Document:

Exhibit 10.1

 

EXECUTION COPY

 

FINAL SETTLEMENT AGREEMENT

 

This
Final Settlement Agreement is made and entered into this 30th
day of December, 2009, by and among Westar Energy, Inc., a Kansas
corporation (“Westar”), Westar Industries, Inc.,
a Delaware corporation and wholly owned subsidiary of Westar (“WII”), Protection One, Inc., a Delaware corporation (“POI”), Protection One Alarm Monitoring, Inc., a
Delaware corporation and wholly owned subsidiary of POI (“POAMI” and together with POI, the “POI Parties”), POI Acquisition, L.L.C., a Delaware limited
liability company (“POIA”), on
behalf of itself and as a successor-in-interest to POI Acquisition I, Inc.
(“POIA Inc.”), and Monarch Master Funding
Ltd, f/k/a Quadrangle Master Funding Ltd, a Cayman Islands exempted company
incorporated with limited liability (“MMFL” and
together with POIA and POIA Inc., the “Buyer Parties”),
as a successor-in-interest to POIA Inc. (each of Westar, WII, POI, POAMI, POIA
and MMFL, a “Party” and  collectively, the “Parties”).

 

RECITALS

 

A.  WHEREAS, pursuant to the Purchase Agreement
dated December 23, 2003, by and among POIA, WII, and Westar (as amended, the “Purchase
Agreement”), POIA, through POIA Inc., purchased an aggregate of
85,291,497 shares of common stock, par value $0.01, of POI from WII, and
assumed all of WII’s rights and obligations under the Revolving Credit
Agreement dated as of December 21, 1998, by and among WII, POI as
guarantor and POAMI;

 

B.  WHEREAS, pursuant to the Settlement Agreement
dated November 12, 2004 by and among Westar, POI, POIA and POIA Inc. (the “Settlement Agreement”), Westar, POI, POIA and POIA Inc.
resolved certain outstanding claims relating to the purchase and sale of POI
stock;

 

C.  WHEREAS, the Settlement Agreement identified
several events that, if occurring after November 12, 2004 (“Subsequent Events”), could result in POI or Westar becoming
entitled to recovery from the other;

 

D.  WHEREAS, on January 21, 2009, Westar
entered into a closing agreement with the Internal Revenue Service (the “Closing Agreement”) for its taxable years 2003 and 2004;

 

E.  WHEREAS, the Closing Agreement resolved the
proper U.S. federal income tax treatment of the sale of POI stock pursuant to
the Purchase Agreement, resulting in a refund of U.S. federal income taxes to
Westar;

 

F.  WHEREAS, the refund of U.S. federal income
taxes due to a change in the treatment of the sale of POI stock is a Subsequent
Event;

 

G.  WHEREAS, Westar and POI have differing views
as to the amount required to be paid under the Settlement Agreement as a result
of the occurrence of such Subsequent Event;

 

 

H.  WHEREAS, pursuant to the Amended and Restated
Service Agreement effective March 1, 2003, between Westar and POAMI, which
amended and restated that certain Service Agreement dated on or about April 9,
1999, previously executed between Westar and POAMI (collectively, the “Service Agreement”), Westar agreed to
provide certain services to POAMI and its affiliates and subsidiaries;

 

I.  WHEREAS, pursuant to Section 7.04 of the
Purchase Agreement, Westar and POIA agreed that the Service Agreement would be
continued for a period of twelve months after the closing, subject to certain
terms and conditions;

 

J.  WHEREAS, Westar, the POI Parties and the
Buyer Parties are in disagreement as to the amount, if any, owed by the POI
Parties to Westar with respect to the acquisition and use of PeopleSoft
software, which acquisition and use Westar claims was provided pursuant to the
Service Agreement;

 

