Document:

Exhibit

Exhibit 10.1

RESTRICTED STOCK UNIT AWARD AGREEMENT
(2015 Performance-Based Award - Special Award)

This Agreement (“Agreement”) is made this <Grant Date> by and between <Participant Name> (“Participant”) and The Progressive Corporation (the “Company”).  

1.    Definitions.  Unless otherwise defined in this Agreement, each capitalized term in this Agreement shall have the meaning given to it in The Progressive Corporation 2015 Equity Incentive Plan (the “Plan”).  Financial and operational terms used in this Agreement (e.g., references to business units or segments) are used consistently with the use of those terms in the Company’s Form 10-K (including exhibits and other documents incorporated therein) for the fiscal year ended December 31, 2014 (the “Form 10-K”) and Form 10-Q for the fiscal quarter ended June 30, 2015.  It is understood that references herein to any performance results of the Company mean the applicable operating results of the Company and its Subsidiaries and Affiliates.

2.    Award of Restricted Stock Units.  The Company grants to Participant an award (the “Award”) of performance-based restricted stock units (“Restricted Stock Units” or “Units”), pursuant and subject to the Plan.  The Award is based on a target award value of <# of Units> Units (the “Target Award Units”).  The number of Restricted Stock Units that are ultimately earned pursuant to the Award (if any) will be determined based on the Target Award Units and the procedures and calculations set forth in this Agreement.  Under the calculations set forth below, the maximum potential Award is a number of Units equal to two (2.0) times the Target Award Units (the “Maximum Award Units”) plus Dividend Equivalent Units (defined below).

3.    Condition to Participant’s Rights under this Agreement. This Agreement shall not become effective, and Participant shall have no rights with respect to the Award or any Restricted Stock Units, unless and until Participant has fully executed this Agreement and delivered it to the Company. In the Company’s sole discretion, such execution and delivery may be accomplished through electronic means. 

4.    Restrictions; Vesting.  Subject to the terms and conditions of the Plan and this Agreement, including the provisions of Paragraph 8 below, Participant’s rights in and to Restricted Stock Units shall vest, if at all, as follows: 

a.    Performance Period.  The “Performance Period” shall be the three-year period commencing with the first day of the Company’s third fiscal quarter of 2015 and ending on the last day of the Company’s second fiscal quarter of 2018.

b.    Certification.  The Award shall vest (if at all) only if, to the extent, and when the Committee certifies: 

i.     the extent to which the Company’s performance results have satisfied the performance criteria set forth in both Subparagraphs c. and d. below; and 

ii.     the corresponding number of Restricted Stock Units (if any) that have vested as a result of such performance.

Such certification shall occur as soon as practicable after the end of the Performance Period (the date of such certification, the “Certification Date”), but in any event must occur (if at all) on or before August 31, 2018 (the “Expiration Date”). If the Committee certifies the vesting of a number of Units that is less than the Maximum Award Units, then with respect to all other Units that could have been earned under this Agreement, the Award will terminate and be forfeited automatically.

c.    Profitability Requirement.  The Award shall not vest unless the Company has achieved a combined ratio of 96 or less for the last twelve (12) fiscal month period during the Performance Period, 

calculated (i) by reference to the Company’s GAAP financial results, and (ii) in the manner described in the Form 10-K (the “Profitability Requirement”).  This section is qualified by the provisions of subparagraph (e) below.

d.    Number of Units Vesting.  Provided that the Profitability Requirement has been satisfied, the number of Restricted Stock Units (if any) that vest in connection with the Award will be determined as follows:

		
	i.
	The number of personal auto policies in force included in the Company’s Agency auto  and Direct auto businesses that are a part of the Company’s Personal Lines segment (“Personal Lines Auto”) and that are combined (or “bundled”) with at least one other Progressive Personal Insurance Product (as defined below) (whether issued at the same time or at different times), as a percentage of all personal auto policies in force included in Personal Lines Auto (the “Bundled Percentage”) on the last day of the Performance Period (the “Ending Bundled Percentage”) will be compared to the Bundled Percentage on the last day of the Company’s second fiscal quarter of 2015 (the “Beginning Bundled Percentage”) to determine the Growth in the Bundled Percentage (determined as described in subparagraph ii  below).  For purposes of determining  the Bundled Percentage:

		
	1.
	if a policyholder has more than one personal auto policy in force, then all Progressive Personal Insurance Products attributable to that policyholder shall be deemed to be combined with only one of such personal auto policies in force;

		
	2.
	all personal auto policies in force held by a policyholder and/or a policyholder’s spouse (including any policy on which any child(ren) of the policyholder and/or spouse is included) shall be treated as one policy in force; and

