Document:

Exhibit 10.1

 

CHANGE OF CONTROL EXECUTIVE SEVERANCE AGREEMENT

 

This Change of Control Executive Severance Agreement is entered into effect this January 1, 2016 (the “Effective Date”) by and between SM Energy Company, a Delaware corporation (the “Company”), and the below named employee of the Company (the “Executive”).

 

RECITALS

 

A.                                    The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to ensure that the Company will have the continued dedication of the Executive notwithstanding the possibility of a Change of Control (as defined in Section 1) of the Company and to provide the Executive with customary compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other companies, and therefore the Board has previously adopted a Change of Control Executive Severance Policy applicable to the Executive.

 

B.                                    This Agreement reflects the terms and conditions of the Change of Control Executive Severance Policy.

 

C.                                    The Company desires to continue the employment of the Executive and the Executive desires to continue his employment with the Company, all upon and subject to the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the Executive’s continued employment with the Company and the mutual agreements set forth herein, the parties agree as follows:

 

AGREEMENT

 

Section 1.                                           Certain Definitions.  The following terms shall for purposes of this Agreement have the following respective definitions:

 

(a)                                 “Accrued Compensation” shall mean all compensation amounts earned or accrued by the Executive through the Termination Date (as defined below) but not paid to the Executive as of the Termination Date, including (i) Base Salary (as defined below), (ii) PTO pay (to the extent provided by Company policy, plan, program or practice or applicable law), (iii) bonuses and incentive compensation, and (iv) reimbursement for reasonable and necessary business expenses incurred by the Executive on behalf of the Company during the period ending on the Termination Date.  For the avoidance of doubt, if the Termination Date occurs prior to the payment of an award pursuant to the Company’s Short Term Incentive Plan but after the completion of the calendar year related to such award, then the amount of such award shall be included as Accrued Compensation.

 

(b)                                 “Base Salary” shall mean the greater of (i) the Executive’s annual base salary at the rate in effect on the Termination Date or (ii) the Executive’s annual base salary at the rate in

 

 

effect immediately prior to a Change of Control, and shall include all amounts of his base salary that are deferred under the qualified and nonqualified employee benefits plans, policies, programs or practices of the Company or any other compensation agreement or arrangement.

 

(c)                                  “Cause” shall mean for purposes of termination of employment (i) the conviction of the Executive of a felony involving moral turpitude or (ii) a resolution adopted in good faith by two-thirds of the members of the Board that the Executive (A) intentionally and continually failed to substantially perform his reasonably assigned duties with the Company (other than a failure resulting from the Executive’s incapacity due to physical or mental illness or from the assignment to the Executive of duties that would constitute Good Reason (as defined below)), which failure continued for a period of at least 30 days after a written notice of demand for substantial performance has been delivered by the Company to the Executive, which notice specifies the manner in which the Executive failed to substantially perform, or (B) intentionally engaged in conduct which is demonstrably and materially injurious to the Company; provided, however, that no termination of the Executive’s employment shall be for Cause until written notice has been delivered to the Executive which sets forth the conduct under this Section 1(c) of which the Executive is allegedly guilty and specifying the particulars thereof in detail.  Neither an act nor a failure to act on the Executive’s part shall be considered “intentional” unless the Executive has acted or failed to act with a lack of good faith and with a lack of reasonable belief that the Executive’s action or failure to act was in the best interests of the Company.  Notwithstanding anything to the contrary contained in this Agreement, no failure to perform by the Executive after a Notice of Termination (as defined below) is given by the Executive to the Company shall constitute Cause for purposes of this Agreement.

 

(d)                                 “Change of Control” shall mean any of the following events:

 

(i)                                     (A)                               The acquisition by any individual or entity (a “Person”) or group of Persons of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of more than 50% of either (1) the then value of the outstanding shares of common stock of the Company, or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors.

 

(B)                               For purposes of paragraph (A), Persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering.  However, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.  If a Person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.  For purposes of determining stock ownership, see (d)(iv), below.

 

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(ii)                                  A majority of members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election; or

 

(iii)                               (A)                               Any one Person, or more than one Person acting as a group (as determined in (d)(iii)(C) below), acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than 50 percent of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions.  For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

 

(B)                               A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to —

 

(1)                                 A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

 

(2)                                 An entity, 50 percent or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

 

(3)                                 A Person, or more than one Person acting as a group, that owns, directly or indirectly, 50 percent or more of the total value or voting power of all the outstanding stock of the Company; or

 

(4)                                 An entity, at least 50 percent of the total value or voting power of which is owned, directly or indirectly, by a Person described in (d)(iii)(B)(3).

 

For purposes of this paragraph (d)(iii)(B) and except as otherwise provided, a Person’s status is determined immediately after the transfer of the assets.  For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but which is a majority-owned subsidiary of the Company after the transaction, is not treated as a change in the ownership of the assets of the Company.

 

(C)                               Persons will not be considered to be acting as a group for purposes of this paragraph (d)(iii) solely because they purchase assets of the Company at the same time, or as a result of the same public offering.  However, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of assets, or similar business transaction with the Company.

 

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If a Person, including an entity shareholder, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation only to the extent of the ownership in that corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

 

(D)                               For purposes of determining stock ownership, see (d)(iv) below.

 

(iv)                              For purposes of determining whether there has been a Change of Control, Code Section 318(a) applies to determine stock ownership.  Stock underlying a vested option is considered owned by the individual who holds the vested option (and the stock underlying an unvested option is not considered owned by the individual who holds the unvested option).  For purposes of the preceding sentence, however, if a vested option is exercisable for stock that is not substantially vested (as defined by §§1.83-3(b) and (j) of the income tax regulations promulgated by the Internal Revenue Service), the stock underlying the option is not treated as owned by the individual who holds the option.

