Document:

exhibit10-3.htm

Exhibit 10.3

RESOLUTIONS

OF THE BENEFIT FINANCE COMMITTEE

OF APPLETON PAPERS INC.

 

Amendment to Appleton Papers Inc. Retirement Plan

 

WHEREAS, the Internal Revenue Service has issued a favorable determination for the Appleton Papers Inc. Retirement Plan, as amended through December 30, 2009 (the "Plan"), by letter dated December 1, 2010, subject to the adoption of certain amendments submitted to the Internal Revenue Service in proposed form and submitted to the IRS under cover of letter of its authorized representative dated August 2, 2010.

 

NOW THEREFORE, the amendments to the Plan, as submitted to the Internal Revenue Service in proposed form under cover of letter dated August 2, 2010 (attached hereto as Exhibit A), are hereby approved and adopted, effective the dates set forth therein.

 

IN WITNESS WHEREOF, the undersigned, being all of the members of the Benefit Finance Committee, to evidence their consent to taking the foregoing actions by written consent in lieu of a meeting, have caused the above amendments to be adopted as of date last entered below, and direct that they be placed with the minutes of the Committee.

 

 

	
Committee Member

	
Date

	
 

/s/ Thomas J. Ferree

Thomas J. Ferree

	
 

1/5/11

	
 

/s/ Jeffrey J. Fletcher

Jeffrey J. Fletcher

	
 

1/10/11

	
 

/s/ Kerry S. Arent 

Kerry S. Arent

	
 

 1/5/11

 

	
 

/s/ James C. Tyrone

James C. Tyrone

	
 

1/10/11

 

  

1

  

EXHIBIT A

RESOLUTIONS

OF THE BENEFIT FINANCE COMMITTEE

OF APPLETON PAPERS INC.

Amendment to Appleton Papers Inc. Retirement Plan

 

1. Section 1.09 is amended and restated in its entirety to read as follows; in addition, the word Committee (when referring to the Administrative Named Fiduciary or the Plan Administrator) is replaced by the term "Administrative Named Fiduciary" or "Plan Administrator", as applicable, each place they appear in the Plan.

 

	
  

	
1.09

	
Committee ("Administrative Named Fiduciary" or "Plan Administrator").  Effective January 1, 2009, the "Committee" (designated as the "Plan Administrator" pursuant to Section 9.05(b) for periods prior to January 1, 2009) is replaced by the term "Administrative Named Fiduciary" (Plan Section 9.02(a)(1)) or "Plan Administrator" (Plan Section 9.05(b)), where applicable.

 

2. Section 1.17 is amended by adding to the end of subsection (b) thereof the following sentence:  "Compensation shall be further limited, as necessary, to comply with the requirements of Code  401(a)(17), as set forth in Plan Section 14.01(b)(5)."

 

3. The text of Section 1.17(e) is deleted as redundant (replaced by Section 14.01(b)(5)(B), as amended).  Section 1.17(f) shall concurrently be renumbered as Section 1.17(e).

 

4. Section 4.03(d) is amended by substituting the words "Eligible Employee" for the word "employee" in paragraphs (1), (3) and (4) thereof.

 

5. Section 7.01 is amended by including the text thereof as subsection (a), and by adding the following, to be included as subsection (b):

 

	
  

	
(b)

	
The Plan Administrator will notify the Participant when a benefit under the Plan is requested.  Such notification shall include a general description of the material features and an explanation of the relative values of the optional forms of benefit available under the Plan in a manner that would satisfy the notice requirements of Code §417(a)(3) and  Treas. Reg. §1.417(a)(3)-1.

 

6. Section 7.10 is amended and restated in its entirety to read as follows (Appendix B, referenced therein, is separately attached to this amending document):

 

 

  

2

  

7.10           Required Commencement of Benefits.

 

	
  

	
(a)

	
Pursuant to Code § 401(a)(9), the payment of benefits under the Plan to a Participant eligible for such benefits shall begin no later than the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 in the case of 5% owners (hereinafter the "required beginning date").  For Participants who are not 5% owners, the required beginning date is the later of the April 1 of the calendar year following the calendar year in which the Participant attains age 70 1/2 or retires.  Except with respect to a 5% owner, a Participant's benefit is actuarially increased to take into account the period after age 70 1/2 in which the Participant does not receive any benefits under the Plan, as required under Code § 401(a)(9)(C)(iii).  Any distribution required under the incidental death benefit requirements of Code § 401(a)(9) shall be treated as a distribution required by this subsection (a).

 

	
  

	
(b)

	
For Plan Years commencing on and after January 1, 2003, minimum required distributions will be made as provided in Appendix B and in accordance with final Treasury Regulation §§ 1.409(a)(9)-2 through 1.401(a)(9)-9 (prior to the effective date of such final regulations, distributions are made in compliance with Treasury Regulation § 1.401(a)(9)T and the Code § 401(a)(9) 1987 Proposed Regulations).

 

7. Section 14.01(b)(3) is amended by deleting the words "he was both a Participant in the Plan and his Earnings were highest" and replacing them with the following words "the Participant had the greatest aggregate compensation from the Company".

 

8. Sections 14.01(b)(4) is amended in its entirety to read as follows:

 

(4)           Dollar Limit:

 

	
  

	
(A)

	
For participants who have one hour of service on or after the first day of the first limitation year ending after December 31, 2001, the "Dollar Limit" is $160,000, as adjusted, effective January 1 of each year, under Code § 415(d) in such manner as the Secretary of Treasury shall prescribe, and payable in the form of a straight life annuity.  A limitation as adjusted under Code § 415(d) will apply to limitation years ending with or within the calendar year for which the adjustment applies.

 

  

3

  

	
  

	
(B)

	
For Plan Years ending on or before December 31, 2001, "Dollar Limit" means $90,000, as adjusted from time to time beginning January 1, 1988  to reflect increases in the cost of living pursuant to regulations prescribed by Code § 415(d), or if greater, the Participant's accrued benefit under the Plan as of December 31, 1982.  No adjustment made pursuant to the preceding sentence shall be taken into account before the year for which such adjustment first takes effect.

 

9. Section 14.01(b)(5) is amended and restated in its entirety to read as follows:

 

(5)           Compensation:

	
  

	
(A)

	
"Compensation" for any Limitation Year means wages, salaries, and fees for professional services and other amounts received (without regard to whether or not an amount is paid in cash) for personal services actually rendered in the course of employment with the Company (or an Affiliate) maintaining the Plan to the extent that the amounts are includible in gross income (or to the extent amounts would have been received and includible in gross income but for an election under Code §§ 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b)), including, but not limited to, commissions paid to salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements or other expense allowances under a nonaccountable plan as described in Treas. Reg. §1.62-2(c), and excluding the following:

	
  

	
(i)

	
contributions (other than elective contributions described in Code §§ 402(e)(3), 408(k)(6), 408(p)(2)(A)(i) or 457(b)) made by the Company to a plan of deferred compensation (including a plan described in Code § 408(k) or 408(p), and whether or not qualified) to the extent the contributions are not includible in the employee's gross income for the taxable year in which contributed. In addition, any distributions from a plan of deferred compensation (whether or not qualified) are not considered as Compensation for Code § 415 purposes, regardless of whether such amounts are included in gross income when received;

  

4

  

	
  

	
(ii)

	
amounts realized from the exercise of a nonstatutory stock option, or when restricted stock (or other property) held by the employee either becomes freely transferrable or is no longer subject to a substantial risk of forfeiture;

	
  

	
(iii)

	
amounts realized from the sale, exchange or other disposition of stock acquired under a statutory stock option;

	
  

	
(iv)

	
other amounts that receive special tax benefits, such as premiums for group-term life insurance (but only to the extent not taxable to the employee and are not salary reduction amounts described in Code § 125); and

	
  

	
(v)

	
other items of income that are similar to any of the items listed in clauses (i) through (iv) above.

