Document:

Liberty Star Uranium & Metals Corp.: Exhibit 10.1 - Filed by newsfilecorp.com

 

NEITHER THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE
BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR
ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN
THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD,
TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT. 

12% CONVERTIBLE NOTE 

MATURITY DATE OF AUGUST 26, 2015 

$150,000 AUGUST 26, 2014 *THE “ISSUANCE DATE” 

FOR VALUE RECEIVED, Liberty Star Uranium & Metals Corp., a
Nevada Corporation (the “Company”) doing business in Tucson, AZ hereby promises
to pay to the order of JSJ Investments Inc., an accredited investor and Texas
Corporation, or its assigns (the “Holder”) the principal amount of One Hundred
and Fifty Thousand Dollars ($150,000), on demand of the Holder at any time on or
after August 26, 2015 (the “Maturity Date”), and to pay interest on the unpaid
principal balance hereof at the rate of Twelve Percent (12%) per annum (the
“Interest Rate”) from the date hereof (the “Issuance Date”) until the same
becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise; provided, that any amount of principal or
interest on this Note which is not paid when due shall bear interest at such
rate on the unpaid principal balance hereof plus Default Interest from the due
date thereof until the same is paid in full. Interest shall commence accruing on
the Issuance Date, shall be computed on the basis of a 365-day year and the
actual number of days elapsed and shall accrue daily and, after the Maturity
Date, compound quarterly. 

	1. 	
      Pre-Payments of Principal and
Interest.

	 	a. 	
      Pre-Payment of Principal. Until the One Hundred and
      Twentieth Day (120) the Company may prepay the principal at a cash
      redemption premium of 140% without the Holder’s consent; from the
      120th day to the One Hundred and Fiftieth Day (150), the
      Company may pay the principal at a cash redemption premium of 150% without
      the Holder’s consent. After the 150th day, up to and upon the
      Maturity Date, this note has a cash redemption premium of 150% of the
      principal amount only upon approval and acceptance by JSJ Investments Inc.
      This last provision only may be exercised if the consent of the Holder is
      obtained.

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	 	b. 	
      Default Interest. Any amount of principal on this Note
      which is not paid when due shall bear Twelve Percent (12%) interest per
      annum from the date thereof until the same is paid (“Default Interest”)
      and the Holder, at the Holder’s sole discretion, may include any accrued
      but unpaid Default Interest in the Conversion Amount.

	 	 	 
	 	c. 	
      General Payment Provisions. This Note shall be paid in
      lawful money of the United States of America by check to such account as
      the Holder may from time to time designate by written notice to the
      Company 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 (as defined below), 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. For purposes of this Note, “Business Day” shall mean any day other
      than a Saturday, Sunday or a day on which commercial banks in the State of
      Texas are authorized or required by law or executive order to remain
      closed.

	2. 	
      Conversion of Note. At any time prior to the Maturity
      Date, or after the Maturity Date, the Conversion Amount of this Note shall
      be convertible into shares of the Company’s common stock, share (the
      “Common Stock”), on the terms and conditions set forth in this Paragraph
      2.

	 	a. 	
      Certain Defined Terms. For purposes of this Note, the
      following terms shall have the following
meanings:

		i. 	
      “Conversion Amount” means the sum of (A) the outstanding
      principal amount of this Note to be converted with respect to which this
      determination is being made, (B) outstanding Interest; and (C) outstanding
      Default Interest, if any, on unpaid interest and principal, if so included
      at the Holder’s sole discretion. 

	 	 	
       

		ii. 	
      “Conversion Price” means a 45% discount to the average of
      the daily VWAP prices for the previous Ten (10) trading days before the
      date of conversion. 

	 	 	
       

		iii. 	
      “Person” means an individual, a limited liability
      company, a partnership, a joint venture, a corporation, a trust, an
      unincorporated organization and a government or any department or agency
      thereof. 

	 	 	
       

		iv. 	
      “Shares” means the Shares of common stock of the Company
      into which any outstanding balance on this Note may be converted upon
      submission of a Conversion Notice. 

	 	b. 	
      Holder’s Conversion Rights. Commencing 181 days after the
      issuance and full payment of this Note, the Holder shall be entitled to
      convert the Conversion Amount into fully paid Shares in accordance with
      the stated Conversion Price.

Exhibit 1 

       
     Unless otherwise agreed in writing by both
parties, at no time will the Lender convert any amount of the note into common
stock that would result in the Lender owning more than 4.99% of the common stock
outstanding. 

	 	c. 	
      Fractional Shares. The Company shall not issue any
      fraction of a share of Common Stock upon any conversion; if such issuance
      would result in the issuance of a fraction of a share of Common Stock, the
      Company shall round such fraction of a share of Common Stock up to the
      nearest whole share.

	 	 	 
	 	d. 	
      Conversion Amount. The Conversion Amount shall be
      converted pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(l)(ii) as
      promulgated by the Securities and Exchange Commission under the Securities
      Act of 1933, as amended, into Shares at the Conversion Price.

	 	 	 
	 	e. 	
      Mechanics of Conversion. The conversion of this Note
      shall be conducted in the following manner:

	 	i.	Holder's Conversion
      Requirements. To convert this Note into shares of Common Stock on any date 181
      days or more after the Note issuance, set forth in the Conversion Notice by the
      Holder (the "Conversion Date"), the Holder hereof shall transmit by email,
      facsimile or otherwise deliver, for receipt on or prior to 11:59 p.m., Eastern
      Time on such date or on the next business day (the "Conversion Date"), a copy of
      a fully executed notice of conversion in the form attached hereto as Exhibit 1
      to the Company. 

    
	 	 	 
	 	ii.	Company's Response.
      Upon receipt by the Company of a copy of a Conversion Notice, the Company shall
      as soon as practicable, but in no event later than two (2) Business Days after
      receipt of such Conversion Notice, send, via email, facsimile or overnight
      courier, a confirmation of receipt of such Conversion Notice to such Holder
      indicating that the Company will process such Conversion Notice in accordance
      with the terms herein. Within three (3) Business Days after the date of the
      Conversion Confirmation, the Company shall have issued and electronically
      transferred the shares to the Broker indicated in the Conversion Notice; should
      the Company be unable to transfer the shares electronically, it shall, within
      two (2) Business Days after the date of the Conversion Confirmation, have
      surrendered to FedEx for delivery the next day to the address as specified in
      the Conversion Notice, a certificate, registered in the name of the Holder, for
      the number of shares of Common Stock to which the Holder shall be entitled. 

    
	 	 	 
	 	iii.	Record Holder. The
      person or persons entitled to receive the shares of Common Stock issuable upon a
      conversion of this Note shall be treated for all purposes as the record holder
    or holders of such shares of Common Stock on the Conversion Date. 

3

	 	iv. 	
      Timely Response by Company. Upon receipt by Company of a
      Conversion Notice, Company shall respond in a timely manner to Holder by
      provision within two business days of the Shares requested in the
      Conversion Notice.

	 	 	 
	 	v. 	
      Penalty for Delinquent Response. If Company fails to
      deliver for whatever reason (including any neglect or failure by,
      e.g., the Company, its counsel or the transfer agent)
      to Holder the Shares as requested in a Conversion Notice and within three
      business days of the receipt thereof, there shall accrue a penalty of
      Additional Shares due to Holder equal to 5% of the number stated in the
      Conversion Notice beginning on the Fourth business day after the date of
      the Notice. The Additional Shares shall be issued and the amount of the
      Note retired will not be reduced beyond that stated in the Conversion
      Notice. Each additional 5 business days beyond the Fourth business day
      after the date of this Notice shall accrue an additional 5% penalty for
      delinquency, without any corresponding reduction in the amount due under
      the Note, for so long as Company fails to provide the Shares so demanded,
      to a maximum of 25% in penalties.

	 	 	 
	 	vi. 	
      Conversion Right Unconditional. If the Holder shall
      provide a Notice of Conversion as provided herein, after 180 days from
      issuance, the Company's obligations to deliver Common Stock shall be
      absolute and unconditional, irrespective of any claim of setoff,
      counterclaim, recoupment, or alleged breach by the Holder of any
      obligation to the Company.

	 	 	 
	 	vii. 	
      Transfer Agent Fees and Legal Fees. The issuance of the
      certificates shall be without charge or expense to the Holder. The Company
      shall pay any and all Transfer Agent fees and legal fees required for
      processing of any Notice of Conversion, including but not limited to the
      cost of obtaining a legal opinion with regard to the
  conversion.

