Document:

Exhibit 4.1

 

 

Registration Rights Agreement

 

 

Dated As of February 12, 2013

 

 

among

 

 

Universal Hospital Services, Inc.,

 

 

UHS Surgical Services, Inc.,
 as Guarantor,

 

 

and

 

 

Barclays Capital Inc.,

Merrill Lynch, Pierce, Fenner & Smith Incorporated,

RBC Capital Markets, LLC,

 

 

PNC Capital Markets LLC and

Wells Fargo Securities, LLC,

as Initial Purchasers

 

 

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is made and entered into this 12th day of February, 2013, among Universal Hospital Services, Inc., a Delaware corporation (the “Issuer”), UHS Surgical Services, Inc. (the “Guarantor”), and Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, LLC, PNC Capital Markets LLC and Wells Fargo Securities, LLC (collectively, the “Initial Purchasers”).

 

This Agreement is made pursuant to the Purchase Agreement, dated February 7, 2013, among the Issuer, the Guarantor and the Initial Purchasers (the “Purchase Agreement”), which provides for the sale by the Issuer to the Initial Purchasers of an aggregate of $220,000,000 principal amount of the Issuer’s 7.625% Second Lien Senior Secured Notes due 2020 and the guarantee related thereto (together, the “Securities”).  The Issuer previously issued $425,000,000 in aggregate principal amount of its 7.625% Second Lien Senior Secured Notes due 2020 under the Indenture (as defined below) (the “Existing Securities”).  The Securities constitute an additional issuance of notes under the Indenture.  In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuer and the Guarantor have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution of this Agreement is a condition to the closing under the Purchase Agreement.

 

In consideration of the foregoing, the parties hereto agree as follows:

 

1.                                      Definitions.

 

As used in this Agreement, the following capitalized defined terms shall have the following meanings:

 

“1933 Act” shall mean the Securities Act of 1933, as amended from time to time.

 

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

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

 

“Closing Date” shall have the meaning ascribed to such term in the Purchase Agreement.

 

“Depositary” shall mean The Depository Trust Company, or any other depositary appointed by the Issuer, provided, however, that such depositary must have an address in the Borough of Manhattan, in the City of New York.

 

“Effectiveness Period” shall have the meaning set forth in Section 2.2 hereof.

 

“Event Date” shall have the meaning set forth in Section 2.5 hereof.

 

 

“Exchange Offer” shall mean the exchange offer by the Issuer of Exchange Securities for Transfer Restricted Securities pursuant to Section 2.1 hereof.

 

“Exchange Offer Registration” shall mean a registration under the 1933 Act effected pursuant to Section 2.1 hereof.

 

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form), and all amendments and supplements to such registration statement, including the Prospectus contained therein, all exhibits thereto and all documents incorporated by reference therein.

 

“Exchange Period” shall have the meaning set forth in Section 2.1 hereof.

 

“Exchange Securities” shall mean the 7.625% Second Lien Senior Secured Notes due 2020 issued by the Issuer under the Indenture containing terms identical to the Securities and the Existing Securities in all material respects (except for references to certain interest rate provisions, restrictions on transfers and restrictive legends) and the guarantees related thereto to be offered to Holders of Securities in exchange for Transfer Restricted Securities pursuant to the Exchange Offer.

 

“Existing Exchange Securities” shall mean the 7.625% Second Lien Senior Secured Notes due 2020 and the related guarantee thereto, of the same series under the Indenture as the Existing Securities without restrictive legends or transfer restrictions, that were issued to Holders of the Existing Securities in an exchange offer pursuant to the Existing Registration Rights Agreement.

 

“Existing Registration Rights Agreement” shall mean the Registration Rights Agreement, dated as of August 7, 2012, by and among the Issuer, the Guarantor, Barclays Capital, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, LLC, PNC Capital Markets LLC and Wells Fargo Securities, LLC.

 

“Existing Securities” shall have the meaning set forth in the preamble.

 

“FINRA” shall have the meaning set forth in the definition of “Registration Expenses”.

 

“Guarantor” shall have the meaning set forth in the preamble.

 

“Holder” shall mean an Initial Purchaser, for so long as it owns any Transfer Restricted Securities, and each of its successors, assigns and direct and indirect transferees who become registered owners of Transfer Restricted Securities under the Indenture and each Participating Broker-Dealer that holds Exchange Securities for so long as such Participating Broker-Dealer is required to deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities.

 

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“Indenture” shall mean the Indenture relating to the Securities, dated as of August 7, 2012, between the Issuer, the Guarantor and Wells Fargo Bank, National Association, as trustee and collateral agent, as the same may be amended, supplemented, waived or otherwise modified from time to time in accordance with the terms thereof.

 

“Initial Purchaser” or “Initial Purchasers” shall have the meaning set forth in the preamble.

 

“Issuer” shall have the meaning set forth in the preamble.

 

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of outstanding Transfer Restricted Securities; provided that whenever the consent or approval of Holders of a specified percentage of Transfer Restricted Securities is required hereunder, Transfer Restricted Securities held by the Issuer and other obligors on the Securities or any Affiliate (as defined in the Indenture) of the Issuer shall be disregarded in determining whether such consent or approval was given by the Holders of such required percentage amount.

 

“Participating Broker-Dealer” shall mean any of Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, RBC Capital Markets, LLC, PNC Capital Markets LLC, Wells Fargo Securities, LLC and any other broker-dealer which makes a market in the Securities and exchanges Transfer Restricted Securities in the Exchange Offer for Exchange Securities.

 

“Person” shall mean an individual, partnership (general or limited), corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof.

 

“Private Exchange” shall have the meaning set forth in Section 2.1 hereof.

 

“Private Exchange Securities” shall have the meaning set forth in Section 2.1 hereof.

 

“Prospectus” shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including any such prospectus supplement with respect to the terms of the offering of any portion of the Transfer Restricted Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to a prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein.

 

“Purchase Agreement” shall have the meaning set forth in the preamble.

 

“Registration Default” shall have the meaning set forth in Section 2.5 hereof.

 

“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by the Issuer and the Guarantor with this Agreement, including without 

 

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limitation: (i) all SEC, stock exchange or Financial Industry Regulatory Authority, Inc. (“FINRA”) registration and filing fees, including, if applicable, the fees and expenses of any “qualified independent underwriter” (and its counsel) that is required to be retained by any holder of Transfer Restricted Securities in accordance with the rules and regulations of the FINRA, (ii) all fees and expenses incurred in connection with compliance with federal securities, state securities or blue sky laws and compliance with the rules of the FINRA (including reasonable fees and disbursements of not more than one counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Transfer Restricted Securities and any filings with the FINRA), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all fees and expenses incurred in connection with the listing, if any, of any of the Transfer Restricted Securities on any securities exchange or exchanges, (v) all rating agency fees, (vi) the fees and disbursements of counsel for the Issuer and the Guarantor and of the independent public accountants of the Issuer and the Guarantor, including the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, (vii) the fees and expenses of the Trustee, and any escrow agent or custodian, (viii) the reasonable fees and expenses of the Initial Purchasers in connection with the Exchange Offer, including the reasonable fees and expenses of not more than one counsel to the Initial Purchasers in connection therewith, (ix) the reasonable fees and disbursements of Cahill Gordon & Reindel LLP, special counsel representing the Holders of Transfer Restricted Securities; and (x) any fees and disbursements of the underwriters customarily required to be paid by issuers or sellers of securities and the fees and expenses of any special experts retained by the Issuer and the Guarantor in connection with any Registration Statement, but excluding underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Transfer Restricted Securities by a Holder.

 

“Registration Statement” shall mean any registration statement of the Issuer which covers any of the Exchange Securities or Transfer Restricted Securities pursuant to the provisions of this Agreement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

 

“SEC” shall mean the Securities and Exchange Commission or any successor agency or government body performing the functions currently performed by the United States Securities and Exchange Commission.

 

“Securities” shall have the meaning set forth in the preamble.

 

“Shelf Registration” shall mean a registration effected pursuant to Section 2.2 hereof.

 

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“Shelf Registration Statement” shall mean a “shelf” registration statement of the Issuer pursuant to the provisions of Section 2.2 hereof which covers all of the Transfer Restricted Securities or all of the Private Exchange Securities on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein.

 

“Special Interest” shall have the meaning set forth in Section 2.5 hereof.

 

“TIA” shall have the meaning set forth in Section 2.1 hereof.

 

“Transfer Restricted Securities” shall mean the Securities and, if issued, the Private Exchange Securities; provided, however, that the Securities and, if issued, the Private Exchange Securities, shall cease to be Transfer Restricted Securities when (i) a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been disposed of pursuant to such Registration Statement, (ii) such Securities shall have ceased to be outstanding, (iii) the Exchange Offer is consummated (except in the case of Securities purchased from the Issuer and continued to be held by the Initial Purchasers) or (iv) two years shall have elapsed since the date of this Agreement.

 

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

 

“Underwriter” shall have the meaning set forth in Section 4(a) hereof.

 

2.                                      Registration Under the 1933 Act.

 

2.1                               Exchange Offer.  The Issuer and the Guarantor shall, for the benefit of the Holders, at the Issuer’s cost, (A) prepare and use all commercially reasonable efforts to file, as soon as practicable but not later than 120 days following the Closing Date, with the SEC an Exchange Offer Registration Statement on an appropriate form under the 1933 Act with respect to a proposed Exchange Offer and the issuance and delivery to the Holders, in exchange for the Transfer Restricted Securities (other than Private Exchange Securities), of a like principal amount of Exchange Securities, (B) use all commercially reasonable efforts to cause the Exchange Offer Registration Statement to be declared effective under the 1933 Act within 210 days of the Closing Date (or within 270 days of the Closing Date in the event the Exchange Offer Registration Statement is reviewed by the SEC), (C) use all commercially reasonable efforts to keep the Exchange Offer Registration Statement effective until the closing of the Exchange Offer and (D) use all commercially reasonable efforts to cause the Exchange Offer to be consummated not later than 30 business days (or longer, if required by the federal securities laws) following the date on which the Exchange Offer Registration Statement was declared effective by the SEC.  The Exchange Securities will be issued under the Indenture.  Upon the effectiveness of the Exchange Offer Registration Statement, the Issuer and the Guarantor shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder eligible and electing to exchange Transfer Restricted Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Issuer within the meaning of Rule 405 under the 1933 Act, (b)

 

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is not a broker-dealer tendering Transfer Restricted Securities acquired directly from the Issuer for its own account, (c) acquired the Exchange Securities in the ordinary course of such Holder’s business and (d) has no arrangements or understandings with any Person to participate in the Exchange Offer for the purpose of distributing the Exchange Securities) to transfer such Exchange Securities from and after their receipt without any limitations or restrictions under the 1933 Act and under state securities or blue sky laws.

