Document:

EX-10.1

	 	 	 
	Alaska Communications 2014 Officer Severance Policy

	 	P/P 250.0
	Prepared by: Legal

	 	Effective Date:
	
 
	 	 
	Supersedes: 2010, 2008 & 2009 Officer Severance Policies & 2006 Officer Severance

Plan

	 	

June 9, 2014
	Approved by: Compensation & Personnel Committee of the Board of Directors

	 	

	 

	 	

	1.	 	Purpose

The Alaska Communications Systems Holdings, Inc. 2014 Officer Severance Policy (“the Policy”) is
established to provide severance income continuance to Eligible Officers under certain termination
and change in control circumstances as further defined in this Policy. In consideration for such
severance income and benefits, the Eligible Officer will release Alaska Communications Systems
Holdings, Inc. and its affiliates (the “Company”) from any and all actions, suits, proceedings,
claims, and demands related to the termination.

	2.	 	Administration

The Policy is administered by the Compensation and Personnel Committee (the “Committee”) designated
by the Board of Directors of the Company (“the Board”). The Committee, subject to action of the
Board, has complete discretion and authority with respect to the Policy and its application. The
Committee reserves the right to interpret the Policy, prescribe, amend and rescind rules relating
to it, determine the terms and provisions of the severance payments and make all other
determinations it deems necessary or advisable for the administration of the Policy. The
determination of the Committee on all matters regarding the Policy will be conclusive.

3. Eligibility

Eligible Officers are regular full-time individuals employed by the Company for a minimum of six
continuous months in the positions listed in this Section 3 below (“Eligible Officer(s)”).
Eligible Officers will be eligible to participate in the Policy; provided, however, that an
employee of the Company who is temporarily appointed to a particular eligible position in an acting
manner, is not eligible to participate as a result of that temporary position. Additionally, any
employee with an employment agreement that includes severance benefits will not be an Eligible
Officer under this Policy.

Vice President

Senior Vice President

Executive Vice President

President

4. Definitions

	 	 	 a. “Cause” means the occurrence, at the sole discretion of the Company, of any of the following:

(i) an act or acts of personal dishonesty or illegal or unethical acts knowingly performed
by the Eligible Officer, including but not limited to omissions;

(ii) a breach of a fiduciary duty owed to the Company, its Board, or stockholders (even if
the Company is required to indemnify the Eligible Officer),

(iii) a breach of an obligation or violation of a provision applicable under any corporate
compliance or ethics policy;

(iv) repeated failures or negligence by the Eligible Officer to perform faithfully and
efficiently the duties, obligations and responsibilities of the position or engaging in
conduct harmful to the Company or its employees, and which failures or conduct are not
remedied after receipt of written notice from the Company within a period set forth in the
notice, (where the Company has or may suffer immediate and grave harm from the Eligible
Officer’s continued employment, no advance warning may be provided); or

(v) a conviction or plea of guilty or “no contest” of the Eligible Officer for a felony or
any misdemeanor involving theft, dishonesty, fraud or moral turpitude.

	b.	 	“Change of Control” means the occurrence of any of the following events:

(i) Any Company transaction or series of related transactions that result in the Company’s
voting stockholders owning less than fifty percent of the voting power of the new company;

(ii) During any period of two years or less, the election of an insurgent slate of directors
comprising a new majority of the Board of Directors (an “insurgent slate” means director
candidates not nominated by the incumbent board);

(iii) Approval by the Company’s stockholders of a complete liquidation or dissolution of the
Company; or

(iv) The sale of all or substantially all of the Company’s assets.

c. “Death” means an Eligible Officer is dead or declared legally dead by a competent authority.

d. “Disability” or “Disabled” means a physical or mental impairment that renders an Eligible
Officer incapable of working for at least six consecutive months during any one year period, not
limited to a calendar year. In the event of a dispute regarding the presence of a Disability, the
Company will seek the opinion of an independent physician.

e. “Eligible Officer” is defined in Section 3.

f. “Executive Officer” means an Eligible Officer who has one of the titles listed in this Section
4.f. below, provided, however, that an employee of the Company who is temporarily appointed to the
position of Executive Officer as an acting Executive Officer, is not considered an Executive
Officer for purposes of the benefits provided under this Policy.

Executive Vice President

Senior Vice President

President

g. “Good Reason” means the occurrence of any of the following events without the Eligible Officer’s
written consent, provided, however within 60 days following the occurrence of the event, the
Eligible Officer must provide at least 30 days written notice of intent to resign specifying the
specific Good Reason for resignation and during which time the Company has not provided a cure
sufficient to remove the Good Reason:

(i) a reduction in Target Annual Compensation of greater than 10% in any three year period,
unless substantially all Eligible Officers’ compensation is similarly reduced;

(ii) a significant reduction in other benefits (unless reduction applies to substantially
all other Eligible Officers or substantially all full-time employees of the Company);

(iii) a significant reduction in job title, responsibilities, number of employees under
supervision, duties or a significant demotion, recognizing that the Company may, from time
to time, have a business need to modify assigned responsibilities or reassign employees
between Eligible Officers, which changes, in and of themselves, will not constitute Good
Reason

(iv) required relocation of the principal work location that is more than 60 miles from the
prior work location; or

	 	(v)	 	the Company’s material breach of a material obligation owed under an employment
agreement.

h. “Severance Benefit” means the COBRA reimbursement benefit described in Section 5 for each
category of Eligible Officer.

i. “Severance Pay” means the pay described in Section 5 for each category of Eligible Officer.

j. “Target Annual Compensation” means base salary, and target annual incentive compensation.

