Document:

Exhibit 10.1

 

 

EXECUTIVE
EMPLOYMENT AGREEMENT

 

This
EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into, at New York, New York, as
of the 11th day of February, 2019 (the “Effective Date”), and is by and between Douglas Satzman,
an individual residing at the address listed in the Company’s files (“Executive”), and XpresSpa Group,
Inc., a Delaware corporation with principal offices located at 780 3rd Avenue, 12th Floor, New York, NY 10017 (the
“Company”).

 

WITNESSETH

 

WHEREAS,
the Executive desires to be employed by the Company as the CEO of the Company, including service as a member of the Board of Directors
of the Company under the terms set forth herein and the Company wishes to employ Executive in such capacities;

 

NOW,
THEREFORE, in consideration of the foregoing recital and the respective covenants and agreements of the parties contained
in this document, the Company and Executive hereby agree as follows:

 

1.            Employment
and Duties.

 

(a)            Subject
to the terms of this Agreement, the Company agrees to hire and employ, and Executive agrees to serve, as the Company’s Chief
Executive Officer (“CEO”). Subject to compliance with applicable nomination and election procedures that may
be required by Company governance documents, Executive also agrees to serve as a member of the Company’s Board of Directors
(the “Board”). The duties and responsibilities of Executive shall include the duties and responsibilities normally
associated with such positions and such other executive officer duties and responsibilities subject to the direction and supervision
of Board. At all times during the Employment Period (as defined below), the Executive shall report directly to the Board. The
Executive is also and will be the senior most executive and service provider to XpresSpa Holdings, LLC and its subsidiaries including,
without limitation, any entities acquired by or merged with XpresSpa (collectively, “XpresSpa”). Executive
shall serve in a loyal, faithful and trustworthy manner, and shall comply with all of the policies of the Company and XpresSpa,
including, without limitation, such policies with respect to legal compliance, conflicts of interest, confidentiality, code of
conduct and business ethics as are from time to time in effect (as the same may be amended or modified from time to time by the
Board in its discretion).

 

(b)            Executive
shall devote substantially all of his working time and efforts during the Company's normal business hours to the business and
affairs of XpresSpa and to the diligent and faithful performance of the duties and responsibilities duly assigned to him pursuant
to this Agreement to the best of Executive’s abilities. Notwithstanding the foregoing, nothing herein shall preclude Executive
from (i) serving on the boards of directors of Tartine JV Holdings, LLC (d/b/a Tartine Manufactory) and of IMA, LLC (d/b/a &vest),
(ii) performing services for such other companies as the Company may designate or permit at the Company’s discretion, (iii)
serving, with the prior written consent of the Board, which consent shall not be unreasonably withheld, as an officer or member
of the boards of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of noncompeting businesses
or charitable, educational or civic organizations, (iv) engaging in charitable activities and community affairs and (v) managing
Executive’s personal investments and affairs; provided, however, that the activities set out in clauses (i), (ii), (iii),
(iv) and (v) shall be limited by Executive so as not to materially interfere, individually or in the aggregate, with the performance
of Executive's duties and responsibilities hereunder.

 

     

     

    

 

2.            Term.
The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, upon the terms set forth
in this Agreement, for the period commencing on the Effective Date and ending on the third (3rd) anniversary of the
Effective Date, unless sooner terminated in accordance with the provisions of Section 9 below (such period is the “Employment
Period”); provided however, that if no later than six (6) months prior to the expiration of the Employment Period,
the Company and the Executive are negotiating but have not yet agreed to extend, renew or novate this Agreement for an additional
term, then, for each month or partial month such negotiations continue, the Employment Period shall be extended for an additional
two (2) months after the third anniversary, up to a maximum extension of twelve (12) months. During any such extension of the
Employment Period (the “Extended Period”), all of the terms, conditions and obligations specified in this Agreement
shall continue in full force and effect, except that the Executive shall not be entitled to any of the payments under Section
9(e)(iii) if he is terminated during the Extended Period. For avoidance of doubt, at any time after six (6) months prior to the
Expiration Date, if negotiations have been conducted, the Company may, in its sole and absolute discretion, unilaterally end such
negotiations with Executive.

 

3.            Place
of Employment. Executive's services shall be performed primarily at the Company’s principal place of business, which
currently is located at 780 Third Avenue, 12th Floor New York, New York 10017, and any other location as specified by the Company
within a 50-mile radius of New York, New York. The parties further acknowledge, however, that Executive may be required to travel
in connection with the performance of his duties hereunder.

 

4.            Compensation.
For all services to be rendered by Executive pursuant to this Agreement, the Company agrees to pay Executive during the Employment
Period an annual base salary, less applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions (the
“Base Salary”) at an annual rate of four hundred thousand dollars ($400,000). During the Employment Period,
the Board has the discretion to raise the Base Salary from time-to-time and shall reevaluate the Executive’s Base Salary
on at least an annual basis (with first reevaluation on or about December, 2019). The Base Salary shall be paid in equal biweekly
installments in accordance with the Company's regular payroll practices.

 

5.            Bonuses
and Incentive Compensation.

 

(a)            During
the Employment Period, the Executive will be eligible to participate in any annual bonus and other incentive compensation program
that the Company may adopt from time to time for its executive officers. If the Executive has earned any bonus or non-equity based
incentive compensation (collectively, “Incentive Compensation”), which remains unpaid upon termination of Employment
for any reason whether by Executive or Company other than for Cause then Executive shall be entitled to receive such Incentive
Compensation at the time the Company distributes such Incentive Compensation to other executive officers of the Company. Such
amount shall be prorated for the year of termination equal to the amount of Incentive Compensation earned multiplied by a fraction
the numerator of which the number of days that Executive worked for the Company prior to the date of termination and the denominator
of which is 365.

 

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(b)            To
the extent that the Company is required pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act
to develop and implement a policy (the “Policy”) providing for the recovery from the Executive of any payment
of incentive based compensation (whether in cash or in equity) paid to the Executive that was based upon erroneous data contained
in an accounting statement, this Agreement shall be deemed amended and the Policy incorporated herein by reference as of the date
that the Company takes all necessary corporate action to adopt the Policy, without requiring any further action of the Company
or the Executive, provided that any such Policy shall only be binding on the Executive if the same Policy applies to the Company's
other executive officers.

 

(c)            Subject
to the conditions set forth in this Section 5(c), the Executive shall be entitled to the incentive compensation set forth on Exhibit
A.

 

(i)            Notwithstanding
anything to the contrary in any applicable equity award agreement, upon termination of employment for any reason other than for
Cause, the vesting of such number of stock options, RSUs and other stock-based awards outstanding and held by the Executive as
of the date of termination of Executive’s employment that would have vested in the one year period immediately following
the termination of employment of Executive (“Post-Termination Period”) will vest during the Post-Termination
Period pursuant to the otherwise applicable vesting provisions to which such stock-based awards are subject and subject to the
applicable requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), provided that
in the sole discretion of the Board, during the Post-Termination Period, the Executive makes himself reasonably available and
cooperates with reasonable requests from the Company concerning any business or legal matters (including, without limitation,
response to a subpoena or testimony in any litigation matters) involving facts or events relating to the Company that may be within
the Executive’s knowledge.

 

(ii)           In
addition, subject to any permitted action by the Board upon a Change of Control (as defined in the Company’s 2012 Employee,
Director and Consultant Equity Incentive Plan, as amended from time to time, the current form of which is annexed as Exhibit
B, herein the “Incentive Plan”) or other merger, sale, dissolution or liquidation of the Company under
the Company’s applicable equity plan to terminate the stock options or other stock-based awards, subject to the applicable
requirements of Section 409A of the Code, any stock option granted on or after the Effective Date, which has vested, shall be
exercisable for not less than one year from the date of termination of Executive’s employment (subject to the scheduled
expiration of any option) and if such option is an incentive stock option it shall automatically convert and be deemed a non-qualified
option as of the date that is three months after termination of Executive's employment.

 

(d)            In
addition to the foregoing incentive compensation set forth in this Section 5, the Company may, but is not obligated, to grant
Executive a discretionary bonus, the granting and amount of which may be determined from time to time by the Board in its sole
and absolute discretion.

