Document:

Carolina Trust BancShares, Inc. 8-K 

Exhibit 10.1

SUBORDINATED NOTE PURCHASE AGREEMENT

This SUBORDINATED
NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of October 13, 2016, and is made by and among Carolina
Trust BancShares, Inc., a North Carolina corporation (“Company”), and the several purchasers of the Subordinated
Notes identified on the signature pages hereto (each a “Purchaser” and collectively, the “Purchasers”).

RECITALS

WHEREAS, Company
has requested that the Purchasers purchase from Company up to Ten Million Dollars ($10,000,000) in aggregate principal amount of
Subordinated Notes (as defined herein), which aggregate amount is intended to qualify as Tier 2 Capital (as defined herein).

WHEREAS, Company
has engaged Sandler O’Neill + Partners, L.P., as its exclusive placement agent (“Placement Agent”) for
the offering of the Subordinated Notes.

WHEREAS, each
of the Purchasers is an institutional accredited investor as such term is contemplated by Rule 501 of Regulation D (“Regulation
D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

WHEREAS, the
sale of the Subordinated Notes by Company is being made pursuant to Rule 506(b) of Regulation D.

WHEREAS, each
Purchaser is willing to purchase from Company a Subordinated Note in the principal amount set forth on each Purchaser’s signature
page (the “Subordinated Note Amount”) in accordance with the terms, subject to the conditions and in reliance
on, the recitals, representations, warranties, covenants and agreements set forth herein and in the Subordinated Notes.

NOW, THEREFORE,
in consideration of the mutual covenants, conditions and agreements herein contained and other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENT

1. 

DEFINITIONS.

1.1 

Defined Terms.
The following capitalized terms generally used in this Agreement and in the Subordinated Notes have the meanings defined or referenced
below. Certain other capitalized terms used only in specific sections of this Agreement may be defined in such sections.

“Affiliate(s)”
means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations,
and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective
Affiliates.

    	  

    	 

    

 

“Agreement” has the
meaning set forth in the preamble hereto.

“Bank”
means Carolina Trust Bank, a North Carolina-chartered commercial bank and wholly owned subsidiary of Company.

“Business
Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the State of North
Carolina are permitted or required by any applicable law or executive order to close.

“Closing”
has the meaning set forth in Section 2.5.

“Closing
Date” means October 13, 2016.

“Company”
has the meaning set forth in the preamble hereto and shall include any successors to Company.

“Company’s
Liabilities” means Company’s obligations under the Transaction Documents.

“Company’s
Reports” means (i) audited financial statements of Company and Bank, as applicable, for the year ended December 31,
2015; (ii) the unaudited financial statements of Company and Bank, as applicable, for the quarter ended June 30, 2016 and (iii)
Company’s reports and Bank’s reports, as applicable, for the year ended December 31, 2015 and the quarter ended June
30, 2016 as filed with the FRB and the FDIC.

“Disbursement”
has the meaning set forth in Section 3.1.

“Equity
Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests in a Person which is not a corporation, and any and all warrants,
options or other rights to purchase any of the foregoing.

“Event
of Default” has the meaning set forth in the Subordinated Notes.

“Exchange
Act” means the Securities and Exchange Act of 1934, as amended.

“FDIC”
means the Federal Deposit Insurance Corporation.

“FRB”
means the Board of Governors of the Federal Reserve System.

“GAAP”
means generally accepted accounting principles in effect from time to time in the United States of America.

“Governmental
Agency(ies)” means, individually or collectively, any federal, state, county or local governmental department, commission,
board, regulatory authority or agency (including, without limitation, each applicable Regulatory Agency) with jurisdiction over
Company.

“Governmental
Licenses” has the meaning set forth in Section 4.3.

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“Hazardous
Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive
materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances
which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic
substances” under the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or regulations.

“Hazardous
Materials Laws” mean any laws, regulations, permits, licenses or requirements pertaining to the protection,
preservation, conservation or regulation of the environment which relates to real property, including: the Clean Air Act, as amended,
42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601
et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act,
as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.;
the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section
300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.

“Indebtedness”
means and includes: (i) all items arising from the borrowing of money that, according to GAAP as in effect from time to time, would
be included in determining total liabilities as shown on the consolidated balance sheet of Company or any Subsidiary of Company;
and (ii) all obligations secured by any lien on property owned by Company or any Subsidiary whether or not such obligations shall
have been assumed; provided, however, Indebtedness shall not include deposits or other Indebtedness created, incurred
or maintained in the ordinary course of Company’s or Bank’s business (including, without limitation, federal funds
purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by Company or
Bank and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.

“Leases”
means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all
amendments, extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate
agreements relating thereto.

“Material
Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably likely to
be material and adverse to the financial position, results of operations or business of such Person, or (ii) would materially impair
the ability of any Person to perform its respective obligations under any of the Transaction Documents, or otherwise materially
impede the consummation of the transactions contemplated hereby; provided, however, that “Material Adverse
Effect” shall not be deemed to include the impact of (1) changes in banking and similar laws, rules or regulations of general
applicability or interpretations thereof by Governmental Agencies, (2) changes in GAAP or regulatory accounting requirements applicable
to financial institutions and their holding companies generally, (3) changes after the date of this Agreement in general economic
or capital market conditions affecting financial institutions or their market prices generally and not specifically related to
Company, Bank, or Purchasers, (4) direct effects of compliance with this Agreement on the operating performance of Company, Bank,
or Purchasers, including expenses incurred by Company, Bank, or Purchasers in consummating the transactions contemplated by this
Agreement, and (5) the effects of any action or omission taken by Company or Bank with the prior written consent of Purchasers,
and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Notes.

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“Maturity
Date” means October 15, 2026.

“Person”
means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an
association, a trust, an unincorporated organization, a government or any department or agency thereof (including a Governmental
Agency) or any other entity or organization.

“Placement
Agent” has the meaning set forth in the Recitals.

“Property”
means any real property owned or leased by Company or any Affiliate or Subsidiary of Company.

“Purchaser”
or “Purchasers” has the meaning set forth in the preamble hereto.

“Regulation
D” has the meaning set forth in the Recitals.

“Regulatory
Agencies” means any federal or state agency charged with the supervision or regulation of depository institutions or
holding companies of depository institutions, or engaged in the insurance of depository institution deposits, or any court, administrative
agency or commission or other authority, body or agency having supervisory or regulatory authority with respect to Company, Bank
or any of their Subsidiaries.

“Secondary
Market Transaction” has the meaning set forth in Section 5.5.

“Securities
Act” has the meaning set forth in the Recitals.

“Subordinated
Note” means the Subordinated Note (or collectively, the “Subordinated Notes”) in the form attached
as Exhibit A hereto, as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered
in substitution or exchange for such Subordinated Note.

“Subordinated
Note Amount” has the meaning set forth in the Recitals.

“Subsidiary”
means with respect to any Person, any corporation or entity in which a majority of the outstanding Equity Interest is directly
or indirectly owned by such Person.

“Tier 2
Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 225 and 12 C.F.R. Part 250,
as amended, modified and supplemented and in effect from time to time or any replacement thereof.

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“Transaction
Documents” has the meaning set forth in Section 3.2.1.1.

1.2 

Interpretations.
The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words “hereof”,
“herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement. The word “including” when used in this Agreement
without the phrase “without limitation,” shall mean “including, without limitation.” All references to
time of day herein are references to Eastern Time unless otherwise specifically provided. All references to this Agreement and
the Subordinated Notes shall be deemed to be to such documents as amended, modified or restated from time to time. With respect
to any reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all
heirs, legal representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document,
instrument or agreement, then it shall also include any replacement, extension or other modification thereof.

1.3 

Exhibits Incorporated.
All Exhibits attached are hereby incorporated into this Agreement.

2. 

SUBORDINATED
DEBT.

2.1 

Certain Terms.
Subject to the terms and conditions herein contained, Company proposes to issue and sell to the Purchasers, severally and not jointly,
Subordinated Notes in an amount equal to the aggregate of the Subordinated Note Amounts. Purchasers, severally and not jointly,
each agree to purchase the Subordinated Notes from Company on the Closing Date in accordance with the terms of, and subject to
the conditions and provisions set forth in, this Agreement and the Subordinated Notes. The Subordinated Note Amounts shall be disbursed
in accordance with Section 3.1. The Subordinated Notes shall bear interest per annum as set forth in the Subordinated Notes.
The unpaid principal balance of the Subordinated Notes plus all accrued but unpaid interest thereon shall be due and payable on
the Maturity Date, or such earlier date on which such amount shall become due and payable on account of (i) acceleration by Purchasers
in accordance with the terms of the Subordinated Notes and this Agreement or (ii) Company’s delivery of a notice of redemption
or repayment in accordance with the terms of the Subordinated Notes.

2.2 

Subordination. The Subordinated
Notes shall be subordinated in accordance with the subordination provisions set forth therein.

2.3 

Maturity Date.
On the Maturity Date, all sums due and owing under this Agreement and the Subordinated Notes shall be repaid in full. Company acknowledges
and agrees that Purchasers have not made any commitments, either express or implied, to extend the terms of the Subordinated Notes
past their Maturity Date, and shall not extend such terms beyond the Maturity Date unless Company and Purchasers hereafter specifically
otherwise agree in writing.

2.4 

Unsecured Obligations.
The obligations of Company to Purchasers under the Subordinated Notes shall be unsecured.

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2.5 

The Closing.
The execution and delivery of the Transaction Documents (the “Closing”) shall occur at the offices of Company
at 10:00 a.m. (local time) on the Closing Date, or at such other place or time or on such other date as the parties hereto may
agree.

2.6 

Payments.
Company agrees that matters concerning payments and application of payments shall be as set forth in this Agreement and in the
Subordinated Notes.

2.7 

Right of Offset.
Each Purchaser hereby expressly waives any right of offset it may have against Company.

2.8 

Use of Proceeds.
Company shall use the net proceeds from the sale of Subordinated Notes for general corporate purposes, investment in Bank, and
to redeem and retire outstanding preferred securities of Bank.

3. 

DISBURSEMENT.

3.1 

Disbursement.
On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by Company and
Company has executed and delivered to each of the Purchasers this Agreement and such Purchaser’s Subordinated Note and any
other related documents in form and substance reasonably satisfactory to Purchasers, each Purchaser shall disburse the Subordinated
Note Amount in immediately available funds set forth on such Purchaser’s signature page to Company in exchange for a Subordinated
Note with a principal amount equal to such Subordinated Note Amount (the “Disbursement”). The Company will deliver
to the respective Purchaser one or more certificates representing the Subordinated Notes in definitive form (or provide evidence
of the same with the original to be delivered by the Company by overnight delivery on the next calendar day in accordance with
the delivery instructions of Purchaser), registered in such names and denominations as such Purchasers may request.

3.2 

Conditions Precedent
to Disbursement.

3.2.1 

Conditions
to the Purchasers’ Obligation. The obligation of each Purchaser to consummate the purchase of the Subordinated Notes
to be purchased by them at Closing and to effect the Disbursement is subject to the fulfillment of or delivery by or at the direction
of the Company to such Purchaser, on or prior to the applicable Closing Date, of each of the following (or written waiver by such
Purchaser prior to the Closing of such delivery):

3.2.1.1 

Transaction
Documents. This Agreement and the Subordinated Notes (collectively, the “Transaction Documents”), each
duly authorized and executed by Company.

3.2.1.2 

Authority Documents.

(a) 

A copy, certified
by the Secretary or Assistant Secretary of Company, of the Articles of Incorporation of Company and all amendments thereto;

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(b) 

A certificate
of existence of Company issued by the Secretary of State of the State of North Carolina;

(c) 

A copy, certified
by the Secretary or Assistant Secretary, of the Bylaws of Company and all amendments thereto;

(d) 

A copy, certified
by the Secretary or Assistant Secretary of Company, of the resolutions of the board of directors of Company, and any committee
thereof, authorizing the execution, delivery and performance of the Transaction Documents;

(e) 

An incumbency
certificate of the Secretary or Assistant Secretary of Company certifying the names of the officer or officers of Company authorized
to sign the Transaction Documents and the other documents provided for in this Agreement; and

(f) 

The opinion
of Wyrick Robbins Yates & Ponton LLP, counsel to the Company, dated as of the Closing Date, substantially in the form set forth
at Exhibit B attached hereto addressed to the Purchasers and Placement Agent.