	3. 	
      Other Rights of Holders: Reorganization,
      Reclassification, Consolidation, Merger or Sale. Any recapitalization,
      reorganization, reclassification, consolidation, merger, sale of all or
      substantially all of the Company's assets to another Person or other
      transaction which is effected in such a way that holders of Common Stock
      are entitled to receive (either directly or upon subsequent liquidation)
      stock, securities or assets with respect to or in exchange for Common
      Stock is referred to herein as "Organic Change." Prior to the consummation
      of any (i) Organic Change or (ii) other Organic Change following which the
      Company is not a surviving entity, the Company will secure from the Person
      purchasing such assets or the successor resulting from such Organic Change
      (in each case, the "Acquiring Entity") a written agreement (in form and
      substance reasonably satisfactory to the Holder) to deliver to Holder in
      exchange for this Note, a security of the Acquiring Entity evidenced by a
      written instrument substantially similar in form and substance to this
      Note, and reasonably satisfactory to the Holder. Prior to the consummation
      of any other Organic Change, the Company shall make appropriate provision
      (in form and substance reasonably satisfactory to the Holders of a
      majority of the Conversion Amount of the Notes then outstanding) to ensure
      that each of the Holders will thereafter have the right to acquire and
      receive in lieu of or in addition to (as the case may be) the shares of
      Common Stock immediately theretofore acquirable and receivable upon the
      conversion of such Holder's Note, such shares of stock, securities or
      assets that would have been issued or payable in such Organic
      Change with respect to or in exchange for the number of shares of Common
      Stock which would have been acquirable and receivable upon the conversion
      of such Holder's Note as of the date of such Organic Change (without
      taking into account any limitations or restrictions on the convertibility
      of the Note). All provisions of this Note must be included to the
  satisfaction of Holder in any new Note created pursuant to this section.      

4

	4. 	
      Representations and Warranties of the Company. In
      connection with the transactions provided for herein, the Company hereby
represents and warrants to the Holders the following.

	 	a. 	
      Organization, Good Standing and Qualification. The
      Company is a corporation duly organized, validly existing and in good
      standing under the laws of the state of its incorporation and has all
      requisite corporate power and authority to carry on its business as now
      conducted. The Company is duly qualified to transact business and is in
      good standing in each jurisdiction in which the failure to so qualify
      would have a material adverse effect on its business or
  properties.

	 	 	 
	 	b. 	
      Authorization. All corporate action has been taken on the
      part of the Company, its officers, directors and stockholders necessary
      for the authorization, execution and delivery of this Agreement. The
      Company has taken all corporate action required to make all of the
      obligations of the Company reflected in the provisions of this Agreement,
      valid and enforceable obligations. The shares of capital stock issuable
      upon conversion of the Notes have been authorized or will be authorized
      prior to the issuance of such shares.

	5. 	
      Fiduciary Obligations. The Company hereby represents that
      it intends to use the proceeds of the Notes primarily for the operations
      of its business and not for any personal, family, or household purpose.
      The Company hereby represents that its board of directors, in the exercise
      of its fiduciary duty, has approved the execution of this Agreement based
      upon a reasonable belief that the loan provided for herein is appropriate
      for the Company after reasonable inquiry concerning its financial
      objectives and financial situation.

	       	
	6. 	
      Reservation of Shares. The Company shall at all times, so
      long as any principal amount of the Note is outstanding, reserve and keep
      available out of its authorized and unissued Common Stock, solely for the
      purpose of effecting the conversion of the Note, such number of shares of
      Common Stock as shall at all times be sufficient to effect the conversion
      of all of the principal amount of the Note then outstanding. The initial
      number of shares of Common Stock reserved for conversions of the Notes and
      each increase in the number of shares so reserved shall be allocated pro
      rata among the Holders of the Notes based on the principal and interest
      amount of the Notes held by each Holder at the time of issuance of the
      Notes or increase in the number of reserved shares, as the case may be. In
      the event a Holder shall sell or otherwise transfer any of such Holder's
      Note, each transferee shall be allocated a pro rata portion of the number
      of reserved shares of Common Stock reserved for such transferor. Any
      shares of Common Stock reserved and allocated to any Person which ceases
      to hold any Note shall be allocated to the remaining Holders, pro rata
      based on the principal amount of the Note then held by such
  Holders.

5

	7. 	Voting Rights. Holders of this Note shall have
      no voting rights, except as required by law. 
		  
	
      8. 
	
      Reissuance of Note. In the event of a conversion or
      redemption pursuant to this Note of less than all of the Conversion Amount
      represented by this Note, the Company shall promptly cause to be issued
      and delivered to the Holder , upon tender by the Holder of the Note
      converted or redeemed, a new note of like tenor representing the remaining
      principal amount of this Note which has not been so converted or redeemed
      and which is in substantially the same form as this Note, as set forth
      above. 

		  
	9. 	Default and Remedies. 

a.          
Event of Default. An "Event of Default" is: (i) default for ten (10) days in
payment of interest or Default Interest on this Note; (ii) default in payment of
the principal amount of this Note when due; (iii) failure by the Company for
thirty (30) days after notice to it to comply with any other material provision
of this Note; (iv) breach of any covenants, warranties, or representations by
the Company herein; (v) cessation of operations by the Company or a material
subsidiary; (vi) if the Company pursuant to or within the meaning of any
Bankruptcy Law; (A) commences a voluntary case; (B) consents to the entry of an
order for relief against it in an involuntary case; (C) consents to the
appointment of a Custodian of it or for all or substantially all of its
property; (D) makes a general assignment for the benefit of its creditors; or
(E) admits in writing that it is generally unable to pay its debts as the same
become due; or (vi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (I) is for relief against the Company in an
involuntary case; (2) appoints a Custodian of the Company or for all or
substantially all of its property; or (3) orders the liquidation of the Company
or any subsidiary, and the order or decree remains unstayed and in effect for
thirty (30) days. The Term "Bankruptcy Law" means Title 11, U.S. Code, or any
similar Federal or State Law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law. 

b.          
Remedies. If an Event of Default occurs and is continuing, the Holder of this
Note may declare all of this Note, including any interest and Default Interest
and other amounts due, to be due and payable immediately. 

	10. 	
      Vote to Change the Terms of this Note. This Note and any
      provision hereof may only be amended by an instrument in writing signed by
      the Company and holders of a majority of the aggregate Conversion Amount
      of the Notes then outstanding.

	 	 
	11. 	
      Lost or Stolen Note. Upon receipt by the Company of
      evidence satisfactory to the Company of the loss, theft, destruction or
      mutilation of this Note, and, in the case of loss, theft or destruction,
      of an indemnification undertaking by the Holder to the Company in a form
      reasonably acceptable to the Company and, in the case of mutilation, upon
      surrender and cancellation of the Notes, the Company shall execute and
      deliver a new Note of like tenor and date and in substantially the same
      form as this Note; provided, however, the Company shall not be obligated
      to re-issue a Note if the Holder contemporaneously requests the Company to
      convert such remaining principal amount into
Shares.

6

	12. 	
      Payment of Collection , Enforcement and Other Costs. If
      after and Event of Default: (i) this Note is placed in the hands of an
      attorney for collection or enforcement or is collected or enforced through
      any legal proceeding; or (ii) an attorney is retained to represent the
      Holder of this Note in any bankruptcy, reorganization, receivership or
      other proceedings affecting creditors ' rights and involving a claim under
      this Note, then the Company shall pay to the Holder all reasonable
      attorneys ' fees, costs and expenses incurred in connection therewith, in
      addition to all other amounts due hereunder. 

	 	
       

	13. 	
      Accredited Investor. Holder represents that it is an
      "accredited investor" as that term is defined under United States
      securities laws . 

	 	
       

	14. 	
      Cancellation . After all principal and accrued interest
      at any time owed on this Note has been paid in full, this Note shall
      automatically be deemed canceled, shall be surrendered to the Company for
      cancellation and shall not be reissued. 