 

In connection with the Exchange Offer, the Issuer and the Guarantor shall:

 

(a)                                 mail as promptly as practicable to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents;

 

(b)                                 keep the Exchange Offer open for acceptance for a period of not less than 20 business days after the date notice thereof is mailed to the Holders (or longer if required by applicable law) (such period referred to herein as the “Exchange Period”);

 

(c)                                  utilize the services of the Depositary for the Exchange Offer;

 

(d)                                 permit Holders to withdraw tendered Transfer Restricted Securities at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the Exchange Period, by sending to the institution specified in the notice, a telegram, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Transfer Restricted Securities delivered for exchange, and a statement that such Holder is withdrawing such Holder’s election to have such Securities exchanged;

 

(e)                                  notify each Holder that any Transfer Restricted Securities not tendered will remain outstanding and continue to accrue interest, but will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); and

 

(f)                                   otherwise comply in all respects with all applicable laws relating to the Exchange Offer.

 

If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Securities acquired by them and having the status of an unsold allotment in the initial distribution, the Issuer upon the request of any Initial Purchaser shall, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in exchange (the “Private Exchange”) for the Securities held by such Initial Purchaser, a like principal amount of debt securities of the Issuer on a senior basis, that are identical (except that such securities shall bear appropriate transfer restrictions) to the Exchange Securities (the “Private Exchange Securities”).

 

The Exchange Securities and the Private Exchange Securities shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture and which, in either case, has been qualified under the Trust Indenture Act of 1939, as amended (the “TIA”), or is exempt from such qualification and shall provide that the Exchange Securities shall 

 

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not be subject to the transfer restrictions set forth in the Indenture but that the Private Exchange Securities shall be subject to such transfer restrictions.  The Indenture or such indenture shall provide that the Exchange Securities, the Private Exchange Securities and the Securities shall vote and consent together on all matters as one class and that none of the Exchange Securities, the Private Exchange Securities or the Securities will have the right to vote or consent as a separate class on any matter.  The Private Exchange Securities shall be of the same series as the Exchange Securities and the Issuer and the Guarantor shall use all commercially reasonable efforts to have the Private Exchange Securities bear the same CUSIP number as the Exchange Securities.  The Issuer and the Guarantor shall not have any liability under this Agreement solely as a result of such Private Exchange Securities not bearing the same CUSIP number as the Exchange Securities.

 

As soon as practicable after the close of the Exchange Offer and/or the Private Exchange, as the case may be, the Issuer and the Guarantor shall:

 

(i)                                     accept for exchange all Transfer Restricted Securities duly tendered and not validly withdrawn pursuant to the Exchange Offer in accordance with the terms of the Exchange Offer Registration Statement;

 

(ii)                                  accept for exchange all Securities properly tendered pursuant to the Private Exchange;

 

(iii)                               deliver to the Trustee for cancellation all Transfer Restricted Securities so accepted for exchange; and

 

(iv)                              cause the Trustee promptly to authenticate and deliver Exchange Securities or Private Exchange Securities, as the case may be, to each Holder of Transfer Restricted Securities so accepted for exchange in a principal amount equal to the principal amount of the Transfer Restricted Securities of such Holder so accepted for exchange.

 

Interest on each Exchange Security and Private Exchange Security will accrue from the last date on which interest was paid on the Transfer Restricted Securities surrendered in exchange therefor or, if no interest has been paid on the Transfer Restricted Securities, from the date of original issuance.  The Exchange Offer and the Private Exchange shall not be subject to any conditions, other than (i) that the Exchange Offer or the Private Exchange, or the making of any exchange by a Holder, does not violate applicable law or any applicable interpretation of the staff of the SEC, (ii) the due tendering of Transfer Restricted Securities in accordance with the Exchange Offer and the Private Exchange, (iii) that each Holder of Transfer Restricted Securities exchanged in the Exchange Offer shall have represented that all Exchange Securities to be received by it shall be acquired in the ordinary course of its business and that at the time of the consummation of the Exchange Offer it shall have no arrangement or understanding with any person to participate in the distribution (within the meaning of the 1933 Act) of the Exchange Securities and shall have made such other representations as may be reasonably necessary under applicable SEC rules, regulations or interpretations to render the use of Form S-4 or other appropriate form under the 1933 Act available and (iv) that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the 

 

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Exchange Offer or the Private Exchange which, in the Issuer’s judgment, would reasonably be expected to impair the ability of the Issuer and the Guarantor to proceed with the Exchange Offer or the Private Exchange.  The Issuer shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right to contact such Holders and otherwise facilitate the tender of Transfer Restricted Securities in the Exchange Offer.

 

2.2                               Shelf Registration.  (i) If, because (A) the Issuer is not required to file the Exchange Offer Registration Statement or (B) of any changes in law, SEC rules or regulations or applicable interpretations thereof by the staff of the SEC, the Issuer is not permitted to effect the Exchange Offer as contemplated by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer Registration Statement is not declared effective within 210 days of the Closing Date (or within 270 days of the Closing Date in the event the Exchange Offer Registration Statement is reviewed by the SEC) or the Exchange Offer is not consummated within 30 business days (or longer, if required by the federal securities laws) after the date on which the Exchange Offer Registration Statement was declared effective by the SEC or (iii) if a Holder notifies the Issuer and the Guarantor prior to the 20th day following the consummation of the Exchange Offer that it (A) is not permitted to participate in the Exchange Offer, (B) may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for resales or (C) is a broker-dealer and owns notes acquired directly from the Issuer or an affiliate of the Issuer, then in case of each of clauses (i) through (iii) the Issuer and the Guarantor shall, at the Issuer’s cost:

 

(a)                                 Use all commercially reasonable efforts to file, as promptly as practicable but no later than 45 days after any of the circumstances in clauses (i) through (iii) above being satisfied, with the SEC a Shelf Registration Statement relating to the offer and sale of the Transfer Restricted Securities by the Holders from time to time in accordance with the methods of distribution elected by the Majority Holders participating in the Shelf Registration and set forth in such Shelf Registration Statement, and thereafter shall use all commercially reasonable efforts to cause to be declared effective, as promptly as practicable but no later than 90 days after such date described above, such Shelf Registration Statement.

 

(b)                                 Use all commercially reasonable efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the SEC (subject to Section 3(e)), or for such shorter period that will terminate when all Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or cease to be outstanding or otherwise to be Transfer Restricted Securities (the “Effectiveness Period”); provided, however, that the Effectiveness Period in respect of the Shelf Registration Statement shall be extended to the extent required to permit dealers to comply with the applicable prospectus delivery requirements of Rule 174 under the 1933 Act and as otherwise provided herein.

 

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(c)                                  Notwithstanding any other provisions hereof, use all commercially reasonable efforts to ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the 1933 Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any supplement to such Prospectus (as amended or supplemented from time to time), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements, in light of the circumstances under which they were made, not misleading.

 

The Issuer and the Guarantor agree, if necessary, to supplement or amend the Shelf Registration Statement, as required by Section 3(b) below, and to furnish to the Holders of Transfer Restricted Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC.

 

2.3                               Expenses.  The Issuer shall pay all Registration Expenses in connection with the registration pursuant to Sections 2.1 or 2.2 hereof.  Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Transfer Restricted Securities pursuant to the Shelf Registration Statement.

 

2.4                               Effectiveness.

 

(a)                                 The Issuer and the Guarantor will be deemed not to have used their commercially reasonable efforts to cause the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, to become, or to remain, effective during the requisite period if the Issuer and the Guarantor voluntarily take any action that would, or omit to take any action which omission would, result in any such Registration Statement not being declared effective or in the Holders of Transfer Restricted Securities covered thereby not being able to exchange or offer and sell such Transfer Restricted Securities during that period as and to the extent contemplated hereby, unless such action is required by applicable law.

 

(b)                                 An Exchange Offer Registration Statement pursuant to Section 2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that if, after it has been declared effective, the offering of Transfer Restricted Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Transfer Restricted Securities pursuant to such Registration Statement may legally resume.

 

2.5                               Interest.  The Indenture executed in connection with the Securities will provide that in the event that either (a) the Exchange Offer Registration Statement is not filed 

 

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with the SEC on or prior to the 120th calendar day following the Closing Date, (b) the Exchange Offer Registration Statement has not been declared effective on or prior to the 210th calendar day following the Closing Date (or prior to the 270th day of the Closing Date in the event the Exchange Offer Registration Statement is reviewed by the SEC), (c) the Exchange Offer is not consummated on or prior to the 30th business day (or later, if required by federal securities laws) following the date on which the Exchange Offer Registration Statement was required to have been declared effective by the SEC or (d) a Shelf Registration Statement is not filed on or prior to the 45th calendar day, or declared effective on or prior to the 90th calendar day, following any of the circumstances in clauses (i) through (iv) of Section 2.2 hereof being satisfied (each such event referred to in clauses (a) through (d) above, a “Registration Default”), the interest rate borne by the Securities shall be increased (“Special Interest”) by one-quarter of one percent per annum upon the occurrence of each Registration Default, which rate will increase by one quarter of one percent each 90-day period that such Special Interest continues to accrue under any such circumstance, provided that the maximum aggregate increase in the interest rate will in no event exceed one percent (1%) per annum and provided further that Special Interest shall in no event be paid for more than one Registration Default at any given time.  Following the cure of all Registration Defaults the accrual of Special Interest will cease and the interest rate will revert to the original rate.

