Document:

ex10_5.htm

EXHIBIT 10.5

 

 

CONVERTIBLE PROMISSORY NOTE

 

Effective Date: August 13, 2014 U.S. $58,000.00

FOR VALUE RECEIVED, AEGEA, Inc., a Colorado corporation (“Borrower”), promises to pay to St. George Investments LLC, a Utah limited liability company, or its successors or assigns (“Lender”), $58,000.00 and any interest, fees, charges, and late fees on the date that is nine (9) months after the Purchase Price Date (as defined below) (the “Maturity Date”) in accordance with the terms set forth herein and to pay interest on the Outstanding Balance (as defined below) at the rate of ten percent (10%) per annum from the Purchase Price Date until the same is paid in full. This Convertible Promissory Note (this “Note”) is issued and made effective as of August 13, 2014 (the “Effective Date”). For purposes hereof, the “Outstanding Balance” of this Note means, as of any date of determination, the Purchase Price (as defined below), as reduced or increased, as the case may be, pursuant to the terms hereof for redemption, conversion, offset, or otherwise, plus any original issue discount (“OID”), the Transaction Expense Amount (as defined below), accrued but unpaid interest, collection and enforcements costs (including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and similar taxes and fees related to Conversions (as defined below), and any other fees or charges (including without limitation late charges) incurred under this Note. This Note is issued pursuant to that certain Securities Purchase Agreement dated August 13, 2014, as the same may be amended from time to time (the “Purchase Agreement”), by and between Borrower and Lender. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Note. Certain capitalized terms used herein but not otherwise defined shall have the meaning ascribed thereto in the Purchase Agreement. Certain other capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

 

This Note carries an OID of $5,000.00. In addition, Borrower agrees to pay $3,000.00 to Lender to cover Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of this Note (the “Transaction Expense Amount”), all of which amount is included in the initial principal balance of this Note. The purchase price for this Note shall be $50,000.00 (the “Purchase Price”), computed as follows: $58,000.00 original principal balance, less the OID, less the Transaction Expense Amount. The Purchase Price shall be payable by Lender by wire transfer of immediately available funds. For purposes hereof, the term “Purchase Price Date” means the date the Purchase Price is delivered by Lender to Borrower.

 

1.           Payment; Prepayment. Provided there is an Outstanding Balance, on each Installment Date (as defined below), Borrower shall pay to Lender an amount equal to the Installment Amount (as defined below) due on such Installment Date in accordance with Section 8. All payments owing hereunder shall be in lawful money of the United States of America or Conversion Shares (as defined below), as provided for herein, and delivered to Lender at the address furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal. Notwithstanding the foregoing, so long as Borrower has not received a Lender Conversion Notice (as defined below) or an Installment Notice (as defined below) from Lender where the applicable Conversion Shares have not yet been delivered and so long as no Event of Default has occurred since the Effective Date (whether declared by Lender or undeclared), then Borrower shall have the right, exercisable on not less than five (5) Trading Days prior written notice to Lender to prepay the Outstanding Balance of this Note, in full, in accordance with this Section 1. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be

 

  

  

  

 

 delivered to Lender at its registered address and shall state: (y) that Borrower is exercising its right to prepay this Note, and (z) the date of prepayment, which shall be not less than five (5) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of Lender as may be specified by Lender in writing to Borrower. If Borrower exercises its right to prepay this Note, Borrower shall make payment to Lender of an amount in cash (the “Optional Prepayment Amount”) equal to 125% multiplied by the then Outstanding Balance of this Note. In the event Borrower delivers the Optional Prepayment Amount to Lender prior to the Optional Prepayment Date or without delivering an Optional Prepayment Notice to Lender as set forth herein without Lender’s prior written consent, the Optional Prepayment Amount shall not be deemed to have been paid to Lender until the Optional Prepayment Date. Moreover, in such event the Optional Prepayment Liquidated Damages Amount will automatically be added to the Outstanding Balance of this Note on the day Borrower delivers the Optional Prepayment Amount to Lender. In the event Borrower delivers the Optional Prepayment Amount without an Optional Prepayment Notice, then the Optional Prepayment Date will be deemed to be the date that is five (5) Trading Days from the date that the Optional Prepayment Amount was delivered to Lender. In addition, if Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to Lender within two (2) Trading Days following the Optional Prepayment Date, Borrower shall forever forfeit its right to prepay this Note.

 

2.           Security. This Note is unsecured.

 

3.           Lender Optional Conversion.

 

3.1.           Lender Conversion Price. Subject to adjustment as set forth in this Note, the conversion price for each Lender Conversion (as defined below) shall be $0.05 (the “Lender Conversion Price”).

 

3.2.           Lender Conversions. Lender has the right at any time after the Purchase Price Date until the Outstanding Balance has been paid in full, including without limitation (i) until any Optional Prepayment Date (even if Lender has received an Optional Prepayment Notice) or at any time thereafter with respect to any amount that is not prepaid, and (ii) during or after any Fundamental Default Measuring Period, at its election, to convert (each instance of conversion is referred to herein as a “Lender Conversion”) all or any part of the Outstanding Balance into shares (“Lender Conversion Shares”) of fully paid and non-assessable common stock, no par value per share (“Common Stock”), of Borrower as per the following conversion formula: the number of Lender Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Lender Conversion Price. Conversion notices in the form attached hereto as Exhibit A (each, a “Lender Conversion Notice”) may be effectively delivered to Borrower by any method of Lender’s choice (including but not limited to facsimile, email, mail, overnight courier, or personal delivery), and all Lender Conversions shall be cashless and not require further payment from Lender. Borrower shall deliver the Lender Conversion Shares from any Lender Conversion to Lender in accordance with Section 9 below within three (3) Trading Days of Lender’s delivery of the Lender Conversion Notice to Borrower.

 

3.3.           Application to Installments. Notwithstanding anything to the contrary herein, including without limitation Section 8 hereof, Lender may, in its sole discretion, apply all or any portion of any Lender Conversion toward any Installment Conversion (as defined below), even if such Installment Conversion is pending, as determined in Lender’s sole discretion, by delivering written notice of such election (which notice may be included as part of the applicable Lender Conversion Notice) to Borrower at any date on or prior to the applicable Installment Date. In such event, Borrower may not elect to allocate such portion of the Installment Amount being paid pursuant to this Section 3.3 in the manner prescribed in Section 8.3; rather, Borrower must reduce the applicable Installment Amount by the Conversion Amount described in this Section 3.3.

 

  

2

  

 

4.           Defaults and Remedies.

 

4.1.           Defaults. The following are events of default under this Note (each, an “Event of Default”): (i) Borrower shall fail to pay any principal when due and payable (or payable by Conversion) hereunder; or (ii) Borrower shall fail to deliver any Lender Conversion Shares in accordance with the terms hereof; or (iii) Borrower shall fail to deliver any Installment Conversion Shares (as defined below) or True-Up Shares (as defined below) in accordance with the terms hereof; or (iv) Borrower shall fail to pay any interest, fees, charges, or any other amount when due and payable (or payable by Conversion) hereunder; or (v) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; or (vi) Borrower shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or (vii) Borrower shall make a general assignment for the benefit of creditors; or (viii) Borrower shall file a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); or (ix) an involuntary proceeding shall be commenced or filed against Borrower; or (x) Borrower shall default or otherwise fail to observe or perform any covenant, obligation, condition or agreement of Borrower contained herein or in any other Transaction Document, other than those specifically set forth in this Section 4.1; or (xi) Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC or shall fail to timely file all required quarterly and annual reports and any other filings that are necessary to enable Lender to sell Conversion Shares or True-Up Shares pursuant to Rule 144; or (xii) any representation, warranty or other statement made or furnished by or on behalf of Borrower to Lender herein, in any Transaction Document, or otherwise in connection with the issuance of this Note shall be false, incorrect, incomplete or misleading in any material respect when made or furnished; or (xiii) the occurrence of a Fundamental Transaction without Lender’s prior written consent; or (xiv) Borrower shall fail to maintain the Share Reserve as required under the Purchase Agreement; or (xv) Borrower effectuates a reverse split of its Common Stock without twenty (20) Trading Days prior written notice to Borrower; or (xvi) any money judgment, writ or similar process shall be entered or filed against Borrower or any subsidiary of Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented to by Lender; or (xvii) Borrower shall fail to deliver to Lender original signature pages to all Transaction Documents within five (5) Trading Days of the Purchase Price Date; or (xvii) Borrower shall fail to change transfer agents and deliver to Lender an irrevocable letter of instructions to transfer agent executed by the new transfer agent within ninety (90) days of the date hereof as required under the Purchase Agreement.

