Document:

Exhibit

Exhibit 10.4

EMMIS OPERATING COMPANY 
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS EMMIS OPERATING COMPANY CHANGE IN CONTROL SEVERANCE AGREEMENT (the “Agreement”) is entered into, effective March 1, 2016 (the “Effective Date”), by and between EMMIS OPERATING COMPANY, an Indiana corporation (the “Company”), and Paul V. Brenner (“Executive”).
W I T N E S S E T H
WHEREAS, Executive is an officer and employee of the Company and also an officer of the Company’s sole shareholder, Emmis Communications Corporation (“Parent”) and that the Company derives a material benefit from compensation to executives that is provided by Parent; and
WHEREAS, the Company considers the establishment and maintenance of sound and vital management to be essential to protecting and enhancing the best interests of the Company; and
WHEREAS, the Company recognizes that, as is the case with many operating subsidiaries of publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company; and
WHEREAS, the Company has determined that it is in the best interests of the Company to secure Executive’s continued services and to ensure Executive’s continued and undivided dedication to his duties in the event of any threat or occurrence of a “Change in Control” (as defined in Section 1).
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:
1.Definitions.  As used in this Agreement, the following terms shall have the respective meanings set forth below:
(a)    “Affiliate” means, with  respect to a specified person, a person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified.
(b)    “Base Salary” means Executive’s gross base salary, regardless of whether payable directly by the Company in cash or the stock compensation program or a similar program.

Exhibit 10.4

(c)    “Board” means the Board of Directors of Parent.  The board of directors of the Company agree to cause the Company to implement any and all directions of the Board hereunder.
(d)    “Bonus Amount” means the greater of (i) the highest annual incentive bonus earned by Executive from the Company (and/or its Affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive’s Date of Termination (annualized in the event Executive was not employed by the Company (or its Affiliates) for the whole of any such fiscal year), or (ii) if the Date of Termination occurs before Executive has been employed for a full fiscal year and before the date on which the Company generally pays bonuses to its executives for the fiscal year in which Executive’s employment commenced, 25% of Executive’s Base Salary for the fiscal year of the Company which includes the Executive’s Date of Termination.
(e)    “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness or any such failure subsequent to Executive being delivered a notice of Termination without Cause by the Company or delivering a notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties; provided that Executive has not cured such failure or commenced such performance within 30 days after such demand is given to Executive, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its Affiliates.  For purpose of the preceding sentence, no act or failure to act by Executive shall be considered “willful” unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company (or upon the instructions of the Company’s chief executive officer or another senior officer of the Company) shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three‐quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clause (i) or (ii) has occurred and specifying the particulars thereof in detail.  The Company must notify Executive of any event constituting Cause within ninety (90) days following the Company’s knowledge of its existence or such event shall not constitute Cause under this Agreement.
(f)    “Change in Control” means any of the following:  (i) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than an Affiliate 

Exhibit 10.4

or any employee benefit plan (or any related trust) of Parent or an Affiliate, and other than Jeffrey H. Smulyan or an Affiliate of Mr. Smulyan) (a “Person”) becomes after the date hereof the beneficial owner of 35% or more of either the then outstanding Stock or the combined voting power of the then outstanding voting securities of Parent entitled to vote in the election of directors, except that no Change in Control shall be deemed to have occurred solely by reason of any such acquisition by a corporation with respect to which, after such acquisition, more than 60% of both the then outstanding common shares of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote in the election of directors are then beneficially owned, directly or indirectly, by the persons who were the beneficial owners of the Stock and voting securities of Parent immediately before such acquisition in substantially the same proportion as their ownership, immediately before such acquisition, of the outstanding Stock and the combined voting power of the then outstanding voting securities of Parent entitled to vote in the election of directors; (ii) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided that any individual who becomes a director after the Effective Date whose election, or nomination for election by Parent’s shareholders, was approved by a vote or written consent of at least two-thirds of the directors then comprising the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Parent (as such terms are used in Rule 14a-11 under the Exchange Act); (iii) the consummation of (A) a merger, reorganization or consolidation with respect to which the individuals and entities who were the respective beneficial owners of the Stock and voting securities of Parent immediately before such merger, reorganization or consolidation do not, after such merger, reorganization or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding common shares and the combined voting power of the then outstanding voting securities entitled to vote in the election of directors of the corporation resulting from such merger, reorganization or consolidation, or (B) the sale or other disposition (or series of sales and/or other dispositions over time resulting in a sale and/or other disposition) of all or substantially all of the assets of the Company or Parent to any Person or Persons as part of the Company’s or Parent’s plan to sell or otherwise dispose of all or substantially all of such assets; (iv) the approval by the shareholders of the Company or Parent of a liquidation or dissolution of the Company or Parent; (v) Parent ceasing to own at least a majority of the common stock of the Company; or (vi) such other event(s) or circumstance(s) as are determined by the Board to constitute a Change in Control.  Notwithstanding the foregoing provisions of this definition, a Change in Control shall be deemed not to have occurred with respect to Executive, if he is, by written agreement executed prior to such Change in Control, a participant on his own behalf in a transaction in which the persons with whom he has the written agreement (and/or their Affiliates) Acquire Parent (as defined below) and, pursuant to the written agreement, Executive has (or has the right to acquire) an equity interest in the resulting entity.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person acquires beneficial ownership of more than 35% of the 

Exhibit 10.4

then outstanding Stock as a result of the acquisition of the Stock by Parent which reduces the number of shares of Stock outstanding; provided, that if after such acquisition by Parent such person becomes the beneficial owner of additional Stock that increases the percentage of outstanding Stock beneficially owned by such person, a Change in Control shall then occur.
For the purposes of this definition, “Acquire Parent” means the acquisition of beneficial ownership by purchase, merger, or otherwise, of either more than 50% of the Stock (such percentage to be computed in accordance with Rule 13d-3(d)(1)(i) of the SEC under the Exchange Act) or substantially all of the assets of Parent or its successors; “person” means such term as used in Rule 13d-5 of the SEC under the Exchange Act; “beneficial owner” means such term as defined in Rule 13d-3 of the SEC under the Exchange Act; and “group” means such term as defined in Section 13(d) of the Exchange Act.
(g)    “Code” means the Internal Revenue Code of 1986, as amended, and regulations and rulings thereunder.  References to a particular section of the Code shall include references to successor provisions.
(h)    “Date of Termination” means the effective date of the Termination of Executive’s Employment.
(i)    “Disability” means Termination of Executive’s Employment by the Company (A) on account of Executive’s disability or incapacity in accordance with Executive’s written employment agreement with the Company, if such agreement contains provisions relating to Termination of Employment for disability or incapacity, or (B) except as provided in clause (A), on account of Executive’s disability or incapacity in accordance with the Company’s policies applicable to salaried employees without a written employment agreement, as in effect immediately before the Change in Control.
(j)     “Exchange Act” means the Securities Exchange Act of 1934, as amended.  References to a particular section of, or rule under, the Exchange Act shall include references to successor provisions.
(k)    “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:
(i)    a material diminution in Executive’s authority, duties, or responsibilities; provided, however, Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of Parent no longer being a publicly traded entity that does not involve another event described in this Subsection (l);

