August 5, 2015, 77,151,089 shares of Class A Common Stock were
issued and outstanding, and (ii) 100,000,000 shares of authorized Class B common
shares, $0.001 par value per share (the “Class B Common Stock” and together with
the Class A Common Stock, the “Common Stock”), of which one (1) Class B share is
issued and outstanding (the “Class B Share”) and owned, beneficially and of
record, by RCAP Holdings, LLC, and (iii) 100,000,000 shares of authorized
preferred stock, $0.001 par value per share (the “Preferred Stock”), of which,
as of the date hereof, (x) 5,800,000 shares of Series B preferred stock (the
“Series B Preferred Stock”) are authorized, issued and outstanding and 80% of
which are owned, beneficially and of record, by Luxor Capital Group, LP together
with its affiliates and its subsidiaries (“Luxor”) and (y) 4,400,000 shares of
Series C preferred stock (the “Series C Preferred Stock”) are authorized, issued
and outstanding and owned, beneficially and of record, by Luxor.

 

B. The Company intends to issue and sell to Investors, and Investors intend to
purchase from the Company, 500,000 shares of a newly created series of
convertible preference stock having the designation, powers, preferences and
rights set forth in a certificate of designation in the form attached as Exhibit
A (the “Certificate of Designation” and such series of preferred stock, the
“Series D-2 Preferred Stock”).

 

C. Concurrently with the execution of this Agreement, AMH Holdings (Cayman),
L.P., a Cayman Islands exempted limited partnership (“AMH”) has entered into a
Transaction Agreement with AR Capital, LLC, a Delaware limited liability company
(“ARC”), and AR Global, LLC, a Delaware limited liability company (“Newco”),
pursuant to which, and subject to the terms and conditions thereof, (i) ARC
shall transfer to Newco all of the assets (including equity interests in
Subsidiaries) used in the conduct of its business, other than certain excluded
assets, and Newco shall assume certain liabilities relating to ARC’s business,
in exchange for 100% of the equity units of Newco and (ii) ARC shall transfer to
AMH 60% of the equity units of Newco in exchange for the consideration set forth
therein (the “ARC Transaction Agreement”).

 

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D. Concurrently with the execution of this Agreement, the Company has entered
into a Membership Interest Purchase Agreement, with RCS Capital Holdings, LLC
(“RCS Holdings”) and Apollo Management Holdings, L.P. (“AMH”) pursuant to which,
and subject to the terms and conditions thereof, the Company and RCS Holdings
shall sell to AMH (i) 100% of the authorized, issued and outstanding equity
securities of Realty Capital Securities, LLC, (ii) 100% of the authorized,
issued and outstanding equity securities of American National Stock Transfer,
LLC, and (iii) 100% of the authorized, issued and outstanding equity securities
of Strategic Capital Management Holdings, LLC (the “MIPA”).

 

E. Concurrently with the execution of this Agreement, the Company has entered
into an investment agreement with Apollo, pursuant to which Apollo shall
purchase a specified number of series D-1 preferred stock (such series of
preferred stock, the “Series D-1 Preferred Stock” and together with the Series
D-2 Preferred Stock, the “Series D Preferred Stock”) from the Company (the
“Apollo Transaction”).

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:

 

ARTICLE I

TRANSACTION

 

1.1           Issuance. Prior to the Closing, the Company shall create or cause
to be created the Series D-2 Preferred Stock, which shall have the rights,
powers and preferences set forth in the Certificate of Designation.

 

1.2           Purchase. On the terms and subject to the conditions set forth in
this Agreement, the Company agrees to sell to each Investor, and each Investor
agrees to purchase severally not jointly from the Company, at the Closing, the
number of shares of Series D-2 Preferred Stock set forth opposite Investor’s
name on Exhibit B, at the Price Per Share. The shares of Series D-2 Preferred
Stock to be purchased by each Investor pursuant to this Section 1.2 are herein
called the “Purchased Shares”.

 

1.3           The Closing. The closing of the purchase of the Purchased Shares
(the “Closing”) shall take place at the offices of Debevoise & Plimpton LLP,
919 Third Avenue, New York, New York 10022, at 10:00 a.m. local time on the
fifth Business Day following the Closing Condition Satisfaction Date (subject to
the satisfaction or waiver of those conditions that by their terms are to be
satisfied by actions taken at the Closing), provided that the parties may agree
in writing on another time, date or place for the Closing. The date on which the
Closing actually occurs is referred to hereinafter as the “Closing Date”.

 

1.4           Closing Deliveries. At the Closing:

 

(a)          the Company shall issue to each Investor the number of Purchased
Shares set forth opposite such Investor’s name on Exhibit B as evidenced by one
or more certificates dated the Closing Date and bearing appropriate legends as
hereinafter provided for, registered in the register of shareholders of the
Company in each Investor’s name.

 

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(b)          each Investor shall severally and not jointly pay to the Company by
wire transfer of immediately available funds to the account of the Company
designated by the Company to each Investor in writing at least three Business
Days prior to the Closing Date an amount equal to the number of the Purchased
Shares multiplied by the Per Share Price (the “Purchase Price”);

 

(c)          the Company shall have delivered to each Investor a statement,
meeting the requirements of Section 1.897-2 of the Treasury Regulations, to the
effect that the Company is not a “United States real property holding
corporation” within the meaning of Section 897 of the Code and the Treasury
Regulations thereunder; and

 

(d)          Investor shall have received from Proskauer Rose LLP, (and/or
Delaware counsel) to the Company, a legal opinion addressed to each Investor,
dated as of the Closing Date, in a form reasonably acceptable to each Investor;

 

(e)          each party shall deliver, or shall cause to be delivered, to each
other party, as applicable, a copy of the Ancillary Agreements, duly executed by
such party or by its Subsidiaries or Affiliates who are party thereto.

 

1.5           Use of Proceeds. The Company shall use the proceeds from the sale
of the Purchased Shares hereunder, the Apollo Transaction and cash on hand of
the Company as the Board of Directors of the Company determines at a meeting to
be held promptly following the issuance of the Purchased Shares.

 

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in (i) the corresponding section of the Company Disclosure
Letter and (ii) the Declarative Portions of the Company’s Recent SEC Filings,
the Company represents and warrants to each Investor as follows:

 

2.1           Organization, Power. The Company and each of its Subsidiaries is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and, where applicable, is duly qualified or
licensed as a foreign limited liability company, corporation or other business
entity to do business and is in good standing in each jurisdiction in which the
nature of its business or the character or location of the properties, assets
and rights owned, leased or operated by it makes such qualification or license
necessary, and the Company and each of its Subsidiaries has the requisite
limited liability company, corporate or similar power and authority necessary to
own all of its properties, assets and rights and to carry on its business as it
is now being conducted, except where any failure to be so qualified, licensed or
in good standing or to have such power or authority would not, individually or
in the aggregate, be Material to a Reasonable Investor. Neither the Company nor
any of its Subsidiaries is in material violation of any provision of its
Organizational Documents.

 

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2.2           Authority. The Company has the requisite power and authority to
execute and deliver this Agreement and the Registration Rights Agreement, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by the
Company of this Agreement and the Registration Rights Agreement, the performance
of its obligations hereunder and thereunder and its consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate or similar action of the
Company and no other corporate or similar action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the Registration Rights Agreement, the performance by it of its
obligations hereunder and thereunder and its consummation of the transactions
contemplated hereby and thereby. This Agreement entered into as of the date
hereof has been, and at the Closing the Registration Rights Agreement to which
the Company is party will be, duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by the other
parties thereto, constitute legal and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as (a)
the enforceability hereof or thereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and (b) the availability of equitable remedies may be limited by
equitable principles of general applicability.

 

2.3           Non-Contravention. The execution and delivery by the Company of
this Agreement and the Registration Rights Agreement do not, and the
consummation of the transactions contemplated hereby and thereby and the
performance of its obligations hereunder and thereunder will not (with or
without the giving of notice, the termination of any grace period or both): (a)
violate, conflict with, or result in a breach or default under any provision of
the Organizational Documents of the Company or (b) assuming that all consents,
authorizations, orders or approvals of, filings or registrations with, and
notices to, each Governmental Authority referred to in Section 2.4(a), have been
obtained or made, (i) violate any Applicable Law, (ii) violate, result in a
violation or breach by the Company of, or cause the termination, acceleration or
cancellation or the loss, impairment or alteration of any right or benefit
(including with respect to Intellectual Property) under, or conflict with or
constitute a default (or give rise to a right of termination, acceleration,
cancellation or the loss, impairment or alteration of any right or benefit
(including with respect to Intellectual Property) under, any mortgage,
indenture, lease, license, note, website terms of use, privacy policy or
statement, contract or agreement (each, whether oral or written, a “Contract”)
to which the Company is a party or by which the Company or any of its properties
is bound, whether with the passage of time, giving of notice, or both or
(iii) result in the creation of any Lien on any of the assets or properties of
the Company, except, in the cases of clauses (i), (ii) and (iii), for any such
violation, breach, termination, acceleration, conflict, default or Lien as would
not, individually or in the aggregate, be Material to a Reasonable Investor.

 

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2.4           Consents.

 

(a)          Except as described in Section 2.4 of the Company Disclosure
Letter, no consent, authorization, order or approval of, filing or registration
with, or notice to, any Governmental Authority (collectively, “Governmental
Approvals”) is required for the execution and delivery by the Company of this
Agreement and the Registration Rights Agreement to which it is a party, the
performance by it of its obligations hereunder and thereunder and its
consummation of the transactions contemplated hereby and thereby, except in any
such case for any such Governmental Approval which is required solely by reason
of the specific regulatory status of each Investor or its respective Affiliates
or the failure of which to be obtained or made would not, individually or in the
aggregate, be Material to a Reasonable Investor.

 

(b)          No consent, authorization, approval or waiver from any party (other
than a Governmental Authority) to any Contract (collectively, “Third Party
Consents”) is required for the execution and delivery by the Company of this
Agreement or the Registration Rights Agreement, the performance by it of its
obligations hereunder and thereunder and its consummation of the transactions
contemplated hereby or thereby, except in any such case for any such Third Party
Consent the failure of which to be obtained or made would not, individually or
in the aggregate, be Material to a Reasonable Investor.

 

2.5           Capitalization.

 

(a)          The Company. The authorized, issued and outstanding capital stock
of the Company (but without giving effect to the issuance of shares of the
Series D Preferred Stock and the shares of Class A Common Stock issuable upon
conversion thereof) is as set forth in Recital A, and the ownership of the Class
B Share, the shares of Series B Preferred Stock and the shares of Series C
Preferred Stock is as set forth in Recital A. All of the outstanding shares of
Common Stock and Preferred Stock are validly issued, fully paid and
nonassessable, were issued in compliance with all Applicable Laws or exemptions
therefrom and have not been issued in violation of any preemptive or similar
rights. At the Closing, the Series D-2 Preferred Stock will have been duly
authorized, and a sufficient number of shares of Class A Common Stock will have
been duly authorized and validly reserved for issuance upon conversion of the
shares of Preferred Stock (including the Series D-2 Preferred Stock) outstanding
after giving effect to the Closing. The Purchased Shares (when issued and paid
for at Closing) and the shares of Class A Common Stock issuable upon conversion
of the Purchased Shares (when so converted) will have been validly issued, fully
paid and nonassessable, will have been issued in compliance with all Applicable
Laws or exemptions therefrom and will not have been issued in violation of any
preemptive or similar rights. At Closing, each Investor will own the Purchased
Shares, beneficially and of record, free and clear of any Lien (other than Liens
arising as a result of this Agreement or under applicable securities laws).
Except as set forth above, there are no outstanding securities convertible into
or exchangeable or exercisable for any shares of capital stock or other equity
interests of the Company, any rights to subscribe for or to purchase, or any
agreements providing for the issuance (contingent or otherwise) of any shares of
capital stock or other equity interests of the Company or any rights to receive
payments based on the value of, or payments in respect of, any shares of capital
stock or other equity interests of the Company. The Company is not a party to
any right of first refusal, right of first offer, proxy, voting agreement,
voting trust, or shareholders agreement with respect to the sale or voting of
any shares of capital stock or other equity interests of the Company or any
securities convertible into or exchangeable or exercisable for any shares of
capital stock or other equity interests of the Company.

 

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(b)          Subsidiaries. All outstanding shares of capital stock or other
equity interests of each of the Company’s Subsidiaries are validly issued, fully
paid and nonassessable, were issued in compliance with all Applicable Laws or
exemptions therefrom and have not been issued in violation of any preemptive or
similar rights, and are owned, directly or indirectly, by the Company. There are
no outstanding securities convertible into or exchangeable or exercisable for
any shares of capital stock or other equity interests of any of the Company’s
Subsidiaries, any rights to subscribe for or to purchase, or any agreements
providing for the issuance (contingent or otherwise) of any shares of capital
stock or other equity interests of any of the Company’s Subsidiaries, or any
rights to receive payments based on the value of, or payments in respect of, any
shares of capital stock or other equity interests of any of the Company’s
Subsidiaries. Neither the Company nor any of the Company’s Subsidiaries is a
party to any right of first refusal, right of first offer, proxy, voting
agreement, voting trust, registration rights agreement, limited liability
company agreement or shareholders agreement with respect to the sale or voting
of any shares of capital stock or other equity interests of the Company’s
Subsidiaries, or any securities convertible into or exchangeable or exercisable
for any shares of capital stock or other equity interests of the Company’s
Subsidiaries.

 

2.6           Company SEC Documents; Internal Controls.

 

(a)          Since January 1, 2014, the Company has timely filed or otherwise
transmitted all material reports, registrations, documents, filings, statements
and submissions, together with any amendments thereto, required to be filed or
furnished by the Company with or to the SEC (the “Company SEC Documents”). As of
their respective dates, or if amended prior to the date hereof, as of the date
of the last such amendment, the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the applicable rules and regulations promulgated thereunder,
and none of the Company SEC Documents at the time it was filed or furnished (or,
if amended prior to the date hereof, as of the date of the last such amendment)
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is subject to the periodic reporting
requirements of the Exchange Act or is otherwise required to file any reports,
registrations, documents, filings, statements or submissions with the SEC. There
are no outstanding or unresolved comments in comment letters received from the
SEC by the Company. To the Company’s knowledge, none of the Company SEC
Documents is the subject of any ongoing SEC review, outstanding SEC comment or
outstanding SEC investigation.

 

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(b)          The consolidated financial statements (including all related notes
and schedules) of the Company included in the Company SEC Documents fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the respective dates thereof and
their consolidated results of operations and consolidated cash flows for the
respective periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments, none of which is material, individually or in
the aggregate, and to the absence of notes therein) and have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and applicable
accounting requirements and published rules and regulations of the SEC.

 

(c)          The Company is in compliance in all material respects with the
applicable provisions of the Sarbanes-Oxley Act of 2002 (as amended, the
“Sarbanes-Oxley Act”) and the listing application and other rules of the NYSE.
Since January 1, 2014, neither the Company nor any of its Subsidiaries has made
any prohibited loans to any executive officer of the Company (as defined in Rule
3b-7 under the Exchange Act) or director of the Company or any of its
Subsidiaries. There are no outstanding loans or other extensions of credit made
by the Company or any of its Subsidiaries to any executive officer (as defined
in Rule 3b-7 under the Exchange Act) or director of the Company.

 

(d)          The Company has established and maintains a system of disclosure
controls and procedures (as such term is defined in paragraph (e) of Rule 13a-15
promulgated under the Exchange Act) as required by Rule 13a-15 promulgated under
the Exchange Act. Such disclosure controls and procedures are designed to ensure
that information required to be disclosed by the Company in periodic reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC.

 

(e)          Since January 1, 2014, the Company’s principal executive officer
and its principal financial officer have disclosed, based on their evaluation of
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15(d)-15(f)), to the Company’s auditors and the audit committee of
the board of directors of the Company (i) all significant deficiencies and
material weaknesses in the design or operation of internal controls over
financial reporting that are reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information and
(ii) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company’s internal control over
financial reporting.

 

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(f)           The Company has provided to each Investor a copy of the most
recent draft of its Quarterly Report on Form 10-Q (the “Draft 10-Q”) for the
quarter ended June 30, 2015.

 

2.7           Litigation.

 

(a)          Section 2.7(a) of the Company Disclosure Letter contains a true,
complete and correct list, since January 1, 2014 through the date of this
Agreement, of all pending and, to the Company’s Knowledge, threatened legal,
administrative, arbitral or other proceeding (including disciplinary
proceedings), action, cease and desist letter, offer to license in lieu of
further action, demand, claim, suit or governmental or regulatory investigation
or inquiry of any nature (collectively, “Proceedings”) against or relating to
the Company or any of its Subsidiaries or any of their properties, assets or
businesses. As of the date hereof, there is no Proceeding pending or, to the
Company’s Knowledge, threatened against or relating to the Company or any of its
Subsidiaries or any of their respective properties, assets or businesses
(including the Business) that would, individually or in the aggregate, be
Material to a Reasonable Investor, or prohibit or materially impair the ability
of the Company to consummate the transactions contemplated by this Agreement or
any Ancillary Agreement or perform its obligations hereunder or thereunder on a
timely basis.

 

(b)          Section 2.7(b) of the Company Disclosure Letter contains a true,
complete and correct list of all material judgments, decrees, injunctions or
orders of any Governmental Authority to which the Company or its Subsidiaries is
or was subject or any of its properties is or was bound, in each case from
January 1, 2014 through the date of this Agreement. As of the date hereof, there
are no settlement agreements or similar written agreements with any Governmental
Authority or outstanding judgments, decrees, injunctions or orders of any
Governmental Authority to which the Company or any of its Subsidiaries is
subject or any of their respective properties are bound that would, individually
or in the aggregate, be reasonably expected to (x) be Material to a Reasonable
Investor, or (y) prohibit or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement or any Ancillary
Agreement or perform its obligations hereunder and thereunder on a timely basis.
As of the date hereof, neither the Company nor any of its Subsidiaries is, or
has been, subject to any felony, misdemeanor, decree, order, proceeding or
examination that would cause the Company or any of its Subsidiaries, to be an
”ineligible issuer” as such term is defined in Rule 405 under the Securities Act
of 1933, nor is there any Proceeding pending or, to the Knowledge of the
Company, threatened by any Governmental Authority that would result in the
Company or any of its Subsidiaries becoming an “ineligible issuer.”

 

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2.8           Compliance with Laws; Permits and Licenses.

 

(a)          The operations of the Company and its Subsidiaries are and since
January 1, 2014 have been conducted in compliance in all material respects with
all Applicable Laws. Neither the Company nor any of its Subsidiaries is in
material default under any Applicable Law or, to the Knowledge of the Company,
there is no investigation by any Governmental Authority with respect to any
material violation of any Applicable Law. The Company and its Subsidiaries hold,
and at all times as required by Applicable Law have held, all material permits,
certificates, licenses, Governmental Approvals and other authorizations of any
Governmental Authority (“Permits”) that are necessary for the operation of their
business as presently conducted or the ownership, operation or use by the
Company and its Subsidiaries of their properties, assets and rights, except
where the failure to hold any such Permit would not, individually or in the
aggregate, be Material to a Reasonable Investor. All Permits held by the Company
and its Subsidiaries are in full force and effect and are not subject to any
suspension, cancellation, modification or revocation or any Proceedings related
thereto, and, to the Knowledge of the Company, no such suspension, cancellation,
modification or revocation or Proceeding is threatened. The Company and its
Subsidiaries are in compliance in all material respects with all the Permits
held by them. As of the date hereof, the Company has not received any written
notification from any Governmental Authority asserting that the Company or its
Subsidiaries is not in compliance with any Applicable Law that such Governmental
Authority enforces or that such Governmental Authority intends to revoke or
suspend any Permit, except where such noncompliance, revocation or suspension
would not, individually or in the aggregate, be Material to a Reasonable
Investor.

 

(b)          As of the date hereof, no Proceeding, examination, audit or review
(other than routine examinations, audits and reviews in the ordinary course of
business consistent with past practice) with respect to the Company or its
Subsidiaries has been initiated or is ongoing, unresolved or, to the Knowledge
of the Company, threatened by any applicable Governmental Authority. The Company
has not received any notice or communication of any unresolved violation or
exception from any applicable Governmental Authority with respect to any report
or statement by any applicable Governmental Authority relating to any
examination that would, individually or in the aggregate, be Material to a
Reasonable Investor. Except to the extent restricted from doing so by Applicable
Law, the Company has previously provided to or otherwise made available to Luxor
true, complete and correct copies of all written correspondence relating to any
investigation or examination provided to or by the Company by the SEC or any
other Governmental Authority since January 1, 2014.

 

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(c)          No director or officer of the Company or any of its Subsidiaries,
or to the Company’s Knowledge, no employee or agent of the Company or any of its
Subsidiaries acting for or on behalf of the Company has, directly or indirectly
(i) used any funds for contributions, gifts, gratuities, entertainment or other
expenses related to political activity, in each case in violation of Applicable
Law, (ii) made any payment in violation of Applicable Law or offered, promised
or authorized the payment of anything of value, regardless of form, whether in
money, property or services, to or for the benefit of any U.S. or non-U.S.
government official or employee, any official or employee of a public
international organization, or any political party or candidate for political
office in each case in violation of Applicable Law and for the purpose of
influencing any act or decision of such individual or of any Governmental
Authority or public international organization, or securing any improper
advantage, in order to obtain or retain business or direct business to any
Person in violation of Applicable Law, (iii) made any other payment, regardless
of form, whether in money, property or services which constitutes criminal
bribery under Applicable Law, or (iv) violated any applicable export control,
money laundering or anti-terrorism law or regulation, the U.S. Foreign Corrupt
Practices Act of 1977, as amended, or any other applicable anti-bribery law or
regulation, of any applicable jurisdiction, or any Applicable Law of similar
effect.

 

2.9           Absence of Certain Changes; No Undisclosed Liabilities.

 

(a)          Since December 31, 2014, through the date of this Agreement, except
as set forth in the Company SEC filings and the draft 10-Q or otherwise
contemplated by this Agreement, (i) there has been no change, event or
development that, individually or in the aggregate, is or would be Material to a
Reasonable Investor, and (ii) the Company and its Subsidiaries have operated in
the ordinary course of business consistent with past practice in all material
respects.

 

(b)          Except as contemplated by this Agreement and except as
(i) specifically reserved for or otherwise reflected in the consolidated
financial statements of the Company included in its Annual Report on Form 10-K
for the fiscal year ended December 31, 2014, (ii) incurred after December 31,
2014 in the ordinary course of business consistent with past practice
liabilities, and (iii)  individually or in the aggregate, is not and would not
reasonably be Material to a Reasonable Investor, the Company and its
Subsidiaries do not have any liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether or not such liabilities or
obligations would be required by GAAP to be reflected or reserved on a
consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP.

 

13 

 

 

2.10         Personnel and Employee Benefits Matters.

 

(a)          No liability under Title IV or Sections 302, 303 or 304 of ERISA or
Sections 412, 430 or 431 of the Code has been incurred by the Company or any of
its Subsidiaries that has not been satisfied in full, and no condition exists
that could present a material risk that the Company or any of its Subsidiaries
could reasonably be expected to incur any such liability. No Employee Benefit
Plan is subject to Title IV of ERISA, and neither the Company, its Subsidiaries
nor any of their respective ERISA Affiliates has, at any time during the last
six years, contributed to or been obligated to contribute to any plan that is
(i) subject to Title IV or (ii) a “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA or a plan that has two or more contributing sponsors
at least two of whom are not under common control, within the meaning of Section
4063 of ERISA. No nonexempt “prohibited transactions” as such term is defined in
Section 406 of ERISA or Section 4975 of the Code have occurred with respect to
any Employee Benefit Plan, and neither the Company or any of its Subsidiaries
has any material Tax liability under Section 4975 of the Code. All contributions
required to be made to any Employee Benefit Plan by Applicable Law or by any
Employee Benefit Plan document or other contractual undertaking, and all
premiums due or payable with respect to insurance policies funding any Employee
Benefit Plan, in each case for any period through the date hereof, have been
timely made or paid in full or, to the extent not required to be made or paid on
or before the date hereof, have been fully reflected on the in the consolidated
financial statements of the Company included in its Annual Report on Form 10-K
for the fiscal year ended December 31, 2014.

 

(b)          Except as would not, individually or in the aggregate, be Material
to a Reasonable Investor, (i) each Employee Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
Applicable Law, including ERISA and the Code, and (ii) each Employee Benefit
Plan that is intended to be “qualified” within the meaning of Section 401(a) of
the Code has received a determination letter from the Internal Revenue Service
that it is so qualified and that any trust maintained thereunder is exempt from
taxation under Section 501(a) of the Code, in each case which letter has not
been revoked, and, to the Company’s Knowledge, there are no existing
circumstances or events that have occurred which would reasonably be expect to
adversely affect the qualified status of any such Employee Benefit Plan or
related trust.

 

(c)          No Employee Benefit Plan provides, and neither the Company nor any
of its Subsidiaries have committed to provide, benefits including death or
medical benefits (whether or not insured), with respect to current or former
employees of the Company or any of its Subsidiaries after retirement or other
termination of service (other than coverage mandated by Section 4980B of the
Code or Section 601 et seq. of ERISA or similar Applicable Law).

