Document:

Exhibit 10.1

 

EMPLOYMENT RETENTION AGREEMENT

 

This Employment Retention Agreement (this “Agreement”) is made by and between Waddell & Reed Financial, Inc. (“Company” or “WDR”) and Michael L. Avery (“Employee”) (collectively, the “parties”).

 

WHEREAS, the parties to this Agreement recognize that Company and/or a Company Affiliate, as defined herein, currently employs Employee as its President, Executive Vice President and Portfolio Manager;

 

WHEREAS, Employee has indicated his intent to retire from employment with Company and all Company Affiliates;

 

WHEREAS, Employer wishes to retain Employee’s services in various roles, including as the President of WDR and Executive Vice President and Portfolio Manager of Waddell & Reed Investment Management Company (“WRIMCO”) and Ivy Investment Management Company (“IICO”) for a specified period of time and to employ Employee under the terms and conditions set forth in this Agreement;

 

WHEREAS, Company desires to make payments and offer incentives to Employee that Employee is not otherwise entitled to receive under Company or Company Affiliate policy or practice to incent Employee’s retention during the period specified herein;

 

WHEREAS, Employee is willing to render services to Company pursuant to the terms and conditions set forth in this Agreement with respect to such employment; and

 

WHEREAS, the parties desire to resolve all claims Employee has, or may have had, against Company,  Waddell & Reed, Inc., Waddell & Reed Investment Management Company, Ivy Investment Management Company, and each of these entities’ parent, subsidiaries, affiliates, and affiliated mutual funds, as well as all of these entities’ current or former insurers, directors, officers, fiduciaries, attorneys, employees (in their representative and/or individual capacities), agents, successors, assigns, employee benefit plans, related corporations, and any and all other entities affiliated with or related to them (collectively, the “Company Affiliates”).

 

NOW, THEREFORE, in exchange for the consideration provided by the parties to this Agreement, Company and Employee hereby agree as follows, subject to this Agreement becoming effective as provided below:

 

1.                                      Continued Employment. Company agrees to continue to employ Employee as President of WDR and Executive Vice President and Portfolio Manager of WRIMCO and IICO from February 1, 2016 until June 30, 2016 (the “Term”) under the terms outlined herein, unless Employee’s employment with Company is terminated earlier pursuant to the termination provisions of this Agreement.

 

2.                                      Scope of Engagement. During the Term, Employee shall be engaged as a full-time employee as the President of WDR and as the Executive Vice President and Portfolio Manager of WRIMCO and IICO.

 

3.                                      Existing Employment Agreement. With respect to his employment during the Term as the Executive Vice President and Portfolio Manager of WRIMCO and IICO, Employee shall continue to operate under the terms of the March 3, 1998 Amended and Restated Employment Agreement entered into between Employee and WRIMCO (the “Employment Agreement”), as modified herein, and which agreement, unless terminated earlier under paragraph 13, shall terminate by mutual consent effective June

 

 

30, 2016.  The parties hereby agree to modify the Employment Agreement to reflect that termination of Employee’s employment under paragraphs 13(b) or (c) herein shall operate as an effective and immediate termination of the Employment Agreement.  Employee’s post termination promises and obligations in the Employment Agreement shall remain in full force and effect following the termination of the Employment Agreement.  Notwithstanding the above and anything to the contrary contained in this Agreement, Company agrees and acknowledges that post-termination non-competition obligations contained in Section 6(a) of the Employment Agreement shall be reduced to a six month period to run concurrent with the six month period immediately following the termination of the Employment Agreement (the “Non-Compete Period”), and shall be null and void and not apply to Employee after the close of the Non-Compete Period. All other restrictive covenants contained in the Employment Agreement, including the nonsolicitation of business and personnel in paragraphs 6(a) and (b) shall be unaffected by this modification.

 

4.                                      Confidentiality Agreement Continuation. With respect to his employment during the Term, Employee shall continue to operate under the terms of the Confidentiality Agreement Employee entered into with WDR on March 22, 1998 (the “Confidentiality Agreement”).  Except as otherwise provided for within this Agreement, Employee’s post termination promises and obligations in the Confidentiality Agreement shall remain in full force and effect following his separation from employment with Company and any Company Affiliate.

 

5.                                      Employment Compensation. During Employee’s engagement as a full-time employee during the Term, Company shall cause Employee to be paid, less applicable deductions and withholdings, both a bi-weekly salary of $26,153.85 and any revenue sharing compensation earned under applicable Company or Company Affiliate policies, all payable on Company’s regularly designated payroll schedules.

 

6.                                      Employee Benefits.  Employee shall be eligible for retirement, welfare and fringe benefits customarily available to full-time employees at Grade 40, commensurate with his status of full-time employment during the Term, as outlined under the general policies, plans and/or practices of Company and Company Affiliates in effect during the Term.

 

7.                                      Reimbursement of Business Expenses. Subject to such written rules and procedures as Company from time to time specifies, Company shall cause employee to be reimbursed for reasonable business expenses necessarily incurred during the Term in the performance of his duties under this Agreement.

 

8.                                      Separation Pay.  In exchange for Employee’s agreement to delay his retirement date and remain employed until June 30, 2016 (the “Retirement Date”) under the terms outlined herein, Company shall continue Employee’s regular bi-weekly salary of $26,153.85, less applicable deductions and withholdings (“Separation Pay”), from July 1, 2016 through December 31, 2016 (the “Separation Period”).  Employee shall receive Separation Pay on regularly designated Company paydays during the Separation Period.  Separation Pay is not eligible for consideration in connection with any management bonus or other salary related compensation program and is not eligible compensation under the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan or under the Waddell & Reed Financial, Inc. Retirement Income Plan.

 

9.                                      Continued Subsidized Group Coverage. In exchange for Employee’s agreement to delay his retirement date and remain employed until June 30, 2016 under the terms outlined herein, during the Separation Period, Employee shall be eligible to continue subsidized participation in the Company’s group health, dental and vision plans at the subsidy level in effect as of June 30, 2016.  Following the Separation Period, Employee shall have the right to continue to participate in these plans on an unsubsidized basis until he and any applicable dependents each attain Medicare eligibility.

 

 

10.                               Restricted Stock Award Vesting. Where Employee has fulfilled all Obligations during the Term, as outlined in paragraph 12, and upon approval by the Waddell & Reed Financial, Inc.  Compensation Committee, 103,332 unvested shares of restricted stock awarded to Employee pursuant to provisions of the Waddell & Reed Financial, Inc. Restricted Stock Award Agreements (the “Restricted Stock Agreements”) Employee entered into with Waddell & Reed Financial, Inc. under the Waddell & Reed Financial, Inc. 1998 Stock Incentive Plan, as amended and restated, (the “Restricted Stock Awards”) shall be vested and all transfer restrictions thereon shall lapse upon the Retirement Date (the “Restricted Stock Award Vesting”). Compensation associated with this vesting shall be treated as ordinary income, subject to applicable deductions and withholdings, and is not eligible compensation under the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan or under the Waddell & Reed Financial, Inc. Retirement Income Plan.

 

11.                               Incentive Payment.  Where Employee has fulfilled all Obligations during the Term, as outlined in paragraph 12, Employee shall receive an additional lump sum of Two Million Dollars and No Cents ($2,000,000.00) (the “Lump Sum Payment”), subject to applicable deductions and withholdings, in exchange for Employee’s execution of an effective separate Release of Claims agreement following the Retirement Date, substantially in the form attached hereto as Exhibit A. The Lump Sum Payment shall be paid to Employee within thirty (30) days of the effective date of the Release of Claims agreement and will not be eligible compensation under the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan or under the Waddell & Reed Financial, Inc. Retirement Income Plan.

