Document:

Exhibit 10.1

 

Execution Version

 

SETTLEMENT AND NOTE REPURCHASE AGREEMENT AND RELEASE

 

This Settlement and Note Repurchase Agreement and Release (this “Agreement”) is entered into as of February 11, 2019, by and between (1) KLS Diversified Master Fund L.P., Silverback Opportunistic Credit Master Fund Limited, Sound Point Beacon Master Fund, LP, Sound Point Credit Opportunities Master Fund, LP, Sound Point Montauk Fund, LP, Whitebox Multi-Strategy Partners, L.P., Whitebox Relative Value Partners, L.P., and Whitebox Asymmetric Partners, L.P. (collectively and together with certain of each of their respective affiliates listed on the schedule attached hereto as Exhibit B, the “Noteholders,” and each such entity, a “Noteholder”), on the one hand, and (2) Ascent Capital Group, Inc., a Delaware corporation (“Ascent”) and William R. Fitzgerald, Jeffery Gardner, Fred Graffam, William Niles, Philip J. Holthouse, Tom McMillin, and Michael J. Pohl (collectively and together with Ascent, the “Ascent Parties,” and each such entity or person individually, an “Ascent Party”), on the other hand. The Noteholders and the Ascent Parties are referred to herein collectively as the “Parties” and each individually as a “Party.”

 

RECITALS

 

WHEREAS Ascent is the issuer of those certain 4.00% Convertible Senior Notes due 2020 (CUSIP 043632 AA6) (the “Notes”) issued pursuant to an Indenture, dated as of July 17, 2013 (as amended by the Supplemental Indenture dated August 30, 2018, the “Indenture”), between Ascent and U.S. Bank National Association, as trustee (in such capacity, the “Trustee”);

 

WHEREAS as of the date of this Agreement, the Noteholders are collectively holders of Notes in the aggregate principal amount of $75,674,000, which represents 78.20% of the aggregate principal amount of the Notes outstanding (the “Subject Notes”);

 

WHEREAS on August 27, 2018, certain of the Noteholders caused an action to be filed in the Court of Chancery of the State of Delaware, styled KLS Diversified Master Fund L.P. et. al. v. Ascent Capital Group, Inc. et al., C.A. No. 2018-0636 (the “Action”), which alleges certain claims against the Ascent Parties including claims for fraudulent transfer and breach of fiduciary duty against the directors of Ascent;

 

WHEREAS, the Parties, solely to avoid the costs, disruption, and distraction of litigation, and without admitting the validity of any of the allegations made in the Action, or any liability with respect thereto, have concluded that it is desirable that the Action be settled and dismissed with prejudice, on the terms set forth in this Agreement (the “Settlement”);

 

WHEREAS, the Parties have negotiated at arm’s length in an effort to resolve the above-described disputes and matters, and have agreed that it is in their respective best interest to fully and finally resolve the claims asserted in the Action (the “Settled Claims”), on the terms set forth in the Agreement, without the need for further litigation;

 

WHEREAS, in connection with the Settlement, the Noteholders desire to sell to Ascent, and Ascent desires to purchase from the Noteholders, in a privately negotiated repurchase, the Subject Notes on the terms set forth in this Agreement (the “Note Repurchase”); and

 

 

WHEREAS, the Parties intend, through this Agreement, to fully and finally settle the disputes that currently exist between them with respect to the Subject Notes, including without limitation the Settled Claims.

 

AGREEMENTS

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

1.                                Agreement Effective Date.  This Agreement shall become effective and binding upon each of the Parties on the date on which this Agreement has been executed and delivered by each of the Parties (such date, the “Agreement Effective Date”).

 

2.                                Noteholder Consent; Further Assurances.  Not later than immediately prior to the Closing Date (as defined below), each Noteholder shall deliver or cause to be delivered to Ascent and the Trustee, satisfactory written evidence of its consent (each, a “Noteholder Consent”) to certain amendments, supplements, waivers, consents and acknowledgements with respect to the Indenture to be effected by the Second Supplemental Indenture to be dated as of a date on or before the Closing Date (the “Second Supplemental Indenture”), substantially in the form set forth as Exhibit A to this Agreement.  Each Noteholder covenants and agrees to promptly execute and deliver such other documents or instruments and perform all such acts, in addition to the matters herein specified, as necessary or desirable to facilitate, implement, close, validate or give effect to, prior to the Closing Date, such Noteholder’s Noteholder Consent and the Second Supplemental Indenture.

 

3.                                Note Repurchase and Aggregate Settlement Payment.  On the Closing Date, Ascent, on behalf of the Ascent Parties, shall pay to the Noteholders an aggregate amount of $70,666,176.28 in cash (the “Aggregate Settlement Payment”), consisting of (i) an aggregate of $6,104,720.92 for professional fees and expenses incurred on the Noteholders’ behalf (the “Noteholder Professional Fees” and each professional owed on account thereof, a “Professional”), (ii) an aggregate of $2,000,000.00 in consideration for the Noteholder Consents, (iii) an aggregate of $10,808,555.36 in consideration for and in full and final satisfaction of the Settled Claims as set forth herein, and (iv) an aggregate of $51,752,900.00 on account of the Note Repurchase to be effected by a book entry transfer of all Subject Notes to Ascent.  The Aggregate Settlement Payment, net of the Noteholder Professional Fees, shall be distributed and paid to the Noteholders in the applicable amounts set forth in the allocation schedule attached hereto as Exhibit B, and the Noteholder Professional Fees shall be paid to each Professional in the amounts set forth in Exhibit B, and all forgoing payments shall be made in accordance with the wiring instructions also set forth in Exhibit B.  Payment to the Noteholders of the Aggregate Settlement Payment and delivery to Ascent of the Subject Notes shall occur three (3) business days after the Agreement Effective Date, or on such later date as counsel for the respective Parties shall mutually agree in writing (such date, the “Closing Date”).

 

4.                                Dismissal of Noteholder Litigation.  Promptly following the Closing Date, the Parties shall file a stipulation of dismissal in the form attached hereto as Exhibit C (the “Stipulation of Dismissal”).

 

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5.                                Conditions to Parties’ Obligations.

 

A.                                    Conditions to Ascent’s Obligations.  Ascent’s obligation to consummate the Note Repurchase and the Settlement is subject to the satisfaction of each of the following conditions:

 

(i)                                   Each of the representations and warranties of the Noteholders contained in this Agreement shall be true and correct as of the Agreement Effective Date and the Closing Date, and each Noteholder shall have performed its covenants and obligations under this Agreement;

 

(ii)                                Each Noteholder shall have executed and delivered to Ascent its respective Noteholder Consent;

 

(iii)                             The Second Supplemental Indenture shall have been executed and delivered by the parties thereto and shall have become effective;

 

(iv)                            Each Noteholder shall have delivered, or caused to be delivered, such Noteholder’s right, title and interest in and to its Subject Notes, together with any documents of conveyance or transfer that Ascent may reasonably request, and shall have effected, by delivery of an instruction letter in accordance with the applicable procedures of the Depository Trust Company and the terms of the Indenture, the delivery to Ascent of the Subject Notes in the aggregate principal amount specified opposite such Noteholder’s name in Exhibit B; and

 

(v)                               The Stipulation of Dismissal shall have been executed and delivered by each of the Parties (to be filed in the Action on the Closing Date as set forth in Section 4 of this Agreement).

 

B.                                    Conditions to Noteholders’ Obligations.   The Noteholders’ obligation to consummate the Note Repurchase and the Settlement is subject to the satisfaction of each of the following conditions:

 

(i)                                   Each of the representations and warranties of Ascent contained in this Agreement shall be true and correct as of the Agreement Effective Date and as of the Closing Date, and the Ascent Parties shall have performed their covenants and obligations under this Agreement; and

 

(ii)                                The Noteholders shall have received from or on behalf of Ascent on the Closing Date their respective allocated amount of the Aggregate Settlement Payment as a wire transfer of immediately available funds in the amounts set forth in Exhibit B to the respective accounts designated in writing to Ascent by each

 

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Noteholder not later than two (2) business days prior to the Closing Date; and

 

(iii)                             The Noteholder Professional Fees shall have been received by each Professional from Ascent on the Closing Date in the amounts set forth in Exhibit B as a wire transfer of immediately available funds.

