Document:

pnx_ex101.htm

Exhibit 10.1

 

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (this “Agreement”), effective as of January 1, 2014, is between The Phoenix Companies, Inc., a Delaware corporation (the “Company”), and «Name» (the “Executive”).

RECITALS

The Company or one of its Affiliates (as defined below) has employed the Executive in an officer position and has determined that the Executive holds a critical position with the Company and/or such Affiliate.

The Company believes that, in the event it is confronted with a situation that could result in a change in ownership or control of the Company, continuity of management will be essential to its ability to evaluate and respond to such situation in the best interests of its shareholders.

The Company understands that any such situation will present significant concerns for the Executive with respect to the Executive’s financial and job security.  The Company desires to assure the Company and its Affiliates of the Executive’s services during the period in which it is confronting such a situation, and to provide the Executive certain financial assurances to enable the Executive to perform the responsibilities of the Executive’s position without undue distraction and to exercise the Executive’s judgment without bias due to the Executive’s personal circumstances.  To achieve these objectives, the Company and the Executive desire to enter into an agreement providing the Company and its Affiliates and the Executive with certain rights and obligations upon the occurrence of a Change in Control (as defined below).

The Company and the Executive therefore agree as follows:

 

1.           Operation of Agreement.

 

(a)           Term.  The initial term of this Agreement shall commence on the date of this Agreement and continue through December 31, 2015, unless terminated earlier as provided in Section 5.  Upon the expiration of the initial or any renewal term, this Agreement shall automatically renew for successive one-year terms, subject to earlier termination as provided in Section 5, unless either party provides the other party with a written notice at least sixty (60) days prior to the end of the initial term or any renewal term that the Company or the Executive does not want the term to be so extended.  Notwithstanding anything to the contrary in this Agreement, the term of this Agreement shall in all events expire (regardless of when the term would otherwise have expired) on the second anniversary of a Change in Control; provided that any payment obligations hereunder resulting from the Executive’s termination of employment prior to the expiration of the term shall continue in full force and effect following the expiration of the term.

 

  

1

  

(b)   Effective Date.  If a Change in Control occurs during the term of this Agreement, this Agreement shall govern the terms and conditions of the Executive’s employment and the benefits and compensation to be provided to the Executive commencing on the date on which a Change in Control occurs (the “Effective Date”) and ending on the second anniversary of the Effective Date; provided that if the Executive is not employed by the Company or one of its Affiliates on the Effective Date, this Agreement shall be void and without effect, and shall not constitute a contract of employment or a guarantee of employment for any period of time.  Notwithstanding the preceding sentence, in the event that prior to the Effective Date, the Executive’s employment with the Company or any of its Affiliates is terminated in connection with a Change in Control (which shall in all events be deemed the case if such termination is within 90 days prior to the Effective Date and deemed not to be the case if such termination is more than 180 days before the Effective Date) without Cause or for Good Reason (as such terms are defined in Sections 5(b) and 5(c) below, but without regard to the requirement under Section 5(c) that such termination occur after the Effective Date), the Executive shall be entitled to receive the benefits provided under Section 6(b), but only to the extent that such benefits are in excess of those previously received by the Executive as a result of the Executive’s prior termination.

 

2.           Definitions.

 

(a)   “Affiliate” means any corporation, partnership, limited liability company, trust or other entity which directly, or indirectly through one or more intermediaries, controls, is under common control with, or is controlled by, the Company.

 

(b)           “Change in Control” means the first occurrence of:

 

(i)    any Person acquires “beneficial ownership” (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), directly or indirectly, of securities of the Company representing 35% or more of the combined Voting Power of the Company’s securities;

 

(ii)   within any 24-month period, the persons who were directors of the Company at the beginning of such period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board of Directors (the “Board”) or the board of directors of any successor to the Company; provided that any director elected or nominated for election to the Board by a majority of the Incumbent Directors still in office shall be deemed to be an Incumbent Director for purposes of this subclause 2(b)(ii);

 

  

2

  

(iii)   the effective date of the consummation of any merger, consolidation, share exchange, division, sale or other disposition of all or substantially all of the assets of the Company (a “Corporate Event”), if immediately following the consummation of such Corporate Event  those Persons who were stockholders of the Company immediately prior to such Corporate Event do not hold, directly or indirectly, a majority of the Voting Power, in substantially the same proportion as prior to such Corporate Event, of (x) in the case of a merger or consolidation, the surviving or resulting corporation or (y) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the relevant Corporate Event, holds more than 35% of the consolidated assets of the Company immediately prior to such Corporate Event;

 

(iv)    the approval by stockholders of the Company of a plan of liquidation with respect to the Company; or

 

(v)    the occurrence of any other event occurs which the Board declares to be a Change in Control.

 

(c)           “Code” means the Internal Revenue Code of 1986, as amended.

 

(d)           “Delay Period” means that period of time between the Executive’s date of Separation from Service and the earlier of (i) six months from the Separation from Service date, and (ii) the Executive’s date of death.

 

(e)           “Employment Period” means the period during which the Executive remains employed with the Company or any Affiliate following the Effective Date through the expiration of the term of this Agreement.

 

(f)           “Person” shall have the same meaning as ascribed to such term in Section 3(a)(9) of the Exchange Act, as supplemented by Section 13(d)(3) of the Exchange Act, and shall include any group (within the meaning of Rule 13d-5(b) under the Exchange Act); provided that Person shall not include (i) the Company or any of its Affiliates, or (ii) any employee benefit plan (including an employee stock ownership plan) sponsored by the Company or any of its Affiliates.

 

(g)           “PIP” means the Company's Performance Incentive Plan (or any successor plan) or similar annual incentive plan applicable to the Executive.

 

(h)   “Separation from Service” shall have the meaning set forth and described in the final regulations promulgated under Code section 409A.

(i)           “Voting Power” means such number of Voting Securities as shall enable the holders thereof to cast all the votes which could be cast in an annual election of directors of a company.

 

  

3

  

(j)           “Voting Securities” shall mean all securities entitling the holders thereof to vote in an annual election of directors of a company.