 

	
  

	
(B)

	
Compensation Limit.  The annual compensation of each Participant taken into account in determining benefit accruals in any Plan Year beginning after December 31, 2001, shall not exceed $200,000.  Annual compensation means compensation during the Plan Year or such other consecutive 12-month period over which compensation is otherwise determined under the Plan (the "determination period").  For purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, compensation for any prior determination period shall be limited as provided below:

	
  

	
(i)

	
In determining benefit accruals in Plan Years beginning after December 31, 2001, the annual compensation limit set forth above; for determination periods beginning before January 1, 2002 the annual compensation limit shall be $150,000 for any determination period beginning in 1996 or earlier; $160,000 for any determination period beginning in 1997, 1998 or 1999; and $170,000 for any determination period beginning in 2000 or 2001.

  

5

  

	
  

	
(ii)

	
The $200,000 limit on annual compensation above shall be adjusted for cost-of-living increases in accordance with Code § 401(a)(17)(B).  The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year.

	
  

	
(C)

	
Compensation timing rules.

	
  

	
(i)

	
General:  In order to be taken into account for a Limitation Year, Compensation within the meaning of Code § 415(c)(3) must be (1) actually paid or made available to a Participant (or, if earlier, includible in the gross income of the Participant) within the Limitation Year, and (2) except as provided in clause (ii) below, paid or treated as paid to the Participant prior to the Participant's severance from employment.  Any payment that is not described in this clause (i) or clause (ii) below is not considered Compensation if paid after severance from employment.  Thus, Compensation does not include severance pay, or parachute payments within the meaning of Code § 280G(b)(2), if they are paid after severance from employment, and does not include post-severance payments under a nonqualified unfunded deferred compensation plan unless the payments would have been paid at that time without regard to the severance from employment.

  

6

  

	
  

	
(ii)

	
Compensation paid after severance from employment. Provided that payment is actually made by the later of 2 1/2 months after severance from employment or the end of the Limitation Year that includes the date of severance from employment, the following amounts are included in Compensation:  (1) regular compensation paid after severance from employment for services during the Participant's regular working hours, and compensation for services outside the Participant's regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; provided that the payment would have been paid to the Participant prior to a severance from employment if the Participant had continued in employment with the Company, and (2) payment for unused accrued bona fide sick, vacation, or other leave, but only if the Participant would have been able to use the leave if employment had continued.

	
  

	
(iii)

	
Salary continuation payments for military service or disability.  The rule of clause (ii)(1) above shall not apply to: (1) payments to an individual who does not currently perform services for the Company by reason of qualified military service (as defined in Code § 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the Company rather than entering qualified military service, or (2) payments made to an Participant who is permanently and totally disabled (as defined in Code § 22(e)(3)).

	
  

	
(iv)

	
Interaction with Code § 417(a)(17).  The definition of Compensation for a Plan Year that is used for purposes of applying the limitations of Code § 415 shall not reflect Compensation for such year that is in excess of the limitation under Code § 401(a)(17) that applies to that Plan Year.

 

  

7

  

10. Section 14.03 is amended and restated in its entirety to read as follows:

 

	
  

	
14.03

	
Adjustments for Early or Late Payment.

(a)           The following adjustments shall apply for early or late payments:

(1)           Payments Starting Prior to Age 62.

	
  

	
(A)

	
Limitation Years Beginning Before July 1, 2007.  If a Participant's Retirement Pension begins prior to age 62 and occurs in a Limitation Year beginning before July 1, 2007, the Dollar Limit applicable to the Participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the actuarial equivalent of the Dollar Limit (adjusted under Section 14.05 for years of participation less than 10, if required).  Actuarial equivalence for this purpose is computed using whichever of the following produces the smaller annual amount: (1) the actuarial equivalent (at such age) of the Dollar Limit computed using the interest rate and mortality table (or other tabular factors) specified in Section 1.07 of Appendix A of the Plan; or (2) the actuarial equivalent (at such age) of the Dollar Limit computed using a 5% interest rate and the applicable mortality table as defined in Section 1.04 of Appendix A to the Plan.

	
  

	
(B)

	
Limitation Years Beginning on or After July 1, 2007.

	
  

	
(i)

	
Plan Does Not Have Immediately Commencing Straight Life Annuity Payable at Both Age 62 and the Age of Benefit Commencement.  If the annuity starting date for the Participant's benefit is prior to age 62 and occurs in a Limitation Year beginning on or after July 1, 2007, and the Plan does not have an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement, the Dollar Limit for the Participant's annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the Participant's annuity starting date that is the actuarial equivalent of the Dollar Limit (adjusted under Section 14.05 for years of participation less than 10, if required) with actuarial equivalence computed using a 5 percent interest rate assumption and the applicable mortality table for the annuity starting date as defined in Section 1.04 of Appendix A to the Plan (and expressing the Participant's age based on completed calendar months as of the annuity starting date).

  

8

  

	
  

	
(ii)

	
Plan Has Immediately Commencing Straight Life Annuity Payable at Both Age 62 and the Age of Benefit Commencement.  If the annuity starting date for the Participant's benefit is prior to age 62 and occurs in a Limitation Year beginning on or after July 1, 2007, and the Plan has an immediately commencing straight life annuity payable at both age 62 and the age of benefit commencement, the Dollar Limit for the Participant's annuity starting date is the lesser of the limitation determined under clause (i) above and the Dollar Limit (adjusted under Section 14.05 for years of participation less than 10, if required) multiplied by the ratio of the annual amount of the immediately commencing straight life annuity under the Plan at the Participant's annuity starting date to the annual amount of the immediately commencing straight life annuity under the Plan at age 62, both determined without applying the limitations of this Section 14.03.

(2)           Payments Starting After Age 65.

	
  

	
(A)

	
Limitation Years Beginning Before July 1, 2007.  If the annuity starting date for the Participant's benefit is after age 65 and occurs in a Limitation Year beginning before July 1, 2007, the Dollar Limit for the Participant's annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the Participant's annuity starting date that is the actuarial equivalent of the Dollar Limit (adjusted under Section 14.05 for years of participation less than 10, if required) with actuarial equivalence computed using whichever of the following produces the smaller annual amount: (1) the interest rate and the mortality table (or other tabular factor) specified in Section 1.07 of Appendix A of the Plan; or (2) a 5-percent interest rate assumption and the applicable mortality table as defined in Section 1.04 of Appendix A to the Plan.

	
  

	
(B)

	
Limitation Years Beginning On or After July 1, 2007.

  

9

  

	
  

	
(i)

	
Plan Does Not Have Immediately Commencing Straight Life Annuity Payable at Both Age 65 and the Age of Benefit Commencement.  If the annuity starting date for the Participant's benefit is after age 65 and occurs in a Limitation Year beginning on or after July 1, 2007, and the Plan does not have an immediately commencing straight life annuity payable at both age 65 and the age of benefit commencement, the Dollar Limit at the Participant's annuity starting date is the annual amount of a benefit payable in the form of a straight life annuity commencing at the Participant's annuity starting date that is the actuarial equivalent of the Dollar Limit (adjusted under Section 14.05 for years of participation less than 10, if required), with actuarial equivalence computed using a 5 percent interest rate assumption and the applicable mortality table for that annuity starting date as defined in Section 1.04 of Appendix A to the Plan (and expressing the Participant's age based on completed calendar months as of the annuity starting date).

	
  

	
(ii)

	
Plan Has Immediately Commencing Straight Life Annuity Payable at Both Age 65 and the Age of Benefit Commencement.  If the annuity starting date for the Participant's benefit is after age 65 and occurs in a Limitation Year beginning on or after July 1, 2007, and the Plan has an immediately commencing straight life annuity payable at both age 65 and the age of benefit commencement, the Dollar Limit at the Participant's annuity starting date is the lesser of the limitation determined under clause (i) above and the Dollar Limit (adjusted under Section 14.05 for years of participation less than 10, if required) multiplied by the ratio of the annual amount of the adjusted immediately commencing straight life annuity under the Plan at the Participant's annuity starting date to the annual amount of the adjusted immediately commencing straight life annuity under the Plan at age 65, both determined without applying the limitations of this Section 14.03. For this purpose, the adjusted immediately commencing straight life annuity under the Plan at the Participant's annuity starting date is the annual amount of such annuity payable to the Participant, computed disregarding the Participant's accruals after age 65 but including actuarial adjustments even if those actuarial adjustments are used to offset accruals; and the adjusted immediately commencing straight life annuity under the Plan at age 65 is the annual amount of such annuity that would be payable under the Plan to a hypothetical participant who is age 65 and has the same accrued benefit as the participant.