5. Severance Pay and Benefits

a. Any Eligible Officer whose employment with the Company is terminated under either of the
circumstances described below in this Section 5.a., and who signs a form of waiver attached as
Exhibit A within 21 days of termination of employment, or 45 days as may be required under
applicable law, and does not revoke the signed waiver within the revocation period as required
under applicable law, will be eligible for Severance Pay and Severance Benefits as described in
this Section 5.

	 	i.	 	An Eligible Officer is terminated by the Company or an affiliate without Cause,
or

	 	ii.	 	An Eligible Officer resigns for Good Reason after giving at least 30 days
written notice of intent to resign specifying the specific Good Reason for the
resignation and during which time the Company has not provided a cure sufficient to
remove the Good Reason.

b. The amount of Severance Pay and Benefits to which an Eligible Officer may be entitled under this
Policy will be determined in accordance with the Eligible Officer’s position.

Executive Officer Severance Pay 

One times the annual base salary in effect on the termination date, unless resigning for Good
Reason based on Section 4g(i) reduction in compensation, then annual base salary prior to
reduction; and

Annual cash incentive payment based on achievement of annual performance goals for the prior full
performance year of Executive Officer’s employment, if unpaid as of the date of termination; and

Prorated annual cash incentive based on actual performance against established goals for the year
of termination, payable at such time as annual cash incentive award payments, if any, are made to
other Executive Officers.

Executive Officer Severance Benefit

Subject to Section 5c below, for up to one year after termination, reimbursement of any monthly
federal medical COBRA premiums actually paid by the Executive Officer for continuing medical
insurance coverage for the Executive Officer and family, less the standard employee contribution
amount. Reimbursement will be provided no later than March 15 of the year after the year in which
the expense was incurred.

Other Eligible Officers Severance Pay

One times the annual base salary in effect on the termination date, unless resigning for Good
Reason based on Section 4g(i) reduction in compensation, then annual base salary prior to
reduction; and

Annual cash incentive payment based on achievement of annual performance goals for the prior full
performance year of employment, if unpaid as of the date of termination.

Other Eligible Officers Severance Benefit

Subject to Section 5c below, for up to six months after termination, reimbursement of any monthly
federal medical COBRA premiums actually paid by the employee for continuing medical insurance
coverage for the employee and family, less the standard employee contribution amount.
Reimbursement will be provided no later than March 15 of the year after the year in which the
expense was incurred

c. Severance Pay provided for under this Section 5 shall be paid in a lump sum on the last day of
the 60 day period following Eligible Officer’s termination of employment.

d. Replacement Medical Benefits. To the extent an Eligible Officer is eligible for medical
benefits coverage under a subsequent employer’s medical plan and before the applicable time period
has elapsed, such Eligible Officer will no longer be eligible for a Severance Benefit. An Eligible
Officer must notify the Company of the start date of the replacement coverage. Any payments for
COBRA coverage or other benefits to which an Eligible Officer was not entitled must be reimbursed
to the Company. Adequate documentation of payment of COBRA premiums is required in order to
qualify for reimbursement.

e. Unvested Equity Compensation. Unless otherwise provided herein, Eligible Officers will not be
eligible for any unvested equity compensation including, but not limited to, stock options,
restricted stock, and performance stock.

f. Other Incentive Compensation. Unless otherwise provided herein, non-executive Eligible Officers
will not be entitled to or deemed to have earned any cash or other bonus or incentive compensation
payments for the final year or partial year of employment.

6. Clawback Requirement. Notwithstanding any other provisions of this Policy to the
contrary, any compensation paid to an Eligible Officer pursuant to this Policy or any other
agreement or arrangement with the Company which is subject to recovery under any law, government
regulation or stock exchange listing requirement, will be subject to such deductions and clawback
as may be required to be made pursuant to such law, government regulation or stock exchange listing
requirement

7. Change of Control Severance Pay and Benefits

Any Eligible Officer whose employment with the Company is terminated without Cause or who resigns
for Good Reason within two and one half months before or one year after a Change of Control will be
eligible for two times base salary, annual cash incentive payment based on achievement of annual
performance goals for the prior full performance year of Executive Officer’s employment, if unpaid
as of the date of termination and the Severance Benefit described in Part 5 above. In addition, all
long term incentive compensation, whether equity or cash, will vest and be released or paid, as
appropriate. Any eligible severance pay and benefits based on a termination prior to Change in
Control is contingent upon and payable subsequent to Eligible Officers termination of employment
without Cause or resignation for Good Reason and the consummation of the Change in Control.

Change of control, in and of itself, will not be deemed Good Reason for a resignation.

8. Disability or Death

In the event of the Death or Disability of an Eligible Officer while employed by the Company, no
severance pay or benefits under this Policy will be payable, however, an Eligible Officer or his or
her estate will be eligible for a prorated annual cash incentive payment based on the time of
active work in the last performance year. Eligibility for this partial cash incentive award is in
accordance with the Company’s incentive compensation policy, including adjustments for Company and
individual performance, and giving credit for active work time in the last performance year.

Unless otherwise provided for in a particular incentive award agreement, no other incentive
compensation, unvested equity compensation or bonus will be deemed to have been earned or be paid
for the final year or partial year of employment following a death or Disability.