K.  WHEREAS, on or about December 18, 2006,
POIA Inc. converted to a Delaware limited liability company immediately after
and pursuant to a plan of reorganization whereby POIA Inc. transferred to POI
all of the POI common stock owned by it in exchange for an equal number of
shares of newly issued POI common stock, and POIA Inc. subsequently distributed
that newly-issued common stock to POIA and MMFL in complete liquidation;

 

L.  WHEREAS, the Parties desire to determine and
satisfy with certainty and finality their obligations under the Settlement
Agreement, the Purchase Agreement and the Service Agreement, as well as resolve
their differences with respect to the acquisition and use of the PeopleSoft
software;

 

NOW
THEREFORE, in consideration of the mutual promises herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Parties agree as follows:

 

IT
IS AGREED;

 

Section 1.  PAYMENT

 

Westar
shall pay to POI the sum of $22,750,000 on December 31, 2009, in
immediately available funds by wire transfer to an account designated by POI in
writing prior to such date.

 

Section 2.  RELEASE BY THE POI PARTIES AND THE BUYER
PARTIES OF WESTAR AND WII

 

(a) 
Each of the POI Parties and the Buyer Parties (on behalf of itself and all
those claiming by, through or under it), for itself, and its officers,
directors and stockholders, hereby

 

2

 

releases
and forever discharges each of Westar and WII, its officers, directors,
stockholders, employees, agents, representatives, predecessors, affiliates,
successors and assigns, and each of them, from any and all liabilities, claims,
demands, debts, actions, causes of action, rights and obligations, whether
known or unknown, whether suspected or unsuspected, whether contingent or
liquidated, whether by apportionment of fault or otherwise, of every kind,
nature or description which it ever had, now has or may hereafter have against
any of them, for or by reason of any matter, cause or thing whatsoever arising
out of or relating to the Settlement Agreement, the Purchase Agreement, or the
Service Agreement.  Each of the POI
Parties, the Buyer Parties, Westar and WII intend this discharge and release to
be construed broadly.

 

(b) 
Each of POI and the Buyer Parties understands that, under either the Settlement
Agreement or the Purchase Agreement, it may in the future become entitled to
payments from Westar and/or WII that it is not entitled to as of the date of
this Final Settlement Agreement.  Each of
POI and the Buyer Parties acknowledges that the payment of $22,750,000
described in Section 1 includes payment by Westar and WII for the
estimated value of any amounts each of POI or the Buyer Parties may become
entitled to in the future under either the Settlement Agreement or the Purchase
Agreement.  As of the date of this Final
Settlement Agreement, each of POI and the Buyer Parties hereby releases and
fully discharges Westar and WII from any payment obligation it may otherwise
become entitled to in the future under either the Settlement Agreement or the
Purchase Agreement.  This release and
discharge by each of POI and the Buyer Parties is made on behalf of itself and
affiliates under its control, and its and their respective successors or
assigns and releases and forever discharges each of Westar and WII, its
subsidiaries, and its and their respective directors, officers, employees,
attorneys, and agents acting in such capacities and all their predecessors,
successors, heirs executors, administrators, representatives, and assigns,
acting in such capacities. Each of POI, the Buyer Parties, Westar and WII
intend this discharge and release to be construed broadly.

 

(c) 
Each of POI and the Buyer Parties understands that, under either the Settlement
Agreement or the Purchase Agreement, Westar and/or WII may in the future, after
the date of this Final Settlement Agreement, become obligated to take an action
or series of actions for the benefit of POI and/or the Buyer Parties.  Such action or actions may include, but are
not limited to, notification to POI and/or the Buyer Parties by Westar and/or
WII of events that POI and/or the Buyer Parties may have no other way of
knowing.  In exchange for the payment of
$22,750,000 described in Section 1 of this Final Settlement Agreement,
each of POI and the Buyer Parties releases and fully discharges each of Westar
and WII from any action or series of actions it may otherwise become obligated
to take under either the Settlement Agreement or the Purchase Agreement after
the date of this Final Settlement Agreement. 
This release and discharge by each of POI and the Buyer Parties is made
on behalf of itself and affiliates under its control and its and their
respective successors or assigns and releases and forever discharges each of
Westar and WII, its subsidiaries, and its and their respective directors,
officers, employees, attorneys, and agents acting in such capacities and all
their predecessors, successors, heirs executors, administrators,
representatives, and assigns, acting in such capacities.  Each of POI, the Buyer Parties, Westar and
WII intend this discharge and release to be construed broadly.