Exhibit 10.4

(ii)    a material breach by the Company or an Affiliate of the Company of this Agreement or an employment agreement to which the Executive and the Company or an Affiliate of the Company are parties;
(iii)    a material reduction by the Company in Executive’s rate of annual Base Salary, as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter (with a reduction or series of reductions exceeding 5% of Base Salary being deemed material);
(iv)    any requirement of the Company that Executive (A) be based anywhere more than thirty-five (35) miles from the office where Executive is based at the time of the Change in Control, if such relocation increases Executive’s commute by more than twenty (20) miles, or (B) travel on Company business to an extent materially greater than the travel obligations of Executive immediately prior to such Change in Control;
(v)    the failure of the Company to obtain the assumption and, if applicable, guarantee, agreement from any successor (and parent corporation) as contemplated in Section 9(b).
Notwithstanding the preceding, an event described above shall not be considered an event of Good Reason, unless the Executive provides notice to the Company of the existence of such event of Good Reason within ninety (90) days after its first occurrence and the Company fails to cure such event within thirty (30) days after receiving Executive’s notice.  Executive’s right to Terminate Employment for Good Reason shall not be affected by Executive’s incapacity due to mental or physical illness, and Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that Executive must Terminate Employment within ninety (90) days following the end of the thirty (30) day cure period specified above, or such event shall not constitute a termination for Good Reason under this Agreement.  

(l)    “Qualifying Termination” means a Termination of Executive’s Employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason.  Termination of Executive’s employment on account of death, Disability, or Retirement shall not be treated as a Qualifying Termination.
(m)    “Retirement” means Executive’s Termination of Employment by reason of retirement (not including any mandatory early retirement) in accordance with the Company’s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive’s written consent; provided, however, that under no circumstances shall a resignation with Good Reason be deemed a Retirement.
(n)    “SEC” means the Securities and Exchange Commission.

Exhibit 10.4

(o)    “Stock” means the Class A Common Stock and the Class B Common Stock of Parent, par value $.01 per share.
(p)    “Termination of Employment”, “Terminates Employment”, or any variation thereof means Executive’s separation from service within the meaning of Code Section 409A(a)(2)(A)(i).
(q)    “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years following such Change in Control.  Notwithstanding anything in this Agreement to the contrary, if (i) Executive’s Employment is Terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a Person who had indicated an intention or taken steps reasonably calculated to effect a Change in Control, or was otherwise made in connection with a Change in Control; and (iii) a Change in Control involving such third party or an Affiliate of such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such Termination of Employment or event constituting Good Reason shall be treated as a Change in Control.  For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive’s Date of Termination under Section l(h).
2.    Obligation of Executive.  In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, Retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.
3.    Term of Agreement.  This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years’ written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement.  Moreover, if Executive is party to a written employment agreement with the Company at the time of a Change in Control, and such agreement would otherwise expire during the Termination Period, the term of such agreement shall automatically be extended to the end of the Termination Period or, if earlier, Executive’s Retirement.  Notwithstanding anything in this Section to the contrary, except as provided in the second sentence of Section 1(r), this Agreement shall terminate if Executive or the Company Terminates Executive’s Employment prior to a Change in Control.
4.    Payments Upon Termination of Employment.

Exhibit 10.4

(a)    Qualifying Termination - Severance.  If during the Termination Period, the Employment of Executive shall Terminate pursuant to a Qualifying Termination, the Company shall provide to Executive:
(i)    within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive’s Base Salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) an amount equal to (I) fifty percent (50%) of Executive’s Base Salary at the rate in effect on the Change in Control (or, if higher, the rate in effect on Termination of Employment), multiplied by (II) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and (C) any accrued vacation pay, in each case to the extent not theretofore paid; plus
(ii)    within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive’s highest annual rate of Base Salary during the 36-month period immediately prior to Executive’s Date of Termination plus (ii) three (3) times Executive’s Bonus Amount.
(b)    Qualifying Termination - Benefits.  If during the Termination Period, the Employment of Executive shall Terminate pursuant to a Qualifying Termination, the Company shall: 
(i)    for a period of three (3) years following Executive’s Date of Termination, continue to provide Executive (and Executive’s dependents, if applicable) with the same level of accident and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive’s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); provided, that, if Executive cannot continue to participate in the Company plans providing such benefits, the Company shall otherwise provide such benefits on the same after-tax basis as if continued participation had been permitted;
(ii)    for the period beginning on Executive’s Date of Termination and continuing for up to 18 months thereafter, reimburse Executive for COBRA premiums paid by Executive for continuation coverage for Executive (and Executive’s dependents, if applicable) under the Company’s medical and dental benefits plan, with such reimbursement being taxable to Executive (any reimbursement required by this paragraph (ii) may be accomplished by the Company’s direct payment of such premium, with such payment taxable to Executive, or by Company reimbursing Executive for such premium within thirty (30) days after Executive’ s payment thereof);