9. Non-Compete, Non-Disparagement and Non-Solicitation

Attached as Exhibit A to this Policy, and incorporated herein by reference, is a Form of Officer’s
Release (“Release”) that provides, among other things, restrictions for competition, disparagement
and solicitation of other Company employees. An Eligible Officer must acknowledge, agree to, and
sign the Release prior to receiving any severance pay or benefits under this Policy. If, during
the term that an Eligible Officer is receiving any severance pay or benefits described in this
Policy, the Eligible Officer violates the terms of this Agreement, the Release, or any other
noncompetition or nondisclosure agreement with the Company, the Company’s obligations to the
Eligible Officer under this Policy will automatically terminate.

10. Tax Withholding; Section 280G

The Company may withhold from any cash amounts payable to an Eligible Officer under this Policy to
satisfy all applicable federal, state, local or other income (including excise) and employment
withholding taxes. In the event the Company fails to withhold such sums for any reason, or
withholding is required for any noncash payments provided in connection with the Eligible Officer’s
termination of employment, the Company may require the Eligible Officer to promptly remit to the
Company sufficient cash to satisfy all applicable income and employment withholding taxes. The
Company will not make any “gross-up” payment to cover any personal tax liability of an Eligible
Officer.

Certain employees under Section 409A of the Internal Revenue Code may be required to delay payments
that would otherwise be payable during the six month period immediately following separation from
service.

In the event that the severance pay or benefits provided under this Policy are subject to an excise
tax under Section 280G of the Internal Revenue Code, then pay and benefits under this Policy will
be either (i) delivered in full or (ii) reduced so that any payment is limited to 2.99 times “base
amount,” within the meaning of Section 280G(b)(3) of the Internal Revenue Code, whichever of the
foregoing amounts results in the Eligible Officer’s receipt of the greatest amount of benefits
after tax. Eligible Officers must cooperate in good faith with the Company in any valuation of
benefits that may be required under Section 280G of the Internal Revenue Code.

Any determinations required to be made related to Section 280G will be made in writing by an
accounting or consulting firm selected by the Company, and will be conclusive and binding upon the
Eligible Officer and the Company. The Company will bear all costs reasonably incurred in
connection with any such calculations. In the event it is later determined that a greater
reduction in payments should have been made to implement the objective and intent of this Section
9, the excess amount shall be returned immediately by the Eligible Officer to the Company, plus
interest at a rate equal to 120% of the semi-annual applicable federal rate as in effect at the
time of the Change in Control.

10. Dispute Resolution and Governing Law

The Committee will interpret the Policy with respect to any dispute that arises between an Eligible
Officer and the Company. The decision of the Committee on all disputes regarding the Policy are
conclusive.

This Policy will be governed by and construed in accordance with the laws of the state of Alaska,
including all matters of construction, validity and performance, without regard to the principles
of conflicts of law thereof, to the extent not superseded by applicable federal law. Each party
will be responsible its own for legal fees and costs incurred in any dispute related to this Policy
or the Release.

11.  Section 409A

The intent of the Company is that the payments and benefits under this Policy comply with or be
exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and
guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum
extent permitted, this Policy shall be interpreted to be in compliance therewith.

Notwithstanding anything in this Policy to the contrary, any compensation or benefits payable under
this Policy that is considered nonqualified deferred compensation under Section 409A and is
designated under this Policy as payable upon termination of employment shall be payable only upon a
“separation from service” with the Company within the meaning of Section 409A (a “Separation from
Service”).

Notwithstanding anything in this Policy to the contrary, if an Eligible Officer is deemed by the
Company at the time of Separation from Service to be a “specified employee” for purposes of Section
409A, to the extent delayed commencement of any portion of the benefits to which he or she is
entitled under this Agreement is required in order to avoid a prohibited distribution under Section
409A, such portion of the benefits shall not be provided to the Eligible Officer prior to the
earlier of (i) the expiration of the six-month period measured from the date of Separation from
Service with the Company or (ii) the date of the Eligible Officer’s death. Upon the first business
day following the expiration of the applicable Section 409A period, all payments deferred pursuant
to the preceding sentence shall be paid in a lump sum, and any remaining payments due under this
Policy shall be paid as otherwise provided herein.

Miscellaneous

a. This Policy will not be deemed to create a contract of employment between the Company and the
Eligible Officer and will create no right in the Eligible Officer to continue in the Company’s
employment for any specific period of time, or to create any other rights on the part of the
Eligible Officer or obligations on the part of the Company, except as set forth herein. This
Policy does not restrict the right of the Company to terminate the Eligible Officer, or restrict
the right of the Eligible Officer to terminate employment.

b. Nonalienation of Benefits. Except in so far as this provision may be contrary to applicable
law, no sale, transfer, alienation, assignment, pledge, collateralization or attachment of any
benefits under this Policy will be valid or recognized by the Company.

c. Eligible Officers will retain applicable rights to indemnification under the Company’s
certificate of incorporation, or otherwise provided at law or pursuant to By-laws. Eligible
Officers will continue to be covered by applicable Company insurance, including directors’ and
officers’ liability or employment practices insurance coverage for work performed while employed by
the Company.

d. This Policy is an unfunded compensation arrangement for a member of a select group of the
Company’s management and any exemptions under ERISA, as applicable to such an arrangement, will be
applicable to this Policy.

e. All notices, requests, demands, and other communication with are required or may be given under
this Policy will be in writing and will be deemed to have been duly given when delivered by hand or
overnight courier service or three days after it has been mailed by United States registered mail,
return receipt requested, postage prepaid, addressed to these respective addresses (or to such
other addresses as the parties may notify each other of in the meantime using the same methods
herein). Notice of change of address, however, is only effective only upon actual receipt.

If to the Company addressed to:

Alaska Communications Systems Holdings, Inc.