 

12.                               Obligations During Term.  In connection with Employee’s ongoing employment during the Term, as outlined herein, Employee shall continue to hold the titles of President of WDR and Executive Vice President and Portfolio Manager of WRIMCO and IICO, and is required to perform the following obligations to the satisfaction of Company (collectively, the “Obligations”):

 

(a)                                 Employee shall perform all duties and responsibilities assigned to him as Executive Vice President and Portfolio Manager of WRIMCO and IICO as outlined in the Employment Agreement.  Exhibit A of the Employment Agreement is hereby modified to include only the following investment vehicles, Ivy Asset Strategy Fund, Waddell & Reed Advisors Asset Strategy Fund, Ivy Funds VIP Asset Strategy, Ivy Managed International Opportunities Fund, InvestEd Portfolios, Ivy Funds VIP Pathfinder Portfolios, and Ivy Funds VIP Pathfinder Managed Volatility Portfolios. In performing these duties Employee shall report to the Chief Executive Officer of Company.  In addition, Employee shall perform only those duties as President of Company that are specifically directed to Employee by Company’s Chief Executive Officer.

 

(b)                                 Employee shall use his best efforts to complete the duties and responsibilities as referenced herein and agrees to act in the best interest of Company and Company Affiliates during the Term.  Employee further agrees to expend all reasonable efforts necessary to accomplish the assigned duties in a timely manner.  Employee further agrees during the Term not to be employed by or work in any capacity for any enterprise or business whose activities are in conflict with Company or any Company Affiliate without the express written consent of Company.

 

(c)                                  Employee shall comply with all Company and Company Affiliates’ practices and procedures in providing services during the Term, including, but not limited to, the Waddell & Reed Financial, Inc. Corporate Code of Business Conduct and Ethics for Directors and Employees.

 

(d)                                 Employee shall assist in transition of duties and knowledge Employee has in connection with his positions as President, Executive Vice President and Portfolio Manager to

 

 

                                                designated personnel, as requested by Company prior to the Retirement Date. In addition, Employee shall follow the direction of Company’s Chief Executive Officer in assisting Company and Company Affiliates in the transition of client and any other designated relationships to personnel specifically designated by Company.

 

(e)                                  Employee shall perform other duties as assigned by Company’s Chief Executive Officer, consistent with the duties and responsibilities of Employee’s position as President of Company and Executive Vice President and Portfolio Manager of WRIMCO and IICO.

 

13.                               Termination of Employment.  Employee’s employment may be terminated as follows:

 

(a)                                 If not earlier terminated, Employee’s employment under this Agreement shall automatically end on the Retirement Date, upon which date Employee shall retire from all positions with Company and any Company Affiliate.

 

(b)                                 Immediately upon the death or disability of Employee.  Disability shall mean Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months. Upon termination of employment under this subparagraph, Employee and/or Employee’s heirs shall be entitled to receive, i) any remaining unpaid Separation Pay referenced in paragraph 8 in a single lump sum, subject to applicable deductions and withholdings, payable within thirty (30) days of the date of termination of the Agreement, and ii) the Lump Sum Payment referenced in paragraph 11 contingent upon Company’s receipt of an effective Release of Claims agreement in the form referenced in paragraph 11, payable per the terms of the separate agreement.  Upon termination of employment under this subparagraph, and pursuant to the terms of the Restricted Stock Agreements, the restrictions and risk of forfeiture with respect to the Restricted Stock Awards referenced in paragraph 10 shall immediately lapse and all shares of the Restricted Stock Awards shall be deemed fully vested and nonforfeitable.

 

(c)                                  Company may terminate this Agreement immediately for “Cause.” For purposes of this Agreement, “Cause” exists when Employee, in Company’s good faith belief, does any of the following:  (1) is convicted or pleads guilty or nolo contendere to a criminal act under federal, state or local law, whether such act would be a felony or a misdemeanor; (2) materially breaches any provision of this Agreement, including, but not limited to, by acting materially dishonestly or grossly negligently regarding his performance hereunder; (3) materially fails to perform his Obligations as set forth in paragraph 12 herein, other than for reasons related to illness, injury or disability; (4) violates any applicable local, state or federal law relating to discrimination or harassment where an independent investigation concludes that Employee has violated any such applicable laws; (5) materially violates Company’s written policies and/or practices applicable to Employee, including, but not limited to, employment policies and practices and the Waddell & Reed Financial, Inc. Corporate Code of Business Conduct and Ethics for Directors and Employees; (6) knowingly takes any action,  or fails to act, where such action/inaction has the effect of undermining or harming Company, its business, its reputation, or its customers, clients or employees; and/or (7) materially fails to comply with any oral or written reasonable request or directive of Company related to Employee’s Obligations under this Agreement, as set forth in paragraph 12. No Cause shall exist under subsections 2, 3, 4, 5, or 6 above unless Company provides Employee with written notice describing the particular circumstances giving rise to Cause, and Employee fails to cure the conduct in question within thirty (30) days following such notice from Company. In

 

 

                                                the event of termination for Cause, Employee shall not be entitled to receive any remaining unpaid Separation Pay or receive the benefits referenced in paragraphs 8, 9, 10, and 11 herein.

 

14.                               General Release. In exchange for Company’s agreement with respect to the Restricted Stock Award Vesting referenced in paragraph 10 herein, Employee agrees as follows:

 

(a)                                 The Restricted Stock Award Vesting offered by Company under this Agreement is adequate consideration for Employee’s execution of this Agreement and the General Release contained herein, and is in excess of anything to which Employee is or may otherwise be entitled under existing policies or practices of Company.

 

(b)                                 To the maximum extent permitted by law, and except as provided in paragraph 24 herein, as of the Effective Date (as defined herein), Employee hereby RELEASES AND FOREVER DISCHARGES Company, the Company Affiliates, and all other parties mentioned in the sixth Whereas Clause of this Agreement (collectively, “Released Parties”), from any and all causes of action, claims, actions, rights, judgments, obligations, damages, demands, accountings, or liabilities of any kind or nature (collectively, “Claims”), whether known or unknown, suspected or unsuspected, that Employee now holds or owns or has at any time held or owned against the Released Parties through the date Employee executes this Agreement. Employee acknowledges and agrees that the Claims released under this Agreement include any and all Claims Employee now holds or owns or has at any time held or owned against the Released Parties related to any and all contract or other Claims arising from or related to Employee’s Employment Agreement, as referenced herein, and any other employment-related agreements entered into by Employee and any of the Released Parties. Employee further acknowledges and agrees that this release of Claims specifically includes, but is not limited to, any and all contract claims; any and all claims for race, sex, national origin, religious, disability, or age discrimination, harassment, and/or retaliation under Title VII of the Civil Rights Act of 1964 (as amended), the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Americans with Disabilities Act (as amended), the Rehabilitation Act, the Genetic Information Nondiscrimination Act, the Kansas Act Against Discrimination, the Kansas Age Discrimination in Employment Act, any and all applicable Missouri state civil rights laws (including, but not limited to, Mo. Rev. Stat. §213.010 et seq., §290.145, §191.665, and §375.1306), any unlawful employment practices and anti-discrimination and anti-harassment laws, and any and all other statutes, regulations, and/or ordinances that address equal employment opportunity; any and all other statutory claims, including, but not limited to, claims under the Family Medical Leave Act, the Occupational Safety and Health Act, the Employment Retirement Income Security Act (as amended) (“ERISA”), the Consolidated Omnibus Budget Reconciliation Act, 42 U.S.C. § 1983, 42 U.S.C. § 1988, the Kansas Wage Payment Act, the Kansas Minimum Wage and Maximum Hours Law, any and all applicable Missouri state wage payment and conditions of employment law (including, but not limited to, Mo. Rev. Stat. §290.010 et seq.); any and all common law claims; any and all whistleblowing claims; any and all tort claims, including, but not limited to, any and all claims for tortious interference with business expectancy, outrage, negligent infliction of emotional distress, defamation, retaliation, and/or wrongful discharge in violation of public policy; any and all public policy claims; any and all claims under any federal and/or state Constitution, any and all claims under any federal, state and/or local common law, and any and all claims under any Company and/or Company Affiliate policy or practice, including, but not limited to, any claims regarding bonus, health, stock incentive, retirement, and/or benefit plans of Company and/or any Company Affiliate.