 

6.                                Releases.  For the consideration delivered pursuant to this Agreement and the transactions contemplated thereby, each of the Ascent Parties and the Noteholders agree that:

 

A.                                  The Ascent Parties, on behalf of themselves and their respective partners, general partners, limited partners, affiliates, parents, subsidiaries (including, without limitation, Monitronics International, Inc.), predecessors, and successors, and all of the foregoing entities’ current and former officers, directors, managers, managing directors, employees, agents, attorneys, advisors, insurers and reinsurers (collectively with the Ascent Parties, the “Ascent Release Parties”), hereby release and discharge (i) the Noteholders, (ii) their respective partners, general partners, limited partners, affiliates, parents, subsidiaries, predecessors, and successors, (iii) all of the foregoing entities’ current and former officers, directors, managers, managing directors, employees, agents, attorneys, advisors, insurers and reinsurers, and (iv) all financial institutions providing custodial or brokerage services to the Noteholders (all of the foregoing, the “Noteholder Release Parties,” and each such entity or person individually, a “Noteholder Release Party”) from any and all claims, liabilities, demands, accounts, reckonings, or causes of action, whether known or unknown, matured or unmatured, arising from, relating to, or in connection with the Action, the Subject Notes and the Indenture; provided that the Ascent Release Parties do not release or discharge the Noteholder Release Parties from any claims, liabilities, demands, accounts, reckonings, or causes of action arising from, relating to, or in connection with a breach of this Agreement.

 

B.                                  The Noteholders, on behalf of themselves and of each other Noteholder Release Party, hereby release and discharge the Ascent Release Parties from any and all claims, liabilities, demands, accounts, reckonings, or causes of action, whether known or unknown, matured or unmatured, arising from, relating to, or in connection with the Action, the Subject Notes and the Indenture; provided that the Noteholder Release Parties do not release or discharge the Ascent Release Parties from any claims, liabilities, demands, accounts, reckonings, or causes of action arising from, relating to, or in connection with a breach of this Agreement.

 

7.                                California Civil Code Section 1542.  The Parties expressly waive the benefits of Section 1542 of the Civil Code of the State of California and any rights that the Parties may have thereunder.  Section 1542 of the Civil Code of the State of California provides as follows:

 

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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

 

The Parties acknowledge that each of them may hereafter discover claims or facts in addition to or different from those which they now know or believe to exist with respect to the subject matter of the claims released hereunder that, if known or suspected at the time of executing the releases, may have materially affected this Settlement.  Nevertheless, each of the Parties waives any right, claim or cause of action that might arise as a result of such different or additional claims or facts.  Each of the Parties acknowledges that it understands the significance and consequence of the releases given and specifically waives any legal principle that limits general releases to known claims only, such as California Civil Code Section 1542.

 

8.                                Mutual Representations.  Each Party represents, warrants, covenants, and agrees for the benefit of each of the other Parties that as of each of the Agreement Effective Date and the Closing Date:

 

A.                                  The Party or its authorized representative has read and fully understands this Agreement.

 

B.                                  It is duly organized, validly existing and in good standing under the laws of the state of its organization, and this Agreement is a legal, valid, and binding obligation of such Party, enforceable against it in accordance with its terms, except as enforcement may be limited by applicable laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

 

C.                                  No consent or approval is required by any other person or entity in order for it to effectuate the transaction contemplated by, and perform its obligations under, this Agreement.

 

D.                                  It has all requisite corporate, limited liability company, limited partnership or other power and authority to enter into, execute, and deliver, and perform its obligations under, and consummate the transactions contemplated by, this Agreement, and the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate and, to the extent applicable, shareholder, partner or member, action.

 

E.                                   The execution, delivery, and performance by it of this Agreement does not, and shall not, require any registration or filing with, consent or approval of, or notice to, or other action to, with or by, any federal, state, or other governmental authority or regulatory body, other than any requirement for routine tax filings; provided that this subparagraph shall not interfere with any cleansing obligation required by any confidentiality agreement entered into between Ascent and the Noteholders.

 

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F.                                    The execution, delivery, and performance of this Agreement does not and shall not:  (a) violate any provision of law, rules or regulations applicable to it or any of its subsidiaries; (b) violate its certificate of incorporation, bylaws, or other organizational documents or those of any of its subsidiaries; or (c) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any court order, contract, commitment, agreement, understanding, arrangement or restriction of any kind to which it or any of its subsidiaries may be bound or to which any of the properties or assets of it or any of its subsidiaries may be subject.

 

9.                                Representations of the Noteholders.  Each Noteholder, on behalf of itself and any affiliated Noteholder, represents, warrants, covenants and agrees, for the benefit of the other Parties hereto that, as of each of the Agreement Effective Date and the Closing Date:

 

A.                                    Such Noteholder is the sole legal and beneficial owner of the face amount of the Subject Notes reflected on Exhibit B to this Agreement or is the nominee, investment manager, or advisor for beneficial holders of such Subject Notes and such Subject Notes constitute all of the Notes beneficially owned by such Noteholder or managed by such nominee, investment manager or advisor;

 

B.                                    Such Noteholder has the full power and authority to act on behalf of, vote and consent to matters concerning its Subject Notes, including without limitation the right to validly deliver its Noteholder Consent, engage in the Notes Repurchase and to settle and release the claims released hereunder;

 

C.                                    Such Noteholder has good, valid and marketable title to the Subject Notes set forth opposite its name set forth in Exhibit B, free and clear of any pledge, lien, security interest, charge, claim, equity, option, proxy, voting restriction, right of first refusal, or other limitation on disposition, transfer, or encumbrances of any kind, that would adversely affect in any way such Noteholder’s ability to perform any of its obligations under this Agreement, including the obligation to validly deliver its Noteholder Consent, engage in the Note Repurchase and to settle and release the claims released hereunder at the time such obligations are required to be performed;

 

D.                                    Such Noteholder is a “qualified institutional buyer” within the meaning of Rule 144A, and an “accredited investor” within the meaning of Rule 501 of Regulation D, under the Securities Act of 1933, as amended (the “Securities Act”);

 

E.                                     Such Noteholder is not, and has not been during the consecutive three month period preceding the Agreement Effective Date, an “Affiliate” within the meaning of the Indenture of Ascent;

 

F.                                      Such Noteholder has reviewed or has had the opportunity to review, with the assistance of professional and legal advisors of its choosing, all

 

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information it deems necessary and appropriate for it to evaluate the risks inherent in transaction set forth in this Agreement; and

 

G.                                  None of the Professionals is an employee of any Noteholder for tax purposes or is receiving any payment hereunder with respect to services provided as an employee.

 

H.                                 Such Noteholder has no actual knowledge of any event that, due to any fiduciary or similar duty to any other person or entity, would prevent it from taking any action required of it under this Agreement.

 

10.                         Cooperation of Noteholders. The Noteholders and their attorneys, advisors and other agents and professionals, shall cooperate with Ascent in the event that any holders of Notes other than the Noteholders commence litigation or otherwise take action to oppose the consummation or implementation of this Agreement, the Settlement, the Note Repurchase or the Second Supplemental Indenture.  The Noteholders and their attorneys, advisors and other agents and professionals, shall not assist, provide information to, coordinate with or otherwise support any holder of Notes other than the Noteholders with respect to any action that may adversely affect the Ascent Parties.  Following the Closing Date, the Noteholders shall not purchase or otherwise obtain any Notes other than the Subject Notes from any other holder of the Notes.

 

11.                         Survival of Representations and Warranties.  All representations and warranties made hereunder shall survive the consummation of the Note Repurchase on the Closing Date.

 

12.                         No Admissions.  It is understood by the Parties that this Agreement constitutes a compromise of potential, unresolved, and disputed claims. This Agreement, and the negotiation thereof, shall in no way constitute, be construed as, or be evidence of an admission or concession of any violation of any statute or law; of any fault, liability, or wrongdoing; or of any infirmity in the claims or defenses of the Parties with regard to any of the complaints, claims, allegations, or defenses asserted or that could have been asserted in the Action or in connection with the subject matter of this Agreement or the Action.  This Agreement shall not be used, directly or indirectly, in any way, in litigation or other proceedings between the Parties, and this Agreement shall not be admissible as evidence in any legal proceeding between the Parties, other than in litigation or a proceeding to enforce the terms of this Agreement.

 

13.                         Amendments.  This Agreement may not be modified or amended in any way except in writing, signed by all Parties.