600 Telephone Avenue MS65

Anchorage, Alaska 99503

If to the Eligible Officer, addressed to the most recent address in the Company’s personnel
records.

f. This Policy supersedes all prior understandings (including oral agreements) between Eligible
Officers and the Company concerning severance matters. Nevertheless; this Policy may be amended,
modified, changed, or terminated by the Company without prior notification or negotiation, and any
such future changes will be applicable to all Eligible Officers.

1

EXHIBIT A

Alaska Communications 2014 Officer Severance Policy

OFFICER’S RELEASE

(Non-Compete, non-disparagement & non-solicitation)

In exchange for a portion of the benefits described in the attached Alaska Communications
Systems 2014 Officer Severance Policy (the “Policy”), to which I agree I am not otherwise entitled,
I hereby release Alaska Communications Systems Group, Inc. (the “Company”), its respective
affiliates, subsidiaries, predecessors, successors, assigns, officers, directors, employees,
agents, stockholders, attorneys, and insurers, past, present and future (the “Released Parties”)
from any and all claims of any kind which I may have had, now have or may have against the Released
Parties, whether known or unknown to me, by reason of facts which have occurred on or prior to the
date that I have signed this Release in connection with, or in any way related to or arising out
of, my employment or termination of employment with the Company; provided that such released claims
will not include any claims to enforce my rights (i) under, or with respect to, the Policy, (ii) to
indemnification provided at law or pursuant to the Company or it’s affiliates’ By-Laws or insurance
or to directors and officers’ liability or employment practices insurance coverage, (iii) under
COBRA or my vested rights under benefit or incentive plans; or (iv) as a stockholder.
Notwithstanding the generality of the preceding sentence, such released claims include, without
limitation, any and all claims under federal, state or local laws pertaining to employment,
including the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. Section 2000e et seq., the Fair Labor Standards Act, as amended, 29 U.S.C.
Section 201 et seq., the Americans with Disabilities Act, as amended, 42 U.S.C. Section 12101 et
seq., the Reconstruction Era Civil Rights Act, as amended, 42 U.S.C. Section 1981 et seq., the
Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et seq., the Family and Medical Leave
Act of 1992, 29 U.S.C. Section 2601 et seq., and any and all state or local laws regarding
employment discrimination and/or federal, state or local laws of any type or description regarding
employment, including, but not limited to, any claims arising from or derivative of my employment
with the Company, as well as any and all claims under contract or tort law or otherwise.

I hereby represent that I have not filed, nor will I in the future file, any action,
complaint, charge, grievance or arbitration against the Company or the Released Parties arising out
of or in any way related to or connected with my employment with the Company, except to the extent
the law otherwise provides.

	 	•	 	I understand and agree that I must forever continue to keep confidential all proprietary
or confidential information which I learned while employed by the Company, whether oral or
written and as defined in the Corporate Compliance Program Manual (“Proprietary Information”)
and will not make use of any such Proprietary Information on my own behalf or on behalf of
any other person or entity, except as specifically authorized by the Policy.

	 	•	 	I understand and agree that as an employee of the Company, I have knowledge of
confidential and highly-sensitive competitive and proprietary information concerning the
Company’s business, including but not limited to customers, products and services, finances,
business strategies, intellectual property and future plans. I agree that, for period of
twelve months after termination of my employment, I will not become an officer, director,
employee, contractor, consultant, partner, joint-venture, or otherwise enter a business
relationship or service with any competitor of the Company in the Alaska markets it serves.

	 	•	 	I agree that for a period of twelve months after termination of my employment I will not
offer, encourage or solicit any other officer or employee of Alaska Communications to leave
the company or enter into an employment or business relationship with me or a subsequent
employer.

	 	•	 	I agree that I will not make, publish, or communicate; or aid, assist, or encourage others
to make, publish or communicate, any negative, defamatory or disparaging remarks, comments or
statements concerning the Company or its businesses or any of its officers, directors,
employees, existing or prospective customers, suppliers, investors or other associated third
parties to any person or entity, or in any public forum, except as required by law, and
except that such statements may be made to members of the Board of Directors of the Company.

	 	•	 	I expressly understand and agree that the Released Parties’ obligations under this Release
and the Policy are in lieu of any and all other amounts to which I might be, am now or may
become entitled to receive from any of the Released Parties upon any claim whatsoever.

	 	•	 	I understand that I must not disclose the terms of this Release and the Policy to anyone
other than my immediate family, financial advisors and legal counsel and that I must
immediately inform my immediate family, financial advisors and legal counsel that they are
prohibited from disclosing the terms of this Release and the Policy.

	 	•	 	It is understood that I will not be in breach of the nondisclosure provisions of this
Release if I am required to disclose information pursuant to a valid subpoena or court order,
provided that I notify the Company (to the attention of the General Counsel of the Company)
as soon as practicable, but prior to the time in which I am required to disclose information,
that I have received the subpoena or court order which may require me to disclose information
protected by this Release. Notwithstanding the foregoing, I also may disclose the terms of
this Release to government taxing authorities or the SEC, if required to do so.

	 	•	 	I agree that any violation or breach by me of my nondisclosure obligations, without
limiting the Company’s remedies, will give rise on the part of the Company to a claim for
relief to recover from me, before a court of competent jurisdiction, any and all amounts
previously paid to or on behalf of me by the Company pursuant to this Policy, plus interest,
but will not release me from the performance of my obligations under this Release.

	 	•	 	I acknowledge that I may be subject to the Company’s Insider Trading Policy for a period
of time after my termination, and I agree to comply with the Insider Trading Policy until I
am not longer subject to it.

	 	•	 	I will not apply for or otherwise seek employment with the Released Parties without their
written consent.