 

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6.            Expenses.
Executive shall be entitled to reimbursement for all reasonable and necessary travel, entertainment, and other expenses incurred
by Executive while employed (in accordance with the policies and procedures established by the Company for its executive officers)
in the performance of his duties and responsibilities under this Agreement; provided that Executive properly accounts for such
expenses in accordance with Company policies and procedures. The Executive shall be responsible for any unreasonable or unnecessary
expenses incurred in violation of Company policies and procedures.

 

7.            Other
Benefits. During the Employment Period, the Executive shall be eligible to participate in all incentive, savings, retirement
(401(k)), and welfare benefit plans, health, medical, dental, vision, life (including accidental death and dismemberment) and
disability insurance plans (collectively, to the extent they exist, “Benefit Plans”), in substantially the
same manner and at substantially the same levels as the Company makes such opportunities available to the Company's executive
officers, provided however, that the Company may not reduce the benefits provided to the Executive under these Benefits Plans
without the Executive's written consent, unless such reduction is required by law. The Executive shall also be entitled to coverage
under such directors and officers, error and omissions, fiduciary liability and other similar insurance coverages, that the Company
makes available to its directors and executives (and to executives of and XpresSpa) and shall enter into its/their standard indemnification
agreement with the Executive.

 

8.            Vacation.
During the Employment Period, the Executive shall be entitled to twenty (20) days of paid time off (“PTO”)
per year. PTO shall be taken at such times as are mutually convenient to the Executive and the Company. The Executive may carry
up to ten (10) days of unused PTO forward from one calendar year to the next. All other unused PTO will be forfeited at the end
of the calendar year. The Company shall not pay Executive for any unused PTO upon termination of employment except as required
by applicable law or provided under Company policy.

 

9.            Termination
of Employment.

 

(a)            General.
The Employment Period and the Executive's employment hereunder shall terminate upon the earliest to occur of: (i) Executive's
death, (ii) a termination by reason of Executive's Disability, (iii) a termination by the Company with or without Cause, (iv)
a termination by Executive with or without Good Reason, or (v) the last day of the Employment Period.

 

(b)            Death.
If Executive dies during the Employment Period, this Agreement and the Executive's employment with the Company shall automatically
terminate and the Company shall have no further obligations to the Executive or his heirs, administrators or executors with respect
to compensation and benefits accruing thereafter, except for the obligation to pay to the Executive's heirs, administrators or
executors (i) any earned but unpaid Base Salary up to and through the date of termination (within fourteen (14) days following
termination), (ii) any earned but unpaid Incentive Compensation under the terms set forth in Section 5, (iii) any and all reasonable
expenses paid or incurred by the Executive in connection with and related to the performance of his duties and responsibilities
for the Company up to and through the date of termination, and (iv) any benefits provided under the Company's employee benefit
plans pursuant to, and in accordance with, the terms of such plans through the date of termination (including, without limitation,
any death benefit or disability benefit plans or programs) (collectively, the “Accrued Obligations”) The Company
shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate
deductions.

 

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(c)            Disability.
In the event that during the Employment Period the Company determines that the Executive is unable to perform his essential duties
and responsibilities hereunder to the full extent required by the Company by reason of a Disability (as defined below), this Agreement
and the Executive's employment with the Company shall terminate immediately upon notice to the Executive, and the Company shall
have no further obligations or liability to the Executive or his heirs, administrators or executors with respect to compensation
and benefits accruing thereafter, except for the obligation to pay the Accrued Obligations. The Company shall deduct, from all
payments made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions. For purposes
of this Agreement, “Disability” shall mean a physical or mental disability that prevents the performance by
the Executive, with or without reasonable accommodation, of his essential duties and responsibilities hereunder for sixty (60)
consecutive days, or an aggregate of one hundred and twenty (120) days during any twelve consecutive months, as determined consistent
with applicable law, provided that the determination of Executive's physical or mental health and the date of the Disability shall
be determined by a medical expert who will examine the Executive as appointed by the Company in its discretion. Executive hereby
consents to such examination and consultation regarding Executive's health and ability to perform as aforesaid.

 

(d)            By
the Company for Cause.

 

(i)            At
any time during the Employment Period, the Company may terminate this Agreement and the Executive's employment hereunder for Cause.
Such termination shall be effective immediately upon notice to the Executive, subject to the provisions of this Section 9(d)(i)
and Section 9(d)(iii). “Cause” as used in this Agreement (and with respect to any other arrangement (including,
without limitation, any option, RSU or other equity-based arrangement) with the Company or its affiliates) shall mean: (a) the
willful and continued failure of the Executive to perform his duties and responsibilities for the Company (other than any such
failure resulting from Executive's death or Disability) or lawful directives of the Board related to Executive’s duties
pursuant to this Agreement, after a written demand by the Board for performance is delivered to the Executive by the Company,
which identifies with reasonable specificity the manner in which the Board believes that the Executive has not performed his duties
and responsibilities, which willful and continued failure is not cured by the Executive within thirty (30) days of his receipt
of such written demand; (b) the conviction of, or plea of guilty or nolo contendere to a felony; (c) faithless conduct
or the breach of fiduciary duty; (d) gross negligence or willful misconduct in the performance of Executive’s material duties;
(e) breach of Section 10 of this Agreement, (f) an intentional or grossly negligent breach of the Non-Disclosure and Non-Solicitation
Agreement then in effect, the current form of which is annexed as Exhibit C (the “NDA”) which
results or could reasonably be expected to result in material harm to the Company or XpresSpa; (g) a material violation of Company’s
or XpressSpa’s policies, which policies and procedures have previously been disclosed to Executive in writing; or (h) a
good faith finding by the Board that Executive has engaged in (A) (1) fraud, (2) dishonesty or faithless conduct, or (3) gross
negligence, in each case related to the Company, or (B) criminal misconduct which (1) constitutes a felony or a crime of moral
turpitude or (2) results or could reasonably be expected to result in harm to the Company.

 

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(ii)           Upon
termination of this Agreement for Cause, the Company shall have no further obligations or liability to the Executive or his heirs,
administrators or executors with respect to compensation and benefits thereafter, except for the obligation to pay the Executive
the Accrued Obligations. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax,
FICA and FUTA, and other appropriate deductions.

 

(iii)          It
is expressly acknowledged and agreed that the decision as to whether “Cause” exists for termination of the employment
relationship by the Company is delegated to the Board for determination (excluding the Executive). However, the termination of
Executive’s employment shall not be deemed to be for “Cause” unless and until (A) there shall have been delivered
to Executive a written notice specifying with reasonable detail the basis for the proposed termination for “Cause,”
and (B) if has so requested by Executive in writing within seven (7) days of such notice, the Executive shall have been provided
a reasonable opportunity to address a physical or telephonic meeting of the Board with a quorum of at least two thirds (2/3) of
the Board’s members, and a majority of the Board (excluding the Executive) at such meeting shall have determined that the
matter forming the basis for “Cause” is not curable or, if curable, was not cured within the applicable cure period.

 

(e)            By
the Executive for Good Reason.

 

(i)            At
any time during the Employment Period, subject to the conditions set forth in Section 9(e)(ii) below, the Executive may terminate
this Agreement and the Executive's employment with the Company for Good Reason. “Good Reason” as used in this Agreement
shall mean the occurrence of any of the following events: (a) without the Executive's prior written consent, a material diminution
of the duties, authorities or responsibilities of the Executive (including as a member of the Board); (b) a material reduction
in Executive's Base Salary; (c) the failure by the Company to pay all or any material portion of the Base Salary, any material
bonus payable, or any material benefits payable to the Executive as required under this Agreement; (d) a change in Executive’s
reporting relationship other than to the Board; (e) relocation of the offices at which Executive must perform the services contemplated
by this Agreement by more than 50 miles from New York, New York, unless the new location of such office is less than 50 miles
from Executive’s principal place of residence; or (f) any other action or inaction that constitutes a material breach by
the Company of this Agreement.

 

(ii)           The
Executive shall not be entitled to terminate this Agreement for Good Reason unless and until he shall have delivered written notice
to the Company of his intention to terminate this Agreement and his employment with the Company for Good Reason, which notice
must be provided within sixty (60) days following the initial occurrence (or following the Executive’s actual knowledge)
of the grounds purporting to constitute Good Reason, and which specifies in reasonable detail the circumstances claimed to provide
the basis for such termination for Good Reason pursuant to Section 9(e)(i) above, and the Company shall not have eliminated the
circumstances constituting Good Reason within thirty (30) days of its receipt from the Executive of such written notice. The Company
shall retain the discretion to terminate the Employment Period at any time during the Good Reason notice period provided for in
this Section 9(e)(ii).