 

14.                         Notices.  Unless otherwise specified, all notices required or permitted under this Agreement shall be in writing and shall be delivered by email and (1) hand or (2) prepaid delivery service with package tracking capabilities.  Such notices shall be addressed to:

 

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A.                                    For notices to the Ascent Parties:

 

	
Ascent   Capital Group, Inc.
    	
 
    
	
5251   DTC Parkway, Suite 1000
    	
 
    
	
Greenwood   Village, CO 80111
    	
 
    
	
Attention:   William E. Niles
    	
 
    
	
Email:   wniles@ascentcapitalgroup.com
    	
 
    
	
 
    	
 
    
	
with a courtesy copy to (which shall not   constitute notice):
    
	
 
    	
 
    
	
Baker   Botts L.L.P.
    	
 
    
	
30   Rockefeller Plaza
    	
 
    
	
New   York, NY 10112
    	
 
    
	
Attention:
    	
Richard   Harper, Esq.
    	
 
    
	
 
    	
Emanuel   C. Grillo, Esq.
    	
 
    
	
 
    	
Renee   L. Wilm, Esq.
    	
 
    
	
 
    	
Adorys Velazquez, Esq.
    	
 
    
	
Email:
    	
richard.harper@bakerbotts.com;
    	
 
    
	
 
    	
emanuel.grillo@bakerbotts.com;
    	
 
    
	
 
    	
renee.wilm@bakerbotts.com;
    	
 
    
	
 
    	
adorys.velazquez@bakerbotts.com;
    	
 
    
				

 

B.                                    For notices to the Noteholder Parties:

 

	
Milbank LLP
    	
 
    
	
55 Hudson Yards
    	
 
    
	
New York, NY 10001
    	
 
    
	
Attention: Evan Fleck,   Esq.
    	
 
    
	
1850 K Street, NW,   Suite 1100
    	
 
    
	
Washington, DC 20006
    	
 
    
	
Attention: Andrew   Leblanc, Esq.
    	
 
    
	
Email: 
    	
efleck@milbank.com
    	
 
    
	
 
    	
aleblanc@milbank.com
    	
 
    

 

15.                         GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF FORUM.  THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.  Each Party hereto agrees that it shall bring any action or proceeding in respect of any claim arising out of or related to this Agreement in state and federal courts sitting in the State of Delaware (collectively, the “Chosen Courts”), and, solely in connection with claims arising out of or related to this Agreement: (a) irrevocably submits to the exclusive jurisdiction of the Chosen Courts and courts of appeals therefrom; (b) waives any objection to laying venue in any such action or proceeding in the Chosen Courts; (c) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any Party hereto; (d) waives, to the fullest extent permitted by applicable law, any right to a trial by jury; and (e) consents to entry of final judgment by the Chosen Courts.

 

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16.                         Withholding.  If any applicable law (as determined in the good faith discretion of Ascent) requires the deduction or withholding of any tax from any amounts payable to any person pursuant to this Agreement, then Ascent shall be entitled to make such deduction or withholding; provided that Ascent shall not deduct or withhold any tax with respect to a Noteholder or a Professional to the extent such Noteholder or Professional has timely provided the tax forms and documentation required under Section 17 hereof.  Any such amounts so deducted and withheld and paid to the appropriate taxing authority shall be treated for all purposes of this Agreement as having been paid to the person in respect of which such deduction and withholding was made.

 

17.                         Tax Status. The Noteholders shall cause each Professional to provide to Ascent, prior to the Closing Date, a properly completed and duly executed Internal Revenue Service Form W-9 certifying that such Professional is exempt from backup withholding tax.  Each Noteholder shall provide to Ascent, prior to the Closing Date, either (A) a properly completed and duly executed Internal Revenue Service Form W-9 certifying that such Noteholder is exempt from backup withholding tax, or (B) a current properly completed and duly executed copy of the applicable Internal Revenue Service Form W-8 (together with all applicable supporting documentation, including applicable tax forms from all direct or indirect partners/members to the extent the Noteholder is treated as a partnership for U.S. federal income tax purposes) establishing a complete exemption from U.S. federal withholding tax (including tax imposed pursuant to Sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended) for any interest paid (or deemed paid) by Ascent on the Notes to such Noteholder.

 

18.                         Successors and Assigns.  The obligations and duties of the Parties under this Agreement may not be assigned or transferred absent written consent of each Party, unless specifically stated otherwise.  This Agreement shall be binding upon the Parties and their respective affiliates, successors and assigns.

 

19.                         Severability.  The provisions of this Agreement are non-severable.

 

20.                         Remedies Cumulative.  All rights, powers, and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any right, power, or remedy thereof by any Party shall not preclude the simultaneous or later exercise of any other such right, power, or remedy by such Party.

 

21.                         Further Assurances.  Subject to the other terms of this Agreement, the Parties agree to execute and deliver such other instruments and perform such acts, in addition to the matters herein specified, as may be reasonably appropriate or necessary from time to time, to effectuate and implement the terms of this Agreement.

 

22.                         Complete Agreement.  The Parties hereby represent and warrant that no promise or inducement not contained herein has been offered to them, that this Agreement constitutes the entire agreement between them related to the subject matter hereof, and supersedes all prior agreements, oral, or written, among the Parties with respect thereto.  The Parties further represent that this Agreement is executed without any reliance upon any statement or representation by the other, their respective agents, representatives, or attorneys not set forth herein.

 

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23.                         Headings.  The headings of all sections of this Agreement are inserted solely for the convenience of reference and are not a part of and are not intended to govern, limit, or aid in the construction or interpretation of any term or provision hereof.

 

24.                         Interpretation and Rules of Construction.  This Agreement is the product of negotiations among the Parties, and in the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard to the interpretation hereof.  The Parties were each represented by counsel during the negotiations, drafting, and execution of this Agreement.

 

25.                         Counterparts.  This Agreement may be executed in facsimile or .pdf form in any number of counterparts, each of which shall for all purposes constitute an original, but all of which shall, when taken together, constitute one and the same instrument and agreement.

 

[Signature Pages to Follow]

 

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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement on the dates set forth with their signatures below.

 

	
KLS DIVERSIFIED MASTER FUND   L.P.
    	
 
    	
SILVERBACK OPPORTUNISTIC CREDIT   MASTER FUND LIMITED,
    
	
 
    	
 
    	
 
    
	
Dated:   February 10, 2019
    	
 
    	
Dated: February 10,   2019
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
/s/ Michael Zarrilli
    	
 
    	
By:
    	
/s/ Robert E. Barron
    
	
 
    	
Michael Zarrilli
    	
 
    	
 
    	
Robert E. Barron
    
	
 
    	
KLS Diversified Master   Fund L.P.
    	
 
    	
 
    	
Silverback   Opportunistic Credit Master
    
	
 
    	
KLS Diversified Asset   Management
    	
 
    	
 
    	
Fund Limited
    

 

	
SOUND POINT BEACON MASTER FUND,   LP
    	
 
    	
SOUND POINT CREDIT   OPPORTUNITIES MASTER FUND, LP
    
	
 
    	
 
    	
 
    
	
Dated:   February 11, 2019
    	
 
    	
Dated:   February 11, 2019
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Kevin Gerlitz
    	
 
    	
By:
    	
/s/ Kevin Gerlitz 
    
	
 
    	
Kevin Gerlitz, Chief   Financial Officer
    	
 
    	
 
    	
Kevin Gerlitz, Chief   Financial Officer
    
	
 
    	
Sound Point Beacon   Master Fund, LP 
    	
 
    	
 
    	
Sound Point Credit   Opportunities Master Fund, LP
    

 

	
SOUND POINT MONTAUK FUND, LP
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Dated:   February 11, 2019
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Kevin Gerlitz 
    	
 
    	
 
    
	
 
    	
Kevin Gerlitz, Chief   Financial Officer
    	
 
    	
 
    
	
 
    	
Sound Point Montauk   Fund, LP.
    	
 
    	
 
    

 

[Signature Page to Settlement and Note Purchase Agreement and Release]

 

 

	
WHITEBOX RELATIVE VALUE   PARTNERS, L.P.
    	
 
    	
WHITEBOX MULTI-STRATEGY   PARTNERS, L.P.
    
