UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 22, 2016
____________________
IMATION CORP.
(Exact name of registrant as specified in
its charter)
___________________
Delaware |
|
001-14310 |
|
41-1838504 |
(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number) |
|
(IRS Employer
Identification Number) |
1099 Helmo Ave. N., Suite 250, Oakdale,
Minnesota 55128
(Address of principal executive offices,
including zip code)
(651) 704-4000
(Registrant’s telephone number, including
area code)
N/A
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
Introductory Note
As previously disclosed, in August 2015,
the Board of Directors (the “Board”) of Imation Corp. (the “Company” or “we”) formed a Strategic
Alternatives Committee to develop strategic value creation initiatives and make recommendations to the Board regarding the Company’s
use of excess capital. As part of this strategic evaluation, the Company has eliminated money losing businesses and harvested capital
from non-core assets. As previously disclosed, after a thorough review, the Board concluded that establishing an investment adviser
as a wholly-owned subsidiary of the Company could be utilized to create significant long-term stockholder value. We have concluded
that the transactions described below, which provide us with the ability to develop a differentiated approach to the investment
and asset management businesses by utilizing a quantitative equity strategy, will assist us in this goal and in building a sustainable,
profitable business.
Item 1.01 Entry into a Material Definitive Agreement.
Stock Purchase Agreement
On November 22, 2016,
we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with NXSN Acquisition Corp., a Delaware
corporation (“NXSN”) and an affiliate of Spear Point Capital Management LLC (“Spear Point”), providing
for, among other things, (i) the contribution by the Company of all of the issued and outstanding common stock of Connected Data,
Inc. (“Connected Data”) to Nexsan Corporation (“Nexsan”), and (ii) the subsequent sale by the Company of
all of the issued and outstanding common stock of Nexsan to NXSN (the “Stock Sale”). Upon the consummation of Stock
Sale (the “SPA Closing”), Nexsan and its subsidiaries, including Connected Data (collectively, the “Subsidiaries”),
will be wholly-owned subsidiaries of NXSN.
The Stock Purchase agreement
also contemplates the issuance and sale by NXSN of up to $10 million of its Series A Preferred Stock (“Preferred Stock”)
to certain investors identified by NXSN, and for an individual designated by NXSN to be appointed to our Board.
Consideration
The consideration to be
paid to the Company in respect of the Stock Sale will consist of (i) a senior secured convertible promissory note issued by NXSN
in an initial aggregate principal amount of $25 million, subject to certain adjustments (the “Note”), and (ii) shares
of common stock, par value $0.01 per share, of NXSN (“NXSN Common Stock”) representing 50% of the issued and outstanding
NXSN Common Stock (the “NXSN Shares”). The form of Note is attached as an exhibit to the Stock Purchase Agreement.
The Note will represent
a senior secured obligation of NXSN, will mature on the third anniversary of the date of issuance, will rank senior in right of
payment to all other indebtedness of NXSN, will be guaranteed by all of Nexsan and certain of its Subsidiaries, and will be secured
by a first priority lien on all of the assets of NXSN, including the capital stock of Nexsan and certain of its Subsidiaries. The
Note will bear interest at a rate of 5 percent per annum from the date of issuance through the second anniversary thereof, and
8 percent per annum thereafter, and will be payable quarterly from the date of issuance through the first anniversary thereof,
and monthly thereafter. The principal amount, and in certain circumstances, the interest rate of the Note will be subject to certain
adjustments from time-to-time after the SPA Closing, including as a result of (i) the failure of NXSN to sell $10 million of Preferred
Stock during the period beginning date of the Stock Purchase Agreement and ending on the 6 month anniversary of the SPA Closing,
(ii) certain surpluses or deficiencies in the net working capital of Nexsan and the Subsidiaries as of the SPA Closing, and (iii)
the satisfaction of any indemnity obligation of the Company arising under the Stock Purchase Agreement.
The Note will also permit
the Company, at any time following the SPA Closing, to convert up to $10 million of the aggregate principal amount thereof into
shares of NXSN Common Stock at a conversion price of $1.25 per share, representing a 25% premium. The Note will include anti-dilution
provisions, negative covenants and other protective provisions that are customary for instruments of its type.
The NXSN Shares, along
with all other NXSN Common Stock, will be entitled (i) to one vote per share of NXSN Common Stock, (ii) to vote, exclusively and
as a separate class, on all matters relating to the size and composition of the board of directors, and the election and removal
of directors, of NXSN, (iii) to vote as a separate class, on all amendments to the certificate of incorporation and bylaws of NXSN
and (iv) to vote as a single class on all other matters submitted to the stockholders of NXSN, excluding matters solely effecting
the Preferred Stock. The remaining 50 percent of the issued and outstanding NXSN Common Stock following the SPA Closing will be
owned by Spear Point Private Equity LP (“SPPE”).
The Stock Purchase Agreement
provides that, simultaneously with the SPA Closing, the Company will enter into a stockholders agreement with SPPE, and each purchaser
of Preferred Stock, providing certain oversight, management and veto rights with respect to NXSN. The Company will have the right
to designate, individually, two of the five directors serving on the board NXSN, and to designate jointly, with SPPE, an additional
independent director to serve on the board, until the Note is paid in full. The Company will also have a consent right with respect
to certain actions proposed to be taken by NXSN, including the issuance of additional amendments to its organizational documents
and issuances of additional capital stock.
Representations, Warranties,
Covenants and Indemnification
Each of the Company and
NXSN have made representations and warranties and have agreed to covenants in the Stock Purchase Agreement that are customary for
transactions of this type. Each of the Company and NXSN have agreed to indemnify and hold harmless the other party and its affiliates
from and against damages arising out of inaccuracies in or breaches of their respective representations, warranties and covenants
in the Stock Purchase Agreement.
Until the earlier of the
SPA Closing and the termination of the Stock Purchase Agreement in accordance with its terms, NXSN is required use commercially
reasonable best efforts to seek commitments to purchase or to sell up to $10 million of Preferred Stock. If NXSN fails to obtain
aggregate commitments to purchase or to sell $10 million of Preferred Stock at the SPA Closing, NXSN will be entitled to sell additional
Shares of Preferred Stock up to such amount for a period of 6 months following the SPA Closing. To the extent that NXSN fails to
sell $10 million of Preferred Stock prior to the six month anniversary of the SPA Closing, then following the expiration of such
6 month period (i) the aggregate principal amount of the Note will be increased by an amount equal to such shortfall, and (ii)
the applicable interest rate on the Note will be increased to 6 percent per annum until the second anniversary of the original
issue date, and 9 percent per annum thereafter, and in each case, such increases will be applied retroactively to the original
issue date of the Note.
The Preferred Stock will
accrue dividends at a rate of 5 percent per annum from the date of issuance through the second anniversary thereof, and 8 percent
per annum thereafter, compounded annually. In the event of any dissolution or liquidation of NXSN, or the occurrence of certain
deemed liquidation events, each share of Preferred Stock will be entitled (i) first to receive from the assets available for distribution
to its stockholders (and prior to any other distribution being made) amount equal to 120% the original issue price per share (subject
to certain adjustments), plus accrued and unpaid dividends thereon, and (ii) thereafter the Preferred Stock will participate in
all other distributions with the holders of NXSN’s common stock, pro-rata on an as converted basis. Each share of Preferred
Stock will be convertible into shares of common stock of NXSN at a rate equal to (y) 120% of the original issue price (subject
to certain adjustments), plus accrued and unpaid dividends thereon, divided by (z) the original issue price.
The Preferred Stock will have the right
to vote with the NXSN common stock, on an as-converted basis and as a single class, on all matters submitted to the stockholders
of the Company, except with respect to the election of directors and similar matters reserved exclusively for the holders of common
stock, and will have the right to vote as a single class with respect to certain matters effecting the rights and preferences of
the Preferred Stock, including the liquidation or dissolution of the NXSN, the amendment of NXSN’s certificate of incorporation
or bylaws, and matters concerning the authorization or issuance of additional shares of capital stock.
The proceeds of the Preferred
Stock sales are expected to be used to fund the ongoing operations of the NXSN following the SPA Closing. On the date of the Stock
Purchase Agreement, NXSN delivered to the Company documents evidencing its receipt of commitments to purchase $2.5 million of Preferred
Stock. For each $2.5 million increment of Commitments delivered by NXSN at the Closing, the Company will issue to NXSN 62,500 warrants
(the “Warrants”) entitling NXSN, for a period of 60 days following the Closing, to purchase 62,500 shares of Common
Stock at an exercise price equal to the greater of (i) $0.75 per share, and (ii) the 10 trading day average ending on the date
immediately preceding the date of the Closing, but in no case greater than $1.20 per share. All shares issued upon exercise of
the Warrants will be subject to customary lock-up agreements for a period of 6 months.
Termination
For a period of 45 days
following the date of the Stock Purchase Agreement (the “Go-Shop Period”), the Company and its affiliates and representatives
may initiate, solicit, receive, evaluate, and engage in discussions and negotiations with third parties regarding competing acquisition
proposals. Following expiration of the Go-Shop Period and until the earlier of the SPA Closing and the termination of the Stock
Purchase Agreement in accordance with its terms, the Company will be subject to customary restrictions on its ability to initiate,
solicit, receive, evaluate, and engage in discussions and negotiations with third parties regarding competing acquisition proposals.
However, the Company and its affiliates and representatives may continue to engage in discussions or negotiations regarding a competing
acquisition proposal with third parties engaged by the Company during the Go-Shop Period following the expiration thereof, and
engage in discussions or negotiations with third parties from whom the Company has received an unsolicited competing acquisition
proposal during the “no-shop” period, if the Company’s board of directors determines in good faith (after consultation
with its advisors and counsel) that (i) such competing proposal either constitutes, or could reasonably be expected to lead to,
a superior acquisition proposal and (ii) the failure to take such action would be inconsistent with the directors’ fiduciary
duties. To the extent that the Company notifies NXSN of its receipt of a superior acquisition proposal, the Stock
Purchase Agreement provides NXSN with the right to deliver to the Company a binding proposal that is at least as favorable to the
Company and its stockholders as the superior acquisition proposal.
Each of the Company and
NXSN has the right to terminate the Stock Purchase Agreement under certain circumstances, including (i) by mutual agreement, (ii)
the failure of the other party to cure any material representation, warranty or covenant, (iii) if the SPA Closing has not occurred
on or before January 31, 2017, by reason of the failure of any condition precedent, (iv) the Company’s board of directors
withdraws or materially and adversely modifies its approval or recommendation of the Stock Purchase Agreement or the Transaction,
or recommended any competing acquisition proposal, and (v) the Company violates the restrictions applicable during the “no
shop” period.
If the Stock Purchase
Agreement is terminated by the Company or NXSN, due to a failure to obtain the approval of the Stock Purchase Agreement and the
transactions contemplated thereby by the Company’s stockholders (“SPA Stockholder Approval”), then the Company
will owe to NXSN a termination fee equal to (i) $375,000 multiplied by (ii) a fraction, the numerator of which is the aggregate
Commitments as of the close of business on the fourteenth day of the Go-Shop Period, and the denominator of which is $10,000,000.
If the Stock Purchase Agreement is terminated by NXSN, then upon the closing of the transactions contemplated by the superior acquisition
proposal the Company will owe to NXSN a termination fee equal to (y) $750,000 multiplied by (z) a fraction, the numerator of which
is the aggregate Commitments as of the close of business on the fourteenth day of the Go-Shop Period, and the denominator of which
is $10,000,000.
Closing Conditions
The SPA Closing is subject
to certain conditions, including, among others, (i) the SPA Stockholder Approval, (ii) the accuracy of the representations and
warranties of the parties, and compliance by the parties with their respective obligations under the Stock Purchase Agreement,
(iii) the completion of the contribution of Connected Data to Nexsan, (iv) receipt of consents of certain third parties and governmental
authorities and (v) the absence of any law or order restraining, enjoining or otherwise prohibiting the consummation of the transactions
contemplated by the Stock Purchase Agreement.
The Company’s obligation
to close the transaction is also contingent upon certain financing conditions being met, including that NXSN must have received
commitments to purchase or must have otherwise sold at least $2.5 million of Preferred Stock.
We qualify the foregoing
summary of the Stock Purchase Agreement and the Note and the related guaranty and security agreement in their entirety by reference
to the actual agreement. A copy of the Stock Purchase Agreement is filed herewith as Exhibit 10.1.
Subscription Agreement and Capacity and Services Agreement
On November 22, 2016, we entered into a
Subscription Agreement (the “Subscription Agreement”) with Clinton Group, Inc. (“Clinton”) pursuant to
which we have agreed, subject to the satisfaction of certain conditions including the approval of our stockholders, to issue 12,500,000
shares of our common stock, par value $0.01 per share (“Common Stock”), plus an additional 2,500,000 shares of Common
Stock at a subsequent closing date, if any, subject to the conditions described below, to Clinton in exchange for Clinton’s
agreement to provide certain investment capacity and services to North Stars Technologies LLC (“North Stars”), our
subsidiary and an investment adviser, in accordance with the terms and conditions of the Capacity and Services Agreement described
below. We intend to change the North Stars name in connection with the closing of the transactions contemplated by the Subscription
Agreement. Clinton is a diversified asset management firm that invests globally across multiple alternative investment strategies,
an investment adviser registered with the U.S. Securities and Exchange Commission (the “SEC”) and a stockholder of
the Company. Joseph A. De Perio, the Non-Executive Chairman of our Board, is a Senior Portfolio Manager at Clinton.
On the initial closing date of the transactions
contemplated by the Subscription Agreement (the “Initial Closing Date”), we will enter into a Capacity and Services
Agreement (the “Capacity and Services Agreement”) with Clinton and North Stars. The Capacity and Services Agreement
provides that, for a period of five years from the Initial Closing Date (the “Initial Term”), North Stars may place
under Clinton’s management cash, to be held in a private investment fund or similar investment vehicle sponsored by North
Stars or a managed account established by North Stars, to be managed by Clinton on a discretionary basis, subject to North Stars’s
supervision, using Clinton’s quantitative equity strategy, split evenly between long and short, with a leverage ratio not
to exceed five times on either side of such split (the “Investment Management Services”). These characteristics of
the Investment Management Services may be altered by agreement between Clinton and North Stars, subject to the approval of our
Board.
Under the terms of the Capacity and Services
Agreement, North Stars and its third-party investors may invest an amount with Clinton not to exceed $1 billion (the “Capacity”),
which aggregate amount includes our investment in Clinton Lighthouse Equity Strategies Fund (Offshore), Ltd. (“Clinton Lighthouse”),
subject to certain adjustments. As of November 22, 2016, we made $31.5 million in net capital contributions to Clinton Lighthouse,
which is net of our $3.5 million redemption from Clinton Lighthouse subsequent to our initial investment. Under the Capacity and
Services Agreement, our investment in Clinton Lighthouse will not incur any fees following the Initial Closing Date. Our investment
in Clinton Lighthouse may be redeemed by the Company in accordance with Clinton Lighthouse’s fund documents which provide
for daily liquidity, subject to certain ordinary course restrictions. The amount of utilized Capacity will be based on the fair
value of the amount invested, as calculated by a nationally-recognized third-party fund administrator and based on Clinton’s
valuation policies and U.S. generally accepted accounting principles.
We have agreed to issue to Clinton, as consideration
for the Capacity and Services (as defined below), 12,500,000 shares of Common Stock (the “Initial Capacity Shares”)
on the Initial Closing Date, as adjusted for any stock splits, stock dividends, stock combinations, reclassifications or similar
transactions, pursuant to, and subject to the terms and conditions of the Subscription Agreement. If desired and approved by our
Board, we may increase the Capacity by any amount up to an additional $500 million for a maximum Capacity of up to $1.5 billion
(the “Capacity Expansion”). In the event we increase the Capacity by any amount beyond $1 billion, we have agreed to
issue an additional 2,500,000 shares of Common Stock to Clinton (the “Subsequent Capacity Shares” and together with
the Initial Capacity Shares, the “Capacity Shares”), as adjusted for any stock splits, stock dividends, stock combinations,
reclassifications or similar transactions, pursuant to, and subject to the terms and conditions of the Subscription Agreement,
which would occur on a subsequent closing date (the “Subsequent Closing”).
Clinton has agreed to a three-year lock-up
with respect to the Initial Capacity Shares and Subsequent Capacity Shares, if any, beginning on each of the Initial Closing Date
and the date of the Subsequent Closing (the “Subsequent Closing Date”), respectively.
On the Initial Closing Date, we will enter
into a Registration Rights Agreement (the “Registration Rights Agreement”) with Clinton relating to the registration
of the resale of the Capacity Shares, which is described below.
In considering the transactions contemplated
by the Subscription Agreement and the Capacity and Services Agreement, our Board formed a special committee (the “Special
Committee”) of independent members of the Board, consisting of directors who are not directly or indirectly affiliated with
Clinton and who are not members of our management. The members of the Special Committee are Alex Spiro, who serves as its Chair,
Tracy McKibben, Donald H. Putnam and Robert Searing. The Special Committee was formed to (i) review and evaluate the terms and
conditions and determine the advisability of the transactions contemplated by the Subscription Agreement, the Capacity and Services
Agreement and the Registration Rights Agreement (collectively, the “Transaction Documents”), (ii) consider whether
there were alternatives to the transactions contemplated by the Transaction Documents that would be in the best interests of the
Company (each an “alternative transaction”), (iii) review and evaluate the terms and conditions and determine the advisability
of any alternative transaction, (iv) if the Special Committee deemed it appropriate or advisable, negotiate the price, structure,
form, terms and conditions of the transactions contemplated by the Transaction Documents or any alternative transaction, as well
as any related agreements, (v) after obtaining full knowledge of the material facts, determine whether any such transaction is
fair, just and reasonable to, and in the best interests of the Company; and (vi) if the Special Committee deemed it appropriate
or advisable, recommend to the entire Board what action, if any, should be taken by the Company with respect to the transactions
contemplated by the Transaction Documents or any alternative transaction. The Special Committee engaged separate legal counsel
and Keefe, Bruyette & Woods, Inc. and Cypress Partners LLC to serve as its financial advisors. The Special Committee determined
that the transactions contemplated by the Transaction Documents are fair, just and reasonable to, and in the best interests of,
the Company and recommended to the Board that it approve the Company’s entry into the Transaction Documents.
Our Board approved the transactions contemplated
by the Transaction Documents, subject to applicable stockholder approval. In making such approval, our Board determined that the
transactions contemplated by the Transaction Documents will not be deemed to result in Clinton becoming an “Acquiring Person”
or give rise to a “Triggering Event” or a “Distribution Date,” as such terms are defined in the 382 Rights
Agreement, dated as of August 7, 2016 (the “382 Rights Agreement”), by and between the Company and Wells Fargo Bank,
N.A. In reaching such determination, our Board determined that the transactions contemplated by the Transaction Documents will
not, directly or indirectly, jeopardize or endanger the availability to the Company of the “Tax Benefits,” as such
term is defined in the 382 Rights Agreement. We qualify the foregoing summary of the 382 Rights Agreement in its entirety by reference
to the actual 382 Rights Agreement, a copy of which is filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed
with the SEC on August 11, 2016 and is incorporated herein by reference.
The closing of the transactions contemplated
by the Subscription Agreement on the Initial Closing Date (the “Initial Closing”) is subject to certain conditions
described in the Subscription Agreement. At the Initial Closing, the Initial Capacity Shares will be issued and the Capacity and
Services Agreement and Registration Rights Agreement described below will be executed. The Subsequent Closing, if any, will be
subject to, among other things, there having been no material adverse changes from the Initial Closing. These conditions include
the following:
| · | Stockholder Approval. The Common Stock is listed on the New York Stock Exchange (the “NYSE”) and is subject
to the rules set forth in the NYSE Listed Company Manual (the “NYSE Rules”). Section 312 of the NYSE Rules (“NYSE
Rule 312”) requires stockholder approval prior to the issuance of Common Stock: (1) to a “related party” or any
company or entity in which a “related party” has a substantial direct or indirect interest (as defined in NYSE Rule
312) if the number of shares of Common Stock to be issued exceeds either 1% of the number of shares of Common Stock or 1% of the
voting power outstanding before the issuance; (2) if the number of shares of Common Stock to be issued equals or exceeds 20% of
the number of shares of Common Stock outstanding prior to the issuance or if the number of votes entitled to be cast by such shares
of Common Stock equals or exceeds 20% of the voting power outstanding prior to the issuance; or (3) if the issuance will result
in a change of control. Because the issuance of the Capacity Shares will satisfy each of the foregoing criteria, the Company must
obtain approval of its stockholders to issue the Capacity Shares. As a result, the Initial Closing is subject to the condition
that the Company obtain stockholder approval of the issuance of the Capacity Shares. The Company intends to hold a special meeting
of the stockholders to seek such approval. |
| · | Clinton Lighthouse. The Initial Closing is subject to the condition that the Company pay all fees, expenses and other
amounts owned pursuant to the letter agreement, dated as of April 29, 2016, by and between the Company and Clinton regarding Clinton
Lighthouse. As of November 22, 2016, the Company owes $499,042 pursuant to the letter agreement. |
Under the Subscription Agreement, in the
event we are unable to obtain the requisite stockholder approval of the issuance of the Capacity Shares to Clinton by February
15, 2017, we have agreed to pay Clinton a $500,000 break-up fee. In addition, the Subscription Agreement provides that we must
pay Clinton a $1,500,000 break-up fee if we elect to not consummate the Initial Closing in the event we enter into an agreement
for the provision by a third-party registered investment adviser to North Stars of services that are comparable to the Services
(as defined below) which we and our Board determine to be more favorable to North Stars than the terms of the Capacity and Services
Agreement.
The Subscription Agreement contains customary
representations and warranties of the Company and Clinton.
Under the Subscription Agreement, we have
agreed to indemnify Clinton and any holder of Capacity Shares and certain of their respective related parties for any losses relating
to (i) our misrepresentation or breach of any representation or warranty in the Subscription Agreement or Registration Rights Agreement,
(ii) our breach of any of our covenants contained in the Subscription Agreement or Registration Rights Agreement or (iii) any third-party
claim arising out of resulting from the execution, delivery, performance or enforcement of the Subscription Agreement or Registration
Rights Agreement. With respect to the losses described in (iii), we will not be obligated to indemnify such parties for the first
$400,000 incurred. We have also agreed that the aggregate amount of our indemnity will be capped at a dollar amount equal to the
number of Initial Capacity Shares multiplied by the closing price of our Common Stock on the Initial Closing Date plus, to the
extent liabilities subject to our indemnification obligation were incurred on or prior to the Subsequent Closing Date, the number
of Subsequent Capacity Shares multiplied by the closing price of our Common Stock on the Subsequent Closing Date.
If approved by our Board, we may extend
the Initial Term under the Capacity and Services Agreement for two subsequent one-year periods (each, a “Capacity Extension”
and, collectively with the Initial Term, the “Term”). In such event, we have agreed to pay Clinton $1.75 million for
the first Capacity Extension (or $2.5 million if we have previously opted for the Capacity Expansion) and an additional $1.75 million
for the second Capacity Extension (or $2.5 million if we have previously opted for the Capacity Expansion), or a maximum of $5
million in the aggregate.
Clinton has agreed, during the Term and
for a subsequent three-month transition period, to consult with North Stars regarding the responsibilities North Stars will retain
with respect to the Capacity (the “Capacity-Related Consultation Services”), which are operations and management, account
reconciliation, profit and loss reporting, position monitoring, cash management, collateral management, liaising with the administrator,
counsel and auditor to be engaged by North Stars, fund formation documentation, regulatory filings, information technology and
investor relations. Clinton has also agreed to consult with North Stars regarding North Stars’s management and compliance
functions for up to one year commencing no later than 90 days from the Initial Closing Date (the “Launch-Related Services”
and, together with the Investment Management Services and the Capacity-Related Consultation Services, the “Services”).
Clinton will be responsible for its own operating and overhead expenses and any expenses attributable to the Capacity and Services
(other than reasonable legal, marketing, administrative, accounting and research costs and expenses, excluding data, which costs
will be reimbursed by North Stars), attributable to Clinton’s performance of the Services and provision of the Capacity.
Pursuant to the terms of the Capacity and
Services Agreement, North Stars’s initial board of directors will be comprised of Joseph A. De Perio, the Non-Executive Chairman
of our Board and a Senior Portfolio Manager at Clinton, Daniel Strauss, a Portfolio Manager at Clinton, Donald H. Putnam, a member
of our Board, Alex Spiro, a member of our Board and Chair of its Special Committee, and one additional or substitute director agreed
upon by the Company, North Stars and Clinton.
Clinton has agreed that during the Term
it will not provide opportunities or services substantially similar to the Capacity-Related Consultation Services to any other
publicly-traded or quoted entity or their affiliates. Clinton has agreed that it will not knowingly, without North Stars’s
consent, accept any investments in any investment vehicle or account managed by Clinton or its affiliates directly from North Stars’s
third-party clients with whom Clinton does not have a pre-existing relationship.
We may terminate the Capacity and Services
Agreement if (i) Clinton’s registration as an investment adviser with the SEC is revoked, suspended, terminated, not renewed,
limited or qualified, (ii) Clinton sells or transfers its advisory business or all or a substantial portion of its assets, trading
systems or methods or goodwill to a third-party that is not an affiliate of Clinton, (iii) Clinton fails to perform its obligations
under the Transaction Documents, (iv) Clinton engages in fraud or embezzlement in connection with the Services, (v) Clinton acts
with gross negligence or willful misconduct in connection with the Services or (vi) Clinton enters bankruptcy or similar proceedings.
If we terminate the Capacity and Services Agreement due to either of the reasons specified in clauses (i) or (vi) of the preceding
sentence, Clinton will be obligated to pay us $2 million.
Clinton may terminate the Capacity and Service
Agreement if (i) North Stars fails to comply with law or we fail to inform Clinton that the Company or North Stars has become subject
to certain types of legal proceedings, (ii) if, at such time when North Stars is required to be registered as an investment adviser,
North Stars is not so registered or, if after and during such time when North Stars is required to be registered as an investment
adviser, North Stars’s registration as an investment adviser with the applicable state securities authority or the SEC is
revoked, suspended, terminated, not renewed, limited or qualified, (iii) North Stars sells or transfers its advisory business or
all or a substantial portion of its assets, trading systems or methods or goodwill to a third-party that is not an affiliate of
the Company, (iv) the Company or North Stars fails to perform its obligations under the Transaction Documents; or (v) the Company
or North Stars enters bankruptcy or similar proceedings.
The Capacity and Services Agreement contains
customary representations and warranties of the Company, North Stars and Clinton.
Pursuant to the Capacity and Services Agreement,
the Company, North Stars and Clinton will agree to certain mutual confidentiality covenants for a period lasting until two years
after the termination of the Capacity and Services Agreement.
Under the Capacity and Services Agreement,
we will agree that Clinton and certain parties related to Clinton will not be liable for damages to the Company or our stockholders
for any action taken or the failure to act on behalf of the Company within the scope of the Services unless the action or omission
was performed or omitted fraudulently or constituted willful misconduct or gross negligence. In addition, Clinton will agree that
the Company, North Stars and certain parties related to the Company will not be liable for damages to Clinton or its affiliates
for any action taken or the failure to act pursuant to the Capacity and Services Agreement unless the action or omission was performed
or omitted fraudulently or constituted willful misconduct or gross negligence.
Under the Capacity and Services Agreement,
we will agree to indemnify Clinton and certain parties related to Clinton for any losses arising out of the Capacity and Services,
provided that the losses did not result from the fraud, gross negligence or willful misconduct of Clinton or such related parties.
Clinton will agree to indemnify the Company, North Stars and certain parties related to the Company from any losses arising out
of the fraud, gross negligence or willful misconduct of Clinton or its related parties.
We qualify the foregoing summaries of the
Subscription Agreement and the Capacity and Services Agreement in their entirety by reference to the actual agreements. A copy
of the Subscription Agreement is filed herewith as Exhibit 10.2, and the form of the Capacity and Services Agreement is attached
as an exhibit to the Subscription Agreement.
Registration Rights Agreement
We will agree, subject to the terms and
conditions of the Registration Rights Agreement, to file a resale shelf registration statement covering the Initial Capacity Shares
(the “Initial Registration Statement”) by the date which is 150 calendar days immediately preceding the third anniversary
of the Initial Closing Date and will agree to file a resale shelf registration statement covering the Subsequent Capacity Shares,
if any (the “Subsequent Registration Statement”), by the date which is 150 calendar days immediately preceding the
third anniversary of the Subsequent Closing Date. The Company must use its reasonable best efforts to have the Initial Registration
Statement declared effective by the SEC by no later than the earlier of the third anniversary of the Initial Closing Date and the
fifth business day after the date the Company is notified by the SEC that the Initial Registration Statement will not be reviewed
or will not be subject to further review. If applicable, the Company must use its reasonable best efforts to have the Subsequent
Registration Statement declared effective by the SEC by no later than the earlier of the third anniversary of the Subsequent Closing
Date and the fifth business day after the date the Company is notified by the SEC that the Subsequent Registration Statement will
not be reviewed or will not be subject to further review.
We qualify the foregoing summary of the
Registration Rights Agreement in its entirety by reference to the actual agreement. A copy of the form of Registration Rights Agreement
is attached as an exhibit to the Subscription Agreement, which is filed herewith as Exhibit 10.2.
Item 3.02 Unregistered Sales of Equity Securities.
Reference is made to the disclosure set
forth in Item 1.01 of this Current Report on Form 8-K, which is incorporated herein by reference. The Capacity Shares issuable
in connection with the Subscription Agreement, Warrants issuable in connection with the Stock Purchase Agreement and the Common
Stock underlying the Warrants will not be registered under the Securities Act of 1933, as amended (the “Securities Act”),
in reliance upon the registration requirements as provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated
thereunder.
Item 5.02 Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with our entry into the Stock
Purchase Agreement, Robert B. Fernander, our Interim Chief Executive Officer, will continue his employment with the Company on
a month-to-month basis until the SPA Closing, at which point he will also take on the role of serving as Nexsan’s Interim
Chief Executive Officer.
Second Amendment of Employment Agreement
On November 22, 2016, the Company and Mr.
Fernander entered into a Second Amendment (the “Employment Agreement Amendment”) of the Employment Agreement, dated
October 14, 2015, as amended by the Renewal, Extension and Amendment, dated October 14, 2016, by and between Mr. Fernander and
the Company (the “Employment Agreement”).
The Employment Agreement Amendment provides
for Mr. Fernander’s continued employment with the Company on a month-to-month basis. Mr. Fernander will continue to receive
a base salary at an annual rate of $600,000 from the Company, but upon the SPA Closing his base salary will be lowered to an annual
rate of $50,000. If Mr. Fernander’s employment with the Company terminates for any reason on or after the SPA Closing, Mr.
Fernander will resign as a member of our Board.