	 	
       

	15. 	
      Waiver of Notice. To the extent permitted by law, the
      Company hereby waives demand, notice, protest and all other demands and
      notices in connection with the delivery , acceptance, performance ,
      default or enforcement of this Note. 

	 	
       

	16. 	
      Governing Law. This Note shall be construed and enforced
      in accordance with, and all questions concerning the construction,
      validity, interpretation and performance of this Note shall be governed
      by, the laws of the State of Texas, without giving effect to provisions
      thereof regarding conflict of laws. Each party hereby irrevocably submits
      to the non-exclusive jurisdiction of the state and federal courts sitting
      in Texas for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein ,
      and hereby irrevocably waives, and agrees not to assert in any suit,
      action or proceeding , any claim that it is not personally subject to the
      jurisdiction of any such court, that such suit, action or proceeding is
      brought in an inconvenient forum or that the venue of such suit, action or
      proceeding is improper. Each party hereby irrevocably waives personal
      service of process and consents to process being served in any such suit,
      action or proceeding by sending by certified mail or overnight courier a
      copy thereof to such party at the address for such 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
      manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT
      MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF
      ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
      AGREEMENT ORANY TRANSACTION CONTEMPLATED HEREBY. 

	 	
       

	17. 	
      Remedies , Characterizations, Other Obligations, Breaches
      and Injunctive Relief . The remedies provided in this Note shall be
      cumulative and in addition to all other remedies available under this
      Note, at law or in equity (including a decree of specific performance
      and/or other injunctive relief), and no remedy contained herein shall be
      deemed a waiver of compliance with the provisions giving rise to such
      remedy and nothing herein shall limit a Holder's right to pursue actual
      damages for any failure by the Company to comply with the terms of this
      Note. The Company covenants to each Holder of Notes that there shall be no
      characterization concerning this instrument other than as expressly
      provided herein. Amounts set forth or provided for herein with respect to
      payments, conversion and the like (and the computation thereof)
      shall be the amounts to be received by the Holder thereof and shall not,
      except as expressly provided herein , be subject to any other obligation
  of the Company (or the performance thereof). 

7

	18. 	
      Entire Agreement. This Agreement constitutes the full and
      entire understanding and agreement between the parties with regard to the
      subjects herein. None of the terms of this Agreement can be waived or
  modified , except by an express agreement signed by the Parties.

	 	
       

	19. 	
      Representations and Warranties . The Company expressly
      acknowledges that the Holder, including but not limited to its officer,
      directors , employees , agents, and affiliates, have not made any
      representation or warranty to it outside the terms of this Agreement. The
      Company further acknowledges that there have been no representations or
      warranties about future financing or subsequent transactions between the
      parties. 

	 	
       

	20. 	
      Notices. All notices and other communications given or
      made to the Company pursuant hereto shall be in writing (including
      facsimile or similar electronic transmissions ) and shall be deemed
      effectively given: (i) upon personal delivery, (ii) when sent by
      electronic mail or facsimile , as deemed received by the close of business
      on the date sent, (iii) five (5) days after having been sent by registered
      or certified mail , return receipt requested , postage prepaid or (iv) one
      (1) day after deposit with a nationally recognized overnight
      courier, specifying next day delivery . All communications shall be sent
      either by email, or fax, or to the address specified on the signature
      page. The physical address, email address, and phone number provided on
      the signature page shall be considered valid pursuant to the above
      stipulations; should the Company' s contact information change from that
      listed on the signature page, it is incumbent on the Company to inform the
      Holder. 

	 	
       

	21. 	
      Severability. If one or more provisions of this Agreement
      are held to be unenforceable under applicable law, such provision shall be
      excluded from this Agreement and the rest of the Agreement shall be
      enforceable in accordance with its terms. 

	 	
       

	22. 	
      Usury. If it shall be found that any interest or other
      amount deemed interest due hereunder violates the applicable law governing
      usury , the applicable rate of interest due hereunder shall automatically
      be lowered to equal the maximum rate of interest permitted under
      applicable law. The Company covenants (to the extent that it may lawfully
      do so) that it will not seek to claim or take advantage of any law that
      would prohibit or forgive the Company from paying all or a portion of the
      principal or interest on this Note . 

	 	
       

		
      Failure or Indulgence Not Waiver. No failure or delay on
      the part of this Note 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 privilege .    

	 	
       

	24. 	
      Short Sales. For so long as any amounts remain unpaid
      under this Note, the Holder shall not sell any Shares of the Company short
      or take any action designed or that could reasonably be expected to cause
      or result in stabilization or manipulation of the price of any of the
      Company's Shares or otherwise affect the market price of the Company's
      Shares. 

8

	25. 	
      Specific Shall Not Limit General ; Construction. No
      specific provision contained in this Note shall limit or modify any more
      general provision contained herein. This Note shall be deemed to be
      jointly drafted by the Company and all Holders and shall not be construed
      against any person as the drafter hereof. 

	 	
	26. 	
      Successors and Assigns. This Agreement shall be binding
      upon successors and assigns. This Note is not assignable.
  

IN WITNESS WHEREOF , the Company has caused this Note to be
signed by its CEO, on and as of the Issuance Date. 

	COMPANY: 	Liberty Star Uranium & Metals
      Corp. 
		  
		  
	Signature: 	/s/ James A.
      Briscoe 
		  
		  
	By: 	James A. Briscoe 
		  
	Title: 	CEO 
		  
	Address: 	5610 E. Sutler Lane 
	  	Tucson, Arizona, 85712 
		  
	Email: 	jbriscoe@libertystaruraniurn.com 
	  	  
	Phone: 	520-907-9492 

HOLDER: JSJ Investments Inc. 

Signature: /s/ Sameer Hirji

Sameer Hirji, President 
JSJ Investments Inc. 
2665 Villa
Creek Drive, Suite 214 
Dallas TX 75234 
888-503-2599 

9

Conversion Notice 

Reference is made to the Convertible Note issued by Liberty
Star Uranium & Metals Corp. (the "Note"), dated August 26, 2014 in the
principal amount of $150,000 with 12% interest. This note currently holds a
principal balance of $150,000 and accrued interest in the amount of $
__________________. The features of conversion stipulates a Conversion Price
equal to a 45% discount of the average of the three daily VWAP prices for the
previous ten (10) trading days before the date of conversion, pursuant to the
provisions of Section 2(a)(2) in the Note. 

In accordance with and pursuant to the Note, the undersigned
hereby elects to convert $ of the PRINCIPAL/INTEREST balance of the Note,
indicated below into shares of Common Stock (the "Common Stock"), of the
Company, by tendering the Note specified as of the date specified below. The
undersigned represents that it is an “accredited investor” as that term is
defined under United States securities laws. 

Date of Conversion: ________________________________

Please confirm the following information: 

Conversion Amount: $ ____________________________

Conversion Price: $__________________ (________ % discount from
$______________________________ ) 

Number of Common Stock to be issued:
___________________________________________________________

Current Issued/Outstanding: 
__________________________________________________________________

PLEASE ISSUE THE COMMON STOCK INTO WHICH THE NOTE IS BEING
CONVERTED IN THE NAME OF THE HOLDER OF THE NOTE AND TRANSFER THE SHARES
ELECTRONICALLY TO: [BROKER INFORMATION] 

HOLDER AUTHORIZATION: 
JSJ INVESTMENTS INC. 
2665 VILLA
CREEK DRIVE, SUITE 214 
DALLAS, TX 75234 
888-503-2599 

Tax ID: 20-2122354 

3

Tax ID: 20-2122354 

Sameer Hirji, President 

Date: 

PLEASE BE ADVISED, pursuant to Section 2(e)(2) of the Note,
"Upon receipt by the Company of a copy of the Conversion Notice, the Company
shall as soon as practicable, but in no event later than two(2) Business Day
after receipt of such Conversion Notice, SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT
COURIER, A CONFIRMATION OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER
INDICATING THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance
with the terms herein. Within three (3) Business Days after the date of the
Conversion Confirmation, the Company shall have issued and electronically
transferred the shares to the Broker indicated in the Conversion Notice; should
the Company be unable to transfer the shares electronically, they shall, within
two (2) Business Days after the date of the Conversion Confirmation, have
surrendered to FedEx for delivery the next day to the address as specified in
the Conversion Notice, a certificate, registered in the name of the Holder, for
the number of shares of Common Stock to which the Holder shall be entitled."