 

If, at any time, the Board of Directors (as defined in the Indenture) of the Issuer determines reasonably and in good faith that the filing of any Shelf Registration Statement or the continuing effectiveness thereof would require disclosure of non-public material information that, in the reasonable judgment of the Board of Directors of the Issuer, would be detrimental to the Issuer or its Affiliates (as defined in the Indenture) if so disclosed or would otherwise materially adversely affect a financing, acquisition, disposition, merger or other material transaction or such action is required by applicable law, then the Issuer may delay or suspend the effectiveness of such Shelf Registration Statement for a reasonable time period, but not in excess of 50 consecutive days or 75 days in the aggregate during any consecutive twelve month period.  If the aggregate number of days in any consecutive twelve month period for which the Shelf Registration shall not be usable pursuant to such determination of the Board of Directors of the Issuer exceeds 50 consecutive days or 75 days in the aggregate, then the interest rate borne by the Securities will be increased by 0.25% per annum of the principal amount of the Securities for the first 90-day period (or portion thereof) beginning on the 51st or 76th such date, as applicable, that such Shelf Registration Statement ceases to be usable, which rate shall be increased by an additional 0.25% per annum of the principal amount of the Securities at the beginning of each subsequent 90-day period, provided that the maximum aggregate increase in the interest rate will in no event exceed one percent (1%) per annum.  Any amounts payable under this paragraph shall also be deemed “Special Interest” for purposes of this Agreement.  Upon the Shelf Registration Statement once again becoming usable, the interest rate borne by the Securities will be reduced to the original interest rate if the Issuer and the Guarantor are otherwise in compliance with this Agreement at such time.  Special Interest shall be computed based on the actual number of days elapsed in each 90-day period in which the Shelf Registration Statement is unusable.

 

The Issuer shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Special Interest is required to be paid (an “Event Date”).  Special Interest shall be paid by depositing with the Trustee, in trust, for the benefit

 

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of the Holders of Transfer Restricted Securities, on or before the applicable semiannual interest payment date, immediately available funds in sums sufficient to pay the Special Interest then due.  The Special Interest due shall be payable on each interest payment date to the record Holder of Securities entitled to receive the interest payment to be paid on such date as set forth in the Indenture.  Each obligation to pay Special Interest shall be deemed to accrue from and including the day following the applicable Event Date.

 

3.                                      Registration Procedures.

 

In connection with the obligations of the Issuer and the Guarantor with respect to Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Issuer and the Guarantor shall use all commercially reasonable efforts to:

 

(a)                                 prepare and file with the SEC a Registration Statement, within the relevant time period specified in Section 2 hereof, on the appropriate form under the 1933 Act, which form (i) shall be selected by the Issuer, (ii) shall, in the case of a Shelf Registration, be available for the sale of the Transfer Restricted Securities by the selling Holders thereof, (iii) shall comply as to form in all material respects with the requirements of the applicable form and include or incorporate by reference all financial statements required by the SEC to be filed therewith or incorporated by reference therein, and (iv) shall comply in all respects with the requirements of Regulation S-T under the 1933 Act, and use all commercially reasonable efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof;

 

(b)                                 prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary under applicable law to keep such Registration Statement effective for the applicable period; and cause each Prospectus to be supplemented by any required prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provision then in force) under the 1933 Act and comply with the provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder applicable to them with respect to the disposition of all securities covered by each Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the selling Holders thereof (including sales by any Participating Broker-Dealer);

 

(c)                                  in the case of a Shelf Registration, (i) notify each Holder of Transfer Restricted Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Transfer Restricted Securities is being filed; (ii) furnish to each Holder of Transfer Restricted Securities and to each underwriter of an underwritten offering of Transfer Restricted Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto and such other documents as such Holder or underwriter may reasonably request, including financial statements and schedules and, if the Holder so requests, all exhibits in order to facilitate the public sale or other disposition of the Transfer Restricted Securities; and (iii) hereby consent to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with 

 

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the offering and sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto;

 

(d)                                 use all commercially reasonable efforts to register or qualify the Transfer Restricted Securities under all applicable state securities or “blue sky” laws of such jurisdictions as any Holder of Transfer Restricted Securities covered by a Registration Statement and each underwriter of an underwritten offering of Transfer Restricted Securities shall reasonably request by the time the applicable Registration Statement is declared effective by the SEC, and do any and all other acts and things which may be reasonably necessary or advisable to enable each such Holder and underwriter to consummate the disposition in each such jurisdiction of such Transfer Restricted Securities owned by such Holder; provided, however, that the Issuer and any Guarantor shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (ii) take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject;

 

(e)                                  notify promptly each Holder of Transfer Restricted Securities under a Shelf Registration or any Participating Broker-Dealer who has notified the Issuer that it is utilizing the Exchange Offer Registration Statement as provided in paragraph (f) below and, if requested by such Holder or Participating Broker-Dealer, confirm such advice in writing promptly (i) when a Registration Statement has become effective and when any post-effective amendments and supplements thereto become effective, (ii) of any request by the SEC or any state securities authority for post-effective amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) in the case of a Shelf Registration, if, between the effective date of a Registration Statement and the closing of any sale of Transfer Restricted Securities covered thereby, the representations and warranties of the Issuer and the Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering cease to be true and correct in all material respects, (v) of the happening of any event or the discovery of any facts during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading, (vi) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of the Transfer Restricted Securities or the Exchange Securities, as the case may be, for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (vii) of any determination by the Issuer that a post-effective amendment to such Registration Statement would be appropriate.  The time periods set forth in Sections 2.1(b) and 2.2(b) regarding effectiveness shall be extended by a number of days equal to the number of days on the period from and including the date of delivery of such notice;

 

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(f)                                   in the case of the Exchange Offer Registration Statement (i) include in the Exchange Offer Registration Statement a section entitled “Plan of Distribution” which section shall be reasonably acceptable to the Participating Broker-Dealers, and which shall contain a summary statement of the positions taken or policies made by the staff of the SEC with respect to the potential “underwriter” status of any broker-dealer that holds Transfer Restricted Securities acquired for its own account as a result of market-making activities or other trading activities and that will be the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) of Exchange Securities to be received by such broker-dealer in the Exchange Offer, whether such positions or policies have been publicly disseminated by the staff of the SEC or such positions or policies, in the reasonable judgment of Barclays Capital Inc. on behalf of the Participating Broker-Dealers and its counsel, represent the prevailing views of the staff of the SEC, including a statement that any such broker-dealer who receives Exchange Securities for Transfer Restricted Securities pursuant to the Exchange Offer may be deemed a statutory underwriter and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities, (ii) furnish to each Participating Broker-Dealer who has delivered to the Issuer the notice referred to in Section 3(e) hereof, without charge, as many copies of each Prospectus included in the Exchange Offer Registration Statement, including any preliminary prospectus, and any amendment or supplement thereto, as such Participating Broker-Dealer may reasonably request, (iii) hereby consent to the use of the Prospectus forming part of the Exchange Offer Registration Statement or any amendment or supplement thereto, by any Person subject to the prospectus delivery requirements of the SEC, including all Participating Broker-Dealers, in connection with the sale or transfer of the Exchange Securities covered by the Prospectus or any amendment or supplement thereto, and (iv) include in the transmittal letter or similar documentation to be executed by an exchange offeree in order to participate in the Exchange Offer (x) the following provision:

 

“If the exchange offeree is a broker-dealer holding Transfer Restricted Securities acquired for its own account as a result of market-making activities or other trading activities, it will deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of Exchange Securities received in respect of such Transfer Restricted Securities pursuant to the Exchange Offer;” and

 

(y) a statement to the effect that by a broker-dealer making the acknowledgment described in clause (x) and by delivering a Prospectus in connection with the exchange of Transfer Restricted Securities, the broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the 1933 Act;

 

(g)                                  in the case of a Shelf Registration, furnish counsel for the Holders of Transfer Restricted Securities copies of any comment letters received from the SEC or any other request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information;

 

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(h)                                 make all commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment;

 

(i)                                     in the case of a Shelf Registration, furnish to each Holder of Transfer Restricted Securities, and each underwriter, if any, without charge, at least one copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules (without documents incorporated therein by reference and all exhibits thereto, unless requested) to the extent such documents are not otherwise filed with the SEC and available through the Electronic Data Gathering and Retrieval System;

 

(j)                                    in the case of a Shelf Registration, cooperate with the selling Holders of Transfer Restricted Securities to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders or the underwriters, if any, may reasonably request at least three business days prior to the closing of any sale of Transfer Restricted Securities;

 

(k)                                 in the case of a Shelf Registration, upon the occurrence of any event or the discovery of any facts, each as contemplated by Sections 3(e)(v) and 3(e)(vi) hereof, as promptly as practicable after the occurrence of such an event, use all commercially reasonable efforts to prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Transfer Restricted Securities or Participating Broker-Dealers, such Prospectus will not contain at the time of such delivery any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or will remain so qualified.  At such time as such public disclosure is otherwise made or the Issuer determines that such disclosure is not necessary, in each case to correct any misstatement of a material fact or to include any omitted material fact, the Issuer agrees promptly to notify each Holder of such determination and to furnish each Holder such number of copies of the Prospectus as amended or supplemented, as such Holder may reasonably request;

 

(l)                                     in the case of a Shelf Registration, a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers on behalf of such Holders; and make representatives of the Issuer as shall be reasonably requested by the Holders of Transfer Restricted Securities, or the Initial Purchasers on behalf of such Holders, available for discussion of such document;

 

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(m)                             provide the Trustee with printed certificates for the Exchange Securities, Private Exchange Securities or the Transfer Restricted Securities, as the case may be, in a form eligible for deposit with the Depositary, if so required by the Trustee or Depositary;

 

(n)                                 [reserved];

 

(o)                                 in the case of a Shelf Registration, enter into agreements (including underwriting agreements) and take all other customary and appropriate actions in order to expedite or facilitate the disposition of such Transfer Restricted Securities and in such connection whether or not an underwriting agreement is entered into and whether or not the registration is an underwritten registration:

 

(i)                                     make such representations and warranties to the Holders of such Transfer Restricted Securities and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in similar underwritten offerings as may be reasonably requested by them;

 

(ii)                                  obtain opinions of counsel to the Issuer and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and the holders of a majority in principal amount of the Transfer Restricted Securities being sold) addressed to each selling Holder and the underwriters, if any, covering the matters customarily covered in opinions requested in sales of securities or underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters;

 

(iii)                               obtain “cold comfort” letters and updates thereof from the Issuer’s and the Guarantor’s independent certified public accountants (and, if necessary, any other independent certified public accountants of any Guarantor or subsidiary of the Issuer or of any business acquired by the Issuer for which financial statements are, or are required to be, included in the Registration Statement) addressed to the underwriters, if any, and use all commercially reasonable efforts to have such letter addressed to the selling Holders of Transfer Restricted Securities (to the extent consistent with Statement on Auditing Standards No. 72 of the American Institute of Certified Public Accounts), such letters to be in customary form and covering matters of the type customarily covered in “cold comfort” letters to underwriters in connection with similar underwritten offerings;

 

(iv)                              enter into a securities sales agreement with the Holders and an agent of the Holders providing for, among other things, the appointment of such agent for the selling Holders for the purpose of soliciting purchases of Transfer Restricted Securities, which agreement shall be in form, substance and scope customary for similar offerings;

 

(v)                                 if an underwriting agreement is entered into, cause the same to set forth indemnification provisions and procedures substantially equivalent to the indemnification provisions and procedures set forth in Section 4 hereof with respect to the underwriters and all other parties to be indemnified pursuant to said 

 

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Section or, at the request of any underwriters, in the form customarily provided to such underwriters in similar types of transactions; and

 

(vi)                              deliver such documents and certificates as may be reasonably requested and as are customarily delivered in similar offerings to the Holders of a majority in principal amount of the Transfer Restricted Securities being sold and the managing underwriters, if any.