Exhibit 10.4

(iii)    for the period beginning 19 months after Executive’s Date of Termination and ending 36 months after Executive’s Date of Termination, reimburse Executive for the cost of purchasing coverage substantially similar to that purchased under the Company’s medical and dental benefits plan pursuant to paragraph (ii) above (with no additional pre-existing condition exclusion), with such reimbursement being taxable to Executive (any reimbursement required by this paragraph (iii) may be accomplished by the Company’s direct payment of such premium, with such payment taxable to Executive, or by Company reimbursing Executive for such premium within thirty (30) days after Executive’ s payment thereof);
Notwithstanding the foregoing, (A) in the event Executive (or, if applicable, Executive’s dependent) becomes ineligible for COBRA continuation coverage during the first 18 months following Executive’s Date of Termination, such person shall not be eligible for further coverage under paragraph (ii) or (iii), and (B) subject to the limitations in clause (A), in the event Executive becomes employed by another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described in paragraphs (i) through (iii) shall be secondary to such benefits during the period of Executive’s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder;
(iv)    for two years following the Executive’s Date of Termination (or such shorter period ending upon the subsequent employment of Executive at a level of service commensurate with Executive’s positions with the Company on the Date of Termination), provide outplacement services for Executive from a provider selected by the Company and at the Company’s expense;
(v)    make such additional payments and provide such additional benefits to Executive as the Company and Executive may agree in writing, or to which Executive may be entitled under the compensation and benefit plans, policies, and arrangements of the Company.
(c)    Nonqualifying Termination.  If during the Termination Period the Employment of Executive shall Terminate other than by reason of a Qualifying Termination, the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of Executive’s Base Salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and any accrued vacation pay, to the extent not theretofore paid.  The Company may make such additional payments and provide such additional benefits to Executive as the Company and Executive may agree in writing, and the Company shall provide Executive with those payments and benefits to which Executive may be entitled under the compensation and benefit plans, policies, and arrangements of the Company or any employment agreement with the Company or an Affiliate of the Company.

Exhibit 10.4

(d)    Stock Rights. In the event of a Change in Control, all restricted Stock and all options, stock appreciation rights, and/or other stock rights held by Executive with respect to Stock that are exempt from Section 409A (“Stock Rights”) which are not fully vested (and exercisable, if applicable) shall become fully vested and exercisable as of a time established by the Board, which shall be no later than a time preceding the Change in Control which allows Executive to exercise the Stock Rights and cause the stock acquired thereby to participate in the Change in Control transaction.  If the Change in Control transaction is structured so that stock participating therein at one time is or may be treated differently from stock participating therein at a different time (e.g., a tender offer followed by a squeeze-out merger), the Board shall interpret this Subsection (d) to provide for the required vesting acceleration in a manner designed to allow Executive to exercise the Stock Rights and cause the stock acquired thereby to participate in the earliest portion of the Change in Control transaction.  If the consummation of a Change in Control transaction is uncertain (e.g., a tender offer in which the tender of a minimum number of shares is a condition to closing, or a voted merger or proxy contest in which a minimum number of votes is a condition to closing), the Board shall apply this Subsection (d) by using its best efforts to determine if and when the Change in Control transaction is likely to close, and proceeding accordingly.  To the extent necessary to implement this Subsection d), each agreement reflecting a Stock Right, and each plan, if any, pursuant to which a Stock Right is issued, if any, shall be deemed amended. 
(e)    Delay in Payments to Specified Employees.  Notwithstanding any other provision of this Agreement, if Executive is a specified employee within the meaning of Code Section 409A(a)(2)(B)(i), distributions pursuant to this Section shall be delayed to the earliest day on which such payments are permitted by Code Section 409A(a)(2)(B)(i) and the regulations thereunder.
5.    Certain Additional Payments by the Company.
(a)    If it is determined (as hereafter provided) that any payment or distribution by the Company or any Affiliate to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then (i) if reduction of the amount payable pursuant to paragraph 4(a)(ii) by no more than ten percent (10%) would result in no Excise Tax being imposed, the amount in paragraph 4(a)(ii) shall be reduced to the minimum extent necessary to result in no Excise Tax being imposed, and (ii) if clause (i) does not apply, Executive will be entitled to receive an additional payment or payments (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all taxes (including any interest or penalties imposed with respect 

Exhibit 10.4

to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b)    Subject to the provisions of Section 5(f) hereof, all determinations required to be made under this Section 5, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the “Accounting Firm”) selected by Executive in his sole discretion.  Executive will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and Executive within 15 calendar days after the date of Executive’s termination of employment, if applicable, and any other such time or times as may be requested by the Company or Executive.  If the Accounting Firm determines that any Excise Tax is payable by Executive, the Company will pay the required Gross-Up Payment to Executive within five business days after receipt of such determination and calculations.  If the Accounting Firm determines that no Excise Tax is payable by Executive, it will, at the same time as it makes such determination, furnish Executive with an opinion that he has substantial authority not to report any Excise Tax on his federal, state, local income or other tax return.  Subject to the provisions of this Section 5, any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the Company and Executive.  As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder.  In the event that an Underpayment is made and the Company exhausts or fails to pursue its remedies pursuant to Section 5(f) hereof and Executive thereafter is required to make a payment of any Excise Tax, Executive will direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Executive as promptly as possible.  Any such Underpayment will be promptly paid by the Company to, or for the benefit of, Executive within five business days after receipt of such determination and calculations.
(c)    The Company and Executive will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company, Parent or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 5(b) hereof.
(d)    The federal, state and local income or other tax returns filed by Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive.  Executive will make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax 

Exhibit 10.4

return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment.  If prior to the filing of Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Executive will within five business days pay to the Company the amount of such reduction.
(e)    The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 5(b) and (d) hereof will be borne by the Company.  If such fees and expenses are initially advanced by Executive, the Company will reimburse Executive the full amount of such fees and expenses within five business days after receipt from Executive of a statement therefor and reasonable evidence of his payment thereof.
(f)    Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment.  Such notification will be given as promptly as practicable but no later than 10 business days after Executive actually receives notice of such claim and Executive will further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by Executive).  Executive will not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due.  If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive will:
(i)    provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company;
(ii)    take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;
(iii)    cooperate with the Company in good faith in order effectively to contest such claim; and
(iv)    permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income 

Exhibit 10.4

tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses.  Without limiting the foregoing provisions of this Section 5(f), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 5(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided that Executive may participate therein at his own cost and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company directs Executive to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment to Executive on an interest-free basis and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(g)    If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(f) hereof, Executive receives any refund with respect to such claim, Executive will (subject to the Company’s complying with the requirements of Section 5(f) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto).  If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(f) hereof, a determination is made that Executive will not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid pursuant to this Section 5.
(h)    To the extent that earlier payment is not required by the preceding provisions of this Section, the Company shall pay amounts required to be paid pursuant to this Section not later than the end of the calendar year next following the calendar year in which Executive remits the related taxes.
6.    Withholding Taxes.  The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom.  In the case of the withholding of an Excise Tax, such withholding shall be consistent with any determination made under Section 5.