Signature: 

James Briscoe 
CEO 
Liberty Star Uranium & Metals
Corp. 

Or 

Patricia Madaris 
Chief Accountant 
Liberty Star Uranium
& Metals Corp. 

Or 

Pete O'Heeron 
Board Director 
Liberty Star Uranium &
Metals Corp. 

Or 

Gary Musil 
Board Director 
Liberty Star Uranium &
Metals Corp. 

11Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT is dated as of September 1, 2014 (“Agreement”) by and between HANGER PROSTHETICS & ORTHOTICS, INC., a Delaware corporation (the “Company”), and SAMUEL M. LIANG (the “Executive”). In consideration of the promises and mutual agreements set forth below, both parties agree as follows:

 

1.                                      Employment; Term.

 

(a)                                 The Company agrees to employ the Executive and the Executive accepts such employment by the Company upon the terms and conditions set forth in this Agreement, for the period beginning on September 1, 2014 (the “Commencement Date”) and ending upon termination pursuant to Section 4 or Section 5 (the “Employment Period”).

 

(b)                                 The parties acknowledge the letter agreement between the Executive and MEDRAD, a business Bayer Medical Care Division of Bayer Healthcare, dated as of April 26, 2010, and the Group Executive Employment Agreement, effective as of July 1, 2011, between the Executive and Bayer Healthcare LLC (collectively, the “Bayer Agreements”). The Executive represents and warrants that the Bayer Agreements do not and will not in any way prevent the Executive from serving in the roles described in Section 2 below and that Executive is not subject to any restrictive covenants (including, without limitation, covenants not to compete and covenants not to solicit) that would prevent the Executive from entering into this Agreement or providing services on the Company’s behalf. The Executive agrees not to use or disclose in the course of the Executive’s employment with the Company any confidential information or trade secrets of any other Person.

 

2.                                      Services.

 

During the Employment Period, the Executive agrees (i) to devote the Executive’s best efforts and full business time and attention to the business affairs of Hanger, Inc. (“Hanger”) and the Company and the performance of his duties and responsibilities hereunder (except for reasonable vacation periods subject to the reasonable approval of the Company or reasonable periods of illness or other incapacity); (ii) to render such services as Hanger’s Chief Executive Officer, the Board of Directors of Hanger (the “Board of Directors”) or the Company, as applicable, may from time to time direct; provided, however, that the Executive recognizes and agrees that the Company or Hanger may change the Executive’s job description as set forth in this Section 2 as a result of a good faith restructuring of the Company’s or Hanger’s operations; (iii) that the Executive will not, except with the prior written consent of the Company or Hanger, become engaged in or render services for any business other than the business of the Company or Hanger; and (iv) that the Executive will follow the written policies and procedures of the Company and Hanger, as set forth by the Company and Hanger from time to time, as well as all applicable federal and state healthcare laws, rules and regulations.  The Executive shall faithfully and diligently perform the duties appropriate to the position of Executive Vice President of Hanger and the Executive shall faithfully and diligently perform the duties appropriate to the position of President of the Company, which, in addition to those responsibilities assigned to him from time to time by Hanger’s Chief Executive Officer or the Board of Directors, shall include, among other things, responsibility for the overall performance of the Company and the Company’s subsidiaries.

 

 

3.                                      Salary, Incentive Bonus, Stock Options, Other Benefits.

 

In consideration for the valuable services to be rendered by the Executive and for the Executive’s agreement not to disclose or use Confidential Information of the Company as described in Section 6 and not to compete against the Company as described in Section 7, the Company hereby agrees as follows:

 

3.1                               Salary.  The Company will pay the Executive a minimum base salary at the rate of Four Hundred Twenty-Five Thousand Dollars ($425,000.00) per annum, payable in accordance with the standard payroll practices of the Company (the “Base Salary”).  The Executive shall be entitled to such increases in Base Salary during the Employment Period as shall be determined and approved by the Compensation Committee of the Board of Directors in its sole discretion, taking account of the performance of Hanger, the Company and the Executive, and other factors generally considered relevant to the salaries of executives holding similar positions with enterprises comparable to Hanger.

 

3.2                               Bonuses.

 

(a)                                 In addition to the Base Salary, the Executive shall participate in Hanger’s current bonus plan for senior corporate officers (the “Bonus Plan”), as approved by the Compensation Committee of the Board of Directors in each calendar year during the term of this Agreement.  The Executive’s target bonus is sixty percent (60%) of the Base Salary (the “Target Bonus”) and is contingent on the Executive meeting certain performance criteria and Hanger and the Company achieving certain year-end financial criteria, and up to one hundred twenty percent (120%) of the Base Salary (the “Maximum Bonus”) if the Executive exceeds certain performance criteria and Hanger and the Company exceed certain year-end financial criteria all as determined in the reasonable discretion of the Board of Directors and its Compensation Committee.  The Executive shall be entitled to such increases in the “Target Bonus” and the “Maximum Bonus” during the term hereof as shall be determined and approved by the Compensation Committee of the Board of Directors in its sole discretion, taking account of the performance of Hanger, the Company and the Executive, and other factors generally considered relevant to the salaries of executives holding similar positions with enterprises comparable to Hanger.  Notwithstanding the foregoing, in the event that the Executive, Hanger or the Company fail to attain their minimum respective criteria in any given year, the Board of Directors and its Compensation Committee may, in their reasonable discretion, decline to award any bonus to the Executive. For the avoidance of doubt, (I) so long as the Executive remains continuously employed with the Company from the Commencement Date through December 31, 2014, the Executive’s bonus will be calculated as if the Executive had been employed by the Company for the entire calendar year of 2014, and (II) the performance criteria for the part of 2014 following the Commencement Date shall be established within sixty (60) days following the Commencement Date.

 

 

(b)                                 The bonus described in Section 3.2(a) shall be payable between January 1 and March 15 (inclusive) of the calendar year following the calendar year for which the bonus is determined in accordance with the Company’s normal practices.  For calendar year 2014, so long as the Executive is employed with the Company through December 31, 2014, the Executive’s bonus shall be calculated as if the Executive had been employed with the Company for all of 2014. In the event that the Executive is employed for less than the full calendar year in the year in which his Termination Date occurs (“Termination Year”), the bonus payable to the Executive shall be subject to Sections 4 and 5 of this Agreement and calculated based on the Executive meeting certain performance criteria and Hanger achieving certain year-end financial criteria, all as determined by the Compensation Committee of the Board of Directors, in its sole discretion.  Such bonus shall be pro-rated for the portion of the Termination Year during which the Executive was employed by the Company.  With respect to the bonus for the Termination Year, any bonus payable pursuant to this Section 3.2(b) shall be payable to the Executive between January 1 and March 15 (inclusive) of the calendar year following the calendar year for which the bonus is determined in accordance with the Company’s normal practices.

 

(c)                                  The Company has paid to the Executive, and the Executive acknowledges receipt of, a one-time bonus in the form of a lump sum cash payment of Twenty Thousand Dollars ($20,000.00), less all applicable payroll taxes and other normal deductions (“Sign-On Bonus”), upon the terms and conditions set forth in the Promissory Note executed by the Executive as maker and in favor of the Company as holder, in the form attached hereto as Exhibit A-1, pursuant to which the Executive shall be obligated to repay the Sign-On Bonus to the Company immediately upon the termination of the Executive’s employment with the Company pursuant to Section 4.3 or Section 4.5 prior to May 1, 2015.

 

3.3                               Stock Options & Restricted Stock.

 

(a)                                 In addition to the compensation described in Section 3.1 and Section 3.2 of this Agreement, the Executive may have the opportunity to receive options to purchase stock or restricted shares of stock of Hanger in a manner consistent with any stock option or restricted share plan adopted by Hanger. The determination as to the amount of stock, if any, to be purchased under such stock option or restricted share plan shall be subject to the sole discretion of the Board of Directors of Hanger or a committee thereof.