	 	•	 	I agree to make myself reasonably available to the Company to respond to requests by the
Company for information concerning matters involving facts or events relating to the Company
that may be within my knowledge, and to assist the Company as reasonably requested with
respect to pending and future litigation, arbitrations, or other dispute resolutions.

	 	•	 	Further, I understand and agree that if I breach certain of my obligations under this
Policy; it would be difficult or impossible to measure the Released Parties’ damages in
dollars. Therefore, to enforce this Policy, I agree that the Released Parties have the right
to, without posting any bond, cease making any payments or providing any benefits required by
this Policy and obtain equitable relief in court including a temporary restraining order
against me, or obtain temporary or permanent injunction, or any other equitable remedy that
is available to the Released Parties.

	 	•	 	I have read this Release carefully, and I acknowledge that I have been given at least
[21/45] days to consider all of its terms, and have been advised to consult with an attorney
and any other advisors of my choice prior to executing this Release, and I have had the
opportunity to do so. I fully understand that by signing below I am forever voluntarily
giving up any right which I may have to sue or bring any other claims against the Released
Parties, including any rights and claims under the Age Discrimination in Employment Act and
any other discrimination laws, whether federal or state. I also understand that I have a
period of seven days after signing this Release within which to revoke my Release, and that
neither the Company nor any other person is obligated to provide any severance pay or
benefits to me pursuant to the Policy until eight days have passed since my signing of this
Release without my signature having been revoked. I understand that any revocation of this
Release must actually be received by the General Counsel of the Company within the seven-day
revocation period.

	 	•	 	I represent and acknowledge that I have decided to enter into this Release voluntarily,
knowlingly and without coercion of any kind.

	 	•	 	I represent and acknowledge that no representation, statement, promise, inducement, threat
or suggestion has been made by any of the Released Parties or by any other individual to
influence me to sign this Release, except such statements as are expressly set forth herein
or in the Policy.

This Release is final and binding and may not be changed or modified except by a written agreement
signed by an authorized Officer of the company.

       Date:      

Eligible Officer

2most_ex41.htm

Exhibit 4.1

 

EIGHTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED NOTE

PURCHASE AGREEMENT AND SIXTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTES

 

THIS EIGHTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED NOTE PURCHASE AGREEMENT AND SIXTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTES (this “Amendment”), effective as of June 9, 2014, is made and entered into by and among MobileSmith, Inc., a Delaware corporation (the “Company”), the undersigned holders (the “Holders”, and each individually, a “Holder”) of the Convertible Secured Subordinated Promissory Notes (the “Notes”) issued by the Company from time to time pursuant to that certain Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended through the date hereof, the “Note Purchase Agreement”), among the Company and the Holders. Capitalized terms used but not defined herein have the meanings assigned to them in the Note Purchase Agreement.

 

WITNESSETH:

 

WHEREAS, the Company and the Holders desire to amend the Notes previously issued pursuant to the Note Purchase Agreement to provide that each of the Notes shall be subordinate to certain indebtedness owing, or to be owed, to Comerica Bank (the “Bank”), such subordination to be on the terms set forth in this Amendment;

 

WHEREAS, the Holders agree to subordinate: (i) all of the Company’s indebtedness and obligations to Holders, whether presently existing or arising in the future to all of the Company’s indebtedness and obligations to Bank; and (ii) all of Holders’ security interests, if any, to all of Bank’s security interests in the Company’s property;

 

WHEREAS, in connection with the Note Purchase Agreement, the Holders desire to direct Doron Roethler, as agent for the Holders (together with its successors and assigns in such capacity, the “Collateral Agent”) to amend that certain Security Agreement, dated November 14, 2007 (the “Security Agreement”), by and between the Company and the Collateral Agent;

 

WHEREAS, Section 9(a) of the Note Purchase Agreement provides that any provision of the Note Purchase Agreement may be amended with the written consent of the Company and Holders holding at least a Requisite Percentage;

 

WHEREAS, Section 8 of each of the Notes provides that any provision of the Notes may be amended with the written consent of the Company and Holders holding at least a Requisite Percentage; and

 

WHEREAS, Section 8(d) of the Security Agreement provides that it may be amended or modified by written consent of the Company and the Collateral Agent.

 

  

1

  

NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

Section 1. Amendment to Note Purchase Agreement.

 

(a) All references in the Note Purchase Agreement to “Note” or “Notes” shall mean the form of Convertible Secured Subordinated Promissory Note attached hereto as Exhibit 1.

 

(b) Section 9 of the Note Purchase Agreement is hereby amended to add the following Paragraph (l) in its entirety to read as follows:

 

(l)

 

i. Each Holder subordinates to Comerica Bank (“Bank”) any security interest or lien that such Holder may have in any property of the Company.  Notwithstanding the respective dates of attachment or perfection of the security interest of Holders and the security interest of Bank, the security interest of Bank in the Collateral, as defined in that certain Loan and Security Agreement between the Company and Bank, dated as of June 9, 2014 (as amended from time to time, the “Loan Agreement”), shall at all times be prior to the security interest of the Holders.

 

ii. All all of Borrower’s indebtedness and obligations to Holders whether presently existing or arising in the future (“Subordinated Debt”) is subordinated in right of payment to all obligations of the Company to Bank now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all interest accruing after the commencement by or against the Company of any bankruptcy, reorganization or similar proceeding, and all obligations under the Loan Agreement (the “Senior Debt”).