 

(d)          There are no pending or, to the Company’s Knowledge, threatened or
anticipated claims by or on behalf of any Employee Benefit Plan, by any employee
or beneficiary under any such Employee Benefit Plan or otherwise involving any
Employee Benefit Plan (other than routine claims for benefits) that,
individually or in the aggregate, have resulted in, or would reasonably be
expected to result in, material liability for the Company and its Subsidiaries,
taken as a whole, and, to the Company’s Knowledge, no set of circumstances
exists which would reasonably be expected to give rise to such a claim.

 

14 

 

 

(e)          Except as would not, individually or in the aggregate, be Material
to a Reasonable Investor, (i) each of the Company and its Subsidiaries is in
compliance with all Applicable Laws respecting labor, employment, worker
classification, fair employment practices, terms and conditions of employment,
workers’ compensation, occupational safety and health requirements, wages and
hours, withholding of taxes, employment discrimination, disability rights or
benefits, equal opportunity, labor relations, employee leave issues and
unemployment insurance and related matters, (ii) no claim with respect to
payment of wages, salary, compensation or benefits pay is pending or, to
Knowledge of the Company, threatened, by or before any Governmental Authority
with respect to any current or former employees, officers, directors, managers
or consultants of the Company or any of its Subsidiaries, (iii) the Company and
each of its Subsidiaries has paid all of its current and former employees,
directors, officers and consultants or adequately accrued for in accordance with
GAAP all wages, salaries, commissions, bonuses, benefits and other compensation
due to or on behalf of such Persons, and (iv) each individual who renders
services to the Company or any of its Subsidiaries who is classified by any such
entity as having the status of an independent contractor or other non-employee
status or the status of an exempt employee or nonexempt employee for any
purpose, including for purposes of participation in any Employee Benefit Plan,
is properly so characterized under all Applicable Laws.

 

(f)          Except as set forth on Section 2.10(g) of the Company Disclosure
Letter, the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of any of the transactions contemplated by
this Agreement will not (alone or in combination with any other event), (i)
entitle any current or former employee, director, officer or consultant of the
Company or any of its Subsidiaries to severance pay or any other payment, (ii)
result in any payment becoming due, accelerate the time of payment or vesting of
benefits, or increase the amount of compensation due to any such employee,
director, officer or consultant, (iii) result in any forgiveness of
indebtedness, trigger any funding or payment obligation under any Employee
Benefit Plan or impose any restrictions or limitations on the ability of the
Company or any of its Subsidiaries right to administer, amend or terminate any
Employee Benefit Plan or (iv) result in any payment (whether in cash or property
or the vesting of property) to any “disqualified individual” (as such term is
defined in Treasury Regulation section 1.280G-1) that could reasonably be
construed, individually or in combination with any other such payment, to
constitute an “excess parachute payment” (as defined in section 280G(b)(1) of
the Code). No person is entitled to receive any additional payment (including
any tax gross-up or other payment) from the Company or any of its Subsidiaries
as a result of the imposition of the excise Taxes required by section 4999 of
the Code or any Taxes required (alone or in combination with any other event) by
section 409A of the Code as a result of the execution, delivery and performance
of this Agreement and the consummation of any of the transactions contemplated
by this Agreement.

 

15 

 

 

(g)          Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement.

 

2.11         Taxes.

 

(a)          Except as set forth on Section 2.11 of the Company Disclosure
Letter, all material U.S. income and other material Tax Returns required to be
filed by, on behalf of or with respect to the Company or any of its Subsidiaries
have been duly and timely filed and all Tax Returns filed by, on behalf of, or
with respect to the Company or any of its Subsidiaries are true, complete and
correct in all material respects. All material Taxes (whether or not reflected
on such Tax Returns) required to be paid by or with respect to, or that could
give rise to a Lien on the assets of, the Company or any of its Subsidiaries
have been duly and timely paid other than those Taxes not yet due. All material
Taxes required to be withheld by the Company or any of its Subsidiaries have
been duly and timely withheld, and such withheld Taxes have been either duly and
timely paid to the proper Governmental Authority or properly set aside in
accounts for such purpose. Except for Permitted Liens, there are no Liens for
material Taxes on any of the assets of the Company or any of its Subsidiaries.

 

(b)          All accounting entries (including charges and accruals) for
material Taxes with respect to the Company and its Subsidiaries reflected on the
books of the Company and its Subsidiaries (excluding any provision for deferred
income taxes reflecting either differences between the treatment of items for
accounting and income tax purposes or carryforwards) are adequate to cover any
material Tax liabilities accruing through the end of the last period for which
the Company and its Subsidiaries ordinarily record items on their respective
books.

 

(c)          No written agreement or other document waiving or extending, or
having the effect of waiving or extending, the statute of limitations or the
period of assessment or collection of any material Taxes with respect to the
Company or any of its Subsidiaries, and no written power of attorney with
respect to any such Taxes has been filed or entered into with any Governmental
Authority. No material Taxes with respect to the Company or any of its
Subsidiaries are currently under audit, examination or investigation by any
Governmental Authority or the subject of any judicial or administrative
proceeding. No Governmental Authority has asserted or threatened in writing to
assert any deficiency, claim or issue with respect to any material Taxes or any
adjustment to any material Taxes against the Company or any of its Subsidiaries
with respect to any taxable period for which the period of assessment or
collection remains open. No jurisdiction (whether within or without the United
States) in which any of the Company or its Subsidiaries has not filed a
particular type of Tax Return or paid a particular type of material Tax has
asserted in writing that the Company or any of its Subsidiaries is required to
file such Tax Return or pay such type of material Tax in such jurisdiction.

 

16 

 

 

(d)          Neither the Company nor any of its Subsidiaries (i) has received or
applied for a Tax ruling or entered into a closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision or any similar provision
of state, local or foreign law), in either case that would be binding upon the
Company or any of its Subsidiaries after the Closing Date, (ii) is or has been a
member of any affiliated, consolidated, combined or unitary group for purposes
of filing Tax Returns or paying Taxes, except for groups whose only members are
two or more of the Company and its Subsidiaries or (iii) has any liability for
the Taxes of any Person (other than the Company or another Subsidiary of the
Company) (whether under Treasury Regulation Section 1.1502-6 or any similar
provision of state, local or foreign law, as a transferee or successor, pursuant
to any Tax sharing or indemnity agreement or other contractual agreements (other
than any customary tax sharing or allocation provisions in commercial contracts
not primarily related to Taxes) (“Tax Agreements”), or otherwise).

 

(e)          Neither the Company nor any of its Subsidiaries has participated in
a reportable transaction within the meaning of Treasury Regulations
Section 1.6011-4(b).

 

(f)           The representations and warranties set forth in this Section 2.11
and in Section 2.10 are the exclusive representations and warranties of the
Company with respect to Tax matters.

 

2.12         Properties and Assets.

 

(a)          The Company or one of its Subsidiaries has a valid and enforceable
leasehold interest in each of the leased premises in which the Company or any of
its Subsidiaries currently conducts its business, except as may be affected by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally or general equitable
principles and except for any failure to have leasehold that would not,
individually or in the aggregate, be Material to a Reasonable Investor. Neither
the Company nor any of its Subsidiaries owns any real property.

 

(b)          The Company and its Subsidiaries own and have good, valid and
marketable title to or, in the case of leased property, good and valid leasehold
interests in, or otherwise will have full or sufficient and legally enforceable
rights to use, all of the tangible properties, assets and rights (tangible or
intangible, and real, personal or mixed) used or held for use in connection
with, necessary for the conduct of, or otherwise material to the operations of,
the businesses of the Company and its Subsidiaries, in each case free and clear
of any Lien other than Permitted Liens, except for any failure to have such
titles, interests or rights that would not, individually or in the aggregate, be
Material to a Reasonable Investor.

 

17 

 

 

2.13         Material Agreements. Section 2.13 of the Company Disclosure Letter
lists each Material Contract to which the Company or any Subsidiary is a party
or bound as of the date of this Agreement. Each such Material Contract is a
legal, valid and binding obligation of the Company or its Subsidiary, as the
case may be, and, to the Company’s Knowledge, each other party thereto, in each
case in full force and effect and enforceable in accordance with its terms,
except as may be affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors’ rights generally or general equitable principles. Neither the Company
nor any of its Subsidiaries has received any written or, to the Company’s
Knowledge, oral notice of cancellation or termination under any option or right
reserved to the other party to any Material Contract or any written or, to the
Company’s Knowledge, oral notice of default under such Material Contract. As of
the date hereof, no condition exists or event has occurred which (whether with
or without notice or lapse of time or both) would constitute a breach or default
by the Company or any of its Subsidiaries or, to the Company’s Knowledge, any
other party thereto under, or result in a right in termination of, any such
Material Contract, except as would not , individually or in the aggregate, be
Material to a Reasonable Investor.

 

2.14         Intellectual Property and IT Systems.

 

(a)          The Owned Intellectual Property is subsisting, and, to the
Company’s Knowledge, is valid and enforceable. Neither the Company nor any of
its Subsidiaries has conducted its business in a manner that would reasonably be
expected to result in (i) the cancellation or unenforceability of any issued,
registered or applied for Owned Intellectual Property except as would not,
individually or in the aggregate, be Material to a Reasonable Investor, or (ii)
the unauthorized disclosure of any material confidential Intellectual Property
used in its business. After giving effect to the transactions contemplated by
this Agreement, the Company and its Subsidiaries (x) are the owners of all of
the Owned Intellectual Property free and clear of any Liens other than Permitted
Liens and (y) own, license or otherwise have the right to use all the
Intellectual Property necessary and sufficient to conduct their businesses as
currently conducted.

 

(b)          Since January 1, 2014, (i) the conduct of the Company’s and its
Subsidiaries businesses has not been and, as currently conducted, is not
infringing, misappropriating, diluting or otherwise violating (“Infringing”) in
any material respects the rights of any Person in respect of any Intellectual
Property and (ii) to the Company’s Knowledge, none of the material Owned
Intellectual Property has been or is being Infringed by any Person.

 

18 

 

 

(c)          The IT Systems (i) are in reasonably good repair and operating
condition, subject only to ordinary wear and tear, and are adequate and suitable
(including with respect to working condition and capacity) for the purposes for
which they are being used or held for use, and (ii) to the Company’s Knowledge,
do not contain any Malware that would reasonably be expected to interfere with
the ability of the Company or any of its Subsidiaries to conduct their
businesses. The Company and its Subsidiaries (x) have implemented and maintain
commercially reasonable security, business continuity, and backup and disaster
recovery plans and procedures with respect to the IT Systems, (y) act in
material compliance therewith, and (z) have taken commercially reasonable steps
to test such plans and procedures on a periodic basis, and such plans and
procedures have been proven effective upon such testing in all material
respects. The Company and its Subsidiaries have implemented or are in the
process of implementing in a timely manner all security patches or security
upgrades that are generally available for the IT Systems that process data or
non-public information that is sensitive in nature about their investors.

 

2.15         Data Protection and Privacy.

 

(a)          Since January 1, 2014, the Company and its Subsidiaries and the
Sponsored Funds have been and are in compliance in all material respects with
any and all Applicable Laws, contractual requirements, terms of use and privacy
policies pertaining to data protection or information privacy, security,
collection, use, disclosure, disposal, maintenance and transmission.

 

(b)          The Company and its Subsidiaries uses commercially reasonable
industry standards to protect the secrecy of data and non-public information
that it (or any third Person on behalf of it) collects, stores, uses, maintains
or transmits and to prevent unauthorized access to, and use or disclosure of,
such data or non-public information by any other Person. Since January 1, 2014,
neither the Company nor any of its Subsidiaries, nor to the Company’s Knowledge,
any third Person working on behalf of any of them, has had an incident of
unauthorized (i) access, (ii) disclosure, (iii) use, (iv) destruction or (v)
loss of any data or non-public information that Company or its Subsidiaries (or
a third Person on behalf of any of them) collects, stores, uses, maintains or
transmits

 

2.16         Broker-Dealer Matters.

 

(a)          Registration. Section 2.16(a) of the Company Disclosure Letter
lists each Subsidiary that is registered as a broker-dealer with the SEC
(collectively, the “Broker-Dealer Subsidiaries”). Each Broker-Dealer Subsidiary
is, and at all times since January 1, 2014, has been, (i) duly registered under
Section 15 of the Exchange Act with the SEC, (ii) in compliance with Applicable
Laws governing their activities and (iii) current in all filings required by the
SEC or any other Governmental Authority to which they are subject, except, in
each case, as would not, individually or in the aggregate, be Material to a
Reasonable Investor. Except as set forth in Section 2.18(a) of the Company
Disclosure Letter, since January 1, 2014, none of the Broker-Dealer Subsidiaries
has received notice of any material violation of any Applicable Laws governing
their activities. The Broker-Dealer Subsidiaries are, and at all times since
January 1, 2014, have been, (x) members in good standing of Financial Industry
Regulatory Authority (“FINRA”) and any other Self-Regulatory Organizations in
which their membership is required in order to conduct their business as
conducted and (y) in compliance with all applicable rules and regulations of
FINRA and any such other Self-Regulatory Organizations, except as would not,
individually or in the aggregate, be Material to a Reasonable Investor. As of
the date hereof, no Subsidiary of the Company other than the Broker-Dealer
Subsidiaries is registered or required to be registered as a broker or dealer
with the SEC or any other Governmental Authority. 

 

19 

 

 

(b)          Disqualification. None of the Broker-Dealer Subsidiaries nor, to
the Company’s Knowledge, any “associated person” (within the meaning of the
Exchange Act) thereof, is ineligible pursuant to Section 15(b) of the Exchange
Act to act as a broker or dealer or as an associated person of a registered
broker-dealer as a result of a “statutory disqualification,” as such term is
defined in Section 3(a)(39) the Exchange Act. As of the date of this Agreement,
there are no Proceedings pending or, to the Company’s Knowledge, threatened that
would reasonably be expected to result in a Broker-Dealer Subsidiary having its
authorization to conduct business as a broker-dealer denied, suspended, revoked
or restricted. Except as set forth in Section 2.18(b) of the Company Disclosure
Letter, as of the date of this Agreement, there are no Proceedings pending or,
to the Company’s Knowledge, threatened that would reasonably be expected to
result in any director, officer or employee of a Broker-Dealer Subsidiary having
his or her registration or license to conduct investment-related activities
denied, suspended, revoked or restricted. Since January 1, 2014, each of the
directors, officers, employees, contractors and agents employed, supervised or
controlled by any Broker-Dealer Subsidiary who is required to be licensed or
registered as a principal, registered representative, salesperson, investment
advisory representative or insurance agent with any Governmental Authority in
connection with his or her activities for or with a Subject Company has been
duly licensed or registered, except as would not, individually or in the
aggregate, be Material to a Reasonable Investor.

 

(c)          Form BD. The Company has provided to each Investor, prior to the
date of this Agreement, true, complete and correct copies of each of the
Broker-Dealer Subsidiary’s Form BD as most recently filed with the SEC and all
state registration forms, each as amended to date.  The information contained in
each such form was true and complete at the time of filing and the Broker-Dealer
Subsidiary has made all amendments to such form as it is required to make under
any Applicable Law, except as would not, individually or in the aggregate, be
Material to a Reasonable Investor. No Broker-Dealer Subsidiary’s Form BD
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. 

 

(d)          Minimum Net Capital. Each of the Broker-Dealer Subsidiaries
maintains its minimum net capital in compliance with the Applicable Laws of the
SEC and any other applicable Governmental Authority and in an amount sufficient
to ensure that it has not been required to file notice under Rule 17a-11 under
the Exchange Act.

 

20 

 

 

(e)          Compliance Policies. The Broker-Dealer Subsidiaries have, and at
all times since January 1, 2014 have had, in place, to the extent required by
Applicable Law, processes to establish, maintain, review, test and modify
written compliance and supervisory policies and procedures reasonably designed
to achieve compliance with all Applicable Laws, including the rules and
regulations of the SEC and FINRA and other Governmental Authority.

 

2.17         Municipal Advisor Matters.

 

(a)          Section 2.17(a) of the Company Disclosure Letter lists each
Subsidiary that is registered as a municipal advisor with the SEC (collectively,
the “Municipal Advisor Subsidiaries”). The Municipal Advisor Subsidiaries are,
and at all times since January 1, 2014, have been, (i) duly registered under
Section 15B of the Exchange Act with the SEC, (ii) in compliance in all material
respects with Applicable Laws governing their activities and (iii) current in
all material filings required by the SEC or any other Governmental Authority.
Since January 1, 2014, none of the Municipal Advisor Subsidiaries has received
notice of any material violation of any Applicable Laws governing their
activities. The Municipal Advisor Subsidiaries are, and at all times since
January 1, 2014, have been, (x) members in good standing of MSRB and such other
organizations in which their membership is required in order to conduct their
business as conducted and (y) in compliance in all material respects with all
applicable rules and regulations of MSRB and such other organizations. As of the
date hereof, none of the Subsidiaries other than the Municipal Advisor
Subsidiaries or, in connection with their service to such entities, any of their
respective directors, officers, or employees, is registered or required to be
registered as a municipal advisor or a municipal advisor representative or in
any similar capacity with the SEC, MSRB, the securities commission of any state
or foreign country or any other self-regulatory body. 

 

(b)          None of the Municipal Advisor Subsidiaries nor, to the Knowledge of
the Company, any “associated person” (within the meaning of the Exchange Act)
thereof, is ineligible pursuant to Applicable Law to act as a municipal advisor
or as an associated person of a registered municipal or subject to any matter
that would be a basis for censure, limitations on the activities, functions or
operations of, or suspension or revocation of the registration of any of the
Municipal Advisor Subsidiaries as a municipal advisor under Section 15B of the
Exchange Act.  As of the date of this Agreement, there are no Proceedings
pending or, to the Knowledge of the Company, threatened that would reasonably be
expected to result in the Municipal Advisor Subsidiaries or any “associated
person” (within the meaning of the Exchange Act) thereof becoming ineligible to
act in such capacity.  Since January 1, 2014, each of the directors, officers,
employees, contractors and agents employed, supervised or controlled by any
Municipal Advisor Subsidiaries who is required to be registered as a municipal
advisor or municipal advisor representative in connection with his, her or its
activities for or with a Subsidiary with any Governmental Authority has been
duly licensed or registered.

 

21 

 

 

(c)          The Company has provided or made available to each Investor, prior
to the date of this Agreement, true, complete and correct copies of each of the
Municipal Advisor Subsidiaries’ Form MA as most recently filed with the SEC and
all state registration forms, each as amended to date.  The information
contained in each such form was true and complete at the time of filing and the
Municipal Advisor Subsidiary has made all amendments to such form as it is
required to make under any Applicable Law. The Form MA is in compliance in all
material respects with the applicable requirements of the Exchange Act and does
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. 

 

(d)          The Municipal Advisor Subsidiaries have, and at all times since
January 1, 2014 have had, in place, to the extent required by Applicable Law,
processes to establish, maintain, review, test and modify written compliance and
supervisory policies and procedures reasonably designed to achieve compliance
with all Applicable Laws, including without limitation the rules and regulations
of the SEC and MSRB and any other domestic or foreign securities regulator or
self-regulatory organization of which such Municipal Advisor Subsidiaries are
members. All such policies and procedures comply in all material respects with
Applicable Law, and, since January 1, 2014, there have been no material
violations or, to the Knowledge of the Company, allegations of material
violations of such policies, by any employee or client of the Company, the
Municipal Advisor Subsidiaries or any of their Affiliates or any Governmental
Authority.

 

2.18         Investment Adviser Compliance Matters.

 

(a)          Section 2.18(a) of the Company Disclosure Letter lists each
Subsidiary that is an investment adviser (collectively, the “IA Subsidiaries”),
including a notation of whether the IA Subsidiary is registered with the SEC or
a state or is an exempt reporting adviser. Each IA Subsidiary (i) is, and at all
times required by Applicable Law since January 1, 2014 has been, registered as
an investment adviser under the Advisers Act and (ii) is registered and licensed
as an investment adviser or in any similar capacity under all other Applicable
Laws or exempt therefrom, except, in the case of clause (ii), as would not,
individually or in the aggregate, be Material to a Reasonable Investor. Since
January 1, 2014, none of the IA Subsidiaries has received notice of any material
violation of any Applicable Laws governing their activities. No Subsidiary of
the Company other than the IA Subsidiaries is registered or required to be
registered as an investment adviser or in any similar capacity with the SEC or
the securities commission of any state.

 

22 

 

 

(b)          Neither the Company, any of its Subsidiaries, any Affiliated Party
of the Company or its Subsidiaries, nor any of their directors, officers or
employees is subject to any disqualification, ineligibility, denial, suspension
or revocation (or subject to any criminal conviction, injunction, court order,
administrative order or other disciplinary event that would be a basis for any
such disqualification, ineligibility, denial, suspension or revocation) that
would disqualify, make ineligible or restrict the Company, its Subsidiaries or
any Affiliated Party from acting (or from receiving or making a payment to the
Company, its Subsidiaries or any Affiliated Party for acting) as (i) an
investment adviser, (ii) a solicitor for an investment adviser, (iii) an
investment adviser, depositor or principal underwriter to an investment company
registered under the Investment Company Act, or (iv) an investment manager,
solicitor, promoter or in any other capacity (including beneficially owning 20%
of the voting securities of an issuer relying on Rule 506 of Regulation D under
the Securities Act) for an investment fund or other issuer offering its
securities in reliance on Rule 506 of Regulation D under the Securities Act.
There is no investigation pending or, to the Knowledge of the Company,
threatened, whether formal or informal, that is likely to result in, such
disqualification, ineligibility or restriction (or the basis for such
disqualification, ineligibility or restriction).

 

(c)          As of the date hereof, neither the Company nor any of its
Subsidiaries or, in connection with their service to any of the foregoing
entities, any of their respective directors, officers, employees, contractors,
or agents, is required to be registered, licensed or qualified as a (i) a bank,
trust company, commodity trading advisor, commodity broker-dealer, futures
commission merchant, transfer agent, introducing broker, municipal securities
dealer, or insurance company or in any similar capacity with the SEC, the CFTC,
the National Futures Association (“NFA”), FINRA, the securities commission or
financial regulatory agency of any state or other jurisdiction or any
self-regulatory body, except as would not, individually or in the aggregate, be
Material to a Reasonable Investor, or (ii) subject to any liability or
disability by reason of any failure to be so registered, licensed or qualified.
Neither the Company nor any Subsidiary has received notice of, and, to the
Knowledge of the Company, there is no basis to believe that there is any event
that is reasonably likely to result in, any pending judicial, arbitral or
administrative action, suit, proceeding or investigation concerning any failure
to obtain any bank, trust company, commodity trading advisor, commodity
broker-dealer, futures commission merchant, transfer agent, introducing broker,
municipal advisor, municipal securities dealer, insurance company registration,
license or qualification, except for as would not, individually or in the
aggregate, be Material to a Reasonable Investor.

 

(d)          The Company and each of its Subsidiaries has filed all material
regulatory reports, schedules, forms, registrations, financial statements, sales
literature, statements, notices, filings and other documents (“Governmental
Reports”), together with any amendments, since January 1, 2014 that were
required to be filed with any Governmental Authority, including (i) with respect
to each IA Subsidiary, each Form ADV and Form PF that was required to be filed
in compliance with Applicable Law and (ii) with respect to any investment
adviser representative of an IA Subsidiary, each Form U4 that was required to be
filed in compliance with Applicable Law. All Government Reports complied in all
material respects with Applicable Law as in effect at the time they were filed
and did not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.

 

23 

 

 

(e)          Each IA Subsidiary has in effect, and at all times, to the extent
required by Applicable Law, has had in effect, all policies and procedures
required by Rule 206(4)-7 under the Advisers Act (“Adviser Compliance
Policies”), including the designation of a chief compliance officer to review
the Adviser Compliance Policies. Such Adviser Compliance Policies comply in all
material respects with Applicable Law and reflect, if applicable, modifications
to such policies as requested in writing by any Governmental Authority. The IA
Subsidiaries are in compliance in all material respects with the Adviser
Compliance Policies and, since January 1, 2014, there have been no material
violations of the Adviser Compliance Policies other than those disclosed in the
annual reports pursuant to Rule 206(4)-7 under the Advisers Act and Rule 38a-1
under the Investment Company Act that have been provided to each Investor.

 

(f)          Since January 1, 2014, the Company, its Subsidiaries and the Funds,
as applicable, have complied with all terms and conditions of each no-action
letter and exemptive order issued by the SEC to them that remains applicable to
its business as conducted on the date of this Agreement necessary to rely on the
relief granted thereby.

