Document:

Exhibit 10.1

 

Award Number: [·]

 

SMART & FINAL STORES, INC.

 

Restricted Stock Agreement

Pursuant to the

Smart & Final Stores, Inc.

Amended & Restated 2014 Stock Incentive Plan

 

AGREEMENT (this “Agreement”), dated as of May 25, 2017, between Smart & Final Stores, Inc., a Delaware corporation (the “Company” and, collectively with its controlled Affiliates, the “Employer”), and David G. Hirz (the “Participant”).

 

Preliminary Statement

 

Subject to the terms and conditions set forth herein, the Committee hereby grants shares of Common Stock as set forth below (the “Shares”) to the Participant, as an Eligible Employee, Consultant or Non-Employee Director, on May 25, 2017 (the “Grant Date”) pursuant to the Smart & Final Stores, Inc. Amended & Restated 2014 Stock Incentive Plan, as it may be amended from time to time (the “Plan”).  Pursuant to Section 2 hereof, the Shares are subject to certain restrictions, which restrictions shall lapse at the times and upon achievement of the performance conditions specified in Section 2(c) hereof.  While such restrictions are in effect, the Shares subject to such restrictions shall be referred to herein as “Restricted Stock.”  Except as otherwise indicated, any capitalized term used but not defined herein shall have the meaning ascribed to such term in the Plan.  By signing and returning this Agreement, the Participant acknowledges having received and read a copy of the Plan and agrees to comply with it, this Agreement and all applicable laws and regulations.

 

Accordingly, the parties hereto agree as follows:

 

NOW, THEREFORE, the parties agree as follows:

 

1.             Grant of Shares.  Subject to the Plan and the terms and conditions set forth herein and therein, the Participant is hereby granted 133,334 Shares.

 

2.             Restricted Stock.

 

(a)           Retention of Certificates.  Promptly after the date of this Agreement, the Company shall issue stock certificates representing the Restricted Stock unless it elects to recognize such ownership through book entry or another similar method.  The stock certificates shall be registered in the Participant’s name and shall bear any legend required by the Plan.  Unless held in book entry form, such stock certificates shall be held in custody by the Company (or its designated agent) until the restrictions on the Restricted Stock shall have lapsed.  Upon the Company’s request, the Participant shall deliver to the Company a duly signed stock power, endorsed in blank, relating to the Restricted Stock.  If the Participant receives, with respect to the Restricted Stock or any part thereof, any (i) dividend (whether paid in shares, securities, moneys or property), (ii) shares of Restricted Stock pursuant to any split, (iii) distribution or return of capital resulting from a split-up, reclassification or other like changes of the Restricted Stock or (iv) warrants, options or any other rights or properties (collectively “RS Property”), the

 

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Participant will also immediately deposit with and deliver to the Company any of such RS Property, including, upon the Company’s request, any certificates representing shares duly endorsed in blank or accompanied by stock powers duly executed in blank.  The RS Property shall be subject to the same restrictions, including that of this Section 2(a), as the Restricted Stock with respect to which it is issued and shall be encompassed within the term “Restricted Stock.”  Unless otherwise determined by the Committee, any RS Property issued in the form of cash will not be reinvested in Common Stock and will be held until delivered to the Participant on the date the Restricted Stock becomes vested.

 

 

(b)           Rights with Respect to Restricted Stock.  The Participant will have all rights of a stockholder with respect to the Restricted Stock, including the right to vote the Restricted Stock, to receive and retain any dividends payable to holders of Common Stock of record on and after the transfer of the Restricted Stock (although such dividends shall be treated, to the extent required by applicable law, as additional compensation for tax purposes if paid on Restricted Stock, and such dividends will be subject to the restrictions provided in Section 2(a)), and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to the Restricted Stock set forth in the Plan, with the exceptions that:  (i) the Participant will not be entitled to delivery of the stock certificate or certificates representing the Restricted Stock until the Restriction Period shall have expired; (ii) the Company (or its designated agent) will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (iii) no RS Property shall bear interest or be segregated in separate accounts during the Restriction Period; and (iv) the Participant may not sell, assign, transfer, pledge, exchange, encumber, hypothecate or otherwise dispose of the Restricted Stock during the Restriction Period.

 

(c)           Vesting.

 

(i)             The Restricted Stock shall vest and cease to be “Restricted Stock” as follows:

 

A.                66,667 Shares on the later of (i) the first anniversary of the Grant Date and (ii) the date that the Committee certifies that the Company has achieved the EBITDA Growth Target (as defined below) as of the end of any fiscal quarter during the First Performance Period (as defined below), provided, in each case, that the Participant has not incurred a Termination prior to such date. The “First Performance Period” means the period beginning on the first day of the Company’s second quarter of fiscal year 2017 and ending on the last day of the Company’s first quarter of fiscal year 2020, provided that the Committee may only certify that the EBITDA Growth Target has been achieved following the end of the Company’s first quarter of fiscal year 2018 or any later fiscal quarter during such period.