 

(e)                                  “Change of Control Date” shall mean the first date during the term of this agreement (as specified in Section 2) on which a Change of Control occurs.  Notwithstanding anything to the contrary contained in this Agreement, if a Change of Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the “Change of Control Date” shall mean the date immediately prior to the date of such termination of employment.

 

(f)                                   “Change of Control Period” shall mean the period commencing on the Change of Control Date and ending on the date two and one-half years after the Change of Control Date.

 

(g)                                  “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(h)                                 “Disability” shall mean a physical or mental infirmity which impairs the Executive’s ability to substantially perform his employment duties with the Company on a full-time basis for a period of 120 consecutive business days, and the Executive has not returned to full-time performance of his employment duties within 30 days after notice by the Company of its intention to terminate employment of the Executive as a result thereof.

 

(i)                                     “Good Reason” shall mean the occurrence after a Change of Control of any of the following events or conditions:

 

(i)                                     a change in the Executive’s status, authority, position, offices, titles, duties or responsibilities (including reporting responsibilities) with the Company which in the Executive’s reasonable judgment represents a diminution or adverse change in, or are

 

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inconsistent with, such status, authority, position, offices, titles, duties or responsibilities in effect at any time within the 90 days preceding the Change of Control Date or at any time thereafter, excluding for this purpose (A) an isolated, unsubstantial and inadvertent action by the Company not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive and (B) any removal or failure to reappoint or reelect the Executive to any such position or offices in connection with the termination of his employment for death, Disability or Cause;

 

(ii)                                  any reduction in the Executive’s salary or any failure to pay the Executive any compensation or benefits to which he is entitled within ten business days after notice thereof;

 

(iii)                               the failure by the Company to provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or incentive or reward opportunities) to those provided for under each compensation and employee benefit policy, plan, program and practice in which the Executive was participating at any time within 90 days preceding the Change of Control Date or at any time thereafter;

 

(iv)                              the Company’s requiring the Executive to be based at any place outside a 25-mile radius from his current location of employment, except for reasonably required travel for the Company’s business which is not materially greater than such travel requirements prior to the Change of Control;

 

(v)                                 any material breach by the Company of any provision of this Agreement;

 

(vi)                              any purported termination by the Company of the Executive’s employment other than as expressly permitted by this Agreement; or

 

(vii)                           the failure by the Company to obtain an agreement reasonably satisfactory to the Executive from any successor to the Company to assume and agree to perform this Agreement as contemplated by Section 7(b).

 

Any event or condition described in clauses (i) through (vii) above which occurs prior to a Change of Control but which the Executive reasonably demonstrates (A) resulted from the request of a third party who has taken steps reasonably calculated to effect a Change of Control which actually occurs or (B) otherwise arose in connection with or anticipation of a Change of Control which actually occurs, shall constitute Good Reason for purposes of this Agreement notwithstanding the fact that it occurred prior to the Change of Control.  The Executive’s right to terminate his employment for Good Reason shall not be affected by his incapacity due to a Disability.

 

(j)                                    “Notice of Termination” shall mean a written notice of termination of the Executive’s employment which (i) indicates the specific termination provision in this Agreement relied upon for such termination, (ii) to the extent applicable sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such termination under the provision so indicated and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date under such notice.

 

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(k)                                 “Target Percentage” shall mean the greater of (i) the Executive’s Short Term Incentive Plan target percentage in effect on the Termination Date or (ii) the Executive’s Short Term Incentive Plan target percentage in effect immediately prior to a Change of Control.

 

(l)                                     “Termination Date” shall mean (i) if the Executive’s employment is terminated by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date of employment termination as specified therein, (ii) if the Executive’s employment is terminated by reason of death, the Termination Date shall be the date of death and (iii) in all other cases, the date of employment termination specified in the Notice of Termination; provided, however, that if the Executive’s employment is terminated by the Company for Cause or due to a Disability, the date specified in the Notice of Termination shall be at least 30 days from the date the Notice of Termination is given to the Executive, provided that in the case of Disability the Executive shall not have returned to the full-time performance of his duties during such 30-day period.

 

Section 2.                                           Term of Agreement.  This Agreement shall commence as of the Effective Date and shall continue in effect until December 31, 2016; provided, however, that on December 31, 2016 and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal Date”), the term of the Agreement shall be automatically extended so as to terminate one year from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company has given written notice to the Executive that the term of the Agreement shall not be so extended, and provided further that notwithstanding any such notice by the Company not to extend, the term of the Agreement shall not expire after the occurrence of a Change of Control until the expiration of the Change of Control Period, as long as the term of the Agreement had not expired prior to the occurrence of the Change of Control.