		
	3.
	“Progressive Personal Insurance Product” shall mean any of the following personal insurance products:  (A) any insurance product currently underwritten by the Company or one of its Subsidiaries or Affiliates and included in the Company’s special lines business unit that is a part of the Company’s Personal Lines segment; (B) any other personal umbrella insurance policies underwritten by the Company or one of its Subsidiaries or Affiliates; and (C) any personal homeowners, condominium owners or renters insurance policies obtained by a policyholder through Progressive Home Advantage (or any successor program), including Platinum (or any successor program) (“PHA”), whether underwritten by the Company or one of its Subsidiaries or Affiliates or by an un-Affiliated third party insurance company; provided, that for purposes of clarification only, any non-PHA products offered through Progressive Advantage Agency and for which the Company or one or more of its Subsidiaries or Affiliates receives only a commission or referral fee, but which are not included in the Company’s policies in force calculations, will be excluded from the term “Progressive Personal Insurance Product.” 

		
	ii.
	Growth in the Bundled Percentage will be determined by dividing the Ending Bundled Percentage by the Beginning Bundled Percentage and subtracting one (1).  For example, if the Beginning Bundled Percentage is 10% and the Ending Bundled Percentage is 13%, then the growth in the Bundled Percentage is 30% (13% /10% -1=1.30-1=.30=30%).

		
	iii.
	If the Growth in the Bundled Percentage is at least twenty percent (20%), then the applicable calculation required by the following table will determine the number of Restricted Stock Units vesting: 

	
		
	Growth in the Bundled Percentage
	Determination of the Number of Units Vesting 

	If Growth in the Bundled Percentage is 40% or more
	The number of Units to vest will equal Target Award Units x 2.0 (i.e., the Maximum Award Units)

	If Growth in the Bundled Percentage is more than 20% but less than 40%
	The number of Units to vest will be in proportion to the extent to which the Growth in the Bundled Percentage exceeds 20%

Target Award Units x  (1.0 + (Growth in the Bundled Percentage  -  20) divided by 20)

For example, if the Growth in the Bundled Percentage is 30%, then the Number of Units that will vest will be:

Target Award Units x (1+((30-20)/20)) or
Target Award Units x 1.5

	If Growth in the Bundled Percentage is exactly 20%
	The number of Units to vest will equal Target Award Units

		
	iv.
	If the Growth in the Bundled Percentage is not at least 20%, or if the Profitability Requirement has not been satisfied, none of the Award shall vest, and the Award shall be forfeited in its entirety.  

e.    Exclusions.  For purposes of determining whether the Profitability Requirement is satisfied, to the extent permitted under Section 162(m), the following items will be excluded from, to the extent that any such item would otherwise be included in, the calculation of the Company’s combined ratio:  (1) the financial results (if such results can be separately determined) attributable to the operations of an entity, business, product line or product that does not constitute a Progressive Personal Insurance Product and that is acquired or disposed of by the Company, or any of its Subsidiaries or Affiliates, during the Performance Period; and (2) all other items of gain, loss or expense determined to be extraordinary or unusual in nature under GAAP that are recognized or incurred during the Performance Period.

f.    Committee Discretion.  Notwithstanding anything to the contrary contained in this Agreement, at or prior to the time of vesting, the Committee, in its sole discretion, may reduce the number of Restricted Stock Units that otherwise would vest according to this Agreement, or eliminate the Award in full.  The Committee, in its sole discretion, may treat individual participants differently for these purposes.  Any such determination by the Committee shall be final and binding on Participant.  Under no circumstances shall the Committee have discretion to increase the award to Participant in excess of the number of Units that would have been awarded at vesting based on this Paragraph 4 (excluding adjustments required by Section 3(c) and/or Section 11 of the Plan).

The Award shall vest in accordance with and subject to the foregoing except to the extent that, prior to the Committee’s certification of the Award, the Award has terminated or been forfeited under the terms and conditions of the Plan or this Agreement.   

5.    Expiration of Award.  Notwithstanding anything to the contrary in this Agreement, if Participant’s rights in and to the Award have not vested in accordance with Paragraph 4 of this Agreement on or before the Expiration Date, this Award shall expire at 11:59 p.m. on the Expiration Date.  Upon such expiration, the Award shall terminate automatically, and Participant shall have no further rights with respect to the Award.  