 

The above shall be done at (i) the effectiveness of such Registration Statement (and each post-effective amendment thereto) and (ii) each closing under any underwriting or similar agreement as and to the extent required thereunder;

 

(p)                                 in the case of a Shelf Registration or if a Prospectus is required to be delivered by any Participating Broker-Dealer in the case of an Exchange Offer, make available for inspection by representatives of the Holders of the Transfer Restricted Securities, any underwriters participating in any disposition pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and any counsel or accountant retained by any of the foregoing, at reasonable times and in a reasonable manner, all financial and other records, pertinent corporate documents and properties of the Issuer and the Guarantor reasonably requested by any such persons, and cause the respective officers, directors, employees, and any other agents of the Issuer or the Guarantor to supply all information reasonably requested by any such representative, underwriter, special counsel or accountant in connection with a Registration Statement, and make such representatives of the Issuer and the Guarantor available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; provided, however, that if any such information is identified by the Issuer as being confidential or proprietary, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information (and shall, if required by the Issuer, sign a customary confidentiality agreement in form and substance reasonably acceptable to such Person and the Issuer);

 

(q)                                 (i)  in the case of an Exchange Offer Registration Statement, a reasonable time prior to the filing of any Exchange Offer Registration Statement, any Prospectus forming a part thereof, any amendment to an Exchange Offer Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Initial Purchasers and to counsel to the Holders of Transfer Restricted Securities and make such changes in any such document prior to the filing thereof as the Initial Purchasers or counsel to the Holders of Transfer Restricted Securities may reasonably request and, except as otherwise required by applicable law, not file any such document in a form to which the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities and counsel to the Holders of Transfer Restricted Securities shall not have previously been advised and furnished a copy of or to which the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities or counsel to the Holders of Transfer Restricted Securities shall reasonably object, and make the representatives of the Issuer and the Guarantor available for discussion of such documents as shall be reasonably requested by the Initial Purchasers; and

 

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(ii)                                  in the case of a Shelf Registration, a reasonable time prior to filing any Shelf Registration Statement, any Prospectus forming a part thereof, any amendment to such Shelf Registration Statement or amendment or supplement to such Prospectus, provide copies of such document to the Holders of Transfer Restricted Securities, to the Initial Purchasers, to counsel for the Holders and to the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any, make such changes in any such document prior to the filing thereof as the Initial Purchasers, the counsel to the Holders or the underwriter or underwriters reasonably request and not file any such document in a form to which the Majority Holders, the Initial Purchasers on behalf of the Holders of Transfer Restricted Securities, counsel for the Holders of Transfer Restricted Securities or any underwriter shall not have previously been advised and furnished a copy of or to which the Majority Holders, the Initial Purchasers of behalf of the Holders of Transfer Restricted Securities, counsel to the Holders of Transfer Restricted Securities or any underwriter shall reasonably object, and make the representatives of the Issuer and the Guarantor available for discussion of such document as shall be reasonably requested by the Holders of Transfer Restricted Securities, the Initial Purchasers on behalf of such Holders, counsel for the Holders of Transfer Restricted Securities or any underwriter.

 

(r)                                    in the case of a Shelf Registration, use all commercially reasonable efforts to cause all Transfer Restricted Securities to be listed on any securities exchange on which similar debt securities issued by the Issuer are then listed if requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any;

 

(s)                                   in the case of a Shelf Registration, use all commercially reasonable efforts to cause the Transfer Restricted Securities to be rated by the appropriate rating agencies, if so requested by the Majority Holders, or if requested by the underwriter or underwriters of an underwritten offering of Transfer Restricted Securities, if any;

 

(t)                                    otherwise comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, an earnings statement covering at least 12 months which shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;

 

(u)                                 cooperate and assist in any filings required to be made with the FINRA and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter and its counsel (including any “qualified independent underwriter” that is required to be retained in accordance with the rules and regulations of the FINRA); and

 

(v)                                 upon consummation of an Exchange Offer or a Private Exchange, obtain a customary opinion of counsel to the Issuer and the Guarantor addressed to the Trustee for the benefit of all Holders of Transfer Restricted Securities participating in the Exchange Offer or Private Exchange, and which includes an opinion that (i) the Issuer has duly authorized, executed and delivered the Exchange Securities and/or Private Exchange Securities, as applicable, and the related indenture, and (ii) each of the Exchange Securities 

 

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and related indenture constitute a legal, valid and binding obligation of the Issuer and the Guarantor, enforceable against the Issuer and the Guarantor in accordance with its respective terms (with customary exceptions).

 

In the case of a Shelf Registration Statement, the Issuer and the Guarantor may (as a condition to such Holder’s participation in the Shelf Registration) require each Holder of Transfer Restricted Securities to furnish to the Issuer such information regarding the Holder and the proposed distribution by such Holder of such Transfer Restricted Securities as the Issuer may from time to time reasonably request in writing.  No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement if such Holder fails to furnish such information in writing to the Issuer within 20 days after receipt of the request therefor.

 

In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Issuer of the happening of any event or the discovery of any facts, each of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to a Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by the Issuer, such Holder will deliver to the Issuer (at its expense) all copies in such Holder’s possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Transfer Restricted Securities current at the time of receipt of such notice.

 

If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the underwriter or underwriters and manager or managers that will manage such offering will be selected by the Majority Holders of such Transfer Restricted Securities included in such offering and shall be acceptable to the Issuer.  No Holder of Transfer Restricted Securities may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder’s Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

 

4.                                      Indemnification; Contribution.

 

(a)                                 The Issuer and the Guarantor agree, jointly and severally, to indemnify and hold harmless the Initial Purchasers, each Holder, each Participating Broker-Dealer, each Person who participates as an underwriter or initial purchaser (any such Person being an “Underwriter”) and their respective affiliates, directors and officers and each Person, if any, who controls any Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

 

(i)                                     against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, prospectus, free writing prospectus or any

 

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“issuer information” (as defined by Rule 433 of the 1933 Act) (or any amendment or supplement thereto) pursuant to which Exchange Securities or Transfer Restricted Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(ii)                                  against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 4(d) below) any such settlement is effected with the written consent of the Issuer; and

 

(iii)                               against any and all expense whatsoever, as incurred (including the fees and disbursements of not more than one counsel chosen by any indemnified party), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under subparagraph (i) or (ii) above;

 

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Issuer by the Holder or Underwriter expressly for use in a Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto).

 

(b)                                 Each Holder severally, but not jointly, agrees to indemnify and hold harmless the Issuer, the Guarantor, the Initial Purchasers, each Underwriter and the other selling Holders, and each of their respective affiliates, directors and officers, and each Person, if any, who controls the Issuer or the Guarantor, the Initial Purchasers, any Underwriter or any other selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in Section 4(a) hereof, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Shelf Registration Statement (or any amendment thereto) or any Prospectus included therein (or any amendment or supplement thereto) in reliance upon and in conformity with written information with respect to such Holder furnished to the Issuer by such Holder expressly for use in the Shelf Registration Statement (or any amendment thereto) or such Prospectus (or any amendment or supplement thereto); provided, however, that no such Holder shall be liable for any claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Transfer Restricted Securities pursuant to such Shelf Registration Statement.

 

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(c)                                  Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action or proceeding commenced against it in respect of which indemnity may be sought hereunder, but failure so to notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement.  An indemnifying party may participate at its own expense in the defense of such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party.  In no event shall the indemnifying party or parties be liable for the reasonable fees and expenses of more than one counsel (in addition to one local counsel) separate from their own counsel for all indemnified parties (which consent shall not be unreasonably withheld) in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances.  No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 4 (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

 

(d)                                 If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 4(a)(ii) hereof effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement, unless such request is being disputed in good faith.

 

(e)                                  If the indemnification provided for in this Section 4 is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, in such proportion as is appropriate to reflect the relative fault of the Issuer and the Guarantor on the one hand and the Holders and the Initial Purchasers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

 

The relative fault of the Issuer and the Guarantor on the one hand and the Holders and the Initial Purchasers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Issuer, the Guarantor, 

 

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the Holders or the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

The Issuer, the Guarantor, the Holders and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 4 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 4.  The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 4 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

 

Notwithstanding the provisions of this Section 4, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by it were offered exceeds the amount of any damages which such Initial Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.

 

No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

For purposes of this Section 4, each Person, if any, who controls an Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such Initial Purchaser or Holder, and each director of the Issuer and the Guarantor, and each Person, if any, who controls the Issuer or the Guarantor within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Issuer and the Guarantor.  The Initial Purchasers’ respective obligations to contribute pursuant to this Section 4 are several in proportion to the principal amount of Securities set forth opposite their respective names in Schedule I to the Purchase Agreement and not joint.