 

3

 

Section 3.  RELEASE BY WESTAR AND WII OF THE POI PARTIES
AND THE BUYER PARTIES

 

(a) 
Each of Westar and WII (on behalf of itself and all those claiming by, through
or under it), for itself, and its officers, directors and stockholders, hereby
releases and forever discharges each of the POI Parties and the Buyer Parties,
and its officers, directors, stockholders, employees, agents, representatives,
predecessors, affiliates, successors and assigns, and each of them, from any
and all liabilities, claims, demands, debts, actions, causes of action, rights
and obligations, whether known or unknown, whether suspected or unsuspected,
whether contingent or liquidated, whether by apportionment of fault or
otherwise, of every kind, nature or description which it ever had, now has or
may hereafter have against any of them, for or by reason of any matter, cause or
thing whatsoever arising out of or relating to the Settlement Agreement, the
Purchase Agreement, the Service Agreement and the acquisition or use of
PeopleSoft software (whether or not provided pursuant to the Service
Agreement).  Each of the POI Parties, the
Buyer Parties, Westar and WII intend this discharge and release to be construed
broadly.

 

(b) 
Each of Westar and WII understands that, under either the Settlement Agreement
or the Purchase Agreement, it may in the future become entitled to payments from
POI and/or the Buyer Parties that it is not entitled to as of the date of this
Final Settlement Agreement.  As of the
date of this Final Settlement Agreement, each of Westar and WII hereby releases
and fully discharges each of POI and the Buyer Parties from any payment
obligation Westar and/or WII may otherwise become entitled to in the future
under either the Settlement Agreement or the Purchase Agreement.  This release and discharge by each of Westar
and WII is made on behalf of itself and affiliates under its control, and its
and their respective successors or assigns and releases and forever discharges
each of POI and the Buyer Parties, its subsidiaries, and its and their
respective directors, officers, employees, attorneys, and agents acting in such
capacities and all their predecessors, successors, heirs executors,
administrators, representatives, and assigns, acting in such capacities.  Each of Westar, WII, POI and the Buyer
Parties intend this discharge and release to be construed broadly.

 

(c) 
Each of Westar and WII understands that, under either the Settlement Agreement
or the Purchase Agreement, POI and/or the Buyer Parties may in the future,
after the date of this Final Settlement Agreement, become obligated to take an
action or series of actions for the benefit of Westar and/or WII.  Such action or actions may include, but are
not limited to, notification to Westar and/or WII by POI and/or the Buyer
Parties of events that Westar and/or WII may have no other way of knowing.  Each of Westar and WII releases and fully
discharges each of POI and the Buyer Parties from any action or series of
actions it may otherwise become obligated to take under either the Settlement
Agreement or the Purchase Agreement after the date of this Final Settlement
Agreement.  This release and discharge by
each of Westar and WII is made on behalf of itself and affiliates under its
control and its and their respective successors or assigns and releases and
forever discharges each of POI and the Buyer Parties and its subsidiaries and
its and their respective directors, officers, employees, attorneys, and agents
acting in such capacities and all their predecessors, successors, heirs
executors, administrators, representatives, and assigns, acting in such
capacities.  Each of Westar, WII, POI and
the Buyer Parties intend this discharge and release to be construed broadly.

