Document:

Exhibit
10.2

FORM
OF ACCRUED
SALARY EXCHANGE
AGREEMENT

 

THIS
EXCHANGE AGREEMENT
(this “Exchange
Agreement”), is dated
as of May
21, 2015, by
and between Attitude
Drinks Incorporated, a
Delaware corporation
(the “Company”),
and the subscribers identified
on Schedule 1
hereto (the “Subscribers”).

 

WHEREAS,
the Company
and the Subscribers
are executing
and delivering this
Agreement in reliance upon
an exemption
from securities registration
afforded by the
provisions of Section
4(a)(2), Section 4(6) and/or
Regulation D (“Regulation
D”) as
promulgated
by the United
States Securities and
Exchange Commission
(the “Commission”)
under the Securities
Act of 1933,
as amended (the
“1933 Act”);

 

WHEREAS,
the Subscribers are
owed an aggregate
of [       ]
for accrued and
unpaid salary (the “Accrued
Salary”) set
forth on Schedule
1 annexed hereto;

 

WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained herein, the amount owed as Accrued Salary shall
be exchanged (the “Exchange”)for in the aggregate, up to [       ] shares of the Company’s Series C Variable Rate
Convertible Preferred Stock (“Preferred Stock”) issued hereunder having the rights, preferences and privileges
set forth in the Certificate of Designation, in the form of Exhibit A hereto, convertible into shares of the Company’s
Common Stock, $0.00001 par value (the “Common Stock”), warrants to purchase the Company’s Common Stock
in the form annexed hereto as Exhibit B (the “Warrants”), and Additional Investment Rights (“AIRs”)
in the form annexed hereto as Exhibit C granting the Subscriber the right to purchase (y) additional shares of Preferred
Stock , and (z) a corresponding amount of Warrants, with payment therefore (“Purchase Price”) will be made
by Subscribers of amounts owed to Subscribers for unpaid salary (:Accrued Salary”) as set forth on the signature page hereto
and all accrued rights thereon (the “Exchange”).. The Preferred Stock, Warrants, AIRs and shares of Common Stock issuable
upon conversion of the Preferred Stock and exercise of the Warrants (the “Conversion Shares”) are collectively
referred to herein as the “Securities”; and

 

NOW,
THEREFORE,
in consideration of
the mutual
covenants and
other agreements
contained in this Agreement
the Company
and the
Subscribers hereby agree
as follows:

 

1.1              
Exchange. On the
Closing Date
the Subscribers will
exchange the Accrued
Salary identified on Schedule
1 for
the Preferred Stock,
Warrants, AIRs
in the amounts
set forth on
Schedule 1.

 

1.2              
Closing. The
“Closing Date”
shall be the
date that the
Preferred Stock, Warrants, AIRs
are delivered
to the Subscribers.
Subject to the
satisfaction or waiver
of the terms
and conditions
of this Exchange Agreement,
on the Closing
Date, Subscribers
shall purchase and
the Company
shall sell to Subscribers
the Preferred Stock, Warrants,
AIRs.

 

2.                 Subscribers
Representations and
Warranties. Each Subscriber
for itself only,
hereby represents to and
agrees with
the Company
that:

 

    (a)                
Organization  and  Standing 
of  the  Subscriber.Subscriber
is duly incorporated or
organized, validly
existing and
in good
standing under
the laws
of the jurisdiction
of its incorporation
or organization.

 

    (b)                 Authorization and Power. Subscriber has the requisite power and authority
to enter into and perform this Exchange Agreement and to purchase the Securities. The execution, delivery
and performance of this Exchange Agreement by Subscriber and the consummation
by Subscriber of the
transactions contemplated hereby and
thereby have been duly authorized by
all necessary corporate action, and no further
consent or authorization of Subscriber or its
Board of Directors or stockholders, if applicable, is required.
This Exchange Agreement has been or will be
duly authorized and executed and when
delivered by Subscriber will constitute valid and binding obligations of
Subscriber, enforceable against Subscriber in accordance with the terms thereof.

 

    1 

     

    

 

   (c)                
No Conflicts. The
execution, delivery
and performance of
this Exchange Agreement and
the consummation
by Subscriber of
the transactions
contemplated
hereby and thereby
or relating hereto do
not and will not (i)
result in a violation
of Subscriber’s charter
documents, bylaws
or other organizational documents,
if applicable, (ii)
conflict with nor
constitute a default
(or an event
which with notice or
lapse of
time or
both would
become
a default) under
any agreement
to which
Subscriber is a
party, nor (iii)
result in a
violation of any
law, rule, or
regulation, or
any order, judgment
or decree of
any court or governmental
agency applicable to Subscriber or its
properties (except for such conflicts, defaults and violations as would not, individually
or in the aggregate, have a material
adverse effect on Subscriber). Subscriber is
not required to
obtain any consent,
authorization or order
of, or make
any filing or
registration with, any court
or governmental agency in order for it
to execute, deliver or perform any of its obligations under this Exchange
Agreement nor to purchase
the Securities in accordance with
the terms hereof,
provided that for purposes of the representation
made in this sentence, Subscriber is assuming
and relying upon the accuracy of the relevant
representations and agreements of the Company
herein.

 

   (d)                 
Information on
Subscriber. Subscriber is,
and will be
at the time
of the conversion of
the Preferred Stock,
or exercise
of the Warrant
or AIRs an
“accredited investor”,
as such
term is
defined in Regulation
D promulgated
by the Commission
under the 1933
Act, is experienced
in investments
and business matters,
has made investments
of a speculative nature
and has purchased securities of United States publicly-owned
companies in private placements
in the past and, with its representatives, has such knowledge and experience in financial,
tax and other business matters as to enable
Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed
investment decision
with respect to the proposed purchase,
which
represents a speculative investment.
Subscriber has the
authority and is
duly and
legally qualified to
purchase and
own the Securities. Subscriber
is able to bear the risk of such
investment
for an indefinite period and to afford a complete
loss thereof. The Subscriber agrees to provide the Company with such information
reasonably required from time to time
for the Company
to comply
with the Company’s
regulatory filing
requirements.

 

    (g)                
Purchase  of  Preferred 
Stock,  Warrants, 
AIRs.On the Closing
Date, Subscriber will purchase the Preferred
Stock, Warrants, AIRs as principal
for its own account for investment only
and not with
a view toward,
or for resale
in connection
with, the
public sale or
any distribution thereof.

 

    (h)               
Compliance
with Securities Act.
Subscriber understands and agrees
that the Securities
have not been
registered
under the 1933
Act or any
applicable state
securities laws,
by reason of their
issuance in a
transaction that does
not require registration
under the 1933
Act (based in
part on the accuracy
of the representations
and warranties of
the Subscriber contained
herein), and
that such Securities must
be held indefinitely
unless a subsequent
disposition
is registered under
the 1933 Act
or any applicable
state securities laws
or is exempt
from such
registration. Subject to compliance
with applicable securities
laws, the Subscriber may
enter into lawful hedging transactions
in the course
of hedging the
position they assume
and the Subscriber
may also
enter into
lawful short positions or
other derivative transactions relating
to the Securities, or interests
in the Securities, and deliver
the Securities, or interests
in the Securities,
to close out their short or other positions or otherwise settle other transactions, or loan or pledge the Securities, or
interests in the
Securities, to third
parties who in
turn may
dispose of these
Securities. The immediately
preceding sentence does not affect, mitigate
or impair any
of the Subscriber’s
representations, warranties and agreements of this Section 2.

 

    (i)
                 Legend. The
Securities shall bear the following or similar legend:

 

    2 

     

    

 

 

"THE
ISSUANCE
AND SALE
OF THE SECURITIES
REPRESENTED BY
THIS CERTIFICATE HAS
NOT BEEN REGISTERED
UNDER
THE SECURITIES
ACT OF
1933, AS
AMENDED,
NOR APPLICABLE
STATE
SECURITIES
LAWS. THE
SECURITIES
MAY NOT
BE OFFERED
FOR SALE,
SOLD, TRANSFERRED
OR ASSIGNED
(I) IN THE
ABSENCE
OF (A) AN EFFECTIVE
REGISTRATION
STATEMENT
FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B)
AN OPINION
OF COUNSEL
(WHICH COUNSEL
SHALL BE
SELECTED BY
THE HOLDER),
IN A GENERALLY
ACCEPTABLE
FORM, THAT REGISTRATION
IS NOT REQUIRED
UNDER SAID
ACT OR (II)
UNLESS
SOLD PURSUANT
TO RULE 144 OR
RULE 144A UNDER SAID
ACT. NOTWITHSTANDING
THE FOREGOING,
THE SECURITIES MAY BE
PLEDGED
IN CONNECTION
WITH A BONA
FIDE
MARGIN ACCOUNT
OR OTHER
LOAN OR
FINANCING
ARRANGEMENT
SECURED BY THE SECURITIES."

 

    (j)                 
Communication
of Offer.The offer
to sell the
Securities was
directly communicated
to Subscriber by the Company.
At no time was Subscriber
presented with or solicited by
any leaflet,
newspaper or magazine
article, radio
or television advertisement,
or any other
form of general advertising
or solicited or
invited to
attend a promotional
meeting otherwise than
in connection and concurrently
with such communicated
offer.

 

    (k)                
Restricted Securities.Subscriber
understands that
the Securities
have not been registered
under the 1933
Act and Subscriber
will not sell,
offer to sell,
assign, pledge, hypothecate
or otherwise transfer any
of the
Securities unless pursuant
to an effective
registration statement
under the 1933 Act,
or unless
an exemption
from registration
is available.
Notwithstanding anything
to the
contrary contained in
this Exchange Agreement, Subscriber may
transfer (without restriction
and without the need
for an opinion of counsel)
the Securities to its
Affiliates (as defined below) provided
that each such Affiliate is an “accredited
investor” under Regulation D and such Affiliate agrees to be bound by
the terms and conditions of this Exchange
Agreement. For the
purposes of this Exchange Agreement, an “Affiliate”
of any person or entity
means any
other person or
entity directly
or indirectly controlling,
controlled
by or
under direct or indirect common
control with such person or entity. Affiliate includes
each Subsidiary of the Company.
For purposes of this definition, “control”
means the power to direct
the management
and policies of such person or firm,
directly or indirectly,
whether through the ownership of voting
securities, by contract or otherwise.

 

    (l)                 
No Governmental
Review. Subscriber understands
that no United
States federal or state
agency or any
other governmental
or state agency
has passed
on or made
recommendations or endorsement
of the Securities
or the suitability
of the investment
in the Securities
nor have such
authorities passed upon or
endorsed the
merits of the
offering of the
Securities.