3.2.1.3 

Other Requirements.
Such other additional information regarding Company, Bank and any other Subsidiary of Company and their respective assets, liabilities
(including any liabilities arising from, or relating to, legal proceedings) and contracts as a Purchaser may reasonably require.

3.2.1.4 

Aggregate Investments.
Each Purchaser shall have actually subscribed for the Subordinated Note Amount set forth on such Purchaser’s signature page.

3.2.1.5 

Representations
and Warranties. The representations and warranties made by Company in Section 4 hereof shall have been true and correct
when made, and shall be true and correct on the Closing Date.

3.2.1.6 

Covenants.
All covenants, agreements and conditions contained in this Agreement to be performed by Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.

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3.2.2 

Conditions
to Company’s Obligation.

3.2.2.1 

Since the date of
this Agreement, there shall not have been any action taken, or any law, rule or regulation enacted, entered, enforced or deemed
applicable to Company or its Subsidiaries or the transactions contemplated by this Agreement by any Governmental Agency which imposes
any restriction or condition that Company determines, in its reasonable good faith judgment, is materially and unreasonably burdensome
on Company’s business or would materially reduce the economic benefits of the transactions contemplated by this Agreement
to Company to such a degree that Company would not have entered into this Agreement had such condition or restriction been known
to it on the date hereof.

3.2.2.2 

With respect to a
given Purchaser, the obligation of Company to consummate the sale of the Subordinated Notes and to effect the Closing is subject
to delivery by or at the direction of such Purchaser to Company of this Agreement, duly authorized and executed by such Purchaser.

4. 

REPRESENTATIONS
AND WARRANTIES OF COMPANY.

Company hereby represents
and warrants to each Purchaser as follows:

4.1 

Organization
and Authority.

4.1.1 

Organization
Matters of Company and Its Subsidiaries.

4.1.1.1 

Company is a bank
holding company registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company Act and is
registered with the North Carolina Office of the Commissioner of Banks under the North Carolina Bank Holding Company Act. Company
is a business corporation validly existing and in good standing under the laws of the State of North Carolina and has all requisite
corporate power and authority to conduct its business and activities as presently conducted, to own its properties, and to perform
its obligations under the Transaction Documents. Company is duly qualified as a foreign corporation to transact business and is
in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.

4.1.1.2 

Each Subsidiary of
Company either has been duly organized and is validly existing as a corporation or limited liability company, or has been duly
chartered and is validly existing as a North Carolina chartered bank, in each case in good standing under the laws of the jurisdiction
of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business and
is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification
is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse Effect. All of the issued and outstanding shares of
capital stock or other equity interests in each Subsidiary of the Company have been duly authorized and validly issued, are fully
paid and non-assessable and, with the exception of Bank’s Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A,
are owned by Company, directly or through Subsidiaries of the Company, free and clear of any security interest, mortgage, pledge,
lien, encumbrance or claim; none of the outstanding shares of capital stock of, or other equity interests in, any Subsidiary of
the Company were issued in violation of the preemptive or similar rights of any security holder of such Subsidiary of the Company
or any other entity.

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4.1.1.3 

Bank is a North Carolina
chartered bank. The deposit accounts of Bank are insured by the FDIC up to applicable limits. Bank has not received any notice
or other information indicating that Bank is not an “insured depository institution” as defined in 12 U.S.C. Section
1813, nor has any event occurred which could reasonably be expected to adversely affect the status of Bank as an FDIC-insured institution.

4.1.2 

Capital Stock
and Related Matters. The Articles of Incorporation of Company authorize Company to issue 10,000,000 shares of common stock
and 1,000,000 shares of preferred stock. As of the date of this Agreement, there are 4,650,558 shares of the Company’s common
stock issued and outstanding and no shares of Company’s preferred stock have been issued and outstanding. All of the outstanding
capital stock of Company has been duly authorized and validly issued and is fully paid and non-assessable. There are, as of the
date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating Company to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital stock of Company or obligating Company to grant,
extend or enter into any such agreement or commitment to any Person other than Company except pursuant to Company’s equity
incentive plans duly adopted by Company’s Board of Directors.

4.2 

No Impediment
to Transactions.

4.2.1 

Transaction
is Legal and Authorized. The issuance of the Subordinated Notes, the borrowing of the aggregate of the Subordinated Note
Amounts, the execution of the Transaction Documents and compliance by Company with all of the provisions of the Transaction Documents
are within the corporate and other powers of Company.

4.2.2 

Agreement.
This Agreement has been duly authorized, executed and delivered, and, assuming due authorization, execution and delivery by the
other parties hereto, constitutes the legal, valid and binding obligations of Company, enforceable in accordance with its terms,
except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating
to or affecting creditors’ rights generally or by general equitable principles.

4.2.3 

Subordinated
Notes. The Subordinated Notes have been duly authorized by the Company and when executed by the Company and issued, delivered
to and paid for by the Purchasers in accordance with the terms of the Agreement, will have been duly executed, issued and
delivered, and will constitute legal, valid and binding obligations of Company, enforceable in accordance with their terms, except
as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors’ rights generally or by general equitable principles.

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4.2.4 

No Defaults
or Restrictions. Neither the execution and delivery of the Transaction Documents nor compliance with their respective terms
and conditions will (whether with or without the giving of notice or lapse of time or both) (i) violate, conflict with or result
in a breach of, or constitute a default under: (1) the Articles of Incorporation or Bylaws of Company; (2) any of the terms, obligations,
covenants, conditions or provisions of any corporate restriction or of any contract, agreement, indenture, mortgage, deed of trust,
pledge, bank loan or credit agreement, or any other agreement or instrument to which Company or Bank, as applicable, is now a party
or by which it or any of its properties may be bound or affected; (3) any judgment, order, writ, injunction, decree or demand of
any court, arbitrator, grand jury, or Governmental Agency; or (4) any statute, rule or regulation applicable to Company, except,
in the case of items (2), (3) or (4), for such violations and conflicts that would not reasonably be expected to have, singularly
or in the aggregate, a Material Adverse Effect on Company, or (ii) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any property or asset of Company. Neither the Company nor the Bank is in default in the
performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture
or other agreement creating, evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued,
or any other agreement or instrument to which Company or Bank, as applicable, is a party or by which Company or Bank, as applicable,
or any of its properties may be bound or affected, except, in each case, only such defaults that would not reasonably be expected
to have, singularly or in the aggregate, a Material Adverse Effect on Company.

4.2.5 

Governmental
Consent. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained by Company
that have not been obtained, and no registrations or declarations are required to be filed by Company that have not been filed
in connection with, or, in contemplation of, the execution and delivery of, and performance under, the Transaction Documents, except
for applicable requirements, if any, of the Securities Act, the Exchange Act or state securities laws or “blue sky”
laws of the various states and any applicable federal or state banking laws and regulations.

4.3 

Possession of
Licenses and Permits. Each of Company and its Subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary
to conduct the business now operated by it except where the failure to possess such Governmental Licenses would not, singularly
or in the aggregate, have a Material Adverse Effect on Company or such applicable Subsidiary; Company and each Subsidiary of Company
is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not,
individually or in the aggregate, have a Material Adverse Effect on Company or such applicable Subsidiary of Company; all of the
Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect on Company or such
applicable Subsidiary of Company; and neither Company nor any Subsidiary of Company has received any notice of proceedings relating
to the revocation or modification of any such Governmental Licenses.

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4.4 

Financial Condition.

4.4.1 

Company Financial
Statements. The financial statements of Company included in Company’s Reports (including the related notes, where
applicable), which have been provided to Purchasers (i) have been prepared from, and are in accordance with, the books and records
of Company; (ii) fairly present in all material respects the results of operations, cash flows, changes in stockholders’
equity and financial position of Company and its consolidated Subsidiaries, for the respective fiscal periods or as of the respective
dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and
amount), as applicable; (iii) complied as to form, as of their respective dates of filing in all material respects with applicable
accounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently
applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and
records of Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable
legal and accounting requirements. Company does not have any material liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against
on the consolidated balance sheet of Company contained in Company’s Reports for Company’s most recently completed quarterly
or annual fiscal period, as applicable, and for liabilities incurred in the ordinary course of business consistent with past practice
or in connection with this Agreement and the transactions contemplated hereby.

4.4.2 

Absence of
Default. Since the date of the latest audited financial statements, no event has occurred which either of itself or with
the lapse of time or the giving of notice or both, would give any creditor of Company the right to accelerate the maturity of any
material Indebtedness of Company. Company is not in default under any other Lease, agreement or instrument, or any law, rule, regulation,
order, writ, injunction, decree, determination or award, non-compliance with which could reasonably be expected to result in a
Material Adverse Effect on Company.

4.4.3 

Solvency.
After giving effect to the consummation of the transactions contemplated by this Agreement, Company has capital sufficient to carry
on its business and transactions and is solvent and able to pay its debts as they mature. No transfer of property is being made
and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder,
delay or defraud either present or future creditors of Company or any Subsidiary of Company.

4.4.4 

Ownership of
Property. Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and good
title to all assets and properties owned by Company and such Subsidiary in the conduct of its businesses, whether such assets and
properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet
contained in Company’s Reports or acquired subsequent thereto (except to the extent that such assets and properties have
been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens,
mortgages, security interests or pledges, except (i) those items which secure liabilities for public deposits or statutory obligations
or any discount with, borrowing from or other obligations to the Federal Home Loan Bank, inter-bank credit facilities, reverse
repurchase agreements or any transaction by Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet due or
delinquent or which are being contested in good faith and (iii) such as do not, individually or in the aggregate, materially affect
the value of such property and do not materially interfere with the use made and proposed to be made of such property by Company
or any of its Subsidiaries. Company and each of its Subsidiaries, as lessee, has the right under valid and existing Leases of real
and personal properties that are material to Company or such Subsidiary, as applicable, in the conduct of its business to occupy
or use all such properties as presently occupied and used by it. With the exception of the lease for the Bank’s main
office located at 901 E. Main St., Lincolnton, North Carolina 28092, such existing Leases and commitments to Lease constitute
or will constitute operating Leases for both tax and financial accounting purposes and the Lease expense and minimum rental commitments
with respect to such Leases and Lease commitments are as disclosed in all material respects in Company’s Reports.

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4.5 

No Material Adverse
Change. Since the date of the latest audited financial statements included in Company’s Reports, there has been no
development or event which has had or could reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries.

4.6 

Legal Matters.

4.6.1 

Compliance
with Law. Company and each of its Subsidiaries (i) has complied with and (ii) is not under investigation with respect to,
and, to the Company’s knowledge, has not been threatened to be charged with or given any notice of any material violation
of any applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality
or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, except where any such
failure to comply or violation would not reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries.
Company and each of its Subsidiaries (x) is, and at all times prior to the date hereof has been, compliant with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any Governmental Agency, and their
own privacy policies and written commitments to their respective customers, consumers and employees, concerning data protection
and the privacy and security of personal data and the nonpublic personal information of their respective customers, consumers and
employees, in each case the failure to comply with which would not result, individually or in the aggregate, in a Material Adverse
Effect, and (y) at no time during the two years prior to the date hereof has received any written notice asserting any violations
of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government, or any Governmental Agency,
or their own privacy policy and written commitment to their respective customers, consumers or employees, concerning data protection
or the privacy and security of personal data or the nonpublic personal information of their respective customers, consumers or
employees, in each case the failure to comply with which would not result, individually or in the aggregate, in a Material Adverse
Effect.

4.6.2 

Regulatory
Enforcement Actions. Company, Bank and its other Subsidiaries are in compliance in all material respects with all laws
administered by and regulations of any Governmental Agency applicable to it or to them, the failure to comply with which would
have a Material Adverse Effect. None of Company, Bank, Company’s Subsidiaries nor any of their officers or directors is now
operating under any restrictions, agreements, memoranda, commitment letter, supervisory letter or similar regulatory correspondence,
or other commitments (other than restrictions of general application) imposed by any Governmental Agency, nor are, to Company’s
knowledge, (a) any such restrictions threatened, (b) any agreements, memoranda or commitments being sought by any Governmental
Agency, or (c) any material legal or regulatory violations previously identified by, or penalties or other remedial action previously
imposed by, any Governmental Agency remains unresolved.

    	12 

    	 

    

 

4.6.3 

Pending Litigation.
There are no actions, suits, proceedings or written agreements pending, or, to Company’s knowledge, threatened or proposed,
against Company or any of its Subsidiaries at law or in equity or before or by any federal, state, municipal, or other governmental
department, commission, board, or other administrative agency, domestic or foreign, that, either separately or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries or affect issuance or payment
of the Subordinated Notes; and neither Company nor any of its Subsidiaries is a party to or named as subject to the provisions
of any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or agency, domestic or
foreign, that either separately or in the aggregate, will have a Material Adverse Effect on Company or any of its Subsidiaries.