 

5.                                      Fungibility Upon Exchange.  Upon completion of the Exchange Offer, the Issuer and the Guarantor will cause the Exchange Securities, the Private Exchange Securities, if any, and the Existing Exchange Securities to be fungible for trading purposes and the Exchange Securities and Private Exchange Securities to bear the same unrestricted CUSIP and ISIN numbers as the Existing Exchange Securities.

 

6.                                      Miscellaneous.

 

6.1                               Rule 144 and Rule 144A.  For so long as the Issuer is subject to the reporting requirements of Section 13 or 15 of the 1934 Act, the Issuer covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and regulations adopted by the SEC thereunder.  If the Issuer ceases to be so required to file such reports, the Issuer covenants that it will upon the request of any Holder of Transfer 

 

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Restricted Securities (a) make publicly available such information as is necessary to permit sales pursuant to Rule 144 under the 1933 Act, (b) deliver such information to a prospective purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it will take such further action as any Holder of Transfer Restricted Securities may reasonably request, and (c) take such further action that is reasonable in the circumstances, in each case, to the extent required from time to time to enable such Holder to sell its Transfer Restricted Securities without registration under the 1933 Act within the limitation of the exemptions provided by (i) Rule 144 under the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A under the 1933 Act, as such Rule may be amended from time to time, or (iii) any similar rules or regulations hereafter adopted by the SEC.  Upon the request of any Holder of Transfer Restricted Securities, the Issuer will deliver to such Holder a written statement as to whether it has complied with such requirements.

 

6.2                               No Inconsistent Agreements.  The Issuer and the Guarantor have not entered into and the Issuer and the Guarantor will not after the date of this Agreement enter into any agreement which is inconsistent with the rights granted to the Holders of Transfer Restricted Securities in this Agreement or otherwise conflicts with the provisions hereof.  The rights granted to the Holders hereunder do not and will not for the term of this Agreement in any way conflict with the rights granted to the holders of the Issuer’s other issued and outstanding securities under any such agreements.

 

6.3                               Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Issuer has obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Transfer Restricted Securities affected by such amendment, modification, supplement, waiver or departure.

 

6.4                               Notices.  All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (a) if to a Holder, at the most current address given by such Holder to the Issuer by means of a notice given in accordance with the provisions of this Section 6.4, which address initially is the address set forth in the Purchase Agreement with respect to the Initial Purchasers; and (b) if to the Issuer, initially at the Issuer’s address set forth in the Purchase Agreement, and thereafter at such other address of which notice is given in accordance with the provisions of this Section 6.4.

 

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; two business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery.

 

Copies of all such notices, demands, or other communications shall be concurrently delivered by the person giving the same to the Trustee under the Indenture, at the address specified in such Indenture.

 

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6.5                               Successor and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Transfer Restricted Securities, in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such person shall be entitled to receive the benefits hereof.

 

6.6                               Third Party Beneficiaries.  The Initial Purchasers (even if the Initial Purchasers are not Holders of Transfer Restricted Securities) shall be third party beneficiaries to the agreements made hereunder between the Issuer and the Guarantor, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.  Each Holder of Transfer Restricted Securities shall be a third party beneficiary to the agreements made hereunder between the Issuer and the Guarantor, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder.

 

6.7                               Specific Enforcement.  Without limiting the remedies available to the Initial Purchasers and the Holders, the Issuer and the Guarantor acknowledge that any failure by the Issuer or the Guarantor to comply with their obligations under Sections 2.1 through 2.4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it would not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuer’s and the Guarantor’s obligations under Sections 2.1 through 2.4 hereof.

 

6.8                               Restriction on Resales.  Until the expiration of one year after the original issuance of the Securities, the Issuer will not, and will cause its “affiliates” (as such term is defined in Rule 144(a)(1) under the 1933 Act) not to, resell any Securities which are “restricted securities” (as such term is defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by the Issuer and shall immediately upon any purchase of any such Securities submit such Securities to the Trustee for cancellation.

 

6.9                               Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

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6.10                        Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

6.11                        GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

 

6.12                        Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

 

6.13                        Underwritten Offerings.  Notwithstanding anything contained herein, any underwritten offering of the Transfer Restricted Securities shall require the prior written consent of the Issuer, which consent may not be unreasonably withheld or delayed.

 

[Signature pages follow]

 

24

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

	
 
    	
UNIVERSAL   HOSPITAL SERVICES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/Rex   T. Clevenger
    
	
 
    	
 
    	
Name:   Rex T. Clevenger
    
	
 
    	
 
    	
Title:   Executive Vice President and Chief   Financial Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
UHS   SURGICAL SERVICES, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Susan L. Wolf
    
	
 
    	
 
    	
Name:   Susan L. Wolf
    
	
 
    	
 
    	
Title:   Treasurer
    

 

 

Confirmed and accepted as of the date first above written:

 

	
By:
    	
BARCLAYS   CAPITAL INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   John Skrobe
    	
 
    
	
 
    	
Name:   John Skrobe
    	
 
    
	
 
    	
Title:   Managing Director
    	
 
    

 

26

 

	
By:
    	
MERILL   LYNCH, PIERCE, FENNER & SMITH INCORPORATED
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Sarang Gadkari 
    	
 
    
	
 
    	
Name:   Sarang Gadkari
    	
 
    
	
 
    	
Title:   Managing Director
    	
 
    

 

27

 

	
By:
    	
RBC   CAPITAL MARKETS, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   James S. Wolfe
    	
 
    
	
 
    	
Name:   James S. Wolfe
    	
 
    
	
 
    	
Title:   Managing Director
    	
 
    

 

28

 

	
By:
    	
PNC   CAPITAL MARKETS LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Andrew J. Alexander
    	
 
    
	
 
    	
Name:   Andrew J. Alexander
    	
 
    
	
 
    	
Title:   Managing Director
    	
 
    

 

29

 

	
By:
    	
WELLS   FARGO SECURITIES, LLC
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Chris McCoy
    	
 
    
	
 
    	
Name:   Chris McCoy
    	
 
    
	
 
    	
Title:   Managing Director
    	
 
    

 

30Exhibit 10.18

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 9th day of January, 2012 (the “Effective Date”), by and between FreeRange Communications, Inc, a Delaware corporation (the “Company”), and James McDermott, an individual (the “Executive”).

 

RECITALS

 

A.            The Company desires that the Executive be employed by the Company to carry out the duties and responsibilities described below, and wishes to provide the Executive with certain compensation and benefits in return for such employment duties and responsibilities, all on the terms and conditions hereinafter set forth.

 

B.            The Executive desires to accept such employment on such terms and conditions.

 

AGREEMENT

 

NOW, THEREFORE, the parties agree as follows:

 

1.                                      Retention and Duties.

 

1.1                               Retention. Beginning on the Effective Date and continuing during the term of the Executive’s employment with the Company, the Company shall employ Executive, and the Executive hereby accepts such employment, all on the terms and conditions expressly set forth in this Agreement.

 

1.2                               Duties. During the term of the Executive’s employment with the Company, the Executive shall serve the Company as its President and Chief Executive Officer and shall have the powers, duties and obligations of management usually vested in the office of the chief executive officer of a corporation, as determined by and subject to the directives of the Company’s Board of Directors (the “Board”), and as governed by the corporate policies of the Company as they are in effect from time to time throughout the Executive’s employment (including, without limitation, the Company’s business conduct and ethics policies, as they may change from time to time). The Executive shall report solely to the Board.

 

1.3                               Location. The Executive’s principal place of employment shall initially be the Company’s offices in Portland, Oregon (the “Principal Place of Employment”). The Executive agrees that he will be regularly present at the Principal Place of Employment, unless otherwise assigned by Company. The Executive acknowledges that the Executive may be required to travel from time to time in the course of performing his duties for the Company.

 

 

2.                                      Compensation.

 

2.1                               Base Salary. The Executive’s base salary (the “Base Salary”) shall be paid in accordance with the Company’s regular payroll practices in effect from time to time, but not less frequently than in monthly installments. The Base Salary shall be payable on a salary basis under state and federal wage and hour laws. The Executive’s initial Base Salary shall be paid at the monthly rate of $12,500 (annual rate of $150,000), subject to standard payroll deductions and withholdings. The Company will review the Executive’s Base Salary at least once per year.

 

2.2                               Bonus Compensation. The Executive will be eligible to receive an annual discretionary incentive bonus (“Incentive Bonus”). The target amount of the bonus for any given bonus period, whether the Executive receives any such bonus, and the amount of any such bonus will be determined by the Board in its sole discretion, based on performance objectives established in writing by the Board for that particular period. The Executive must remain an active employee through the end of any given calendar year in order to earn an Incentive Bonus for that year and any such bonus will be paid prior to March 15 of the year following the year in which the Executive’s right to such amount became vested. The Executive will not be eligible for, and will not earn, any Incentive Bonus (including a prorated bonus) if the Executive’s employment terminates for any reason before the end of the calendar year. The Executive’s initial target Incentive Bonus amount (for 2012) shall equal One Hundred Fifty Thousand Dollars (US $150,000). The Executive’s target Incentive Bonus for each bonus period after 2012 shall be determined by the Board.

 

2.3                               Stock Option Grant. The Company shall grant the Executive an option (the “Option”) to purchase a total of 1,000,000 shares of common stock (“Stock”) at the fair market value at the time of the grant, as determined by the Board. The Option shall be subject to the terms and conditions of the Stock Incentive Plan (the “Stock Plan”) and such further terms and conditions as are set forth in a written stock option agreement entered into by the Company and the Executive with respect to the Option. Except as expressly modified in this Agreement, the Option will vest in accordance with the Executive’s stock option agreement, which provides, among other terms, that the unvested portion of any Option is forfeited upon termination of the Executive’s employment. All Options issued both now or in the future shall be incentive stock options to the maximum extent permitted by law. The initial option set forth herein will vest twenty-five percent (25%) as of December 31, 2012 (the end of the first calendar year of the Executive’s start date) with the remaining shares to vest in thirty-six equal monthly components at the end of each calendar month thereafter, until the Option is fully vested or the Executive’s employment ends, whichever occurs first. Any future option grant will vest over similar terms (one year cliff, and then equal monthly vesting thereafter over the following three (3) years), as will be set forth in and governed in all respects by the applicable plan documents and option agreements between the Executive and the Company governing such options.