The Employment Agreement Amendment provides
that Mr. Fernander will be eligible to receive a fee if he and Geoff Barrall, our Chief Technology Officer, directly secure an
offer for the purchase of Nexsan pursuant to the Go-Shop Period described above, other than by any party that has executed a letter
of intent with the Company with respect to such purchase prior to the date of the Employment Agreement Amendment, that is accepted
and consummated during the period between the date of execution of the Stock Purchase Agreement and the SPA Closing. Such fee will
be equal to 3% of the market value of Nexsan after taking into account both holders of debt and equity and will be divided evenly
between Messrs. Fernander and Barrall.
The foregoing description of the Employment
Agreement Amendment is qualified in its entirety by reference to the text of the Employment Agreement Amendment, which is filed
as Exhibit 10.3 to this Current Report on Form 8-K and incorporated herein by reference. Subject to the terms provided by the Employment
Agreement Amendment, the employment of Mr. Fernander will continue to be governed by the Employment Agreement, which is filed as
Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 20, 2015 and incorporated herein by
reference.
Nexsan Employment Agreement
On November 22, 2016, the Company, Mr. Fernander
and Nexsan entered into an Employment Agreement (the “Nexsan Employment Agreement”) appointing Mr. Fernander as the
Interim Chief Executive Officer of Nexsan, subject to and commencing on the SPA Closing.
The Nexsan Employment Agreement has a term
of six months from the SPA Closing and provides that Mr. Fernander will receive an initial annual base salary of $600,000, one-third
of which is payable by the Company and two-thirds of which is payable by Nexsan.
The Nexsan Employment Agreement provides
that Mr. Fernander will be eligible to receive a fee, subject to certain conditions relating to Mr. Fernander’s continued
employment with Nexsan, upon the occurrence of certain change in control or liquidity events at Nexsan, such as a sale of Nexsan
or the registered public offering of its equity securities. Such fee will be equal to 3% of the market value of Nexsan, after taking
into account both holders of debt and equity, and will be payable in equal halves by Nexsan and the Company.
The Nexsan Employment Agreement also provides
that if Mr. Fernander’s employment with Nexsan is terminated by Nexsan without “cause,” if Mr. Fernander resigns
for “good reason” (as such terms are defined in the Nexsan Employment Agreement) or upon the expiration of the term
thereof, Mr. Fernander will be entitled to receive a lump sum severance payment of $450,000, payable in equal halves by Nexsan
and the Company (or solely by the Company in the event of a termination due to the expiration of the term). Upon the SPA Closing,
Nexsan and the Company will each deposit the gross amounts of their respective portions of the severance payment in escrow.
The foregoing description of the Nexsan
Employment Agreement is qualified in its entirety by reference to the text of the Nexsan Employment Agreement, which is filed as
Exhibit 10.4 to this Current Report on Form 8-K and incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
Attached as Exhibit 99.1 hereto is a presentation
that representatives of the Company plan to use with investors relating to the transactions described in this Current Report on
Form 8-K.
Exhibit 99.1 attached hereto shall
not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing
under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 8.01 Other Events.
On November 14, 2016, our Board authorized
a share repurchase program under which we may repurchase up to 5 million of our outstanding shares of Common Stock. Under the share
repurchase program, we may repurchase shares from time to time using a variety of methods, which may include open market transactions
and privately negotiated transactions. This authorization replaces the Board’s previous share repurchase authorization from
May 2, 2012.
To the extent we repurchase shares, and
the timing and manner of such repurchases, will depend on a variety of factors, including market conditions, regulatory requirements
and other corporate considerations, as determined by our Audit and Finance Committee. We are not obligated to repurchase any specific
number of shares under the repurchase program, and repurchases may be suspended or discontinued at any time without prior notice.
We expect to finance the repurchases with existing cash balances.
Additional Information About the Transaction and Where to
Find It
In connection with the proposed issuance
of Capacity Shares and the transactions contemplated by the Stock Purchase Agreement (the “SPA Transaction”), the Company
intends to file with the SEC a preliminary proxy statement. When completed, the Company will mail a definitive proxy statement
and other relevant documents to its stockholders in connection with its solicitation of proxies for the special meeting of stockholders
to be held to approve the proposed issuance of Capacity Shares and the SPA Transaction. This Current Report on Form 8-K does not
contain all the information that should be considered concerning the proposed issuance of Capacity Shares and the SPA Transaction.
It is not intended to provide the basis for any investment decision or any other decision in respect to the proposed issuance of
Capacity Shares or the SPA Transaction. The Company’s stockholders and other interested persons are advised to read, when
available, the preliminary proxy statement, the amendments thereto, and definitive proxy statement in connection with the Company’s
solicitation of proxies for the special meeting to be held to approve the proposed issuance of Capacity Shares and the SPA Transaction,
as these materials will contain important information about the Company, the proposed issuance of Capacity Shares and the SPA Transaction.
The definitive proxy statement will be mailed to stockholders of the Company as of a record date to be established for voting on
the proposed issuance of Capacity Shares and the SPA Transaction. Stockholders will also be able to obtain copies of the proxy
statement and other documents filed with the SEC that will be incorporated by reference in the proxy statement, without charge,
once available, at the SEC’s web site at (www.sec.gov), or by directing a request to: Imation Corp., 1099 Helmo Ave. N.,
Suite 250, Oakdale, Minnesota 55128, Attn: Corporate Secretary, (651) 704-4000.
Participants in Solicitation
The Company and its directors and executive
officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with
the proposed issuance of Capacity Shares and the SPA Transaction. Information regarding the special interests of these directors
and executive officers in the proposed issuance of Capacity Shares will be included in the proxy statement referred to above. Additional
information regarding the directors and executive officers of the Company is also included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2015, which is available free of charge at the SEC web site (www.sec.gov) and at the
address described above and will also be included in the definitive proxy statement for the proposed issuance of Capacity Shares
and the SPA Transaction when available.
Forward Looking Statements
This Current Report on Form 8-K may include
“forward looking statements” within the meaning of the “safe harbor” provisions of the United Stated Private
Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts, and involve risks and uncertainties
that could cause actual results to differ materially from those expected and projected. Words such as “expects”, “believes”,
“anticipates”, “intends”, “estimates”, “seeks” and variations and similar words
and expressions are intended to identify such forward-looking statements. Such forward-looking statements with respect to the transactions
contemplated by the Transaction Documents, the SPA Transaction and potential repurchases of our Common Stock are based on current
expectations that are subject to risks and uncertainties. A number of factors could cause actual events, performance or results
to differ materially from the events, performance and results discussed in the forward-looking statements. These factors include,
but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination
of the Subscription Agreement or Stock Purchase Agreement, (2) the outcome of any legal proceedings that may be instituted against
the Company or others following announcement of the transactions contemplated by the Transaction Documents or Stock Purchase Agreement;
(3) the inability to complete the transactions contemplated by the Transaction Documents or Stock Purchase Agreement due to the
failure to obtain approval of the stockholders of the Company or other conditions to closing in the Subscription Agreement or Stock
Purchase Agreement, (4) delays in obtaining, adverse conditions contained in, or the inability to obtain necessary regulatory approvals
or complete regulatory reviews required to complete the transactions contemplated by the Transaction Documents or Stock Purchase
Agreement; (5) the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and
consummation of the transactions described herein; (6) the ability to recognize the anticipated benefits of the proposed transactions;
(7) costs related to the proposed transactions; (8) changes in applicable laws or regulations; (9) the possibility that Clinton
may be adversely affected by other economic, business, and/or competitive factors; and (10) other risks and uncertainties indicated
from time to time in the proxy statement relating to the proposed issuance of Capacity Shares and SPA Transaction, including those
under “Risk Factors” therein, and other filings with the SEC by the Company. Readers are cautioned not to place undue
reliance upon any forward-looking statements, which speak only as of the date made, and the Company undertakes no obligation to
update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required
by law.
Disclaimer
This communication shall not constitute
an offer to sell or the solicitation of an offer to buy the Capacity Shares or any other security. The Capacity Shares have not
been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the
United States absent registration or an applicable exemption from registration requirements.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
We incorporate by reference herein the Exhibit
Index following the signature page to this Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
IMATION CORP. |
|
|
|
|
Dated: November 22, 2016 |
By: |
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/s/ Danny Zheng |
|
|
Name: |
|
Danny Zheng |
|
Title: |
|
Chief Financial Officer |
Exhibit Index
Exhibit No. |
|
Description |
10.1* |
|
Stock Purchase Agreement, dated as of November 22, 2016, by and between the Company and NXSN Acquisition Corp. |
10.2 |
|
Subscription Agreement, dated as of November 22, 2016, by and between the Company and Clinton Group, Inc. |
10.3 |
|
Second Amendment to Employment Agreement, dated as of November 22, 2016, by and between the Company and Robert B. Fernander. |
10.4 |
|
Employment Agreement, dated as of November 22, 2016, by and among Nexsan Corporation, Robert B. Fernander and the Company. |
99.1 |
|
Investor Presentation. |
* The schedules and certain
exhibits to this Exhibit have been omitted pursuant to Regulation S-K Item 601(b)(2). The Company agrees to furnish suplementally
copies of such omitted schedules and exhibits to the SEC upon request.
Exhibit 10.1
STOCK
PURCHASE AGREEMENT
Between
IMATION
CORP. AND NXSN ACQUISITION CORP.
Dated
as of November 22, 2016
TABLE
OF CONTENTS
1. |
Definitions |
1 |
|
|
|
2. |
Purchase and Sale of Company Shares |
9 |
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|
|
3. |
Representations and Warranties of
the Purchaser |
11 |
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|
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4. |
Representations and Warranties of
the Seller |
14 |
|
|
|
5. |
Pre-Closing Covenants |
26 |
|
|
|
6. |
Post-Closing Covenants |
32 |
|
|
|
7. |
Conditions to Obligation to Close |
36 |
|
|
|
8. |
Remedies for Breaches of This Agreement |
38 |
|
|
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9. |
Tax Matters |
42 |
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|
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10. |
Termination |
46 |
|
|
|
11. |
Miscellaneous |
47 |
LIST
OF EXHIBITS, ANNEXES AND SCHEDULES
Exhibit
A – Form of Purchaser Note
Exhibit
B – Form of Security Agreement
Exhibit
C – Form of Equity Commitment Letter
Exhibit
D – Form of Contribution Agreement
Exhibit
E – Form of Stockholders Agreement
Exhibit
F – Form of Preferred Stock Purchase Agreement
Exhibit
G – Form of A&R Charter
General
Schedules
Purchaser
Schedules
Seller
Schedules
STOCK
PURCHASE AGREEMENT
This
Stock Purchase Agreement (this “Agreement”) entered into as of November 22, 2016, by and between Imation Corp.,
a Delaware corporation (the “Seller”) and NXSN Acquisition Corp., a Delaware corporation (the “Purchaser”).
The Purchaser and the Seller are each referred to as a “Party” and collectively as the “Parties.”
WHEREAS,
the Seller owns 1,000 shares of Common Stock (collectively, “Company Shares”) of Nexsan Corporation, a Delaware
corporation (the “Company”), which Company Shares represent all of the issued and outstanding capital stock
of the Company;
WHEREAS,
the Seller owns all of the issued and outstanding capital stock of Connected Data; and
WHEREAS,
the Seller wishes to contribute to the Company all of the issued and outstanding capital stock of Connected Data, and thereinafter,
sell to the Purchaser the Company Shares on the terms and subject to the conditions set forth herein.
NOW,
THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
1. Definitions.
“A&R
Charter” means the amended and restated certificate of incorporation of the Purchaser in the form of Exhibit G
hereto.
“Accounting
Firm” means any nationally recognized accounting firm mutually agreeable to the Parties.
“Accredited
Investor” has the meaning set forth in Rule 501(a) of Regulation D promulgated under the Securities Act.
“Adverse
Consequences” means all Proceedings, Orders, damages, dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs and attorneys’ fees and expenses, other than
any special, consequential, incidental, exemplary, punitive or indirect damages, including lost profits or revenues, diminution
in value or damages based on any type of multiple.
“Affiliate”
means, with respect to any Person, any other Person who directly or indirectly (through
one or more intermediaries), controls, is controlled by or under common control with such Person. For purposes of this definition,
“control” (including, with
correlative meanings, the terms “controlled by” and
"under common control with”), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or otherwise. Without limiting the foregoing,
(A) prior to the Closing, the Company and each Subsidiary of the Company shall be Affiliates of Seller, and (B) from and after
the Closing, the Company and each Subsidiary of the Company shall be Affiliates of the Purchaser, and (C) the Seller and the Purchaser
shall not be Affiliates.
“Affiliated
Group” means any affiliated group within the meaning of Code §1504(a) or any similar group defined under a similar
provision of Law.
“Applicable
Rate” means the prime rate of interest publicly announced from time to time by Citibank, N.A. plus 3% per annum.
“Bylaws”
has the meaning set forth in §5(n).
“Closing”
has the meaning set forth in §2(c) below.
“Closing
Date” has the meaning set forth in §2(c) below.
“Closing
Statement” has the meaning set forth in §2(f)(i) below.
“COBRA”
means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code §4980B and of any similar state Law.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Common
Stock” means the common stock of the Company.
“Company”
has the meaning set forth in the recitals of this Agreement.
“Company
Acquisition Agreement” has the meaning set forth in §5(h) below.
“Company
Acquisition Proposal” has the meaning set forth in §5(g)(iii) below.
“Company
Agreements” means any written or oral contract, instrument, agreement, lease, commitment, obligation, plan, or arrangement
(or group of related agreements) to which the Company or any of its Subsidiaries is a party or by which it or its property may
be bound, including all Leases, and all licensing, reseller, development, marketing, support and alliance agreements, and any
agreements which relate primarily to the business, assets, liabilities, Intellectual Property, financial condition, operations
or prospects of the Company or such Subsidiary.
“Company
Shares” has the meaning set forth in the recitals of this Agreement.
“Company
Superior Proposal” has the meaning set forth in §5(g) below.
“Company
Working Capital” means, as of the Closing Date,
(i)
the sum of the Company’s and its Subsidiaries’ (including Connected Data’s) (A) accounts receivable (net of
allowances for doubtful accounts), (B) prepaid expenses (but not including any prepaid amounts due to Seller or any Affiliate
of the Seller), (C) Inventory (net of allowances) and (D) other current assets (but not including (1) cash, cash equivalents,
and marketable securities, and (2) any amounts due from Seller or any Affiliate of the Seller), minus
(ii)
the sum of the Company’s and its Subsidiaries’ (including Connected Data’s) accounts payable, accrued liabilities,
deferred revenue (current portion) and other current liabilities (but not including any payables, liabilities or other amounts
due or owed to the Seller or any Affiliate of the Seller),
calculated
in accordance with GAAP and any accounting methods, practices, principles, policies, classifications, judgments and valuation
and estimation methodologies set forth in §1 of the General Schedules.
“Competitive
Business” has the meaning set forth in §6(g) below.
“Confidential
Information” means, with respect to any Party, any information of or concerning the businesses and affairs of such Party
and its Affiliates, other than information that (a) is or becomes generally available to and known by the public (other than as
a result of any breach of this Agreement), or (b) is lawfully acquired by another Party or its Affiliates or Representatives from
a source that was not subject to a confidentiality obligation (whether by contract, as fiduciary or otherwise) with respect to
such information. For the avoidance of doubt, all information of or concerning the businesses and affairs of Company and its Subsidiaries
shall be Confidential Information of the Purchaser from and after the Closing subject to §11(q).
“Connected
Data” means Connected Data, Inc., a California corporation.
“Contribution
Agreement” means the agreement between the Company and the Seller dated as of the date of the Closing, in the form of
Exhibit C.
“DGCL”
means the Delaware General Corporation Law.
“Employee
Benefit Plan” means any “employee benefit plan” (as such term is defined in ERISA §3(3)) and any other
employee benefit plan, program or arrangement of any kind.
“Employee
Pension Benefit Plan” has the meaning set forth in ERISA §3(2).
“Employee
Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).
“Employment
Agreements” has the meaning set forth in §2(d)(i)(B).
“Environmental,
Health, and Safety Requirements” shall mean all federal, state, local and foreign statutes, regulations, ordinances
and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual
obligations and all common law concerning public health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or
cleanup of any hazardous materials, substances or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants,
toxic chemicals, petroleum products or by-products, asbestos, polychlorinated biphenyls, noise or radiation, each as amended and
as now or hereafter in effect.
“Equity
Commitment Letters” means those commitment letters in the form of Exhibit B hereto pursuant to which, subject
to the terms and conditions thereof, the Equity Investors commit to provide equity financing to the Purchaser, with such commitments
being satisfied by the purchase of Series A Preferred Stock under the Preferred Stock Purchase Agreement and any confirmations,
acknowledgments, guarantees and other ancillary documents relating thereto.
“Equity
Investor” means each Person (other than the Purchaser) who executes an Equity Commitment Letter committing to the purchase
of Series A Preferred Stock pursuant to the Preferred Stock Purchase Agreement, or who enters into the Preferred Stock Purchase
Agreement committing to purchase Series A Preferred Stock.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate” means each entity which is treated as a single employer with the Company for purposes of Code §414.
“Fiduciary”
has the meaning set forth in ERISA §3(21).
“Final
Working Capital” means the Company Working Capital (a) as set forth in the Closing Statement delivered by the Purchaser
and accepted by the Seller; (b) as set forth in the Closing Statement delivered by the Purchaser, if Seller fails to timely deliver
Notice of Dispute in accordance with §2(f)(ii); (c) as finally determined by the Accounting Firm pursuant to §2(f)(iii);
or (d) as modified by any agreement among the Purchaser and the Seller.
“Financial
Statement” has the meaning set forth in §4(h) below.
“Firm”
means Winston & Strawn LLP.
“Fraud”
means any intentional act or omission knowingly committed by a Party with the intent to deceive and mislead another Person.
“Funded
Equity Commitments” means the aggregate amount, determined as of any given time, of (i) equity commitments represented
by duly executed Equity Commitment Letters that have been delivered to Seller as of such time (not including the amount of any
such commitments that have been satisfied by the purchase of Series A Preferred Stock under the Preferred Stock Purchase Agreement),
and (ii) amounts that have been received by the Purchaser (and that would otherwise be immediately available for investment in
the Company and its Subsidiaries) as of such time from the issuance and sale of shares of Series A Preferred Stock pursuant to
the Preferred Stock Purchase Agreement.
“GAAP”
means United States generally accepted accounting principles as in effect from time to time.
“General
Schedules” means the disclosure schedules jointly prepared and delivered by the Seller and the Purchaser concurrently
with the execution and delivery of this Agreement, which disclosure schedules are arranged in sections, subsections and paragraphs
corresponding to the numbered and lettered sections, subsections and paragraphs in this Agreement, other than those in §3
and §4.
“Go-Shop
Period” has the meaning set forth in §5(g)(ii) below.
“Governmental
Entity” means any transnational, domestic or foreign, federal, state or local governmental authority, department, court,
agency or official, including any political subdivision thereof (including the IRS).
“Income
Tax” means any Tax that is based on, or computed with respect to, net income or earnings (and any franchise Tax or Tax
on doing business imposed in lieu thereof) and all related interest and penalties.
“Income
Tax Return” means any Tax Return relating, or with respect, to Income Taxes.
“Indemnified
Party” means any Purchaser Party, Seller Party or other Person (as applicable) entitled to indemnification pursuant
to §8 of this Agreement.
“Indemnifying
Party” means any of the Purchaser, the Seller or other Person (as applicable) who has an obligation to indemnify and
hold harmless any Indemnified Party pursuant to §8 of this Agreement.
“Intellectual
Property” means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), and
all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations in part,
revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate
names and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith,
(c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all
mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business
information (including research and development, know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software (including databases and related documentation), (g) all
other similar intellectual property rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).
“Interest
Rate” shall have the meaning set forth in the Purchaser Note.
“Knowledge”
means actual knowledge of Robert Fernander, Danny Zheng and Geoff Barrall.
“Laws”
means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, regulations, ordinances,
codes and principles of common law, including the interpretation or administration thereof by any Governmental Entity charged
with the enforcement, interpretation or administration thereof, in each case having the force of law.
“Leased
Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures,
improvements, fixtures or other interest in real property held by any of the Company or its Subsidiaries.
“Leases”
means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions,
renewals, guaranties and other agreements with respect thereto, pursuant to which any of the Company or its Subsidiaries holds
any Leased Real Property, including the right to all security deposits and other amounts and instruments deposited by or on behalf
of the Company or its Subsidiaries thereunder.
“Liability”
means any liability (whether absolute or contingent, whether accrued or unaccrued, or whether liquidated or unliquidated), including
any liability for Taxes.
“Material
Adverse Change” means a material adverse change in, or effect on, the business, financial condition, operations, results
of operations or prospects of the Company and its Subsidiaries taken as a whole, excluding any event, occurrence, fact, condition
or change, directly or indirectly, arising out of or attributable to: (a) general economic, regulatory or political conditions
(or changes therein) or conditions (or changes therein) in the financial, credit or securities markets (including changes in interest
or currency exchange rates) in any country or region in which the Company and its Subsidiaries, as applicable, operate; (b) any
natural or man-made disaster or act of war, armed hostilities or terrorism, or the escalation or worsening thereof; (c) condition,
change, event, occurrence or effect generally affecting the industries in which the Company and its Subsidiaries operate; (d)
any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or
at the written request of the Purchaser or its Affiliates; (e) the announcement, pendency or completion of the Transactions, including
losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with the Company or
any of its Subsidiaries; (f) any changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation
or interpretation thereof; or (g) any failure by the Company or any of its Subsidiaries to meet any internal or published projections,
forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions
of this definition) shall not be excluded).
“Multiemployer
Plan” has the meaning set forth in ERISA §3(37).
“Notice
of Dispute” has the meaning set forth in §2(f)(ii).
“Order”
means any order, award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or verdict entered, issued, made
or rendered by any Governmental Entity.
“Ordinary
Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect
to quantity and frequency).
“Partnership”
has the meaning set forth in §3(b)(i).
“Party”
has the meaning set forth in the preface above.
“PBGC”
means the Pension Benefit Guaranty Corporation.
“Person”
means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Entity.
“Post-Closing
Tax Period” means any Tax period beginning after the Closing Date.
“Pre-Closing
Tax Period” means any Tax period ending on or before the Closing Date.
“Preferred
Stock Purchase Agreement” means an agreement, substantially in the form of Exhibit F hereto, among the Purchaser
and the Equity Investors providing for the issuance and sale of Series A Preferred Stock to the Equity Investors.
“Proceeding”
means any action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, arbitration, audit, or judicial
or administrative proceeding.
“Prohibited
Transaction” has the meaning set forth in ERISA §406 and Code §4975.
“Proxy
Statement” has the meaning set forth in §5(l) below.
“Purchase
Price” has the meaning set forth in §2(b) below.
“Purchaser”
has the meaning set forth in the preface above.
“Purchaser
Common Stock” means the common stock, $0.01 par value per share, of the Purchaser.
“Purchaser
Note” has the meaning set forth in §2(b) below.
“Purchaser
Parties” means, collectively, the Purchaser, the Purchaser’s Affiliates (including the Company and the Company’s
Subsidiaries) and the Purchaser’s Representatives; provided, that “Purchaser Parties” shall not include
the Seller or the Seller’s controlled Affiliates (other than the Company and the Company’s Subsidiaries).
“Purchaser
Schedules” means the disclosure schedules delivered by the Purchaser concurrently with the execution and delivery of
this Agreement, together with any Schedule Supplement delivered hereinafter, which disclosure schedules are arranged in sections,
subsections and paragraphs corresponding to the numbered and lettered sections, subsections and paragraphs in §3 of
this Agreement.
“Purchaser
Shares” has the meaning set forth in §2(b) below.
“Purchaser
Tax Losses” means, collectively: (a) Seller Indemnified Taxes; (b) any reasonable fees and out-of-pocket expenses of
attorneys or other tax advisors, arising out of or incident to the imposition, assessment or assertion of any Seller Indemnified
Tax; and (c) any Tax (and related costs) imposed on the Purchaser, any of its Affiliates, or the Company and its Subsidiaries
as a result of a breach of any covenant of the Seller in §9; it being understood that “Purchaser Tax Loss”
means any of the foregoing.
“Recommendation
Change” has the meaning set forth in §5(h) below.
“Reference
Balance Sheet” means, collectively, the combined unaudited balance sheets of the Company and its Subsidiaries (including
Connected Data) as of September 30, 2016.
“Reportable
Event” has the meaning set forth in ERISA §4043.
“Representative”
means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants
and other agents of such Person.
“Requisite
Vote” means the adoption of this Agreement, each other Transaction Document and the Transactions by the affirmative
vote or consent of the holders of a majority of the issued and outstanding shares of the Seller’s capital stock entitled
to vote thereon.
“Review
Period” has the meaning set forth in §2(f)(ii).
“Schedule
Supplement” has the meaning set forth in §5(f).
“Schedules”
means, collectively, the Purchaser Schedules, the Seller Schedules and the General Schedules; it being understood that the term
“Schedule” means any of the foregoing.
“Securities
Act” means the Securities Act of 1933, as amended.
“Securities
Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Security
Agreement” means the guaranty and security agreement between the Company and the Seller dated as of the date of the
Closing, substantially in the form of Exhibit E.
“Security
Interest” means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) those set
forth in the Financial Statements, (b) mechanic’s, materialmen’s, carriers’, workmen’s, warehousemen’s,
repairmen’s and similar liens, (c) liens for Taxes not yet due and payable or that are being contested in good faith by
appropriate proceedings, (d) liens securing rental payments under capital lease arrangements, (e) requirements and restrictions
of zoning, licensing, permitting, building and other similar Laws, or easements, encroachments, overlaps, overhangs, or any other
matter which would be disclosed by an accurate survey or physical inspection of the property, (f) lien, encumbrance or other security
interest incurred or deposits made in connection with workers’ compensation, unemployment insurance, and other types of
social security or to secure the performance of tenders or statutory obligations, (g) those arising under federal or state securities
Laws or a Person’s organizational documents, and (h) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
“Seller”
has the meaning set forth in the preface above.
“Seller
Affiliated Group” means any Affiliated Group the common parent of which is the Seller.
“Seller
Indemnified Taxes” means any Liability (a) for any Taxes of the Company and its Subsidiaries with respect to any Pre-Closing
Tax Period, (and the portion of any Straddle Period ending on the Closing Date as determined pursuant to §9(b)), and
(b) for any Income Tax of a Seller Affiliated Group for which the Company or any of its Subsidiaries is liable under Treasury
Regulation Section 1.1502-6 (or any analogous provision of state or local Law), in each case, excluding any (x) Taxes included
in the computation of Final Working Capital, (y) Taxes attributable to or resulting from any breach by Purchaser or its Affiliates
of the covenants and agreements contained in §9 of this Agreement, and (z) Transfer Taxes.
“Seller
Parties” means, collectively, the Seller, the Seller’s Affiliates and the Seller’s Representatives; provided,
that “Seller Parties” shall not include the Company, the Company’s Subsidiaries, the Purchaser or the Purchaser’s
controlled Affiliates.
“Seller
Schedules” means the disclosure schedules delivered by the Seller concurrently with the execution and delivery of this
Agreement, together with any Schedule Supplement delivered hereinafter, which disclosure schedules are arranged in sections, subsections
and paragraphs corresponding to the numbered and lettered sections, subsections and paragraphs in §4 of this Agreement.
“Seller
Stockholders” means, collectively, the holders of capital stock of the Seller.
“Seller
Stockholders Meeting” has the meaning set forth in §5(k) below.
“Seller
Tax Losses” means (a) any Tax of the Company or any of its Subsidiaries that is not a Seller Indemnified Tax, (b) any
reasonable fees and out-of-pocket expenses of attorneys or other tax advisors, arising out of or incident to the imposition, assessment
or assertion of any Tax that is not a Seller Indemnified Tax, and (c) any Tax (and related costs) imposed on the Seller or any
of its Affiliates as a result of a breach of any covenant of the Purchaser in §9; it being understood that “Seller
Tax Loss” means any of the foregoing.
“Seller
Tax Matter” means (a) amending a Tax Return of the Company or any Subsidiary of the Company for a Pre-Closing Tax Period
or Straddle Period; (b) making or revoking an election on any Tax Return filed after the Closing Date that adversely affects the
Taxes or Tax Returns of the Company or any Subsidiary of the Company for a Pre-Closing Tax Period (or Straddle Period); (c) extending
or waiving the applicable statute of limitations with respect to a Tax of the Company or any Subsidiary of the Company for a Pre-Closing
Tax Period or Straddle Period; (d) filing any ruling request with any Governmental Entity that relates to Taxes or Tax Returns
of the Company or any Subsidiary of the Company for a Pre-Closing Tax Period or Straddle Period; or (e) entering (or pursuing)
any voluntary disclosure agreements with any Governmental Entity that relate to Taxes or Tax Returns of the Company or any Subsidiary
of the Company for any Pre-Closing Tax Period or Straddle Period.
“Seller
Warrant” means a warrant entitling the holder thereof, for a period of sixty (60) days following the Closing Date, to
purchase one share of common stock of the Seller at an exercise price per share of the greater of (a) $0.75, and (b) the average
closing price of the Seller’s common stock for the ten (10) trading day period ending the day immediately prior to the Closing
Date; provided, that (x) the exercise price per share shall not exceed $1.20; (y) such warrants shall only be exercisable
in cash; and (z) all shares of the Seller’s common stock issued upon the exercise of such warrants shall be subject to customary
lock-up agreements restricting the pledge, sale, transfer or other disposition of such shares of common stock for a period of
six (6) months following the exercise of such warrants.
“Series
A Preferred Stock” means the preferred stock, $0.01 par value per share, of the Purchaser designated Series A Preferred
Stock in the A&R Charter and having the rights, privileges and preferences set forth therein.
“Stockholders
Agreement” means the stockholders agreement among the Purchaser, the Seller, and the Equity Investors dated as of the
date of the Closing, substantially in the form of Exhibit D.
“Straddle
Period” means any Tax period that includes, but does not end on, the Closing Date.
“Subsidiary”
means any Person with respect to which a specified Person, directly or indirectly, owns a majority of the common stock or has
the power to vote or direct the voting of sufficient securities to elect a majority of the directors. For purposes of this Agreement,
Connected Data shall be deemed to be a Subsidiary of the Company.
“Target
Working Capital” means $850,000.
“Tax”
means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration,
value added, alternative or add on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
“Tax
Benefit” means for any year a reduction in Taxes payable to a Governmental Entity
or any increase in any Tax refund receivable (including any related interest) from any Governmental Entity
(determined on a with or without basis).
“Tax
Representations” has the meaning set forth in §4(l)(viii).
“Tax
Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment thereof.
“Tax
Sharing Agreement” means any existing agreement or arrangement binding the Company or any of its Subsidiaries that provides
for the allocation, apportionment, sharing or assignment of any Tax Liability or benefit, or the transfer or assignment of income,
revenues, receipts, or gains for the purpose of determining any Person’s Tax Liability, provided, that such term
shall not include (i) any provisions of contracts entered into in the Ordinary Course of Business with third parties that normally
include these type of provisions such as leases or credit agreements; (ii) any such agreement sharing responsibilities solely
between the Company and its Subsidiaries; or (iii) any provision of this Agreement.
