ASSIGNMENT AND EXCHANGE AGREEMENT

 

THIS ASSIGNMENT AND EXCHANGE AGREEMENT (the “Agreement”) is dated this 1st day
of April, 2016 (the “Effective Date”), by and among Old Main Capital, LLC (the
“Holder”), Epic Stores Corp. (the “Company”) and Epic Stores LLC, a wholly-owned
subsidiary of the Company (the “Subsidiary”).

WHEREAS, the Holder and the Subsidiary are parties to that certain Loan
Agreement, dated as of February 26, 2016 (the “Loan”); and

WHEREA, the Subsidiary desires to assign the Loan to the Company, the Company
desires to accept such assignment and the Holder desires to consent to such
assignment (the “Assignment”); and

WHEREAS, following the Assignment, the Holder desires to exchange the Loan, plus
accrued and unpaid interest thereon, less amounts paid in to date, for a 10%
Senior Secured Convertible Promissory Note in the Principal Amount of $266,000
of the Company (the “Exchange Securities”), and the Company desires to issue the
Exchange Securities to the Holder in exchange for the Loan, all on the terms and
conditions set forth in this Agreement; and

WHEREAS, the reliance upon the representations made by each of the Holder, the
Subsidiary and the Company in this Agreement, the transactions contemplated by
this Agreement are such that the offer and exchange of securities by the Company
under this Agreement will be exempt from registration under applicable United
States securities laws as a result of this exchange offer being undertaken
pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”).

NOW, THEREFORE, in consideration of the terms and conditions contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and the Holder hereby agree as follows:

Section 1. Assignment and Exchange. Subject to and upon the terms and conditions
set forth in this Agreement, the Subsidiary agrees to assign the Loan to the
Company, the Holder agrees to surrender the Loan to the Company and, in exchange
therefore, the Company agrees to issue to the Holder the Exchange Securities
(the “Exchange”).

1.1 Assignment. On the Closing Date (as defined below), the Subsidiary shall
assign the Loan to the Company, and the Holder hereby consents to such
Assignment. The closing of the Assignment and the Exchange shall occur on the
date of the effectiveness of a Registration Statement registering the shares of
common stock of the Company (the “Underlying Shares”) issuable upon conversion
of the Exchange Securities, or as soon thereafter as the parties may mutually
agree in writing (the “Closing Date”), subject to the provisions of Section 4
and Section 5 herein.

   

 

1.2 Exchange. Immediately following the Assignment, the Company shall issue and
deliver the Exchange Securities to the Holder, and the Holder shall surrender
the Loan to the Company.

1.3 Section 4(a)(2). Assuming the accuracy of the representations and warranties
of each of the Company and the Holder set forth in Sections 2 and 3 of this
Agreement, the parties acknowledge and agree that the purpose of such
representations and warranties is, among other things, to ensure that the
Exchange qualifies as an exchange of securities under Section 4(a)(2) of the
Securities Act.

Section 2. Representations and Warranties of the Company and the Subsidiary. The
Company and the Subsidiary represents and warrants to the Holder that:

2.1 Organization and Qualification. The Company and each of the subsidiaries of
the Company (the “Subsidiaries”) is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company, nor any Subsidiary is in violation
or default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not have or reasonably be expected to result
in: (i) a material adverse effect on the legality, validity or enforceability of
this Agreement or any documents executed in connection herewith (the
“Transaction Documents”), (ii) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii),
a “Material Adverse Effect”) and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

2.2 Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and each of the other Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, the Board of Directors or the
Company’s stockholders in connection herewith or therewith other than in
connection with the Required Approvals. This Agreement and each other
Transaction Document to which it is a party has been

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(or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

2.3 Issuance of Exchange Securities. The issuance of the Exchange Securities is
duly authorized and, upon issuance in accordance with the terms hereof, the
Underlying Shares shall be validly issued, fully paid and non-assessable shares
of the Common Stock of the Company. Assuming the truth and accuracy of each of
the representations and warranties of the Holder contained in Section 3 of this
Agreement, the issuance by the Company of the Exchange Securities is exempt from
registration under the Securities Act.

2.4 No Conflicts. The execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which it is a party, the
issuance of the Exchange Securities and the consummation by it of the
transactions contemplated hereby and thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the
creation of any options, contracts, agreements, liens, security interests, or
other encumbrances (“Liens”) upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.

2.5 Filings, Consents and Approvals.  The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the notice and/or application(s) to each applicable Trading Market for
the

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issuance and the listing of the Exchange Securities for trading thereon in the
time and manner required thereby, and (ii) the filing of Form D with the
Commission and such filings as are required to be made under applicable state
securities laws (collectively, the “Required Approvals”).

2.6 Acknowledgment Regarding the Exchange. The Company acknowledges and agrees
that the Holder are acting solely in the capacity of an arm’s length third party
with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges the Holder are not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby, and any advice given by the
Holder or any of their representatives or agents in connection with this
Agreement is merely incidental to the Exchange.