 

B.                66,667 Shares on the later of (i) the second anniversary of the Grant Date and (ii) the date that the Committee certifies that the Company has achieved the EBITDA Growth Target as of the end of any fiscal quarter during the Second Performance Period (as defined below), 

 

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provided, in each case, that the Participant has not incurred a Termination  prior to such date. The “Second Performance Period” means the period beginning on the first day of the Company’s second quarter of fiscal year 2018 and ending on the last day of the Company’s first quarter of fiscal year 2020, provided that the Committee may only certify that the EBITDA Growth Target has been achieved following the end of the Company’s first quarter of fiscal year 2019 or any later fiscal quarter during such period.

 

 

(ii)            “EBITDA Growth Target”, as of any date of determination, means the Adjusted EBITDA targets, as set forth on Schedule A, for the four fiscal quarters of the Company immediately preceding such determination date.

 

(iii)           “Adjusted EBITDA” means earnings before interest, income taxes, depreciation and amortization expense  as presented in the Company’s external financial reporting, but the Committee shall make  appropriate adjustments (solely to the extent consistent with the exemption under Section 162(m) for compensation intended to constitute performance-based compensation that is payable to a covered employee) relating to the following items: the expense or income effect of unusual items relating to strategic transaction costs, severance costs, discontinued operations, store closure costs and closed store costs, store pre-opening costs, non-cash rent expense or income, share-based compensation expense, unusual legal charges, charges related to debt extinguishment and refinancing, charges related to capital restructurings, asset impairment charges, gain or loss on asset sales, expenses associated with business optimization programs, changes in applicable law, rules, regulations or accounting principles, or charges for litigation, claims, judgments or settlements.

 

(iv)          In all cases the Committee shall certify whether the Company has achieved the EBITDA Growth Target as soon as administratively feasible following the end of the quarter in which the EBITDA Growth Target is achieved but in no event more than 70 days following the end of such quarter.  If the Committee does not certify achievement of the EBITDA Growth Target, all Restricted Stock still subject to restriction shall be forfeited 70 days following the end of the Second Performance Period.

 

(d)           Detrimental Activity.

 

(i)             In consideration for the grant of Restricted Stock and in addition to any other remedies available to the Company, the Participant acknowledges and agrees that the Restricted Stock is subject to the provisions in the Plan regarding Detrimental Activity.  If the Participant engages in any Detrimental Activity prior to, or during the one-year period after, any vesting of Restricted Stock, all unvested Restricted Stock shall be forfeited, without compensation, and the Committee shall be entitled to recover from the Participant (at any time within one year after such engagement in Detrimental 

 

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Activity) an amount equal to the Fair Market Value as of the vesting date(s) of any Restricted Stock that had vested in the period referred to above.

 

(ii)            The restrictions regarding Detrimental Activity are necessary for the protection of the business and goodwill of the Company and are considered by the Participant to be reasonable for such purposes.  Without intending to limit the legal or equitable remedies available in the Plan and in this Agreement, the Participant acknowledges that engaging in Detrimental Activity will cause the Company material irreparable injury for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of such activity or threat thereof, the Company shall be entitled, in addition to the remedies provided under the Plan, to obtain from any court of competent jurisdiction a temporary restraining order or a preliminary or permanent injunction restraining the Participant from engaging in Detrimental Activity or such other relief as may be required to specifically enforce any of the covenants in the Plan and this Agreement without the necessity of posting a bond, and in the case of a temporary restraining order or a preliminary injunction, without having to prove special damages.

 

(e)           Withholding.  Unless otherwise directed or permitted by the Committee, the Participant must pay or provide for all applicable withholding taxes in respect of the Restricted Stock by (i) remitting the aggregate amount of such taxes to the Company in full, by cash, check, bank draft or money order payable to the order of the Company, or (ii) to the extent permitted by the Committee, by making arrangements with the Company to have such taxes withheld from other compensation due to the Participant.

 

(f)            Section 83(b).  If the Participant properly elects (as permitted by Section 83(b) of the Code) within 30 days after the Grant Date to include in gross income for federal income tax purposes in the year of issuance the fair market value of all or a portion of such Restricted Stock, the Participant shall be solely responsible for any foreign, federal, state, provincial or local taxes the Participant incurs in connection with such election.  The Participant acknowledges that it is the Participant’s sole responsibility, and not the Company’s, to file timely and properly the election under Section 83(b) of the Code and any corresponding provisions of state tax laws if the Participant elects to utilize such election.

 

3.             Legend.  All certificates representing the Restricted Stock shall have endorsed thereon the following legend:

 

(a)           “The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Smart & Final Stores, Inc. (the “Company”) Amended & Restated 2014 Stock Incentive Plan (as amended from time to time, the “Plan”), and an Award Agreement entered into between the registered owner and the Company. Copies of such Plan and Agreement are on file at the principal office of the Company.”

 

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Notwithstanding the foregoing, in no event shall the Company be obligated to issue a certificate representing the Restricted Stock prior to the vesting dates set forth above.

 

4.             Termination.

 

(a)           Termination by Death or Disability.  If the Participant’s Termination is by reason of death or Disability during the Restriction Period, all Restricted Stock still subject to restriction shall immediately vest and cease to be “Restricted Stock.”