“Termination
Fee” has the meaning set forth in §10(b) below.
“Third
Party Claim” has the meaning set forth in §8(e) below.
“Transaction
Costs” means (i) all fees and expenses unpaid as of immediately prior to Closing that have been incurred by the Company
or any of its Subsidiaries or the Seller in connection with the sale of the Company and its Subsidiaries, and the consummation
of Transactions, and (ii) any success bonus, sales bonus, change in control payments, severance payments, retention payments,
stock appreciation right payments, “phantom stock” payments or other payments to employees or consultants that are
due and payable on the Closing Date, including the employer portion of any related payroll and other employment Taxes). Transaction
Costs shall include the unpaid fees and expenses payable at the Closing to the Company’s financial advisors and attorneys.
“Transaction
Documents” means this Agreement, the Purchaser Note, the Contribution Agreement, the Stockholders Agreement, the Security
Agreement and any other agreements, instruments, certificates, opinions, or other documents, entered into, delivered or otherwise
contemplated hereby or required to effect the Transactions.
“Transactions”
means the transactions contemplated by this Agreement or by the other Transaction Documents.
“Transfer
Taxes” has the meaning set forth in §9(f).
2. Purchase
and Sale of Company Shares.
(a) Basic
Transaction. On and subject to the terms and conditions of this Agreement, at the Closing, the Purchaser shall purchase, acquire
and accept from the Seller, and the Seller shall sell, assign, convey and deliver to the Purchaser, the Company Shares for the
consideration specified below in §2(b).
(b) Purchase
Price. In consideration for the purchase of the Company Shares, at the Closing, the Purchaser agrees to:
(i) deliver
to the Seller a promissory note (the “Purchaser Note”) in the form of Exhibit A in the aggregate principal
amount of $25,000,000, subject to the adjustments set forth in §2(e), §2(f), and §8(g) (the
principal amount thereof, as so adjusted, the “Purchase Price”); and
(ii) issue
to the Seller five (5) shares of Purchaser Common Stock, representing fifty percent (50%) of the issued and outstanding shares
of Purchaser Common Stock (the “Purchaser Shares”) as of the Closing Date.
(c) The
Closing. The closing of the Transactions (the “Closing”) shall take place on the second business day following
the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions set forth in §7
(other than conditions that by their nature are to be satisfied at the Closing itself but subject to the satisfaction or waiver
of those conditions) or such other date as the Parties may mutually determine (the “Closing Date”).
(d) Deliveries.
(i) Signing
Deliverables. Contemporaneously with the execution and delivery hereof:
(A) the
Purchaser is delivering to the Seller documents and instruments evidencing Funded Equity Commitments in an aggregate amount greater
than or equal to $2,500,000; and
(B) the
Seller is delivering to the Purchaser duly executed copies of employment agreements between the Company and each of Robert Fernander
and Geoff Barrall (the “Employment Agreements”).
(ii) Closing
Deliverables. At the Closing:
(A) the
Seller will deliver to the Purchaser the various Transaction Documents referred to in §7(a);
(B) the
Seller will issue and deliver to the Purchaser Sixty-two Thousand Five Hundred (62,500) Seller Warrants for each $2,500,000 increment
of Funded Equity Commitments secured by the Purchaser as of the Closing Date; provided, that in no event shall the Purchaser
be (1) issued more than 250,000 Seller Warrants or (2) entitled to receive any Seller Warrants in respect of any increment of
Funded Equity Commitments that is less than $2,500,000; and
(C) the
Purchaser will deliver to the Seller the various Transaction Documents referred to in §7(b).
(e) Adjustments
to Purchase Price.
(i) If,
on the six (6) month anniversary of the Closing Date, the aggregate Funded Equity Commitments are less than $10,000,000, then
the aggregate principal amount of and the Interest Rates stated in the Purchaser Note shall be adjusted as follows:
(A) the
aggregate principal amount of the Purchaser Note shall be increased by an amount equal to $10,000,000, minus the aggregate
Funded Equity Commitments on such date; and
(B) the
base Interest Rates stated in the Purchaser Note shall be increased one percent (1%) per annum, such that the base Interest Rate
during the period from such date until the second anniversary of the Closing will be six percent (6%) per annum, and thereafter
the base Interest Rate will be nine percent (9%) per annum;
provided,
that, for the avoidance of doubt, (i) during such six (6) month period, interest on the original principal amount of the Purchaser
Note shall accrue at the Interest Rate stated in the Purchaser Note; and (ii) if the principal amount of the Purchaser Note and
Interest Rate are adjusted pursuant to the foregoing clauses (A) and (B), then such adjustments shall be applied
as if they were effective on the original issue date.
(ii) Any
amounts which become payable as adjustments to the Purchaser Note as a result of the application of §2(e)(i)(A) will
constitute adjustments to the Purchase Price for all purposes hereunder.
(f) Post-Closing
Working Capital Adjustment.
(i) Closing
Statement. As soon as practicable, but no later than sixty (60) days following the Closing, the Purchaser shall prepare and
deliver to Seller a statement setting forth the Purchaser’s good faith calculation of (A) the balance sheet of the Company
and its Subsidiaries (including Connected Data) as of the Closing Date, and (B) the Company Working Capital (such statement, the
“Closing Statement”).
(ii) Review.
The Seller shall have thirty (30) days (the “Review Period”) to review the Closing Statement. During
the Review Period, the Purchaser shall, and shall cause the Purchaser Parties, to (A) cooperate with and assist the Seller Parties
in their review of the Closing Statement and (B) make available to the Seller Parties, upon reasonable notice and during regular
business hours, all books, records and work papers of the Company and the Company’s subsidiaries related to the preparation
of the Closing Statement that are reasonably requested by the Seller Parties. If the Seller objects to any item on the Closing
Statement, then, prior to the expiration of the Review Period, the Seller shall deliver to the Purchaser written notice stating,
in reasonable detail, the Seller’s objections, the basis for such objections, the amounts in dispute and the Seller’s
alternative computation of each such item and amount (the “Notice of Dispute”). If the Seller fails to
deliver a Notice of Dispute prior to the expiration of the Review Period, then the Closing Statement as delivered by the Purchaser,
and the items and amounts therein, shall be final and binding on the Parties. If the Seller delivers a Notice of Dispute,
then the Purchaser and the Seller shall attempt to resolve the disputed matters as promptly as reasonably possible.
(iii) Dispute
Resolution. If the Purchaser and the Seller are unable to resolve all disputed items set forth in the Notice of Dispute (if
any) within thirty (30) days after delivery of the Notice of Dispute to the Purchaser (or such longer period as they may agree
upon), then either the Purchaser or the Seller may submit the remaining disputed matters to the Accounting Firm for resolution.
The Purchaser and the Seller shall, and shall cause their respective Affiliates, to provide to the Accounting Firm such support
and cooperation as is necessary for it to perform its function. The Accounting Firm shall deliver to the Purchaser and the
Seller, as promptly as practicable and in any event within thirty (30) days after its appointment, a written decision setting
forth its determination of the remaining disputed items in the Notice of Dispute. In rendering its determination, the Accounting
Firm (A) shall act as an expert and not as an arbitrator, (B) shall limit its determination only to the remaining items in dispute
set forth in the Notice of Dispute, (C) shall make all calculations in accordance with the standards and definitions in this Agreement,
and (D) with respect to each item in dispute, shall not assign a value to any item in dispute greater than the greatest value
for such item assigned to it by the Purchaser, on the one hand, or the Seller, on the other hand, or less than the lowest value
for such item assigned to it by the Purchaser, on the one hand, or the Seller, on the other hand. Such determination shall
be final, conclusive and binding upon the Parties absent fraud or manifest error. Notwithstanding anything else contained
herein, no Party may assert that any award issued by the Accounting Firm is unenforceable because it has not been timely rendered.
The terms of appointment and engagement of the Accounting Firm shall be as reasonably agreed upon between the Purchaser and the
Seller, and any associated engagement fees shall initially be borne fifty percent (50%) by the Purchaser and fifty percent (50%)
by the Seller; provided, that such fees shall ultimately be borne by the Purchaser and the Seller in the same proportion
as the aggregate amount of the disputed items that is unsuccessfully disputed by each such Party (as determined by the Accounting
Firm) bears to the total amount of the disputed items submitted to the Accounting Firm. Except as provided in the preceding
sentence, all other costs and expenses incurred by the Parties in connection with resolving any dispute hereunder before the Accounting
Firm shall be borne by the Party incurring such cost and expense.
(iv) Adjustment.
(A) If
the Target Working Capital exceeds the Final Working Capital by $350,000 or more, then the Seller shall owe to the Purchaser an
amount equal to such excess; or
(B) If
the Final Working Capital exceeds the Target Working Capital by $350,000 or more, then the Purchaser shall owe to the Seller an
amount equal to such excess.
(v) Any
amounts which become payable pursuant to this §2(f) will constitute an adjustment to the Purchase Price for all purposes
hereunder, and shall be applied to and reduce (in the case of §2(f)(iv)(A)) or increase (in the case of §2(f)(iv)(B))
the aggregate principal amount of the Purchaser Note.
3. Representations
and Warranties of the Purchaser.
The
Purchaser represents and warrants to the Seller as of the date of this Agreement as follows, except as set forth in the Purchaser
Schedules.
(a) Organization
of the Purchaser; Authorization of Transaction.
(i) The
Purchaser has been duly organized, and is validly existing and in good standing under the Laws of the State of Delaware.
(ii) The
Purchaser has full corporate power and authority to execute and deliver this Agreement and each other Transaction Document to
which it is a party, and to perform its obligations hereunder and thereunder. This Agreement has been, and at or prior to
the Closing each other Transaction Document will be, duly executed and delivered by the Purchaser, and assuming due authorization,
execution and delivery of the same by each other Person party thereto, constitutes a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and other similar Laws of general application affecting or relating to the enforcement
of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a Proceeding at
law or in equity. All corporate action required to be taken by the Purchaser in order to authorize the Purchaser to enter
into the Transaction Documents and to consummate the Transactions has been taken. The Purchaser need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Entity in order to execute, deliver
or perform any Transaction Document or to consummate the Transactions.
(b) Capitalization;
Liabilities.
(i) As
of the date hereof, the entire authorized capital stock of the Purchaser consists of 1,000 shares of Purchaser Common Stock, of
which five (5) shares are issued and outstanding. Spear Point Private Equity LP (the “Partnership”) is the
beneficial and record owner of all such shares of issued and outstanding Purchaser Common Stock, free and clear of all Security
Interests.
(ii) Upon
the Purchaser’s filing of the A&R Charter, and until such time immediately prior to the Closing, the entire authorized
capital stock of the Purchaser consists of: (A) 10,000,000 shares of Series A Preferred Stock, none of which shall be issued or
outstanding or held in treasury; and (B) 30,000,000 shares of Purchaser Common Stock, five (5) of which shall be issued and outstanding
and held of record and owned beneficially by the Partnership. Immediately following the Closing, and after giving effect to the
Transactions, the entire authorized capital stock of the Purchaser will consist of: (i) 10,000,000 shares of Series A Preferred
Stock, none of which shall be issued or outstanding or held in treasury (provided, however, that to the extent the Purchaser has
consummated any issuance and sale of Series A Preferred Stock under the Preferred Stock Purchase Agreement, such number of shares
of Series A Preferred Stock shall be issued and outstanding as provided in the Preferred Stock Purchase Agreement); and (ii) 30,000,000
shares of Purchaser Common Stock, ten (10) of which shall be issued and outstanding, with five (5) of such shares held of record
and owned beneficially by the Partnership, and five (5) of such shares (representing the Purchaser Shares) held of record and
owned beneficially by the Seller.
(iii) The
Purchaser Shares, when issued and delivered to Seller in accordance with this Agreement, will be duly authorized and validly issued
and fully paid and nonassessable, will be free and clear of all encumbrances, and will not be issued in violation of any preemptive
right, right of first refusal or similar right of any Person. The Purchaser is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Purchaser to sell, transfer, or otherwise dispose of any capital stock
of the Purchaser (other than sales of Series A Preferred Stock under the Preferred Stock Purchase Agreement, and the conversion
of any shares of Series A Preferred Stock into shares of Purchaser Common Stock). The Purchaser is not, and will not be, a party
or subject to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of
the Purchaser other than the Stockholders Agreement and there are no outstanding stock appreciation rights, phantom stock, profit
participation, or similar rights with respect to the Purchaser, in each case, other than those contemplated by the Transaction
Documents. The Purchaser does not (A) have any Subsidiaries or (B) directly or indirectly, own any capital stock or other interest
of, or have any obligation to make capital contributions or otherwise provide financial support to, any other Person.
(iv) The
Purchaser is a newly formed corporation and has not conducted any material operations and does not have any material liabilities,
other than those arising under the Transaction Documents.
(c) Noncontravention.
The execution, delivery and performance by the Purchaser and its Affiliates of this Agreement and each other Transaction
Document to which they are parties, and the consummation of the Transactions by the Purchaser and its Affiliates, do not and will
not (i) violate or conflict with any Law or Order applicable to the Purchaser or its Affiliates or any provision of their respective
organizational documents, (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Purchaser or its Affiliates are a party or by which any of their
respective assets are bound or subject, or (iii) result in the imposition of any Security Interest upon any of the Purchaser Shares
or any assets of the Purchaser.
(d) Brokers’
Fees. The Purchaser has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect
to the Transactions for which the Seller, the Company or any of the Company’s Subsidiaries could become liable or obligated.
(e) Investment.
The Purchaser is acquiring the Company Shares for its own account for investment purposes and not with a view to or for offer
or sale in connection with any distribution thereof. The Purchaser acknowledges and agrees that (A) the Company Shares are not
registered under the Securities Act, or any state securities Laws, and that the Company Shares may not be transferred or sold
except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom; (B) it
has conducted its own independent investigation, review and analysis of the business, results of operations, prospects, condition
(financial or otherwise) or assets of the Company and Company’s Subsidiaries; and (C) it has been provided adequate access
to the personnel, properties, assets, premises, books and records, and other documents and data of the Seller, the Company and
the Company’s Subsidiaries for such purpose.
(f) Equity
Commitments.
(i) Attached
to §3(f)(i) of the Purchaser Schedules are true, correct and complete copies of all executed Equity Commitment Letters
and other documents evidencing Funded Equity Commitments. As of the date hereof, there are at least $2,500,000 in Funded
Equity Commitments.
(ii) All
executed Equity Commitment Letters and other documents evidencing Funded Equity Commitments constitute legal, valid and binding
obligations of the Purchaser and each other Person party thereto (assuming such Person’s due authorization, execution and
delivery), and remain in full force and effect. No executed Equity Commitment Letter or any other document evidencing a
Funded Equity Commitment has been amended or modified and the respective obligations and commitments contained therein have not
been withdrawn or rescinded in any respect, and no event has occurred or no fact or circumstance exists which, with or without
notice, lapse of time or both, would constitute a default or breach under any executed Equity Commitment Letters or any other
document evidencing a Funded Equity Commitment on the part of the Purchaser or, to the knowledge of the Purchaser, any other Person
party thereto. There are no side letters, agreements, contracts, arrangements or other terms imposing any conditions or
contingencies on the funding of the equity commitments or the release of any funds, other than those expressly set forth in the
executed Equity Commitment Letters and any other document evidencing Funded Equity Commitments. Subject to the
terms and conditions of all Equity Commitment Letters evidencing Funded Equity Commitments, as of the date hereof, and assuming
the conditions set forth in §7(a) are satisfied, the conditions to (A) closing the transactions contemplated under
such Equity Commitment Letters, and (B) the release of the funds under each other document evidencing Funded Equity Commitments,
in each case, will be satisfied. Notwithstanding the foregoing, as of any date after the date hereof, such Equity Commitment Letters
will not be outstanding to the extent such Funded Equity Commitments have been satisfied by the purchase of Series A Preferred
Stock under the Preferred Stock Purchase Agreement; provided, that the representations herein shall thereafter apply to the Preferred
Stock Purchase Agreement and other documents relating to the Series A Preferred Stock so purchased.
(g) No
Other Representations or Warranties; Non-Reliance.
(i) Except
for the representations and warranties expressly made by the Purchaser in this §3, none of the Purchaser, the Purchaser’s
Affiliates or Representatives, or any other Person has made or is making any oral or written representation or warranty, express
or implied, with respect to the Purchaser, its Affiliates or any of its or their respective businesses, assets, liabilities, prospects,
results of operations or financial condition.
(ii) Without
limiting the generality of the foregoing, the Purchaser acknowledges and agrees that (A) none of the Seller, the Seller’s
Affiliates or Representatives or any other Person has made or is making any representation or warranty, express or implied, except
for the representations and warranties expressly set forth in §4; (B) none of the Seller, the Seller’s Affiliates
or Representatives or any other Person has made or is making any representation or warranty to the Purchaser, Purchaser’s
Affiliates or Representatives, or any other Person with respect to any projections, forecasts, estimates, plans or budgets, expenses
or expenditures, present or future financial results operations or affairs, or any other information, statements or documents
delivered to or made available to Purchaser, Purchaser’s Affiliates or Representatives, or any other Person, with respect
to the Seller, Seller’s Affiliates, the Company or the Company’s Subsidiaries or any of their respective businesses,
assets, liabilities, prospects, results of operations or financial condition, except as expressly covered by representations and
warranties set forth in §4; and (C) in making its decision to enter into this Agreement and to consummate the Transactions,
the Purchaser has relied solely upon its own investigation and the express representations and warranties of the Seller set forth
in §4.
4. Representations
and Warranties of the Seller.
The
Seller represents and warrants to the Purchaser as of the date of this Agreement as follows, except as set forth in the Seller
Schedules.
(a) Organization,
Power and Authorization of the Seller.
(i) The
Seller is duly organized, validly existing, and in good standing under the Laws of the State of Delaware.
(ii) The
Seller has full corporate power and authority to execute and deliver this Agreement and each other Transaction Document to which
it is a party, and to perform its obligations hereunder and thereunder, subject to, with respect to the execution and delivery
of the other Transaction Documents and consummation of the Transactions, the Requisite Vote. This Agreement has been, and at or
prior to the Closing each other Transaction Document will be, duly executed and delivered by the Seller, and, assuming the due
execution and delivery of the same by each other Person party thereto, constitutes (or will constitute) a valid and legally binding
obligation of the Seller, enforceable against the Seller in accordance with its terms, except that such enforceability (A) may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar Laws of general application
affecting or relating to the enforcement of creditors’ rights generally and (B) is subject to general principles of equity,
whether considered in a Proceeding at law or in equity. All corporate action required to be taken by the Seller’s Board
of Directors in order to authorize the Seller to enter into this Agreement has been taken, and all corporate action required to
be taken by the Seller’s Board of Directors in order to authorize the Seller to enter into each Transaction Document (other
than this Agreement) and to perform its obligations thereunder will be taken prior to the Closing. The Board of Directors of the
Seller (and any applicable committee thereof) has adopted resolutions (y) authorizing and approving the Transactions and (z) recommending
the adoption of this Agreement and the Transactions to the stockholders of the Seller.
(iii) The
Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental
Entity in order to consummate the Transactions, except for: (A) the filing of the Proxy Statement with the SEC in accordance with
the Exchange Act, and such other reports under the Exchange Act as may be required in connection with the Transaction Documents
and the Transactions; (B) such Consents as may be required under applicable state securities or “blue sky” Laws and
the securities Laws of any foreign country or the rules and regulations of the NYSE; and (C) such other notices, filings, consents
and approvals which if not given, made or obtained would not result in a Material Adverse Change.
(iv) The
Seller (A) understands that the Purchaser Note has not been, and will not be, registered under the Securities Act, or under any
state securities Laws, and is being offered and sold in reliance upon federal and state exemptions for transactions not involving
a public offering, (B) is acquiring the Purchaser Note solely for its own account for investment purposes, and not with a view
to the distribution thereof, (C) is a sophisticated investor with knowledge and experience in business and financial matters,
(D) has received certain information concerning the Purchaser and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding the Purchaser Note, (E) is able to bear the economic
risk and lack of liquidity inherent in holding the Purchaser Note, and (F) is an Accredited Investor.
(b) Organization,
Qualification, Power and Authorization of the Company.
(i) Each
of the Company and its Subsidiaries is duly organized, validly existing, and to the extent applicable, in good standing under
the Laws of the jurisdiction of its incorporation. Each of the Company and its Subsidiaries is duly authorized to conduct business
and to the extent applicable, in good standing under the Laws of each jurisdiction where such qualification is required, and has
full corporate power and authority and all licenses, permits, and authorizations necessary to carry on the businesses in which
it is presently engaged and to own and use the properties owned and used by it, except for such failures to be so qualified or
have such licenses, permits or authorizations as would not result in a Material Adverse Change.
(ii) §4(b)(ii)
of the Seller Schedule lists the directors and officers of the Company and each of its Subsidiaries. The Seller has made available
to the Purchaser true and correct copies of the organizational documents of the Company and each of its Subsidiaries (as amended
to date), and neither the Company nor any of its Subsidiaries is in default under or in violation of, in any material respect,
any provision of its organizational documents. The minute books (containing the records of meetings of the stockholders, the board
of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of the Company
and each of its Subsidiaries are correct and complete, in each case, except as would not result in a Material Adverse Change.
(iii) The
Company and each Subsidiary of the Company has full corporate power and authority to execute and deliver each of the Transaction
Documents to which it is a party, and to perform its obligations thereunder, subject to the Requisite Vote. All corporate action
required on the part of the Company and each Subsidiary to authorize the execution, delivery and performance of the Transaction
Documents to which they are parties has been taken or will be taken prior to the Closing. Each of the Transaction Documents to
which the Company or any Subsidiary is a party shall, when executed and delivered (and assuming the due execution and delivery
of the same by each other Person party thereto), constitute the valid and legally binding obligation of the Company or Subsidiary
executing same, enforceable in accordance with its terms and conditions, except that such enforceability (A) may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar Laws of general application affecting
or relating to the enforcement of creditors’ rights generally and (B) is subject to general principles of equity, whether
considered in a Proceeding at law or in equity. None of the Company or any of its Subsidiaries need give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any Governmental Entity in order to consummate the Transactions.
(c) Capitalization.
The Seller holds of record and owns beneficially (A) all of the Company Shares, and such Company Shares represent all of the issued
and outstanding capital stock of the Company, and (B) 1,000 shares of common stock of Connected Data, representing all of the
issued and outstanding capital stock of Connected Data. The Company Shares and the shares of common stock of Connected Data owned
by the Seller are held free and clear of any Security Interest. The Seller is not a party to any option, warrant, purchase right,
or other contract or commitment that could require the Seller to sell, transfer, or otherwise dispose of any capital stock of
the Company (other than this Agreement) or any capital stock of Connected Data (other than the Contribution Agreement). The Seller
is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock
of the Company or of Connected Data.
(d) Noncontravention.
The execution, delivery and performance by Seller and its Affiliates of each Transaction Document to which they are parties, and
the consummation of the Transactions by Seller and its Affiliates, will not (i) subject to the Requisite Vote, violate any Law
or Order applicable to the Seller, the Company or any of the Company’s Subsidiaries or any provision of the organizational
documents of the Seller, the Company or any of the Company’s Subsidiaries; (ii) subject to the Requisite Vote, conflict
with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any Company Agreement; or (iii) result in the imposition of any Security
Interest upon any assets of the Company or any of the Company’s Subsidiaries, except, in the case of clauses (ii) and (iii)
as would not result in a Material Adverse Change.
(e) Brokers’
Fees. None of the Seller, the Company or any of the Company’s Subsidiaries has any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the Transactions as a result of any arrangement made by or
on behalf of the Seller or its Affiliates.
(f) Title
to Assets. The Company and its Subsidiaries have good and marketable title to, or a valid leasehold interest in, the properties
and assets reflected on the Reference Balance Sheet or acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of Business since the date of the Reference Balance Sheet.
(g) Subsidiaries.
§4(g) of the Seller Schedule sets forth for each Subsidiary of the Company (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its capital stock, (iii) the number of issued and outstanding
shares of each class of its capital stock, the names of the holders thereof, and the number of shares held by each such holder,
and (iv) the number of shares of its capital stock held in treasury. All of the issued and outstanding shares of capital stock
of each Subsidiary of the Company have been duly authorized and are validly issued, fully paid, and nonassessable. The Company
and its Subsidiaries hold of record and own beneficially all of the outstanding shares purported to be owned by them on §4(g)
of the Seller Schedule free and clear of any Security Interest. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require
any of the Company and its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any of its Subsidiaries
or that could require any Subsidiary of the Company to issue, sell, or otherwise cause to become outstanding any of its own capital
stock. There are no outstanding stock appreciation rights, phantom stock, profit participation, or similar rights with respect
to any Subsidiary of the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the
voting of any capital stock of any Subsidiary of the Company. None of the Company and its Subsidiaries controls directly or indirectly
or has any direct or indirect equity participation in any corporation, partnership, trust, or other business association which
is not a Subsidiary of the Company.
(h) Financial
Statements. Attached to §4(h) of the Seller Schedule are the following financial statements of the Company and
its Subsidiaries (collectively, the “Financial Statements”): (i) combined unaudited balance sheets of the Company
and its Subsidiaries as of December 31, 2015, and the related statements of income, changes in stockholders’ equity, and
cash flow as of and for the fiscal years then ended; and (ii) the Reference Balance Sheet and the related statements of income,
changes in stockholders’ equity, and cash flow for the nine-month period ended September 30, 2016. The Financial Statements
(including the notes thereto) (x) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, (y) present fairly, in all material respects, the financial condition of the Company and its Subsidiaries as
of such dates and the results of operations of the Company and its Subsidiaries for such periods stated therein, and are correct
and complete in all material respects, and (z) are consistent, in all material respects, with the books and records of the Company
and its Subsidiaries (which books and records are correct and complete in all material respects), in each case, subject to the
qualifications, statements and notes therein, to normal year-end adjustments, and to the lack of footnotes and other presentation
items (none of which are material individually or in the aggregate).
(i) Events
Subsequent. Since the date of the Reference Balance Sheet, there has not been any Material Adverse Change. Without limiting
the generality of the foregoing, except as contemplated by the Transaction Documents, since the date of the Reference Balance
Sheet:
(i) none
of the Company or any of its Subsidiaries has sold, leased, transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
(ii) none
of the Company or any of its Subsidiaries has entered into any agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) either involving more than $200,000 or outside the Ordinary Course of Business;
(iii) no
Person (including any of the Company and its Subsidiaries) has accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $150,000 to
which the Company or any of its Subsidiaries is a party or by which any of them is bound;
(iv) none
of the Company or any of its Subsidiaries has imposed any Security Interest upon any of its assets, tangible or intangible, except
that will be released at or prior to the Closing;
(v) none
of the Company or any of its Subsidiaries has made any capital expenditure (in a transaction or series of related transactions)
either involving more than $150,000 or outside the Ordinary Course of Business;
(vi) none
of the Company or any of its Subsidiaries has made any capital investment in, any loan to, or any acquisition of the securities
or assets of, any other Person (in a transaction or series of related transactions);
(vii) none
of the Company or any of its Subsidiaries has issued any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation;
(viii) none
of the Company or any of its Subsidiaries has delayed or postponed the payment of accounts payable and other Liabilities outside
the Ordinary Course of Business;
(ix) none
of the Company or any of its Subsidiaries has cancelled, compromised, waived, or released any right or claim (or series of related
rights and claims) either involving more than $50,000 or outside the Ordinary Course of Business;
(x) none
of the Company or any of its Subsidiaries has granted any license or sublicense of any rights under or with respect to any Intellectual
Property (other than non-exclusive licenses granted to customers in the Ordinary Course of Business);
(xi) there
has been no change made or authorized in the organizational documents of the Company or any of its Subsidiaries;
(xii) none
of the Company or any of its Subsidiaries has issued, sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital
stock;
(xiii) none
of the Company or any of its Subsidiaries has declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(xiv) none
of the Company or any of its Subsidiaries has experienced any damage, destruction, or loss (whether or not covered by insurance)
to its property;
(xv) none
of the Company or any of its Subsidiaries has made any loan to, or entered into any other transaction with, any of its directors,
officers, and employees (excluding the Employment Agreements, employment agreements entered into and listed in §4(i)(xv)
of the Seller Schedule, and those employee benefits granted to employees generally and advances for business expenses in each
case made in the Ordinary Course of Business);
(xvi) none
of the Company or any of its Subsidiaries has entered into any employment contract with any executive officer (excluding the Employment
Agreements) or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement;
(xvii) none
of the Company or any of its Subsidiaries has granted any increase in the base compensation of any of its directors, officers,
and employees in excess of $50,000 or outside the Ordinary Course of Business;
(xviii) none
of the Company or any of its Subsidiaries has adopted, amended, modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any
such action with respect to any other Employee Benefit Plan) except for such changes as affect employees generally and made within
the Ordinary Course of Business or in accordance with Law; and
(xix) none
of the Company or any of its Subsidiaries has committed to any of the foregoing.
(j) Liabilities.
None of the Company and its Subsidiaries has any Liability of a type required to be reflected on a balance sheet prepared in accordance
with GAAP, except for those Liabilities (i) which are reserved or set forth on the Reference Balance Sheet; (ii) which have arisen
after the date of the Reference Balance Sheet in the Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of Law);
(iii) which have been incurred in connection with the Transactions; and (iv) which do not, alone or in the aggregate, result in
a Material Adverse Change. None of the Company or any of its Subsidiaries has any Liability to (y) any predecessor or other Person
(or any officer, director, employee or Affiliate of any predecessor or other Person) who sold or otherwise transferred any stock
in the Company or any Subsidiary, or any assets, Company Agreements or other property to the Company or any Subsidiary (including
under any contingent purchase price, earn-out or other arrangement), or (z) any of the Seller, its Subsidiaries or other Affiliates,
and their respective officers, directors and employees).
(k) Legal
Compliance. During the past two (2) years, (i) the Company and its Subsidiaries, and each of their respective predecessors
have complied with all applicable Laws, and (ii) no Proceeding has been filed or commenced against any of them alleging any failure
to comply with any applicable Law, except for violations or Proceedings as would not result in a Material Adverse Change.
(l) Tax
Matters.
(i) The
Company and each of its Subsidiaries has filed all Tax Returns that it was required to file. All such Tax Returns were correct
and complete in all material respects. All Taxes owed by any of the Company and its Subsidiaries (whether or not shown on any
Tax Return) have been paid. Neither the Company nor any of its Subsidiaries currently is the beneficiary of any extension of time
within which to file any Tax Return. No claim has been made in writing in the past five (5) years by an authority in a jurisdiction
where either the Company or any of its Subsidiaries does not file Tax Returns that the Company or such Subsidiary is subject to
taxation by that jurisdiction. There are no Security Interests on any of the assets of any of the Company and its Subsidiaries
that arose in connection with any failure (or alleged failure) to pay any Tax (which, for the avoidance of doubt, shall not include
any Security Interests for Taxes not yet due and payable, which are being contested in good faith and disclosed on §4(l)(i)
of the Seller Schedule, or for which adequate reserves have been established on the books and records of the Company or applicable
Subsidiary).