 

  

10

  

 

	
  

	
(b)

	
Any decrease in the Dollar Limit determined in accordance with Sections 14.03(a)(1) or (2) shall not reflect the mortality decrement to the extent that benefits will not be forfeited upon the death of the Participant.  If any benefits are forfeited upon death, the full mortality decrement is taken into account.

 

11. Section G2.09(b)(4) is amended by updating the reference therein to Treasury Regulations to "Treas. Reg. § 1.409(a)(9)-6(c)."

 

12. Appendix A is amended in its entirety to read as follows:

 

APPENDIX A

 

 

Actuarial Assumptions

 

Unless otherwise expressly provided in the Plan, the following actuarial assumptions shall be used to determine benefits under the Plan for Participants who either separate from service or accrue benefits on or after January 1, 2008.  As to all other Participants, actuarial determinations governing benefits under the Plan shall be made in accordance with the Plan as in effect before January 1, 2008.

 

	
1.01  

	
50% Joint and Surviving Spouse Annuity.

 

The percentage of the Basic Monthly Benefit payable to the Participant and continuing to his Surviving Spouse at one half the rate (i.e., 50%) after his death during the remaining lifetime of such Spouse shall be determined using the following assumptions:

 

	
(1)  

	
Interest:  8%.

 

	
(2)  

	
Mortality:  The 1983 Group Annuity Mortality Table for males for the participants and the 1983 Group Annuity Mortality Table for females for the spouse.

 

	
1.02  

	
75% Joint and Surviving Spouse Annuity Option.

 

The percentage of the Basic Monthly Benefit payable to the Participant and continuing to his Surviving Spouse at three-fourths the rate (i.e., 75%) after his death during the remaining lifetime of such Spouse shall be determined using the following assumptions:

 

	
(1)  

	
Interest:  8%.

 

	
(2)  

	
Mortality:  The 1983 Group Annuity Mortality Table for males for the participants and the 1983 Group Annuity Mortality Table for females for the spouse.

 

	
1.03  

	
100% Joint and Surviving Spouse Annuity Option.

 

The percentage of the Basic Monthly Benefit payable to the Participant and continuing to his Surviving Spouse at the same rate after his death during the remaining lifetime of such Spouse shall be determined using the following assumptions:

 

  

11

  

 

	
(1)  

	
Interest:  8%.

 

	
(2)  

	
Mortality:  The 1983 Group Annuity Mortality Table for males for the participants and the 1983 Group Annuity Mortality Table for females for the spouse.

 

	
1.04  

	
Code Section 415 Limits.

 

For purposes of applying the limits of Code § 415, a retirement benefit that is payable in any form other than a straight life annuity and that is not subject to Code 417(e)(3) must be adjusted to an actuarially equivalent straight life annuity that equals:

 

	
  

	
(1)

	
For Limitation Years beginning on or after July 1, 2007, the greater of the annual amount of the straight life annuity (if any) payable under the Plan at the same annuity starting date, and the annual amount of a straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit computed using an interest rate of 5 percent and the applicable mortality table under § Code 417(e)(3).

	
  

	
(2)

	
For Limitation Years beginning before July 1, 2007, the annual amount of a straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit computed using whichever of the following produces the greater annual amount: (i) the interest rate and mortality table or other tabular factor specified in the Plan for adjusting benefits in the same form; and (ii) a 5 percent interest rate assumption and the applicable mortality table under Code § 417(e)(3).

	
1.05  

	
Reemployed Pensioners, etc.

 

For purposes of increasing a Participant's Retirement Pension to reflect the value of excess Missed Payments as provided in Plan Section 7.09(a) and for reducing the pension of a Participant who had previously received benefits from an Affiliate or under another plan of the Company, as provided under Plan Section 5.07, the following factors shall be used:

 

	
(1)  

	
Interest:  8.00%

 

	
(2)  

	
Mortality:  The 1983 Group Annuity Mortality Table (males, 3 year setback).

 

	
1.06  

	
Benefit Forms Subject to Code § 417(e)(3).

 

The straight life annuity that is actuarially equivalent to the Participant's form of benefit shall be determined under this Section 1.06 if the form of the Participant's benefit is a benefit form subject to Code § 417(e)(3).  In this case, the actuarially equivalent straight life annuity shall be determined as follows:

 

  

12

  

	
  

	
(1)

	
Annuity Starting Date in Plan Years Beginning After 2005.  If the annuity starting date of the Participant's form of benefit is in a Plan Year beginning after 2005, the actuarially equivalent straight life annuity is equal to the greatest of (i) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using the interest rate specified in the Plan and the mortality table (or other tabular factor) specified in the Plan for adjusting benefits in the same form; (ii) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using a 5.5 percent interest rate assumption and the applicable mortality table defined in Section 1.07(2) below; and (iii) the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using the applicable interest rate and the applicable mortality table defined in Section 1.07(2) below, divided by 1.05.

 

	
  

	
(2)

	
Annuity Starting Date in Plan Years Beginning in 2004 or 2005.  If the annuity starting date of the Participant's form of benefit is in a Plan Year beginning in 2004 or 2005, the actuarially equivalent straight life annuity is equal to the annual amount of the straight life annuity commencing at the same annuity starting date that has the same actuarial present value as the Participant's form of benefit, computed using whichever of the following produces the greater annual amount: (i) the interest rate specified in the Plan for adjusting benefits in the same form; and (ii) a 5.5 percent interest rate assumption and the applicable mortality table defined in Section 1.07(2) below.

 

	
1.07  

	
All Other Equivalencies.

 

For purposes of all calculations not expressly set forth in the Plan, the following interest and mortality assumptions shall apply:

 

	
  

	
(1)

	
Interest:

	
The applicable interest rate as defined in Code § 417(e)(3)C).

 

(2)           Mortality:               The applicable mortality table as defined in Code § 417(e)(3)(B).

 

	
  

	
(3)

	
Expected Retirement Age:  For a Participant other than a Rule of 65 Retiree who terminates prior to his Earliest Retirement Age - age 65; for a Rule of 65 Retiree who terminates prior to his Earliest Retirement Age - age 65; and for any other Participant - age at Pension Commencement Date.

 

* * * * *

  

13

  

 

APPLETON PAPERS INC.

 

RETIREMENT PLAN

 

APPENDIX B

 

MINIMUM DISTRIBUTION REQUIREMENTS

 

ARTICLE 1.

 

General Rules.

 

	
1.01  

	
Effective Date.  The provisions of this APPENDIX B will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.

 

	
1.02  

	
Coordination with Minimum Distribution Requirements Previously in Effect.  If the total amount of 2002 required minimum distributions under the plan made to the distributee prior to the effective date of this section equals or exceeds the required minimum distributions determined under this section, then no additional distributions will be required to be made for 2002 on or after such date to the distributee.  If the total amount of 2002 required minimum distributions under the plan made to the distributee prior to the effective date of this section is less than the amount determined under this section, then required minimum distributions for 2002 on and after such date will be determined so that the total amount of required minimum distributions for 2002 made to the distributee will be the amount determined under this section.

 

	
1.03  

	
Precedence.  The requirements of this section will take precedence over any inconsistent provisions of the plan.

 

	
1.04  

	
Requirements of Treasury Regulations Incorporated.  All distributions required under this section will be determined and made in accordance with the Treasury regulations under section 401(a)(9) of the Internal Revenue Code.

 

	
1.05  

	
TEFRA Section 242(b)(2) Elections.  Notwithstanding the other provisions of this section, other than section 1.4, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the plan that relate to section 242(b)(2) of TEFRA.

 

ARTICLE 2.

 

Time and Manner of Distribution.

 

	
2.01  

	
Required Beginning Date.  The participant's entire interest will be distributed, or begin to be distributed, to the participant no later than the participant's required beginning date.