 

 

(c)                                  The foregoing Release does not include any claims that cannot be released or waived by law, including, but not limited to, the right to file a charge with or participate in an investigation conducted by certain government agencies; provided, however, that Employee is releasing and waiving the right to any monetary recovery should any government agency pursue any claims on Employee’s behalf.

 

(d)                                 The foregoing Release does not affect the Employee’s right to enforce the terms of this Agreement. Additionally, the foregoing Release does not affect Employee’s right to receive any vested benefits under an employee benefit plan subject to ERISA or to any other vested benefit Employee may be entitled to receive under any applicable Company or Company Affiliate benefit plan, including but not limited to the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan or the Waddell & Reed Financial, Inc. Retirement Income Plan, although Employee’s eligibility to make contributions to and/or accrue service and benefit credit under these benefit plans shall cease as of the Retirement Date.

 

(e)                                  In exchange for and in consideration of the promises of Company contained in this Agreement, Employee agrees not to initiate any legal, administrative, or other proceeding relating to any of the matters released herein, to the fullest extent permitted by law.

 

15.          No Interference. Employee agrees, following the end of his employment with Company, to take no action to interfere knowingly with Company’s operation of business or management of personnel, specifically including, but not limited to, Company’s operation of its Investment Management Division.

 

16.          Post-Employment Cooperation. Upon reasonable request by Company, Employee will participate in the investigation, prosecution, or defense of any matter involving Company, any matter involving any of the Company Affiliates, or any other matter that arose or will arise during Employee’s employment, provided Company shall reimburse Employee for any reasonable travel and out-of-pocket expenses incurred in providing such participation at its request, the purpose of which reimbursement is to avoid cost to Employee and not to influence Employee’s participation. Company’s request for reasonable cooperation shall take into consideration Employee’s personal and business commitments and the amount of notice provided to Employee by Company.

 

17.          Compensation and Benefits Received. Employee expressly agrees that, except for payments and benefits offered to Employee as provided for in this Agreement and any vested benefits under an employee benefit plan subject to ERISA, no additional payments or other consideration are appropriate or due to Employee for any reason, and that Employee has received all compensation and leave due and owing to Employee relating to any employment or other relationship with Company, or any express or implied contract, including without limitation, all wages, commissions, bonuses, incentive pay, retention bonus, sick pay and vacation pay, and any form of leave from Company and/or any Company Affiliate in connection with Employee’s employment up to the Effective Date of this Agreement.

 

18.          Effective Date.  This Agreement shall be effective and enforceable as of the date of the last signature reflected below (the “Effective Date”).

 

19.          Advice of Counsel. Company advised/hereby advises Employee to consult with an attorney before executing this Agreement, particularly regarding the RELEASE AND WAIVER OF CLAIMS in paragraph 14.

 

20.          Obligation to Protect Confidential Information. Employee acknowledges that as a result of Employee’s employment relationship with Company and/or any Company Affiliate, Employee acquired confidential information of a special and unique nature and value relating to Company and

 

 

Company Affiliate matters.  Except as otherwise provided for within this Agreement, Employee will not remove from Company or any Company Affiliate, or directly or indirectly communicate, divulge, or use, whether for Employee’s benefit or for the benefit of any third party, any confidential and/or proprietary information concerning the Company business and/or the Company Affiliates’ business, including, but not limited to, any and all proprietary information, information regarding the nature of Company and Company Affiliates’ investment management systems, proprietary investment management practices, investment holdings, returns, allocations, private equity investments, transactions, communications, operating agreements, amendments, consents, investment strategies and dispositions, location of proprietary electronic data, strategic plans of Company and any Company Affiliate, passwords, passcodes or similar mechanisms for gaining access to any computer, computer system, computer network, computer data, or any other electronic data storage device or any data contained therein, information regarding Company or Company Affiliates’ personnel matters, information related to any internal investigation or auditing process, client lists, client account and contact information, proprietary products, proprietary commission information, proprietary supervisory information, Company or Company Affiliates’ research, agreements, systems, procedures, manuals, operations, services, materials, policies, and the manner in which they are developed, marketed, and/or provided, Company legal matters, attorney-client privileged information, attorney work product-privileged information, and any and all such other information regarded as trade secrets and/or confidential and/or proprietary information by Company, by Company Affiliates, and/or under any applicable law, regulation, rule, and/or ethical guideline (collectively, “Confidential Information”). Employee understands that Confidential Information includes, but is not limited to, trade secrets and information relating thereto. Employee further acknowledges and agrees that Confidential Information referenced this paragraph includes Confidential Information, as defined in the Employment Agreement and the Confidentiality Agreement referenced herein.  Notwithstanding the above, Confidential Information shall not include any contact information located in Employee’s rolodex (whether paper or electronic), which Employee shall be able to download/transfer after the Retirement Date, and any information that is generally known in the industry or in the public domain or becomes generally known in the industry or in the public domain through no wrongful act on Employee’s part.

 

21.          Unauthorized Access.        Employee agrees that following the end of his employment under this Agreement, he will no longer be authorized to access any of Company or Company Affiliates’ systems, including, but not limited to, Company or Company Affiliates’ computers, systems, applications, servers, workstations, operating systems, databases, accounting systems, network infrastructure, software, programs, and any documentation, data or property contained within or in connection with any network infrastructure or systems listed herein.  Employee agrees that any unauthorized attempt to access or any actual access of the network infrastructure, systems or data described herein following the termination of employment would be damaging to Company and/or Company Affiliates.

 

22.          Employee Representations.  As of the date Employee signed this Agreement, and except as otherwise provided for within this Agreement, Employee (1) has not suffered a work-related injury not properly disclosed to Company; (2) has not exercised any actual or apparent authority by or on behalf of Company and/or any Company Affiliates that Employee has not specifically disclosed to Company; (3) has not entered into any agreements, whether written or otherwise, with any of Company or Company Affiliates’ employees (current and former) and/or third parties that could legally bind Company and/or any Company Affiliate that Employee has not specifically disclosed to Company; (4) is not aware of any Company or Company Affiliates’ noncompliance with regulatory, administrative or other legal obligation, including by any Company or Company Affiliates’ personnel, that has not already been reported; and (5) has not engaged in any conduct that could be deemed counter to the Waddell & Reed Financial, Inc. Corporate Code of Business Conduct and Ethics for Directors and Employees.