 

 

3.                                      Benefits.

 

3.1                               Retirement, Welfare and Fringe Benefits. The Executive shall be entitled to participate in all employee pension and welfare benefit plans and programs, if any, made available by the Company to the Company’s employees generally, in accordance with the eligibility and participation provisions of such plans and as such plans or programs may be in effect from time to time.

 

3.2                               Reimbursement of Business Expenses. Subject to the Company’s expense reimbursement policy, the Company will reimburse reasonable and necessary business expenses the Executive incurs in performing his duties hereunder. Reimbursement for such expenses shall be subject to the Company’s policies and procedures for documenting such expenses and submitting requests for reimbursement.

 

3.3                               Vacation and Other Leave. The Executive will be entitled to accrue paid vacation time as he performs work, at the rate of four (4) weeks (or 160 hours) per year, up to a maximum accrual amount of 240 hours. Once the Executive reaches the maximum accrual, additional vacation time will not accrue until Executive brings his vacation time balance below the maximum accrual amount. The Executive shall accrue and be entitled to take paid vacation in accordance with the Company’s policies in effect from time to time, including the Company’s policies regarding vacation accruals and payout of vacation. During the first six (6) months of employment, the Executive may borrow up to two (2) weeks of paid vacation time in excess of any accrued amount, subject to recoupment from future accruals. The Executive shall also be entitled to all other sick leave and paid holidays available to Company employees generally pursuant to, and subject to the conditions of applicable Company policies.

 

3.                                      Confidential Information and Outside Activities.

 

4.1                               Confidential Information Agreement. As a condition of employment, concurrently with entering into this Agreement, the Executive shall execute and abide by the Company’s standard form of At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement), a copy of which is attached hereto as Exhibit B (the “Confidentiality Agreement”).

 

4.2                               No Other Employment; Minimum Time Commitment. During the term of the Executive’s employment with the Company, the Executive shall devote substantially all of the Executive’s business time, energy and skill to the performance of the Executive’s duties for the Company, and the Executive will not, except with the prior written consent of the Board, undertake or engage in any other employment, occupation or business enterprise, other than ones in which the Executive is a passive investor. Notwithstanding the foregoing, the Executive will be permitted to continue to serve, to the extent such service does not interfere with the performance of the Executive’s duties hereunder, on the boards of directors (or similar bodies) of the entities on which the Executive serves as of the Effective Date, as listed on Exhibit A hereto.

 

 

4.3                               No Adverse Interests. During the Executive’s employment with the Company. the Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.

 

4.4                               No Breach of Contract. The Executive hereby represents to the Company that: (i) the execution and delivery of this Agreement by the Executive and the performance by the Executive of the Executive’s duties hereunder shall not constitute a breach of, or otherwise contravene, the terms of any other agreement or policy to which the Executive is a party or otherwise bound; (ii) the Executive does not possess confidential information arising out of prior employment, consulting, or other third party relationships, that would be used in connection with the Executive’s employment by the Company, except as expressly authorized by that third party; (iii) the Executive will not improperly use any information (including, without limitation, confidential information and trade secrets) relating to any other person or entity in carrying out his duties hereunder; (iv) during the Executive’s employment by the Company, the Executive will use in the performance of the Executive’s duties only information which is generally known and used by persons with training and experience comparable to the Executive’s own, common knowledge in the industry, otherwise legally in the public domain, or obtained or developed by the Company or by the Executive in the course of the Executive’s work for the Company; and (v) except as disclosed in writing to Company on Exhibit A hereto, and except for the Confidentiality Agreement, the Executive is not bound by any confidentiality, trade secret, non-competition, non-solicitation, or similar agreement.

 

5.                                      At-Will Employment; Termination.

 

5.1                               At-Will Employment. The Executive’s employment relationship is at-will. Either the Executive or the Company may terminate the employment relationship at any time, with or without Cause or advance notice.

 

5.2                               Benefits Upon Termination. Upon termination of the Executive’s employment for any reason, unless otherwise required by law, the Company shall have no further obligation to make or provide to the Executive, and the Executive shall have no further right to receive or obtain from the Company, any payments or benefits after his last day of employment (the “Separation Date”), except as follows:

 

(a)                                               The Company shall pay the Executive any Accrued Obligations (as defined in Section 5.4). The Accrued Obligations shall be paid within the time required by law or when otherwise due pursuant to any applicable Company plan or policy. In the event of the Executive’s death, the Accrued Obligations shall be paid to such beneficiary as is required by law. In addition, the Executive shall be entitled to: (i) receipt of benefits otherwise due terminated employees under group insurance coverage consistent with the terms of the applicable Company welfare benefit plan; (ii) the Executive’s rights under the Consolidated Omnibus Budget Reconciliation Act to continue participation in medical, dental, hospitalization and life insurance coverage at his own expense; and (iii) any benefits available to the Executive pursuant to Company’s 401(k) plan (if any), according to the plan provisions applicable upon termination of employment.

 

 

(b)                                               If the Executive’s employment with the Company terminates as a result of an Involuntary Termination (as defined in Section 5.4 below), the Company shall provide Executive with the following severance benefits:

 

(i)  The Company shall pay Executive, as severance, the equivalent of twelve (12) months of his Base Salary, subject to standard payroll deductions and withholdings, which will be paid over the twelve (12) month period following the Separation Date, on the Company’s regular payroll dates running from the Separation Date; provided, however, that for compliance with Internal Revenue Code Section 409A, no payments will begin prior to the 60th day following the Separation date. On that 60th date, the Company will pay a lump sum payment to Executive equal to the payments that would have been paid earlier but for compliance with Section 409A, with the balance paid thereafter as originally scheduled; and

 

(ii)  Provided that Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums to continue his coverage (including coverage for eligible dependents, if applicable) (“COBRA Premiums”) through the period (the “COBRA Premium Period”) starting on the Separation Date and ending on the earliest to occur of: (1) the duration of the salary continuation period set forth in Section 5.2(b)(i) above; (2) the date Executive becomes eligible for group health insurance coverage through a new employer; or (3) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination. In the event Executive becomes covered under another employer’s group health plan or otherwise ceases to be eligible for COBRA during the COBRA Premium Period, Executive must immediately notify the Company of such event. Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA Premiums without a substantial risk of violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company instead shall pay to Executive, on the first day of each calendar month, a fully taxable cash payment equal to the applicable COBRA premiums for that month (including premiums for Executive and Executive’s eligible dependents who have elected and remain enrolled in such COBRA coverage), subject to applicable tax withholdings (such amount, the 1pecial Cash Payment”), for the remainder of the COBRA Premium Period. Executive may, but is not obligated to, use such Special Cash Payments toward the cost of COBRA premiums. In the event the Company opts for the Special Cash Payments, then on the sixtieth (60th) day following the Separation Date, the Company will make the first payment to Executive under this paragraph, in a lump sum, equal to the aggregate Special Cash Payments that the Company would have paid to Executive through such date had the Special Cash Payments commenced on the first day of the first month following the Separation Date through such sixtieth (60th) day, with the balance of the Special Cash Payments paid thereafter on the schedule described above.

 

(c)                                                If the Executive’s employment with the Company terminates as a result of an Involuntary Termination (as defined in Section 5.4 below) within twelve (12) months following the date of a Change of Control (as defined in Section 5.4 below), the Company shall pay Executive, as severance, the equivalent of twelve (12) months of his Base Salary, subject to standard payroll deductions and withholdings, which will be paid

 

 

over the twelve (12) month period following the Separation Date, on the Company’s regular payroll dates running from the Separation Date and as to each Company stock option grant and restricted stock award, if any, held by the Executive on the Separation Date, all outstanding options shall automatically accelerate and become vested on the Separation Date. In all other circumstances involving Involuntary Termination, any and all then unvested Company options, stock option grants, and restricted stock awards held by Executive shall become subject to accelerated vesting in the amount of the greater of twelve (12) months or fifty percent (50%).

 

(c)                                  Notwithstanding the foregoing provisions of this Section 5.2, if: (A) the Company determines that the Executive has materially breached his obligations under this Agreement, the Confidentiality Agreement, or the Release of Claims contemplated by Section 5.3, then, in addition to any other remedies available to Company, the Executive shall not be entitled to, and the Company will not be obligated to continue to pay or provide, any severance or other benefits or option/restricted stock acceleration otherwise available pursuant to this Section 5.2. The Company shall provide written notice to the Executive of any such determination.

 

5.3                               Release of Claims. The Executive agrees that the benefits contemplated by Section 5.2 are in lieu of any other severance benefit, plan, or program that may be otherwise applicable to the Executive. All amounts paid to the the Executive pursuant to Section 5.2 shall be paid without regard to whether the Executive has taken or takes actions to secure other employment or income. The Executive shall be eligible for the payments and other benefits provided in Section 5.2 only upon the Executive’s entering into, within the time required by Company, and not revoking (if such document contains a revocation clause), a separation agreement and release of claims in a form reasonably satisfactory to the Company (the “Release of Claims”), whereby the Executive releases all claims whatsoever against Company, its related corporations, and their respective current and former employees, agents, officers and shareholders. No severance or other benefits or option/restricted stock acceleration will be paid or provided until the Release of Claims becomes effective.

 

5.4                               Certain Defined Terms. For purposes of this Agreement, the following terms have the definitions set forth below.

 

(a)                                 “Accrued Obligations” means:

 

(i)                                     any Base Salary that had accrued but had not been paid (including accrued and unused vacation time) on or before the Separation Date; and

 

(ii)                                  any Incentive Bonus pursuant to Section 2.2, to the extent earned as of the Separation Date but not paid to the Executive; and

 

(iii)                               any reimbursement due to the Executive pursuant to Section 3.2 for expenses incurred by the Executive on or before the Separation Date.

 

 

(b)                                 “Cause” shall mean: (i) an intentional material act of fraud or dishonesty in connection with Employee’s duties, or in the course of his employment with the Company; (ii) the conviction of a felony; (iii) a willful act by the Executive which constitutes gross misconduct and which is materially injurious to the Company; or (iv) intentional wrongful disclosure of material trade secrets or material confidential information of the Company; and (v) a willful failure by the Executive to substantially perform his duties under this Agreement that is not cured by the Executive within thirty (30) days after written notice is given to him by the Company identifying such misconduct, other than a failure resulting from the Executive’s complete or partial incapacity due to physical or mental illness or impairment. No act or failure to act by the Executive shall be considered “willful” unless committed without good faith and without a reasonable belief that the act or omission was in the Company’s best interest.