4.6.4 

Environmental.
No Property is or, to Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release,
threatened release, discharge, disposal, transportation or presence of any Hazardous Materials and neither Company nor any of its
Subsidiaries has engaged in such activities. There are no claims or actions pending or, to Company’s knowledge, threatened
against Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials
or pursuant to any Hazardous Materials Law.

4.6.5 

Brokerage Commissions.
Except for commissions paid to the Placement Agent, neither Company nor any Affiliate of Company is obligated to pay any brokerage
commission or finder’s fee to any Person in connection with the transactions contemplated by this Agreement.

4.6.6 

Investment
Company Act. Neither Company nor any of its Subsidiaries is an “investment company” or a company “controlled”
by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

4.7 

No Misstatement.
No information, exhibit, report, schedule or document, when viewed together as a whole, furnished by Company to Purchasers in connection
with the negotiation, execution or performance of this Agreement contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements contained therein not misleading in light of the circumstances when made
or furnished to Purchasers and as of the Closing Date.

    	13 

    	 

    

 

4.8 

Internal Accounting
Controls. Company, Bank and each other applicable Subsidiary of the Company has established and maintains a system of internal
control over financial reporting that pertains to the maintenance of records that accurately and fairly reflect the transactions
and dispositions of the Company’s assets (on a consolidated basis), provides reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with GAAP and that Company’s and Bank’s receipts
and expenditures are being made only in accordance with authorizations of Company management and Board of Directors, and provides
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the
Company on a consolidated basis that could have a material effect on the financial statements. Such internal control over financial
reporting is effective to provide reasonable assurance regarding the reliability of the Company’s financial reporting and
the preparation of the Company’s financial statements for external purposes in accordance with GAAP. Since the conclusion
of the Company’s last completed fiscal year there has not been and there currently is not (i) any significant deficiency
or material weakness in the design or operation of its internal control over financial reporting which are reasonably likely to
adversely affect its ability to record, process, summarize and report financial information, or (ii) any fraud, whether or
not material, that involves management or other employees who have a role in the Company’s or Bank’s internal control
over financial reporting. The Company (A) has implemented and maintains disclosure controls and procedures reasonably designed
and maintained to ensure that material information relating to the Company is made known to the Chief Executive Officer and the
Chief Financial Officer of the Company by others within the Company and (B) has disclosed, based on its most recent evaluation
prior to the date hereof, to the Company’s outside auditors and the audit committee of the Company’s Board of Directors
(x) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect the Company’s internal controls over financial reporting. Such disclosure
controls and procedures are effective for the purposes for which they were established.

4.9 

Representations
and Warranties Generally. The representations and warranties of the Company set forth in this Agreement in any certificate
or other document delivered to Purchasers by or on behalf of Company pursuant to or in connection with this Agreement are true
and correct as of the date hereof and will be true and correct as of the Closing Date and as otherwise specifically provided herein
or therein. None of the representations, warranties, covenants and agreements made in this Agreement or in any certificate or other
document delivered to Purchasers by or on behalf of Company pursuant to or in connection with this Agreement contains any untrue
statement of a material fact or omits to state a material fact or any fact necessary to make the statements contained therein not
misleading in light of the circumstances when made and as of the Closing Date. 

5. 

GENERAL COVENANTS,
CONDITIONS AND AGREEMENTS.

Company hereby further
covenants and agrees with each Purchaser as follows:

5.1 

Compliance with
Transaction Documents. Company shall comply with, observe and timely perform each and every one of the covenants, agreements
and obligations under the Transaction Documents.

5.2 

Affiliate Transactions.
Company shall not itself, nor shall it cause, permit or allow any of its Subsidiaries to enter into any transaction, including,
the purchase, sale or exchange of property or the rendering of any service, with any Affiliate of Company except in the ordinary
course of business and pursuant to the reasonable requirements of Company’s or such Affiliate’s business and upon terms
consistent with applicable laws and regulations and reasonably found by the appropriate board(s) of directors to be fair and reasonable
and no less favorable to Company or such Affiliate than would be obtained in a comparable arm’s length transaction with a
Person not an Affiliate.

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5.3 

Compliance with
Laws.

5.3.1 

Generally.
Company shall comply and cause Bank and each of its other Subsidiaries to comply in all material respects with all applicable statutes,
rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties, except,
in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on Company.

5.3.2 

Regulated Activities.
Company shall not itself, nor shall it cause, permit or allow Bank or any other of its Subsidiaries to (i) engage in any business
or activity not permitted by all applicable laws and regulations, except where such business or activity would not reasonably be
expected to have a Material Adverse Effect on Company, Bank and/or such of its Subsidiaries or (ii) make any loan or advance secured
by the capital stock of another bank or depository institution, or acquire the capital stock, assets or obligations of or any interest
in another bank or depository institution, in each case other than in accordance with applicable laws and regulations and safe
and sound banking practices.

5.3.3 

Taxes.
Company shall and shall cause Bank and any other of its Subsidiaries to promptly pay and discharge all taxes, assessments and other
governmental charges imposed upon Company, Bank or any other of its Subsidiaries or upon the income, profits, or property of Company
or any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the
property of Company, Bank or any other of its Subsidiaries. Notwithstanding the foregoing, none of Company, Bank or any other of
its Subsidiaries shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof shall be contested
in good faith by appropriate proceedings, and appropriate reserves therefor shall be maintained on the books of Company, Bank and
such other Subsidiary.

5.3.4 

Corporate Existence.
Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and
that of Bank and the other Subsidiaries and its and their rights and franchises, and comply in all material respects with all related
laws applicable to Company, Bank or the other Subsidiaries.

5.3.5 

Dividends,
Payments, and Guarantees During Event of Default. Upon the occurrence of a failure by Company to make any required payment
of principal or interest on the Subordinated Notes or of an Event of Default (as defined under the Subordinated Notes) until such
failure or Event of Default is cured, except as required by any federal or state Governmental Agency, Company shall not (a) declare
or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its
capital stock; (b) make any payment of principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of
Company’s Indebtedness that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee
that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, any class of Company’s common stock; (ii) any declaration of a
non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any
such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification
of Company’s capital stock or the exchange or conversion of one class or series of Company’s capital stock for another
class or series of Company’s capital stock; (iv) the purchase of fractional interests in shares of Company’s capital
stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or
(v) purchases of any class of Company’s common stock related to the issuance of common stock or rights under any benefit
plans for Company’s directors, officers or employees or any of Company’s dividend reinvestment plans.

    	15 

    	 

    

 

5.3.6 

Tier 2 Capital.
If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed
on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated
Notes, Company will immediately notify the Noteholder (as defined in the Subordinated Note), and thereafter Company and the Noteholder
(as defined in the Subordinated Note) will work together in good faith to execute and deliver all agreements as reasonably necessary
in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital.

5.4 

Absence of Control.
It is the intent of the parties to this Agreement that in no event shall Purchasers, by reason of any of the Transaction Documents,
be deemed to control, directly or indirectly, Company, and Purchasers shall not exercise, or be deemed to exercise, directly or
indirectly, a controlling influence over the management or policies of Company 

5.5 

Secondary Market
Transactions. Each Purchaser shall have the right at any time and from time to time to securitize its Subordinated Notes
or any portion thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities
secured by or evidencing ownership interests in the Subordinated Notes (each such securitization is referred to herein as a “Secondary
Market Transaction”). In connection with any such Secondary Market Transaction, Company shall, at Company’s expense,
cooperate with Purchasers and otherwise reasonably assist Purchasers in satisfying the market standards to which Purchasers customarily
adhere or which may be reasonably required in the marketplace or by applicable rating agencies in connection with any such Secondary
Market Transaction. Subject to any written confidentiality obligation, all information regarding Company may be furnished, without
liability except in the case of gross negligence or willful misconduct, to any Purchaser and to any Person reasonably deemed necessary
by Purchaser in connection with participation in such Secondary Market Transaction. All documents, financial statements, appraisals
and other data relevant to Company or the Subordinated Notes may be retained by any such Person.

5.6 

Bloomberg and
DTC. Company shall use commercially reasonable efforts to cause the Subordinated Notes to be quoted on Bloomberg and to
be registered in the name of The Depository Trust Company.

5.7 

Rule 144A Information.
While any Subordinated Notes remain “restricted securities” within the meaning of the Securities Act, the Company will
make available, upon request, to any seller of such Subordinated Notes the information specified in Rule 144A(d)(4) under the Securities
Act, unless the Company is then subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended.

    	16 

    	 

    

 

5.8 

DTC Registration.
The Company shall use commercially reasonable efforts to cause the Subordinated Notes held by Qualified Institutional Buyers as
defined in Rule 144A of the Securities Act to be registered in the name of Cede & Co. as nominee of The Depository Trust Company
(“DTC”) or a nominee of DTC.

6. 

REPRESENTATIONS,
WARRANTIES AND COVENANTS OF PURCHASERS.

Each Purchaser hereby
represents and warrants to Company, and covenants with Company, severally and not jointly, as follows:

6.1 

Legal Power and
Authority. It has all necessary power and authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. It is an entity duly organized, validly existing and in good standing under
the laws its jurisdiction of organization.

6.2 

Authorization
and Execution. The execution, delivery and performance of this Agreement has been duly authorized by all necessary action
on the part of such Purchaser, and this Agreement has been duly authorized, executed and delivered, and, assuming due authorization,
execution and delivery by the other parties hereto, is a legal, valid and binding obligation of such Purchaser, enforceable against
such Purchaser in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

6.3 

No Conflicts.
Neither the execution, delivery or performance of the Transaction Documents nor the consummation of any of the transactions contemplated
thereby will conflict with, violate, constitute a breach of or a default (whether with or without the giving of notice or lapse
of time or both) under (i) its organizational documents, (ii) any agreement to which it is party, (iii) any law applicable to it
or (iv) any order, writ, judgment, injunction, decree, determination or award binding upon or affecting it.

6.4 

Purchase for
Investment. It is purchasing the Subordinated Note for its own account and not with a view to distribution and with no
present intention of reselling, distributing or otherwise disposing of the same. It has no present or contemplated agreement, undertaking,
arrangement, obligation, Indebtedness or commitment providing for, or which is likely to compel, a disposition of the Subordinated
Notes in any manner.

6.5 

Institutional
Accredited Investor. It is and will be on the Closing Date an institutional “accredited investor” as such term
is defined in Rule 501(a) of Regulation D and as contemplated by subsections (1), (2), (3) and (7) of Rule 501(a) of Regulation
D, and has no less than $5,000,000 in total assets.

6.6 

Financial and
Business Sophistication. It has such knowledge and experience in financial and business matters that it is capable of evaluating
the merits and risks of the prospective investment in the Subordinated Notes. It has relied solely upon its own knowledge of, and/or
the advice of its own legal, financial or other advisors with regard to, the legal, financial, tax and other considerations involved
in deciding to invest in the Subordinated Notes.

    	17 

    	 

    

 

6.7 

Ability to Bear
Economic Risk of Investment. It recognizes that an investment in the Subordinated Notes involves substantial risk. It has
the ability to bear the economic risk of the prospective investment in the Subordinated Notes, including the ability to hold the
Subordinated Notes indefinitely, and further including the ability to bear a complete loss of all of its investment in Company.

6.8 

Information.
It acknowledges that: (i) it is not being provided with the disclosures that would be required if the offer and sale of the Subordinated
Notes were registered under the Securities Act, nor is it being provided with any offering circular or prospectus prepared in connection
with the offer and sale of the Subordinated Notes; (ii) it has conducted its own examination of Company and the terms of the Subordinated
Notes to the extent it deems necessary to make its decision to invest in the Subordinated Notes; and (iii) it has availed itself
of publicly available financial and other information concerning Company to the extent it deems necessary to make its decision
to purchase the Subordinated Notes. It has reviewed the information set forth in Company’s Reports and the exhibits and schedules
hereto and contained in the data room established by Company on September 19, 2016.

6.9 

Access to Information.
It acknowledges that it and its advisors have been furnished with all materials relating to the business, finances and operations
of Company that have been requested by it or its advisors and have been given the opportunity to ask questions of, and to receive
answers from, persons acting on behalf of Company concerning terms and conditions of the transactions contemplated by this Agreement
in order to make an informed and voluntary decision to enter into this Agreement.