 

  

1

  

	
2.02  

	
Death of Participant Before Distributions Begin.  If the participant dies before distributions begin, the participant's entire interest will be distributed, or begin to be distributed, no later than as follows:

 

	
(a)  

	
If the participant's surviving spouse is the participant's sole designated beneficiary, distributions to the surviving spouse will begin by December 31 of the calendar year immediately following the calendar year in which the participant died, or by December 31 of the calendar year in which the participant would have attained age 70 1/2, if later.

 

	
(b)  

	
If the participant's surviving spouse is not the participant's sole designated beneficiary, distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the participant died.

 

	
(c)  

	
If there is no designated beneficiary as of September 30 of the year following the year of the participant's death, the participant's entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the participant's death.

 

	
(d)  

	
If the participant's surviving spouse is the participant's sole designated beneficiary and the surviving spouse dies after the participant but before distributions to the surviving spouse begin, this section 2.2, other than section 2.2(a), will apply as if the surviving spouse were the participant.

 

For purposes of this section 2.2 and section 5, distributions are considered to begin on the participant's required beginning date (or, if section 2.2(d) applies, the date distributions are required to begin to the surviving spouse under section 2.2(a)).  If annuity payments irrevocably commence to the participant before the participant's required beginning date (or to the participant's surviving spouse before the date distributions are required to begin to the surviving spouse under section 2.2(a)), the date distributions are considered to begin is the date distributions actually commence.

 

	
2.03  

	
Form of Distribution.  Unless the participant's interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with sections 3, 4 and 5 of this section. If the participant's interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of section 401(a)(9) of the Code and the Treasury regulations. Any part of the participant's interest which is in the form of an individual account described in section 414(k) of the Code will be distributed in a manner satisfying the requirements of section 401(a)(9) of the Code and the Treasury regulations that apply to individual accounts.

 

  

2

  

ARTICLE 3.

 

Determination of Amount to be Distributed Each Year.

 

	
3.01  

	
General Annuity Requirements.  If the participant's interest is paid in the form of annuity distributions under the plan, payments under the annuity will satisfy the following requirements:

 

	
(a)  

	
The annuity distributions will be paid in periodic payments made at intervals not longer than one year;

 

	
(b)  

	
The distribution period will be over a life (or lives) or over a period certain not longer than the period described in section 4 or 5;

 

	
(c)  

	
Once payments have begun over a period certain, the period certain will not be changed even if the period certain is shorter than the maximum permitted;

 

	
(d)  

	
Payments will either be non-increasing or increase only as follows:

 

	
(1)  

	
by an annual percentage increase that does not exceed the annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the Bureau of Labor Statistics;

 

	
(2)  

	
to the extent of the reduction in the amount of the participant's payments to provide for a survivor benefit upon death, but only if the beneficiary whose life was being used to determine the distribution period described in section 4 dies or is no longer the participant's beneficiary pursuant to a qualified domestic relations order within the meaning of section 414(p);

 

	
(3)  

	
to provide cash refunds of employee contributions upon the participant's death; or

 

	
(4)  

	
to pay increased benefits that result from a plan amendment.

 

	
3.02  

	
Amount Required to be Distributed by Required Beginning Date.  he amount that must be distributed on or before the participant's required beginning date (or, if the participant dies before distributions begin, the date distributions are required to begin under section 2.2(a) or (b)) is the payment that is required for one payment interval.  he second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually.  All of the participant's benefit accruals as of the last day of the first distribution calendar year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the participant's required beginning date.

 

	
3.03  

	
Additional Accruals After First Distribution Calendar Year.  any additional benefits accruing to the participant in a calendar year after the first distribution calendar year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.

 

  

3

  

ARTICLE 4.

 

Requirements For Annuity Distributions That Commence During Participant's Lifetime.

 

	
4.01  

	
Joint Life Annuities Where the Beneficiary Is Not the Participant's Spouse.  If the participant's interest is being distributed in the form of a joint and survivor annuity for the joint lives of the participant and a non-spouse beneficiary, annuity payments to be made on or after the participant's required beginning date to the designated beneficiary after the participant's death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the participant using the table set forth in Q&A-2 of section 1.401(a)(9)-6T of the Treasury regulations.  If the form of distribution combines a joint and survivor annuity for the joint lives of the participant and a non-spouse beneficiary and a period certain annuity, the requirement in the preceding sentence will apply to annuity payments to be made to the designated beneficiary after the expiration of the period certain.

 

	
4.02  

	
Period Certain Annuities.  Unless the participant's spouse is the sole designated beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution commencing during the participant's lifetime may not exceed the applicable distribution period for the participant under the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury regulations for the calendar year that contains the annuity starting date.  If the annuity starting date precedes the year in which the participant reaches age 70, the applicable distribution period for the participant is the distribution period for age 70 under the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury regulations plus the excess of 70 over the age of the participant as of the participant's birthday in the year that contains the annuity starting date.  If the participant's spouse is the participant's sole designated beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the participant's applicable distribution period, as determined under this section 4.2, or the joint life and last survivor expectancy of the participant and the participant's spouse as determined under the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury regulations, using the participant's and spouse's attained ages as of the participant's and spouse's birthdays in the calendar year that contains the annuity starting date.

 

ARTICLE 5.

 

Requirements For Minimum Distributions Where Participant Dies

 

Before Date Distributions Begin.

 

	
5.01  

	
Participant Survived by Designated Beneficiary.  If the participant dies before the date distribution of his or her interest begins and there is a designated beneficiary, the participant's entire interest will be distributed, beginning no later than the time described in section 2.2(a) or (b), over the life of the designated beneficiary or over a period certain not exceeding:

 

  

4

  

	
(a)  

	
Unless the annuity starting date is before the first distribution calendar year, the life expectancy of the designated beneficiary determined using the beneficiary's age as of the beneficiary's birthday in the calendar year immediately following the calendar year of the participant's death; or

 

	
(b)  

	
If the annuity starting date is before the first distribution calendar year, the life expectancy of the designated beneficiary determined using the beneficiary's age as of the beneficiary's birthday in the calendar year that contains the annuity starting date.

 

	
5.02  

	
No Designated Beneficiary.  If the participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the participant's death, distribution of the participant's entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the participant's death.

 

	
5.03  

	
Death of Surviving Spouse Before Distributions to Surviving Spouse Begin.  If the participant dies before the date distribution of his or her interest begins, the participant's surviving spouse is the participant's sole designated beneficiary, and the surviving spouse dies before distributions to the surviving spouse begin, this section 5 will apply as if the surviving spouse were the participant, except that the time by which distributions must begin will be determined without regard to section 2.2(a).

 

ARTICLE 6.

 

Definitions.

 

	
6.01  

	
Designated beneficiary.  The individual who is designated as the beneficiary under section 1.09 of the Plan and is the designated beneficiary under section 401(a)(9) of the Internal Revenue Code and section 1.401(a)(9)-1, Q&A-4, of the Treasury regulations.

 

	
6.02  

	
Distribution calendar year.  A calendar year for which a minimum distribution is required. For distributions beginning before the participant's death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the participant's required beginning date.  For distributions beginning after the participant's death, the first distribution calendar year is the calendar year in which distributions are required to begin pursuant to section 2.2.

 

	
6.03  

	
Life expectancy.  Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury regulations.

 

	
6.04  

	
Required beginning date.  The date specified in the plan.

 

* * * * *

  

5a50062708ex10-1.htm

Exhibit 10.1

 

EXCHANGE, MODIFICATION AND FORBEARANCE AGREEMENT

 

THIS EXCHANGE, MODIFICATION AND FORBEARANCE AGREEMENT (the “Agreement”), dated as of  November 8, 2011 (the “Agreement Date”), is entered into between ANTs software, inc., a Delaware corporation having an address at 1031 Cambridge Square, Suite F, Alpharetta, Georgia 30009 (the “Company”), Inventa Technologies, Inc., a Delaware corporation having an address at 1031 Cambridge Square, Suite F, Alpharetta, Georgia 30009 (“Inventa”), Manchester Securities Corp., a New York corporation having an address at 40 West 57th Street, New York, New York 10019-4001 (“Manchester”), SAMC LLC, a Delaware limited liability company having an address at c/o JGB Management Inc., 400 Madison Avenue, Suite 8D, New York, New York 10017 (“SAMC”), JGB Capital Offshore Ltd., a Cayman Islands exempted company having an address at c/o JGB Management Inc., 400 Madison Avenue, Suite 8D, New York, New York 10017 (“JGB Offshore”), JGB Capital LP, a Delaware limited partnership having an address at c/o JGB Management Inc., 400 Madison Avenue, Suite 8D, New York, New York 10017 (“JGB Capital” and collectively with Manchester, SAMC and JGB Offshore, the “Investors” and each an “Investor”), and Wells Fargo Bank, National Association, a national banking association having an address at 45 Broadway, 14th Floor, New York, New York 10006, in its capacity as collateral agent for the Investors (the “Collateral Agent”).