 

(g)          Since January 1, 2014 each of the Company and its Subsidiaries
conducted its activities with respect to Clients subject to ERISA and/or Section
4975 of the Code in accordance with in all material respects such law, rules and
regulations, as the same may be in effect from time to time. To the extent that
any Client to which Company, any of its Subsidiaries provides investment advice
or investment management services (including sub-advisory services) is (i) an
employee benefit plan, as defined in Section 3(3) of ERISA, that is subject to
Title I of ERISA; (ii) a plan subject to Section 4975 of the Code; (iii) a
benefit plan investor, as defined in Section 3(42) of ERISA and the regulations
promulgated thereunder, or any entity whose assets include the assets of any
such plan described in clause (i) or (ii) above or any such benefit plan
investor within the meaning of ERISA and applicable regulations; or (iv) a
Person acting on behalf of any such plan described in clause (i) or (ii) above,
or a benefit plan investor or entity, then (A) the Company or its applicable
Subsidiary has provided such advice or management or advisory services in
compliance in all material respects with the applicable requirements of ERISA
and any prohibited transaction exemption pursuant to which such service or
advice is provided, and (B) neither the Company, any of its Subsidiaries nor any
other Person has engaged in a non-exempt “Prohibited Transaction” within the
meaning of Section 406 of ERISA or Section 4975(c) of the Code that has or could
reasonably be expected to result in material liability to the Company and its
Subsidiaries, taken as a whole. With respect to any Client whose assets are
subject to the provisions of Part 4 of Title I of ERISA, the Company is a
qualified professional asset manager (as such term is used in Prohibited
Transaction Class Exemption 84-14, as amended).

 

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2.19         Funds.

 

(a)          Listing of Funds.

 

(i)          Neither the Company nor any of its Subsidiaries acts as sponsor,
investment adviser, investment manager, depositor, principal underwriter,
distributor or in any other capacity with respect to any entity (other than the
Funds) that (i) is registered, or is required to be registered, as an investment
company, or that has elected to be regulated as a BDC, under the Investment
Company Act or in any other jurisdiction or (ii) has made, or intends to make, a
public offering in the United States or in any other jurisdiction.

 

(ii)         Neither the Company nor any of its Subsidiaries acts as commodity
pool operator, commodity trading advisor, investment adviser, investment
sub-adviser, general partner, managing member, manager or sponsor to any
commodity pool (as defined under the Commodity Exchange Act) or to any pooled
investment vehicle (other than the Funds).

 

(b)          Funds: Compliance with Laws.

 

(i)          Each Sponsored Fund and, to the Knowledge of the Company, each
Sub-Advised Fund is in compliance in all material respects with the applicable
provisions of the Advisers Act, Investment Company Act, the Commodity Exchange
Act, the Securities Act, the Exchange Act and all Applicable Law. Each Sponsored
Registered Fund and, to the Knowledge of the Company, each Sub-Advised
Registered Fund is, and at all times required under Applicable Law has been,
duly registered with the SEC as an investment company under the Investment
Company Act. Each Sponsored BDC and, to the Knowledge of the Company, each
Sub-Advised BDC has at all times required under Applicable Law elected to be
regulated, and been regulated, as a business development company pursuant to
section 54 of the Investment Company Act.

 

(ii)         No Sponsored Fund and, to the Knowledge of the Company, no
Sub-Advised Fund, nor any director, executive officer or any other officer
thereof, is ineligible pursuant to Rule 506(d) of Regulation D under the
Securities Act with respect an offering of securities in reliance on Rule 506 of
Regulation D under the Securities Act, nor is there any Proceeding pending or,
to the Knowledge of the Company, threatened by any Governmental Authority that
would result in the ineligibility of any Sponsored Fund, any Sub-Advised Fund or
any director, executive officer or any other officer thereof with respect an
offering of securities in reliance on Rule 506 of Regulation D under the
Securities Act.

 

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(iii)        As of the date hereof, no Proceeding (other than routine
examinations, audits or reviews in the ordinary course of business consistent
with past practice) with respect to any Sponsored Fund or, to the Knowledge of
the Company, any Sub-Advised Fund has been initiated or is ongoing, unresolved
or, to the Knowledge of the Company, threatened by any Governmental Authority.
There is no injunction, order, judgment or decree imposed upon any Sponsored
Fund or, to the Knowledge of the Company, any Sub-Advised Fund that would
materially impair the ability of the Fund to continue to operate its business as
currently conducted, except as would not, individually or in the aggregate, be
Material to a Reasonable Investor.

 

(iv)       Each Sponsored Regulated Fund has adopted and maintained, at all
times, to the extent required by Applicable Law, all written compliance policies
and procedures required by Applicable Law ( “Sponsored Regulated Fund Compliance
Policies”). All such Sponsored Regulated Fund Compliance Policies have been
reviewed annually as required by Rule 38a-1 under the Investment Company Act.
The Sponsored Regulated Fund Compliance Policies are in compliance with
Applicable Law in all material respects. Each Sponsored Regulated Fund is, and
at all times required by Applicable Law since January 1, 2014 has been, in
compliance in all material respects with such policies and procedures.

 

(v)         The board of directors or trustees or general partner, as
applicable, of each Sponsored Regulated Fund and, to the Knowledge of the
Company, each Sub-Advised Registered Fund has been established and operated in
conformity with the requirements and restrictions of Sections 10, 16 and 55, as
applicable, of the Investment Company Act and satisfies the fund governance
standards as defined in Rule 0-1 under the Investment Company Act. Each of the
Sponsored Regulated Funds and, to the Knowledge of the Company, each of the
Sub-Advised Registered Funds will be governed by a board of trustees, general
partner or board of directors (if any) at least 75% of whom are not “interested
persons” (as defined in the Investment Company Act) of the investment adviser to
such Regulated Fund. No director or trustee, as applicable, of the Sponsored
Regulated Funds, who has been identified as an “independent” or “non-interested”
trustee in such Sponsored Registered Fund’s most recent registration statement
on Form N-1A or such Sponsored BDC’s most recent registration statement on Form
N-2 is an “interested person” of such Sponsored Regulated Fund, as that term is
defined in Section 2(a)(19) of the Investment Company Act, or has had at any
time since January 1, 2014, a material business or professional relationship
with such Sponsored Registered Fund’s or Sponsored BDC’s investment adviser or
principal underwriter or with the principal executive officer or any controlling
person of such investment adviser or principal underwriter other than as set
forth in such Sponsored Registered Fund’s registration statement on Form N1-A or
such Sponsored BDC’s registration on Form N-2.

 

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(vi)         No (A) director or trustee of a Sponsored Regulated Fund who is an
“interested person” (as such term is defined in section 2(a)(9) of the
Investment Company Act) (an “interested director or trustee”) or (B) to the
Knowledge of the Company, director or trustee who is not an interested director
or trustee (a “non-interested director or trustee”) of any Sponsored Regulated
Fund is ineligible pursuant to Section 9(a) or 9(b) of the Investment Company
Act to serve as such. There is no Proceeding pending or, to the Knowledge of the
Company, threatened which would reasonably be expected to result in the
ineligibility of any such Person to serve in any such capacities. No (x)
interested director or trustee; or, (z) to the Knowledge of the Company,
non-interested director or trustee of any Sponsored Regulated Fund is, or at any
time during the past three (3) years has been, (1) subject to any cease and
desist, censure or other disciplinary or similar order issued by, (2) a party to
any written agreement, consent agreement, memorandum of understanding or
disciplinary agreement with, (3) a party to any commitment letter or similar
undertaking to, (4) subject to any order or directive by or (5) a recipient of
any supervisory letter from, any Governmental Authority, regardless of whether
the Company any of its Subsidiaries expects or intends to provide investment
advisory services to such Governmental Authority.

 

2.20         Insurance. Each of the Company and its Subsidiaries maintains such
worker’s compensation, comprehensive property and casualty, liability, errors
and omissions, directors’ and officers’, fidelity and other insurance as it may
be required to maintain under all Applicable Laws. Each of the Company and its
Subsidiaries has complied in all material respects with the terms and provisions
of such policies and such insurance policies are in full force and effect (and
all premiums due and payable thereon have been paid in full on a timely basis).
As of the date hereof, there is no material claim by the Company or any of its
Subsidiaries pending under any such policy as to which coverage has been denied
or disputed by the underwriters of such policy or in respect of which such
underwriters have reserved their rights. Since January 1, 2014, the Company and
its Subsidiaries have properly reported all material claims, acts, omissions,
events, circumstances, occurrences and losses relating to its business, or to
the properties, rights or assets of the Company and its subsidiaries, to the
extent required under each such policy, except as would not reasonably be,
individually or in the aggregate, Material to a Reasonable Investor

 

2.21         Affiliate Arrangements. Except as set forth on Section 2.22 of the
Company Disclosure Letter, there are no Contracts between the Company and any of
its Subsidiaries, on the one hand, and any of the Company’s Affiliates (other
than its Subsidiaries), any stockholder or equity holder of the Company or any
of its Affiliates (other than the Company or its Subsidiaries in their capacity
as stockholders or equity holders of the Company’s Subsidiaries), or any
director, officer or employee of the Company or any of the Company’s Affiliates,
on the other hand (any such Contract, an “Affiliate Agreement”). Except as set
forth in Section 2.22 of the Company Disclosure Letter, none of the Company’s
Affiliates (other than its Subsidiaries), any stockholder or equity holder of
the Company or any of its Affiliates (other than the Company or its Subsidiaries
in their capacity as stockholders or equity holders of the Company’s
Subsidiaries), or any director, officer or employee of the Company or any of the
Company’s Affiliates owns any material asset or right (whether real or personal,
tangible or intangible) used in the businesses of the Company and its
Subsidiaries.

 

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2.22         Information Supplied. None of the information supplied or to be
supplied by or on behalf of the Company expressly for inclusion or incorporation
by reference in the Information Statement will, as of the date it is mailed to
the stockholders of the Company, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

 

2.23         Brokers. No broker, investment banker, financial advisor or other
Person, other than Centerview Partners LLC, the fees and expenses of which will
be paid by the Company, is entitled to any broker’s, finder’s, financial
advisor’s or other similar fee or commission from the Company or any of its
Subsidiaries in connection with the transactions contemplated by this Agreement.

 

2.24         Compliance with Environmental Law. The Company and its Subsidiaries
have complied in the past three years and are in compliance with all applicable
Environmental Laws pertaining to any of their properties, assets or rights and
the use and ownership thereof, except as would not, individually or in the
aggregate be Material to a Reasonable Investor. No violation by the Company is
being or has been alleged in writing or, to the Knowledge of the Company, orally
of any applicable Environmental Law relating to any of its properties, assets or
rights or the use or ownership thereof. There are no Proceedings pending or, to
the Knowledge of the Company, threatened against the Company or its Subsidiary
under any Environmental Law.

 

2.25         No Other Representations and Warranties. Except for the
representations and warranties contained in this Article II, the Company makes
no express or implied representations or warranties, and the Company hereby
disclaims any such representations or warranties with respect to the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR

 

Each Investor represents and warrants to the Company as to itself as follows:

 

3.1           Organization. Each Investor is duly organized, validly existing
and in good standing under the laws of its jurisdiction of formation.

 

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3.2           Authority. Each Investor has the requisite corporate power and
authority to execute and deliver this Agreement and the Registration Rights
Agreement, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery by
each Investor of this Agreement and the Registration Rights Agreement, the
performance of its obligations hereunder and thereunder and the consummation by
each Investor of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate or other organizational
action, and no other corporate or other organizational action on the part of
each Investor is necessary to authorize the execution and delivery by Investor
of this Agreement and the Registration Rights Agreement, the performance of its
obligations hereunder and thereunder and the consummation by Investor of the
transactions contemplated hereby and thereby. This Agreement has been, and at
the Closing, of the Registration Rights Agreement will be, duly and validly
executed and delivered by each Investor and, assuming the due authorization,
execution and delivery by the other parties thereto, constitute a legal and
binding obligation of each Investor, enforceable against each Investor in
accordance with their terms, except as (a) the enforceability hereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors’ rights generally and (b) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

 

3.3           Non-Contravention. The execution and delivery by each Investor of
this Agreement and the Registration Rights Agreement do not, and the
consummation by Investor of the transactions contemplated hereby and thereby and
the performance by each Investor of its obligations hereunder and thereunder
will not (with or without the giving of notice, the termination of any grace
period or both): (a)  violate, conflict with, or result in a breach or default
under any provision of its Organizational Documents or (b) assuming that all
consents, authorizations, orders or approvals of, filings or registrations with,
and notices to, each Governmental Authority referred to in Section 3.4(a) have
been obtained or made, (i) violate any Applicable Law or (ii) violate, result in
a violation or breach by each Investor of, or the termination or the
acceleration of, or conflict with or constitute a default under, any Contract to
which each Investor is a party or by which any of its property is bound, except,
in the case of clauses (i) and (ii), for any such violation, breach,
termination, acceleration, conflict or default as would not, individually or in
the aggregate, reasonably be expected to prohibit or materially impair the
ability of each Investor to consummate the transactions contemplated by this
Agreement or any Ancillary Agreement or perform its obligations hereunder or
thereunder on a timely basis.

 

3.4           Consents, etc. Except as set forth in the Investor Disclosure
Letter, no Governmental Approval is required for the execution and delivery of
this Agreement by each Investor, the performance of its obligations hereunder
and its consummation of the transactions contemplated hereby, except in any such
case for (x) any such Governmental Approval which is required solely by reason
of the specific regulatory status of the Company or its Affiliates and (y) any
such Governmental Approval the failure of which to be obtained or made would not
reasonably be expected to prohibit or materially impair the ability of each
Investor to consummate the transactions contemplated by this Agreement or any
Ancillary Agreement or perform its obligations hereunder or thereunder on a
timely basis.

 

29 

 

 

3.5           Available Funds. Each Investor will have available all funds
necessary to satisfy all of its obligations hereunder and in connection with the
transactions contemplated hereby, and its ability to consummate such
transactions is not dependent or conditional upon the receipt of financing
(whether debt or equity) from any Third Party.

 

3.6           Investment Intent. Each Investor is acquiring the Purchased Shares
for its own account, for investment purposes only and not with a view to, or for
resale in connection with, the distribution thereof, except pursuant to
registration under the Securities Act or pursuant to an exemption from such
registration available under the Securities Act. Each Investor understands that
the Purchased Shares may not be sold, transferred or otherwise disposed of
without registration under the Securities Act, except pursuant to an exemption
from such registration available under the Securities Act.

 

3.7            No Other Representations and Warranties. Except for the
representations and warranties contained in this Article III, each Investor
makes no express or implied representations or warranties, and each Investor
hereby disclaims any such representations or warranties with respect to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.

 

ARTICLE IV
COVENANTS

 

4.1           Conduct of Business. During the period from the date hereof and
continuing through the Closing, except to the extent required by Applicable Law,
as may be consented in writing to by each Investor or as expressly required by
this Agreement, the Company will, and will cause each of its Subsidiaries to,
use its reasonable best efforts to (i) operate in the ordinary course consistent
with past practice; (ii) keep available the present services of the Company’s
and its Subsidiaries’ employees and other service providers; and (iii) preserve
intact the Company’s and its Subsidiaries’ rights, franchises, goodwill and
relations with Clients and others with whom the Company and its Subsidiaries
conduct business. Without limiting the generality of the foregoing, except as
(w) required by Applicable Law, (x) expressly permitted or required by this
Agreement or any Ancillary Agreement, (y) set forth on Section 4.1 of the
Company Disclosure Letter or (z) with each Investor’s prior written consent (not
to be unreasonably withheld, conditioned or delayed), the Company will not:

 

(a)           amend its Organizational Documents;

 

(b)           declare or pay any dividend or distribution on the Common Stock;

 

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(c)            take any action that would require any anti-dilution adjustment
to be made under the Certificates of Designation as if issued on the date of
this Agreement;

 

(d)            take any other action that would require the affirmative vote of
at least a majority of the shares of Series D-2 Preferred Stock under the
Certificate of Designation as if such shares had been issued on the date of this
Agreement; or

 

(e)            merge with or consolidate into, or sell, transfer or lease all or
substantially all of its property or assets to, any other Person;

 

(f)            subject itself to any bankruptcy, receivership, insolvency or
similar proceeding; and

 

(g)           authorize, resolve, commit or agree, whether in writing or
otherwise, to take any action prohibited by clauses (a) through (f) above.

 

4.2           Access; Confidentiality.

 

(a)          The Company will provide each Investor and its respective
employees, accountants, counsel and other authorized representatives, during the
period from the date hereof until the Closing, with reasonable access to the
premises, employees, books and records and properties of the Company and its
Subsidiaries upon reasonable advance notice during normal business hours,
provided that such access does not interfere with the normal operations of the
Company and its Subsidiaries. The Company will, and will cause its Subsidiaries
to, furnish each Investor with such financial, operational, regulatory and
compliance data and other information with respect to its respective businesses,
assets, rights, properties liabilities and obligations as Investor may from time
to time reasonably request. Any information concerning the Company and its
Subsidiaries obtained by each Investor or its respective representatives
pursuant to this Section 4.2 shall be subject to the terms of the
Confidentiality Agreement, and such information shall be held by each Investor
and its respective representatives in accordance with the terms of the
Confidentiality Agreement.

 

(b)          Notwithstanding the obligations contained in this Section 4.2, the
Company and its Subsidiaries will not be required to provide access to or to
disclose information where such access or disclosure would result in the loss of
any attorney-client privileges or protections or contravene any Applicable Law
or binding agreement in effect; provided, that the parties hereto shall
cooperate in seeking and use reasonable best efforts to find a way to allow
disclosure of such information in a manner that does not result in any of the
foregoing consequences. Notwithstanding anything to the contrary contained in
this Agreement, neither Investor’s review of any matters related to the
transactions contemplated by this Agreement, including the review of the
business or financial and other conditions of the Company and its Subsidiaries
conducted by the officers, employees, accountants, counsel and other authorized
representatives or agents of each Investor or its respective Affiliates, nor to
the knowledge of each Investor with respect to any such matters, whether or not
resulting from any such review, whether prior to or after the date hereof, shall
affect (a) the representations and warranties made by the Company in or pursuant
to this Agreement or (b) the remedies of Investor for breaches of such
representations and warranties.

 

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4.3           Reasonable Best Efforts; Regulatory Approvals .

 

(a)          Each Investor and the Company will use their respective reasonable
best efforts, as promptly as possible, to take or cause to be taken all action
and do or cause to be done all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including the satisfaction on a timely basis of the conditions to the Closing
within their respective control.

 

(b)          Each Investor and the Company will (i) as soon as practicable after
the date hereof, (A) file (on a confidential basis if reasonably requested by a
party and permitted under Applicable Law) such applications, notices,
registrations and requests as may be required or advisable to be filed by it
with any Governmental Authority as set forth in Section 4.3 of the Company
Disclosure Letter in order to consummate the transactions contemplated hereby,
(B) use its reasonable best efforts to obtain all consents, authorizations,
orders and approvals of all such Governmental Authorities referred to in the
preceding clause (A) and (C) use its reasonable best efforts to satisfy all
conditions, undertakings and requirements as may be necessary or appropriate to
obtain all such consents, authorizations, orders and approvals or as may be set
forth therein, (ii) subject to Applicable Law restricting the exchange of such
information, furnish the other parties hereto with copies of all documents and
correspondence (x) prepared by or on behalf of such party for submission to any
Governmental Authority and (y) received by or on behalf of such party from any
Governmental Authority, in each case, in connection with the transactions
contemplated hereby and (iii) subject to Applicable Law, use its reasonable best
efforts to consult with and keep the other parties hereto informed as to the
status of such matters.

 

(c)          To the extent that any Third Party Consent is required under any
Contract in connection with the consummation of the transactions contemplated by
this Agreement, the Company and each Investor shall use their reasonable best
efforts to obtain such Third Party Consent on or prior to the Closing Date.

 

4.4           Public Announcements; Confidentiality.

 

(a)          Prior to the Closing, neither the Company nor its Subsidiaries
shall, without the prior written approval of each Investor, make any internal or
external communication, statement or announcement (whether to their employees,
clients, customers, business partners, equity holders or otherwise) regarding
this Agreement or the transactions contemplated hereby, or otherwise disclose
any of the contents of this Agreement, unless otherwise required by Applicable
Law, in which case the Person making such disclosure shall give prior written
notice to each Investor and consider in good faith each Investor’s suggestions
with respect thereto.

 

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(b)          The parties to this Agreement agree to be bound by and comply with
the provisions set forth in the Confidentiality Agreement, the provisions of
which are hereby incorporated herein by reference.

 

4.5           Supplemental Disclosure. Each Investor and the Company will, prior
to the Closing, give prompt notice to the other party, to the extent it has
Knowledge (i) of the occurrence, or failure to occur, of any event or existence
of any condition that has caused or could reasonably be expected to cause any of
its representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time after the date of this Agreement
such that the conditions to closing set forth in Sections 5.2 or 5.3, as
applicable, would reasonably be expected not to be met; (ii) of the occurrence
of any matter or event that would reasonably be, in the case of the Company and
its Subsidiaries, Material to a Reasonable Investor, or, in the case of each
Investor, that would reasonably be expected to prohibit or materially impair the
ability of each Investor to consummate the transaction contemplated by this
Agreement or perform its obligations hereunder; (iii) of any failure on its part
to comply with or satisfy, in any material respect, any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; (iv) of
any notice or other written communication from any Person alleging that the
consent of such Person is or may be required in connection with the consummation
of the transactions contemplated by this Agreement and (v) of any lawsuit,
action or proceeding pending or, to the knowledge of each Investor or to the
Knowledge of the Company (as applicable), threatened against the party or the
parties relating to the transactions contemplated herein; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement; provided,
further, that any failure to comply with this Section 4.5 shall not constitute a
breach or noncompliance of a covenant by such party for purposes of determining
the satisfaction of the conditions set forth in Section 5.2(b) or Section
5.3(b). In addition, each Investor shall keep the special committee of the board
of directors of the Company reasonably informed of any material developments
relating to the closing of the transactions contemplated by the ARC Transaction
Agreement and the MIPA.

 

4.6           Information Statement.

 

(a)          As soon as reasonably practicable after the date of this Agreement,
the Company will file with the SEC an information statement in preliminary form
of the type contemplated by Rule 14c-2 promulgated under the Exchange Act,
prepared by the Company with the assistance and subject to the approval (not to
be unreasonably withheld, delayed or conditioned) of each Investor, related to
this Agreement and the stockholder approval of the transactions contemplated
hereby (as amended or supplemented from time to time, the “Information
Statement”). In connection with the Information Statement, the Company shall
take all actions necessary to comply, and will comply in all material respects,
with the Exchange Act, including Regulation 14C and Schedule 14C promulgated
thereunder, as applicable.

 

33 

 

 

(b)          The Company shall use its reasonable best efforts, and each
Investor shall reasonably cooperate with the Company, to have the Information
Statement cleared by the SEC as promptly as practicable after such filing
(including by responding to comments of the SEC). Each Investor and the Company
will furnish all information as may be reasonably requested by the other in
connection with the preparation, filing, clearance and distribution of the
Information Statement. As promptly as practicable after the Information
Statement shall have been cleared by the SEC (or after ten (10) calendar days
have passed since the filing of the preliminary Information Statement with the
SEC without notice from the SEC of its intent to review the Information
Statement or such other date as required by applicable Law), the Company shall
cause the Information Statement to be mailed to its stockholders and to be filed
in definitive form with the SEC as required. No filing of, or amendment or
supplement to, the Information Statement will be made by the Company without the
approval (not to be unreasonably withheld, delayed or conditioned) of each
Investor. If, at any time prior to the Closing, any information relating to the
Company, each Investor or any of its respective Affiliates, directors or
officers is discovered by the Company or each Investor which information is
required to be set forth in an amendment or supplement to the Information
Statement so that the Information Statement would not include any misstatement
of a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading, the party that discovers such information will promptly notify the
other parties hereto and an appropriate amendment or supplement describing such
information will be promptly filed with the SEC and, to the extent required by
Applicable Law, disseminated to the stockholders of the Company. The Company
will notify each Investor promptly of the time when the Information Statement
shall have been cleared by the SEC or of the receipt of any comments or other
communications, whether written or oral, from the SEC or the staff of the SEC
and of any request by the SEC or the staff of the SEC for amendments or
supplements to the Information Statement, or for additional information, and
will provide each Investor and their respective counsel with a reasonable
opportunity to participate in, provide comments on and approve (such approval
not to be unreasonably withheld, delayed or conditioned) the Company’s response
to such comments and other communications, and to participate in any discussions
or meetings with the SEC relating to the Information Statement or any other
matters that are the subject of this Agreement. The parties will supply each
other with copies of all correspondence between any of it or its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Information Statement or this Agreement or the transactions
contemplated hereby.

 

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4.7           Listing Undertaking. The Company undertakes to take all such
actions as are necessary, to cause the shares of Common Stock to be issued upon
the conversion of the Purchased Shares to be approved for listing on the NYSE,
subject to official notice of issuance, promptly after Closing.

 

4.8           Certificate of Designation. Prior to the Closing, the Company
shall file the Certificate of Designation with the Secretary of State of the
State of Delaware, in accordance with Applicable Law and the Organizational
Documents of the Company.

 

4.9           [Intentionally omitted].

 

4.10         NYSE Rules; Reservation of Shares of Common Stock. The Company
shall at all times maintain a reserve for issuance from its duly authorized
shares of Common Stock in an amount equal to the number of shares of Common
Stock issuable upon conversion of all shares of Preferred Stock (including
Series D-2 Preferred Stock) then outstanding.