Section 3. Representations and Warranties of the Holder. Each Holder represents
and warrants, severally and not jointly, to the Company that:

3.1 Ownership of the Loan. The Holder is the legal and beneficial owner of the
Loan. The Holder paid for the Loan, and has continuously held the Loan since its
issuance or purchase. The Holder, individually or through an affiliate, owns the
Loan outright and free and clear of any options, contracts, agreements, liens,
security interests, or other encumbrances.

3.2 No Public Sale or Distribution. The Holder is acquiring the Exchange
Securities in the ordinary course of business for its own account and not with a
view toward, or for resale in connection with, the public sale or distribution
thereof; provided, however, that by making the representations herein, the
Holder does not agree to hold any of the Exchange Securities for any minimum or
other specific term and reserves the right to dispose of the Exchange Securities
at any time in accordance with an exemption from the registration requirements
of the Securities Act and applicable state securities laws. The Holder does not
presently have any agreement or understanding, directly or indirectly, with any
person to distribute, or transfer any interest or grant participation rights in,
the Loan or the Exchange Securities.

3.3 Accredited Investor and Affiliate Status. The Holder is an “accredited
investor” as that term is defined in Rule 501 of Regulation D under the
Securities Act. The Holder is not, and has not been, for a period of at least
three months prior to the date of this Agreement (a) an officer or director of
the Company, (b) an “affiliate” of the Company (as defined in Rule 144) (an
“Affiliate”) or (c) a “beneficial owner” of more than 10% of the common stock
(as defined for purposes of Rule 13d-3 of the Exchange Act).

3.4 Reliance on Exemptions. The Holder understands that the Exchange is being
made in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and each Holder’s

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compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Holder set forth herein in order to determine the
availability of such exemptions and the eligibility of each Holder to complete
the Exchange and to acquire the Exchange Securities.

3.5 Information. The Holder has been furnished with all materials relating to
the business, finances and operations of the Company and materials relating to
the Exchange which have been requested by the Holder. The Holder has been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by the Holder or its
representatives shall modify, amend or affect the Holder’s right to rely on the
Company’s representations and warranties contained herein. The Holder
acknowledges that all of the documents filed by the Company with the SEC under
Sections 13(a), 14(a) or 15(d) of the Exchange Act that have been posted on the
SEC’s EDGAR site are available to the Holder, and the Holder has not relied on
any statement of the Company not contained in such documents in connection with
the Holder’s decision to enter into this Agreement and the Exchange.

3.6 Risk. The Holder understands that its investment in the Exchange Securities
involves a high degree of risk. The Holder is able to bear the risk of an
investment in the Exchange Securities including, without limitation, the risk of
total loss of its investment. The Holder has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to the Exchange. There is no assurance that the Exchange
Securities will continue to be quoted, traded or listed for trading or quotation
on the Nasdaq Capital Market or on any other organized market or quotation
system.

3.7 No Governmental Review. The Holder understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement in connection with the Exchange or the
fairness or suitability of the investment in the Exchange Securities nor have
such authorities passed upon or endorsed the merits of the Exchange Securities.

3.8 Organization; Authorization. The Holder is duly organized, validly existing
and in good standing under the laws of its state of formation and has the
requisite organizational power and authority to enter into and perform its
obligations under this Agreement.

3.9 Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Holder and shall constitute the legal,
valid and binding obligations of the Holder enforceable against the Holder in
accordance with its terms. The execution, delivery and performance of this
Agreement by the Holder and the consummation by the Holder of the transactions
contemplated hereby (including, without limitation, the irrevocable surrender of
the Loan) will not result in a violation of the organizational documents of the
Holder.

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3.10 Prior Investment Experience. The Holder acknowledges that it has prior
investment experience, including investment in securities of the type being
exchange, including the Loan or the Exchange Securities, and has read all of the
documents furnished or made available by the Company to it and is able to
evaluate the merits and risks of such an investment on its behalf, and that it
recognizes the highly speculative nature of this investment.

3.11 Tax Consequences. The Holder acknowledges that the Company has made no
representation regarding the potential or actual tax consequences for the Holder
which will result from entering into the Agreement and from consummation of the
Exchange. The Holder acknowledges that it bears complete responsibility for
obtaining adequate tax advice regarding the Agreement and the Exchange.

3.12 No Registration, Review or Approval. The Holder acknowledges, understands
and agrees that the Exchange Securities are being exchanged hereunder pursuant
to an exchange offer exemption under Section 4(a)(2) of the Securities Act.