	
 
    	
 
    	
 
    
	
Dated:   February 11, 2019
    	
 
    	
Dated:   February 11, 2019
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Mark Strefling
    	
 
    	
By:
    	
/s/ Mark Strefling
    
	
 
    	
Mark Strefling, Chief   Executive Officer and General Counsel
    	
 
    	
 
    	
Mark Strefling, Chief   Executive Officer and General Counsel
    
	
 
    	
Whitebox Relative Value   Partners, L.P.
    	
 
    	
 
    	
Whitebox Multi-Strategy   Partners, L.P.
    

 

	
WHITEBOX ASYMMETRIC PARTNERS, L.P.,
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Dated: February 11, 2019
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Mark Strefling
    	
 
    	
 
    
	
 
    	
Mark Strefling, Chief Executive Officer and General   Counsel
    	
 
    	
 
    
	
 
    	
Whitebox Asymmetric Partners, L.P.
    	
 
    	
 
    

 

[Signature Page to Settlement and Note Purchase Agreement and Release]

 

 

	
ASCENT CAPITAL GROUP, INC.
    	
 
    	
WILLIAM R. FITZGERALD,
    
	
 
    	
 
    	
 
    
	
Dated: February 8,   2019
    	
 
    	
Dated: February 8,   2019
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ William Niles
    	
 
    	
By:
    	
/s/ William R.   Fitzgerald 
    
	
 
    	
William Niles
    	
 
    	
 
    	
William R. Fitzgerald
    
	
 
    	
Ascent Capital   Group, Inc.
    	
 
    	
 
    	
c/o Ascent Capital   Group, Inc.
    
	
 
    	
5251 DTC Parkway,   Suite 1000
    	
 
    	
 
    	
5251 DTC Parkway,   Suite 1000
    
	
 
    	
Greenwood Village, CO   80111
    	
 
    	
 
    	
Greenwood Village, CO   80111
    
	
 
    	
 
    	
 
    
	
JEFFERY GARDNER
    	
 
    	
FRED GRAFFAM
    
	
 
    	
 
    	
 
    
	
Dated: February 8,   2019
    	
 
    	
Dated: February 8,   2019
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Jeffrey Gardner
    	
 
    	
By:
    	
/s/ Fred Graffam
    
	
 
    	
Jeffrey Gardner
    	
 
    	
 
    	
Fred Graffam
    
	
 
    	
c/o Ascent Capital   Group, Inc.
    	
 
    	
 
    	
c/o Ascent Capital   Group, Inc.
    
	
 
    	
5251 DTC Parkway,   Suite 1000
    	
 
    	
 
    	
5251 DTC Parkway,   Suite 1000
    
	
 
    	
Greenwood Village, CO 80111
    	
 
    	
 
    	
Greenwood Village, CO   80111
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
WILLIAM NILES
    	
 
    	
PHILIP J. HOLTHOUSE
    
	
 
    	
 
    	
 
    
	
Dated: February 8,   2019
    	
 
    	
Dated: February 8,   2019
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ William Niles
    	
 
    	
By:
    	
/s/ Philip J. Holthouse   
    
	
 
    	
William Niles
    	
 
    	
 
    	
Philip J. Holthouse
    
	
 
    	
c/o Ascent Capital Group, Inc.
    	
 
    	
 
    	
c/o Ascent Capital   Group, Inc.
    
	
 
    	
5251 DTC Parkway,   Suite 1000
    	
 
    	
 
    	
5251 DTC Parkway,   Suite 1000
    
	
 
    	
Greenwood Village, CO   80111
    	
 
    	
 
    	
Greenwood Village, CO   80111
    
	
 
    	
 
    	
 
    
	
TOM MCMILLIN
    	
 
    	
MICHAEL J. POHL
    
	
 
    	
 
    	
 
    
	
Dated: February 8,   2019
    	
 
    	
Dated: February 8,   2019
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/ Tom McMillin
    	
 
    	
By:
    	
/s/ Michael J. Pohl
    
	
 
    	
Tom McMillin
    	
 
    	
 
    	
Michael J. Pohl
    
	
 
    	
c/o Ascent Capital   Group, Inc.
    	
 
    	
 
    	
c/o Ascent Capital   Group, Inc.
    
	
 
    	
5251 DTC Parkway,   Suite 1000
    	
 
    	
 
    	
5251 DTC Parkway,   Suite 1000
    
	
 
    	
Greenwood Village, CO   80111
    	
 
    	
 
    	
Greenwood Village, CO   80111
    

 

[Signature Page to Settlement and Note Purchase Agreement and Release]

 

 

EXHIBIT A

 

(Form of Consent and Supplemental Indenture)

 

 

[DTC PARTICIPANT LETTERHEAD]

 

DTC PARTICIPANT CONFIRMATION

 

February 14, 2019

 

Ascent Capital Group, Inc.

5251 DTC Parkway, Suite 1000

Greenwood Village, Colorado 80111

 

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

 

Email: ascma@dfking.com

Attn: Andrew Beck

Facsimile No.: (212) 709-3328

 

RE:               Ascent Capital Group, Inc. 4.00% Convertible Senior Notes due 2020

CUSIP No. 043632 AA6

DTC Participant Account Number: [·]

 

Ladies and Gentlemen:

 

Please see the attached Consent of Beneficial Owner[s] (the “Consent”), which evidences the exercise by our customer[s] of [its/their] right to consent with respect to the aggregate principal amount identified for [each] such customer[s] in the table below of the above-referenced securities (the “Notes”) credited to our DTC Participant account on February 11, 2019.

 

	
Beneficial
    	
 
    	
Aggregate

Principal
   Amount of
    	
 
    	
DTC Participant
    	
 
    	
 
    	
 
    
	
Owner/Customer
    	
 
    	
Notes
    	
 
    	
Name
    	
 
    	
Number
    	
 
    	
CUSIP No.
    	
 
    
	
[             ]
    	
 
    	
[             ]
    	
 
    	
[             ]
    	
 
    	
[     ]
    	
 
    	
043632 AA6
    	
 
    
	
[             ]
    	
 
    	
[             ]
    	
 
    	
[             ]
    	
 
    	
[     ]
    	
 
    	
043632 AA6
    	
 
    
	
[             ]
    	
 
    	
[             ]
    	
 
    	
[             ]
    	
 
    	
[     ]
    	
 
    	
043632 AA6
    	
 
    

 

The undersigned hereby certifies that the information and facts set forth in the attached Consent with respect to the ownership interests of our customer[s] are true and correct, including the aggregate principal amount of Notes credited to our DTC Participant account that are beneficially owned by [each] such customer[s].

 

 

	
Medallion   Stamp  
    	
Very   truly yours,
    
	
 
    	
 
    
	
[PLACE   MEDALLION STAMP HERE]
    	
[INSERT   NAME OF PARTICIPANT]
    
	
 
    	
 
    
	
 
    	
BY:
    	
 
    
	
 
    	
 
    	
Name:
    	
[TYPE   NAME]
    
	
 
    	
 
    	
Title:
    	
[TYPE   TITLE]
    

 

 

[BENEFICIAL HOLDER LETTERHEAD]

 

CONSENT OF BENEFICIAL OWNER[S]

 

February 14, 2019

 

Ascent Capital Group, Inc.

5251 DTC Parkway, Suite 1000

Greenwood Village, Colorado 80111

 

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

 

Email: ascma@dfking.com

Attn: Andrew Beck

Facsimile No.: (212) 709-3328

 

Ladies and Gentlemen:

 

As of February 11, 2019 (the “Record Date”), the aggregate principal amount of 4.00% Convertible Senior Notes due 2020 (the “Notes”) of Ascent Capital Group, Inc. (the “Company”) set forth in the table below are credited to the DTC account of [NAME OF PARTICIPANT] (the “Participant”) and are beneficially owned by the person[s] (the “Customer[s]”) set forth next to [each] such amount in the table below, [each,] a customer of Participant.

 

	
Beneficial
    	
 
    	
Aggregate

Principal
   Amount of
    	
 
    	
DTC Participant
    	
 
    	
 
    	
 
    
	
Owner/Customer
    	
 
    	
Notes
    	
 
    	
Name
    	
 
    	
Number
    	
 
    	
CUSIP No.
    	