 

4.11         Investor Undertaking.Each Investor hereby undertakes to vote all of
its Series D-2 Preferred Stock to approve any amendments to the certificates of
designation governing the rights of the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock as mutually agreed among the
holders of such Preferred Stock and the Company.

 

4.12         Expenses; Transfer Taxes.

 

(a)          Except as expressly set forth herein, each party shall bear the
fees, costs and expenses of it and its Subsidiaries incurred in connection with
the negotiation and preparation of this Agreement and the Ancillary Agreements,
and the consummation of the transactions contemplated hereby (including legal,
accounting and financial advisors).

 

(b)          All transfer, documentary, sales, use, stamp, registration, value
added and other such Taxes and fees (including any real property transfer tax
and any similar Tax, and including any penalties and interest) incurred in
connection with the transactions contemplated by this Agreement shall be borne
equally by the parties, and the Company shall file all necessary Tax returns and
other documentation with respect to all such Taxes and fees, and, if required by
Applicable Law, each Investor shall, and shall cause its Affiliates to, join in
the execution of any such Tax returns and other documentation.

 

4.13         Further Assurances. Each party shall cooperate with the others, and
execute and deliver, or use its reasonable best efforts to cause to be executed
and delivered, all such other instruments, including instruments of conveyance,
assignment and transfer, and take all such other actions as such party may
reasonably be requested to take by the other parties hereto from time to time,
consistent with the terms of this Agreement, in order to effectuate the
provisions and purposes of this Agreement and the transactions contemplated
hereby.

 

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ARTICLE V
CONDITIONS TO THE CLOSING

 

5.1           Mutual Conditions. The respective obligations of each Investor and
the Company to consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver in writing by the parties hereto) as of
the Closing of the following condition:

 

(a)          No Injunction. There shall be no (i) injunction, restraining order
or decree of any nature of any Governmental Authority of competent jurisdiction
in effect that restrains or prohibits the consummation of the transactions
contemplated hereby or (ii) pending action, suit or proceeding brought by any
Governmental Authority which seeks to restrain the consummation of the
transactions contemplated hereby.

 

5.2           Additional Conditions to the Obligations of each Investor. The
obligations of each Investor to consummate the transactions contemplated by this
Agreement are subject to the satisfaction (or waiver in writing by each
Investor) as of the Closing of each of the following additional conditions:

 

(a)          Representations and Warranties of the Company. The representations
and warranties of the Company set forth in Sections 2.1, 2.2, 2.5 and 2.23 (such
representations and warranties, the “Fundamental Representations”) shall be true
and correct in all respects (with only such exceptions as are de minimus) as of
the Closing Date as though made at and as of the Closing Date, except to the
extent that any representation and warranty is made as of a specified date other
than the Closing Date, in which case such representation and warranty shall be
true and correct in all respects (with only such exceptions as are de minimis)
as of such specified date. The representation and warranty set forth in Section
2.7 shall be true and correct in all material respects as of the Closing Date as
though made at and as of the Closing Date. Other than the Fundamental
Representations and Section 2.7, the representations and warranties of the
Company contained in Article II of this Agreement (read without giving effect to
any qualifications or exceptions contained therein regarding materiality,
“Material to a Reasonable Investor” or similar qualification, except for
references to “Material Contracts”) shall be true and correct as of the Closing
Date as though made at and as of the Closing Date, except to the extent that any
representation and warranty is made as of a specified date other than the
Closing Date, in which case such representation and warranty shall be true and
correct as of such specified date and except for such failures to be true and
correct that individually or in the aggregate would not have a Material Adverse
Effect.

 

36 

 

 

(b)          Performance of Company Covenants. The Company shall have performed
and complied with in all material respects all covenants and conditions
contained in this Agreement to be performed or complied with by it prior to or
at the Closing.

 

(c)          Material Proceedings. Since the date hereof, there has been no (i)
new Proceeding instituted by a Governmental Authority or claim filed in state or
federal court by any Person against Company or any of its Subsidiaries, in each
case alleging actions, occurrences or omissions, or (ii) new development in any
Proceeding set forth in Section 2.7 of the Company Disclosure Letter, in each
case for clause (i) and (ii), that would, individually or in the aggregate, be
Material to a Reasonable Investor.

 

(d)          Company Certificate. Each Investor shall have received a
certificate, dated as of the Closing Date, executed by a senior officer of the
Company on behalf of the Company, to the effect that the conditions specified in
paragraphs (a), (b) and (c) have been fulfilled.

 

(e)          Registration Rights Agreement. The Company shall have delivered to
each Investor an executed Registration Rights Agreement.

 

(f)          Certificate of Designation. The Certificate of Designation filed
with the Secretary of State of the State of Delaware Designation shall have been
declared effective.

 

(g)          Apollo Transaction. Closing under the Apollo Transaction shall
occur simultaneously and the Company shall receive the proceeds of the equity
investment from Luxor.

 

(h)          [Intentionally omitted].

 

5.3           Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the transactions contemplated by this
Agreement are subject to the satisfaction (or waiver in writing by the Company)
as of the Closing of each of the following additional conditions:

 

(a)          Representations and Warranties. The representations and warranties
of each Investor set forth in Sections 3.1 and 3.2 shall be true and correct in
all respects (with only such exceptions as are de minimis) as of the Closing
Date as though made at and as of the Closing Date, except to the extent that any
representation and warranty is made as of a specified date other than the
Closing Date, in which case such representation and warranty shall be true and
correct in all respects (with only such exceptions as are de minimis) as of such
specified date. Other than the representations and warranties referred to in the
immediately preceding sentence, the representations and warranties of Luxor
contained in Article III of this Agreement (read without giving effect to any
qualifications or exceptions contained therein regarding materiality or similar
qualification) shall be true and correct as of the Closing Date as though made
at and as of the Closing Date, except to the extent that any representation and
warranty is made as of a specified date other than the Closing Date, in which
case such representation and warranty shall be true and correct as of such
specified date and except, in each case, for such failures to be true and
correct that, individually or in the aggregate, would not reasonably be expected
to prevent or materially delay the ability of each Investor to complete the
transactions contemplated by this Agreement or to perform its obligations
hereunder.

 

37 

 

 

(b)          Performance of Covenants. Each Investor shall have performed and
complied with in all material respects all covenants and conditions contained in
this Agreement to be performed or complied with by it prior to or at the
Closing.

 

(c)          Certificate. The Company shall have received a certificate, dated
as of the Closing Date, executed by each Investor, to the effect that the
conditions specified in paragraphs (a) and (b) above have been fulfilled by each
Investor.

 

ARTICLE VI
TERMINATION

 

6.1           Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:

 

(a)          by mutual written consent of each Investor and the Company;

 

(b)          by the Company or each Investor upon written notice to the other
parties in the event that any Governmental Authority (including any court of
competent jurisdiction) shall have issued an order, decree or ruling or taken
any other official action enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action
shall have become final and non-appealable; provided that the right to terminate
this Agreement pursuant to this Section 6.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement shall have
been a material cause of, or resulted in, the occurrence of such order, decree,
ruling or other action;

 

(c)          by the Company, if there shall be a breach by each Investor of any
representation or warranty or any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Section
5.3(a) or (b) and which breach cannot be cured or has not been cured within 30
calendar days after the giving of written notice to the applicable Investor of
such breach; provided that the Company shall not have the right to terminate
this Agreement pursuant to this Section 6.1(c) if it is then in breach of any of
its covenants set forth in this Agreement that would result in the closing
conditions set forth in Section 5.2 (other than those conditions which by their
terms cannot be satisfied until the Closing) not being satisfied;

 

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(d)          by each Investor, if there shall be a breach by the Company of any
representation or warranty or any covenant or agreement contained in this
Agreement which would result in a failure of a condition set forth in Section
5.2(a) or (b) and which breach cannot be cured or has not been cured within 30
calendar days after the giving of written notice to the Company of such breach;
provided that each Investor shall not have the right to terminate this Agreement
pursuant to this Section 6.1(d) if it is then in breach of any of its covenants
set forth in this Agreement that would result in the closing conditions set
forth in Section 5.3 (other than those conditions which by their terms cannot be
satisfied until the Closing) not being satisfied;

 

(e)          by the Company or each Investor upon written notice given to the
other parties in the event that the Closing shall not have taken place on or
before June 30, 2016 (the “Outside Date”), unless such party has breached any
covenant or agreement hereunder and such breach has resulted in the failure of
the Closing to occur on or prior to the Outside Date; or

 

(f)          by each Investor, if the investment agreement with respect to the
Apollo Transaction shall have been terminated in accordance with its terms
without any shares of Series D Preferred Stock having been purchased.

 

For purposes of this Section 6.1, termination of this Agreement by an Investor
shall not affect the rights and obligations of any other Investor under this
Agreement.

 

6.2           Termination Right. Notwithstanding anything contained to the
contrary herein, to the extent that the Company Disclosure Letter contains any
disclosure that (i) would be Material to a Reasonable Investor taking into
account the availability and extent of indemnification under Article VII hereof
and (ii) a reasonable person would not have recognized would have been disclosed
against the pertinent representation and warranty after reading this Agreement
and the Declarative Portions of the Company’s Recent SEC Filings Investor shall
have the right to terminate this Agreement (“Termination Right”) by serving
notice to the Company within 72 hours of receiving the Company Disclosure
Letter.

 

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6.3           Effect of Termination. In the event of the termination of this
Agreement as provided above, this Agreement (other than this Section 6.3) shall
become void and of no further force and effect, and there shall be no duties,
liabilities or obligations of any kind or nature whatsoever on the part of any
party hereto to the other parties based either upon this Agreement or the
transactions contemplated hereby, provided that (a) no such termination (nor any
provision of this Agreement) shall relieve any party from liability for any
damages for any actual and intentional fraud or any willful and material breach
of any covenant hereunder prior to such termination and (b) the obligations of
the parties referred to in the last sentence of Section 4.2(a) and Article VIII
shall continue to apply following any such termination of this Agreement. For
purposes of this Agreement, “willful and material breach” means a material
breach of any covenant set forth in this Agreement that is a consequence of an
act or failure to act by or on behalf of the breaching party with knowledge that
the taking of such act or failure to take such act would, or would reasonably be
expected to, result in a breach of this Agreement.

 

ARTICLE VII
INDEMNIFICATION

 

7.1           Indemnification by the Company.

 

(a)          From and after the Closing, subject to the other provisions of this
Article VII, the Company shall indemnify each Investor and its officers,
directors, employees and Affiliates (collectively, the “Indemnified Investor
Parties”), and hold each of them harmless from and against, any and all actions,
suits, proceedings, demands, assessments, judgments, claims, liabilities, losses
(including losses arising from the diminution of value), costs, damages,
expenses, interest or penalties, and reasonable attorneys’ fees, expenses and
disbursements, whether or not resulting from a Third Party Claim (collectively,
“Damages”), suffered, paid or incurred by such Indemnified Investor Party
arising out of, resulting from or caused by: (i) any breach of any of the
representations and warranties (read without giving effect to any qualifications
regarding materiality, Material to a Reasonable Investor or similar
qualifications other than with respect to the representations in Section 2.9(a))
made by the Company in Article II, or in any certificate or other document
delivered in connection with this Agreement, as if such representation or
warranty was made as of the Closing (except in the case of representations and
warranties which by their terms speak only as of a specific date or dates, in
which case as of such date or dates), (ii) any breach by the Company of any
covenant or agreement of the Company contained in this Agreement, and (iii) any
matter described in the Company Disclosure Letter that (x) would be Material to
a Reasonable Investor and (y) a reasonable person would not have recognized
would have been disclosed against the pertinent representation and warranty
after reading this Agreement and the Declarative Portions of the Company’s
Recent SEC Filings and (iv) any material pre closing violation of law or any
Proceeding alleging the same.

 

(b)          Notwithstanding anything to the contrary contained in this Section
7.1, except with respect to actual fraud or breaches of Fundamental
Representations, as to which the limitations in this Section 7.1(b) shall not
apply, the Indemnified Investor Parties shall be entitled to indemnification for
breaches of representations and warranties pursuant to Section 7.1(a)(i):

 

40 

 

 

(i)          only if, and then only to the extent that, the aggregate Damages to
all Indemnified Investor Parties (without duplication), with respect to all
claims for indemnification pursuant to Section 7.1(a)(i), exceed $750,000,
whereupon (subject to the provisions of clause (ii) below) the Company shall be
obligated to pay in full all such amounts but only to the extent such aggregate
Damages are in excess of $750,000; and

 

(ii)         only with respect to claims for indemnification in respect of which
notice of the inaccuracy or breach giving rise to such claim shall have been
given to the Company on or before the date that is eighteen (18) months after
the Closing Date (other than claims for indemnification arising from a breach of
any Fundamental Representation, which must be asserted by the Indemnified
Investor Parties not later than sixty days following the expiration of the
relevant statute of limitations).

 

In addition, the Company shall not be liable for indemnification pursuant to
Section 7.1(a)(i) with respect to any Damages suffered, paid or incurred by an
Indemnified Investor Party of less than $20,000 (a “De Minimis Damage”), and all
De Minimis Damages shall be disregarded for purposes of the foregoing deductible
(it being understood and agreed that in the event any Damage is greater than the
threshold for a De Minimis Loss, no portion of such Damage shall be disregarded
pursuant to this sentence).

 

(c)          Notwithstanding anything to the contrary contained in this Section
7.1, the Indemnified Investor Parties shall be entitled to indemnification
pursuant to Section 7.1(a)(iii) only if, and then only to the extent that, the
aggregate Damages to all Indemnified Investor Parties (without duplication),
with respect to all claims for indemnification pursuant to Section 7.1(a)(iii),
exceed $1,000,000, whereupon the Company shall be obligated to pay in full all
such amounts but only to the extent such aggregate Damages are in excess of
$1,000,000.

 

(d)          Notwithstanding anything to the contrary contained in this Section
7.1, the Indemnified Investor Parties shall be entitled to indemnification
pursuant to Section 7.1(a)(iv) only if, and then only to the extent that, the
aggregate Damages to all Indemnified Investor Parties (without duplication),
with respect to all claims for indemnification pursuant to Section 7.1(a)(iv),
exceed $750,000, whereupon the Company shall be obligated to pay in full all
such amounts but only to the extent such aggregate Damages are in excess of
$750,000.

 

7.2           Indemnification by each Investor.

 

(a)          From and after the Closing Date, subject to the other provisions of
this Article VII, each Investor shall indemnify the Company and their respective
officers, directors, employees and Affiliates (collectively, the “Indemnified
Company Parties”) and to hold each of them harmless from and against any and all
Damages suffered, paid or incurred by such Indemnified Company Party arising out
of, resulting from or caused by: (i) any breach of any of the representations
and warranties made by each Investor in Article III as if such representation or
warranty was made as of the Closing (except in the case of representations and
warranties which by their terms speak only as of a specific date or dates, in
which case as of such date or dates); or (ii) any breach by each Investor of any
covenant or agreement of each Investor contained in this Agreement.

 

41 

 

 

(b)          Notwithstanding anything to the contrary contained in this
Section 7.2, except with respect to actual fraud or breaches of representations
and warranties contained in Sections 3.1 and 3.2 as to which the limitations of
this Section 7.2(b) shall not apply, the Indemnified Company Parties shall be
entitled to indemnification pursuant to Section 7.2(a)(i):

 

(i)          only if, and then only to the extent that, the aggregate Damages to
all Indemnified Company Parties (without duplication), with respect to all
claims for indemnification pursuant to Section 7.2(a)(i), exceed $750,000,
whereupon (subject to the provisions of clause (ii) below) Investor shall be
obligated to pay in full all such amounts but only to the extent such aggregate
Damages are in excess of $750,000; and

 

(ii)         only with respect to claims for indemnification in respect of which
notice of the inaccuracy or breach giving rise to such claim shall have been
given to each Investor on or before the date that is eighteen (18) months after
the Closing Date.

 

In addition, each Investor shall not be liable for indemnification pursuant to
Section 7.2(a)(i) with respect to any De Minimis Damages suffered, paid or
incurred by an Indemnified Company Party, and all De Minimis Damages shall be
disregarded for purposes of the foregoing deductible (it being understood and
agreed that in the event any Damage is greater than the threshold for a De
Minimis Loss, no portion of such Damage shall be disregarded pursuant to this
sentence). Further, no Investor shall be responsible for indemnification
pursuant to Section 7.2(a)(i) for any breach set forth in Section 7.2(a) of any
other Investor.

 

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7.3           Indemnification Procedures.

 

(a)          If an Indemnified Investor Party or an Indemnified Company Party
(each, an “Indemnified Party”) believes that a claim, demand or other
circumstance exists that has given or may reasonably be expected to give rise to
a right of indemnification under this Article VII (whether or not the amount of
Damages relating thereto is then quantifiable), such Indemnified Party shall
assert its claim for indemnification by giving written notice thereof (a “Claim
Notice”) to the Company (if indemnification is sought from the Company (an
“Indemnifying Company Party”)) or to each Investor (if indemnification is sought
from each Investor (an “Indemnifying Investor Party”)) (in either such case, the
“Indemnifying Party”) (i) if the event or occurrence giving rise to such claim
for indemnification is, or relates to, a claim, suit, action or proceeding
brought by a Person not a party to this Agreement or affiliated with any such
party (a “Third Party Claim”), promptly and in any event no later than thirty
(30) days after it has received notice of such claim, suit, action or proceeding
by such Indemnified Party, or (ii) if the event or occurrence giving rise to
such claim for indemnification is not, or does not relate to, a Third Party
Claim, promptly after the discovery by the Indemnified Party of the
circumstances giving rise to such claim for indemnity; provided, however, that
any failure or delay in providing such notice shall not release the Indemnifying
Party from any of its obligations under this Article VII except to the extent
the Indemnifying Party is actually prejudiced by such failure or delay. Each
Claim Notice shall describe the claim in reasonable detail based on information
available at the time.

 

(b)          If any claim or demand by an Indemnified Party under this Article
VII relates to a Third Party Claim, the Indemnifying Party may elect to assume,
conduct and control the defense of the Indemnified Party against such Third
Party Claim (including using counsel of the Indemnifying Party's choosing). The
Indemnified Party may participate at its own expense, with counsel of its
choosing, in the defense of such Third-Party Claim although such Third-Party
Claim shall be controlled by the Indemnifying Party. Until the Indemnifying
Party has assumed the defense of the Indemnified Party against such Third Party
Claim, the Indemnified Party may defend such Third Party Claim but in no event
shall the Indemnified Party negotiate a settlement or a compromise of such Third
Party Claim without the prior written consent of the Indemnifying Party (not to
be unreasonably withheld, conditioned or delayed), and if such Indemnifying
Party provides such prior written consent, any such settlement or compromise by
the Indemnified Party and the Indemnified Party’s reasonable costs and expenses
arising out of such defense, settlement or compromise of such Third Party Claim
shall be Damages subject to indemnification hereunder to the extent provided
herein. Except with the prior written consent of the Indemnified Party (not to
be unreasonably withheld, conditioned or delayed), the Indemnifying Party shall
not settle or otherwise compromise or pay such Third Party Claim; provided that
any such settlement or compromise shall be permitted hereunder without the
written consent of the Indemnified Party if such settlement or compromise (w)
involves only money damages paid by or on behalf of the Indemnifying Party, (x)
does not encumber any of the assets of any Indemnified Party or its Affiliates
or include any restriction or condition that would apply to or adversely affect
any Indemnified Party or any of its Affiliates or the conduct of any Indemnified
Party’s or its Affiliates’ business, (y) includes a complete release by such
Third Party of such Indemnified Party and (z) does not include any admission of
wrongdoing or misconduct by such Indemnified Party.

 

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(c)          Each Indemnified Party shall make available to the Indemnifying
Party all information and documents in its possession or reasonably available to
such Indemnified Party relating to such action or claim which is not
confidential or proprietary in nature or which is made available under the terms
of a confidentiality agreement or is delivered or obtained under appropriate
protective orders reasonably satisfactory to such party, together with all
pertinent information regarding the amount of the Damages that it asserts it has
sustained or incurred. In addition, the parties shall render to each other such
assistance as may reasonably be requested in order to help ensure the proper and
adequate defense of any such action or claim. The party in charge of the defense
shall keep the other parties reasonably apprised at all times as to the status
of the defense or any settlement negotiations with respect thereto.

 

(d)          Each Indemnifying Party shall, subject to Section 7.4(a), pay any
Damages payable pursuant to the terms of this Article VII to the applicable
Indemnified Party within twenty (20) Business Days after receiving notice from
such Indemnified Party that such amounts are payable pursuant to the terms of
this Article VII, unless the Indemnifying Party in good faith disputes the
amount of the Damages and/or its obligation to provided indemnification
hereunder. In the event of such a dispute, the Indemnifying Party shall pay the
amount of Damages for which it is liable for within twenty (20) Business Days
following the final determination of the amount of such Damages that the
Indemnifying Party is liable hereunder. A “final determination” shall exist when
(i) the parties agree in writing or (i) a court of competent jurisdiction shall
have made such determination in a final and non-appealable judgment.

 

7.4        General.

 

(a)          The aggregate amount which the Company is or may be required to pay
pursuant to Section 7.1(a)(i) and 7.1(a)(ii) shall not exceed fifty percent
(50%) of the Purchase Price, the aggregate amount which the Company is or may be
required to pay pursuant to Section 7.1(a)(iii) shall not exceed the Purchase
Price and the aggregate amount which Investor is or may be required to pay
pursuant to Section 7.2(a)(i) and 7.2(a)(ii) shall not exceed fifty percent
(50%) of the Purchase Price.

 

(b)          Notwithstanding anything herein to the contrary, no Indemnifying
Party shall be liable for any Damages that are not reasonably foreseeable, that
are speculative, that are based on reputational damage to each Investor or any
of its Affiliates (including the Subject Companies), or that constitute punitive
or other exemplary Damages, except to the extent that such Damages have been
awarded to a Third Party against an Indemnified Party.

 

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(c)          The amount which the Indemnifying Party is or may be required to
pay to any Indemnified Party pursuant to this Article VII shall be reduced
(retroactively, if necessary) by any insurance proceeds, indemnification from
other sources or other amounts actually recovered by or on behalf of such
Indemnified Party in reduction of the related Damages, net of any deductibles or
other similar expenses incurred in connection therewith, it being understood and
agreed that an Indemnified Party shall use commercially reasonable efforts to
seek recovery under any applicable insurance policies, other contracts or
arrangements that provide for indemnification or from other sources that may
provide recovery for such Damages. If an Indemnified Party shall have received
payment from the Indemnifying Party in respect of Damages and shall subsequently
receive insurance or indemnification proceeds or other amounts in respect of
such Damages, then such Indemnified Party shall promptly repay to the
Indemnifying Party a sum equal to the amount of such net insurance or
indemnification proceeds or other net amounts actually received. The
Indemnifying Party shall be subrogated to any right of action which the
Indemnified Party may have against any other Person with respect to any matter
giving rise to a claim for indemnification hereunder. Any Indemnified Party that
becomes aware of Damages for which it seeks indemnification shall be required to
use commercially reasonable efforts to mitigate the Damages.

 

(d)          The amount of any Damages for which indemnification is provided
under this Article VII shall be adjusted to take account of any net Tax benefit
(or cost) actually realized by the Indemnified Party or any of its Affiliates in
the year such Damages are incurred or paid arising from the incurrence or
payment of any such Damages. In computing the amount of any such Tax benefit (or
cost), the Indemnified Party (or its applicable Affiliate) shall be deemed to
recognize all other items of income, gain, loss, deduction or credit before
recognizing any item arising from the receipt of any indemnity payment hereunder
or the incurrence or payment of any indemnified Damages.

 

(e)          An Indemnified Party shall be entitled to indemnification pursuant
to Sections 7.1(a)(ii) and 7.2(a)(ii) only if a notice asserting the right to
indemnification has been given to the Indemnifying Party not later than the
earlier of sixty days following the expiration of the relevant statute of
limitations, if applicable.

 

(f)          The indemnification provided in this Article VII shall be the
exclusive post-Closing remedy available to any party with respect to any breach
of any representation, warranty, covenant or agreement in this Agreement, or
otherwise in respect of the transactions contemplated by this Agreement, except
in the case of actual fraud or with respect to matters for which the remedy of
specific performance, injunctive relief or other non-monetary equitable remedies
are available.

 

ARTICLE VIII
GENERAL PROVISIONS

 

8.1           Survival. Except for the Fundamental Representations and the
representations contained in Section 2.11, in each case, which shall survive
until the earlier of (i) sixty days following the expiration of the relevant
statute of limitations and (ii) the fifth anniversary of the Closing Date, each
of the representations and warranties of the parties hereunder shall survive the
Closing until the date which is eighteen (18) months after the Closing Date, at
which time they shall terminate and be of no further force or effect; provided,
that any representation or warranty in respect of which indemnity may be sought
under this Agreement shall survive the time at which it would otherwise
terminate pursuant to this Section 8.1 if notice of the inaccuracy or breach
thereof giving rise to such right of indemnity shall have been given to the
party against whom such indemnity may be sought prior to such time.