Exhibit 10.4

7.    Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of Executive’s employment with the Company or involving the failure or refusal of the Company and/or Parent to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof); provided, however, Executive shall be required to repay any such amounts to the Company to the extent that a court or an arbitration panel issues a final order from which no appeal can be taken, or with respect to which the time period to appeal has expired, setting forth that Executive has not wholly or partially prevailed on at least one material issue in dispute.  The amount of expenses eligible for reimbursement in one year pursuant to this Section shall not affect the amount of expenses eligible for reimbursement in any following year.  Under no circumstances shall the Company’s reimbursement for expenses incurred in a calendar year be made later than the end of the next following calendar year; provided, however, this requirement shall not alter the Company’s obligation to reimburse Executive for eligible expenses on a current basis.
8.    Scope of Agreement.  Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or any Affiliate of the Company, and if Executive’s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any Termination of Executive’s Employment during the Termination Period shall be subject to all of the provisions of this Agreement.
9.    Successors; Binding Agreement.
(a)    This Agreement shall not be terminated by any Change in Control or other merger, consolidation, statutory share exchange, sale of substantially all the assets or similar form of corporate transaction involving the Company (a “Business Combination”).  In the event of any Business Combination, the provisions of this Agreement shall be binding upon the surviving corporation, and such surviving corporation shall be treated as the Company hereunder.  For purposes of clarity only, a corporation acquiring substantially all of the assets of the Company shall be a “surviving corporation” for purposes of the preceding sentence. 
(b)    The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any parent corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company and Parent hereunder.  Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder, with the event of Good Reason occurring on the date on which such Business Combination becomes effective.

Exhibit 10.4

(c)    This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive’s estate.
10.    Notice.  (a)  For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when actually received or, if mailed, three days after mailing by registered or certified mail, return receipt requested, or one business day after mailing by a nationally recognized express mail delivery service with instructions for next-day delivery, addressed as follows:
If to the Executive, to the Executive’s principal residence as reflected in the records of the Company. 
If to the Company or Parent: 
 
Emmis Operating Company 
40 Monument Circle 
Suite 700 
Indianapolis, Indiana 46204 
Attn.:  Legal Department
or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.
(b)    A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for Termination of Executive’s Employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice).  The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.
11.    Full Settlement; Resolution of Disputes.  The Company’s obligation to make any payments and provide any benefits pursuant to this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other 

Exhibit 10.4

severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company; provided, however, that if any such other agreement or plan would provide Executive with a greater payment or more or longer benefits in respect of any particular item described hereunder (e.g., severance, welfare benefits), then Executive shall receive such particular item of payment and/or benefit pursuant to such other agreement or plan, in lieu of receiving that particular item pursuant to this Agreement; and provided further, retention bonuses and/or completion bonuses shall not be considered severance pay for purposes of this Section.  The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others.  In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable and benefits provided to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment.  The parties agree that any controversy or claim of either party hereto arising out of or in any way relating to this Agreement, or breach thereof, shall be settled by final and binding arbitration in Indianapolis, Indiana by three arbitrators in accordance with the applicable rules of the American Arbitration Association, and that judgment upon any award rendered may be entered by the prevailing party in any court having jurisdiction thereof.  The Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section.
12.    Employment by Affiliates of the Company.  Employment by the Company for purposes of this Agreement shall include employment by any Affiliate.
13.    Survival.  The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a Termination of Employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
14.    GOVERNING LAW; VALIDITY.  THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF INDIANA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, OF SUCH PRINCIPLES OF ANY OTHER JURISDICTION WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF INDIANA.  THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

Exhibit 10.4

15.    Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.
16.    Miscellaneous.  No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including, without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.  Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.
 [signatures appear on the following page(s)]

Exhibit 10.4

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.
	
				
	 
	 
	EMMIS OPERATING COMPANY

	 
	 
	By:
	/s/ Jeffrey H. Smulyan

	 
	 
	 
	Jeffrey H. Smulyan

	 
	 
	 
	Chief Executive Officer

	 
	 
	 
	 

	 
	 
	Date:  March 1, 2016

	 
	 
	 

	 
	 
	EXECUTIVE

	 
	 
	 
	/s/ Paul Brenner

	 
	 
	 
	Paul Brenner

	 
	 
	 
	 

	 
	 
	Date:  March 1, 2016

Parent hereby acknowledges and agrees to perform all of its obligations hereunder, including without limitation obligations with respect to the Board hereunder and with respect to Stock and all options, stock appreciation rights, and/or other stock rights held by Executive.

	
				
	 
	 
	EMMIS COMMUNICATIONS CORPORATION

	 
	 
	By:
	/s/ Jeffrey H. Smulyan

	 
	 
	 
	Jeffrey H. Smulyan

	 
	 
	 
	Chief Executive Officer

	 
	 
	 
	 

	 
	 
	Date:  March 1, 2016EXHIBIT 4.7

 

EXCEPT AS PROVIDED IN SECTION 11(B) HEREOF, THIS WARRANT MAY NOT BE TRANSFERRED.

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MUST NOT TRADE SUCH SECURITIES BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE LATER OF (1) MAY 30, 2007 AND (2) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR U.S. STATE SECURITIES LAWS. THE HOLDER HEREOF AGREES FOR THE BENEFIT OF DRAGONWAVE INC. THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO DRAGONWAVE INC., OR (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S (“REGULATION S”) UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, OR (C) (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, OR (D) UNDER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, OR (E) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (E) ABOVE, UPON THE PROVISION OF A LEGAL OPINION OF SELLER’S U.S. COUNSEL OF RECOGNIZED STANDING REASONABLY SATISFACTORY TO DRAGONWAVE INC., THAT THE SALE OF SUCH SECURITIES IS NOT REQUIRED TO BE REGISTERED UNDER THE U.S. SECURITIES ACT.

 

WARRANT FOR THE PURCHASE OF

COMMON SHARES

OF

DRAGONWAVE INC.

(a corporation incorporated under the Canada Business Corporations Act)

 

DATED AS OF MAY 30, 2007

 

VOID AFTER 5:00 P.M., CENTRAL STANDARD TIME, ON MAY 30, 2017

 

DragonWave Inc., a corporation incorporated under the laws of Canada (the “Company”), hereby certifies that Sprint/United Management Company, a Kansas corporation (the “Holder”), an Affiliate (as hereinafter defined) of Sprint Nextel Corporation (“Sprint”), is entitled, subject to the terms set forth below, to purchase from the Company, at the time, in the amounts and during the 

 

 

period described in Section 3 below, that number of Common Shares of the Company determined pursuant to the provisions of Section 2 below, at a price of $3.55 (the “Purchase Price”), subject to adjustment as provided herein.