(ii) Except
to the extent it would not result in a Material Adverse Change, the Company and each of its Subsidiaries has withheld and paid
all Taxes known to have been required to have been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(iii) No
Tax audits or other actions concerning any Tax Liability of the Company or any of its Subsidiaries are pending, or to the Knowledge
of the Sellers, the Company or any of its Subsidiaries, threatened in writing with regard to any Tax Returns of the Company or
any of its Subsidiaries.
(iv) None
of the Seller, the Company or any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency, in each case, with respect to the Company or any of its Subsidiaries.
(v) Neither
the Company nor any of its Subsidiaries has made any payments that were not deductible as a result of the application of Code
§280G, and neither the Company nor any of its Subsidiaries is obligated to make any payments in connection with the transactions
contemplated by this Agreement that will not be deductible as a result of the application of Code §280G. Neither of the Company
nor any of its Subsidiaries has been a United States real property holding corporation within the meaning of Code §897(c)(2)
during the applicable period specified in Code §897(c)(1)(A)(ii). Neither the Company nor any of its Subsidiaries (A) has
been a member of an Affiliated Group filing a consolidated federal Income Tax Return (other than a Seller Affiliated Group) or
(B) has any Liability for the Taxes of any Person (other than a member of a Seller Affiliated Group) under Reg. §1.1502-6
(or any similar provision of Law), as a transferee or successor, or pursuant to a Tax Sharing Agreement that will not be canceled
pursuant to §9(d).
(vi) The
unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the date of the Reference Balance Sheet, exceed the reserve
for Tax Liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax items)
set forth on the face of the Reference Balance Sheet and (B) do not exceed that reserve in accordance with the past custom and
practice of the Company and its Subsidiaries in filing their Tax Returns.
(vii) Neither
the Company nor any of its Subsidiaries will be required to include any material item of income in, or exclude any material item
of deduction from, taxable income for any Post-Closing Tax Period as a result of any (A) change in method of accounting for a
Pre-Closing Tax Period under Code §481(c) (or any corresponding or similar provision of state, local or foreign Income Tax
Law); (B) “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state,
local or foreign Income Tax Law) executed on or prior to the Closing Date; (C) deferred intercompany gain or any excess loss account
described in Treasury Regulations under Code §1502 (or any corresponding or similar provision of state, local or foreign
Income Tax Law); (D) installment sale governed by Code §453 (or any corresponding or similar provision of state, local or
foreign Income Tax Law) or open transaction disposition, in each case, made on or prior to the Closing Date; or (E) prepaid amount
received on or prior to the Closing Date.
(viii) The
representations and warranties in this §4(l) (the “Tax Representations”) shall constitute the sole
and exclusive representations and warranties regarding any Tax matters relating to the Company or any of its Subsidiaries, including
any representations or warranties regarding compliance with Tax Laws, Liability for Taxes, the filing of Tax Returns, and the
accrual and reserves for Taxes on any financial statements or books and records of the Company and its Subsidiaries. No Tax Representation
shall be with respect to the availability or use of any Tax attribute (including a net operating loss) or Tax credit in any Post-Closing
Tax Period (or portion of a Straddle Period beginning after the Closing Date) or otherwise relate to Taxes payable in any Post-Closing
Tax Period (or portion of a Straddle Period beginning after the Closing Date).
(m) Real
Property. None of the Company or any of its Subsidiaries owns or has owned, during the past two (2) years, any real property.
§4(m) of the Seller Schedule sets forth the address of each parcel of Leased Real Property, and a true and complete
list of all Leases for each such Leased Real Property and the date and name of the parties to such Lease. The Company and each
of its Subsidiaries have made available to the Purchaser a true and complete copy of each such Lease, or in the case of any oral
Lease, a written summary of the material terms of such Lease.
(n) Intellectual
Property.
(i) The
Company and its Subsidiaries own or have the right to use pursuant to a license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Company and its Subsidiaries in the Ordinary Course of Business.
Subject to any consents under §4(d), each item of material Intellectual Property owned or used by any of the Company
and its Subsidiaries immediately prior to the Closing hereunder will be owned or available for use by the Company or the Subsidiary
on substantially identical terms and conditions immediately subsequent to the Closing hereunder. Each of the Company and its Subsidiaries
has taken commercially reasonable action to maintain and protect each item of material Intellectual Property that it owns.
(ii) To
the Knowledge of the Seller, none of the Company and its Subsidiaries has interfered with, infringed upon, misappropriated, or
otherwise violated any Intellectual Property rights of third parties, and in the last two (2) years, none of the Seller, the Company
and its Subsidiaries has ever received any written charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation by the Company or any of its Subsidiaries (including any claim that any of the Company
and its Subsidiaries must license or refrain from using any Intellectual Property rights of any third party). To the Knowledge
of the Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise violated any Intellectual Property
rights of any of the Company and its Subsidiaries.
(iii) §4(n)(iii)
of the Seller Schedule identifies each patent or registration which has been issued to any of the Company and its Subsidiaries
with respect to any of its Intellectual Property, and identifies each pending patent application or application for registration
which any of the Company and its Subsidiaries has made with respect to any of its Intellectual Property. The Seller has made available
to the Purchaser copies of all such patents, registrations, and applications. §4(n)(iii) of the Seller Schedule also
identifies each material trade name or material unregistered trademark used by any of the Company and its Subsidiaries in connection
with any of its businesses. With respect to each item of Intellectual Property required to be identified in §4(n)(iii)
of the Seller Schedule, and to the Knowledge of the Seller with respect to any unregistered trade name or trademark:
(A) the
Company and its Subsidiaries possess all right, title, and interest in and to the item, free and clear of any Security Interest,
license, or other restriction (other than licenses for commercially available off-the-shelf software and software-as-a-service
and nonexclusive licenses granted in the Ordinary Course of Business);
(B) the
item is not subject to any outstanding Order; and
(C) no
Proceeding is pending or, to the Knowledge of the Seller, is threatened which challenges the legality, validity, enforceability,
use, or ownership of the item.
(o) Tangible
Assets. The Company and its Subsidiaries own or lease all buildings, machinery, equipment, and other tangible assets necessary
for the conduct of their respective businesses as presently conducted. Each such tangible asset has been maintained in accordance
with normal industry practice, is in good operating condition and repair (subject to normal wear and tear), and is suitable for
the purposes for which it presently is used.
(p) Inventory.
The inventory of the Company and its Subsidiaries consists of raw materials and supplies, manufactured and purchased parts, goods
in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured,
and none of which is slow moving, obsolete, damaged, or defective, subject only to the reserve for inventory write-down set forth
on the Reference Balance Sheet in accordance with the past custom and practice of the Company and its Subsidiaries.
(q) Company
Agreements. §4(q) of the Seller Schedule lists the following contracts to which the Company or any of its Subsidiaries
are parties or by which their respective assets or properties are bound (including any groups of related agreements):
(i) contracts
for the lease of personal property to or from any Person providing for lease payments in excess of $150,000 per annum;
(ii) contracts
for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing
or receipt of services, the performance of which will extend over a period of more than one year, result in a loss to any of the
Company and its Subsidiaries, or involve consideration in excess of $150,000 per annum;
(iii) contracts
concerning a partnership or joint venture;
(iv) contracts
under which any of the Company and its Subsidiaries has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which it has imposed a Security Interest on any of its assets, tangible or
intangible;
(v) contracts
concerning confidentiality or noncompetition;
(vi) contracts
with the Seller and its Affiliates (other than the Company and its Subsidiaries);
(vii) contracts
concerning any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other plan
or arrangement for the benefit of any current or former directors, officers, and employees of any of the Company and its Subsidiaries;
(viii) contracts
concerning any collective bargaining agreement;
(ix) contracts
for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess
of $100,000 or providing severance benefits;
(x) contracts
under which any of the Company and its Subsidiaries has advanced or loaned any amount to any of its directors, officers, and employees
outside advances for business travel or similar expenses in the Ordinary Course of Business;
(xi) contracts
under which any of the Company and its Subsidiaries (A) has granted any license or other right to any material Intellectual Property
owned by any of the Company and its Subsidiaries (excluding nonexclusive licenses granted in the Ordinary Course of Business)
or (B) is granted any license or other right to any material Intellectual Property owned by any third party (excluding commercially
available off-the-shelf software and software-as-a-service);
(xii) contracts
for which a default or termination would reasonably be expected to result in a Material Adverse Change; or
(xiii) any
other agreement (or group of related agreements) the performance of which involves consideration in excess of $150,000 per annum.
The
Seller has made available to the Purchaser a copy of each written Company Agreement listed in §4(q) of the Seller
Schedule and a written summary setting forth the terms and conditions of each oral Company Agreement referred to in §4(q)
of the Seller Schedule. Each Company Agreement constitutes a legal, valid, binding and enforceable obligation of the Company
or Subsidiary of the Company party thereto, and to the Knowledge of the Seller, each other party thereto, and is in full force
and effect. None of the Company, any Subsidiary of the Company, or to the Knowledge of the Seller, any other party thereto is
in breach of or default under any Company Agreement, except for breaches, defaults, terminations or modifications that would not
result in a Material Adverse Change. To the Knowledge of the Seller, no event has occurred which with notice or lapse of time
would constitute a breach or default, or permit termination, modification, or acceleration, under any Company Agreement.
(r) Notes
and Accounts Receivable. All notes and accounts receivable of the Company and its Subsidiaries reflected on the Reference
Balance Sheet (i) are reflected properly, in all material respects, on their respective books and records, (ii) are valid receivables
and, to the Knowledge of Seller, not subject to setoffs or counterclaims (other than normal cash discounts and rebates accrued
in the Ordinary Course of Business), (iii) are current and collectible, and (iv) to the Knowledge of the Seller, will be collected
in accordance with their terms at their recorded amounts, subject only to the reserve for bad debts set forth on the Reference
Balance Sheet in accordance with the past custom and practice of the Company and its Subsidiaries.
(s) Powers
of Attorney. There are no outstanding powers of attorney executed on behalf of the Company or any of its Subsidiaries.
(t) Insurance.
§4(t) of the Seller Schedule sets forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers’ compensation coverage and bond and surety arrangements) to
which the Company or any of its Subsidiaries has been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past two (2) years: (i) the name, address, and telephone number of the agent; (ii) the name of the insurer, the
name of the policyholder, and the name of each covered insured; (iii) the policy number and the period of coverage; (iv) a brief
description of the type of insurance and amount (including deductibles and ceilings) of coverage provided by each policy; and
(v) a description of any premium adjustments or other loss-sharing arrangements. Each insurance policy set forth in §4(t)
of the Seller Schedule is in full force and effect, and to the Knowledge of the Seller, will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following the consummation of the Transactions. None of
the Company or any of its Subsidiary of the Company, nor to the Knowledge of the Seller, any other party thereto, is in breach
or default (including with respect to the payment of premiums or the giving of notices), and no event has occurred which, with
notice or the lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration,
under the policy, except for breaches, defaults, terminations or modifications that would not result in a Material Adverse Change.
Each of the Company and its Subsidiaries has been covered during the past two (2) years by insurance in scope and amount customary
and reasonable for the businesses in which it has engaged during the aforementioned period. §4(t) of the Seller Schedule
describes any self-insurance arrangements affecting the Company or any of its Subsidiaries.
(u) Litigation.
§4(u) of the Seller Schedule sets forth (i) each material outstanding Order to which the Company or any of its Subsidiaries
is subject, other than Orders of general applicability to Persons or businesses engaged in similar businesses, and (ii) each Proceeding
that is pending, or to the Knowledge of the Seller, threatened in writing against the Company, the Company’s Subsidiaries
or any of their respective officers, directors or employees. None of the Proceedings set forth in §4(u) of the Seller
Schedule could reasonably be expected to result in any Material Adverse Change.
(v) Product
Warranty. Each product manufactured, sold, leased, or delivered by the Company and its Subsidiaries has been manufactured,
sold, leased, or delivered in conformity, in all material respects, with all applicable contractual commitments and all express
and implied warranties, and none of the Company or any of its Subsidiaries has any material Liability for replacement or repair
thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the Reference
Balance Sheet. No product manufactured, sold, leased, or delivered by the Company or any of its Subsidiaries is subject to any
material guaranty, warranty, or indemnity that is not set forth in any Company Agreement or the Company’s or such Subsidiaries’
applicable standard terms and conditions of sale or lease. The Seller has made available to the Purchaser copies of the standard
terms and conditions of sale or lease of the Company and each of its Subsidiaries containing applicable guaranty, warranty, and
indemnity provisions.
(w) Employees.
To the Knowledge of the Seller, no executive, key employee, or group of employees has any plans to terminate employment with any
of the Company and its Subsidiaries. None of the Company and its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining
disputes. To the Knowledge of the Seller, none of the Company and its Subsidiaries has committed any unfair labor practice. None
of the Seller and the directors and officers (and employees with responsibility for employment matters) of the Company and its
Subsidiaries has any Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union
with respect to employees of any of the Company and its Subsidiaries.
(x) Employee
Benefits.
(i) §4(x)
of the Seller Schedule lists each Employee Benefit Plan that any of the Company and its Subsidiaries maintains, to which any
of the Company and its Subsidiaries contributes or has any obligation to contribute, or with respect to which any of the Company
and its Subsidiaries has any material Liability or potential Liability.
(A) Each
such Employee Benefit Plan (and each related trust, insurance contract, or fund) has been maintained, funded and administered
in accordance in all material respects with the terms of such Employee Benefit Plan and the terms of any applicable collective
bargaining agreement and complies in form and in operation in all material respects with the applicable requirements of ERISA,
the Code, and other applicable Laws.
(B) All
required reports and descriptions (including annual reports (IRS Form 5500), summary annual reports, and summary plan descriptions)
have been timely filed and/or distributed in accordance in all material respects with the applicable requirements of ERISA and
the Code with respect to each such Employee Benefit Plan. The requirements of COBRA have been met in all material respects with
respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan subject to COBRA.
(C) Except
as would not reasonably be likely to result in material Liability to the Company and its Subsidiaries, taken as a whole, (x) all
contributions (including all employer contributions and employee salary reduction contributions) which are due have been made
within the time periods prescribed by ERISA and the Code to each such Employee Benefit Plan which is an Employee Pension Benefit
Plan and (y) all contributions for any period ending on or before the Closing Date which are not yet due have been made to each
such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Company and its Subsidiaries.
All material premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each
such Employee Benefit Plan which is intended to meet the requirements of a “qualified plan” under Code §401(a)
has received a determination from the Internal Revenue Service that such Employee Benefit Plan is so qualified, and, to the Knowledge
of the Seller, nothing has occurred since the date of such determination that could adversely affect the qualified status of any
such Employee Benefit Plan.
(E) The
market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer
Plan) equals or exceeds the present value of all vested and nonvested Liabilities thereunder determined in accordance with PBGC
methods, factors, and assumptions applicable to an Employee Pension Benefit Plan terminating on the date for determination.
(F) The
Seller has delivered to the Purchaser correct and complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most recent annual report (IRS Form 5500, with all
applicable attachments), and all related trust agreements, insurance contracts, and other funding arrangements which implement
each such Employee Benefit Plan.
(ii) With
respect to each Employee Benefit Plan that any of the Company, its Subsidiaries, and any ERISA Affiliate maintains, to which any
of them contributes or has any obligation to contribute, or with respect to which any of them has any material Liability or potential
Liability:
(A) No
such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event. No Proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted or, to the Knowledge of the Seller, threatened.
(B) Except
as would not reasonably be likely to result in material Liability to the Company and its Subsidiaries, taken as a whole, (x) there
have been no Prohibited Transactions with respect to any such Employee Benefit Plan; and (y) no Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan. No Proceeding with respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending or, to the Knowledge of the Seller, threatened. The
Seller has no Knowledge of any basis for any such Proceeding.
(C) None
of the Company and its Subsidiaries has incurred, and none of the Seller and the directors and officers (and employees with responsibility
for employee benefits matters) of the Company and its Subsidiaries has any reason to expect that any of the Company and its Subsidiaries
will incur, any Liability to the PBGC (other than with respect to PBGC premium payments not yet due) or otherwise under Title
IV of ERISA (including any withdrawal Liability as defined in ERISA §4201) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan, or under COBRA with respect to any such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(iii) (A)
None of the Company, its Subsidiaries, and any ERISA Affiliate has incurred any Liability on account of a “partial withdrawal”
or a “complete withdrawal” (within the meaning of ERISA §§4205 and 4203, respectively) from any Multiemployer
Plan, no such Liability has been asserted, and there are no events or circumstances which could result in any such partial or
complete withdrawal; (B) none of the Company, its Subsidiaries, or any ERISA Affiliate is bound by any contract or agreement or
has any obligation or Liability described in ERISA §4204; and (C) none of the Company, its Subsidiaries or any ERISA Affiliate
sponsors or contributes to, or is required to sponsor or contribute to, any Multiemployer Plan.
(iv) None
of the Company and its Subsidiaries maintains, contributes to or has an obligation to contribute to, or has any Liability or potential
Liability with respect to, any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type
benefits for current or future retired or terminated directors, officers or employees of the Company or any of its Subsidiaries
(or any spouse or other dependent thereof) other than in accordance with COBRA.
(y) Guaranties.
None of the Company or any of its Subsidiaries is a guarantor or otherwise is liable for any indebtedness of any other Person.
(z) Environmental,
Health, and Safety Matters.
(i) The
Company and its Subsidiaries have complied, within the past five (5) years and is in compliance with, in all material respects,
all Environmental, Health, and Safety Requirements.
(ii) Neither
the Company nor any of its Subsidiaries has received from any Governmental Entity, within the past five (5) years any written
notice or report regarding any actual or alleged violation of Environmental, Health, and Safety Requirements or any investigation
with respect thereto, except for such matters as have been resolved or which are not result in a Company Material Adverse Change.
(iii) Neither
this Agreement nor the consummation of the Transaction are reasonably be expected to result in any obligations for site investigation
or cleanup pursuant to any of the so-called “transaction-triggered” or “responsible property transfer”
Environmental, Health, and Safety Requirements.
(iv) Neither
the Company nor any of its Subsidiaries has, either expressly or by operation of law, assumed or undertaken any Liability, including
without limitation any obligation for corrective or remedial action, of any other Person relating to Environmental, Health, and
Safety Requirements.
(v) To
the Knowledge of the Seller, no facts, events or conditions relating to the past or present facilities, properties or operations
of the Company, its Subsidiaries, or any of their respective predecessors or Affiliates could reasonably be expected to (A) prevent,
hinder or limit continued compliance with Environmental, Health, and Safety Requirements, (B) give rise to any initial investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and Safety Requirements, or (C) give rise to any material
Liability pursuant to Environmental, Health, and Safety Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources
damage.
(aa) Certain
Business Relationships. None of the Seller, Seller’s Affiliates (other than the Company and the Company’s Subsidiaries)
or their respective officers and directors have been involved in any material business arrangement or relationship with the Company
or any of its Subsidiaries within the past twelve (12) months, excluding those business arrangements or relationships relating
to (a) any intercompany indebtedness that will be extinguished at or prior to the Closing, (b) employment agreements entered into
in the Ordinary Course of Business, or (c) employee benefits granted and advances for business expenses made in the Ordinary Course
of Business. None of the Seller, Seller’s Affiliates (other than the Company and the Company’s Subsidiaries) or any
of their respective officers and directors own any material asset, tangible or intangible, which is used in the business of the
Company or its Subsidiaries.
(bb) No
Other Representations or Warranties.
(i) Except
for the representations and warranties expressly made by the Seller in this §4, none of the Seller, the Seller’s
Affiliates (including the Company and the Company’s Subsidiaries) or Representatives, or any other Person has made or is
making any oral or written representation or warranty, express or implied, with respect to the Seller or the Seller’s Affiliates
(including the Company and the Company’s Subsidiaries) or any of its or their respective businesses, assets, liabilities,
prospects, results of operations or financial condition.
(ii) Without
limiting the generality of the foregoing, the Seller acknowledges and agrees that (A) none of the Purchaser, the Purchaser’s
Affiliates or Representatives or any other Person has made or is making any representation or warranty, express or implied, except
for the representations and warranties expressly set forth in §3; (B) none of the Purchaser, the Purchaser’s
Affiliates or Representatives or any other Person has made or is making any representation or warranty to the Seller, the Seller’s
Affiliates or Representatives, or any other Person with respect to any projections, forecasts, estimates, plans or budgets, expenses
or expenditures, present or future financial results operations or affairs, or any other information, statements or documents
delivered to or made available to the Seller, the Seller’s Affiliates or Representatives, or any other Person, with respect
to the Purchaser or Purchaser’s Affiliates or any of their respective businesses, assets, liabilities, prospects, results
of operations or financial condition, except as expressly covered by representations and warranties set forth in §3;
and (C) in making its decision to enter into this Agreement and to consummate the Transactions, the Seller has relied solely upon
its own investigation and the express representations and warranties of the Purchaser set forth in §3.
5. Pre-Closing
Covenants.
The
Parties agree as follows with respect to the period between the execution of this Agreement and the earlier of (y) Closing and
(z) the termination of this Agreement in accordance with §10.
(a) General.
Subject to the other terms and conditions of this Agreement, each of the Parties will use its reasonable best efforts to take
all actions, to do, and to assist and cooperate with the other Party in doing, all things necessary, proper, or advisable in order
to consummate and make effective the Transactions, including satisfaction, but not waiver, of the closing conditions set forth
in §7 below.
(b) Notices,
Consents and Filings. Each of the Parties will use, and will cause its respective Affiliates to, give all notices to, make
any filings with, and use its commercially reasonable best efforts to obtain all authorizations, consents, waivers and approvals
of all Persons that are required to be given, made or obtained in connection with the execution, delivery and performance of the
Transaction Documents and consummation of the Transactions; provided, however, that the foregoing shall not require
the Purchaser, the Seller, the Company or any of their respective Affiliates to (i) make any payment or undertake any obligation
to any Person in order to obtain such consent, approval or waiver; and (ii) defend or contest any Proceeding challenging any Transaction
Document or that may otherwise prevent, materially impede, interfere with, hinder or delay the consummation of the Transactions,
including seeking to have any stay or temporary restraining Order entered by any Governmental Entity vacated or reversed.
(c) Operation
of Business. Except as otherwise contemplated by this Agreement or any other Transaction Document, as required by applicable
Law or as the Purchaser shall otherwise consent to in writing (which consent shall not be unreasonably withheld, conditioned or
delayed), the Seller will not cause or permit the Company or any of its Subsidiaries to (i) engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business, or (ii) otherwise engage in any practice, take any action,
or enter into any transaction of the sort described in §4(i).
(d) Preservation
of Business. The Seller will cause the Company and each of its Subsidiaries to keep their respective business and properties
substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
(e) Full
Access. The Seller will permit, and will cause each of the Company and its Subsidiaries to permit, Representatives of the
Purchaser to have reasonable access at reasonable times, upon reasonable notice and in a manner so as not to interfere with the
normal operations of the Seller’s, or its Affiliates’ businesses or personnel, to all premises, properties, personnel,
books, records (including Tax records, but excluding confidential portions of personnel records and medical records), contracts,
and documents of or pertaining to the Company and its Subsidiaries; provided, that that in any case, such access and requests
for access shall (i) be reasonable and serve legitimate business purposes, (ii) not reasonably be expected to cause significant
competitive harm to the Seller or its Affiliates if the Transaction is not consummated, (iii) be subject to any limitations that
are imposed by Law or reasonably required to preserve any applicable attorney-client privilege or other legally recognized privilege,
(iv) be subject to the Confidentiality Agreements, and (v) be made to such Persons identified by the Seller. Notwithstanding the
foregoing, none of the Purchaser or its Affiliates or Representatives shall communicate with, question or attempt to gain access
to any employee, customer or supplier of the Seller or its Affiliates (including the Company and the Company’s Subsidiaries)
without the prior consent, approval and coordination of the Seller.
(f) Notice
of Developments. The Parties shall keep each other reasonably apprised of the status of matters relating to the consummation
of the Transaction, including, subject to applicable Laws, confidentiality restrictions, contractual obligations or other legally
binding requirements, (i) promptly furnishing the other Party with copies of all notices or other communications received from
any Person, (ii) any failure to comply with or satisfy, in any material respect, any covenant, condition or agreement hereunder,
(iii) the prompt written notice to the other Party of any material adverse development or any Material Adverse Change with respect
to Seller or material adverse effect on the Purchaser’s financial condition or ability to consummate the Transaction, and
(iv) any event, fact or circumstance that gives such Party any reason to believe that any of conditions set forth in §7
will not be expected to be satisfied. The Purchaser and the Seller shall have the right (but not the obligation) to supplement
or amend the Purchaser Schedules and the Seller Schedules, respectively, with respect to any matter hereafter arising or of which
it becomes aware after the date hereof (each, a “Schedule Supplement”). To the extent that a Schedule Supplement
relates to an event, fact or circumstance that occurred prior to the date of this Agreement, then such Schedule Supplement shall
not be deemed to have cured any inaccuracy in or breach of any representation contained in this Agreement, including for purposes
of indemnification pursuant to §8. To the extent that a Schedule Supplement relates to an event, fact or circumstance
occurring on or after the date of this Agreement, then to the extent that such event, fact or circumstance set forth in such Schedule
Supplement amends or supplements a representation or warranty, such Schedule Supplement shall not give rise to, or form the basis
of, a claim for a breach of a representation or warranty with respect to any indemnity claim pursuant to §8 (except
to the extent caused by the Seller’s breach of §5(c)). All Schedule Supplements may be considered for purposes
of determining the satisfaction of the conditions in §7, except as provided in §7(a)(ii) and §7(b)(ii).
(g) Company
Acquisition Proposals.
(i) Exclusivity.
Subject to §5(g)(ii), from and after the date of this Agreement until the Closing or the earlier termination of this
Agreement in accordance with its terms, the Seller, the Company and its Subsidiaries will not, and will not permit their respective
Affiliates or Representatives to, (A) solicit, initiate, or encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiries or proposals that constitute, or could reasonably be expected to lead to, any Company
Acquisition Proposal, or (B) engage in, or enter into, any negotiations or discussions concerning any Company Acquisition Proposal.
Notwithstanding the foregoing, in the event that, notwithstanding compliance with the preceding sentence, the Seller or its Affiliates
or Representatives receives a Company Acquisition Proposal that constitutes, or that the Board of Directors of the Seller determines
in good faith (in consultation with outside counsel) is reasonably likely to lead to, a Company Superior Proposal, the Seller
and the Company may, to the extent that the Board of Directors of the Seller determines in good faith (in consultation with outside
counsel) that a failure to do so would, in the absence of the foregoing prohibitions, be inconsistent with its fiduciary duties,
participate in discussions regarding any Company Superior Proposal in order to be informed and make a determination with respect
thereto. In such event, the Seller and the Company shall, (y) no less than twenty-four (24) hours prior to participating in any
such discussions, inform the Purchaser of the material terms and conditions of such Company Acquisition Proposal, including the
identity of the Person making such Company Acquisition Proposal and (z) promptly keep the Purchaser informed of the status including
any material change to the terms of any such Company Acquisition Proposal.
(ii) Go-Shop
Period. During the period commencing on the date hereof and ending on the date which is forty-five (45) days hereafter (the
“Go-Shop Period”), the Seller and Seller’s Affiliates and Representatives will not be restricted from
engaging in any of the activities otherwise proscribed in §5(g)(i) above. During the Go-Shop Period, the Seller and
its Affiliates and Representatives shall take commercially reasonable efforts to obtain a Company Superior Proposal in order for
the Board of Directors of the Seller to be informed and make a determination with respect thereto. In the event the Seller or
the Company receives any Company Superior Proposal, the Seller shall, (A) no less than twenty-four (24) hours prior to participating
in any substantive discussions regarding such Company Superior Proposal, inform the Purchaser of the material terms and conditions
thereof, including the identity of the Person making such Company Superior Proposal and (B) promptly keep the Purchaser informed
of the status, including any material change to the terms of such Company Superior Proposal. Notwithstanding the foregoing or
anything in §5(g)(i) to the contrary, with respect to each Company Acquisition Proposal received by the Company during
the Go-Shop Period that constitutes, or that the Board of Directors of the Seller determines in good faith (in consultation with
outside counsel) is reasonably likely to lead to, a Company Superior Proposal, the Seller and its Affiliates and Representatives
may, to the extent that the Board of Directors of the Seller determines in good faith (in consultation with outside counsel) that
a failure to do so would, in the absence of the prohibitions in this §5(g)(ii) and in §5(g)(i), be inconsistent
with its fiduciary duties, participate in discussions regarding any Company Superior Proposal despite the expiration of the Go-Shop
Period in order to be informed and make a determination with respect thereto; provided, that Seller and the Company shall
comply with the last sentence of §5(g)(i).
(iii) Company
Acquisition Proposal. As used herein, the term “Company Acquisition Proposal” shall mean any bona
fide proposal or offer relating to any (A) merger, consolidation, business combination, or similar transaction involving the Seller
or any of its Affiliates, (B) sale, lease or other disposition, directly or indirectly, by merger, consolidation, share exchange
or otherwise, of any assets of the Seller or any of its Affiliates in one or more transactions, (C) issuance, sale, or other disposition
of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants
to purchase such securities, or securities convertible into such securities) of the Seller or any Affiliate of the Seller, (D)
liquidation, dissolution, recapitalization or other similar type of transaction involving the Seller or any Affiliate of the Seller,
(E) tender offer or exchange offer for the securities of the Seller or any of its Affiliates, which transaction, in the case of
(A), (B), (C), (D) or (E) above, would result in a third party (or its shareholders) acquiring directly or indirectly more than
twenty percent (20%) of the voting power of the Company and the Company’s Subsidiaries or the assets representing more than
twenty percent (20%) of the net income, net revenue or assets of the Company and the Company’s Subsidiaries on a consolidated
basis, (F) transaction which is similar in form, substance or purpose to any of the foregoing transactions, or (G) public announcement
of an agreement, proposal, plan or intention to do any of the foregoing; provided, however, that the term “Company
Acquisition Proposal” shall not include the Transactions.
(iv) Company
Superior Proposal. For purposes of this Agreement, “Company Superior Proposal” means any Company
Acquisition Proposal that (A) is not solicited by the Seller, or by other Persons in violation of the first sentence of §5(g)(i),
and (B) the Board of Directors of the Seller determines in good faith would, if consummated, result in a transaction more favorable
to the Seller’s stockholders than the Transactions and that the Persons making such Company Acquisition Proposal have the
financial means (including third-party financing) to conclude such Company Acquisition Proposal.