 

(b)           Termination for Any Reason Other than Death or Disability.  If the Participant’s Termination is for any reason other than the Participant’s death or Disability during the Restriction Period, all Restricted Stock still subject to restriction shall be forfeited.  The Participant hereby waives any right to accelerated vesting of the Restricted Stock upon any Termination provided in the Amended and Restated Employment Agreement between the Participant and the Company, dated July 20, 2016 (the “Employment Agreement”), including upon an involuntary termination without Cause, the Participant’s resignation for Good Reason or Retirement by the Participant (each as defined in the Employment Agreement).

 

5.             Change in Control.  The provisions in the Plan regarding Change in Control shall apply to the Shares.

 

6.             Restriction on Transfer of Shares.  The provisions in the Plan regarding Transfer Restrictions shall apply to the Shares.

 

7.             Provisions of Plan Control.  This Agreement is subject to all the terms, conditions and provisions of the Plan, including the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time.  The Plan is incorporated herein by reference. If and to the extent that this Agreement conflicts or is inconsistent with the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.

 

8.             Notices.  All notices, demands or requests made pursuant to, under or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made:

 

(a)           unless otherwise specified by the Company in a notice delivered by the Company in accordance with this Section 8, any notice required to be delivered to the Company shall be properly delivered if delivered to:

 

Smart & Final Stores, Inc.

600 Citadel Drive
 Commerce, California 90040

	
Attention:
    	
General Counsel
    
	
Telephone:
    	
(323) 869-7500
    
	
Facsimile:
    	
(323) 869-7862
    

 

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

 

Proskauer Rose LLP
 2049 Century Park East, Suite 3200
 Los Angeles, CA 90067

	
Attention:
    	
Michael A. Woronoff
    
	
Telephone:
    	
(310) 284-4550
    
	
Facsimile:
    	
(310) 557-2193
    

 

(b)           if to the Participant, to the address on file with the Employer.

 

Any notice, demand or request, if made in accordance with this Section 8 shall be deemed to have been duly given:  (i) when delivered in person; (ii) three days after being sent by United States mail; or (iii) on the first business day following the date of deposit if delivered by a nationally recognized overnight delivery service.

 

9.             No Right to Employment/Consultancy/Directorship.  This Agreement shall not give the Participant or other Person any right to employment, consultancy or directorship by the Employer, or limit in any way the right of the Employer to terminate the Participant’s employment, consultancy or directorship at any time.

 

10.          Waiver of Jury Trial.  EACH PARTY TO THIS AGREEMENT, FOR ITSELF AND ITS AFFILIATES, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE ACTIONS OF THE PARTIES HERETO OR THEIR RESPECTIVE AFFILIATES PURSUANT TO THE PLAN OR THIS AGREEMENT OR IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT OF THE PLAN OR THIS AGREEMENT.

 

11.          Dispute Resolution.  All controversies and claims arising out of or relating to this Agreement, or the breach hereof, shall be settled by the Employer’s mandatory dispute resolution procedures as may be in effect from time to time with respect to matters arising out of or relating to Participant’s employment with the Employer.

 

12.          Severability of Provisions.  If at any time any of the provisions of this Agreement shall be held invalid or unenforceable, or are prohibited by the laws of the jurisdiction where they are to be performed or enforced, by reason of being vague or unreasonable as to duration or geographic scope or scope of the activities restricted, or for any other reason, such provisions shall be considered divisible and shall become and be immediately amended to include only such restrictions and to such extent as shall be deemed to be reasonable and enforceable by the court or other body having jurisdiction over this Agreement and the Company and the Participant agree that the provisions of this Agreement, as so amended, shall be valid and binding as though any invalid or unenforceable provisions had not been included.

 

13.          Governing Law.  All matters arising out of or relating to this Agreement and the transactions contemplated hereby, including its validity, interpretation, construction, 

 

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performance  and enforcement, shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to its principles of conflict of laws.

 

14.          Section 162(m).  All payments under this Agreement are intended to constitute “qualified performance-based compensation” within the meaning of Section 162(m). This award shall be construed and administered in a manner consistent with such intent.

 

15.          Section 409A.  Although the Company makes no guarantee with respect to the tax treatment of the Restricted Stock, the award of Restricted Stock pursuant to this Agreement is intended to be exempt from Section 409A and shall be limited, construed and interpreted in accordance with such intent.  With respect to any dividends and other RS Property, however, this Agreement is intended to comply with, or to be exempt from, the applicable requirements of Section 409A and shall be limited, construed and interpreted in accordance with such intent; provided that the Employer does not guarantee to the Participant any particular tax treatment of the Restricted Stock or RS Property.  In no event whatsoever shall the Employer be liable for any additional tax, interest or penalties that may be imposed on the Participant by Section 409A or any damages for failing to comply with Section 409A.