 

4

 

Section 4.  REPRESENTATIONS AND WARRANTIES OF THE POI
PARTIES

 

Each
of the POI Parties represents and warrants that:

 

(a) 
it is a corporation validly existing and in good standing under the laws of the
State of Delaware;

 

(b) 
it has all corporate power and authority to execute and deliver this Final
Settlement Agreement and to perform its obligations hereunder;

 

(c) 
its execution, delivery and performance of this Final Settlement Agreement, and
its consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action, including by its board of
directors;

 

(d) 
this Final Settlement Agreement has been duly and validly executed and
delivered by it and (assuming the due authorization, execution and delivery
hereof by the other Parties) constitutes a legal, valid and binding obligation
of it enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity);

 

(e)   its execution and delivery of this Final
Settlement Agreement, its consummation of the transactions contemplated hereby,
and its compliance with any of the provisions hereof will not conflict with,
constitute a default under or violate (x) any of the terms, conditions or
provisions of its articles of incorporation or by-laws, (y) any of the terms,
conditions or provisions of any document, agreement or other instrument to
which it is a party or by which its property is bound, or (z) any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on it or its property; and

 

(f) 
no consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with its execution and delivery of this Final Settlement
Agreement, its consummation of the transactions contemplated hereby, or its
compliance with any of the provisions thereof.

 

Section 5.  REPRESENTATIONS AND WARRANTIES OF POIA

 

POIA
represents and warrants that:

 

(a) 
it is a limited liability company validly existing and in good standing under
the laws of the State of Delaware;

 

(b) 
it has all power and authority to execute and deliver this Final Settlement
Agreement and to perform its obligations hereunder;

 

5

 

(c) 
its execution, delivery and performance of this Final Settlement Agreement, and
its consummation of the transactions contemplated hereby, have been duly
authorized by all necessary action, including by its members;

 

(d) 
this Final Settlement Agreement has been duly and validly executed and
delivered by it and (assuming the due authorization, execution and delivery
hereof by the other Parties) constitutes a legal, valid and binding obligation
of it enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity);

 

(e)   its execution and delivery of this Final
Settlement Agreement, its consummation of the transactions contemplated hereby,
and its compliance with any of the provisions hereof will not conflict with,
constitute a default under or violate (x) any of the terms, conditions or
provisions of its organizational documents, (y) any of the terms,
conditions or provisions of any document, agreement or other instrument to
which it is a party or by which its property is bound, or (z) any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on it or its property; and

 

(f) 
no consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with its execution and delivery of this Final Settlement
Agreement, its consummation of the transactions contemplated hereby, or its
compliance with any of the provisions thereof.

 

Section 6.  REPRESENTATIONS AND WARRANTIES OF MMFL

 

MMFL
represents and warrants that:

 

(a) 
it is a Cayman Islands exempted company incorporated with limited liability;

 

(b) 
it has all power and authority to execute and deliver this Final Settlement
Agreement and to perform its obligations hereunder;

 

(c) 
its execution, delivery and performance of this Final Settlement Agreement, and
its consummation of the transactions contemplated hereby, have been duly
authorized by all necessary action, including by its owners;

 

(d) 
this Final Settlement Agreement has been duly and validly executed and
delivered by it and (assuming the due authorization, execution and delivery hereof
by the other Parties) constitutes a legal, valid and binding obligation of it
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity);

 

6

 

(e)   its execution and delivery of this Final
Settlement Agreement, its consummation of the transactions contemplated hereby,
and its compliance with any of the provisions hereof will not conflict with,
constitute a default under or violate (x) any of the terms, conditions or
provisions of its organizational documents, (y) any of the terms,
conditions or provisions of any document, agreement or other instrument to
which it is a party or by which its property is bound, or (z) any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on it or its property; and

 

(f) 
no consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with its execution and delivery of this Final Settlement
Agreement, its consummation of the transactions contemplated hereby, or its
compliance with any of the provisions thereof.