 

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8.2           Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed given if
delivered personally, mailed by registered or certified mail with postage
prepaid and return receipt requested or sent by commercial overnight courier,
courier fees prepaid (if available; otherwise, by the next best class of service
available), to the parties at the following addresses:

 

(a)if to any Investor, to it at:

 

c/o Luxor Capital Partners, LP

1114 Avenue of the Americas 29th Floor

New York NY 10036

Attention: Norris Nissim, Esq., General Counsel

Facsimile: (212) 763-8001

 

with a copy (which shall not constitute notice) to:

 

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, NY 10036

Phone: 212.715.9100

Fax: 212.715.8000

Abbe Dienstag (adienstag@kramerlevin.com)

 

(b)if to the Company, to it at:

 

RCS Capital Corporation

405 Park Ave

New York, NY 10022

Attention: James A. Tanaka (JTanaka@rcscapital.com)

Fax: 646-861-7743

 

with a copy (which shall not constitute notice) to:

 

Proskauer Rose LLP

11 Times Square

New York, NY 10036

Attn: Steven L. Lichtenfeld (SLichtenfeld@proskauer.com)

 

or to such other Person or address as any party shall specify by notice in
writing to the other parties in accordance with this Section 8.2. All such
notices or other communications shall be deemed to have been received on the
date of the personal delivery, on the third Business Day after the mailing or
dispatch thereof, or in the case of electronic mail or facsimile transmission,
on the date received, subject to confirmation of receipt; provided that notice
of change of address shall be effective only upon receipt.

 

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8.3           Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The words “hereof”, “herein” and “hereunder”
and words of like import used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement. The words “party”
or “parties” shall refer to parties to this Agreement. References to Articles
and Sections are to Articles and Sections of this Agreement unless otherwise
specified. All Disclosure Letters referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Any
capitalized term used in any Disclosure Letter but not otherwise defined therein
shall have the meaning given to such term in this Agreement. Any singular term
in this Agreement shall be deemed to include the plural, and any plural term the
singular. Whenever the words “include”, “includes” or “including” are used in
this Agreement, they shall be deemed to be followed by the words “without
limitation,” whether or not they are in fact followed by those words or words of
like import. “Writing”, “written” and comparable terms refer to printing, typing
and other means of reproducing words (including electronic media) in a visible
form. References to any agreement or contract are to that agreement or contract
as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof. References to any Person include the successors and
permitted assigns of that Person. References from or through any date mean,
unless otherwise specified, from and including or through and including any such
date. Any reference to “days” means calendar days unless Business Days are
expressly specified. If any action under this Agreement is required to be done
or taken on a day that is not a Business Day, then such action shall be required
to be done or taken not on such day but on the first succeeding Business Day
thereafter. All references to “$” or “dollars” set forth in this Agreement are
to U.S. dollars.

 

8.4           Amendment and Modification; Waiver.

 

(a)          This Agreement may not be amended except by an instrument or
instruments in writing signed and delivered on behalf of each Investor and the
Company.

 

(b)          At any time prior to the Closing, any party that is entitled to the
benefits hereof may (i) extend the time for the performance of any of the
obligations or other acts of the other parties, (ii) waive any inaccuracy in the
representations and warranties of any other party contained herein or in any
Disclosure Letter or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements of any other party or conditions contained
herein. Any agreement on the part of a party to any such extension or waiver
shall be valid if set forth in an instrument in writing signed and delivered on
behalf of such party. Waivers shall operate to waive only the specific matter
described in the writing and shall not impair the rights of the party granting
the waiver in other respects or at other times. A party’s waiver of a breach of
a provision of this Agreement, or failure (on one or more occasions) to enforce
a provision of, or to exercise a right under, this Agreement, shall not
constitute a waiver of a similar breach, or of such provision or right other
than as explicitly waived.

 

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8.5           Entire Agreement. This Agreement (including the Disclosure Letters
and the Ancillary Agreements) and the Confidentiality Agreement constitute the
entire agreement and supersede all other prior agreements and understandings,
both written and oral, of the parties with respect to the subject matter hereof.

 

8.6           Disclosure Letters. For purposes of the representations and
warranties of the Company and each Investor in this Agreement, items disclosed
in one section of a Disclosure Letter shall be considered to be made for
purposes of all other sections of such Disclosure Letter to the extent that the
relevance of any such disclosure to any other such section of such Disclosure
Letter is reasonably apparent from the text of such disclosure. For purposes of
the representations and warranties of the Company in this Agreement, items
disclosed in the forms, statements and reports of the Company’s publicly
available, filed with, or furnished (on a publicly available basis) to the SEC
on or after January 1, 2014 and prior to the date of this Agreement shall be
considered to be disclosed for purposes of the Company Disclosure Letter
(excluding any risk factor disclosures contained in such documents under the
heading “Risk Factors” and any disclosure of risks or other matters included in
any “forward-looking statements” disclaimer or other statements that are
cautionary, predictive or forward-looking in nature, which in no event shall be
deemed to be an exception to, or disclosure for purposes of, any representation
or warranty set forth in Article II). The disclosure of any item or matter in
any Disclosure Letter shall not be construed as an admission, representation or
indication that such item or other matter is “material” or would be Material to
a Reasonable Investor or that such item or other matter is required to be
referred to or disclosed in such Disclosure Letter. The disclosure of any item
or matter relating to any possible breach or violation of any law or contract
shall not be construed as an admission or indication that any such breach or
violation exists or has actually occurred.

 

8.7           Third Party Beneficiaries. Except with respect to Indemnified
Parties in their capacity as such pursuant to Article VII, nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
the parties or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.

 

8.8           Specific Performance. The parties agree that if any of the
provisions of this Agreement were not performed by the parties in accordance
with their specific terms or were otherwise breached thereby, irreparable damage
would occur, no adequate remedy at law would exist and damages would be
difficult to determine, and that each party hereto shall be entitled to specific
performance to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof, in addition to any other
remedy to which it may be entitled at law or in equity.

 

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8.9           Assignment; Binding Effect. This Agreement may not be assigned by
any party without the prior written consent of the other parties, provided that
each Investor may assign this Agreement, including each Investor’s right to
acquire the Series D-2 Preferred Stock and obligation to pay the Purchase Price,
to any Affiliate of each Investor without consent of the Company, but any such
assignment shall not relieve each Investor of its obligations hereunder to the
extent the assignee fails to perform such obligations; provided, further, that
notwithstanding any such assignment, each Investor shall continue to have the
right to enforce this Agreement. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective successors and permitted
assigns.

 

8.10         Governing Law. This Agreement shall be governed in all respects
(including as to validity, interpretation and effect) by the internal laws of
the State of New York, without giving effect to any conflict of laws rules or
principles that would require or permit the application of another
jurisdiction’s laws.

 

8.11         Jurisdiction; Waiver of Jury Trial.

 

(a)          Each party hereby irrevocably agrees that any action or proceeding
arising out of any dispute in connection with this Agreement, any rights or
obligations hereunder or the performance of such rights or obligations shall be
brought exclusively in the courts of the State of New York located in the
Borough of Manhattan or the federal courts of the United States of America
located in the Southern District of New York (and appellate courts thereof) and
hereby expressly submits to the personal jurisdiction and venue of such courts
for the purposes thereof and expressly waives any claim of improper venue and
any claim that such courts are an inconvenient forum. Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing of copies thereof
by registered or certified mail or by overnight courier service, postage
prepaid, to its address set forth in Section 8.2.

 

(b)          Each party hereby waives all rights to a jury trial with respect to
any action or claim arising out of any dispute in connection with this
Agreement, any rights or obligations hereunder or the performance of such rights
and obligations. Each party (i) certifies that no representative, agent or
attorney of any party has represented, expressly or otherwise, that such party
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that the other parties have been induced to enter into this
Agreement and the transactions contemplated hereby by, among other things, the
waivers and certifications contained herein.

 

8.12         Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other
Governmental Authority to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such a determination, the parties shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the fullest
extent possible.

 

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8.13         Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.

 

ARTICLE IX
DEFINITIONS

 

The following terms when used in this Agreement shall have the following
meanings:

 

“Acquisition Proposal” has the meaning set forth in Section 4.7.

 

“Adviser Compliance Policies” has the meaning set forth in Section 2.18(d).

 

“Advisers Act” means the Advisers Act of 1940 and the rules and regulations
thereunder.

 

“Advisory Contract” means any written agreement pursuant to which a the Company
or any of its Subsidiaries provides Investment Advisory Services (including
sub-advisory services) to a Client.

 

“Affiliate” of a Person means a Person that directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common control
with, the first Person. “Control” (and “controlled by” and “under common control
with”) means possessing, directly or indirectly, the power to direct or cause
the direction of a Person’s management or policies, through owning voting
securities, by contract or credit arrangement, as trustee or executor, or
otherwise.

 

“Affiliated Party” of an entity means any person “associated” (as defined under
the Advisers Act) with such entity and any “affiliated person” (as defined in
the Investment Company Act).

 

“Agreement” has the meaning set forth in the introductory paragraph hereof.

 

“AMH” has the meaning set forth in the recitals.

 

“Ancillary Agreements” means the Registration Rights Agreement, , the MIPA, the
Certificate of Designation and all other agreements or instruments to be
executed and delivered in connection with the transactions contemplated hereby.

 

50 

 

 

“Applicable Law” means any domestic or foreign federal, state or local statute,
law (whether statutory or common law), ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment,
decree, policy, guidelines or other requirement of any Governmental Authority
applicable to the Company and its Subsidiaries and Clients, or any of their
respective Affiliates, holders of equity securities, properties, assets,
officers, directors, employees or agents, as the case may be.

 

“Apollo” means Apollo Management Holdings, L.P.

 

“Apollo Transaction” has the meaning set forth in the recitals.

 

“ARC” has the meaning set forth in the recitals.

 

“ARC Transaction Agreement” has the meaning set forth in the recitals.

 

“BDC” means any entity that has elected to be regulated or is regulated as a
business development company pursuant to section 54 of the Investment Company
Act of 1940 (15 U.S.C. 80a-54)” for which the Company or any of its Subsidiaries
serves as an investment adviser, depositor, underwriter, principal underwriter
or distributer or as a sub-adviser.

 

“Broker-Dealer Subsidiaries” has the meaning set forth in Section 2.16(a).

 

“Business Day” means any day which is not a Saturday, Sunday or a day on which
banks in New York, New York are authorized or obligated by law or executive
order to be closed.

 

“Cap” has the meaning set forth in Section 7.4(b).

 

“Certificate of Designation” has the meaning set forth in the recitals.

 

“CFTC” means the Commodity Futures Trading Commission.

 

“Claim Notice” has the meaning set forth in Section 7.3(a).

 

“Class A Common Stock” has the meaning set forth in the recitals.

 

“Class B Common Stock” has the meaning set forth in the recitals.

 

“Class B Share” has the meaning set forth in the recitals.

 

“Client” means any Fund to which the Company or any of its Subsidiaries provides
Investment Advisory Services (including any sub-advisory services).

 

“Closing” has the meaning set forth in Section 1.3.

 

51 

 

 

“Closing Condition Satisfaction Date” means the date on which the conditions set
forth in Article V have been satisfied or waived (other than those conditions
that by their terms are to be satisfied by actions taken at the Closing, but
subject to the satisfaction or waiver of those conditions at such time).

 

“Closing Date” has the meaning set forth in Section 1.3.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Commodity Exchange Act” means the Commodity Exchange Act of 1936 and the rules
and regulations thereunder.

 

“Common Stock” has the meaning set forth in the recitals.

 

“Company” has the meaning set forth in the introductory paragraph hereof.

 

“Company Disclosure Letter” means the disclosure letter delivered by the Company
to each Investor within five Business Days of execution hereof.

 

“Company Fundamental Representations” has the meaning set forth in
Section 5.2(a).

 

“Company SEC Documents” has the meaning set forth in Section 2.6(a).

 

“Confidentiality Agreement” means the confidentiality agreement between Luxor
and the Company, dated May 13, 2015, as amended.

 

“Consent” means any consent, approval, authorization, waiver, permit, license,
grant, agreement, exemption or order of, or registration, declaration or filing
with, any Person, including any Governmental Authority, that is required in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.

 

“Contract” has the meaning set forth in Section 2.3.

 

“Damages” has the meaning set forth in Section 7.1(a).

 

“Declarative Portions of the Company’s Recent SEC Filings” means (i) the forms,
statements, schedules, reports or other documents filed or furnished on or after
January 1, 2014 by the Company with or to the SEC (to the extent available on
the SEC’s EDGAR system not less than five (5) Business Days prior to the date
hereof), (ii) the most recent draft of the Company’s Quarterly Report on Form
10-Q for the quarter ended June 30, 2015, with respect to both (i) and (ii)
above, other than (x) any disclosures contained under the captions “Risk
Factors” or “Forward Looking Statements” and (y) any other disclosures that are
non-specific, predictive, cautionary or forward looking in nature and (iii) the
items set forth on Schedule 1.

 

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“Disclosure Letters” means the Company Disclosure Letter and each Investor
Disclosure Letter.

 

“Employee Benefit Plan” means each employee benefit plan, scheme, program,
policy, arrangement or contract, whether written or unwritten, including any
“employee benefit plan”, as defined in Section 3(3) of ERISA, whether or not
subject to ERISA, and any bonus, deferred compensation, equity purchase, equity
grant or other equity-based arrangement (including, to the extent applicable,
under Organizational Documents of the Company and its Subsidiaries), and any
employment, termination, retention, bonus, change in control or severance plan,
program, policy, arrangement or contract for the benefit of any current or
former officer, employee, partner, director or other service provider of the
Company or any of its Subsidiaries or in which any of them participate as of the
date hereof, which in any such case is maintained or contributed to by any of
the Company or any of its Subsidiaries or with respect to which the Company or
any of its Subsidiaries could incur or has incurred liability under Applicable
Law, including the Code or ERISA.

 

“Environmental Law” means any law, code, license, permit, authorization,
approval, consent, common law, legal doctrine, requirement or agreement with any
Governmental Authority relating to (i) the protection, preservation or
restoration of the environment (including air, water, vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource), or to human health or safety, or
(ii) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of hazardous substances.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” of any entity means any other entity which, together with such
entity, would be treated as a single employer under Section 414 of the Code and
the regulations promulgated thereunder.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC thereunder.

 

“FINRA” has the meaning set forth in Section 2.16(b).

 

“Fund” means any Sponsored Fund or Sub-Advised Fund.

 

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“GAAP” means U.S. generally accepted accounting principles.

 

“Governmental Approvals” has the meaning set forth in Section 2.4(a).

 

“Governmental Authority” means any United States or foreign government, any
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including the SEC, CFTC or any other authority, agency,
department, board, commission or instrumentality of the United States, any State
of the United States or any political subdivision thereof or any foreign
jurisdiction, and any court, tribunal or arbitrator(s) of competent
jurisdiction, and any United States or foreign governmental or non-governmental
self-regulatory organization, agency or authority, including FINRA and NFA.

 

“Governmental Reports” has the meaning set forth in Section 2.18(c).

 

“Holdings” has the meaning set forth in the recitals.

 

“IA Subsidiaries” has the meaning set forth in Section 2.18(a).

 

“Indebtedness” means, without duplication, all obligations of the Company or any
of its Subsidiaries, determined on a consolidated basis in accordance with GAAP,
for (a) borrowed money, including all indebtedness evidenced by any note, bond,
debenture or other debt ‎security or any credit agreement or indenture, (b)
indebtedness of Persons other than the Company or any of its Subsidiaries of the
type referred to ‎in this definition which is directly or indirectly guaranteed
by the Company or any of its Subsidiaries, (c) accrued interest owed with
respect to any indebtedness‎ referred to in this definition and (d) any costs to
eliminate hedging or swap arrangements outstanding as of the Closing.

 

“Indemnified Company Parties” has the meaning set forth in Section 7.2(a).

 

“Indemnifying Company Party” has the meaning set forth in Section 7.3(a).

 

“Indemnified Investor Parties” has the meaning set forth in Section 7.1(a).

 

“Indemnifying Investor Party” has the meaning set forth in Section 7.3(a).

 

“Indemnified Party” has the meaning set forth in Section 7.3(a).

 

“Indemnifying Party” has the meaning set forth in Section 7.3(a).

 

“Information Statement” has the meaning set forth in Section 4.6(a).

 

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“Infringing” has the meaning set forth in Section 2.13(b).

 

“Intellectual Property” means, in any and all jurisdictions throughout the
world, any (i) trademarks, service marks, trade names, trade dress, Internet
domain names, social media usernames (e.g., Twitter handles), personalized
subdomains or vanity URLs and other indicia or origin, and the goodwill
associated with any and all of the foregoing and symbolized thereby, (ii)
copyrights and rights in copyrightable subject matter in published and
unpublished works of authorship, (iii) rights in Software, (iv) all
registrations and applications to register or renew the registration of any of
the foregoing, (v) patents and patent applications, including all reissues,
divisions, renewals, reexaminations, extensions, provisionals, continuations and
continuations-in-part thereof, (vi) rights in Trade Secrets and (vii) all other
intellectual property rights.

 

“Investment Advisory Services” means the provision by the Company or any of its
Subsidiaries of investment advisory services with respect to securities, real
estate, real estate-related assets, or working and other interests in producing
and non-producing oil and gas properties.

 

“Investment Company Act” means the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.

 

“Investor” has the meaning set forth in the introductory paragraph hereof.

 

“Investor Disclosure Letter” means the disclosure letter delivered by each
Investor to the Company at the time of execution hereof.

 

“Investor Fundamental Representations” has the meaning set forth in Section
5.3(a).

 

“IT Systems” means the hardware, Software, data, databases, data communication
lines, network and telecommunications equipment, Internet-related information
technology infrastructure, wide area network and other information technology
equipment, owned, leased or licensed by or to the Company or any of its
Subsidiaries.

 

“IRS” means the United States Internal Revenue Service.

 

“Knowledge of the Company” or “the Company’s Knowledge” means the knowledge
after due inquiry of any of the individuals identified in Section 9A of the
Company Disclosure Letter.

 

“Knowledge of each Investor” or Investor’s Knowledge” means the actual knowledge
of any of the individuals identified in Section 10 of the Luxor Disclosure
Letter.

 

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“Lenders” has the meaning set forth in the recitals.

 

“Lien” means any mortgage, pledge, hypothecation, right of others, claim,
security interest, encumbrance, lease, sublease, license, occupancy agreement,
adverse claim or interest, easement, covenant, encroachment, burden, title
defect, title retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other restrictions or
limitations of any nature whatsoever (whether absolute or contingent), including
such as may arise under any Contracts.

 

“Luxor” has the meaning set forth in the recitals.

 

“Luxor Consent” has the meaning set forth in the recitals.

 

“Malware” means any virus, Trojan horse, time bomb, key-lock, spyware, worm,
malicious code or other software program designed to or able to, without the
knowledge and authorization of the Company or any of its Subsidiaries, disrupt,
disable, harm, interfere with the operation of or install itself within or on
any Software, computer data, network memory or hardware.

 

“Material to a Reasonable Investor” means, with respect to any fact,
circumstance, contingency, change, effect, event or occurrence, that a
reasonable and prudent investor would deem such fact, circumstance, contingency,
change, effect, event or occurrence to be material in making a decision to
invest in the Company’s securities.

 

“Material Adverse Effect” means any change, effect, event or occurrence that (a)
is or would reasonably be expected to be, individually or in the aggregate,
materially adverse to the assets, liabilities, results of operations or
financial condition of the Company and its Subsidiaries, taken as a whole, other
than any such effect, change, event or occurrence to the extent resulting from
(i) any change in the capital markets or securities markets after the date
hereof, (ii) any change in general economic conditions or interest rates arising
after the date hereof, (iii) any outbreak or substantial worsening of major
hostilities in which the United States is involved or any act of terrorism
within or involving the United States or its property or citizens arising after
the date hereof, (iv) the failure of the Company to achieve any financial
projections or forecasts in and of itself (but not including the underlying
reasons therefor unless otherwise excepted pursuant to the other subsections of
this definition), (v) the entering into of this Agreement or public announcement
or consummation of the transactions contemplated hereby, (vi) any change after
the date of this Agreement in Applicable Law or accounting principles or
interpretations thereof, (vii) any natural disaster, earthquake, flood,
hurricane or any acts of God, (viii) any action required by this Agreement or
the omission to take an action prohibited by this Agreement, except, in each
case of clauses (i), (ii), or (iii) to the extent that such change, effect,
event or occurrence has a materially disproportionate adverse effect on the
Company and its Subsidiaries, taken as a whole, relative to other alternative
investment firms generally; or (b) would reasonably be expected to prevent or
materially delay the ability of the Company to complete the transaction
contemplated by this Agreement or perform its obligations hereunder.

 

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“Material Contract” means (a) any “material contract” (as such term is defined
in item 601(b)(10) of Regulation S-K promulgated under the Securities Act) or
(b) any written or binding oral Contract to which the Company or any of its
Subsidiaries is a party or by which any of their respective properties, rights
or assets are bound that:

 

(i)          is a voting agreement or a registration rights agreement;

 

(ii)         would restrict the payment of dividends upon, or the redemption or
conversion of, shares of Series D-2 Preferred Stock or shares of Class A Common
Stock issuable upon conversion thereof;

 

(iii)        is a joint venture, partnership, limited liability company or other
similar agreement material to the Company or any of its Subsidiaries;

 

(iv)       grants any right of first refusal or right of first offer or similar
right on any assets that are material to the Company and its Subsidiaries, taken
as a whole;

 

(v)        provides for any payments that are conditioned, in whole or in part,
on a change of control of the Company, any of its Subsidiaries or transactions
of the type contemplated hereby;

 

(vi)       is an employment, consulting, severance, bonus (including fee
sharing), compensation or collective bargaining Contract relating to or for the
benefit of current or former employees, directors or other service providers;

 

(vii)      contains (A) a “clawback” or similar undertaking requiring the
reimbursement or refund of any material fees (whether performance based or
otherwise) paid to the Company or any of its Subsidiaries or (B) a “most favored
nation” clause or other term providing preferential pricing or treatment to a
third party in any material Contract;

 

(viii)     relates to the acquisition or disposition of any business, a material
amount of equity interests or assets, or any material properties or assets,
under which the Company or any of its Subsidiaries has continuing material
obligations or contingent liabilities, including contingent “earnout” or similar
payments or indemnification obligations;

 

57 

 

 

(ix)        is an Affiliate Agreement (including any Contract with Luxor);

 

(x)         any non-competition, non-solicitation or exclusive dealing
agreement, or any other agreements that purports to limit or restrict in any
material respect (A) the ability of the Company or any of its Subsidiaries to
solicit customers or employees or investments or (B) the manner in which, or the
localities in which, all or any portion of the business or operations of the
Company or any of its Subsidiaries is or would be conducted;

 

(xi)        by its terms does not terminate or is otherwise not cancelable
within ninety (90) days without penalty, cost or liability in excess of
$1,000,000 and requires or would reasonably be expected to involve aggregate
payments by the Company or its Subsidiaries in excess of $1,000,000 per fiscal
year; or

 

(xii)       relates to Indebtedness of the Company or any of its Subsidiaries in
excess of $1,000,000 in the aggregate, or the granting of any liens (other than
Permitted Liens) or a security interest in any material property of the Company
or any of its Subsidiaries.

 

“MIPA” has the meaning set forth in the recitals.

 

“Municipal Advisor Subsidiaries” has the meaning set forth in Section 2.17(a).

 

“Newco” has the meaning set forth in the recitals.

 

“NFA” has the meaning set forth in Section 2.15(c).

 

“Notice” has the meaning set forth in Section 4.3(e)(i).

 

“Organizational Documents” means the articles of incorporation, certificate of
incorporation, charter, by-laws, articles of formation, certificate of
formation, regulations, operating agreement, certificate of limited partnership,
partnership agreement, limited liability company agreement and all other similar
documents, instruments or certificates executed, adopted or filed in connection
with the creation, formation or organization of a Person, including any
amendments thereto.

 

“Outside Date” has the meaning set forth in Section 6.1(e).

 

“Owned Intellectual Property” means all Intellectual Property owned or purported
to be owned by the Company or any of its Subsidiaries.

 

58 

 

 

“Permits” has the meaning set forth in Section 2.15(b).

 

“Permitted Liens” means (i) Liens for Taxes, assessments or other governmental
charges not yet due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been reflected on the Financial
Statements in accordance with GAAP, (ii) carriers’, warehousemen’s, mechanics’,
materialmen’s, repairman’s or other similar Liens arising in the ordinary course
of business, (iii) easements, rights of way, building, zoning and other similar
encumbrances or title defects arising in the ordinary course of business,
(iv) Liens on assets securing debt incurred to finance the acquisition of such
assets, (v) Liens on any Contributed Asset or on the assets of any Transferred
Entity incurred in the ordinary course of business, and (vi) Liens on properties
which do not materially impair business operations or the use of such properties
in the ordinary course of business or materially affect the value of such
properties.

 

“Person” means any individual, corporation, limited or general partnership,
limited liability company, limited liability partnership, trust, association,
joint venture, governmental entity or other entity.

 

“Preferred Stock” has the meaning set forth in the recitals.

 

“Price Per Share” means $25.

 

“Private Fund” means any “private fund” (as such term is defined in Section
202(a)(29) of the Advisers Act) for which the Company or any of its Subsidiaries
serves as an investment adviser, general partner, managing member or sponsor or
as a sub-adviser.