 

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(iii)          In
the event that the Executive terminates this Agreement and his employment with the Company for Good Reason or the Company terminates
this Agreement without Cause, the Company shall pay or provide to the Executive (or, following his death, to the Executive's heirs,
administrators or executors):

 

(A)   
The Accrued Obligations through the date the Employment Period is terminated.

 

(B)   
(y) An amount of Base Salary (at the rate of Base Salary in effect immediately prior to the Executive's termination hereunder)
equal to one half (1/2) of the Executive's Base Salary, or (z) if the Company terminates the Executive’s employment without
Cause as a result of a Change of Control, an amount of Base Salary (at the rate of Base Salary in effect immediately prior to
the Executive's termination hereunder) equal to one (1) times the Executive's Base Salary (as the case may be, the “Separation
Payment”). Except as otherwise provided in this Agreement, the Company shall pay to Executive the Separation Payment
provided in this Section 9(e)(iii)(B) in substantially equal installments over a period of (i) six (6) months in the case of termination
under clause (y) above or (ii) twelve (12) months in the case of termination under clause (z) above, in either case payable in
accordance with the Company's regular payroll practices, commencing on the Company's next regular payroll date following the date
the Release (referenced in Section 9(i) below) becomes irrevocable and enforceable. The Company shall deduct, from all payments
made hereunder, all applicable taxes, including income tax, FICA and FUTA, and other appropriate deductions. For purposes of this
Section 9(e)(iii)(B), “Change of Control” means (A) an acquisition or series of acquisitions by a person(s)
or entity(ies) (unrelated to the Company) of more than fifty percent (50%) of the outstanding shares or securities entitled to
vote for the election of directors or similar managing authority of the Company, (B) a sale or disposition of all or substantially
all of Company’s assets to an unrelated third party, or (C) the Company is merged or consolidated with another entity in
which more than fifty percent (50%) of the outstanding shares or securities entitled to vote for the election of directors or
similar managing authority of the surviving entity is owned by a person(s) or entity(ies) unrelated to the Company.

 

(C)   
Subject to Section 9(i) below, COBRA continuation coverage paid in full by the Company, so long as Executive has not become
actually covered by the medical plan of a subsequent employer during any such month and is otherwise entitled to COBRA continuation
coverage, with such payments for up to a maximum of (y) six (6) months following the date of termination, or (z) if the Company
terminates the Executive’s employment without Cause as a result of a Change of Control, twelve (12) months following the
date of termination. After such period, Executive is responsible for paying the full cost for any additional COBRA continuation
coverage to which Executive is then entitled. If the Company's payment of the COBRA premiums on the Executive's behalf would violate
the nondiscrimination rules or cause the reimbursement of claims to be taxable under the Patient Protection and Affordable Care
Act of 2010, together with the Health Care and Education Reconciliation Act of 2010 (collectively, the “Act”)
or Section 105(h) of the Code, the Company paid premiums shall be treated as taxable payments and be subject to imputed income
tax treatment to the extent necessary to eliminate any discriminatory treatment or taxation under the Act or Section 105(h) of
the Code.

 

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(f)            By
Executive without Good Reason. At any time during the Employment Period, the Executive shall be entitled to terminate this
Agreement and the Executive's employment with the Company without Good Reason by providing prior written notice to the Company
of at least sixty (60) calendar days, provided however that the Company shall maintain the discretion to terminate the Employment
Period at any time during the notice period set forth in this Section 9(f). Upon termination by the Executive of this Agreement
and the Executive's employment with the Company without Good Reason, the Company shall have no further obligations or liability
to the Executive or his heirs, administrators or executors with respect to compensation and benefits thereafter, except for the
obligation to pay the Executive the Accrued Obligations. The Company shall deduct, from all payments made hereunder, all applicable
taxes, including income tax, FICA and FUTA, and other appropriate deductions.

 

(g)            By
the Company without Cause. At any time during the Employment Period, the Company shall be entitled to terminate this Agreement
and the Executive's employment with the Company without Cause upon written notice to the Executive which shall set forth a date
of termination. Upon termination by the Company of this Agreement and the Executive's employment with the Company without Cause,
the Company shall pay or provide to the Executive (or, following his death, to the Executive's heirs, administrators or executors)
the amounts and benefits due upon a resignation for Good Reason, as further described in Section 9(e)(iii), including the Separation
Payment. The Company shall deduct, from all payments made hereunder, all applicable taxes, including income tax, FICA and FUTA,
and other appropriate deductions.

 

(h)            Upon
Expiration of the Employment Period. If the Executive's employment terminates upon the expiration of the Employment Period
set forth in Section 1, the Company shall have no further obligations or liability to the Executive or his heirs, administrators
or executors with respect to compensation and benefits thereafter, except for the obligation to pay the Executive the Accrued
Obligations.

 

(i)             Release
of Claims. It is agreed that an express condition of the payment or provision by the Company of any severance amount or post
termination benefit called for under Section 9(e)(iii) and Section 9(g) of this Agreement (other than the payment of any Accrued
Obligations) shall be subject to the Company's concurrent receipt of a general release of all claims against the Company and its
affiliates by Executive a form reasonably acceptable to the Company and Executive and negotiated in good faith, and, in absence
of such a reasonably acceptable form, in the form set forth on Exhibit D, which release must be effective, unrevoked
and irrevocable prior to the ninetieth (90th) day following the termination of the Executive's employment (the “Release”).

 

(j)            
Section 409A. Notwithstanding any provision in this Agreement to the contrary:

 

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(i)            This
Agreement is intended to comply with the requirements of Section 409A of the Code, such Code Section hereinafter being referred
to as “Section 409A.” Deferrals of compensation subject to the restrictions set forth under Section 409A (hereinafter,
“Non-Qualified Deferred Compensation”) may only be made to Executive pursuant to this Agreement upon an event and
in a manner permitted by Section 409A.

 

(ii)           Any
amounts payable solely on account of Executive’s involuntary separation from service within the meaning of Section 409A
shall be excludible from the requirements of Section 409A, either as involuntary separation pay (exempt from the provisions of
Section 409A under Treas. Reg. Section 1.409A-1(b)(9)) or as short-term deferral amounts (as described in Treas. Reg. Section
1.409A-1(b)(4)), to the maximum possible extent.

 

(iii)          For
purposes of Section 409A, the right to a series of installment payments under this Agreement shall be treated as a right to a
series of separate payments.

 

(iv)          All
taxable reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with Section
409A including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time
specified in this Agreement, (ii) the amount of expenses available for reimbursement, or the in-kind benefits provided, during
a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits provided, in any other calendar year,
(iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year
in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange
for another benefit.

 

(v)            To
the extent required by Section 409A, and notwithstanding any other provision of this Agreement to the contrary, no payment of
Non-Qualified Deferred Compensation will be provided to, or with respect to, Executive on account of his separation from service
until the first to occur of (A) the date of Executive’s death or (B) the date which is one day after the six (6) month anniversary
of his separation from service, but in either case only if he is a “specified employee” (as defined under Section
409A(a)(2)(B)(i) of the Code and the regulations promulgated thereunder) in the year of his separation from service. Any payment
that is delayed pursuant to the provisions of the immediately preceding sentence shall instead be paid in a lump sum within thirty
(30) days following the first to occur of the two dates specified in such immediately preceding sentence. Furthermore, any payments
scheduled to be paid under Sections 9(e)(iii) or 9(g) during the applicable ninety (90) day period pending the effectiveness of
the Release referenced therein and in Section 9(i), will be accumulated and paid, subject to the other provisions of this Section
9(j), on such ninetieth (90th) day or earlier following the effectiveness of such Release.

 

(vi)           Any
payment of Non-Qualified Deferred Compensation made pursuant to a voluntary or involuntary termination of employment shall be
withheld until Executive incurs both (A) such a termination of employment and (B) a “separation from service” with
the Company and all of its affiliates, as such term is defined in Treas. Reg. Section 1.409A-1(h).

 

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(vii)          To
the extent the Agreement provides that Non-Qualified Deferred Compensation can be paid or commenced during a certain period (e.g.,
sixty (60) days) following a permissible payment or commencement event or trigger, the date of such payment or payment commencement
shall be determined by the Company in its sole discretion (and by disregarding any desire of Executive) and, if the payment or
commencement period exceeds ninety (90) days and spans two taxable years of Executive, then such Non-Qualified Deferred Compensation
shall be paid and/or commenced during the second of such taxable years.

