Document:

icbk-ex101_10.htm

 

Exhibit 10.1

County Bancorp, Inc.
Investors Community bank

Employment Agreement

This Employment Agreement (this “Agreement”) is made and entered effective as of August 15, 2017 (the “Effective Date”), by and between County Bancorp, Inc. (the “Company”), Investors Community Bank (the “Bank” and together with the Company, the “Employer”) and Glen L. Stiteley (the “Executive,” and together with the Employer, the “Parties”).

A.The Company is the sole shareholder of the Bank.

B.The Parties have made commitments to each other on a variety of important issues concerning the Executive’s employment, including the performance that will be expected of the Executive, the compensation the Executive will be paid, how long and under what circumstances the Executive will remain employed and the financial details relating to any decision that either the Employer or the Executive may make to terminate this Agreement.

C.The Parties desire to enter into this Agreement as of the Effective Date and, to the extent provided herein, to have this Agreement supersede all of the terms of all prior agreements between the Parties, whether or not in writing.

Now, therefore, in consideration of the foregoing and the mutual promises and covenants of the Parties set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby expressly covenant and agree as follows:

1.Employment Term.  The term of this Agreement (the “Term”) and the Executive’s employment under this Agreement shall commence as of the Effective Date and end on December 31, 2018, unless sooner terminated as provided herein.  The Term shall be extended automatically for one (1) additional year beginning on January 1, 2018, and on each January 1 thereafter unless either Party notifies the other Party, by written notice delivered no later than ninety (90) days prior to such January 1, that the Term shall not be extended for an additional year.  Notwithstanding any provision of this Agreement to the contrary, if a Change of Control occurs during the Term, this Agreement shall remain in effect for the two (2)-year period following the Change of Control and shall then terminate.

2.Duties.  During the Term, the Executive shall devote the Executive’s full business time, energies and talents to serving as the Treasurer and Chief Financial Officer of the Company and the Executive Vice President – Treasurer and Chief Financial Officer of the Bank at the direction of the Company’s President / Bank’s Chief Executive Officer (“CEO”).  The Executive shall have such duties and responsibilities as may be assigned to the Executive from time to time by the CEO, which duties and responsibilities shall be commensurate with the Executive’s position, shall perform all duties assigned to the Executive faithfully and efficiently, subject to the direction of the CEO, and shall have such authorities and powers as are inherent to the undertakings applicable to the Executive’s position and necessary to carry out the responsibilities and duties required of the Executive hereunder.  Notwithstanding the foregoing provisions of this Section 2, during the Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including activities of a charitable, educational, religious or similar nature (including professional associations) to the extent such activities do not, in the reasonable judgment of the CEO, inhibit, prohibit, interfere with or conflict with the Executive’s duties under this Agreement or conflict in any material way with the business of the Employer or an Affiliate; provided, however, that the Executive shall not serve on the board of directors of any business (other than the Employer or an Affiliate) or hold any other position with any business without receiving the prior written consent of the CEO.  For purposes of this Agreement, “Affiliate” means each 

 

 

company, corporation, partnership, Financial Institution or other entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Employer, where “control” means (i) the ownership of fifty-one percent (51%) or more of the voting securities or other voting or equity interests of any corporation, partnership, joint venture or other business entity, or (ii) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation, partnership, joint venture or other business entity.

3.Compensation and Benefits.

(a)Base Salary.  For services performed by the Executive for the Employer pursuant to this Agreement during the Term, the Employer shall pay the Executive a base salary at the rate of Two Hundred Forty Thousand Dollars ($240,000.00) per year, payable in substantially equal installments in accordance with the Employer’s regular payroll practices (“Salary”).  Beginning on or about January 1, 2018, and on or about each January 1 thereafter, the Executive’s rate of Salary shall be reviewed by the Compensation Committee (the “Committee”) of the Board and, following such review, the Salary may be increased, but not decreased, with such adjusted amount then becoming the “Salary” for purposes of this Agreement.

(b)Annual Bonuses.  The Executive shall be eligible to receive performance-based annual incentive bonuses (each, the “Incentive Bonus”) from the Employer for each fiscal year ending during the Term.  Any Incentive Bonus shall be paid not later than two and one-half months following the close of the year in which it is earned, provided that any Incentive Bonus shall not be considered earned until the Board has made all determinations and taken all actions necessary to establish such Incentive Bonus.

(c)Long Term Incentive Program.  The Executive shall be eligible to participate in the Employer’s long-term equity incentive program, as determined in the sole discretion of the Committee.

(d)Other Benefits.  Executive shall be eligible to participate, subject to the terms thereof, in all other plans of the Company as may be in effect from time to time with respect to senior executives employed by the Company, as determined by the Committee (excluding participation in any non-qualified retirement or deferred compensation programs, unless specifically selected for participation by the Committee).  During the Employment Period, Executive and Executive’s dependents, as the case may be, shall be eligible to participate, subject to the terms thereof, in all tax qualified retirement and similar benefit plans and all medical, dental, disability, group and executive life, accidental death and travel accident insurance, and other similar welfare benefit plans of the Company as may be in effect from time to time with respect to employees of the Company generally.

(e)Business Reimbursements.  The Executive shall be eligible to be reimbursed by the Employer, on terms that are substantially similar to those that apply to other similarly situated and performing executives employed by the Employer, for reasonable out-of-pocket expenses for entertainment, travel, meals, lodging, and similar items that are consistent with the Employer’s expense reimbursement policy and that are actually incurred by the Executive in the promotion of the Employer’s business.

4.Termination.  Either Party may terminate the Executive’s employment and this Agreement pursuant to the terms of this Section 4.  The Executive’s right to benefits and payments, if any, for periods after the Date of Termination shall be determined in accordance with Section 5.

(a)Death or Disability.  This Agreement shall terminate immediately in the event of the Executive’s Disability or death.  In accordance with Section 13, the Company shall promptly give the Executive written notice of any such determination of the Executive’s Disability and of any decision of the Board to terminate the Executive’s employment by reason thereof.  In the event of Disability, until the Date of Termination, the Salary payable to the Executive shall be reduced dollar-for-dollar by the amount of disability benefits paid to the Executive in accordance with any disability policy or program of the Company or the Bank.

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(b)Discharge for Cause.  In accordance with the procedures hereinafter set forth, the Company may discharge the Executive from the Executive’s employment hereunder for Cause.  This Agreement shall terminate immediately as of the Date of Termination in the event the Executive is discharged for Cause.  Any discharge of the Executive for Cause shall be communicated by a written notice of termination to the Executive given in accordance with Section 13.

(c)Resignation for Good Reason.  Prior to the Executive’s termination for Good Reason, the Executive shall give the Employer written notice in accordance with Section 13 of the occurrence of the event or condition that the Executive believes constitutes a Good Reason within thirty (30) days of the initial existence of such event or condition.  If the Employer determines that the events or conditions exist as alleged by the Executive, and does not cure such events or conditions within thirty (30) days of the Executive’s written notice, then this Agreement and the Executive’s employment hereunder shall terminate on the thirtieth (30th) day following the Executive’s written notice.

(d)Discharge without Cause; Resignation without Good Reason.  Either Party may terminate this Agreement and the Executive’s employment hereunder for any reason by delivering written notice of termination in accordance with Section 13 to the other Party no fewer than thirty (30) days before the Date of Termination, which date shall be specified in the notice of termination.  The Employer may provide for an earlier Date of Termination, provided the Employer pays to the Executive the Salary that would have been earned during such notice period.  Any payment in lieu of notice pursuant to this Section 4(d) shall be made in a single lump sum on the first payroll date following the Date of Termination.

5.Rights upon Termination.  If either Party terminates this Agreement and the Executive’s employment under this Agreement, the Executive’s right to benefits, if any, for periods after the Date of Termination shall be determined in accordance with this Section 5:

(a)Accrued Obligations.  If the Date of Termination occurs during the Term for any reason, the Executive shall be entitled to the Accrued Obligations, in addition to any other benefits to which the Executive may be entitled under the following provisions of this Section 5 or the express terms of any employee benefit plan or as required by law.  Any benefits to be provided to the Executive pursuant to this Section 5(a) shall be provided within thirty (30) days after the Date of Termination; provided, however, that any benefits, incentives or awards payable as described in Section 5(e) shall be provided in accordance with the terms of the applicable plan, program or arrangement.  Except as may expressly be provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Employer following the Date of Termination for purposes of any plan, program or arrangement.

(b)Termination for Cause, Death, Disability, Voluntary Resignation without Good Reason, or Non-Renewal.  If the Date of Termination occurs during the Term and is a result of a termination for Cause, the Executive’s Disability or death, or a termination by the Executive other than for Good Reason, or if this Agreement expires due to notice of non-renewal by either Party as provided under Section 1 or at the end of a Covered Period, then, other than the Accrued Obligations, the Executive shall have no right to benefits under this Agreement (and the Employer shall have no obligation to provide any such benefits) for periods after the Date of Termination. In the event of a termination due to the executive’s death or Disability, the Employer shall also provide the Executive, or Executive’s estate or beneficiary, a Pro Rata Bonus.

(c)Termination other than for Cause or Termination for Good Reason.  If the Executive’s employment with the Employer is subject to a Termination, other than during a Covered Period, then, in addition to the Accrued Obligations, the Employer shall provide the Executive the following benefits:

(i)On the thirtieth (30th) day following the Date of Termination, the Executive shall commence receiving the Severance Amount (less any amount described in Section 5(c)(ii), with such amount to be paid in substantially equal monthly installments, equal in number to the number of 

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months utilized in determining the Severance Amount, but in no event more than twelve (12) months, with each successive payment being due on the first payroll date following the monthly anniversary of the Date of Termination.

(ii)To the extent any portion of the Severance Amount exceeds the “safe harbor” amount described in Treasury Regulation §1.409A-1(b)(9)(iii)(A), the Executive shall receive such portion of the Severance Amount that exceeds the “safe harbor” amount in a single lump sum payment payable on the thirtieth (30th) day following the Date of Termination.

(d)Termination upon a Change of Control.  If the Executive’s employment with the Employer is subject to a Termination within a Covered Period, then, in addition to Accrued Obligations, the Employer shall provide the Executive the following benefits:

(i)On the thirtieth (30th) day following the Date of Termination, the Employer shall pay the Executive a lump sum payment in an amount equal to the Severance Amount.

(e)Other Benefits.

(i)The Executive’s rights following a termination of employment with the Employer for any reason with respect to any benefits, incentives or awards provided to the Executive pursuant to the terms of any plan, program or arrangement sponsored or maintained by the Employer, whether tax-qualified or not, which are not specifically addressed herein, shall be subject to the terms of such plan, program or arrangement and this Agreement shall have no effect upon such terms except as specifically provided herein.

(ii)Except as specifically provided herein, the Employer shall have no further obligations to the Executive under this Agreement following the Executive’s termination of employment for any reason.

(f)Continuing Obligations after Termination.  If the Executive’s employment with the Employer terminates for any reason, the Employer’s obligations and the Executive’s obligations under Sections 5 through 24 shall continue after termination of the employment relationship.

6.Release.  Notwithstanding any provision of this Agreement to the contrary, no benefits owed to the Executive under Section 5 (except for the Accrued Obligations) shall be provided to the Executive unless the Executive executes (without subsequent revocation) and delivers to the Employer a general release and waiver, in a form that is substantially similar to the release attached hereto as Exhibit A (the “Release”).

7.Excise Tax Limitation.

(a)It is the intention of the Employer and the Executive that no portion of any payment under this Agreement, or payments to or for the benefit of the Executive under any other agreement or plan, be deemed to be an “Excess Parachute Payment” as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), or its successors.  It is agreed that the present value of and payments to or for the benefit of the Executive in the nature of compensation, receipt of which is contingent on a Change of Control, and to which Section 280G of the Code applies (in the aggregate “Total Payments”) shall not exceed an amount equal to one dollar less than the maximum amount which the Employer may pay without loss of deduction under Section 280G(a) of the Code.  Present value for purposes of this Agreement shall be calculated in accordance with Section 280G(d)(4) of the Code.  Within one hundred and twenty (120) days following the earlier of (A) the giving of the notice of termination or (B) the giving of notice by the Employer to the Executive of its belief that there is a payment or benefit due the Executive which will result in an Excess Parachute Payment, the Executive and the Employer, at the Employer’s expense, shall obtain the opinion of an Independent Advisor (as defined below), which opinion need not be unqualified, which sets forth (A) the 

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Executive’s applicable Base Amount (as defined under Section 280G of the Code), (B) the present value of Total Payments and (C) the amount and present value of any Excess Parachute Payments.  In the event that such opinion determines that there would be an Excess Parachute Payment, the payment hereunder or any other payment determined by such Independent Advisor to be includable in Total Payments shall be modified, reduced or eliminated as specified by the Parties shall reasonably determine, so that under the bases of calculation set forth in such opinions there will be no Excess Parachute Payment; provided that any such modification, reduction or elimination must be in accordance with Section 409A of the Code.  The provisions of this Section 7, including the calculations, notices and opinions provided for herein shall be based upon the conclusive presumption that (A) the compensation and benefits provided for in Section 5 hereof and (B) any other compensation earned by the Executive pursuant to the Employer’s compensation programs which would have been paid in any event, are reasonable compensation for services rendered, even though the timing of such payment is triggered by the Change of Control.  In the event that the provisions of Sections 280G and 4999 of the Code are repealed without succession, this Section 7 shall be of no further force or effect.