 

    (m)              
Correctness of Representations.
Subscriber represents that
the foregoing representations
and warranties are
true and correct
as of the
date hereof
and, unless Subscriber
otherwise notifies the
Company prior
to the Closing
Date, shall be
true and correct
as of the
Closing Date.

 

    (n)                  
Pledge –Liens.
Subscriber represents that
the Accrued Salary
is owed to Subscriber
and Subscriber has
not pledged the
Accrued
Salary and the
Accrued Salary is
not the subject
of any levy,
garnishment or liens.

 

    3 

     

    

 

3.                  Company
Representations and
Warranties.  The Company
represents to and 
agrees with each
Subscriber that:

 

     (a)                Due  Incorporation.The Company
is a
corporation duly
incorporated, validly
existing and
in good
standing under
the laws of
the jurisdiction
of its
incorporation and
has the requisite
corporate power to
own its properties
and to carry
on its business
as presently conducted.
The Company
is duly qualified
as a foreign corporation to
do business and is in good standing
in each jurisdiction where the
nature of the business
conducted or property
owned by it makes such
qualification necessary, other
than those jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For
purposes of this Exchange Agreement,
a “Material Adverse Effect”
shall mean a material
adverse effect on the financial
condition, results of operations, prospects, properties or business of the Company
and its Subsidiaries taken as a whole.
For purposes of this Exchange Agreement,
“Subsidiary” means,
with respect to any entity at
any date, any direct or indirect corporation, limited
or general partnership, limited
liability company,
trust, estate, association,
joint venture
or other business
entity of which
(A) more
than 30% of

(i)
the outstanding capital
stock having ordinary
voting power
to elect a
majority of
the board of
directors or other managing
body of such
entity, (ii)
in the case
of a partnership
or limited
liability company,
the interest in the
capital or profits
of such partnership
or limited
liability company or
(iii) in the
case of a
trust, estate, association, joint
venture or other
entity, the beneficial
interest in such
trust, estate, association
or other entity business
is, at the
time
of determination,
owned or controlled
directly or indirectly through
one or more intermediaries,
by such
entity, or
(B) is under the
actual control of the
Company.

 

    (b)                Authority; Enforceability.
This Exchange
Agreement, the
Preferred Stock, Warrants, AIRs
and any other
agreements delivered
or required
to be delivered
together with or
pursuant to this
Exchange Agreement
or in connection
herewith (collectively “Transaction
Documents”)
have been duly authorized,
executed and delivered by the Company
and Subsidiaries, as the case may
be, and are valid
and binding agreements of the Company
and Subsidiaries, as the case may be, enforceable
in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,
moratorium and similar
laws
of general applicability
relating to or affecting creditors'
rights generally and
to general principles of equity.
The Company
and Subsidiaries, as the case may
be, have full corporate power and authority necessary
to enter into and deliver the
Transaction Documents
and to perform their obligations
thereunder.

 

    (c)                Consents.No
consent, approval, authorization
or order of
any court, governmental
agency or body or arbitrator
having jurisdiction
over the Company,
or any of
its Affiliates,
the OTC Bulletin Board
(the “Bulletin Board”)
or the Company's
shareholders is required
for the execution
by the Company
of the Transaction
Documents and compliance
and performance by
the Company
of its obligations
under the Transaction Documents,
including, without limitation,
the issuance and sale of the Securities. The Transaction
Documents and the Company’s performance of its obligations
thereunder have been unanimously
approved by
the Company’s
Board of
Directors. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with,
any governmental
authority in the world, including without
limitation, the United States, or elsewhere
is required by the Company or any
Affiliate of the Company
in connection with the consummation
of the transactions contemplated
by this Exchange Agreement, except as would
not otherwise have
a Material Adverse Effect or the
consummation of any of the other agreements, covenants or commitments
of the Company
or any Subsidiary contemplated
by the other Transaction Documents.
Any such qualifications and filings will, in the case of qualifications, be effective
on the Closing and will, in the case of filings,
be made within the time prescribed by
law.

 

   (d)
                The Securities. The Securities
upon issuance:

 

    4 

     

    

 

           (i)                 are,
or will be,
free and clear
of any security
interests, liens, claims
or other encumbrances,
subject only
to restrictions upon
transfer under the 1933 Act and any applicable state securities
laws;

 

          (ii)               
have been, or
will be, duly
and validly
authorized and on
the dates of issuance
of the
Preferred Stock,
Warrants, AIRs the
issuance of the
Conversion Shares upon
conversion of the
Preferred Stock or
exercise of the
Warrants, the Preferred
Stock, Warrants, AIRs
and Conversion Shares
will be duly
and validly
issued, fully
paid and non-assessable
and if registered
pursuant to the
1933 Act and resold
pursuant to an
effective registration statement
or an exemption
from registration, will
be free trading, unrestricted
and unlegended;

 

           (iii)             
will not have
been issued or
sold in violation
of any preemptive
or other similar
rights of the
holders of any
securities of the
Company or
rights to acquire
securities or debt
of the Company;

 

           (iv)
             will not subject the holders thereof to
personal liability by reason of being such holders;
and

           (v)               
assuming
the representations
and warranties of
the Subscribers as set
forth in Section
2 hereof
are true and
correct, will not
result in a
violation of Section
5 under the
1933 Act.

 

      (e)                
No Integrated Offering.
Neither the Company,
nor any
of its Affiliates,
nor any person acting
on its or
their behalf, has
directly or indirectly
made any
offers or
sales
of any
security of
the Company
nor solicited any
offers to buy
any security
of the Company
under circumstances
that would cause the
offer of the
Securities pursuant to
this Exchange Agreement
to be integrated with
prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder
approval provisions, including, without
limitation, under the rules and regulations
of the Bulletin Board. No prior offering will impair
the exemptions relied upon in the Exchange
or the Company’s
ability to timely
comply with
its obligations hereunder. Neither the
Company nor any of its Affiliates
will take any action or suffer any inaction or conduct any
offering other than
the transactions contemplated
hereby
that may
be integrated with
the offer or
issuance of the Securities or
that would impair
the exemptions relied upon in
the Exchange or the Company’s
ability to timely comply
with its obligations
hereunder.

 

     (f)                 
No General Solicitation. Neither
the Company,
nor any of
its Affiliates, nor to its
knowledge, any
person acting on
its or their
behalf, has engaged
in any
form of
general solicitation or general
advertising (within the
meaning of Regulation D
under the 1933
Act) in connection
with the offer
or sale of the
Securities.

 

    
(g)                 Dilution. The Company's executive officers and directors understand the
nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a
potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive
equity of the Company. The board of directors of the Company has concluded, in its good faith business
judgment that the issuance
of the Securities is in the best interests
of the Company.
The Company
specifically acknowledges that its obligation to issue the Preferred
Stock and Warrants upon the exercise of
the AIRS and the issuance of the Conversion Shares upon conversion of
the Preferred Stock and exercise of
the Warrants is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other stockholders of the Company or
parties entitled to receive
equity of the Company.

     (h)                
Investment Company. Neither the Company nor any Affiliate of the Company is an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.

 

    5 

     

    

 

     (i)                 
Reporting Company/Shell
Company.
The Company
is subject to
reporting obligations pursuant
to Section 15(d)
of the Securities
Exchange Act of
1934, as
amended (the “1934
Act”). Pursuant
to the
provisions of the
1934 Act, except
as set forth
on Schedule 3(i)
the Company
has timely
filed all reports and
other materials
required to be filed
thereunder with the
Commission during
the preceding twelve months.
The Company is not a “shell
company” or “former shell company”as
those terms are employed
in Rule 144 under
the 1933 Act.

 

    (j)                 
Company
Predecessor and Subsidiaries.
The Company
makes
each of the representations
contained in Sections
3(a), (b), (c),
(h) (k) and
(l) of this
Exchange Agreement,
as same relate
or could be
applicable to each
Subsidiary. All
representations made
by or relating
to the Company
of a historical or
prospective nature and all undertakings and
obligations to act or refrain from certain
actions described herein
shall relate, apply and
refer to the
Company and
Subsidiaries and their
predecessors and successors.

 

    (k)                
Correctness of Representations.
The Company
represents that the
foregoing representations
and warranties are
true and correct
as of the
date hereof in
all material
respects, and,
unless the Company
otherwise notifies the
Subscribers prior
to the Closing
Date, shall be
true and correct
in all material
respects as
of the Closing
Date;
provided, that, if
such representation or
warranty is made
as of a different
date, in which case
such representation or
warranty
shall be true
as of such
date.

 

     (l)                
Survival. The foregoing representations and warranties shall survive the Closing Date.

 

4.                
Regulation D Offering/Legal
Opinion. The
offer and issuance
of the Securities
to the Subscribers is
being made pursuant
to the exemption
from the registration
provisions of the
1933 Act afforded by
Section 4(a)(2) or
Section 4(6) of
the 1933
Act and/or
Rule 506 of
Regulation D promulgated
thereunder. On the
closing date,
the Company
will provide an
opinion reasonably acceptable
to the Subscribers from the
Company’s legal counsel
opining on the
availability of
an exemption
from registration
under the 1933 Act as it relates to the offer and issuance of the Securities and other matters
reasonably requested by Subscribers. A
form of
the legal
opinion is
annexed herto as
Exhibit D. The
Company
will provide, at the Company’s
expense, to the Subscribers, such other legal opinions, if any,
as are reasonably necessary in Subscribers’ opinion for the issuance and resale
of the Preferred Stock and Conversion Shares pursuant to an effective registration
statement, Rule 144 under the 1933 Act or an exemption
from registration.

 

5.1.              
Conversion of
Preferred Stock
and Exercise
of the Warrants.

 

     (a)                 Upon the conversion
of a Preferred Stock, exercise of the Warrants or any
part thereof, the Company
shall, at its own cost and expense, take all necessary action, including obtaining
and delivering an opinion of counsel to
assure that the Company's
transfer agent shall issue stock certificates
in the name of a Subscriber
(or its permitted
nominee) or such
other persons as designated by
Subscriber and in such denominations to be specified at conversion representing the number
of shares of Common
Stock issuable upon such conversion. The Company
warrants that no instructions other than these instructions
have been or will be given to the
transfer agent of the
Company's Common Stock and that the
certificates representing such shares shall contain no legend
other than the legend set forth
in Section 2(i) If and when a
Subscriber sells the Conversion Shares, assuming
(i) a registration statement including
such Conversion Shares for registration has been filed
with the Commission, is effective and
the prospectus, as supplemented
or amended, contained therein is current and (ii) Subscriber
or its agent confirms in writing to the transfer
agent that Subscriber has complied
with the prospectus delivery requirements,
the Company will reissue the Conversion Shares without restrictive legend and
the Conversion Shares will be free-trading, and freely transferable. In the event
that the Conversion Shares are sold in a manner
that complies with
an exemption from registration, the Company will
promptly instruct its counsel to
issue to the transfer agent an opinion permitting
removal of the legend indefinitely
if such sale is
intended to be made in conformity
with Rule 144(b)(1)(i) of the 1933 Act, provided that Subscriber delivers
reasonably requested representations in support of such opinion.