 
    
	
[             ]
    	
 
    	
[             ]
    	
 
    	
[             ]
    	
 
    	
[     ]
    	
 
    	
043632 AA6
    	
 
    
	
[             ]
    	
 
    	
[             ]
    	
 
    	
[             ]
    	
 
    	
[     ]
    	
 
    	
043632 AA6
    	
 
    
	
[             ]
    	
 
    	
[             ]
    	
 
    	
[             ]
    	
 
    	
[     ]
    	
 
    	
043632 AA6
    	
 
    

 

Customer[s] hereby consent[s], pursuant to Section 9.02 of the Indenture, dated as of July 17, 2013, between the Company, as issuer, and U.S. Bank National Association, as trustee (in such capacity, the “Trustee”), as amended by that certain First Supplemental Indenture, dated as of August 30, 2018 (the “Indenture”), to the amendments, supplements, waivers, consents and acknowledgements set forth in that certain Second Supplemental Indenture, to be dated on or about February 14, 2019, by and between the Company and the Trustee, in the form attached hereto as Annex A (the “Second Supplemental Indenture”).  The Trustee is hereby requested to and directed to execute and deliver the Second Supplemental Indenture upon the consent of the holders of at least

 

 

a majority in aggregate principal amount of the Notes outstanding at the close of business on the Record Date.

 

*   *   *   *   *   *   *   *

 

 

	
 
    	
Very   truly yours,
    
	
 
    	
 
    
	
 
    	
[INSERT   NAME OF CUSTOMER]
    
	
 
    	
 
    
	
 
    	
BY:
    	
 
    
	
 
    	
 
    	
Name:   [TYPE NAME]
    
	
 
    	
 
    	
Title:   [TYPE TITLE]
    
	
 
    	
 
    
	
 
    	
[INSERT   NAME OF CUSTOMER]
    
	
 
    	
 
    
	
 
    	
BY:
    	
 
    
	
 
    	
 
    	
Name:   [TYPE NAME]
    
	
 
    	
 
    	
Title:   [TYPE TITLE]
    
	
 
    	
 
    
	
 
    	
[INSERT   NAME OF CUSTOMER]
    
	
 
    	
 
    
	
 
    	
BY:
    	
 
    
	
 
    	
 
    	
Name:   [TYPE NAME]
    
	
 
    	
 
    	
Title:   [TYPE TITLE]
    

 

 

ANNEX A

 

Form of Second Supplemental Indenture

 

[Attached]

 

 

FORM OF SECOND SUPPLEMENTAL INDENTURE

 

This Second Supplemental Indenture (this “Supplemental Indenture”), dated as of February [·], 2019, between Ascent Capital Group, Inc., a Delaware corporation (the “Company”), as issuer, and U.S. Bank National Association, as trustee (the “Trustee”), is to the Indenture, dated as of July 17, 2013 (as amended by the Supplemental Indenture dated August 30, 2018, the “Indenture”).  Capitalized terms used herein but not defined shall have the meanings assigned to them in the Indenture.

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Trustee are parties to the Indenture, which provides for the issuance of the Company’s 4.00% Convertible Senior Notes due 2020 (the “Notes”);

 

WHEREAS, Section 9.02 of the Indenture provides that, in certain circumstances, the Trustee and the Company may supplement the Indenture with the consent of the holders of at least a majority in aggregate principal amount of the outstanding Notes;

 

WHEREAS, the Company intends to supplement the Indenture to (a) remove from (i) each of Section 6.01(d) and Section 6.01(e) the reference to “or any Subsidiary that is a Significant Subsidiary (or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary)” and (ii) Section 6.01(h) the reference to “any Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary,” and (b) allow conversion of the Company into a non-corporate legal form;

 

WHEREAS, the holders of approximately 78.20% of the aggregate principal amount of the outstanding Notes have consented to the amendments effected by this Supplemental Indenture in accordance with the provisions of the Indenture, and evidence of such consents has been provided by the Company to the Trustee;

 

WHEREAS, the Company has heretofore delivered, or is delivering contemporaneously herewith to the Trustee, the Officers’ Certificate and Opinion of Counsel referred to in Section 9.05 of the Indenture;

 

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Notes as follows:

 

ARTICLE I

 

RELATION TO INDENTURE; GENERAL REFERENCES

 

SECTION 1.01              Relation to Indenture.  Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed, and all the terms, conditions and provisions thereof shall remain in full force and effect.  This Supplemental Indenture shall form an integral part of the Indenture for all purposes, and every holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby.

 

 

SECTION 1.02              General References.  All references in this Supplemental Indenture to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Supplemental Indenture; and the terms “herein”, “hereof”, “hereunder” and any other words of similar import refer to this Supplemental Indenture.

 

ARTICLE II

 

AMENDMENTS

 

SECTION 2.01              Amendment of Section 4.05 of the Indenture.  Section 4.05 of the Indenture is hereby amended and restated in its entirety to read as follows:

 

“Section 4.05.  Existence.  Subject to Article 10, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, or, if it has converted to a non-corporate legal form in accordance with the procedures provided herein, its partnership, limited liability company or other existence; provided that the Company may utilize any conversion procedures provided for under the laws of the jurisdiction of its organization to convert from one legal form of organization to another legal form, subject to the condition that the Company must comply with Section 10.01(a) in connection with any such conversion.”

 

SECTION 2.02              Amendment of Section 6.01(d) and Section 6.01(e) of the Indenture.

 

(a) Section 6.01(d) of the Indenture is hereby amended and restated in its entirety to read as follows:

 

“(d)                           a default or defaults under any bonds, debentures, notes or other evidences of indebtedness (other than the Notes) by the Company having, individually or in the aggregate, a principal or similar amount outstanding of at least $25,000,000, whether such indebtedness now exists or shall hereafter be created, which default or defaults shall have resulted in the acceleration of the maturity of such indebtedness prior to its express maturity or shall constitute a failure to pay at least $25,000,000 of such indebtedness when due and payable after the expiration of any applicable grace period with respect thereto;”

 

(b) Section 6.01(e) of the Indenture is hereby amended and restated in its entirety to read as follows:

 

“(e)                            the entry against the Company of a final judgment or final judgments for the payment of money in an aggregate amount in excess of $25,000,000, by a court or courts of competent jurisdiction, which judgments remain undischarged, unwaived, unstayed, unbonded or unsatisfied for a period of 60 consecutive days;”

 

SECTION 2.03              Amendment of Section 6.01(h) of the Indenture.  Section 6.01(h) of the Indenture is hereby amended and restated in its entirety to read as follows:

 

“(h)                           (i) the Company, pursuant to or within the meaning of any Bankruptcy Law:

 

2

 

(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, its inability generally to pay its debts as they become due; or

 

(ii)                                  a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

 

(A)                               is for relief against the Company in an involuntary case;

 

(B)                               appoints a Custodian of the Company for all or substantially all of the property of the Company; or

 

(C)                               orders the liquidation of the Company and the order or decree remains unstayed and in effect for 60 consecutive days.”

 

SECTION 2.04              Amendment of Section 9.01 of the Indenture.  Section 9.01 of the Indenture is hereby amended to add a new clause (j) immediately following clause (i) to read as follows:

 

“(j)                              to provide for the conversion of the Company from a corporation to a limited liability company, partnership or other legal entity pursuant to Article 10.”

 

SECTION 2.05              Amendment of Section 10.01 of the Indenture.  Section 10.01 of the Indenture is hereby amended and restated in its entirety to read as follows:

 

“Section 10.01.             Company May Consolidate, Etc. on Specified Terms.  Subject to the provisions of Section 10.02, the Company shall not consolidate with, merge with or into, or convey, transfer or lease all or substantially all of its properties and assets to another Person, or convert pursuant to the laws of the state of incorporation or formation of the Company into a different form of legal entity, unless:

 

(a) the resulting, surviving or transferee Person, including the Company following any such conversion (the “Successor Company”) shall be a corporation, partnership, limited liability company or similar entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia, and the Successor Company (if not the Company) shall expressly assume, by supplemental indenture, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture; and

 

3

 

(b) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing under this Indenture.

 

Upon any such consolidation, merger, conveyance, transfer, conversion or lease the Successor Company shall succeed to, and may exercise every right and power of, the Company under this Indenture.

 

For purposes of this Section 10.01, the conveyance, transfer or lease of all or substantially all of the properties and assets of one or more Subsidiaries of the Company to another Person, which properties and assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company to another Person.”

 

SECTION 2.06              Amendment of Section 10.02 of the Indenture.  Section 10.02 of the Indenture is hereby amended to replace all references to “consolidation, merger, conveyance, transfer or lease” with references to “consolidation, merger, conveyance, transfer, conversion or lease”.