 

Section 7.  REPRESENTATIONS AND WARRANTIES OF WESTAR AND
WII

 

Each
of Westar and WII represents and warrants that:

 

(a) 
it is a corporation validly existing and in good standing under the laws of the
State of Kansas (in the case of Westar) and the State of Delaware (in the case
of WII);

 

(b) 
it has all corporate power and authority to execute and deliver this Final
Settlement Agreement and to perform its obligations hereunder;

 

(c) 
its execution, delivery and performance of this Final Settlement Agreement, and
its consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action, including by its board of
directors;

 

(d) 
this Final Settlement Agreement has been duly and validly executed and
delivered by it and (assuming the due authorization, execution and delivery
hereof by the other Parties) constitutes a legal, valid and binding obligation
of it enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity);

 

(e) 
its execution and delivery of this Final Settlement Agreement, its consummation
of the transactions contemplated hereby, and its compliance with any of the
provisions hereof will not conflict with, constitute a default under or violate
(x) any of the terms, conditions or provisions of its articles of
incorporation or by-laws, (y) any of the terms, conditions or provisions
of any document, agreement or other instrument to which it is a party or by
which its property is bound, or (z) any judgment, writ, injunction,
decree, order or ruling of any court or governmental authority binding on it or
its property; and

 

(f) 
no consent, approval, waiver, license or authorization or other action by, or
filing with, any court or governmental agency, commission or authority is
required in connection with

 

7

 

its
execution and delivery of this Final Settlement Agreement, its consummation of
the transactions contemplated hereby, or its compliance with any of the
provisions thereof.

 

Section 8.  MISCELLANEOUS

 

(a) 
The failure of any Party to insist upon strict adherence to any term of this
Final Settlement Agreement on any occasion shall not be considered a waiver of
its rights or deprive it of the right thereafter to insist upon strict
adherence to that term or any other term of this Final Settlement Agreement.

 

(b) 
Except as otherwise provided herein, all costs and expenses incurred in
connection with this Final Settlement Agreement shall be paid by the Party
incurring such cost or expense.

 

(c) 
This Final Settlement Agreement shall be governed by and construed in
accordance with the law of the State of Delaware, without regard to the
conflicts of law rules of such state.

 

(d) 
Each Party agrees 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
Final Settlement Agreement or the transactions contemplated hereby shall be
brought in any federal court located in Delaware or any Delaware state court,
so long as one of such courts shall have subject matter jurisdiction over such
suit, action or proceeding, and that any cause of action arising out of this
Final Settlement Agreement shall be deemed to have arisen from a transaction of
business in the State of Delaware.  Each
Party hereby irrevocably consents to the jurisdiction of such courts (and of
the appropriate appellate courts) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
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 brought in any such court has been brought in an inconvenient forum.

 

(e) 
Each Party hereby irrevocably waives any and all right to trial by jury in any
legal proceeding arising out of or related to this Final Settlement Agreement.

 

(f) 
Any modification of this Final Settlement Agreement shall not be valid or
enforceable unless in writing and signed by all Parties.  It is expressly agreed that this Final
Settlement Agreement cannot be modified orally, by course of dealing, or by
implied agreement.

 

(g) 
Each Party agrees that this Final Settlement Agreement may be executed in one
or more counterparts and all such counterparts taken together shall constitute
one and the same agreement.  Each Party
further agrees that fax or pdf copies of this Final Settlement Agreement in
counterpart or otherwise bearing signatures of each Party may be treated as
executed original documents.

 

(h) 
Each Party acknowledges that it is represented by counsel in connection with
this Final Settlement Agreement, that it has in fact consulted with counsel
concerning this Final Settlement Agreement, and that, after such consultations,
it fully understands the terms of this Final Settlement Agreement and executes
it freely and voluntarily, intending fully to be bound hereby.

 

8

 

(i) 
Each Party acknowledges that money damages alone may not be adequate to remedy
a breach of this Final Settlement Agreement. 
Each Party hereby consents to the specific performance of this Final Settlement
Agreement.  In the event that legal
action is instituted to enforce this Final Settlement Agreement, the prevailing
Party shall be entitled to recover from each non-prevailing Party (on a joint
and several basis) all costs and expenses of litigation, including without
limitation court costs and reasonable attorneys’ fees.