 

4.2.           Remedies. Upon the occurrence of any Event of Default, Borrower shall within one (1) Trading Day deliver written notice thereof via facsimile, email or reputable overnight courier (with next day delivery specified) (an “Event of Default Notice”) to Lender. At any time and from time to time after the earlier of Lender’s receipt of an Event of Default Notice and Lender becoming aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the Outstanding Balance becoming immediately due and payable in cash at the Mandatory Default Amount (as defined hereafter). Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the Outstanding Balance by applying the Default Effect (as defined below) (subject to the limitation set forth below) via written notice to Borrower without accelerating the Outstanding Balance, in which event the Outstanding Balance shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the Outstanding Balance shall not be immediately due and payable unless so declared by Lender (for the avoidance of doubt, if Lender elects to apply the Default Effect pursuant to this sentence, it shall reserve the right to declare the Outstanding Balance immediately due and payable at any time and no such election by Lender shall be deemed to be a waiver of its right to declare the Outstanding Balance immediately due and payable as set forth herein unless otherwise agreed to by Lender in writing). For purposes hereof, the “Default Effect” is calculated by multiplying the Outstanding Balance as of the date the applicable Event of Default occurred by (i) 15% for each occurrence of any Major Default, 

 

  

3

  

 

or (ii) 5% for each occurrence of any Minor Default, and then adding the resulting product to the Outstanding Balance as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the Outstanding Balance under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder with respect to Major Defaults and three (3) times hereunder with respect to Minor Defaults; and provided further that the Default Effect shall not apply to any Event of Default pursuant to Section 4.1(ii) hereof. Notwithstanding the foregoing, upon the occurrence of any Event of Default described in clauses (v), (vi), (vii), (viii) or (ix) of Section 4.1, the Outstanding Balance as of the date of acceleration shall become immediately and automatically due and payable in cash at the Mandatory Default Amount, without any written notice required by Lender. The “Mandatory Default Amount” means the greater of (i) the Outstanding Balance divided by the Installment Conversion Price (as defined below) on the date the Mandatory Default Amount is demanded, multiplied by the volume weighted average price (the “VWAP”) on the date the Mandatory Default Amount is demanded, or (ii) the Default Effect. At any time following the occurrence of any Event of Default, upon written notice given by Lender to Borrower, interest shall accrue on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of 22% per annum or the maximum rate permitted under applicable law (“Default Interest”); provided, however, that no Default Interest shall accrue during the Fundamental Default Measuring Period (as defined below). Additionally, following the occurrence of any Event of Default, Borrower may, at its option, pay any Lender Conversion in cash instead of Lender Conversion Shares by paying to Lender on or before the applicable Delivery Date (as defined below) a cash amount equal to the number of Lender Conversion Shares set forth in the applicable Lender Conversion Notice multiplied by the highest intra-day trading price of the Common Stock that occurs during the period beginning on the date the applicable Event of Default occurred and ending on the date of the applicable Lender Conversion Notice. In connection with acceleration described herein, Lender need not provide, and Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and Lender 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 Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to Borrower’s failure to timely deliver Conversion Shares upon Conversion of the Notes as required pursuant to the terms hereof.

 

4.3.           Fundamental Default Remedies. Notwithstanding anything to the contrary herein, in addition to all other remedies set forth herein, the Fundamental Liquidated Damages Amount shall be added to the Outstanding Balance upon Lender’s delivery to Borrower of a notice (which notice Lender may deliver to Borrower at any time following the occurrence of a Fundamental Default) setting forth its election to declare a Fundamental Default and the Fundamental Liquidated Damages Amount that will be added to the Outstanding Balance.

 

4.4.           Certain Additional Rights. Notwithstanding anything to the contrary herein, in the event Borrower fails to make any payment or otherwise to deliver any Conversion Shares as and when required under this Note, then (i) the Lender Conversion Price for all Lender Conversions occurring after the date of such failure to pay shall equal the lower of the Lender Conversion Price applicable to any Lender Conversion and the Market Price as of any applicable date of Conversion, and (ii) the true-up provisions of Section 11 below shall apply to all Lender Conversions that occur after the date of such failure to pay, provided that all references to the “Installment Notice” in Section 11 shall be replaced with references to a “Lender Conversion Notice” for purposes of this Section 4.4, all references to “Installment Conversion Shares” in Section 11 shall be replaced with references to “Lender Conversion Shares” for purposes of this Section 4.4, and all references to the “Installment Conversion Price” in Section 11 shall be replaced with references to the “Lender Conversion Price” for purposes of this Section 4.4.

 

  

4

  

 

4.5.           Cross Default. A breach or default by Borrower of any covenant or other term or condition contained in any Other Agreements (as defined below) shall, at the option of Lender, be considered an Event of Default under this Note, in which event Lender shall be entitled (but in no event required) to apply all rights and remedies of Lender under the terms of this Note. “Other Agreements” means, collectively, (a) all existing and future agreements and instruments between, among or by Borrower (or an affiliate), on the one hand, and Lender (or an affiliate), on the other hand, and (b) any financing agreement or a material agreement that affects Borrower’s ongoing business operations. For the avoidance of doubt, all existing and future loan transactions between Borrower and Lender and their respective affiliates will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to Lender.

 

5.           Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or conversions called for herein in accordance with the terms of this Note.

 

6.           Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

 

7.           Rights Upon Issuance of Securities.

 

7.1.           Subsequent Equity Sales. Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell or issue any Common Stock to Lender or any third party for a price that is less than the then effective Lender Conversion Price, then such Lender Conversion Price shall be automatically reduced and only reduced to equal such lower issuance price. Except with respect to Excluded Securities, if Borrower or any subsidiary thereof, as applicable, at any time this Note is outstanding, shall sell or grant any option to any party to purchase, or sell or grant any right to reprice, or issue any Common Stock, preferred shares convertible into Common Stock, or debt, warrants, options or other instruments or securities to Lender or any third party which are convertible into or exercisable for shares of Common Stock (together herein referred to as “Equity Securities”), including without limitation any Deemed Issuance (as defined herein), at an effective price per share less than the then effective Lender Conversion Price (such issuance, together with any sale of Common Stock, is referred to herein as a “Dilutive Issuance”), then, the Lender Conversion Price shall be automatically reduced and only reduced to equal such lower effective price per share. If the holder of any Equity Securities so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options, or rights per share which are issued in connection with such Dilutive Issuance, be entitled to receive shares of Common Stock at an effective price per share that is less than the Lender Conversion Price, such issuance shall be deemed to have occurred for less than the Lender Conversion Price on the date of such Dilutive Issuance, and the then effective Lender Conversion Price shall be reduced and only reduced to equal such lower effective price per share. Such adjustments described above to the Lender Conversion Price shall be permanent (subject to additional adjustments under this section), and shall be made whenever such Common Stock or Equity Securities are issued. Borrower shall notify Lender, in writing, no later than the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 7.1, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification, whether or not Borrower provides a Dilutive Issuance Notice pursuant to this Section 7.1, upon the occurrence of any Dilutive Issuance, on the date of such Dilutive Issuance the Lender Conversion Price shall be lowered to equal the applicable effective price per share regardless of whether Borrower or Lender accurately refers to such lower effective price per share in any Installment Notice or Lender Conversion Notice.

 

  

5

  

 

7.2.           Adjustment of Lender Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Lender Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Lender Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7.2 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 7.2 occurs during the period that a Lender Conversion Price is calculated hereunder, then the calculation of such Lender Conversion Price shall be adjusted appropriately to reflect such event.

 

7.3.           Other Events. In the event that Borrower (or any subsidiary) shall take any action to which the provisions hereof are not strictly applicable, or, if applicable, would not operate to protect Lender from dilution or if any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then Borrower’s board of directors shall in good faith determine and implement an appropriate adjustment in the Lender Conversion Price so as to protect the rights of Lender, provided that no such adjustment pursuant to this Section 7.3 will increase the Lender Conversion Price as otherwise determined pursuant to this Section 7, provided further that if Lender does not accept such adjustments as appropriately protecting its interests hereunder against such dilution, then Borrower’s board of directors and Lender shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by Borrower.

 

8.           Borrower Installments.

 

8.1.           Installment Conversion Price. Subject to the adjustments set forth herein, the conversion price for each Installment Conversion (the “Installment Conversion Price”) shall be the lesser of (i) the Lender Conversion Price, and (ii) 70% (the “Conversion Factor”) of the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding the applicable Conversion (the “Market Price”), provided that if at any time the average of the three (3) lowest Closing Bid Prices in the twenty (20) Trading Days immediately preceding any date of measurement is below $0.01, then in such event the then-current Conversion Factor shall be reduced to 65% for all future Conversions (subject to other reductions set forth in this section). Finally, in addition to the Default Effect, if any Major Default occurs after the Effective Date, the Conversion Factor shall automatically be reduced for all future Conversions by an additional 5% for each of the first three (3) Major Defaults that occur after the Effective Date (for the avoidance of doubt, each occurrence of any Major Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions in Conversion Factor, even if the same Major Default occurs three (3) separate times). For example, if there are three (3) separate occurrences of a Major Default pursuant to Section 4.1(iii), then for purposes of this example the Conversion Factor would be reduced by 5% for the first such occurrence, and so on for each of the second and third occurrences of such Major Default.

 

  

6

  

 

8.2.           Installment Conversions. Beginning on the date that is six (6) months after the Purchase Price Date and on the same day of each month thereafter until the Maturity Date (each, an “Installment Date”), Borrower shall pay to Lender the applicable Installment Amount due on such date, subject to the provisions of this Section 8. Payments of each Installment Amount may be made (a) in cash, or (b) by converting such Installment Amount into shares of Common Stock (“Installment Conversion Shares”, and together with the Lender Conversion Shares, the “Conversion Shares”) in accordance with this Section 8 (each an “Installment Conversion”, and together with Lender Conversions, a “Conversion”) per the following formula: the number of Installment Conversion Shares equals the portion of the applicable Installment Amount being converted divided by the Installment Conversion Price, or (c) by any combination of the foregoing, so long as the cash is delivered to Lender on the applicable Installment Date and the Installment Conversion Shares are delivered to Lender on or before the applicable Delivery Date. Notwithstanding the foregoing, Borrower will not be entitled to elect an Installment Conversion with respect to any portion of any applicable Installment Amount and shall be required to pay the entire amount of such Installment Amount in cash if on the applicable Installment Notice Due Date (defined below) there is an Equity Conditions Failure (as defined below), and such failure is not waived in writing by Lender. Moreover, in the event Borrower desires to pay all or any portion of any Installment Amount in cash, it must notify Lender in writing of such election and the portion of the applicable Installment Amount it elects to pay in cash not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Date. If Borrower fails to so notify Lender, it shall not be permitted to elect to pay any portion of such Installment Amount in cash unless otherwise agreed to by Lender in writing or proposed by Lender in an Installment Notice delivered by Lender to Borrower. Notwithstanding that failure to repay this Note in full by the Maturity Date is an Event of Default, the Installment Dates shall continue after the Maturity Date pursuant to this Section 8 until the Outstanding Balance is repaid in full, provided that Lender shall, in Lender’s sole discretion, determine the Installment Amount for each Installment Date after the Maturity Date.