6.    Dividend Equivalents.  Subject to this Paragraph 6, Participant shall be credited with Dividend Equivalents with respect to the outstanding Award with respect to dividends for which a record date occurs prior to the vesting date.  All Dividend Equivalents so credited will be deemed to be reinvested in Restricted Stock Units on the date that the applicable dividend or distribution is made to the Company’s shareholders, based on the Target Award Units and any Units resulting from prior reinvestments of Dividend Equivalents, in the number of Units determined by dividing the value of the Dividend Equivalents by the Fair Market Value of the Company’s Stock on such date (rounded to the nearest thousandth of a whole Unit or as otherwise reasonably determined by the 

Company); provided, however, that if Dividend Equivalents cannot be reinvested in Units due to the operation of Section 3(a) of the Plan, such Dividend Equivalents will be credited to Participant as a cash value based on the Target Award Units and any Units resulting from prior reinvestments of Dividend Equivalents, which cash value shall be held by the Company (without interest) subject to this Agreement. The Units resulting from the reinvestment of such Dividend Equivalents (“Dividend Equivalent Units”) and, if applicable, cash value resulting from such reinvestment, shall be subject to the same terms and conditions, and shall vest or be forfeited (as applicable) at the same time, upon the same conditions, and in the same proportion, as the Target Award Units set forth in this Award; provided, however, that if a vesting date occurs after the record date for, but before the payment date of, a dividend, then the Dividend Equivalent Units related to such dividend and to Units vesting on such vesting date will be paid in cash or in Stock, in the sole discretion of the Company, as soon as practicable following the payment date for such dividend.

7.    Units Non-Transferable.  No Restricted Stock Units (and no Dividend Equivalent Units) shall be transferable by Participant other than by will or by the laws of descent and distribution, and then only in accordance with the Plan.  In the event the Award is transferred or assigned pursuant to a court order, such transfer or assignment shall be without liability to the Company, and the Company shall have the right to offset against the Award any expenses (including attorneys’ fees) incurred by the Company, or any or its Subsidiaries or Affiliates in connection with such transfer or assignment.  

8.    Termination of Employment.  Except as otherwise provided in the Plan, including Section 11 (Change in Control Provisions) and Section 14(d) thereof, if Participant’s employment with the Company or any Subsidiary or Affiliate terminates for any reason other than death, the Award and all Restricted Stock Units held by Participant that are unvested or subject to restriction at the time of such termination shall be forfeited automatically.  In the event that Participant’s employment terminates as a result of Participant’s death, then this Agreement will remain effective for up to one year after such termination and the Restricted Stock Units (and Dividend Equivalents) will vest if, when and to the extent, that the performance measures identified in Paragraph 4 above are achieved and certified by the Committee pursuant to Paragraph 4 prior to the earlier to occur of (x) the expiration of such one (1) year period and (y) the Expiration Date.  The balance of the Award, if any, shall be forfeited. 

9.    Disqualifying Activity.  Notwithstanding any other provision of this Agreement, if the Committee determines that Participant is engaging in, or has engaged in, a Disqualifying Activity and that Disqualifying Activity occurred prior to the vesting of the Award, the Award and all applicable Restricted Stock Units that are then unvested or subject to restriction shall be forfeited or deemed to be forfeited automatically as of the Disqualification Date determined by the Committee and, if the vesting has already occurred, the provisions of Section 10(b)(ii) of the Plan will apply.  Any determination by the Committee that the Participant is engaging in, or has engaged in, any Disqualifying Activity, and of the Disqualification Date, shall be final and conclusive on Participant. 

10.    Delivery at Vesting.  Subject to the provisions of the Plan and this Agreement, upon vesting of all or part of the Award, the Company shall deliver to Participant one share of the Company’s Stock in exchange for each such vested Restricted Stock Unit and for each Dividend Equivalent Unit related thereto, and the remaining Restricted Stock Units (if any) shall be cancelled.  Unless determined otherwise by the Company at any time prior to the applicable delivery, each fractional Restricted Stock Unit shall vest and be settled in an equal fraction of a share of the Company’s Stock.  The delivery of such shares of Stock shall be on or as soon as practicable following the Certification Date, but in no event later than March 15 of the calendar year following the year in which the Certification Date occurred.

11.    Taxes.  No later than the date as of which an amount relating to the Award first becomes taxable, Participant shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Taxes and other items of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the Plan and this Agreement shall be conditioned on such payment or arrangements and the Company and its Subsidiaries and Affiliates, to the extent permitted by law, shall have the right to deduct any such taxes from any payment of any kind otherwise due to Participant.  At vesting, Restricted Stock Units awarded under this Agreement will be valued at the Fair Market Value of the Company’s Stock on such date.  