 

16.          Interpretation.  Unless a clear contrary intention appears: (a) the defined terms herein shall apply equally to both the singular and plural forms of such terms; (b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by the Plan or this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (c) any pronoun shall include the corresponding masculine, feminine and neuter forms; (d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (e) reference to any law, rule or regulation means such law, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any law, rule or regulation means that provision of such law, rule or regulation from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (f) “hereunder,” “hereof,” “hereto,”  and words of similar import shall be deemed references to this Agreement as a whole and not to any particular article, section or other provision hereof; (g) numbered or lettered articles, sections and subsections herein contained refer to articles, sections and subsections of this Agreement; (h) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (i) “or” is used in the inclusive sense of “and/or”; (j) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto; and (k) reference to dollars or $ shall be deemed to refer to U.S. dollars.

 

17.          No Strict Construction.  This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year first above written.

 

	
 
    	
SMART &   FINAL STORES, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Leland P. Smith
    
	
 
    	
Name:
    	
Leland P. Smith
    
	
 
    	
Title:
    	
Senior Vice President   and General Counsel
    

 

PARTICIPANT

 

	
By:
    	
/s/ David G. Hirz
    	
 
    
	
Name:
    	
David G. Hirz
    	
 
    
	
Participant Address:
    	
 
    

 

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Schedule A

 

EBITDA Growth Target

 

9ex10-1.htm

Exhibit 10.1

 

EXCHANGE AGREEMENT

 

THIS EXCHANGE AGREEMENT (the “Agreement”), dated as of ___________, 2017, is made by and between Towerstream Corporation, a Delaware corporation (“Company”), and the holder of Series D Preferred Stock (as defined herein) signatory hereto (the “Holder”).

 

WHEREAS, pursuant to that certain Purchase Agreement (the “Purchase Agreement”), dated as of November 8, 2016, by and by and among MELODY SPECIAL SITUATIONS OFFSHORE CREDIT MINI-MASTER FUND, L.P., MELODY CAPITAL PARTNERS OFFSHORE CREDIT MINI- MASTER FUND, L.P., MELODY CAPITAL PARTNERS ONSHORE CREDIT FUND, L.P., FORTRESS CREDIT OPPORTUNITIES V CLO LIMITED, FORTRESS CREDIT OPPORTUNITIES III CLO LP, FORTRESS CREDIT FUNDING V LP (each, an “Assignor” and collectively, the “Assignors”), Melody Business Finance LLC, as Administrative Agent, and the Holder, whereby, among other things, the Holder paid $5,500,000 to the Assignors for $5,000,000 of liabilities consisting of principal and accrued interest of $4,935,834.16 and $64,165.84, respectively, (“Acquired Loan Amount”) under the outstanding term Loan Agreement (as defined in the Purchase Agreement) between the Assignors and the Company;

 

WHEREAS, on November 9, 2016 the Company designated 1,000 shares of Series D Convertible Preferred Stock (the “Series D Preferred Stock”); 

 

WHEREAS, pursuant to that certain Exchange Agreement, dated as of November 9, 2016, by and between the Company and the Holder, the Holder exchanged the Acquired Loan Amount for 1,000 shares of Series D Preferred Stock (collectively, the “Melody Exchange Shares”) and warrants to purchase common stock of the Company, par value $0.001 per share (the “Common Stock”);

 

WHEREAS, as of November 22, 2016, 622 of the Melody Exchange Shares remained issued and outstanding;

 

WHEREAS, on November 22, 2016, the Company amended and restated the terms of the Series D Preferred Stock (the “Amendment and Restatement”), to among other things, (i) designate an aggregate of 4,421 shares of Series D Preferred Stock and (ii) effectuate a 1-for-5.5 forward split of the then issued and outstanding Melody Exchange Shares such that an aggregate of 3,421 Melody Exchange Shares were issued and outstanding on a post-split basis; 

 

WHEREAS, on November 22, 2016, immediately following the Amendment and Restatement, the Company issued to the Holder an additional 1,000 shares of Series D Preferred Stock for an aggregate purchase price of $1,000,000, such that an aggregate of 4,421 shares of Series D Preferred Stock were issued and outstanding, including the 3,421 Melody Exchange Shares; 

 

WHEREAS, on December 30, 2016, 2,466 shares of Series D Preferred Stock were issued and outstanding and the Company amended the terms of the Series D Preferred Stock to reduce the liquidation preference in the event of a fundamental transaction, liquidation, dissolution or winding-up of the Company from 200% to 100% of the aggregate stated value of the outstanding shares of Series D Preferred Stock; 

 

WHEREAS, also on December 30, 2016, the Company then exchanged 1,233 shares of Series D Preferred Stock, representing 50% of the outstanding shares of Series D Preferred Stock on that date, for 1,233 newly issued shares Series F Convertible Preferred Stock (the “Series F Preferred Stock”); 

 

WHEREAS, as of the date hereof, 1,233 shares of Series D Preferred Stock remain issued and outstanding and 643 shares of Series F Preferred Stock remain issued and outstanding; 

 

WHEREAS, the Company wishes to issue Series G Preferred Shares (as such term is defined below) for all of the outstanding Series D Preferred Shares (the “Series D Exchange Securities”) as provided herein;   

 

 