 

SECTION 2.07              Effect of Amendments.  The Notes are hereby amended to be consistent with the other amendments to the Indenture effected by this Supplemental Indenture.  The parties hereto hereby agree that the Company shall not be required under Section 9.04 of the Indenture to issue a new Global Note reflecting the terms amended in accordance with this Supplemental Indenture.  The parties further agree that any Notes issued after the date hereof shall reflect the terms of the Indenture as amended by this Supplemental Indenture and any subsequent amendments or supplemental indentures.

 

ARTICLE III

 

MISCELLANEOUS

 

SECTION 3.01              Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF NEW YORK, AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED IN SUCH STATE.

 

SECTION 3.02              Trustee Makes No Representation.  The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture.

 

SECTION 3.03              Severability. In the event any provision in this Supplemental Indenture or in the Notes as amended by this Supplemental Indenture shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired.

 

SECTION 3.04              Counterparts.  This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

 

4

 

SECTION 3.05              Successors. All the agreements of the Company and Trustee contained in this Supplemental Indenture shall bind each of their respective successors and assigns whether so expressed or not.

 

SECTION 3.06              Effect of Headings.  The article and section headings herein have been inserted for convenience of reference only and are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

 

[Rest of Page Intentionally Left Blank]

 

5

 

IN WITNESS WHEREOF, the parties have caused this Second Supplemental Indenture to be duly executed as of the date first written above.

 

	
 
    	
ASCENT CAPITAL GROUP, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
William   E. Niles
    
	
 
    	
 
    	
Title:
    	
Chief   Executive Officer, General Counsel and Secretary
    
	
 
    	
 
    	
 
    
	
 
    	
U.S. BANK NATIONAL ASSOCIATION, as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Signature Page to Second Supplemental Indenture

 

 

EXHIBIT C 

 

(Form of Stipulation of Dismissal)

 

 

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

 

	
KLS DIVERSIFIED MASTER   FUND L.P., 
    	
)
    	
 
    
	
SILVERBACK OPPORTUNISTIC CREDIT 
    	
)
    	
 
    
	
MASTER FUND LIMITED, SOUND 
    	
)
    	
 
    
	
POINT BEACON MASTER FUND, LP, 
    	
)
    	
 
    
	
SOUND POINT CREDIT 
    	
)
    	
C.A. No.: 2018-0636-JRS
    
	
OPPORTUNITIES MASTER FUND, LP, 
    	
)
    	
 
    
	
SOUND POINT MONTAUK FUND, LP, 
    	
)
    	
 
    
	
WHITEBOX MULTI-STRATEGY 
    	
)
    	
 
    
	
PARTNERS, L.P., WHITEBOX 
    	
)
    	
 
    
	
RELATIVE VALUE PARTNERS, L.P., and

WHITEBOX ASYMMETRIC PARTNERS,

L.P., individually and on behalf of ASCENT

CAPITAL GROUP, INC.,
    	
)
   )
   )
   )
    	
 
    
	
 
    	
)
    	
 
    
	
Plaintiffs,
    	
)
    	
 
    
	
 
    	
)
    	
 
    
	
v.
    	
)
    	
 
    
	
 
    	
)
    	
 
    
	
 
    	
)
    	
 
    
	
ASCENT CAPITAL GROUP, INC. (as

a nominal defendant), WILLIAM R.

FITZGERALD, JEFFERY GARDNER,

FRED GRAFFAM, WILLIAM NILES,

PHILIP J. HOLTHOUSE, TOM

MCMILLIN, and MICHAEL J. POHL,
    	
)
   )
   )
   )
   )
   )
    	
 
    
	
 
    	
)
    	
 
    
	
Defendants.
    	
)
    	
 
    

 

STIPULATION OF DISMISSAL

 

WHEREAS, the parties have settled their dispute and have agreed to dismiss this action;

 

IT IS HEREBY STIPULATED AND AGREED, by and between Plaintiffs KLS Diversified Master Fund L.P., Silverback Opportunistic Credit

 

 

Master Fund Limited, Sound Point Beacon Master Fund, LP, Sound Point Credit Opportunities Master Fund, LP, Sound Point Montauk Fund, LP, Whitebox Multi-Strategy Partners, L.P., Whitebox Relative Value Partners, L.P., and Whitebox Asymmetric Partners, L.P., individually and on behalf of Ascent Capital Group, Inc, and Defendants Ascent Capital Group, Inc. William R. Fitzgerald, Jeffery Gardner, Fred Graffam, William Niles, Philip J. Holthouse, Tom McMillin, and Michael J. Pohl, through their undersigned counsel, pursuant to Court of Chancery Rule 41(a)(1)(ii), that the above-captioned case is hereby dismissed with prejudice, with each party to bear its own costs, fees, and expenses.

 

	
 
    	
WHITEFORD,   TAYLOR & PRESTON, LLC
    
	
OF COUNSEL:
    	
 
    
	
 
    	
/s/
    
	
MILBANK, TWEED,   HADLEY & McCLOY LLP
    	
Chad J. Toms   (No. 4155)
    
	
 
    	
Kaan Ekiner   (No. 5607)
    
	
 
    	
405 North King Street,   Suite 500
    
	
Dennis F. Dunne
    	
Wilmington, Delaware   19801
    
	
Alan J. Stone
    	
(302) 357-3254
    
	
Andrew M. Leblanc
    	
 
    
	
Evan R. Fleck
    	
Attorneys for Plaintiffs
    
	
28 Liberty Street
    	
 
    
	
New York, NY 10005
    	
 
    
	
(212) 530-5000
    	
 
    

 

2

 

	
 
    	
POTTER   ANDERSON & CORROON LLP
    
	
 
    	
 
    
	
OF COUNSEL:
    	
By:
    	
/s/
    
	
 
    	
 
    	
Peter J.   Walsh, Jr. (#2437)
    
	
Richard B. Harper
    	
 
    	
Jeremy W. Ryan (#4057)
    
	
Emanuel Grillo
    	
 
    	
Jacob R. Kirkham   (#5768)
    
	
Jessica Rosenbaum
    	
 
    	
1313 N. Market Street,   6th Floor
    
	
BAKER BOTTS LLP
    	
 
    	
Wilmington, Delaware   19899-0951
    
	
30 Rockefeller Plaza
    	
 
    	
(302) 984-6000
    
	
New York, New York   10112
    	
 
    
	
T: 212-408-2500
    	
Attorneys for Defendants and   Nominal Defendant
    
	
 
    	
 
    
	
Thomas E. O’Brien
    	
 
    
	
BAKER BOTTS LLP
    	
 
    
	
2001 Ross Ave #1100
    	
 
    
	
Dallas, Texas 75201
    	
 
    
	
T: 214-953-6934
    	
 
    
	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
 
    
					

 

3NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAS BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO BORROWER. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Original Issue Date: October 19, 2018

 

$100,000

 

12% CONVERTIBLE PROMISSORY NOTE

DUE October 19 2019 

 

THIS CONVERTIBLE PROMISSORY NOTE is one of a series of duly authorized and validly issued Notes of Rasna Therapeutics, Inc., a Nevada corporation, (the “Borrower”), having its principal place of business at 420 Lexington Avenue, Suite 2525, New York, New York 10170, due October 19, 2019 (this note, the “Note” and, collectively with the other notes of such series, the “Notes”).

 

FOR VALUE RECEIVED, Borrower promises to pay to _________________, or its registered assigns (the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of $100,000.00 on October 19, 2019 (the “Maturity Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Note in accordance with the provisions hereof. Notwithstanding the foregoing, in the event the Company raises $1,000,000 or more in financing during the 30 days after the date of this Note, the Holder shall have the right to demand immediate payment of this Note and any accrued but unpaid interest.  This Note is subject to the following additional provisions:

 

Section 1.          Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, the following terms shall have the following meanings:

 

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Alternate Consideration” shall have the meaning set forth in Section 5(e).

	1

 

“Bankruptcy Event” means any of the following events: (a) Borrower or any Subsidiary thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Borrower or any Subsidiary thereof, (b) there is commenced against Borrower or any Subsidiary thereof any such case or proceeding that is not dismissed within 15 days after commencement, (c) Borrower or any Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) Borrower or any Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 15 calendar days after such appointment, (e) Borrower or any Subsidiary thereof makes a general assignment for the benefit of creditors, (f) Borrower or any Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) Borrower or any Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

  

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(d).