 

23.          Non Disparagement. Employee agrees not in any way to disparage Company, Company Affiliates (as defined herein and specifically including Company and Company Affiliate employees and

 

 

agents in their representative and individual capacities), or any Released Parties, and agrees not to make or solicit any comments, statements, or the like to the media or to others, including claims against the entities, their agents, or representatives that may be considered derogatory or detrimental to the good name or business reputation of the above-mentioned parties. Likewise, Company agrees that it shall direct in writing Officers of Company as of the Effective Date of this Agreement, that while they are employed or affiliated with Company or Company Affiliates and while they are acting in an official capacity on behalf of Company or Company Affiliates, they shall not disparage Employee in any way and not to make or solicit any comments, statements, or like to the media or to others, that may be considered derogatory or detrimental to Employee’s good name or reputation. Notwithstanding, Employee and Company recognize and agree that nothing herein restricts Company’s or Employee’s his ability to engage in protected activity.

 

24.          References. Company and Employee agree that any inquiries for employment references on behalf of Employee submitted to the Company’s Human Resource Department shall be directed to Henry J. Herrmann, who will provide information consistent with the sum and substance of the press release announcing Employee’s retirement dated February 2, 2016 (attached in substantive form and incorporated into this Agreement as Exhibit B). If Mr. Herrmann is no longer with Company, such employment reference requests will be managed as outlined herein by the Company’s Vice President of Human Resources.

 

25.          Protected Activity. Nothing in this Agreement is intended to limit, restrict or interfere with Employee’s right to engage in any protected activity, including, but not limited to, testifying before, communicating with and/or participating in any investigation conducted by or proceeding held before any regulatory agency, including, but not limited to, the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, Inc., and/or the Equal Employment Opportunity Commission (and/or similar state or federal agency), and nothing herein is intended to restrict Employee’s ability to participate in concerted activity under the National Labor Relations Act.

 

26.          Additional Terms.  The parties further agree as follows:

 

(a)                                 Unless referenced specifically herein, this Agreement constitutes the entire agreement between Employee and Company with respect to the matters contemplated hereby and supersedes and is in full substitution for any and all prior understanding or agreements with respect to Employee’s employment.  No modification or waiver of any provision of this Agreement will be valid unless in writing and signed by Employee and Company.  Further, in entering into this Agreement, they did not rely on any promise or agreement not included in this Agreement.

 

(b)                                 Nothing herein shall impact Employee, Company and/or Company Affiliates’ rights under the Indemnification Agreement entered into between Employee and Waddell & Reed Financial, Inc. as of November 13, 2009 and any coverage Employee continues to have under Company’s or Company Affiliates’ Directors and Officers insurance policies.

 

(c)                                  This Agreement is severable. If any provision of this Agreement is declared unenforceable, void, invalid, or voidable, then the parties intend that the validity, legality, and enforceability of the remaining provision of this Agreement shall in no way be affected or impaired, and the remaining provision of this Agreement shall remain valid and enforceable as written, to the fullest extent permitted by law.

 

(d)                                 This Agreement shall be construed in accordance with the laws of the State of Kansas, regardless of any conflict of laws provision.  Further, any action to interpret or enforce

 

 

this Agreement shall be brought in the federal or state courts situated in Kansas, regardless of the state of residence of any party to such action.

 

(e)                                  In the event either party to this Agreement breaches its obligations under this Agreement the injured party may pursue all legal remedies available to it as a result of the breach, including, but not limited to, an action in a competent court for actual damages for the injury caused by the breaching party, as well as reasonable attorneys’ fees and costs.

 

(f)                                   The parties expressly agree and understand that neither the existence of this Agreement nor anything contained in this Agreement shall constitute an admission of any liability on the part of Company or any Company Affiliate.  Any and all such liability is expressly denied. Neither the existence of this Agreement nor anything contained in this Agreement shall be construed as rendering Employee a “prevailing party” for purposes of awarding attorneys’ fees or costs under any applicable local, state or federal law.

 

(g)                                  To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent that this Agreement constitutes a “nonqualified deferred compensation plan” as such term is defined in Code Section 409A, and this Agreement shall be construed and applied in a manner consistent with this intent. In this regard, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. Any reimbursements under this Agreement that would constitute nonqualified deferred compensation subject to Section 409A of the Code shall be subject to the following additional rules: (i) no reimbursement of any such expense shall affect Employee’s right to reimbursement of any such expense in any other taxable year; (ii) reimbursement of the expense shall be made, if at all, promptly but not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit. The payments and benefits payable to Employee under this Agreement shall be construed as exempt from Section 409A to the maximum possible extent. Except as described above, Company makes no representations regarding the taxation of the payments and benefits provided under this Agreement (and the manner in which such payments and benefits are reported to Employee or an appropriate taxing jurisdiction by Company is not intended to be such a representation) and in no event shall Company or any Company Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Employee on account of the payments and benefits provided under this Agreement (including taxes, penalties, interest or other expenses resulting from non-compliance with Section 409A of the Internal Revenue Code or excise taxes imposed by Section 4999 of the Internal Revenue Code).

 

(h)                                 Company’s or Employee’s failure to exercise any of its rights under this Agreement with regard to a breach of this Agreement shall not be construed as a waiver of such breach, nor shall it prevent Company or Employee from later enforcing strict compliance with any and all promises in this Agreement.

 

(i)                                     This Agreement will be binding on and inure to the benefit of Employee and Employee’s heirs, administrators, representatives, executors, successors, and assigns, and will be binding on and inure to the benefit of Company, Company Affiliates, and those entities’ successors and assigns.

 

 

(j)                                    This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same Agreement.  Any party to this Agreement may execute this Agreement by signing any such counterpart.

 

(k)                                 The headings in this Agreement are for convenience and are not intended to affect construction or interpretation.

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year indicated below.

 

For Employee:

 

BY SIGNING BELOW, I SPECIFICALLY AGREE THAT I HAVE READ THE FOREGOING EMPLOYMENT RETENTION AGREEMENT, THAT I RECOGNIZE IT CONTAINS A GENERAL RELEASE, THAT I FULLY UNDERSTAND EACH AND EVERY PROVISION OF THIS AGREEMENT, THAT I HAVE HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY ABOUT THIS AGREEMENT, AND THAT I AM VOLUNTARILY, FREELY AND KNOWINGLY EXECUTING IT.

 

 

	
Date:
    	
2/1/16
    	
 
    	
/s/ Michael L. Avery
    
	
 
    	
 
    	
 
    	
Michael L. Avery
    

 

 

For Company:

 

 

	
Date:
    	
2/1/16
    	
 
    	
/s/ Henry J. Herrmann
    
	
 
    	
Waddell & Reed   Financial, Inc.
    

 

 

For Waddell & Reed Investment Management Company

with respect to Paragraph 3:

 

 

	
Date:
    	
2/1/16
    	
 
    	
/s/ Henry J. Herrmann
    
	
 
    	
Waddell & Reed   Investment Management Company
    

 

 

EXHIBIT A TO EMPLOYMENT RETENTION AGREEMENT

 

FORM OF — RELEASE OF ALL CLAIMS

 

This Release of All Claims (“Agreement”) is made by and between Waddell & Reed Financial, Inc. (“Company”) and Michael L. Avery (“Employee”) (collectively, the “parties”).