 

(viii)       
The preceding provisions of this section of the Agreement shall not be construed as a representation, covenant or guarantee
by the Company or by any officer, director or affiliate of the Company of any particular tax effect to Executive under this Agreement.
Neither the Company nor any of its officers, directors or affiliates shall be liable to Executive for any tax, penalty or interest
imposed under Section 409A nor for reporting (or for failing to report) in good faith any payment made under this Agreement as
an amount includible in gross income under Section 409A. Neither the Company nor any of its officers, directors or affiliates
will have any liability to Executive or any other party if a payment or benefit under this Agreement is challenged by any taxing
authority or is ultimately determined not to be exempt or compliant. Executive further understands and agrees that Executive will
be entirely responsible for any and all taxes on any benefits payable to Executive as a result of this Agreement. 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
and/or benefits provided to the Executive under this Agreement, and such amounts payable and/or benefits provided to the Executive
under this Agreement shall not be reduced because Executive obtains other employment, becomes self-employed and/or receives remuneration
and/or benefits from a third party after the date of termination.

 

10.            Covenant
Not to Compete.

 

(a)            The
Executive recognizes that the services to be performed by him hereunder are special, unique and extraordinary. The parties confirm
that it is reasonably necessary for the protection of the Company that the Executive agree, and accordingly, the Executive does
hereby agree, that, he shall not, directly or indirectly, at any time during the “Restricted Period” within the “Restricted
Area” engage in any “Restricted Business Activity” (as those terms are defined in Sections 10(b), (c) and (d)
below). In the event of any inconsistencies between the terms of this Agreement and the NDA, this Agreement shall control.

 

(b)            The
term “Restricted Business Activity” as used in this Section 10, means that the Executive shall not, directly
or indirectly:

 

(i)            provide
services, either on his own behalf or as an officer, director, partner, consultant, associate, employee, owner, agent, independent
contractor, or coventurer of any third party that sells products or services that are directly competitive in airports with the
core products or services sold by XpresSpa during Employment Period; or

 

(ii)           solicit
any material commercial relationships of XpresSpa, other than in the furtherance of the business of XpresSpa during the Employment
Period;

 

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provided
however, that Restricted Business Activity shall not be construed to prevent and this Agreement shall not prevent the Executive
from (i) owning, directly or indirectly, in the aggregate, an amount not exceeding two percent (2%) of the issued and outstanding
voting securities of any class of any company whose voting capital stock is traded or listed on a national securities exchange
or in the over-the-counter market; or (ii) soliciting any material commercial relationships of XpresSpa for the purpose of selling
products or providing services that are not the same or substantially similar to the core products or services sold by XpresSpa
during the Employment Period.

 

(c)            The
term “Restricted Period,” as used in this Section 10, shall mean during the Employment Period and for six (6)
months after the date the Executive is no longer employed by the Company.

 

(d)            The
term “Restricted Area” as used in this Section 10 shall mean the United States of America and every country
outside the United States of America where the Company and/or XpresSpa is directly or indirectly operating or Executive is aware
that the Company and/or XpresSpa is planning to operate, is actively evaluating operating in such country in the future, or is
involved in any negotiations, discussions or other actions relating to such plans, including but not limited to submitting or
responding to a RFP; except for any country which the Company or XpresSpa has abandoned such plans or has ceased, without any
reason (such as waiting for responses from third parties), to pursue such plans or to respond to a RFP for a period exceeding
sixty (60) days.

 

(e)            If
any of the restrictions contained in this Section 10 shall be deemed to be unenforceable by reason of the extent, duration or
geographical scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof, and in its reduced form this Section shall then be enforceable in the
manner contemplated hereby.

 

(f)            The
provisions of this Section 10 shall survive the termination of the Executive's employment hereunder and until the end of the Restricted
Period.

 

11.            Executive’s
Representations. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance
of this Agreement by Executive does not and shall not conflict with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Executive is a party or by which Executive is bound, (ii) Executive is not a party
to or bound by any employment agreement, noncompete agreement, non-solicitation agreement, covenants agreement, or confidentiality
agreement with any other person or entity, (iii) Executive shall not use any confidential information or trade secrets of any
third party in connection with the performance of Executive’s duties hereunder and (iv) this Agreement constitutes the valid
and binding obligation of Executive, enforceable against Executive in accordance with its terms. Executive hereby acknowledges
and represents that Executive has had the opportunity to consult with independent legal counsel regarding Executive’s rights
and obligations under this Agreement and that Executive fully understands the terms and conditions contained herein.

 

    	 	11	 

     

    

 

12.            Dispute
Resolution.

 

(a)            In
the event of a breach or anticipated breach of the Agreement by either Party, the non-breaching Party shall inform the breaching
Party by letter of the suspected or anticipated breach. The breaching Party shall have ten (10) days to cure said breach, if curable.
In the event the breach has not been cured within ten (10) days, if curable, then, except as otherwise provided in Section 14(a),
the non-breaching Party shall pursue a remedy or remedies through final and binding arbitration to which Sections 12 (b) and (c)
below shall apply.

 

(b)            Any
dispute arising between the Parties under this Agreement or concerning Executive’s employment or the termination of Executive’s
employment shall be submitted to final and binding arbitration before the American Arbitration Association (“AAA”).
Such arbitration shall be conducted in New York, New York, and the arbitrator will apply New York law, including federal law as
applied in New York courts. The arbitration shall be conducted in accordance with AAA Employment Arbitration Rules as modified
herein. The arbitration shall be conducted by a single arbitrator and the award of the arbitrator shall be final and binding on
the parties, and judgment on the award may be confirmed and entered in any state or federal court in the State and City of New
York. The arbitration shall be conducted on a strictly confidential basis, and the Parties shall not disclose the existence of
a claim, the nature of a claim, any documents, exhibits, or information exchanged or presented in connection with such a claim,
or the result of any action (collectively, “Arbitration Materials”) to any third party, with the sole exception
of their respective legal counsel, who also shall be bound by these confidentiality terms. Nothing herein shall prevent either
Party from seeking or obtaining an injunction in aid of arbitration, nor from confirming the award of the arbitrator in court.

 

(c)            In
the event of any court proceeding, including a court proceeding to challenge or enforce an arbitrator’s award, the parties
hereby consent to the exclusive jurisdiction of the state and federal courts in New York, New York and agree to venue in that
jurisdiction. Each Party hereby irrevocably waives personal service of process and consents to process being served in any such
suit, action or proceeding by delivering a copy thereof to such Party in accordance with the notice provisions of Section 13 below.
The Parties agree to take all steps necessary to protect the confidentiality of all confidential information, including the Arbitration
Materials (if applicable), in connection with any such proceeding, agree to file all confidential information under seal, and
agree to the entry of an appropriate protective order.

 

13.            Defend
Trade Secrets Act of 2016 Notice. In accordance with the federal Defend Trade Secrets Act of 2016 (“DTSA”),
nothing in this Agreement is intended to interfere with or discourage the Executive’s good faith disclosure of a trade secret
or other confidential information to any governmental entity related to a suspected violation of law. Notwithstanding anything
to the contrary in this Agreement, the DTSA provides that the Executive cannot be held criminally or civilly liable under any
federal or state trade secret law (a) if the Executive discloses a trade secret or other confidential information (i) in confidence
(A) to any federal, state, or local government official, either directly or indirectly, or (B) an attorney, and solely for the
purpose of reporting or investigating a suspected violation of the law; or (ii) in a complaint or other document filed in a lawsuit
or other proceeding, if such filing is made under seal; and does not disclose the trade secret, except pursuant to court order.
Should the Executive file a lawsuit for retaliation for reporting a suspected violation of law, he may disclose the trade secret
to his attorney and use the trade secret information in the court proceeding, if the Executive (y) files any document containing
the trade secret under seal, and (z) does not disclose the trade secret, except pursuant to court order.