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

“Change of Control Transaction” means, the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of Borrower, by contract or otherwise) of in excess of 50% of the voting securities of Borrower, (b) Borrower merges into or consolidates with any other Person, or any Person merges into or consolidates with Borrower and, after giving effect to such transaction, the stockholders of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of Borrower or the successor entity of such transaction, (c) Borrower sells or transfers all or substantially all of its assets to another Person and the stockholders of Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by Borrower of an agreement to which Borrower is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (d) above.

 

“Closing Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then reported in the “pink sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Borrower and reasonably acceptable to Holder, the fees and expenses of which shall be paid by Borrower.

 

	2

 

“Common Stock Equivalents” means any securities of the Borrower or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Conversion” shall have the meaning ascribed to such term in Section 4.

 

“Conversion Date” shall have the meaning set forth in Section 4(a).

 

“Conversion Price” shall have the meaning set forth in Section 4(b).

 

“Conversion Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms hereof.

 

 “Event of Default” shall have the meaning set forth in Section 6(a).

 

“Fundamental Transaction” shall have the meaning set forth in Section 5(d).

 

“Liens” means a lien, charge, pledge, security interest, or encumbrance.

 

“Material Adverse Effect” shall mean the result of any of the following: (i) a material adverse effect on the legality, validity or enforceability of this Note, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Borrower and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Borrower’s ability to perform in any material respect on a timely basis its obligations under this Note.

 

“New York Courts” shall have the meaning set forth in Section 8(d).

 

“Note Register” shall have the meaning set forth in Section 3(c).

 

“Notice of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of the number of instruments which may be issued to evidence such Notes.

 

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

	3

  

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Share Delivery Date” shall have the meaning set forth in Section 4(c)(ii).

 

“Subsidiary” means with respect to any entity at any date, any direct or indirect corporation, limited or general partnership, limited liability company, trust, estate, association, joint venture or other business entity of which (A) more than 30% of (i) the outstanding capital stock having (in the absence of contingencies) ordinary voting power to elect a majority of the board of directors or other managing body of such entity, (ii) in the case of a partnership or limited liability company, the interest in the capital or profits of such partnership or limited liability company or (iii) in the case of a trust, estate, association, joint venture or other entity, the beneficial interest in such trust, estate, association or other entity business is, at the time of determination, owned or controlled directly or indirectly through one or more intermediaries, by such entity, or (B) is under the actual control of the Borrower.

 

“Successor Entity” shall have the meaning set forth in Section 5(d).

 

“Trading Day” means a day on which the principal Trading Market is open for trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board, the OTCQB or the OTCQX (or any successors to any of the foregoing).

 

Section 2.         Interest Payment.

 

a)        Interest in Cash.  Interest shall be payable on the Maturity Date, accelerated or otherwise, when the principal and accrued but unpaid interest shall be due and payable, or sooner as described below.  Interest will be payable in cash.

 

b)         Conversion Privileges.  The Conversion Rights set forth in Section 4 shall remain in full force and effect immediately from the date hereof and until the Note is paid in full regardless of the occurrence of an Event of Default.  This Note shall be payable in full on the Maturity Date, unless previously converted into Common Stock in accordance with Section 4 hereof.

 

c)        Application of Payments.   Interest on this Note accrues at a rate of 12% per annum and shall be calculated on the basis of a 360-day year and the actual number of days elapsed.  Payments made in connection with this Note shall be applied first to amounts due hereunder other than principal and interest, thereafter to interest and finally to principal.

 

d)        Pari Passu.   Except as otherwise set forth herein, all payments made on this Note and all actions taken by the Borrower with respect to this Note, shall be made and taken pari passu with respect to this Note. Notwithstanding anything to the contrary contained herein, it shall not be considered non-pari passu for a Holder to elect to receive interest paid in shares of Common Stock or for the Borrower to actually pay interest in shares of Common Stock to such electing Holder.

e)          Manner and Place of Payment.   Principal and interest on this Note and other payments in connection with this Note shall be payable at the Holder’s offices as designated above in lawful money of the United States of America in immediately available funds without set-off, deduction or counterclaim.  Upon assignment of the interest of Holder in this Note, Borrower shall instead make its payment pursuant to the assignee’s instructions upon receipt of written notice thereof. Notwithstanding the foregoing, this Note may be prepaid, in whole or in part, at any time prior to the Maturity Date, without premium or penalty.

 

f)         Intentionally omitted.

	4

 

Section 3.           Registration of Transfers and Exchanges.

 

a)          Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

 

b)          Transfer and Exchange. This Note may be transferred or exchanged only in compliance with the applicable federal and state securities laws and regulations.

 

c)         Reliance on Note Register. Prior to due presentment for transfer to Borrower of this Note, Borrower and any agent of Borrower may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither Borrower nor any such agent shall be affected by notice to the contrary.

 

Section 4.           Conversion.

 

a)          Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall effect conversions by delivering to Borrower a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Note to Borrower unless the entire principal amount of this Note has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion. The Holder and Borrower shall maintain records showing the principal amount(s) converted and the date of such conversion(s). Borrower may deliver an objection to any Notice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

b)          Conversion Price.  The conversion price for the principal and interest in connection with voluntary conversions by the Holder shall be to the lower of (i) $0.65 or (ii) the price of the next financing during the 180 days after the date of this Note, subject to adjustment herein (the “Conversion Price”).    The Conversion Price is subject to adjustment as described in this Note.  Adjustments made after conversions which result in a reduction of the Conversion Price shall not have any retroactive effect.

	5

 

c)          Mechanics of Conversion.

 

i.        Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted plus interest elected by the Holder to be converted by (y) the Conversion Price.

 

ii.      Delivery of Certificate Upon Conversion. Not later than three (3) Trading Days after each Conversion Date (the “Share Delivery Date”), Borrower shall deliver, or cause to be delivered, to the Holder a certificate or certificates representing the Conversion Shares.

 

iii.      Failure to Deliver Certificates. If, in the case of any Notice of Conversion, such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to Borrower at any time on or before its receipt of such certificate or certificates, to rescind such Conversion, in which event Borrower shall promptly return to the Holder any original Note delivered to Borrower and the Holder shall promptly return to Borrower the Common Stock certificates issued to such Holder pursuant to the rescinded Conversion Notice.

 

iv.     Obligation Absolute. Borrower’s obligations to issue and deliver the Conversion Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to Borrower or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of Borrower to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by Borrower of any such action Borrower may have against the Holder. 

 

v.      Reservation of Shares Issuable Upon Conversion. Borrower covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the then outstanding principal amount of this Note and interest which has accrued and would accrue on such principal amount, assuming such principal amount was not converted through the Maturity Date.  Borrower covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

	6

 

vi.        Fractional Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Note. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, Borrower shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

 

vii.      Transfer Taxes and Expenses. The issuance of certificates representing Conversion Shares shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that, Borrower shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Note so converted and Borrower shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to Borrower the amount of such tax or shall have established to the satisfaction of Borrower that such tax has been paid. Borrower shall pay all Transfer Agent fees required for same-day processing of any Notice of Conversion.

 

d)          Intentionally omitted.  

 

Section 5.           Certain Adjustments.