 

iii. No Holder will demand or receive from the Company (and the Company will not pay to any Holder) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will any Holder exercise any remedy with respect to the Collateral, nor will any Holder commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against the Company, nor shall the scheduled maturity date as to any portion of the Subordinated Debt be prior to the scheduled maturity date of the Senior Debt (and Holders shall immediately amend the Subordinated Debt loan documentation to extend its maturity date to effect compliance herewith) for so long as any portion of the Senior Debt remains outstanding, provided, however, that the Holders may receive regularly scheduled payments of interest that constitute Subordinated Debt, so long as an event of default under the Loan Agreement has not occurred, is not continuing and would not exist immediately after the payments to Holder were made; and provided further that nothing in this Agreement shall prohibit a Holder from converting all or any part of the Subordinated Debt into equity securities of the Company.

 

  

2

  

 

iv. Each Holder shall promptly deliver to Bank in the form received (except for endorsement or assignment by such Holder where required by Bank) for application to the Senior Debt any payment, distribution, security or proceeds received by such Holder with respect to the Subordinated Debt other than in accordance with this Section 9(l). For the avoidance of doubt, Bank is an intended third party beneficiary of the provisions of this Section 9(l)(iv) and may enforce the performance of such provisions by appropriate action or proceeding.

 

v. In the event of the Company’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Bank’s claims against the Company and the estate of the Company shall be paid in full before any payment is made to any Holder.

 

vi. Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Section 9(l).  No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Section 9(l) in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interest or lien that Holders may have in any property of the Company.  By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.

 

vii. This Section 9(l) shall remain effective for so long as the Company owes any amounts to Bank under the Loan Agreement or otherwise.  If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Bank for any reason (including, without limitation, the bankruptcy of the Company), this Section 9(l) and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and each Holder shall immediately pay over to Bank all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder.  At any time and from time to time, without notice to Holders, Bank may take such actions with respect to the Senior Debt as Bank, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to the Company, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against the Company or any other person.  No such action or inaction shall impair or otherwise affect Bank’s rights hereunder.

 

viii. This Section 9(l)  shall bind any successors or assignees of each Holder and shall benefit any successors or assigns of Bank.  This Section 9(l) is solely for the benefit of Holders and Bank and not for the benefit of the Company or any other party. For the avoidance of doubt, Bank is an intended third party beneficiary of the provisions of this Section 9(l) and may enforce the performance of such provisions by appropriate action or proceeding. Each Holder further agrees that if the Company is in the process of refinancing a portion of the Senior Debt with a new lender, and if Bank makes a request of the Holders, Holders shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Section 9(l).

 

  

3

  

 

Section 2. Amendment to Preamble.

 

(a) The second paragraph of the preamble of each Note shall be deleted in its entirety and the following shall be inserted in lieu thereof:

 

This Note is one of the “Notes” issued pursuant to the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended, modified or supplemented, the “Note Purchase Agreement”), between the Company and the Investors (as defined in the Note Purchase Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Note Purchase Agreement. This Note and the Investor are subject to certain restrictions, and are entitled to certain rights and privileges, set forth in the Note Purchase Agreement.  This Note is expressly subject to Section 9(l) of the Note Purchase Agreement.

 

(b) The provisions in the preamble of any Additional Note issued on the date hereof or hereafter shall be the same as provided in the Notes, as hereby amended.

 

Section 3. Amendment to Security Agreement.  The Holders hereby approve, and direct the Collateral Agent to provide written consent to enter into, that certain Amendment to the Security Agreement dated as of the date hereof by and between the Company and the Collateral Agent attached hereto as Exhibit 2.

 

Section 4. Ratification. Except as specifically amended above, each of the Notes and the Note Purchase Agreement shall continue in full force and effect in accordance with its terms, and is hereby in all respects ratified and confirmed.

 

Section 5. Counterparts. This Amendment may be executed in several counterparts and by facsimile or other electronic transmission, each of which shall be an original and all of which together shall constitute but one and the same.

 

[Remainder of Page Intentionally Left Blank]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first above written.

 

	 	
MOBILESMITH, INC.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Gleb Mikhailov	 
	 	Name:	Gleb Mikhailov	 
	 	Title:	Chief Financial Officer	 
	 	 	 	 

 

	 	
GRASFORD INVESTMENTS LTD.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Avy Lugassy	 
	 	Name:	Avy Lugassy	 
	 	
Title:

	Principal	 
	 	 	 	 

	 	
CRYSTAL MANAGEMENT LTD.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Doron Roethler	 
	 	
Name:

	
Doron Roethler

	 
	 	
Title:

	Beneficial Owner	 
	 	 	 	 

	 	 	 
	
 

	 	 
	 	
WILLIAM FURR

	 
	 	 	 
	 	 	 

 

	 	
THE BLUELINE FUND

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	
Name:

	 	 
	 	
Title:

	 	 
	 	 	 	 

	 	
UBP, UNION BANCAIRE PRIVEE

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	
Name:

	 	 
	 	
Title:

	 	 
	 	 	 	 

  

5

  

EXHIBIT 1

 

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE COMPANY, IN ITS SOLE DISCRETION, SHALL HAVE THE RIGHT TO REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH ANY PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

 

MOBILESMITH, INC.

 

CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTE

 

	 $_______________	___________________, __ ____
	 	
  Raleigh, NC                                         

 

 

FOR VALUE RECEIVED, MobileSmith, Inc., a Delaware corporation (the “Company”) promises to pay to _____________________ (“Investor”), or its registered assigns, in lawful money of the United States of America the principal sum of ____________________ ($_____), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to 8.00% per annum, computed on the basis of the actual number of days elapsed and a year of 360 days. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earlier of (i) November 14, 2016, (ii) a Change of Control or (iii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Investor or made automatically due and payable in accordance with the terms hereof (such date upon which all amounts payable hereunder are due is referred to herein as the “Maturity Date”).