Participant must satisfy the minimum statutory tax withholding obligations resulting from the vesting of Restricted Stock Units (“Minimum Withholding Obligations”) either (a) by surrendering to the Company Restricted Stock Units that are then vesting with a value sufficient to satisfy the Minimum Withholding Obligations, or (b) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by check or other instrument.  Unless Participant advises the Company, during the Company’s second fiscal quarter of 2018, of his or her election to use an alternative payment method, Participant shall be deemed to have elected to surrender to the Company Restricted Stock Units that are then vesting with a value sufficient to satisfy the Minimum Withholding Obligations.  

Under no circumstances will Participant be entitled to satisfy any Minimum Withholding Obligations by surrendering Restricted Stock Units that are not then vesting or any Restricted Stock.  Any election by Participant to satisfy Minimum Withholding Obligations by surrendering Stock owned by Participant prior to the date of such satisfaction must be approved in advance by the Committee.  All payments, surrenders of Units or Stock, elections or requests for approval must be made by Participant in accordance with such procedures as may be adopted by the Company in connection therewith, and subject to such rules as have been or may be adopted by the Committee.  

12.    Non-Solicitation.  In consideration of the Award made to Participant under this Agreement, for a period of twelve (12) months immediately following Participant's “Separation Date” (defined below), Participant shall not directly or indirectly recruit or solicit for hire, or hire, or assist in any manner in the recruitment, solicitation for hire or hiring, of any employee or officer of the Company or any of its Subsidiaries or Affiliates, or in any way induce any such employee or officer to terminate his or her employment with the Company or any of its Subsidiaries or Affiliates.  For purposes of this Paragraph 12, "Separation Date" means the date on which Participant's employment with the Company or one of its Subsidiaries or Affiliates is terminated for any reason.

13.    Recoupment.  If the Securities and Exchange Commission adopts final rules under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that require, as a condition to the Company’s continued listing on a national securities exchange, that the Company develop and implement a policy requiring the recovery of erroneously awarded compensation, and such regulations are applicable to Participant and the Award granted pursuant to this Agreement, then the following shall apply: 

In the event that the Company is required to prepare a restatement of one or more of its financial statements due to the material noncompliance of the Company with any financial reporting requirement under the federal securities laws, the Company will be entitled to recover from Participant, and Participant will promptly upon written demand return to the Company (whether or not Participant remains an employee of the Company at the time of such restatement or thereafter), the amount of any Award granted hereunder that (i) was paid or distributed to Participant (or any assignee or transferee permitted under Paragraph 7 above) during the three year period preceding the date on which the Company is required to prepare such restatement, and (ii) is in excess of what would have been paid or distributed to Participant (or any such assignee or transferee) under the restatement, or such other amount as may be required by the rules of the Securities and Exchange Commission or, if applicable, the New York Stock Exchange.  

The provisions of this Paragraph 13 are in addition to the rights of the Company as set forth in Section 14(h) of the Plan.

14.    Entire Agreement.  This Agreement constitutes the entire agreement between the parties and supersedes and cancels any other agreement, representation or communication, whether oral or in writing, between the parties relating to the Award, provided that the Agreement shall be at all times subject to the Plan. 

15.    Amendment.  The Committee may amend the terms of this Award to the fullest extent permitted by Section 12 of the Plan. 

16.     Acknowledgments.  Participant: (a) acknowledges receiving a copy of the Plan Description relating to the Plan, and represents that he or she is familiar with all of the material provisions of the Plan, as set forth in 

such Plan Description; (b) accepts this Agreement and the Award subject to all provisions of the Plan and this Agreement; and (c) agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee relating to the Plan, this Agreement or the Award.

Participant evidences his or her agreement with the terms and conditions of this Agreement, and his or her intention to be bound by this Agreement, by electronically accepting the Award pursuant to the procedures adopted by the Company.  Upon such acceptance by Participant, this Agreement will be immediately binding and enforceable against Participant and the Company.   

THE PROGRESSIVE CORPORATION

By:  /s/     Charles E. Jarrett        
Vice President & Secretaryex10_24.htm

Exhibit 10.24

 

NOTE PURCHASE AGREEMENT

 

NOTE PURCHASE AGREEMENT dated as of July 16, 2015 (this “Agreement”) between the EGS, LLC, a Delaware limited liability company (the “Purchaser”), and Merriman Holdings, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, the Purchaser and the Company entered into the Note Purchase Agreement dated as of April 20, 2015 (the “Original Note Purchase Agreement”), pursuant to which the Company issued to the Purchaser, and the Purchaser purchased from the Company, the Note and the Warrants (both as defined in the Original Note Purchase Agreement)

 

WHEREAS, subject to the terms and conditions in this Agreement, the Purchaser is purchasing the Additional Note and the Additional Warrants (each as defined herein), subject to the terms and condition hereof.