(h) Seller
Board Approval and Recommendation. Neither the Board of Directors of the Seller nor any committee thereof shall, except to
the extent that the failure to do so would be inconsistent with their fiduciary duties as determined in good faith in consultation
with outside counsel, (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to the Purchaser, the approval
or recommendation by the Board of Directors of the Seller or such committee of this Agreement or the Transactions, (ii) approve,
recommend, or otherwise support or endorse any Company Acquisition Proposal, or (iii) cause the Company or the Seller or any Subsidiary
to enter into any letter of intent, agreement in principle, acquisition agreement or similar agreement (each a “Company
Acquisition Agreement”) with respect to any Company Acquisition Proposal (any such action, “Recommendation
Change”). Nothing contained in this §5(h) shall prohibit the Seller from taking and disclosing to its stockholders
a position contemplated by Rule 14d-9 or 14e-2 promulgated under the Securities Exchange Act or from making any disclosure to
the Seller’s stockholders if, in the good faith judgment of the Board of Directors of the Seller, in consultation with outside
counsel, such disclosure is necessary for the Board of Directors to comply with its fiduciary duties under applicable Law.
(i) Notification
of Proposals. In addition to the obligations of the Company set forth in §5(g) and §5(h), the Seller
and the Company will promptly (and in any event within twenty-four (24) hours) advise the Purchaser, orally and in writing, if
any Company Acquisition Proposal is made or proposed to be made or any information or access to properties, books or records of
the Company is requested in connection with a Company Acquisition Proposal, the principal terms and conditions of any such Company
Acquisition Proposal or potential Company Acquisition Proposal or inquiry (and will disclose any written materials received by
the Company in connection with such Company Acquisition Proposal, potential Company Acquisition Proposal or inquiry) and the identity
of the Person making such Company Acquisition Proposal, potential Company Acquisition Proposal or inquiry. The Seller Company
will keep the Purchaser advised of the status and details (including amendments and proposed amendments) of any such request or
Company Acquisition Proposal.
(j) Opportunity
to Enhance Terms. Notwithstanding any provision hereof to the contrary, prior to taking any action permitted by §5(h),
(i) the Seller shall give to the Purchaser at least three (3) business days’ prior written notice of its intention to take
such action (which notice shall specify the reasons for any Recommendation Change or the material terms and conditions of any
such Company Acquisition Agreement, as applicable) and, no later than the time of such notice, provide the Purchaser an unredacted
copy of the relevant proposed transaction agreement and other material documents contemplated with or by the party making any
such Company Acquisition Proposal, (ii) if requested by the Purchaser, the Seller and its representatives shall negotiate in good
faith with the Purchaser during such notice period to enable the Purchaser to propose changes to the terms of this Agreement intended
to eliminate the need for the Board of Directors of the Seller to effect a Recommendation Change or to cause such Company Acquisition
Proposal to no longer constitute a Company Superior Proposal, (iii) the Board of Directors of the Seller shall have considered
in good faith (after consultation with its financial advisors and outside legal counsel) any changes to this Agreement proposed
in writing by the Purchaser and determined that a Recommendation Change would still be required if such changes were to be given
effect or that the Company Acquisition Proposal would continue to constitute a Company Superior Proposal if such changes were
to be given effect, as applicable, and (iv) in the event of any change to the material facts and circumstances relating to such
Recommendation Change or in any change to the form or amount of consideration or any material terms of the transaction in the
case of a Company Acquisition Agreement involving a potential transaction or any change to any of the financial terms (including
the form or amount of consideration) or any material terms of such Company Acquisition Proposal, the Seller shall, in each case,
have delivered to the Purchaser an additional notice and a summary of the relevant proposed transaction agreement and other material
documents and a new three (3) Business Day notice period shall commence during which time this §5(j) shall apply.
(k) Meeting
of Seller Stockholders. As promptly as practicable after the date hereof, and in no event later than the date which is forty-five
(45) days after the date hereof, the Seller shall take all action necessary in accordance with the DGCL and its Certificate of
Incorporation and bylaws to convene a meeting of its stockholders (“Seller Stockholders Meeting”) for the purposes
of voting upon this Agreement and the Transactions and shall use its commercially reasonable best efforts to hold such Seller
Stockholders Meeting as soon as practicable after the date hereof.
(l) SEC
Matters.
(i) As
promptly as practicable after execution of this Agreement, the Seller shall prepare and file a Current Report on Form 8-K pursuant
to the Securities Exchange Act to report the execution of this Agreement, and the Parties shall issue a mutually agreeable press
release announcing the execution of this Agreement.
(ii) As
promptly as practicable after execution of this Agreement, the Seller will prepare and file with the SEC, in consultation with
the Purchaser and its Affiliates, a proxy statement/prospectus and a form of proxy, in connection with the vote of the Seller’s
stockholders with respect to the Transactions (such proxy statement/prospectus, together with any amendments thereof or supplements
thereto, in each case in the form or forms mailed to the Seller’s stockholders, is herein called the “Proxy Statement”).
Each Party will use, and will cause its respective Affiliates to use, commercially reasonable best efforts to have the Proxy Statement
approved by the SEC as promptly as practicable after such filing, and the Seller shall thereafter, in compliance with the relevant
requirements of the Securities Exchange Act, cause the Proxy Statement to be filed and mailed to its stockholders at the earliest
practicable date. The Purchaser acknowledges that the Proxy Statement and certain other forms, reports and other filings required
to be made by the Seller under the Securities Exchange Act in connection with the Transaction (collectively, “Additional
Proxy Materials”) may require certain disclosures regarding the Purchaser and its Affiliates. Accordingly, the Purchaser
covenants and agrees (A) to provide to Seller promptly all information concerning the Purchaser and its Affiliates that is reasonably
required to be included in the Proxy Statement and Additional Proxy Materials, (B) to make their respective Representatives available
to the Seller and its counsel in connection with the drafting of the Proxy Statement and responding in a timely manner to comments
from the SEC, (C) the Proxy Statement, the Additional Proxy Materials and any supplements thereto, or provided by the Seller for
inclusion in the Proxy Statement, the Additional Proxy Materials or any supplements thereto or any other document filed with any
other regulatory agency in connection herewith, shall not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. If, at any
time prior to the Closing, the Purchaser or any of its Affiliates or Representatives becomes aware of any event, fact or circumstance
relating to matter which should be set forth in an amendment or a supplement to the Proxy Statement so that such documents would
not contain any untrue statement of a material fact or failure to state a material fact necessary to make the statements therein,
in light of the circumstances in which they are made, not misleading, then the Purchaser shall promptly inform the Seller and
its Affiliates and Representatives of such event, fact or circumstance and shall cooperate with the Seller in preparing and disseminating
any such required amendment or supplement.
(iii) Prior
to the Closing, the Parties shall prepare a mutually agreeable press release announcing the consummation of the Transaction.
(iv) The
Purchaser acknowledges and agrees that the Purchaser, its Affiliates and Representatives and its and their respective Affiliates
and Representatives may be exposed to material nonpublic information regarding the Seller and its Affiliates during the course
of the Transaction, and aware of the restrictions imposed by United States federal securities and other Laws applicable to Persons
possessing material nonpublic information about a public company. The Purchaser agrees, for itself and on behalf of its Affiliates
and Representatives and their respective Affiliates and Representatives, that, while any of them are in possession of such material
nonpublic information, none of such Persons shall (A) purchase or sell any securities of the Seller, (B) communicate such information
to any other Person, (C) take any other action with respect to the Seller or its securities in violation of such Laws, or (D)
cause or encourage any other Person to do any of the foregoing.
(m) Financing;
Cooperation with Financing.
(i) The
Purchaser shall use its commercially reasonable best efforts to (A) cause the financing contemplated by the executed Equity Commitment
Letters and the other documents evidencing Funded Equity Commitments, subject to the terms and conditions set forth therein, to
be available at Closing, and (B) solicit additional commitments to purchase shares of Series A Preferred Stock pursuant to the
Preferred Stock Purchase Agreement up to an aggregate amount (together with the Funded Equity Commitments) of $10,000,000. Without
limiting the generality of the foregoing, the Purchaser shall use, and shall cause its Affiliates to use, commercially reasonable
best efforts to (v) satisfy on a timely basis all conditions under all Equity Commitment Letters and all other documents evidencing
Funded Equity Commitments and comply with its obligations thereunder; (w) not terminate, amend or modify or waive any remedy any
Equity Commitment Letter or any other document evidencing a Funded Equity Commitment; (x) not take any other action that would
reasonably be expected to adversely affect the ability of the Purchaser or the Purchaser’s Affiliates (or any beneficiary
thereof) to enforce any Equity Commitment Letter or any other document evidencing a Funded Equity Commitment (in each case, subject
to the Purchaser’s power to control such events); (y) not take any other action that would reasonably be expected to prevent,
impede or delay the consummation of the Transactions or make the satisfaction of the conditions to obtaining the financing contemplated
by any executed Equity Commitment Letters less likely to occur; and (z) promptly notify the Seller of any breach or default by
any party to any executed Equity Commitment Letter or any other document evidencing a Funded Equity Commitment or the receipt
of any written notice or other written communication from any Equity Investor or other financing source with respect to any breach,
default, termination or repudiation by any party to any executed Equity Commitment Letter or any other document evidencing a Funded
Equity Commitment of any provision thereof.
(ii) If
funds in the amount set forth in the executed Equity Commitment Letters as of the date hereof become unavailable to the Purchaser,
the Purchaser and its Affiliates shall use its commercially reasonable best efforts to obtain such funds to the extent available
on terms no less favorable (and conditions no less onerous) in the aggregate to the Purchaser than as set forth in the Equity
Commitment Letters. If prior to the Closing, the Purchaser consummates an issuance or sale of any shares of Series A Preferred
Stock, then the Purchaser (A) shall deposit the proceeds thereof in the operating account of the Purchaser; (B) shall not use
any of the proceeds thereof to make investments in any Person or for any purpose; (C) shall have complied with is obligations
under §5(n) prior to the consummation of any such issuance or sale, and (D) shall cause each of the purchasers of
Series A Preferred Stock to enter into the Stockholders Agreement.
(iii) Notwithstanding
the foregoing, in the event that the Purchaser enters into Equity Commitment Letters with Equity Investors which provide for at
least $2,500,000 in Funded Equity Commitments after the date hereof, the Purchaser and the Partnership may terminate the Equity
Commitment Letter with the Equity Investor that has been executed as of the date hereof with the prior written consent of the
Seller (not to be unreasonably withheld); provided, that the Purchaser shall require the terminating party to covenant
and agree to re-execute an Equity Commitment Letter on the same terms, if at any time following such termination the aggregate
Funded Equity Commitments are less than $2,500,000.
(iv) The
Seller agrees to provide, and to cause the Company and its Subsidiaries to provide, all reasonable cooperation in connection with
the arrangement of the Financing as may be reasonably requested by the Purchaser, including participation in meetings, telephone
conferences, due diligence sessions, and furnishing financial, operational, and other pertinent information concerning the Company
and its Subsidiaries.
(n) The
Purchaser shall (i) file with the Secretary of State of the State of Delaware the A&R Charter, and (ii) amend and restate
its bylaws in their entirety, in a form and substance mutually agreeable to the Parties (the “Bylaws”). Following
the filing of such A&R Charter and the amendment and restatement of the Bylaws, the Purchaser and its Affiliates shall not
take any action to amend, restate, repeal, supplement, terminate, or otherwise modify the A&R Charter or the Bylaws without
the Seller’s prior written consent.
6. Post-Closing
Covenants.
The
Parties agree as follows with respect to the period following the Closing:
(a) Post-Closing
Transactions. Contemporaneously with or immediately (but in no event more than three (3) Business Days) following the Closing.
The Seller shall make commercially reasonable efforts to cause the Board of Directors of Seller (A) to appoint Rodney Bienvenu
as a member of the Board of Directors of Seller, to serve in such capacity until the first annual meeting of the Stockholders
of the Seller following the Closing, and (B) subject to his prior resignation, removal or death, to include in the definitive
proxy statement for the purpose of soliciting proxies from the Stockholders in connection with the first annual meeting of the
Stockholders following the Closing the election of Rodney Bienvenu as a Class III member of the Board of Directors of the Seller.
(b) General.
In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement,
each Party will take, or will cause to be taken, such further actions and do, or will cause to be done, all such further things
(including the execution and delivery of such further instruments and documents) as may be necessary, desirable or appropriate
to carry out the provisions of each Transaction Document and to give full effect to the Transactions, or as any other Party reasonably
may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification
therefor under §8 below).
(c) Books
and Records. The Seller acknowledges and agrees that from and after the Closing the Purchaser will be entitled to possession
of all documents, books, records (including Tax records), agreements, and financial data of the Company and its Subsidiaries;
provided, that the Seller and its Affiliates and Representatives shall be entitled to retain originals (and only required
to provide the Purchaser and Purchaser’s Affiliates copies) of all documents, books, records, data and other information
that are primarily related to the businesses and operations of the Seller and its Affiliates; and provided, further,
that all information of or relating to the business and operations of the Seller or its Affiliates (other than the Company and
the Company’s Subsidiaries) that is contained or incorporated into the documents, books, records, data and other information
delivered to the Purchaser following the Closing shall be deemed Confidential Information of the Seller and its Affiliates and
subject to the restrictions set forth herein, including §11(q). For a period of five (5) years following the Closing
Date (or such longer period as required by applicable Laws), the Purchaser shall, and shall cause its Affiliates and Representatives
to (i) hold all documents, books, records (including Tax records), agreements, and financial data pertaining to the operations
of the Company and the Company’s Subsidiaries prior to the Closing in accordance with standard record retention policies
and the relevant Tax Laws of each jurisdiction in which the Company and the Company’s Subsidiaries are situated or operate,
and (ii) afford to the Seller and Seller’s Affiliates and Representatives, upon reasonable notice and without undue interruption
to Purchasers’ business, reasonable access during normal business hours to all such documents, records and information in
connection with any applicable filing or reporting obligations and other reasonable business purposes; provided, that nothing
herein shall limit the Seller’s rights of discovery; and provided, further, that the Purchaser and the Purchaser’s
Affiliates shall not prior to the destruction, alterations or disposal of any of such documents, records or information without
providing to Seller written notice and an opportunity to repossess such documents, records and information at Sellers’ expense.
(d) Litigation
Support. In the event and for so long as any Party actively is contesting or defending against any Proceeding in connection
with (i) the Transactions or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any of the Company and its Subsidiaries,
the other Party will, and will cause its respective Affiliates to, cooperate with such contesting Party and its Representatives
in the contest or defense of such Proceeding, make available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all at the sole cost and expense of the contesting
or contesting Party (unless the contesting Party is entitled to indemnification therefor under §8 below).
(e) Transition.
The Seller shall not take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of the Company and its Subsidiaries from maintaining the same business relationships
with the Company and its Subsidiaries after the Closing as it maintained with the Company and its Subsidiaries prior to the Closing.
The Seller will refer all customer inquiries relating to the businesses of the Company and its Subsidiaries to the Purchaser from
and after the Closing.
(f) Confidentiality.
Each Party shall, and shall cause its Affiliates and Representatives to, treat and hold in confidence all the Confidential Information
of the other Party and its Affiliates, and refrain from disclosing or using any of the Confidential Information of the other Party
and its Affiliates except as permitted by this Agreement. In the event that any Party is requested or required (by oral question
or request for information or documents in any Proceeding, interrogatory, subpoena, civil investigative demand, or similar process)
to disclose any Confidential Information of the other Party or such other Party’s Affiliates, then such Party will notify
the other Party promptly of the request or requirement so that the other Party may seek an appropriate protective Order or waive
compliance with the provisions of this §6(f). If, in the absence of a protective Order or the receipt of a waiver
hereunder, the disclosing Party or its Affiliates are, on the advice of counsel, compelled to disclose any Confidential Information
of the other Party or its Affiliates to any tribunal or else stand liable for contempt, then the disclosing Party may disclose
the Confidential Information to the tribunal; provided, however, that the disclosing Party and its Affiliates shall
cooperate with the other Party and its Affiliates to obtain, at the reasonable request and sole expense of the other Party, an
Order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required
to be disclosed.
(g) Covenant
Not to Compete. Until the earlier of (y) the third anniversary of the Closing Date, and (z) a default by the Purchaser under
the Purchaser Note (which is not cured in accordance with the terms thereof), none of the Seller or its Subsidiaries will engage
directly or indirectly in any business that the Company or any of its Subsidiaries conducts as of the Closing Date (each such
business, a “Competitive Business”); provided, however, that the foregoing shall not restrict
or prohibit the Seller or any of Seller’s Affiliates from:
(i) owning
five percent (5%) of the outstanding voting securities of any publicly-traded Person engaged in any Competitive Businesses;
(ii) holding
or acquiring interests in or securities of any Person as an investment by its pension funds or other benefit plan funds whether
or not such Person is engaged in a Competitive Businesses;
(iii) holding
or acquiring interests in or securities of any Person or business that derived, in the aggregate (on a consolidated basis), no
more than thirty-five percent (35%) of its total annual revenues in its most recent full fiscal year from a Competitive Business;
provided, that following such acquisition, the Seller and its Affiliates shall, within eighteen (18) months thereafter, divest,
discontinue or take such other similar actions to cause such acquired Person or business to derive, in the aggregate (on a consolidated
basis), no more than five percent (5%) of its total annual revenues for any fiscal year after such eighteen (18) months from the
Competitive Business;
(iv) owning
or holding any indebtedness or securities of, or participating in the management of, the Purchaser, the Company or any of their
respective Affiliates;
(v) performing
any obligation or exercising any right under any Transaction Document; or
(vi) engaging
in any other business, other than a Competitive Businesses.
If
the final judgment of a court of competent jurisdiction declares that any term or provision of this §6(g) is invalid
or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid
or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(h) D&O
Matters.
(i) The
Parties agree that all rights to indemnification, advancement of expenses and exculpation by the Company and its Subsidiaries
now existing in favor of each Person who is now, or has been prior to the date hereof an officer or director of the Company as
provided in the Company’s certificate of incorporation as in effect on the date of this Agreement shall remain in full force
and effect in accordance with their terms, and, in the event that any Proceeding is pending or asserted or any claim made during
such period, until the final disposition of such Proceeding.
(ii) With
respect to any Subsidiaries of the Company, after the Closing Date the Purchaser shall require each such Subsidiary to continue
to provide all rights to indemnification, advancement of expenses and exculpation by the Subsidiaries now existing in favor of
each Person who is now, or has been prior to the date hereof an officer or director of a Company Subsidiary as provided in the
Subsidiary’s organizational documents as in effect on the date of this Agreement.
(iii) Immediately
following the Closing, the Purchaser shall obtain and keep in effect appropriate insurance policies with customary coverage and
amounts covering the directors and officers of the Company and its Subsidiaries.
(i) Employee
Matters.
(i) For
a period of at least one (1) year following the Closing, the Purchaser shall provide, or cause its Subsidiaries (including the
Company and its Subsidiaries) to provide, to each continuing employee of the Company and its Subsidiaries with (A) base salary
(or base wages) that is at least equal to the base salary (or base wages) in effect for such employee immediately prior to the
Closing; (B) annual cash bonus opportunities that are at least equal to the annual cash bonus opportunities in effect for such
employee immediately prior to the Closing, (C) employee benefits that are at least substantially similar, in the aggregate, to
the employee benefits provided by the Seller, the Company or their respective Subsidiaries immediately prior to the Closing, and
(D) severance benefits that are at least equal to the severance benefits provided to such employee by the Seller, the Company
or their respective Subsidiaries immediately prior to the Closing; provided, however, that the Purchaser shall have
the discretion to amend or modify the employee benefits provided pursuant to clauses (C) and (D) of this §6(i)(i)
in the Ordinary Course of Business in accordance with the terms of the applicable employee benefit or severance plans.
(ii)
From and after the Closing, the Purchaser shall, and shall cause its Subsidiaries (including
the Company and its Subsidiaries) to, honor all obligations of the Company and its Subsidiaries to provide employee benefits to
continuing employees of the Company and its Subsidiaries, whether under an individual agreement or under an Employee Benefit Plan
of the Company or any of its Subsidiaries, in accordance with their terms as in effect immediately prior to the Closing.
(iii) Purchaser
will use its commercially reasonable best efforts to enter into an agreement with Insperity, no later than the Closing, on terms
substantially similar to the Insperity Agreement (as such term is defined in the Seller Schedules) and if Purchaser enters into
such an agreement, to keep such agreement in full force and effect for a period of at least one (1) year following the Closing.
(iv) From
and after the Closing, the Purchaser must, and must cause its Subsidiaries (including the Company and its Subsidiaries) and any
third-party insurance providers or third-party administrators to, (A) waive all limitations as to any pre-existing condition or
waiting periods under the applicable Employee Benefit Plans of the Purchaser or its Subsidiaries with respect to participation
and coverage requirements applicable to each continuing employee of the Company and its Subsidiaries under any such Employee Benefit
Plans of Purchaser or its Subsidiaries that such employee may be eligible to participate in from and after the Closing, other
than limitations or waiting periods that are already in effect with respect to such employee and that have not been satisfied
as of the Closing under any comparable Employee Benefit Plan of the Seller, the Company or their respective Subsidiaries; (B)
give each continuing employee full credit for purposes of eligibility, vesting and accrual of benefits under any Employee Benefit
Plans of Purchaser or its Subsidiaries that such employee may be eligible to participate in from and after the Closing for such
employee’s service with the Company and any of its Subsidiaries to the same extent that such service was credited for purposes
of any comparable Employee Benefit Plan of the Seller, the Company or their respective Subsidiaries immediately prior to the Closing
(except to the extent that such credit would result in the duplication of benefits); and (C) recognize the dollar amount of all
co-payments, deductibles and similar expenses incurred by each continuing employee (and his or her eligible dependents) during
the calendar year in which the Closing occurs for purposes of satisfying such year’s deductible and co-payment limitations
under the relevant welfare Employee Benefit Plan of Purchaser or its Subsidiaries in which such employee (and dependents) will
be eligible to participate from and after the Closing.
(v) Nothing
herein shall be construed to create any third-party beneficiary rights in any employee, or any right of any employee to employment
or continued employment for any specified period or to a particular term or condition of employment.
7. Conditions
to Obligation to Close.
(a) Conditions
to Obligation of the Purchaser. The obligation of the Purchaser to consummate the Transactions is subject to satisfaction
of the following conditions at or prior to the Closing:
(i) the
Requisite Vote shall have been obtained;
(ii) the
representations and warranties of the Seller set forth in §4 shall be true and correct in all respects at and as of
the Closing Date (except to the extent any such representation or warranty speaks as of a specific date, in which case such representation
or warranty shall be true and correct as of such specific date), except where the failure of such representations and warranties
to be true and correct at and as of the Closing Date would not constitute a Material Adverse Change; provided, that for
purposes of determining whether the foregoing closing condition has been satisfied and the certifications to be made pursuant
to §7(a)(xii), the representations and warranties of the Seller in §4 shall be considered without regard
to any matter set forth in any Schedule Supplement to the Seller Schedules;
(iii) the
Seller shall have performed and complied with, in all material respects, all covenants, agreements, and obligations contained
in this Agreement required to be performed or complied with by the Seller through the Closing;
(iv) the
Seller shall have delivered to the Purchaser (A) a duly executed counterpart to the Security Agreement; (B) a duly executed counterpart
to the Stockholders Agreement; and (C) a duly executed counterpart to each other Transaction Document to which the Seller or its
Affiliates are a party;
(v) the
Seller shall have delivered to the Purchaser stock certificates representing all of the Company Shares, duly endorsed in blank
(or affidavits of lost certificates in lieu thereof) or accompanied by duly executed assignment documents in either case satisfactory
in form and substance to the Purchaser;
(vi) the
Seller shall have delivered to the Purchaser a fully executed copy of the Contribution Agreement, and such other documents and
instruments reasonably requested by the Purchaser evidencing the consummation of the transactions contemplated thereby;
(vii) the
Seller, the Company and its Subsidiaries shall have given the notices and received all authorizations, consents, and approvals
set forth in §7(a)(vii) of the General Schedules;
(viii) no
Proceeding shall be pending before any Governmental Entity of competent jurisdiction seeking a preliminary or permanent injunction
with respect to the consummation of the Transactions, and Order or Law of any Governmental Entity of competent jurisdiction prohibiting
or restraining the consummation of the Transactions shall be in effect;
(ix) the
Seller shall have delivered to the Purchaser duly executed resignations, effective as of the Closing, of each director and officer
of the Company and its Subsidiaries other than those whom the Purchaser shall have specified in writing at least five (5) business
days prior to the Closing, and duly executed agreements with those Persons specified in §7(a)(ix) of the General Schedules;
(x) the
Seller shall have delivered to the Purchaser duly executed agreements, releases or other instruments, in form and substance reasonably
satisfactory to the Purchaser, acknowledging the satisfaction in full by the Company and its Subsidiaries of all liabilities and
obligations owed to the Seller prior to the Closing Date (other than those obligations and liabilities arising out of the Transaction
Documents), including any liabilities described as or otherwise included as intercompany liabilities or payables on the Financial
Statements;
(xi) the
Seller shall have delivered to the Purchaser a fully executed license, in in form and substance reasonably satisfactory to the
Purchaser, granting to the Company and its Subsidiaries (without further consideration) a perpetual, irrevocable, royalty-free,
fully paid-up, worldwide right and license to utilize the Intellectual Property set forth in §7(a)(xi) of the General
Schedules; and
(xii) the
Seller shall have delivered to the Purchaser a duly executed certificate to the effect that each of the conditions specified above
in §7(a)(ii), §7(a)(iii), §7(a)(vii) and §7(a)(viii) have been satisfied in all respects.
The
Purchaser may waive any condition specified in this §7(a) if the Purchaser executes a writing so stating at or prior
to the Closing.
(b) Conditions
to Obligation of the Seller. The obligation of the Seller to consummate the Transactions at the Closing is subject to satisfaction
of the following conditions at or prior to the Closing:
(i) the
Requisite Vote shall have been obtained;
(ii) the
representations and warranties of the Purchaser set forth in §3 shall be true and correct in all respects at and as
of the Closing Date (except to the extent any such representation or warranty speaks as of a specific date, in which case such
representation or warranty shall be true and correct as of such specific date), except where the failure of such representations
and warranties to be true and correct would not have a material adverse effect on the Purchaser’s financial condition or
ability to consummate the Transaction; provided, that for purposes of determining whether the foregoing closing condition
has been satisfied and the certifications to be made pursuant to §7(b)(x), the representations and warranties of the
Purchaser in §3 shall be considered without regard to any matter set forth in any Schedule Supplement to the Purchaser
Schedules;
(iii) the
Purchaser and its Affiliates shall have performed and complied with, in all material respects, all covenants, agreements and obligations
contained in this Agreement required to be performed or complied with by the Purchaser and its Affiliates through at or prior
to Closing;
(iv) the
Purchaser shall have delivered to the Seller (A) a duly executed counterpart to the Security Agreement; (B) a duly executed counterpart
to the Stockholders Agreement; (C) a duly executed counterpart to each other Transaction Document to which the Purchaser or its
Affiliates are a party; and (D) a copy of the A&R Charter certified by the Secretary of State of the State of Delaware;
(v) the
Purchaser shall have (A) delivered to the Seller a duly executed Purchaser Note, and (B) issued and delivered to the Seller stock
certificates representing all of the Purchaser Shares;
(vi) no
Proceeding shall be pending before any Governmental Entity of competent jurisdiction seeking a preliminary or permanent injunction
with respect to the consummation of the Transactions, and Order or Law of any Governmental Entity of competent jurisdiction prohibiting
or restraining the consummation of the Transactions shall be in effect;
(vii) the
Purchaser and its Affiliates shall have given the notices and received the other authorizations, consents, and approvals set forth
in §7(b)(vii) of the General Schedule;
(viii) the
A&R Charter and the Bylaws, in each case, shall be in full force and effect, and no Proceeding for the amendment, restatement,
repeal, termination or other modification thereof shall be proposed or pending;
(ix) the
Purchaser has consummated (or simultaneously with the Closing will consummate) the issuance and sale of Series A Preferred Stock
under the Preferred Stock Purchase Agreement, and the Purchaser and its Affiliates shall have delivered to the Seller such other
documents and instruments reasonably requested by the Seller evidencing that proceeds of such issuance and sale were not less
than $2,500,000 and all such proceeds have been deposited in the operating account of the Purchaser;
(x) the
Purchaser shall have delivered to the Seller a duly executed certificate to the effect that each of the conditions specified above
in §7(b)(ii), §7(b)(iii), §7(b)(vi), §7(b)(vii), §7(b)(viii), and
§7(b)(ix) has been satisfied in all respects.
The
Seller may waive any condition specified in this §7(b) if it executes a writing so stating at or prior to the Closing.
8. Remedies
for Breaches of This Agreement.
(a) Survival.
Subject to the other provisions of this Agreement, (i) each of the representations and warranties (A) of the Purchaser set forth
in §3, (B) of the Seller set forth in §4, and (C) of the Parties set forth in any other Transaction Document
(other than this Agreement) shall survive the Closing until 12:01 a.m. New York City time on the nine (9) month anniversary of
the Closing Date; (ii) each obligation, covenant and agreement of the Parties in this Agreement or in any other Transaction Document
which by its terms is to be performed at or prior to the Closing shall survive the Closing for a period of ninety (90) days; and
(iii) each obligation, covenant and agreement of the Parties in this Agreement or in any other Transaction Document which by its
terms is to be performed after the Closing shall survive the Closing in accordance with its terms or until it is fully performed;
provided, that the Tax Representations shall survive until thirty (30) days after the expiration of the applicable statute
of limitations. No Party shall have any obligation to indemnify or hold harmless the other Party pursuant to this §8
unless notice of a claim is given to such Party prior to the expiration of the applicable survival period set forth above; provided,
that if a Party is given notice of a claim before the end of the applicable survival period above, such survival period shall
continue as to such claim until such claim is finally resolved.
(b) Indemnification
for the Benefit of the Purchaser. Subject to the limitations set forth herein, from and after the Closing:
(i) Generally.
The Seller agrees to indemnify and hold harmless the Purchaser Parties from and against any Adverse Consequences actually suffered
by the Purchaser Parties resulting from, arising out of, relating to, in the nature of, or caused by (A) any inaccuracy in or
breach of any representation or warranty of the Seller in §4 made on the date hereof and as though such representations
or warranties were made on the Closing Date and as though the Closing Date were substituted for the date of this Agreement throughout
§4, or of any Seller Party in any other Transaction Document (other than the Note and the Security Agreement); and
(B) the failure by the Seller Parties to perform or satisfy any obligation, covenant or agreement in this Agreement or in any
other Transaction Document (other than the Note and the Security Agreement).
(ii) Taxes.
The Seller agrees to indemnify and hold harmless the Purchaser Parties from and against any Purchaser Tax Loss; provided,
that, notwithstanding anything else in this Agreement to the contrary, no Seller Party shall be liable for any Adverse Consequences
related to Taxes except for Purchaser Tax Losses. Purchaser Tax Losses shall be computed taking into account Tax Benefits as provided
in §8(d)(v).
(c) Indemnification
for the Benefit of the Seller. Subject to the limitations set forth herein, from and after the Closing:
(i) Generally.