 

Section 3.                                           Payments and Benefits Upon Termination of Employment During Change of Control Period.  If during the term of this Agreement the Executive shall cease to be employed by the Company within a Change of Control Period, the Executive shall be entitled to the following compensation payments and benefits:

 

(a)                                 Termination Other than for Cause or Disability or Termination for Good Reason.  If the Executive’s employment with the Company shall be terminated before the Executive’s death either (i) by the Company other than for Cause or Disability or (ii) by the Executive for Good Reason, the Executive shall be entitled to the following:

 

(i)                                     the Company shall pay the Executive all Accrued Compensation;

 

(ii)                                  the Company shall pay the Executive a lump sum equal to 2.0 multiplied by Executive’s Base Salary;

 

(iii)                               the Company shall pay the Executive a lump sum equal to (A) 2.0 multiplied by (B) the Executive’s Base Salary multiplied by (C) the Executive’s Target Percentage;

 

(iv)                              the Company shall pay the Executive a lump sum equal to (A) the Executive’s Short Term Incentive Plan target percentage multiplied by (B) the Executive’s Base Salary multiplied by (C) a fraction, the numerator of which is the

 

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number of days between January 1 and the Termination Date and the denominator of which is 365; and

 

(v)                                 the Company shall pay the Executive a lump sum equal to 24 multiplied by the Company’s then monthly contribution for medical, dental, and vision insurance on behalf of the Executive and his or her family.

 

(b)                                 Termination for Cause, Disability or Death or Other than for Good Reason.  If the Executive’s employment with the Company shall be terminated either (i) by the Company for Cause or Disability, (ii) by reason of the Executive’s death, or (iii) by the Executive other than for Good Reason, the Company shall pay to the Executive all Accrued Compensation.

 

(c)                                  Other Compensation and Benefits.  The Executive’s entitlement to any other compensation or benefits from or any indemnification by the Company shall be determined in accordance with the Company’s employee benefit and other applicable compensation plans, programs, policies and practices, and any applicable indemnification provisions or agreements then in effect.  Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.  If the Executive is entitled to severance pay and benefits pursuant to Section 3(a)(ii) and (iii), such severance pay and benefits shall be reduced to the extent of any other severance or termination pay explicitly designated as such to which the Executive may be entitled under any agreement with the Company or any of its affiliated companies.

 

(d)                                 Section 409A of the Code.  This Agreement is intended in all respects to comply with the provisions of Section 409A of the Code and in particular, those provisions of Section 409A dealing with distributions.  This Agreement shall be interpreted and applied in a manner consistent with Section 409A of the Code and any ambiguity shall be resolved in favor of compliance with Section 409A of the Code.  In the event any payments or benefits pursuant to the other provisions of this Agreement would result in the imposition on the Executive of any additional taxes or interest pursuant to the provisions of Section 409A of the Code and final Treasury Regulations, Internal Revenue Service guidance or other provisions of law, the amount of such payments shall be appropriately and equitably adjusted in order that the Executive may receive the same economic benefits as provided under this Agreement and in compliance with Section 409A of the Code and without the imposition on the Executive of any additional taxes and interest thereunder.  Any payments to the Executive under this Agreement which Section 409A(a)(2)(B)(i) of the Code indicates may not be made before the date which is six months after the date of Executive’s separation from employment service (the “Section 409A Six-Month Waiting Period”) shall not be made during the Section 409A Six-Month Waiting Period but rather shall be delayed and shall be paid upon the expiration of the Section 409A Six-Month Waiting Period.  In particular, with respect to severance payments provided for under Section

 

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3(a)(ii) of this Agreement, such severance payments that would otherwise be paid during the Section 409A Six-Month Waiting Period shall be paid in lump sum upon the expiration of the Section 409A Six-Month Waiting Period, together with simple interest on the amount of each deferred payment at the short term applicable federal rate as of the date of termination of employment.  For purposes of this Agreement, “termination of employment,” “separation from service” or similar language means separation from service by the Executive from the Company for any reason whatsoever within the meaning of Code Section 409A and Treasury Regulation § 1.409A-1(h).

 

Section 4.                                           Notice of Termination.  Following a Change of Control, any purported termination of the Executive’s employment by the Company, for Cause or otherwise, or by the Executive for Good Reason, shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 8(d).  For purposes of this Agreement, no such purported termination shall be effective without such Notice of Termination.  The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the Executive or the Company from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.  If the Company determines in good faith that a Disability of the Executive has occurred while the Executive is employed by the Company during the Change of Control Period, it may give to the Executive written notice in accordance with Section 8(d) of its intention to terminate the Executive’s employment.  In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that within the 30 days after such receipt the Executive shall not have returned to full-time performance of the Executive’s duties.

 

Section 5.                                           No Set-Off or Mitigation; Resolution of Disputes.

 

(a)                                 No Set-Off.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.

 

(b)                                 No Mitigation Required.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and, except as provided in Section 3(a)(iii), such amounts shall not be reduced whether or not the Executive obtains other employment.

 

(c)                                  Payments Pending Resolution of Disputes.  If there shall be any dispute between the Company and the Executive under this Agreement (i) in the event of any termination of the Executive’s employment by the Company, whether such termination was validly for Cause, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Executive of the existence of Good Reason was not made in good faith, the Company shall pay all amounts and provide all benefits to the Executive and/or the Executive’s dependents or other

 

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beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 3(a) as though such termination were by the Company other than for Cause, or by the Executive for Good Reason; provided, however, that the Company shall not be required to pay any disputed amount pursuant to this Section 5(c) except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled.

 

(d)                                 Attorney Fees and Expenses.  The Company shall pay as they become due all attorney fees and related expenses (including the costs of experts, evidence and counsel) reasonably incurred by the Executive as a result of the Executive seeking to obtain or enforce any right or benefit provided by this Agreement.

 

Section 6.                                           Excise Tax Limitation.