    6 

     

    

 

    (b)                
Each Subscriber will
give notice of
its decision
to exercise its
right to convert its
Preferred Stock, dividends,
or part thereof
by emailing,
telecopying or
otherwise
delivering a completed
Notice of Conversion
(a form
of which is
annexed as Exhibit
A to the
Preferred Stock) to
the Company
via confirmed
telecopier transmission
or otherwise
pursuant to this
Exchange Agreement. Subscribers
will not be
required to surrender
the certificate
representing the Preferred
Stock until the Preferred Stock
has been fully
converted. Each date on which
a Notice of Conversion
is faxed or emailed to the Company
in accordance with the provisions hereof by 6 PM Eastern Time
(“ET”) (or if
received by the Company after 6
PM ET, then the next business day)
shall be deemed a “Conversion
Date.” The Company
will itself or cause the Company’s
transfer agent to transmit the Company’s
Common Stock certificates representing
the Conversion Shares issuable upon conversion of the Preferred
Stock to Subscribers via express courier for receipt by Subscribers within three (3)
business days after the Conversion Date (such fifth
day being the “Delivery
Date”). In the event the Conversion
Shares are electronically transferable,
then delivery of the Shares must
be made by electronic transfer
provided request for such electronic transfer has been made
by the Subscribers. A certificate
representing
the balance of the
Preferred
Stock not so converted will
be provided
by the Company
to a Subscriber if
requested by a Subscriber,
provided such Subscriber delivers
the original certificate to the Company.

 

    (c)                
The Company
understands that
a delay in
the delivery
of the Conversion Shares
in the form
required pursuant to
Section 5.1
hereof later
than the
Delivery Date could
result in economic
loss to the
Subscribers. As
compensation to Subscribers
for such loss,
the Company
agrees to pay (as
liquidated damages and
not as a
penalty)
to each applicable
Subscriber for late
issuance of Conversion Shares in
the form required pursuant to Section 5.1 hereof upon
Conversion of the Preferred Stock or exercise
of the Warrants, the amount
of $100 per business day after
the Delivery Date for each $10,000 of Preferred
Stock
stated value and dividends
(and proportionately
for other amounts) being
converted of the corresponding Conversion
Shares which are not timely delivered.
The Company shall pay
any payments
incurred under this Section upon demand.
Furthermore, in addition
to any other remedies
which may be available to
the Subscribers, in the
event that
the Company fails for
any reason to
effect delivery of the
Conversion Shares
on or before
the Delivery Date, the
Subscriber will be
entitled to revoke
all or part of
the relevant Notice of Conversion by
delivery of a notice to such effect to
the Company whereupon the
Company and Subscriber shall each be restored
to their respective positions immediately prior to the delivery of such notice, except
that the damages payable
in connection with the Company’s
default shall be payable
through the date notice of revocation or rescission is given to the Company.

 

5.2.             Maximum  Conversion.A Subscriber shall
not be entitled to convert on a
Conversion Date that amount of the
Preferred Stock nor may the Company
make any payment
including stated value, dividends, or liquidated or other damages by delivery of Conversion Shares in connection with
that number of Conversion Shares which would be in excess of the sum
of (i) the number
of shares of Common
Stock beneficially owned by Subscriber and its Affiliates on a Conversion
Date or payment
date, and (ii) the number
of Conversion Shares issuable upon
the conversion
of the Preferred Stock with
respect to which the determination
of this provision is being made on
a calculation date, which would result in beneficial ownership
by Subscriber and its Affiliates of more than 4.99% of the outstanding shares
of Common Stock of the Company
on such Conversion Date. For the
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended,
and Rule 13d-3 thereunder. Subject
to the foregoing, the
Subscribers shall not be limited
to aggregate conversions of only 4.99%
and aggregate conversions by the
Subscribers may exceed 4.99%. A Subscriber may increase it ownership
limitation to 9.99% upon 61 days
notice to the Company.
The Subscribers shall have the authority to determine
whether the restriction contained in this Section 5.2 will limit any conversion
of a Preferred Stock and the extent such limitation applies and to which
convertible or exercisable instrument or part thereof such limitation
applies.

 

    7 

     

    

 

5.3.            
Injunction  Posting 
of  Bond.In
the event a
Subscriber shall elect
to convert Preferred Stock,
exercise the
Warrant or any
part thereof,
the Company
may
not refuse conversion
based on any claim
that such Subscriber
or anyone
associated or affiliated with
such Subscriber has not
complied with Subscriber’s
obligations under the
Transaction Documents,
or for any
other reason,
unless, a final
non- appealable injunction
from a court
made
on notice to
Subscriber, restraining and
or enjoining
conversion of all
or part of
such Preferred Stock
shall have been
sought and obtained
by the
Company
and the Company
has posted a
surety bond for
the benefit of
Subscriber equal to
the greater of
(i) 125% of the
outstanding stated value and accrued but unpaid dividends
of the Preferred Stock,
and the aggregate purchase price of
the Conversion Shares which
are sought to
be subject to
the injunction,
or (ii) the
closing price of
the Common
Stock on the trading day before the issue date of the injunction multiplied
by the number of Conversion Shares issuable
upon conversion of the Preferred Stock,
which bond shall remain in effect until
the completion
of arbitration/litigation of the
dispute and the
proceeds of which
shall be payable
to Subscriber to the extent the judgment
or decision is in Subscriber’s favor.

 

5.4.             Buy-In. In addition to any other rights available to Subscribers, if the Company fails
to deliver to a Subscriber Conversion Shares by the Delivery Date and if after the Delivery Date Subscriber
or a broker on Subscriber’s behalf purchases
(in an open market
transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by Subscriber of the Common Stock which Subscriber was entitled
to receive upon such conversion (a “Buy-In”),
then the Company
shall pay to Subscriber (in addition to any
remedies available to or elected by
the Subscribers) the amount by which
(A) Subscriber’s total purchase price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (B)
the aggregate stated value and/or dividend
amount of the Preferred Stock for which such conversion request
was not timely
honored together with interest thereon at a rate of 15% per annum,
accruing until such amount
and any accrued interest thereon is
paid in full (which
amount shall be
paid as liquidated damages and
not as a penalty). For example, if
a Subscriber purchases shares of Common
Stock having a total purchase price
of $11,000 to cover
a Buy-In with respect to an attempted conversion of $10,000
of Preferred Stock stated value
and/or dividends, the Company
shall be required to pay Subscriber
$1,000 plus interest. Subscriber shall provide the Company written
notice and evidence indicating
the amounts payable
to Subscriber in respect
of the Buy-In.

 

6.
                 left intentionally blank. 

 

7.                  Covenants
of the Company. The Company covenants and agrees with the Subscribers as follows:

 

     (a)                
Stop Orders. Subject
to the prior
notice requirement described
in Section 7(h), the
Company
will advise the
Subscribers, within
twenty-four
hours after it
receives notice of
issuance by the Commission,
any state securities
commission
or any other
regulatory authority
of any stop order or of any
order preventing or
suspending any
offering of any
securities of the
Company,
or of the
suspension of the qualification of the Common Stock of the Company
for offering or sale in any jurisdiction, or the initiation of any proceeding for any
such purpose. The Company will not issue
any stop transfer order or other order impeding
the sale, resale
or delivery of
any of the
Securities, except
as may be
required by any applicable federal
or state securities laws
and only if at least two business days prior notice of such instruction is given to
the Subscribers.

 

    8 

     

    

 

     (b)                
Listing/Quotation. The
Company shall
promptly secure
the quotation or listing
of the Conversion
Shares upon such
national securities
exchange, or automated
quotation system
upon which the Company’s
Common Stock
is quoted or
listed and
upon which
such Conversion Shares
are or become
eligible for quotation
or listing
(subject to official
notice of issuance)
and shall maintain
same so long as
any Securities
are outstanding. The
Company
will maintain
the quotation
or listing of
its Common Stock on the American
Stock Exchange, Nasdaq Capital Market,
Nasdaq Global Market, Nasdaq Global Select Market, Bulletin
Board, or New York Stock
Exchange (whichever of the foregoing
is at the time the principal trading
exchange or market
for the
Common
Stock (the “Principal
Market”), and will comply
in all respects with the Company's
reporting, filing and other obligations
under the bylaws or rules of the
Principal Market, as applicable. Subject to the limitation
set forth in Section 7(h), the Company
will provide Subscribers with
copies of all
notices it receives
notifying the
Company of
the threatened and
actual delisting of the Common
Stock from any Principal Market. As of
the date of this Exchange Agreement and
the Closing Date, the Bulletin Board is the Principal Market.

 

     (c)                
Market Regulations.
If required,
the Company
shall notify the
Commission, the Principal
Market and applicable
state authorities,
in accordance
with their requirements,
of the transactions contemplated
by this Exchange
Agreement, and shall
take all other
necessary action and proceedings
as may be
required and permitted
by applicable law,
rule and regulation,
for the legal
and valid issuance
of the Securities to
the Subscribers and promptly
provide copies thereof to
the Subscribers.

 

     (d)                
Filing Requirements.
From the date
of this Exchange
Agreement
and until the last
to occur of
all the Securities
have been paid
back, resold or
transferred by the
Subscribers pursuant to a
registration statement or
pursuant to Rule
144(b)(1)(i) (the
date of such
latest occurrence being
the “End Date”),
the Company
will (A) cause
its Common
Stock to continue
to be registered
under Section
12(b) or 12(g) of
the 1934
Act, (B) comply
in all
respects with its
reporting and filing
obligations
under the 1934
Act, and (C)
voluntarily comply
with all reporting
requirements
that are applicable
to an issuer
with a
class
of shares registered
pursuant to Section 12(g) of the 1934
Act, if the Company
is not subject to such reporting requirements.
The Company will use its best efforts
not to take any action or file any document
(whether or not permitted by the 1933
Act or the 1934 Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting
and filing obligations under said acts
until the End Date. Until the End Date, the Company
will continue the listing
or quotation of the Common
Stock on a Principal Market and will comply
in all respects with the Company’s
reporting, filing and other obligations
under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if
required under
Regulation D and
to provide
a copy thereof
to Subscribers
promptly
after such filing.