The Purchaser agrees to indemnify and hold harmless the Seller Parties from and against any Adverse Consequences actually suffered
by the Seller Parties resulting from, arising out of, relating to, in the nature of, or caused by (A) any inaccuracy in or breach
of any representation or warranty of the Purchaser in §3 made on the date hereof and as though such representations
or warranties were made on the Closing Date and as though the Closing Date were substituted for the date of this Agreement throughout
§3, or of any Purchaser Party in any other Transaction Document (other than the Note and the Security Agreement);
and (B) the failure by the Purchaser Parties to perform or satisfy any obligation, covenant, or agreement in this Agreement or
in any other Transaction Document (other than the Note and the Security Agreement).
(ii) Taxes.
The Purchaser agrees to indemnify and hold harmless the Seller Parties from and against any Seller Tax Loss; provided,
that, notwithstanding anything else in this Agreement to the contrary, no Purchaser Party shall be liable for any Adverse Consequences
related to Taxes except for Seller Tax Losses. Seller Tax Losses shall be computed taking into account Tax Benefits as provided
in §8(d)(v).
(d) Certain
Limitations.
(i) Specified
Matters. Notwithstanding anything in this §8 to the contrary, the rights, remedies, and obligations of the Seller
Parties and Purchaser Parties with respect to the Note, the Security Agreement and the matters set forth in §8(d)(i)
of the General Schedules, and any Adverse Consequences relating to any breach thereof or otherwise arising therefrom, shall be
governed exclusively by the terms and conditions set forth in the Note, the Security Agreement and §8(d)(i) of the
General Schedules, respectively, and shall not be subject to this §8 unless provided otherwise.
(ii) De
Minimis. No Adverse Consequences may be claimed by the Purchaser Parties pursuant to §8(b), or by the Seller Parties
pursuant to §8(c), unless the amount of such Adverse Consequences, together with all other Adverse Consequences
arising out of the same facts and circumstances, exceeds $10,000; provided, that the foregoing limitation shall not Adverse
Consequences resulting from, arising out of, relating to, in the nature of, or caused by any Fraud on the part of the Seller,
Purchaser or any of their respective Affiliates.
(iii) Deductible.
The Seller shall not be liable to any Purchaser Party pursuant to §8(b), unless and until the aggregate Adverse Consequences
incurred by the Purchaser Parties exceeds $250,000 (the “Deductible”), in which case, the Purchaser Parties
shall only be entitled to recover Adverse Consequences in excess of the Deductible; provided, that the foregoing limitation
shall not apply to any Adverse Consequences resulting from, arising out of, relating to, in the nature of, or caused by any Fraud
on the part of the Seller or its Affiliates. Purchaser shall not be liable to any Seller Party under §8(c), unless
and until the aggregate Adverse Consequences incurred by the Seller Parties exceeds the Deductible, in which case the Seller Parties
shall only be entitled to recover Adverse Consequences in excess of the Deductible; provided, that the foregoing limitation
shall not apply to any Adverse Consequences resulting from, arising out of, relating to, in the nature of, or caused by any Fraud
on the part of the Purchaser or its Affiliates.
(iv) Cap.
The aggregate liability of the Seller pursuant to §8(b) shall not exceed $2,500,000. Notwithstanding the foregoing,
(A) to the extent that a Purchaser Party realizes any Adverse Consequences arising out of, relating to, in the nature of, or caused
by any failure by the Seller Parties to perform or satisfy any of their respective obligations, covenants or agreements in this
Agreement or in any other Transaction Document following the Closing for which it is entitled to indemnification pursuant to §8(b)(i)(B),
the maximum aggregate liability of the Seller pursuant to §8 shall be the aggregate amount of principal and accrued
but unpaid interest outstanding under the Purchaser Note at the time the first claim for indemnification is made, but in no event
shall exceed the Purchase Price as adjusted pursuant to the terms hereof; and (B) the limitations in this §8(d)(iv)
shall not apply to any (1) indemnity under §8(b)(ii) or §8(c)(ii), or (2) Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or caused by any Fraud on the part of the Seller or its Affiliates.
(v) Mitigation;
Other Sources. Each Indemnified Party shall take reasonable steps to mitigate any Adverse Consequences upon becoming aware
of any events, facts, or circumstances that would be reasonably expected to give rise to such Adverse Consequences. The amount
of Adverse Consequences payable by an Indemnifying Party under this §8 shall be (A) reduced by any insurance proceeds
received by the Indemnified Party (which the Indemnified Party shall use commercially reasonable efforts to recover) with respect
to the claim for which indemnification is sought; (B) reduced by any amounts, when and as, recovered from any third parties, by
way of indemnification or otherwise, with respect to the claim for which indemnification is sought; and (C) reduced by the amount
of any Tax Benefit realized or realizable by the Indemnified Party (in cash or as a reduction in Taxes otherwise due) arising
from the incurrence or payment of any such Adverse Consequences. In computing the amount of any such Tax Benefit, the Indemnified
Party shall be deemed to fully utilize, at the highest applicable marginal Tax rate then in effect, all Tax items arising from
the incurrence or payment of any indemnified Adverse Consequences. If an indemnification payment is received by an Indemnified
Party in respect of any Adverse Consequences, and such Indemnified Party later receives insurance recoveries or third-party indemnity
payment or realizes any Tax Benefit in respect of all or a portion of such Adverse Consequences, then the Indemnified Party shall
promptly notify the Indemnifying Party, and within five (5) Business Days thereafter, deliver to the Indemnifying Party the amount
of the indemnification payments previously paid to the Indemnified Party with respect to such Adverse Consequences.
(vi) Single
Recovery. Notwithstanding anything contained in this Agreement to the contrary, any amounts payable pursuant to the indemnification
obligations under §8 shall be paid without duplication, and in no event shall any Indemnified Party be entitled to
recover indemnification payments under different provisions of this Agreement or other Transaction Documents for the same Adverse
Consequences, including any Adverse Consequences that are expressly taken into account and reflected in working capital or other
similar post-closing adjustment provided for in any Transaction Document.
(e) Matters
Involving Third Parties.
(i) If
any Indemnified Party receives notice of a claim or Proceeding from any third party with respect to any matter which may give
rise to a claim for indemnification against any Indemnifying Party under this §8 (a “Third Party Claim”),
then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any
Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within fifteen
(15) days after the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will assume the defense
of such Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification
obligations (if any) hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other
equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment
of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.
(iii) So
long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with §8(e)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third
Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C)
the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably).
(iv) In
the event any of the conditions in §8(e)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in
any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying
Party in connection therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party promptly and periodically for
the costs of defending against the Third Party Claim (including attorneys’ fees and expenses), and (C) the Indemnifying
Parties will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this §8.
(f) Certain
Tax Matters. Notwithstanding the foregoing, to the extent that there is any conflict between the provisions of this §8
and §9, the provisions of §9 shall control.
(g) Recoupment
Under Purchaser Note. The Purchaser Parties shall have the option of recouping all or any part of any amounts owing
by the Seller under this §8 (as determined by the agreement of the Parties or a final non-appealable Order of a court
of competent jurisdiction) by notifying the Seller (i) that the principal amount outstanding under the Purchaser Note is
being reduced by such amount (which shall affect the timing and amount of payments required under the Purchaser Note in the same
manner as if the Purchaser had made a permitted prepayment without premium or penalty), or (ii) that the number of shares of Purchaser
Common Stock received upon conversion of a portion of the Purchaser Note are being cancelled (the number of such shares of Purchaser
Common Stock being cancelled shall equal the number of shares received by the Seller for conversion of an amount of the Purchaser
Note equal to the amount so satisfied).
(h) Exclusive
Remedy. The Parties acknowledge and agree, for themselves and on behalf of their respective Affiliates and Representatives,
that the sole and exclusive remedy of each Indemnified Party with respect to any and all Adverse Consequences arising out of,
resulting from or for any inaccuracy in or breach of any representation, warranty, covenant, agreement or obligation set forth
in this Agreement or any other Transaction Document (other than the Note and Security Agreement), shall be pursuant to the indemnification
provisions set forth in this §8; provided, however, that nothing in this §8(h) shall (i)
operate to interfere with or impede the operation of the provisions of any this Agreement or Transaction Document expressly providing
for the resolution of certain disputes by any independent third party, including the Accounting Firm, (ii) operate to interfere
with or impede the operation of the provisions of this Agreement or any other Transaction Document providing for, or otherwise
limit the rights of any Party to seek or obtain, any equitable remedy, including specific performance or injunctive relief, whether
instead of or in addition any other rights such Party may have hereunder, (iii) limit the liability of any Party or limit the
remedies available to any Party with respect to any Fraud or criminal misconduct, and (iv) operate to interfere with or impede
the operation of §8(d)(i) of this Agreement.
(i) Tax
Treatment of Indemnification Payments. Any indemnification payment made pursuant to this Agreement shall be treated by Purchaser
and Seller as an adjustment to the Purchase Price for Tax purposes.
9. Tax
Matters.
The
following provisions shall govern the allocation of responsibility as between the Purchaser, the Company and the Seller for certain
Tax matters following the Closing Date:
(a) Tax
Returns.
(i) Seller
shall (A) prepare and file (or cause to be prepared and filed) all Tax Returns with respect to the Company or any of its Subsidiaries
that are required to be filed on or prior to the Closing Date (taking into account any extension of a required filing date), (B)
prepare (or cause to be prepared) all Income Tax Returns of the Company or any of its Subsidiaries for any Pre-Closing Tax Period
that are required to be filed after the Closing Date (taking into account any extensions of a required filing date), and (C) prepare
and file (or cause to be prepared and filed) all Tax Returns that relate to any Seller Affiliated Group (each a “Seller-Filed
Tax Return”). Seller shall deliver to Purchaser each Seller-Filed Tax Return due after the Closing Date. Purchaser shall
cooperate with Seller regarding the preparation and filing of any Seller-Filed Tax Returns, including causing the Company or applicable
Subsidiary to promptly file, in the manner prepared by Seller, any Seller-Filed Tax Return that needs to be filed after the Closing
Date by such Company or Subsidiary.
(ii) Purchaser,
at its sole cost and expense, shall cause the Company and each Subsidiary of the Company to file (taking into account any extensions
of a required filing date) all Tax Returns of the Company or any of its Subsidiaries that are not Seller-Filed Tax Returns (each
a “Purchaser-Filed Tax Return”). Any Purchaser-Filed Tax Return relating to a Pre-Closing Tax Period or Straddle
Period shall be prepared in a manner consistent with past practice and without a change of any election or any accounting method
and shall be submitted by Purchaser to Seller (together with schedules, statements and, to the extent reasonably requested by
Seller, supporting documentation) at least 30 business days prior to the due date (including any applicable extension) of such
return (or, if earlier, 30 days prior to the intended filing date). Seller shall have the right to review and comment on such
Purchaser-Filed Tax Return. If Seller, within 10 business days after review of any such Purchaser-Filed Tax Return, notifies Purchaser
in writing that it objects to any items in such return, the disputed item shall be resolved in a manner mutually agreeable to
both Parties within 10 business days, and if not so resolved, then by the Accounting Firm within a reasonable time, taking into
account the deadline for filing such return. Upon resolution of all such items, the relevant Purchaser-Filed Tax Return shall
be adjusted to reflect such resolution and shall be binding upon the Parties without further adjustment. The costs, fees and expenses
of such Independent Accountant shall be borne equally by Purchaser and Seller.
(iii) Except
to the extent otherwise required pursuant to a “determination” within the meaning of Code §1313(a) (or any comparable
provision of Law), neither the Company nor any of its Subsidiaries shall amend any Tax Return with respect to a Pre-Closing Tax
Period or a Straddle Period or otherwise initiate (or agree to) any other Seller Tax Matter without the prior written consent
of Seller, such consent not to be unreasonably withheld, conditioned or delayed.
(iv) With
respect to certain Tax matters, the Seller and the Purchaser agree as follows:
(v) The
Company’s and its Subsidiaries’ year end for U.S. federal Income Tax purposes shall end as of the end of the Closing
Date.
(A) That
no election shall be made to waive the carry back of any net operating loss or other Tax attribute or Tax credit incurred or realized
in a Pre-Closing Tax Period by the Company or any Subsidiary of the Company.
(B) That
no election shall be made by any party (or the Company or any Subsidiary of the Company) under Treasury Regulation Section 1.1502-76(b)(2)
(or any similar provision of state, local, or non-U.S. Law) to ratably allocate items incurred by the Company or any Subsidiary
of the Company.
(C) That
Seller shall include the Company and its Subsidiaries on the U.S. federal Income Tax Return for the Seller Affiliated Group, as
applicable, through the close of business on the Closing Date and, to the extent permitted by applicable Law, all deductions relating
to the Transaction Costs and other amounts the Seller is incurring shall (to the extent paid) be claimed on the Tax Returns of
the Seller Affiliated Group (or, for applicable state and local purposes, a Pre-Closing Tax Period or Straddle Period Tax Return
of the Company or the applicable Subsidiary that incurred the Transaction Cost).
(D) That
Purchaser and Seller shall treat the payments to the Seller with respect to the Tax refunds and Tax Benefits under §9(i)
as payments of additional Purchase Price for all relevant Tax purposes, provided that Seller and the Purchaser shall treat
such payments as interest to the extent required Code Section 483 or any other analogous provision of the Code or under state
or local Tax Law.
(b) Allocation
of Taxes. To the extent permissible under applicable Laws, the Parties agree to elect (and have the Company and each of its
Subsidiaries elect) to have each Tax year of the Company and each of its Subsidiaries end on the Closing Date and, if such election
is not permitted or required in a jurisdiction with respect to a specific Tax such that the Company or any of its Subsidiaries
is required to file a Tax Return for a Straddle Period, to utilize the following conventions for determining the amount of Taxes
attributable to the portion of the Straddle Period ending on the Closing Date: (i) in the case of property Taxes and other similar
Taxes imposed on a periodic basis, the amount attributable to the portion of the Straddle Period ending on the Closing Date shall
equal the Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of calendar days
in the portion of the period ending on the Closing Date and the denominator of which is the number of calendar days in the entire
Straddle Period; and (ii) in the case of all other Taxes (including but not limited to Income Taxes, sales Taxes, employment Taxes,
and withholding Taxes), the amount attributable to the portion of the Straddle Period ending on the Closing Date shall be determined
as if the Company or applicable Subsidiary filed a separate Tax Return with respect to such Taxes for the portion of the Straddle
Period ending as of the end of the day on the Closing Date using a “closing of the books methodology.” For purposes
of applying the foregoing, (A) any item determined on an annual or periodic basis (including amortization and depreciation deductions)
for Income Tax purposes shall be allocated to the portion of the Straddle Period ending on the Closing Date based on the relative
number of days in such portion of the Straddle Period as compared to the number of days in the entire Straddle Period; (B) any
Tax or item of income, gain, loss, deduction or credit from a transaction contemplated by §9(h) shall be allocated
to the portion of the Straddle Period beginning on the day after the Closing Date; and (C) any item of deduction attributable
to any Transaction Costs shall (to the extent paid by Seller and its Affiliates) be allocated to the portion of the Straddle Period
ending on the Closing Date.
(c) Tax
Periods Beginning After the Closing Date. The Company and its Subsidiaries shall prepare or cause to be prepared and file
or cause to be timely filed all Tax Returns for the Company and its Subsidiaries for all periods which begin after the Closing
Date and the Company and its Subsidiaries shall pay all Taxes shown on such Tax Returns. The Seller shall not have responsibility
for any Tax Returns for the Company and its Subsidiaries for any periods beginning after the Closing Date.
(d) Cooperation
on Tax Matters.
(i) The
Purchaser, the Company and its Subsidiaries and the Seller shall cooperate fully, as and to the extent reasonably requested by
the other Party, in connection with the filing of Tax Returns pursuant to this §9 and any Proceeding with respect
to Taxes. Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and
information which are reasonably relevant to any such Proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided hereunder. The Company and its Subsidiaries and the
Seller agree (A) to retain all books and records with respect to Tax matters pertinent to the Company and its Subsidiaries relating
to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent
notified, any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the other Party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other Party so requests, and at such Party’s sole cost and expense, the Company and
its Subsidiaries or the Seller, as the case may be, shall allow the other Party to take possession of such books and records.
(ii) Notwithstanding
anything to the contrary herein, except to the extent solely relating to the Company or its Subsidiaries, Seller and its Affiliates
shall not be required at any time to provide to Purchaser any right to access or to review any Tax Return or Tax work papers of
Seller, any Seller Affiliated Group, or any Affiliate of Seller.
(e) Tax
Sharing Agreements. The Seller shall cause all Tax Sharing Agreements with respect to or involving the Company and its Subsidiaries
to be terminated as of the Closing Date and, after the Closing Date, the Company and its Subsidiaries shall not be bound thereby
or have any Liability thereunder.
(f) Certain
Taxes and Fees. All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of
the Transactions (“Transfer Taxes”), shall be paid by the Purchaser when due, and Purchaser will, at its own
expense, file all necessary Tax Returns and other documentation with respect to all such Taxes, fees and charges, and, if required
by applicable Law, the Seller will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
(g) Connected
Data. For the avoidance of doubt, Connected Data shall be included within the meaning of Subsidiaries for all purposes in
this §9.
(h) Purchaser
Covenants. Purchaser covenants that it shall not (and that it shall not cause or permit the Company, any Subsidiary of the
Company or any Affiliate of Purchaser), if doing so could result in an increase of any Taxes of the Seller, an increase for any
Tax that could constitute a Seller Indemnified Tax, or a decrease (or deferral) of any refund that is payable to the Seller under
§9, (a) take any action on the Closing Date but after the Closing other than in the Ordinary Course of Business, (b)
pay any dividend or redeem any shares of stock or (c) enter into any transaction, merger or restructuring, liquidate, or convert
to another type of entity under state Law. Purchaser further covenants that it shall not (and that it shall not cause or permit
the Company, any Subsidiary of the Company or any Affiliate of the Purchaser to) (i) extend or waive the statute of limitations
for the assessment or collection of any Seller Indemnified Tax (without the prior written consent of the Seller, such consent
not to be unreasonably withheld, conditioned, or delayed); (ii) file for a private letter ruling or other ruling from a Governmental
Entity that relates to Taxes or Tax Returns of a Purchased Entity for a Pre-Closing Tax Period or Straddle Period; or (iii) make
or change or revoke any Tax election, amend any Tax Return, take any Tax position on any Tax Return, or pursue (or agree to) any
voluntary disclosure with respect to (or that otherwise affects) Taxes or Tax Returns of the Company or any of its Subsidiaries
for a Pre-Closing Tax Period or Straddle Period.
(i) Tax
Refunds; Tax Benefits. From and after the Closing, Purchaser shall pay to Seller the amount of any refunds, credits, or offsets
received by any Purchaser Party in respect of Taxes of the Company or any of its Subsidiaries for a Pre-Closing Tax Period (or
portion of a Straddle Period ending on or prior to the Closing Date as determined pursuant to §9(b)) (net of any reasonable
third-party out-of-pocket expenses incurred by the Purchaser Parties in obtaining such refund or credit). Any amount due under
this §9(i) shall be paid ten (10) days after receiving the refund from the Governmental Entity (or, in the case of
a credit or offset, ten (10) days after filing the Tax Return claiming such credit or offset). Notwithstanding the foregoing,
no amount shall be due under this §9(i) to the extent such amount is included in the Final Working Capital.
(j) Tax
Claims; Tax Controversy.
(i) If
any Governmental Entity makes a claim or demand for a Tax that is a Purchaser Tax Loss or Seller Tax Loss against an Indemnified
Party for such Tax (any such claim or demand, a “Tax Claim”), the party that has the right to be indemnified
(the “Tax Indemnified Party”) shall notify the party from which such indemnification would be sought (the “Tax
Indemnifying Party”) of such Tax Claim within 10 days of receipt thereof, and shall give the Tax Indemnifying Party
such information with respect thereto as the Tax Indemnifying Party may reasonably request. The Tax Indemnifying Party may discharge,
at any time, its indemnification obligation with respect to any Tax Claim by paying to the Tax Indemnified Party the amount payable
pursuant to §8, calculated on the date of such payment. The Tax Indemnifying Party shall have the right, at its own
expense, to participate in and, upon notice to the Tax Indemnified Party, to assume the defense of any Proceeding (including any
Tax audit) relating to a Tax Claim (a “Tax Controversy”). If the Tax Indemnifying Party assumes such defense,
the Tax Indemnifying Party shall have the sole discretion as to the conduct of such defense and the Tax Indemnified Party shall
have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Tax Indemnifying Party. Whether or not the Tax Indemnifying Party chooses to assume the defense of
any Tax Claim, the Parties hereto shall cooperate and shall cause their Affiliates to cooperate in the defense or prosecution
thereof.
(ii) Notwithstanding
the foregoing, Seller shall control any Tax Controversy relating to any Taxes or Tax Return of any Seller Affiliated Group.
(iii) The
Tax Indemnifying Party shall not be liable for any Tax (i) the payment of which was made without the Tax Indemnifying Party’s
prior written consent, unless the Tax Indemnified Party has complied with the provisions set forth in this §9(j) and
a final “determination” within the meaning of the Code (or comparable provisions of Law) of the amount of Tax has
been made, (ii) resulting from a settlement effected without the prior written consent of the Tax Indemnifying Party, or (iii)
resulting from any Tax Controversy with respect to which the Tax Indemnified Party has not complied with the provisions set forth
in this §9(j) (including affording the Tax Indemnifying Party with the right, in accordance with this §9(j),
to participate in or control the defense of a Tax Controversy that could result in a Tax for which the Tax Indemnifying Party
is responsible under §8).
10. Termination.
(a) Termination
of Agreement. Certain of the Parties may terminate this Agreement as provided below:
(i) the
Purchaser and the Seller may terminate this Agreement by mutual written consent at any time prior to the Closing;
(ii) the
Purchaser may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing (A) in the event
the Seller has breached any material representation, warranty, or covenant contained in this Agreement in any material respect,
the Purchaser has notified the Seller of the breach, and the breach has continued without cure for a period of 30 days after the
written notice of such breach has been delivered to the Seller, or (B) if the Closing shall not have occurred on or before January
31, 2017, by reason of the failure of any condition precedent under §7(a) hereof (unless the failure results primarily
from the Purchaser breaching any material representation, warranty, or covenant contained in this Agreement);
(iii) the
Purchaser may terminate this Agreement by giving written notice to the Seller at any time prior to the Closing in the event (A)
the Board of Directors of the Seller or any committee thereof, shall have withdrawn or modified in a manner adverse to the Purchaser
its approval or recommendation of the Transactions or this Agreement, (B) the Seller shall have failed to include in the Proxy
Statement the recommendation of the Board of Directors of the Seller in favor of approval of the Transactions or this Agreement,
(C) in connection with a Rule 14d-9 disclosure, the Board of Directors of the Seller shall have taken any action other than a
rejection of a Rule 14d-9 proposal, (D) the Board of Directors of the Seller or any committee thereof shall have recommended any
Company Acquisition Proposal, (E) the Seller or any of its officers or directors or other Persons shall have entered into discussions
or negotiations in violation of §5(g)(i) or the Seller shall have otherwise breached §5(g) through §5(l),
(F) the Board of Directors of the Seller or any committee thereof shall have resolved to do any of the foregoing or (G) any Company
Acquisition Proposal is consummated or an agreement with respect to any Company Acquisition Proposal is signed; and
(iv) the
Seller may terminate this Agreement by giving written notice to the Purchaser at any time prior to the Closing (A) in the event
the Purchaser has breached any material representation, warranty, or covenant contained in this Agreement in any material respect,
the Seller has notified the Purchaser of the breach, and the breach has continued without cure for a period of 30 days after written
notice of such breach has been delivered to the Purchaser, or (B) if the Closing shall not have occurred on or before January
31, 2017, by reason of the failure of any condition precedent under §7(b) hereof (unless the failure results primarily
from the Seller breaching any material representation, warranty, or covenant contained in this Agreement).
(b) Termination
Fee.
(i) If
this Agreement is terminated by the Seller pursuant to §10(a)(iv)(B) or the Purchaser pursuant to §10(a)(ii)(B),
in either case, due to a failure to obtain the Requisite Vote, then the Seller shall promptly, but in no event later than the
fifth business day after such termination, pay to the Purchaser a termination fee equal to (A) $375,000, multiplied by
(B) a fraction, the numerator of which is the aggregate Funded Equity Commitments as of the close of business on the fourteenth
day of the Go-Shop Period, and the denominator of which is $10,000,000.
(ii) If
this Agreement is terminated by the Purchaser pursuant to §10(a)(iii) as a result of any Company Acquisition Proposal,
then the Seller shall pay to the Purchaser promptly, upon the closing of the transactions contemplated by the Company Acquisition
Proposal, a termination fee equal to (A) $750,000, multiplied by (B) a fraction, the numerator of which is the aggregate Funded
Equity Commitments as of the close of business on the fourteenth day of the Go Shop Period, and the denominator of which is $10,000,000.
(iii) The
fee (if any) payable pursuant to §10(b)(i) and §10(b)(ii) is referred to herein as the “Termination
Fee.” The Seller acknowledges that the agreements contained in this §10 are an integral part of the Transactions,
and that, without these agreements, Purchaser would not enter into this Agreement, and accordingly, if the Seller fails promptly
to pay the amount due pursuant to this §10(b), and, in order to obtain such payment, Purchaser commences a Proceeding
which results in a judgment against the Seller, the Seller shall pay to the Purchaser its costs and expenses (including attorneys’
fees and expenses) in connection with such suit, together with interest on the amount of the fee at the Applicable Rate in effect
on the date such payment was required to be made.
(c) Effect
of Termination. Subject to §10(b) above and §10(d) below, if any Party terminates this Agreement pursuant
to §10(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any
Party to any other Party; provided, that notwithstanding the foregoing, (a) the confidentiality obligations of the Parties
set forth in §6(f), the defined terms §1, and provisions set forth in §11 shall survive the
termination; and (b) no Party shall be excused or relieved of from any liability arising out of, relating to or resulting from
any breach of this Agreement prior to such termination.
(d) Effect
of Termination Fee. If this Agreement is terminated under circumstances in which the Purchaser is entitled to receive the
Termination Fee, the payment of such Termination Fee shall be the sole and exclusive remedy available to the Purchaser; provided,
that the foregoing shall not limit the liability of any Party or limit the remedies available to any Party with respect to any
Fraud or criminal misconduct.
11. Miscellaneous.
(a) Press
Releases and Public Announcements. Except as provided herein, no Party shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written approval of the Purchaser and the Seller; provided,
however, that any Party may make any public disclosure it believes in good faith is required by applicable Law or any listing
or trading agreement concerning its publicly traded securities (in which case the disclosing Party will use its commercially reasonable
best efforts to advise the other Parties prior to making the disclosure).
(b) No
Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and
their respective successors and permitted assigns, except as provided herein (including pursuant to §6(h), §8,
and §11(q)).
(c) Entire
Agreement. This Agreement and the Transaction Documents constitutes the entire agreement among the Parties and supersedes
any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related
in any way to the subject matter hereof.
(d) Succession
and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Parties; provided, however, that the Purchaser may (i) assign any
or all of its rights and interests hereunder to one or more of its Affiliates, (ii) designate one or more of its Affiliates to
perform its obligations hereunder (in any or all of which cases the Purchaser nonetheless shall remain responsible for the performance
of all of its obligations hereunder), and (iii) assign any or all of its rights and interests hereunder and delegate any or all
of its obligations hereunder to a transferee in connection with a transfer of the Company Shares.
(e) Counterparts.
This Agreement may be executed in one or more counterparts, which shall be deemed an original but all of which together will constitute
one and the same instrument.
(f) Interpretation
and Usage. The section captions or headings contained in this Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement. Each reference to a designated section (or §), Schedule, or an
Exhibit is, unless otherwise specified, to a section (or §), Schedule or an Exhibit to this Agreement. Unless the context
of this Agreement clearly requires otherwise: (i) all nouns and pronouns stated in either the singular or the plural will include
the singular and the plural, and pronouns stated in the masculine, the feminine or neuter gender will include the masculine, the
feminine, and the neuter, (ii) the words “including” and “includes” shall be deemed to be followed by
“without limitation” and “but is not limited to,” respectively; (iii) the words “herein,”
“hereof,” and “hereunder” and other words of similar import refer to this Agreement as a whole and not
to any particular section (or §) or other subdivision; (iv) “or” is not exclusive; (v) the word “will”
shall have the same meaning as the word “shall”; (vi) the word “extent” in the phrase “to the extent”
means the degree to which a subject or other thing extends and shall not simply mean “if”; (vii) references to “day”
or “days” in the lower case means calendar days; and (viii) references to a particular Person include such Person’s
successors and assigns to the extent not prohibited by this Agreement.
(g) Notices.
All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (a) when delivered personally, with written confirmation of receipt;
(b) when received by the addressee if sent by a nationally recognized overnight courier; (c) on the date sent by facsimile or
email (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day
if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered
mail (in each case, return receipt requested, postage pre-paid), and addressed to the intended recipient as set forth below:
If to the Seller: |
|
With a copy to: |
|
|
|
Chairman, Imation Corp. |
|
Joel L. Rubinstein |
Joseph A. De Perio |
|
Partner |
Clinton Group, Inc. |
|
Winston & Strawn LLP |
510 Madison Avenue, 9th Floor |
|
200 Park Avenue |
New York, NY 10022 |
|
New York, NY 10166-4193 |
jad@clinton.com |
|
JRubinstein@winston.com |
(212) 377-4252 |
|
(212) 294-5336 |
|
|
|
If to the Purchaser: |
|
With a copy to: |
|
|
|
NXSN Acquisition Corp. |
|
Ernest (JR) Mysogland |
c/o Rodney A. Bienvenu, Jr. |
|
Managing Member |
Managing Member |
|
Spear Point Capital Management LLC |
Spear Point Capital Management LLC |
|
191 Post Road West |
400 Poydras St., Suite 2100 |
|
Westport, CT 06880 |
New Orleans, LA 70130 |
|
jr@spearpointllc.com |
ron@spearpointllc.com |
|
(203) 221-2641 |
(504) 252-1369 |
|
|
Any
Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered
by giving the other Parties notice in the manner herein set forth.
(h) Governing
Law. This Agreement shall be governed by and construed in accordance with the domestic Laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the Laws of any jurisdiction other than the State of Delaware.
(i) Amendments
and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed
by the Purchaser and the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty
or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
(j) Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.
(k) Expenses.
Except as otherwise provided in §10 concerning the Termination Fee, each of the Purchaser and the Seller will bear
its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the Transactions;
provided, however, that the Seller will also bear the costs and expenses of the Company and its Subsidiaries (including
all of their legal fees and expenses) in connection with this Agreement and the Transactions in the event that the Transactions
are consummated.
(l) Construction.
The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question
of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this
Agreement. Any reference to any statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The Parties intend that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect,
the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant. The Exhibits, Annexes, and Schedules identified in this Agreement
are incorporated herein by reference shall be construed with and as an integral part of this Agreement to the same extent as if
the same had been set forth verbatim herein.
(m) Schedules.