(b)The Employer and the Executive hereby recognize that the Restrictive Covenants under Section 8 have value and that the value shall be recognized in the Section 280G calculations by an allocation of a portion of the termination benefits to the restrictive covenant provisions based on the fair market value of such restrictive covenant provisions.  The Independent Advisor shall make the determination of the fair value to be allocated to the restrictive covenant provisions.

(c)For purposes of this Agreement, “Independent Advisor” shall mean an independent nationally recognized accounting firm approved by the Employer and the Executive, where such approval shall not be unreasonably withheld by either party.

8.Restrictive Covenants.

(a)Confidential Information.  The Executive acknowledges that, as a result of the Executive’s employment with the Employer, the Executive has and will produce and access to confidential and/or proprietary, non‐public information concerning the Employer or its Affiliates, including marketing materials, financial and other information concerning customers and prospective customers, customer lists, records, data, trade secrets, proprietary business information, pricing and profitability information and policies, strategic planning, commitments, plans, procedures, litigation, pending litigation and other information not generally available to the public (collectively, “Confidential Information”).  The Executive shall not directly or indirectly use, disclose, copy or make lists of Confidential Information for the benefit of anyone other than the Employer, either during the Executive’s employment with the Employer or for a period of five (5) years thereafter, except to the extent that such information is or thereafter becomes lawfully available from public sources, or such disclosure is authorized in writing by the Employer, required by law or any competent administrative agency or judicial authority, or otherwise as is reasonably necessary or appropriate in connection with the performance by the Executive of the Executive’s duties hereunder.  Unless otherwise prohibited by law, if the Executive receives a subpoena or other court order or is otherwise required by law to provide information to a governmental authority or other person concerning the activities of the Employer or any of its Affiliates, or the Executive’s activities in connection with the business of the Employer or any of its Affiliates, the Executive shall immediately notify the Employer of such subpoena, court order or other requirement and deliver forthwith to the Employer a copy thereof and any attachments and non-privileged correspondence related thereto.  The Executive shall take reasonable precautions to protect against the inadvertent disclosure of Confidential Information.  The Executive shall abide by the Employer’s reasonable policies, as in effect from time to time, respecting avoidance of interests conflicting with those of the Employer and its Affiliates.  In this regard, the Executive shall not directly or indirectly render services to any person or entity where the Executive’s service would involve the use or disclosure of Confidential Information.  The Executive shall not use any Confidential Information to guide the Executive in searching publications or other publicly available information, selecting a series of items of knowledge from unconnected sources and fitting them together to claim that the Executive did not violate any agreements set forth in this Agreement.

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The Executive shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Accordingly, the Executive has the right to disclose in confidence trade secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The Executive also has the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b). Nothing in this Agreement shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.

(b)Documents and Property.

(i)All records, files, documents and other materials or copies thereof relating to the business of the Employer or its Affiliates that the Executive prepares, receives, or uses, shall be and remain the sole property of the Employer and, other than in connection with the performance by the Executive of the Executive’s duties hereunder, shall not be removed from the premises of the Employer or any of its Affiliates without the Employer’s prior written consent, and shall be promptly returned to the Employer upon the Executive’s termination of employment for any reason, together with all copies (including copies or recordings in electronic form), abstracts, notes or reproductions of any kind made from or about the records, files, documents or other materials.

(ii)The Executive acknowledges that the Executive’s access to and permission to use the Employer’s and any Affiliate’s computer systems, networks and equipment, and all the Employer and Affiliate information contained therein, is restricted to legitimate business purposes on behalf of the Employer.  Any other access to or use of such systems, network, equipment and information is without authorization and is prohibited.  The restrictions contained in this Section 8 extend to any personal computers or other electronic devices of the Executive that are used for business purposes relating to the Employer or any Affiliate.  The Executive shall not transfer any Employer or Affiliate information to any personal computer or other electronic device that is not otherwise used for any business purpose relating to the Employer.  Upon the termination of the Executive’s employment with the Employer for any reason, the Executive’s authorization to access and permission to use the Employer’s and any Affiliate’s computer systems, networks and equipment, and any Employer and Affiliate information contained therein, shall cease.

(c)Non-Competition and Non-Solicitation.  As an essential ingredient of, and in consideration of the substantial severance benefits provided pursuant to this Agreement in addition to the Executive’s employment, or continued employment, with the Employer, the Executive shall not, during the Restricted Period, directly or indirectly do any of the following:

(i)Engage or invest in, own, manage, operate, finance, control, participate in the ownership, management, operation, or control of, be employed by, associated with, or in any manner connected with, serve as a director, officer, or consultant to, lend the Executive’s name or any similar name to, lend the Executive’s credit to or render services or advice to, any Financial Institution with an office located, or to be located at an address identified in a filing with any regulatory authority, within the Restricted Area; provided, however, that the ownership by the Executive of shares of the capital stock of any Financial Institution, which shares are listed on a securities exchange and that do not represent more than 1% of the institution’s outstanding capital stock, shall not violate any terms of this Agreement.  For purposes of clarification and not limitation or expansion, it is the parties intent that the foregoing is not intended to limit Executive from performing services outside of the Restricted Area for a person or entity solely because the person or 

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entity has a location within the Restricted Area, unless Executive’s services are directed towards activities on behalf of such person or entity within the Restricted Area;

(ii)(A) Hire, or induce or attempt to induce any employee of the Employer or its Affiliates (limited to all officer-level employees, Executive’s direct reports, or members of Executive’s department or area of responsibility) to leave the employ of the Employer or its Affiliates; (B) interfere with the relationship between the Employer or its Affiliates and any such employee of the Employer or its Affiliates; or (C) induce or attempt to induce any customer, supplier, licensee, or other business relation of the Employer or its Affiliates with whom the Executive had an ongoing business relationship while employed by the Employer or its Affiliates to cease doing business with the Employer or its Affiliates or interfere with the relationship between the Employer its Affiliates and their respective customers, suppliers, licensees, or other business relations with whom the Executive had an ongoing business relationship.

(iii)Solicit the business of any person or entity known to the Executive to be a customer of the Employer or its Affiliates, where the Executive, or any person reporting to the Executive, had accessed Confidential Information of, had an ongoing business relationship with while employed by the Employer of its Affiliates, or had made Substantial Business Efforts with respect to, such person or entity, with respect to products, activities, or services that compete in whole or in part with the products, activities, or services of the Employer its Affiliates.

(d)Remedies for Breach of Restrictive Covenant.  The Executive has reviewed the provisions of this Agreement with legal counsel, or has been given adequate opportunity to seek such counsel, and the Executive acknowledges that the covenants contained in this Section 8 are reasonable with respect to their duration, geographical area and scope.  The Executive further acknowledges that the restrictions contained in this Section 8 are reasonable and necessary for the protection of the legitimate business interests of the Employer, that they create no undue hardships, that any violation of these restrictions would cause substantial injury to the Employer and such interests, and that such restrictions were a material inducement to the Employer to enter into this Agreement.  In the event of any violation or threatened violation of these restrictions, the Employer, in addition to and not in limitation of, any other rights, remedies or damages available to the Employer under this Agreement or otherwise at law or in equity, shall be entitled to preliminary and permanent injunctive relief to prevent or restrain any such violation by the Executive and any and all persons directly or indirectly acting for or with the Executive, as the case may be.  If the Executive violates the Restrictive Covenant and the Employer brings legal action for injunctive or other relief, the Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full period of the Restrictive Covenant.  Accordingly, the Restrictive Covenant shall be deemed to have the duration specified herein computed from the date the relief is granted but reduced by the time between the period when the Restrictive Period began to run and the date of the first violation of the Restrictive Covenant by the Executive.  Notwithstanding anything contained in this Agreement to the contrary, in the event that the Executive’s employment is terminated without Cause or the Executive resigns for Good Reason and the Employer reasonably determines in good faith that the Executive has violated any provision of Section 8, then the Employer shall be entitled to discontinue any payments or benefits that would otherwise be provided to the Executive under Sections 5(c), and 5(d), and the Executive shall forfeit the Executive’s rights to the same.

(e)Other Agreements.  In the event of the existence of another agreement between the Parties that (i) is in effect during the Restricted Period, and (ii) contains restrictive covenants that conflict with any of the provisions of Section 8, then the more restrictive of such provisions from the two agreements shall control for the period during which both agreements would otherwise be in effect.

9.Defense and Indemnification.

(a)The Employer agrees that if the Executive is made a party to or involved in, or is threatened to be made a party to or otherwise to be involved in, any action, suit or proceeding, whether civil, 

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criminal, administrative or investigative (a “Proceeding”), by reason of the fact that the Executive is or was a director, officer or employee of the Employer or is or was serving at the request of the Employer as a director, officer, member, employee or agent of another corporation, limited liability corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive’s alleged action in an official capacity while serving as a director, officer, member, employee or agent, the Executive shall be indemnified and held harmless by the Employer against any and all liabilities, losses, expenses, judgments, penalties, fines and amounts reasonably paid in settlement in connection therewith, and shall be advanced reasonable expenses (including reasonable attorneys’ fees) as and when incurred in connection therewith, to the fullest extent legally permitted or authorized by the Employer’s By-laws or, if greater, by the laws of the State of Wisconsin, as may be in effect from time to time, subject to receipt by the Employer of an undertaking by the Executive or on the Executive’s behalf to repay such amount if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Employer. The rights conferred on the Executive by this Section 9 shall not be exclusive of any other rights which the Executive may have or hereafter acquire under any statute, the By-laws, agreement, vote of shareholders or disinterested directors, or otherwise.  The indemnification and advancement of expenses provided for by this Section 9 shall continue as to the Executive after the Executive ceases to be a director, officer or employee and shall inure to the benefit of the Executive’s heirs, executors and administrators.

(b)During the Term and thereafter for the duration of any statute of limitations or other period during which a claim might be successfully brought against the Executive, the Executive shall be covered to the same extent as directors by any directors’ and officers’ liability insurance policy maintained by the Employer from time to time.

10.Regulatory Suspension and Termination.

(a)If the Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Company’s and/or the Bank’s affairs by a notice served under Section 8(e)(3) (12 U.S.C. § 1818(e)(3)) or 8(g) (12 U.S.C. § 1818(g)) of the Federal Deposit Insurance Act, as amended, the Employer’s obligations under this contract shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Employer shall: (i) pay the Executive all of the compensation withheld while their contract obligations were suspended, and; (ii) reinstate any of the obligations, which were suspended.

(b)If the Executive is removed and/or permanently prohibited from participating in the conduct of the Company’s and/or the Bank’s affairs by an order issued under Section 8(e) (12 U.S.C. § 1818(e)) or 8(g) (12 U.S.C. § 1818(g)) of the Federal Deposit Insurance Act, as amended, all obligations of the Employer under this contract shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

(c)If the Company and/or the Bank is in default as defined in Section 3(x) (12 U.S.C. § 1813(x)(1)) of the Federal Deposit Insurance Act, as amended, all obligations of the Employer under this contract shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.

(d)Except to the extent the Federal Deposit Insurance Corporation (the “FDIC”) or the Board of Governors of the Federal Reserve System (each a “primary federal regulator”) determines that continuation of this contract is necessary for the continued operation of the Employer:

(e)All obligations of the Employer under this contract shall be terminated by or at the direction of a primary federal regulator at the time: (A) the FDIC enters into an agreement to provide assistance to or on behalf of the Employer under the authority contained in Section 13(c) of the Federal Deposit Insurance Act (12 U.S.C. § 1823(c)); or (B) a primary federal regulator approves a supervisory acquisition to 

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resolve problems related to the operation of the Employer; provided, however, that any rights of the parties that have already vested shall not be affected by such termination; and

(f)All obligations of the Employer under this contract shall be suspended by or at the direction of a primary federal regulator if such primary federal regulator determines that the Employer is in an unsafe or unsound condition for the period, and such suspension shall continue so long as such determination remains in effect.

(g)Any payments made to the Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with Section 18(k) (12 U.S.C. §1828(k)) of the Federal Deposit Insurance Act as amended, and any regulations promulgated thereunder.

11.No Set-Off; No Mitigation.  Except as provided herein, the Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including any set-off, counterclaim, recoupment, defense or other right which the Employer may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, and such amounts shall not be reduced whether or not the Executive obtains other employment.  

12.Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of the Executive and the successors and assigns of the Employer.  

13.Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand or by recognized commercial delivery service or if mailed within the continental United States by first class certified mail, return receipt requested, postage prepaid, addressed as follows:

(a)If to the Employer, to:

County Bancorp, Inc.

PO Box 700

860 North Rapids Rd

Manitowoc, WI, 54221

Attention:  Corporate Secretary

 

(b)If to the Executive, to:

The most recent address reflected in Employer records.

 

Such addresses may be changed by written notice sent to the other Party at the last recorded address of that Party.

14.Source of Funds.  The Company and the Bank shall be jointly and severally liable for all payments and benefits to be provided pursuant to the terms of this Agreement.  All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Company or the Bank; provided, however, that to the extent that any payments and benefits provided for in this Agreement are paid to or received by the Executive from either the Company or the Bank, such payments and benefits shall not also be an obligation of the other, with the intent that there not be any duplication of benefits.