 

     (e)                 Reservation. Prior to the Closing, the Company undertakes to reserve
on behalf of Subscribers from its authorized but unissued Common Stock, a number
of shares of Common Stock
equal to 150% of the amount
of Common Stock necessary to allow Subscribers to be able to
convert all of the Preferred Stock, Warrants, and AIRs including dividends that would accrue thereon through the End Date
(“Required Reservation”). Failure to have sufficient shares reserved pursuant to this Section 7(e) at
any time shall be a material default
of the Company’s obligations under
this Exchange Agreement. Without waiving the foregoing requirement,
if at any time Preferred Stock,
Warrants, and AIRs are owned by the Subscribers, the Company
has reserved on behalf of the Subscribers less than 125% of the amount
necessary for full conversion of
the outstanding Preferred
Stock, Warrants, and AIRs and dividends
at the conversion price in effect on every such date (“Minimum
Required Reservation”), the
Company will promptly reserve
the Minimum Required Reservation, or
if there are insufficient authorized and available
shares of Common Stock to do so, the Company
will take all action necessary to increase
its authorized capital to be able to fully
satisfy its reservation requirements
hereunder, including the filing of
a preliminary
proxy with the Commission
not later than fifteen business days after the first day
the Company has reserved less than the Minimum Required
Reservation. The Company agrees to
provide notice to the Subscribers not later than three days
after the date the Company
has less than the Minimum
Required Reservation
reserved on behalf of
the Subscribers.

 

    9 

     

    

 

 

     (f)                   DTC
Program. At
all times
that Preferred
Stock, Warrants, and
AIRs are outstanding or
issuable, the Company
will take such
steps as are
necessary for the
Conversion Shares to
be delivered electronically to
a participant in
the Depository
Trust Company
Automated Securities
Transfer Program. In the event that
there is a chill on delivery of shares via the Depository Trust Company
Automated Securities Transfer Program,
the Company
shall immediately and in any event no
less than one day after such chill is announced, inform
the Subscribers of such chill.

 

     (g)               
Confidentiality/Public
Announcement.From
the date of
this Exchange Agreement and
until the
End Date, the
Company
agrees that
except in connection
with a Form
8-K, Form
10- K, Form 10-Q
and a registration
statement or
statements which include
the Securities for
registration with the Commission
or in correspondence
with the Commission
regarding same or
in respect to
a stock exchange listing,
it will not
disclose publicly or
privately the identity of
the Subscribers unless
expressly
agreed to
in writing by Subscribers
or only to
the extent
required by law and
then only
upon not less
than three days
prior notice to Subscribers.
In any event
and subject to
the foregoing,
the Company
undertakes to file
a Form 8-K describing
the Exchange not later than the
fourth (4th) business day after the Closing
Date. Prior to the filing date of such Form 8-K, a draft in the final form will be provided to Subscribers for Subscribers’
review and approval. In the
Form 8-K, the
Company will specifically
disclose the amount
of Common
Stock outstanding immediately
after the Closing. Upon delivery by the Company
to the Subscribers after the Closing Date of any notice or information, in writing,
electronically or otherwise, and while Securities are held
by Purchases, unless the Company
has in good
faith determined
that the matters
relating
to such notice do not
constitute material,
nonpublic information relating
to the Company
or Subsidiaries, the Company
shall within one business day after any such delivery publicly disclose such material,
nonpublic information on a Report
on Form 8-K. In the
event that the Company
believes that a notice or communication
to Subscribers contains material, nonpublic information relating to the Company or Subsidiaries,
the Company shall
so indicate to Subscribers
prior to delivery of such
notice or information. Subscribers will be granted sufficient time to notify the Company that
such Subscriber elects not
to receive such
information. In such case,
the Company
will not deliver
such information to any such Subscriber.
In the absence of any such indication, Subscribers
shall be allowed to presume that all matters
relating to
such notice and information
do not constitute
material, nonpublic information relating to the
Company or Subsidiaries.

 

     (h)                  
Non-Public  Information.The
Company covenants and
agrees that except for
the Reports, Other
Written Information and
exhibits to this
Exchange Agreement and
the Transaction Documents, which information
the Company undertakes to publicly
disclose on the Form 8-K described
in Section 7(g)
above, neither it
nor any other
person acting
on its behalf
will at any time
provide
Subscribers or
their agents
or counsel with
any information
that the Company
believes constitutes material non-public
information, unless prior
thereto Subscribers
shall have agreed in writing to accept
such information. The Company understands
and confirms that Subscribers shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

 

    (i)                   
Negative Covenants.So
long as Securities
are outstanding, without
the Consent of the Subscribers,
the Company
and its officers
and directors will
not and will not permit
any of its
Subsidiaries to directly
or indirectly:

 

               (i)                 
amend  its 
Articles,  bylaws
 or  its 
charter  documents  so 
as  to materially
and adversely affect
any rights of
the Subscribers;

 

              (ii)
                 repay, repurchase or
offer to repay, repurchase or otherwise acquire or make any dividend or distribution in respect of any of its Common Stock,
Preferred Stock, or other equity securities other than to the extent permitted or required under the Transaction
Documents;

 

    10 

     

    

 

          (iii)             
prepay or redeem
any financing
related debt or
past due obligations or
securities, or past
due obligations (except
with respect to
vendor obligations,
or any such
obligations which in management’s
good faith, reasonable
judgment
must be repaid
to avoid disruption
of the Company’s
businesses);

 

          (iv)              
liquidate, merger,
consolidate, nor sell
a substantial amount
of its assets
with or to
any other
entity, except
for a migratory
merger
with a wholly-owned
subsidiary, result
of which does not
change the relative
ownership or rights
of the holders
of the Securities
and Common Stock.

 

		8.	Covenants of the
Company Regarding
Indemnification.

 

(a)                    
Indemnification.The
Company agrees
to indemnify,
hold harmless,
reimburse
and defend the
Subscribers, the Subscribers’
officers, directors, agents,
counsel, Affiliates,
members,
managers, control persons,
and principal
shareholders, against
any claim,
cost, expense, liability, obligation,
loss or damage
(including reasonable
legal fees) of
any nature, incurred
by or imposed
upon the Subscribers or any
such person which results, arises
out of or is based
upon (i) any material
misrepresentation by Company or breach of any representation
or warranty by Company in this Exchange
Agreement or in any Exhibit attached hereto in any Transaction Document,
or other agreement delivered
pursuant hereto or in connection
herewith, now or after the date hereof;
or (ii) after any applicable notice and/or cure periods, any
breach or default
in performance
by the Company
of any covenant or undertaking to
be performed by the Company
hereunder, or any other agreement entered into by
the Company and Subscribers relating hereto.

 

(b)                
 Indemnification
Procedures.
Promptly after
receipt by an
indemnified party hereunder
of notice of
the commencement
of any
action, such
indemnified party
shall, if a
claim in respect
thereof is to
be made
against the indemnifying
party hereunder,
notify the
indemnifying
party in writing
thereof, but the omission
so to notify the indemnifying
party shall not relieve it from
any liability which it may have
to such indemnified party other than under
this Section 8(b) and shall only relieve it from
any liability
which it may
have to such
indemnified party
under this Section
8(b), except and
only if
and to the extent the indemnifying
party is prejudiced by such omission. In
case any such action shall be brought against
any indemnified party and it shall
notify the indemnifying
party of the commencement
thereof, the indemnifying
party shall be
entitled to participate
in and,
to the extent
it shall wish,
to assume and
undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice
from the indemnifying
party to such indemnified
party of its election so to assume
and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified
party under
this Section 8(b) for any legal expenses
subsequently incurred
by such indemnified
party in connection
with the defense thereof
other than reasonable costs of investigation and of liaison with counsel so
selected, provided, however, that, if the defendants in any such action include
both the indemnified
party and the indemnifying
party and the indemnifying
party shall have reasonably concluded that there may be reasonable
defenses available to
indemnified party
which are different from or additional
to those available to the indemnifying
party or if the interests of the indemnified
party reasonably may be deemed
to conflict with the interests of the indemnifying
party,
the indemnified parties, as a group,
shall have the right to
select one separate counsel, reasonably satisfactory to the indemnified
and indemnifying
party, and to assume such legal defenses
and otherwise to participate in
the defense of such action,
with the reasonable expenses
and fees of such separate
counsel and other expenses related to such participation
to be reimbursed by the indemnifying
party as incurred.

 

    11 

     

    

 

                                 9.
              Unlegended Shares and 144 Sales.

 

    (a)                   
Delivery of Unlegended
Shares. Within
five (5) business
days (such fifth business
day being the
“Unlegended Shares
Delivery Date”) after
the day on
which the Company
has received (i) a
notice that Conversion
Shares or any
other Common
Stock held by Subscribers
has been sold pursuant to a registration
statement or Rule 144 under the
1933 Act, (ii)
a representation that the prospectus delivery requirements,
or the requirements of
Rule 144, as applicable and if required,
have been satisfied, (iii) the original
share certificates representing the shares
of Common
Stock that have been sold, and (iv)
in the case of sales under Rule 144, customary
representation letters of the Subscribers and, if required,
Subscribers’ broker regarding compliance
with the requirements of Rule 144,
the Company at its expense, (y)  
shall deliver, and shall cause legal counsel selected by the Company
to deliver to its transfer agent (with copies to Subscribers) an appropriate instruction
and opinion of such counsel, directing
the delivery of shares of
Common Stock
without any legends
including the legend
set forth in
Section 2(h) above
(the “Unlegended Shares”); and
(z) cause the transmission
of the certificates representing the
Unlegended Shares together with a legended certificate representing the balance of
the submitted
Common Stock certificate, if any,
to the Subscribers at the address specified
in the notice of sale, via express courier,
by electronic transfer or otherwise on or before the Unlegended Shares Delivery Date.

 

     (b)                   
DWAC.In lieu of
delivering physical
certificates representing the Unlegended
Shares, upon request
of Subscriber, so
long as the
certificates therefor do
not bear
a legend and the
Subscriber is not
obligated to return
such certificate
for the
placement
of a legend
thereon, the Company
shall cause its
transfer agent to
electronically transmit
the Unlegended Shares
by crediting the
account of Subscribers’ prime
broker with the Depository Trust Company
through its Deposit Withdrawal Agent Commission
system, if such
transfer agent participates in
such DWAC
system.
Such delivery must
be made on or before the Unlegended Shares Delivery Date.