 

a)          Stock Dividends and Stock Splits. If Borrower, at any time while this Note is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by Borrower upon conversion of the Notes), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of Borrower, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of Borrower) outstanding immediately before such event, and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)          Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 5(a) above, if at any time Borrower grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

	7

 

c)          Pro Rata Distributions. During such time as this Note is outstanding, if Borrower shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Note, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Note (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)         Subsequent Equity Sales. From 180 days after the date of issuance of this Note until Maturity, if the Company or any Subsidiary shall issue any Common Stock or Common Stock Equivalents, in a transaction other than in an Exempt Transaction (“Subsequent Financing”) entitling any person or entity to acquire shares of Common Stock at an effective price per share less than the Conversion Price (subject to prior adjustment for reverse and forward stock splits and the like) (the “Discounted Conversion Price,” as further defined below), then, the Conversion Price shall be reduced then to an amount equal to the Discounted Conversion Price. The sale of Common Stock Equivalents shall be deemed to have occurred at the time of the issuance of the Common Stock Equivalents and the Discounted Conversion Price covered thereby shall also include the actual exercise or conversion price thereof at the time of the conversion or exercise (in addition to the consideration per share of Common Stock underlying the Common Stock Equivalents received by the Company upon such sale or issuance of the Common Stock Equivalents). In the case of any Subsequent Financing involving an “MFN Transaction” (as defined below), the Discounted Conversion Price shall be deemed to be the lowest adjustment price. If shares are issued for a consideration other than cash, the per share selling price shall be the fair value of such consideration as determined in good faith by the Board of Directors of the Company. The term “MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions which grants to an investor the right to receive additional shares based upon future transactions of the Company on terms more favorable than those granted to such investor in such offering. The Company shall not refuse to adjust the Conversion Price hereunder based on any claim that such Purchaser or any one associated or affiliated with such Purchaser has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice, restraining and or enjoining an issuance hereunder shall have been sought and obtained. Nothing herein shall limit a Purchaser’s right to pursue actual damages for the Company's failure to adjust the Conversion Price hereunder and such Purchaser 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. Notwithstanding anything to the contrary herein, this Section 5(d) shall not apply in respect of an Exempt Issuance. The Holder’s rights under this Section 5(d) shall terminate upon the earlier of (i) the Company completing a Subsequent Financing at an effective price per share equal to or greater than the Conversion Price to institutional investors which results in minimum gross proceeds to the Company of $15 million or (ii) listing of the Company’s Common Stock on the NYSE MKT or The NASDAQ Stock Market.

	8

 

e)          Fundamental Transaction. If, at any time while this Note is outstanding, (i) Borrower, directly or indirectly, in one or more related transactions effects any merger or consolidation of Borrower with or into another Person, (ii) Borrower, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by Borrower or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) Borrower, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, (v) Borrower, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section 4(c)  on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of Borrower, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(c)  on the conversion of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and Borrower shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. Borrower shall cause any successor entity in a Fundamental Transaction in which Borrower is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of Borrower under this Note in accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Note which is convertible for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Note referring to the “Borrower” shall refer instead to the Successor Entity), and may exercise every right and power of Borrower and shall assume all of the obligations of Borrower under this Note with the same effect as if such Successor Entity had been named as Borrower herein.

	9

 

f)         Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of Borrower) issued and outstanding.

 

g)          Notice to the Holder.

 

i.        Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, Borrower shall promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

ii.        Notice to Allow Conversion by Holder. If (A) Borrower shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) Borrower shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) Borrower shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of Borrower shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which Borrower is a party, any sale or transfer of all or substantially all of the assets of Borrower, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) Borrower shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of Borrower, then, in each case, Borrower shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Note Register, at least twenty (20) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding Borrower or any of the Subsidiaries, Borrower shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to convert this Note during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

	10

 

Section 6.             Events of Default.

 

a)           “Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

i.        any default in the payment of (A) the principal amount of any Note or (B) liquidated damages and other amounts owing to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of any other default under clause (B) above, is not cured within 3 Trading Days;

 

ii.      Borrower shall fail to observe or perform any other covenant or agreement contained in the Notes (other than a breach by Borrower of its obligations to deliver shares of Common Stock to the Holder upon conversion) which failure is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder or by any Other Holder to Borrower and (B) 10 Trading Days after Borrower has become or should have become aware of such failure;

 

iii.       a default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur under any other material agreement, lease, document or instrument to which Borrower or any Subsidiary is obligated (and not covered by clause (vi) below);

 

iv.       any representation or warranty made in this Note, any written statement pursuant hereto or thereto or any other report, financial statement or certificate made or delivered to the Holder or any Other Holder shall be untrue or incorrect in any material respect as of the date when made or deemed made;

 

v.         Borrower or any Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

vi.      Borrower or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than  $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

	11

vii.      Borrower does not meet the current public information requirements under Rule 144;

 

viii.     Borrower shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to Section 4(c) or Borrower shall provide at any time notice to the Holder, including by way of public announcement, of Borrower’s intention to not honor requests for conversions of any Notes in accordance with the terms hereof;

 

ix.       any monetary judgment, writ or similar final process shall be entered or filed against Borrower, any subsidiary or any of their respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of 45 calendar days;

 

x.         any dissolution, liquidation or winding up by Borrower or a material Subsidiary of a substantial portion of their business;

 

xi.        cessation of operations by Borrower or a material Subsidiary;

 

xii.      The failure by Borrower or any material Subsidiary to maintain any material intellectual property rights, personal, real property, equipment, leases or other assets which are necessary to conduct its business (whether now or in the future) and such breach is not cured with twenty (20) days after written notice to the Borrower from the Holder;

 

xiii.      An event resulting in the Common Stock no longer being listed or quoted on a Trading Market, or notification from a Trading Market that the Borrower is not in compliance with the conditions for such continued quotation and such non-compliance continues for twenty (20) days following such notification;

 

xiv.        a Commission or judicial stop trade order or OTCBB suspension;

 

xv.         a failure by Borrower to notify Holder of any material event of which Borrower is obligated to notify Holder pursuant to the terms of this Note;

 

xvi.       a default by the Borrower of a material term, covenant, warranty or undertaking of any other agreement to which the Borrower and Holder are parties, or the occurrence of an event of default under any such other agreement to which Borrower and Holder are parties which is not cured after any required notice and/or cure period; or

 

xvii.      the occurrence of an Event of Default under any Other Note.

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b)          Remedies Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Note, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing on the Maturity Date and also five (5) days after the occurrence of any Event of Default interest on this Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by Borrower. In connection with such acceleration described herein, the Holder need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 6(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

Section 7          Intentionally omitted.

 

Section 8.         Miscellaneous.

 

a)     Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) if to Borrower, to: Rasna Therapeutics, Inc., Attn: Kunwar Shailubhai, facsimile: ________, with a copy by fax only to (which shall not constitute notice): Sheppard Mullin Richter & Hampton LLP, 30 Rockefeller Plaza, New York, NY 10112, Attn: Jeffrey Fessler, Esq., facsimile: (212) 930-9725, and (ii) if to the Holder, to: the address and fax number indicated on the front page of this Note, with an additional copy by fax only to (which shall not constitute notice): __________ facsimile: _______.

	13

 

b)     Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of Borrower, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of Borrower. This Note ranks pari passu with all other Notes now or hereafter issued under the terms set forth herein.         

 

c)       Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, Borrower shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to Borrower.

 

d)        Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated hereby (whether brought against a party hereto or its respective Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in New York, New York (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts 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 such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.  

 

e)        Waiver. Any waiver by Borrower or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of Borrower or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by Borrower or the Holder must be in writing.

	14

 

f)      Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances.

 

g)        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. Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and Borrower (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.

 

h)       Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

i)         Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

 

j)       Amendment. Unless otherwise provided for hereunder, this Note may not be modified or amended or the provisions hereof waived without the written consent of Borrower and the Holder.

 

k)       Facsimile Signature.  In the event that the Borrower’s signature is delivered by facsimile transmission, PDF, electronic signature or other similar electronic means, such signature shall create a valid and binding obligation of the Borrower with the same force and effect as if such signature page were an original thereof.

 

 

*********************

 

(Signature Pages Follow)

 

	15

              IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 19th day of October 2018.

 

                                                                        RASNA THERAPEUTICS, INC.

 

 

                                                                        By: ___________________________________

                                                                                    Name: Kunwar Shailubhai

                                                                                    Title: Chief Executive Officer

                                                                                    

WITNESS:

 

 

 

______________________________________

 

	16

 

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert principal under the Convertible Promissory Note due October 19, 2018 of Rasna Therapeutics, Inc., a Nevada corporation (the “Borrower”), into shares of common stock (the “Common Stock”), of Borrower according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by Borrower in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

  

The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock.

 

Conversion calculations:

	
 

	
Date to Effect Conversion: ____________________________

	
 

	
 

	
 

	
Principal Amount of Note to be Converted: $__________________

	
 

	
 

	
 

	
Number of shares of Common Stock to be issued: ______________

	
 

	
 

	
 

	
Signature: _________________________________________

	
 

	
 

	
 

	
Name: ____________________________________________

	
 

	
 

	
 

	
Address for Delivery of Common Stock Certificates: __________

	
 

	
_____________________________________________________ 

	
 

	
_____________________________________________________

	
 

	
 

	
 

	
Or

	
 

	
 

	
 

	
DWAC Instructions: _________________________________

	
 

	
 

	
 

	
Broker No:_____________

	
 

	
Account No: _______________

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