Any item disclosed in any Schedule referenced by a particular section (or §) in this Agreement shall be deemed to have been
disclosed with respect to every other section (or §) in this Agreement if the relevance of such disclosure to such other
sections is reasonably apparent on its face. The specification of any dollar amount in the representations or warranties contained
in this Agreement or the inclusion of any specific item in any Schedule is not intended to imply that such amounts, or higher
or lower amounts or the items so included or other items, are or are not material, and no Party shall use the fact of the setting
of such amounts or the inclusion of any such item in any dispute or controversy as to whether any obligation, item or matter not
described herein or included in a Schedule is or is not material for purposes of this Agreement. The inclusion of information
in any Schedule shall not be construed as an admission that such information is material. Capitalized terms set forth in the Schedules
attached shall have the same meanings as set forth in this Agreement, unless defined otherwise in such Schedule.
(n) Specific
Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly,
each of the Parties agrees that the other Parties shall be entitled to an injunction, specific performance or other equitable
relief in the event of any breach or threatened breach of this Agreement of this Agreement and to enforce specifically this Agreement
and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction
over the Parties and the matter (subject to the provisions set forth in §11(o) below), in addition to any other remedy
to which they may be entitled, at law or in equity.
(o) Submission
to Jurisdiction. Each of the Parties submits to the jurisdiction of any state or federal court sitting in the City of Wilmington
and the County of New Castle, Delaware, in any action or Proceeding arising out of or relating to this Agreement and agrees that
all claims in respect of the action or Proceeding may be heard and determined in any such court. Each Party also agrees not to
bring any action or Proceeding arising out of or relating to this Agreement in any other court. Each of the Parties waives any
defense of inconvenient forum to the maintenance of any action or Proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any Party may make service on any other Party by sending
or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices
in §11(g) above. Nothing in this §11(o), however, shall affect the right of any Party to bring any action
or Proceeding arising out of or relating to this Agreement to serve legal process in any other manner permitted by Law.
(p) Remedies
Cumulative. Except as otherwise provided, all rights, powers and remedies provided under this Agreement or otherwise available
in respect hereof at law or in equity shall be cumulative and not alternative, and the exercise of any such right, power or remedy
by any Party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such Party.
(q) Conflict
Waiver; Attorney-Client Privilege.
(i) Each
of the Parties acknowledges and agrees, on its own behalf and on behalf of its directors, members, shareholders, partners, officers,
employees and Affiliates, that:
(A) The
Firm has acted as counsel to the Seller and its Affiliates (including the Company and the Company’s Subsidiaries), and the
Company in connection with the negotiation, preparation, execution and delivery of the Transaction Documents and the consummation
of the Transactions. The Purchaser agrees, and shall cause its Affiliates (including, from and after the Closing, the Company
and the Company’s Subsidiaries) to agree, that, following consummation of the Transactions, such representation and any
prior representation of the Seller and its Affiliates (including the Company and the Company’s Subsidiaries) by the Firm
shall not preclude the Seller and its Affiliates from serving as counsel to the Seller or Seller’s Affiliates or Representatives,
in connection with any liability, obligation, dispute or Proceeding arising out of or relating to the Transaction Documents or
the Transactions.
(B) The
Purchaser shall not, and shall cause its Affiliates (including, from and after the Closing, the Company and the Company’s
Subsidiaries) not to, seek or have the Firm disqualified from any such representation based upon the prior representation of the
Seller and its Affiliates (including the Company and the Company’s Subsidiaries). The Purchaser hereby consents, and shall
cause its Affiliates (including, from and after the Closing, the Company and the Company’s Subsidiaries) to consent, to
such representation by the Firm, and waives, and shall cause its Affiliates (including, from and after the Closing, the Company
and the Company’s Subsidiaries) to waive, any conflict of interest arising from such prior representation. The Purchaser
acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that it has consulted with
counsel or have been advised it should do so in connection with the Transaction Documents and the Transactions. The covenants,
consents, and waiver contained in this §11(q) shall not be deemed exclusive of any other rights to which the Firm
is entitled whether pursuant to Law, contract or otherwise.
(ii) All
communications between the Seller and its Affiliates (including the Company and the Company’s Subsidiaries, on the one hand,
and the Firm, on the other hand, relating to the negotiation, preparation, execution and delivery of the Transaction Documents
and the Transactions (the “Privileged Communications”) shall be deemed to be attorney-client privileged and
the expectation of client confidence relating thereto shall belong solely to the Seller Parties and shall not pass to or be claimed
by the Purchaser or its Affiliates (including, from and after the Closing, the Company and the Company’s Subsidiaries).
Accordingly, neither Purchaser nor any of its Affiliates (including, from and after the Closing, the Company and the Company’s
Subsidiaries) shall have access to any Privileged Communications or to the files of the Firm relating to such engagement from
and after Closing. Without limiting the generality of the foregoing, from and after the Closing, (A) the Seller Parties shall
be the sole holders of the attorney-client privilege with respect to such engagement, and none of the Purchaser or any of its
Affiliates (including, from and after the Closing, the Company and the Company’s Subsidiaries) shall be a holder thereof,
(B) to the extent that files of the Firm in respect of such engagement constitute property of the client, only the Seller Parties
(and not the Purchaser or any of its Affiliates (including, from and after the Closing, the Company and the Company’s Subsidiaries)
shall hold such property rights, and (C) the Firm shall have no duty whatsoever to reveal or disclose any such attorney-client
communications or files to Purchaser or any of its Affiliates (including, from and after the Closing, the Company and the Company’s
Subsidiaries) by reason of any attorney-client relationship between the Firm and the Company or otherwise. Notwithstanding the
foregoing, in the event that a dispute or Proceeding arises between Purchaser or any of its Affiliates (including, from and after
the Closing, the Company and the Company’s Subsidiaries), on the one hand, and a Person other than any of Seller Party,
on the other hand, Purchaser or any of its Affiliates (including, from and after the Closing, the Company and the Company’s
Subsidiaries) may assert the attorney-client privilege to prevent disclosure of confidential communications to such third party;
provided, however, that neither Purchaser nor any of its Affiliates (including, from and after the Closing, the
Company and the Company’s Subsidiaries) may waive such privilege without the prior written consent of the Seller Parties,
which consent shall not be unreasonably withheld, conditioned, or delayed. In the event that Purchaser or any of its Affiliates
(including, from and after the Closing, the Company and the Company’s Subsidiaries) is legally required by Order or otherwise
legally required to access or obtain a copy of all or a portion of the Privileged Communications, to the extent (x) permitted
by applicable Law, and (y) advisable in the opinion of the Purchaser’s counsel, then the Purchaser shall immediately (and,
in any event, within fifteen (15) Business Days) notify the Seller in writing so that Seller can seek a protective Order.
(iii) This
§11(q) is intended for the benefit of, and shall be enforceable by, the Firm. This §11(q) is irrevocable,
and no term of this Section may be amended, waived, or modified, without the prior written consent of the Firm.
*****
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the date first above written.
|
SELLER |
|
|
|
By: |
/s/ Joseph A. De Perio |
|
|
|
Name: |
Joseph A. De Perio |
|
|
|
Its: |
Non-Executive Chairman |
|
|
|
PURCHASER |
|
|
|
By: |
/s/ Trevor L. Colhoun |
|
|
|
Name: |
Trevor L. Colhoun |
|
|
|
Its: |
Chairman |
Signature Page
THIS NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE TRANSFERRED WITHOUT
COMPLIANCE WITH THE TERMS HEREOF AND REGISTRATION UNDER THE SECURITIES ACT OR AN APPLICABLE EXEMPTION THEREFROM.
PAYMENTS THAT BECOME DUE AND PAYABLE UNDER
THIS NOTE SHALL BE ADJUSTED PURSUANT TO THE PROVISIONS OF SECTION 25(a).
NXSN
Acquisition Corp.
Senior
Secured Convertible Note
Issuance Date: [Closing Date under the Stock Purchase Agreement] |
|
Original Principal Amount as of
the Issuance Date: U.S.
$25,000,000.001 |
FOR VALUE RECEIVED,
NXSN Acquisition Corp., a Delaware corporation (the “Company”), hereby promises to pay to the order of Imation
Corp. or registered assigns (“Holder”) the amount set out above as the Original Principal Amount (as reduced
pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether
upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof)
and to pay interest (“Interest”) on any outstanding Principal at a rate per annum set forth below (the “Interest
Rate”), from the date of this Senior Secured Convertible Note (this “Note”) set out above as the Issuance
Date (the “Issuance Date”) until the same becomes due and payable, whether upon an Interest Date (as
defined below), the Maturity Date, acceleration, conversion, redemption or otherwise (in each case in accordance with the terms
hereof), as adjusted pursuant to Section 25(a). For purposes of the table below, the word “from” means “from
and including” and the word “to” means “to but excluding.” In addition, the Original Principal Amount
shall be adjusted pursuant to the Stock Purchase Agreement. Furthermore, the Principal and Interest are subject to set-off and
recoupment under the Stock Purchase Agreement. Notwithstanding the above, Interest on $_______, which is the additional Principal
added to this Note pursuant to Section (2)(e)(i)(C) of the Stock Purchase Agreement, will not begin to accrue until the date that
is six months after the Issuance Date, at which point, Interest shall begin to accrue and be payable on each Interest Date at the
Interest Rate set forth below and on the same terms and conditions as the rest of the Principal hereunder.
1 Original Principal Amount to be adjusted pursuant to
the terms of the Stock Purchase Agreement.
Year | |
Interest Rate2 |
From the Issuance Date to the 1st anniversary of the Issuance Date | |
5% |
From the 1st anniversary of the Issuance Date to the 2nd anniversary of the Issuance Date | |
5% |
From the 2nd anniversary of the Issuance Date to the 3rd anniversary of the Issuance Date | |
8% |
(1) MATURITY.
On the Maturity Date, the Holder shall surrender this Note to the Company and the Company shall pay to the Holder an amount, as
adjusted pursuant to Section 25(a), in cash, representing all outstanding Principal, accrued and unpaid Interest and accrued and
unpaid Late Charges, if any. The “Maturity Date” shall be the date which is the third anniversary of
the Issuance Date, or otherwise as provided herein.
(2) INTEREST;
INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 365-day
year and actual days elapsed and shall be payable, as adjusted pursuant to Section 25(a), in arrears on (i) the last day of each
Quarterly Period from the Issuance Date to the 1st anniversary of the Issuance Date, (ii) the last day of each Monthly Period from
the 1st anniversary of the Issuance Date thereafter to the Maturity Date, and (iii) on the Maturity Date (each, an “Interest
Date”) with the first Interest Date being __________, 2016. Interest shall be payable on each Interest Date in cash,
to the record holder of this Note on the applicable Interest Date. Prior to the payment of Interest on an Interest Date, Interest
on this Note shall accrue at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount (as
defined below) in accordance with Section 3(b)(i). From and after the occurrence of an Event of Default, the Interest Rate shall
be increased by four percent (4%) per annum. In the event that such Event of Default is subsequently cured, the adjustment referred
to in the preceding sentence shall cease to be effective as of the date of such cure; provided that the Interest as calculated
at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of cure of such Event of Default.
(3) CONVERSION
OF NOTES. This Note shall be convertible into shares of common stock of the Company, par value $_____ per share (the “Common
Stock”), on the terms and conditions set forth in this Section 3.
2 Interest Rate to be increased by 1% in all years if
Funded Equity Commitments are less than $10M on the Closing Date pursuant to the terms of the Stock Purchase Agreement.
(a) Conversion
Right. Subject to the provisions of Section 3(d), at any time or times on or after the Issuance Date, the Holder shall be entitled
to convert (the “Conversion Right”) any portion of the outstanding and unpaid Conversion Amount (as defined
below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all taxes (other than Incomes Taxes) that may be payable with respect to the
issuance and delivery of Common Stock upon conversion of any Conversion Amount.
(b) Conversion
Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).
(i) “Conversion
Amount” means the sum of (A) the portion of the Principal to be converted, redeemed or otherwise with respect to which
this determination is being made up to a maximum Principal amount of $10,000,000, (B) accrued and unpaid Interest with respect
to such Principal and (C) accrued and unpaid Late Charges with respect to such Principal and Interest.
(c) “Conversion
Price” means, as of any Conversion Date (as defined below) or other date of determination, $[____]3, subject
to adjustment as provided herein (as adjusted for stock splits, stock dividends, reverse stock splits, reclassification, recapitalization
and similar events).
(d) Mechanics
of Conversion.
(i) Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall (A) transmit by facsimile or other electronic transmission (or otherwise deliver), for receipt on or prior to
11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A
(the “Conversion Notice”) to the Company and (B) if required by Section 3(c)(iii), surrender this Note to a
common carrier for delivery to the Company as soon as practicable on or following such date (or an indemnification undertaking
with respect to this Note in the case of its loss, theft or destruction). On or before the first (1st) Business Day
following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile a confirmation of receipt of such
Conversion Notice to the Holder. On or before the second (2nd) Business Day following the date of receipt of a Conversion
Notice (the “Share Delivery Date”), the Company shall issue and deliver to the address as specified in
the Conversion Notice, a [certificate, registered in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled]4. If this Note is physically surrendered for conversion as required by
Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this
Note and at its own expense, issue and deliver to the holder a new Note (in accordance with Section 19(d)) representing the outstanding
Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this
Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.
3 NTD – Insert price equal to 120% of the purchase
price per common stock share on an as converted basis paid in the Transaction by the Buyers.
4 NTD – Confirm shares of NXSN Acquisition Corp.
to be certificated.
(ii) Company’s
Failure to Timely Convert. If the Company shall fail to issue a certificate to the Holder for the number of shares of Common
Stock to which the Holder is entitled upon conversion of any Conversion Amount on or prior to the date which is five (5) Business
Days after the Conversion Date (a “Conversion Failure”), then (A) the Company shall pay damages to the Holder
for each date of such Conversion Failure in an amount equal to 1.5% of the product of (I) the sum of the number of shares of Common
Stock not issued to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled and (II) the Conversion
Price and (B) the Holder, upon written notice to the Company, may void its Conversion Notice with respect to, and retain or have
returned, as the case may be, any portion of this Note that has not been converted pursuant to such Conversion Notice; provided
that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments which have accrued
prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise.
(iii) Registration;
Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and
addresses of the holders of the Note and the principal amount of the Note (the “Registered Notes”). The entries
in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holder of the Note
shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation,
the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary. A Registered Note may
be assigned or sold in whole or in part only by registration of such assignment or sale on the Register. Upon its receipt of a
request to assign or sell all or part of any Registered Note by a Holder, the Company shall record the information contained therein
in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the
surrendered Registered Note to the designated assignee or transferee pursuant to Section 19. Notwithstanding anything to the contrary
set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required
to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted
or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting
physical surrender and reissue of this Note. The Holder and the Company shall maintain records showing the Principal, Interest
and Late Charges converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder
and the Company, so as not to require physical surrender of this Note upon conversion.
(4) RIGHTS
UPON EVENT OF DEFAULT.
(a) Event
of Default. Each of the following events shall constitute an “Event of Default”:
(i) the
Company’s (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within ten
(10) Business Days after the applicable Conversion Date or (B) notice, written or oral, to any holder of the Note, including by
way of public announcement or through any of its agents, at any time, of its intention not to comply with a request for conversion
of the Note into shares of Common Stock that is tendered for conversion in accordance with the provisions of the Note;
(ii) the
Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as due under
this Note, Guaranty and Security Agreement or Control Agreement (as defined in the Guaranty and Security Agreement) or any other
agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby
to which the Holder is a party (collectively, the “Loan Documents”), except, in the case of a failure to pay
Interest and Late Charges when and as due, in which case only if such failure continues for a period of at least three (3) Business
Days;
(iii) any
default under, redemption of or acceleration prior to maturity of any material Indebtedness of the Company or any of its Subsidiaries
as a whole;
(iv) the
Company or any of its Subsidiaries, pursuant to or within the meaning of title 11 of the United States Code, or any existing or
future similar Federal, foreign or state law relating to bankruptcy, insolvency, reorganization or relief of debtors, (collectively,
“Bankruptcy Law”), (A) commences a voluntary case or proceeding or otherwise seeks to have an order for relief
entered with respect to it, or seeks to adjudicate it a bankrupt or insolvent, or seeks reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, (B) has commenced against it
any case, proceeding or other action of the type nature referred to in clause (A) above that (1) results in the entry
of an order for relief or any such adjudication or appointment or (2) remains undismissed, undischarged or unbonded for a
period of thirty (30) days, or consents to the entry of an order for relief against it in such an involuntary case or proceeding,
(C) consents to the appointment of a receiver, administrator, manager, trustee, assignee, liquidator, custodian, conservator, or
similar official (a “Custodian”) for, or entry of an attachment order (an “Attachment Order”)
with respect to, it or all or any substantial portion of its revenue or assets, (D) makes a general assignment for the benefit
of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due;
(v) a
court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Company or
any of its Subsidiaries in an involuntary case or proceeding of the type referred to in clause (iv) above, (B) appoints a Custodian
for, or enters an Attachment Order with respect to, the Company or any of its Subsidiaries, or all or any substantial portion of
the revenue or assets of any of them, or (C) orders the dissolution, liquidation, or winding-up of the Company or any of its Subsidiaries,
and such order or decree is not discharged or stayed within thirty (30) days;
(vi) a
distress, attachment, execution or other legal process is levied, enforced or sued out on or against any material part of the property,
assets or revenues of the Company or any of its Subsidiaries, which is material to the Company and its Subsidiaries as a whole,
and is not discharged or stayed within thirty (30) days;
(vii) any
step is taken by any Person that could reasonably be expected to result in the seizure, compulsory acquisition, expropriation or
nationalization of all or a material part of the assets of the Company or any of its Subsidiaries, which is material to the Company
and its Subsidiaries as a whole, and such step is not reversed within thirty (30) days;;
(viii) a
final judgment or judgments for the payment of money aggregating in excess of $500,000 are rendered against the Company or any
of its Subsidiaries and which judgments are not, within ninety (90) days after the entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within ninety (90) days after the expiration of such stay; provided, however, that any judgment
which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $500,000 amount
set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written
statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity
and the Company will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment;
(ix) the
Company or any Subsidiary breaches any representation, warranty, covenant or other term or condition of any Loan Document, except,
in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least five (5) consecutive
Business Days after receipt of notice thereof;
(x) any
breach or failure in any respect to comply with Section 9 or Section 15 of this Note;
(xi) the
Company or any Subsidiary shall fail to perform or comply with any covenant or agreement contained in the Guaranty and Security
Agreement or any other Loan Document to which it is a party;
(xii) any
material provision of the Guaranty and Security Agreement or any other Loan Document shall at any time for any reason (other than
pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Company or any Subsidiary intended
to be a party thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall
be commenced by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish
the invalidity or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or
obligation purported to be created under the Guaranty and Security Agreement or any other Loan Document;
(xiii) the
merger between Nexsan Corporation and the Company as contemplated by the Stock Purchase Agreement is rejected for filing by the
Delaware Secretary of State or otherwise does not become or no longer is effective, and such rejection or lack of effectiveness
is not cured within five days; and
(xiv) the
Guaranty and Security Agreement or any other Loan Document, after delivery thereof pursuant hereto, shall for any reason fail or
cease to create a valid and perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien in
favor of the Holder on any material portion of the collateral purported to be covered thereby, and such failure is not cured within
five days.
(b) Remedies.
Upon the occurrence of any Event of Default, the then unpaid principal and accrued but unpaid interest shall, at the election of
the Holder, be immediately due and payable, all without demand, presentment or notice, each of which is hereby waived by the Company,
and Holder shall have all other rights accorded under this Note by law; provided, that upon the occurrence of the Event
of Default specified in Section 4(a)(iv) or Section 4(a)(v) above, the entire principal amount of this Note and unpaid interest,
and/or other amounts payable by the Company hereunder shall automatically be due and payable without any declaration, notice, presentment
or demand of any kind (all of which are hereby waived). All sums remaining unpaid upon the occurrence of any Event of Default,
on the Maturity Date or the accelerated maturity date shall bear interest at the rate specified above, plus four percent (4%).
(c) Exception.
Notwithstanding anything in this Note or any other Loan Document to the contrary, no misrepresentation or breach of any representation
or warranty made by the Company, Nexsan or a Subsidiary of either the Company or Nexsan in any of the Loan Documents shall constitute
an Event of Default if such misrepresentation or breach was due to (in whole or in part) a misrepresentation or breach of any representation
or warranty made by Imation Corp. (the initial Holder hereunder) in the Stock Purchase Agreement.
(5) RIGHTS
UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) Holder consents in writing to such Fundamental
Transaction and (ii) the Successor Entity assumes in writing all of the obligations of the Company under this Note and the other
Loan Documents in accordance with the provisions of this Section 5(a) pursuant to written agreements in form and substance satisfactory
to the Holder and approved by the Holder prior to such Fundamental Transaction, including agreements to deliver to Holder in exchange
for the Note a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to
the Note, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest
rates of the Note held by such holder and having similar ranking to the Note, and satisfactory to the Holder. Upon the occurrence
of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Note referring to the “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 with the same effect as if such Successor Entity had been named as the Company herein. Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion
or redemption of this Note at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Common
Stock (or other securities, cash, assets or other property) purchasable upon the conversion or redemption of the Notes prior to
such Fundamental Transaction, such shares of common stock (or its equivalent) of the Successor Entity as adjusted in accordance
with the provisions of this Note. The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions
and shall be applied without regard to any limitations on the conversion or redemption of this Note.
(b) Fundamental
Transaction Prepayment. No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Fundamental
Transaction, the Company shall deliver written notice thereof via facsimile or other electronic transmission and overnight courier
to the Holder (a “Change of Control Notice”). At any time during the period beginning after the Holder’s
receipt of a Change of Control Notice and ending on the date of the consummation of such Change of Control (or, in the event a
Change of Control Notice is not delivered at least ten (10) days prior to a Change of Control, at any time on or after the date
which is ten (10) days prior to a Change of Control and ending ten (10) days after the consummation of such Change of Control),
the Holder may require the Company to prepay all or any portion of this Note by delivering written notice thereof (“Change
of Control Redemption Notice”) to the Company, which Change of Control Redemption Notice shall indicate the portion of
the Principal the Holder is electing to have the Company prepay. The portion of this Note subject to prepayment pursuant to this
Section 5 (the “Prepayment Portion”) shall include a prepayment premium equal to 1% of the aggregate amount
of the outstanding Principal so prepaid, plus the amount of any accrued and unpaid Interest on the Prepayment Portion through the
date of such redemption payment together with the amount of any accrued and unpaid Late Charges on such Prepayment Portion and
Interest. Prepayments required by this Section 5 shall have priority to payments to shareholders in connection with a Fundamental
Transaction. The parties hereto agree that in the event of the Company’s prepayment of any portion of the Note under this
Section 5(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’ inability to
predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity for the Holder.
Accordingly, any redemption premium due under this Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.
(6) RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.
(a) Purchase
Rights. If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”),
then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which
the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion
of the convertible portion of this Note 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 Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights.
(b) Other
Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a conversion of this Note, (i) in addition to the shares
of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares
of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of
Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled
to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall
apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion
or redemption of this Note.
(7) RIGHTS
UPON ISSUANCE OF OTHER SECURITIES.
(a) Adjustment
of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Issuance Date, the Company issues or sells,
or in accordance with this Section 7(a) is deemed to have issued or sold, any shares of Common Stock (including the issuance or
sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed
to have been issued or sold by the Company in connection with any Excluded Security) for a consideration per share (the “New
Issuance Price”) less than a price (the “Applicable Price”) equal to the Conversion Price in effect
immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”),
then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to a price determined in accordance
with the following formula:
CP2 = CP1* (A + B) ÷
(A + C).
For purposes of the foregoing formula, the
following definitions shall apply:
“CP2” shall mean the Conversion
Price in effect immediately after such Dilutive Issuance.
“CP1” shall mean the Conversion
Price in effect immediately prior to such Dilutive Issuance;
“A” shall mean the number of shares
of Common Stock outstanding immediately prior to such Dilutive Issuance (treating for this purpose as outstanding all shares of
Common Stock issuable upon exercise of Options outstanding immediately prior to such issuance or upon conversion or exchange of
Convertible Securities (including the Series A Preferred Stock) outstanding immediately prior to such issuance);
“B” shall mean the number of shares
of Common Stock that would have been issued if the shares of Common Stock issued in the Dilutive Issuance had been issued at a
price per share equal to CP1 (determined by dividing the aggregate consideration received by the Company in respect
of such issue by CP1); and
“C” shall mean the number of shares
of Common Stock issued in the Dilutive Issuance.
(b) For
purposes of determining the adjusted Conversion Price under Section 7(a), the following shall be applicable:
(i) Issuance
of Options. If the Company in any manner grants or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities
issuable upon exercise of such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable
upon the exercise of any such Option or upon conversion or exchange or exercise of any Convertible Securities issuable upon exercise
of such Option” shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon granting or sale of the Option, upon exercise of the Option and upon conversion
or exchange or exercise of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Conversion
Price shall be made upon the actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon conversion or exchange or exercise of such Convertible Securities.
(ii) Issuance
of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon such conversion or exchange or exercise thereof is less than the Applicable
Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance of sale of such Convertible Securities for such price per share. For the purposes of this Section 7(a)(ii),
the “price per share for which one share of Common Stock is issuable upon such conversion or exchange or exercise”
shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to
any one share of Common Stock upon the issuance or sale of the Convertible Security and upon the conversion or exchange or exercise
of such Convertible Security. No further adjustment of the Conversion Price shall be made upon the actual issuance of such share
of Common Stock upon conversion or exchange or exercise of such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the Conversion Price had been or are to be made pursuant
to other provisions of this Section 7(a), no further adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(iii) Change
in Option Price or Rate of Conversion. If the purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exchange or exercise of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in effect
at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional consideration or changed conversion rate, as the
case may be, at the time initially granted, issued or sold. For purposes of this Section 7(a)(iii), if the terms of any Option
or Convertible Security that was outstanding as of the Issuance Date are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof
shall be deemed to have been issued as of the date of such change. No adjustment shall be made if such adjustment would result
in an increase of the Conversion Price then in effect.
(iv) Calculation
of Consideration Received. In case any Option is issued in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto,
(x) the Options will be deemed to have been issued for a value determined by use of the Black Scholes Option Pricing Model (the
“Option Value”) and (y) the other securities issued or sold in such integrated transaction shall be deemed to
have been issued for the difference of (I) the aggregate consideration received by the Company, less (II) the Option Value. If
any Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration
received therefor will be deemed to be the net amount received by the Company therefor. If any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of the consideration other than cash received by
the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case
the amount of consideration received by the Company will be the Closing Sale Price of such securities on the date of receipt. If
any Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of
such portion of the net assets and business of the non-surviving entity as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined jointly by
the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within
five (5) Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected
by the Company and the Holder. The determination of such appraiser shall be deemed binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the Company.
(v) Record
Date. If the Company takes a record of the holders of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the Common
Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may be.
(c) Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Issuance Date
undertakes any action (whether by way of subdivision, stock split, stock dividend, recapitalization or otherwise) that increases
any one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision will be proportionately reduced. If the Company at any time on or after the Issuance Date
undertakes any action (by combination, reverse stock split or otherwise) that reduces any one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will
be proportionately increased.
(d) Other
Events. If any event occurs of the type contemplated by the provisions of this Section 7 but not expressly provided for by
such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Holder under this Note; provided that no such adjustment will increase the Conversion Price
as otherwise determined pursuant to this Section 7.
(e) Rights
Upon Distribution of Assets. 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 or other similar transaction) (a “Distribution”), at any time after the Issuance Date, then, in
each such case any Conversion Price in effect immediately prior to the close of business on the record date fixed for the determination
of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Conversion Price by a fraction of which (i) the numerator shall
be the Fair Market Value of the shares of Common Stock on the Business Day immediately preceding such record date minus the value
of the Distribution (as determined in good faith by the Company’s Board of Directors) applicable to one share of Common Stock,
and (ii) the denominator shall be the Fair Market Value of the shares of Common Stock on the Business Day immediately preceding
such record date.
(8) SECURITY.
This Note is secured to the extent and in the manner set forth in the Guaranty and Security Agreement.
(9) NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation or through
any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note or otherwise
amend or modify the rights, privileges or preference of the Common Stock in a manner that adversely affects the conversion rights
of the Holder, and will at all times in good faith carry out all of the provisions of this Note and take all action as may be required
to protect the rights of the Holder of this Note.
(10) RESERVATION
OF AUTHORIZED SHARES.
(a) Reservation.
The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for the
Note equal to 130% of the Conversion Rate with respect to the Conversion Amount of the Note as of the Issuance Date. So
long as the Note is outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of the Note, 130% of the number of shares of Common
Stock as shall from time to time be necessary to effect the conversion of the Note then outstanding; provided that at no time shall
the number of shares of Common Stock so reserved be less than the number of shares required to be reserved by the previous sentence
(without regard to any limitations on conversions) (the “Required Reserve Amount”).
(b) Insufficient
Authorized Shares. If at any time while the Note remains outstanding the Company does not have a sufficient number of authorized
and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Note at least a
number of shares of Common Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then
the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve the Required Reserve Amount for the Note then outstanding.
(11) RESTRICTION
ON REDEMPTION AND CASH DIVIDENDS. Until the Note has been converted, redeemed or otherwise satisfied in accordance with its
terms, the Company shall not, directly or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on
its capital stock without the prior express written consent of the Holder.
(12) PREPAYMENT.
Subject to Holder’s Conversion Right, the Company may at any time and from time to time prepay the Note, in whole or in part
(other than any Conversion Amount, if the Conversion Right is exercised by Holder), upon irrevocable notice delivered to the Holder
by not later than 11:00 a.m. at least five Business Days prior thereto, which notice shall specify the date of such prepayment.
If any such notice is given, all outstanding Principal (other than any Principal related to the Conversion Amount, if the Conversion
Right is exercised by Holder) shall be due and payable on the date specified therein, together with accrued interest to such date
on the amount prepaid and all Late Fees, if any. If this Note is prepaid through any prepayments, Holder shall be paid a prepayment
premium equal to 1% of the aggregate amount of the outstanding Principal so prepaid. The parties hereto agree that in the event
of the Company’s prepayment of any portion of the Note under this Section 12, the Holder’s damages would be uncertain
and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability
of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 12 is
intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity
and not as a penalty. Notwithstanding the foregoing, in the event that pursuant to the Stock Purchase Agreement, the Original Principal
Amount is reduced, but such reduction is determined after the Company has made payments of Principal or Interest hereunder, the
amounts due hereunder by the Company shall be recalculated taking into account the reduction in the Original Principal Amount,
and in the event Company has made any payments in excess of the amounts which would have been required hereunder had the Original
Principal Amount been so reduced prior to making such payments, the amount of such excess shall be treated as prepayments, and
no penalties or premiums shall be due or charged with respect to such prepayments.
(13) VOTING
RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law, including but not limited
to the General Corporation Law of the State of Delaware, and as expressly provided in this Note. Notwithstanding the above, for
so long as the obligations of the Company under this Note are outstanding, the Holder shall have the right to appoint two directors
to the Company’s Board of Directors in its sole discretion and shall have the right to appoint, with the consent of [the
Preferred Stockholder] a third director to the Company’s Board of Directors. The Company shall have no more than five directors
on the Board of Directors unless the Holder consents in writing to an increase in the number of members of the Board of Directors.