 

     (c)                    
Late Delivery of
Unlegended Shares.The
Company
understands that a delay
in the
delivery of the
Unlegended Shares pursuant
to Section 9
hereof later than
the Unlegended Shares Delivery
Date could result
in economic
loss to a
Subscribes. As compensation
to a Subscriber
for such loss, the
Company agrees
to pay
late payment
fees (as liquidated
damages and
not as
a penalty)
to the Subscriber for
late delivery
of Unlegended Shares in
the amount of $100 per
business day after the Unlegended Shares
Delivery Date for each $10,000 of purchase price of the Unlegended Shares subject
to the delivery default. If during any
360 day period,
the Company fails
to deliver
Unlegended Shares as required by
this Section 9 for an aggregate
of thirty days, then each
Subscriber or assignee holding Securities subject to such default may, at its option,
require the Company
to redeem all or any portion of the Unlegended
Shares subject to such default at
a price per
share equal to
the greater of
(i) 105% of
the Purchase Price
paid by the
Subscriber for the Unlegended Shares that were not timely delivered, or (ii) a fraction in which the numerator is the
highest closing price
of the Common
Stock during
the aforedescribed
thirty day
period and the
denominator of which is
the lowest
conversion price
or exercise price,
as the case may be, during
such thirty
day period, multiplied
by the price
paid by
Subscriber for such
Common
Stock (“Unlegended
Redemption Amount”).
The Company
shall pay any payments
incurred under this Section in immediately available funds upon demand.

 

    (d)                 Injunction. In the event a Subscriber shall request delivery
of Unlegended Shares as described
in Section 9 and the Company
is required to deliver
such Unlegended Shares pursuant to
Section 9, the Company may not refuse to deliver Unlegended
Shares based on any claim that Subscriber or
anyone associated or affiliated with Subscriber has not complied with Subscriber’s obligations
under the Transaction Documents,
or for any other reason, unless, an injunction
or temporary restraining order from a
court, on notice, restraining and or enjoining delivery of such Unlegended Shares shall have
been sought and obtained by the
Company and the Company
has posted a surety bond for the benefit
of Subscriber in the
amount of the greater of (i) 120% of the amount
of the aggregate purchase price of the Common
Stock which is subject to the injunction
or temporary restraining order,
(ii) the closing price of the
Common Stock on
the trading day before the issue date of the injunction multiplied
by the number of Unlegended Shares to be subject to the
injunction, which bond shall remain in effect until the completion
of arbitration/litigation of the
dispute and the proceeds of which shall be payable
to Subscriber to the extent Subscriber
obtains judgment in Subscriber’s
favor.

 

    12 

     

    

 

    (e)                 Buy-In.In addition to any other rights available to Subscribers, if the
Company fails to deliver to a Subscriber Unlegended Shares as required
pursuant to this Agreement and after
the Unlegended Shares Delivery
Date the Subscriber, or a broker on the Subscriber’s
behalf, purchases (in an
open market
transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by
Subscriber of the shares of Common
Stock which the Subscriber was entitled to receive from the Company (a “Buy-In”), then the Company
shall promptly pay in cash
to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount
by which (A) the Subscriber’s total purchase price (including brokerage
commissions, if any) for the shares
of common stock so purchased exceeds (B)
the aggregate purchase price of the shares of Common Stock delivered to the
Company for reissuance
as Unlegended Shares together with interest thereon at a rate of 15% per annum accruing until such amount
and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages
and not as a penalty). For example,
if a Subscriber’s purchases shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
$10,000 of purchase
price of shares of Common
Stock delivered to
the Company for reissuance as
Unlegended Shares, the Company
shall be required to pay the Subscriber $1,000, plus interest. The
Subscriber shall provide the Company
written notice indicating the amounts
payable to the Subscriber in
respect of the Buy-In.

 

    (f)                 
144 Default. At
any time commencing
six months after
the Closing Date,
in the event the
Subscribers are not
permitted to sell
any of the
Conversion Shares without
any restrictive legend or
if such
sales are permitted
but subject to
volume limitations
or further
restrictions on resale
as a result of
the unavailability
to Subscribers of
Rule 144(b)(1)(i) under
the 1933 Act
or any successor
rule (a “144
Default”), for
any reason
including but not
limited to failure
by the
Company to
file quarterly,
annual or any other filings required
to be made
by the Company
by the required filing dates, or the
Company’s failure to make
information publicly available which
would allow Subscribers’ reliance on Rule 144 in connection with sales of Conversion
Shares, except due to a change in current applicable
securities laws or because the Subscriber is
an Affiliate (as defined under Rule 144)
of the Company,
then the Company
shall pay
Subscribers as liquidated damages
and not as a penalty for each thirty
days (or such lesser pro-rata amount
for any period
less than thirty
days)
an amount
equal to one
percent (1%) of
the purchase price
of the Conversion Shares
subject to such
144 Default. Liquidated
Damages shall
not be payable
pursuant to this Section 9(f) in connection
with Shares for such times as such Shares
may be sold by the holder thereof without any legend or volume or other restrictions
pursuant to Section 144(b)(1)(i) of the 1933 Act or pursuant to an
effective registration statement.

 

                                 10.
             Miscellaneous.

 

     (a)                Notices.All notices, demands, requests, consents, approvals, and other
communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein,
shall be (i) personally served,
(ii) deposited in the mail,
registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery,
telegram, or facsimile,
addressed as set forth below or
to such other address as such party shall
have specified most recently
by written notice. Any notice or other communication
required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by facsimile,
with accurate confirmation generated by the transmitting facsimile
machine, at
the address or number
designated below (if
delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such
delivery (if delivered other than on a
business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date
of mailing by express
courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing,
whichever shall first occur. The
addresses for such communications
shall be: (i) if to the Company,
to: Attitude Drinks Incorporated, 712 U.S. Highway 1, Suite #200, North
Palm Beach, FL 33408, Attn: Roy Warren, CEO and President, facsimile:
(561) 799-5039, with a copy by facsimile
only to:_______,__________________,Attn:_____, Esq., facsimile: (___)
_____-______, and (ii) if to the Subscribers, to: the address and fax
number indicated on the Signature
page hereto, with an additional copy by fax only to: Grushko & Mittman, P.C.,
515 Rockaway Avenue, Valley Stream,
New York 11581, facsimile:
(212) 697- 3575.

 

    13 

     

    

 

 

    (b)              
Entire  Agreement;  Assignment.This
Exchange Agreement and
other documents
delivered
in connection herewith
represent the entire
agreement between
the parties
hereto with respect
to the subject matter
hereof and may be
amended only
by a writing
executed by both
parties. Neither the Company
nor the Subscribers
has relied on
any representations
not contained or
referred to in
this Exchange Agreement and
the documents delivered
herewith. No right
or obligation
of the Company
shall be assigned without prior notice
to and the written consent of the Subscribers.

 

     (c)              
Counterparts/Execution. This
Exchange Agreement
may be executed
in any number
of counterparts and by
the different signatories hereto
on separate counterparts, each of which,
when so executed, shall
be deemed an
original, but
all such counterparts
shall constitute but
one and the
same instrument. This Exchange
Agreement
may
be executed
by facsimile
signature and delivered
by electronic transmission.

 

     (d)               
Law Governing this
Exchange Agreement.
This Exchange
Agreement shall be governed
by and construed
in accordance with
the laws of
the State of
New York without
regard to principles
of conflicts of
laws. References
in the Transaction
Documents
to laws,
rules, regulations and forms
shall also include
successors to
and functionally equivalent replacements
of such laws,
rules, regulations and forms.
A successor rule
to Rule 144(b)(1)(i)
shall include any
rule that would
be available to a non-Affiliate of the Company
for the sale of Common Stock not
subject to volume restrictions and after a six month
holding period. Any
action brought by
either party against
the other concerning the transactions contemplated
by this Exchange Agreement shall be brought only
in the state courts of New York or in
the federal courts located in the
state and county of New
York. The parties to this
Exchange Agreement hereby irrevocably
waive any objection to jurisdiction and
venue of any action instituted
hereunder and shall not assert any defense
based on lack of jurisdiction or
venue or based upon forum
non conveniens. The
parties executing this
Exchange Agreement and other agreements
referred to herein or delivered in connection
herewith on behalf of the Company agree
to submit
to the in personam jurisdiction of such courts and hereby irrevocably waive trial by
jury. The prevailing party shall be entitled to recover from
the other party its reasonable attorney's
fees and costs. In the event that any provision
of this Exchange Agreement or any other agreement
delivered in connection herewith is invalid
or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and
shall be deemed
modified to
conform with
such statute or
rule of law.
Any such provision which may prove
invalid or unenforceable under any
law shall not affect the validity or
enforceability of any
other provision of
any agreement. Each party hereby
irrevocably waives personal service of process
and consents to process being served in any suit, action
or proceeding in connection with this Exchange Agreement or any other Transaction
Document
by mailing a copy thereof via registered or certified mail
or overnight delivery (with
evidence of delivery)
to such party
at the address
in effect for
notices to it under
this Exchange
Agreement and agrees
that such service
shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed
to limit in any way any
right to serve process in any other manner
permitted by
law.

 

    14 

     

    

 

(e)                
Specific  Enforcement,
 Consent 
to  Jurisdiction.The Company
and Subscribers acknowledge and
agree that irreparable
damage would
occur in the
event that any
of the provisions of
this Exchange
Agreement were not
performed in
accordance with their
specific terms
or were otherwise
breached. It is
accordingly agreed that
the parties
shall be entitled
to seek an
injunction or injunctions to
prevent or cure
breaches of
the provisions of
this Exchange Agreement
and to enforce specifically
the terms and provisions hereof,
this being
in addition to
any other
remedy
to which
any of them may
be entitled by law or equity.
Subject to Section
10(d) hereof, the Company and each Subscribers
hereby irrevocably waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction
in New York of such court,
that the suit, action or proceeding
is brought in an inconvenient forum or that the venue of the suit, action or proceeding
is improper. Nothing in this Section shall
affect or limit any right to serve
process in any other manner permitted
by law.