 

WHEREAS, the parties to this Agreement recognize that Company and/or a Company Affiliate, as defined herein, has employed Employee in various positions; that Employee has elected to retire from his employment with Company and all Company Affiliates; that Employee, on the one hand, and Company and all Company Affiliates on the other, hereby mutually agree to end employment of Employee by this written Agreement and wish to end all employment and other relationships in an amicable and cooperative manner; that Employee agreed to enter into this Agreement in exchange for good and valuable consideration that is in addition to any benefits Employee may otherwise be entitled to receive by operation of law or by Company or Company Affiliate policy or practice; that Company has agreed to enter into this Agreement in exchange for certain releases and promises of Employee; and that the parties desire through this Agreement to resolve any and all claims, demands, or causes of action (“claims”) Employee has, or may have, against Company and any Company Affiliates.

 

NOW, THEREFORE, in consideration of the mutual promises, agreements, and releases contained in this Agreement, Employee and Company agree to resolve all issues and controversies that exist between them, including any future effects of the alleged acts, omissions, and events, as follows:

 

1.              The parties desire to resolve all claims Employee has, or may have had, against Company,  Waddell & Reed, Inc., Waddell & Reed Investment Management Company, Ivy Investment Management Company, and each of these entities’ parent, subsidiaries, affiliates, and affiliated mutual funds, as well as all of these entities’ current or former insurers, directors, officers, fiduciaries, attorneys, employees (in their representative and/or individual capacities), agents, successors, assigns, employee benefit plans, related corporations, and any and all other entities affiliated with or related to them (collectively, the “Company Affiliates”).

 

2.              In consideration of the release referenced in Paragraph 3 of this Agreement, and all other promises made by Employee within this Agreement, Company agrees as follows, subject to the other terms of this Agreement, including but not limited to this Agreement becoming effective as provided below:

 

(a)                                 Employee’s employment and all associations with Company and Company Affiliates ended               , 2016 (“Termination Date”).  Employee has no power or authority to act on behalf of Company or any Company Affiliate following the Termination Date.

 

(b)                                 If this Agreement is not revoked and becomes effective, Company shall pay to Employee, within thirty (30) days of the Effective Date, as defined herein, the gross amount of Two Million Dollars and No Cents ($2,000,000.00) (the “Lump Sum Payment”), subject to applicable deductions and withholdings. The Lump Sum Payment is not eligible compensation under the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan or under the Waddell & Reed Financial, Inc. Retirement Income Plan.

 

 

(c)                                  In connection with Employee’s separation from Company and all Company Affiliates, and following the Separation Period referenced in the Employment Retention Agreement entered into between the parties, effective                 (the “Retention Agreement”), Employee and any eligible dependents may elect to continue to participate in the Company and/or Company Affiliates’ group health, dental and vision plans on an unsubsidized basis until he and any applicable dependents each attain Medicare eligibility.

 

(d)                                 Unless specified otherwise in this Agreement, or as provided for in the Retention Agreement, nothing in this Agreement shall interfere with Employee’s ability to receive all compensation earned as of the Termination Date pursuant to Company or Company Affiliates’ revenue sharing compensation plans in accordance with the relevant plan documents or to receive benefits provided for under the terms of the Waddell & Reed Financial, Inc. 401(k) and Thrift Plan or the Waddell & Reed Financial, Inc. Retirement Income Plan, although Employee’s eligibility to make contributions to and/or accrue service and benefit credit under these benefit plans shall cease as of the Termination Date.

 

(e)                                  Unless specified otherwise herein, or as provided for in the Retention Agreement, Employee’s ability to receive and/or participate in any Company or Company Affiliate provided compensation or benefit plan ceases as of the Termination Date.

 

3.                                      In connection with consideration provided by Company under this Agreement, Employee agrees as follows:

 

(a)                                 The benefits provided by Company under this Agreement are adequate consideration for Employee’s execution of this Agreement and are in excess of anything to which Employee is or may otherwise be entitled under existing policies or practices of Company and/or any Company Affiliate.

 

(b)                                 To the maximum extent permitted by law, and except as provided in Paragraph 4 herein, as of the Effective Date, Employee hereby RELEASES AND FOREVER DISCHARGES Company, the Company Affiliates, and all other parties mentioned in Paragraph 1 of this Agreement (collectively, “Released Parties”), from any and all causes of action, claims, actions, rights, judgments, obligations, damages, demands, accountings, or liabilities of any kind or nature (collectively, “Claims”), whether known or unknown, suspected or unsuspected, that Employee now holds or owns or has at any time held or owned against the Released Parties through the date Employee executes this Agreement. Employee acknowledges and agrees that the Claims released under this Agreement include any and all Claims Employee now holds or owns or has at any time held or owned against the Released Parties related to any and all contract or other Claims arising from or related to Employee’s Employment Agreement, as referenced herein, and any other employment-related agreements entered into by Employee and any of the Released Parties. Employee further acknowledges and agrees that this release of Claims specifically includes, but is not limited to, any and all contract claims; any and all claims for race, sex, national origin, religious, disability, or age discrimination, harassment, and/or retaliation under Title VII of the Civil Rights Act of 1964 (as amended), the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Age Discrimination in Employment Act (“ADEA”), the Americans with Disabilities Act (as amended), the Rehabilitation Act, the Genetic Information Nondiscrimination Act, the Kansas Act Against Discrimination, the Kansas Age Discrimination in Employment Act, any and all applicable Missouri state civil rights laws (including but not limited to Mo. Rev. Stat. §213.010 et seq., §290.145,

 

 

                                                §191.665, and §375.1306), any unlawful employment practices and anti-discrimination and anti-harassment laws, and any and all other statutes, regulations, and/or ordinances that address equal employment opportunity; any and all other statutory claims, including but not limited to claims under the Family Medical Leave Act, the Occupational Safety and Health Act, the Employment Retirement Income Security Act (as amended) (“ERISA”), the Consolidated Omnibus Budget Reconciliation Act, 42 U.S.C. § 1983, 42 U.S.C. § 1988, the Kansas Wage Payment Act, the Kansas Minimum Wage and Maximum Hours Law, any and all applicable Missouri state wage payment and conditions of employment law (including but not limited to Mo. Rev. Stat. §290.010 et seq.); any and all common law claims; any and all whistleblowing claims; any and all tort claims, including but not limited to any and all claims for tortious interference with business expectancy, outrage, negligent infliction of emotional distress, defamation, retaliation, and/or wrongful discharge in violation of public policy; any and all public policy claims; any and all claims under any federal and/or state Constitution, any and all claims under any federal, state and/or local common law, and any and all claims under any Company and/or Company Affiliate policy or practice, including but not limited to any claims regarding bonus, health, stock incentive, retirement, and/or benefit plans of Company and/or any Company Affiliate.

 

(c)                                  The foregoing Release does not include any claims that cannot be released or waived by law, including but not limited to the right to file a charge with or participate in an investigation conducted by certain government agencies; provided, however, that Employee is releasing and waiving the right to any monetary recovery should any government agency pursue any claims on Employee’s behalf.

 

(d)                                 The foregoing Release does not affect Employee’s right to enforce the terms of this Agreement and/or the Retention Agreement.  Additionally, the foregoing Release does not affect Employee’s right to receive any vested benefits under an employee benefit plan subject to ERISA or to any other vested benefit Employee may be entitled to receive under any applicable Company or Company Affiliate benefit plan.