 

1.                                      Definitions.

 

“Acquisition” means: (a) any sale, license, or other disposition of all or substantially all of the assets (including intellectual property) of the Company; (b) any reorganization, consolidation, merger or amalgamation of the Company in which the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction; or (c) a take-over bid, tender offer, share exchange or other transaction pursuant to which more than 50% of the outstanding voting securities of the Company are acquired by one or more persons acting jointly or in concert.

 

“Affiliate” means any entity that, directly or indirectly through one or more intermediaries, is controlled by, or is under common control with, Sprint or the Holder.

 

“Common Shares” means the Company’s Common Shares.

 

“DragonWave Products and Services” means the Company’s AirPair products or any other products or services marketed or sold by the Company, including without limitation products or services that may be introduced or acquired by the Company in the future.

 

“Exercise Term” means any time between the date hereof and May 30, 2017.

 

“IPO” means the Company’s initial public offering of its Common Shares pursuant to which the Common Shares are listed, admitted or posted for trading on the Toronto Stock Exchange and/or the Alternative Investment Market of the London Stock Exchange plc and/or any other recognized stock exchange or market or trading quotation system.

 

“Market Price” of a Common Share on any day means the average closing price of a Common Share for the twenty (20) consecutive trading days preceding such day on the stock exchange, market or trading quotation system on which the highest volume of the Common Shares are listed, admitted or posted for trading.

 

“Maximum Warrant Allocation” shall have the meaning set forth in Section 2(a) hereof.

 

“New Security” shall have the meaning set forth in Section 4(b) hereof.

 

“Registered Holder” means the Holder, or as applicable any successor or permitted assign of the Holder to whom this Warrant is transferred.

 

“Reorganization Event” means any capital reorganization or any reclassification of the capital stock of the Company.

 

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“Share Exchange Transaction” shall have the meaning set forth in Section 4(b) hereof.

 

“Sprint Purchases” means purchases of DragonWave Products and Services for deployment or use in the 4G or other networks of Sprint and/or the Holder and/or their respective Affiliates (or any one of them) (including, for avoidance of doubt any purchase by: (i)  Sprint, the Holder and/or any of their respective Affiliates for its own account, or (ii) any partner, agent, vendor, integrator, reseller, distributor, original equipment manufacturer or other person or entity purchasing, directly or indirectly, for or on behalf of, or in respect of any network of, Sprint, the Holder and/or their respective Affiliates).

 

“Substituted Security” shall have the meaning set forth in Section 4(b) hereof.

 

“Surviving Entity” means the continuing or surviving entity, or other successor of the business of the Company, after an Acquisition or Reorganization Event.

 

“Warrant Stock” means the Common Shares acquired or acquirable upon exercise of this Warrant.

 

2.                                      Shares to be Issued Upon Exercise.

 

(a)                                 The Registered Holder is hereby entitled, subject to Section 2(b) below, to purchase from the Company, at any time and from time to time, up to a maximum of one hundred twenty-six thousand two hundred fifty (126,250) Common Shares, subject to adjustment as provided in Section 4 below (the “Maximum Warrant Allocation”).

 

(b)                                 Notwithstanding any other term or provision of this Warrant, this Warrant shall only be exercisable for that portion of the Maximum Warrant Allocation that is vested as provided in this Section 2(b).  The Maximum Warrant Allocation shall vest:

 

(i)                                     as to twenty five percent (25%) of the Maximum Warrant Allocation, on receipt by the Company (or any subsidiary thereof) of orders for Sprint Purchases with a cumulative aggregate purchase price, measured from the date of this Warrant (and not, for greater certainty, including any Sprint Purchases prior to the date of this Warrant) of at least two hundred and fifty thousand United States dollars (USD$250,000); and

 

(ii)                                  as to the remainder of the Maximum Warrant Allocation, on the first to occur of: (A) receipt by the Company (or any subsidiary) of orders for Sprint Purchases, for delivery on or before February 28, 2008, with a cumulative aggregate purchase price measured from the date of this Warrant (including amounts referred to in Section 2(b)(i)) (but not, for greater certainty, including any Sprint Purchases prior to the date of this Warrant) of at least five million United States dollars (USD$5,000,000), and (B) receipt by the Company (or any subsidiary thereof) of orders for Sprint Purchases, for delivery on or before December 31, 2008, with a cumulative aggregate purchase price (including amounts referred to in Section 2(b)(i)) (but not, for greater certainty, including any Sprint Purchases prior to the date of this Warrant) of at least fifteen million United States dollars (USD$15,000,000).

 

3

 

Within 15 days of each vesting event provided in subsections 2(b)(i) and (ii) above, the Company will provide written notice to the Registered Holder confirming the vesting event and the aggregate number of shares of Warrant Stock that the Registered Holder is then entitled to purchase, taking into account any previous vesting events.  Notwithstanding the foregoing, the Registered Holder will be entitled to purchase the applicable number of shares of Warrant Stock upon the occurrence of an associated vesting event as provided above whether or not the Company actually delivers such notice.

 

3.                                      Exercise of Warrant.

 

(a)                                 This Warrant may be exercised as to any vested portion of the Maximum Warrant Allocation at any time during the Exercise Term by the Registered Holder in whole or in part, and from time to time, by surrendering this Warrant, with the purchase form appended hereto as Annex B duly executed by such Registered Holder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full of the Purchase Price payable in respect of the number of shares of Warrant Stock purchased upon such exercise. The Purchase Price may be paid by a check drawn on the bank account of the Registered Holder or the surrender of shares pursuant to the Net Issue Election provisions set forth in Section 3(d) hereof.

 

(b)                                 Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which this Warrant shall have been surrendered to the Company, together with the aggregate Purchase Price in respect of the portion of the Warrant so exercised, as provided in subsection 3(a) above.  At such time, the person(s) or entity(ies) in whose name or names any certificates for Warrant Stock shall be issuable upon such exercise as provided in Section 3(c) below shall be deemed to have become the holder or holders of record of the Warrant Stock represented by such certificates.