 

(a)                                 Notwithstanding anything to the contrary contained in this Agreement, if the payments and benefits provided under this Agreement and benefits provided to, or for the benefit of, the Executive under any other Company plan or agreement (such payments or benefits are collectively referred to as the “Payments”) would be subject to the excise tax (the “Excise Tax”) imposed under Section 4999 of the Code, the Payments shall be reduced to the Limited Payment Amount of the greater of (i) the largest amount of Payments that would result in no portion of the Payments being subject to the Excise Tax, or (ii) the largest amount of Payments, up to and including the total Payments, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), that results in the Executive’s receipt, on an after-tax basis, of the greater amount of Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax.  The intent of the foregoing provision is to reduce the Payments only in the event and to the extent that doing so will maximize the net present value of the Payments, on an after-tax basis, to be received by the Executive.  Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate any reduction in Payments, the Company shall reduce or eliminate the Payments by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined below).  Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive’s rights and entitlements to any benefits or compensation.

 

(b)                                 The determination of whether the Payments shall be reduced to the Limited Payment Amount pursuant to this Agreement and the amount of such Limited Payment Amount shall be made, at the Company’s expense, by an accounting firm selected by the Executive which is one of the five largest accounting firms in the United States (the “Accounting Firm”).  The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation, to the Company and the Executive within ten business days of the Termination Date, if applicable, or such other time as requested by the Company or by the Executive (provided that the Executive reasonably believes that any of the Payments may be subject to the Excise Tax), and if the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Payments it shall furnish the

 

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Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such Payments.  The Determination shall be binding, final and conclusive upon the Company and the Executive.

 

Section 7.                                           Successors and Assigns.

 

(a)                                 This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)                                 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the business and/or 50% or more of the assets of the Company (on a consolidated basis) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, the term “Company” shall mean the Company as previously defined and any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law or otherwise.

 

Section 8.                                           Miscellaneous.

 

(a)                                 Governing Law and Venue.  This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to principles of conflict of laws.  Any action brought by any party to this Agreement shall be brought and maintained in a court of competent jurisdiction located in Denver, Colorado.

 

(b)                                 Captions.  The captions of this Agreement are for convenience of reference only, are not part of the provisions hereof and shall have no force or effect in the interpretation of this Agreement.

 

(c)                                  Amendment.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

(d)                                 Notice.  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party, by confirmed telefax, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	
If   to the Executive:
    	
Name
    
	
 
    	
Address
    
	
 
    	
Address
    
	
 
    	
Telefax   (print):
    
	
 
    	
 
    
	
If   to the Company:
    	
SM   Energy Company
    
	
 
    	
1775   Sherman Street, Suite 1200
    
	
 
    	
Denver,   CO 80203
    

 

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Attn:   Senior Vice President, Human Resources
    
	
 
    	
Telefax:  (303) 861-0934
    

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

 

(e)                                  Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and any provision that is determined to be invalid or unenforceable shall be enforced to the maximum extent permissible under law.

 

(f)                                   Entire Agreement.  This Agreement constitutes the entire agreement between the parties concerning the subject matter hereof.

 

(g)                                  Tax Withholding.  The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(h)                                 Waiver.  The Executive’s or the Company’s failure to insist upon strict compliance with any provision hereof or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

(i)                                     No Guaranteed Employment.  The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company concerning the Executive’s employment with the Company, the provisions of such other agreement not inconsistent herewith which shall remain in full force and effect, the employment of the Executive by the Company is “at will” and, prior to the Change of Control Date, may be terminated by either the Executive or the Company at any time.

 

(j)                                    Execution in Counterparts and by Facsimile.  This Agreement may be executed in counterparts and signature pages may be delivered by facsimile transmission.

 

*     *     *     *     *

 

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IN WITNESS WHEREOF, this Change of Control Executive Severance Agreement is hereby duly executed by each party hereto as of the day and year first above written.

 

 

	
COMPANY:
    
	
 
    
	
SM   ENERGY COMPANY,
    
	
a   Delaware corporation
    
	
 
    
	
 
    
	
By:
    	
 
    	
 
    
	
 
    	
John   R. Monark, Senior Vice President, Human Resources
    	
 
    
	
 
    	
 
    	
 
    
	
 
    
	
EXECUTIVE:
    
	
 
    
	
 
    
	
 
    	
 
    
	
Name
    

 

12Exhibit 4.1

 

THIS NOTE AND THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

 

WAVE SYNC
CORP.

 

CONVERTIBLE
PROMISSORY NOTE

 

	US $15,000,000	October
19, 2015

 

FOR VALUE
RECEIVED, Wave Sync Corp., a Delaware corporation (the “Company”), promises to pay to Jie Yang (the “Holder”),
the principal sum of Fifteen Million DOLLARS ($15,000,000) (the “Principal”) in lawful money of the United States
of America, without interest.  The principal amount hereof shall be paid in full to the Holder on the two (2) year anniversary
of the date hereof (the “Maturity Date”).

 

Capitalized
terms used herein but not defined herein shall have the meaning ascribed to it in that certain Share Purchase Agreement, dated
of even date herewith (the “SPA”), pursuant to which the Holder is acquiring this Note.

 

The following
is a statement of the rights of the Holder of this Note and the terms and conditions to which this Note is subject, and to which
the Holder, by acceptance of this Note, agrees:

 

1.           Principal
Repayment.  The outstanding principal amount of this Note shall be payable on the Maturity Date, without interest,
unless this Note has been earlier converted as described below.

 

2.           Ranking.   Except
for the indebtedness of the Company and its Subsidiaries in existence on the date hereof as described in the SPA (including the
financial statements that form a part thereof), and subject to the terms and conditions of this Note, the obligations of the Company
under this Note shall rank senior with respect to all existing indebtedness of the Company as
of the date hereof and to any and all indebtedness incurred hereafter. The term “indebtedness”
as used in this Section 2, refers to all unsecured debts and obligations of the Company, including trade payables.  