6.10 

Investment Decision.
It has made its own investment decision based upon its own judgment, due diligence and advice from such advisors as it has deemed
necessary and not upon any view expressed by any other person or entity, including the Placement Agent. Neither such inquiries
nor any other due diligence investigations conducted by it or its advisors or representatives, if any, shall modify, amend or affect
its right to rely on Company’s representations and warranties contained herein. It is not relying upon, and has not relied
upon, any advice, statement, representation or warranty made by any Person by or on behalf of Company, including, without limitation,
the Placement Agent, except for the express statements, representations and warranties of Company made or contained in this Agreement.
Furthermore, it acknowledges that (i) the Placement Agent has not performed any due diligence review on behalf of it and (ii) nothing
in this Agreement or any other materials presented by or on behalf of Company to it in connection with the purchase of the Subordinated
Notes constitutes legal, tax or investment advice.

6.11 

Private Placement;
No Registration; Restricted Legends. It understands and acknowledges that the Subordinated Notes are being sold by Company
without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively,
Rule 506(b) of Regulation D under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any state securities
laws, and accordingly, may be resold, pledged or otherwise transferred only if exemptions from the Securities Act and applicable
state securities laws are available to it. It is not subscribing for the Subordinated Notes as a result of or subsequent to any
advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television
or radio, or presented at any seminar or meeting. It further acknowledges and agrees that all certificates or other instruments
representing the Subordinated Notes will bear the restrictive legend set forth in the form of Subordinated Note. It further acknowledges
its primary responsibilities under the Securities Act and, accordingly, will not sell or otherwise transfer the Subordinated Notes
or any interest therein without complying with the requirements of the Securities Act and the rules and regulations promulgated
thereunder and the requirements set forth in this Agreement.

    	18 

    	 

    

 

6.12 

Placement Agent.
It will purchase the Subordinated Note(s) directly from Company and not from the Placement Agent and understands that neither the
Placement Agent nor any other broker or dealer has any obligation to make a market in the Subordinated Notes.

6.13 

Tier 2 Capital.
If all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed
on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated
Notes, Company will immediately notify the Purchasers, and thereafter Company and the Purchasers will work together in good faith
to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations
evidenced by the Subordinated Notes to qualify as Tier 2 Capital.

6.14 

Accuracy of Representations.
It understands that each of the Placement Agent and Company will rely upon the truth and accuracy of the foregoing representations,
acknowledgements and agreements in connection with the transactions contemplated by this Agreement, and agrees that if any of the
representations or acknowledgements made by it are no longer accurate as of the Closing Date, or if any of the agreements made
by it are breached on or prior to the Closing Date, it shall promptly notify the Placement Agent and Company.

6.15 

Representations
and Warranties Generally. The representations and warranties of Purchaser set forth in this Agreement are true and correct
as of the date hereof and will be true and correct as of the Closing Date and as otherwise specifically provided herein. Any certificate
signed by a duly authorized representative of Purchaser and delivered to the Company or to counsel for Company shall be deemed
to be a representation and warranty by Purchaser to Company as to the matters set forth therein.

7. 

Intentionally
omitted.

8. 

MISCELLANEOUS.

8.1 

Prohibition on
Assignment by Company. Except as described in Section 8(b) (Merger or Sale of Assets) of the Subordinated Notes, Company
may not assign, transfer or delegate any of its rights or obligations under this Agreement or the Subordinated Notes without the
prior written consent of Purchasers. In addition, in accordance with the terms of the Subordinated Notes, any transfer of such
Subordinated Notes must be made in accordance with the Assignment Form attached thereto and the requirements and restrictions thereof.

8.2 

Time of the Essence.
Time is of the essence of this Agreement.

    	19 

    	 

    

 

8.3 

Waiver or Amendment.
No waiver or amendment of any term, provision, condition, covenant or agreement herein or in the Subordinated Notes shall be effective
except with the consent of the holders of not less than more than fifty percent (50%) in aggregate principal amount (excluding
any Subordinated Notes held by Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided,
however, that without the consent of each holder of an affected Subordinated Note, no such amendment or waiver may: (i)
reduce the principal amount of the Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any
Subordinated Note; (iii) extend the maturity of any Subordinated Note, (iv) change the currency in which payment of the obligations
of Company under this Agreement and the Subordinated Notes are to be made; or (v) lower the percentage of aggregate principal amount
of outstanding Subordinated Notes required to approve any amendment of this Agreement or the Subordinated Notes, (vi) make any
changes to Section 6 (Failure to Make a Payments) of the Subordinated Notes that adversely affects the rights of any holder of
a Subordinated Note; or (vii) disproportionately affect any of the holders of the then outstanding Subordinated Notes. Notwithstanding
the foregoing, Company may amend or supplement the Subordinated Notes without the consent of the holders of the Subordinated Notes
to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of
certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any holder of any of the Subordinated
Notes. No failure to exercise or delay in exercising, by a Purchaser or any holder of the Subordinated Notes, of any right, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege
preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand
on Company in any case shall, in itself, entitle Company to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of Purchasers to any other or further action in any circumstances without notice or demand.
No consent or waiver, expressed or implied, by Purchasers to or of any breach or default by Company in the performance of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the
same or any other obligations of Company hereunder. Failure on the part of Purchasers to complain of any acts or failure to act
or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Purchasers
of their rights hereunder or impair any rights, powers or remedies on account of any breach or default by Company.

8.4 

Severability.
Any provision of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely
affect the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms
and provisions of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though
any such invalid portion had never been included herein. Notwithstanding any of the foregoing to the contrary, if any provisions
of this Agreement or the application thereof are held invalid or unenforceable only as to particular persons or situations, the
remainder of this Agreement, and the application of such provision to persons or situations other than those to which it shall
have been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest
extent permitted by law.

8.5 

Notices.
Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing
and if delivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested,
or if delivered by a responsible overnight commercial courier promising next business day delivery, addressed:

    	20 

    	 

    

 

	if to Company:	
        Carolina Trust BancShares, Inc.

        901 East Main Street

        Lincolnton, North Carolina 28092

        Attention: Jerry L. Ocheltree, President

	 	 
	with a copy to:	
        Wyrick Robbins Yates & Ponton LLP

        4101 Lake Boone Trail, Suite 300

        Raleigh, North Carolina 27607

        Attention: Todd H. Eveson

	 	 
	if to Purchasers:	To the address indicated on such Purchaser’s signature page.

or to such other address or addresses as
the party to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for the
giving of notice; provided that no change in address shall be effective until five (5) Business Days after being given to the other
party in the manner provided for above. Any notice given in accordance with the foregoing shall be deemed given when delivered
personally or, if mailed, three (3) Business Days after it shall have been deposited in the United States mails as aforesaid or,
if sent by overnight courier, the Business Day following the date of delivery to such courier (provided next business day delivery
was requested).

8.6 

Successors and
Assigns. This Agreement shall inure to the benefit of the parties and their respective heirs, legal representatives, successors
and assigns; except that, unless a Purchaser consents in writing, no assignment made by Company in violation of this Agreement
shall be effective or confer any rights on any purported assignee of Company. The term “successors and assigns” will
not include a purchaser of any of the Subordinated Notes from any Purchaser merely because of such purchase.

8.7 

No Joint Venture.
Nothing contained herein or in any document executed pursuant hereto and no action or inaction whatsoever on the part of a Purchaser,
shall be deemed to make a Purchaser a partner or joint venturer with Company.

8.8 

Documentation.
All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to a Purchaser
shall be in form and substance satisfactory to such Purchaser.

8.9 

Entire Agreement.
This Agreement and the Subordinated Notes along with the Exhibits thereto constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and may not be modified or amended in any manner other than by supplemental written agreement
executed by the parties hereto. No party, in entering into this Agreement, has relied upon any representation, warranty, covenant,
condition or other term that is not set forth in this Agreement or in the Subordinated Notes.

    	21 

    	 

    

 

8.10 

Choice of Law.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to
its laws or principles of conflict of laws (except Sections 5-1401 and 5-1402 of the New York General Obligations Law). Nothing
herein shall be deemed to limit any rights, powers or privileges which a Purchaser may have pursuant to any law of the United States
of America or any rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful
any transaction or conduct by a Purchaser which is lawful pursuant to, or which is permitted by, any of the foregoing.

8.11 

No Third Party
Beneficiary. This Agreement is made for the sole benefit of Company and the Purchasers, and no other person shall be deemed
to have any privity of contract hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any
other person have any right of action of any kind hereon or be deemed to be a third party beneficiary hereunder; provided,
that the Placement Agent may rely on the representations and warranties contained herein to the same extent as if it were a party
to this Agreement.

8.12 

Legal Tender
of United States. All payments hereunder shall be made in coin or currency which at the time of payment is legal tender
in the United States of America for public and private debts.

8.13 

Captions; Counterparts.
Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions. This
Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the
same instrument. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile signature page were an original thereof.

8.14 

Knowledge; Discretion.
All references herein to Purchaser’s or Company’s knowledge shall be deemed to mean the knowledge of such party based
on the actual knowledge of such party’s Chief Executive Officer and Chief Financial Officer or such other persons holding
equivalent offices. Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by
a Purchaser, to the making of a determination or designation by a Purchaser, to the application of a Purchaser’s discretion
or opinion, to the granting or withholding of a Purchaser’s consent or approval, to the consideration of whether a matter
or thing is satisfactory or acceptable to a Purchaser, or otherwise involving the decision making of a Purchaser, shall be deemed
to mean that such Purchaser shall decide using the reasonable discretion or judgment of a prudent lender.

8.15 

Waiver Of Right
To Jury Trial. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION
DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF COMPANY OR PURCHASERS. THE PARTIES ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED
IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL.
THE PARTIES FURTHER ACKNOWLEDGE THAT (I) THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (II) THIS
WAIVER HAS BEEN REVIEWED BY THE PARTIES AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (III)
THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

    	22 

    	 

    

 

8.16 

Expenses.
Except as otherwise provided in this Agreement, each of the parties will bear and pay all other costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated pursuant to this Agreement.

8.17 

Survival.
Each of the representations and warranties set forth in this Agreement shall survive the consummation of the transactions contemplated
hereby for a period of one year after the date hereof. Except as otherwise provided herein, all covenants and agreements contained
herein shall survive until, by their respective terms, they are no longer operative.

[Signature Pages Follow]

    	23 

    	 

    

 

IN WITNESS WHEREOF,
Company has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the date
first above written.

	 	
        COMPANY:

         

        CAROLINA TRUST BANCSHARES, INC.

         

	 	 	 
	 	By:	 
	 	 	
        Name:  Jerry L. Ocheltree

        Title:    President &
        Chief Executive Officer

 

    	[Company Signature Page to Subordinated Note Purchase Agreement]

    	 

    

 

IN WITNESS WHEREOF,
the Purchaser has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the
date first above written.

	 	
        PURCHASER:

        [NAME OF PURCHASER]

         

	 	By:	 
	 	 	
        Name:  [●]

        Title:    [●]

	 	 	 
	 	
        Address of Purchaser:

        [●]

	 	 	 
	 	
        Principal Amount of Purchased Subordinated
        Note:

        $[●]

 

 

    	[Purchaser Signature Page to Subordinated Note Purchase Agreement]Exhibit 10.1

 

INVESTMENT AGREEMENT

by and among

SIGA TECHNOLOGIES, INC.,

ST HOLDINGS ONE LLC,

BLACKWELL PARTNERS LLC - SERIES A, 

NANTAHALA CAPITAL PARTNERS LIMITED PARTNERSHIP, 

NANTAHALA CAPITAL PARTNERS II LIMITED PARTNERSHIP, 

SILVER CREEK CS SAV, L.L.C.,

AND

 NANTAHALA CAPITAL PARTNERS SI, LP

Dated as of October 13, 2016

 

TABLE OF CONTENTS

 

	 	 	 	
Page

	 	 	 	 
	
ARTICLE I THE RIGHTS OFFERING AND BACKSTOP COMMITMENT

	
1

	 	 	 	 
	 	
SECTION 1.1.

	
THE RIGHTS OFFERING

	
1

	 	
SECTION 1.2.

	
BACKSTOP COMMITMENT

	
2

	 	 	 	 
	
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY

	
4

	 	 	 	 
	 	
SECTION 2.1.