15.Tax Withholding.  The Employer shall provide for the withholding of any taxes required to be withheld by federal, state or local law with respect to any payment in cash, shares of stock and/or other property made by or on behalf of the Employer to or for the benefit of the Executive under this Agreement or otherwise.  The 

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Employer may, at its option: (a) withhold such taxes from any cash payments owing to the Executive hereunder, (b) require the Executive to pay to the Employer in cash such amount as may be required to satisfy such withholding obligations and/or (c) make other satisfactory arrangements with the Executive to satisfy such withholding obligations.

16.Applicable Law.  All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal laws of the State of Wisconsin applicable to agreements made and wholly to be performed in such state without regard to conflicts of law provisions of any jurisdiction.

17.Mandatory Arbitration.  Except as provided in Section 8(d), if any dispute or controversy arises under or in connection with this Agreement, and such dispute or controversy cannot be settled through negotiation, the Parties shall first try in good faith to settle the dispute or controversy by mediation administered by the American Arbitration Association under its Commercial Mediation Procedures.  If such mediation is not successful, the dispute or controversy shall be settled exclusively by arbitration in accordance with the rules of the American Arbitration Association then in effect.  Judgment may be entered on the arbitrator’s award in any court having jurisdiction.  Notwithstanding the foregoing, the Company may resort to the applicable federal or state court, with proper jurisdiction, located in or nearest to Manitowoc, Wisconsin, for injunctive and such other relief as may be available in the event that the Employee engages in conduct, after termination of this Agreement, that amounts to a violation of the Wisconsin Uniform Trade Secrets Act or amounts to unlawful interference with the business expectations of the Company or its Affiliates.  The FDIC may appear at any arbitration hearing but any decision made thereunder shall not be binding on the FDIC.

18.Service of Process.  Each Party may be served with process in any manner permitted under State of Wisconsin law, or by United States registered or certified mail, return receipt requested.

19.Entire Agreement; Severability.  This Agreement constitutes the entire agreement between the Executive and the Employer concerning the subject matter hereof, and supersedes all prior negotiations, undertakings, agreements and arrangements with respect thereto, whether written or oral, with the exception of certain separate agreements between the Parties with respect to the reimbursement of certain relocation expenses.  If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement and all other provisions shall remain in full force and effect.  The various covenants and provisions of this Agreement are intended to be severable and to constitute independent and distinct binding obligations.  Without limiting the generality of the foregoing, if the scope of any covenant contained in this Agreement is too broad to permit enforcement to its full extent, such covenant shall be enforced to the maximum extent permitted by law, and the Parties hereby agree that such scope may be judicially modified accordingly.

20.No Assignment.  The Executive’s rights to receive payments or benefits under this Agreement shall not be assignable or transferable whether by pledge, creation of a security interest or otherwise, other than a transfer by will or by the laws of descent or distribution.  In the event of any attempted assignment or transfer contrary to this Section, the Employer shall have no liability to pay any amount so attempted to be assigned or transferred.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees.

21.Successors.  This Agreement shall be binding upon and inure to the benefit of the Employer, its successors and assigns (including, without limitation, any company into or with which the Employer may merge or consolidate).  The Employer agrees that it will not affect the sale or other disposition of all or substantially all of its assets unless either (a) the person or entity acquiring the assets, or a substantial portion of the assets, shall expressly assume by an instrument in writing all duties and obligations of the Employer under this Agreement, or (b) the Employer shall provide, through the establishment of a separate reserve, for 

10

 

the payment in full of all amounts which are or may reasonably be expected to become payable to the Executive under this Agreement.

22.Execution in Counterparts.  This Agreement may be executed by the Parties in two (2) or more counterparts, each of which shall be deemed to be an original, but all such counterparts shall constitute one (1) and the same instrument, and all signatures need not appear on any one (1) counterpart.

23.Code Section 409A.  

(a)To the extent any provision of this Agreement or action by the Employer would subject the Executive to liability for interest or additional taxes under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Employer.  It is intended that this Agreement will comply with, or be exempt from, Code Section 409A, and this Agreement shall be administered accordingly and interpreted and construed on a basis consistent with such intent.  Notwithstanding any provision of this Agreement to the contrary, no termination or similar payments or benefits shall be payable hereunder on account of the Executive’s termination of employment unless such termination constitutes a “separation from service” within the meaning of Code Section 409A.  For purposes of Code Section 409A, all installment payments of deferred compensation made hereunder, or pursuant to another plan or arrangement, shall be deemed to be separate payments.  To the extent any reimbursements or in-kind benefit payments under this Agreement are subject to Code Section 409A, such reimbursements and in-kind benefit payments shall be made in accordance with Treasury Regulation §1.409A-3(i)(1)(iv).  This Agreement may be amended to the extent necessary (including retroactively) by the Employer to avoid the application of taxes or interest under Code Section 409A, while maintaining to the maximum extent practicable the original intent of this Agreement.  This Section 23 shall not be construed as a guarantee of any particular tax effect for the Executive’s benefits under this Agreement and the Employer does not guarantee that any such benefits will satisfy the provisions of Code Section 409A.

(b)Notwithstanding any provision of this Agreement to the contrary, if Executive is determined to be a Specified Employee as of the Date of Termination, then, to the extent required pursuant to Code Section 409A, payments due under this Agreement that are deemed to be deferred compensation shall be subject to a six-month delay following the Date of Termination; and all delayed payments shall be accumulated and paid in a lump-sum payment as of the first day of the seventh month following the Date of Termination (or, if earlier, as of Executive’s death), with all such delayed payments being credited with interest (compounded monthly) for this period of delay equal to the prime rate in effect on the first day of such six-month period (based on the prime rate as reflected in the Wall Street Journal).  Any portion of the benefits hereunder that were not otherwise due to be paid during the six-month period following the Date of Termination shall be paid to Executive in accordance with the payment schedule established herein.

24.Amendment.  This Agreement may not be amended or modified except by written agreement signed by the Executive and the Employer.

25.Definitions.  For purposes of this Agreement, the following capitalized terms shall have the meanings set forth below:

(a)“Accrued Obligations” shall mean, as of the Date of Termination, the sum of (i) the Executive’s Salary under Section 3(a) earned through the Date of Termination to the extent not theretofore paid, (ii) the amount of any Incentive Bonus earned for any completed performance periods (which is a calendar year performance period as of the Effective Date) to the extent not theretofore paid (iii) any accrued but unpaid vacation pay for the period ending on the Date of Termination, and (iv) any incurred but unreimbursed business expenses that are properly submitted prior to or within thirty (30) days of the Date of Termination.  For the purpose of this Section 25(a), dollar amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued unless it has been specifically approved by the Board in accordance with the applicable plan, program or policy.

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(b)“Average Incentive Bonus” means the total Incentive Bonuses paid (or yet to be paid) for the 3 most recently completed performance periods divided by 3 (regardless of the number of years employed prior to the Date of Termination; provided, however, that in the event that the Date of Termination occurs during a Covered Period, the term “Average Incentive Bonus” shall mean the higher of: (i) the foregoing amount, or (ii) the Incentive Bonus paid (or yet to be paid) for the most recently completed performance period.

(c)“Cause” shall mean:

(i)the Executive’s willful and continued failure to substantially perform the Executive’s duties under this Agreement (other than as a result of physical or mental illness or injury); 

(ii)the Executive’s conviction of, or the pleading of nolo contender to, embezzlement, fraud or a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal) or such other crime or legal violation which disqualifies the Executive from serving as an executive officer or director of the Employer or otherwise substantially impairs the Executive’s ability to perform the Executive’s duties or responsibilities; 

(iii)the Executive’s engagement in one or more unsafe or unsound banking practices that have a material adverse effect on the Employer;

(iv)the Executive’s removal or permanent suspension from banking pursuant to Section 8(e) of the FDIA or any other applicable state or federal law;

(v)the Executive’s breach of a fiduciary responsibility in connection with the Executive’s duties set forth in this Agreement;

(vi)an act or omission by the Executive that leads to a material harm (financial or reputational) to the Employer or an Affiliate in the community; 

(vii)a material breach of Employer policies as may be in effect from time to time, provided such policies are uniformly applied and enforced;

(viii)the Executive’s material breach of this Agreement; or

(ix)the Executive’s knowing and material violation of any applicable material law or regulation respecting the business of the Employer that has had, or is reasonably expected to have, a material adverse effect upon the Employer, on a consolidated basis. 

For purposes of this Agreement, no act or failure to act, on the Executive’s part, shall be considered willful if it is done, or omitted to be done, by the Executive in good faith and with a reasonable belief that the Executive’s action or omission was in the best interests of the Employer.  

Further, a termination for Cause shall be deemed to have occurred if, after the Termination, facts and circumstances arising during the course of such employment or engagement are discovered that would have warranted a termination for Cause. 

Further, with respect to subsections (i), (vi), (vii), and (viii), the Executive shall be entitled to at least 30 days’ prior written notice of the Employer’s intention to terminate the Executive’s employment for Cause, which notice shall specify the grounds for the termination for Cause; and the Executive shall be provided a reasonable opportunity to cure any conduct or act, if curable, alleged as grounds for the termination for Cause.

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(d)“Change of Control” shall mean the first to occur of the following: 

(i)Individuals who, on the Effective Date, constitute the Board (the “Incumbent Directors”) cease during any 12 month period, for any reason, to constitute at least a majority of the Board; provided, that any person becoming a director subsequent to the Effective Date whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director;

(ii)Any Person is or becomes a “beneficial owner” (as defined in Exchange Act Rule 13d-3), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then Voting Securities; provided, that the event described in this paragraph (b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (i) by the Company or any Subsidiary; (ii) by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary; (iii) by any underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) pursuant to a “Non-Qualifying Transaction” (as defined in paragraph (iii), below); or

(iii)The consummation of a merger, consolidation, statutory share exchange, sale of all or substantially all of the Company’s assets, a plan of liquidation or dissolution of the Company or similar form of corporate transaction involving the Company or any of its Subsidiaries that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Transaction”), unless immediately following such Business Transaction: (i) 50% or more of the total voting power of (A) the corporation resulting from such Business Transaction (the “Surviving Corporation”), or (B) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Company Voting Securities that were outstanding immediately prior to such Business Transaction (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Transaction), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Transaction; (ii) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation); and (iii) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) following the consummation of the Business Transaction were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Transaction (any Business Transaction that satisfies all of the criteria specified in (i), (iii) and (iii) above shall be deemed to be a “Non-Qualifying Transaction”).

(iv)Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any person acquires beneficial ownership of more than 50% of the Voting Securities as a result of the acquisition of Voting Securities by the Company which reduces the number of Voting Securities outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Voting Securities that increases the percentage of outstanding Voting Securities beneficially owned by such Person, a Change in Control of the Company shall then occur.

(v)Further notwithstanding any provision in the foregoing definition of Change in Control to the contrary, in the event that any Award constitutes deferred compensation, and the 

13

 

settlement of, or distribution of benefits under such Award is to be triggered by a Change in Control, then such settlement or distribution shall be subject to the event constituting the Change in Control also constituting a “change in control event” under Code Section 409A.

(e)“Covered Period” shall mean the period beginning six (6) months prior to the effective date of the Change of Control and ending two (2) years following such date.

(f)“Date of Termination” shall mean (i) in the event of a discharge of the Executive by the Board for Cause, the date specified in such notice of termination, (ii) in the event of the Executive’s Disability, the date the Executive is determined to have incurred such Disability, (iii) in the event of the Executive’s death, the date of the Executive’s death, and (iv) in the case of any other termination of employment, the date specified in the written notice provided by the Employer or the Executive to the other.  Applicable notice period requirements are determined in accordance with Section 4.

(g)“Disability” shall mean means that (i) Executive is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) Executive is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident or health plan covering employees of the Employer.

(h)“Financial Institution” shall mean any person, firm, partnership, corporation, trust or other entity that owns or operates, a bank, savings and loan association, credit union or similar financial institution.

(i)“Good Reason” shall mean any of the following:

(i)a material and adverse change in the nature or scope of the Executive’s duties and responsibilities (notwithstanding a change in title);

(ii)a material diminution in the Executive’s Salary or Incentive Bonus target, if applicable, without the Executive’s consent;

(iii)a change, without the Executive’s written consent, in the location of the Executive’s principal place of employment with the Employer by more than twenty‐five (25) miles from the location of Employer’s main office as of the Effective Date which is not closer to the Executive’s principal residence at the time of relocation.

(j)“Monthly Compensation” shall mean one twelfth of the sum of (i) the Executive’s Salary, and (ii) the Average Incentive Bonus.

(k)“Pro Rata Bonus” means an Incentive Bonus for the year of termination, based upon the actual performance of the Employer for the year of termination and prorated based upon the number of days in the calendar year of termination preceding and including the date of termination, divided by 365; provided however, that in the event of a termination due to the Executive’s death or Disability, the term “Pro Rata Bonus” shall mean an amount determined based upon the amount accrued by the Employer as of the end of the month in which such termination occurs.