 

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1.             Purchase of Secured Promissory Note and Common Stock Purchase Warrants. On the terms and subject to the conditions contained in this Agreement, the Purchaser hereby agrees to purchase from the Company, and the Company hereby agrees to issue to Purchaser, for an aggregate purchase price of $333,333.33, (i) a Secured Promissory Note in the original principal amount of $333,333.33 (the “Additional Note”), provided, however, if the Purchaser tenders to the Company for exchange the $1,000,000 secured promissory note dated April 20, 2015 issued by the Company pursuant to the Original Note Purchase Agreement, the Company shall issue to the Purchaser, in exchange therefor and for the Additional Note, a Secured Promissory Note in the original principal amount of $1,333,333.33 in the form attached hereto as Exhibit A (the “Note”), and (ii) a Common Stock Purchase Warrant to purchase 166,667 shares of common stock of the Company, in substantially the same form as the warrants issued pursuant to the Original Note Purchase Agreement (the “Warrants”, and together with the Note, the “Securities”).  The Company’s obligations under the Note shall be secured by a pledge by the Company of all of the capital stock of Merriman Capital, Inc., a California corporation, owned by it (which constitutes 99.998% of the issued and outstanding common stock, par value $0.0001 per share, which is the only class of its capital stock outstanding) pursuant to the Stock Pledge Agreement dated as of April 20, 2015 (as amended from time to time, the “Stock Pledge Agreement”) between the Company and the Purchaser.  All other outstanding indebtedness of the Company shall be subordinated to the prior payment in full of the Note, and any and all liens and security interests securing any of such indebtedness shall be subordinated to the liens and security interests securing the Note, pursuant to the Intercreditor Agreement dated as of April 20, 2015 (as amended as of July 10, 2015) among the holders of such other indebtedness, the Purchaser and the Company.

 

The Purchaser shall be entitled to instruct the Company to issue the Warrants in a name designated by the Purchaser.

 

  

  

  

2.             Representations and Warranties of the Company.  The Company hereby represents and warrants to the Purchaser as follows:

2.1              Authority; Binding Agreements.  The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware.  The execution, delivery and performance of this Agreement by the Company has been duly approved by all required parties and all other actions required to authorize the offer and sale of the Securities have been duly taken.  The Company has the requisite power and authority to execute and deliver this Agreement, and perform its obligations therein and consummate the transactions contemplated hereby.  When executed and delivered by the Company, this Agreement will constitute the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or at equity).

 

2.2              No Governmental Consents.  No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated hereby, except qualification (or taking such action as may be necessary to secure an exemption from qualification, if available) of the offer and sale of the Securities under applicable federal and state securities laws, which filings and qualifications, if required, will be accomplished in a timely manner.

 

3.             Representations and Warranties of the Purchaser.  The Purchaser hereby represents and warrants to the Company as follows:

 

3.1              Due Execution; Enforceability.  The Purchaser has duly executed and delivered this Agreement and this Agreement constitutes the valid and legally binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding at law or at equity).

 

3.2              Financial Status.  The Purchaser has such knowledge and experience in financial and business matters as will enable the Purchaser to evaluate the merits and risks of an investment in the Company, and the Purchaser has the capacity to protect its own interests in connection with an investment in the Securities.

3.3              Investment Intent.  The Purchaser is acquiring the Securities for its own account as a principal, for investment purposes only, not for any other person or entity and not for the purpose of resale or distribution.  Other than designating that the Warrants be issued in the name of the members of the Purchaser individually, the Purchaser does not have any present intention of selling, granting any participation in or otherwise distributing any such Securities.

   

  

  

  

 

4.             Board Observer Rights.  So long as the Note remains outstanding, the Company shall hold regular meetings of its board of directors at least once per calendar quarter and the Purchaser shall be entitled to designate one (1) observer to the board of directors of the Company, and any committee thereof, which observer shall receive (at the same time and in the same manner provided to the directors) notice of and copies of all materials provided to directors in connection with, and shall be entitled to attend, all meetings of the board of directors of the Company, and any committee thereof.  Such observer shall also receive (at the same time and in the same manner provided to the directors) notice of and copies of all materials provided to the directors of the Company in connection with any actions to be taken by written consent of the board of directors of the Company, and any committee thereof.  The Company shall reimburse Purchaser for all reasonable expenses (including all travel, meal and lodging expenses) incurred by its board observer in connection with attending any meetings described above.