 

(f)                 
Damages. In the
event the Subscribers
is entitled to
receive any liquidated or
other damages pursuant
to the Transactions
Documents, the Subscribers
may elect to
receive the
greater of actual
damages or
such liquidated damages.
In the event
the Subscribers is
granted rights under
different sections of the
Transaction Documents
relating to the
same subject
matter or which
may
be exercised contemporaneously,
or pursuant to
which damages
or remedies are different,
Subscriber is granted the
right in Subscriber’s absolute
discretion to proceed under such section
as Subscriber elects.

 

(g)                
Calendar Days.
All references to
“days” in
the Transaction Documents
shall mean calendar days
unless otherwise stated.
The terms
“business days”
and “trading days”
shall mean
days that the New
York Stock Exchange
is open for
trading for
three or
more hours.
Time periods
shall be determined
as if the
relevant action, calculation
or time period were
occurring in New
York City.
Any deadline that falls on
a non-business day in any
of the Transaction Documents
shall be automatically
extended to the next
business day and
interest, if any,
shall be calculated
and payable
through such extended period.

 

(h)                
Captions: Certain Definitions.The
captions of the
various sections
and paragraphs of this
Exchange Agreement have
been inserted only
for the
purposes of
convenience; such captions
are not a
part of this
Exchange Agreement
and shall not
be deemed
in any
manner to
modify, explain, enlarge
or restrict any
of the provisions
of this
Exchange Agreement.

 

(i)                 
Severability.In the
event that
any term or
provision of this
Exchange Agreement shall be
finally determined
to be superseded,
invalid, illegal or
otherwise unenforceable pursuant
to applicable law
by an authority
having jurisdiction
and venue,
that determination
shall not impair
or otherwise affect
the validity, legality
or enforceability: (i)
by or before that
authority of the remaining
terms and
provisions of this Exchange Agreement,
which shall be enforced as if the unenforceable
term
or provision were deleted, or (ii) by or before
any other
authority of any of the terms
and provisions of this Exchange Agreement.

 

(k)                 Maximum
Liability.
In no event
shall the liability
of the Subscribers
or permitted
successor hereunder
or under any
Transaction Document
or other agreement
delivered in connection herewith
be greater in
amount
than the
dollar amount
of the net
proceeds actually received
by Subscribers or successor
upon the
sale of Conversion
Shares.

 

[SIGNATURE
PAGE TO FOLLOW]

 

    15 

     

    

 

SIGNATURE
PAGE TO
SUBSCRIPTION AGREEMENT

 

Please
acknowledge your
acceptance of the
foregoing Subscription Agreement
by signing
and returning a copy
to the
undersigned whereupon
it shall
become a binding
agreement between us.

 

Attitude Drinks,
Inc.

a Delaware
corporation

 

 

 

 

By:
_________________________________

        Name: Roy G. Warren

        Title:
CEO

 

Dated:
May 21, 2015

 

 

	SUBSCRIBER	 	Surrendered Notes being	Preferred Stock
	 	 	 	 
	 	 	 	 
	Name of Subscriber	 	 	 
	 	 	 	 
	[RC]	 	 	 
	 	 	 	 
	Address:	 	 	Warrants
	 	 	 	 
		 	 	
	 	 	 	 
	Fax
        No.: __________________________	 	 	 
	 	 	 	 
	Taxpayer
        ID# (if applicable):___________	 	 	AIRs
	 	 	 	 
	 	 	 	 
	(Signature)	 	 	 
	By:	 	 	 

 

 

    16 

     

    

 

 

LIST
OF EXHIBITS
AND SCHEDULES

  

 

	 	Exhibit
A	Certificate of Designation (filed as Exhibit 3.3 on Form 8-K August 12, 2015)
	 	 	 
	 	Exhibit
B	Form of Warrant (filed as Exhibit 4.3 on Form 8-K August 18, 2015)
	 	 	 
	 	Exhibit
C	Form of AIR (filed as Exhibit 4.4 on Form 8-K August 18, 2015)
	 	 	 
	 	Exhibit
D	Form of Legal Opinion (Not provided at closing)
	 	 	 
	 	Schedule
1	List of Subscribers
	 	 	 
	 	Schedule 3(i)	Past due SEC Reports

 

 

    17 

     

    

Schedule
1 

List of
Subscribers

 

	Name of Subscriber and Address	$ Amount to Convert	Issued Preferred Stock Shares
	 	 	 
	Roy Warren	$155,838	156
	712 U.S. Highway 1 #200	 	 
	North Palm Beach, Florida 33408	 	 
	 	 	 
	Tommy Kee	$371,442	 371
	712 U.S. Highway 1 #200	 	 
	North Palm Beach, Florida 33408	 	 
	 	 	 
	Craig Peters	$269,085	 269
	712 U.S. Highway 1 #200	 	 
	North Palm Beach, Florida 33408	 	 
	 	 	 
	Debbie Lieblong	$67,309	 67
	712 U.S. Highway 1 #200	 	 
	North Palm Beach, Florida 3340	 	 
	 	 	 

 

 

    18 

     

    

Schedule 3(i)

Past due SEC Reports

For Attitude Drinks Incorporated

 

Attitude Drinks Incorporated will be preparing and filing the following
past due SEC filings in the next 30-60 days:

 

Form 10-Q for the 3 months ended June 30, 2014

 

Form 10-Q for the 6 months ended September 30, 2014

 

Form 10-Q for the 9 months ended December 31, 2014

 

Note as of the August 18, 2015 closing date, the above filings have
been prepared and filed with the Securities Exchange Commission. The Form 10-K for the fiscal year ended March 31, 2015 is expected
to be filed in late August, 2015 and first half of September, 2015 based on the receipt of additional financing.

 

 19Exhibit 10.9

 

June 12, 2015

 

Mr. Scott K. Barber

1177 Bishop Street

Honolulu, HI 96813

 

Dear Scott:

 

This letter confirms our discussions regarding your employment with Hawaiian Telcom Holdco, Inc. and any of its subsidiaries and affiliates as may employ you from time to time (collectively, and together with any successor thereto, the “ Company “).  You and the Company are parties to the Offer Letter dated December 12, 2012 (the “Prior Letter”).  The parties desire to amend and restate the Prior Letter in its entirety, effective as of June 22, 2015 (the “Effective Date”), as set forth herein.  Notwithstanding anything herein to the contrary, you will be continue to be an at-will employee of the Company.

 

1.                                            Position:  President and Chief Executive Officer.

 

2.                                            Base Salary:  $485,000 per year (the “Base Salary”), payable in accordance with the Company’s customary payroll practices.  Paydays are expected to be every other Friday (total of 26 pay days a year).  Your paycheck will be delivered to you or made available to you on such dates.  If a payday falls on a holiday or weekend, you may pick up your paycheck on the weekday immediately preceding the payday.

 

3.                                            Annual Performance Award:  You will be eligible to participate in an annual performance compensation plan (“Performance Compensation Plan”) established by the Company’s Board of Directors (the “Board”) or Compensation Committee thereof, at a target level that is specified by the Compensation Committee (currently specified as 100% of your eligible salary) as it may be amended from time to time by the Board or Compensation Committee. The actual performance award, if any, shall be pursuant to the terms and conditions set forth in the Performance Compensation Plan and shall be payable at such time as performance awards are paid to other senior executive officers who participate therein.  Payment of any annual performance award will be subject to your continued employment with the Company through the date the performance award is paid pursuant to the Performance Compensation Plan.

 

4.                                            Equity Award:  Subject to approval by the Board or the Compensation Committee, you will be eligible to receive equity awards from time to time pursuant to the Company’s 2010 Equity Incentive Plan (beginning with a restricted stock unit (“RSU”) award representing 120% of your annual Base Salary scheduled to be granted in March 2016) with such terms and conditions as determined by the Board or the Compensation Committee, in its sole discretion.  In addition, you will receive, effective as of the Effective Date, an RSU award under the Company’s 2010 Equity Incentive Plan of the number of RSUs equal to (i) $351,161 divided by the closing price of the Company’s common stock on the trading day immediately prior to the date in which your position as the Company’s new President and Chief Executive Officer is

 

 

effective, which shall be deemed the grant date, minus (ii) 9,841 RSUs, that will have a grant date that is the Effective Date and will be governed by the terms of the Restricted Stock Unit Agreement attached hereto as Exhibit A.  It is expressly understood that your entitlement to participation in the 2010 Equity Incentive Plan is not a guarantee that the award referenced herein will attain any particular value in the future.

 

5.                                            Employee Benefits:   You will continue to be eligible to participate in Company employee benefit plans and programs commensurate with your position and seniority. This currently includes five (5) weeks’ vacation for each completed twelve (12) month period of service with a maximum carryover of ten (10) weeks.  Please note that the Company reserves the right to change its benefits package at its sole discretion.

 

6.                                            Severance Benefits:  You will continue to be eligible to participate and receive the severance benefits provided in the Company’s Executive Severance Plan (as revised and in effect as of the date hereof—a copy of which is available upon request), subject to all of the terms and conditions thereof.  You hereby acknowledge and agree that the only severance benefits you are eligible to receive from the Company will be pursuant to the Executive Severance Plan.

 

7.                                            Certain Restrictions:  You will continue to be bound by the terms of the Hawaiian Telcom Business Protection Agreement (attached as Exhibit B to the Prior Letter) and the Arbitration Agreement (attached as Exhibit C to the Prior Letter).  Additionally, you will continue to be subject to the policies, practices and procedures maintained by the Company as set forth in the Company’s Code of Business Conduct, employee handbook and other Company policies, which may be modified from time to time.

 

8.                                            Interpretation and Severability:  The words of this letter will be interpreted according to their common meaning.  If any provision of this letter is deemed unenforceable for any reason, said provision will not affect the remaining terms of this letter and a court, upon motion by the Company, may amend said provision so as to render it valid and enforceable while providing to the Company the maximum protections permitted by law.  Hawaii law will govern the interpretation and enforcement of this letter.

 

If you agree with the terms of employment set forth in this letter, please indicate your understanding and agreement by executing in the space provided and returning this letter to me by June 15, 2015.  By executing in the space provided, you acknowledge that no promises, representations, understandings or agreements, either oral or in writing, were made with you that are inconsistent with the terms of this letter and that this letter will, in any event, supersede any such prior or contemporaneous promises, representations, understandings, or agreements, including the Prior Agreement.

 

 

I look forward to continuing to work with you in building, developing and integrating the Company into a strong business with a positive community presence.