 

W I T N E S S E T H:

 

WHEREAS, the Investors are the holders of certain 5% Senior Secured Notes due March 3, 2016, of the Company  in the aggregate original principal amount of $8,400,000 (the “Notes”) issued pursuant to that certain Note Purchase Agreement, dated March 3, 2011, by and among the Company, the Investors and the Collateral Agent (the “Note Purchase Agreement”);

 

WHEREAS, Inventa, a wholly-owned subsidiary of the Company, guaranteed the obligations under the Notes pursuant to that certain Guaranty dated as of March 3, 2011 (the “Guaranty”);

 

WHEREAS, on April 29, 2011, the aggregate principal amount of the Notes was reduced to $2,150,000 in connection with the release to the Investors of $6,250,000 from escrow accounts established pursuant to the Note Purchase Agreement;

 

WHEREAS, multiple events of default have occurred, and are currently continuing, under the Notes;

 

WHEREAS, on September 23, 2011, SAMC, JGB Offshore and JGB Capital (collectively, the “JGB Investors”) delivered a written notice of default and acceleration to the Company pursuant to Section 5(b) of the Notes and declared all obligations under the Notes owned by the JGB Investors, including principal and accrued and unpaid interest, under the Notes to be immediately due and payable (the “JGB Acceleration Notice”);

 

WHEREAS, on October 6, 2011, Manchester delivered a written notice of default and acceleration to the Company pursuant to Section 5(b) of the Notes and declared all obligations under the Notes owned by Manchester, including principal and accrued and unpaid interest, under the Notes to be immediately due and payable (the “Manchester Acceleration Notice” and together with the JGB Acceleration Notice, the “Acceleration Notices”);

 

  

  

  

WHEREAS, the Company has not made any payments to the Investors in response to the Acceleration Notices;

 

WHEREAS, the Notes and the Guaranty are secured by a first priority security interest in all of the assets of the Company and Inventa pursuant to a Security Agreement, dated March 3, 2011, by and among the Company, Inventa and the Collateral Agent;

 

WHEREAS, the Investors have agreed to forebear from exercising certain rights and remedies under the Notes and the Security Agreement in accordance with the terms and conditions set forth in this Agreement;

 

WHEREAS, in consideration of such forbearance the Company has agreed to amend the Notes as provided in this Agreement;

 

WHEREAS, the Investors are also the holders of certain Series B Warrants (the “Warrants”) issued pursuant to that certain Warrant Purchase Agreement, dated March 3, 2011, by and among the Company and the Investors;

 

WHEREAS, the Warrants were originally exercisable for an aggregate of 28,474,578 shares of common stock, par value $0.0001 per share, of the Company (the “Common Stock”) at an exercise price $0.59 per share;

 

WHEREAS, as a result of anti-dilution adjustments the Warrants are currently exercisable for no less than 168,000,010 shares of Common Stock at an exercise price no greater than $0.10;

 

WHEREAS, under the Warrants the Investors have various rights against the Company, including, without limitation, the right to put the Warrants to the Company in the event of a change of control of the Company or a sale of substantially all of the Company’s assets;

 

WHEREAS, the Company has received a bona fide offer from a third party to acquire all or substantially of the assets of the Company and its subsidiaries (the “Asset Sale”) and the Company expects such Asset Sale to be consummated no later than November 28, 2011;

 

WHEREAS, if the Investors exercise their put right as a result of the Asset Sale, the Warrant provides that the Company must purchase the Warrants for an amount equal to the Black Scholes Value (as defined in the Warrant) of the unexercised portion of the Warrants on the date of such Asset Sale (the “Fundamental Transaction Put Price”);

 

WHEREAS, the Company and the Investors disagree on certain matters regarding the payment of the Fundamental Transaction Put Price and recognize that such disagreements may result in significant litigation between the Company and the Investors; and

 

WHEREAS, in order to avoid the time and expense of litigation, the parties have agreed that the Company shall issue, in accordance with the terms and conditions of this Agreement, secured notes in the aggregate amount of $7,000,000 to the Investors in exchange for the Warrants, which amount, the Company believes represents a reasonable compromise regarding its potential liability to the Investors under the Warrants in the event that the Asset Sale is consummated;

 

  

2

  

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

 

1.           Definitional Matters.  Capitalized terms used herein but not defined herein shall have the respective meanings given such terms in the Notes.

 

2.           Acknowledgments of the Company.

 

a.           Events of Default under the Notes. The Company acknowledges that it is in default under the Notes and the Security Agreement (the “Existing Defaults”) and that such Existing Defaults include, without limitation, the following Events of Default set forth in Section 5(a) of the Note, which have occurred and are currently continuing:

 

	
  

	
i)

	
the Company’s failure to pay accrued and unpaid interest on the Notes when due on June 1, 2011, July 1, 2011, August 1, 2011, September 1, 2011 and October 1, 2011;

 

	
  

	
ii)

	
the suspension and cessation from trading and the failure of the Common Stock to be designated for quotation on an Eligible Market for a period of three (3) consecutive Business Days, such suspension and cessation commencing on September 19, 2011; and

 

	
  

	
iii)

	
the Company’s failure to comply with its covenants under Section 3.2 of the Note Purchase Agreement, and in particular the Company’s failure to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2011; and

 

	
  

	
iv)

	
the Company’s failure to comply with its covenants and agreements under the Registration Rights Agreement, including, without limitation, Section 2(a) thereof.

 

b.           Acceleration Notices Duly Delivered.  The Company and Inventa acknowledge receipt of the Acceleration Notices and agree that such Acceleration Notices were duly delivered to the Company and Inventa by the Investors in accordance with the Notes, the Note Purchase Agreement and the Guaranty.

 

c.           Amount Due and Payable Under the Notes.  The Company and Inventa acknowledge and agree that interest has been accruing on the principal amount of the Notes at a default interest rate of 18% (the “Default Rate”) since June 1, 2011, and that upon acceleration of the Notes pursuant to the Acceleration Notices an amount equal to 120% of the entire outstanding principal amount of the Notes plus accrued and unpaid interest thereon was, and is as of the date hereof, immediately due and payable.  The Company and Inventa also acknowledge that interest continues to accrue at the Default Rate until the Notes are paid in full.

 

d.           Warrant Adjustments.  The Company acknowledges and agrees that as a result of anti-dilution adjustments under Section 2(a) of the Warrants, the Warrants are currently exercisable for no less than 168,000,010 shares of Common Stock at an exercise price no greater than $0.10 per share.

 

  

3

  

3.           Exchange of Warrants for Convertible Notes.

 

a.           Exchange.  Upon the following terms and conditions, in exchange for the surrender and cancellation of the Warrants, the Company shall issue to the Investors, and the Investors shall acquire from the Company, 5% Senior Secured Convertible Notes of the Company due January 1, 2012, substantially in the form attached hereto as Exhibit A, in the aggregate original principal amount equal to $7,000,000 and in the denominations set forth on Schedule 1 (each an “Exchange Note” and collectively, the “Exchange Notes”).  All of the provisions of the Note Purchase Agreement that are applicable to the Notes shall apply to the Exchange Notes mutatis mutandis.

 

b.           Delivery of Exchange Notes. Promptly following execution hereof or as soon thereafter as is reasonably possible, the Company shall deliver the original Exchange Notes to the Investors’ counsel and each Investor shall cause its Warrants (or an affidavit of lost warrant in form and substance acceptable to the Company) to be delivered to the Company’s counsel.