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WHEREAS, the Company wishes to issue Series H Preferred Shares (as such term is defined below) for all of the outstanding Series F Preferred Shares (the “Series F Exchange Securities” and, together with the Series D Exchange Securities, the “Exchange Securities”) as provided herein;   

 

  WHEREAS, the Company has authorized a new series of convertible preferred stock of the Company designated as Series G Convertible Preferred Stock, $0.001 par value, the terms of which are set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series G Convertible Preferred Stock (the “Series G Certificate of Designations”) in the form attached hereto as Exhibit A (together with any convertible preferred shares issued in replacement thereof in accordance with the terms thereof, the “Series G Preferred Shares”), which Series G Preferred Shares shall be convertible into Common Stock, in accordance with the terms of the Series G Certificate of Designations; 

 

WHEREAS, the Company has authorized a new series of convertible preferred stock of the Company designated as Series H Convertible Preferred Stock, $0.001 par value, the terms of which are set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series H Convertible Preferred Stock (the “Series H Certificate of Designations and, together with the Series G Certificate of Designations, the “Certificates of Designations”) in the form attached hereto as Exhibit B (together with any convertible preferred shares issued in replacement thereof in accordance with the terms thereof, the “Series H Preferred Shares” and, together with the Series G Preferred Shares, the “New Preferred Shares”), which Series H Preferred Shares shall be convertible into Common Stock, in accordance with the terms of the Series H Certificate of Designations; and

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), the Company desires to exchange with the Holder, and the Holder desires to exchange with the Company, the Series D Exchange Securities for the Series G Preferred Shares and exchange the Series F Exchange Securities for the Series H Preferred Shares.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and Holder agree as follows:

 

1.     Terms of the Exchange. The Company and Holder agree that (i) the Holder will exchange the Series D Exchange Securities and will relinquish any and all other rights it may have under the Series D Exchange Securities in exchange for such number of Series G Preferred Shares as set forth on Schedule A, annexed hereto and (ii) the Holder will exchange the Series F Exchange Securities and will relinquish any and all other rights it may have under the Series F Exchange Securities in exchange for such number of Series H Preferred Shares as set forth on Schedule A, annexed hereto.

    

2.     Closing. Upon satisfaction of the conditions set forth herein, a closing shall occur at the principal offices of the Company, or such other location as the parties shall mutually agree (the “Closing”). At Closing, Holder shall surrender the Exchange Securities and the Company shall deliver to Holder the New Preferred Shares, in such amounts as are set forth on Schedule A. Upon Closing, any and all obligations of the Company to Holder under the Exchange Securities shall be fully satisfied (including any rights related to the Exchange Securities under the Purchase Agreement) and Holder will have no remaining rights, powers, privileges, remedies or interests under the Exchange Securities.

 

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

 

4.     Representations and Warranties of the Holder. The Holder represents and warrants as of the date hereof and as of the closing to the Company as follows:

 

a.     Authorization; Enforcement. The Holder has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement by the Holder and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Holder and no further action is required by the Holder. This Agreement has been (or upon delivery will have been) duly executed by the Holder and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Holder enforceable against the Holder in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

 

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b.     Tax Advisors. The Holder has reviewed with its own tax advisors the U.S. federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. With respect to such matters, the Holder relies solely on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The Holder understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

    

c.     Information Regarding Holder. Holder is an “accredited investor”, as such term is defined in Rule 501 of Regulation D promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Holder to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase, which represents a speculative investment. Holder has the authority and is duly and legally qualified to purchase and own the Securities (as defined below). Holder is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.

 

d.     Legend. The Holder understands that the New Preferred Shares have been issued and the shares of Common Stock issuable upon conversion of the New Preferred Shares (the “Conversion Shares” and, together with the New Preferred Shares, the “Securities”) when issued, shall be issued pursuant to an exemption from registration or qualification under the Securities Act and applicable state securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

e.     Removal of Legends. Certificates evidencing the Securities shall not be required to contain the legend set forth in Section 4(d) above or any other legend (i) while a registration statement covering the resale of such Shares is effective under the Securities Act, (ii) following any sale of such Shares pursuant to Rule 144 (as defined herein) (assuming the transferor is not an affiliate of the Company), (iii) if such Shares are eligible to be sold, assigned or transferred under Rule 144 and the Holder is not an affiliate of the Company (provided that the Holder provides the Company with reasonable assurances that such Shares are eligible for sale, assignment or transfer under Rule 144 which shall not include an opinion of the Holder’s counsel), (iv) in connection with a sale, assignment or other transfer (other than under Rule 144), provided that the Holder provides the Company with an opinion of counsel to the Holder, in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration under the applicable requirements of the Securities Act or (v) if such legend is not required under applicable requirements of the Securities Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the Commission). If a legend is not required pursuant to the foregoing, the Company shall no later than three (3) business days following the delivery by the Holder to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, if applicable), together with any other deliveries from the Holder as may be required above in this Section 4(e), as directed by the Holder, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer Program, credit the aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to the Holder, a certificate representing such Shares that is free from all restrictive and other legends, registered in the name of the Holder or its designee. The Company shall be responsible for any transfer agent fees or DTC fees with respect to any issuance of Shares or the removal of any legends with respect to any Shares in accordance herewith, including, but not limited to, fees for the opinions of counsel rendered to the transfer agent in connection with the removal of any legends.