 

3.           Business Time.  During the Employment Period, the Executive shall devote substantially the Executive’s full business time and efforts to the performance of the Executive’s duties on behalf of the Company, and its Affiliates, except for periods of vacation and sick leave or other leave period required by law.  So long as the following activities do not (individually or in the aggregate) materially interfere with the performance of the Executive’s duties with the Company and its Affiliates and are conducted in compliance with the Company’s Code of Conduct (as in effect from time to time), the Executive may:  (a) participate in charitable, civic, educational, professional, community or industry affairs or serve on the boards of directors or advisory boards of not for profit companies; and (b) manage his/her and his/her family’s personal financial and legal affairs.  The Executive may serve on the boards of directors or similar governing bodies of any for profit entity only with the prior written consent of the Company’s Chief Executive Officer or, if the Executive is the Company’s Chief Executive Officer, the Company’s Board of Directors and only as long as such service is not in violation of the Company’s Code of Conduct.  It is expressly understood and agreed that the Executive’s continuing to serve to the same extent and in the same manner on any boards and committees on which the Executive is serving or with which the Executive is otherwise associated immediately preceding the Effective Date shall not be deemed to interfere with the performance of the Executive’s services to the Company and its Affiliates.

 

4.           Compensation.

 

(a)           Base Salary.  During the Employment Period, the Executive shall receive a base salary at a monthly rate at least equal to the monthly salary paid to the Executive immediately prior to the Effective Date.  The base salary may be increased (but not decreased) at any time and from time to time by action of the Board or any committee thereof, the board of directors of any Affiliate or any committee thereof in the event the Executive is employed by an Affiliate, and any individual having authority to take such action in accordance with the Company’s or any Affiliate’s regular practices.  The Executive’s base salary, as it may be increased from time to time, shall hereafter be referred to as the “Base Salary.”

 

(b)           Total Incentive Compensation.  During the Employment Period, the total incentive compensation opportunities made available to the Executive in each year in the form of short-term incentive compensation and long-term incentive compensation (“Total Incentive Compensation”), whether in equity or cash, shall not be less than the Total Incentive Compensation made available to the Executive immediately prior to the Effective Date.  For purposes of this Section 4(b), the amount of Total Incentive Compensation made available to the Executive, whether prior to or after a Change in Control, shall be conclusively determined by an independent compensation consultant selected by the Company prior to the occurrence of a Change in Control (or, if that entity is no longer able to serve or declines to serve in such capacity, such other independent compensation consultant that has no existing client relationship with the Company and its Affiliates as shall be selected by the designated consultant and reasonably acceptable to the Board (either such consultant hereinafter referred to as the “Compensation Consultant”)), using methods of valuation and comparison commonly used in competitive compensation practices, which shall be consistently applied.  The Company shall provide the Compensation Consultant with any and all data that the consultant shall reasonably request in order to make its evaluations hereunder.

 

  

4

  

5.           Termination.

 

(a)           Death, Disability, or Voluntary Resignation.  This Agreement shall terminate automatically upon the Executive’s termination due to death, termination due to “Disability” (as defined below), voluntary retirement (other than for Good Reason, as defined below) under any of the retirement plans of the Company or its Affiliates applicable to the Executive as in effect from time to time, or Executive’s voluntary resignation for any reason (other than for Good Reason).  For purposes of this Agreement, “Disability” shall mean the Executive’s inability to perform his or her material duties for six consecutive months due to a physical or mental incapacity.

 

(b)           Cause.  The Company and each of its Affiliates that employ the Executive may terminate the Executive’s employment for Cause.  For purposes of this Agreement, “Cause” means:  (i) the Executive’s conviction of or plea of nolo contendere to, a felony (other than with respect to a traffic violation or an incident of vicarious liability); (ii) an act of willful misconduct on Executive’s part with regard to the Company or its Affiliates having a material adverse impact on the Company or its Affiliates (including, without limitation, a willful violation of the Company’s Code of Conduct), or (iii) the Executive’s failure in good faith to attempt or refusal to perform legal directives of the Board or executive officers of the Company, as applicable, which directives are consistent with the scope and nature of the Executive’s employment duties and responsibilities and which failure or refusal is not remedied by the Executive within thirty (30) days after notice of such non-performance is given to the Executive.  The Executive shall be provided an opportunity, together with his or her counsel, to be heard before the Board prior to termination and after such notice.  If the majority of the members of the Board do not confirm, through a duly-adopted resolution following such opportunity, that the Company had grounds for a “Cause” termination, the Executive shall have the option to treat his or her employment as not having terminated or as having been terminated pursuant to a termination without Cause.  No event shall constitute grounds for a “Cause” termination in the event that the Company fails to take action within 90 days after the Company’s Chairman or the Chairman of the Company’s Audit Committee obtains actual knowledge of the occurrence of such event.  Additionally, for purposes of clause (ii) of this definition, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company and its subsidiaries.

 

  

5

  

(c)           Good Reason.  After the Effective Date, the Executive may resign from employment at any time for Good Reason.  For purposes of this Agreement, “Good Reason” means the occurrence after the Effective Date of any of the following, without the express written consent of the Executive and which occurrence is not remedied by the Company within thirty (30) days after written notice of such occurrence is given to the Company):

 

(i)           the material reduction in the Executive’s title, position, duties or responsibilities from the title, position, duties or responsibilities held or exercised by the Executive prior to the Effective Date;

 

(ii)           any requirement by the Company that the geographic location where the Executive regularly provides services to the Company is materially changed to a location  that is more than 35 miles from where the Executive provides service to the Company immediately prior to the Effective Date;

 

(iii)           a material diminution/reduction by the Company of the Executive’s Base Salary or Total Incentive Compensation opportunity or a reduction in the employee benefits provided to the Executive under the Company’s employee benefit plans (unless the Executive is provided with substantially equivalent replacement benefits); or

 

(iv)           any failure to obtain the assumption and agreement to perform this Agreement by a successor as contemplated by Section 12(b).

 

(d)           Notice of Termination.  Any termination of the Executive’s employment after the Effective Date by the Company and/or its Affiliates for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party hereto in accordance with Section 14(d).  For purposes of this Agreement, a “Notice of Termination” means a written notice given:  (i) in the case of a termination for Cause, within 10 business days of the Company or any Affiliate that employs the Executive having actual knowledge of the events giving rise to such termination; or (ii) in the case of a termination for Good Reason, within 10 business days of the Executive’s having actual knowledge of the events giving rise to such termination, but in no event later than 90 calendar days after the actual event.  Any such Notice of Termination shall (x) indicate the specific termination provision in this Agreement relied upon, (y) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated, and (z) if the termination date is other than the date of receipt of such notice, specify the termination date of this Agreement (which date shall be not more than 15 days after the giving of such notice).