 

8.3.           Allocation of Installment Amounts. Subject to Section 8.2 regarding an Equity Conditions Failure, for each Installment Date (each, an “Installment Notice Due Date”), Borrower may elect to allocate the amount of the applicable Installment Amount between cash and via an Installment Conversion, by email or fax delivery of a notice to Lender substantially in the form attached hereto as Exhibit B (each, an “Installment Notice”), provided, that to be effective, each applicable Installment Notice must be received by Lender not more than twenty-five (25) or less than fifteen (15) Trading Days prior to the applicable Installment Notice Due Date. If Lender has not received an Installment Notice within such time period, then Lender may prepare the Installment Notice and deliver the same to Borrower by fax or email. Following its receipt of such Installment Notice, Borrower may either ratify Lender’s proposed allocation in the applicable Installment Notice or elect to change the allocation by written notice to Lender by email or fax on or before 12:00 p.m. New York time on the applicable Installment Date, so long as the sum of the cash payments and the amount of Installment Conversions equal the applicable Installment Amount, provided that Lender must approve any increase to the portion of the Installment Amount payable in cash. If Borrower fails to notify Lender of its election to change the allocation prior to the deadline set forth in the previous sentence (and seek approval to increase the amount payable in cash), it shall be deemed to have ratified and accepted the allocation set forth in the applicable Installment Notice prepared by Lender. If neither Borrower nor Lender prepare and deliver to the other party an Installment Notice as outlined above, then Borrower shall be deemed to have elected that the entire Installment Amount be converted via an Installment Conversion. Borrower acknowledges and agrees that regardless of which party prepares the applicable Installment Notice, the amounts and calculations set forth thereon are subject to correction or adjustment because of error, mistake, or any adjustment resulting from an Event of Default or other adjustment permitted under the Transaction Documents (an “Adjustment”). Furthermore, no error or mistake in the preparation of such notices, or failure to apply any Adjustment that could have been applied prior to the preparation of an Installment Notice may be deemed a waiver of Lender’s right to enforce the terms of any Note, even if such error, mistake, or failure to include an Adjustment arises from Lender’s own calculation. Borrower shall deliver the Installment Conversion Shares from any Installment Conversion to Lender in accordance with Section 9 below on or before each applicable Installment Date.

 

  

7

  

 

9.           Method of Conversion Share Delivery. On or before the close of business on the third (3rd) Trading Day following the Installment Date or the third (3rd) Trading Day following the date of delivery of a Lender Conversion Notice, as applicable (the “Delivery Date”), Borrower shall deliver or cause to be delivered to Lender or its broker (as designated in the Lender Conversion Notice), via reputable overnight courier, a certificate or certificates representing the aggregate number of Conversion Shares to which Lender shall be entitled, registered in the name of Lender or its designee. For the avoidance of doubt, Borrower has not met its obligation to deliver Conversion Shares by the Delivery Date unless Lender or its broker, as applicable, has actually received the certificate representing the applicable Conversion Shares no later than the close of business on the relevant Delivery Date pursuant to the terms set forth above.

 

10.           Conversion Delays. If Borrower fails to deliver Conversion Shares or True-Up Shares in accordance with the timeframes stated in Sections 3, 8, 9, or 11, as applicable, Lender, at any time prior to selling all of those Conversion Shares or True-Up Shares, as applicable, may rescind in whole or in part that particular Conversion attributable to the unsold Conversion Shares or True-Up Shares, with a corresponding increase to the Outstanding Balance (any returned Conversion Amount will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144). In addition, for each Lender Conversion, in the event that Lender Conversion Shares are not delivered by the fourth Trading Day (inclusive of the day of the Lender Conversion), a late fee equal to the greater of (a) $500.00 per day and (b) 2% of the applicable Lender Conversion Share Value rounded to the nearest multiple of $100.00 (but in any event the cumulative amount of such late fees for each Lender Conversion shall not exceed 200% of the applicable Lender Conversion Share Value) will be assessed for each day after the third Trading Day (inclusive of the day of the Lender Conversion) until Lender Conversion Share delivery is made; and such late fee will be added to the Outstanding Balance (such fees, the “Conversion Delay Late Fees”). For illustration purposes only, if Lender delivers a Lender Conversion Notice to Borrower pursuant to which Borrower is required to deliver 100,000 Lender Conversion Shares to Lender and on the Delivery Date such Lender Conversion Shares have a Lender Conversion Share Value of $20,000.00 (assuming a Closing Sale Price on the Delivery Date of $0.20 per share of Common Stock), then in such event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00) would be added to the Outstanding Balance of the Note until such Lender Conversion Shares are delivered to Lender. For purposes of this example, if the Lender Conversion Shares are delivered to Lender twenty (20) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $10,000.00 (20 days multiplied by $500.00 per day). If the Lender Conversion Shares are delivered to Lender one hundred (100) days after the applicable Delivery Date, the total Conversion Delay Late Fees that would be added to the Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day, but capped at 200% of the Lender Conversion Share Value).

 

11.           True-Up. On the date that is twenty-three (23) Trading Days (a “True-Up Date”) from each date Borrower delivers Free Trading (as defined below) Installment Conversion Shares to Lender, there shall be a true-up where Borrower shall deliver to Lender additional Installment Conversion Shares (“True-Up Shares”) if the Installment Conversion Price as of the True-Up Date is less than the Installment Conversion Price used in the applicable Installment Notice. In such event, Borrower shall deliver to Lender within three (3) Trading Days of the True-Up Date (the “True-Up Share Delivery Date”) a number of True-Up Shares equal to the difference between the number of Installment Conversion Shares that would have been delivered to Lender on the True-Up Date based on the Installment Conversion Price as of the True-Up Date and the number of Installment Conversion Shares originally delivered to Lender pursuant to the applicable Installment Notice. For the avoidance of doubt, if the Installment Conversion Price as of the True-Up Date is higher than the Installment Conversion Price set forth in the applicable Installment Notice, then Borrower shall 

 

  

8

  

 

have no obligation to deliver True-Up Shares to Lender, nor shall Lender have any obligation to return any excess Installment Conversion Shares to Borrower under any circumstance. For the convenience of Borrower only, Lender may, in its sole discretion, deliver to Borrower a notice (pursuant to a form of notice substantially in the form attached hereto as Exhibit C) informing Borrower of the number of True-Up Shares it is obligated to deliver to Lender as of any given True-Up Date, provided that if Lender does not deliver any such notice Borrower shall not be relieved of its obligation to deliver True-Up Shares pursuant to this Section 11. Notwithstanding the foregoing, if Borrower fails to deliver any required True-Up Shares on or before any applicable True-Up Share Delivery Date, then in such event the Outstanding Balance of this Note will automatically increase (under Lender’s and Borrower’s expectations that any such increase will tack back to the Purchase Price Date for purposes of determining the holding period under Rule 144) by a sum equal to the number of True-Up Shares deliverable as of the applicable True-Up Date multiplied by the Market Price for the Common Stock as of the applicable True-Up Date.

 

12.           Ownership Limitation. Notwithstanding anything to the contrary contained in this Note or the other Transaction Documents, if at any time Lender shall or would be issued shares of Common Stock under any of the Transaction Documents, but such issuance would cause Lender (together with its affiliates) to beneficially own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date (including for such purpose the shares of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then Borrower must not issue to Lender shares of the Common Stock which would exceed the Maximum Percentage. For purposes of this section, beneficial ownership of Common Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares of Common Stock issuable to Lender that would cause the Maximum Percentage to be exceeded are referred to herein as the “Ownership Limitation Shares”. Borrower will reserve the Ownership Limitation Shares for the exclusive benefit of Lender. From time to time, Lender may notify Borrower in writing of the number of the Ownership Limitation Shares that may be issued to Lender without causing Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower shall be unconditionally obligated to immediately issue such designated shares to Lender, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization of the Common Stock is less than $10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such increase to “9.99%” shall remain at 9.99% until increased, decreased or waived by Lender as set forth below. By written notice to Borrower, Lender may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Lender.

 

13.           Payment of Collection Costs. If this Note is placed in the hands of an attorney for collection or enforcement prior to commencing arbitration or legal proceedings, or is collected or enforced through any arbitration or legal proceeding, or Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, then Borrower shall pay the costs incurred by Lender for such collection, enforcement or action including, without limitation, attorneys’ fees and disbursements. Borrower also agrees to pay for any costs, fees or charges of its transfer agent that are charged to Lender pursuant to any Conversion or issuance of shares pursuant to this Note.

 

14.           Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s counsel.

 

15.           Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.

 

  

9

  

 

16.           Resolution of Disputes.

 

16.1.           Arbitration of Disputes. By its acceptance of this Note, each party agrees to be bound by the Arbitration Provisions set forth as an Exhibit to the Purchase Agreement.

 

16.2.           Calculation of Disputes. Notwithstanding the Arbitration Provisions, in the case of a dispute as to any arithmetic calculation hereunder, including without limitation calculating the Outstanding Balance, Lender Conversion Price, Lender Conversion Shares to be delivered, Installment Conversion Price, Installment Conversion Shares to be delivered, the Market Price, or the VWAP (collectively, “Calculations”), Borrower or Lender (as the case may be) shall submit the disputed determinations or arithmetic calculations (as the case may be) via facsimile or email with confirmation of receipt (a) within two (2) Trading Days after receipt of the applicable notice giving rise to such dispute to Borrower or Lender (as the case may be) or (b) if no notice gave rise to such dispute, at any time after Lender learned of the circumstances giving rise to such dispute. If Lender and Borrower are unable to agree upon such determination or calculation within two (2) Trading Days of such disputed determination or arithmetic calculation (as the case may be) being submitted to Borrower or Lender (as the case may be), then Borrower shall, within two (2) Trading Days, submit via facsimile the disputed Calculation to an independent, reputable investment bank or accounting firm selected by Lender. Borrower shall cause the investment bank or accounting firm to perform the determinations or calculations (as the case may be) and notify Borrower and Lender of the results no later than ten (10) Trading Days from the time it receives such disputed determinations or calculations (as the case may be). Such investment bank’s or accounting firm’s determination or calculation with respect to the disputes set forth in this Section 16.2 (as the case may be) shall be binding upon all parties absent demonstrable error. The investment banker’s or accounting firm’s fee for performing such Calculation shall be paid by the incorrect party, or if both parties are incorrect, by the party whose Calculation is furthest from the correct Calculation as determined by the investment banker or accounting firm. In the event Borrower is the losing party, no extension of the Delivery Date shall be granted and Borrower shall incur all effects for failing to deliver the applicable Conversion Shares in a timely manner as set forth in this Note.