 

    	 	12	 

     

    

 

14.            Miscellaneous.

 

(a)            The
Executive acknowledges that the services to be rendered by him under the provisions of this Agreement are of a special, unique
and extraordinary character and that it would be difficult or impossible to replace such services. Furthermore, the parties acknowledge
that monetary damages alone would not be an adequate remedy for any breach by the Executive of this Agreement. Accordingly, the
Executive agrees that any breach or threatened breach by him of this Agreement or the NDA shall entitle the Company, in addition
to all other legal remedies available to it, to apply to any court of competent jurisdiction to seek to enjoin such breach or
threatened breach. The parties understand and intend that each restriction agreed to by the Executive hereinabove shall be construed
as separable and divisible from every other restriction, that the unenforceability of any restriction shall not limit the enforceability,
in whole or in part, of any other restriction, and that one or more or all of such restrictions may be enforced in whole or in
part as the circumstances warrant. In the event that any restriction in this Agreement is more restrictive than permitted by law
in the jurisdiction in which the Company seeks enforcement thereof, such restriction shall be limited to the extent permitted
by law. The remedy of injunctive relief herein set forth shall be in addition to, and not in lieu of, any other rights or remedies
that the Company may have at law or in equity.

 

(b)            The
Executive may not assign or delegate any of his rights or duties under this Agreement without the express written consent of the
Company. The Company will require any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company 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 “Company” shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement provided for in this subsection (b) or which otherwise becomes
bound by all of the terms and provisions of this Agreement by operation of law.

 

(c)            This
Agreement, together with the NDA and any indemnification agreement, equity plan, stock option agreement, restricted stock unit
agreement or other stock agreement to which plaintiff is a party or otherwise subject to, constitutes and embodies the full and
complete understanding and agreement of the parties with respect to the Executive's employment by the Company, and supersedes
all prior understandings and agreements, whether oral or written, between the Executive and the Company, and shall not be amended,
modified or changed except by an instrument in writing executed by the party to be charged. The invalidity or partial invalidity
of one or more provisions of this Agreement shall not invalidate any other provision of this Agreement. No waiver by either party
of any provision or condition to be performed shall be deemed a waiver of similar or dissimilar provisions or conditions at the
same time or any prior or subsequent time.

 

    	 	13	 

     

    

 

(d)            Executive
acknowledges that he has had the opportunity to be represented by separate independent counsel in the negotiation of this Agreement,
has consulted with his attorney of choice, or voluntarily chose not to do so, concerning the execution and meaning of this Agreement,
and has read this Agreement and fully understands the terms hereof, and is executing the same of his own free will. Executive
warrants and represents that he has had sufficient time to consider whether to enter into this Agreement and that he is relying
solely on his own judgment and the advice of his own counsel, if any, in deciding to execute this Agreement.

 

(e)            This
Agreement shall inure to the benefit of, be binding upon and enforceable against, the parties hereto and their respective successors,
heirs, beneficiaries and permitted assigns including, any successor of the Company including a purchaser of all or substantially
all of Company’s assets.

 

(f)            
If this Agreement or the Employment Period is terminated for any reason, the NDA and Sections 9 and 10 shall survive termination
of this Agreement.

 

(g)            The
headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.

 

(h)            All
notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall
be deemed to have been duly given when personally delivered, sent by registered or certified mail, return receipt requested, postage
prepaid, or by reputable national overnight delivery service (e.g. FedEx) for overnight delivery to the party at the address set
forth in the preamble to this Agreement, or to such other address as either party may hereafter give the other party notice of
in accordance with the provisions hereof. Notices shall be deemed given on the sooner of the date actually received or the third
business day after deposited in the mail or one business day after deposited with an overnight delivery service for overnight
delivery.

 

(i)            
This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without reference
to principles of conflicts of laws.

 

(j)            
This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one of the same instrument. The parties hereto have executed this Agreement as of the date
set forth above.

 

(k)            Each
Party will pay its own costs and expenses related to the transactions contemplated by this Agreement.

 

 

 

[Remainder
of Page Intentionally Left Blank]

[Signature Page Follows]

    	 	14	 

     

    

 

[Signature
Page to Executive Employment Agreement]

 

 

 

IN
WITNESS WHEREOF, the Executive and the Company have caused this Executive Employment Agreement to be executed as of the date
first above written.

 

 

	 	COMPANY:	 
	 	 	 	 	 
	 	 	 	 	 
	 	XPRESSPA
    GROUP, INC.	 
	 	 	 	 	 
	 	 	 	 	 
	 	By:	 	 /s/
    Bruce Bernstein	 
	 	Name:	 	Bruce Bernstein	 
	 	Title:	 	Chairman of the Board of Directors	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	EXECUTIVE:	 
	 	 	 	 	 
	 	 	 	 	 
	 	/s/
Douglas Satzman	 
	 	DOUGLAS SATZMAN	 

 

    	 	15	 

     

    

 

EXHIBIT
A

 

INCENTIVE
COMPENSATION

 

  

 

 

    	 	16	 

     

    

 

EXHIBIT
B

 

2012
EMPLOYEE, DIRECTOR AND CONSULTANT EQUITY INCENTIVE PLAN (as amended on November 28, 2016)

 

 

    	 	17	 

     

    

 

EXHIBIT
C

 

FORM
OF NDA

 

  

 

 

    	 	18	 

     

    

 

EXHIBIT
D

 

FORM
OF SEPARATION AGREEMENT RELEASE

 

  

 

    	 	19ex_134715.htm

Exhibit 10.1

 

 

THIS SECOND AMENDED AND RESTATED SUBORDINATED SECURED PROMISSORY NOTE (THIS “NOTE”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

PAYMENT AND ENFORCEMENT OF THIS NOTE, AND THE LIENS AND SECURITY INTERESTS SECURING THIS NOTE, WILL BE SUBORDINATED TO THE CLAIMS, LIENS AND SECURITY INTERESTS OF THE HOLDER OF SENIOR INDEBTEDNESS AS DEFINED IN, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE INTERCREDITOR AND DEBT SUBORDINATION AGREEMENT, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, BY AND BETWEEN THE HOLDER OF THIS NOTE, AS JUNIOR CREDITOR, AND ALTERNA CAPITAL SOLUTIONS, LLC, AS SENIOR CREDITOR (THE “SUBORDINATION AGREEMENT”), TO THE EXTENT SUCH INTERCREDITOR AND DEBT SUBORDINATION HAS BEEN EXECUTED BY THE HOLDER OF THIS NOTE AND ALTERNA CAPITAL SOLUTIONS, LLC.

 

 

 

 

SECOND AMENDED AND RESTATED SUBORDINATED SECURED PROMISSORY NOTE 

 

	$3,201,536.81 	February 7, 2019

    

FOR VALUE RECEIVED, STANLEY FURNITURE COMPANY LLC (formerly known as Churchill Downs LLC), a Delaware limited liability company (“Maker”), hereby promises to pay to the order of HG HOLDINGS, INC. (formerly known as Stanley Furniture Company, Inc.), a Delaware corporation (“Holder”), on March 2, 2023 (the “Maturity Date”), the principal amount of Three Million Two Hundred One Thousand Five Hundred Thirty-Six Dollars and Eighty-One Cents ($3,201,536.81), as such principal amount may be adjusted after the date hereof pursuant to Section 2.7 of that certain Asset Purchase Agreement, dated as of November 20, 2017 (the “Purchase Agreement”), between Maker and Holder, to the extent not theretofore paid (such unpaid principal amount at any time, the “Principal Amount”), together with interest thereon calculated from the date hereof in accordance with the provisions of this Note (the unpaid amount of any such accrued interest at any time, the “Interest Amount” and the sum of the Principal Amount and the Interest Amount at any time, the “Total Amount”). Certain capitalized terms which are used and not otherwise defined in this Note are defined in Section 7 below.

 

1.        PAYMENT OF PRINCIPAL AND INTEREST. Subject, in each case, to the Subordination Agreement:

 

(a)     Subject to the imposition of the Default Rate (as defined below), interest on the Principal Amount shall accrue daily at a fixed rate of six percent (6.00%) per annum (computed on the basis of a 365 or 366 day year, as applicable, and the actual number of days elapsed), each such payment shall be due (i) on February 15, 2019, for interest accrued (or to be accrued) from January 1, 2019, through March 31, 2019, and (ii) on April 1, 2019, and on the first Business Day of each calendar quarter thereafter continuing through and including the Maturity Date, in advance, for interest to be accrued for each such calendar quarter beginning on such payment date.

 

1

 

 

(b)     Except as set forth otherwise herein, the Total Amount shall be payable in full on the Maturity Date; provided that the Total Amount is subject to acceleration upon the occurrence, and during the continuation, of an Event of Default as set forth below.

 

(c)     Maker may, at its option, prepay at any time and from time to time all or any part of the Total Amount, without premium or penalty.