 

  

6

  

(e)           Date of Termination.  For the purpose of this Agreement, the term “Date of Termination” means:  (i) in the case of a termination for which a Notice of Termination is required, the date of receipt of such Notice of Termination or, if later, the date specified therein, as the case may be, and (ii) in all other cases, the actual date on which the Executive’s Separation from Service occurs during the Employment Period.

 

6.           Obligations of the Company or an Affiliate upon Termination.

 

(a)           Death, Disability, Retirement, Voluntary Resignation and Termination for Cause.  If the Executive’s employment is terminated during the Employment Period by reason of the Executive’s death, Disability, termination for Cause, or voluntary termination due to his or her retirement or other resignation (other than on account of Good Reason), this Agreement shall terminate without further obligations to the Executive or the Executive’s legal representatives under this Agreement other than those obligations accrued hereunder at the Date of Termination, and the Company or the Affiliate that employs the Executive shall pay to the Executive (or the Executive’s beneficiary or estate), at the times determined below:  (i) the Executive’s full Base Salary through the Date of Termination (the “Earned Salary”), (ii) any vested amounts or benefits owing to the Executive under and in accordance with the terms and conditions of any otherwise applicable employee benefit plans, agreements and programs and any accrued vacation pay not yet paid (the “Accrued Obligations”), and (iii) any other benefits payable in such situation under the plans, agreements, policies or programs of the Company and its Affiliates and in accordance with the terms of such plans, policies and programs (the “Additional Benefits”).  Any Earned Salary shall be paid in cash in a single lump sum as soon as practicable, but in no event more than 30 days (or at such earlier or later date required by law), following the Date of Termination.  Accrued Obligations and Additional Benefits shall be paid in accordance with the terms of the applicable plan, program or arrangement.

 

(b)           Termination Without Cause or for Good Reason.  If, during the Employment Period, the Company or the Affiliate that employs the Executive terminates the Executive’s employment other than for Cause or the Executive terminates his or her employment for Good Reason:

 

(i)           Additional Lump Sum Payments.  In lieu of (and not in addition to) any severance benefits payable to the Executive under any other plan, policy or program of the Company or any Affiliate (each, a “Severance Policy”) or under any written agreement between the Executive and the Company (each, a “Prior Agreement”), the Company shall pay to the Executive (or cause the Executive to be paid), at the times determined below, the following amounts:

 

	
  

	
(A)

	
the Executive’s Earned Salary;

 

  

7

  

	
  

	
(B)

	
a cash amount (the “Severance Amount”) equal to [2.0 or 1.0] times the sum of (x) the Executive’s annual rate of Base Salary as then in effect and (y) the target applicable to the Executive under the PIP for the year in which the Executive’s employment terminates; and

 

	
  

	
(C)

	
the Accrued Obligations and Additional Benefits.

 

The Earned Salary shall be paid in cash in a single lump sum as soon as practicable, but in no event more than 30 days (or at such earlier or later date required by law), following the Date of Termination.  The Severance Amount shall be paid in a single lump sum as soon as practicable, but no later than 60 days, following the Date of Termination.  The Accrued Obligations and Additional Benefits shall be paid in accordance with the terms of the applicable plan, program or arrangement.  Notwithstanding the foregoing, but subject to Section 13(b), the Executive may elect in writing to receive the benefits payable under any Severance Policy that would otherwise be available to him or her, or the termination benefits under any Prior Agreement to which he or she is a party, in each case in lieu of receiving the benefits payable hereunder; provided, however, that such benefits shall be paid in a lump sum at the same times as in the preceding sentences of this paragraph.

 

[(ii)           Payment in Consideration of the Restrictive Covenants in Section 7.  In addition to the Severance Amount specified in and payable under Section 6(b)(i) and as the consideration for the covenants made by Executive pursuant to Section 7 hereof, the Company shall pay to the Executive (or cause the Executive to be paid) a single lump sum amount equal to the product of 1.5 times the sum of (x) the Executive’s annual rate of Base Salary as then in effect and (y) the target applicable to the Executive under the PIP for the year in which the Executive’s employment terminates (the “Non-competition Payment”).  Such Non-Competition Payment shall be paid as soon as practicable, but no later than 60 days, following the Date of Termination.]

 

(iii)           Continuation of Benefits.  The Executive (and, to the extent applicable, the Executive’s dependents) shall be entitled, after the Date of Termination until the end of the second calendar year following the calendar year of the Date of Termination (the “End Date”), to continue participation in all of the employee and executive plans providing medical, dental and long-term disability benefits that the Executive participated in prior to the Date of Termination (collectively, the “Continuing Benefit Plans”); provided that coverage with regard to medical, dental and long-term disability benefits for the period after the end of the eighteen (18)-month period following the Date of Termination shall be deemed to be monthly, in-kind payments of the premiums and will be taxable income to the Executive; and provided further that the participation by the Executive (and, to the extent applicable, the Executive’s dependents) in any Continuing Benefit Plan shall cease on the date, if any, prior to the End Date on which the Executive becomes eligible for comparable benefits under a similar plan, policy or program of a subsequent employer (“Prior Date”).  The Executive agrees to notify the Company promptly if and when Executive begins employment with another employer and if and when Executive becomes eligible to participate in any benefit or other welfare plans, programs or arrangements of another employer.  The Executive’s participation in the Continuing Benefit Plans will be on the same terms and conditions that would have applied had the Executive continued to be employed by the Company or the Affiliate that employs the Executive through the End Date or the Prior Date.  To the extent any such benefits cannot be provided under the terms of the applicable plan, policy or program, the Company shall provide (or shall cause to be provided) comparable benefits under another plan or from its general assets. To the extent any medical or dental plan is a “self-insured medical reimbursement plan” under Code section 105(h) and such coverage would be discriminatory thereunder, the premiums (both during and after the eighteen (18)-month period) shall be taxable income to the Executive and the Company or its Affiliates shall pay the Executive promptly after the provision of such benefits additional cash payments to the extent necessary for the Executive to receive the same net after-tax benefits that the Executive would have received under such plans if the Executive had continued to receive such plan benefits while employed with the Company; provided that any such additional cash payment that would be paid within the Delay Period (as defined in Section 2(d) hereof) shall not be paid during such Delay Period, but shall be paid immediately thereafter.