 

(e)                                  In exchange for and in consideration of the promises of Company contained in this Agreement, Employee agrees not to initiate any legal, administrative, or other proceeding relating to any of the matters released herein, to the fullest extent permitted by law.

 

(f)                                   Employee acknowledges that by executing this Agreement, he is waiving and releasing any and all legal rights and claims he may have under the ADEA and all other federal, state and local laws regarding age discrimination, whether those claims are presently known to Employee or hereafter discovered.  However, nothing in the foregoing is intended to limit or restrict Employee’s right to challenge the validity of this Agreement as to claims and rights asserted under the ADEA or Employee’s right to enforce this Agreement.

 

(g)                                  Employee agrees, following the Termination Date, to take no action to interfere knowingly with Company or any Company Affiliate’s operation of business or management of personnel.

 

(h)                                 In connection with Employee’s retirement, Employee voluntarily ended his employment with Company and/or with any Company Affiliates upon mutual consent of Company, effective June 30, 2016.

 

 

(i)                                     Upon reasonable request by the Company, Employee will participate in the investigation, prosecution, or defense of any matter involving Company, any matter involving any of the Company Affiliates, or any other matter that arose or will arise during Employee’s employment, provided Company shall reimburse Employee for any reasonable travel and out-of-pocket expenses incurred in providing such participation at its request, the purpose of which reimbursement is to avoid cost to Employee and not to influence Employee’s participation. Company’s request for reasonable cooperation shall take into consideration Employee’s personal and business commitments and the amount of notice provided to Employee by Company.

 

(j)                                    Employee acknowledges that the Company and Company Affiliates’ relationships with its employees, contractors and business associates are among their most important assets.  Employee agrees that for a period of one (1) year after the termination of his employment with Company, Employee will not, as examined from an objective viewpoint, directly or indirectly, individually or in any capacity whatsoever, (i) participate in the solicitation, recruitment, hiring, or contracting as an employee or engaging as an independent contractor any employee, contractor, sales assistant or agent of Company and/or any Company Affiliate, or (ii) induce or attempt to induce any such persons to terminate, or in any way interfere knowingly with, the contractual or other relationship between Company and/or any Company Affiliate and any such persons.

 

(k)                                 Employee expressly agrees that, except as otherwise provided in this Agreement and the Retention Agreement, no additional payments or other consideration are appropriate or due to Employee for any reason, and that Employee has received all compensation and leave due and owing to Employee relating to any employment or other relationship with Company and/or any Company Affiliate, or any express or implied contract, including without limitation, all wages, commissions, bonuses, incentive pay, retention bonus, sick pay and vacation pay, and any form of leave from Company and/or any Company Affiliate.

 

(l)                                     Employee received this Agreement on              , 2016 (the “Date of Receipt”).  Employee is hereby advised and acknowledges that Employee has twenty-one (21) calendar days to consider this Agreement and sign it, although Employee may sign and return it sooner if Employee so chooses. However, in no event may Employee sign the Agreement before the calendar day following the Termination Date or after twenty-one days following the Date of Receipt.  Any signature before the calendar day following the Termination Date or after the Date of Receipt shall be deemed ineffective and not a valid execution of this Agreement. Employee may return this signed Agreement to Company’s General Counsel, at 6300 Lamar Avenue, Overland Park, Kansas 66202.  Company hereby advises Employee that Employee may revoke this Agreement by delivering a written notice of revocation via certified mail to Company’s General Counsel, at the address referenced within this paragraph within seven (7) calendar days after Employee signs this Agreement.  Where no revocation is made, this Agreement will become effective and enforceable on the 8th calendar day following the date Employee signs this Agreement (the “Effective Date”).

 

(m)                             Company advised/hereby advises Employee to consult with an attorney before executing this Agreement, particularly regarding the RELEASE AND WAIVER OF CLAIMS in Paragraph 3(b) — 3(d).

 

(n)                                 Employee acknowledges that as a result of Employee’s employment relationship with Company and/or any Company Affiliate, Employee acquired confidential information of

 

 

                                                a special and unique nature and value relating to Company and Company Affiliate matters.  Except as otherwise provided for within this Agreement, Employee will not remove from Company or any Company Affiliate, or directly or indirectly communicate, divulge, or use, whether for Employee’s benefit or for the benefit of any third party, any confidential and/or proprietary information concerning the Company business and/or the Company Affiliates’ business, including but not limited to any and all proprietary information, information regarding the nature of Company and Company Affiliates’ investment management systems, proprietary investment management practices, investment holdings, returns, allocations, private equity investments, transactions, communications, operating agreements, amendments, consents, investment strategies and dispositions, location of proprietary electronic data, strategic plans of Company and any Company Affiliate, passwords, passcodes or similar mechanisms for gaining access to any computer, computer system, computer network, computer data, or any other electronic data storage device or any data contained therein, information regarding Company or Company Affiliates’ personnel matters, information related to any internal investigation or auditing process, client lists, client account and contact information, proprietary products, proprietary commission information, proprietary supervisory information, Company or Company Affiliates’ research, agreements, systems, procedures, manuals, operations, services, materials, policies, and the manner in which they are developed, marketed, and/or provided, Company legal matters, attorney-client privileged information, attorney work product-privileged information, and any and all such other information regarded as trade secrets and/or confidential and/or proprietary information by Company, by Company Affiliates, and/or under any applicable law, regulation, rule, and/or ethical guideline (collectively, “Confidential Information”). Employee understands that Confidential Information includes, but is not limited to, trade secrets and information relating thereto. Employee further acknowledges and agrees that Confidential Information referenced this Paragraph includes Confidential Information, as defined in the Amended and Restated Employment Agreement Employee entered into with Waddell & Reed Investment Management Company on March 3, 1998 (“Employment Agreement”) and the Confidentiality Agreement Employee entered into with Waddell & Reed Financial, Inc. on March 22, 1998 (“Confidentiality Agreement”). Notwithstanding the above, Confidential Information shall not include any contact information located in Employee’s rolodex (whether paper or electronic), which Employee shall be able to download/transfer after the Termination Date, and any information that is generally known in the industry or in the public domain or becomes generally known in the industry or in the public domain through no wrongful act on Employee’s part.

 

(o)                                 Employee certifies that, as of the date Employee signed this Agreement, and except as otherwise provided for in this Agreement and in the Retention Agreement, Employee has returned to Company all Company or Company Affiliate property in Employee’s possession or control, including but not limited to any Confidential Information, as defined in this Agreement, Company or Company Affiliate issued credit card, access devices, office equipment, training and supervisory manuals, board materials, documents, records, notebooks, computers, printers, scanners, computer disks, mobile devices, tapes, zip drives, thumb drives, and similar repositories of or documents containing any Confidential Information, including all existing copies, abstracts, and summaries thereof.

 

(p)                                 To the extent Employee has not already done so, Employee agrees within thirty (30) days of the Termination Date, to submit any and all expense reimbursement requests, including supporting documentation.  Employee shall be reimbursed for any reasonable, legitimate outstanding business expenses in accordance with Company and/or Company Affiliates’

 

 

                                                policies.  Employee acknowledges and agrees that expenses not timely and properly submitted in accordance with this paragraph shall not be subject to reimbursement by Company.