 

17.           Cancellation. After repayment or conversion of the entire Outstanding Balance (including without limitation delivery of True-Up Shares pursuant to the payment of the final Installment Amount, if applicable), this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

 

18.           Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Note.

 

19.           Assignments. Borrower may not assign this Note without the prior written consent of Lender. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Lender without the consent of Borrower.

 

20.           Time of the Essence. Time is expressly made of the essence with respect to each and every provision of this Note and the documents and instruments entered into in connection herewith.

 

21.           Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the Purchase Agreement titled “Notices.”

 

  

10

  

 

 

22.           Liquidated Damages. Lender and Borrower agree that in the event Borrower fails to comply with any of the terms or provisions of this Note, Lender’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Lender and Borrower agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Lender’s and Borrower’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).

 

[Remainder of page intentionally left blank; signature page follows]

 

 

 

 

 

 

 

 

 

  

11

  

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.

 

BORROWER:

 

AEGEA, Inc.

By:                                                                                                       

Name:                                                                                                          

Title:                                                                                                     

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

St. George Investments LLC

By: Fife Trading, Inc., Manager

By:                                                                                                             

John M. Fife, President

 

 

 

 

[Signature Page to Convertible Promissory Note]

  

  

 

ATTACHMENT 1

DEFINITIONS

For purposes of this Note, the following terms shall have the following meanings:

 

A1.           “Adjusted Outstanding Balance” means the Outstanding Balance of this Note as of the date the applicable Fundamental Default occurred less any Conversion Delay Late Fees included in such Outstanding Balance.

 

A2.           “Approved Stock Plan” means any stock option plan which has been approved by the board of directors of Borrower, pursuant to which Borrower’s securities may be issued to any employee, officer or director for services provided to Borrower.

 

A3.           “Closing Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on its principal market, as reported by Bloomberg, or, if its principal market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in “OTC Pink” by Pink OTC Markets Inc. (formerly Pink Sheets LLC), and any successor thereto. If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by Lender and Borrower. If Lender and Borrower are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 16.2. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

A4.           “Deemed Issuance” means an issuance of Common Stock that shall be deemed to have occurred on the latest possible permitted date pursuant to the terms hereof in the event Borrower fails to deliver Conversion Shares as and when required pursuant to Sections 3 or 8 of the Note. For the avoidance of doubt, if Borrower has elected or is deemed under Section 8.3 to have elected to pay an Installment Amount in Installment Conversion Shares and fails to deliver such Installment Conversion Shares, such failure shall be considered a Deemed Issuance hereunder even if an Equity Conditions Failure exists at that time or other relevant date of determination.

 

A5.           “Equity Conditions Failure” means that any of the following conditions has not been satisfied during any applicable Equity Conditions Measuring Period (as defined below): (i) with respect to the applicable date of determination all of the Conversion Shares are freely tradable under Rule 144 or without the need for registration under any applicable federal or state securities laws (in each case, disregarding any limitation on conversion of this Note); (ii) on each day during the period beginning one month prior to the applicable date of determination and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), the Common Stock is listed or designated for quotation (as applicable) on any of The New York Stock Exchange, NYSE Amex, the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTCQX or the OTCQB (each, an “Eligible Market”) and shall not have been suspended from trading on any such Eligible Market (other than suspensions of not more than two (2) Trading Days and occurring prior to the applicable date of determination due to business announcements by Borrower); (iii) on each day during the Equity Conditions Measuring Period, Borrower shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely basis as set forth in Section 9 hereof and all other shares of capital stock required to be delivered by Borrower on a timely basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating Section 12 hereof (Lender acknowledges that Borrower shall be entitled to assume that this condition has been met for all purposes hereunder absent written notice from Lender); (v) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed or designated for quotation (as applicable); (vi) on each day during the Equity Conditions Measuring Period, no public 

 

Attachment 1 to Convertible Promissory Note, Page 1

  

  

 

announcement of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated; (vii) Borrower shall have no knowledge of any fact that would reasonably be expected to cause any of the Conversion Shares to not be freely tradable without the need for registration under any applicable state securities laws (in each case, disregarding any limitation on conversion of this Note); (viii) on each day during the Equity Conditions Measuring Period, Borrower otherwise shall have been in material compliance with each, and shall not have breached any, term, provision, covenant, representation or warranty of any Transaction Document; (ix) without limiting clause (viii) above, on each day during the Equity Conditions Measuring Period, there shall not have occurred an Event of Default or an event that with the passage of time or giving of notice would constitute an Event of Default; (x) on each Installment Notice Due Date and each Installment Date, the average and median daily dollar volume of the Common Stock on its principal market for the previous twenty (20) Trading Days shall be greater than $5,000.00; and (xi) the ten (10) day average VWAP of the Common Stock is greater than $0.01.

 

A6.           “Excluded Securities” means any shares of Common Stock, options, or convertible securities issued or issuable in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any issuances pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Purchase Price Date.

 

A7.           “Free Trading” means that (a) the shares or certificate(s) representing the applicable shares of Common Stock have been cleared and approved for public resale by the compliance departments of Lender’s brokerage firm and the clearing firm servicing such brokerage, and (b) such shares are held in the name of the clearing firm servicing Lender’s brokerage firm and have been deposited into such clearing firm’s account for the benefit of Lender.

 

A8.           “Fundamental Default” means that Borrower either fails to pay the entire Outstanding Balance to Lender on or before the Maturity Date or fails to pay the Mandatory Default Amount within three (3) Trading Days of the date Lender delivers any notice of acceleration to Borrower pursuant to Section 4.2 of this Note.

 

A9.           “Fundamental Default Conversion Value” means the Adjusted Outstanding Balance multiplied by the highest Fundamental Default Ratio that occurs during the Fundamental Default Measuring Period.

 

A10.           “Fundamental Default Measuring Period” means a number of months equal to the Outstanding Balance as of the date the Fundamental Default occurred divided by the Installment Amount, with such number being rounded up to the next whole month; provided, however, that if Borrower repays the entire Outstanding Balance prior to the conclusion of the Fundamental Default Measuring Period, the Fundamental Default Measuring Period shall end on the date of repayment. For illustration purposes only, if the Outstanding Balance were equal to $125,000 as of the date a Fundamental Default occurred and if the Installment Amount were $28,500, then the Fundamental Default Measuring Period would equal five (5) months calculated as follows: $125,000/$28,500 equals 4.386, rounded up to five (5).

 

A11.           “Fundamental Default Ratio” means a ratio that will be calculated on each Trading Day during the Fundamental Default Measuring Period by dividing the Closing Sale Price for the Common Stock on a given Trading Day by the Lender Conversion Price (as adjusted pursuant to the terms hereof) in effect for such Trading Day.

 

A12.           “Fundamental Liquidated Damages Amount” means the greater of (i) (a) the quotient of the Outstanding Balance on the date the Fundamental Default occurred divided by the then-current Conversion Factor, minus (b) the Outstanding Balance on the date the Fundamental Default occurred, or (ii) the Fundamental Default Conversion Value.

 

A13.           “Fundamental Transaction” means that (y) (i) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consolidate or merge with or into (whether or not Borrower or any of its subsidiaries is the surviving corporation) any other person or entity, or (ii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other person or entity, or (iii) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the person or persons making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer), or (iv) Borrower or any of its subsidiaries shall, directly or 

 

Attachment 1 to Convertible Promissory Note, Page 2

  

  

 

indirectly, in one or more related transactions, consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares of voting stock of Borrower (not including any shares of voting stock of Borrower held by the other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other business combination), or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize, recapitalize or reclassify the Common Stock, other than an increase in the number of authorized shares of Borrower’s Common Stock, or (z) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of Borrower.

 

A14.            “Installment Amount” means the greater of (i) $14,500.00 ($58,000.00 ÷ 4), plus the sum of any accrued and unpaid interest as of the applicable Installment Date and accrued, and unpaid late charges, if any, under this Note as of the applicable Installment Date, and any other amounts accruing or owing to Lender under this Note as of such Installment Date, and (ii) the then Outstanding Balance divided by the number of Installment Dates remaining prior to the Maturity Date.

 

A15.           “Lender Conversion Share Value” means the product of the number of Lender Conversion Shares deliverable pursuant to any Lender Conversion multiplied by the Closing Sale Price of the Common Stock on the Delivery Date for such Lender Conversion.

 

A16.           “Major Default” means any Event of Default occurring under Sections 4.1(i), (iii), (iv), (xi), or (xiv) of this Note.

 

A17.           “Market Capitalization of the Common Stock” shall mean the product equal to (a) the average VWAP of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding shares of Common Stock as reported on Borrower’s most recently filed Form 10-Q or Form 10-K.

 

A18.           “Minor Default” means any Event of Default that is not a Major Default or a Fundamental Default.

 

A19.           “Optional Prepayment Liquidated Damages Amount” means an amount equal to the difference between (a) the product of (i) the number of shares of Common Stock obtained by dividing (1) the applicable Optional Prepayment Amount by (2) the Lender Conversion Price as of the date Borrower delivered the applicable Optional Prepayment Amount to Lender, multiplied by (ii) the Closing Sale Price of the Common Stock on the date Borrower delivered the applicable Optional Prepayment Amount to Lender, and (b) the applicable Optional Prepayment Amount paid by Borrower to Lender. For illustration purposes only, if the applicable Optional Prepayment Amount were $50,000.00, the Lender Conversion Price as of the date the Optional Prepayment Amount was paid to Lender was equal to $0.75 per share of Common Stock, and the Closing Sale Price of a share of Common Stock as of such date was equal to $1.00, then the Optional Prepayment Liquidated Damages Amount would equal $16,666.67 computed as follows: (a) $66,666.67 (calculated as (i) (1) $50,000.00 divided by (2) $0.75 multiplied by (ii) $1.00) minus (b) $50,000.00.