	
ORGANIZATION, GOOD STANDING AND QUALIFICATION

	
4

	 	
SECTION 2.2.

	
AUTHORIZATION

	
4

	 	
SECTION 2.3.

	
NO CONFLICTS

	
4

	 	
SECTION 2.4.

	
EXEMPTION FROM REGISTRATION

	
4

	 	
SECTION 2.5.

	
COMPLIANCE WITH LAWS

	
5

	 	
SECTION 2.6.

	
LITIGATION

	
5

	 	
SECTION 2.7.

	
CAPITALIZATION

	
5

	 	
SECTION 2.8.

	
SEC REPORTS

	
5

	 	
SECTION 2.9.

	
BROKERS

	
6

	 	
SECTION 2.10.   

	
CONSENTS

	
6

	 	 
	
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BACKSTOP PARTIES

	
6

	 	 
	 	
SECTION 3.1.

	
AUTHORIZATION

	
6

	 	
SECTION 3.2.

	
NO VIOLATIONS OR CONFLICTS

	
7

	 	
SECTION 3.3.

	
EXEMPT TRANSACTION; INVESTMENT INTENT

	
7

	 	
SECTION 3.4.

	
INDEPENDENT INVESTIGATION

	
7

	 	
SECTION 3.5.

	
ECONOMIC RISK

	
7

	 	
SECTION 3.6.

	
NO GOVERNMENT RECOMMENDATION OR APPROVAL

	
8

	 	
SECTION 3.7.

	
NO REGISTRATION

	
8

	 	
SECTION 3.8.

	
NO PUBLIC SOLICITATION

	
8

	 	
SECTION 3.9.

	
INDEPENDENT LEGAL ADVICE

	
8

	 	 	 	 
	
ARTICLE IV CONDITIONS TO CLOSING

	
8

	 	 	 	 
	 	
SECTION 4.1.

	
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE BACKSTOP PARTIES

	
8

	 	
SECTION 4.2.

	
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY

	
9

	 	
SECTION 4.3.

	
CONDITIONS TO THE OBLIGATIONS OF THE BACKSTOP PARTIES

	
9

	 	 	 	 
	
ARTICLE V TERMINATION

	
9

	 	 	 	 
	 	
SECTION 5.1.

	
TERMINATION

	
9

	 	
SECTION 5.2.

	
EFFECTS OF TERMINATION

	
10

 

i

TABLE OF CONTENTS

 (Cont’d)

 

	 	
Page

	 	 
	
ARTICLE VI MISCELLANEOUS

	
10

	 	 	 	 
	 	
SECTION 6.1.

	
INTERPRETATION; CERTAIN DEFINITIONS

	
10

	 	
SECTION 6.2.

	
REGISTRATION RIGHTS

	
13

	 	
SECTION 6.3.

	
SURVIVAL

	
13

	 	
SECTION 6.4.

	
INDEMNIFICATION

	
14

	 	
SECTION 6.5.

	
LEGENDS

	
15

	 	
SECTION 6.6.

	
NOTICES

	
15

	 	
SECTION 6.7.

	
FURTHER ASSURANCES

	
17

	 	
SECTION 6.8.

	
AMENDMENTS AND WAIVERS

	
17

	 	
SECTION 6.9.

	
FEES AND EXPENSES

	
17

	 	
SECTION 6.10.

	
SUCCESSORS AND ASSIGNS

	
17

	 	
SECTION 6.11.

	
GOVERNING LAW

	
18

	 	
SECTION 6.12.

	
JURISDICTION

	
18

	 	
SECTION 6.13.

	
WAIVER OF JURY TRIAL

	
18

	 	
SECTION 6.14.

	
ENTIRE AGREEMENT

	
18

	 	
SECTION 6.15.

	
EFFECT OF HEADINGS AND TABLE OF CONTENTS

	
18

	 	
SECTION 6.16.

	
SEVERABILITY

	
19

	 	
SECTION 6.17.

	
COUNTERPARTS; NO THIRD PARTY BENEFICIARIES

	
19

	 	
SECTION 6.18.

	
INDEPENDENT INVESTMENT DECISION

	
19

	 	
SECTION 6.19.   

	
SPECIFIC PERFORMANCE

	
19

 

ii

INVESTMENT AGREEMENT, dated as of October 13, 2016 (this “Agreement”), among SIGA Technologies, Inc., a Delaware corporation (the “Company”), and ST Holdings One LLC, a Delaware limited liability company,  (“ST”), Blackwell Partners LLC - Series A, a Delaware limited liability company, Nantahala Capital Partners Lomoted Partnership, a Massachusetts limited partnershup, Nantahala Capital Partners II Limited Partnership, a Delaware limited partnership, Silver Creek CS SAV, L.L.C., a Delaware limited liability company, and Nantahala Capital Partners SI, LP, a Delware limited partnership, collectively the “Backstop Parties” and each individually, a “Backstop Party”). Capitalized terms used but not otherwise defined are defined in Section 6.1(b) of this Agreement.

R E C I T A L S

WHEREAS, the Company has proposed to offer and sell certain shares of Common Stock pursuant to a Rights Offering, on the terms and subject to the conditions set forth in the Registration Statement;

WHEREAS, the Company desires that each Backstop Party provide, and each Backstop Party has individually agreed with the Issuer to provide a Backstop Commitment to the Rights Offering, on the terms and subject to the conditions set forth herein; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:

ARTICLE I

THE RIGHTS OFFERING AND BACKSTOP COMMITMENT

Section 1.1.          The Rights Offering.  The Company is contemplating commencing a rights offering on the following terms: (i) the Company shall distribute, at no charge to its stockholders, one Right to each holder of record of Common Stock for each share of Common Stock held by such holder as of the Record Date, (ii) each Right shall entitle the holder thereof to purchase, at the election of such holder, such number of shares of Common Stock at the Rights Subscription Price thereby entitling such holders of rights, in the aggregate, to subscribe for Common Stock worth an aggregate of up to $35.3 million, provided that no fractional shares of Common Stock shall be issued, (iii) each such Right shall be non-transferable, (iv) the rights offering shall remain open as set forth in the Registration Statement (the “Subscription Period”) and (v) each holder who fully exercises all Rights held by him shall be entitled to subscribe for additional shares of Common Stock that were not subscribed for in the Rights Offering (such exercising holders, the “Exercising Holders”), provided if an insufficient number of unsubscribed shares of Common Stock are available, all such over-subscription requests shall be honored proportionately among the Exercising Holders based on the number of shares of Common Stock each such holder subscribed for in accordance with clause (ii) (such rights offering, the “Rights Offering”). The Company hereby agrees to use commercially reasonable efforts to complete the Rights Offering as soon as reasonably practicable, subject to the terms and conditions set forth herein. Specifically, the Company hereby agrees, subject to the terms and conditions set forth herein, to use commercially reasonable efforts to complete its Registration Statement on Form S-1, as initially filed with the SEC on May 6, 2016 and as amended on August 22, 2016, and as may be subsequently amended from time to time (the “Registration Statement”), and use commercially reasonable efforts to cause such Registration Statement to be declared effective by the SEC as soon as reasonably practicable.

 

1

(b)          Except as provided in Section 6.8 hereof, the Company shall pay all of its expenses associated with the Registration Statement, the Prospectus, the Rights Offering and the other transactions contemplated hereby, including filing and printing fees, fees and expenses of any subscription and information agents, its counsel and accounting fees and expenses and costs associated with clearing the Common Stock offered thereby for sale under applicable state securities Laws.

Section 1.2.          Backstop Commitment

 

(a)            Subject to the consummation of the Rights Offering and the terms and conditions of this Agreement, in order to provide assurance that the Rights Offering will be sufficiently subscribed, the Company commits to sell and each Backstop Party individually commits to the Company to purchase from the Company, at a price per share equal to the Rights Subscription Price, a number of shares of Common Stock and, in the case of ST, Preferred Stock, if necessary pursuant to Section 1.2(f) (the “Backstop Commitment”), equal to the portion of the Backstopped Amount set forth for each Backstop Party on Schedule 1.2(a)(i); provided, that each Backstop Party’s Backstop Commitment shall be proportionately adjusted (in the same manner as the sample adjustments on Schedule 1.2(a)(ii)) such that the aggregate amount of the securities purchased by such Backstop Party both pursuant to its Backstop Commitment and through the exercise of its Rights and over-subscription privilege in the Rights Offering shall be equal to a percentage of the aggregate amount of all securities purchased by the Backstop Parties, both pursuant to their Backstop Commitments and through the exercise of their pro rata Rights and over-subscription privileges in the Rights Offering, that equals such Backstop Party’s pro rata percentage of the Backstop Commitment; provided, further, that to the extent any Backstop Party fails to purchase any portion of its Backstop Commitment, each other Backstop Party shall purchase, based on its pro rata portion of the Backstop Commitment, such number of shares as is necessary to satisfy the entire Backstop Commitment up to such Backstop Party's Backstop Commitment Limit.  The amount of Preferred Stock to be sold, if any, shall be equal to such amount, when combined with the amount of Common Stock to be sold pursuant hereto, as does not require ST to file any notices or other filings required by the HSR Act.  For purposes of clarity, in all cases the aggregate Backstop Commitment of the Backstop Parties shall be equal to the full Backstopped Amount subject to the Backstop Commitment Limits for participating Backstop Parties, as applicable.

(b)          Simultaneous with the closing of the Rights Offering, the Company shall issue to each Backstop Party a notice setting forth the Backstopped Amount. Each Backstop Party shall immediately exercise its pro rata portion of the Backstop Commitment.

(c)          On the terms and subject to the conditions set forth in this Agreement, the closing of the Backstop Commitment (the “Closing”) shall occur on the later of (i) immediately following the closing of the Rights Offering and (ii) the date that all of the conditions to the Closing set forth in Article IV have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, NY  10036, or such other place, time and date as shall be agreed between the Company and ST (the date on which the Closing occurs, the “Closing Date”).

 

2

(d)          At the Closing, the Company shall irrevocably instruct the Company’s transfer agent to issue to the Backstop Parties certificates representing the Acquired Shares against payment by or on behalf of each Backstop Party of the purchase price therefor by wire transfer in immediately available funds to the account designated by the Company in writing at least two days prior to the expiration date of the Rights Offering.

(e)          At the Closing, the Company shall pay to each Backstop Party its pro rata portion of the Backstop Option Premium, which shall be allocated as set forth on Schedule 1.2(e), as adjusted in the event that any Backstop Party fails to purchase any portion of its Backstiop Commitment and other Backstop Parties purchase such shares.  The Parties intend to treat the Backstop Commitment and the Backstop Option Premium as a “put option” and a “put option premium”, respectively, for all U.S. federal income and other applicable tax purposes;

(f)          If any shares of Preferred Stock are issued to ST, ST shall as soon as reasonably practicable following the Closing make any filings with or notifications to the Federal Trade Commission (“FTC”) and the United States Department of Justice (the “DOJ”) pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and any other Governmental Entity as may be required by any other applicable federal, state or foreign Law, order or other legal restraint regulating antitrust matters (collectively, the “Antitrust Laws”) in respect of  the transactions contemplated by this Agreement. In the event that the FTC or the DOJ issues a Request for Additional Information and Documentary Material under the HSR Act in relation to the transactions contemplated by this Agreement, each of ST and the Company shall take such measures as may be reasonably necessary to limit the scope of such Request, certify substantial compliance with such Request and otherwise respond to and seek to resolve any requests for information, documents, data or testimony made by the FTC or the DOJ under the HSR Act. Each of ST and the Company shall use commercially reasonable efforts to take, or cause to be taken, all other actions and do, or cause to be done, all other things necessary, proper or advisable to secure clearance under the HSR Act and all applicable Antitrust Laws (including the expiration or termination of any applicable waiting period thereunder) of the transactions contemplated by this Agreement.

(g)          Upon clearance under the HSR Act and all applicable Antitrust Laws (including the expiration or termination of any applicable waiting period thereunder), the shares of Preferred Stock issued in fulfillment of ST’s Backstop Commitment shall automatically and without any further action on the part of any Person convert to shares of Common Stock.

 

3

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as Previously Disclosed, the Company represents and warrants to each of the Backstop Parties that:

Section 2.1.          Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as proposed to be conducted.  The Company is duly qualified to transact business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by them makes such qualification necessary, except where the failure to so qualify would not, individually or in the aggregate, have a material adverse effect on the business, condition (financial or otherwise), earnings, properties or results of operations of the Company (a “Material Adverse Effect”).