 

	
 
    	
Sincerely,
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/ Richard A. Jalkut
    
	
 
    	
Richard A. Jalkut
    
	
 
    	
Chairman of the Board of   Directors
    
	
 
    	
 
    
	
Understood, accepted and   agreed to effective as of this 12th day of June, 2015
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ Scott K. Barber
    	
 
    	
 
    
	
Signature
    	
 
    
	
 
    	
 
    
	
Scott K. Barber
    	
 
    	
 
    
	
Print Name 
    	
 
    

 

 

EXHIBIT A

 

RSU GRANT AGREEMENT

 

 

RESTRICTED STOCK UNIT AGREEMENT FOR EXECUTIVES

PURSUANT TO THE

HAWAIIAN TELCOM 2010 EQUITY INCENTIVE PLAN

 

*  *  *  *  *

 

	
Participant:
    	
Scott   K. Barber
    
	
 
    	
 
    
	
Grant   Date:
    	
June 20,   2015
    
	
 
    	
 
    
	
Total   Maximum Number of Restricted Stock Units granted:
    	
5,387   (the “Total   Maximum RSUs”)
    
	
 
    	
 
    
	
Total   Target Number of Restricted Stock Units:
    	
4,205 (the “Total Target RSUs”)
    

 

*  *  *  *  *

 

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Hawaiian Telcom Holdco, Inc., a Delaware corporation (the “Company”), and the Participant specified above, pursuant to the Hawaiian Telcom 2010 Equity Incentive Plan (the “Plan”), which is administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”); and

 

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Stock Units (“RSUs”) provided herein to the Participant, each of which is a bookkeeping entry representing the equivalent in value of one (1) Share.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

 

1.  Incorporation By Reference; Plan Document Receipt.  This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the grant of the RSUs hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein.  The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content.  In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan.

 

2.  Grant of Restricted Stock Unit Award.  The Company hereby grants to the Participant, as of the Grant Date specified above, the Total Maximum RSUs specified above. The Total Maximum RSUs is determined by adding the Time-Based RSUs and the Maximum Performance-Based RSUs as defined in Section 3(a) below. Except as otherwise provided by the 

 

 

Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason.  The Participant shall not have the rights of a stockholder in respect of the Shares underlying this Award until such Shares are delivered to the Participant in accordance with Section 4.

 

3.   Vesting.

 

(a) General.  Except as otherwise provided in this Section 3, RSUs subject to this Award shall vest as follows:

 

(i)               Time-Based RSUs.  Fifty percent (50%) of the Total Target RSUs (the “Time-Based RSUs”) shall vest in equal installments of twelve and one-half percent (12.5%) of the Total Target RSUs on March 12, 2016, March 12, 2017, March 12, 2018, and March 12, 2019, (or if the Company’s shares are not traded such day on an established national or regional securities exchange, the vesting date shall be the immediately prior day on which the Company’s shares are traded on an established national or regional securities exchange), subject to the Participant’s continued employment by the Company or one of its Subsidiaries through each such vesting date; and

 

(ii)            Performance-Based RSUs.   An amount of RSUs equal to the Target PBRSUs (as defined below) multiplied by 1.5625 (the “Maximum Performance-Based RSUs” or “Maximum PBRSUs”) shall vest on the vesting dates and in the amounts set forth in this Section 3(a)(ii) based upon the Company’s performance over one year for revenue and Adjusted EBITDA and over two years for total shareholder return of the Company in comparison to the NASDAQ Telecommunications Index (the “Index”), subject to the Participant’s continued employment with the Company or one of its Subsidiaries through each vesting date, and provided further, in no event may the Participant vest in any of the PBRSUs pursuant to this Section 3(a)(ii) in the event the FY2015 Adjusted EBITDA performance is below Threshold (as shown in the table below).  “Target PBRSUs” shall mean the Total Target RSUs less the Time-Based RSUs. The Committee shall determine the extent to which the performance goals set forth herein are achieved and the total number of PBRSUs that will vest pursuant to this Section 3(a)(ii) in its sole and absolute discretion.  For purposes of clarity, in no event may Participant vest in more than the Maximum PBRSUs pursuant to this Section 3(a)(ii).

 

On the Determination Date (as defined below) and on each of the first two annual anniversaries of the Determination Date, an amount of PBRSUs shall vest equal to the product of A times B times C, where:

 

A =                       Total Base Percentage of Target PBRSUs Vested (as defined below);

 

B =                       TSR Award Modifier (as defined below); and

 

C =                       Sixteen and two-thirds percent (16 2/3%) of the Total Target RSUs.

 

2

 

Notwithstanding the foregoing, the Committee in its sole discretion, after consideration of such factors as it deems appropriate, may reduce the number of Performance-Based RSUs that otherwise would vest pursuant to this Section 3(a)(ii).

 

For purposes of this Section 3(a)(ii), “Total Base Percentage of Target PBRSUs Vested” shall mean (1) Weighted % Vested from Revenue Performance, plus (2) Weighted % Vested from Adjusted EBITDA Performance, each of which shall be determined as follows:

 

	
Weighted   % Vested from Revenue Performance
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Measurement
    	
 
    	
Weighting
    	
 
    	
Factor
    	
 
    	
Amount
    ($ in
   mils)
    	
 
    	
Base % of
   Target PBRSUs
   Vested
    	
 
    
	
FY2015 Revenue
    	
 
    	
40
    	
%
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Threshold
    	
 
    	
 
    	
 
    	
95
    	
%
    	
$
    	
381.4
    	
 
    	
75
    	
%
    
	
Target 
    	
 
    	
 
    	
 
    	
100
    	
%
    	
$
    	
401.5
    	
 
    	
100
    	
%
    
	
Maximum
    	
 
    	
 
    	
 
    	
105
    	
%
    	
$
    	
421.6
    	
 
    	
125
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Weighted % Vested from Adjusted   EBITDA Performance
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Measurement
    	
 
    	
Weighting
    	
 
    	
Factor
    	
 
    	
Amount
    ($ in
   mils)
    	
 
    	
Base % of
   Target PBRSUs
   Vested
    	
 
    
	
FY2015 Adjusted   EBITDA
    	
 
    	
60
    	
%
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Threshold
    	
 
    	
 
    	
 
    	
95
    	
%
    	
$
    	
114.4
    	
 
    	
75
    	
%
    
	
Target 
    	
 
    	
 
    	
 
    	
100
    	
%
    	
$
    	
120.4
    	
 
    	
100
    	
%
    
	
Maximum
    	
 
    	
 
    	
 
    	
105
    	
%
    	
$
    	
126.4
    	
 
    	
125
    	
%
    

 

In the event of performance between Threshold and Target or between Target and Maximum, straight-line interpolation will determine the weighted percentages set forth above.  If performance is below Threshold, the applicable weighted percentage will equal zero percent (0%).  In no event may the Weighted % Vested from Revenue Performance or the Weighted % Vested from Adjusted EBITDA Performance exceed 125%.

 

3

 

For purposes of this Section 3(a)(ii), “TSR Award Modifier” shall have the meaning set forth below based on the Company’s TSR relative performance which shall be equal to the Company TSR, minus the Index TSR (each, as defined below), multiplied by 100%:

 

	
Level
    	
 
    	
TSR Relative Performance
   (Company TSR minus Index TSR)
    	
 
    	
TSR Award
   Modifier
    	
 
    
	
High
    	
 
    	
+15% and higher
    	
 
    	
125
    	
%
    
	
Target
    	
 
    	
0%
    	
 
    	
100
    	
%
    
	
Low
    	
 
    	
-15% and lower
    	
 
    	
75
    	
%
    

 

In the event of TSR relative performance between levels, straight-line interpolation will determine the TSR Award Modifier. The TSR Award Modifier shall never exceed 125% or go below 75%.

 

For purposes of this Section 3(a)(ii), “TSR” shall mean the aggregate total shareholder return on Shares over the two-year period beginning January 1, 2015 and ending on December 31, 2016 (the “TSR Performance Period”) against the total shareholder return over the same two-year period for the Index.  TSR shall be calculated for the Company and Index using:

 

·                  A beginning price for the Shares and the Index equal to the trading volume weighted average price over the first 5 trading days in January 2015, and accounting for the reinvestment of dividends over this period (“Beginning Price”), and

 

·                  An ending price for the Shares and the Index equal to the trading volume weighted average price over the last 5 trading days in December 2016, and accounting for the reinvestment of dividends over this period (“Ending Price”).

 

TSR shall be calculated for the Company and the Index as follows:

 

Company TSR = (Share Ending Price/Share Beginning Price) — 1

 

Index TSR = (Index Ending Price/ Index Beginning Price) — 1

 

The “Determination Date” for the Performance-Based RSUs shall be March 12, 2017 or, if later, the date in fiscal year 2017 on which the Committee determines the Total Base Percentage of PBRSUs Vested, the TSR Award Modifier and the total number of RSUs that will be eligible to vest pursuant to this Section 3(a)(ii), if any; provided, however, the Determination Date shall not be later than the earlier of (i) thirty (30) days following the completion of the Company’s final audited financial statement for fiscal year 2016, and (ii) April 30, 2017.

 

4

 

EXAMPLE:  Executive is awarded a grant of 10,000 Total Target RSUs (i.e., 5,000 Target PBRSUs). The FY2015 Revenue and FY2015 Adjusted EBITDA both equal or exceed their respective Maximum levels, and the Company TSR outperforms the Index TSR by more than 15%.  Accordingly, on the Determination Date and on each of the first two annual anniversaries of the Determination Date, the following amount of PBRSUs (equal to one-third of Executive’s Maximum Performance-Based RSUs) would vest, as follows:

 

	
No. of
   Target
   PBRSUs
    	
 
    	
 
    	
 
    	
Total Base
   Percentage
   of Target
   PBRSUs
   Vested
    	
 
    	
 
    	
 
    	
TSR
   Award
   Modifier
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1,666.66
    	
 
    	
x
    	
 
    	
125
    	
%
    	
x
    	
 
    	
125
    	
%
    	
=
    	
 
    	
2,604
    	
 
    	
(rounded down to   nearest whole share)
    	
 
    

 

The Shares delivered in respect of PBRSUs that vest pursuant to this Section 3(a)(ii) shall be non-transferable, provided such transfer restrictions shall lapse in equal installments on each of the first three (3) annual anniversaries of the date on which such PBRSUs became vested, except as provided in Sections 3(b) and 3(c) below.

 

Any determinations made pursuant to Section 3 by the Committee shall be made in the sole and absolute discretion of the Committee and shall be conclusive and binding on the parties for all purposes.

 

(b) Certain Terminations.