 

A20.           “Trading Day” shall mean any day on which the Common Stock is traded or tradable for any period on the Common Stock’s principal market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

Attachment 1 to Convertible Promissory Note, Page 3 

  

  

 

EXHIBIT A

 

St. George Investments LLC

303 East Wacker Drive, Suite 1200

Chicago, Illinois 60601

 

 

	
AEGEA,Inc.                                                                                                                                         

Attn: Keith Duffy

772 U.S. Highway One, Suite 200

North Palm Beach, Florida 33408

	  Date: __________________

 

 

LENDER CONVERSION NOTICE

The above-captioned Lender hereby gives notice to AEGEA, Inc., a Colorado corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 13, 2014 (the “Note”), that Lender elects to convert the portion of the Note balance set forth below into fully paid and non-assessable shares of Common Stock of Borrower as of the date of conversion specified below. Said conversion shall be based on the Lender Conversion Price set forth below. In the event of a conflict between this Lender Conversion Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Lender Conversion Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

	
  

	
A.

	
Date of Conversion:

	
____________

	
  

	
B.

	
Lender Conversion #:

	
____________

	
  

	
C.

	
Conversion Amount:

	
____________

	
  

	
D.

	
Lender Conversion Price:  _______________

	
  

	
E.

	
Lender Conversion Shares:  _______________ (C divided by D)

	
  

	
F.

	
Remaining Outstanding Balance of Note:  ____________*

 

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Lender Conversion Notice and such Transaction Documents.

 

$_________________ of the Conversion Amount converted hereunder shall be deducted from the Installment Amount(s) relating to the following Installment Date(s): __________________________________________.

Please deliver, via reputable overnight courier, a certificate representing  Lender Conversion Shares to:

Name:              _____________________________________

Address:          _____________________________________

                     _____________________________________

Sincerely,

Lender:

St. George Investments LLC

By: Fife Trading, Inc., Manager

By:                                                                                                           

John M. Fife, President

 

Exhibit A to Convertible Promissory Note, Page 1

  

  

 

EXHIBIT B

 

AEGEA, Inc.

772 U.S. Highway One, Suite 200

North Palm Beach, Florida 33408

 

 

	St. George Investments LLC 	 Date: _____________

Attn: John Fife

303 East Wacker Dr., Suite 1200

Chicago, Illinois 60601

INSTALLMENT NOTICE

 

The above-captioned Borrower hereby gives notice to St. George Investments LLC, a Utah limited liability company (the “Lender”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 13, 2014 (the “Note”), of certain Borrower elections and certifications related to payment of the Installment Amount of $_________________ due on ___________, 201_ (the “Installment Date”). In the event of a conflict between this Installment Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of Installment Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

INSTALLMENT CONVERSION AND CERTIFICATIONS

AS OF THE INSTALLMENT DATE

	
A.

	
INSTALLMENT CONVERSION

 

	
  

	
A.

	
Installment Date: ____________, 201_

	
  

	
B.

	
Installment Amount:

	
____________

	
  

	
C.

	
Portion of Installment Amount Borrower elected to pay in cash: ____________

	
  

	
D.

	
Portion of Installment Amount to be converted into Common Stock: ____________ (B minus C)

	
  

	
E.

	
Installment Conversion Price:  _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of Installment Date)

	
  

	
F.

	
Installment Conversion Shares:  _______________ (D divided by E)

	
  

	
G.

	
Remaining Outstanding Balance of Note:  ____________ *

 

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Installment Notice and such Transaction Documents.

	
B.

	
EQUITY CONDITIONS CERTIFICATION

 

	
1.

	
Market Capitalization of the Common Stock:________________

 

(Check One)

 

	
2.

	
_________ Borrower herby certifies that no Equity Conditions Failure exists as of the Installment Date.

 

	
3.

	
_________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:

 

Exhibit B to Convertible Promissory Note, Page 1

  

  

 

                                                                                                                                                                                                                                                                                                           

 

                                                                                                                                                                                                                                                                                                           

 

                                                                                                                                                                                                                                                                                                           

 

                                                                                                                                                                                                                                                                                                           

 

 

Sincerely,

 

Borrower:

 

AEGEA, Inc.

 

 

By:                                                      

 

Name:                                                  

 

Title:                                                      

 

 

Exhibit B to Convertible Promissory Note, Page 2

  

  

 

EXHIBIT C

St. George Investments LLC

303 East Wacker Drive, Suite 1200

Chicago, Illinois 60601

 

	 AEGEA, Inc.	  Date: __________________

Attn: _________________

772 U.S. Highway One, Suite 200

North Palm Beach, Florida 33408

TRUE-UP NOTICE

 

The above-captioned Lender hereby gives notice to AEGEA, Inc., a Colorado corporation (the “Borrower”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 13, 2014 (the “Note”), of True-Up Conversion Shares related to _____________, 201_ (the “Installment Date”). In the event of a conflict between this True-Up Notice and the Note, the Note shall govern, or, in the alternative, at the election of Lender in its sole discretion, Lender may provide a new form of True-Up Notice to conform to the Note. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

TRUE-UP CONVERSION SHARES AND CERTIFICATIONS

AS OF THE TRUE-UP DATE

	
1.

	
TRUE-UP CONVERSION SHARES

 

	
  

	
A.

	
Installment Date: ____________, 201_

 

	
  

	
B.

	
True-Up Date: ____________, 201_

 

	
  

	
C.

	
Portion of Installment Amount converted into Common Stock:

	
_____________

 

	
  

	
D.

	
True-Up Conversion Price:  _______________ (lower of (i) Lender Conversion Price in effect and (ii) Market Price as of True-Up Date)

 

	
  

	
E.

	
True-Up Conversion Shares:  _______________ (C divided by D)

 

	
  

	
F.

	
Installment Conversion Shares delivered: ________________

 

	
  

	
G.

	
True-Up Conversion Shares to be delivered: ________________ (only applicable if E minus F is greater than zero)

 

	
2.

	
EQUITY CONDITIONS CERTIFICATION (Section to be completed by Borrower)

 

	
  

	
A.

	
Market Capitalization of the Common Stock:________________

 

(Check One)

 

	
  

	
B.

	
_________ Borrower herby certifies that no Equity Conditions Failure exists as of the applicable True-Up Date.

 

	
  

	
C.

	
_________ Borrower hereby gives notice that an Equity Conditions Failure has occurred and requests a waiver from Lender with respect thereto. The Equity Conditions Failure is as follows:

 

Exhibit C to Convertible Promissory Note, Page 1

  

  

 

 

                                                                                                                                                                                                                                                                                                           

 

                                                                                                                                                                                                                                                                                                           

 

                                                                                                                                                                                                                                                                                                           

 

                                                                                                                                                                                                                                                                                                           

 

Sincerely,

Lender:                      

St. George Investments LLC

By: Fife Trading, Inc., Manager

By:                                                          

John M. Fife, President

ACKNOWLEDGED AND CERTIFIED BY:

 

Borrower:

 

AEGEA, Inc.

 

 

By:                                                      

 

Name:                                                  

 

Title:                                                      

Exhibit C to Convertible Promissory Note, Page 2

  

  

 

EXHIBIT D

AEGEA, Inc.

772 U.S. Highway One, Suite 200

North Palm Beach, Florida 33408

St. George Investments LLC Date: _____________

Attn: John Fife

303 East Wacker Dr., Suite 1200

Chicago, Illinois 60601

NOTICE OF EXERCISE

OF BORROWER OFFSET RIGHT

The above-captioned Borrower hereby gives notice to St. George Investments LLC, a Utah limited liability company (the “Lender”), pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on August 13, 2014 (the “Note”), of Borrower’s election to exercise the Borrower Offset Right as set forth below. In the event of a conflict between this Notice of Exercise of Borrower Offset Right and the Note, the Note shall govern. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

 

	
  

	
A.

	
Effective Date of Offset: ____________, 201_

	
  

	
B.

	
Amount of Offset:

	
____________

	
  

	
C.

	
Investor Note(s) Being Offset:  _______________

 

* Subject to adjustments for corrections, defaults, interest and other adjustments permitted by the Transaction Documents (as defined in the Purchase Agreement), the terms of which shall control in the event of any dispute between the terms of this Notice of Exercise of Borrower Offset Right and such Transaction Documents.

Sincerely,

 

Borrower:

 

AEGEA, Inc.

 

 

By:                                                      

 

Name:                                                  

 

Title:                                                      

 

 

 

Exhibit D to Convertible Promissory Note, Page 2Exhibit 10.1

Enova International, Inc.

Executive Change-in-Control Severance

and

Restrictive Covenant Agreement

(Executive Officers Other Than the CEO)

THIS EXECUTIVE CHANGE-IN-CONTROL SEVERANCE AND RESTRICTIVE COVENANT AGREEMENT (the “Agreement”) is made and entered into by and between Enova International, Inc. (the “Company”), a Delaware corporation, and __________________ (“Executive”), and is effective as of __________________, 2014 (hereinafter referred to as the “Effective Date”).

WHEREAS, the Executive is currently employed by the Company or one of its subsidiaries or affiliates and serves in the capacity as the Company’s __________; and

WHEREAS, the Executive possesses considerable experience and knowledge of the business and affairs of the Company concerning its policies, methods, personnel, operations, information technology, compliance, legal, human resources and/or marketing, and

WHEREAS, the Company is desirous of assuring insofar as possible, that it will have, and continue to have, the benefit of the Executive’s services; and the Executive is desirous of having such assurances; and

WHEREAS, the Company recognizes that circumstances may arise in which a Change in Control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty of employment without regard to the Executive’s competence or past contributions.  Such uncertainty may result in the loss of the valuable services of the Executive to the detriment of the Company and the stockholders of the Company; and

WHEREAS, both the Company and the Executive are desirous that any proposal for a Change in Control or acquisition will be considered by the Executive objectively and with reference only to the business interests of the Company and the stockholders of the Company; and

WHEREAS, the Executive will be in a better position to consider the Company’s best interests if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such Change in Control or acquisition.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements of the parties set forth in this Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1

Article 1. Definitions.  