 

“Proceedings” has the meaning set forth in Section 2.7.

 

“Purchase Price” has the meaning set forth in Section 1.4(b).

 

“Purchased Shares” has the meaning set forth in Section 1.2.

 

“RCS Holdings” has the meaning set forth in the recitals.

 

“Registered Fund” means an investment company registered under the Investment
Company Act for which the Company or any of its Subsidiaries serves as an
investment adviser, depositor, underwriter, principal underwriter or distributer
or as a sub-adviser.

 

“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the Closing Date, between the Company and each Investor to be negotiated
in good faith prior to the Closing in form and substance customary for
transactions of the type being consummated hereunder.

 

59 

 

 

“Regulated Fund” means any Registered Fund or BDC.

 

“Refinancing Payments” has the meaning set forth in Section 4.10(d).

 

“REIT” means any real estate investment trust for which the Company or any of
its Subsidiaries provides Investment Advisory Services.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC thereunder.

 

“Series B Preferred Stock” has the meaning set forth in the recitals.

 

“Series C Preferred Stock” has the meaning set forth in the recitals.

 

“Series D Preferred Stock” has the meaning set forth in the recitals.

 

“Series D-1 Preferred Stock” has the meaning set forth in the recitals.

 

“Series D-2 Preferred Stock” has the meaning set forth in the recitals.

 

“Software” means all computer software, including application software, system
software, firmware, middleware, mobile digital applications, assemblers,
applets, compilers and binary libraries, including all source code and object
code versions of any and all of the foregoing, in any and all forms and media,
and all related documentation.

 

“Specified Liabilities” means the liabilities described on Section 9B of the
Company Disclosure Letter.

 

“Sponsored BDC” means a BDC for which the Company or any of its Subsidiaries
serves as an investment adviser, depositor, underwriter, principal underwriter
or distributer or otherwise sponsors.

 

“Sponsored Fund” means any Registered Fund, BDC or Unregulated Fund for which
the Company or any of its Subsidiaries acts as sponsor or any wholly owned
Subsidiaries thereof.

 

“Sponsored Registered Fund” means a Registered Fund for which the Company or any
of its Subsidiaries as an investment adviser, depositor, underwriter, principal
underwriter or distributer or otherwise sponsors.

 

60 

 

 

“Sponsored Regulated Fund” means any Sponsored Registered Fund or Sponsored BDC.

 

“Sponsored Regulated Fund Compliance Policies” has the meaning set forth in
Section 2.20(b)(iv).

 

“Sub-Advised BDC” means any BDC for which the Company or any of its Subsidiaries
provides Investment Advisory Services acting solely as sub-adviser.

 

“Sub-Advised Fund” means any Fund for which the Company or any of its
Subsidiaries provides Investment Advisory Services acting solely as sub-adviser.

 

“Sub-Advised Registered Fund” means any Registered Fund for which the Company or
any of its Subsidiaries provides Investment Advisory Services acting solely as a
sub-adviser.

 

“Sub-Advised Regulated Fund” means any Regulated Fund for which the Company or
any of its Subsidiaries provides Investment Advisory Services acting solely as a
sub-adviser.

 

“Subsidiary” means, with respect to a Person, any other Person (whether or not
incorporated) that the first Person, directly or indirectly, owns or has the
power to vote or control more than 50% of any class or series of capital stock
or other equity interests of such Person; provided that the term “Subsidiary”
shall not include any Fund or controlled Affiliate of any Fund in the case of
the Company or any similar investment vehicle or controlled Affiliate thereof in
the case of any other Person.

 

“Tax” means any U.S. federal, state, local or foreign income, alternative,
minimum, accumulated earnings, personal holding company, franchise, capital
stock, profits, windfall profits, gross receipts, sales, use, value added,
transfer, registration, stamp, premium, excise, customs duties, severance,
environmental (including taxes under section 59A of the Code), real property,
personal property, ad valorem, occupancy, license, occupation, employment,
payroll, social security, disability, unemployment, workers’ compensation,
withholding, estimated or other similar tax, duty, fee, assessment or other
governmental charge or deficiencies thereof (including all interest and
penalties thereon and additions thereto).

 

“Tax Agreements” has the meaning set forth in Section 2.10(d).

 

“Tax Return” means any federal, state, local or foreign tax return, declaration,
statement, report, schedule, form or information return or any amendment to any
of the foregoing relating to Taxes.

 

61 

 

 

“Termination Right” has the meaning set forth in Section 6.2.

 

“Third Party Claim” has the meaning set forth in Section 7.3(a).

 

“Third Party Consents” has the meaning set forth in Section 2.4(b).

 

“Trade Secrets” means all inventions, processes, designs, formulae, models,
tools, algorithms, Software architectures, trade secrets, know-how, ideas,
research and development, data and databases and confidential information.

 

“Unregulated Fund” means any REIT or Private Fund.

 

[Remainder of Page Intentionally Left Blank]

 

62 

 

 

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

 

 

 

  LUXOR CAPITAL PARTNERS, LP         By: /s/ Norris Nissim   Name: Norris Nissim
  Title: General Counsel     Luxor Capital Group, LP, Investment Manager        
LUXOR CAPITAL PARTNERS OFFSHORE MASTER FUND, LP         By: /s/ Norris Nissim  
Name: Norris Nissim   Title: General Counsel     Luxor Capital Group, LP,
Investment Manager         LUXOR SPECTRUM OFFSHORE MASTER FUND, LP         By:
/s/ Norris Nissim   Name: Norris Nissim   Title: General Counsel     Luxor
Capital Group, LP, Investment Manager         LUXOR WAVEFRONT, LP         By:
/s/ Norris Nissim   Name: Norris Nissim   Title: General Counsel     Luxor
Capital Group, LP, Investment Manager

 

63 

 

 

  OC 19 MASTER FUND, L.P.-LCG         By: /s/ Norris Nissim   Name: Norris
Nissim   Title: General Counsel     Luxor Capital Group, LP, Investment Manager

 

64 

 

 

  RCS CAPITAL CORPORATION         By: /s/ Edward M. Weil, Jr.   Name: Edward M.
Weil, Jr.   Title: Chief Executive Officer

 

65 

 

 

EXHIBIT A

 

Form of Certificate of Designation

 

See attached.

 

66 

 

  

 

RCS CAPITAL CORPORATION

 

 

 

CERTIFICATE OF DESIGNATION

 

Pursuant to Section 151 of the General
Corporation Law of the State of Delaware

 

 

 

11% Series D-2 Convertible Preferred Stock

 

(Par Value $0.001 Per Share)

 

 

 

 

RCS Capital Corporation (the “Corporation”), a corporation organized and
existing under and by virtue of the provisions of the General Corporation Law of
the State of Delaware (the “General Corporation Law”), hereby certifies that,
pursuant to the authority expressly granted to and vested in the Board of
Directors of the Corporation (the “Board of Directors”) by the Third Amended and
Restated Certificate of Incorporation of the Corporation (as amended from time
to time in accordance with Section 8(c) hereof, the “Certificate of
Incorporation”) which authorizes the issuance, by the Corporation, in one or
more series of up to 100,000,000 shares of preferred stock, par value $0.001 per
share (the “Preferred Stock”), and in accordance with the provisions of
Section 151 of the General Corporation Law, the Board of Directors on August 5,
2015 duly adopted the following resolutions:

 

RESOLVED, that, pursuant to the authority expressly granted to and vested in the
Board of Directors by the provisions of Section 4.03 of the Certificate of
Incorporation and in accordance with the provisions of Sections 141(c) and 151
of the General Corporation Law, the Board of Directors, hereby authorizes,
creates and provides for the issuance of a series of Preferred Stock, par value
$0.001 per share, of the Corporation, herein designated as the 11% Series D-2
Convertible Preferred Stock (the “Series D-2 Preferred Stock”), which shall
consist initially of 500,000 shares of Series D-2 Preferred Stock (subject to
increase or decrease as set forth herein in accordance with Section 151(g) of
the General Corporation Law), and the powers, designations, preferences and
relative, participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of the shares of such
series (in addition to the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Certificate of
Incorporation that are applicable to the Preferred Stock of all series) are
hereby fixed as follows (certain terms used herein being defined in Section 2)
hereof:

 

1.General.

 

(a)          The shares of such series shall be designated the 11% Series D-2
Convertible Preferred Stock, par value $0.001 per share (the “Series D-2
Preferred Shares”).

 

(b)          Each Series D-2 Preferred Share shall be identical in all respects
with the other Series D-2 Preferred Shares.

 

(c)          The number of Series D-2 Preferred Shares shall initially be
500,000, which number may from time to time be increased (but not above the
total number of authorized shares of Preferred Stock and subject to
Section 8(c)(i)) or decreased (but not below the number of Series D-2 Preferred
Shares then outstanding) by resolution of the Board of Directors. Whenever any
Series D-2 Preferred Shares that have been issued are reacquired in any manner
by the Corporation, including in connection with a conversion into Common
Shares, the Corporation shall take all action as may be necessary to retire such
shares and to cause such shares to resume the status of authorized but unissued
Preferred Stock, undesignated as to class or series.

 

(d)          No fractional Series D-2 Preferred Shares shall be issued.

 

 

 

 

2.Certain Definitions. As used herein, the following terms shall have the
following meanings:

 

“4.9% Share Cap” shall have the meaning set forth in Section 7(b).

 

“9.9% Share Cap” shall have the meaning set forth in Section 7(a).

 

“24.9% Share Cap” shall have the meaning set forth in Section 7(c).

 

“accrued and unpaid dividends”, with respect to any share of any class or
series, means an amount computed at the annual dividend rate for the class or
series of which the particular share is a part, from and including the date on
which dividends on such share became cumulative to and including the date to
which such dividends are to be accrued, less the aggregate amount of all
dividends theretofore paid thereon.

 

“Acquired Entity or Business” means a Person, business, property or asset
acquired by the Corporation or any of its Subsidiaries.

 

“Acquired EBITDA” means, with respect to any Acquired Entity or Business (any of
the foregoing a “Pro Forma Entity”), the Adjusted EBITDA of such Pro Forma
Entity, and which, for the avoidance of doubt, shall include pro forma
adjustment reflecting the amount of net cost savings and synergies projected by
the Corporation in good faith to be realized as a result of actions taken or to
be taken within 12 months after the date the acquisition of a Pro Forma Entity
(which cost savings or synergies shall be calculated on a pro forma basis as
though such cost savings or synergies had been realized on the first day of such
period); provided that (A) such cost savings or synergies are reasonably
identifiable and factually supportable, (B) no cost savings or synergies shall
be added pursuant to this defined term to the extent duplicative of any expenses
or charges otherwise added to LTM Adjusted EBITDA, whether through a pro forma
adjustment or otherwise, for such period and (C) such actions have been taken or
are to be taken within 12 months after the date of determination to take such
action.

 

“Additional Shares” shall have the meaning set forth in Section 6(e).

 

“Adjusted EBITDA” shall have the meaning set forth in the definition of LTM
Adjusted EBITDA.

 

“Adjustment Price” shall have the meaning set forth in Section 6(e)(iv).

 

“Affiliate” shall mean, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.

 

“Agreement Value” shall mean, in respect of any one or more Hedging Agreements,
after taking into account the effect of any legally enforceable netting
agreement relating to any such Hedging Agreement, (i) for any date on or after
the date such Hedging Agreement has been closed out and termination value(s)
determined in accordance therewith, such termination value(s) and (ii) for any
date prior to the date referenced in clause (i), the amount(s) determined as the
mark-to-market value(s) for such Hedging Agreement, as determined based upon one
or more mid-market or other readily available quotations provided by any
recognized dealer in such Hedging Agreement.

 

 2 

 

 

“Annual Dividend Rate” shall mean 11.00% per annum of the Liquidation Preference
if paid in cash, per Series D-2 Preferred Share; provided, however that to the
extent a dividend for a Dividend Period is not paid in cash on the applicable
Dividend Payment Date (whether at the option of the Board of Directors or as
otherwise required by this Certificate of Designation), then the Annual Dividend
Rate for such Dividend Period with respect to dividends not paid in cash shall
mean 12.50% per annum of the Liquidation Preference.

 

“Beneficial Owner” shall mean a “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Exchange Act).

 

“Board of Directors” shall have the meaning set forth in the introductory
paragraph of this Certificate of Designation.

 

“Business Day” shall mean any day other than Saturday, Sunday or a day on which
state or federally chartered banking institutions in New York, New York are not
required to be open.

 

“Capital Lease Obligations” of any Person shall mean the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

 

“Certificate of Incorporation” shall have the meaning set forth in the
introductory paragraph of this Certificate of Designation.

 

“Change of Control” shall be deemed to have occurred if any of the following
occurs:

 

(a)          any “person” or “group” as defined in Rules 13d-3 and 13d-5 under
the Exchange Act (other than (i) the current holder as of the date of the filing
of this Certificate of Designation of Class B Common Stock or its Affiliates or
(ii) the Luxor Group) is or becomes the Beneficial Owner, directly or
indirectly, of the Corporation’s Common Shares, voting or otherwise,
representing 50% or more of the total voting power or economic interests of all
outstanding classes of the Corporation’s common stock, voting or otherwise; or

 

(b)          the Corporation consolidates with, or merges with or into, another
person or the Corporation sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of the Corporation’s assets, or
any person consolidates with, or merges with or into, the Corporation, in any
such event other than pursuant to a transaction in which the persons that
Beneficially Owned, directly or indirectly, the Corporation’s voting stock
immediately prior to such transaction Beneficially Own, directly or indirectly,
shares of the voting stock representing at least a majority of the total voting
power of all outstanding classes of voting stock of the Corporation or of the
continuing, surviving or transferee person (or any parent thereof) immediately
after giving effect to such transaction (all such terms having the meanings
ascribed thereto in publicly-traded convertible securities of corporate issuers
in the U.S. securities markets).

 

 3 

 

 

“Class B Common Stock” shall mean the Class B Common Stock, par value $0.001 per
share, of the Corporation.

 

“Closing Price” shall mean, for any date, the closing price per security for the
securities in question for such date (or, if not a Trading Day, the nearest
preceding date that is a Trading Day) on the primary Eligible Market or exchange
or quotation system on which the securities in question are then listed or
quoted.

 

“Common Shares” shall mean shares of any capital stock of any class or series of
the Corporation (including, on the Issue Date, the Class A Common Stock, par
value $0.001 per share, of the Corporation) which has no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and which is not
subject to redemption by the Corporation. However, subject to the provisions of
Section 6, shares issuable upon conversion of Series D-2 Preferred Shares shall
include only shares of the class of capital stock of the Corporation designated
as Class A Common Stock, par value $0.00l per share, of the Corporation on the
Issue Date or shares of any class or classes resulting from any reclassification
or reclassifications thereof and which have no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and which are not
subject to redemption by the Corporation.

 

“Common Share Events” shall have the meaning set forth in Section 6(e)(i).

 

“Constituent Person” shall have the meaning set forth in Section 6(f).

 

“Continuation Right” shall have the meaning set forth in Section 4(b).

 

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms “Controlling” and “Controlled” shall have meanings correlative thereto.

 

“Conversion Price” shall mean the Initial Conversion Price, as adjusted from
time to time in accordance with the terms hereof.

 

“Corporation” shall have the meaning set forth in the introductory paragraph of
this Certificate of Designation.

 

“Corporation Conversion Election Date” shall have the meaning set forth in
Section 6(b)(ii).

 

“Corporation Conversion Election Notice” shall have the meaning set forth in
Section 6(b)(ii).

 

 4 

 

 

“Corporation Redemption Closing Date” shall have the meaning set forth in
Section 5(a).

 

“Corporation Redemption Date” shall mean December 12, 2022, March 12, 2023, June
12, 2023, and September 12, 2023 and each successive anniversary of such dates.

 

“Corporation Redemption Notice” shall have the meaning set forth in Section
5(a).

 

“Current Market Price” shall mean, with respect to the Common Shares, on any
date specified herein, the average of the Market Price during the period of the
most recent ten (10) consecutive Trading Days ending on such date.

 

“Distributed Securities” shall mean rights, options or warrants to subscribe for
or purchase any securities of the Corporation, other than those rights, options
and warrants referred to in and treated under Section 6(e)(ii).

 

“Dividend Payment Date” shall mean, with respect to each Dividend Period, the
eleventh (11th) calendar day of each of January, April, July and October,
commencing on October 11, 2015; provided, however, that if any Dividend Payment
Date falls on any day other than a Business Day, the dividend payment due on
such Dividend Payment Date shall be paid on the first Business Day immediately
following such Dividend Payment Date.

 

“Dividend Payment Record Date” shall have the meaning set forth in Section 3(a).

 

“Dividend Periods” shall mean quarterly dividend periods commencing on January
1, April 1, July 1 and October 1 and ending on and including the day preceding
the first day of the next succeeding Dividend Period (other than the initial
Dividend Period, which shall commence on the Issue Date and end on and include
September 30, 2015).

 

“Eligible Market” shall mean any of the New York Stock Exchange, the NYSE MKT,
the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital
Market or OTC Bulletin Board.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, and any statute
successor thereto, in each case as amended from time to time.

 

“FINRA” shall mean Financial Industry Regulatory Authority, Inc.

 

“FINRA Approval” shall have the meaning set forth in Section 7.

 

“GAAP” shall mean generally accepted accounting principles (GAAP), as in effect
from time to time; provided, however, that any lease that is recharacterized as
a capital lease and any obligations that are recharacterized as Capital Lease
Obligations, in each case due to a change in GAAP after the Issue Date shall not
be treated as a capital lease or Capital Lease Obligation, as the case may be,
but shall instead be treated as it would have been in accordance with GAAP in
effect on the Issue Date.

 

 5 

 

 

“General Corporation Law” shall have the meaning set forth in the introductory
paragraph of this Certificate of Designation.

 

“Group Member” means any member of a “group” as such term is used in Regulation
13D under the Securities Act.

 

“Hedging Agreement” shall mean any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement.

 

“holder” of Series D-2 Preferred Shares shall mean the stockholder in whose name
such Series D-2 Preferred Shares are registered in the stock books of the
Corporation.

 

“Holder Conversion Election Date” shall have the meaning set forth in Section
6(b)(i).

 

“Holder Conversion Election Notice” shall have the meaning set forth in Section
6(b)(i).

 

“Holder Redemption Closing Date” shall have the meaning set forth in Section
5(b).

 

“Holder Redemption Date” shall mean December 12, 2022, and each successive
anniversary of such date.

 

“Holder Redemption Notice” shall have the meaning set forth in Section 5(b).

 

“Indebtedness” of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments representing
extensions of credit, (c) all obligations of such Person issued or assumed as
the deferred purchase price of property or services (excluding (i) trade
accounts payable and accrued obligations incurred in the ordinary course of
business, (ii) any earn-out obligation until such obligation becomes a liability
on the balance sheet of such Person in accordance with GAAP and (iii)
obligations resulting from take-or-pay contracts entered into in the ordinary
course of business)); (d) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on property owned or acquired by such Person
(including all obligations of such Person under conditional sale or other title
retention agreements relating to property or assets purchased by such Person
(excluding trade accounts payable and other accrued obligations, in each case
incurred in the ordinary course of business)), whether or not the obligations
secured thereby have been assumed, but limited to the lower of (i) the fair
market value of such property and (ii) the amount of the Indebtedness so
secured, (e) all guarantees by such Person of obligations of others of the type
referred to in clauses (a), (b), (c) or (f) of this defined term, (f) all
Capital Lease Obligations of such Person, (g) net obligations of such Person
under any Hedging Agreements, valued at the Agreement Value thereof, (h) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any capital stock of such Person or any other
Person or any warrants, rights or options to acquire such capital stock, valued,
in the case of redeemable preferred interests, at the greater of its voluntary
or involuntary liquidation preference plus accrued and unpaid dividends, and
(i) all obligations of such Person as an account party in respect of letters of
credit and bankers’ acceptances, in each case, if and to the extent that any of
the foregoing indebtedness (other than under the Hedging Agreements) would
appear as a liability upon a balance sheet (excluding the footnotes thereto) of
such Person prepared in accordance with GAAP. The Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or joint venturer, to the extent such Person is
liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness do not provide that such Person is liable therefor.

 

 6 

 

 

“Initial Conversion Price” shall mean $5.00.

  

“Issue Date” shall mean the date on which any Series D-2 Preferred Shares are
issued and sold.

 

“Junior Shares” shall have the meaning set forth in Section 9.

 

“Liquidation” shall mean (A) a dissolution or winding up of the Corporation,
whether voluntary or involuntary, (B) a consolidation or merger of the
Corporation with and into one or more entities which are not Affiliates of the
Corporation which results in a Change of Control, or (C) a sale or transfer of
all or substantially all of the Corporation’s assets other than to an Affiliate
of the Corporation.

 

“Liquidation Preference” shall mean (A) Twenty-Five Dollars ($25.00) in cash per
Series D-2 Preferred Share plus (B) all accrued and unpaid dividends added
thereto in accordance with Section 3(a).

 

“LTM Adjusted EBITDA” shall mean net income on a consolidated basis for the
Corporation and its Subsidiaries, plus interest expense, plus tax expense, plus
depreciation and amortization expense, plus employee share-based compensation
expense, plus acquisition and integration related expenses, and plus equity
issuance and related offering costs, in each case, for the trailing 12 calendar
months (“Adjusted EBITDA”), and plus, without duplication, the Acquired EBITDA
of any Pro Forma Entity acquired by the Corporation or a Subsidiary during such
period to the extent not subsequently disposed by the Corporation, and
calculated as if such acquisition occurred on the first day of such period with
adjustments made through the date of acquisition.

 

“Luxor” shall mean Luxor Capital Group LP.

 

 7 

 

 

“Luxor Group” shall mean Luxor together with any of its Affiliates that own
Series D-2 Preferred Shares.

 

“Mandatory Conversion” shall have the meaning set forth in Section 6(a)(ii).

 

“Mandatory Conversion Right” shall have the meaning set forth in Section
6(a)(ii).

 

“Market Price” shall mean, with respect to the Common Shares on any date, the
last reported sales price, regular way on such day, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if the Common Shares are not listed or
admitted for trading on NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Common Shares are listed or admitted
for trading or, if the Common Shares are not listed or admitted for trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the principal automated quotation system that may then be in use
or, if the Common Shares are not quoted by any such system, the average of the
closing bid and asked prices as furnished by a professional market maker
regularly making a market in the Common Shares selected for such purpose by the
Board of Directors or, if there is no such professional market maker, such
amount as an independent investment banking firm selected by the Board of
Directors determines to be the value of a Common Share.

 

“Merger Liquidation” shall have the meaning set forth in Section 4(b).

 

“Non-Electing Share” shall have the meaning set forth in Section 6(f).

 

“NYSE” shall mean the New York Stock Exchange.

 

“Optional Conversion” shall have the meaning set forth in Section 6(a)(i).

 

“Optional Conversion Right” shall have the meaning set forth in Section 6(a)(i).

 

“Parity Shares” shall have the meaning set forth in Section 9.

 

“Person” shall mean any individual, firm, partnership, corporation, limited
liability company or other entity, and shall include any successor (by merger or
otherwise) of such entity.

 

“Preferred Stock” shall have the meaning set forth in the introductory paragraph
of this Certificate of Designation.

 

“Pro Forma Entity” shall have the meaning set forth in the definition of
Acquired EBITDA.

 

“Redemption” shall mean any redemption of Series D-2 Preferred Shares pursuant
to Section 5.

 

 8 

 

 

“Redemption Price” shall mean the product of (a) the number of Series D-2
Preferred Shares held by a holder of Series D-2 Preferred Shares being redeemed
at any applicable time and (b) the Liquidation Preference plus an amount equal
to all accrued and unpaid dividends thereon from the date immediately following
the immediately preceding Dividend Payment Date to the applicable redemption
date.

 

“SEC” shall mean the U.S. Securities and Exchange Commission.

 

“Senior Shares” shall have the meaning set forth in Section 9.

 

“Series B Preferred Shares” shall mean shares of the Corporation’s 11% Series B
Preferred Stock, par value $0.001 per share.

 

“Series C Preferred Shares” shall mean shares of the Corporation’s 7% Series C
Convertible Preferred Stock, par value $0.001 per share.

 

“Series D-1 Preferred Shares” shall mean shares of the Corporation’s 11% Series
D-1 Preferred Stock, par value $0.001 per share.

 

“Series D-2 Preferred Shares” shall have the meaning set forth in Section 1.

 

“Series D-2 Preferred Stock” shall have the meaning set forth in the
introductory paragraph of this Certificate of Designation.

 

“set apart for payment” shall be deemed to include, without any action other
than the following, the recording by the Corporation in its accounting ledgers
of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of a dividend or other distribution by the Board of Directors, the
allocation of funds to be so paid on any series or class of shares of capital
stock of the Corporation; provided, however, that if any funds for any class or
series of Junior Shares or any class or series of Parity Shares are placed in a
separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then “set apart for payment” with respect to the Series D-2
Preferred Shares shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.

 

“Shares” shall mean the total number of shares of stock that the Corporation
shall have authority to issue pursuant to Section 4.01 of the Certificate of
Incorporation.