 

(d)     No later than 30 days after delivery to Holder of the audited annual financial statements pursuant to Section 5(a) below, commencing with the delivery to Holder of the financial statements for Maker’s fiscal year ending December 31, 2018, Maker shall prepay the Principal Amount in an amount equal to Excess Cash Flow for such fiscal year.

 

(e)     Any amount paid to Holder by Maker in respect of this Note will be applied first, to reimburse or pay Holder for any costs and expenses relating to this Note, second, to reduce the Interest Amount and, third, to reduce the Principal Amount. All payments in cash in respect of this Note will be made by wire transfer of immediately available funds to an account designated in writing by Holder, and any payment so received after 1:00 p.m. New York time on any day will be deemed to have been received on the following Business Day. Any amount that (but for the application of this sentence) would become payable in respect of this Note on a day which is not a Business Day will instead become due and payable on the next succeeding Business Day, and interest accruing on the Principal Amount will reflect any such extension.

 

2.      SECURITY. As security for the payment of all the Obligations, Maker hereby grants (and reaffirms its prior grant) to Holder a continuing security interest in and to all of its right, title and interest in and to the following property, whether now or hereafter owned, existing, acquired or arising and wherever now or hereafter located (collectively, the “Collateral”): (i) all Accounts and all Goods whose sale, lease or other disposition by Maker has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, Maker; (ii) all Chattel Paper, Instruments, Documents and General Intangibles (including all patents, patent applications, trademarks, trademark applications, tradenames, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses, software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contract rights and rights to payment of money, promissory notes, payment intangibles, security interests, security deposits and rights to indemnification); (iii) all Inventory; (iv) all Goods (other than Inventory), including Equipment and Fixtures; (v) all securities and other Investment Property; (vi) all Deposit Accounts, bank accounts and all deposits and cash; (vii) all Letter of Credit Rights; (viii) all Commercial Tort Claims; and (ix) all additions and accessions to, substitutions for, and replacements, products and Proceeds of the foregoing property, including proceeds of all insurance policies insuring the foregoing property, and all of Maker’s books and records relating to any of the foregoing. As used herein, each of “Account”, “Account Debtor”, “Chattel Paper”, “Commercial Tort Claims”, “Deposit Accounts”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter of Credit Rights”, and “Proceeds” shall have the respective meanings assigned to such terms, as of the date of this Note, in the New York Uniform Commercial Code. Notwithstanding the foregoing, Collateral shall not include, and Maker shall not be deemed to have granted a security interest in, (i) any rights or interests in any license, lease, contract or agreement to which Maker is a party and all software or related goods and/or databases licensed or provided thereunder, to the extent, but only to the extent, that such a grant would, under the terms of such license, lease contract or agreement, result in a breach of the terms of, or constitute a default under, such license, lease, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to 9-406, 9-407 or 9-408 of the Uniform Commercial Code or other applicable law), (ii) any Equipment or other assets subject to a purchase money security interest to the extent that the agreements governing the indebtedness secured by such purchase money security interest prohibits the granting of a security interest to Holder hereunder (other than to the extent that any such prohibition would be rendered ineffective pursuant to 9-406, 9-407 or 9-408 of the Uniform Commercial Code or other applicable law) or (iii) any rights or property, including any intent-to-use trademark applications, to the extent that any valid and enforceable law or regulation applicable to such rights or property prohibits the creation of a security interest in such rights or property or would otherwise result in a material loss of rights from the creation of such security interest therein (other than to the extent that any such term would be rendered ineffective pursuant to 9-406, 9-407 or 9-408 of the Uniform Commercial Code or other applicable law); provided, that, with respect to each of the foregoing clauses (i) - (iii), immediately upon the ineffectiveness, lapse or termination of any such restriction, the Collateral shall include, and Maker shall be deemed to have granted a security interest in, all such rights and interests or Equipment or other assets, as the case may be, as if such provision had never been in effect; and provided, further that, notwithstanding any such restriction, Collateral shall include the right to receive all proceeds derived from or in connection with the sale, assignment or transfer of such rights and interests. Notwithstanding the foregoing, subject to the Subordination Agreement, on and after the closing date of that certain Asset Purchase Agreement dated on or about September 6, 2018 (the “Stone & Leigh APA”), by and between the Maker and Stone & Leigh, LLC, a Tennessee limited liability company, pursuant to which certain Stone & Leigh and other assets were sold, such assets transferred under the Stone & Leigh APA were released from the definition of “Collateral” hereunder.

 

2

 

 

By its signature hereto, Maker agrees that any time and from time to time, Maker will promptly execute and deliver all further instruments and documents, obtain such agreements from third parties, and take all further action that may be necessary or desirable, or that Holder may request, in order to create and/or maintain the validity, perfection or (subject to the Subordination Agreement) the priority of and protect any security interest granted or purported to be granted hereby. Without limiting the generality of the foregoing, Maker hereby (i) authorizes Holder to file against Maker, one or more financing, continuation or amendment statements pursuant to the Uniform Commercial Code in form and substance satisfactory to Holder, which statements will describe the Collateral as “all assets now owned or hereafter acquired”, (ii) agrees, from time to time to take such actions as may be requested by Holder to perfect the security interest of Holder with respect to that portion of the Collateral over which control may be obtained within the meaning of the Uniform Commercial Code, and (iii) agrees to execute and deliver to Holder customary short form intellectual property security agreements to be filed with the United States Patent and Trademark Office and the United States Copyright Office (and any successor office and any similar office in any state of the United State or in any other country). If Maker shall at any time hold or acquire any Commercial Tort Claim having a value in excess of $100,000, Maker shall promptly notify Holder in writing signed by Maker of the particulars thereof necessary to grant Holder a valid security interest therein and in the proceeds thereof pursuant to the Uniform Commercial Code. If Holder fails to execute and deliver any such release or other instrument promptly following such reasonable request of Maker or Senior Lender, Holder hereby irrevocably authorizes, empowers and appoints each of Maker and Senior Lender as its agent and attorney-in-fact to execute and deliver such release or other instrument.

 

On and after the date hereof, Maker will not, without providing at least 30 days’ prior written notice to Holder, change its legal name, identity, type of organization, jurisdiction of organization, corporate structure or location of its chief executive office.

 

This Note and the obligations of Maker hereunder are also guaranteed by Stanley Intermediate Holdings LLC, a Delaware limited liability company (“US Parent”), Churchill Downs Holdings Ltd., a British Virgin Islands business company (“BVI Parent”), and Stanley Furniture Company 2.0, LLC, a Virginia limited liability company (“SFC 2.0” and together with US Parent and BVI Parent, each a “Guarantor” and collectively, the “Guarantors”), pursuant to a Guaranty, dated as of March 2, 2018 (as amended, restated, supplemented or otherwise modified or replaced from time to time (including by joinder), the “Guaranty”), made by US Parent and SFC 2.0 (and joined by BVI Parent), to Holder, and the Obligations and the Guaranty are further secured by (i) certain Membership Interests Pledge Agreements, dated as of March 2, 2018, between Holder and each of US Parent and Maker, as applicable (as amended, restated, supplemented or otherwise modified or replaced from time to time, each, a “Pledge” and collectively, the “Pledges”), (ii) certain Security Agreements, dated as of March 2, 2018, between Holder and each of US Parent and SFC 2.0, as applicable (as amended, restated, supplemented or otherwise modified or replaced from time to time, each, a “Security Agreement” and collectively, the “Security Agreements”), and (iii) a Collateral Assignment (Security Agreement), dated as of March 2, 2018, between Holder and Maker (as amended, restated, supplemented or otherwise modified or replaced from time to time, the “IP Agreement”) and other collateral documents relating hereto or to any of the foregoing (such other documents, as amended, restated, supplemented or otherwise modified or replaced from time to time, together with this Note, the Pledges, the Guaranty, the Security Agreements, and the IP Agreement, each a “Related Document” and collectively the “Related Documents”).

 

3

 

 

3.      SUBORDINATION. HOLDER EXPRESSLY ACKNOWLEDGES AND AGREES THAT MAKER’S OBLIGATIONS HEREUNDER, INCLUDING THE PAYMENTS OF INTEREST, PRINCIPAL AND OTHER AMOUNTS TO BE MADE TO HOLDER PURSUANT TO THIS NOTE AND ALL OF HOLDER’S RIGHTS AND REMEDIES WITH RESPECT TO THE COLLATERAL, ARE IN EACH CASE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE SUBORDINATION AGREEMENT.