Section 2.2.          Authorization.  The transactions contemplated by this Agreement have been approved by the Board.  This Agreement constitutes valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability affecting the rights of creditors and by general equitable principles.

Section 2.3.          No Conflicts.  The execution and delivery of this Agreement and the consummation of the issuance of the shares of Common Stock and the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under, the certificate of incorporation or bylaws of the Company, or any indenture, credit agreement, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, Federal or state regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any of its properties or assets.

Section 2.4.          Exemption from Registration.  The issuance and sale of Acquired Shares to the Backstop Parties representing the Backstop Commitment pursuant to this Agreement is exempt from the registration and prospectus delivery requirements of the Securities Act.  In the case of each offer or sale of the Acquired Shares, no form of general solicitation or general advertising was used by the Company or its representatives, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising.  Neither the Company nor any person acting on its behalf has offered or sold, nor will the Company or any person acting on its behalf offer or sell directly or indirectly, any Common Stock or any other security in any manner that would render the issuance and sale of any of the Acquired Shares a violation of Section 5 of the Securities Act or the registration or qualification requirements of any state securities laws, nor has the Company authorized, nor will it authorize, any person to act in such manner.

 

4

Section 2.5.          Compliance with Laws.  As of the date hereof, the conduct of the business of the Company complies (and has complied) in all material respects with all applicable Law.  The Company has not received notice of any alleged violation of applicable Law from any Governmental Entity.  The Company shall comply with all applicable securities laws with respect to the sale of the shares of Common Stock, and, if applicable, any shares of Preferred Stock, including, but not limited to, the filing of all reports required to be filed in connection therewith with the SEC or any other regulatory authority.

Section 2.6.          Litigation.  Except as disclosed in the Registration Statement, there is no action, suit or proceeding before or by any Governmental Entity, now pending or, to the knowledge of the Company, threatened, against or affecting the Company, or any of the Company, its assets or properties, which could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

Section 2.7.          Capitalization.  The Company, as of the date of the Closing, will have six hundred million (600,000,000) shares of Common Stock and twenty million (20,000,000) shares of preferred stock, par value $.0001 per share (the “Preferred Stock”) authorized pursuant to its amended and restated certificate of incorporation and 54,284,296 shares of Common Stock and no shares of Preferred Stock issued and outstanding as of the date hereof.  All of the issued and outstanding shares of capital stock of the Company have been duly authorized and are validly issued, fully paid and non-assessable.

(b)          Except as provided for under the Plan (as defined in the Registration Statement) or as Previously Disclosed or described in the Registration Statement, (i) there is no subscription, warrant, option, convertible security or other right (contingent or otherwise) to purchase or acquire any shares of capital stock of the Company that is authorized or outstanding, (ii) the Company does not have any obligation (contingent or otherwise) to issue any subscription, warrant, option, convertible security or other such right or to issue or distribute to holders of any shares of its capital stock or other equity securities any evidences of indebtedness or assets of the Company, (iii) the Company does not have any obligation (contingent or otherwise) to purchase, redeem or otherwise acquire any shares of its capital stock (or other equity securities) or any interest therein or to pay any dividend or make any other distribution in respect thereof, and (iv) there are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company.

Section 2.8.          SEC Reports.

The consolidated financial statements of the Company and the related notes contained in the SEC Reports present fairly, in all material respects, the financial position of the Company as of the dates indicated, and the results of its operations, cash flows and the changes in shareholders’ equity for the periods therein specified, subject, in the case of unaudited financial statements for interim periods, to normal year-end audit adjustments.  Such financial statements (including the related notes) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods therein specified, except that unaudited financial statements may not contain all footnotes required by GAAP.  Each of the SEC Reports has been timely filed, to the extent required by law, and, as of their respective dates, each of the SEC Reports, as amended, complied as to form in all material respects with the applicable requirements of the Securities Act or the Exchange Act or any other applicable law, as the case may be, and the rules and regulations of the SEC thereunder, in each case, to the extent applicable to such SEC Reports, and none of the SEC Reports contained, when filed or, if amended prior to the date of this Agreement, as of the date of such amendment with respect to those disclosures that are amended, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company has made available each of the SEC Reports (including via the EDGAR system). As of the date hereof, there are no material outstanding or unresolved comments in comment letters from the SEC staff with respect to any of the SEC Reports. To the knowledge of the Company, as of the date hereof, (A) none of the SEC Reports is the subject of ongoing SEC review or outstanding SEC comment and (B) neither the SEC nor any other Governmental Entity is conducting any investigation or review of any SEC Reports.

 

5

Section 2.9.          Brokers.  The Company has taken no action which would give rise to any claim by any person for brokerage commissions, finders’ fees or similar payments by any Backstop Party relating to this Agreement or the transactions contemplated hereby.

Section 2.10.          Consents.  Except as to the consent of the United States Bankruptcy Court for the Southern District of New York in connection with the Company’s chapter 11 case (as further described in the Registration Statement) and filings which may be required under applicable state securities regulations, no consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state, local, or other governmental authority or of any court or other tribunal is required by the Company in connection with the transactions contemplated hereby.  No consent of any party to any Contract to which the Company is a party, or by which any of its properties or assets is bound, is required for the execution, delivery, or performance by the Company of the transactions contemplated by the Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE BACKSTOP PARTIES

Each Backstop Party severally, and not jointly, represents and warrants solely with respect to itself to the Company that:

Section 3.1.          Authorization.  Such Backstop Party has the full power and authority to execute, deliver and perform this Agreement and to perform its obligations hereunder.  This Agreement has been duly approved by all necessary action of such Backstop Party, as applicable, has been executed by persons duly authorized, and constitutes a valid and legally binding obligation of such Backstop Party, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability affecting the rights of creditors and by general equitable principles.

 

6

Section 3.2.          No Violations or Conflicts.

The execution and delivery of this Agreement and the consummation of the purchase of the shares of Common Stock and the transactions contemplated by this Agreement do not and will not conflict with or result in a breach by such Backstop Party of any of the terms or provisions of, or constitute a default under, any provision of the organizational or governing documents of such Backstop Party or any of their respective Affiliates, or any indenture, credit agreement, mortgage, deed of trust or other agreement or instrument to which such Backstop Party or any of their respective Affiliates are a party or by which it or any of its properties or assets are bound, or any existing applicable decree, judgment or order of any court, Federal or state regulatory body, administrative agency or other governmental body having jurisdiction over such Backstop Party or any of its properties or assets.

Section 3.3.           Exempt Transaction; Investment Intent.  Such Backstop Party is an accredited investor as the term is defined in Rule 501(a) under the Securities Act and (b) Such Backstop Party is purchasing the Acquired Shares for its own account and not with a view of reselling its Acquired Shares in violation of the Securities Act.

Section 3.4.          Independent Investigation.  In agreeing to purchase Acquired Shares pursuant to this Agreement, such Backstop Party has relied upon an independent investigation made by it and, to its knowledge has, prior to the date hereof, been given access to and the opportunity to examine all books and records of the Company, and all material contracts and documents of the Company; provided, that such investigation shall not affect a Backstop’s Party’s ability to rely on the accuracy of the representations and warranties of the Company set forth herein.  Such Backstop Party will keep confidential all non-public information regarding the Company that it receives from the Company unless disclosure of such information is compelled by a court or other administrative body or to comply with applicable Law.  In making the investment decision to purchase the Acquired Shares, such Backstop Party is not relying on any oral or written representations or assurances from the Company, any representation of the Company or any other person other than as set forth in this Agreement, the public filings of the Company or in a document executed by a duly authorized representative of the Company.  Such Backstop Party has such experience in business and financial matters that it is capable of evaluating the risk of its investment and determining the suitability of its investment.

Section 3.5.          Economic Risk.  Such Backstop Party understands and acknowledges that an investment in Acquired Shares involves a high degree of risk, including a possible total loss of investment.  Such Backstop Party represents that it is able to bear the economic risk of the investment.  In making this statement, such Backstop Party hereby represents and warrants that such Backstop Party has adequate means of providing for its current needs and contingencies.  Such Backstop Party further represents that it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the investment in the Acquired Shares to be received by it.  Further, such Backstop Party represents that it has no present need for liquidity in the Acquired Shares.

 

7

Section 3.6.          No Government Recommendation or Approval.  Such Backstop Party understands that no United States federal or state agency or similar agency of any other country has passed upon or made any recommendation or endorsement of the Company, this transaction or the subscription of its Acquired Shares.

Section 3.7.          No Registration.  Such Backstop Party understands that the Acquired Shares to be received by such Backstop Party pursuant to this Agreement have not been registered under the Securities Act and are being offered and sold pursuant to and in reliance of an exemption from registration contained in the Securities Act based in part upon the representations of such Backstop Party contained herein and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of each Backstop Party set forth herein in order to determine the applicability of such exemptions and the suitability of such Backstop Party to acquire such Acquired Shares.

Section 3.8.          No Public Solicitation.  Such Backstop Party does not know of any public solicitation or advertisement of an offer in connection with the proposed issuance and sale of the Acquired Shares.

Section 3.9.          Independent Legal Advice.  Such Backstop Party and the Company acknowledge that each has had the opportunity to review this Agreement and the transactions contemplated by this Agreement, and has consulted with its own legal counsel, and other advisors prior to execution of the Agreement.

ARTICLE IV

CONDITIONS TO CLOSING

Section 4.1.          Conditions to the Obligations of the Company and the Backstop Parties.  The obligations of the Company and each of the Backstop Parties to effect the Closing shall be subject to the following conditions:

(a)          all authorizations, consents, orders or permits of, or filings with, and the expirations of waiting periods required from (as applicable), any Governmental Entity shall have been filed, have occurred or been obtained (all such authorizations, consents, orders, permits or filings, and the lapse of all such waiting periods being referred to as the “Requisite Regulatory Approvals”) and all such Requisite Regulatory Approvals shall be in full force and effect;

(b)          no provision of any applicable Law and no judgment, injunction, order or decree shall prohibit the consummation of any of the transactions contemplated at the Closing; and

(c)          the consummation of the Rights Offering in accordance in all material respects with the terms and subject to the conditions set forth in Section 1.1(b).

 

8

Section 4.2.          Conditions to the Obligations of the Company.  The obligations of the Company to effect the Closing shall be subject to the following conditions:

(a)          all representations and warranties of each Backstop Party in this Agreement shall be true and correct as of the date hereof and as of the Closing Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); and

(b)          Each Backstop Party shall have performed in all material respects all its obligations hereunder required to be performed by such Backstop Party at or prior to the Closing.

Section 4.3.          Conditions to the Obligations of the Backstop Parties.  The obligations of each of the Backstop Parties to effect the Closing shall be subject to the following conditions:

(a)          the representations and warranties of the Company contained in this Agreement shall be true and correct as of the date hereof and as of the Registration Effective Date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); and

(b)          the Company shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Closing.

 

ARTICLE V

TERMINATION

Section 5.1.          Termination.  This Agreement may be terminated at any time prior to the Closing:

(a)          by mutual written agreement of the Company and each of the Backstop Parties;

(b)          by either the Company or ST, upon written notice to the other parties hereto, in the event that the Closing does not occur on or before December 1, 2016 (as may be extended at the option of the ST); provided, however; the right to terminate this Agreement pursuant to this Section 5.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date; or

(c)          by the Company, on the one hand, or all the Backstop Parties, upon written notice to each other party, in the event that any Governmental Entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable.

9

Section 5.2.          Effects of Termination.  In the event of the termination of this Agreement as provided in Section 5.1, this Agreement (other than Article VI which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided that nothing herein shall relieve any party from liability for intentional breach of this Agreement.

ARTICLE VI

MISCELLANEOUS

Section 6.1.          Interpretation; Certain Definitions.

(a)          Interpretation.  When a reference is made in this Agreement to “Preamble,” “Articles,” “Sections” or “Annexes,” such reference shall be to a Preamble, Article or Section of, or Annex to, this Agreement unless otherwise indicated.  The terms defined in the singular have a comparable meaning when used in the plural, and vice versa.  The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.”  No rule of construction against the draftsperson shall be applied in connection with the interpretation or enforcement of this Agreement, as this Agreement is the product of negotiation between sophisticated parties advised by counsel.  All references to “$” or “dollars” mean the lawful currency of the United States of America.  Except as expressly stated in this Agreement, all references to any statute, rule or regulation are to the statute, rule or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of statutes, include any rules and regulations promulgated under the statute) and to any section of any statute, rule or regulation include any successor to the section. References to “words of similar import” with respect to Material Adverse Effect or materiality, does not include knowledge qualifiers.  The use herein of masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require.  This Agreement will be interpreted as if it were a series of separate agreements between the Company and each Backstop Party individually.