 

This Note is one of the “Notes” issued pursuant to the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended, modified or supplemented, the “Note Purchase Agreement”), between the Company and the Investors (as defined in the Note Purchase Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Note Purchase Agreement. This Note and the Investor are subject to certain restrictions, and are entitled to certain rights and privileges, set forth in the Note Purchase Agreement.  This Note is expressly subject to Section 9(l) of the Note Purchase Agreement.

 

THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT DATED AS OF NOVEMBER 14, 2007 (AS AMENDED, RESTATED OR SUPPLEMENTED, THE “SECURITY AGREEMENT”) AND EXECUTED BY COMPANY FOR THE BENEFIT OF THE INVESTORS. ADDITIONAL RIGHTS OF INVESTOR ARE SET FORTH IN THE SECURITY AGREEMENT.

 

  

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The following is a statement of the rights of Investor and the conditions to which this Note is subject, and to which Investor, by the acceptance of this Note, agrees:

 

1. Definitions. As used in this Note, the following capitalized terms have the following meanings:

 

(a) “Business Day” shall mean any day other than a Saturday or Sunday or other day on which the New York Stock Exchange is permitted or required by law to close.

 

(b) the “Company” includes the corporation initially executing this Note and any Person which shall succeed to or assume the obligations of the Company under this Note.

 

(c)  “Conversion Price” shall mean the lowest “Applicable Conversion Price” determined for each Note issued under the Note Purchase Agreement. The “Applicable Conversion Price” for each Note issued under the Note Purchase Agreement shall be calculated by multiplying 110% by the closing price of the Company’s common stock on April 14, 2014 (in each case as adjusted for stock splits, dividends or combinations, recapitalizations or similar events).

 

(d) “Change of Control” shall mean (i) any consolidation or merger or other transaction or series of transactions involving the Company pursuant to which the Company’s stockholders own less than fifty percent (50%) of the voting securities of the surviving entity (other than an equity financing) or (ii) the sale of all or substantially all of the assets of the Company.

 

(e) “Event of Default” has the meaning given in Section 4 hereof.

 

(f) “Note Purchase Agreement” has the meaning given in the introductory paragraph hereof.

 

(g) “Obligations” shall mean and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Company to Investor of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of this Note, the Note Purchase Agreement and the Security Agreement, including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by the Company hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 U. S. C. Section 101 et seq.), as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding.

 

(h) “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

 

  

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(i) “Requisite Percentage” shall mean, at least a majority of the aggregate outstanding principal amount of the Notes issued pursuant to the Note Purchase Agreement

 

(j) “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(k) “Security Agreement” has the meaning given in the introductory paragraphs to this Note.

 

(l) “Transaction Documents” shall mean this Note, each of the other Notes issued under the Note Purchase Agreement, the Note Purchase Agreement, the Registration Rights Agreement, dated November 14, 2007, as amended, restated and supplemented, and the Security Agreement.

 

2. Interest. Accrued interest on this Note shall be payable in cash in quarterly installments commencing on the third month anniversary of the date of issuance of this Note with the final installment payable on the Maturity Date.

 

3. Prepayment. This Note may not be prepaid without the consent of a Requisite Percentage. Any prepayment must be made in connection with the prepayment of all outstanding Notes.

 

4. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note and the other Transaction Documents:

 

(a) Failure to Pay. The Company shall fail to pay (i) when due any principal or interest payment on the due date hereunder or (ii) any other payment required under the terms of this Note or any other Transaction Document on the date due and, with respect to this subclause (ii) only, such payment shall not have been made within five (5) days of the Company’s receipt of written notice to the Company of such failure to pay;

 

(b) Non-Performance of Affirmative Covenants. The Company shall default in the due observance or performance of any material covenant set forth in the Note, the Note Purchase Agreement or the Security Agreement, which default shall continue uncured for fifteen (15) days after receipt of written notice to the Company thereof;

 

(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing;

 

  

8

  

 

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

 

(e) Misrepresentations. Any of the representations and warranties of the Company in the Note Purchase Agreement or the Security Agreement proves to have been false or misleading in any material respect when made or furnished or deemed made;

 

(f) Judgments. One or more judgments, decrees or orders (excluding settlement orders) for the payment of money shall be entered against the Company or any of its subsidiaries involving in the aggregate a liability of $1,000,000 or more, and any such judgment, decree or order shall continue without discharge or stay for a period of sixty (60) days; or

 

(g) Cross-Defaults. The Company or any of its subsidiaries shall default in the performance or observance of any agreement or instrument relating to any indebtedness, or any other event shall occur or condition exist, and the effect of such default, event or condition is to cause or permit the holder or holders of any such indebtedness to cause indebtedness, in excess of $500,000 individually or in the aggregate, to become due prior to its stated maturity.

 

5. Rights of Investor upon Default. Upon the occurrence or existence of any Event of Default (other than an Event of Default described in Sections 4(c) or 4(d)) and at any time thereafter during the continuance of such Event of Default, Investor may, with the consent of the Agent, by written notice to the Company, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. Upon the occurrence or existence of any Event of Default described in Sections 4(c) and 4(d), immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default and subject to the consent of the Agent, Investor may exercise any other right power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both.