 

“Spin-Off” shall have the meaning set forth in Section 6(e)(iii).

 

“Subsidiary” or “subsidiary” of any Person shall mean and include (a) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through subsidiaries, and (b) any limited liability company,
partnership, association, joint venture or other entity in which such Person
directly or indirectly through subsidiaries has more than a 50% equity interest
at the time. Unless otherwise expressly provided, all references herein to a
“Subsidiary” shall mean a Subsidiary of the Corporation.

 

 9 

 

 

“Trading Day” shall mean any day on which the securities in question are traded
on the NYSE or, if such securities are not listed or admitted for trading on the
NYSE, on the principal national securities exchange on which such securities are
listed or admitted for trading.

 

“Trading Market” shall mean whichever of the NYSE, the NYSE MKT, the NASDAQ
Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board on which the securities in question are listed or quoted for
trading on the date in question.

 

“Transaction” shall have the meaning set forth in Section 6(f).

 

“VWAP” shall mean the dollar volume-weighted average price for the securities in
question on its Trading Market during the period beginning at 9:30:01 a.m., New
York City time (or such other time as the Trading Market publicly announces is
the official open of trading), and ending at 4:00:00 p.m., New York City time
(or such other time as the Trading Market publicly announces is the official
close of trading), as reported by Bloomberg, L.P. through its “Volume at Price”
function or, if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01 a.m., New York
City time (or such other time as the Trading Market publicly announces is the
official open of trading), and ending at 4:00:00 p.m., New York City Time (or
such other time as the Trading Market publicly announces is the official close
of trading), as reported by Bloomberg, L.P., or, if no dollar volume-weighted
average price is reported for such security by Bloomberg, L.P. for such hours,
the average of the highest closing bid price and the lowest closing ask price of
any of the market makers for such security as reported in the “pink sheets” by
Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the VWAP
cannot be calculated for the securities in question on a particular date on any
of the foregoing bases, the VWAP of the securities in question shall be the fair
market value of the securities in question on such date as determined by the
Board of Directors in good faith.

 

3.Dividends.

 

(a)          The holders of Series D-2 Preferred Shares shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends per Series D-2 Preferred Share
payable in cash at the applicable Annual Dividend Rate; provided, however, that
if any dividend payable on any Dividend Payment Date is not paid in full in cash
on such Dividend Payment Date, the amount payable as dividends on such Dividend
Payment Date that is not paid in cash on such Dividend Payment Date shall
automatically, without any further action by the Corporation, be added to the
Liquidation Preference on the relevant Dividend Payment Date at the Annual
Dividend Rate applicable with respect to dividends not paid in cash. Each such
dividend payable in cash shall be payable in arrears to the holders of record of
the Series D-2 Preferred Shares, as they appear on the stock records of the
Corporation at the close of business on each record date, which shall not be
more than 30 days preceding the applicable Dividend Payment Date (the “Dividend
Payment Record Date”), as shall be fixed by the Board of Directors. The amount
of accrued and unpaid dividends on any Series D-2 Preferred Stock at any date
shall be the amount of any dividends thereon, calculated at the applicable
Annual Dividend Rate, to and including such date, whether or not earned or
declared, which have not been paid; provided that an amount equal to any
dividend that was not paid in cash on any applicable Dividend Payment Date shall
be added to the Liquidation Preference in accordance with this Section 3(a) and
such dividend not paid in cash and so added shall not be considered as an
accrued and unpaid dividend for any purposes hereof.

 

 10 

 

 

(b)          The amount of dividends payable based on the Annual Dividend Rate
for each full Dividend Period for the Series D-2 Preferred Shares shall be
computed by dividing the applicable Annual Dividend Rate by four (4). The amount
of dividends payable for the initial Dividend Period, or any other period
shorter or longer than a full Dividend Period, on the Series D-2 Preferred
Shares shall be computed on the basis of four 90-day quarters and a 360-day
year. Holders of Series D-2 Preferred Shares shall not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the
dividends on the Series D-2 Preferred Shares as herein provided.

 

(c)          All dividends paid with respect to Series D-2 Preferred Shares
shall be paid pro rata.

 

(d)          So long as any Series D-2 Preferred Shares are outstanding, no
dividends, except as described in the immediately following sentence, shall be
authorized and declared and paid or set apart for payment on any series or class
or classes of Parity Shares for any period unless full accrued and unpaid
dividends have been or contemporaneously are authorized and declared and paid in
cash or authorized and declared and a sum sufficient for the payment thereof set
apart for such payment on the Series D-2 Preferred Shares for the immediately
preceding Dividend Period and on the Parity Shares for the immediately preceding
dividend period applicable to the Parity Shares. When dividends are not paid in
full or a sum sufficient for such payment is not set apart, as aforesaid, for
the Dividend Period referred to in the immediately preceding sentence, then all
dividends authorized and declared upon Series D-2 Preferred Shares and all
dividends authorized and declared upon any other series or class or classes of
Parity Shares shall be authorized and declared ratably in proportion to the
respective amounts of dividends accrued and unpaid on the Series D-2 Preferred
Shares and such class or classes or series of Parity Shares.

 

(e)          So long as any Series D-2 Preferred Shares are outstanding, no
dividends shall be authorized and declared and paid or set apart for payment and
no other distribution shall be authorized and declared and made upon Junior
Shares (other than dividends or other distributions paid solely in Junior
Shares, or options, warrants or rights to subscribe for or purchase Junior
Shares), nor shall any Junior Shares be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Common
Shares made for purposes of and in compliance with requirements of an employee
incentive or benefit plan of the Corporation or any subsidiary) for any
consideration (or any moneys to be paid to or made available for a sinking fund
for the redemption of any shares of such stock) by the Corporation, directly or
indirectly (except by conversion or exercise into or exchange for Junior
Shares), unless in each case the full accrued and unpaid dividends on all
outstanding Series D-2 Preferred Shares shall have been paid in cash and on any
other Parity Shares shall have been previously paid for the immediately
preceding Dividend Period and the immediately preceding dividend period
applicable to the Parity Shares.

 

 11 

 

 

(f)          In any case where any Dividend Payment Date shall not be a Business
Day, then (notwithstanding any other provision of this Certificate of
Designation) payment of dividends need not be made on such date, but may be made
on the next succeeding Business Day with the same force and effect as if made on
the Dividend Payment Date; provided, however, that no interest shall accrue on
such amount of dividends for the period from and after such Dividend Payment
Date.

 

4.Liquidation Preference.

 

(a)          In the event of any Liquidation, before any payment or distribution
of the assets of the Corporation (whether capital or surplus) shall be made to
or set apart for the holders of Junior Shares, the holders of Series D-2
Preferred Shares shall be entitled (subject to the Continuation Right of such
holders described below) to receive an amount equal to the greater of: (i) the
Liquidation Preference plus an amount equal to all accrued and unpaid dividends
from the date immediately following the immediately preceding Dividend Payment
Date to the date of the final distribution to such holder; and (ii) an amount
per Series D-2 Preferred Share equal to the amount or consideration which would
have been payable had each Series D-2 Preferred Share been converted into Common
Shares pursuant to Section 6 hereof immediately prior to such Liquidation. Until
the holders of the Series D-2 Preferred Shares have been paid the amount
specified in the first sentence of this Section 4(a) in full, no payment will be
made to any holder of Junior Shares upon Liquidation. If, upon any such
Liquidation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Series D-2 Preferred Shares shall be insufficient to pay in
full the preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Shares, then such assets, or the
proceeds thereof, shall be distributed among the holders of such Series D-2
Preferred Shares and such other Parity Shares ratably in accordance with the
amounts that would be payable on such Series D-2 Preferred Shares and such other
Parity Shares if all amounts payable thereon were paid in full.

 

(b)          In connection with a Merger Liquidation (as defined below), each
holder of Series D-2 Preferred Shares shall have the right (a “Continuation
Right”) to elect, by delivering written notice to the Corporation not less than
five (5) Business Days prior to the Merger Liquidation, to require the
Corporation to make provision for such holder’s Series D-2 Preferred Shares to
be assumed by the surviving entity as described in Section 6(f); provided,
however, notwithstanding the election by any of the holders of the Series D-2
Preferred Shares of the Continuation Right, the Corporation shall have the
right, in connection with any Merger Liquidation, to elect, by delivering
written notice to the holders of Series D-2 Preferred Shares at any time prior
to the Merger Liquidation, to redeem any or all of the outstanding Series D-2
Preferred Shares for an amount per Series D-2 Preferred Share equal to the
amount specified in the Section 4(a). A “Merger Liquidation” shall be a
Liquidation which constitutes a consolidation or merger of the Corporation with
one or more entities that are not Affiliates of the Corporation and as a result
of which the Corporation is not the surviving entity. Upon a merger or
consolidation of the Corporation with one or more entities that are Affiliates
of the Corporation, the Corporation shall make provision for the Series D-2
Preferred Shares to be assumed by the surviving entity as described in Section
6(f).

 

 12 

 

 

(c)          Notice of any Liquidation shall be given by mail, postage prepaid,
not less than fifteen (15) days prior to the distribution or payment date stated
therein, to each holder of record of Series D-2 Preferred Shares appearing on
the stock books of the Corporation as of the date of such notice at the address
of said holder shown therein. Such notice shall state a distribution or payment
date, the amount to be paid pursuant to Section 4(a) and the place where such
amount shall be distributable or payable.

 

(d)          After the payment in cash to the holders of Series D-2 Preferred
Shares of the full amount specified in the Section 4(a) with respect to
outstanding Series D-2 Preferred Shares, the holders of outstanding Series D-2
Preferred Shares shall have no right or claim, based on their ownership of
Series D-2 Preferred Shares, to any of the remaining assets of the Corporation.
Subject to the rights of the holders of any Parity Shares, upon any Liquidation
of the Corporation, after payment shall have been made in full to the holders of
Series D-2 Preferred Shares and any Parity Shares, as provided in this Section
4, any other series or class or classes of Junior Shares shall, subject to the
respective terms thereof, be entitled to receive any and all assets remaining to
be paid or distributed, and the holders of the Series D-2 Preferred Shares and
any Parity Shares as such shall not be entitled to share therein.

 

5.Redemption.

 

(a)          Subject to Section 5(c), but not prior to December 12, 2022, the
Corporation, at its option, shall have the right to redeem, on any Corporation
Redemption Date, in whole or in part, Series D-2 Preferred Shares by providing,
not less than 30 days prior to a Corporation Redemption Closing Date, written
notice to each holder of its intent to redeem the Series D-2 Preferred Shares
(each, a “Corporation Redemption Notice”) which will specify the number of
Series D-2 Preferred Shares to be redeemed and the date set for such redemption,
which date shall be no more than thirty (30) days after the Corporation
Redemption Notice (the “Corporation Redemption Closing Date”); provided,
however, that if such Redemption would result in the holders of Series D-2
Preferred Shares owning after such Corporation Redemption Closing Date Series
D-2 Preferred Shares with an aggregate Liquidation Preference of less than
$4,166,666.67 in the aggregate, then the Corporation shall be required to redeem
all (and not less than all) of the Series D-2 Preferred Shares. Subject to
Section 5(c), any such Redemption shall be paid in cash on the Corporation
Redemption Closing Date, for the Series D-2 Preferred Shares specified in the
Corporation Redemption Notice in an amount equal to the Redemption Price.

 

(b)          Subject to Section 5(c), but not prior to December 12, 2022, each
holder, at its option, shall have the right, in its sole discretion, to require
the Corporation to redeem, on any Holder Redemption Date, in whole or in part,
its Series D-2 Preferred Shares by providing written notice to the Corporation
of its intent to cause the Corporation to redeem such holder’s Series D-2
Preferred Shares (each, a “Holder Redemption Notice”) which will specify (i) the
name of the holder delivering such Holder Redemption Notice, (ii) the number of
Series D-2 Preferred Shares to be redeemed, and (iii) that such holder is
exercising its option, pursuant to this Section 5, to require the Corporation to
redeem shares of Series D-2 Preferred Shares held by such holder. The
Corporation shall, within fifteen (15) Business Days of receipt of such Holder
Redemption Notice, deliver to the holder exercising its rights to require
redemption of the Series D-2 Preferred Shares a notice specifying the date set
for such redemption, which date shall be no more than ninety (90) days after the
Holder Redemption Notice (the “Holder Redemption Closing Date”). Subject to
Section 5(c), any such Redemption shall be paid in cash on the Holder Redemption
Closing Date, for the Series D-2 Preferred Shares specified in the Holder
Redemption Notice in an amount equal to the Redemption Price.

 

 13 

 

 

(c)          Any Redemption shall be paid only out of any cash or surplus
available therefor under applicable Delaware law (including any cash or surplus
made available as a result of any revaluation or otherwise in accordance with
the terms of this Section 5(c)), and, if there is not a sufficient amount of
cash or surplus available, then out of the remaining assets of the Corporation
available therefor under applicable Delaware law (valued at the fair market
value thereof on the date of payment, as determined by the Board of Directors).
In connection with a Redemption, the Corporation shall take all actions required
or permitted under Delaware law to permit the Redemption of the Series D-2
Preferred Shares, including, without limitation, through the revaluation of its
assets in accordance with Delaware law, to make funds available under applicable
Delaware law for such Redemption or to determine the existence of sufficient
surplus, and the Corporation shall apply all of its assets to any such
Redemption except to the extent prohibited by Delaware law governing dividends
to stockholders and redemption or repurchase of capital stock.

 

(d)          In the case of any Redemption, the rights of the holders of such
Series D-2 Preferred Shares subject to Redemption shall cease only upon the
payment in full of the Redemption Price. Until the payment in full of the
Redemption Price to such holder, the Series D-2 Preferred Shares of such holder
shall be deemed to be outstanding and such holder shall retain all rights with
respect thereto, including the conversion rights as set forth in Section 6
hereof.

 

(e)          Whenever any shares of Series D-2 Preferred Stock are redeemed by
the Corporation pursuant to this Section 5, the Corporation shall take all
action as may be necessary to retire such redeemed shares and to cause such
redeemed shares to resume the status of authorized and unissued preferred stock,
without designation as to series.

 

6.Conversion.

 

(a)          Subject to the terms and conditions contained in this Section 6,
the Series D-2 Preferred Shares shall be convertible as follows:

 

(i)           from and after the Issue Date, the holders of Series D-2 Preferred
Shares shall have the right, at their option (the “Optional Conversion Right”),
to convert some or all of their Series D-2 Preferred Shares as set forth in the
Holder Conversion Election Notice (as defined below) into the number of fully
paid and non-assessable Common Shares obtained by dividing the aggregate
Liquidation Preference plus an amount equal to all accrued and unpaid dividends
from the date immediately following the immediately preceding Dividend Payment
Date to the date of conversion of such specified Series D-2 Preferred Shares by
the Conversion Price (each an “Optional Conversion”); and

 

 14 

 

 

(ii)         at any time following the date that is twenty-four (24) months
following the Issue Date, provided that for the previous 30 consecutive full
Trading Days prior to the Corporation Conversion Election Date (A) both the
one-day VWAP and the daily Closing Price of a Common Share are each in excess of
$50.66 (as adjusted for Common Share Events) and (B) Common Shares with an
aggregate value of at least $10,000,000 have been traded on the Trading Market
on each of such 30 consecutive full Trading Days, the Corporation shall have the
right, at its option (the “Mandatory Conversion Right”), to convert up to such
number of the outstanding shares of Series D-2 Preferred Shares as otherwise
permitted under Section 7 into the number of fully paid and non-assessable
Common Shares obtained by dividing the aggregate Liquidation Preference plus an
amount equal to all accrued and unpaid dividends from the date immediately
following the immediately preceding Dividend Payment Date to the date of
conversion of such Series D-2 Preferred Shares by the Conversion Price (the
“Mandatory Conversion”); provided, however, such Mandatory Conversion Right may
not be exercised by the Corporation more than two (2) times in any twelve (12)
month period.

 

(b)          Any Optional Conversion or the Mandatory Conversion shall be
subject to the following terms and conditions, as applicable:

 

(i)          In order to exercise the Optional Conversion Right, the holder of
Series D-2 Preferred Shares shall send a written notice to the Corporation (the
“Holder Conversion Election Notice”) stating that the holder thereof has elected
to convert Series D-2 Preferred Shares. The Holder Conversion Election Notice
shall also state the number of Series D-2 Preferred Shares such holder wishes to
convert and the number of Common Shares to be issued by the Corporation to such
holder pursuant to the Optional Conversion. The holder of Series D-2 Preferred
Shares shall include with the Holder Conversion Election Notice the certificate
or certificates representing the Series D-2 Preferred Shares to be converted
duly endorsed or assigned to the Corporation or in blank. As promptly as
practicable, but in no event later that fifteen (15) Business Days, following
receipt of a Holder Conversion Election Notice and the certificate or
certificates representing the Series D-2 Preferred Shares to be converted, the
Corporation shall (or shall cause a transfer agent for the Common Shares to)
issue and shall deliver a certificate or certificates for the number of full
Common Shares issuable upon such Optional Conversion, together with payment in
lieu of any fraction of a share, as provided in Section 6(d), to such holder. If
fewer than all the Series D-2 Preferred Shares represented by a certificate
delivered to the Corporation pursuant to this Section 6(b)(i) are to be
converted pursuant to a Holder Conversion Election Notice, upon such conversion
the Corporation shall (or shall cause a transfer agent for the Series D-2
Preferred Shares to) also issue and deliver to the holder of Series D-2
Preferred Shares a new certificate representing the Series D-2 Preferred Shares
not so converted.

 

 15 

 

 

(ii)         In order to exercise the Mandatory Conversion Right, the
Corporation shall send a written notice to the holders of Series D-2 Preferred
Shares (the “Corporation Conversion Election Notice”) that the Corporation has
elected to exercise the Mandatory Conversion Right and convert such Series D-2
Preferred Shares (the date of such written notice, the “Corporation Conversion
Election Date”) and which shall include the one-day VWAP, daily Closing Price
and the trading volume of the Common Shares for the 30 full Trading Days
preceding the date of the Corporation Conversion Election Notice, and the number
of Common Shares to be issued in the Mandatory Conversion. Following the receipt
of the Corporation Conversion Election Notice, the applicable holder of Series
D-2 Preferred Shares shall surrender to the Corporation the certificate or
certificates representing the Series D-2 Preferred Shares so converted, duly
endorsed or assigned to the Corporation or in blank. As promptly as practicable,
but in no event later than fifteen (15) Business Days, following receipt of the
certificate or certificates representing the Series D-2 Preferred Shares
converted in the Mandatory Conversion, the Corporation shall (or shall cause a
transfer agent for the Common Shares to) issue and deliver, a certificate or
certificates for the number of full shares of Common Shares issuable upon such
Mandatory Conversion, together with payment in lieu of any fraction of a share,
as provided in Section 6(d), to the holders entitled to receive the same.
Notwithstanding anything in this Section 6(b)(ii) to the contrary but subject to
the limitations set forth in Section 7, upon the close of business on the
Corporation Conversion Election Date, the number Series D-2 Preferred Shares
converted in the Mandatory Conversion shall automatically be deemed converted
into Common Shares, which Common Shares shall be deemed to be outstanding of
record, and all rights with respect to such Series D-2 Preferred Shares so
converted, including any rights, if any, to receive notices and vote (other than
as holders of Common Shares), will terminate, except for the right to receive
the number of Common Shares into which such Series D-2 Preferred Shares have
been converted.

 

(iii)        Unless the Common Shares issuable on an Optional Conversion or
Mandatory Conversion are to be issued in the same name as the name in which such
Series D-2 Preferred Shares are registered, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form reasonably
satisfactory to the Corporation, duly executed by the holder or such holder’s
duly authorized attorney and an amount sufficient to pay any transfer or similar
tax (or evidence reasonably satisfactory to the Corporation demonstrating that
such taxes have been paid).

 

(iv)        Holders of Series D-2 Preferred Shares at the close of business on
any Dividend Payment Record Date shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion thereof (in addition to any accrued and unpaid
dividends to the date of conversion) following such Dividend Payment Record Date
and prior to such Dividend Payment Date. A holder of Series D-2 Preferred Shares
on a Dividend Payment Record Date whose Series D-2 Preferred Shares are
thereafter converted into Common Shares on or before such Dividend Payment Date
will receive the dividend payable by the Corporation on such Series D-2
Preferred Shares on such Dividend Payment Date.

 

(c)          Each Optional Conversion shall be deemed to have been effected
immediately prior to the close of business on the date the Corporation receives
the Holder Conversion Election Notice and related stock certificates (the date
of such receipt by the Corporation, the “Holder Conversion Election Date”) and
the Person or Persons in whose name or names any Common Shares shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the Common Shares represented thereby at such time on such date, and
such conversion shall be on such date.

 

 16 

 

 

(d)          No fractional shares or scrip representing fractions of Common
Shares shall be issued upon conversion of the Series D-2 Preferred Shares.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the conversion of a Series D-2 Preferred Share, the Corporation
shall pay to the holder of such Series D-2 Preferred Share an amount in cash
based upon the Current Market Price of a Common Share on the Trading Day
immediately preceding the Holder Conversion Election Date or Corporation
Conversion Election Date, as applicable. If more than one Series D-2 Preferred
Share shall be converted at one time by the same holder, the number of full
Common Shares issuable upon conversion thereof shall be computed on the basis of
the aggregate number of Series D-2 Preferred Shares so converted.

 

(e)          The Conversion Price shall be adjusted from time to time as
follows:

 

(i)          If, after the Issue Date, the Corporation (A) pays a dividend or
makes a distribution on its shares of capital stock in Common Shares, (B)
subdivides its outstanding Common Shares into a greater number of shares, (C)
combines its outstanding Common Shares into a smaller number of shares or (D)
issues any shares of capital stock by reclassification of its Common Shares (the
events set forth in clauses (A), (B), (C) and (D) above being hereinafter
referred to as the “Common Share Events”), the Conversion Price shall be
adjusted so that the holder of any Series D-2 Preferred Share thereafter
converted shall be entitled to receive the number of Common Shares that such
holder would have owned or have been entitled to receive after the happening of
any Common Share Event had such Series D-2 Preferred Share been converted
immediately prior to the record date in the case of a dividend or distribution
or the effective date in the case of a subdivision, combination or
reclassification. An adjustment made pursuant to this subparagraph (i) shall
become effective immediately upon the opening of business on the day next
following the record date (subject to paragraph (f) below) in the case of a
dividend or distribution and shall become effective immediately upon the opening
of business on the day next following the effective date in the case of a
subdivision, combination or reclassification.

 

(ii)         If, after the Issue Date, the Corporation issues rights, options or
warrants to all holders of Common Shares entitling them (for a period expiring
within 45 days after the record date mentioned below in this subparagraph (ii))
to subscribe for or purchase Common Shares at a price per share less than the
Current Market Price per Common Share on the record date for the determination
of stockholders entitled to receive such rights, options or warrants, then the
Conversion Price shall be adjusted to equal the price determined by multiplying
(A) the Conversion Price in effect at such time by (B) a fraction, the numerator
of which shall be the sum of (I) the number of Common Shares outstanding on the
close of business on the date fixed for such determination and (II) the number
of Common Shares that the aggregate proceeds to the Corporation from the
exercise of such rights, options or warrants for Common Shares would purchase at
such Current Market Price, and the denominator of which shall be the sum of (I)
the number of Common Shares outstanding on the close of business on the date
fixed for such determination and (II) the number of additional Common Shares
offered for subscription or purchase pursuant to such rights, options or
warrants. Such adjustment shall become effective immediately upon the opening of
business on the day next following such record date (subject to paragraph (f)
below). In determining whether any rights, options or warrants entitle the
holders of Common Shares to subscribe for or purchase Common Shares at less than
such Current Market Price, there shall be taken into account any consideration
received by the Corporation upon issuance and upon exercise of such rights,
options or warrants, the value of such consideration, if other than cash, to be
determined by the Board of Directors, whose determination shall be conclusive,
absent manifest error.

 

 17 

 

 

(iii)        If the Corporation distributes to all holders of its Common Shares
any shares of capital stock of the Corporation (other than Common Shares), cash,
assets, evidence of its indebtedness, or Distributed Securities, then in each
case the Conversion Price shall be adjusted so that it shall equal the price
determined by multiplying (A) the Conversion Price in effect at such time by (B)
a fraction, the numerator of which shall be the Current Market Price per Common
Share on the date fixed for the determination of the stockholders entitled to
receive such distribution less the then fair market value (as determined by the
Board of Directors, or a committee thereof, whose determination shall be
conclusive, absent manifest error and subject to the adjustment for Spin-Offs
set forth herein) of the portion of such shares of capital stock, cash, assets
or evidences of indebtedness or Distributed Securities applicable to one Common
Share, and the denominator of which shall be the Current Market Price per Common
Share on the record date mentioned below. Such adjustment shall become effective
immediately upon the opening of business on the day next following (subject to
paragraph (f) below) the record date for the determination of stockholders
entitled to receive such distribution. For the purposes of this subparagraph
(iii), the distribution of a Distributed Security, which is distributed not only
to the holders of the Common Shares on the date fixed for the determination of
stockholders entitled to such distribution of such Distributed Security, but
also is required to be distributed with each Common Share delivered to a Person
converting a Series D-2 Preferred Share after such determination date, shall not
require an adjustment of the Conversion Price pursuant to this subparagraph
(iii); provided that on the date, if any, on which a Person converting a Series
D-2 Preferred Share would no longer be entitled to receive such Distributed
Security with a Common Share (other than as a result of the termination of all
such Distributed Securities), a distribution of such Distributed Securities
shall be deemed to have occurred, and the Conversion Price shall be adjusted as
provided in this subparagraph (iii) (and shall be adjusted as of the date fixed
for the determination of the stockholders entitled to receive such distribution,
with any subsequent adjustments being reapplied as appropriate).