(l)“Restricted Area” means the area that encompasses a 25-mile radius from each banking or other office location of the Employer and its Affiliates for which the Executive has provided services during the 12-month period immediately preceding the executive’s termination; provided, however, 

14

 

that in the event of a Change in Control, the Restricted Area shall be determined as of the date immediately preceding the Change in Control.

(m)“Restricted Period” shall mean during the Executive’s employment with the Employer and for a period of twelve (12) months immediately following the termination of the Executive’s employment for any reason, whether such termination occurs during the Term or thereafter; provided, however, that the in the event that the Date of Termination occurs during a Covered Period the “Restricted Period” shall be reduced to the twelve (12) month period immediately following the date of the Change in Control for purposes of Section 8(c).

(n)“Restrictive Covenants” shall mean those restrictions individually and collectively set forth in Section 8.

(o)“Severance Amount” means:

(i)For any Termination that occurs during the Term and not during a Covered Period shall be an amount equal to the sum of (i) twelve (12) times the Executive’s Monthly Compensation, plus (ii) a Pro Rata Bonus; or

(ii)For any Termination that occurs during a Covered Period, an amount equal to the sum of (i) twenty-four (24) times the Executive’s Monthly Compensation, plus (ii) a Pro Rata Bonus.  

(p)“Specified Employee” means any person who is a “key employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by the Company based upon the 12-month period ending on each December 31st (such 12-month period is referred to below as the “identification period”).  If Executive is determined to be a key employee, Executive shall be treated as a Specified Employee for purposes of this Agreement during the 12-month period that begins on the April 1 following the close of the identification period.  For purposes of determining whether Executive is a key employee, “compensation” means Executive’s W-2 compensation as reported by the Company for a particular calendar year.

(q)“Substantial Business Efforts” means marketing, promotional, purchasing, sales, or solicitation activities undertaken on behalf of the Employer or an Affiliate, which include (i) in person and voice communications and (ii) either or both of (A) delivery of a quote, bid, proposal, or request for any of the foregoing or (B) visits to the site of the actual or potential business development and other similar meetings or visits (conducted alone or with other employees of the Employer or an Affiliate), where such activities would enjoy a reasonable prospect of success in the absence of any breach of this Agreement

(r)“Termination” shall mean termination of the Executive’s employment either:

(i)by the Employer or its successor, as the case may be, other than a termination for Cause or any termination as a result of the Executive’s Disability or death; or

(ii)by the Executive for Good Reason.

(s)“Voting Securities” shall mean any securities that ordinarily possess the power to vote in the election of directors without the happening of any precondition or contingency.

26.Construction.  In this Agreement, unless otherwise stated, the following uses apply: (i) references to a statute shall refer to the statute and any amendments and any successor statutes, and to all regulations promulgated under or implementing the statute, as amended, or its successors, as in effect at the relevant time; (ii) in computing periods from a specified date to a later specified date, the words “from” and “commencing 

15

 

on” (and the like) mean “from and including,” and the words “to,” “until,” and “ending on” (and the like) mean “to, and including”; (iii) references to a governmental or quasi-governmental agency, authority, or instrumentality shall also refer to a regulatory body that succeeds to the functions of the agency, authority, or instrumentality; (iv) indications of time of day shall be based upon the time applicable to the location of the principal headquarters of the Employer; (v) the words “include,” “includes,” and “including” (and the like) mean “include, without limitation,” “includes, without limitation,” and “including, without limitation,” (and the like) respectively; (vi) all references to preambles, recitals, sections, and exhibits are to preambles, recitals, sections, and exhibits in or to this Agreement; (vii) the words “hereof,” “herein,” “hereto,” “hereby,” “hereunder,” (and the like) refer to this Agreement as a whole (including exhibits); (viii) any reference to a document or set of documents, and the rights and obligations of the parties under any such documents, means such document or documents as amended from time to time, and all modifications, extensions, renewals, substitutions, or replacements thereof; (ix) all words used shall be construed to be of such gender or number as the circumstances and context require; (x) the captions and headings of preambles, recitals, sections, and exhibits appearing in or attached to this Agreement have been inserted solely for convenience of reference and shall not be considered a part of this Agreement, nor shall any of them affect the meaning or interpretation of this Agreement or any of its provisions; and (xi) all accounting terms not specifically defined herein shall be construed in accordance with GAAP.

 

In Witness Whereof, the Employer has caused this Agreement to be executed by its duly authorized officer and the Executive has signed this Agreement, effective as of the date first written above.

 

County Bancorp, Inc.

 

 

By:  /s/ Timothy J. Schneider

Name:  Timothy J. Schneider

Title:  President

 

 

 

 

Investors Community bank

 

 

By:  /s/ Timothy J. Schneider

Name:  Timothy J. Schneider

Title:  CEO

 

 

 

 

Executive

 

 

By:  /s/ Glen L. Stiteley

Name:  Glen L. Stiteley

 

 

 

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EXHIBIT A

General Release and Waiver

This General Release and Waiver (“Agreement”) is made and entered into by and between County Bancorp, Inc. (the “Company”) and Glen L. Stiteley (the “Executive”).

Whereas, the Executive and the Company desire to settle fully and amicably all issues between them, including any issues arising out of the Executive’s employment with the Company and the termination of that employment; and

Whereas, the Executive and the Company are parties to that certain Employment Agreement, made and entered into as of August 15, 2017, (the “Employment Agreement”).

Now, therefore, for and in consideration of the mutual promises contained herein, and for other good and sufficient consideration, receipt of which is hereby acknowledged, the Executive and the Company (collectively, the “Parties” and, individually, each a “Party”), intending to be legally bound, hereby agree as follows:

1.Termination of Employment.  The Executive’s employment with the Company shall terminate effective as of the close of business on _____________ (the “Date of Termination”). 

2.Compensation and Benefits.  Subject to the terms of this Agreement, the Company shall compensate the Executive under this Agreement as follows (collectively, the “Severance Payments”):

(a)Severance Payments.  _______________.

(b)Accrued Salary and PTO (Paid Time Off).  The Executive shall be entitled to a lump sum payment in an amount equal to the Executive’s earned but unpaid annual base salary and PTO (paid time off) pay or its equivalent program for the period ending on the Date of Termination, with such payment to be made on the first payroll date following the Date of Termination.

(c)Executive Acknowledgement.  The Executive acknowledges that, subject to fulfillment of all obligations provided for herein, the Executive has been fully compensated by the Company, including under all applicable laws, and that nothing further is owed to the Executive with respect to wages, bonuses, severance, other compensation, or benefits.  The Executive further acknowledges that the Severance Payments (other than (b) above) are consideration for the Executive’s promises contained in this Agreement, and that the Severance Payments are above and beyond any wages, bonuses, severance, other compensation, or benefits to which the Executive is entitled from the Company under the terms of the Executive’s employment or under any other contract or law that the Executive would be entitled to absent execution of this Agreement.

(d)Withholding.  The Severance Payments shall be treated as wages and subject to all taxes and other payroll deductions required by law.

3.Termination of Benefits.  Except as provided in Section 2 above or as may be required by law, the Executive’s participation in all employee benefit (pension and welfare) and compensation plans of the Company shall cease as of the Date of Termination.  Nothing contained herein shall limit or otherwise impair the Executive’s right to receive pension or similar benefit payments that are vested as of the Date of Termination under any applicable tax-qualified pension or other plans, pursuant to the terms of the applicable plan.

A-1

 

4.Release of Claims and Waiver of Rights.  The Executive, on the Executive’s own behalf and that of the Executive’s heirs, executors, attorneys, administrators, successors, and assigns, fully releases and discharges the Company, its predecessors, successors, parents, subsidiaries, affiliates, and assigns, and its and their directors, officers, trustees, employees, and agents, both in their individual and official capacities, and the current and former trustees and administrators of each retirement and other benefit plan applicable to the employees and former employees of the Company, both in their official and individual capacities (the “Releasees”) from all liability, claims, demands, and actions the Executive now has, may have had, or may ever have, whether currently known or unknown, as of or prior to the Executive’s execution of this Agreement (the “Release”), including liability claims, demands, and actions: 

(a)Arising from or relating to the Executive’s employment or other association with the Company, or the termination of such employment,

(b)Relating to wages, bonuses, other compensation, or benefits,

(c)Relating to any employment or change in control contract, 

(d)Relating to any employment law, including

(i)The United States and State of Wisconsin, 

(ii)The Civil Rights Act of 1964, 

(iii)The Civil Rights Act of 1991,

(iv)The Equal Pay Act,

(v)The Employee Retirement Income Security Act of 1974, 

(vi)The Age Discrimination in Employment Act (the “ADEA”),

(vii)The Americans with Disabilities Act,

(viii)Executive Order 11246, and

(ix)Any other federal, state, or local statute, ordinance, or regulation relating to employment,

(e)Relating to any right of payment for disability,

(f)Relating to any statutory or contractual right of payment, and

(g)For relief on the basis of any alleged tort or breach of contract under the common laws of the State of Wisconsin, or any other state, including defamation, intentional or negligent infliction of emotional distress, breach of the covenant of good faith and fair dealing, promissory estoppel, and negligence.

The Executive acknowledges that the Executive is aware that statutes exist that render null and void releases and discharges of any claims, rights, demands, liabilities, actions, and causes of action that are unknown to the releasing or discharging party at the time of execution of the release and discharge.  The Executive waives, surrenders, and shall forego any protection to which the Executive would otherwise be entitled by virtue of the existence of any such statutes in any jurisdiction, including the State of Wisconsin.

5.Exclusions from General Release.  Excluded from the Release are any claims or rights (i) that cannot be waived by law, (ii) to indemnification from the Company pursuant to the Employment Agreement, the Company’s bylaws, or any charter provision, (iii) to coverage under any applicable directors’ and officers’ liability insurance coverage for the Company or any affiliate, or (iv) to file a charge with an administrative agency or participate in any agency investigation.  The Executive is, however, waiving the right to recover any money in connection with a charge or investigation.  The Executive is also 

A-2

 

waiving the right to recover any money in connection with a charge filed by any other individual or by the Equal Employment Opportunity Commission or any other federal or state agency.

6.Covenant Not to Sue.

(a)A “covenant not to sue” is a legal term that means the Executive promises not to file a lawsuit in court.  It is different from the release of claims and waiver of rights contained in Section 4 above.  Besides waiving and releasing the claims covered by Section 4 above, the Executive shall never sue the Releasees in any forum for any reason covered by the Release.  Notwithstanding this covenant not to sue, the Executive may bring a claim against the Company to enforce this Agreement, to challenge the validity of this Agreement under the ADEA or for any claim that arises after execution of this Agreement.  If the Executive sues any of the Releasees in violation of this Agreement, the Executive shall be liable to them for their reasonable attorneys’ fees and costs (including the costs of experts, evidence, and counsel) and other litigation costs incurred in defending against the Executive’s suit.

(b)If the Executive has previously filed any lawsuit against any of the Releasees, the Executive shall immediately take all necessary steps and execute all necessary documents to withdraw or dismiss such lawsuit to the extent the Executive’s agreement to withdraw, dismiss, or not file a lawsuit would not be a violation of any applicable law or regulation.

7.Whistleblower Reporting and Recovery.  Notwithstanding any provision in this Release to the contrary, Executive is not waiving the right to report possible securities law violations to the Securities and Exchange Commission or other governmental agencies or the right to receive any resulting whistleblower awards

8.Representations by Executive.  The Executive warrants that the Executive is legally competent to execute this Agreement and that the Executive has not relied on any statements or explanations made by the Company or its attorneys.  The Executive acknowledges that the Executive has been afforded the opportunity to be advised by legal counsel regarding the terms of this Agreement, including the Release.  The Executive acknowledges that the Executive has been offered at least twenty-one 21 days to consider this Agreement.  After being so advised, and without coercion of any kind, the Executive freely, knowingly, and voluntarily enters into this Agreement.  The Executive acknowledges that the Executive may revoke this Agreement within seven (7) days after the Executive has signed this Agreement and acknowledges understanding that this Agreement shall not become effective or enforceable until seven (7) days after the Executive has signed this Agreement (the “Effective Date”), as evidenced by the date set forth below the Executive’s signature on the signature page hereto.  Any revocation must be in writing and directed to Chief Executive Officer.  If sent by mail, any revocation must be postmarked within the seven-day period described above and sent by certified mail, return receipt requested.

9.Restrictive Covenants.  Section 8 of the Employment Agreement (entitled “Restrictive Covenants”) shall continue in full force and effect as if fully restated herein.

10.Non-Disparagement.  The Parties shall not engage in any disparagement or vilification of the other Party, and shall refrain from making any false, negative, critical, or disparaging statements, implied or expressed, concerning the other Party, including regarding management style, methods of doing business, the quality of products and services, role in the community, or treatment of employees.  The Parties shall do nothing that would damage the other Party’s business reputation or goodwill.

A-3

 

11.Company Property.

(a)The Executive shall return to the Company all information, property, and supplies belonging to the Company or any of its affiliates, including any confidential or proprietary information, Company autos, keys (for equipment or facilities), laptop computers and related equipment, cellular phones, smart phones or PDAs (including SIM cards), security cards, corporate credit cards, and the originals and all copies of all files, materials, and documents (whether in tangible or electronic form) containing confidential or proprietary information or relating to the business of the Company or any of its affiliates.