 

(c)                                  “Change of Control” shall mean the earlier occurrence of any of the following events:

 

(i)                                     any “person” (as such terms are used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934 as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or

 

(ii)                                  the consummation of a merger, reorganization or consolidation of the Company with any other entity, other than a merger, reorganization, or consolidation which would result in the voting securities of the Company immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power of such surviving entity outstanding immediately after such merger or consolidation; or

 

(iii)                               the Company liquidates or dissolves, or sells, leases, exchanges or otherwise transfers or disposes of all or substantially all of its assets; or

 

(iv)                              any sale or exchange of the membership or other equity interests by the owners of the Company in one transaction or series of related transactions where more than 50% of the outstanding voting power of the Company is acquired by a person or entity or group of related persons or entities;

 

(v)                                 any other transactions or series of related transactions occur which have substantially the same effect as the transactions specified in any of the preceding subsections (i)-(v); or

 

(vi)                              an initial public offering of the Company.

 

 

(d)                                 “Good Reason” shall mean a resignation by the Executive after the occurrence of any of the following events or circumstances without the Executive’s express written consent, and provided the Executive must have provided written notice to the Company of the event giving rise to Good Reason stating the Executive’s intent to resign and identifying the circumstances the Executive believes qualify as “Good Reason” pursuant to this Section 5.4(d), 30 days shall have passed from such notice with no correction having occurred, and the Executive has resigned from all positions the Executive holds not later than 90 days after the expiration of such correction period: (i) a material reduction in Executive’s title, material reduction of the Executive’s duties, authority or responsibilities: (ii) a material reduction by the Company of the Executive’s Base Salary. which the parties agree is a reduction of at least 10% of the Base Salary (unless pursuant to a salary reduction program applicable generally to the Company’s similarly situated employees), (iii) a material reduction by the Company of the Executive’s target Incentive Bonus, excluding any reduction generally applicable to senior executives, (iv) material violation by the Company of any material term of any employment, severance, or change of control agreement between the Executive and the Company, or (v) failure by successor entity to assume this Agreement..

 

(e)                                  “Disability” shall mean the Executive’s physical or mental impairment that, as determined in good faith by the Board, renders the Executive unable to perform the essential functions of his employment, with or without reasonable accommodation that does not impose an undue hardship on the Company, for more than 120 days in any 12-month period. The Executive shall cooperate in providing such records and examinations as may be reasonably requested by the Board in making a determination of Disability.

 

Involuntary Termination” shall mean a resignation by the Executive for Good Reason or the Company’s termination of the Executive without Cause. For purposes of clarity, the term Involuntary Termination does not include a termination of the Executive’s employment due to the Executive’s death or Disability, the Executive’s resignation under circumstances that do not qualify as Good Reason, or the Company’s termination of Executive’s employment for Cause.

 

5.5                               Notice of Termination. Except for termination in the event of the Executive’s death, which shall be automatic, any termination of the Executive’s employment under this Agreement shall be communicated by written notice of termination or resignation from the terminating or resigning party to the other party. The notice of termination or resignation shall indicate the specific provision(s) of this Agreement relied upon in effecting the termination or resignation.

 

5.6                               409A Compliance. It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent no so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A. For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the Executive’s right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. Notwithstanding any provision to the contrary in this Agreement, if the Executive is

 

 

deemed by the Company at the time of the Executive’s Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to the Executive prior to the earliest of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service with the Company, (ii) the date of the Executive’s death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation. Upon the first business day following the expiration of such applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Paragraph shall be paid in a lump sum to the Executive, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred.

 

6.                                      Withholding and Taxes. Notwithstanding anything else herein to the contrary, the Company may withhold (or cause there to be withheld, as the case may be) from any amounts otherwise due or payable under or pursuant to this Agreement such federal, state and local income, employment, or other taxes or withholding, as may be required to be withheld pursuant to any applicable law or regulation.

 

7.                                      Assignment. This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder; provided, however, that in the event of a merger, consolidation, or transfer or sale of all or substantially all of the assets of the Company with or to any other individual(s) or entity, this Agreement shall, subject to the provisions hereof, be binding upon and inure to the benefit of such successor and such successor shall discharge and perform all the promises, covenants, duties, and obligations of the Company hereunder.

 

8.                                      Number and Gender. Where the context requires, the singular shall include the plural, the plural shall include the singular, and any gender shall include all other genders.

 

9.                                      Section Headings. The section headings of and titles of paragraphs and subparagraphs contained in, this Agreement are for the purpose of convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation thereof.

 

10.                               Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Oregon, irrespective of its conflict of laws rules.

 

11.                               Severability. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of this Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable.

 

 

12.                               Entire Agreement. This Agreement, together with the Confidentiality Agreement and any stock option agreement referenced in Section 2.3, embodies the entire agreement of the parties hereto respecting the matters within its scope. This Agreement supersedes all prior and contemporaneous agreements of the parties hereto that directly or indirectly bears upon the subject matter hereof Any prior negotiations, correspondence, agreements, proposals or understandings relating to the subject matter hereof shall be deemed to have been merged into this Agreement, and to the extent inconsistent herewith, such negotiations, correspondence, agreements, proposals, or understandings shall be deemed to be of no force or effect. There are no representations, warranties, or agreements, whether express or implied, or oral or written, with respect to the subject matter hereof except as expressly set forth herein.

 

13.                               Modifications. This Agreement may not be amended, modified or changed (in whole or in part), except by a formal, definitive written agreement expressly referring to this Agreement, which agreement is executed by both of the parties hereto.

 

14.                               Waiver. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other ccurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

15.                               Arbitration. To ensure the timely and economical resolution of disputes that may arise in connection with the Executive’s employment with the Company, the Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, the Executive’s employment, or the termination of the Executive’s employment, including but not limited to statutory claims, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in San Francisco, California, conducted by JAMS, Inc. (“JAMS”) under the then applicable JAMS rules (which can be found at http://www.jamsadr.corn/rulesclausest). By agreeing to this arbitration procedure, both the Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. The Company acknowledges that the Executive will have the right to be represented by legal counsel at any arbitration proceeding. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the

 

 

dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that the Executive or the Company would be entitled to seek in a court of law. The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of the Executive if the dispute were decided in a court of law. Nothing in this Agreement is intended to prevent either the Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.

 

16.                               Notices.

 

(a)                                 All notices required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given and made if (i) delivered by hand or (iii) sent by registered or certified mail, postage prepaid, return receipt requested. Any notice shall be duly addressed to the parties as follows:

 

(i)             if to the Company:

 

attn.: Jon Maroney

 

[home address]

 

(ii)          if to the Executive:

 

James McDermott

 

[home address]

 

(b)                             Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 16 for the giving of notice and, in the case of the Executive, the address may be updated through the normal process by which Company employees inform Company of a change in their mailing address. Any communication shall be effective when delivered by hand, when otherwise delivered against receipt therefor, or five (5) business days after being mailed in accordance with the foregoing.

 

17.                               Counterparts.  This Agreement  may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Facsimile, electronic image or other photographic copies of such signed counterparts may be used in lieu of the originals for any purpose.

 

 

18.                               Legal Counsel; Mutual Drafting. Each party recognizes that this is a legally binding contract and acknowledges and agrees that they have had the opportunity to consult with legal counsel of their choice. Each party has cooperated in the drafting, negotiation and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against either party on the basis of that party being the drafter of such language. The Executive agrees and acknowledges that he has read and understand this Agreement, is entering into it freely and voluntarily, and has advised to seek counsel prior to entering into this Agreement and has had ample opportunity to do so.

 

19.                               Attorney’s Fees. In the event of the bringing of any action, proceeding, arbitration or suit by a party hereto against another party hereunder by reason of any breach of any of the covenants, agreement, or provisions arising out of this Agreement, the prevailing party shall be entitled to recover all costs and expenses of that action or suit, or at trial, arbitration or on appeal, and in collection of judgment, including reasonable attorney’s fees, accounting, and other professional fees resulting therefrom, provided, however, in no event, shall the Executive be required to pay any JAMs’ arbitration fees in excess of the amount of court fees that would be required of the Executive if the dispute were decided in a court of law, as referenced above.

 

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement as of the Effective Date.

 

	
 
    	
“COMPANY”
    
	
 
    	
 
    
	
 
    	
a   Delaware corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jon Maroney
    
	
 
    	
 
    
	
 
    	
Name:   Jon Maroney
    
	
 
    	
Title:   Chairman of the Board, FreeRange Communication, Inc.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
“EXECUTIVE”
    
	
 
    	
/s/   James McDermott
    

 

 

Exhibit A

 

As of the Effective Date, the Executive Serves on the Board of Directors (or Similar Body) of the Following Entities:

 

None

 

List:

Submittable

SpinSimple

ChirpSocial

 

The Executive Is Bound By The Following Confidentiality. Trade Secret, Non-Competition, Non Solicitation, Or Similar Agreement(s).

 

None

 

List Parties:

 

 

Exhibit B

 

Confidentiality Agreement

 

 

FIRST AMENDMENT TO 
 EMPLOYMENT AGREEMENT

 

This First Amendment to Employment Agreement (this “Amendment”) is dated as of January 17, 2013, by and between Storycode, Inc., a Delaware corporation formerly known as Free Range Communications, Inc. (the “Company”), and James McDermott, an individual (the “Executive”).

 

WHEREAS, the Company and Executive are parties to that certain Employment Agreement dated as of January 9, 2012 (the “Employment Agreement”);

 

WHEREAS, pursuant to that certain Agreement and Plan of Merger dated as of December 27, 2012, by and between the Company, TigerLogic Corporation (“Parent”), TLSC Merger Sub, Inc. (“Merger Sub”), and Jon Maroney, the Company is merging with and into Merger Sub, with the Company surviving (the “Merger”); and

 

WHEREAS, as a condition to the Merger, Parent is requiring the Company and Executive to amend the Employment Agreement as provided herein, with the amendment effective on the effectiveness of the Merger.