 

5.             Miscellaneous Provisions.

 

5.1              Further Assurances. The Purchaser and the Company each hereby covenant to execute and deliver, from time to time, such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out, and perform all of the terms, provisions, and conditions of this Agreement and the transactions contemplated hereby, including any required regulatory approvals or any approvals by any applicable governmental authority.

 

5.2              Assignment.  Except as expressly contemplated in Section 1 hereof, neither party shall have the right or the power to assign or delegate any provision of this Agreement or any rights it may have in, to or under this Agreement except with the prior written consent of the other party.  Except as provided in the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties’ respective successors, assigns, executors and administrators.

 

5.3              Interpretation; Counterparts.  The headings contained in this Agreement are for reference purposes only and do not define or limit the provisions hereof.  Section, party, recital, exhibit and preamble references are to this Agreement unless otherwise stated.  This Agreement may be executed by facsimile and in separate counterparts, each of which shall be deemed an original and both of which shall constitute one and the same document.

 

5.4              Entire Agreement.  This Agreement and any agreement referred to herein or executed contemporaneously herewith, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior oral or written, and all contemporaneous oral, agreements, representations, warranties, statements, promises and understandings with respect to the subject matter hereof.  This Agreement may be amended only in a writing executed by the party to be bound thereby.

 

5.5              No Implied Waivers.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

  

  

  

 

5.6              Expenses.  Except as otherwise specifically provided in this Agreement, the parties to this Agreement shall bear their respective costs and expenses incurred in connection with the preparation and execution of this Agreement and the transactions contemplated hereby.

 

5.7              Severability.  If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances is not affected thereby, and that provision shall be enforced to the greatest extent permitted by law.

 

5.8              GOVERNING LAW.  THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

 

5.9              CONSENT TO JURISDICTION.  EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK, NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT.  EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH AN ACTION OR PROCEEDING.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN THIS AGREEMENT (WHICH MAILING SHALL BE BY CERTIFIED MAIL).  EACH PARTY HERETO AGREES THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

IN WITNESS WHEREOF, the parties have hereby executed this Subscription Agreement as of the day set forth above and in the acceptance set forth below.

 

	  	
MERRIMAN HOLDINGS, INC.

	  	  	  
	  	  	  
	  	
By:

	  
	  	  	
D. Jonathan Merriman

	  	  	  
	  	
EGS, LLC

	  	  	  
	 	 	 
	  	
By:

	  
	  	  	
Marshall Geller, Managing Member

     

  

  

  

 

EXHIBIT A

 

FORM OF SECURED PROMISSORY NOTE

   

  

  

  

 

SECURED PROMISSORY NOTE

 

	
$1,333,333.33

	
July 16, 2015

San Francisco, California

FOR VALUE RECEIVED, MERRIMAN HOLDINGS, INC., a Delaware corporation (“Maker”), hereby promises to pay to the order of EGS, LLC, a Delaware limited liability company (“Lender”), its successors and assigns, in lawful money of the United States of America, the lesser of ONE MILLION THREE HUNDRED THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND 33/100 DOLLARS ($1,333,333.33) or the principal amount outstanding from time to time under this Promissory Note, together with accrued and unpaid interest thereon, at the rate or rates set forth below, on July 16, 2016 (or, if such date is not a business day, the next preceding business day) (the “Maturity Date”) or such earlier date on which all outstanding obligations payable by Maker hereunder become due and payable in accordance with the terms hereof.

The unpaid principal amount of this Promissory Note shall bear interest at a rate per annum equal to twelve percent (12.00%) calculated on the basis of a 365 day year and the actual number of days elapsed and payable quarterly in arrears on the last business day of July, October and January in each year and on the Maturity Date (each, an “Interest Payment Date”); provided, however, that upon the occurrence and during the continuance of any Event of Default (as hereinafter defined), all outstanding principal (and, to the extent permitted by law, accrued interest that was payable, but was not paid, on any prior Interest Payment Date) shall bear interest at a rate per annum equal to fifteen percent (15.00%) calculated on the basis of a 365 day year and the actual number of days elapsed, which interest shall be payable upon demand.  If any interest is determined to be in excess of the then legal maximum rate, then that portion of each interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of the obligations evidenced by this Promissory Note.  All accrued and unpaid interest on this Promissory Note shall be payable on the Maturity Date or on such earlier date as this Promissory Note shall be prepaid, in whole or in part.