(b)The Executive shall not, at any time on or after the Date of Termination, directly or indirectly use, access, or in any way alter or modify any of the databases, e-mail systems, software, computer systems, or hardware or other electronic, computerized, or technological systems of the Company or any of its affiliates.  The Executive acknowledges that any such conduct by the Executive would be illegal and would subject the Executive to legal action by the Company, including claims for damages and/or appropriate injunctive relief.

12.No Admissions.  The Company denies that the Company or any of its affiliates, or any of their employees or agents, has taken any improper action against the Executive, and this Agreement shall not be admissible in any proceeding as evidence of improper action by the Company or any of its affiliates or any of their employees or agents. 

13.Confidentiality of Agreement.  The Executive shall keep the existence and the terms of this Agreement confidential, except for The Executive’s immediate family members and the Executive’s legal and tax advisors in connection with services related hereto and except as may be required by law or in connection with the preparation of tax returns.

14.Non-Waiver.  The Company’s waiver of a breach of this Agreement by the Executive shall not be construed or operate as a waiver of any subsequent breach by the Executive of the same or of any other provision of this Agreement.

15.Applicable Law; Mandatory Arbitration and Equitable Relief.  All questions concerning the construction, validity, and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by Sections 16 and 17 of the Employment Agreement as if restated herein in their entirety.

16.Legal Fees.  In the event that either Party commences mediation, arbitration, litigation, or any similar action to enforce or protect such Party’s rights in accordance with and under this Agreement, the prevailing Party in any such action shall be entitled to recover reasonable attorneys’ fees and costs (including the costs of experts, evidence, and counsel) and other costs relating to such action, in addition to all other entitled relief, including damages and injunctive relief.

17.Entire Agreement.  This Agreement sets forth the entire agreement of the Parties regarding the subject matter hereof, and shall be final and binding as to all claims that have been or could have been advanced on behalf of the Executive pursuant to any claim arising out of or related in any way to the Executive’s employment with the Company and the termination of that employment.

18.Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

19.Successors.  This Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns.

A-4

 

20.Enforcement.  The provisions of this Agreement shall be regarded as divisible and separable and if any provision should be declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not be affected thereby.  If the scope of any restriction or requirement contained in this Agreement is too broad to permit enforcement of such restriction or requirement to its full extent, then such restriction or requirement shall be enforced to the maximum extent permitted by law, and the Executive hereby consents that any court of competent jurisdiction may so modify such scope in any proceeding brought to enforce such restriction or requirement.

21.Construction.  In this Agreement, unless otherwise stated, the following uses apply: (a) references to a statute refer to the statute and any amendments and any successor statutes, and to all regulations promulgated under or implementing the statute, as amended, or its successors, as in effect at the relevant time; (b) in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including, “ and the words “to,” “until,” and “ending on” (and the like) mean “to, and including”; (c) references to a governmental or quasi-governmental agency, authority, or instrumentality also refer to a regulatory body that succeeds to the functions of the agency, authority, or instrumentality; (d) the words “include,” “includes,” and “including” (and the like) mean “include, without limitation,” “includes, without limitation,” and “including, without limitation,” (and the like) respectively; (e) all references to preambles, recitals, sections, and exhibits are to preambles, recitals, sections, and exhibits in or to this Agreement; (f) the words “hereof,” “herein,” “hereto,” “hereby,” “hereunder,” (and the like) refer to this Agreement as a whole (including exhibits); (g) any reference to a document or set of documents, and the rights and obligations of the parties under any such documents, means such document or documents as amended from time to time, and all modifications, extensions, renewals, substitutions, or replacements thereof; (h) all words used shall be construed to be of such gender or number as the circumstances and context require; (i) the captions and headings of preambles, recitals, sections, and exhibits appearing in or attached to this Agreement have been inserted solely for convenience of reference and shall not be considered a part of this Agreement, nor shall any of them affect the meaning or interpretation of this Agreement or any of its provisions; and (j) all accounting terms not specifically defined herein shall be construed in accordance with GAAP.

In witness whereof, the Parties have duly executed this Agreement as of the dates set forth below their respective signatures below.

	
County Bancorp, Inc.

 

 

By:/s/ Timothy J. Schneider
Name: Timothy J. Schneider
Title: President

	
 

Executive

 

 

By:/s/ Glen L. Stiteley

 

 

A-5Exhibit 4.1

 

THIS INSTRUMENT AND THE RIGHTS
AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN LETTER AGREEMENT RE
SUBORDINATION OF SELLER PAYMENTS DATED AS OF JULY 25, 2016 (THE “SUBORDINATION AGREEMENT”), BY AND AMONG LOGICMARK
INVESTMENT PARTNERS, LLC, A DELAWARE LIMITED LIABILITY COMPANY, ET. AL, LOGICMARK, LLC, A DELAWARE LIMITED LIABILITY COMPANY, NXT-ID,
INC., A DELAWARE CORPORATION, AND EXWORKS CAPITAL FUND I, L.P., IN ITS CAPACITY AS AGENT FOR THE LENDERS (IN SUCH CAPACITY, “SENIOR
LENDER”), TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY BORROWER (AS DEFINED BELOW) AND CERTAIN OF ITS AFFILIATES PURSUANT
TO THAT CERTAIN LOAN AND SECURITY AGREEMENT DATED AS OF JULY 25, 2016 BETWEEN BORROWER THE OTHER “LOAN PARTY OBLIGORS”
FROM TIME TO TIME PARTY THERETO, AGENT AND THE “LENDERS” FROM TIME TO TIME PARTY THERETO, AS SUCH LOAN AND SECURITY
AGREEMENT HAS BEEN AND HEREAFTER MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME; SUBORDINATED LENDER, BY
ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

 

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

 

SECURED SUBORDINATED
PROMISSORY NOTE

 

	$______	Original Issue Date: November
29, 2016
	 	Amended: July 19, 2017

FOR VALUE
RECEIVED, NXT-ID, INC., a Delaware corporation (“Borrower”), hereby promises to pay to the order of ___________,
in its capacity as a Holder (“Holder,” which is sometimes referred to as the Subordinated Lender, per the definition
in Section 12(l)), pursuant to that certain Exchange Agreement dated July 19, 2017 (the “Exchange Agreement”), the
principal sum of ________ Dollars ($______) together with interest thereon as hereinafter described, in immediately available funds,
at such times as set forth below and in accordance with the terms set forth herein.

 

    	 	1	 

     

    

1.       Reference
to Purchase Agreement. This Secured Subordinated Promissory Note (this “Note”) is executed and delivered pursuant
to Exchange Agreement. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Exchange
Agreement. As used herein all references to the Purchase Agreement shall include the Exchange Agreement.

2.       Payment
of Principal. Subject to the restrictions and limitations provided herein and in the Intercreditor Agreement, all outstanding
principal and accrued interest shall be due and payable in full on July 19, 2018, unless due sooner pursuant to the terms hereof
(the “Maturity Date”).

3.     Payment of Interest.

(a)               
Except as otherwise provided herein, interest shall accrue from the original date of
issuance of this Note on the unpaid principal amount of this Note (the “Principal Balance”) at the rate of fifteen
percent (15.0%) per annum (the “Interest Rate”), which interest shall accrue on the original principal amount
of the Note, even if the outstanding principal has been reduced by conversion or otherwise. The
accrued interest will be paid quarterly in Common Stock at the then in effect Conversion Price. On the Maturity Date any accrued
but unpaid interest is payable in cash by wire transfer of immediately available funds or at Holder’s option, in shares of
Common Stock at the then in effect Conversion Price. Interest due under this Note shall be calculated on the basis of a 365-day
year and the actual number of days elapsed in any portion of a month for which interest may be due.

(b)              
From and after an Event of Default (as defined herein), interest shall accrue on the amount of the Principal Balance
hereunder at a rate equal to the Interest Rate plus five percent (5.0%) per annum.

 

4.Conversion.

 

(a)               
Conversion Generally. At any time after the Original Issue Date until all amounts due under this have been
paid in full, this Note shall be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at
any time and from time to time (subject to the conversion limitations set forth in Section 4(d) hereof). The Holder shall
effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex A
(each, a “Notice of Conversion”), specifying therein the principal amount of this Note and/or any other amounts
due under this Note to be converted and the date on which such conversion shall be effected (such date, the “Conversion
Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder,
the Holder shall not be required to physically surrender this Note to the Company unless the entire principal amount of this Note,
all accrued and unpaid interest thereon and all other amounts due under this Note have been so converted. Conversions hereunder
shall have the effect of lowering the outstanding principal amount of this Note in an amount equal to the applicable conversion
amount. The Holder and the Company shall maintain a Conversion Schedule showing the principal amount(s) and/or any other amounts
due under this Note converted and the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion
within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of
the Holder shall be controlling and determinative in the absence of manifest error. The Holder, and any assignee by acceptance
of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this
Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

 

    	 	2	 

     

    

 

(b)       Conversion
Price. The conversion price in effect on any Conversion Date shall be equal $2.00 (“Conversion Price”).
All such foregoing determinations will be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification
or similar transaction that proportionately decreases or increases the Common Stock. Nothing herein shall limit a Holder’s
right to pursue actual damages or declare an Event of Default pursuant to Section 8 hereof and the Holder shall have the right
to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant
to any other Section hereof or under applicable law.

 

(c)       Mechanics
of Conversion.

 

i.        
    Conversion Shares Issuable Upon a Conversion. The number of Conversion Shares issuable
upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the sum of all outstanding (i)
principal, (ii) interest, and (iii) any other amount due under this Note to be converted as provided in the applicable
Notice of Conversion by (y) the Conversion Price.

 

ii.            Delivery of Certificate Upon Conversion. Not later than two (2) Trading Days after each Conversion Date (the “Share
Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates
representing the Conversion Shares, which, on or after the date on which if the resale of such Conversion Shares are covered by
and are being sold pursuant to an effective Registration Statement or such Conversion Shares are eligible to be sold under Rule
144 without the need for current public information and the Company has received an opinion of counsel to such effect reasonably
acceptable to the Company (which opinion the Company will be responsible for obtaining at its own cost) shall be free of restrictive
legends and trading restrictions (other than those which may then be required by the Purchase Agreement) representing the number
of Conversion Shares being acquired or being sold, as the case may be, upon the conversion of this Note, and (B) a bank check in
the amount of accrued and unpaid interest (if the Company has elected to pay accrued interest in cash). All certificate or certificates
required to be delivered by the Company under this Section 4(d) shall be delivered electronically through DTC or another established
clearing corporation performing similar functions, unless the Company or its Transfer Agent does not have an account with DTC and/or
is not participating in the DTC Fast Automated Securities Transfer Program; then, the Company shall issue and deliver to the address
as specified in such Notice of Conversion, a certificate (or certificates), registered in the name of the Holder or its designee,
for the number of Conversion Shares to which the Holder shall be entitled. If the Conversion Shares are not being sold pursuant
to an effective Registration Statement or if the Conversion Date is prior to the date on which such Conversion Shares are eligible
to be sold under Rule 144 without the need for current public information, the Conversion Shares shall bear a restrictive legend
in the following form, as appropriate:

 

“NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144
OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

    	 	3	 

     

    

Notwithstanding the foregoing, commencing
on such date that the Conversion Shares are eligible for sale under Rule 144 subject to current public information requirements,
the Company, upon request and at the Company’s expense, shall obtain a legal opinion to allow for such sales under Rule 144.

 

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

 

iv.                       
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion
Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any other circumstance that might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however,
that such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In
the event the Holder of this Note shall elect to convert any or all of the outstanding principal or interest amount hereof, the
Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been
engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining
and or enjoining conversion of all or part of this Note shall have been sought. If the injunction is not granted, the Company shall
promptly comply with all conversion obligations herein. If the injunction is obtained, the Company must post a surety bond for
the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Note, which is subject to the injunction,
which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of
which shall be payable to the Holder to the extent it obtains judgment. In the absence of seeking such injunction, the Company
shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion.

 

    	 	4	 

     

    

v.                       
Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued shares of Common Stock a number of shares of Common Stock at least equal 100% of the
Required Minimum for the sole purpose of issuance upon conversion of this Note and payment of interest on this Note, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the
other holders of the Notes), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5,
but ignoring any Beneficial Ownership Limitations or other restrictions and/or limitations on conversions set forth herein or elsewhere)
upon the conversion of the then-outstanding principal amount of this Note and payment of interest hereunder. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and
nonassessable, and, at such times as a Registration Statement covering such shares is then effective under the Securities Act,
will be registered for public resale in accordance with such Registration Statement. For purposes of this Note, the “Required
Minimum” shall be defined as all outstanding debt plus interest and any fees divided by the Conversion Price or
the Alternate Conversion Price then in effect, as applicable. The Company shall be required to calculate the Required Minimum on
the first trading day of each month that the Note is outstanding and provide such calculation to the Holder and the transfer agent
promptly. For purposes of calculating the Required Minimum, Company shall assume that all then-outstanding principal will remain
outstanding until the Maturity Date and that all accrued but unpaid interest hereon accrues at the rate of 12% per annum is paid
on the Maturity Date and all amounts convert into shares of Common Stock at the Conversion Price or Alternate Conversion Price
then in effect.