 

(c)                                  As soon as practicable after each exercise of this Warrant in whole or in part, and in any event within ten (10) days thereafter, the Company at its expense will cause to be issued in the name of, and delivered to, the Registered Holder, or, subject to the terms and conditions hereof, as the Registered Holder (upon payment by the Registered Holder of any applicable transfer taxes) may direct:

 

(i)                                     a certificate or certificates for the number of full shares of Warrant Stock to which such Registered Holder shall be entitled upon such exercise plus, in lieu of any fractional share to which such Registered Holder would otherwise be entitled, cash in an amount determined pursuant to Section 5 hereof; and

 

(ii)                                  in case such exercise is in part only, a new warrant or warrants (dated the date hereof) of like tenor, with a new Warrant Schedule attached thereto reflecting the number of shares of Warrant Stock equal (without giving effect to any adjustment therein) to the number of such shares reflected in the Warrant Schedule attached as Annex A to this Warrant on the date of such exercise minus the number of such shares purchased by the Registered Holder upon such exercise as provided in subsection 3(a) above.

 

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(d)                                 Upon any exercise of this Warrant, in whole or in part, the Registered Holder may elect to receive, without the payment by the Registered Holder of any additional consideration, the number of shares of Warrant Stock, calculated in accordance with the formula set forth below by the surrender of this Warrant to the Company, with the net issue election notice (attached hereto as Annex C) duly executed, at the office of the Company.  Thereupon, the Company shall issue to the Registered Holder such number of fully paid and nonassessable Common Shares as is computed using the following formula:

 

 

where

 

X =                             the number of shares of Warrant Stock to be issued to the Registered Holder pursuant to this Section 3(d).

 

Y =                             the number of shares of Warrant Stock covered by this Warrant in respect of which the net issue election is made pursuant to this Section 3(d).

 

A =                             the Market Price of one share of Warrant Stock at the time the net issue election is made pursuant to this Section 3(d).

 

B =                             the Purchase Price in effect under this Warrant at the time the net issue election is made pursuant to this Section 3(d).

 

The Company shall promptly respond in writing to an inquiry by the Registered Holder as to the Market Price of one share of Warrant Stock.

 

4.                                      Adjustments.

 

(a)                                 Adjustment of Purchase Price Amount Upon Stock Splits, Dividends, Distributions and Combinations.  In case the Company shall at any time subdivide its outstanding Common Shares into a greater number of shares or issue a stock dividend or make a distribution with respect to outstanding Common Shares payable in Common Shares or in securities convertible with no additional consideration into Common Shares, the Purchase Price for all shares of Warrant Stock issuable immediately prior to such subdivision or stock dividend or distribution shall be proportionately reduced and the number of shares of Warrant Stock proportionately increased; and conversely, in case the Common Shares shall be combined into a smaller number of shares, the Purchase Price for all shares of Warrant Stock issuable immediately prior to such combination shall be proportionately increased and the number of shares of Warrant Stock proportionately reduced.  The provisions of this Warrant applicable to the “Common Shares” and “Warrant Stock” shall apply mutatis mutandis to any Common Shares issued pursuant to this Section 4(a).

 

5

 

(b)                                 Reorganization Event or Acquisition.

 

(i)                                     In case of any Reorganization Event or Acquisition which is effected in a manner by which the holders of Common Shares shall be entitled (either directly or upon subsequent liquidation) to equity securities with respect to or in exchange for Common Shares (a “Share Exchange Transaction”), then this Warrant shall, after such Share Exchange Transaction, entitle the Registered Holder hereof to purchase the kind and number of shares or other equity securities of the Company or the Surviving Entity (in either case, a “Substituted Security”) to which the Registered Holder hereof would have been entitled if it had held the Warrant Stock issuable upon the exercise hereof immediately prior to such Share Exchange Transaction.  The Company shall not effect any such Share Exchange Transaction unless prior to the consummation thereof the Surviving Entity (if other than the Company) resulting therefrom or the corporation purchasing the assets of the Company shall, by written instrument executed and mailed to the Registered Holder hereof at the last address of such Registered Holder appearing on the books of the Company, (A) assume the obligation to deliver to such Registered Holder such Substituted Securities as, in accordance with the foregoing provisions, such Registered Holder may be entitled to purchase, and (B) agree to be bound by all the terms of this Warrant.

 

(ii)                                  In the case of any Acquisition in which the holders of Common Shares shall be entitled to cash, cash equivalents, nonequity securities or other property of the Company or the Surviving Entity (“Property”) with respect to or in exchange for Common Shares, then subject as hereinafter provided: (A) this Warrant shall, after such Acquisition, entitle the Registered Holder hereof to purchase the kind of issued and outstanding common stock or other equity security of the Company or the Surviving Entity (in either case, a “New Security”), as the case may be, which is most similar to the Common Shares, in an amount equal to the number of shares of the New Security equal to the value on the effective date of such Acquisition of the Property issued per Common Share multiplied by the number of Common Shares to which the Registered Holder hereof would have been entitled if it had held the Common Shares issuable upon the exercise hereof immediately prior to such Acquisition, divided by the Market Price on such effective date, and (B) the Company shall not effect any such Acquisition unless prior to the consummation thereof the Surviving Entity (if other than the Company) resulting therefrom shall, by written instrument executed and mailed to the Registered Holder hereof at the last address of such Registered Holder appearing on the books of the Company: (a) assume the obligation to deliver to such Registered Holder such New Securities as, in accordance with the foregoing provisions, such Registered Holder may be entitled to purchase and (b) agree to be bound by all the terms of this Warrant. Notwithstanding the foregoing, if the Surviving Entity in an Acquisition referred to in this sub-section 4(b)(ii) is unwilling to assume the obligations under and agree to be bound by all of the terms of this Warrant, then upon receiving the notice of the Acquisition referred to in Section 7, the Registered Holder shall have the option:  (x) to exercise the vested portion of this Warrant in full, pursuant to the cashless exercise provision in Section 3(d), subject to and conditional upon the closing of the Acquisition, or (y) to require the Company to purchase the warrant for a cash payment to the Registered Holder equal to quotient of A multiplied by B, where A is the number of vested shares of Warrant Stock then subject to issuance pursuant to this Warrant and B is equal to ten percent (10%) of the price of a single share of Warrant Stock payable by the purchaser pursuant to the Acquisition.  If the Registered Holder does not notify the Company in writing of its election pursuant to the foregoing sentence within five (5) days of 

 

6

 

receiving the notice of the Acquisition referred to in Section 7 of this Warrant, the Registered Holder shall be irrevocably deemed to have elected the option that would yield a greater dollar value to the Registered Holder.  On the closing of such Acquisition, subject to issuing the Warrant Stock to the Registered Holder as required pursuant to Section 3(d) or tendering the cash payment to the Registered Holder to purchase the Warrant as contemplated above, as applicable, all obligations of the Company to the holder of this Warrant shall terminate.