 

(b)                                 As an incentive for the Executive’s future performance in improving shareholder value, the Company granted to the Executive, and the Executive acknowledges receipt of: (i) a special, time-based grant of Three Hundred Thousand Dollars ($300,000.00) worth of restricted shares of Hanger stock (“Special Grant”); and (ii) a grant for the calendar year 2014 of Four Hundred Thousand Dollars ($400,000.00) worth of restricted shares of Hanger stock, half of which is time-based and half of which is performance-based (“2014 Grant”).  The vesting schedule for the Special Grant and the 2014 Grant shall conform to the vesting schedule described in Section 3.3(c) of this Agreement and the Stock Agreement (as hereinafter defined). The Special Grant and the 2014 Grant shall be subject to such other terms and conditions as reasonably determined by Hanger’s Board of Directors or a committee thereof, consistent with the terms and conditions of the applicable stock incentive plan and restricted share grant agreement(s).

 

 

(c)                                  The options or restricted shares provided in Section 3.3(a) and Section 3.3(b) shall be evidenced by one or more stock option agreements or restricted share grant agreements (each, a “Stock Agreement”) between the Executive and Hanger, which Stock Agreement(s) shall provide for a vesting schedule of four (4) years, in equal parts, of the options or restricted shares granted thereunder.  Notwithstanding any provisions now or hereafter existing under any stock incentive plan of Hanger, all options or restricted shares granted to the Executive shall vest in full immediately upon the Termination Date except for termination of employment pursuant to Section 4.3 or Section 4.5 hereof, and the Executive (or his estate or legal representative, if applicable) shall thereafter have twelve (12) months from such Termination Date to exercise such options, if applicable.

 

(d)                                 Notwithstanding any provisions now or hereafter existing under any stock option plan or restricted share plan of Hanger, in the event of a Change in Control (as hereinafter defined), all options or restricted shares provided to the Executive pursuant to Section 3.3(a) and Section 3.3(b) of this Agreement or any Stock Agreement shall be granted and shall immediately fully vest as of the date of such Change in Control with such options or restricted shares being valued at the closing price of Hanger’s common stock on the day prior to the day of the Change in Control.

 

(e)                                  For purposes of this Agreement, a “Change in Control” shall be deemed to exist if:

 

(i)                                     a person, as defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (other than the Executive or a group including the Executive), either (A) acquires twenty percent (20%) or more of the combined voting power of the outstanding securities of Hanger having the right to vote in elections of directors and such acquisition shall not have been approved within sixty (60) days following such acquisition by a majority of the Continuing Directors (as hereinafter defined) then in office, or (B) acquires fifty percent (50%) or more of the combined voting power of the outstanding securities of Hanger having a right to vote in elections of directors; or

 

(ii)                                  Continuing Directors shall for any reason cease to constitute a majority of the Board of Directors; or

 

(iii)                               Hanger disposes of all or substantially all of the business of Hanger to a party or parties other than a subsidiary or other affiliate of Hanger pursuant to a partial or complete liquidation of Hanger, sale of assets (including stock of a subsidiary of Hanger) or otherwise; or

 

(iv)                              the Board of Directors approves Hanger’s consolidation or merger with or into any other Person (other than a wholly-owned subsidiary of Hanger), or any other Person’s consolidation or merger with or into Hanger, which results in all or part of the outstanding shares of Stock being changed in any way or converted into or exchanged for stock or other securities or cash or any other property.

 

(f)                                   For purposes of this Agreement, the term “Continuing Director” shall mean a member of the Board of Directors who either was a member of the Board of Directors on the date hereof or who subsequently became a Director of Hanger and whose election, or nomination for election, was approved by a vote of at least two-thirds (2/3) of the Continuing Directors then in office.

 

 

3.4                               Benefits.  The Executive also shall be entitled to (i) an automobile allowance in the amount of One Thousand Dollars ($1,000.00) per month and the provision of, or reimbursement for, parking of such automobile at the Company’s headquarters, (ii) five (5) weeks of vacation per year, and (iii) sick leave, medical and other benefits, including, without limitation, participation in the Company’s Supplemental Executive Retirement Program (“SERP”) and appropriate directors and officers liability insurance (to the extent commercially reasonable for the Company to obtain such insurance), all of which are consistent with those received by other similarly-situated members of the Board of Directors and/or senior executives of Hanger and its subsidiaries as determined in the sole discretion of the Compensation Committee of the Board of Directors. For 2014, the Executive’s level of contribution in the SERP shall be twenty percent (20%) of the Executive’s Base Salary. Following 2014, the Executive’s level of contribution in the SERP shall be determined by Hanger’s Board of Directors or a committee thereof. The Executive shall receive the life insurance equal to whatever the Company provides to its employees, plus additional life insurance in an amount equal to Four Hundred Fifty Thousand Dollars ($450,000.00), with the premiums for such policy to be paid by the Company, and the Executive shall also receive the option to participate in the Company’s supplemental life and accidental death and dismemberment policies, with the premiums for such policies to be paid by the Executive, all in accordance with the terms and conditions of such policies as generally applied by the Company.

 

3.5                               Determination of Cap or Payment.

 

(a)                                 Notwithstanding any other provision of this Agreement, if any portion of any payment under this Agreement, or under any other agreement or arrangement with the Executive or plan of the Company or one of its subsidiaries or affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” and would, but for this Section 3.5, result in the imposition on the Executive of an excise tax under Code Section 4999 (the “Excise Tax”), then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) reduced to 299.99% of the Executive’s “base amount” for purposes of Code Section 280G so that no portion of such Total Payments would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).

 

(b)                                 Within forty (40) days following a termination or notice by one party to the other of its belief that there is a payment or benefit due the Executive that will result in an excess parachute payment, the Company shall obtain, at its expense, the opinion (which need not be unqualified) of nationally recognized tax counsel (“Tax Counsel”) selected by the Compensation Committee of the Board of Directors, which sets forth (i) the “base amount” within the meaning of Code Section 280G; (ii) the aggregate present value of the payments in the nature of compensation to the Executive as prescribed in Code Section 280G(b)(2)(A)(ii); (iii) the amount and present value of any “excess parachute payment” within the meaning of Code Section 280G(b)(1); and (iv) the net after-tax proceeds to the Executive, taking into account the tax imposed under Code Section 4999 if (x) the Total Payments were delivered in full or (y) the Total Payments were reduced in accordance with Section 3.5(a).  Such opinion shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive.  If such opinion determines that clause (a)(ii) above applies, then the payments or benefits under this agreement or any other payment or benefit determined by Tax Counsel to be includable in the Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment.  In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order:  (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits to be received by the Executive (on the basis of the relative present value of the parachute payments).

 

 

(c)                                  For purposes of this Agreement, (i) the value of any noncash benefits or any deferred payment or benefit shall be determined in accordance with the principles of Code Sections 280G(d)(3) and (4), and (ii) the Executive shall be deemed to pay federal income tax and employment taxes at the highest stated rate of federal income and employment taxation, and state and local income taxes at the highest stated rate of taxation in the state or locality of the Executive’s domicile (determined in both cases in the calendar year in which the termination or notice described in Section 3.5(b) is given, whichever is earlier), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

 

(d)                                 If such Tax Counsel so requests in connection with the opinion required by this Section 3.5, the Company shall obtain, at its expense, and the Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to (1) the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Code Section 280G, or (2) the fair market value of any non-cash benefit.  Such firm shall be selected by the Compensation Committee of the Board of Directors.

 

(e)                                  This Section 3.5 shall be amended to comply with any amendment or successor provision to Code Sections 280G or 4999.  If such provisions are repealed without successor, then this Section 3.5 shall be cancelled without further effect.

 

3.6                               Relocation.  The Executive shall relocate the Executive’s and his family’s primary residence to within fifty (50) miles of Austin, Texas on or before December 31, 2016. The Executive shall receive the following benefits subject to the following terms and conditions in connection with the Executive’s relocation:

 

(a)                                 In order to defray the temporary living and travel costs associated with the Executive’s delayed relocation, the Company has paid to Executive, and the Executive acknowledges receipt of, a one-time travel bonus in the form of a lump sum cash payment of Fifty Thousand Dollars ($50,000.00), less all applicable payroll taxes and other normal deductions (“Travel Bonus”), upon the terms and conditions set forth in the Promissory Note executed by the Executive as maker and in favor of the Company as holder, in the form attached hereto as Exhibit A-2, pursuant to which the Executive shall be obligated to repay the Travel Bonus to the Company immediately upon the termination of the Executive’s employment with the Company pursuant to Section 4.3 or Section 4.5 prior to May 1, 2015.