 

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

 

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

 

    	 	5	 

     

    

(d)       Holder’s
Conversion Limitations. The Company shall not effect any conversion of principal and/or interest of this Note, and a Holder
shall not have the right to convert any principal and/or interest of this Note, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, the Holder (together with the Holder’s Affiliates, and any Persons
acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Note
with respect to which such determination is being made, but shall exclude the number of shares of Common Stock that are issuable
upon (i) conversion of the remaining, unconverted principal amount of this Note beneficially owned by the Holder or any of its
Affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company subject
to a limitation on conversion or exercise analogous to the limitation contained herein (including, without limitation, any other
Notes) beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes
of this Section 4(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. To the extent that the limitation contained in this Section 4(e) applies, the determination
of whether this Note is convertible (in relation to other securities owned by the Holder together with any Affiliates) and of which
principal amount of this Note is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion
shall be deemed to be the Holder’s determination of whether this Note may be converted (in relation to other securities owned
by the Holder together with any Affiliates) and which principal amount of this Note is convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company
each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this
paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination
as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder. For purposes of this Section 4(d), in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i)
the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (ii) a more recent
public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent
setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company
shall within two (2) Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. 
In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise
of securities of the Company, including this Note, by the Holder or its Affiliates since the date as of which such number of outstanding
shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion
of this Note held by the Holder. The Holder, upon not less than 61 days’ prior written notice to the Company, may increase
or decrease the Beneficial Ownership Limitation provisions of this Section 4(d), provided that the Beneficial Ownership Limitation
in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance
of shares of Common Stock upon conversion of this Note held by the Holder and the Beneficial Ownership Limitation provisions of
this Section 4(d) shall continue to apply. Any such increase or decrease will not be effective until the 61st day after
such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of this Section 4(e) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Note. In connection with the conversion of this Note and any other notes that
are issued in connection with the Exchange Agreement, until and unless the Company has received the necessary shareholder approval
in accordance with the Nasdaq’s corporate governance listing rules, the Company shall not be required to issue in the aggregate
more than 19.99% of the number of shares of Common Stock of the Company issued and outstanding immediately prior to the date hereof,
and in no event shall the Company be required to pay any penalties or fees of any kind due to the operation of the provisions contained
in this Section 4(d).

 

    	 	6	 

     

    

Section 5.   Certain Adjustments.

 

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

 

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

 

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

 

    	 	7	 

     

    

(d)            Fundamental
Transaction. The Company shall not, directly or indirectly, in one or more related transactions, effect any merger or consolidation
of the Company and/or or any of its Subsidiaries with and/or into another Person, without the express written consent of 90% of
the then-issued and outstanding principal amount of Notes (the “90% Amount”). If, subject to the Company obtaining
written consent of the 90% Amount, at any time while this Note is outstanding (i) the Company, directly or indirectly, in one
or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in
one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person, whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each, a “Fundamental Transaction”), then, upon any subsequent
conversion of this Note, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon
such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation in Section
4(e) on the conversion of this Note), the number of shares of Common Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Note
is convertible immediately prior to such Fundamental Transaction (without regard to any limitation in Section 4(e) on the conversion
of this Note). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one (1) share of
Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under
this Note and the other Documents (as defined in the Purchase Agreement) in accordance with the provisions of this Section 5(e)
pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without
unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the holder of this Note, deliver to the
Holder in exchange for this Note a security of the Successor Entity evidenced by a written instrument substantially similar in
form and substance to this Note that is convertible for a corresponding number of shares of capital stock of such Successor Entity
(or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon conversion of this Note (without
regard to any limitations on the conversion of this Note) prior to such Fundamental Transaction, and with a conversion price which
applies the conversion price hereunder to such shares of capital stock (but taking into account the relative value of the shares
of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares
of capital stock and such conversion price being for the purpose of protecting the economic value of this Note immediately prior
to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder.
Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that
from and after the date of such Fundamental Transaction, the provisions of this Note and the other Documents referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Note and the other Documents with the same effect as if such Successor
Entity had been named as the Company herein.

 

    	 	8	 

     

    

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

 

(f)             Notice
to the Holder.

 

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

 

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

    	 	9	 

     

    

6.             
Prepayment. Subject to the limitations contained herein, Borrower may, at its option at any time, prepay,
in whole but not in part, without premium or penalty, the Principal Balance, together with accrued but unpaid interest on such
Principal Balance to July 12, 2018.

7.             
Mandatory Prepayment. Notwithstanding Section 2 above, and subject to the Intercreditor Agreement, the total
unpaid Principal Balance due Subordinated Lender under this Note, together with all accrued and unpaid interest thereon to July
12, 2018, shall immediately be due and payable, upon the consummation of a Capital Event. As used herein, the term “Capital
Event” shall mean (a) the consummation of a transaction, whether in a single transaction or in a series of related transactions
that are consummated contemporaneously (or consummated pursuant to contemporaneous agreements), with any other Person or group
of related Persons on an arm’s-length basis, pursuant to which such party or parties (i) acquire (whether by merger, stock
purchase, recapitalization, reorganization, redemption, issuance of capital stock or otherwise) directly or indirectly substantially
all of the outstanding capital stock of the Borrower or (ii) acquire assets constituting all or substantially all of the assets
of the Borrower and its subsidiaries on a consolidated basis or (b) the consummation of a private or public offering of debt or
equity of Borrower or any subsidiary following the date hereof.

8.               Defaults.
The occurrence of any one or more of the following events shall constitute a default by Borrower under this Note and shall
be referred to as an “Event of Default”:

(a)          If
Borrower fails to pay any amount due and payable hereunder within five (5) business days of the date when due;

(b)       
      If Borrower otherwise fails to perform, keep or observe any term, provision,
condition, covenant, warranty or representation contained in this Note or the Purchase Agreement which is required to be
performed, kept or observed by Borrower;

(c)              
If an Event of Default shall have occurred under the Security Agreement (as defined below);

    	 	10	 

     

    

(d)             
If Borrower (i) becomes insolvent or generally fails to pay, or admits in writing its inability to pay debts as they
become due; (ii) applies for, consents to, or acquiesces in, the appointment of a trustee, receiver, sequestrator or other custodian
for it or any of its property, or make a general assignment for the benefit of its creditors; (iii) in the absence of such application,
consents or acquiescences, permits or suffers to exist the appointment of a trustee, receiver, sequestrator or other custodian
for it or for all of its property thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged
within 90 days, provided that it hereby expressly authorizes the Subordinated Lender to appear in any court conducting any relevant
proceeding during such 90-day period to preserve, protect and defend Subordinated Lender’s rights under this Note; or (iv)
files for or permits or suffers to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law (including, without limitation, Title 11, United States Code, as amended from
time to time), or any dissolution, winding up or liquidation proceeding, in respect of it, and, if any such case or proceeding
is not commenced by it, such case or proceeding shall be consented to or acquiesced in by it or shall result in the entry of an
order for relief or shall remain for 90 days undismissed;

(e)  
         If a default shall have occurred under any agreement between Borrower and any
other third party lender to the Borrower, in each case if such default results in the acceleration of the maturity of the
underlying indebtedness.

9.       Consequences
of Default. Subject to the Intercreditor Agreement, upon the occurrence of an
Event of Default then, at Subordinated Lender’s option, and without notice by Subordinated Lender to Borrower except as otherwise
expressly required herein:

(a)             
The total unpaid principal balance due Subordinated Lender under this Note, together with all accrued and unpaid
interest thereon, shall immediately be due and payable;

(b)             
Subordinated Lender may exercise any one or more of the rights and remedies arising under the Security Agreement;
and

(c)             
 Subordinated Lender shall have the right to exercise any and all other remedies available to it at law or in equity.

10.       Security
Agreement. The payment of this Note is secured by a subordinated security agreement
by and between Subordinated Lender and Borrower (the “Security Agreement”), the form of which is attached to this Note
as Exhibit A, of even date herewith.

11.       Subordination.
Notwithstanding anything herein to the contrary, as of the date hereof, the indebtedness evidenced by this Note is expressly subordinated
pursuant to that certain letter agreement dated as of even date herewith by and between Senior Lender and the Subordinated Lender
on behalf of the Sellers (the “Intercreditor Agreement”). Nothing herein shall be construed or interpreted to conflict
with the terms of the Intercreditor Agreement. To the extent of any conflict between the terms of the Intercreditor Agreement and
the terms of this Agreement, the terms of the Intercreditor Agreement shall control.

 

    	 	11	 

     

    

 

12.       Miscellaneous.

 

(a)             
Subordinated Lender’s remedies under this Note and the Security Agreement shall be cumulative and concurrent
and may be pursued against Borrower, the collateral described in the Security Agreement or any portion or combination of such collateral
and other security, and Subordinated Lender may resort to every other right or remedy available at law or in equity without first
exhausting the rights and remedies contained herein, all in Subordinated Lender’s sole discretion.

 

(b)             
Failure of Subordinated Lender, for a period of time or on more than one occasion, to exercise its option to accelerate
the Maturity Date shall not constitute a waiver of the right to exercise the same at any time during the continued existence of
the Event of Default or in the event of any subsequent Event of Default. Subordinated Lender shall not by any other omission or
act be deemed to waive any of its rights or remedies hereunder unless such waiver be in writing and signed by Subordinated Lender,
and then only to the extent specifically set forth therein. A waiver in connection with one event shall not be construed as continuing
or as a bar to or waiver of any right or remedy in connection with a subsequent event.

 

(c)             
Borrower hereby: (i) waives and renounces any and all exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof; (ii) waives presentment and demand
for payment, notices of nonpayment and of dishonor, protest of dishonor, and notice of protest; (iii) consents to any and all extensions
of time, renewals, waivers, or modifications that may be granted by Subordinated Lender with respect to the payment or other provisions
hereof, and to the release of any security at any time given for the payment hereof, or any part thereof, with or without substitution,
and to the release of any person or entity liable for the payment hereof; and (iv) consents to the addition of any and all other
makers, endorsers, guarantors, and other obligors for the payment hereof, and to the acceptance of any and all other security for
the payment hereof, and agrees that the addition of any such obligors or security shall not affect the liability of Borrower, any
guarantor and all others now liable for all or any part of the obligations evidenced hereby.

 

(d)            
All payments made on account of the indebtedness evidenced by this Note shall be made in currency and coin of the
United States of America which shall be legal tender for public and private debts at the time of payment. Said payments and prepayments
are to be made via wire transfer pursuant to Subordinated Lender’s instructions, or at such place as Subordinated Lender
may, from time to time, in writing appoint.

 

(e)             
Reserved.

 

(f)   
  Time is of the essence hereof.

 

(g)            
Following an Event of Default, Borrower shall permit Subordinated Lender, its representatives and agents, upon reasonable
notice and during normal business hours, to (i) visit and inspect any of the properties of Borrower,
(ii) examine the corporate and financial records of Borrower and make copies thereof or extracts therefrom and (iii) discuss the
affairs, finances and accounts of any such corporations with the directors, officers, managers, key employees, consultants and
independent accountants of Borrower.

 

    	 	12	 

     

    

 

(h)            This Note and the rights and obligations of all parties hereunder shall be governed, construed and enforced in accordance
with the internal laws of the State of Delaware, excluding any choice of law rules which may direct the application of the laws
of another jurisdiction.

 

(i)              The
parties hereto intend and believe that each provision in this Note comports with all applicable law. However, if any provision
of this Note is found by a court of law to be in violation of any applicable law, and if such court should declare such provision
of this Note to be unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such provisions
shall be given full force and effect to the fullest possible extent that it is legal, valid and enforceable, then the remainder
of this Note shall be construed as if such unlawful, void or unenforceable provision were not contained therein, and that the
rights, obligations and interests of Borrower and Subordinated Lender under the remainder of this Note shall continue in full
force and effect.

 

(j)              To
induce Subordinated Lender to accept this Note, Borrower irrevocably agrees that, subject to Subordinated Lender’s
sole and absolute discretion, all actions or proceedings in any way, manner or respect, arising out of, from or related to
this Note or the Security Agreement shall be litigated in courts having situs within Cook County, Illinois. Borrower hereby
consents and submits to the jurisdiction of any local, state or federal court located within said county. Borrower hereby
waives any right it may have to transfer or change the venue of any litigation brought against Borrower by Subordinated
Lender in accordance with this paragraph.

 

(k)       BORROWER
IRREVOCABLY, UNCONDITIONALLY AND VOLUNTARILY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH OR HEREWITH OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH
OR RELATED TO THIS NOTE OR THE SECURITY AGREEMENT OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT AND AGREES THAT SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

(1)            The
term “Subordinated Lender” as used herein, shall mean such endorsee, assignee, or other transferee or successor to
Subordinated Lender then becoming the holder of this Note. This Note shall inure to the benefit of Subordinated Lender and its
successors and assigns and shall be binding upon the undersigned and its successors and assigns. The term “Borrower”
as used herein, shall include Borrower’s successors, assigns, legal and personal representatives, executors, administrators,
devisees, legatees and heirs.

 

    	 	13	 

     

    

 

(m)            All
notices, requests, demands and other communications between the parties required or permitted to be given hereunder shall be
given in the manner set forth in the Purchase Agreement.