 

  

8

  

(iv)           Deemed Vesting for Certain Benefits.  If not already fully vested in any equity award on the Effective Date, the Executive shall be deemed to have met all service and other requirements for full vesting of benefits under all stock option or other stock or equity compensation plans of the Company in which the Executive participates and the stock options held by the Executive shall remain exercisable for the lesser of two years or the duration of their normal terms, if the Executive’s employment is terminated after a Change in Control and during the term of this Agreement, unless during that period the Executive meets all of the full vesting criteria.  Any equity award that is covered by this paragraph and that is subject to performance or market conditions will vest at target.

 

(v)           Pro-rata Payment of PIP and Long-Term Incentive Award.  The Company shall pay to the Executive a cash amount equal to a pro rata portion of (A) the Executive’s target annual incentive award under the PIP for the fiscal year in which the Executive’s Date of Termination occurs and (B) subject to the terms and conditions of the individual award agreements underlying each award when granted, any awards made to the Executive under the Company’s long-term incentive plan (or any successor plan) determined using (i) the targets applicable to such awards were achieved if the Change in Control occurs prior to the completion of the performance period, or (ii) the actual results achieved if the Change in Control occurs after the completion of the performance period.  The PIP amount and the long-term incentive awards amount shall not be paid prior to six (6) months following the Executive’s Date of Termination. The pro-rata portion of each award shall be determined by multiplying the value of the award times a fraction, the numerator of which is the number of days during the performance period applicable to each such award prior to the Date of Termination and the denominator of which is the number of days in the performance period applicable to each such award. Notwithstanding the foregoing, any amount payable under this subparagraph in respect of the annual incentive award or in respect of any long-term incentive plan shall be the only amounts payable to the Executive under the PIP and long-term incentive plans for the year in which the Date of Termination occurs.

  

9

  

(vi)           Outplacement.  The Company shall provide the Executive with reasonable outplacement services at a level commensurate with the Executive’s position for up to twelve (12) consecutive months after the Executive’s Date of Termination.

 

[Outplacement Services:  For those Executives subject to a non-compete clause in this Agreement, reasonable outplacement services will be provided for a period of up to 12 consecutive months following the end of the non-compete period, so long as the services do not extend beyond the end of the second calendar year after the calendar year of the Executive’s termination of employment and reimbursement is made by the end of the third calendar year after the calendar year of the Executive’s termination of employment.]

 

(c)           Discharge of the Company’s and its Affiliates’ Obligations.  Except as expressly provided in the last sentence of this Section 6(c) and all of Section 15, the amounts payable to the Executive pursuant to this Section 6 following termination of the Executive’s employment shall be in full and complete satisfaction of the Executive’s rights under this Agreement and any other claims the Executive may have in respect of the Executive’s employment by the Company and its Affiliates.  Such amounts shall constitute liquidated damages with respect to any and all such rights and claims and, upon the Executive’s receipt of such amounts, the Company and its Affiliates shall be released and discharged from any and all liability to the Executive in connection with this Agreement or otherwise in connection with the Executive’s employment by the Company and its Affiliates.  Notwithstanding the foregoing: (i) the Executive shall retain all rights with respect to the Company’s continuing obligations to indemnify the Executive as a former officer and/or director of the Company or its Affiliates, and to provide directors and officers liability insurance, to the fullest extent permitted under the Company’s certificate of incorporation and by-laws or any other arrangement and (ii) to the extent the Executive is entitled to greater rights with respect to any category of severance payments or benefits in any similar situation under any other arrangement with the Company, the Executive shall be entitled to such greater rights.

  

10

  

(d)           Section 280G Limitation on Payments by the Company and its Affiliates.

(i)           Application of Section 6(d).  In the event that any amount or benefit to be paid or distributed to, or on behalf of, the Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to, or on behalf of, the Executive by the Company, its Affiliates and their successors, including any acquiror of the Company or its Affiliates (or any person or entity required to be aggregated with the Company or its Affiliates for purposes of Code section 280G) under any other plan, agreement, or arrangement (collectively, the “Covered Payments”), would be an “excess parachute payment” as defined in Code section 280G, and would thereby subject the Executive to the tax (the “Excise Tax”) imposed under Code section 4999 (or any similar tax that may hereafter be imposed), the Company shall reduce the aggregate value of all Covered Payments to an amount equal to 2.99 times the Executive’s average annual compensation calculated in accordance with Code section 280G (such reduced payments to be referred to as the “Payment Cap”).  In the event that as a consequence of the foregoing, Executive receives reduced payments and benefits hereunder, Executive shall have the right to designate which of the payments and benefits otherwise provided for in this Agreement that the Executive will receive in connection with the application of the Payment Cap, but may not change the time of payment thereof.

(ii)           Calculation of Benefits.  Immediately following delivery of any notice of involuntary termination not for Cause by the Company or of any Notice of Termination by the Executive for Good Reason, the Company shall notify the Executive of the aggregate present value of all “parachute payments” (within the meaning of Code section 280G) to which the Executive would be entitled under this Agreement and any other plan, program or arrangement as of the projected Date of Termination, together with the projected maximum payments, determined as of such projected Date of Termination, that could be paid without the Executive exceeding the Payment Cap.

(iii)           Application of Code Section 280G.  For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax,

  

11

  

(1)           such Covered Payments will be treated as “parachute payments” within the meaning of Code section 280G, and all “parachute payments” in excess of the “base amount” (as defined under Code section 280G(b)(3)) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of an independent certified public accountant other than the Company’s normal independent certified public accountants or tax counsel selected by such accountants (the “Accountants”), relying on the best authority available at the time of such determination (including, but not limited to, any proposed Treasury regulations upon which taxpayers may rely), that the Company or any otherwise applicable Subsidiary has a reasonable basis to conclude that such Covered Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for personal services actually rendered (within the meaning of Code section 280G(b)(4)(B)) in excess of the “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax, and

(2)           the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Code section 280G.

(iv)           Adjustments in Respect of the Payment Cap.