 

c.           Closing Date. The date upon which the Exchange Notes are released to the Investors shall be the “Closing Date”.

 

d.           Guaranty.  The Exchange Notes will be guaranteed by Inventa.  The guaranty substantially in the form of Exhibit B attached hereto shall be executed by Inventa and delivered on the Closing Date (the “Exchange Notes Guaranty”).

 

e.           Security Interest.  The Exchange Notes will be secured by a first priority security interest in all of the assets of the Company and its subsidiaries pursuant to the Amended and Restated Security Agreement, substantially in the form of Exhibit C hereto (the “Amended and Restated Security Agreement”).  The liens securing the Exchange Notes will rank pari-passu with the liens securing the Notes.  This Agreement constitutes written instructions of the Investors to the Collateral Agent to amend and restate the Security Agreement in accordance with Section 27 thereof.

 

f.           Termination of Warrant Purchase Agreement.  Effective on and after the Closing Date, the Warrant Purchase Agreement shall be terminated, provided, however, that the following provisions of the Warrant Purchase Agreement shall survive termination of the Warrant Purchase Agreement and shall remain in full force and effect (including any definitions of capitalized terms used in any of the following Sections of the Warrant Purchase Agreement): (i) Article 6 (Indemnification) and (ii) Article 7 (Miscellaneous).

 

g.           Redemption of Exchange Notes.  If the Company consummates the Asset Sale for a gross purchase price of less than forty million dollars ($40,000,000) the Company shall be obligated to redeem the Exchange Notes for an amount equal to the unpaid interest outstanding thereon plus the sum of (I) the principal amount of the Exchange Notes, multiplied by (ii) the quotient of (W) the gross purchase price at which the Asset Sale is consummated and (X) $40,000,000; provided, however, that in no event will the Exchange Notes be redeemed under this Section 3(g) for an aggregate face amount of less than five million dollars ($5,000,000).  If the Company consummates the Asset Sale for a gross purchase price of more than forty million dollars ($40,000,000), the Company shall be obligated to redeem the Exchange Notes for an amount equal to the unpaid interest outstanding thereon plus the sum of (I) the principal amount of the Exchange Notes, multiplied by (ii) the quotient of (Y) the gross purchase price at which the Asset Sale is consummated and (Z) $40,000,000; provided, however, that in no event will the Exchange Notes be required to be redeemed under this Section 3(g) for an aggregate face amount greater than nine million dollars ($9,000,000).  For purposes hereof “gross purchase price” shall include any portion of the purchase price that is deferred or contingent and the value of any payments or value given to members of management of the Company or Inventa in the form of consulting or employment agreements or otherwise.

 

  

4

  

4.           Forbearance; Amendment of Notes.

 

a.           Forbearance.  Solely as an accommodation to the Company (and without waiving any rights or remedies available to the Investors under the Note Purchase Agreement, the Notes, the Security Agreement (as amended and restated hereby) or any other agreement or instrument executed and delivered by the Company in connection therewith (the “Financing Documents”), the Investors, subject to the provisions of this Agreement, and in consideration of the provisions hereof, agree to forbear from exercising their rights and remedies with respect to the Existing Defaults until November 28, 2011 (the “Forbearance Deadline”) provided that, and so long as, the following conditions  (the “Conditions”) are satisfied:

 

	
  

	
i)

	
if the Company enters into the Asset Sale, up to 100% of the proceeds from such Asset Sale will be paid directly to the Investors to be applied against the Notes and the Exchange Notes in accordance with the terms thereof; and

 

	
  

	
ii)

	
without limiting any rights available to the Investors under the Loan Documents, if, as of the Forbearance Deadline, the Notes and the Exchange Notes shall not have been paid in full, the Investors shall be entitled to cause the Collateral Agent, pursuant to the terms of Section 3.11 of the Note Purchase Agreement, to take possession of all or any portion of the Collateral (as defined in the Amended and Restated Security Agreement) and to cause the Collateral Agent to sell or otherwise dispose of the Collateral, and all proceeds from such sales shall be applied to the Notes and the Exchange Notes until they are satisfied in full.

 

Any failure by the Company to timely satisfy any Conditions shall be an Event of Default under the Financing Documents and the Exchange Notes. Any Event of Default under the Financing Documents or the Exchange Notes shall be a default under this Agreement.  Any provision of this Agreement to contrary notwithstanding, the Investors do not waive any of the Existing Defaults and hereby preserve all of their rights and remedies with respect to such Existing Defaults.  Accordingly, following the expiration of the Forbearance Deadline, the Investors shall be free to exercise their rights and remedies under the Financing Documents, the Original Notes, the Exchange Notes and the Amended and Restated Security Agreement, at law or in equity, and at such time as the Investors may elect.

 

  

5

  

The Investors reserve all rights and remedies and the right to declare defaults and/or Events of Default under the Financing Documents, this Agreement and the Exchange Notes that occur on or after the date hereof, whether or not enumerated in this Agreement.  If there shall be any defaults or Events of Default under the Financing Documents, this Agreement or the Exchange Notes, in any case, arising at any time on or after the date hereof, none of the aforementioned defaults shall be waived, and the Investors may exercise their rights and remedies under the Financing Documents, this Agreement or the Exchange Notes, at law or in equity, and at such time as the Investors may elect.

 

b.           Amendments to Notes. The parties agree that the aggregate principal amount of the Notes shall be increased by $350,000 to $2,500,000 and that each of the Notes shall be amended and restated substantially in the form attached hereto as Exhibit D.  The amended and restated Notes shall be issued in the denominations set forth on Schedule 2 attached hereto.  For the avoidance of doubt, the amendment and restatement of the Notes contemplated hereby shall not for any purposes be deemed to be a repayment, satisfaction or substitution of the Notes, but merely as a modification thereof.  For the avoidance of doubt, all terms and conditions of the Note Purchase Agreement shall remain in full force and effect (except as modified by Section 4(d) hereof) and all of the terms of conditions of the Note Purchase Agreement shall continue to apply to the Notes as amended and restated hereby.

 

c.           Acknowledgement by Inventa.  Inventa acknowledges and consents to the transactions contemplated by this Agreement, including, without limitation, this Section 4, and agrees that the Guaranty shall remain in full force and effect with respect to the Notes as amended and restated hereby.

 

d.           Amendment to Note Purchase Agreement.  Effective on and after the Closing Date, the Note Purchase Agreement shall be amended by deleting Section 3.10 (Additional Investment) thereof in its entirety and replacing such section with:

 

“Section 3.10.  Intentionally Omitted.”

 

For the avoidance of doubt, the other provisions of the Note Purchase Agreement are unmodified hereby and shall remain in full force and effect in accordance with their respective terms.

 

5.           Insolvency Proceedings and Certain Waivers.

 

a.           To induce the Investors to forbear in accordance with this Exchange Agreement, the Company and Inventa agree that if any Insolvency Proceeding (as defined below) with respect to the Company and/or Inventa occurs at any time:

 

	
  

	
i)

	
Neither the Company nor Inventa shall not directly or indirectly object to, challenge, contest or otherwise seek to invalidate or reduce (or support directly or indirectly any other person in any such objection, challenge or contest): (A) the existence, validity or amount of the Notes and the Exchange Notes (together, the “Obligations”) or (B) the extent, legality, validity, perfection, priority or enforceability of any Lien, pledge, security interest and/or mortgage Lender purportedly securing any of the Obligations or any guaranty of any of the Obligations; and

 

  

6

  

	
  

	
ii)

	
The Company shall not seek to subordinate or recharacterize any claim of any Investor against the Company.  Inventa shall not seek to subordinate or recharacterize any claim of any Investor against Inventa.