 

(i)                                     Upon a Participant’s Termination due to the Participant’s death or Disability, unvested RSUs on the date of death or Disability (as determined by the Committee in its sole discretion) shall become vested at the time specified in, and in the pro-rated amount determined pursuant to, Section 3(b)(iii) below.  Any such vested RSUs shall be paid as provided in Section 4 and any transfer restrictions applicable to any Shares previously issued upon vesting of Performance-Based RSUs shall immediately lapse upon the Participant’s Termination.

 

(ii)                                  Upon a Participant’s Termination due to the Participant’s Termination by the Company without Cause or Termination by the Participant for Good Reason, unvested RSUs on the date of Termination shall become vested at the time specified in, and in the pro-rated amount determined pursuant to, Section 3(b)(iii) below.  Any such vested RSUs shall be paid as provided in Section 4 and any transfer restrictions applicable to any Shares previously issued upon vesting of Performance-Based RSUs shall immediately lapse upon the Participant’s Termination.

 

5

 

(iii)                               For purposes of Sections 3(b)(i) and 3(b)(ii) above, (I) the following number of Time-Based RSUs shall become vested immediately upon Termination (and any remaining unvested Time-Based RSUs shall be forfeited immediately upon Termination):  (x) the number of Time-Based RSUs scheduled to vest on the next annual anniversary of the Grant Date, multiplied by (y) the ratio, the numerator of which is the number of days that have elapsed from the immediately preceding anniversary of the Grant Date (or the applicable Grant Date, in the event the date of Termination is less than one year following the Grant Date) to the date of Termination and the denominator of which is 365, and (II) the following number of Performance-Based RSUs shall become vested upon the regularly scheduled vesting date (e.g., the Determination Date or the first or second annual anniversary thereof) next to occur on or after the Termination (and any remaining unvested Performance-Based RSUs shall be forfeited immediately following such Determination Date): (x) the number of Performance-Based RSUs that would otherwise vest on such vesting date based on actual performance as determined pursuant to the provisions of Section 3(a)(ii) above, multiplied by (y) the ratio (A) if the Termination occurs on or before December 31, 2016, the numerator of which is the number of days that elapsed between January 1, 2015 and the Termination and the denominator of which is 730, or (B) if the Termination occurs on or after January 1, 2017, the numerator of which is the number of days that elapsed between the first day of the fiscal year in which the Termination occurred and the Termination and the denominator of which is 365.

 

(c)   Change in Control.  Upon the occurrence of a Change in Control while the Participant is employed by the Company or its Subsidiaries, all unvested Time-Based RSUs on the date of the Change in Control shall immediately become vested and be paid as provided in Section 4, and all unvested Maximum Performance-Based RSUs on the date of the Change in Control shall immediately become vested based upon performance as of the date of the Change in Control and be paid as provided in Section 4, and any transfer restrictions applicable to any Shares previously issued upon vesting of Performance-Based RSUs or issued pursuant to this Section 3(c) shall immediately lapse upon the Change in Control.

 

(d) Leaves of Absence.  Notwithstanding anything stated herein or the Plan to the contrary, if the Participant takes a leave of absence, the Company may, at its discretion, suspend vesting during the period of leave to the extent permitted under applicable local law.

 

(e) Forfeiture.  Except as set forth in Section 3(b) above, all unvested RSUs shall be immediately forfeited upon the Participant’s Termination for any reason.

 

4.  Delivery of Shares. Subject to Sections 10 and 13, RSUs shall be automatically settled in Shares upon vesting of such RSUs.  In connection with the delivery of the Shares pursuant to this Agreement, the Participant agrees to execute any documents reasonably requested by the Company.  In no event shall a Participant be entitled to receive any Shares with respect to any unvested or forfeited portion of the RSU award.

 

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5.       Dividends and Other Distributions.  The Participant shall be entitled to receive all dividends and other distributions paid with respect to the Shares underlying the RSUs, provided that any such dividends or other distributions will be subject to the same vesting requirements as the underlying RSUs and shall be paid at the time the Shares are delivered pursuant to Section 4.

 

6.          Non-transferability.

 

(a)  Restriction on Transfers.  All RSUs, and any rights or interests therein, (i) shall not be sold, exchanged, transferred, assigned or otherwise disposed of in any way at any time by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or by the laws of descent and distribution, (ii) shall not be pledged or encumbered in any way at any time by the Participant (or any beneficiary(ies) of the Participant) and (iii) shall not be subject to execution, attachment or similar legal process.  Any attempt to sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of these RSUs, or the levy of any execution, attachment or similar legal process upon these RSUs, contrary to the terms of this Agreement and/or the Plan, shall be null and void and without legal force or effect.

 

(b)  Other Rights.  Notwithstanding anything herein to the contrary, the Participant, and any permitted transferee, shall not, directly or indirectly, Transfer any Shares acquired by the Participant or permitted transferee (or his or her estate or legal representative), unless in each such instance the Participant or permitted transferee (or his or her estate or legal representative) shall have first offered to the Company the Shares proposed to be Transferred pursuant to a bona fide offer from a third party.  The right of first refusal must be exercised by the Company by delivering to the Participant or permitted transferee (or his or her estate or legal representative) written notice of such exercise within twenty (20) business days of the Company’s receipt of written notification of the proposed sale.  Upon the exercise of a right of first refusal, the Shares proposed to be sold shall be purchased by the Company at the price per share offered to be paid by the prospective transferee.  The notice of exercise of the right of first refusal shall specify the date and location for the closing of such purchase.  This right of first refusal shall expire immediately upon the effectiveness of the filing of a Form 10 with the Securities and Exchange Committee or, if later, the date that the Company’s shares otherwise become registered with the Securities and Exchange Commission.

 

7.            Code Section 409A.  For purposes of Code Section 409A, the regulations and other guidance there under and any state law of similar effect (collectively “Section 409A”), each distribution that is made pursuant to this Agreement is hereby designated as a separate payment.  The Participant and the Company intend that all distributions made or to be made under this Agreement comply with, or are exempt from, the requirements of Section 409A so that none of the distributions will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be so exempt.  Specifically, any distribution made in connection with the Participant’s Termination and paid on or before the 15th day of the 3rd month following the end of the Participant’s first tax year in which the Participant’s Termination occurs or, if later, the 15th day of the 3rd month following the end of the Company’s first tax year in which the Participant’s Termination occurs, shall be exempt from Section 409A to the maximum extent 

 

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permitted pursuant to Treasury Regulation Section 1.409A-1(b)(4) and any additional distribution made in connection with the Participant’s Termination under this Agreement shall be exempt from Section 409A to the maximum extent permitted pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) (to the extent it is exempt pursuant to such section it will in any event be paid no later than the last day of the Participant’s 2nd taxable year following the taxable year in which the Participant’s Termination occurs).  Notwithstanding the foregoing, if any of the distributions provided in connection with the Participant’s Termination do not qualify for any reason to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A- 1(b)(4), Treasury Regulation Section 1.409A-1(b)(9)(iii), or any other applicable exemption and the Participant is, at the time of the Participant’s Termination, a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i), each such distribution will not be made until the first regularly scheduled payroll date of the 7th month after the Participant’s Termination and, on such date (or, if earlier, the date of the Participant’s death), the Participant will receive all distributions that would have been made during such period in a single distribution.  Any remaining distributions due under this Agreement shall be made as otherwise provided herein. The determination of whether the Participant is a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i) as of the time of such Termination shall made by the Committee in accordance with the terms of Section 409A.

 

8.            Entire Agreement; Amendment.  This Agreement, together with the Plan contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter.  The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan.  This Agreement may also be modified or amended by a writing signed by both the Company and the Participant.  The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

 

9.            Acknowledgment of Employee.  This award of RSUs does not entitle Participant to any benefit other than that granted under this Agreement.  Any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation.  Participant understands and accepts that the benefits granted under this Agreement are entirely at the discretion of the Company and that the Company retains the right to amend or terminate this Agreement and the Plan at any time, at its sole discretion and without notice.

 

10.          Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Hawaii, without reference to the principles of conflict of laws thereof.

 

11.          Withholdings and Required Deductions.  Prior to any relevant tax, withholding or required deduction event, as applicable, the Participant agrees to make arrangements satisfactory to the Company for the satisfaction of any applicable tax, withholding, required deduction and payment on account obligations of the Company and/or any Affiliate that arise in connection with the RSUs.  In this regard, the Participant authorizes the Company and/or any Affiliate, or their respective agents, at their discretion, to satisfy any obligations related to any taxes or other required deductions applicable to the RSUs by one or a combination of the following:  (1) withholding from the Participant’s wages or other cash compensation payable to the Participant 

 

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by the Company or any Affiliate; (2) withholding from proceeds of the sale of Shares acquired upon settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); (3) withholding of Shares that otherwise would be issued upon settlement of the RSUs; or (4)  any other arrangement approved by the Company.  Unless the tax obligations or other required deductions described herein are satisfied, the Company shall have no obligation to issue a certificate or book-entry transfer for such Shares.

 

12.             No Right to Employment.  Any questions as to whether and when there has been a termination of such employment and the cause of such termination shall be determined in the sole discretion of the Committee.  Nothing in this Agreement or in the Plan shall interfere with or restrict in any way the rights of the Company or its Subsidiaries to terminate the Participant’s employment or service at any time, for any reason and with or without cause.

 

13.             Notices.  Any notice which may be required or permitted under this Agreement shall be in writing, and shall be delivered in person or via facsimile transmission, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

 

(a)           If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

 

(b)           If such notice is to the Participant, at his/her address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

 

14.             Compliance with Laws.  This issuance of RSUs (and the Shares underlying the RSUs) pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and in each case any respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto.  The Company shall not be obligated to issue these RSUs or any of the Shares pursuant to this Agreement if any such issuance would violate any such requirements.

 

15.             Binding Agreement; Assignment.  This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign (except as provided by Section 6 hereof) any part of this Agreement without the prior express written consent of the Company.

 

16.                Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

 

17.             Headings.  The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

 

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

 

19.             Severability.  The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

 

[Remainder of Page Intentionally Left Blank]

 

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

 

 

	
 
    	
HAWAIIAN TELCOM HOLDCO, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Dan T. Bessey
    
	
 
    	
 
    	
 
    
	
 
    	
Name:   
    	
Dan   T. Bessey
    
	
 
    	
 
    	
 
    
	
 
    	
Title:   
    	
Senior   Vice President and CFO
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PARTICIPANT
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Scott K. Barber
    
	
 
    	
Name:   Scott K. Barber
    

 

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