(1)           If the Executive receives reduced payments and benefits under this Section 6(d) (or this Section 6(d) is determined not to be applicable to the Executive because the Accountants conclude that the Executive is not subject to any Excise Tax) and it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding (a “Final Determination”) that, notwithstanding the good faith of the parties in applying the terms of this Section 6(d), the aggregate “parachute payments” within the meaning of Code section 280G paid to the Executive or for his benefit are in an amount that would result in the Executive being subject an Excise Tax and, taking into account the amount of such aggregate parachute payments specified in such Final Determination, the Payment Cap should have been applied under the provisions of this Section 6(d), then the amount equal to the excess parachute payments made to the Executive shall be deemed for all purposes to be a loan to the Executive made on the date of receipt of such excess payments, which the Executive shall have an obligation to repay to the entity making such payment on demand, together with interest on such amount at the applicable Federal rate (as defined in Code section 1274(d)) from the date of the payment hereunder to the date of repayment by the Executive.

 

  

12

  

(2)           If the Executive receives reduced payments and benefits under this Section 6(d) and it is established pursuant to a Final Determination that, notwithstanding the good faith of the parties in applying the terms of this Section 6(d), the aggregate “parachute payments” within the meaning of Code section 280G paid to the Executive or for his benefit are in an amount that would result in the Executive being subject to an Excise Tax and, taking into account the amount of such aggregate parachute payments, the Payment Cap should not have been applied under Section 6(d), then the Company shall pay the Executive 30 days following such Final Determination an amount equal to the excess of (i) the amount of Aggregate Parachute Payments that would have been payable to the Executive without regard to Section 6(d) over (ii) the reduced amount actually paid to the Executive in accordance with Section 6(d), together with interest on such excess amount at the applicable Federal rate (as defined in Code section 1274(d)) from the date payment would have been made to the Executive of such excess amount (or any portion thereof) but for the application of Section 6(d) to the date of actual payments.

 

(3)           If the Executive receives reduced payments and benefits by reason of Section 6(d)(i) and it is established pursuant to a Final Determination that the Executive could have received a greater amount without exceeding the Payment Cap, then the Company or the appropriate Subsidiary shall promptly thereafter pay the Executive within 30 days of the date of the Final Determination the aggregate additional amount which could have been paid without exceeding the Payment Cap, together with interest on such amount at the applicable Federal rate (as defined in Code section 1274(d)) from the original payment due date to the date of actual payment.

(v)           Survival.  The provisions of this Section 6(d) of the Agreement shall survive the termination of the Executive’s employment hereunder and the termination of this Agreement with regard to any event that occurred prior thereto.

7.           Restrictive Covenant(s).

 

(a)           Non-Solicitation.  During the Employment Period, and for a period of 1.5 years after the Employment Period, the Executive agrees not to induce, encourage, or solicit, either directly or indirectly, any customer, client, employee, officer, director, agent, broker, registered representative or independent contractor to either:  (i) terminate their respective relationship or contracts with the Company or its Affiliates; or (ii) not place business with the Company or its Affiliates.  The Executive agrees the restrictions in this paragraph apply whether the Executive voluntarily terminates his or her employment or is involuntarily terminated with or without Cause or for Good Reason during the Employment Period.

 

  

13

  

[(b)           Non-Competition.  For a period of 1.5 years after his Date of Termination, Executive shall not, directly or indirectly, either for Executive’s own benefit or purposes or for the benefit or purposes of any other person or entity, engage in, invest in, own, manage, operate, control or participate in the ownership, management, operation or control of, or be employed by or render services to, any business which is engaged in a Competitive Activity.  For purposes of this Agreement, the term “Competitive Activity” shall mean any activity that is directly competitive with the Company’s business of manufacturing and distributing life insurance and associated products, including any activities that are directly ancillary thereto.  Notwithstanding the foregoing, Executive shall not be deemed to be in breach of the covenant contained in this Section 7(b) unless the activity in which Executive engages, or the services which Executive provides, in respect of such Competitive Activity relate in a substantial way to the services provided to, and responsibilities undertaken by the Executive for, the Company during the 18 month period immediately prior to Executive’s Date of Termination.  For purposes of this Section 7(b), it is agreed that Executive’s ownership of not more than one percent (1%) of the outstanding voting stock of a publicly traded corporation or not more than five percent (5%) of the equity of a private entity shall not in itself constitute a violation of this Agreement, provided that in the case of equity of a private entity such ownership interest is treated by Executive as a passive investment and Executive discloses such ownership interest in writing to the Company.]

 

8.           Non-Exclusivity of Rights.  Except as expressly provided in this Agreement, nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other agreements with the Company or any of its Affiliates, including employment agreements, stock option agreements, and other stock or equity compensation agreements.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any Affiliate at or subsequent to the Date of Termination shall be payable in accordance with such plan or program and subject to Section 15, if applicable.

 

9.           No Offset.  Except as expressly provided in this Agreement and specifically Section 15, the obligation of the Company to make the payments provided for in this Agreement or any of its Affiliates to make the payments provided for in this Agreement and otherwise to perform the obligations hereunder shall not be diminished or otherwise affected by any circumstances, including, but not limited to, any set-off, counterclaim, recoupment, defense or other right which the Company or any of its Affiliates may have against the Executive or others, whether by reason of the subsequent employment of the Executive or otherwise.

 

  

14

  

10.           Legal Fees and Expenses.  If the Executive asserts any claim in any contest (whether initiated by the Executive or by the Company or any of its Affiliates) as to the validity, enforceability or interpretation of any provision of this Agreement or to enforce and/or collect any payment or benefit payable hereunder, the Company shall pay the Executive’s legal expenses (or cause such expenses to be paid) including, but not limited to, the Executive’s reasonable attorneys’ fees, on a quarterly basis, promptly upon presentation of proof of such expenses in a form acceptable to the Company, which submission shall be made within forty-five (45) days after the end of such quarter; provided that the Executive shall reimburse the Company for such amounts (to the extent permitted under applicable law), plus simple interest thereon at the 90-day United States Treasury Bill rate as in effect from time to time, compounded annually, if the arbitrator determines that the Executive’s claims were substantially frivolous or brought in bad faith.

 

11.           Surviving Agreements.  This Agreement provides for certain payments and benefits to the Executive to be determined by the employee benefit plans and programs, incentive plans, stock option, and other stock or equity compensation plans of the Company and its Affiliates.  To the extent so provided, such programs and plans constitute part of the agreement and understanding between the Executive and the Company and are incorporated herein and made a part hereof.  The Executive and the Company hereby reaffirm their respective commitments under such programs and plans, and again agree to be bound by each of the covenants contained therein for the benefit of the Company in consideration of the benefits made available to the Executive hereby.