 

4.         REPRESENTATIONS AND WARRANTIES. Maker hereby makes the following representations and warranties:

 

(a)     Organization, Authority and Qualification. Maker is duly organized, validly existing and in good standing under the laws of Delaware and has all necessary power and authority to execute and deliver this Note and the other Related Documents to which Maker is a party and to perform its obligations hereunder and thereunder.

 

(b)      Due Authorization. The execution and delivery by Maker of this Note and the other Related Documents to which Maker is a party and the performance by Maker of its obligations hereunder and thereunder have been duly authorized by all requisite limited liability company action on the part of Maker. Each of this Note and the other Related Documents to which Maker is a party has been duly executed and delivered by Maker and constitutes a legal, valid and binding obligation of Maker, enforceable against Maker in accordance with its terms (subject to applicable law, bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors rights and remedies generally and subject, as to enforceability, to rules of law governing specific performance, injunctive relief and to general principles of equity).

 

(c)       No Conflict. The execution, delivery and performance by Maker of this Note and the other Related Documents to which Maker is a party does not and will not violate, conflict with or result in the breach of any provision of Maker’s organizational documents.

 

(d)      Purchase Agreement. Maker has made certain representations and warranties set forth in the Purchase Agreement, which are hereby incorporated by reference herein.

 

(e)       Solvency. The fair salable value of Maker’s assets exceeds the fair value of its liabilities. After giving effect to the transactions described in this Note, the Related Documents and the Purchase Agreement, the Maker would not be left with unreasonably small capital in relation to its business as presently conducted or as contemplated to be conducted after the transactions contemplated by the Purchase Agreement, and the Maker is not unable to pay its debts (including trade debts) as they mature.

 

4

 

 

(f)      Debt and Liens. Maker has no liabilities other than liabilities owed to Senior Lender or the Holder or other liabilities incurred in the ordinary course of business in connection with the transactions contemplated by the Purchase Agreement. Maker’s assets are not subject to liens and encumbrances other than liens in favor of Senior Lender or Holder.

 

5.       COVENANTS. Maker covenants and agrees that, until the Total Amount owing under this Note has been paid in full,

 

(a)     Maker will deliver to Holder a copy of Maker’s annual consolidated financial statements, including balance sheet, statement of income, and statement of cash flows, reviewed by independent certified public accountants acceptable to Holder no later than ninety (90) days after the end of each fiscal year of Maker,

 

(b)     Maker will deliver a copy of Maker’s unaudited (internally prepared) quarterly consolidated financial statements, including balance sheet, statement of income, and statement of cash flows, to Holder no later than sixty (60) days following each calendar quarter end,

 

(c)     Maker will not, without the prior written consent of Holder, pay, distribute or authorize any Restricted Payment, other than Restricted Payments constituting tax distributions permitted under the Senior Loan Documents (if such documents are available and in effect) (the “Tax Distributions”) so long as cash interest payments under this Note have been paid pursuant to the terms hereof for the shorter of the period this Note has been outstanding or the twelve-month period preceding the payment of such Tax Distributions,

 

(d)     Maker will not, without the prior written consent of Holder, issue any additional ownership interests in or other Equity Interests of or in Maker other than those that by their terms will be subject to the Pledges,

 

(e)     If any, Maker will give Holder (i) prompt written notice of any amendment, modification or waiver of the Senior Loan Documents or provisions thereof and (ii) prompt written notice following the maturity of the indebtedness under the Senior Loan Documents being accelerated for any reason, including as a result of occurrence of any event of default under the Senior Loan Documents,

 

(f)     Maker will maintain its legal existence and good standing in its respective jurisdiction of formation and maintain qualification in each jurisdiction in which it is required to be qualified,

 

(g)     Maker will incur no liabilities for borrowed money other than such liabilities owed to Senior Lender and the Holder,

 

(h)     Maker will grant no liens on its assets to any party other than Holder and Senior Lender,

 

(i)      Maker will not, without the prior written consent of Holder, (x) directly or indirectly enter into or permit to exist any transaction with any affiliate of Maker, except for transactions that are made in the ordinary course of business on fair and reasonable terms that are no less favorable to Maker than would be obtained in an arm’s length transaction with a non-affiliated person, or (y) pay, distribute or authorize any compensation or other payments to officers, directors or employees of Maker except for such amounts that are in the ordinary course of business and on fair and reasonable terms, and

 

(j)     Holder will have the right, while any Obligations remain outstanding hereunder, (i) to appoint a representative designated by Holder from time to time to attend all meetings of the Board of Directors of US Parent as a non-voting observer; and (ii) to receive all information distributed by US Parent to voting members of the Board of Directors of US Parent.

 

5

 

 

6.         EVENTS OF DEFAULT AND REMEDIES. An “Event of Default” shall be deemed to have occurred under this Note if:

 

(i)      failure of Maker to make any payment when the same becomes due and payable in cash; or

 

(ii)     Maker shall default in the due performance or observance of any other term, covenant or agreement on its part contained in this Note and such default shall continue unremedied for fifteen (15) days from receipt by Maker of written notice thereof from Holder; or

 

(iii)     Maker shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, or (vi) take any action for the purpose of effecting any of the foregoing; or

 

(iv)     a proceeding or case shall be commenced against Maker (other than by Holder), without its application or consent, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of all or any substantial part of its assets, or (iii) similar relief under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and in each case such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 or more days; or an order for relief against such Person shall be entered in an involuntary case under the Bankruptcy Code; or

 

(v)      a default or event of default (howsoever defined or denominated) shall occur under the Senior Loan Documents; or

 

(vi)     there shall occur a sale of all or substantially all of the assets of Maker or Maker shall cease to be a wholly owned subsidiary of US Parent and BVI Parent.

 

If any Event of Default occurs and is continuing, Holder may: (i) declare the Total Amount to be immediately due and payable; (ii) exercise all rights and remedies available to Holder under this Note, under applicable law or at equity; and (iii) exercise from time to time any default rights and remedies available to it under the Uniform Commercial Code and any other applicable law in addition to, and not in lieu of, any rights and remedies expressly granted in this Note; provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to Maker under the Bankruptcy Code, the unpaid Total Amount shall automatically become due and payable without further act of Holder. The failure of Holder at any time to exercise the foregoing rights shall not be deemed a waiver thereof. All of Holder’s rights and remedies shall be cumulative and non-exclusive to the extent permitted by applicable law. At any sale of the Collateral, if permitted by applicable law, Holder may be the purchaser of the Collateral or any part thereof and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at such sale, to use and apply any of the Obligations as a credit on account of the purchase price of the Collateral or any part thereof payable at such sale.

 

6

 

 

Without limiting the foregoing remedies, subject to the Subordination Agreement, the portion of the Principal Amount not paid on or before the date when due hereunder and, to the extent permitted by law, accrued interest not paid or before the date when due hereunder, shall bear interest at a fixed rate of six percent (6.00%) per annum in excess of the otherwise applicable rate until the same shall be paid (the “Default Rate”).

 

7.         DEFINED TERMS. As used in this Note, the following capitalized terms have the following respective meanings:

 

“Bankruptcy Code” means the United States Bankruptcy Code of 1978, as amended from time to time, or any successor federal statute.

 

“Business Day” means a day (other than a Saturday or Sunday) on which banks generally are open in New York, New York for the conduct of substantially all of their activities.

 

“EBITDA” shall mean, on a consolidated basis for Maker, for a specified period, the sum of (a) net income (or loss) for such period (excluding extraordinary, unusual or nonrecurring gains and losses), plus (b) all interest expense for such period, plus (c) all charges against income for such period for federal, state and local taxes, plus (d) depreciation expenses for such period, plus (e) amortization expenses for such period.

 

“Equity Interests” means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, partnership or membership interests, limited liability company interests, or other ownership or profit interests in or equivalents (regardless of how designated) of or in a Person, whether voting or non-voting.

 

“Excess Cash Flow” means, for any fiscal year, on a consolidated basis for Maker, EBITDA, minus each of the following, to the extent actually paid in cash during such fiscal year, capital expenditures, taxes, dividends and distributions, interest, fees and principal payments and prepayments on this Note and other debt for borrowed money (including capitalized leases).