Wherever used in this Agreement, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized:

	
(a)
	
“Agreement” means this Executive Change-in-Control Severance and Restrictive Covenant Agreement.

	
(b)
	
“Base Salary” means, at any time, the then regular annual rate of pay which the Executive is receiving as annual salary, excluding amounts: (i) received under short-term or long-term incentive or other bonus plans, regardless of whether or not the amounts are deferred, or (ii) designated by the Company as payment toward reimbursement of expenses.

	
(c)
	
“Board” means the Board of Directors of the Company.

	
(d)
	
“Cause” shall be determined solely by the Committee in the exercise of good faith and reasonable judgment, and shall mean the occurrence of any one or more of the following:

	
(i)
	
Executive’s willful and continued failure to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s Disability), after a written demand for substantial performance is delivered to the Executive that specifically identifies the manner in which the Committee believes that the Executive has not substantially performed his duties, and the Executive has failed to remedy the situation within fifteen (15) business days of such written notice from the Company; or

	
(ii)
	
The Executive’s conviction of a felony; or

	
(iii)
	
The Executive’s willful engaging in conduct that is demonstrably and materially injurious to the Company, monetarily or otherwise. However, no act or failure to act on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the action or omission was in the best interests of the Company.

	
(e)
	
“Change in Control” means an event that is a change in the ownership of the Company, a change in the effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, all as defined in Code Section 409A and guidance issued thereunder (“Code §409A”).  Notwithstanding the above, a “Change in Control” shall not include any event that is not treated under Code §409A as a change in control event with respect to Associate. Notwithstanding the foregoing, neither a change in ownership nor a change in effective control shall be considered to have occurred as a result of any acquisition or disposition of the Company’s stock by, or an increase in the percentage of the Company’s stock owned by, Cash America International, Inc. or 

2

		
any entity required to be aggregated with Cash America International, Inc. under Code Sections 414(b) or 414(c).  For clarification purposes and without limiting the foregoing, the acquisition or disposition of the Company’s stock in a public offering or sale or in a spin-off transaction by Cash America International, Inc. shall not result in a Change in Control unless required by Code §409A.

	
(f)
	
“Code” means the Internal Revenue Code of 1986, as amended.

	
(g)
	
“Committee” means the Management Development and Compensation Committee of the Board, or, if no Management Development and Compensation Committee exists, then the full Board, or a committee of Board members, as appointed by the full Board to administer this Agreement.

	
(h)
	
“Company” means the Company (including any and all subsidiaries) or any entity that becomes a successor thereto in a transaction (i) that qualifies under Code Section 368(a)(1)(F) as a mere change in identity, form or place of organization, or (ii) that is a liquidation into a parent corporation described in Code Section 332(b).

	
(i)
	
“Disability” shall have the meaning ascribed to such term in the Executive’s governing long-term disability plan, or if no such plan exists, at the discretion of the Board.

	
(j)
	
“Effective Date” means the date specified in the opening sentence of this Agreement.

	
(k)
	
“Effective Date of Termination” means the date on which a Qualifying Termination occurs, as provided in Section 2.2 herein.

	
(l)
	
“Exchange Act” means the Securities Exchange Act of 1934, as amended.

	
(m)
	
“Good Reason” means, without the Executive’s express written consent, the occurrence after a Change in Control of the Company of any one (1) or more of the following events which remains uncured after the expiration of 30 days following the delivery of written notice of such event to the Company in accordance with Section 2.7:

	
(i)
	
The assignment of the Executive to duties materially inconsistent with, and which would constitute a material diminution with respect to, the Executive’s authorities, duties, responsibilities, and status (including offices, titles, and reporting requirements) as an executive and/or officer of the Company, or a material reduction or alteration in the nature or status of the Executive’s authorities, duties, or responsibilities from those in effect as of ninety (90) calendar days prior to the Change in Control, other than any insubstantial or inadvertent act;

3

	
(ii)
	
The Company’s requiring the Executive to be based at a location in excess of thirty-five (35) miles from the location of the Executive’s principal job location or office immediately prior to the Change in Control; except for required travel on the Company’s business to an extent substantially consistent with the Executive’s then-present business travel obligations;

	
(iii)
	
The material reduction by the Company of the Executive’s Base Salary in effect on the Effective Date hereof, or as the same shall be increased from time to time;

	
(iv)
	
The failure of the Company to continue in effect any of the Company’s short- and long-term incentive compensation plans, or employee benefit or retirement plans, policies, practices, or other compensation arrangements in which the Executive participates which results in a material diminution in the incentive compensation opportunity or benefits provided to the Executive, unless such failure to continue the plan, policy, practice, or arrangement pertains to all plan participants generally; or the failure by the Company to continue the Executive’s participation therein on materially the same basis, both in terms of the amount of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control of the Company;

	
(v)
	
The failure of the Company to obtain a satisfactory agreement from any successor to the Company as a result of a Change in Control of the Company to assume and agree to perform the Company’s obligations under this Agreement, such that there is a breach of Article 8 herein; and

	
(vi)
	
A material breach of this Agreement by the Company which is not remedied by the Company within ten (10) business days of receipt of written notice of such breach delivered by the Executive to the Company.

	
(n)
	
“Qualifying Termination” means any of the events described in Section 2.2 herein, the occurrence of which gives rise to the entitlement to the payment of Severance Benefits hereunder.

	
(o)
	
“SERP” means the Enova International, Inc. Supplemental Executive Retirement Plan, as amended from time to time.

	
(p)
	
“Separation from Service” or “Separate from Service” means the Executive separates from service with the Company as determined under Code §409A.  For purposes of determining whether a Separation from Service has occurred, the “Company” shall include the Company (or the subsidiary or former subsidiary of the Company) that employs the Executive immediately before the separation (the “Employing Entity”) and all entities that would be treated as a single employer with the Employing Entity at such time under Code Sections 414(b) or (c), but substituting “at least 50 percent” instead of “at least 80 percent” each place it appears in applying such rules.

4

	
(q)
	
“Severance Benefits” mean the payment of severance compensation as provided in Section 2.3 herein.

Article 2. Severance Benefits

2.1Right to Severance Benefits. The Executive shall be entitled to receive from the Company Severance Benefits as described in Section 2.3 herein, if there has been a Change in Control of the Company and if, within twelve (12) months thereafter, the Executive Separates from Service with the Company for any reason specified in Section 2.2 herein as being a Qualifying Termination. The Executive shall not be entitled to receive Severance Benefits if he is terminated for Cause, or if his employment with the Company ends due to death, Disability, or due to a voluntary termination of employment for reasons other than as specified in Section 2.2(b) herein.

2.2Qualifying Termination. The occurrence of any one of the following events within twelve (12) months after a Change in Control of the Company shall be considered a “Qualifying Termination” and shall give rise to Executive’s entitlement to Severance Benefits under this Agreement:

	
(a)
	
Termination of the Executive’s employment by the Company without Cause; and

	
(b)
	
The Executive’s voluntary termination of employment following the initial existence of a Good Reason.

For purposes of this Agreement, a Qualifying Termination shall not include a termination of employment by reason of death or Disability, the Executive’s voluntary termination for reasons other than as specified in Section 2.2(b) herein, or the Company’s termination of Executive for Cause.

2.3Description of Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Sections 2.1 and 2.2 herein, the Company shall pay to the Executive and provide him with the following Severance Benefits:

	
(a)
	
A lump-sum amount equal to the Executive’s unpaid Base Salary, accrued vacation pay and unreimbursed business expenses, as well as all other items earned by and owed to the Executive to the extent permitted under Code §409A, through and including the Effective Date of Termination.

	
(b)
	
A lump-sum amount equal to the Executive’s annual target bonus amount, established under the annual bonus plan or plans in which the Executive is then participating, for the bonus plan year in which the Executive’s Effective Date of Termination occurs, multiplied by a fraction the numerator of which is the number of full completed months in the year from January 1 through the Effective Date of Termination, and the denominator of which is twelve (12). This payment will be in lieu of any other payment to be made to the Executive under the annual bonus plan or plans in which the Executive is then participating for the plan year.

5

	
(c)
	
A lump-sum amount equal to one (1) multiplied by the higher of: (i) the Executive’s annual rate of Base Salary in effect upon the Effective Date of Termination, or (ii) the Executive’s annual rate of Base Salary in effect on the date of the Change in Control.

	
(d)
	
A lump-sum amount equal to one (1) multiplied by the higher of: (i) the Executive’s annual target bonus established under the annual bonus plan or plans in which the Executive is then participating for the bonus plan year in which the Executive’s Effective Date of Termination occurs, or (ii) the actual annual bonus payment made to the Executive under the annual bonus plan or plans in which the Executive participated in the year preceding the year in which the Effective Date of Termination occurs.

	
(e)
	
An immediate vesting of any and all outstanding cash-based long-term incentive awards held by the Executive, as granted to the Executive by the Company as a component of the Executive’s compensation.  In addition, he shall be entitled to receive payment for any vested awards the payment value of which is to be determined after the Effective Date of Termination.  The value of all such vested awards shall be the greater of: (i) an amount calculated under the terms of the incentive award, which shall be based on the higher of actual performance goal achievement or target award level established for each award, multiplied by a fraction the numerator of which is the full number of completed calendar months in the preestablished performance period as of the Effective Date of Termination, and the denominator of which is the full number of months in the entire performance period; or (ii) the amount to which the Executive would be entitled under the terms of the long-term incentive award in the absence of this provision.  The amount, timing and form of payment of the vested awards shall be determined pursuant to the terms of the long-term incentive awards.

	
(f)
	
An immediate vesting and the lapse of all restrictions on any and all outstanding stock-based awards held by the Executive, including the maximum amount of any performance-based awards, if any, to the extent not already provided for in the award agreement.