 

6. Conversion.

 

(a) Optional Conversion. At any time on or prior to the Maturity Date each Investor will have the option to convert all or a portion of the entire principal amount of the Notes outstanding into Common Stock immediately upon the Investor’s request; provided, however, that if, at the time of any particular conversion, the Company does not have the number of authorized shares of Common Stock sufficient to allow for such particular conversion as well as the issuance of the maximum amount of Common Stock permitted under the Company’s 2004 Equity Compensation Plan, the Investors may only convert that portion of their Notes outstanding for which the Company has a sufficient number of authorized shares of Common Stock. To the extent multiple Investors request conversion of their Notes on the same date, any limitations on conversion shall be applied on a pro rata basis. In such case, the Investors may request, in writing, that the Company call a special meeting of the stockholders of the Company specifically for the purpose of increasing the number of authorized shares of Common Stock to cover the remaining portion of the Notes outstanding, as well as the maximum issuances contemplated pursuant to the Company’s 2004 Equity Compensation Plan, within 90 calendar days after the Company’s receipt of the Investors’ written request. Notwithstanding the above, the Company shall use its best efforts to increase its number of authorized shares of Common Stock to 100,000,000 or such greater number so as to allow for the full conversion of any outstanding Notes on the earlier of: (1) promptly after the date on which a request for conversion, for which there are not sufficient shares available to effect such conversion, is received by the Company, or (2) the time of the next shareholder meeting. The number of shares of Common Stock that this Note may be converted into shall be determined by dividing the principal amount then outstanding by the Conversion Price at the time of conversion. If the Investor elects to convert this Note on demand, it shall provide the Company with written notice of its election at least one (1) day prior to the date selected for conversion. Upon conversion, the Investor shall deliver to the Company the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement reasonably acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with this Note). However, upon such conversion of this Note, this Note shall be deemed converted and of no further force and effect, whether or not the Note is delivered for cancellation as set forth in the preceding sentence. If there shall occur a Change of Control, the Company shall give written notice to the Investor at least five (5) days prior to any closing thereof and the Investor’s election to convert this Note shall be conditional upon the consummation thereof.

 

  

9

  

 

(b) Mechanics of Optional Conversion. As soon as practicable following surrender by the Investor of the original of this Note, the Company shall issue and deliver to Investor a certificate or certificates for the shares of Common Stock into which the Note has been converted (bearing such legends as may be required or advisable in the opinion of counsel to the Company). Such conversion shall be deemed to have been made immediately prior to the close of business on the date selected for the conversion and the Investor shall be treated for all purposes as the record holder or holders of such Common Stock on such date.

 

(c) Fractional Shares; Interest; Effect of Conversion. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Investor upon the conversion of this Note, the Company shall pay to Investor an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment of any amounts specified in this Section 6(c), the Company shall be forever released from all its obligations and liabilities under this Note.

 

7. Successors and Assigns. Subject to the restrictions on transfer described in Sections 9 and 10 below, the rights and obligations of the Company and Investor shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

8. Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the holders of a Requisite Percentage.

 

9. Transfer of this Note or Securities Issuable on Conversion Hereof. With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Investor will give written notice to the Company prior thereto, describing briefly the manner thereof, together with (unless waived by the Company) a written opinion of Investor’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, the Company, as promptly as practicable, shall notify Investor that Investor may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for Investor, or other evidence, is not reasonably satisfactory to the Company, the Company shall so notify Investor promptly after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary. Notwithstanding anything in this Section 9 to the contrary, no opinion of counsel shall be required with respect to any transfer by an Investor to its officers, directors, partners, members or other affiliates.

 

  

10

  

10. Assignment by the Company. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the holders of a Requisite Percentage.

 

11. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and faxed, mailed or delivered to each party at the respective addresses of the parties as set forth in the Note Purchase Agreement, or at such other address or facsimile number as the Company shall have furnished to Investor in writing. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing or (v) two days after being deposited in the U.S. mail, first class with postage prepaid.

 

12. Pari Passu Notes. Investor acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Note Purchase Agreement or pursuant to the terms of such Notes. In the event Investor receives payments in excess of its pro rata share of the Company’s payments to the Investors of all of the Notes, then Investor shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

 

13. Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

14. Waivers. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

15. Remedies Cumulative. The remedies of Investor as provided herein and in the Note Purchase Agreement and in any other documents governing or securing repayment hereof shall be cumulative and concurrent and may be pursued singly, successively, or together, at the sole discretion of Investor to the extent provided herein and in the Note Purchase Agreement and may be exercised as often as occasion therefore shall arise. No act or omission of the Investor, including specifically, but without limitation, any failure to exercise any right, remedy or recourse, shall be effective as a waiver of any right of the Investor hereunder, unless set forth in a written document executed by the Investor, and then only to the extent specifically recited therein. A waiver or release with reference to one event shall not be construed as continuing, as a bar to, or as a waiver or release of any subsequent right, remedy or recourse as to any subsequent event. All notices, waivers, releases and/or consents by an Investor shall be directed to the Company only through the Agent.

 

16. No Rights of a Stockholder. Nothing contained in this Note shall be construed as conferring upon the Investor or any other Person the right to vote or consent or to receive notice as an stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company prior to the time that this Note is converted pursuant to Section 6.

 

17. Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware, or of any other state.

 

 

(Signature Page Follows)

 

  

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The Company has caused this Note to be issued as of the date first written above.

	 	
MOBILESMITH, INC.

	 
	 	a Delaware corporation	 
	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	 	 
	 	Name:	 	 
	 	 	 	 
	 	Title: 	 	 
	 	 	 	 

 

[SIGNATURE PAGE TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTE, DATED ________________, ISSUED TO _________________ BY MOBILESMITH, INC.]

                             

12

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