 

3.           Conversion.

 

(a)           Generally.  The
holder of this Note shall have the right, exercisable at any time after thirty (30) days following the issuance of this Note but
prior to the Maturity Date, at the election of the holder of this Note, to convert all, but not less than all, of the principal
amount then outstanding into shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock) at a conversion price (the “Conversion Price”) equal to $1.00 per share (the Common Stock underlying
the Note being referred to herein as the “Shares”), provided that the Company has effectuated a reverse split
at a ratio of one (1) for twenty (20) of all of the issued and outstanding Common Stock as of the date of this Note (the “Reverse
Split”).

 

(b)           Mechanics
of Conversion.  The conversion of this Note shall be conducted in the following manner: upon any conversion of all
but not less than all of the outstanding principal amount of this Note, plus all accrued but unpaid interest thereon: (i)
the Holder shall deliver a completed and executed Notice of Conversion attached hereto as Exhibit A and surrender
and deliver this Note, duly endorsed, to the Company’s office or such other address which the Company shall designate against
delivery of the certificates presenting the Shares to be delivered; (ii) in exchange for the surrendered Note, the Company shall prepare
and deliver irrevocable instructions addressed to the Company’s transfer and exchange agent, as applicable, to issue
such required number of Shares as set forth in the Conversion Notice which Shares shall be delivered to the Holder within
five (5) Business Days of the delivery of the documentation to the Company; and (iii) upon delivery of the Shares, this Note
shall become fully paid and satisfied.   

 

     

    

    

 

(c)           Adjustments
to Conversion Price.

 

(i)            Adjustments
for Stock Splits and Combinations and Stock Dividends.  If the Company shall at any time or from time to time
after the date hereof, effect a stock split (other than the Reverse Split contemplated by this Note) or combination of the outstanding
Common Stock or pay a stock dividend in shares of Common Stock, then the Conversion Price shall be proportionately adjusted. Any
adjustments under this Section 3(c)(i) shall be effective at the close of business on the date the stock split or combination becomes
effective or the date of payment of the stock dividend, as applicable.

 

(ii)           Merger
Sale, Reclassification, etc. In case of any (A) consolidation or merger (including a merger in which the Company
is the surviving entity), (B) sale or other disposition of all or substantially all of the Company’s assets or distribution
of property to shareholders (other than distributions payable out of earnings or retained earnings), or reclassification, change
or conversion of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the
stock or securities of which are at the time receivable upon the conversion of this Note) or any similar corporate reorganization
on or after the date hereof, then and in each such case the Holder of this Note, upon the conversion hereof at any time thereafter
shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the conversion hereof prior
to such consolidation, merger, sale or other disposition, reclassification, change, conversion or reorganization, the stock or
other securities or property to which such Holder would have been entitled upon such consummation if such Holder had converted
this Note immediately prior thereto.

 

(iii)          Adjustments
for Issuance of Additional Shares of Common Stock.

 

(A)          In
the event the Company, shall, at any time, from time to time, issue or sell any additional shares of Common Stock (other than pursuant
to Common Stock Equivalents (hereafter defined) granted or issued prior to the issuance date of this Note) (“Additional
Shares of Common Stock”), at a price per share less than the Conversion Price then in effect or without consideration,
then the Conversion Price upon each such issuance shall be adjusted to that price (rounded to the nearest cent) determined by multiplying
the Conversion Price then in effect by a fraction: 

 

(1)           the
numerator of which shall be equal to the sum of (x) the number of shares of Common Stock outstanding immediately prior to the issuance
of such Additional Shares of Common Stock plus (y) the number of shares of Common Stock (rounded to the nearest
whole share) which the aggregate consideration for the total number of such Additional Shares of Common Stock so issued would purchase
at a price per share equal to the Conversion Price then in effect, and

 

(2)           the
denominator of which shall be equal to the number of shares of Common Stock outstanding immediately after the issuance of such
Additional Shares of Common Stock.

 

(B)          The
provisions of paragraph (A) of Section 3(iii) shall not apply to any issuance of Additional Shares of Common Stock for which an
adjustment is provided elsewhere in this Section 3).  No adjustment of the number of Shares for which this Note shall
be convertible shall be made under this clause (iii) upon the issuance of any Additional Shares of Common Stock which are issued
pursuant to the exercise of any Common Stock Equivalents, if any such adjustment shall previously have been made upon the issuance
of such Common Stock Equivalents pursuant to the other provisions of this Section 3.

 

(C)           Issuance
of Common Stock Equivalents.  The provisions of this Section 3(iii) shall apply if (a) the Company, at any time after
the issuance date of this Note, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common
Stock (“Convertible Securities”), other than the Note, or (b) any rights or warrants or options to purchase
any such Common Stock or Convertible Securities (collectively, the “Common Stock Equivalents”) shall be issued
or sold.  If the price per share for which Additional Shares of Common Stock may be issuable pursuant to any such Common
Stock Equivalent shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock
Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted,
and such price as so amended shall be less than the applicable Conversion Price in effect at the time of such amendment or adjustment,
then the applicable Conversion Price upon each such issuance or amendment shall be adjusted as provided in the first sentence of
subsection (iii)(A) of this Section 3.  No adjustment shall be made to the Conversion Price upon the issuance of Common
Stock pursuant to the exercise, conversion or exchange of any Convertible Security or Common Stock Equivalent where an adjustment
to the Conversion Price was made as a result of the issuance or purchase of any Convertible Security or Common Stock Equivalent.