 

 

(b)                                 Provided that the Executive relocates the Executive’s and his family’s primary residence to within fifty (50) miles of Austin, Texas on or before September 30, 2016, within thirty (30) days after the date of the relocation (“Relocation Date”) and the Executive’s provision of notice thereof to the Company, the Company will pay the Executive a one-time bonus in the form of a lump sum cash payment of Two Hundred Thousand Dollars ($200,000.00), less all applicable payroll taxes and other normal deductions (“Relocation Bonus”), upon the terms and conditions set forth in the Promissory Note to be executed by the Executive as maker and in favor of the Company as holder, in the form attached hereto as Exhibit A-3, pursuant to which the Executive shall be obligated to repay the Relocation Bonus to the Company immediately upon the termination of the Executive’s employment with the Company pursuant to Section 4.3 or Section 4.5 prior to the one (1) year anniversary date of the Relocation Date.

 

(c)                                  The relocation benefits set forth in the Company’s Senior Executive AVX Relocation Policy, a copy of which is attached hereto as Exhibit B, consistent with the relocation policies and procedures of the Company for executives, as previously disclosed by the Company to the Executive.

 

4.                                      Termination of Employment.

 

4.1                               Death. The Executive’s employment shall be terminated by the Executive’s death.  In the event of the death of the Executive, the Company shall pay to the estate or other legal representative of the Executive the Base Salary (at the annual rate in effect) and vacation as accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  Except as otherwise provided in this Agreement, the rights and benefits of the estate or other legal representative of the Executive under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

4.2                               Disability.

 

(a)                                 “Disability” means, for purposes of this Agreement, that the Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by an independent physician reasonably satisfactory to the Executive and the Company, whose fees shall be paid by the Company.

 

(b)                                 If the Executive shall incur a Disability, the employment of the Executive shall be terminated.  In the event of such termination, the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and vacation accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable). Except as otherwise provided under this Agreement, the rights and benefits of the Executive or his transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

 

4.3                               Due Cause.  The employment of the Executive hereunder may be terminated by the Company at any time for Due Cause (as hereinafter defined).  In the event of such termination, the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and vacation accrued through the Termination Date and not theretofore paid to the Executive.  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or his transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.  For purposes hereof, “Due Cause” shall mean any of: (i) the repeated failure or refusal of the Executive to follow in all material respects specific lawful directives of the Chief Executive Officer of Hanger, the Board of Directors or the Company (except due to sickness, injury or disabilities), (ii) gross inattention to duty or any other willful, reckless or grossly negligent act (or omission to act) by the Executive, which, in the good faith judgment of the Chief Executive Officer of Hanger or the Board of Directors, materially injures the Company, including the repeated failure to follow in all material respects the lawful written policies and procedures of the Company, (iii) a material breach of this Agreement by the Executive after written notice of such breach and a failure to cure within thirty (30) days of such notice, or (iv) the commission by the Executive of a felony or other crime involving moral turpitude or an act of financial dishonesty against Hanger and/or the Company.

 

4.4                               Termination by the Company Without Cause.

 

(a)                                 The Company may terminate the Executive’s employment at any time, for whatever reason it deems appropriate or without reason; provided, however, that in the event that such termination is not pursuant to Section 4.1 (Death); Section 4.2 (Disability); Section 4.3 (Due Cause); Section 4.5 (Voluntary Termination); or Section 4.6 (Retirement), the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and vacation accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).

 

(b)                                 In addition to the payments described in Section 4.4(a), the Company shall pay to the Executive, on the date that is six (6) months and one day after the Termination Date, a lump sum in an amount equal to eighteen (18) months of the monthly Base Salary (at the annual rate in effect immediately prior to termination) and an additional bonus payment equal to one and one-half (1.5) times the Target Bonus for the Termination Year (collectively, the “Severance Payment”). In addition, the Company shall for eighteen (18) months following the Termination Date, (i) reimburse the Executive for his reasonable costs of medical and dental coverage as provided under COBRA, (ii) reimburse the Executive for his reasonable costs incurred in maintaining his life and disability coverage, and (iii) reimburse the Executive for similar, applicable benefits granted to the Executive in Section 3.4, each at levels substantially equivalent to those provided by the Company to the Executive immediately prior to the termination of his employment (including such other benefits as shall be provided to senior corporate officers of the Company in lieu of such benefits from time to time during the eighteen (18) month payment period), on the same basis, including the Company’s payment of premiums and contributions, as such benefits are provided to other senior corporate officers of the Company or were provided to the Executive prior to the termination; provided, however, that no further contribution to the SERP shall be made to the benefit of the Executive following the Termination Date, in accordance with the SERP’s terms. Reimbursements of expenses which provide for nonqualified deferred compensation under Code Section 409A, if any, shall not be paid before six (6) months and one day after the Executive’s Termination Date.  The amount of expenses eligible for reimbursement, or in-kind benefits provided, during a taxable year of the Executive may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other taxable year.  Reimbursements shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.  The right to reimbursement hereunder is not subject to liquidation or exchange for another benefit.

 

 

In addition, for a period of eighteen (18) months immediately following the Executive’s Termination Date, the Executive will be provided with outplacement services commensurate with those provided to other senior corporate officers of the Company through a vendor selected by the Company. Except as otherwise provided under this Agreement, the rights and benefits of the Executive or his transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(c)                                  Notwithstanding Section 4.4(b), in the event that (i) the Executive is not a Specified Employee, then the Company shall pay to the Executive the Severance Payment within forty-five (45) days from the Termination Date and the six (6) month delay for reimbursements shall cease to apply, or (ii) the Executive is a Specified Employee and the death of the Executive occurs within six (6) months following the Termination Date, the Company shall pay to the Executive’s estate any unpaid portion of the amounts due to be paid to the Executive pursuant to Section 4.4(b) within forty-five (45) days following the Executive’s death.  If the Executive’s estate or legal representative fails to notify the Company of the death of the Executive such that the Company is unable to make timely payment hereunder, then the Company shall not be treated as in breach of this Agreement and shall not be liable to the estate or legal representative for any losses, damages, or other claims resulting from such late payment.

 

(d)                                 Notwithstanding anything in this Agreement to the contrary, the Executive shall not be entitled to any payments under Section 4.4(b) unless the Executive has first duly and timely executed (and not revoked) a form of mutual agreement and general release acceptable to the Company releasing both the Company and the Executive from certain claims the other party may have in connection with the Executive’s employment with the Company and the termination thereof, to the extent permitted by law.

 

4.5                               Voluntary Termination.  The Executive may terminate his employment with the Company at any time and the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and vacation accrued through the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  In the event the Executive terminates the Executive’s employment under this Section 4.5, written notice of at least thirty (30) days shall be provided to the Company in accordance with the provisions of Section 9. Except as otherwise provided under this Agreement, the rights and benefits of the Executive or his transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

 

4.6                               Retirement.

 

(a)                                 In the event of the Executive’s Retirement (as defined in Section 4.6(b)), the Company shall pay to the Executive the Base Salary (at the annual rate then in effect) and vacation accrued through the date of Retirement and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or his transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(b)                                 “Retirement” shall mean the Executive’s voluntary termination of employment at or after age sixty-five (65), provided the Executive has given the Company written notice of the Executive’s intent to retire no less than one (1) year prior to the scheduled Termination Date and the Executive has, as of the scheduled Termination Date, been continuously employed with Hanger, including any of its direct or indirect subsidiaries, for a period of no less than ten (10) years.