(b)          Certain Definitions.  As used in this Agreement, the terms have the following meanings:

“Acquired Shares” means shares of Common Stock and Preferred Stock, if any, acquired by the Backstop Parties pursuant to the Backstop Commitment.

 “Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person; provided, for purposes of this Agreement, the Company shall not be deemed to be an Affiliate of any Backstop Party.

“Agreement” shall have the meaning set forth in the Preamble.

“Antitrust Laws” shall have the meaning set forth in Section 1.2(e).

 

10

“Backstop Commitment” shall have the meaning set forth in Section 1.2(a).

"Backstop Commitment Limit" shall equal each Backstop Party's Backstop Commitment  pro rata percentage as identified in Schedule 1.2(a)(i) times the maximum possible Backstop Amount ($35.3 million dollars); provided, that the Backstop Commitment Limit for ST shall equal one hundred percent of the the Backstopped Amount.

“Backstop Option Premium” shall be equal to five percent (5%) of the aggregate amount of the Rights Offering, payable, at the option of the Company, in (i) Common Stock or, if required due to compliance with Antitrust Laws, Preferred Stock, (ii) cash or (iii) other equity securities; provided, that with respect to option (iii), the type of equity securities shall be as mutually agreed by the parties.  The Backstop Option Premium shall be paid to the Backstop Parties in accordance with the allocation set forth on Schedule 1.2(e), provided, that to the extent any Backstop Party fails to honor any portion of its Backstop Commitment, the Backstop Party who honors such portion of such defaulting Backstop Party’s Backstop Commitment shall receive any portion of the Backstop Option Premium associated with such portion of such defaulting Backstop Party’s Backstop Commitment.

“Backstopped Amount” shall mean the number of shares of Common Stock and Preferred Stock, if any, by which (i) the number of shares of Common Stock necessary to be sold in the Rights Offering in order to raise aggregate proceeds equal to $35.3 million exceeds (ii) the number of shares of Registered Common Stock subscribed for and purchased pursuant to the Rights Offering. Such Preferred Stock issued in connection with the Backstop Commitment shall have the same economic rights as shares of Common Stock but shall have no voting rights and shall be convertible on a one-to-one basis with the Common Stock.

“Board” means the board of directors of the Company.

“Business Day” means any day other than a Saturday, Sunday or one on which banks are authorized to close in New York, New York.

 “Closing” shall have the meaning set forth in Section 1.2(c).

“Closing Date” shall have the meaning set forth in Section 1.2(c).

 “Common Stock” means the common stock, par value $0.0001 per share, of the Company.

“Company” shall have the meaning set forth in the Preamble.

 “Contract” means any contracts, agreements, licenses, notes, bonds, mortgages, indentures, commitments, leases or other instruments or obligations, whether written or oral.

“DGCL” means the Delaware General Corporation Law, as amended.

“DOJ” shall have the meaning set forth in Section 1.2(e).

“Exchange Act” shall have the meaning set forth in Section 2.5.

 

11

“FTC” shall have the meaning set forth in Section 1.2(e).

“GAAP” means United States generally accepted accounting principles.

“Governmental Entity” means any domestic or foreign governmental or regulatory authority, agency, commission, body, court or other legislative, executive or judicial governmental entity.

“HSR Act” shall have the meaning set forth in Section 1.2(e).

“Law” means any federal, state, local or foreign law, statute or ordinance, common law, or any rule, regulation, judgment, order, writ, injunction, decree, arbitration award, license or permit of any Governmental Entity.

“Loss” shall have the meaning set forth in Section 6.4(b).

“Material Adverse Effect” shall have the meaning set forth in Section 2.1.

 “Person” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.

“Preferred Stock” shall have the meaning set forth in Section 2.7(a).

“Previously Disclosed” means (i) information set forth in or incorporated in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 or its other reports and forms filed with the SEC under Sections 13(a), 14(a) or 15(d) of the Exchange Act on or after January 1, 2016 (except for risks and forward looking information set forth or incorporated in the section “Risk Factors” in the Form 10-K or in any forward looking statement disclaimers or similar statements that are similarly non-specific and are predictive or forward looking in nature) and (ii) the information set forth in the Schedules corresponding to the provision of this Agreement to which such information relates (provided that any disclosure with respect to a particular paragraph or section of this Agreement or the Schedules shall be deemed to be disclosed for other paragraphs and sections of the Agreement and the Schedules to the extent that the relevance of such disclosure would be reasonably apparent to a reader of such disclosure).

“Prospectus” means the final prospectus relating to the Rights Offering filed pursuant to Rule 424 of the Securities Act.

 “Record Date” means the date as of which each holder of Common Stock shall be offered one Right for each share of Common Stock held as of such date, which date shall be selected by the Board in accordance with the DGCL.

“Registered Common Stock” means Common Stock issued in the Rights Offering to Persons.

 

12

 “Registration Effective Date” means the date on which the Registration Statement is declared effective by the SEC.

 “Registration Statement” shall have the meaning set forth in Section 1.1(a).

“Representatives” means, with respect to a Person, such Person’s directors, officers, investment bankers, attorneys, accountants and other advisors or representatives.

“Regulatory Approvals” shall have the meaning set forth in Section 4.1(a).

“Right” means one non-transferable right to subscribe for shares of Common Stock as set forth in the Registration Statement.

“Rights Offering” shall have the meaning set forth in Section 1.1(a).

“Rights Subscription Price” means a price per share as set forth in the Registration Statement.

“Schedules” means the disclosure schedules delivered by the Company concurrently with the execution of this Agreement.

“SEC” means the Securities and Exchange Commission.

“SEC Reports” means the Company’s filings made with the SEC.

“Securities Act” means the Securities Act of 1933, as amended.

“Shelf Registration Statement” shall have the meaning set forth in Section 6.2.

“Subscription Period” shall have the meaning set forth in Section 1.1(a).

Section 6.2.          Registration Rights.  If the Company proposes to file with the SEC a registration statement for the sale of Common Stock on a delayed or continuous basis (a “Shelf Registration Statement”), the Company will use its reasonable best efforts to include the Acquired Shares in such Shelf Registration Statement so that each Backstop Party will be able to sell its Acquired Shares without regard to any volume limitation or holding period requirements under Rule 144 under the Securities Act. No Backstop Party shall be required to make any representations or warranties to or agreements with the Company other than representations, warranties or agreements regarding such Backstop Party, such Backstop Party’s title to the registered shares of Common Stock and such Backstop Party’s intended method of distribution or any other representations required to be made by such Backstop Party under applicable law, and the aggregate amount of the liability of such Backstop Party in connection with any sales under a Shelf Registration Statement shall not exceed such Backstop Party’s net proceeds from the sale of Common Stock under the Shelf Registration Statement.  All expenses incident to the Company’s compliance with this section shall be paid by the Company.

 

Section 6.3.          Survival.  Each of the representations and warranties in this Agreement (or any certificate delivered pursuant hereto) shall survive the execution and delivery of this Agreement and the Closing but only for a period of twelve (12) months following the Closing Date.

 

13

Section 6.4.          Indemnification.  Notwithstanding anything in this Agreement to the contrary, from and after the date hereof the Company agrees to indemnify, defend and hold harmless each Backstop Party and their respective Affiliates and each of their respective officers, directors, partners, employees, agents and Representatives (the “Indemnified Parties” and each, an “Indemnified Party”), to the fullest extent lawful, from and against any and all actions, suits, claims, proceedings, costs, losses, liabilities, damages, expenses (including reasonable and documented fees of counsel), amounts paid in settlement and other costs (collectively, “Losses”) arising out of or relating to the Company’s breach of any representation, warranty, covenant or agreement made by the Company contained in this Agreement. The Company agrees that it will not, without the Indemnified Party’s prior written consent, not to be unreasonably withheld or delayed, settle or compromise any claim or consent to entry of any judgment in respect thereof in any pending or threatened action, suit, claim or proceeding in respect of which indemnification has been sought hereunder unless such settlement or compromise includes an unconditional release of such Indemnified Party from all liability arising out of such action, suit, claim or proceeding.

(b)          The Company shall indemnify and hold harmless, to the full extent permitted by law, each Backstop Party, and its respective Indemnified Parties from and against any and all losses, penalties, judgments, suits, costs, claims, damages, liabilities and expenses, joint or several (including reasonable costs of investigation and legal expenses) (each, a “Loss” and collectively “Losses”) arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in a Shelf Registration Statement (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), or any other disclosure document produced by or on behalf of the Company or any of its subsidiaries including reports and other documents filed under the Exchange Act or any “free writing prospectus” or amendment thereof or supplement thereto, (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, preliminary prospectus or any free writing prospectus in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information has not been corrected in a subsequent writing prior to or concurrently with the sale of the Acquired Shares to the Person asserting the claim.  or (iii) any actions or inactions or proceedings in respect of the foregoing whether or not such indemnified party is a party thereto.

(c)          Indemnification by the Selling Backstop Party. Each Backstop Party that sells Common Stock under a Shelf Registration Statement agrees (severally and not jointly) to indemnify and hold harmless, to the fullest extent permitted by law, the Company, and its officers and directors from and against any Losses resulting from (i) any untrue statement of a material fact in such Shelf Registration Statement (including any final, preliminary or summary prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein or any “free writing prospectus” or amendment thereof or supplement thereto), or (ii) any omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, preliminary prospectus or any “free writing prospectus,” in light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by such selling Backstop Party to the Company specifically for inclusion in the Shelf Registration Statement and has not been corrected in a subsequent writing prior to or concurrently with the sale of the Acquired Shares to the Person asserting the claim. In no event shall the liability of any selling Backstop Party hereunder be greater in amount than the dollar amount of the net proceeds received by such Backstop Party under the sale of Acquired Shares giving rise to such indemnification obligation.

 

14

(d)          The obligations of the Company under this Section 6.3 shall survive the Closing or termination of this Agreement and the transfer of any Acquired Shares. The agreements contained in this Section 6.3 shall be in addition to any other rights of the Indemnified Party against the Company or others, under this Agreement.

Section 6.5.          Legends.  Each Backstop Party agrees with the Company that the certificate representing the Acquired Shares shall contain a legend substantially similar to the following effect:

THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (AS AMENDED, THE “SECURITIES ACT”) OR UNDER ANY APPLICABLE STATE SECURITIES LAWS.  THESE SHARES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, ABSENT AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS THE PROPOSED TRANSFER MAY BE EFFECTED WITHOUT REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

Section 6.6.          Notices.  All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of delivery, if delivered personally or by electronic transmission, upon confirmation of receipt or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier services, to the parties to this Agreement at the following address or to such other address either party to this Agreement shall specify by notice to the other party:

If to the Company:

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

SIGA Technologies, Inc.

660 Madison Avenue

New York, NY 10065

Attention: Daniel J. Luckshire

Email: dluckshire@siga.com

 

15

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

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, New York 10036

Attention: James Grayer, Esq.

Email: jgrayer@kramerlevin.com

Robin Abrams, Esq.

SIGA Technologies, Inc.

660 Madison Avenue

New York, NY 10065

Email: rabrams@siga.com

If to ST:

Michael Borofsky

ST Holdings One LLC

35 East 63rd Street

New York, NY 10065

Email: mborofsky@mafgrp.com

If to Blackwell Partners LLC - Series A:

c/o Nantahala Capital Management, LLC

19 Old Kings Highway S, Suite 200

Darien, CT 06820

Attention: Paul Rehm

Email: paul@nantahalapartners.com & info@nantahalapartners.com

If to Nantahala Capital Partners Limited Partnership:

c/o Nantahala Capital Management, LLC

19 Old Kings Highway S, Suite 200

Darien, CT 06820

Attention: Paul Rehm

Email: paul@nantahalapartners.com & info@nantahalapartners.com

 

16

If to Nantahala Capital Partners II Limited Partnership:

c/o Nantahala Capital Management, LLC

19 Old Kings Highway S, Suite 200

Darien, CT 06820

Attention: Paul Rehm

Email: paul@nantahalapartners.com & info@nantahalapartners.com

If to Silver Creek CS SAV, L.L.C.:

c/o Nantahala Capital Management, LLC

19 Old Kings Highway S, Suite 200

Darien, CT 06820

Attention: Paul Rehm

Email: paul@nantahalapartners.com & info@nantahalapartners.com

If to Nantahala Capital Partners SI, LP:

c/o Nantahala Capital Management, LLC

19 Old Kings Highway S, Suite 200

Darien, CT 06820

Attention: Paul Rehm

Email: paul@nantahalapartners.com & info@nantahalapartners.com

Section 6.7.          Further Assurances. Each party hereto shall do and perform or cause to be done and performed all further acts and shall execute and deliver all other agreements, certificates, instruments and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

Section 6.8.          Amendments and Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is duly executed and delivered by the parties hereto.  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.