Section 4. Conditions Precedent to Obligations of the Company. The obligation of
the Company to consummate the transactions contemplated by this Agreement is
subject to the satisfaction on each Closing Date of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Holder with prior written notice thereof:

4.1 Delivery. The Holder shall have delivered the Loan to the Company.

4.2 No Prohibition. No order of any court, arbitrator, or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement.

4.3 Representations. The accuracy in all material respects when made and on the
applicable Closing Date of the representations and warranties of the Holder
contained herein (unless as of a specific date therein).

Section 5. Conditions Precedent to Obligations of the Holder. The obligation of
each Holder to consummate the transactions contemplated by this Agreement is
subject to the satisfaction on each Closing Date of each of the following
conditions, provided that these conditions are for each Holder’s sole benefit
and may be waived by the applicable Holder at any time in its sole discretion by
providing the Company with prior written notice thereof:

5.1 No order of any court, arbitrator, or governmental or regulatory authority
shall be in effect which purports to enjoin or restrain any of the transactions
contemplated by this Agreement;

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5.2 the accuracy in all material respects when made and on the applicable
Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein);

5.3 all obligations, covenants and agreements of the Company required to be
performed at or prior to the applicable Closing Date shall have been performed;

5.4 there is no event of default then existing on any Exchange Securities; and

5.5 from the date hereof to the relevant Closing Date, trading in the Company’s
common stock shall not have been suspended by the SEC or any trading market and,
at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any trading market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or
any material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Holder makes it impracticable or inadvisable to
purchase the Exchange Securities at the closing.

Section 6. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement
shall be construed under the laws of the state of New York, without regard to
principles of conflicts of law or choice of law that would permit or require the
application of the laws of another jurisdiction. The Company and the Holder each
hereby agrees that all actions or proceedings arising directly or indirectly
from or in connection with this Agreement shall be litigated only in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York located in New York County, New York. The Company
and the Holder each consents to the exclusive jurisdiction and venue of the
foregoing courts and consents that any process or notice of motion or other
application to either of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by generally
recognized overnight courier or certified or registered mail, return receipt
requested, directed to such party at its or his address set forth below (and
service so made shall be deemed “personal service”) or by personal service or in
such other manner as may be permissible under the rules of said courts. THE
COMPANY AND THE HOLDER EACH HEREBY WAIVES ANY RIGHT TO A JURY TRIAL IN
CONNECTION WITH ANY LITIGATION PURSUANT TO THIS AGREEMENT.

Section 7. Fees and Expenses.   Except as expressly set forth below, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.  The Company shall pay all transfer agent fees (including, without
limitation, any fees required for same-day

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processing of any instruction letter delivered by the Company and any conversion
or exercise notice delivered by the Holder), stamp taxes and other taxes and
duties levied in connection with the delivery of any Exchange Securities to the
Holder.

Section 8. Certain Transactions. The Holder covenants that neither it, nor any
affiliate acting on its behalf or pursuant to any understanding with it will
execute any “short sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act of any of the Company’s securities during the period commencing
with the execution of this Agreement and ending on the later of (i) the Maturity
Date (as defined in the Exchange Securities) or (ii) the date that the Exchange
Securities are no longer outstanding (provided that this provision shall not
prohibit any sales made where a corresponding Notice of Conversion (as defined
in the Exchange Securities) is tendered to the Company and the shares received
upon such conversion or exercise are used to close out such sale).

Section 9. Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

Section 10. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

Section 11. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

Section 12. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Holder, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Holder makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Holder. No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.

Section 13. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally; (b) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (c) one calendar day (excluding
Saturdays, Sundays, and national banking holidays) after deposit

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with an overnight courier service, in each case properly addressed to the party
to receive the same.

The addresses and facsimile numbers for such communications shall be:

If to the Company or the Subsidiary:

Epic Stores Corp.

20805 North 19th Ave., #2

Phoenix, AZ 85027

Attn: CEO

 

If to the Holder:

 

Old Main Capital, LLC

3109 Stirling Road, Suite 100

Fort Lauderdale, FL 33312

Attn: Adam Long

 

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

Robinson Brog Leinwand Greene Genovese & Gluck P.C.
875 Third Avenue, 9th Floor
New York, NY 10022
Attn: David E. Danovitch, Esq.

 

or to such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.

Section 14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Exchange Securities. The Holder may assign some
or all of their rights hereunder without the consent of the Company, in which
event such assignee shall be deemed to be the Holder hereunder with respect to
such assigned rights.

Section 15. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

Section 16. Survival of Representations. The representations and warranties of
the Company and the Holder contained in Sections 2 and 3, respectively, will
survive the closing of the transactions contemplated by this Agreement.

Section 17. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

[Signature Page Follows]

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

Epic Stores LLC

 

 

By: /s/ Brian Davidson

Name: Brian Davidson

Title: Manager

 

 

Epic Stores CORP.

 

 

By: /s/ Brian Davidson

Name: Brian Davidson

Title: President

 

 

OLD MAIN CAPITAL, LLC

 

 

By: /s/ Adam Long

Name: Adam Long

Title: President

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