 

12.           Successors.

 

(a)  This Agreement is personal to the Executive and, without the prior written consent of the Company, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives and his or her estate.

 

(b)  This Agreement shall inure to the benefit of and be binding upon the Company and shall be assignable, in writing, by the Company only to the acquiror of all or substantially all, of the assets of the Company.  The Company shall require any successor to all or substantially all of the business and/or assets of the Company, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock, or otherwise, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform if no such succession had taken place.

 

  

15

  

13.           Section 409A.

 

(a) The intent is that payments and benefits under this Agreement comply with Code section 409A and accordingly this Agreement shall be interpreted to be in compliance therewith.  The Company may from time to time amend this Agreement, without obtaining the consent of the Executive, as the Company deems necessary or desirable to comply with the requirements of Code section 409A and the regulations and guidance provided thereunder, regardless of whether any such amendment would cause a reduction or cessation of a benefit accrued prior to the adoption of such amendment.  To the extent that this Agreement is modified to comply with Code section 409A, such modification shall, to the extent reasonably possible, maintain the original intent of the applicable provision of this Agreement without violating the provisions of Code section 409A.

 

(b) It is intended that the payments under this Agreement, to the extent applicable, comply with the short-term deferral rule under Code section 409A.

14.           Miscellaneous.

(a)           Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut, applied without reference to principles of conflict of laws.

(b)           Amendments.  Except as provided in Section 13(a), this Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

(c)           Entire Agreement.  This Agreement constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and completely supersedes and replaces any prior agreement between the Executive and the Company or any of its Affiliates concerning the subject matter herein.  No subsequent agreement concerning the subject matter herein, oral or otherwise, shall be binding between the parties unless it is in writing and signed by the party against whom enforcement is sought.  Except as expressly provided herein, nothing in this Agreement shall be construed or interpreted to enhance, increase, reduce or diminish any rights, duties or obligations of the Executive under any agreement between the Executive and the Company or any of its Affiliates, or under any employee benefit plan program (as further set forth in Section 11) or procedure established by the Company or any of its affiliates with respect to any subject matter herein.  There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein.  The Executive acknowledges that the Executive is entering into this Agreement of the Executive’s own free will and accord, and with no duress, that the Executive has read this Agreement and that the Executive understands it and its legal consequences.

 

  

16

  

(d)           Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party, overnight mail, or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	
  

	
If to the Executive:

	
Home address of the Executive noted on the records of the Company

 

If to the Company:               The Phoenix Companies, Inc.

One American Row

PO Box 5056

Hartford, CT 06102-5056

Attn.:  General Counsel

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

 

(e)           Tax Withholding.  The Company shall withhold (or cause such withholding) from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(f)           Severability; Reformation.  In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

 

(g)           Waiver.  Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived.  No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or the Executive’s rights hereunder on any occasion or series of occasions.

 

(h)           Confidentiality.  In further consideration for entering into this Agreement, the Executive, after termination of the Executive’s employment, shall retain in confidence any confidential or proprietary information known to the Executive concerning the Company and its Affiliates and their business so long as such information is not publicly disclosed and shall not use such information in any way injurious to the Company or its Affiliates except for any disclosure to which an authorized officer of the Company or such Affiliate has consented or any disclosure or use required by any order of any governmental body or court (including legal process).  If requested, the Executive shall return to the Company and its Affiliates any memoranda, documents or other materials possessed by the Executive and containing confidential or proprietary information of the Company and its Affiliates.  Notwithstanding the preceding sentence, the Executive shall not be required to return to the Company or its Affiliates, any memoranda, documents or other materials containing confidential or proprietary information of the Company or its Affiliates, if such materials were provided to the Executive in his or her capacity as a director of the Company or its Affiliates.

 

  

17

  

(i)           Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

(j)   Captions.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

15.   Compensation Recovery Policy (“Clawback Policy”).

 

The Executive is covered under the Company’s Compensation Recovery, Policy, as currently in effect and as amended from time to time (“Clawback Policy”), which, under certain circumstances, allows the Company to recover incentive compensation paid to certain executives.  The benefits provided under Sections 4(b), 6(a)(iii), 6(b)(i)(B), 6(b)(ii), 6(b)(iv), and 6(b)(v) of this Agreement are subject to the Clawback Policy, a copy of the currently effective version of which has been provided to the Executive, and such benefits shall be repaid to the Company if and to the extent that the Company’s Board determines that repayment must be pursuant to the Clawback Policy.

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and the Company has caused this Agreement to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written.

	 	
THE PHOENIX COMPANIES, INC.

	 	 
	 	 	 	 	 
	
 

	
By: 

	/s/ 	 	 
	 	 	Name:  Jody A. Beresin	 	 
	 	 	Title:    Senior Vice President	 	 
	 	 	 	 	 
	 	WITNESS:	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	EXECUTIVE: 	 	
DATE:

	 	 	 	 	 
	 	 	 	 	 
	 	(Name)	 	 
	 	 	 	 
	 	WITNESS:	 	 
	 	 	 	 	 
	 	 	 	 	 

 

18RealSource Residential 8-K

EXHIBIT 4.1

 

NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

	No. _______	
 U.S. $________________.00

 

Form of

REALSOURCE RESIDENTIAL, INC.

 

12% SERIES A SENIOR UNSECURED CONVERTIBLE PROMISSORY NOTE

DUE __________, 2015

 

THIS PROMISSORY NOTE is one of a duly authorized issue of notes of RealSource Residential, Inc., a Nevada corporation, having a principal place of business at 2089 Fort Union Blvd., Salt Lake City, UT 84121 (the “Company”) designated as 12% Series A Senior Unsecured Convertible Promissory Notes due ________, 2015 (the “Notes”), in an aggregate principal amount of up to $2,000,000 (with no aggregate minimum offering amount and with a Company option for an additional $250,000).

 

This Note is purchased by the initial Holder (as defined herein) pursuant to the terms of that certain Executive Summary/Risk Factor Booklet of the Company (such document and any amendments or supplements thereto prepared and furnished by the Company, being referred to herein as the “Executive Summary”), and the Subscription Agreement, between the Company and the initial Holder of this Note, as amended, modified or supplemented from time to time in accordance with its terms (the “Subscription Agreement”).