 

(iii)                               The provisions of this Warrant applicable to the “Common Shares” and “Warrant Stock” shall apply mutatis mutandis to any Substituted Security or New Security issuable pursuant to this Section 4(b).

 

(iv)                              Furthermore, in the case of Reorganization Event or Acquisition which entitles the Registered Holder to purchase Substituted Securities or New Securities under this Warrant, the Purchase Price for all Substituted Securities or New Securities issuable immediately prior to such Reorganization Event or Acquisition shall be adjusted to equal the price determined by dividing the Purchase Price for each such share of Warrant Stock issuable immediately prior to such Acquisition or Reorganization Event by the number of shares of Substituted Securities or New Securities the Registered Holder is entitled to receive in respect of each share of Warrant Stock otherwise issuable hereunder.

 

(c)                                  Computation of Adjustments.  Upon each computation of an adjustment in the Purchase Price for any share of Warrant Stock issuable hereunder, the Purchase Price for all such shares of Warrant Stock shall be computed to the nearest cent (i.e., fractions of .5 of a cent, or greater, shall be rounded to the highest cent) and the shares which may be purchased upon exercise of this Warrant shall be calculated to the nearest whole share (i.e., fractions of one half of a share, or greater, shall be treated as being a whole share).  No such adjustment shall be made, however, if the change in the Purchase Price for any such share of Warrant Stock would be less than $.01 per share, but any such lesser adjustment shall be made at the time and together with the next subsequent adjustment which, together with any adjustments carried forward, shall amount to $.01 per share or more.

 

(d)                                 Notice of Adjustment of Purchase Price, Number of Shares.  Upon any adjustment of the Purchase Price or number of shares of Warrant Stock purchasable hereunder, the Company shall promptly give written notice thereof to the Registered Holder, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.

 

5.                                      Fractional Shares.

 

The Company shall not be required to issue fractional shares upon the exercise of this Warrant.  If the Registered Holder would be entitled upon the exercise of any rights evidenced hereby to receive a fractional interest in a Common Share, the Company shall, upon such exercise, pay in lieu of such fractional interest an amount in cash equal to the value of such fractional interest, calculated based upon the Market Price as of the date this Warrant is exercised.

 

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6.                                      Lock-up.

 

The Registered Holder shall enter into a lock-up agreement, substantially in the form attached as Annex D, pursuant to which the Registered Holder shall not, for a period of no more than 180 days after the completion of the IPO offer, sell or otherwise dispose of this Warrant or the Warrant Stock issuable on the exercise hereof.

 

7.                                      Notices of Record Date, Etc.

 

In the event that:

 

(a)                                 the Company shall set a record date for the purpose of entitling or enabling the holders of its Common Shares (or other shares or securities at the time deliverable upon the exercise of this Warrant) to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive any other right, or

 

(b)                                 there is an Acquisition, or

 

(c)                                  there shall occur any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation, amalgamation or merger of the Company with or into another corporation, or any transfer of all or substantially all of the assets of the Company, other than pursuant to an Acquisition, or

 

(d)                                 there shall occur any voluntary or involuntary dissolution, liquidation or winding-up of the Company,

 

then, and in each such case, the Company will mail or cause to be mailed to the Registered Holder a notice specifying, as the case may be, (i) the record date for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, (ii) the effective date of Acquisition, (iii) the effective date of  such reorganization, reclassification, consolidation, amalgamation, merger or transfer or (iv) the date of such dissolution, liquidation or winding-up is to take place, and also specifying, if applicable, the date and time as of which the holders of record of Common Shares (or such other shares or securities at the time deliverable upon the exercise of this Warrant) shall be entitled to exchange their Common Shares (or such other stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, amalgamation, merger, transfer, dissolution, liquidation or winding-up.  Such notice shall be mailed at least ten (10) days prior to the record date or effective date for the event specified in such notice.

 

8.                                      Acquisition/Liquidation or Dissolution.

 

Notwithstanding Section 4(b), effective and conditional upon the completion of: (a) an Acquisition at any time on or after the five year anniversary of this Warrant or (b) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, to the extent not then exercised,

 

8

 

this Warrant shall terminate and be of no further force or effect;  provided, that, any exercise by the Registered Holder of this Warrant in connection with any such Acquisition or any voluntary or involuntary dissolution, liquidation or winding-up of the Company may be made subject to and conditional upon the completion of such event.

 

9.                                      Reservation of Stock.

 

The Company will at all times reserve and keep available, solely for issuance and delivery upon the exercise of this Warrant, such shares of Warrant Stock and other stock, securities and property, as from time to time shall be issuable upon the exercise of this Warrant.

 

10.                               Replacement of Warrants.

 

Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and (in the case of loss, theft or destruction) upon delivery of an indemnity agreement (with surety if reasonably required) in an amount reasonably satisfactory to the Company, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will issue, in lieu thereof, a new Warrant of like tenor.

 

11.                               Transfers and Legends

 

(a)                                 The Company will maintain a register containing the name and address of the Registered Holder of this Warrant.  The Registered Holder may change its, his or her address as shown on the warrant register by written notice to the Company requesting such change.

 

(b)                                 This Warrant shall not be transferable by the Registered Holder and shall be exercisable only by the Registered Holder; provided that this Warrant may be transferred to, and may be exercised by, any company that directly, or indirectly through one or more intermediaries, is controlled by, or is under common control with, the Registered Holder;  provided, that, on the request of the Company, any such transferee or other company that is exercising this Warrant shall execute an instrument of accession, in a form reasonably satisfactory the Company, agreeing to be bound by the obligations and restrictions applicable to the Registered Holder set forth in this Warrant.

 

(c)                                  Until any transfer of this Warrant is made in the warrant register, the Company may treat the Registered Holder of this Warrant as the absolute owner hereof for all purposes; provided, however, that if and when this Warrant is properly assigned in blank, the Company may (but shall not be obligated to) treat the bearer hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

 

(d)                                 The Warrant Stock issuable on the exercise of this Warrant shall be imprinted with legends in substantially the following form:

 

(i)                                     UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES REPRESENTED BY THIS

 

9

 

CERTIFICATE MUST NOT TRADE SUCH SECURITIES BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER THE LATER OF (1) MAY 30, 2007 AND (2) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY OF CANADA.