Section 6.9.          Fees and Expenses. Without limiting the Company’s obligations under Section 1.1(e), any expenses of any Backstop Party incurred in connection with the transactions contemplated under this Agreement, including, without limitation, any and all advisory, legal, filing and other fees incurred in connection therewith, whether incurred prior to or after the date hereof, shall in each case be paid by such Backstop Party. For avoidance of doubt, ST shall be responsible for all costs and expenses related to or arising from any HSR Act filing.

 

Section 6.10.          Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  This Agreement shall not be assignable by operation of law or otherwise, provided that, a Backstop Party shall be permitted, to assign this Agreement to any of their respective Affiliates, provided that (i) such assignee shall execute an agreement for the benefit of the Company in form and substance reasonably satisfactory to the Company, pursuant to which such proposed assignee agrees to be bound by the terms and conditions of this Agreement and (ii) that no such assignment shall relieve any Backstop Party of its obligations hereunder.  Without limiting the foregoing, none of the rights of any Backstop Party hereunder shall be assigned to, or enforceable by, any Person to whom such Backstop Party may transfer capital stock of the Company (other than a transfer to such Backstop Party’s Affiliates to the extent permitted in accordance with the terms of this Agreement).

 

17

Section 6.11.          Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CHOICE OF LAW RULES OF SUCH STATE, EXCEPT FOR MATTERS ARISING UNDER THE SECURITIES ACT OR THE EXCHANGE ACT WHICH MATTERS SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH SUCH LAWS.

Section 6.12.          Jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may only be brought in the United States District Court for the Southern District of New York or any New York State court sitting in the County of New York, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.

Section 6.13.          Waiver of Jury Trial.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 6.14.          Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties and/or their affiliates with respect to the subject matter of this Agreement.

Section 6.15.          Effect of Headings and Table of Contents.  The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

 

18

Section 6.16.          Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable Law, such provision shall be deemed to be excluded from this Agreement and the balance of this Agreement shall be interpreted as if such provision were so excluded and shall be enforced in accordance with its terms to the maximum extent permitted by Law.

Section 6.17.          Counterparts; No Third Party Beneficiaries.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures were upon the same instrument. Facsimile or electronic transmission in any portable document format (i.e., pdf) of any signed original document and/or retransmission of any signed facsimile transmission will be deemed equivalent to delivery of an original. Except to the extent contemplated by Section 6.3, no provision of this Agreement shall confer upon any Person other than the parties hereto any rights or remedies hereunder.

Section 6.18.          Independent Investment Decision.  No Backstop Party has agreed to act with any other Backstop Party for the purpose of acquiring, holding, voting or disposing of the Acquired Shares purchased hereunder or any other securities of the Company for purposes of Section 13(d) under the Exchange Act, and each Backstop Party is acting independently with respect to its investment in the Acquired Shares. The decision of each Backstop Party to purchase shares of Common Stock or Preferred Stock, as appropriate, pursuant to this Agreement has been made by such Backstop Party independently of any other purchase and independently of any information, materials, statements or opinions as to the business, affairs, operations, assets, properties, liabilities, results of operations, condition (financial or otherwise) or prospects of the Company or its subsidiaries which may have made or given by any other Backstop Party or by any agent or employee of any other Backstop Party, and no Backstop Party or any of its agents or employees shall have any liability to any other Backstop Party (or any other person) relating to or arising from any such information, materials, statements or opinions.

Section 6.19.          Specific Performance.  The transactions contemplated by this Agreement are unique.  Accordingly, each of the Company and each Backstop Party  acknowledge and agree that, in addition to all other remedies to which it may be entitled, each of the parties hereto is entitled to seek a decree of specific performance, provided that such party is not in material default hereunder. The Company and each Backstop Party agree that, if for any reason a party shall have failed to perform its obligations under this Agreement, then the party seeking to enforce this Agreement against such nonperforming party shall be entitled to specific performance and injunctive and other equitable relief, and the parties further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief.  This provision is without prejudice to any other rights that any party may have against another party for any failure to perform its obligations under this Agreement, including the right to seek damages for a breach of any provision of this Agreement, and all rights, powers and remedies available (at law or in equity) to a party in respect hereof by the other party shall be cumulative and not alternative or exclusive, and the exercise or beginning of the exercise of any thereof by a party shall not preclude the simultaneous or later exercise of any other rights, powers or remedies by such party.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

	 	
SIGA TECHNOLOGIES, INC.

	 
	 	 	 	 
	 	
By:

	
/s/ Daniel J. Luckshire

	 
	 	
Name:  

	
Daniel J. Luckshire

	 
	 	
Title:

	
EVP and CFO

	 

 

	 	
ST HOLDINGS ONE LLC

	 
	 	 	 	 
	 	
By:

	
/s/ Michael Borofsky

	 
	 	
Name:  

	
Michael Borofsky

	 
	 	
Title:

	
Authorized Signatory

	 

 

	 	
BLACKWELL PARTNERS LLC  - SERIES A

	 	 	 	 
	 	
By:

	
/s/ Jannine Lall

	 	
Name:  

	
Jannine Lall

	 
	 	
Title:

	
Controller, DUMAC Inc

	 
	 	 	 	 
	 	
By:

	
/s/ Justin B. Nixon

	 	
Name:

	
Justin B. Nixon

	 
	 	
Title:

	
Investment Manager, DUMAC Inc.

	 
	 	 	 	 
	 	
NANTAHALA CAPITAL PARTNERS LIMITED PARTNERSHIP

	 	 	 	 
	 	
By:

	
Nantahala Capital Management, LLC

	 
	 	 	 	 
	 	 	
Its General Partner

	 
	 	 	 	 
	 	
By:

	
/s/ Wilmot Harkey

	 
	 	 	 	 
	 		
Name: Wilmot Harkey

	 
	 	 	 	 
	 		
Title: Manager

	 

 

	 	
NANTAHALA CAPITAL PARTNERS LIMITED PARTNERSHIP

	 	 	 	 
	 	
By:

	
Nantahala Capital Management, LLC

	 
	 	 	 	 
	 	 	
Its General Partner

	 
	 	 	 	 
	 	
By:

	
/s/ Wilmot Harkey

	 
	 	 	 	 
	 		
Name: Wilmot Harkey

	 
	 	 	 	 
	 		
Title: Manager

	 
	 	 	 	 
	 	
SILVER CREEK CS SAV, L.L.C.

	 	 	 	 
	 	
By:

	
Nantahala Capital Management, LLC

	 
	 	 	 	 
	 	 	
Its Investment Manager

	 
	 	 	 	 
	 	
By:

	
/s/ Wilmot Harkey

	 
	 	 	 	 
	 		
Name: Wilmot Harkey

	 
	 	 	 	 
	 		
Title: Manager

	 
	 	 	 	 
	 	
NANTAHALA CAPITAL PARTNERS SI, LP

	 	 	 	 
	 	
By:

	
Nantahala Capital Management, LLC

	 
	 	 	 	 
	 	 	
Its Investment Manager

	 
	 	 	 	 
	 	
By:

	
/s/ Wilmot Harkey

	 
	 	 	 	 
	 		
Name: Wilmot Harkey

	 
	 	 	 	 
	 		
Title: Manager

	 

 

SCHEDULE 1.2(a)(i)

Backstop Commitment Pro Rata Portions

	
ST Holdings One LLC

	
79.744%

	 	 
	
Blackwell Partners LLC - Series A

	
4.582%

	 	 
	
Nantahala Capital Partners Limited Partnership

	
1.732%

	 	 
	
Nantahala Capital Partners II Limited Partnership

	
4.270%

	 	 
	
Silver Creek CS SAV, L.L.C.

	
2.265%

	 	 
	
Nantahala Capital Partners SI, LP

	
7.407%

	 	 
	 	
100.000%

 

SCHEDULE 1.2(a)(ii)

Sample Backstop Commitment Adjustments

 

	 	 	
Pro Rata Allocation:

   	 	 	
Shares

	 	 	
Pro Rata

Allocation

	 	 	 	 	 	 	 
	 	 	 	 	 	
Party A

	 	 	
8,142,644

	 	 	
75.0%

	 	 	 	 	 	 	 
	 	 	 	 	 	
Party B

	 	 	
2,714,215

	 	 	
25.0%

	 	 	 	 	 	 	 
	 	 	
Amount

Purchased by

Backstop

Parties in

Rights

Offering

	 	
+  

	
Backstopped

Amount

	 	
=  

	
Total

Amount

to be Purchased

by Backstop

Parties

	 		
Backstop

Tranche 1

	 	 	
Backstop

Tranche 2

	 	 	
Total

Purchases

	 
	
Example 1:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Party A

	 	
$

	
12,000,000

	 	 	 	 	 	 	 	 	
$

	
0

	 	 	
$

	
6,562,500

	 	 	
$

	
18,562,500

	 
	
Party B

	 	
$

	
2,750,000

	 	 		 	 		 	 	
$

	
1,250,000

	 	 	
$

	
2,187,500

	 	 	
$

	
6,187,500

	 
	 	 	
$

	
14,750,000

	 	 	
$

	
10,000,000

	 	 	
$

	
24,750,000

	 	 	
$

	
1,250,000

	 	 	
$

	
8,750,000

	 	 	
$

	
24,750,000

	 
	
Example 2:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Party A

	 	
$

	
8,000,000

	 	 	 	 	 	 	 	 	 	 	
$

	
4,000,000

	 	 	
$

	
4,500,000

	 	 	
$

	
16,500,000

	 
	
Party B

	 	
$

	
4,000,000

	 	 	 	 	 	 	 	 	 	 	
$

	
0

	 	 	
$

	
1,500,000

	 	 	
$

	
5,500,000

	 
	 	 	
$

	
12,000,000

	 	 	
$

	
10,000,000

	 	 	
$

	
22,000,000

	 	 	
$

	
4,000,000

	 	 	
$

	
6,000,000

	 	 	
$

	
22,000,000

	 
	
Example 3:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Party A

	 	
$

	
12,000,000

	 	 	 	 	 	 	 	 	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
12,000,000

	 
	
Party B

	 	
$

	
2,750,000

	 	 	 	 	 	 	 	 	 	 	$	500,000	 	 	
$

	
0

	 	 	
$

	
3,250,000

	 
	 	 	
$

	
14,750,000

	 	 	
$

	
500,000

	 	 	
$

	
15,250,000

	 	 	
$

	
500,000

	 	 	
$

	
0

	 	 	
$

	
15,250,000

	 
	
Example 4:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Party A

	 	
$

	
8,000,000

	 	 	 	 	 	 	 	 	 	 	
$

	
500,000

	 	 	
$

	
0

	 	 	
$

	
8,500,000

	 
	
Party B

	 	
$

	
4,000,000

	 	 	 	 	 	 	 	 	 	 	
$

	
0

	 	 	
$

	
0

	 	 	
$

	
4,000,000

	 
	 	 	
$

	
12,000,000

	 	 	
$

	
500,000

	 	 	
$

	
12,500,000

	 	 	
$

	
500,000

	 	 	
$

	
0

	 	 	
$

	
12,500,000

	 

 

	 	
**

	
Backstop Tranche 1 adjusts purchases made in Rights Offering to pro‐rata allocation, provided that the Backstopped Amount is sufficient.

	 	
***

	
Backstop Tranche 2 maintains pro‐rata allocation following Tranche 1 adjustment.

 

SCHEDULE 1.2(e)

Backstop Option Premium

	
ST Holdings One LLC

	
79.744%

	 	 
	
Blackwell Partners LLC - Series A

	
4.582%

	 	 
	
Nantahala Capital Partners Limited Partnership

	
1.732%

	 	 
	
Nantahala Capital Partners II Limited Partnership

	
4.270%

	 	 
	
Silver Creek CS SAV, L.L.C.

	
2.265%

	 	 
	
Nantahala Capital Partners SI, LP

	
7.407%

	 	 
	 	
100.000%

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00263-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00263-of-00352.parquet"}]]