 

b.           Upon the Forbearance Deadline, neither the Company nor Inventa shall not oppose or otherwise interfere with the exercise by the Investors, or their nominee or agent, of any of the "Secured Creditor Remedies."  As used herein, "Secured Creditor Remedies" means any action by the Investors, or its nominees or agents, in furtherance of the sale, foreclosure, realization upon, or the repossession or liquidation of, any of the Collateral (as defined in the Amended and Restated Security Agreement), including, without limitation:  (i) the exercise of any remedies or rights of a "secured party" under Article 9 of the Uniform Commercial Code; (ii) the exercise of any remedies or rights as a mortgagee or beneficiary; (iii) the exercise of any remedies available to a judgment creditor; (iv) the exercise of any rights of forfeiture, recession or repossession of any assets; (v) the exercise of any set-off rights, including, without limitation, any set-off rights for the collection of any amounts due in respect of any of the Obligations; (vi) the exercise of any right or remedy available to creditors under the U.S. Bankruptcy Code; or (vii) any other remedy in respect of the Collateral available to the Investors pursuant to the Transaction Documents (as defined below), the Note Purchase Agreement, the Notes or any other agreement by and among the Investors, or their agent, and the Company or Inventa or under applicable law.

 

c.           As used herein, "Insolvency Proceeding" shall mean (a) any case or proceeding commenced by or against the Company or Inventa under any provision of any Insolvency Laws (defined below) or under any other bankruptcy, insolvency, reorganization or other law affecting creditors' rights or any other or similar proceedings seeking any stay, reorganization, arrangement, composition or readjustment of the obligations and indebtedness, (b) any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian or other insolvency official with similar powers with respect to the Company or Inventa or any of their respective assets or (c) any proceeding for liquidation, dissolution or other winding up of the business of the Company or Inventa under any provision of any Insolvency Laws or (d) any assignment for the benefit of creditors or any marshalling of assets of the Company or Inventa.  "Insolvency Laws" shall mean (i) the U.S. Bankruptcy Code, (ii) any successors to such statutes, and (iii) any other applicable insolvency or other similar law of any jurisdiction including, without limitation, any law of any jurisdiction permitting a debtor to obtain a stay or a compromise of the claims of its creditors against it.

 

d.           The Company and Inventa specifically waive (to the extent permitted by law) any right to receive prior notice of a sale or other disposition of all or a portion of the Collateral.

 

e.           The Company and Inventa specifically waive and release (to the extent permitted by law) any equity or right of redemption, stay or appraisal that the Company and/or Inventa have or may have under any rule of law or statute now existing or adopted after the date of this Exchange Agreement, and any right to require the Investors to (1) proceed against any person, (2) proceed against or exhaust any of the Collateral or pursue its rights and remedies against the Collateral in any particular order or (3) pursue any other remedy within its power.   Lender is not required to take any action to preserve the Company’s or Inventa’s rights against other parties.

 

  

7

  

f.           The Company and Inventa acknowledge and agree that the waivers set forth in this Section constitute material consideration for the agreement of the Investors to execute and deliver this Exchange Agreement.

 

6.           Release of Claims and Covenant Not to Sue.  As a material part of the consideration for the Investor’s agreement to enter into this Exchange Agreement, the Company, Inventa and, if any, each guarantor or owner of any Collateral signing this Exchange Agreement or any consent to this Exchange Agreement (individually, a "Releasing Party" and collectively, the "Releasing Parties") agree as follows (the "Release Provision"):

 

a.           Each Releasing Party absolutely and unconditionally releases and forever discharges the Investors, and any and all Affiliates, insurers, indemnitors, successors or assigns of the Investors, together with any and all of the past, present or future officers, directors, employees, agents, attorneys, representatives, participants, heirs, successors or assigns of any of the foregoing (each a "Released Party" and collectively, the "Released Parties"), from any and all claims, demands or causes of action of any kind, nature or description, whether arising at law or in equity or upon contract or tort or under any state or federal law or otherwise (including any claims, demands or causes of action for subordination or recharacterization of debt), which any Releasing Party has had, now has or has made claim to have against any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of time to and including the date of this Exchange Agreement, whether such claims, demands and causes of action are matured or unmatured or known or unknown, arising from or relating to or in connection with matters arising out of, in connection with or relating to (i) the Obligations, (ii) negotiations between any Releasing Party and the Investors in connection with this Exchange Agreement,  and (iii) any other agreement or transaction between any Releasing Party and the Investors or any Affiliate of any Investor.

 

b.           Each Releasing Party covenants and agrees never to institute or cause to be instituted or continue prosecution of any suit or other form of action or proceeding of any kind or nature whatsoever against any Released Party, by reason of or in connection with any of the matters, claims or causes of action released by such Releasing Party in this Exchange Agreement.  The provisions of this Exchange Agreement, including the Release Provision, may be pleaded as a full and complete defense to, and may be used as the basis for an injunction against, any action, suit, or other proceeding that may be instituted, prosecuted, or attempted in breach of the foregoing release.

 

7.           Representations and Warranties.  The Company and Inventa hereby make to the Investors the following representations and warranties:

 

a.           Authorization; Enforcement.  Each of the Company and Inventa has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement, the Amended and Restated Security Agreement, the Exchange Notes, the guaranties contemplated hereby and any other agreement or instrument executed or delivered by the Company or Inventa in connection with this Agreement (collectively, the “Transaction Documents”) and otherwise to carry out its obligations under the Transaction Documents, provided, however, that Inventa has been administratively dissolved by the Secretary of State of the State of Delaware.  The execution and delivery of the Transaction Documents by each of the Company and Inventa and the consummation by each of them of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary action on the part of the Company and Inventa and no further action is required by the Company or Inventa, or their respective boards of directors or stockholders in connection therewith.  The Transaction Documents have been duly executed by the Company and Inventa and, when delivered in accordance with the terms thereof will constitute the valid and binding obligations of the Company and Inventa enforceable against the Company and Inventa in accordance with their respective terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies,  (iii) insofar as indemnification and contribution provisions may be limited by applicable law, and (iv) solely with respect to Inventa, to the extent that Inventa’s status as a dissolved corporation under the laws of the State of Delaware may interfere with, limit or impede such enforcement.

 

  

8

  

b.           No Conflicts.  The execution, delivery and performance of the Transaction Documents and the consummation by the Company and Inventa of the transactions contemplated thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any of its subsidiary’s, certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any lien or encumbrance upon any of the properties or assets of the Company or any subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other material instrument (evidencing a Company or subsidiary debt or otherwise) or other material understanding to which the Company or any subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a material adverse effect on the Company and its subsidiaries taken as a whole, or their ability to perform the obligations under the Transaction Documents.

 

c.           Filings, Consents and Approvals.  The Company  is not required to obtain any approval, consent, waiver, authorization or order of, give any notice to, or make any filing, qualification or registration with, any court or other federal, state, local, foreign or other governmental authority or other person or entity in connection with the execution, delivery and performance of the Transaction Documents.  No further approval or authorization of any stockholder, the Board of Directors or others is required for the issuance of any shares of Common Stock issuable upon conversion of the Notes, as amended and restated hereby, or the Exchange Notes (the “Underlying Shares”).  Inventa is not required to obtain any approval, consent, waiver, authorization or order of, give any notice to, or make any filing, qualification or registration with, any court or other federal, state, local, foreign or other governmental authority or other person or entity in connection with the execution, delivery and performance of the Transaction Documents, except for those filings in the State of Delaware as may be required to restore Inventa’s status as a corporation duly organized, validly existing and in good standing in the State of Delaware.

 

  

9

  

d.           Issuance and Reservation of Securities.  The Exchange Notes are duly authorized.  Any Underlying Shares, when issued in accordance with the terms of the Notes, as amended and restated hereby, and the Exchange Notes, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, encumbrances or restrictions.  The Company has reserved, and shall at all times hereafter reserve, from its duly authorized capital stock for issuance upon conversion of the Notes, as amended and restated hereby, and the Exchange Notes, at least such amount of shares of Common Stock as is equal to the amount of Underlying Shares into which the Notes and the Exchange Notes are fully convertible, respectively (without regard to any limitations on ownership or conversion or exercise set forth therein).

 

e.           No Registration.  No registration under the Securities Act of 1933, as amended (the “Securities Act”), is required for the issuance of the Exchange Notes or any Underlying Shares in accordance with the terms hereof and thereof.

 

f.           Survival.  All of the Company’s and Inventa’s warranties and representations contained in this Agreement shall survive the execution, delivery and acceptance of this Agreement by the parties hereto.