 

FOR VALUE RECEIVED, the Company promises to pay to _________________________, the registered holder hereof, and such party’s successors and assigns (the “Holder”), the principal sum of _________________________________ Dollars ($__________.00) on or prior to ___________, 2015 as provided hereunder (the “Maturity Date”) and to pay interest to the Holder on the principal sum at the rate of 12% per annum, which interest shall be payable on the Maturity Date and on any Conversion Date (as defined in Section 4) with respect to such principal amount then outstanding hereunder.

 

Interest shall accrue daily at the aforesaid annual interest rate commencing on the Original Issue Date (as defined in Section 4) until payment in full of the principal amount of this Note, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made.  Interest shall be calculated on the basis of a 360-day year and for the actual number of days elapsed.  Interest hereunder will be paid to the person in whose name this Note (or one or more predecessor Notes) is registered on the records of the Company regarding registration and transfers of the Notes (the “Note Register”).

 

    	1

    	 

    
 

 

Except as provided for herein, the principal of, and interest on, this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts, at the address of the Holder last appearing on the Note Register.

 

Prior to the Maturity Date, upon 15 days prior written notice to the Holder, the Company may elect to prepay this Note in whole, without premium or penalty but with accrued interest to the date of prepayment on the amount prepaid.

 

This Note is not secured.

 

This Note is subject to the following additional provisions:

 

1.         Investment Representations.  This Note has been issued subject to certain investment representations of the original Holder set forth in the Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable law.  Prior to due presentment to the Company for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

2.         Events of Default.

 

(a)          When used herein, the term “Event of Default” means any one of the following events:

 

(i)           any default in the payment of the principal of or interest on this Note, as and when the same shall become due and payable in accordance with the terms hereof;

 

(ii)          the Company shall fail to observe or perform any material covenant, agreement or warranty contained in, or otherwise commit any breach of, this Note or the Subscription Agreement, and such failure or breach shall not have been remedied within thirty (30) days after the date on which notice of such written failure or breach shall have been received by the Company;

 

(iii)         (A) the Company or any of its subsidiaries shall commence a voluntary case under the United States Bankruptcy Code or insolvency laws as now or hereafter in effect or any successor thereto (the “Bankruptcy Code”); or (B) an involuntary case is commenced against the Company under the Bankruptcy Code and the petition is not controverted within 30 days, or is not dismissed within 90 days, after commencement of  such involuntary case; or (C) a “custodian” (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of the Company which continues undischarged or unstayed for a period of 90 days; or (D) the Company is adjudicated insolvent or bankrupt; or (E) any order of relief or other order approving any such case or proceeding is entered; or (F) the Company makes a general assignment for the benefit of creditors; or (G) the Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or (H) the Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing;

 

(iv)         the Company shall become a party to any Change of Control Transaction (as defined in Section 5).

 

    	2

    	 

    
 

 

(b)          If any Event of Default occurs and is continuing, the full principal amount of this Note, together with accrued interest and other amounts owing in respect thereof, to the date of acceleration shall become, immediately due and payable in cash.  Interest shall continue to accrue on the amount due hereunder beginning from the seventh day after an Event of Default is declared through the date of payment in full thereof at the rate of 12% per annum.  All Notes and Underlying Shares (as defined herein) for which the full repayment price hereunder shall have been paid in accordance herewith shall be promptly surrendered to or as directed by the Company.  Following an Event of Default, the Holder need not provide, and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law.  Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder.  No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.  The rights of the Holder in this Section 2 shall be pari passu with other Holders.

 

3.         Conversion.

 

(a)           Optional Conversion.  The Holder shall have the following conversion rights with respect to this Note:

 

(i)            Right to Convert.

 

(A)          Conversion Ratio.  The entire (but not part of) principal amount of this Note, together with accrued interest thereon (subject to Section 3(a)(i)(C) below), shall be convertible, at the option of the Holder, into shares of fully paid and nonassessable shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”) at any time after the date of issuance of this Note.  In such event, the number of fully paid and nonassessable shares of Common Stock to be issued upon conversion (the “Conversion Shares”) shall equal: (1) the principal amount of this Note and the accrued interest thereon divided by (2) $0.50 (the “Conversion Price”).

 

(B)           Fractional Shares.  No fractional shares of Common Stock shall be issued upon conversion of the Note.  In lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall have the right in its discretion to either (1) pay cash equal to such fraction multiplied by the Fair Market Value (as defined herein) of a share of Common Stock, or (2) round up such fractional share to the nearest whole number.

 

(C)           Cash for Interest.  Notwithstanding the provisions of Section 3(a)(i)(A) above, at the time of conversion of this Note, the Company shall have the right in its discretion to pay any accrued interest on this Note in cash in lieu of Conversion Shares.

 

    	3

    	 

    
 

 

(ii)           Mechanics of Conversion.

 

(A)           Notice of Conversion.  In order for a Holder to voluntarily convert this Note into Conversion Shares, the Holder shall surrender this Note (or, if such Holder appearing in the Note Register alleges that the Note has been lost, stolen or destroyed, a lost note affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such Note), at the principal office of the Company, together with written notice that the Holder elects to convert the Note.  Such notice shall state the Holder’s name or the names of the nominees in which the Holder wishes the certificate or certificates for Conversion Shares to be issued.  If reasonably required by the Company, a Note surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the registered Holder or his, her or its attorney duly authorized in writing.  The close of business on the conversion date set forth in the notice to be provided pursuant to this Section 3(a)(ii)(A) shall be the time of conversion (the “Conversion Time”), and the Conversion Shares issuable upon conversion of this Note shall be deemed to be outstanding of the Conversion Time.  The Company shall, as soon as practicable after the Conversion Time: (1) issue and deliver to the Holder or to his, her or its nominees, a certificate or certificates for the Conversion Shares issuable upon such conversion in accordance with the provisions hereof, (2) pay in cash, if applicable, such amount as provided in Section 3(a)(i)(B) in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion, and (3) if elected by the Company, pay in cash any accrued interest due under the Note as provided in Section 3(a)(i)(C).

 

(B)           Reservation of Shares.  The Company shall at all times reserve and keep available out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of this Note, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Notes; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding Notes, the Company shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Articles of Incorporation.  Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of the Notes, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

 

(C)           Effect of Conversion.  Any Note which has been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such Note shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive (i) Conversion Shares in exchange therefor, (ii) payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 3(a)(i)(B), and (iii) if applicable, payment of any interest pursuant to Section 3(a)(i)(C).