 

(j) 
This Final Settlement Agreement constitutes the complete agreement among the
Parties with respect to the subject matter of this Final Settlement Agreement,
and all promises, representations, understandings, warranties, and agreements
with reference to the subject matter of this Final Settlement Agreement and all
inducements to the making of this Final Settlement Agreement relied upon by the
Parties have been fully expressed in this Final Settlement Agreement.  Each Party expressly acknowledges that, other
than as set out in this Final Settlement Agreement, it is not relying on any
representation or warranty of any other Party in entering into this Final
Settlement Agreement.

 

(k) 
This Final Settlement Agreement may not be assigned by any Party (whether by
operation of law or otherwise) without the prior written consent of each of the
other Parties.  This Final Settlement
Agreement shall be binding upon and inure to the benefit of each of the Parties
and their respective successors and permitted assigns.

 

(l) 
Other than the provisions of Sections 2 and 3 with respect to which the persons
released thereby are intended third-party beneficiaries, the provisions of this
Final Settlement Agreement are solely for the benefit of the Parties and are
not intended to confer upon any other person any rights or remedies hereunder,
and there are no other third-party beneficiaries of this Final Settlement
Agreement.

 

9

 

IN
WITNESS WHEREOF, the undersigned have executed this Final Settlement Agreement
as of the day and year first above written.

 

 

	
   

  	
  WESTAR
  ENERGY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark A. Ruelle

  
	
   

  	
   

  	
  Name: 

  	
  Mark
  A. Ruelle

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President and

  
	
   

  	
   

  	
   

  	
  Chief
  Financial Officer

  
	
   

  	
   

  
	
   

  	
  Date: 

  	
  12/30/2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WESTAR
  INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark A. Ruelle

  
	
   

  	
   

  	
  Name:

  	
  Mark
  A. Ruelle

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
  Date:

  	
  12/30/2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION
  ONE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
   

  	
  Name:

  	
  Eric
  Griffin

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President and Secretary

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  12/30/09

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PROTECTION
  ONE ALARM MONITORING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ J. Eric Griffin

  
	
   

  	
   

  	
  Name:

  	
  Eric
  Griffin

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President and Secretary

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  12/30/09

  
					

 

 

	
   

  	
  POI
  ACQUISITION, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Huber

  
	
   

  	
   

  	
  Name: 

  	
  Michael
  Huber

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
	
   

  	
   

  
	
   

  	
  Date: 

  	
  12/30/09

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MONARCH
  MASTER FUNDING LTD

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Monarch
  Alternative Capital LP, its advisor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew J. Herenstein

  
	
   

  	
   

  	
  Name:

  	
  Andrew
  J. Herenstein

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Principal

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  12/30/2009Exhibit
10.12

 

THESE
SECURITIES ARE NOT REGISTERED UNDER STATE OR FEDERAL SECURITIES LAWS, AND MAY NOT
BE OFFERED, OR SOLD, PLEDGED (EXCEPT A PLEDGE PURSUANT TO THE TERMS OF WHICH
ANY OFFER OR SALE UPON FORECLOSURE WOULD BE MADE IN A MANNER THAT WOULD NOT VIOLATE
THE REGISTRATION PROVISIONS OF FEDERAL OR STATE SECURITIES LAWS) OR OTHERWISE
DISTRIBUTED FOR VALUE, NOR MAY THESE SECURITIES BE TRANSFERRED ON THE
BOOKS OF THE COMPANY, WITHOUT OPINION OF COUNSEL, CONCURRED IN BY COUNSEL FOR
THE COMPANY, THAT NO VIOLATION OF SAID REGISTRATION PROVISIONS WOULD RESULT
THEREFROM.