 

With respect to an adjustment pursuant to this subparagraph (iii) where there
has been a payment of a dividend or other distribution on the Common Shares of
shares of capital stock of any class or series, or similar equity interest, of
or relating to a subsidiary of the Corporation or other business unit of the
Corporation (a “Spin-Off”), then if the VWAP of the capital stock or similar
equity interest distributed to holders of Common Shares applicable to one Common
Share over the 10 consecutive Trading Day period beginning on the fifth trading
day after the effective date of the Spin-Off exceeds the fair market value as
determined by the Board of Directors, then the Conversion Price shall be
re-adjusted using such VWAP as the fair market value.

 

 18 

 

 

The occurrence of a distribution or the occurrence of any other event as a
result of which holders of Series D-2 Preferred Shares shall not be entitled to
receive rights, including exchange rights (the “Rights”), pursuant to any
stockholders protective rights agreement that may be adopted by the Corporation
as if such holders had converted such shares into Common Shares immediately
prior to the occurrence of such distribution or event shall not be deemed a
distribution of Distributed Securities for the purposes of any Conversion Price
adjustment pursuant to this subparagraph (iii) or otherwise give rise to any
Conversion Price adjustment pursuant to this Section 6; provided, however, that
in lieu of any adjustment to the Conversion Price as a result of any such
distribution or occurrence, the Corporation shall make provision so that Rights,
to the extent issuable at the time of conversion of any Series D-2 Preferred
Shares into Common Shares, shall issue and attach to such Common Shares then
issued upon conversion in the amount and manner and to the extent and as
provided in such stockholders protective rights agreement.

 

(iv)        If, at any time or from time to time after the Issue Date, the
Corporation issues or sells any Common Shares (other than in connection with any
underwritten public offering and issuances to unaffiliated third parties for an
acquisition on an arm’s-length basis) (“Additional Shares”) for a consideration
per share that is less than the Current Market Price on the Business Day
immediately preceding the earlier of the issuance or sale, or public
announcement of the issuance or sale, of such Additional Shares, then the
Conversion Price shall be reduced to an amount determined by multiplying the
Conversion Price in effect at such time by a fraction of which (x) the numerator
is the sum of (i) the product of (A) the number of Common Shares outstanding
immediately prior to such issuance or sale multiplied by (B) the greater of
(1) the Conversion Price in effect at such time and (2) the Closing Price on the
date preceding the earlier of the issuance or sale or public announcement of the
issuance or sale of such Additional Shares (the greater of (1) and (2) above
hereinafter referred to as the “Adjustment Price”) and (ii) the aggregate
consideration receivable by the Corporation for the total number of Common
Shares so issued or sold, and (y) the denominator equals the product of (i) the
sum of (A) the total number of Common Shares outstanding immediately prior to
such issuance or sale and (B) the number of additional Common Shares issued or
sold, multiplied by (ii) the Adjustment Price. An adjustment made pursuant to
this subparagraph (iv) shall be made on the next Business Day following the date
on which any such issuance or sale is made and shall be effective retroactively
to the close of business on the date of such issuance or sale.

 

(v)         Other than adjustments for cash dividends paid on Common Shares
pursuant to Section 6(e)(iii) above, no adjustment in the Conversion Price shall
be required unless such adjustment would require a cumulative increase or
decrease of at least 1% in such price; provided, however, that any adjustments
that by reason of this subparagraph (v) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment until made;
and provided further, however that any adjustment shall be required and made in
accordance with the provisions of this Section 6 (other than this subparagraph
(v)) not later than such time as may be required in order to preserve the
tax-free nature of a distribution to the holders of Common Shares.
Notwithstanding any other provisions of this Section 6, the Corporation shall
not be required to make any adjustment of the Conversion Price for (A) the
issuance of any Common Shares pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the Corporation
and the investment of additional optional amounts in Common Shares under such
plan, or (B) the issuance of any Common Shares or options or rights to purchase
those shares pursuant to any present or future employee, director or consultant
benefit plan or program of or assumed by the Corporation. All calculations under
this Section 6 shall be made to the nearest cent (with $.005 being rounded
upward) or to the nearest one-tenth of a share (with .05 of a share being
rounded upward), as the case may be. Anything in this paragraph (e) to the
contrary notwithstanding, the Corporation shall be entitled, to the extent
permitted by law, to make such adjustments in the Conversion Price, in addition
to those required by this paragraph (e), as it in its discretion shall determine
to be advisable in order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution of rights, options or
warrants to purchase stock or securities, or a distribution of other assets
(other than cash dividends) hereafter made by the Corporation to its
stockholders shall not be taxable.

 

 19 

 

 

(f)          If the Corporation becomes party to any transaction (including
without limitation a merger, consolidation, self-tender offer for all or
substantially all Common Shares outstanding or recapitalization of the Common
Shares but excluding any Common Share Events (each of the foregoing being
referred to herein as a “Transaction”)), in each case as a result of which
Common Shares shall be converted into the right to receive stock, securities or
other property (including cash or any combination thereof), each Series D-2
Preferred Share that is not redeemed or converted into the right to receive
stock, securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares of stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that number
of Common Shares into which one Series D-2 Preferred Share was convertible
immediately prior to such Transaction, assuming such holder of Common Shares (i)
is not a Person with which the Corporation consolidated or into which the
Corporation merged or which merged into the Corporation or to which such sale or
transfer was made, as the case may be (a “Constituent Person”), or an Affiliate
of a Constituent Person and (ii) failed to exercise his or her rights of the
election, if any, as to the kind or amount of stock, securities and other
property (including cash) receivable upon such Transaction (provided that if the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each Common Share held
immediately prior to such Transaction by other than a Constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not have
been exercised (“Non-Electing Share”), then for the purpose of this paragraph
(f) the kind and amount of stock, securities and other property (including cash)
receivable upon such Transaction by each Non-Electing Share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
Non-Electing Shares). The Corporation shall not be a party to any Transaction
unless the terms of such Transaction are consistent with the provisions of this
paragraph (f), and it shall not consent or agree to the occurrence of any
Transaction until the Corporation has entered into an agreement with the
successor or purchasing entity, as the case may be, for the benefit of the
holders of the Series D-2 Preferred Shares that will contain provisions enabling
the holders of the Series D-2 Preferred Shares that remain outstanding after
such Transaction to convert their Series D-2 Preferred Shares into the
consideration received by holders of Common Shares at the Conversion Price in
effect immediately prior to such Transaction. The provisions of this paragraph
(f) shall similarly apply to successive Transactions.

 

 20 

 

 

(g)          If:

 

(i)          the Corporation pays a dividend on (or makes any other distribution
on or repurchases) the Common Shares; or

 

(ii)         the Corporation grants to the holders of the Common Shares rights,
options or warrants to subscribe for or purchase any shares of any class or any
other rights, options or warrants (other than Rights to which the second
paragraph of subparagraph (e)(iii) of this Section 6 applies); or

 

(iii)        there shall occur any reclassification of the Common Shares (other
than an event to which subparagraph (e)(i) of this Section 6 applies) or any
consolidation or merger to which the Corporation is a party and for which
approval of any stockholders of the Corporation is required, or a self-tender
offer by the Corporation for all or substantially all of its outstanding Common
Shares, or the sale or transfer of all or substantially all of the assets of the
Corporation as an entirety and for which approval of any stockholders of the
Corporation is required; or

 

(iv)        there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation,

 

then the Corporation shall cause to be prepared and delivered to the holders of
the Series D-2 Preferred Shares at their addresses as shown on the stock records
of the Corporation, as promptly as possible, but at least fifteen (15) days
prior to the applicable date hereinafter specified, a notice stating (A) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, options or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Shares of record to be entitled to
such dividend, distribution or grant of rights, options or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, self-tender offer, sale, transfer, liquidation, dissolution or winding
up is expected to become effective, and the date as of which it is expected that
holders of Common Shares of record shall be entitled to exchange their Common
Shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, self-tender offer, sale, transfer,
liquidation, dissolution or winding up. Failure to give or receive such notice
or any defect therein shall not affect the legality or validity of the
proceedings described in this Section 6.

 

(h)          Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly prepare and deliver to the holders of the Series D-2
Preferred Shares a notice of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the effective date of such adjustment
and an officer’s certificate setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. The Corporation shall mail such notice and such certificate to the
holders of each Series D-2 Preferred Share at such holder’s last address as
shown on the stock records of the Corporation.

 

 21 

 

 

(i)          In any case in which paragraph (e) of this Section 6 provides that
an adjustment shall become effective on the day next following the record date
for an event, the Corporation may defer until the occurrence of such event (A)
issuing to the holder of any Series D-2 Preferred Share converted after such
record date and before the occurrence of such event the additional Common Shares
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Shares issuable upon such conversion before giving
effect to such adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to paragraph (f) of this Section 6.

 

(j)          There shall be no adjustment of the Conversion Price in case of the
issuance of any shares of capital stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 6. If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section 6, only one
adjustment shall be made, and such adjustment shall be the amount of adjustment
that has the highest absolute value.

 

(k)          If the Corporation takes any action affecting the Common Shares,
other than action described in this Section 6, that in the opinion of the Board
of Directors would materially adversely affect the conversion rights of the
holders of the Series D-2 Preferred Shares, the Conversion Price for the Series
D-2 Preferred Shares may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.

 

(l)          The Corporation will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Shares, for the purpose of effecting conversion of the Series D-2
Preferred Shares, the full number of Common Shares deliverable upon the
conversion of all outstanding Series D-2 Preferred Shares not theretofore
converted. For purposes of this paragraph (l), the number of Common Shares that
shall be deliverable upon the conversion of all outstanding shares of Series D-2
Preferred Shares shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.

 

(m)          The Common Shares issued by the Corporation in an Optional
Conversion or Mandatory Conversion, as applicable shall, upon issuance to such
holder, be freely transferrable whether pursuant to Rule 144 without any volume
limitations or issued pursuant to an effective registration statement. Any
Common Shares issued upon conversion of the Series D-2 Preferred Shares shall be
validly issued, fully paid and non-assessable. Before taking any action that
would cause an adjustment reducing the Conversion Price below the then-par value
of the Common Shares deliverable upon conversion of the Series D-2 Preferred
Shares, the Corporation shall take any corporate action that, in the opinion of
its counsel, may be necessary in order that the Corporation may validly and
legally issue fully paid and non-assessable Common Shares at such adjusted
Conversion Price. The Corporation shall endeavor to list the Common Shares
required to be delivered upon conversion of the Series D-2 Preferred Shares,
prior to such delivery, upon each national securities exchange, if any, upon
which the outstanding Common Shares are listed at the time of such delivery.

 

 22 

 

 

(n)          The Corporation shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of Common
Shares or other securities or property on conversion of the Series D-2 Preferred
Shares pursuant hereto; provided, however, that the Corporation shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of any Common Shares or other securities or property in
a name other than that of the holder of the Series D-2 Preferred Shares to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Corporation the amount
of any such tax or established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.

 

(o)          If the Conversion Price is adjusted from time to time in accordance
with this Section 6 as the result of an event that alters the number of
outstanding Common Shares (or an event in connection with which the Corporation
issues any rights, options or warrants or other securities that, upon exercise
or conversion (or otherwise), and such issuance would then alter the number of
outstanding Common Shares), then the number of Common Shares issuable hereunder
shall be adjusted by multiplying (A) the Common Shares issuable hereunder at
such time by (B) a fraction, the numerator of which shall be the Conversion
Price (prior to such adjustment) and the denominator of which shall be the
Conversion Price (following such adjustment).

 

7.Ownership Limits

 

(a)          At any time when a holder of Series D-2 Preferred Shares that is a
member of the Luxor Group then Beneficially Owns 9.9% or less, but greater than
4.9%, of the Common Shares outstanding and notwithstanding any other provision
contained herein or in the Certificate of Incorporation, in no event will such
holder of Series D-2 Preferred Shares be allowed to accept Common Shares
issuable upon conversion of the Series D-2 Preferred Shares (taking into account
Common Shares owned by any Person deemed to be, with respect to such shares, a
Beneficial Owner and Common Shares issuable upon conversion of the Series D-2
Preferred Shares or otherwise) that, when taken together with the Common Shares
otherwise held, collectively exceeds 9.9% of the Common Shares outstanding on
the Trading Day immediately preceding the Holder Conversion Election Date or
Corporation Conversion Election Date, as applicable (each as appropriately
adjusted for share splits, share dividends, combinations, recapitalizations and
the like and taking into account the number of Common Shares resulting from such
conversion) (the “9.9% Cap”). Each holder of Series D-2 Preferred Shares that is
a member of the Luxor Group, on the one hand, and the Corporation, on the other
hand, agrees that this provision is for the benefit of such holder and can be
waived by such holder of Series D-2 Preferred Shares on 65 days prior written
notice to the Corporation.

 

 23 

 

 

(b)          At any time when a holder of Series D-2 Preferred Shares that is a
member of the Luxor Group then Beneficially Owns 4.9% or less of the Common
Shares outstanding and notwithstanding any other provision contained herein or
in the Certificate of Incorporation, in no event will such holder of Series C
Preferred Shares be allowed to accept Common Shares issuable upon conversion of
the Series D-2 Preferred Shares (taking into account Common Shares owned by any
Person deemed to be, with respect to such shares, a Beneficial Owner or Group
Member, and Common Shares issuable upon conversion of the Series D-2 Preferred
Shares or otherwise) that, when taken together with the Common Shares otherwise
held, collectively exceeds 4.9% of the Common Shares outstanding on the Trading
Day immediately preceding the Holder Conversion Election Date or Corporation
Conversion Election Date, as applicable (each as appropriately adjusted for
share splits, share dividends, combinations, recapitalizations and the like and
taking into account the number of Common Shares resulting from such conversion)
(the “4.9% Cap”). Each holder of Series D-2 Preferred Shares that is a member of
the Luxor Group, on the one hand, and the Corporation, on the other hand, agrees
that this provision is for the benefit of such holder and can be waived by such
holder of Series D-2 Preferred Shares on 65 days prior written notice to the
Corporation.

 

(c)          In no event will a holder of Series D-2 Preferred Shares be allowed
to accept Common Shares issuable upon conversion of the Series D-2 Preferred
Shares that would result in the ownership of an aggregate number of Common
Shares, when taken together with any other Common Shares then held by such
holder and persons aggregated with such holder under FINRA rules, in excess of
24.9% of the Common Shares outstanding on the Trading Day immediately preceding
the Holder Conversion Election Date (each as appropriately adjusted for share
splits, share dividends, combinations, recapitalizations and the like and taking
into account the number of Common Shares resulting from such conversion) (the
“24.9% Share Cap”), unless such ownership of Common Shares in excess of the
24.9% Share Cap is duly approved in advance by FINRA (such approval, the “FINRA
Approval”).

 

(d) In no event will a holder of Series D-2 Preferred Shares be allowed to
accept Common Shares issuable upon conversion of the Series D-2 Preferred Shares
until shareholder consent is obtained in accordance with New York Stock Exchange
(“NYSE”) rules. .

 

8.Voting; Directors; Covenants.

 

(a)          Except as otherwise set forth herein or in the Certificate of
Incorporation or by law specifically provided, the holders of Series D-2
Preferred Shares shall have no voting rights whatsoever. As to matters upon
which holders of Series D-2 Preferred Shares are entitled to vote, the holder
thereof shall be entitled to one (1) vote per Series D-2 Preferred Share, except
in respect of the voting rights set forth in Section 8(b) hereof.

 

(b)          The holders of the Series D-2 Preferred Shares:

 

(i)          shall be entitled to vote with the holders of the Common Shares on
all matters submitted for a vote of holders of Common Shares (whether at a
meeting of such holders or by written consent), voting together with the holders
of Common Shares (and not as a separate class or series),

 

(ii)         shall be entitled to a number of votes equal to the number of votes
to which Common Shares issuable upon conversion of the Series D-2 Preferred
Shares would have been entitled if such Common Shares had been issued and
outstanding at the time of the applicable record date, and

 

(iii)        shall be entitled to notice of any shareholders meeting in
accordance with the Bylaws of the Corporation.

 

 24 

 

 

provided that until the FINRA Approval has been obtained, in no event will a
holder of Series D-2 Preferred Shares have a number of votes on any matter
submitted for a vote of holders of Common Shares that, when taken together with
the votes of any other Preferred Shares and Common Shares then held by such
holder and persons aggregated with such holder under FINRA rules, exceeds 24.9%
of total number of votes entitled to be voted on such matter; and provided
further that until shareholder consent is obtained in accordance with NYSE
rules, in no event will a holder of Series D-2 Preferred Shares be entitled to
vote the Series D-2 Shares on any matter submitted for a vote of holders of
Common Shares

 

(c)          So long as any Series D-2 Preferred Shares remain outstanding, in
addition to any other vote or consent of stockholders required by law or the
Certificate of Incorporation, the Corporation shall not, directly or indirectly
(including through merger or consolidation with any other corporation) and shall
not permit any of its Subsidiaries to, without the affirmative vote at a meeting
or the written consent without a meeting of the holders of at least a majority
of Series D-1 Preferred Shares and Series D-2 Preferred Shares, voting as a
single class (other than Section 8(j)(ii) below, which shall only require the
affirmative vote of the holders of at least a majority of the Series D-1
Preferred Shares):

 

(i)          authorize or approve the issuance of any shares of, or of any
security convertible into, or convertible or exchangeable for, shares of,
Preferred Stock or any other capital stock of the Corporation, which shares rank
senior to or on a parity with Series D-2 Preferred Shares (other than (A) the
Series B Preferred Shares, the Series B Preferred Shares, the Series C Preferred
Shares or the Series D-1 Preferred Shares, or (B) any prior or parity shares
that are not redeemable, except for a Change of Control, delisting event, or
similar event, by the holder or, with respect to Senior Shares, are not
convertible and are not equity linked) in the payment of dividends or in the
distribution of assets upon liquidation (complete or partial), dissolution or
winding up of the affairs of the Corporation (other than the issuance of any
Additional Shares pursuant to Section 6(e)), or authorize or create, or increase
the authorized number of, any class or series of capital stock of the
Corporation the shares of which rank senior to or on a parity with Series D-2
Preferred Shares (other than (A) the Series B Preferred Shares, the Series C
Preferred Shares or the Series D-1 Preferred Shares, or (B) any senior or parity
shares that are not redeemable, except for a Change of Control, delisting event,
or similar event, by the holder or, with respect to Senior Shares, are not
convertible and are not equity linked) in the payment of dividends or in the
distribution of assets upon liquidation (complete or partial), dissolution or
winding up of the affairs of the Corporation or any security convertible into,
or convertible or exchangeable for, shares of any such class or series (other
than any increase in the authorized number of Series D-2 Preferred Shares);

 

(ii)         amend, alter or repeal any of the provisions of the Certificate of
Designation designating the 11% Series D-2 Convertible Preferred Stock as a
series of Preferred Stock, the Certificate of Incorporation or the Bylaws of the
Corporation so as to materially and adversely affect the powers, designations,
preferences and rights of the Series D-2 Preferred Shares or change the size of
the Board of Directors; provided, however, that the amendment of the Certificate
of Incorporation so as to authorize or create, or to increase the authorized
amount of, any Junior Shares shall not be deemed to affect adversely the powers,
designations, preferences and rights of the Series D-2 Preferred Shares or the
holders thereof;

 

 25 

 

 

(iii)        enter into any transaction or series of related transactions with
any Affiliate of the Corporation or any of its subsidiaries, other than in the
ordinary course of business and on terms and conditions substantially as
favorable to the Corporation or such subsidiary as would reasonably be obtained
by the Corporation or such subsidiary at that time in a comparable arm’s-length
transaction with a Person other than an Affiliate; or

 

(iv)        contract, create, incur, or assume any Indebtedness or guarantee any
Indebtedness if, at the time of or after giving effect to such contract,
creation, incurrence, assumption or guarantee, the aggregate outstanding amount
of all Indebtedness on a consolidated basis of the Corporation and its
Subsidiaries equals or exceeds or would equal or exceed 4.0 times LTM Adjusted
EBITDA.

 

9.Rank.

 

The Series D-2 Preferred Stock ranks, with respect to rights to the payment of
dividends and the distribution of assets in the event of any liquidation,
dissolution or winding up of the Corporation, (i) senior to all Common Shares,
and senior to all other equity securities of the Corporation other than equity
securities referred to in clauses (ii) and (iii) of this sentence (“Junior
Shares”); (ii) to the extent authorized under Section 8(c)(i) of this
Certificate of Designation, on a parity with the Series B Preferred Shares,
Series C Preferred Shares and Series D-1 Preferred Shares and all other equity
securities of the Corporation the terms of which specifically provide that such
equity securities rank on a parity with the Series D-2 Preferred Shares with
respect to rights to the payment of dividends and the distribution of assets in
the event of any liquidation, dissolution or winding up of the Corporation
(“Parity Shares”); and (iii) to the extent authorized under Section 8(c)(i) of
this Certificate of Designation, junior to all equity securities of the
Corporation the terms of which specifically provide that such equity securities
rank senior to the Series D-2 Preferred Shares with respect to rights to the
payment of dividends and the distribution of assets in the event of any
liquidation, dissolution or winding up of the Corporation (“Senior Shares”). The
term “equity securities” does not include convertible debt securities (the
issuance of which, for the avoidance of doubt, shall be subject to Section
8(c)(iii)).

 

10.         Record Holders.

 

The Corporation may deem and treat the record holder of any Series D-2 Preferred
Shares as the true and lawful owner thereof for all purposes, and the
Corporation shall not be affected by any notice to the contrary.

 

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11.         Reports to Holders.

 

So long as any Series D-2 Preferred Shares remain outstanding, if the
Corporation is not required to file information, documents or reports pursuant
to either of Section 13 or Section 15(d) of the Exchange Act, and is required by
any debt financing agreement to provide quarterly reports, the Corporation shall
cause quarterly reports (containing unaudited financial statements) for the
first three quarters of each fiscal year and annual reports (containing audited
financial statements and an opinion thereon by the Corporation’s independent
certified public accountants) which the Corporation would be required to file
under Section 13 of the Exchange Act if it had a class of securities listed on a
national securities exchange to be mailed to each holder of record of Series D-2
Preferred Shares appearing on the stock books of the Corporation as of the date
of such mailing at the address of said holder shown therein within fifteen (15)
days after the date when such report would have been required to be filed under
Section 13 of the Exchange Act. If the Corporation is no longer a party to any
debt financing agreement which requires the preparation of quarterly reports,
the Corporation shall cause the annual reports of each of its broker-dealer
subsidiaries (containing audited statements) that the Corporation must provide
to FINRA, to be mailed to each holder of record of Series D-2 Preferred Shares
appearing on the stock books of the Corporation as of the date of such mailing
at the address of said holder shown therein within fifteen (15) days after the
date when such reports are required to be filed with FINRA.

 

12.         Preemptive Rights.

 

No holder of Series D-2 Preferred Shares shall be entitled to any preemptive
rights to subscribe for or acquire any unissued Shares (whether now or hereafter
authorized) or securities of the Corporation convertible into, or carrying a
right to subscribe to or acquire, Shares.

 

13.         No Other Rights.

 

The Series D-2 Preferred Shares shall not have any powers, designations,
preferences or relative, participating, optional, or other special rights, nor
shall there be any qualifications, limitations or restrictions or any powers,
designations, preferences or rights of such shares, other than as set forth
herein or in the Certificate of Incorporation or as may be provided by law.

 

14.         Waiver.

 

Notwithstanding any provision in this Certificate of Designation to the
contrary, any provision contained herein and any right of the holders of Series
D-2 Preferred Shares granted hereunder may be waived as to all Series D-2
Preferred Shares (and the holders thereof) upon the approval of the Board of
Directors (or an authorized committee thereof) and the holders of a majority of
the Series D-2 Preferred Shares then outstanding.

 

[Signature Page Follows.]

 

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IN WITNESS WHEREOF, RCS Capital Corporation has caused this Certificate to be
duly executed in its name and on its behalf by its _____________ this __th day
of ______, 2015.

 

  RCS CAPITAL CORPORATION       By:       Name:       Title:  

 

 

 

 

EXHIBIT B

 

Purchased Shares

 

Investor   Purchased Shares       Luxor Capital Partners, LP   297,280 Shares of
Series D-2 Preferred Stock Luxor Capital Partners Offshore Master Fund, LP  
123,600 Shares of Series D-2 Preferred Stock Luxor Wavefront, LP   55,960 Shares
of Series D-2 Preferred Stock Thebes Offshore Master Fund, LP   23,160 Shares of
Series D-2 Preferred Stock

 

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