 

 

3

 

 

f.     Restricted Securities. The Holder understands that: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Holder shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Holder, in a form reasonably acceptable to the Company, to the effect that such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Holder provides the Company with reasonable assurance that such Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder except as set forth herein.

    

5.     Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to the Holder:

 

a.     Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and each of the other agreements entered into by the parties hereto in connection with the transactions contemplated by this Agreement (collectively, the “Exchange Documents”) and otherwise to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors of the Company or the Company’s stockholders in connection therewith, including, without limitation, the issuance of the Securities, and no further filing, consent, or authorization is required by the Company, its Board of Directors or its stockholders.  This Agreement and any Other Agreement (as defined herein) have been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

b.     Organization and Qualification. Each of the Company and its subsidiaries (the “Subsidiaries”) are entities duly organized and validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or prospects of the Company or any Subsidiary, individually or taken as a whole, (ii) the transactions contemplated hereby or in any of the other Exchange Documents or (iii) the authority or ability of the Company to perform any of its obligations under any of the Exchange Documents. Other than its Subsidiaries, there is no Person (as defined below) in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any governmental entity or any department or agency thereof.

 

 

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c.     No Conflict. The execution, delivery and performance of the Exchange Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) result in a violation of the Certificate of Incorporation (as defined below) or other organizational documents of the Company or any of its Subsidiaries, any capital stock of the Company or any of its Subsidiaries or Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules and regulations of the OTCQB (the “Principal Market”) except, in the case of clause (ii) or (iii) above, to the extent such violations that could not reasonably be expected to have a Material Adverse Effect.

   

d.     No Consents. Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated by the Exchange Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company or any Subsidiary is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date of this Agreement, and neither the Company nor any of its Subsidiaries is aware of any facts or circumstances which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or filings contemplated by the Exchange Documents. Except as disclosed in the Company’s filings with the Commission (the “SEC Documents”), the Company is not in violation of the requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting or suspension of the Common Stock in the foreseeable future. The Company has obtained all necessary consents and approvals from the Principal Market.

 

e.     Securities Law Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance by the Company of the Securities is exempt from registration under the Securities Act. The offer and issuance of the Securities is exempt from registration under the Securities Act pursuant to the exemption provided by Section 3(a)(9) thereof. The Company covenants and represents to the Holder that neither the Company nor any of its Subsidiaries has received, anticipates receiving, has any agreement to receive or has been given any promise to receive any consideration from the Holder or any other Person in connection with the transactions contemplated by the Exchange Documents.

 

f.     Issuance of Securities. The issuance of the Securities is duly authorized and upon issuance in accordance with the terms of the Exchange Documents shall be validly issued, fully paid and non-assessable and free from all taxes, liens, charges and other encumbrances with respect to the issue thereof. The issuance of the Conversion Shares is duly authorized and upon issuance in accordance with the terms of the Exchange Documents and Certificates of Designations shall be validly issued, fully paid and non-assessable and free from all taxes, liens, charges and other encumbrances with respect to the issue thereof.

   

g.     Transfer Taxes. As of the date of this Agreement, all share transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the issuance of the Securities to be exchanged with the Holder hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

 

5

 

 

h.     Equity Capitalization. Except as disclosed in the SEC Documents: (i) none of the Company’s or any Subsidiary’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company or any Subsidiary; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act; (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries have any liabilities or obligations required to be disclosed in the SEC Documents which are not so disclosed in the SEC Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The Company has furnished to the Holder true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s bylaws, as amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto that have not been disclosed in the SEC Documents.

 

i.     Shell Company Status. The Company is not and has not, for a period of at least two years, been an issuer identified in Rule 144(i)(1) of the Securities Act. The Company is, and has been for a period of at least 90 days, subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 

 

j.     The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration under the Investment Company Act of 1940, as amended.

 

6.     Additional Agreements of the Parties. The Company and the Holder agree as follows:

 

a.     Rule 144 Acknowledgments. The Holder and the Company confirm that the Company has not received any consideration for the transactions contemplated by this Agreement. Pursuant to Rule 144 promulgated by the Commission pursuant to the Securities Act and the rules and regulations promulgated thereunder as such Rule 144 may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule 144, the holding period of the Securities tacks back to October 16, 2014, the issue date of the Acquired Loan Amount. The Company agrees not to take a position contrary to this paragraph and, at Closing, the Company’s counsel will deliver an opinion attesting to the acknowledgements contained in Section 5(d), Section 5(e) and this Section 6(a).

 

b.     Waiver of Dilutive Issuance Rights. The Holder hereby waives its rights under Section 5(f)(i) of the Amended and Restated Certificate of Designations of Preferences, Rights and Limitations of Series D Preferred Stock filed with the Secretary of State of Delaware on November 22, 2016, as amended to date, and its waives its rights under Section 5(f)(i) of the Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred Stock filed with the Secretary of State of Delaware on December 30, 2016, as amended to date, solely with respect to the issuance of the Securities contemplated by this Agreement. 