	
(g)
	
Equivalent payment for continued medical coverage under the Company’s group health plan and/or under the Company’s supplemental executive medical expense reimbursement plan (“MERP”), if any, for a period of twelve (12) months following the date of Separation from Service, based on the same coverage level, including dependent coverage, as in effect on the Effective Date of Termination.  Executive’s dependents shall be entitled to continue coverage for the full twelve (12) month period following the Effective Date of Termination, even if the Executive dies during such period.  Each payment or premium discount provided under this subsection shall be considered a separate payment for purposes of Code §409A.  Equivalent payment under this subsection shall be provided as follows:

6

	
(i)
	
With respect to coverage other than the MERP, such equivalent payment shall be provided by:

	
(A)
	
providing reimbursement of the portion of the monthly COBRA premium in excess of the amounts (if any) that similarly-situated active employees would pay for similar coverage under the Company’s plans for the twelve (12) month period, or such shorter period, of time during which Executive has COBRA coverage, or a direct reduction in premiums in lieu of reimbursement if determined by the Company in its discretion; and

	
(B)
	
if for any reason during the twelve (12) month period following the Effective Date of Termination, Executive does not have COBRA coverage under the Company’s group health plan, the Company shall make an additional lump sum payment to Executive (or to Executive’s estate if Executive has died), equal to the reimbursement described in clause (i)(A) of this subsection for the first monthly COBRA premium times the number of months in the period from the date Executive’s COBRA coverage ends through the end of the twelfth (12th) month following the Effective Date of Termination.

	
(ii)
	
The Company shall also pay a lump-sum payment equal to the portion of the monthly MERP premium in excess of the amounts (if any) that similarly-situated active employees would pay for similar coverage under the MERP for a period of twelve (12) months.

	
(h)
	
Up to $25,000 for reimbursement of amounts paid by the Executive for reasonable outplacement services from a reputable executive search firm of the Executive’s selection (or direct payment to such search firm), to the extent that the Executive incurs such expenses (i) as a direct result of the Separation from Service and (ii) within twelve (12) months after the date of the Separation from Service.  Notwithstanding anything in this Agreement to the contrary, the Company shall provide any reimbursements described in this Section 2.3(h) to the Executive on or before the December 31 of the third calendar year following the calendar year that includes the Separation from Service.

2.4Termination for Total and Permanent Disability. Following a Change in Control, if the Executive’s employment is terminated with the Company due to Disability, the Executive’s benefits shall be determined in accordance with the Company’s retirement, insurance, and other applicable plans and programs then in effect.

7

2.5Termination for Retirement or Death. Following a Change in Control, if the Executive’s employment with the Company is terminated by reason of his death or retirement, the Executive’s benefits shall be determined in accordance with the Company’s retirement, survivor’s benefits, insurance, and other applicable programs then in effect.

2.6Termination for Cause or by the Executive Other Than for Good Reason. Following a Change in Control, if the Executive’s employment is terminated either: (i) by the Company for Cause; or (ii) voluntarily by the Executive for reasons other than as specified in Section 2.2(b) herein, the Company shall pay the Executive his full Base Salary at the rate then in effect, accrued vacation or paid time off, and other items earned by and owed to the Executive through the Effective Date of Termination, plus all other amounts to which the Executive is entitled under any compensation plans of the Company at the time such payments are due, and the Company shall have no further obligations to the Executive under this Agreement.

2.7Notice of Termination. Any termination of the Executive’s employment by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. In order to terminate for Good Reason, (i) the Executive must give the Company 30 days’ written notice of the intent to terminate for Good Reason within 90 days of the initial existence of the conditions purportedly constituting Good Reason; (ii) the termination for Good Reason shall only take effect if the Company has not cured any conditions that are identified in such notice by Executive, and that constitute Good Reason, within 30 days after such notice; and (iii) the date of termination of employment may not be later than 130 days after the date of the initial existence of the conditions purportedly constituting Good Reason.

Article 3. Form and Timing of Severance Benefits

3.1Termination Form and Timing of Severance Benefits. The Severance Benefits described in Sections 2.3(a), 2.3(b), 2.3(c) and 2.3(d) herein and the lump sum payments described in Section 2.3(g)(ii) herein shall be paid in cash to the Executive in a single lump sum as soon as practicable following the date of Separation from Service, but in no event later than ten (10) calendar days from such date.  Notwithstanding the foregoing, to the extent required by Code §409A, all or a portion of such payments shall be delayed to the date that is six months after the date of Separation from Service. The lump sum payment described in Section 2.3(g)(i)(B) herein, if applicable, shall be paid in cash to the Executive in a single lump sum on the first day of the thirteenth (13th) month following the date of Separation from Service.

3.2Withholding of Taxes. Upon payment of Severance Benefits or other amounts payable under this Agreement, the Company shall withhold from those Severance Benefits or other amounts all federal, state, city, or other taxes as legally shall be required.

8

Article 4. The Company’s Payment Obligation

4.1Payment Obligations Absolute. Except as provided in Section 9.8 herein, the Company’s obligation to make the payments and the arrangements provided for herein shall be absolute and unconditional, and shall not be affected by any circumstances including, without limitation, any offset, counterclaim, recoupment, defense, or other right which the Company may have against the Executive or anyone else. All amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and except as provided in Section 9.8 herein, the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company’s obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in Section 2.3(h) herein.

4.2Contractual Rights to Benefits. This Agreement establishes and vests in the Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder.

Article 5. Term of Agreement.  

This Agreement will commence on the Effective Date and shall continue in effect for two (2) full years. However, at the end of such two (2) year period and at the end of each additional year thereafter, the term of this Agreement shall be extended automatically for one (1) additional year, unless either party delivers written notice six (6) months prior to the end of such term, or extended term, stating that the Agreement will not be extended. In such case, the Agreement will terminate at the end of the term, or extended term, then in progress.  However, in the event of a Change in Control of the Company, the term of this Agreement shall automatically be extended for two (2) years from the date of the Change in Control.

Article 6. Executive’s Restrictive Covenants.

6.1Confidential and Proprietary Information.  Executive acknowledges that, prior to, and during the term of Executive’s employment with the Company or any of its affiliates, Executive has been, and will be, privy to confidential and proprietary information of the Company and its subsidiaries and affiliates, including former subsidiaries and affiliates (collectively, the “Enterprise”).

6.2Nondisclosure. Executive agrees to not disclose to any third party, without the prior written consent of the Board or unless necessary to perform Executive’s duties and responsibilities, the trade secrets, proprietary information, marketing strategies, business strategies, business plans, pricing data, legal analyses, financial information, insurance information, customer lists, customer information, creditor files, processes, policies, procedures, research, lists, methodologies, specifications, software, software code, computer systems, 

9

software and hardware architecture and specifications, customer information systems, point of sale systems, management information systems, software design and development plans and materials, computer information control and security plans and systems, intellectual property, contracts, business records, technical expertise and know-how, and other confidential and proprietary information and trade secrets of the Enterprise (collectively, the “Property”), which have been or will be provided to Executive by the Enterprise and are confidential and proprietary property of the Enterprise.  Executive further agrees not to use any Property to Executive’s personal benefit or the benefit of any third party.  Executive also agrees to return to the Company all such Property which is tangible upon the termination of Executive’s employment for any reason.  Notwithstanding the foregoing, the Property protected hereunder will not include any data or information that has been disclosed to the public (except where such public disclosure has been made by Executive without authorization), that has been independently developed and disclosed by others, or that otherwise enters the public domain through lawful means.  The restrictions in this Section are in addition to, and not in lieu of, any rights or remedies the Company or any of its affiliates may have available pursuant to the laws of the State of Illinois to prevent the disclosure of trade secrets and proprietary information.

6.3Nondisclosure Period.  Executive’s obligations under the nondisclosure provisions in this Article 6: (i) will apply to confidential information that does not constitute trade secrets during the term of Executive’s employment hereunder and for a period of twenty four (24) months after the date such employment terminates for any reason, and (ii) will apply to trade secrets until such Property no longer constitutes trade secrets.

6.4Nonsolicitation of Employees and Agents.  Executive agrees that, for the twenty four (24) month period following the date Executive’s employment terminates, Executive will not, directly or indirectly, solicit, recruit or induce any employee, officer, agent or independent contractor of the Enterprise to terminate such party’s engagement with the Enterprise so as to work for any person or business which competes with the Enterprise for talent; provided, the restrictions set forth in this Section will only apply to employees, officers, agents or independent contractors with whom Executive has business contact during the 12 month period ending on the date Executive’s employment terminates.

6.5Covenant Against Competition.  Executive will not at any time during Executive’s employment with the Enterprise, other than in performance of Executive’s duties for the Enterprise, and for the twelve (12) month period following the date Executive’s employment terminates, on Executive’s own behalf, or on behalf of any other person or entity, compete with the Enterprise by providing employment, management or consulting services, similar to those Executive provided to the Enterprise with respect to any products or services similar to those offered or under development by the Company or any of its affiliates or subsidiaries (collectively, the “Enova Products and Services”) anywhere within the Territory at any time during the 12 month period ending on the day Executive’s employment terminates. For purposes of this Agreement, the term “Territory” will mean any territory in which the Enterprise offers its services or products at any time during the 12 month period ending on the day Executive’s employment terminates.

10

6.6Nonsolicitation of Customers and Clients.  Executive will not at any time during Executive’s employment with the Enterprise, other than in performance of Executive’s duties for the Enterprise, and for a period of twenty-four (24) months after the day Executive’s employment terminates, on Executive’s own behalf or on behalf of any other person or entity, solicit, initiate contact, call upon, initiate communication with or attempt to initiate communication with any customer or client of the Enterprise or any representative of any customer or client of the Enterprise, with a view to providing Enova Products and Services to such clients or customers; provided, the restrictions set forth in this Section that are applicable after the day Executive’s employment terminates will apply only to customers or clients of the Enterprise with whom Executive had contact within the twelve (12) month period ending on the day Executive’s employment terminates.

6.7Enforcement of Restrictive Covenants.