 

(q)                                 Employee represents and warrants there are no existing or outstanding attorneys’ liens or other liens that are not extinguished or satisfied by the execution of this Agreement.  Employee agrees to indemnify and hold harmless Company and/or any Company Affiliates, for any liability in connection with such liens.

 

(r)                                    Employee agrees that following the Termination Date he will no longer be authorized to access any of Company or Company Affiliates’ systems or subscription services, Company or Company Affiliates’ computers, systems, applications, servers, workstations, operating systems, databases, accounting systems, network infrastructure, software, programs, and any documentation, data or property contained within or in connection with any network infrastructure or systems listed herein. Employee agrees that any unauthorized attempt to access or any actual access of the network infrastructure, systems or data described herein following the termination of employment would be damaging to Company and/or Company Affiliates.

 

(s)                                   As of the date Employee signed this Agreement, and except as otherwise provided for within this Agreement, Employee (1) has not suffered a work-related injury not properly disclosed to Company; (2) has not exercised any actual or apparent authority by or on behalf of Company and/or any Company Affiliates that Employee has not specifically disclosed to Company; (3) has not entered into any agreements, whether written or otherwise, with any of Company or Company Affiliates’ employees (current and former) and/or third parties that could legally bind Company and/or any Company Affiliate that Employee has not specifically disclosed to Company; (4) is not aware of any Company or Company Affiliates’ noncompliance with regulatory, administrative or other legal obligation, including by any Company or Company Affiliates’ personnel, that has not already been reported; and (5) has not engaged in any conduct that could be deemed counter to the Waddell & Reed Financial, Inc. Corporate Code of Business Conduct and Ethics for Directors and Employees.

 

(t)                                    Employee agrees not to participate voluntarily in or aid in or encourage any person or entity in connection with any lawsuit or other adversarial proceeding against Company or any Company Affiliate, to the maximum extent permitted by law.

 

(u)                                 Employee agrees not in any way to disparage Company, Company Affiliates (as defined herein and specifically including Company and Company Affiliate employees and agents in their representative and individual capacities), or any Released Parties, and agrees not to make or solicit any comments, statements, or the like to the media or to others, including claims against the entities, their agents, or representatives that may be considered derogatory or detrimental to the good name or business reputation of the above-mentioned parties. Likewise, Company agrees that it shall direct in writing Officers of Company as of the Effective Date of this Agreement, that while they are employed or affiliated with Company or Company Affiliates and while they are acting in an official capacity on behalf of Company or Company Affiliates, they shall not disparage Employee in any way and not to make or solicit any comments, statements, or like to the media or to others, that may be considered derogatory or detrimental to Employee’s good name or reputation. Notwithstanding, Employee and Company recognize and agree that nothing herein restricts Company’s or Employee’s ability to engage in protected activity.

 

 

(v)                                 In addition to any other remedies or relief that may be available, the prevailing party in any dispute arising as a result of any misrepresentation made by the other party in this Agreement agrees to pay any attorneys’ fees the prevailing party may incur as a result of any such misrepresentation.

 

4.                                      Nothing in this Agreement is intended to limit, restrict or interfere with Employee’s right to engage in any protected activity, including but not limited to testifying before, communicating with and/or participating in any investigation conducted by or proceeding held before any regulatory agency, including but not limited to the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, Inc., and/or the Equal Employment Opportunity Commission (and/or similar state or federal agency), and nothing herein is intended to restrict Employee’s ability to participate in concerted activity under the National Labor Relations Act.

 

5.                                      The parties further agree as follows:

 

(a)                                 Unless specified herein, or as provided for in the Retention Agreement, this Agreement constitutes the entire agreement between Employee and Company with respect to the matters contemplated hereby and supersedes and is in full substitution for any and all prior understanding or agreements with respect to Employee’s employment. No modification or waiver of any provision of this Agreement will be valid unless in writing and signed by Employee and Company.  Further, in entering into this Agreement, they did not rely on any promise or agreement not included in this Agreement.

 

(b)                                 Nothing herein shall impact Employee, Company and/or Company Affiliates’ rights under the Indemnification Agreement entered into between Employee and Waddell & Reed Financial, Inc. as of November 13, 2009 and any coverage Employee continues to have under Company’s or Company Affiliates’ Directors and Officers insurance policies.

 

(c)                                  Except as reflected in the Retention Agreement, Employee’s post termination promises and obligations in the Employment Agreement and Confidentiality Agreement, as referenced herein, shall remain in full force and effect.

 

(d)                                 This Agreement is severable. If any provision of this Agreement is declared unenforceable, void, invalid, or voidable, then the parties intend that the validity, legality, and enforceability of the remaining provisions of this Agreement shall in no way be affected or impaired, and the remaining provisions of this Agreement shall remain valid and enforceable as written, to the fullest extent permitted by law.

 

(e)                                  This Agreement shall be construed in accordance with the laws of the State of Kansas, regardless of any conflict of laws provision.  Further, any action to interpret or enforce this Agreement shall be brought in the federal or state courts situated in Kansas, regardless of the state of residence of any party to such action.

 

(f)                                   In the event either party to this Agreement breaches its obligations under this Agreement the injured party may pursue all legal remedies available to it as a result of the breach, including, but not limited to, an action in a competent court for actual damages for the injury caused by the breaching party, as well as reasonable attorneys’ fees and costs. The parties agree that Company and/or any Company Affiliate may be entitled to seek injunctive and other equitable relief to prevent a breach of this Agreement, in addition to any other remedy to which Company and/or Company Affiliate might be entitled.  Company and/or Company Affiliates’ remedies for breach as referenced herein shall be

 

 

                                                cumulative and the pursuit of one remedy shall not be deemed to exclude any and all other remedies.

 

(g)                                  The parties expressly agree and understand that neither the existence of this Agreement nor anything contained in this Agreement shall constitute an admission of any liability on the part of Company or any Company Affiliate.  Any and all such liability is expressly denied. Neither the existence of this Agreement nor anything contained in this Agreement shall be construed as rendering Employee a “prevailing party” for purposes of awarding attorneys’ fees or costs under any applicable local, state or federal law.

 

(h)                                 To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent that this Agreement constitutes a “nonqualified deferred compensation plan” as such term is defined in Code Section 409A, and this Agreement shall be construed and applied in a manner consistent with this intent. In this regard, each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. Any reimbursements under this Agreement that would constitute nonqualified deferred compensation subject to Section 409A of the Code shall be subject to the following additional rules: (i) no reimbursement of any such expense shall affect Employee’s right to reimbursement of any such expense in any other taxable year; (ii) reimbursement of the expense shall be made, if at all, promptly but not later than the end of the calendar year following the calendar year in which the expense was incurred; and (iii) the right to reimbursement shall not be subject to liquidation or exchange for any other benefit. The payments and benefits payable to Employee under this Agreement shall be construed as exempt from Section 409A to the maximum possible extent. Except as described above, the Company makes no representations regarding the taxation of the payments and benefits provided under this Agreement (and the manner in which such payments and benefits are reported to Employee or an appropriate taxing jurisdiction by the Company is not intended to be such a representation) and in no event shall the Company or any Company Affiliate be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Employee on account of the payments and benefits provided under this Agreement (including taxes, penalties, interest or other expenses resulting from non-compliance with Section 409A of the Internal Revenue Code or excise taxes imposed by Section 4999 of the Internal Revenue Code).