 

NOW, THEREFORE, in consideration of the agreements and undertakings set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the conditions set forth herein, the Company and Executive agree as follows:

 

1.                                      Certain Terms.  Capitalized terms used herein but not defined in this Amendment have the meanings given to such terms in the Employment Agreement.

 

2.                                      Amendments to Employment Agreement.

 

(a)                                 Section 1.2:  Duties.  Section 1.2 of the Employment Agreement shall be amended and restated as follows:

 

1.2                               Duties.  During the term of Executive’s employment with the Company, the Executive shall serve the Company as its Senior Vice President, Mobile and Social, as determined by and subject to the directives of Parent’s President and Chief Executive Officer, and as governed by the corporate policies of the Company and Parent as they are in effect from time to time throughout Executive’s employment (including, without limitation, the Company’s business conduct and ethics policies, as they may change from time to time).  Executive shall report to Parent’s President and Chief Executive Officer.

 

(b)                                 Section 2.1:  Base Salary.  Section 2.1 of the Employment Agreement shall be amended to provide that Executive’s Base Salary for 2013 is $200,000 annually, paid in accordance with the Company’s normal payroll procedures and subject to standard deductions and withholdings.

 

(c)                                  Section 2.2:  Bonus Compensation.  Section 2.2 shall be amended to add that Executive’s target Incentive Bonus for 2013 shall equal 50% of his Base Salary for 2013, with performance objectives to be established by Parent’s President and Chief Executive Officer and board of directors, with the determination of whether Executive receives any such bonus, and the amount, determined by the Parent’s board of directors in their sole discretion.

 

 

(d)                                 Section 2.4:  Signing Bonus.  A new Section 2.4 of the Employment Agreement shall be added as follows:

 

2.4                               Signing Bonus.  Effective immediately following the effectiveness of the Merger (the “Closing”), Executive will be entitled to receive a special signing bonus in the amount of $45,000 (the “Signing Bonus”), subject to standard deductions and withholdings.  The Signing Bonus is payable in two installments, with the first payment of $25,000 made on the Closing and the second payment of $20,000 made on the six month anniversary thereof.  If, prior to the six month anniversary of the Closing, Executive resigns without Good Reason or is terminated for Cause, Executive must repay a pro-rated portion of the first installment of the Signing Bonus equal to $4,167 for each month of employment not provided between Closing and the second payment date.  If Executive’s employment terminates for any reason prior to the six month anniversary of the Closing, Executive shall not be entitled to receive the second installment of the Signing Bonus.  If, prior to the one year anniversary of the Closing, Executive resigns without Good Reason or is terminated for Cause, Executive must repay a pro-rated portion of the second installment of the Signing Bonus equal to $3,333 for each month of employment not provided between the six month anniversary of the Closing and the first anniversary of the Closing.  Annual or other bonuses thereafter shall be in the sole discretion of Parent and subject to approval of the Compensation Committee of the Parent’s board of directors.

 

(e)                                  Section 3.3:  Vacation and Other Leave.  Section 3.3 of the Agreement shall be amended to delete the fourth sentence of such section in its entirety.

 

(f)                                   Section 5.2:  Benefits Upon Termination.

 

(i)                                     Section 5.2(b)(i) shall be amended to replace the references to 12 months with six months.

 

(ii)                                  A new Section 5.2(b)(iii) of the Employment Agreement shall be added as follows:

 

5.2(b)(iii)                                               If the Executive’s employment with the Company terminates as a result of an Involuntary Termination prior to, or more than twelve (12) months following the date of a Change of Control (as defined in Section 5.4 below), all then-outstanding unvested stock option awards held by the Executive on the Separation Date will become vested and exercisable, as to a number of shares per award equal to the greater of (x) the number of shares that would have vested under the award as of the first anniversary of the Separation Date and (y) 50% of the then-unvested shares.

 

(iii)                               Section 5.2(c) is hereby deleted in its entirety and replaced with the following new Section 5.2(c):

 

5.2(c)                 If the Executive’s employment with the Company terminates as a result of an Involuntary Termination on or within twelve (12) months following the date of a Change of Control, then in addition to receiving the severance benefits provided in Section 5.2(b), and in lieu of the accelerated vesting provided in Section 5.2(b)(iii), all then-outstanding unvested stock option awards and shares of restricted stock held by the Executive on the Separation Date will become fully vested and, as applicable, exercisable.

 

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(g)                                  Section 5.4:  Certain Defined Terms.

 

(i)                                     By entering into this Amendment, the Executive expressly consents to the terms of his title, duties, authority and responsibilities as described in this Amendment, as permitted by Section 5.4 of the Agreement.  Therefore, as of the date of this Amendment, the Executive acknowledges that he is waiving his right to resign for Good Reason solely to the extent of the change to his title, duties, authority and responsibilities, as expressly described in this Amendment.  This wavier is not a waiver of any subsequent changes to the terms and conditions of the Executive’s employment that may give rise to Good Reason.

 

(ii)                                  Section 5.4 shall be amended to add the following sentence at the end of the section:

 

Notwithstanding the foregoing, the Executive must provide the Company with the written notice (referred to in the first sentence of this Section 5.4(d)) identifying the event or condition giving rise to Good Reason (and his intent to resign) within ninety (90) days following the initial existence of such event or condition.

 

(iii)                               Parent and the Executive agree that the definition of Change of Control applies not only to the Closing but also to future transactions involving the Company and Parent.

 

(h)                                 Section 5.6.  Section 5.6 is hereby deleted in its entirety and replaced with the following new Section 5.6.

 

It is intended that all of the benefits provided under the Agreement (including the Amendment) satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) provided under Treasury Regulations Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and the Agreement will be construed to the greatest extent possible as consistent with those provisions. To the extent not so exempt, the Agreement (and any definitions under the Agreement) will be construed in a manner that complies with Section 409A, and incorporates by reference all required definitions and payment terms.  When termination of employment is used in reference to the triggering of Executive’s rights to severance payments and benefits, a termination of employment will only be deemed to occur when the Executive has a “separation from service” (as defined under Treasury Regulations Section 1.509A-1(h)).   For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii)), the Executive’s right to receive any installment payments under the Agreement will be treated as a right to receive a series of separate and distinct payments.

 

If the Company, in consultation with qualified external legal counsel, determines that any of the payments in connection with a separation from service constitute “deferred compensation” under Section 409A, and if the Executive is a “specified employee” (as such term is defined in Section 409A(a)(2)(B)(i)) of the Company or Parent at the time of his separation from service, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the payments due on a separation from service will

 

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be delayed as follows: on the earlier to occur of (i) the date that is six months and one day after the effective date of the Executive’s separation from service, and (ii) the date of the Executive’s death (such earlier date, the “Delayed Initial Payment Date”), the Company will (A) pay to the Executive a lump sum amount equal to the sum of the payments that the Executive would otherwise have received through the Delayed Initial Payment Date if the commencement of the payments had not been delayed pursuant to this paragraph, and (B) commence paying the balance of the payments in accordance with the applicable payment schedules set forth above.  No interest will be due on any amounts so deferred.

 

With respect to expenses eligible for reimbursement or in-kind benefits, if any, provided to the Executive under this or any other Agreement, (i) the amount of such expenses eligible for reimbursement or in-kind benefits provided in any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits provided in another taxable year, (ii) any reimbursements of such expenses and the provision of any in-kind benefits shall be made no later than the end of the calendar year following the calendar year in which the related expenses were incurred, except, in each case, to the extent that the right to reimbursement does not provide for a “deferral of compensation” within the meaning of Section 409A, and (iii) the right to reimbursement or in-kind benefit shall not be subject to liquidation or exchange for another benefit.

 

(i)                                     Section 7:  Assignment.  Section 7 of the Agreement shall be amended to add the following sentence:  “On effectiveness of the Merger, the Company may assign this Agreement to Parent or one of Parent’s other direct or indirect subsidiaries for which Executive shall be providing services following the Merger.  All references to the Company following the Merger shall include Parent and the direct or indirect subsidiary of Parent for which Executive provides services.”

 

(j)                                    Section 20:  Nonsolicitation.  A new Section 20 shall be added to the Agreement as follows:

 

20.                               Nonsolicitation.  For a period of one year following the termination of Executive’s employment for any reason, Executive agrees that he will not, directly or indirectly, (A) divert or attempt to divert from the Company (or Parent or its other direct or indirect subsidiaries) any business of any kind in which it is engaged, including, without limitation, the solicitation of or interference with any of its suppliers or customers; or (B) solicit, hire, recruit, or employ any person or entity who is employed by or has a contractual relationship with the Company (or Parent or its other direct or indirect subsidiaries), or encourage any person or entity who is employed by or has a contractual relationship with the Company (or Parent or its other direct or indirect subsidiaries) to terminate their employment or contractual relationship with the Company (or Parent or its other direct or indirect subsidiaries).

 

3.                                      Effectiveness.  This Amendment shall become effective only on the effectiveness of the Merger.  If the Merger Agreement terminates pursuant to its terms, this Amendment shall terminate and shall have no further force or effect.

 

4.                                      No Other Amendments.  Except for the amendments specified in Section 2 of this Amendment, this Amendment shall not be deemed to effect any amendment, modification or waiver of any provision of the Employment Agreement.

 

4

 

5.                                      Governing Law.  This Amendment shall be construed, and the rights and obligations of the Parties determined, according to the laws of the State of Oregon, irrespective of its conflict of law rules.

 

6.                                      Counterparts.  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 thereto and hereto were upon the same instrument.  This Amendment shall be deemed signed and effective as of the date set forth above upon the Parties exchanging facsimile or electronic copies of the executed signature pages.

 

[signature page attached]

 

5

 

IN WITNESS WHEREOF, intending to be legally bound hereby, the Parties have executed this Amendment as of the day and year first above written.

 

	
 
    	
“COMPANY”
    
	
 
    	
 
    
	
 
    	
STORYCODE, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Jon Maroney
    
	
 
    	
Name:   Jon Maroney
    
	
 
    	
Title:   Chairman of the Board
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
“EXECUTIVE”
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   James McDermott
    
	
 
    	
JAMES   MCDERMOTT

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