 

(n)              The
non-prevailing party shall pay to the prevailing party the reasonable costs and expenses (including, without limitation, reasonable
attorneys’ fees) incurred by the prevailing party in any litigation, contest, dispute, suit, proceeding or action in any
way relating to this Note or any attempt by Subordinated Lender to enforce its rights against Borrower by virtue of this Note.

 

(o)               It
is the intention of the Borrower and the Subordinated Lender to conform strictly to all applicable usury laws now or hereafter
in force, and any interest payable under this Note shall be subject to reduction to the amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters.
If the maturity of this Note is accelerated by reason of an election by the Subordinated Lender hereof resulting from an Event
of Default, voluntary prepayment by the Borrower or otherwise, then earned interest may never include more than the maximum amount
permitted by law, computed from the date hereof until payment, and any interest in excess of the maximum amount permitted by law
shall be canceled automatically and, if theretofore paid, shall at the option of the Subordinated Lender hereof either be rebated
to the Borrower or credited on the outstanding principal amount of this Note, or if this Note has been paid, then the excess shall
be rebated to the Borrower. The aggregate of all interest (whether designated as interest, service charges, points or otherwise)
contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the maximum legal rate upon the
unpaid principal balance of this Note remaining unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to the Borrower
or credited on the outstanding principal amount of this Note, or if this Note has been repaid, then such excess shall be rebated
to the Borrower.

 

 

[Signature Page Follows]

 

 

    	 	14	 

     

    

 

IN WITNESS WHEREOF, the undersigned
has caused this Secured Subordinated Promissory Note to be signed and executed as of the date first written above.

 

	
        NXT-ID, INC.

         

	
        By:_________________________________

        Name:

        Title:

        

 

 

    	 	15	 

     

    

 

 

Exhibit A

Security Agreement

 

(see attached)

 

     

     

    

 

 

THIS INSTRUMENT AND THE RIGHTS AND
OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN LETTER AGREEMENT RE SUBORDINATION
OF SELLER PAYMENTS DATED AS OF JULY 25, 2016 (THE “SUBORDINATION AGREEMENT”), BY AND AMONG LOGICMARK INVESTMENT PARTNERS,
LLC, A DELAWARE LIMITED LIABILITY COMPANY, ET. Al, LOGICMARK, LLC, A DELAWARE LIMITED LIABILITY COMPANY, NXT-ID, INC., A DELAWARE
CORPORATION, AND EXWORKS CAPITAL FUND I, L.P., IN ITS CAPACITY AS AGENT FOR THE LENDERS (IN SUCH CAPACITY, “SENIOR LENDER”),
TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY BORROWER (AS DEFINED BELOW) AND CERTAIN OF ITS AFFILIATES PURSUANT TO THAT CERTAIN
LOAN AND SECURITY AGREEMENT DATED AS OF JULY 25, 2016 BETWEEN BORROWER THE OTHER “LOAN PARTY OBLIGORS” FROM TIME TO
TIME PARTY THERETO, AGENT AND THE “LENDERS” FROM TIME TO TIME PARTY THERETO, AS SUCH LOAN AND SECURITY AGREEMENT HAS
BEEN AND HEREAFTER MAY BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME; SUBORDINATED LENDER, BY ITS ACCEPTANCE
HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

SUBORDINATED SECURITY AGREEMENT

THIS SUBORDINATED
SECURITY AGREEMENT (this “Agreement”), is dated as of July 25, 2016 by NXT-ID, INC., a Delaware corporation
(“Nxt-ID”), and LOGICMARK, LLC, a Delaware limited liability company (together with Nxt-ID, “Borrower”),
to ______________, in its capacity as Seller Representative on behalf of the Sellers (as defined below) (collectively, “Subordinated
Lender”).

WHEREAS,
this Agreement is executed and delivered pursuant to that certain Interest Purchase Agreement, dated as of May 17, 2016, by and
among (a) Borrower, (b) Seller Representative, and (c) LOGICMARK INVESTMENT PARTNERS, LLC, a Delaware limited liability company
(“Original Holder”), GOTTLIEB FAMILY, LLC, a Virginia limited liability company, BEN CORNETT, KEVIN O’CONNOR
and GENERATION3 PARTNERS I, LLC, a Delaware limited liability company (collectively, the “Sellers”), as amended by
that certain First Amendment to Interest Purchase Agreement, dated as of July 7, 2016, by and between Borrower and Seller Representative
(as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with its terms, the “Purchase
Agreement”);

WHEREAS,
in accordance with the Purchase Agreement, Borrower has issued to the Original Holder (on
behalf of the Sellers) that certain Secured Promissory Note dated as of the date hereof in the original principal amount of $2,500,000
(the “Subordinated Note”); and

 

    		A-1 	 

     

    

 

WHEREAS, on or about
November [RC], 2016, the Original Holder assigned a portion the Note to various parties and the Company reissued the Note to the
various parties (the reissued Note are collectively referred to herein as the “Notes”) pursuant to that certain
Exchange Agreement dated November [__], 2016.

 

WHEREAS, as security for
the discharge of the Borrower’s obligations to the Subordinated Lender under the Subordinated Note together with the other
notes issued pursuant to the Exchange Agreement, the Borrower is hereby granting the Subordinated Lender a subordinated security
interest in all of the assets of the Borrower as more fully set forth herein.

NOW, THEREFORE,
in consideration of the foregoing recitals and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.                 
Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Subordinated Note, Exchange Agreement or the Purchase Agreement, as the case may be. As used herein, “Senior
Loan Agreement” shall mean that certain Loan and Security Agreement, dated as of the date hereof (as amended or otherwise
modified from time to time in accordance with the terms thereof), by and among Borrower, the other parties thereto as “Loan
Party Obligors”, each of the “Lenders” party thereto from time to time and Senior Lender in its capacity as agent
for such Lenders.

2.                 
Grant. Subject to Section 4 hereof, Borrower hereby grants to Subordinated Lender a security interest in and to
any and all property of Borrower, of any kind or description. tangible or intangible, whether now existing or hereafter arising
or acquired, it being acknowledged by Subordinated Lender that the security interest being granted hereunder is subordinate to
a certain first lien and security interest in Borrower’s assets held by Senior Lender, including, but not limited to, the
following (collectively, the “Collateral”): 

 

(a)              All Accounts; Chattel Paper; Electronic Chattel Paper; Commercial Tort Claims; Deposit Accounts; Documents; Equipment;
Farm Products; Fixtures; General Intangibles, including Payment Intangibles; Goods; Instruments; Inventory; Software; Financial
Assets; Securities; Investment Property; Letter of Credit Rights and Supporting Obligations; Security Entitlements, as each of
these terms are defined by the Uniform Commercial Code as enacted and construed in the State of Delaware (the “UCC”),
and all substitutions, additions, accessories, replacements, parts, exchanges, increases, tools, manuals, warranties, warranty
claims, insurance policies and proceeds related to any of the foregoing, it being the intent of Borrower to grant to Subordinated
Lender a security interest in all of Borrower’s present and future personal property wheresoever located;

 

(b)           All
products, replacements, additions, substitutions and renewals of and to the Collateral

 

(c)              Any
and all after-acquired right, title and interest in and to any of the Collateral;

(d)           All
cash and non-cash proceeds from the sale, transfer or pledge of any or all of the Collateral; and

(e)           All
insurance policies and proceeds insuring the foregoing Collateral or any part thereof, including unearned premiums.

    		A-2	 

     

    

3.                 
Security for Liabilities. This Agreement secures, and the Collateral is security for, the prompt payment in
full when due, whether at stated maturity, by acceleration or otherwise, and performance of all obligations of Borrower now or
hereafter existing under the Subordinated Note (collectively, the “Secured Liabilities”).

4.                 
Subordination. Notwithstanding anything herein to the contrary, as of the date hereof, the indebtedness evidenced
by the Subordinated Note and the security interest granted by this Agreement are expressly subordinated pursuant to that certain
letter agreement dated as of even date herewith by and between Senior Lender and the Subordinated Lender on behalf of the
Sellers (the “Intercreditor Agreement”). Nothing herein shall be construed or interpreted to conflict with the
terms of the Intercreditor Agreement. To the extent of any conflict between the terms of the Intercreditor Agreement and the terms
of this Agreement, the terms of the Intercreditor Agreement shall control.

5.                 
Representations, Warranties and Covenants. Borrower represents, warrants and covenants that:

(a)               
This Agreement creates a valid security interest in the Collateral.

(b)              
Borrower has full title to the Collateral, free of all security interests, liens
and encumbrances other than the security interests granted herein and pursuant to the Senior Loan Agreement and the Permitted Liens
(as defined in the Senior Loan Agreement).

(c)               
Borrower will defend the Collateral against the claims and demands of all persons
other than Senior Lender and/or Subordinated Lender and will not do or permit anything to be done that may impair the security
interest of Senior Lender, Subordinated Lender or the value of the Collateral as collateral hereunder without the prior written
consent of Subordinated Lender.

(d)              
Unless and until a Default (as defined herein) shall have occurred, Borrower may
have possession of the Collateral and use the same in any lawful manner consistent with the provisions of this Agreement, the Senior
Loan Agreement, and all policies of insurance thereon.

(e)               
Except for the Permitted Liens and the Senior Loan Agreement, Borrower will not permit the Collateral to be encumbered,
provided that Borrower shall have the right in the ordinary course of Borrower’s business and subject to the terms and conditions
of the Senior Loan Agreement to replace any items of personal property included in the Collateral with similar items if (i) such
replacements have value and utility equivalent or superior to that existing when the security interest created hereby first attached
hereto and (ii) Subordinated Lender obtains a lien on or security interest in such replacements.

    		A-3	 

     

    

Borrower will
from time to time execute or cause to be executed such additional security agreements, financing statements, renewals thereof and
other documents (and pay the cost of filing and recording the same in all public offices reasonably
deemed necessary by Subordinated Lender) and do such other acts (including the deposit with Subordinated Lender of any certificate
of title issuable with respect to the Collateral, with an official notation thereon of the security interest hereunder) to establish,
maintain and evidence Subordinated Lender’s subordinated security interest in the Collateral, free of all other liens and
claims other than the Subordinated Note, the Senior Loan Agreement and the Permitted Liens. Borrower agrees that a carbon, photographic
or photostatic copy, or other reproduction, of this Agreement or of any financing statement, shall be sufficient to evidence Subordinated
Lender’s security interest. Borrower hereby irrevocably authorizes Subordinated Lender at any time, and from time to time,
to file in any jurisdiction any initial financing statements and amendments thereto without the signature or consent of Borrower
that (i) indicate the Collateral (A) is comprised of all assets of Borrower or words of similar effect, regardless of whether any
particular asset comprising a part of the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed, or (B) as being of an equal or lesser scope or within greater
detail as the grant of the security interest set forth herein, and (ii) contain any other information required by Section 5 of
Article 9 of the Uniform Commercial Code of the jurisdiction wherein such financing statement or amendment is filed regarding the
sufficiency or filing office acceptance of any financing statement or amendment. Borrower further ratifies and affirms its authorization
for any financing statements and/or amendments thereto, executed and filed by Subordinated Lender in any jurisdiction prior to
the date of this Agreement. In addition, Borrower shall make appropriate entries on its books and records disclosing Subordinated
Lender’s security interests in the Collateral.

(g)              
Borrower will cause all taxes and assessments upon the Collateral or upon its use or operation to be paid in full
when due.

(h)              
Borrower will at all times until satisfaction in full of the Secured Liabilities, cause the Collateral to be insured
against risks of fire, vandalism, theft, and other such risks as Lender may reasonably require in the amount of its full insurable
value with an insurer or insurers reasonably acceptable to Subordinated Lender, subject to the rights of Senior Lender. Subject
to the rights of Senior Lender under the Senior Loan Agreement and the Intercreditor Agreement, Borrower will forthwith remit to
Subordinated Lender, in the form received, with any endorsements necessary to effect payment thereof to Subordinated Lender, any
proceeds of insurance required or maintained pursuant to this Agreement which Borrower, or any affiliate of Borrower may receive
or which Borrower and any other party or parties may receive. All policies of insurance shall contain a standard lender loss payable
clause in favor of Subordinated Lender, shall provide that Subordinated Lender’s interest therein shall not be invalidated
by the act, omission or neglect of anyone other than Subordinated Lender and for at least ten (10) days’ prior written notice
of cancellation to Subordinated Lender. Borrower shall furnish Subordinated Lender with evidence of such insurance or other evidence
reasonably satisfactory to Subordinated Lender as to compliance with the provisions of this paragraph prior to the expiration or
cancellation of any such insurance. Subject to the Intercreditor Agreement and the rights of Senior Lender, Subordinated Lender
may act as attorney in fact for Borrower in making, adjusting and settling claims under and canceling such insurance and endorsing
Borrower’s name on any drafts drawn by insurers of the Collateral. If Borrower shall fail to
provide such insurance or fail to renew the same upon expiration thereof, Borrower agrees that Subordinated Lender, at the sole
cost of Borrower, may obtain such insurance as Subordinated Lender shall deem reasonably appropriate, and the entire cost thereof
shall be added to the Secured Liabilities.