 

(ii)                                  THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR U.S. STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF DRAGONWAVE INC. THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO DRAGONWAVE INC., OR (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S (“REGULATION S”) UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, OR (C) (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, OR (D) UNDER AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, OR (E) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (E) ABOVE, UPON THE PROVISION OF A LEGAL OPINION OF SELLER’S U.S. COUNSEL OF RECOGNIZED STANDING REASONABLY SATISFACTORY TO DRAGONWAVE INC., THAT THE SALE OF SUCH SECURITIES IS NOT REQUIRED TO BE REGISTERED UNDER THE U.S. SECURITIES ACT.

 

(e)                                  If this Warrant is exercised at any time when the Warrant Stock is listed on the Toronto Stock Exchange, in addition to the legends set forth in Section 11(d), the Warrant Stock shall be imprinted with a legend in substantially the following form:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON THE TSX.  IF DRAGONWAVE INC. IS A “FOREIGN ISSUER” WITHIN THE MEANING OF REGULATION S AT THE TIME OF TRANSFER, A NEW CERTIFICATE, BEARING NO LEGEND, MAY BE OBTAINED FROM

 

10

 

COMPUTERSHARE INVESTOR SERVICES INC., AS REGISTRAR AND TRANSFER AGENT FOR THESE SECURITIES, OR SUCH OTHER ORGANIZATION OR ENTITY PERFORMING SUCH FUNCTION FOR DRAGONWAVE INC. (THE “TRANSFER AGENT”) UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE TRANSFER AGENT AND DRAGONWAVE INC., AND, IF SO REQUIRED BY THE TRANSFER AGENT, AN OPINION OF COUNSEL TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S.

 

13.          Mailing of Notices, Etc.

 

All notices and other communications in connection with the Warrant shall be mailed by first-class certified or registered mail, postage prepaid, to the address listed below for each party or to such other address as such party shall provide to the other party hereto pursuant to written notice.

 

If to the Registered Holder, addressed to:

 

Sprint/United Management Company

c/o Sprint Nextel Corporation

2001 Edmund Halley Drive

Reston, Virginia 20191

Attn: Vice President & Assistant Treasurer — Capital Markets

(Re: Warrants)

Fax: (703) 433-4414

 

With a copy to:

 

Sprint Nextel Corporation

Legal Department

2001 Edmund Halley Drive

Reston, Virginia 20191

Attn: General Counsel (Re: Warrants)

Fax: (703) 433-4846

 

If to the Company, addressed to:

 

DragonWave Inc.

411 Legget Drive

Suite 600

Kanata, ON  K2K 3C9

Attn:  CFO

Fax:  (613) 599-4265

 

11

 

14.          No Rights as Stockholder.

 

Until the exercise of this Warrant, the Registered Holder of this Warrant shall not have or exercise any rights by virtue hereof as a stockholder of the Company.

 

15.          Change or Waiver.

 

Any term of this Warrant may be changed or waived only by an instrument in writing signed by the party against which enforcement of the change or waiver is sought.

 

16.          Headings.

 

The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

 

17.          Governing Law.

 

This Warrant shall be governed by and construed in accordance with the laws of the Province of Ontario, without giving effect to the conflict of laws principles of such jurisdiction.

 

18.          Capitalization Representation.

 

As of the date hereof, the authorized capital stock of the Company consists of an unlimited number of Common Shares, of which 24,644,473 Common Shares are issued and outstanding. All shares, when issued, will be duly authorized and validly issued, fully paid and nonassessable, and issued in compliance with all applicable laws concerning the issuance of securities.  Except for Common Shares reserved for issuance under the Company’s Fourth Amended and Restated Stock Option/Stock Issuance Plan, as the same may be amended from time to time, and for other options and warrants to purchase securities disclosed in the Company’s documents publicly filed with Canadian securities regulators, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or obligating the Company to issue or sell any share of capital stock of, or other equity interest in, the Company.

 

19.          Information Covenant.

 

No later than thirty (30) days after the end of each calendar quarter during the Exercise Term, the Company will provide the Registered Holder with summary capitalization tables.  In addition to the foregoing, in the event the Company consummates an equity financing during the Exercise Term pursuant to which it sells any security for the principal purpose of raising capital, the Company agrees to provide the Registered Holder with the applicable valuation information relevant to such financing, provided that such information, to the extent not a matter of public knowledge, shall be held by the Registered Holder in confidence and shall not be disclosed by the Registered Holder to any third party (other than Sprint and/or its Affiliates).

 

12

 

	
 
    	
DRAGONWAVE INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Russell Frederick
    
	
Dated: May 30,   2007
    	
Name:
    	
Russell Frederick
    
	
 
    	
Title:
    	
Chief Financial Officer
    

 

Signature page of Sprint Warrant

 

13

 

ANNEX A

 

WARRANT SCHEDULE

 

	
 
    	
 
    	
Number of Shares
    	
 
    	
 
    
	
 
    	
 
    	
of Warrant Stock
    	
 
    	
 
    
	
 
    	
 
    	
Issuable Pursuant
    	
 
    	
 
    
	
Date
    	
 
    	
to Warrant
    	
 
    	
Purchase Price
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    

 

 

ANNEX B

 

PURCHASE FORM

 

	
To:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    

 

The undersigned pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects to purchase             Common Shares covered by such Warrant and herewith makes payment of $       , representing the full purchase price for such shares at the price per share provided for in such Warrant.

 

The undersigned understands and acknowledges the terms and restrictions on the right to transfer or dispose of the Common Shares set forth in Section 6 of the attached Warrant, which the undersigned has carefully reviewed.  The undersigned consents to the placing of a legend on its certificate for the Common Shares referring to such restrictions and the placing of stop transfer orders until the Common Shares may be transferred in accordance with the terms of such restrictions.

 

	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
 
    
	
 
    	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Dated:
    	
 
    

 

 

ANNEX C

 

NET ISSUE ELECTION NOTICE

 

	
To:
    	
 
    	
 
    	
Date:
    	
 
    

 

The undersigned hereby elects under Section 3(e) to surrender the right to purchase         Common Shares pursuant to this Warrant.  The certificate(s) for the shares issuable upon such net issue election shall be issued in the name of the undersigned or as otherwise indicated below.

 

	
 
    	
[INSERT NAME OF   REGISTERED HOLDER]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name for Registration:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Mailing Address:
    

 

 

ANNEX D

 

FORM OF LOCK-UP AGREEMENT

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