This Promissory Note replaces the secured promissory note dated April 20, 2015 in the stated principal amount of $1,000,000 made by the Maker payable to the order of the Lender (the “Original Promissory Note”); accrued interest on the principal amount of the Original Promissory Note outstanding from time to time from and including the date of initial funding thereof on April 28, 2015 through but excluding the date of this Promissory Note, shall be paid on the Interest Payment Date occurring on July 31, 2015 (the “Initial Interest Payment Date”).  This Promissory Note also evidences an additional loan made by the Lender to the Maker in the principal amount of $333,333.33 on or about the date hereof; accrued interest on the principal amount of such additional loan outstanding from time to time from and including the date of funding thereof through and including the Initial Interest Payment Date, together with interest accruing on the portion of the principal amount hereof heretofore evidenced by the Original Promissory Note from and including the date of this Promissory Note through and including the Initial Interest Payment Date, also shall be paid on the Initial Interest Payment Date.

 

  

  

  

As additional consideration to Lender, and a material inducement to Lender to loan funds to the Maker pursuant to this Note, Maker agrees to issue to the Lender warrants to purchase Common Stock, $0.0001 par value per share (“Common Stock”), of the Maker (the “Warrants”).  The number of shares of Common Stock issuable upon exercise in full of the Warrants (the “Warrant Shares”) shall be 666,667, the exercise price of the Warrants shall be $1.00 per Warrant Share and the expiry date of the Warrants shall be the date that is five (5) years after the date hereof; provided, however, that the exercise price of any Warrants exercised after the occurrence of an Event of Default (as hereinafter defined) (regardless whether such Event of Default is cured or waived) shall be $0.01 per Warrant Share.  Warrants to purchase 500,000 Warrant Shares were issued and delivered to the Lender together with delivery to the Lender of the Original Promissory Note; the expiry date of such Warrants shall be amended to be the date that is five (5) years after the date hereof.  Warrants to purchase the remaining 166,667 Warrant Shares shall be delivered to the Lender substantially concurrently with the delivery of this Promissory Note to the Lender.

 

Issuer hereby represents and warrants that the Warrant Shares will be duly authorized, validly issued, fully paid and non-assessable upon issuance.  The Warrant Shares will not be registered under the Securities Act of 1933, as amended, and will carry legends restricting resale.

This Promissory Note may be prepaid in whole or in part at any time, without premium or penalty.

This Promissory Note shall not entitle Lender to any rights as a stockholder of Maker.

This Promissory Note is secured pursuant to that certain Stock Pledge Agreement, dated as of April 20, 2015 (as amended as of the date hereof, the “Stock Pledge Agreement”) between Maker and Lender.

This Promissory Note, together with the Stock Pledge Agreement, the Note Purchase Agreement dated as of April 20, 2015 or the Note Purchase Agreement dated as of July 16, 2015, both between the Maker and the Lender (together, the “Note Purchase Agreements”) and the Subordination Agreement (as hereinafter defined) are referred to herein as the “Loan Documents”.

Maker agrees that neither Maker nor any of its Subsidiaries will (i) incur or suffer to exist any indebtedness other than Permitted Indebtedness, or (ii) incur any other obligations of any nature whatsoever other than in the ordinary course of business, or (iii) prepay, in whole or in part, any indebtedness or other obligations of Maker prior to the stated maturity thereof (provided, however, that Maker may prepay its $500,000 promissory note made payable to Manatuck Hill Scout Fund LP in an amount up to $200,000 so long as, after giving effect to such prepayment, such promissory note continues to be outstanding in a principal amount not less than $300,000), or (iv) create or suffer to exist any lien on or security interest in any of its assets, other than (x) liens and security interests arising under the Stock Pledge Agreement, (y) liens and security interests that are contractually subordinated to liens and security interests arising under the Stock Pledge Agreement, securing indebtedness that is contractually subordinated to the prior payment in full of this Promissory Note, pursuant to the Intercreditor Agreement dated as of April 20, 2015, as modified by the Consent and Amendment No. 1 to Intercreditor Agreement dated as of July 10, 2015 (as so modified, the “Subordination Agreement”) among the Lender, holders of all other outstanding indebtedness of the Maker, and the Maker and (z) liens and security interests arising by operation of law that do not secure indebtedness for borrowed money, or (v) sell, assign, or otherwise transfer all or any material part of its assets, other than, in the case of any Subsidiary, in the ordinary course of its business, or (vi) in the case of Maker, pay any dividend or make any other distribution in respect of its Common Stock or any other equity interest in Maker.