    		A-4	 

     

    

(i)                
As used herein, “full insurable value” means the actual replacement cost of the Collateral (without taking
into account any depreciation), determined annually by an insurer or by Borrower or, at the request of Subordinated Lender, by
an independent insurance broker (subject to Subordinated Lender’s reasonable approval) including an endorsement covering
acts of municipal authorities including increased cost of construction and demolition.

(j)                
Following the occurrence of a Default and subject to the Intercreditor Agreement and the rights of the Senior Lender
set forth in the Senior Loan Agreement, Subordinated Lender from time to time may (but shall not be obligated to), pay any amount
or perform any act which Borrower has agreed to do hereunder and which Borrower shall have failed to do. All moneys so advanced
and expenses so incurred by Subordinated Lender shall be immediately due and payable and shall be added to the Secured Liabilities
if not paid within five (5) days following Subordinated Lender’s demand therefor.

6.       Defaults
and Remedies. (a) Borrower, without notice or demand of any kind, shall be in default under this Agreement upon the occurrence
of any of the following events (each a “Default”):

(i)                
Nonpayment of Secured Liabilities. Any amount due and owing on any of the Secured Liabilities, whether by
its terms or as otherwise provided herein, is not paid when due.

(ii)              
Misrepresentation. Any oral or written warranty, representation, certificate or statement of Borrower in this
Agreement, the Purchase Agreement, any of the Subordinated Note or any other agreement with Subordinated Lender shall be false
when made or at any time thereafter, or if any financial data or any other information now or hereafter furnished to Subordinated
Lender by or on behalf of Borrower shall prove to be false, inaccurate or misleading in any material respect.

(iii)      
Nonperformance. Any failure to perform or default in the performance of any covenant, condition or agreement
contained in this Agreement, or in any of the Subordinated Note any other agreement with Subordinated Lender.

(iv)       
Bankruptcy, Insolvency, Etc. Borrower becomes insolvent or generally fails to pay, or admits in writing its
inability or refusal to pay, debts as they become due, or Borrower applies for, consents to, or acquiesces in the appointment of
a trustee, receiver or other custodian for itself or any property thereof, or makes a general assignment for the benefit of creditors;
or, in the absence of such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for Borrower
or for a substantial part of the property of any thereof and is not discharged within thirty (30) days, or any bankruptcy, reorganization,
debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding,
is commenced in respect of Borrower, and if such case or proceeding is not commenced by Borrower, it is consented to or acquiesced
in by Borrower, or remains undismissed for thirty (30) days; or Borrower takes any action to authorize, or in furtherance of, any
of the foregoing.

    		A-5	 

     

    

(v)              
Judgments. The entry of any final judgment, decree, levy, attachment, garnishment
or other process, or the filing of any lien against Borrower which is not fully covered by insurance.

(vi)            
Collateral Impairment. The entry of any judgment, decree, levy, attachment,
garnishment or other process, or the filing of any lien against, any of the Collateral or any collateral under a separate security
agreement securing any of the Secured Liabilities and such judgment or other process shall not have been, within thirty (30) days
from the entry thereof, (A) bonded over to the satisfaction of Subordinated Lender and appealed, (B) vacated, or (C) discharged,
or the loss, theft, destruction, seizure or forfeiture, or the occurrence of any deterioration or impairment of any of the Collateral
or any of the collateral under any security agreement securing any of the Secured Liabilities, or any decline or depreciation in
the value or market price thereof (whether actual or reasonably anticipated), which causes the Collateral in the sole opinion of
Subordinated Lender acting in good faith, to become unsatisfactory as to value or character, or which causes Subordinated Lender
to reasonably believe that it is insecure and that the likelihood for repayment of the Secured Liabilities is or will soon be impaired,
time being of the essence. The cause of such deterioration, impairment, decline or depreciation shall include, but is not limited
to, the failure by Borrower to do any act deemed necessary by Subordinated Lender to preserve and maintain the value and collectability
of the Collateral.

(b)       If
a Default exists Subordinated Lender shall immediately notify Senior Lender in writing, then at the election of Subordinated Lender,
subject to the Intercreditor Agreement and the rights of the Senior Lender, and without further demand or notice of any kind, Subordinated
Lender may declare all of the Secured Liabilities to be immediately due and payable and exercise from time to time any rights and
remedies available to Subordinated Lender under the laws of the State of Illinois in order to collect the Secured Liabilities.
Subject to the Intercreditor Agreement, Borrower shall, in such event, and if Subordinated Lender so requests, assemble the Collateral,
at the expense of Borrower, at a convenient place designated by Subordinated Lender. At any sale held pursuant hereto, Subordinated
Lender shall be authorized to bid in the amount of the Secured Liabilities, or so much thereof as Subordinated Lender, in its reasonable
discretion, shall deem appropriate, at such sale. Subordinated Lender shall not be liable nor accountable to Borrower if less than
the entire amount of the Secured Liabilities shall be so bid. Borrower shall pay all expenses incurred by Subordinated Lender in
the collection of such indebtedness, including reasonable attorneys’ fees and legal expenses, and in the repair of any real
estate or other property to which any of the Collateral may be affixed. If any notification of intended disposition of any of the
Collateral is required by law, such notification shall be deemed commercially reasonable and proper
if given at least ten (10) days before such disposition. Any proceeds of the disposition of any of the Collateral may be applied
by Subordinated Lender to the payment of the reasonable expenses of retaking, holding, preparing for sale and selling the Collateral,
including reasonable attorneys’ fees and legal expenses, and any balance of such proceeds may be applied by Subordinated
Lender toward the payment of such of the indebtedness, and in such order of application, as Subordinated Lender may from time to
time elect.

    		A-6	 

     

    

(c)               
No delay or omission on the part of Subordinated Lender in the exercise of any right or remedy shall operate as a
waiver thereof. The remedies available to Subordinated Lender under this Agreement shall be exercisable in any combination whatsoever
and shall be in addition to, and exercisable in any combination, any and all remedies available by operation of law and under the
Subordinated Note.

7.                 
Waiver. No delay on Subordinated Lender’s part in exercising any power of sale, lien, option or other right
hereunder, and no notice or demand which may be given to or made upon Borrower by Subordinated Lender with respect to any power
of sale, lien, option or other right hereunder, shall constitute a waiver thereof, or limit or impair Subordinated Lender’s
right to take any action or to exercise any power of sale, lien, option, or any other right hereunder, without notice or demand,
or prejudice Subordinated Lender’s rights as against Borrower in any respect.

8.                 
Assignment. Borrower shall not assign or transfer this Agreement, either voluntarily, by operation of law,
by merger or stock sale or otherwise, without the prior written consent of Subordinated Lender.

9.                 
Termination. Upon the indefeasible payment in full of all Secured Liabilities Subordinated Lender shall release
the security interest granted to Subordinated Lender pursuant to this Agreement and, except as otherwise provided herein, all of
Borrower’s obligations hereunder shall at such time terminate.

10.        
Lien Absolute. All rights of Subordinated Lender hereunder, and all obligations of Borrower hereunder, shall
be absolute and unconditional irrespective of:

(a)               
any lack of validity or enforceability of any of the Subordinated Note or any other agreement or instrument governing
or evidencing any Secured Liabilities;

(b)              
any change in the time, manner or place of payment of, or in any other term of, all or any part of the Secured Liabilities,
or any other amendment or waiver of or any consent to any departure from any of the Subordinated Note or any other agreement or
instrument governing or evidencing any Secured Liabilities;

(c)               
any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Secured Liabilities; or

(d)              
any other circumstance which might otherwise constitute a defense available to, or a discharge of, Borrower.

11.             
Release. Borrower consents and agrees that Subordinated Lender may at any time, or from time to time, in its
discretion (a) renew, extend or change the time of payment, and/or the manner, place or terms of payment of all or any part of
the Secured Liabilities and (b) exchange, release and/or surrender all or any of the Collateral, or any part thereof, by whomsoever
deposited, which is now or may hereafter be held by Subordinated Lender in connection with all or any of the Secured Liabilities,
all in such manner and upon such terms as Subordinated Lender may deem proper, and without notice to or further assent from Borrower,
it being hereby agreed that Borrower shall be and remains bound under this Agreement, irrespective of the value or condition of
any of the Collateral, and notwithstanding any such change, exchange, settlement, compromise, surrender, release, renewal or extension,
and notwithstanding also that the Secured Liabilities may, at any time, exceed the aggregate principal amount thereof set forth
in the Subordinated Note, or any other agreement governing any Secured Liabilities. Borrower hereby waives notice of acceptance
of this Agreement, and also presentment, demand, protest and notice of dishonor of any and all of the Secured Liabilities, and
promptness in commencing suit against any party hereto or liable hereon, and, except as otherwise provided herein, in giving any
notice to or of making any claim or demand hereunder upon Borrower. No act or omission of any kind on Subordinated Lender’s
part shall in any event affect or impair this Agreement unless such act or omission constitutes the willful misconduct of Subordinated
Lender or any of its agents.

    		A-7	 

     

    

12.             
Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any
petition be filed by or against Borrower for liquidation or reorganization, should Borrower become insolvent or make an assignment
for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Borrower’s assets,
and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured
Liabilities, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by any obligee of the Secured Liabilities, whether as a “voidable preference,” “fraudulent conveyance”
or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof,
is rescinded, reduced, restored or returned, the Secured Liabilities shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.

13.             
Supplemental Reports. Borrower shall immediately upon receipt thereof, provide to Subordinated Lender copies
of any reports submitted by Borrower to the Senior Lender pursuant to the Senior Loan Agreement or related agreements.

14.             
Waiver of Claims. Borrower acknowledges, agrees and affirms
that Borrower possesses no claims, defenses, offsets, recoupment or counterclaims of any kind or nature against Subordinated
Lender or with respect to the enforcement of any of the Subordinated Note, as amended or modified hereby (collectively, the “Claims”).
Borrower further acknowledges and agrees that it has no knowledge of any facts that would or might give rise to any Claims. If
facts now exist which would or could give rise to any Claim against Subordinated Lender or with respect to the enforcement of any
of the Subordinated Note, as amended or modified hereby, Borrower hereby unconditionally, irrevocably and unequivocally waives
and fully releases any and all such Claims as if such Claims were the subject of a lawsuit, adjudicated to final judgment from
which no appeal could be taken and therein dismissed with prejudice.

15.                Miscellaneous.

(a)               Subordinated
Lender may execute any of its duties hereunder by or through agents or employees and shall be entitled to the advice of counsel
concerning all matters pertaining to its duties hereunder.

    		A-8	 

     

    

(b)              
Borrower agrees to promptly reimburse Subordinated Lender for actual out-of-pocket expenses, including, without limitation,
reasonable counsel fees, incurred by Subordinated Lender or the Sellers in connection with the enforcement of Subordinated Lender’s
rights under this Agreement.

(c)               
Neither Subordinated Lender nor any of its managers, members, officers, directors, employees, agents or counsel shall
be liable for any action lawfully taken or omitted to be taken by it or them hereunder or in connection herewith, except for its
or their own gross negligence or willful misconduct.

(d)                 
THIS AGREEMENT SHALL BE BINDING UPON BORROWER AND ITS SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT OF,
AND BE ENFORCEABLE BY, SUBORDINATED LENDER, AND ITS SUCCESSORS AND ASSIGNS, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS IN EFFECT IN THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS,
AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING DULY SIGNED
FOR AND ON BEHALF OF SUBORDINATED LENDER AND BORROWER.

16.               Severability.
If for any reason any provision or provisions hereof are determined to be invalid and contrary
to any existing or future law, such invalidity shall not impair or affect the operation of those portions of this Agreement which
are valid.

17.               Notice.
All notices, requests, demands and other communications between the parties required
or permitted to be given hereunder shall be given in the manner set forth in the Purchase Agreement.

 

18.             
Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning
or content of any kind whatsoever and are not a part of the agreement between the parties hereto.

19.             
WAIVER OF JURY TRIAL. SUBORDINATED LENDER AND BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE SUBORDINATED NOTE, ANY OF THE OTHER OBLIGATIONS, THE COLLATERAL,
OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR
COURSE OF DEALING IN WHICH SUBORDINATED LENDER AND BORROWER ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. Except as prohibited by law, Borrower waives any right which it may have to
claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. Borrower (i) certifies that neither Subordinated Lender nor any representative,
agent or attorney of Subordinated Lender has represented, expressly or otherwise, that Subordinated Lender would not, in the event
of litigation, seek to enforce the foregoing waivers, and (ii) acknowledges that, in entering into this Agreement and the Subordinated
Note, Subordinated Lender is relying upon, among other things, the waivers and certifications contained in this Section.

20.             
Counterparts. This Agreement may be executed in any number of counterparts and electronically, which shall,
collectively and separately, constitute one agreement.

[Signature Page Follows]

    		A-9	 

     

    

IN WITNESS WHEREOF, this Agreement has been
duly executed as of the date first written above.

 

BORROWER:

NXT-ID. INC.

 

	By:	 	 
	Name:	 	 
	Title:	 	 

 

LOGICMARK, LLC

 

	By:	 	 
	Name:	 	 
	Title:	 	 

 

SUBORDINATED LENDER:

 

_______Holder

 

	By:	 	 
	Name:	 	 
	Title:	 	 

[Signature Page to Subordinated Security Agreement]

 A-10

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