 

5.                                      Change In Control and Termination Provisions.

 

If within a two (2) year period following any Change in Control there occurs:

 

(a)                                 any termination of the Executive (other than as set forth in Section 4.1 (Death), Section 4.2 (Disability), Section 4.3 (Due Cause), Section 4.5 (Voluntary Termination) or Section 4.6 (Retirement) of this Agreement);

 

(b)                                 a material diminution of the Executive’s authority and responsibilities, as compared to the Executive’s authority and responsibilities immediately prior to the Change in Control;

 

(c)                                  any reduction in the Base Salary or Bonus Plan targets (as distinguished from the payments received thereunder), as compared to such Base Salary or such targets as of the date immediately prior to the Change in Control;

 

(d)                                 any failure to provide the Executive with benefits: (1) at least as favorable as those enjoyed by similarly-situated senior corporate officers of the Company under the Company’s pension, life insurance, medical, health and accident, disability or other written employee plans under which the form and/or amounts of benefits are prescribed in applicable documents or (2) granted to the Executive by this Agreement;

 

(e)                                  any relocation of the Executive’s principal site of employment to a location more than fifty (50) miles from the Executive’s principal place of employment as of the date immediately prior to the Change in Control; or

 

 

(f)                                   any material breach of this Agreement by the Company; then, at the option of the Executive, exercisable by the Executive within ninety (90) days after the occurrence of any of the foregoing events, the Executive may resign his employment with the Company (or, if involuntarily terminated, give notice of his intention to collect benefits under this Agreement) by delivering a notice in writing (the “Notice of Termination”) to the Company, and the Executive shall be entitled to receive the Base Salary (at the annual rate then in effect) and vacation accrued to the Termination Date and the bonus provided for in Section 3.2 for the Termination Year (as well as any then earned but unpaid bonus for the year preceding the Termination Year, if applicable).  In addition, the Company shall pay to the Executive on the date that is six (6) months and one day after the Termination Date the Severance Payment.  In addition, the Company shall, for eighteen (18) months following the Termination Date, (i) reimburse the Executive for his reasonable costs of medical and dental coverage as provided under COBRA, (ii) reimburse the Executive for his reasonable costs incurred in maintaining his life and disability coverage, and (iii) reimburse the Executive for similar, applicable benefits granted to the Executive in Section 3.4, each at levels substantially equivalent to those provided by the Company to the Executive immediately prior to the termination of his employment (including such other benefits as shall be provided to senior corporate officers of the Company in lieu of such benefits from time to time during the eighteen (18) month period), on the same basis, including the Company’s payment of premiums and contributions, as such benefits are provided to other senior corporate officers of the Company or were provided to the Executive prior to the termination; provided, however, that no further contribution to the SERP shall be made to the benefit of the Executive following the Termination Date, in accordance with the SERP’s terms. Reimbursements of expenses which provide for nonqualified deferred compensation under Code Section 409A, if any, shall not be paid before six (6) months and one day after the Executive’s Termination Date.  The amount of expenses eligible for reimbursement, or in-kind benefits provided, during a taxable year of the Executive may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided in any other taxable year.  Reimbursements shall be paid on or before the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.  The right to reimbursement hereunder is not subject to liquidation or exchange for another benefit.

 

In addition, for a period of eighteen (18) months immediately following the Executive’s Termination Date, the Executive will be provided with outplacement services commensurate with those provided to other senior corporate officers of the Company through a vendor selected by the Company.  Except as otherwise provided under this Agreement, the rights and benefits of the Executive or his transferee under the benefit plans and programs of the Company shall be determined in accordance with the provisions of such plans and programs.

 

(g)                                  Notwithstanding the prior provisions of this Section 5, in the event that (i) the Executive is not a Specified Employee, then the Company shall pay to the Executive the Severance Payment within forty-five (45) days from the Termination Date and the six (6) month delay for reimbursements shall cease to apply, or (ii) the Executive is a Specified Employee and the death of the Executive occurs within six (6) months following the Termination Date, the Company shall pay to the Executive’s estate any unpaid portion of the amounts due to be paid to the Executive pursuant to this Section 5 within forty-five (45) days following the Executive’s death.  If the Executive’s estate or legal representative fails to notify the Company of the death of the Executive such that the Company is unable to make timely payment hereunder, then the Company shall not be treated as in breach of this Agreement and shall not be liable to the estate or legal representative for any losses, damages, or other claims resulting from such late payment.

 

 

(h)                                 Notwithstanding anything contained in this Agreement to the contrary, the Executive shall not be entitled to any payments under this Section 5 unless the Executive has first duly and timely executed (and not revoked) the form of mutual agreement and general release acceptable to the Company releasing both the Company and the Executive from certain claims the other party may have in connection with the Executive’s employment with the Company and the termination thereof, to the extent permitted by law.

 

6.                                      Confidential Information.

 

6.1                               Unless the Executive secures the Company’s written consent, the Executive will not, for a period of twenty-four (24) months after the Termination Date, disclose, use, disseminate, lecture upon, or publish Confidential Information, whether or not such Confidential Information was developed by him.

 

6.2                               “Confidential Information” means information disclosed to the Executive or known by him as a result of his employment with the Company, not generally known in the industry, about the Company’s and/or Hanger’s (including any direct or indirect subsidiary of Hanger) services, products, or customers, including, but not limited to, clinical programs, procedures and protocols, research, operating manuals, business methods, financial strategic planning, client retention, customer and supplier lists, data processing, insurance plans, risk management, marketing, contracting, selling and employees; provided, however, that Confidential Information shall not include any information that (i) the Executive can demonstrate was known to him prior to the date of this Agreement; or (ii) is now, or becomes in the future, available to Persons who are not legally required to treat such information as confidential unless such information was acquired through wrongful acts or omissions of which the Executive is aware.

 

6.3                               In the event the Executive is compelled to disclose any Confidential Information pursuant to an order of a court or other governmental or legal body of competent jurisdiction, the Executive must provide written notice of such order as soon as reasonably practicable to permit the Company, at its own cost and expense, but with the Executive’s assistance and cooperation, to object to such disclosure.

 

7.                                      Non-Compete.

 

7.1                               In the event the Employment Period is terminated under Sections 4.3, 4.5, 4.6 or 5, then this Section 7 will apply to the Executive. In the event the Employment Period is otherwise terminated, such as pursuant to Section 4.4, then no part of this Section 7 will apply to the Executive.

 

 

7.2                               The Executive will not, during the Executive’s term of employment and for a period of twenty-four (24) months after the Termination Date, directly or indirectly (i) engage, whether as principal, agent, investor, representative, stockholder (other than as the holder of not more than five percent (5%) of the stock or equity of any corporation the capital stock of which is publicly traded), employee, consultant, volunteer or otherwise, with or without pay, in any activity or business venture anywhere within the continental United States that is competitive with the Business on the Termination Date, (ii) solicit or entice or endeavor to solicit or entice away from the Company and/or Hanger (including any direct or indirect subsidiary of Hanger) any director, officer, employee, agent or consultant of the Company and/or Hanger (including any direct or indirect subsidiary of Hanger), either on his own account or for any Person, firm, corporation or other organization, regardless of whether the Person solicited would commit any breach of such Person’s contract of employment by reason of leaving the Company’s service; (iii) solicit or entice or endeavor to solicit or entice away any of the clients or customers of the Company and/or Hanger (including any direct or indirect subsidiary of Hanger) as of the Termination Date for the purpose of competing in the Business, either on his own account or for any other Person, firm, corporation or organization; (iv) employ or otherwise utilize (whether as a consultant, advisor or otherwise) any Person who was a director, officer, or employee of the Company and/or Hanger (including any direct or indirect subsidiary of Hanger) at any time during the two (2) years preceding the Termination Date, unless such Person’s employment was terminated by the Company and/or Hanger (including any direct or indirect subsidiary of Hanger); or (v) employ or otherwise utilize (whether as a consultant, advisor or otherwise) any Person who is or may be likely to be in possession of any Confidential Information.  The parties hereto agree that if, in any proceeding, the Court or other authority shall refuse to enforce covenants set forth in this Section 7, because such covenants cover too extensive a geographic area or too long a period of time, any such covenant shall be deemed appropriately amended and modified in keeping with the intention of the parties to the maximum extent permitted by law.

 

7.3                               Since a material purpose of this Agreement is to protect the Company’s investment in the Executive and to secure the benefits of the Executive’s background and general experience in the industry, the parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of Section 6 or this Section 7 and that any such breach will cause the Company irreparable harm.  Therefore, in the event of a breach by the Executive of any of the provisions of Section 6 or this Section 7, the Company or its successors or assigns may, in addition to other rights and remedies existing in its favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions of this Agreement.

 

7.4                               The Executive specifically authorizes and permits the Company to provide any Person with which the Executive serves (or may serve) as an employee, director, owner, stockholder, consultant, partner (limited or general) or otherwise with a copy of this Agreement or a general description of some or all of the terms of this Agreement.