	
(a)
	
Severability. Executive acknowledges and agrees that the restrictive covenants contained in this Article 6 (collectively, the “Covenants”) are reasonable and valid and do not impose limitations greater than those that are necessary to protect the business interests and confidential information of the Enterprise. Executive expressly agrees and consents that, and represents and warrants to the Company that, the Covenants will not prevent or unreasonably restrict or interfere with Executive’s ability to make a fair living after Executive’s employment terminates. The parties agree that the invalidity or unenforceability of any one or more of the Covenants, or any part thereof, will not affect the validity or enforceability of the other Covenants, all of which are inserted conditionally on their being valid in law.  In case any one or more of the Covenants contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect for any reason, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable Covenant had never been contained herein, and specifically, the parties hereto agree that in the event any court of appropriate jurisdiction should determine that any portion or provision of any Covenant is invalid, unenforceable, overly-broad or excessively restrictive, the parties agree to request such court to rewrite such Covenant in order to make such Covenant legal, enforceable and acceptable to such court to the maximum extent permissible under the law actually applied to determine the validity, legality, enforceability or reasonableness of any such Covenant. The parties agree that the Covenants contained in this Agreement are severable and divisible; that none of such Covenants depends on any other Covenant for its enforceability; that such Covenants constitute enforceable obligations between the parties; that each such Covenant will be construed as an agreement independent of any other Covenant of this Agreement; and that the existence of any claim or cause of action by one party to this Agreement against the other party to this Agreement, whether predicated on this Agreement or otherwise, will not constitute a defense to the enforcement by any party to this Agreement of any such Covenant.

11

	
(b)
	
Injunctive Relief.  Executive hereby agrees that any remedy at law for any breach of any of the Covenants will be inadequate and that the Enterprise will be entitled to apply for injunctive relief in addition to any other remedy the Enterprise might have under this Agreement.

	
(c)
	
Claim for Damages.  Executive acknowledges that, in addition to seeking injunctive relief, any of the entities comprising the Enterprise may bring a cause of action against Executive for any and all losses, liabilities, damages, deficiencies, costs (including, without limitation, court and arbitration costs), and expenses (including, without limitation, reasonable attorneys’ fees), incurred by the Enterprise and arising out of or due to any breach of any Covenant.  In addition, either party may bring an action against the other for breach of any other provision of this Agreement.

	
(d)
	
Survival.  To the extent applicable, the Covenants will survive the termination of this Agreement and/or the termination of Executive’s employment with the Company and its affiliates.  In addition, the termination of this Agreement will not terminate any other obligations or rights that, by the specific terms of this Article 6, extend beyond such termination.

	
(e)
	
Tolling.  The duration of the Covenants shall be extended for a period of time equal to any period of time in which Executive engages in conduct in violation of the Covenants.

Article 7. Legal Remedies.

7.1Dispute Resolution.  The Executive shall have the right and option to elect to have any good faith dispute or controversy arising under or in connection with this Agreement settled by litigation or arbitration. If arbitration is selected, such proceeding shall be conducted by final and binding arbitration before a panel of three (3) arbitrators in accordance with the laws and under the administration of the American Arbitration Association.

7.2Payment of Legal Fees. In the event that it shall be necessary or desirable for the Executive to retain legal counsel and/or to incur other costs and expenses in connection with the enforcement of any or all of his rights under this Agreement, the Company shall pay (or the Executive shall be entitled to recover from the Company) on or before the December 31 of the calendar year following the calendar year in which the legal costs and expenses are incurred, any reasonable attorneys’ fees, costs, and expenses in connection with the good faith enforcement of the Executive’s rights (including the enforcement of any arbitration award) that arise during the Executive’s lifetime.  This shall include, without limitation, court costs and attorney’s fees incurred by the Executive as a result of any good faith claim, action, or proceeding, including any such action against the Company arising out of, or challenging the validity or enforceability of, this Agreement or any provision hereof.  This right to receive legal fees is not subject to liquidation or exchange for another benefit, and the amount of fees or expenses provided during one calendar year will not affect the amount of fees or expenses eligible for reimbursement or provided in any other calendar year.

12

Article 8. Successors.  

The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) of all or a significant portion of the assets of the Company (including without limitation any acquirer in a Change in Control event described in subsection (e) of Article 1 hereof) by agreement, in form and substance satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the “Company” for purposes of this Agreement.  Notwithstanding the foregoing, neither a change in control of a successor not deemed to be the “Company” under Section 1(h) hereto, nor the spin-off or public offering of all or any portion of the common stock of Enova International, Inc. or its successors or affiliates, shall be considered a “Change in Control.”

Article 9. Miscellaneous.

9.1Employment Status. This Agreement is not, and nothing herein shall be deemed to create, an employment contract between the Executive and the Company or any of its subsidiaries or affiliates. The Executive acknowledges that the rights of the Company remain wholly intact to change or reduce at any time and from time to time his compensation, title, responsibilities, location, and all other aspects of the employment relationship, or to discharge him prior to a Change in Control (subject to such discharge possibly being considered a Qualifying Termination pursuant to Section 2.2).

9.2Entire Agreement. This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. In addition, the payments provided for under this Agreement in the event of the Executive’s termination of employment shall be in lieu of any severance benefits payable under any severance plan, program, or policy of the Company to which he might otherwise be entitled.

9.3Notices. All notices, requests, demands, and other communications hereunder shall be sufficient if in writing and shall be deemed to have been duly given if delivered by hand or if sent by registered or certified mail to the Executive at the last address he has filed in writing with the Company or, in the case of the Company, at its principal offices in Chicago, Illinois.

9.4Execution in Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

13

9.5Conflicting Agreements. The Executive hereby represents and warrants to the Company that his entering into this Agreement, and the obligations and duties undertaken by him hereunder, will not conflict with, constitute a breach of, or otherwise violate the terms of, any other employment or other agreement to which he is a party, except to the extent any such conflict, breach, or violation under any such agreement has been disclosed to the Board in writing in advance of the signing of this Agreement.  In addition, to the extent this Agreement conflicts, or is inconsistent, with any other agreement entered into by and between Executive and the Company or any of its affiliates, including any agreement, provision, terms or covenants included in any ‘new hire’ paperwork, the parties agree that the most stringent provision shall control.

9.6Severability. Subject to Section 6.7(a), in the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are not part of the provisions hereof and shall have no force and effect.  Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have no obligation to make any payment to the Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a federal or state court or regulatory agency of competent jurisdiction; provided, however, that such an order shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to such order.

9.7Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and by the Company, as applicable, or by the respective parties’ legal representatives or successors.  Notwithstanding the foregoing, if any provision of this Agreement would cause compensation to be includible in the Executive’s income pursuant to Code §409A, then such provision shall be null and void, and the Company shall amend the Agreement in such a way as to cause substantially similar economic results without causing such inclusion; any such amendment shall be binding on the Executive.

9.8Compensation Recovery.  Notwithstanding anything in this Agreement to the contrary, in the event that the Company is required to materially restate its financial results due to the Company’s material noncompliance with any financial reporting requirement under Federal securities laws, excluding a restatement of such financial results due solely to a change in generally accepted accounting principles in the United States or such other accounting principles that may be adopted by the Securities and Exchange Commission and are or become applicable to the Company, the Committee may, in its discretion or as necessary to comply with applicable law, require the Executive to repay the Company an amount equal to all or any portion of any incentive compensation (including stock and stock-based awards) that has been paid, issued or granted to the Executive pursuant to any incentive compensation program within the three years preceding the date on which the Company is required to prepare an accounting restatement, to the extent that such amount was based on the erroneous data and exceeded the amount that would have been paid, issued or granted to the Executive under the accounting restatement.  Such cancellation or repayment obligation shall be effective as of the date specified by the Committee.  Any repayment obligation shall be satisfied in cash or in such other form of consideration, such as shares of stock of the Company, permitted by applicable law and 

14

acceptable to the Committee, and the Committee may provide for an offset to any future payments owed by the Company or its affiliates to the Executive if necessary to satisfy the repayment obligation; provided however, that if any such offset is prohibited under applicable law, the Committee shall not permit any such offset and may require immediate repayment by the Executive.  Notwithstanding the foregoing, to the extent required to comply with applicable law, any applicable stock exchange listing requirements, and/or any compensation recovery or clawback policy adopted by the Company or any of its affiliates after the Effective Date, the Company may unilaterally amend this Section 9.8 and such amendment shall be binding on the Executive; provided, however, regardless of whether the Company makes such a unilateral amendment, the Executive shall be bound by any compensation recovery or clawback policy adopted by the Company after the Effective Date.

9.9Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of Illinois shall be the controlling law in all matters relating to this Agreement without giving effect to principles of conflicts of laws.

9.10Code §409A Compliance.  This Agreement is intended to comply with the requirements of Code §409A and guidance issued thereunder (with the severance pay and benefits to be exempt from, or in compliance with, Code §409A) and shall be construed accordingly.  Any payments or distributions payable to Executive under this Agreement upon his Separation from Service of amounts classified as “nonqualified deferred compensation” for purposes of Code §409A, and not exempt from Code §409A, shall in no event be made or commence until 6 months after the date of such Separation from Service.  Each payment under this Agreement (whether of cash, property or benefits) shall be treated as a separate payment for purposes of Code §409A.  With respect to payments or benefits provided under this Agreement that are reimbursements or in-kind payments that are not exempt from Code §409A, the amount of such payment(s) or benefit(s) during any calendar year shall not affect payment(s) or benefit(s) provided in any other calendar year, and the right to any payment(s) or benefit(s) shall not be subject to liquidation or exchange for another benefit.  Any reimbursements under this Agreement shall be paid as soon as practicable but no later than 90 days after Executive submits evidence of such expenses to the Company (which payment date shall in no event be later than the last day of the calendar year following the calendar year in which the expense was incurred).

9.11Construction.  This Agreement is intended to provide for severance payments and benefits and short-term deferrals exempt from Internal Revenue Code §409A, and shall be construed accordingly.  To the extent that this Agreement provides for amounts not eligible for such exemptions, this Agreement is intended to comply with Code §409A, and shall be construed accordingly.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

 

 

 

15

IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

 

	
ENOVA INTERNATIONAL, INC.

	
 
	
 
	
 

	
By:
	
 
	
 

	
Name:
	
 
	
 

	
 
	
 
	
Chairman of the Enova International, Inc. Management Development & Compensation Committee

 

	
EXECUTIVE:

	
 
	
 
	
 

	
Name:
	
 
	
 

 

16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}]]