 

 

6

 

 

c.     Securities Laws Disclosure; Publicity.  The Company shall within one (1) Trading Days immediately following the date hereof file a Current Report on Form 8-K, including the Exchange Documents as exhibits thereto, with the Securities and Exchange Commission (the “Commission”).  The Company and the Holder shall consult with each other in issuing any other press releases with respect to the transactions contemplated hereby, and neither the Company nor the Holder shall issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of the Holder, or without the prior consent of the Holder, with respect to any press release of the Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Holder, or include the name of the Holder in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of the Holder, except (a) as required by federal securities law in connection with the filing of final Exchange Documents (including signature pages thereto) with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Holder with prior notice of such disclosure permitted under this Section 6(c).

 

d.     Termination of Certain Rights. The Company and Holder agree that, effective at the Closing, (i) the Holder’s rights under Section 6(b) of the Exchange Agreement by and between the Company and the Holder dated November 9, 2016 shall be terminated, null and void and (ii) the letter agreement by and between the Company and the Holder dated November 9, 2016 shall be terminated, null and void and Company shall have no further obligations to the Holder thereunder.

 

e.     Reserved. 

 

f.     Material Non-public Information. Except with respect to the material terms and conditions of the transactions contemplated by the Exchange Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide Holder or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto Holder shall have entered into a written agreement with the Company regarding the confidentiality and use of such information. The Company understands and confirms that Holder shall be relying on the foregoing covenant in effecting transactions in securities of the Company. 

 

g.     Conversion Procedures. The form of Notice of Conversion included in the Certificates of Designations sets forth the totality of the procedures required of the Holder in order to convert the New Preferred Shares. No additional legal opinion, other information or instructions shall be required of the Holder to convert its New Preferred Shares. The Company shall honor conversions of the New Preferred Shares and shall deliver Conversion Shares in accordance with the terms, conditions and time periods set forth in the Exchange Documents.

  

h.     SEC Filing Obligations. Until such time that the Holder no longer owns Securities, the Company covenants to file all periodic reports with the Commission pursuant to Section 15(d) of the Exchange Act or alternatively, if registered under Section 12(b) or 12(g) of the 1934 Act, maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act. At any time commencing on the Closing Date and ending at such time that all of the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, in addition to Holder’s other available remedies, the Company shall pay to a Holder, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal to two percent (2.0%) of the aggregate Stated Value (as defined in the Certificates of Designations) of the New Preferred Shares and accrued interest held by such Holder on the day of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required for the Holder to transfer the Conversion Shares pursuant to Rule 144. The payments to which a Holder shall be entitled pursuant to this Section 6(h) are referred to herein as “Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information Failure Payments are incurred and (ii) the third (3rd) business day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full. Nothing herein shall limit Holder’s right to pursue actual damages for the Public Information Failure, and Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief.

 

 

7

 

 

i.     Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities if required under Regulation D and to provide a copy thereof, promptly upon request of Holder. The Company shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Holder at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions promptly upon request of Holder.

 

j.     Preservation of Corporate Existence. The Company shall preserve and maintain its corporate existence, rights, privileges and franchises in the jurisdiction of its incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in which such qualification is necessary in view of its business or operations and where the failure to qualify or remain qualified might reasonably have a Material Adverse Effect upon the financial condition, business or operations of the Company taken as a whole.

  

7.     Miscellaneous.

 

a.     Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

 

b.     Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by and construed under the laws of the State of New York without regard to the choice of law principles thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of New York located in The City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith or therewith or with any transaction contemplated hereby or thereby, and hereby irrevocably waives any objection that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. 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 WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

c.     Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

d.     Counterparts/Execution. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains an electronic file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or electronic file signature page (as the case may be) were an original thereof.

 

 

8

 

 

e.     Notices. Any notice or communication permitted or required hereunder shall be in writing and shall be deemed sufficiently given if hand-delivered or sent (i) postage prepaid by registered mail, return receipt requested, or (ii) by facsimile, to the respective parties as set forth below, or to such other address as either party may notify the other in writing.

 

	
If to the Company, to:
	
Towerstream Corporation

	
 
	
88 Silva Lane

	
 
	
Middletown, RI 02842

	
 
	
Attention:   Chief Executive Officer

 

If to Holder, to the address set forth on the signature page of the Holder.

 

  

f.     Expenses. The parties hereto shall pay their own costs and expenses in connection herewith.

 

g.     Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the parties with regard to the subject matter hereof and thereof, superseding all prior agreements or understandings, whether written or oral, between or among the parties. This Agreement may be amended, modified, superseded, cancelled, renewed or extended, and the terms and conditions hereof may be waived, only by a written instrument signed by all parties, or, in the case of a waiver, by the party waiving compliance. Except as expressly stated herein, no delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right, power or privilege hereunder preclude any other or future exercise of any other right, power or privilege hereunder.