 

    	 	2	 

    

    

 

(D)          Certain
Issues Excepted.  Anything herein to the contrary notwithstanding, the Company shall not be required to make any
adjustment to the Conversion Price under this Section 3 in connection with securities of the Company issued: (i) in connection
with a merger, acquisition or consolidation, (ii) in connection with bona fide joint venture, strategic license or similar business
partnering arrangements (provided that the transaction or arrangement is not primarily for the purpose of raising capital from
Person whose primary business is investing in securities), and (iii) in connection with any share split, share dividend, recapitalization
or similar transaction by the Company for which adjustment is made pursuant to this Section 3.

 

(e)           Elimination
of Fractional Interests.  No fractional shares of Common Stock shall be issued upon conversion of this Note, nor
shall the Company be required to pay cash in lieu of fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated and that all issuances of Common Stock shall be rounded up to the nearest whole share.

 

4.           Events
of Default.  In the event that any of the following (each, an “Event of Default”) shall occur:

 

(a)           Default
in Covenants.  The Company shall default in any material manner in the observance or performance of the affirmative
or negative covenants or agreements set forth in the SPA or this Note, dated of even date herewith, between the Holder
and the Company (collectively, the “Transaction Documents”); or

 

(b)           Breach
of Representations and Warranties.  The Company materially breaches any representation or warranty
contained in the Transaction Documents; or

 

(c)           Judgments. Any
final, non-appealable judgment, decree or order for the payment of money is entered against any of the Company or the
Company’s subsidiaries in an amount equal to $5,000,000 or more and the same remains unsatisfied or unbonded
for more than thirty (30) days; or

 

(d)           Illegality
of Note.  Any court of competent jurisdiction issues an order declaring the Note or any provision thereunder to be
illegal; or

 

(e)           Bankruptcy.  The
Company shall: (i) admit in writing its inability to pay its debts as they become due; (ii) apply for, consent to, or acquiesce
in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general
assignment for the benefit of creditors; (iii) in the absence of such application, consent or acquiesce in, permit or suffer to
exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property;
or (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and,
if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented
to or acquiesced in by the Company or shall result in the entry of an order for relief; 

 

then, and so long as such Event
of Default is continuing for a period of thirty (30) calendar days, by written notice to the Company from the Investor Representative,
all obligations of the Company under this Note shall be immediately due and payable without presentment, demand, protest or any
other action nor obligation of the Holder of any kind, all of which are hereby expressly waived, and Holder may exercise any other
remedies the Holder may have at law or in equity.  

 

    	 	3	 

    

    

 

5.           Affirmative
Covenants of the Company.  The Company hereby agrees that, so long as the Note remains outstanding and unpaid, or
any other amount is owing to the Holder hereunder, the Company will:

 

(a)           Corporate
Existence and Qualification.  Take the necessary steps to preserve its corporate existence and its right to conduct
business in all states in which the nature of its business requires qualification to do business;

 

(b)           Books
of Account.  Keep its books of account in accordance with good accounting practices;

 

(c)           Insurance.  Maintain
insurance with responsible and reputable insurance companies or associations, as determined by the Company in its sole but reasonable
discretion, in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company operates;

 

(d)           Compliance
with Law.  Comply with the charter and bylaws or other organizational or governing documents of the Company, and
any law, treaty, rule or regulation, or determination of an arbitrator or a court or other governmental authority, in each case
applicable to or binding upon the Company or any of its property or to which each the Company or any of its property is subject;

 

(e)           Notice
of Known Events of Default.  The Company shall furnish to the Holder a notice of any occurrence of an Event of Default,
and what action the Company is taking or proposes to take with respect thereto, promptly after such Event of Default becomes known
to the Company.

 

(f)            Further
Assurances.  The Company shall execute and deliver any and all such further documents and take any and all such other
actions as may be reasonably necessary or appropriate to carry out the intent and purposes of this Note and to consummate the transactions
contemplated herein.

 

6.           Negative
Covenants of the Company.  Except for the transactions completed by the SPA and all related documents between and
among the Company and its Subsidiaries, the Company hereby agrees that, so long as this Note remains outstanding and unpaid it
will not, nor will it permit any of its Subsidiaries, without the consent of the Holder, to:

 

(a)           Indebtedness
for Borrowed Money.  Except as set forth on Schedule 6(a) hereto, incur, or permit to exist, any
Indebtedness (as defined below and excluding this Note) for borrowed money in excess of (i) US$10,000,000 during the twelve (12)
month period beginning on the date hereof, or (ii) US$15,000,000 during period beginning on the date hereof and ending on the Maturity
Date, except in the ordinary course of the Company’s business.  For purposes of this Section 6(a), “Indebtedness”
shall mean: (i) all obligations of the Company for borrowed money or with respect to deposits or advances of any kind, (ii) all
obligations of the Company evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of the Company
for the deferred purchase price of property or services, except current accounts payable arising in the ordinary course of business
and not overdue beyond such period as is commercially reasonable for the Company’s business, (iv) all obligations of the
Company under conditional sale or other title retention agreements relating to property purchased by the Company, (v) all payment
obligations of the Company with respect to interest rate or currency protection agreements, (vi) all obligations of the Company
as an account party under any letter of credit or in respect of bankers’ acceptances, (vii) all obligations of any third
party secured by property or assets of such Person (regardless of whether or not the Company is liable for repayment of such obligations),
except for obligations to secure Indebtedness incurred within the limitations of this Section 6(a); (viii) all guarantees of the
Company and (ix) the redemption price of all redeemable preferred stock of the Company, but only to the extent that such stock
is redeemable at the option of the holder or requires sinking fund or similar payments at any time prior to the Maturity Date;