 

AMENDED AND RESTATED

CONVERTIBLE PROMISSORY NOTE

 

	
  $1,100,000.00

  	
  December 30,
  2009

  
	
   

  	
  New
  York, New York

  

 

This
Amended and Restated Convertible Promissory Note (this “Note”) amends
and restates in its entirety the Convertible Promissory Note dated May 13,
2009 (the “Original Note”), issued by XShares Group, Inc., a
Delaware corporation (the “Company”), promises to pay to MGT Capital
Investments, Inc. (the “Holder”) in the original principal amount
of $1,100,000.00.

 

For
value received of the Company promises to pay to the Holder, the principal sum
of One Million One Hundred Thousand Dollars ($1,100,000.00). Interest shall
accrue from the date of the Original Note on the unpaid principal amount at a
rate equal to ten percent (10%) per annum, compounded annually.  The
Original Note was made in conjunction with the execution of that certain
Securities Purchase Agreement dated May 13, 2009 (the “Purchase
Agreement”).  This Note is subject to
the terms and conditions of the Purchase Agreement, as amended to date, and as
set forth below:

 

1.             Maturity.

 

(a)           Unless converted as provided in Section 2,
this Note will automatically mature and be due and payable on April 30,
2010  (the “Maturity Date”).  Subject to Sections 1(b) and 2 below,
interest shall accrue on this Note  but
shall not be due and payable until the Maturity Date.

 

(b)           Notwithstanding the foregoing, the
entire unpaid principal sum of this Note, together with accrued and unpaid
interest thereon and interest at the rate of eighteen (18%) percent per annum
going forward, shall become immediately due and payable upon the insolvency of
the Company, the commission of any act of bankruptcy by the Company, the
execution by the Company of a general assignment for the benefit of creditors,
the filing by or against the Company of a petition in bankruptcy or any
petition for relief under the federal bankruptcy act or the continuation of
such petition without dismissal for a period of ninety (90) days or more, the
appointment of a receiver or trustee to take possession of the property or
assets of the Company, the breach of any representations, warranties or
covenants under the Purchase Agreement or this Note, or the failure to pay this
Note on the Maturity Date.

 

(c)           This Note may be prepaid in full at
any time prior to conversion pursuant to Section 2( below), with or
without notice, without penalty or premium.

 

1

 

2.             Conversion.

 

(a)           Conversion
into Series B Preferred Stock.  The entire principal amount of this Note
shall be converted into shares of the Company’s Series B Preferred Stock
at the second Closing.  Accrued interest
on this Note shall be converted into Accruing Dividends (as defined in the
Company’s Second Amended and Restated Articles of Incorporation attached to the
Purchase Agreement (the “Certificate”)) from the date of the Original
Note.

 

(b)           Conversion
prior to Second Closing.  At
any time, and from time to time, prior to the second Closing, the Holder may at
its sole option, convert the all or a portion of unpaid principal sum of this
Note, and interest thereon, into shares of the Company’s Series B
Preferred Stock at a price of $0.0284 per share.  In addition, if at any time prior to the second
Closing, there shall be (a) an acquisition of the Company by another
entity other than Holder or its affiliates by means of a merger, consolidation,
or other transaction or series of related transactions resulting in the
exchange of the outstanding shares of the Company’s capital stock such that
shareholders of the Company prior to such transaction own, directly or
indirectly, less than 50% of the voting power of the surviving entity, or (b) a
sale or transfer of all or substantially all of the Company’s assets to any
other person other than Holder or its affiliates, then, at the Holder’s option,
the entire unpaid principal sum of this Note, and interest thereon, shall be
immediately paid to the Holder or converted into shares of the Company’s Series B
Preferred Stock at a price of $0.0284 per share.