 

h.     Headings. The headings used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

i.     Independent Nature of the Holder’s Obligations and Rights. The obligations of the Holder under the Exchange Documents are several and not joint with the obligations of any other holder of securities of the Company (each, an “Other Holder”) under any other agreement to obtain securities of the Company (each, an “Other Agreement”), and the Holder shall not be responsible in any way for the performance of the obligations of any Other Holders under any Other Agreement. Nothing contained herein or in any Other Agreement, and no action taken by the Holder pursuant hereto or any Other Holder pursuant to any Other Agreement, shall be deemed to constitute the Holder or any Other Holder as, and the Company acknowledges that the Holder and the Other Holders do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or create a presumption that the Holder and any Other Holder are in any way acting in concert or as a group or entity with respect to such obligations or the transactions contemplated by the Exchange Documents, any other agreement or any matters, and the Company acknowledges that the Holder and the Other Holders are not acting in concert or as a group or entity, and the Company shall not assert any such claim, with respect to such obligations or the transactions contemplated by the Exchange Documents and any Other Agreement. The decision of the Holder to acquire the Securities pursuant to the Exchange Documents has been made by the Holder independently of any Other Holder. The Holder acknowledges that no Other Holder has acted as agent for the Holder in connection with the Holder making its acquisition hereunder and that no Other Holder will be acting as agent of the Holder in connection with monitoring the Holder’s Securities or enforcing its rights under the Exchange Documents. The Company and the Holder confirm that the Holder has independently participated with the Company in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. The Holder shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any of the Other Agreements, and it shall not be necessary for any Other Holder to be joined as an additional party in any proceeding for such purpose. To the extent that any of the Other Holders and the Company enter into the same or similar documents, all such matters are solely in the control of the Company, not the action or decision of the Holder, and would be solely for the convenience of the Company and not because it was required or requested to do so by the Holder or any Other Holder. For clarification purposes only and without implication that the contrary would otherwise be true, the transactions contemplated by the Exchange Documents include only the transaction between the Company and the Holder and do not include any other transaction between the Company and any Other Holder.

 

 

9

 

 

j.     Listing. The Company shall use reasonable best efforts to promptly secure the listing or designation for quotation (as the case may be) of all of the Conversion Shares upon the Principal Market or any other national securities exchange or automated quotation system, upon which the Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) (but in no event later than the date of this Agreement) and shall use reasonable best efforts to maintain such listing or designation for quotation (as the case may be) of all Shares from time to time issuable under the terms of this Agreement on such national securities exchange or automated quotation system. The Company shall maintain the Common Stock’s listing or authorization for quotation (as the case may be) on the Principal Market, The New York Stock Exchange, the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTCQX (each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take any action which could be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 7(j).

 

k.     Pledge of Securities. The Company acknowledges and agrees that the Securities may be pledged by the Holder in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and if the Holder effects a pledge of Securities it shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any Other Agreement. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by the Holder.

 

l.     Separate Counsel. Each party hereto represents and agrees with each other that it has been represented by or had the opportunity to be represented by, independent counsel of its own choosing, and that it has had the full right and opportunity to consult with its respective attorney(s), that to the extent, if any, that it desired, it availed itself of this right and opportunity, that it or its authorized officers (as the case may be) have carefully read and fully understand this Agreement in its entirety and have had it fully explained to them by such party's respective counsel, that each is fully aware of the contents thereof and its meaning, intent and legal effect, and that it or its authorized officer (as the case may be) is competent to execute this Agreement and has executed this Agreement free from coercion, duress or undue influence. By their execution of this Agreement, the Company, on the one hand, and the Holder, on the other hand, hereby waive any actual or perceived conflict(s) of interest in connection with any prior, existing and any future business relationships between the Company’s counsel and the Company or the Company’s counsel and the Holder.

 

 

(Signature Pages Follow)

  

 

10

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.

 

Towerstream CORPORATION

 

 

 

By:____________________________________

Name: Ernest Ortega

Title: Chief Executive Officer 

 

 

HOLDER

 

 

 

 

____________________________________

Name:  

Title:  

 

 

Address for Notices:

__________________________________________

__________________________________________

__________________________________________

__________________________________________

 

Address for delivery of Securities:

__________________________________________

__________________________________________

__________________________________________

__________________________________________

  

 

11

 

 

Schedule A

 

	
Name
	
Series D Exchange 

Securities
	
Series F Exchange 

Securities 
	
Series G Preferred 

Shares 
	
Series H Preferred 

Shares 

	
 
	
1,233 shares of Series D Convertible Preferred Stock
	
643 Shares of Series F Convertible Preferred Stock 
	
938 Shares of Series G Convertible Preferred Stock
	
938 Shares of Series H Convertible Preferred Stock

 

 

12

 

 

Exhibit A

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES G CONVERTIBLE PREFERRED STOCK 

  

 

13

 

 

Exhibit B

CERTIFICATE OF DESIGNATION OF PREFERENCES,

RIGHTS AND LIMITATIONS

OF

SERIES H CONVERTIBLE PREFERRED STOCK 

 

 

14

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