 

(b)           Loans;
Investments.  Lend or advance money, credit or property to or invest in (by capital contribution, loan, purchase
or otherwise) any Person in excess of US$2,000,000 except: (i) investments in United States Government obligations,
certificates of deposit of any banking institution with combined capital and surplus of at least $200,000,000; (ii) accounts receivable
arising out of sales in the ordinary course of business; and (iii) inter-company loans between and among the Company and its Subsidiaries;

 

    	 	4	 

    

    

 

(c)           Dividends
and Distributions.  Pay dividends or make any other distribution on shares of the capital stock of the Company other
than inter-company dividends, and distributions between and among the Company and its Subsidiaries;

 

(d)           Liens.  Except
as set forth on Schedule 6(d) hereto, shall not create, assume or permit to exist, any lien on any of its property
or assets now owned or hereafter acquired except (i) liens in favor of the Holder; (ii) liens granted to secure Indebtedness incurred
within the limitations of Section 6(a) hereof; (iii) liens incidental to the conduct of its business or the ownership
of its property and assets which were not incurred in connection with the borrowing of money or the obtaining of advances or credit
and which do not materially impair the use thereof in the operation of its business; (iv) liens subordinate to the liens granted
to secure this Note (v) liens for taxes or other governmental charges which are not delinquent or which are being contested in
good faith and for which a reserve shall have been established in accordance with generally accepted accounting principles; and
(vi) purchase money liens granted to secure the unpaid purchase price of any fixed assets purchased within the limitations of Section
6(g) hereof;

 

(e)           Contingent
Liabilities.  Assume, endorse, be or become liable for or guarantee the obligations of any Person, contingently or
otherwise, excluding however, the endorsement of negotiable instruments for deposit or collection in the ordinary course of business
or guarantees of the Company made within the limitations of Section 6(a) hereof;

 

(f)            Sales
of Receivables; Sale - Leasebacks.  Except as set forth on Schedule 6(f) hereto, sell, discount
or otherwise dispose of notes, accounts receivable or other obligations owing to the Company, with or without recourse, except
for the purpose of collection in the ordinary course of business; or sell any asset pursuant to an arrangement to thereafter lease
such asset from the purchaser thereof;

 

(g)           Capital
Expenditures; Capitalized Leases.  Expend in the aggregate for the Company and all its Subsidiaries in excess of
US$5,000,000 in any fiscal year for Capital Expenditures (as defined below), including payments made on account of Capitalized
Leases (as defined below).  For purposes of the foregoing, Capital Expenditures shall include payments made on account
of any deferred purchase price or on account of any indebtedness incurred to finance any such purchase price.  “Capital
Expenditures” shall mean for any period, the aggregate amount of all payments made by any Person directly or indirectly
for the purpose of acquiring, constructing or maintaining fixed assets, real property or equipment which, in accordance with generally
accepted accounting principles, would be added as a debit to the fixed asset account of such Person, including, without limitation,
all amounts paid or payable with respect to Capitalized Lease Obligations and interest which are required to be capitalized in
accordance with generally accepted accounting principles.  “Capitalized Lease” shall mean any lease
the obligations to pay rent or other amounts under which constitute Capitalized Lease Obligations.  “Capitalized
Lease Obligations” shall mean as to any Person, the obligations of such Person to pay rent or other amounts under a lease
of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified
and accounted for as a capital lease on a balance sheet of such Person under generally accepted accounting principles and, for
purposes of this Note, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with generally
accepted accounting principles;

 

(h)           Nature
of Business.  Materially alter the nature of the Company’s business or otherwise engage in any business other
than the business engaged in or proposed to be engaged in on the date of this Note;

 

(i)            Stock
of Subsidiaries.  Sell or otherwise dispose of any Subsidiary or permit a Subsidiary to issue any additional shares
of its capital stock except pro rata to its stockholders; and

 

(j)            Accounting
Changes.  Make, or permit any Subsidiary to make any change in their accounting treatment or financial reporting
practices except as required or permitted by generally accepted accounting principles in effect from time to time.

 

    	 	5	 

    

    

 

(k)           Merger
or Sale.

 

(i)            The
Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, consolidate or merge with or into another
Person (whether or not the Company or such Subsidiary is the surviving corporation), or sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole in one or
more related transactions, to any other Person, unless (A) either the Company or such Subsidiary is the surviving corporation or
the Person formed by or surviving any such consolidation or merger (if other than the Company or such Subsidiary) or to which such
sale, assignment, transfer, conveyance or other disposition shall have been made is a corporation organized or existing under the
laws of the United States, any state thereof or the District of Columbia, (B) the Person formed by or surviving any such consolidation
or merger (if other than the Company or such Subsidiary) or the Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made (1) assumes in writing all the obligations of the Company under the Note and the other Transaction
Documents and (2) causes to be delivered to the Holder an opinion of nationally recognized independent counsel, or other independent
counsel reasonably satisfactory to the Holder, to the effect that all agreements or instruments effecting such assumption are enforceable
in accordance with their terms and comply with the terms hereof, and (C) immediately after such transaction, no default or Event
of Default exists.

 

The foregoing paragraph in this
Section 6(k)(i) shall not apply to (x) a merger of the Company with an Affiliate with no material assets, liabilities or operations
solely for the purpose of reincorporating the Company in another jurisdiction; or (y) any consolidation or merger, or any sale,
assignment, transfer, conveyance, lease or other disposition of assets between or among the Company and its Subsidiaries; provided,
however, that such consolidation or merger shall comply with subclauses (A) and (B) in the foregoing paragraph.