 

(c)           Mechanics
and Effect of Conversion. 
No fractional shares of the Company’s capital stock will be issued upon
conversion of this Note.  In lieu of any
fractional share to which the Holder would otherwise be entitled, the Company
will pay to the Holder in cash the amount of the unconverted principal and
interest balance of this Note that would otherwise be converted into such
fractional share.  Upon conversion of
this Note pursuant to this Section 2, the Holder shall surrender this
Note, duly endorsed, at the principal offices of the Company or any transfer
agent of the Company.  At its expense,
the Company will, as soon as practicable thereafter, issue and deliver to such
Holder, at such principal office, a certificate or certificates for the number
of shares to which such Holder is entitled upon such conversion, together with
any other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the
Holder for any cash amounts payable as described herein.  Upon conversion of this Note, the Company
will be forever released from all of its obligations and liabilities under this
Note with regard to that portion of the principal amount and accrued interest
being converted including without limitation the obligation to pay such portion
of the principal amount and accrued interest.

 

3.             Payment.  All
payments shall be made in lawful money of the United States of America at such
place as the Holder hereof may from time to time designate in writing to the
Company.  Payment shall be credited first
to the accrued interest then due and payable and the remainder applied to
principal.

 

4.             Transfer;
Successors and Assigns. 
The terms and conditions of this Note shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.  Notwithstanding the foregoing, the Holder may
not assign, pledge, or otherwise transfer this Note, except for transfers to
affiliates.  Subject to the preceding
sentence, this Note may be transferred only upon surrender of the original Note
for registration of transfer, duly endorsed, or accompanied by a duly executed
written instrument of transfer in form satisfactory to the Company.  Thereupon, a new note for the same principal
amount and interest will be issued to, and registered in the name of, the
transferee.  Interest and principal are
payable only to the registered holder of this Note.

 

2

 

5.             Governing Law.  This Note and any controversy arising out of
or relating to this Note shall be governed by and construed in accordance with
the General Corporation Law of the State of Delaware as to matters within the
scope thereof, and as to all other matters shall be governed by and construed
in accordance with the internal laws of the State New York, without regard to
conflict of law principles that would result in the application of any law
other than the law of the State of New York.

 

6.             Notices.  All
notices and other communications given or made pursuant to this Note shall be
in writing and shall be deemed effectively given upon the earlier of actual
receipt or:  (a) personal delivery
to the party to be notified, (b) five (5) days after having been sent
by registered or certified mail, return receipt requested, postage prepaid, or (c) one
(1) business day after deposit with a nationally recognized overnight
courier, freight prepaid, specifying next business day delivery, with written
verification of receipt.  All
communications shall be sent to the respective parties at their address as set
forth on the signature page, or to such e-mail address, facsimile number or
address as subsequently modified by written notice given in accordance with
this Section 6.

 

7.             Amendments and Waivers.  Any term of this Note may be amended only with
the written consent of the Company and the Holder.  Any amendment or
waiver effected in accordance with this Section 7 shall be binding upon
the Company, the Holder and each transferee of the Note.

 

8.             Shareholders, Officers and Directors Not Liable.  In no event shall any shareholder, officer or
director of the Company be liable for any amounts due or payable pursuant to
this Note.

 

9.             Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder
in the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege, nor shall any waiver by the Holder of any such right
or rights on any one occasion be deemed a waiver of the same right or rights on
any future occasion.

 

3

 

10.           Action
to Collect on Note.  If
action is instituted to collect on this Note, the Company promises to pay all
costs and expenses, including reasonable attorney’s fees, incurred in
connection with such action.

 

	
   

  	
  XSHARES GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  James McCluskey,
  Authorized Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  XShares Group, Inc.

  
	
   

  	
   

  	
  420 Lexington Avenue,
  Suite 2550

  
	
   

  	
   

  	
  New York, NY 10170

  
				

 

	
  ACKNOWLEDGED AND ACCEPTED:

  
	
  this 30th day of December,
  2009,

  
	
  By: MGT CAPITAL INVESTMENTS,
  INC.,

  
	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  
	
  Its: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  MGT Capital
  Investments, Inc.

  
	
   

  	
  Kensington Centre

  
	
   

  	
  66 Hammersmith Road

  
	
   

  	
  London W14 8UD

  
	
   

  	
  United Kingdom

  
				

 

4

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