 

(i)                                     Company’s or Employee’s failure to exercise any of its rights under this Agreement with regard to a breach of this Agreement shall not be construed as a waiver of such breach, nor shall it prevent Company or Employee from later enforcing strict compliance with any and all promises in this Agreement.

 

(j)                                    This Agreement will be binding on and inure to the benefit of Employee and Employee’s heirs, administrators, representatives, executors, successors, and assigns, and will be binding on and inure to the benefit of Company, Company Affiliates, and those entities’ successors and assigns.

 

(k)                                 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same Agreement.  Any party to this Agreement may execute this Agreement by signing any such counterpart.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year indicated below.

 

For Employee:

 

BY SIGNING BELOW, I SPECIFICALLY AGREE THAT I HAVE READ THE FOREGOING AGREEMENT, THAT I FULLY UNDERSTAND EACH AND EVERY PROVISION OF THIS AGREEMENT, THAT I HAVE HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY ABOUT THIS AGREEMENT, AND THAT I AM VOLUNTARILY, FREELY, AND KNOWINGLY EXECUTING IT.

 

 

	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Michael L. Avery
    

 

 

For Company:

 

 

	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Waddell & Reed   Financial, Inc.cncg_ex101.htm

Exhibit 10.1

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR 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, RULE 144A, OR RULE 145 IF APPLICABLE, UNDER SAID ACT.

Principal Amount: $450,000                                                                                                                                                                                               Issue Date: January 27, 2016

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, CONCIERGE TECHNOLOGIES, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Wainwright Holdings, Inc., a Delaware corporation, (the “Holder”) the sum of Four Hundred Fifty Thousand Dollars ($450,000) together with any interest as set forth herein, on January 27, 2021  (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of four percent (4%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may be prepaid in whole or in part by borrower at any time during its term. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of eight percent (8%) per annum from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of San Francisco, California are authorized or required by law or executive order to remain closed.

 

  

  

  

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1  Conversion Right.  The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the date of surrender of the Note and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price  (the “Conversion Price”) determined as provided herein (a “Conversion”). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 2:00 p.m., Pacific time on such conversion date (the “Conversion Date”).  The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

1.2 Conversion Price.

(a) Calculation of Conversion Price.  The conversion price (the “Conversion Price”) shall be $0.10 (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

 

  

2

  

(b) Conversion Price During Major Announcements.  Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the  “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in this Section 1.2(a).  For purposes hereof,  “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.

1.3  Authorized Shares.  The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.

 

1.4 Method of Conversion.

(a) Mechanics of Conversion.  Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time and from time to time after 180 days have elapsed from the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 2:00 p.m., Pacific time, and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(b) Surrender of Note Upon Conversion.  Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted.  The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.  In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error.  Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note.  The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

 

  

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(c) Payment of Taxes.  The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d) Delivery of Common Stock Upon Conversion.  Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note.

(e) Obligation of Borrower to Deliver Common Stock.  Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.  If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.  The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 2:00 p.m., Pacific time, on such date.

(f) Delivery of Common Stock by Electronic Transfer.  In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

  

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(g) Failure to Deliver Common Stock Prior to Deadline.  Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $500 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock through willful or deliberate hindrances on the part of the Borrower.  Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note.  The Borrower agrees that the right to convert is a valuable right to the Holder.  The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify.  Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

1.5  Concerning the Shares.  The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless  (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of  counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor. Until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR 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.”

 

  

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The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold.  In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 2.2 of the Note.

1.6 Effect of Certain Events.

(a) Effect of Merger, Consolidation, Etc.  At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:  (i) be deemed to be an Event of Default (as defined in Article II) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article II) or (ii) be treated pursuant to Section 1.6(b) hereof.  “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b) Adjustment Due to Merger, Consolidation, Etc.  If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof.  The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b).  The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

  

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(c) Adjustment Due to Distribution.  If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d) Notice of Adjustments.  Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.7 Status as Shareholder.  Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms  of this Note.  Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.  In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

 

  

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1.8 Prepayment.  Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full or in part. Any notice of prepayment hereunder (an “Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment (the “Prepayment Date”) which shall be not more than three (3) Trading Days from the date of the Prepayment Notice, and (3) the amount of the prepayment (the “Prepayment Amount”).  On the date fixed for prepayment, the Borrower shall make payment of the Prepayment Amount to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of the Prepayment Amount in cash per the instruction provided by the Holder and convey to the Holder the allocation of the Prepayment Amount as to Interest, Principal or other amounts.

 

ARTICLE II. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

2.1 Failure to Pay Principal or Interest.  The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

2.2 Conversion and the Shares.  The Borrower, through willful or deliberate hindrances, fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion.  It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

 

  

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2.3 Breach of Covenants.  The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

2.4 Breach of Representations and Warranties.  Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.

2.5 Receiver or Trustee.  The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

2.6 Judgments.  Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $1,000,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

2.7 Bankruptcy.  Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

2.8 Delisting of Common Stock.  The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange.

 

  

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2.9 Failure to Comply with the Exchange Act.  The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

2.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

2.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

2.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

2.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note.

2.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

2.15 If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE III. MISCELLANEOUS

3.1 Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges.  All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

  

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3.2 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:

If to the Borrower, to:

Concierge Technologies, Inc.

29115 Valley Center Road - K-206

Valley Center, CA 92082

Attn: David Neibert, Chief Financial Officer

facsimile: 888.312.0124

Email: dneibert@conciergetechnology.net

              With a copy to (which copy shall not constitute notice):

Horwitz + Armstrong, Inc.

Attn: Larry Horwitz

26475 Rancho Parkway South

Lake Forest, CA 92630

facsimile: 949.540-6578

Email: lhorwitz@horwitzarmstrong.com

                 If to the Holder:

Wainwright Holdings, Inc.

Attn: Nicholas Gerber

1999 Harrison Street, Ste 1530

Oakland, CA 94612

Tel: 925.295.9465

Email: nicholas.gerber@gmail.com

              With a copy to (which copy shall not constitute notice):

Stuart Crumbaugh

Tel: 510.522.9600

Email: scrumbaugh@unitedstatesoilfund.com

  

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3.3 Amendments.  This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder.  The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

3.4 Assignability.  This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns.  Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act).  Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

3.5 Cost of Collection.  If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

3.6 Governing Law.  This Note shall be governed by and construed in accordance with the laws of the State of California without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of California or in the federal courts located in the state and county of Orange.  The parties to this Note 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 Borrower and Holder 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 Note 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 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 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.

 

  

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3.7 Notice of Corporate Events.  Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).  In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time.  The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 3.7.

3.8 Remedies.  The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this January 27, 2016.

CONCIERGE TECHNOLOGIES, INC.

 

By: _______________________________

       DAVID W. NEIBERT

                     Chief Financial Officer

 

  

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EXHIBIT A --  NOTICE OF CONVERSION

The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of CONCIERGE TECHNOLOGIES, INC., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of January 27, 2016 (the “Note”), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

	
  

	
[  ]

	
The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker:

Account Number:

	
  

	
[  ]

	
The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

[name and address to go on cert]

Date of Conversion:                                                                                        _____________

Applicable Conversion Price:                                                                        $0.10

Number of Shares of Common Stock to be Issued

    Pursuant to Conversion of the Notes:                                                      _____________

Amount of Principal Balance Due remaining

    Under the Note after this conversion:                                                      _____________

Wainwright Holdings, Inc.

By:  _____________________________

Name:

Title:

Date:  ______________

[address of noteholder]

 

 

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