 

“Obligations” means the obligations of Maker with respect to the due and prompt payment of (i) the principal of and interest on this Note (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), when and as due, whether at maturity, by acceleration, or otherwise, and (ii) all other monetary obligations, including fees, costs, attorneys’ fees and disbursements (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceedings) payable pursuant to this Note or any of the other Related Documents.

 

“Person” means an individual, a partnership, a corporation, an association, a limited liability company, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

 

“Restricted Payment” means the declaration or payment by Maker of any dividend or other distribution on account of, or the repurchase, redemption or other acquisition for value of, any Equity Interests of Maker, now or hereafter outstanding.

 

7

 

 

“Senior Lender” means, solely on and after the Senior Loan Documents have been executed and are in effect with the consent of the Holder, Alterna Capital Solutions, LLC, a Florida limited liability company.

 

“Senior Loan Documents” means the ACS Agreement (as defined in the Subordination Agreement) executed by Maker in favor of the Senior Lender, and all other related loan documents executed in connection therewith.

 

“Subordination Agreement” has the meaning set forth in the legends on the first page of this Note.

 

8.         CANCELLATION. After the entire Total Amount of this Note has been paid in full, this Note will be surrendered to Maker for cancellation and will not be reissued.

 

9.         MISCELLANEOUS.

 

(a)      Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given, made or sent by delivery in person, by an internationally recognized overnight courier service, by facsimile, by registered or certified mail (postage prepaid, return receipt requested), or by electronic mail (at such e-mail addresses as a party may designate in accordance herewith) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9(a)):

 

if to Holder:

 

HG HOLDINGS, INC.

2115 E. 7th Street, Suite 101

Charlotte, North Carolina 28204

Attention: Bradley G. Garner

Email: brad@halepartnership.com

 

with a copy to:

 

MCGUIREWOODS LLP

Gateway Plaza

800 East Canal Street

Richmond, Virginia 23219

Attention: David W. Robertson

Fax: 804-698-2152

Email: drobertson@mcguirewoods.com

 

if to Maker:

 

STANLEY FURNITURE COMPANY LLC

200 North Hamilton Street, No. 200

High Point, North Carolina 27260

Attention: Walter A. Blocker

Email: walter.blocker@vntrade.vn

 

8

 

 

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

 

DEXTRA PARTNERS PTE. LTD.

269A South Bridge Road

Singapore 058818

Attention: Bernhard Weber

Fax: 65 6645 0470

Email: b.weber@dextrapartners.com

 

All notices hereunder shall be deemed to have been duly given: when received, if personally delivered or transmitted by facsimile or electronic mail; the day after it is sent; if sent for next day delivery to a domestic address by an internationally recognized overnight delivery service; and upon receipt, if sent by certified or registered mail, return receipt requested.

 

(b)    Assignment. This Note shall be binding upon Maker and its successors and assigns, and shall inure to the benefit of and be enforceable by any successor in interest to Holder.

 

(c)      Amendment. This Note may not be amended or modified except by an instrument in writing signed by, or on behalf of, Holder and Maker.

 

(d)     Replacement. Upon receipt of evidence reasonably satisfactory to Maker of the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction of this Note, upon delivery of an unsecured indemnity agreement in such reasonable amount as Maker may determine or, in the case of any such mutilation, upon the surrender of this Note to Maker for cancellation, Maker at its expense will execute and deliver, in lieu thereof, a new Note of the same class and of like tenor, dated so that there will be no loss of interest on such lost, stolen, destroyed or mutilated Note.

 

(e)     Severability. Whenever possible, each provision of this Note will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note is held to be prohibited by or invalid under applicable law, then such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Note.

 

(f)       Descriptive Headings; Interpretation. The descriptive headings of this Note are inserted for convenience only and do not constitute a substantive part of this Note. The use of the word “including” in this Note is by way of example rather than by limitation.

 

(g)     Waiver. Either Maker or Holder may (i) extend the time for the performance of any of the obligations or other acts of the other party or (ii) waive compliance with any of the agreements of the other party or conditions to such party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of either party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights.

 

(h)     Third Party Beneficiaries. This Note shall be binding upon and inure solely to the benefit of the parties hereto, their affiliates and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Note.

 

(i)       Currency. Unless otherwise specified in this Note, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars and all payments hereunder shall be made in United States dollars.

 

9

 

 

(j)     Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed and performed entirely within the State of New York. Any judicial proceeding brought by or against Maker with respect to any of the Obligations or this Note may be brought in any court of competent jurisdiction in the State of New York, United States of America, and, by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.

 

(k)     Usury; Maximum Rate. Notwithstanding any other provision of this Note, Holder does not intend to charge, and Maker shall not be required to pay, any interest or other fees in excess of the maximum permitted by applicable law (the “Maximum Rate”). Notwithstanding any contrary provisions contained herein, (a) the Maximum Rate will be calculated on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, (b) in determining whether the interest hereunder exceeds interest at the Maximum Rate, the total amount of interest will be spread throughout the entire term of this Note until its payment in full, and (c) if Holder ever charges or receives anything of value that is deemed to be interest under applicable law, and if the occurrence of any event, including acceleration of maturity of obligations owing under this Note, should cause such interest to exceed the maximum lawful amount, any amount that exceeds interest at the Maximum Rate will be applied to the reduction of the unpaid principal balance under this Note, and if this Note is paid in full, any remaining excess will be paid to Maker.

 

(l)     Expenses. Maker shall reimburse Holder on demand for all costs, expenses and fees (including expenses and fees of its counsel) incurred by Holder in connection with the enforcement of Holder’s rights hereunder and under the other Related Documents.

 

(m)    Specific Waivers. Presentment and demand for payment, notice of dishonor, protest and notice of protest are hereby waived.

 

(n)     Repayments or Recovery. This Note shall continue to be effective or be reinstated, as the case may be, if at any time all or part of any payment of any of the Obligations is rescinded or must otherwise be returned by Holder upon the insolvency, bankruptcy or reorganization of Maker or any Guarantor or otherwise. Without limiting the generality of the foregoing, if the incurrence or payment of the Obligations by Maker or any Guarantor or the transfer to Holder of any property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (each, a “Voidable Transfer”), and if Holder is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that Holder is required or elects to repay or restore, the liability of Maker automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made. The provisions of this section will be and remain effective notwithstanding the release of any of the Collateral by Holder in reliance upon such payment and any such release will be without prejudice to Holder’s rights hereunder and under any Guaranty and will be deemed to have been conditioned upon such payment having become final and irrevocable. This section shall survive the termination of this Note.

 

(o)    This NOTE constitutes an amendment and restatement in its entirety of the AMENDED AND RESTATED SUBORDINATED SECURED PROMISSORY NOTE, dated as of SEPTEMBER 6, 2018, issued BY the Maker in favor of the holder (the “prior note”), and this NOTE is in substitution and replacement of the prior Note. The execution and delivery of this NOTE and the consummation of the transactions contemplated hereby are not intended by the parties to be, and shall not constitute, a novation or an accord and satisfaction of the Prior Obligations or any other obligations owing UNDER the RELATED documents. Each of the parties hereto hereby acknowledges and agrees that the promise to pay pursuant to this NOTE is not intended to, nor shall it be construed, as constituting a release of the Prior Note or any other Document relating thereto, but is intended to constitute a restatement and reconfirmation of the Prior Note. fROM AND AFTER THE DATE HEREOF, THIS NOTE SHALL BE THE “JUNIOR NOTE” REFERRED TO AND DEFINED IN THE SUBORDINATION AGREEMENT, WHICH SHALL REMAIN IN FULL FORCE AND EFFECT.

 

[Signature page follows]

 

10

 

 

IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

 

	
			 

				
			MAKER:

				
			 

			
	 	 	 
	 	
			STANLEY FURNITURE COMPANY LLC,

			formerly known as Churchill Downs LLC, a

			Delaware limited liability company

				 
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				s/Richard Ledger	
			 

			
	
			 

				
			Name: 

				
			Richard Ledger

				
			 

			
	
			 

				
			Title:

				
			CEO

				
			 

			

 

 

Accepted and agreed as of the date first above written: 

 

HOLDER:

 

HG HOLDINGS, INC.,

formerly known as Stanley Furniture Company, Inc.,

a Delaware corporation

 

 

	
			By:

				
			s/Steven A. Hale II

			

	
			Name:

				
			Steven A. Hale II

			

	
			Title:

				
			Chairman and CEO

			

 

Signature Page to Second Amended and Restated Note

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