 

 (ii)          Upon
any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially
all of the assets of the Company or any of its Subsidiaries permitted by Section 6(k)(i) hereof, the successor corporation formed
by such consolidation or into or with which the Company or such Subsidiary is merged or to which such sale, assignment, transfer,
lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Note referring to the “Company,”
or to a “Subsidiary” shall refer instead to the successor corporation and not to the Company or such Subsidiary, as
the case may be), may exercise every right and power of the Company or such Subsidiary under this Note with the same effect as
if such successor Person had been named as the Company or a Subsidiary herein and shall be bound by every obligation and liability
of the Company or such Subsidiary under this Note and the other Transaction Documents, however, that the predecessor Person shall
not be relieved from the obligation to pay the principal of the Note.

 

(l)            Transactions
with Affiliates.  Except for transactions contemplated by the Transaction Documents or as otherwise approved by the
Board (including a majority of the independent directors then on the Board), the Company shall not, and shall cause its Subsidiaries
not to enter into any transaction with any director, officer, employee or holder of more than five percent of the outstanding capital
stock of any class or series of capital stock of the Company or any Subsidiary, member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or member of the family of any such person, is a director,
officer, trustee, partner or holder of more than five percent of the outstanding capital stock thereof.

 

7.           Holder
Not Deemed a Stockholder.  No Holder, as such, of this Note shall be entitled to vote or receive dividends or be
deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Note be construed to confer upon
the Holder hereof, as such, any of the rights at law of a stockholder of the Company prior to the issuance to the Holder of the
shares of Common Stock which the Holder is then entitled to receive upon the due conversion of this Note.

 

8.           Mutilated,
Destroyed, Lost or Stolen Notes.  In case this Note shall become mutilated or defaced, or be destroyed, lost or stolen,
the Company shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced
Note, or in lieu of and in substitution for the destroyed, lost or stolen Note.  In the case of a mutilated or defaced
Note, the Holder shall surrender such Note to the Company.  In the case of any destroyed, lost or stolen Note, the Holder
shall furnish to the Company: (i) evidence to its satisfaction of the destruction, loss or theft of such Note and (ii) such security
or indemnity as may be reasonably required by the Company to hold the Company harmless.

 

    	 	6	 

    

    

 

9.           Waiver
of Demand, Presentment, etc.  The Company hereby expressly waives demand and presentment for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence
in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.  The Company agrees that, in the event of an Event of Default, to reimburse
the Holder for all reasonable costs and expenses (including reasonable legal fees of one counsel) incurred in connection with the
enforcement and collection of this Note.

 

10.         Payment.  All
payments with respect to this Note shall be made in lawful money of the United States of America, at the address of the Holder
as of the date hereof or as designated in writing by the Holder from time to time.  The receipt by the Holder of immediately
available funds shall constitute a payment of principal and shall satisfy and discharge the liability for principal
of this Note to the extent of the sum represented by such payment.     

 

11.         Assignment.  The
rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the successors
and permitted assigns of the parties hereto.  The Holder may not assign, pledge or otherwise transfer this Note or any
interest therein without the prior written consent of the Company.  Principal is payable only to the registered Holder
of this Note on the books and records of the Company.

 

12.         Waiver
and Amendment.  Any provision of this Note, including, without limitation, the due date hereof, and the observance
of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the Holder.

 

13.         Notices.  Any
notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly
given if given in accordance with the provisions of Section 9.2 of the SPA.

 

14.         Governing
Law.  This Note shall be governed by and construed in accordance with the laws of the State of New York, USA, excluding
that body of law relating to conflicts of laws.

 

15.         Consent
to Jurisdiction.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Note (whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City
of New York.  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the enforcement of this Note, and hereby irrevocably waives,
and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is improper.  Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  THE
COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE HOLDER (INCLUDING THEIR RESPECTIVE AFFILIATES, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES)
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

16.         Severability.  If
one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this
Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance
with its terms.

 

17.         Headings.  Section
headings in this Note are for convenience only, and shall not be used in the construction of this Note.

 

[Signature Page
Follows]

 

    	 	7	 

    

    

 

IN WITNESS
WHEREOF, the Company has caused this Note to be issued as of the date first above written.

 

	 	WAVE SYNC CORP.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	 	8	 

    

    

 

Exhibit A

 

WAVE SYNC
CORP.

NOTE CONVERSION
NOTICE

 

Reference is
made to the Convertible Promissory Note in the original principal amount of $15,000,000 of Wave Sync Corp., a Delaware corporation
(the “Company”), issued to the undersigned (the “Note”).

 

In accordance with and pursuant
to the terms of the Note, the undersigned hereby elects to convert the entire outstanding principal amount due and owing under
the Note into shares of Common Stock, $0.001 par value per share, of the Company (the “Common Stock”), by tendering
the original of the Note for cancellation.

 

Please confirm the following information:

 

Principal Amount Outstanding

under the Note: $15,000,000

 

Conversion Price: $1.00 per share  

 

Number of Shares to be issued:  15,000,000

 

Please issue the Shares into which
the Note is being converted in the following name and to the following address:

 

	Issue to:	_____________________________________________
	 	 
	Address:	_____________________________________________
	 	_____________________________________________
	 	_____________________________________________
	 	 
	Facsimile Number:	_____________________________________________
	 	 
	Authorization:	_____________________________________________
	 	By:  __________________________________________
	 	Title: _________________________________________

 

Dated:  ________________________

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