 

(D)           No Further Adjustment.  Upon any such conversion, no adjustment to the Conversion Price shall be made for any accrued and unpaid interest surrendered for conversion (or paid in cash as the case may be) or on the Common Stock to be delivered upon conversion.

 

(iii)          Taxes.  The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of the Conversion Shares upon conversion of this Note.  The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the Note so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.

 

    	4

    	 

    
 

 

(b)           Adjustment for Stock Splits, Dividends and Combinations.

 

(A)         If the Company shall at any time or from time to time after the Purchase Date effect a subdivision, combination or similar event (a “Split Event”) of the outstanding Common Stock, the number of shares of Common Stock issuable upon conversion of this Note and the Conversion Price in effect immediately before the Split Event shall be proportionately adjusted so that the shares of Common Stock issuable will adjust in proportion to such increase or decrease in the shares of Common Stock outstanding following the Split Event, and the Conversion Price shall adjust so that the aggregate Conversion Price shall be the same as if a conversion of the Series A Stock was effected immediately prior to the Split Event.  Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

(B)           Adjustment for Dividends and Distributions.  In the event the Company at any time or from time to time after the Purchase Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:

 

(1)           the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

 

(2)           the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

 

Notwithstanding the foregoing: (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the Holders of Notes simultaneously receive a distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding Notes had been converted into Common Stock on the date of such event.

 

(C)           Adjustment for Merger or Reorganization, etc.  If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock is converted into or exchanged for securities, cash or other property (other than a transaction covered by this Section 3(b)), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, the principal and interest under this Note shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Company issuable upon conversion of this Note immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction

 

    	5

    	 

    
 

 

(c)           Mandatory Conversion.

 

(i)            Trigger Event.  In the event that the 90-day trailing volume weighted average public price per share of the Common Stock exceeds $1.50 at any time during the term of this Note, this Note and all other Notes shall automatically and without any further action required convert at the then applicable Conversion Price.

 

(ii)           Procedural Requirements.  All holders of record of Notes shall be sent written notice 10 days prior to the occurrence of any of the transactions set forth in Section 3(c)(i) and the place designated for mandatory conversion of all such Notes pursuant to this Section 3(c).  Upon receipt of such notice, the Holder shall surrender his, her or its Note (or, if such Holder alleges that the Note has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such Note) to the Company at the place designated in such notice.  If reasonably required by the Company, Notes surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the registered holder or by his, her or its attorney duly authorized in writing.  All rights with respect to the Notes converted pursuant to Section 3(c)(i), including the rights, if any, to receive notices (other than as a holder of Common Stock), will terminate automatically upon the occurrence of any of the transactions set forth in Section 3(c)(i) (notwithstanding the failure of the Holder to surrender this Note at or prior to such time or the failure by the Company to provide the notice specified by this Section 3(c)(ii)).  The date of the occurrence of any of the transactions set forth in Section 3(c)(i) shall also be deemed as the Conversion Time.  As soon as practicable after any of the transactions set forth in Section 3(c)(i) and the surrender of the Note (or lost Note affidavit and agreement), the Company shall issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of Conversion Shares issuable on such conversion in accordance with the provisions hereof, together with cash, if applicable, as provided herein in lieu of any fraction of a share of Common Stock or interest.

 

4.           Definitions.  As used herein, the following capitalized terms shall have the following meanings:

 

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

 

“Change of Control Transaction” means the consummation of any of (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended) of in excess of 50% of the voting securities of the Company, (ii) a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Board of Directors on the date hereof in one or a series of related transactions or (iii) the merger of the Company with or into another entity, consolidation or sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction, the holders of the Company’s securities continue to hold at least 50% of such securities following such transaction.

 

“Fair Market Value” shall be determined based upon the average closing price of the Common Stock on the five (5) days prior to the date the Fair Market Value is determined.

 

“Original Issue Date” shall mean the date of the issuance of this Note.

 

    	6

    	 

    
 

 

“Person” means a corporation, an association, a partnership, a limited liability company, any other entity (including any trust), an organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

 

5.           Payment Unconditional.  Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and interest on, this Note at the time, place, and rate, and in the coin or currency, herein prescribed.  This Note is a direct obligation of the Company.  This Note ranks pari passu with all other Notes now or hereafter issued pursuant to the Executive Summary and the Subscription Agreement.

 

6.           No Rights as Shareholder.  This Note shall not entitle the Holder to any of the rights of a shareholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of shareholders or any other proceedings of the Company, unless, until and to the extent converted into shares of Common Stock in accordance with the terms hereof.

 

7.           Lost Notes.  If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed debenture, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

 

8.           Governing Law, Notices, etc.  All questions concerning the governing law, construction, validity, enforcement and interpretation of this Note shall be determined in accordance with the provisions of the Subscription Agreement.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.

 

9.           No Waiver, etc.  Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note.  The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note.

 

10.         Amendments.  Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the face value of the then outstanding Notes.

 

11.         Waiver of Presentment.  The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder.

 

12.         Currency.  All payments with respect to this Note shall be made in lawful money of the United States of America, at the address last appearing on the Note Register of the Company as designated in writing by the Holder hereof from time to time.  The forwarding by the Company of such funds shall constitute a payment of principal and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such payment.

 

    	7

    	 

    
 

 

13.         Successors and Assigns.  The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the permitted successors, assigns, heirs, administrators and transferees of the parties hereto.  Notwithstanding the foregoing, the Holder may not assign, pledge or otherwise transfer this Note without the prior written consent of the Company.  Any permitted assignment shall be undertaken pursuant to agreements of transfer approved by the Company.  The principal and any accrued but unpaid interest of this Note is payable only to the registered Holder of this Note in the Note Register.

 

14.         Severability.  If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms.

 

15.         Business Days.  Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next calendar month, the preceding Business Day in the appropriate calendar month).

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer duly authorized for such purpose, as of the date first above indicated.

 

	 	
REALSOURCE RESIDENTIAL, INC.

	 
	 	 	 	 
	 	By:	 	 
	 	 	Name:	 
	 	 	Title:	 

    	8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00224-of-00352.parquet"}]]