 

g.           Holding Period for Notes and Exchange Notes.  Pursuant to Rule 144 promulgated under the Securities Act, the holding period of the Notes, as amended and restated hereby, and the Exchange Notes and the Underlying Shares tack back to March 4, 2011 (the original issue date of the Notes and the Warrants).  The Company agrees not to take a position contrary to this paragraph.    The Company is not currently, and has never been, an issuer of the type described in paragraph (i) of Rule 144.  Without limiting any of the terms, conditions or covenants contained in this Agreement or other documents, if at any time it is determined that any Underlying Shares are not freely tradable without restriction or limitation pursuant to Rule 144 (other than the public information requirement of Rule 144 with respect to the period of time prior to March 4, 2012), then the Company shall promptly register the resale of all Underlying Shares under the Securities Act by filing a registration statement with the SEC as soon as practicable (but in no event later than 30 days) and causing such registration statement to be declared effective as soon as practicable (but in no event later than 90 days).

 

h.           Legends.  Certificates evidencing the Underlying Shares shall not contain any legend: (i) while a registration statement covering the resale of such Underlying Shares is effective under the Securities Act, (ii) following any sale of such Underlying Shares pursuant to Rule 144, (iii) if such Underlying Shares are eligible for sale under Rule 144 without restriction, or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).

 

  

10

  

i.           Indebtedness.  Schedule 7(i) hereto sets forth as of the date hereof all outstanding secured and unsecured indebtedness of the Company or any subsidiary, or for which the Company or any subsidiary has commitments.

 

8.           Rule 144 Legal Opinion.  If all or any portion of a Note or Exchange Note is converted at a time when there is an effective registration statement to cover the resale of the Underlying Shares, or if such Underlying Shares may be sold under Rule 144 without restriction or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations thereof), then such Underlying Shares shall be issued free of all legends, and the Company shall cause its counsel to issue a legal opinion to the Company’s transfer agent to effect such issuance free of all legends.  The Company agrees that the Underlying Shares may be sold under Rule 144 without restriction on and after March 4, 2012.

 

9.           Conversion Procedures.  The form of conversion notice included in the Notes, as amended and restated herby, and the Exchange Note sets forth the totality of the procedures required of the Investors in order to convert the Notes or the Exchange Notes, as the case may be.  No additional legal opinion or other information or instructions shall be required of any Investor to convert a Note or Exchange Note.  The Company shall honor all conversions of the Notes and Exchange Notes and shall deliver Underlying Shares in accordance with the terms, conditions and time periods set forth in the Notes or Exchange Notes, as the case may be.

 

10.           Miscellaneous.

 

a.           Legal Opinion.  On the Closing Date, the Company shall cause its counsel to deliver to each Investor a legal opinion, dated as of the Closing Date, substantially in the form of Exhibit E attached hereto.

 

b.           Announcement. The Company will announce the transactions contemplated hereby prior to 8:30AM New York City time on November 7, 2011 (the “Announcement Time”), by issuing a Current Report on Form 8-K disclosing the material terms of the transactions contemplated hereby and attaching this Agreement and all other related agreements thereto as exhibits to such Current Report on Form 8-K.

 

c.           Counterparts. This Agreement may be executed in two or more counterparts and by facsimile signature, delivery of PDF images of executed signature pages by email or otherwise, and each of such counterparts shall be deemed an original and all of such counterparts together shall constitute one and the same agreement.

 

d.           Fees and Expenses.  Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Exchange Note or any Underlying Shares.

 

e.           Severability.  If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

  

11

  

f.           Governing Law and Jurisdiction.  This Agreement shall be governed by and interpreted in accordance with laws of the State of New York, excluding its choice of law rules.  The parties hereto hereby waive the right to a jury trial in any litigation resulting from or related to this Agreement.  The parties hereto consent to exclusive jurisdiction and venue in the federal courts sitting in the southern district of New York, unless no federal subject matter jurisdiction exists, in which case the parties hereto consent to exclusive jurisdiction and venue in the New York state courts in the borough of Manhattan, New York.  Each party waives all defenses of lack of personal jurisdiction and forum non conveniens.  Process may be served on any party hereto in the manner authorized by applicable law or court rule.

 

g.           Further Assurances.  The Company and Inventa each hereby agrees and provides further assurances that it will, in the future, execute and deliver any and all further agreements, certificates, instruments and documents and do and perform or cause to be done and performed, all acts and things as may be necessary or appropriate to carry out the intent and accomplish the purposes of this Agreement.

 

h.           Amendment.  No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding at least 66 2/3% of the outstanding principal amount of the Notes and the Exchange Notes; provided, that if any Investor is materially adversely affected by such waiver or amendment, such waiver or amendment shall not be effective without the written consent of the adversely affected Investor.

 

i.           Equal Treatment.  No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Agreement, the Notes or the Exchange Notes unless the same consideration is also offered to all of the parties hereto. Further, neither the Company nor Inventa shall make any payment of principal or interest on the Notes or the Exchange Notes in amounts that are disproportionate to the respective principal amounts outstanding on the Notes and the Exchange Notes at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Investor by the Company and negotiated separately by each Investor, and is not intended for the Company to treat the Investors as a class and shall not in any way be construed as the Investors acting in concert or as a group with respect to the purchase, disposition or voting of securities or otherwise.

 

  

12

  

j.           Independent Nature of Investors’ Obligations and Rights.  The rights and obligations of each Investor hereunder or any document or instrument delivered in connection herewith are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under this Agreement or any document or instrument delivered in connection herewith.  Nothing contained herein or any document or instrument delivered in connection herewith, and no action taken by any Investor hereunder or thereunder, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby. The Company shall not assert any claim inconsistent with the foregoing. The Company acknowledges that each Investor has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors.  Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or any document or instrument delivered in connection herewith, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

 

[Signature Page Follows]

 

  

13

  

IN WITNESS WHEREOF, this Agreement is executed as of the date first set forth above.

 

 

ANTS SOFTWARE, INC.

 

 

	
By:

	
______________________

	
  

	
Name:

	
Title:

	 

 

 

INVENTA TECHNOLOGIES, INC.

 

 

	
By:

	
______________________

	
  

	
Name:

	
Title:

	 

 

 

MANCHESTER SECURITIES CORP.

 

 

	
By:

	
______________________

	
Name:

	
Elliot Greenberg

	
Title:

	
Vice President

 

SAMC LLC

	
By:

	
______________________

	
Name:

	 

	
Title:

	 

 

JGB CAPITAL LP

	
By:

	
______________________

	
Name:

	 

	
Title:

	 

 

  

14

  

JGB CAPITAL OFFSHORE LTD.

 

	
By:

	
______________________

	
Name:

	 

	
Title:

	 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Collateral Agent for the Investors

 

 

	
By:

	
______________________

	
Name:

	 

	
Title:

	 

 

  

15

  

 

SCHEDULE 1

 

 

	
Investor

	
Face Amount of Exchange Notes

	
Manchester Securities Corp.

	
$3,500,000

	
JGB Capital LP

	
$875,000

	
JGB Capital Offshore Ltd.

	
$875,000

	
SAMC LLC

	
$1,750,000

 

  

Schedule - 1

  

 

SCHEDULE 2

 

 

	
Investor

	
Face Amount of Amended Notes

	
Manchester Securities Corp.

	
$1,250,000

	
JGB Capital LP

	
$312,500

	
JGB Capital Offshore Ltd.

	
$312,500

	
SAMC LLC

	
$625,000

 

  

Schedule - 2

  

 

EXHIBIT A

 

Form of Exchange Note

 

 

 

 

 

 

 

  

Exhibit A

  

 

EXHIBIT B

 

Form of Exchange Notes Guaranty

 

 

 

 

 

 

  

Exhibit B

  

 

EXHIBIT C

 

Form of Amended and Restated Security Agreement

 

 

 

 

 

 

  

Exhibit C

  

 

EXHIBIT D

 

Form of Amended and Restated Notes

 

 

 

 

 

 

  

Exhibit D

  

 

EXHIBIT E

 

Form of Legal Opinion

 

 

 

 

 

 

Exhibit E

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