 

8.                                      Miscellaneous.

 

8.1                               Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law.  The parties agree that (i) the provisions of this Agreement shall be severable in the event that any of the provisions hereof are for any reason whatsoever invalid, void or otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable provisions shall be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable and (iii) the remaining provisions shall remain enforceable to the fullest extent permitted by law.

 

 

8.2                               This Agreement embodies the complete agreement and understanding among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

 

8.3                               This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive and the Company, and their respective successors and assigns.

 

8.4                               Assignment.

 

8.4.1                     By the Company and/or Hanger. The Company shall require any successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company and/or Hanger to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.  As used in this Section, the “Company” shall mean the Company and/or Hanger as hereinbefore defined and any successor to its business and/or assets as aforesaid which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law and this Agreement shall be binding upon and inure to the benefit of, the Company, as so defined.  The Company and the Executive agree that the Company may not assign this Agreement without the express, written consent of the Executive.

 

8.4.2                     By the Executive. The Executive may not assign this Agreement or any part thereof without the prior written consent of a majority of the Board of Directors; provided, however, that nothing herein shall preclude one or more beneficiaries of the Executive from receiving any amount that may be payable following the occurrence of his legal incompetency or his death and shall not preclude the legal representative of his estate from receiving such amount or from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate.  The term “beneficiaries,” as used in this Agreement, shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Executive (in the event of his incompetency) or the Executive’s estate.

 

8.5                               All questions concerning the construction, validity and interpretation of the Agreement will be governed by the internal law, and not the law of conflicts, of the State of Delaware.  All disputes under this Agreement shall be submitted to and governed by binding arbitration with an arbitrator from the American Arbitration Association; except only that the Company may seek relief in a court of competent jurisdiction in the event of a claimed violation of Section 6 or Section 7 of this Agreement. Any such arbitration shall occur in or around Austin, Texas, or such other location as may be mutually acceptable to the Parties.  In deciding any dispute, the arbitrator shall be required to (i) apply the terms and conditions of this Agreement to such dispute; and (ii) set forth in writing the award and a summary of those facts considered by the arbitrator to be material to the decision. Each party shall bear its own attorneys’ fees and litigation costs.  This agreement to arbitrate shall be enforceable under the Federal Arbitration Act and may be specifically enforced in court.

 

 

8.6                               Any provision of this Agreement may be amended or waived only with the prior written consent of the Company and the Executive.  Notwithstanding anything in this Agreement to the contrary, the Company shall unilaterally have the right to amend this Agreement to comply with Section 409A of the Code.

 

8.7                               This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  The parties further agree that facsimile signatures or signatures scanned into .pdf (or similar) format and sent by e-mail shall be deemed original signatures.

 

9.                                      Notices.

 

Any notice to be given hereunder shall be in writing and delivered personally or sent by certified mail, postage prepaid, return receipt requested, addressed to the party concerned at the address indicated below or at such other address as such party may subsequently be designated by like notice:

 

If to the Company:

 

Hanger, Inc.
 Suite 300
 10910 Domain Drive
 Austin, Texas 78758
 Attention: Vice President, Human Resources

 

If to the Executive:

 

Samuel M. Liang

3 Spring Lake Drive

Far Hills, New Jersey 07931

 

With a copy to:

 

Rick Steiner Fell & Benowitz LLP

90 Broad Street, 23rd Floor

New York, New York 10004

Attention: Robert J. Benowitz, Esq.

 

10.                               Withholding.

 

Anything to the contrary notwithstanding, all payments required to be made by the Company hereunder to the Executive or his beneficiaries, including his estate, shall be subject to withholding of such amounts relating to taxes as the Company may reasonably determine it should withhold pursuant to any applicable law or regulation.  In lieu of withholding such amounts, in whole or in part, the Company may, in its sole discretion, accept other provisions for payment of taxes as permitted by law, provided it is satisfied in its sole discretion that all requirements of law affecting its responsibilities to withhold such taxes have been satisfied.

 

 

11.                               Survivorship.

 

The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations.

 

12.                               Definitions.

 

12.1                        “Business” shall mean any competitive business of any of the following: (a) fabricating, distributing, wholesaling or retailing of orthotics or prosthetics, or the operation of clinics to fit patients for orthotics or prosthetics; (b) the development and commercialization of devices that utilize neuromuscular electrical stimulation to provide voluntary movement and function to a neuromuscular impaired extremity; (c) the design, manufacture and sale of vending machines and/or automated cabinets for use in the distribution of orthotic and prosthetic products and/or the prosthetic and orthotic distribution system business whereby vending machines and/or automated cabinets containing prosthetic and orthotic products are placed in hospitals, doctors’ offices, physical therapists’ offices and/or other medical facilities; (d) orthotic and prosthetic network management, care and administration; (e) the business of providing rehabilitative products (cold therapy, continuous passive motion, or similar products) and services directly to patients; (f) integrated clinical programs for sub-acute and long-term care rehabilitation providers (including, without limitation, skilled nursing facilities, home health agencies, outpatient clinics and other rehabilitation providers), combining innovative medical technology with evidence-based clinical protocols and advanced therapist training; and/or (g) or any other related businesses in which the Company and/or Hanger (including any direct or indirect subsidiary of Hanger) is engaged during and at the termination of the Employment Period.

 

12.2                        “Person” shall mean and include an individual, a partnership, a joint venture, a corporation, a limited liability company, a trust, an unincorporated organization and a governmental entity or any department or agency thereof.

 

12.3                        “Termination Date” shall mean (i) if the Executive’s employment is terminated by the Company for any reason whatsoever, other than death or Disability, the Executive’s last day of work; (ii) if the Executive’s employment is terminated by reason of death or Disability, the date of death of the Executive or the effective date of the Disability, as the case may be; and (iii) if the Executive’s employment is terminated by the Executive, the expiration date of the applicable notice period that is required pursuant to this Agreement.  Notwithstanding the foregoing, no Termination Date shall be earlier than the date as of which the Executive has incurred a “separation from service” within the meaning of Internal Revenue Code (“Code”) Section 409A, as determined by applying the default rules thereof.

 

 

12.4                        The Executive will be a “Specified Employee” if the Executive is a key employee (as defined in Code Section 416(i) but without regard to Code Section 416(i)(5)) of the Company or an affiliate of the Company (within the meaning of Code Section 414(b) or (c)) any of the stock of which is publicly traded on an established securities market or otherwise, as determined at the time of the Executive’s “separation from service”.  The Executive is a key employee under Code Section 416(i) if the Executive meets the requirements of Code Section 416(i)(1)(A)(i), (ii) or (iii), applied in accordance with the regulations under Code Section 416, but disregarding Code Section 416(i)(5), at any time during the twelve (12) month period ending on an identification date.  For purposes of determining whether the Executive is a key employee, compensation shall mean wages within the meaning of Code Section 3401(a) but determined without regard to any rules that limit the amount of remuneration included in wages based on the nature or location of the employment or services performed.  If the Executive is a key employee as of an identification date, the Executive is treated as a key employee for the twelve (12) month period beginning on the first day of the fourth month following the identification date.  The identification date for this Agreement shall be December 31 of each year, such that if the Executive satisfies the foregoing requirements for key employee status as of December 31 of a year, the Executive shall be treated as a key employee for the twelve (12) month period starting April 1 of the following calendar year.

 

If, in a transaction constituting a “change in control” of the Company, as determined by Code Section 409A, the Company is merged with or acquired by another entity, and immediately following such change in control of the Company the stock of either the Company or the acquirer or successor in such transaction is publicly traded on an established securities market or otherwise, then for the period between the date of such transaction and the next specified employee effective date of the acquirer or survivor, the acquirer or survivor shall combine the lists of the specified employees of each entity participating in the transaction and re-order the list to identify the top 50 key employees (as well as 1% and 5% owners that are considered key employees) in accordance with Treasury Regulation §1.409A-1(i)(6)(i)

 

[The next page is the signature page.]

 

 

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

 

	
 
    	
HANGER   PROSTHETICS & ORTHOTICS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Vinit Asar
    
	
 
    	
 
    	
Vinit   Asar 
    
	
 
    	
 
    	
Chief   Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
/s/   Samuel M. Liang
    
	
 
    	
 
    	
Samuel   M. Liang

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