 

  

  

  

“Permitted Indebtedness” shall mean, (1) all indebtedness of Merriman Capital, Inc., a California corporation and a wholly-owned subsidiary of Maker, disclosed to Lender by Maker prior to Maker’s delivery of the Original Promissory Note to Lender, including, but not limited to, that certain Demand Promissory Note dated as of April 9, 2015, executed and delivered by Merriman Capital, Inc. to Ronald L. Chez and (2) all indebtedness of Maker disclosed to Lender by Maker prior to Maker’s delivery of the Original Promissory Note to Lender that is subject to the Subordination Agreement.

Upon the occurrence of any Event of Default described in clause (a) or (b) below, immediately and without notice, all outstanding obligations payable by Maker hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding.  Upon the occurrence of an Event of Default under clause (c), (d), (e), (f) or (g) below, and at any time thereafter during the continuance of such Event of Default, at the option and upon written notice of Lender, all outstanding obligations payable by Maker hereunder shall, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, be forthwith due and payable, and Lender may, immediately and without expiration of any period of grace, enforce payment of all outstanding obligations, anything contained herein to the contrary notwithstanding.  In addition to the foregoing remedies, upon the occurrence and during the continuance of any Event of Default, Lender may exercise any other right power or remedy permitted to it by law, either by suit in equity or by action at law, or both. The occurrence of any one or more of the following shall constitute an “Event of Default”:

(a)           Maker (i) applies for or consents to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property; (ii) is unable, or admits in writing its inability, to pay its debts generally as they mature; (iii) makes a general assignment for the benefit of its or any of its creditors; (iv) is dissolved or liquidated in full or in part; (v) becomes insolvent (as such term may be defined or interpreted under any applicable statute); (vi) commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consents to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or (vii) takes any action for the purpose of effecting any of the foregoing;

 

  

  

  

 

(b)           Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Maker or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Maker or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect are commenced and an order for relief is entered or such proceeding is not be dismissed or discharged within thirty (30) days of commencement;

(c)           Maker (i) shall fail to pay any accrued and unpaid interest on this Promissory Note (or fail to make any other payment (other than payment of principal hereof) that is due and payable hereunder or under the Stock Pledge Agreement) when the same becomes due and payable and such failure shall continue for five (5) business days or (ii) shall fail to repay any principal of this Promissory Note when the same becomes due and payable;

(d)           Maker (i) shall fail to observe or perform any covenant contained in clause (i) through (vi) in the preceding paragraph or (ii) shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Promissory Note (other than those specified in clause (c) above) or in any other Loan Document and such failure shall continue for fifteen (15) business days after Maker’s receipt of written notice from Lender of such failure or, if earlier, after Maker has knowledge or notice thereof;

(e)           A material breach of the Stock Pledge Agreement by Maker or a material breach of the Subordination Agreement by Maker or a Subordinated Lender (as defined therein);

(f)            Any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of Maker to Lender in writing in or in connection with this Promissory Note or any other Loan Document, or as an inducement to Lender to make the loans evidenced by this Promissory Note, shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; or

(g)           The Maker or any of its Subsidiaries shall fail to pay any other indebtedness for borrowed money or interest thereon at maturity thereof, or a breach of or default under any agreement or other document governing, or any instrument evidencing, any such indebtedness shall occur which results in a right by the holders thereof, whether or not exercised, to accelerate the maturity of such indebtedness.

Maker hereby waives presentment, demand, notice of dishonor, protest, notice of protest and all other demands, protests and notices in connection with the execution, delivery, performance, collection and enforcement of this Promissory Note. Maker shall pay all costs of collection when incurred, including attorneys’ fees, costs and expenses.

This Promissory Note shall be construed and interpreted in accordance with, and be governed by the internal laws of, the State of New York.  The Maker agrees to submit to the jurisdiction of New York state courts and United States federal courts sitting in New York, New York, and waives trial by jury. In the event that any provision of this Promissory Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

 

  

  

  

All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to Maker, to: Merriman Holdings, Inc., 250 California Street, 16th Floor, San Francisco, California 94104, Attention: General Counsel, telecopier: (415) 248-5698, (ii) if to Lender to: Marshall Geller, St. Cloud Capital, LLC, 310 St. Cloud Road, Los Angeles, California 90077, email: mgeller@stcloudcapital.com, as may be updated by a party by written notice to the other party from time to time.

IN WITNESS WHEREOF, Maker has caused this Promissory Note to be executed as of the day and year first above written.

	  	
MERRIMAN HOLDINGS, INC.

	  	  	  
	  	  	  
	  	
By:

	  
	  	  	
Name:  D. Jonathan Merriman

	  	  	
Title:  Chief Executive Office

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