The Company’s Certificate of Incorporation shall provide Holder the Board of Director appointment rights set out in this
Section 13 and the Company shall not amend the Company’s Certificate of Incorporation to remove such appointment rights for
so long as the obligations of the Company under this Note are outstanding. In the event there are more than one Holder, such designation
rights shall be subject to the determination of a majority in interest of the Holders.
(14) REGISTRATION
RIGHTS. At any time after an IPO, Holder, to the extent it has exercised its conversion right under Section 3, may request
registration under the Securities Act of all or any portion of the Common Stock it received in such conversion pursuant to a registration
statement on Form S-1 or any successor form thereto, pursuant to a form of registration rights agreement reasonably acceptable
to Holder.
(15) COVENANTS.
So long as this Note is outstanding:
(a) Rank. All
payments due under this Note shall be senior to all other Indebtedness of the Company.
(b) Incurrence
of Indebtedness. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness, other than (i) the Indebtedness evidenced by this Note and (ii)
other Permitted Indebtedness.
(c) Issuance
of Preferred Stock. Other than the shares of preferred stock set forth on Schedule 15(c) attached hereto, the Company
shall not issue any shares of preferred stock or other equity securities that rank senior or that have any priority over the Common
Stock.
(d) Existence
of Liens. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow
or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.
(e) Restricted
Payments. The Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Permitted
Indebtedness (other than this Note), whether by way of payment in respect of principal of (or premium, if any) or interest on,
such Indebtedness if at the time such payment is due or is otherwise made or, after giving effect to such payment, an event constituting,
or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing.
(f) Loans,
Advances, Investments, Etc. The Company shall not, and the Company shall not permit any of its Subsidiaries to, make or commit
or agree to make any loan, advance, guarantee of obligations, other extension of credit or capital contributions to, or hold or
invest in or commit or agree to hold or invest in, or purchase or otherwise acquire or commit or agree to purchase or otherwise
acquire any shares of the capital stock, bonds, notes, debentures or other securities of, or make or commit or agree to make any
other investment in, any other Person, or purchase or own any futures contract or otherwise become liable for the purchase or sale
of currency or other commodities at a future date in the nature of a futures contract, or permit any of its Subsidiaries to do
any of the foregoing, except for: (i) investments existing on the date hereof, as set forth on Schedule 13(e) hereto,
but not any increase in the amount thereof as set forth in such Schedule or any other modification of the terms thereof, (ii) temporary
loans and advances by it to its Subsidiaries and by such Subsidiaries to it, made in the ordinary course of business consistent
with past practice, and (iii) Permitted Investments.
(g) Fundamental
Changes; Dispositions. Other than in accordance with Section 5(a), the Company shall not, and the Company shall not permit
any of its Subsidiaries to, wind-up, liquidate or dissolve, or merge, consolidate or amalgamate with any Person, or convey, sell,
lease or sublease, transfer or otherwise dispose of, whether in one transaction or a series of related transactions, all or any
part of its business, property or assets (including by way of spin-off, slit-off or business separation), whether now owned or
hereafter acquired (or agree to do any of the foregoing), or purchase or otherwise acquire, whether in one transaction or a series
of related transactions, all or substantially all of the assets of any Person (or any division thereof) (or agree to do any of
the foregoing), or permit any of its Subsidiaries to do any of the foregoing; provided, however, that the Company
and its Subsidiaries may (A) sell Inventory in the ordinary course of business consistent with past practices, (B) dispose
of obsolete or worn-out equipment in the ordinary course of business consistent with past practices and (C) sell or otherwise dispose
of other property or assets for cash in an aggregate amount not less than the fair market value of such property or assets provided
that the proceeds of such dispositions in the case of clauses (B) and (C) above, do not exceed $500,000 in the aggregate in any
twelve-month period.
(h) Change
in Nature of Business. The Company shall not, and the Company shall not permit any of its Subsidiaries to, (i) make any change
in the nature of its business as described in Schedule 13(g) hereto or (ii) cease conducting any such business.
(i) Stock
Option Plans. Without the prior written consent of the Holder, the Company shall not, and the Company shall not permit any
of its Subsidiaries to, maintain or adopt any stock option plan, stock appreciation plan or any similar plan, or to amend or modify
any such plan in any material respect.
(j) Accounting
Methods; Auditors. Without the prior written consent of the Holder, the Company shall not, and the Company shall not permit
any of its Subsidiaries to, (i) modify or change its Fiscal Year, (ii) change or make material modifications to its billing systems
and accounting practices, (iii) change or modify its method of accounting (other than as may be required to conform to GAAP) or
(iv) change its independent certified public accounts or registered public accountants, as applicable, that review, audit and/or
certify its respective financial statements.
(k) Creation
of New Subsidiaries. So long as the obligations of the Company under this Note are outstanding, if the Company shall create
or acquire any Subsidiary, simultaneous with the creation or acquisition of such Subsidiary, the Company shall (1) promptly cause
such Subsidiary to become a guarantor by executing a guaranty in favor of the Holder in form and substance reasonably acceptable
to the Company, the Subsidiary and the Holder, (ii) promptly cause such Subsidiary to become a grantor under the Guaranty and Security
Agreement by executing a joinder to the Guaranty and Security Agreement in form and substance reasonably acceptable to the Company,
the Subsidiary and the Holder, (iii) promptly cause such Subsidiary to become a pledgor by the Company and such Subsidiary executing
a pledge agreement in form and substance reasonably acceptable to the Company, the Subsidiary and the Holder, and (iv) promptly
cause such Subsidiary to duly execute and/or deliver such opinions of counsel and other documents, in form and substance reasonable
acceptable to the Holder, as the Holder shall reasonably request with respect thereto.
(l) Intellectual
Property. So long as the obligations of the Company under this Note are outstanding, the Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, (i) assign, transfer or otherwise encumber or allow any other Person to have any rights
or license to any of the intellectual property rights of the Company or its Subsidiaries, except in the ordinary course of business,
or (ii) knowingly take any action or inaction to impair the value of their intellectual property rights.
(m) Change
in Collateral; Collateral Records. The Company shall (i) advise the Holder promptly, in sufficient detail, of any material
adverse change relating to the type, quantity or quality of the Collateral (as defined in the Guaranty and Security Agreement)
or the Lien granted thereon and (ii) execute and deliver, and cause each of its Subsidiaries to execute and deliver, to the Holder,
solely for the Holder’s convenience in maintaining a record of Collateral, such written statements and schedules as the Holder
may reasonably require, designating, identifying or describing the Collateral.
(n) Transactions
with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except (i) in the ordinary course
of business in a manner and to an extent consistent with past practice or (ii) necessary or desirable for the prudent operation
of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a
comparable arm’s length transaction with a Person that is not an Affiliate thereof.
(o) Preservation
of Existence, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, its
existence, rights and privileges, and become or remain, and cause each of its Subsidiaries to become or remain, duly qualified
and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary.
(p) Maintenance
of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all
of its properties which are necessary or useful in the proper conduct of its business in good working order and condition, ordinary
wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases
to which it is a party as lessee or under which it occupies property, so as to prevent any material loss or forfeiture thereof
or thereunder.
(q) Maintenance
of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such
amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is
carried generally in accordance with sound business practice by companies in similar businesses similarly situated and in any event
in amount, adequacy and scope reasonably satisfactory to the Holder. All policies covering the Collateral are to be made payable
to the Holder as a co-payee with the Company, as its interests may appear, in case of loss, under a standard non-contributory “lender”
or “secured party” clause and are to contain such other provisions as the Holder may reasonably require to fully protect
the interest of the Holder in the Collateral and to any payments to be made under such policies. All certificates of insurance
are to be delivered to the Holder and the policies are to be premium prepaid, with the loss payable and additional insured endorsement
in favor of the Holder and such other Persons as the Holder may designate from time to time, and shall provide for not less than
30 days’ prior written notice to the Holder of the exercise of any right of cancellation. If the Company or any of its Subsidiaries
fails to maintain such insurance, the Holder may arrange for such insurance, but at the Company’s expense and without any
responsibility on the Holder’s part for obtaining the insurance, the solvency of the insurance companies, the adequacy of
the coverage, or the collection of claims. Upon the occurrence and during the continuance of an Event of Default, the Holder shall
have the sole right, in the name of the Holder, the Company and its Subsidiaries, to file claims under any insurance policies,
to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements,
receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(16) PARTICIPATION.
The Holder, as the holder of this Note, shall be entitled to such dividends paid and distributions made to the holders of Common
Stock to the same extent as if the Holder had converted the convertible portion of this Note into Common Stock and had held such
shares of Common Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be
made concurrently with the dividend or distribution to the holders of Common Stock.
(17) CONSENT
TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative consent of the Holder shall be required for any change or amendment
to this Note.
(18) TRANSFER.
This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject to compliance
with all applicable securities laws (provided that any assignee or transferee seeking to exercise any conversion rights shall be
required to enter into the Stockholders Agreement (as defined under the Stock Purchase Agreement).
(19) REISSUANCE
OF THIS NOTE.
(a) Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 19(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 19(d)) to the Holder representing the outstanding Principal not being transferred. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) and
this Section 19(a), following conversion, exchange or redemption of any portion of this Note, the outstanding Principal represented
by this Note may be less than the Principal stated on the face of this Note.
(b) Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company
shall execute and deliver to the Holder a new Note (in accordance with Section 19(d)) representing the outstanding Principal.
(c) Note
Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 19(d) and in principal amounts of at least $250,000)
representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such
outstanding Principal as is designated by the Holder at the time of such surrender.
(d) Issuance
of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 19(a) or Section 19(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued Interest and Late Charges on the Principal and Interest of this Note, from the Issuance
Date.
(20) REMEDIES,
CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note and the other Loan Documents at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual
and consequential damages for any failure by the Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the
Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach
or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any
breach, without the necessity of showing economic loss and without any bond or other security being required.
(21) PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company
or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay
the costs incurred by the Holder for the valid collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, attorneys’ fees and disbursements.
(22) CONSTRUCTION;
HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note.
(23) FAILURE
OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
(24) DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the Fair Market Value or the arithmetic calculation of the
Conversion Rate, the Company shall submit the disputed determinations or arithmetic calculations via facsimile or other electronic
transmission within one (1) Business Day of receipt of the Conversion Notice or other event giving rise to such dispute, as the
case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation within one
(1) Business Day of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall,
within one Business Day submit via facsimile or other electronic transmission (a) the disputed determination of the Fair Market
Value to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Conversion Rate to the Company’s independent, outside accountant. The Company, at the Company’s
expense, shall cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and
notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations
or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be
binding upon all parties absent demonstrable error.
(25) NOTICES;
PAYMENTS.
(a) Notices.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with the Guaranty and Security Agreement. The Company shall provide the Holder with prompt written notice of all actions taken
pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without limiting the
generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the Conversion
Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least twenty (20) days
prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon
the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock or (C) for determining rights
to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder.
(b) Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, such payment shall be made in lawful
money of the United States of America by a check drawn on the account of the Company and sent via overnight courier service to
such Person at such address as previously provided to the Company in writing; provided that the Holder may elect to receive a payment
of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request
and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on
any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the
case of any Interest Date which is not the date on which this Note is paid in full, the extension of the due date thereof shall
not be taken into account for purposes of determining the amount of Interest due on such date. Any amount of Principal or other
amounts due under the Loan Documents, other than Interest, which is not paid when due shall result in a late charge being incurred
and payable by the Company in an amount equal to interest on such amount at the rate of ten percent (10%) per annum from the date
such amount was due until the same is paid in full (“Late Charge”).
(c) Highest
Lawful Rate.
(i) If
the transactions contemplated in this Note or by any other Loan Document would be usurious as to the Holder under laws applicable
to it (including the laws of the United States of America and the State of Delaware or any other jurisdiction whose laws may be
mandatorily applicable to the Holder notwithstanding the other provisions of this Note), then, in that event, notwithstanding anything
to the contrary in this Note or any other Loan Document, it is agreed as follows: the aggregate of all consideration which constitutes
Interest under law applicable to the Holder that is contracted for, taken, reserved, charged or received by the Holder under this
Note or any other Loan Document shall under no circumstances exceed the maximum amount allowed by such applicable law, any excess
shall be canceled automatically and if theretofore paid shall be credited by the Holder on the Principal amount of this Note (or,
to the extent that the Principal amount of this Note shall have been or would thereby be paid in full, refunded by the Holder to
the Company). If at any time and from time to time (1) the amount of Interest payable to the Holder on any date shall be computed
at the Highest Lawful Rate applicable to the Holder pursuant to this Section 25(c) and (2) in respect of any subsequent interest
computation period the amount of Interest otherwise payable to the Holder would be less than the amount of Interest payable to
the Holder computed at the Highest Lawful Rate applicable to the Holder, then the amount of Interest payable to the Holder in respect
of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to the Holder
until the total amount of Interest payable to the Holder shall equal the total amount of Interest which would have been payable
to the Holder if the total amount of Interest had been computed without giving effect to this Section 25(c).
(ii) For
purposes of this Section 25(c), the term “applicable law” shall mean that law in effect from time to time and applicable
to the transaction between the Company, on the one hand, and the Holder, on the other, that lawfully permits the charging and collection
of the highest permissible, lawful non-usurious rate of interest on such loan transaction and this Note, including laws of the
State of Delaware and, to the extent controlling, laws of the United States of America.
(26) CANCELLATION.
After all Principal, accrued Interest and other amounts at any time owed on this Note have been paid in full, this Note shall automatically
be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.
(27) SET-OFF
AND RECOUPMENT. This Note, and the Principal and Interest hereunder, is subject to set-off and recoupment by the Company as set
forth in the Stock Purchase Agreement.
(28) WAIVER
OF NOTICE. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices
in connection with the delivery, acceptance, performance, default or enforcement of this Note.
(29) COUNTERPARTS.
This Note may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute
one instrument.
(30) No
Effect on Stock Purchase Agreement. Notwithstanding anything in this Agreement or any other Loan Document to the contrary,
no term or provision of this Note or any other Loan Document shall have the effect of modifying or amending any of the rights of
the Company (as Purchaser) under the Stock Purchase Agreement, including, without limitation, any rights to set-off or recoup amounts
under this Note or any of the obligations, including, without limitation, the indemnity obligations, of Imation Corp. (the initial
Holder) (as Seller) under the Stock Purchase Agreement.
(31) GOVERNING
LAW; JURISDICTION; SEVERABILITY; JURY TRIAL. This Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the
State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware
or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware.
The Company irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Wilmington, Delaware,
for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that
the venue of such suit, action or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision of this Note is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith
and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY AND HOLDER EACH HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(32) CERTAIN
DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:
(a) “Account
Receivable” means, with respect to any Person, any and all rights of such Person to payment for goods sold and/or services
rendered, including accounts, general intangibles and any and all such rights evidenced by chattel paper, instruments or documents,
whether due or to become due and whether or not earned by performance, and whether now or hereafter acquired or arising in the
future, and any proceeds arising therefrom or relating thereto.
(b) “Affiliate”
means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a
Person means the power, directly or indirectly, either to (a) vote 50% or more of the securities having ordinary voting power for
the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
(c) “Approved
Stock Plan” means any employee benefit plan which has been approved by the Board of Directors of the Company and, if
required, by the Holder in accordance with Section 15(i), pursuant to which the Company’s securities may be issued to any
employee, consultant, officer or director for services provided to the Company.
(d) “Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in the State of Delaware are authorized
or required by law to remain closed.
(e) “Change
of Control” means any Fundamental Transaction other than (A) a Fundamental Transaction in which holders of the Company’s
voting power immediately prior to the Fundamental Transaction continue after the Fundamental Transaction to hold, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities, or (B) pursuant to a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Company.
(f) “Contingent
Obligations” means, with respect to any Person, any direct or indirect liability, contingent or otherwise, of that Person
with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the
Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with respect thereto.
(g) “Convertible
Securities” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable
for Common Stock.
(h) “Disposition”
means any transaction, or series of related transactions, pursuant to which the Company or any of its Subsidiaries sells, assigns,
transfers or otherwise disposes of any property or assets (whether now owned or hereafter acquired) to any other Person, in each
case, whether or not the consideration therefor consists of cash, securities or other assets owned by the acquiring Person, excluding
any sales of Inventory in the ordinary course of business on ordinary business terms.
(i) “Excluded
Securities” means any Common Stock issued or issuable: (i) in connection with any Approved Stock Plan; (ii) upon conversion
of the Note; and (iii) upon conversion of any Options or Convertible Securities which are outstanding prior to or as of the Issuance
Date (including, without limitation, the shares of the Company’s Series A Preferred Stock), provided that the terms of such
Options or Convertible Securities are not amended, modified or changed on or after the Issuance Date other than antidilution adjustments
pursuant to the terms thereof in existence as of the Issuance Date.
(j) “Fair
Market Value”, with respect to securities for which there is no established trading market shall be made by reference
to prevailing conditions in capital markets generally, including (to such extent, if any, as the Company’s Board of Directors
in good faith deems relevant): (a) the possibility of a public offering for such securities or a private sale of such securities;
(b) the financial statements of the issuer thereof prepared on a pro forma basis after giving effect to the events in question
and considering, among other factors: (i) the price per security paid by a bona fide, unaffiliated purchaser in an arms’-length
transaction; (ii) the existence and nature of any recent or pending transactions or transaction proposals; (iii) book value; (iv)
replacement value; (v) earnings; and (vi) the value of future cash flows of such issuer as an ongoing enterprise; and (c) both
the sale of various combinations of the individual assets of such issuer as well as a sale of such issuer as a whole; and shall
make no deduction, discount or other subtraction whatsoever for the possible minority status of the holder of such security or
for any lack of marketability of such security (other than by virtue of conditions in capital markets generally) or any restrictions
on the transfer thereof. If the Company and the Holder are unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 24. All such determinations are to be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the applicable calculation period.
(k) “Fiscal
Year” means the Company’s fiscal year that ends on December 31, or such other fiscal year adopted by the Company
for the financial reporting purposes in accordance with GAAP.
(l) “Fundamental
Transaction” means that (A) the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate
or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii)
allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated
or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock 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 purchase agreement or other business combination), or (v) enter into or consummate
any Deemed Liquidation Event (as defined in the Certificate of Incorporation), or (vi) reorganize, recapitalize or reclassify its
Common Stock, or (B) any “person” or “group” (as these terms are used for purposes of Section 13(d) and
14(d) of the 1934 Act) (not including any Persons or groups holding any stock of the Company as of the Issuance Date) shall become
the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of more than 50% of the
aggregate ordinary voting power represented by issued and outstanding Common Stock or any preferred stock; provided, however,
that none of the transactions contemplated under the Stock Purchase Agreement, including, without limitation, the Company’s
acquisition of all of the stock of Nexsan, the Company’s issuance of Series A Preferred Stock to Equity Investors (as defined
therein), and the merger of the Company and Nexsan, shall be considered or treated as Fundamental Transactions hereunder.
(m) “GAAP”
means United States generally accepted accounting principles, consistently applied.
(n) “Guaranty
and Security Agreement” means that certain guaranty and security agreement provided by Company, Nexsan Corporation and
their Subsidiaries for the benefit of Holder dated as of even date herewith.
(o) “Highest
Lawful Rate” means the maximum non-usurious interest rate, if any, that at any time or from time to time may be contracted
for, taken, reserved, charged or received on the Indebtedness obligations and liability of the Company under this Note under laws
applicable to the Holder which are currently in effect or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than applicable laws now allow.
(p) “Income
Tax” means any tax that is based on, or computed with respect to, net income or earnings (and any franchise tax or tax
on doing business imposed in lieu thereof) and all related interest and penalties.
(q) “Indebtedness”
of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed
as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business
and not outstanding for more than 120 days after the date such payable was created), (iii) all reimbursement or payment obligations
with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds,
debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property,
assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or
sale of such property), (vi) all monetary obligations under any leasing or similar arrangement which, in accordance with GAAP consistently
applied for the periods covered thereby, is classified as a “capital lease”, (vii) all indebtedness referred to in
clauses (i) through (vi) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (viii) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (i) through (vii) above.
(r) “Inventory”
means, with respect to any Person, all goods and merchandise of such Person, including, without limitation, all raw materials,
work-in-process, packaging, supplies, materials and finished goods of every nature used or usable in connection with the shipping,
storing, advertising or sale of such goods and merchandise, whether now owned or hereafter acquired, and all such other property
the sale or other disposition of which would give rise to an Account Receivable or cash.
(s) “IPO”
means an initial offering of the Common Stock or any other equity securities of the Company pursuant to an effective registration
statement filed under the Securities Act.
(t) “Monthly
Period” means each of: the period beginning on and including the first day of each month and ending on and including
the last day of each month.
(u) “Nexsan”
means Nexsan Corporation.
(v) “Options”
means any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.
(w) “Permitted
Indebtedness” means (A) the principal of (and premium, if any), interest on, and all fees and other amounts (including,
without limitation, any reasonable out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and
disbursements), collateral protection expenses and other reimbursement or indemnity obligations relating thereto) payable by Company
and/or its Subsidiaries under or in connection with any Indebtedness entered into by the Company and/or its Subsidiaries with one
or more financial institutions, in form and substance reasonably satisfactory to the Holder, including, without limitation, the
terms and conditions of any intercreditor arrangements relating to any Collateral securing both the Note and such Indebtedness;
provided, however, that (1) the aggregate outstanding amount of such Indebtedness permitted hereunder (taking into
account the maximum amounts which may be advanced under the loan documents evidencing such Indebtedness) does not at any time exceed
US $500,000, (2) such Indebtedness does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance,
directly or indirectly, of any principal or premium, if any, thereon until ninety-one (91) days after the Maturity Date (as may
be extended pursuant to Section 1) or later and (3) to the extent such Indebtedness is secured by any assets or equity interests
held by the Company, such security interest shall be a second priority (or more junior priority) security interest, (B) unsecured
Indebtedness incurred by the Company that is made expressly subordinate in right of payment to the Indebtedness evidenced by this
Note, as reflected in a written agreement acceptable to the Holder and approved by the Holder in writing, and which Indebtedness
does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal
or premium, if any, thereon until ninety-one (91) days after the Maturity Date (as may be extended pursuant to Section 1) or later,
(C) Indebtedness secured by Permitted Liens, (D) Contingent Obligations of the Company and/or its Subsidiaries consisting of guarantees
or indemnities within the ordinary course of business of such Person or otherwise within the scope of the business plan of the
Company (which business plan shall have been approved by the Holder in writing), (E) the Note, and (F) extensions, refinancings
and renewals of items of Permitted Indebtedness set forth in clauses (A), (B) and (C), provided that the principal amount thereof
is not increased or the terms thereof modified to impose more burdensome terms upon the Company or its Subsidiary, as the case
may be.
(x) “Permitted
Investments” means marketable direct obligations issued or unconditionally guaranteed by the United States Government
or issued by any agency thereof and backed by the full faith and credit of the United States, in each case, maturing within six
months from the date of acquisition thereof; provided, however, that, for avoidance of doubt, Permitted Investments shall not include
any securities or other obligations issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation
or any successors thereto.
(y) “Permitted
Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings
for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course
of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business
with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings,
(iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price
of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B)
existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired
and improvements thereon, and the proceeds of such equipment, (v) Liens securing obligations arising under the Note, (vi) Liens
incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in
clauses (i) and (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered
by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vii)
leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not
interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (viii) Liens in favor
of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation
of goods and (ix) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under
Section 4(a)(ix).
(z) “Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency thereof.
(aa) “Quarterly
Period” means each of: the period beginning on and including January 1 and ending on and including March 31, the period
beginning on and including April 1 and ending on and including June 30, the period beginning on and including July 1 and ending
on September 30 and the period beginning on and including October 1 and ending on and including December 31.
(bb) “Stock
Purchase Agreement” means that certain Stock Purchase Agreement entered into as of November ___, 2016, by and between
Imation Corp. (as Seller thereunder) and the Company (as Purchaser thereunder), pursuant to which this Note was issued.
(cc) “Subsidiary”
means any entity in which the Company, directly or indirectly, owns capital stock or holds an equity or similar interest of such
entity.
(dd) “Successor
Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Fundamental Transaction
or the Person with which such Fundamental Transaction shall have been made.
IN WITNESS WHEREOF, the Company
has caused this Note to be duly executed as of the Issuance Date set out above.
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NXSN Acquisition Corp. |
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By: |
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Name: |
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Title: |
AGREED AND ACCEPTED
as of the ____ day of [ ],
2017
IMATION CORP. |
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By: |
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Name: |
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SCHEDULE 13(e)
Investments
SCHEDULE 13(g)
Nature of Business
EXHIBIT A
NXSN ACQUISITION CORP.
CONVERSION NOTICE
Reference is made to the Senior Secured Convertible
Note (the “Note”) issued to the undersigned by [NXSN Acquisition Corp.] (the “Company”).
In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of common stock, par value $0.001 per share (the “Common Stock”),
as of the date specified below.
Aggregate Conversion Amount to be converted: |
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Please confirm the following information:
Number of shares of Common Stock to be issued: |
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Please issue the Common Stock into which the Note is being converted
in the following name and to the following address:
(if electronic book entry transfer)
(if electronic book entry transfer)
GUARANTY AND SECURITY AGREEMENT
Dated as of [Closing Date under SPA]
by and among
NxSN
Acquisition Corp.
and
Nexsan
corporation
and
Each Other Grantor
From Time to Time Party Hereto
and
IMATION CORP.,
as Lender
TABLE
OF CONTENTS
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Page |
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ARTICLE I DEFINED TERMS |
1 |
Section 1.1 |
Definitions |
1 |
Section 1.2 |
Certain Other Terms |
8 |
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ARTICLE II GUARANTY |
9 |
Section 2.1 |
Guaranty |
9 |
Section 2.2 |
Limitation of Guaranty |
9 |
Section 2.3 |
Contribution |
9 |
Section 2.4 |
Authorization; Other Agreements |
10 |
Section 2.5 |
Guaranty Absolute and Unconditional |
10 |
Section 2.6 |
Waivers |
11 |
Section 2.7 |
Reliance |
11 |
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ARTICLE III GRANT OF SECURITY INTEREST |
12 |
Section 3.1 |
Collateral |
12 |
Section 3.2 |
Grant of Security Interest in Collateral |
12 |
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ARTICLE IV Representations and Warranties |
13 |
Section 4.1 |
Title; No Other Liens |
13 |
Section 4.2 |
Perfection and Priority |
13 |
Section 4.3 |
Locations of Inventory, Equipment and Books and Records |
14 |
Section 4.4 |
Pledged Collateral |
14 |
Section 4.5 |
Instruments and Tangible Chattel Paper Formerly Accounts |
14 |
Section 4.6 |
Intellectual Property |
14 |
Section 4.7 |
Commercial Tort Claims |
16 |
Section 4.8 |
Specific Collateral |
16 |
Section 4.9 |
Enforcement |
16 |
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ARTICLE V Covenants |
16 |
Section 5.1 |
Maintenance of Perfected Security Interest; Further Documentation and Consents |
16 |
Section 5.2 |
Changes in Locations, Name, Etc. |
17 |
Section 5.3 |
Pledged Collateral |
18 |
Section 5.4 |
Accounts |
20 |
Section 5.5 |
Commodity Contracts |
20 |
Section 5.6 |
Delivery of Instruments and Tangible Chattel Paper and Control of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper |
20 |
Section 5.7 |
Intellectual Property |
21 |
Section 5.8 |
Notices |
22 |
Section 5.9 |
Notice of Commercial Tort Claims |
23 |
Section 5.10 |
Controlled Securities Account |
23 |
ARTICLE VI Remedial Provisions |
23 |
Section 6.1 |
Code and Other Remedies |
23 |
Section 6.2 |
Accounts and Payments in Respect of General Intangibles |
26 |
Section 6.3 |
Pledged Collateral |
27 |
Section 6.4 |
Proceeds to be Turned over to and Held by Lender |
28 |
Section 6.5 |
Sale of Pledged Collateral |
28 |
Section 6.6 |
Deficiency |
29 |
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ARTICLE VII Agent |
29 |
Section 7.1 |
Lender’s Appointment as Attorney-in-Fact |
29 |
Section 7.2 |
Authorization to File Financing Statements |
30 |
Section 7.3 |
Authority of Lender |
31 |
Section 7.4 |
Duty; Obligations and Liabilities |
31 |
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ARTICLE VIII Miscellaneous |
31 |
Section 8.1 |
Reinstatement |
31 |
Section 8.2 |
Release of Collateral |
32 |
Section 8.3 |
Independent Obligations |
32 |
Section 8.4 |
No Waiver by Course of Conduct |
32 |
Section 8.5 |
Amendments in Writing |
33 |
Section 8.6 |
Additional Grantors; Additional Pledged Collateral |
33 |
Section 8.7 |
Notices |
33 |
Section 8.8 |
Successors and Assigns |
33 |
Section 8.9 |
Counterparts |
33 |
Section 8.10 |
Severability |
33 |
Section 8.11 |
Governing Law |
34 |
Section 8.12 |
Waiver of Jury Trial |
34 |
ANNEXES AND SCHEDULES
Annex 1 |
Form of Pledge Amendment |
Annex 2 |
Form of Joinder Agreement |
Annex 3 |
Form of Intellectual Property Security Agreement |
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Schedule 1 |
Commercial Tort Claims |
Schedule 2 |
Filings |
Schedule 3 |
Location of Inventory, Equipment, Books and Records |
Schedule 4 |
Pledged Collateral |
Schedule 5 |
Intellectual Property |
GUARANTY AND SECURITY AGREEMENT, dated
as of [Closing Date under SPA], by NXSN Acquisition Corp., a Delaware corporation (“Borrower”), and Nexsan Corporation,
a Delaware corporation ( “Nexsan”), and each of the other entities listed on the signature pages hereof or that
becomes a party hereto pursuant to Section 8.6 (together with Nexsan and the Borrower, the “Grantors”
and each, a “Grantor”), Imation Corp., a Delaware corporation ( “Lender” or “Secured
Party”).
WITNESSETH:
WHEREAS, pursuant to
the Senior Secured Convertible Note dated as of the date hereof (as the same may be amended, restated, supplemented and/or modified
from time to time, the “Note”) issued by the Borrower in favor of Lender, whereby the Borrower agreed to certain
repayment terms for amounts owing to Lender (the “Loan”) upon the terms and subject to the conditions set forth
therein;
WHEREAS, each Grantor
has agreed to guaranty the obligations of Borrower under the Note (the “Obligations”) and secure all of their
Obligations under the Note by granting to Lender a security interest in and lien upon substantially all of their Property;
WHEREAS, each Grantor
will derive substantial direct and indirect benefits from the making of the extensions of credit under the Note; and
WHEREAS, it is a condition
precedent to the obligation of the Lender to make its extension of credit to the Borrower under the Note that the Grantors shall
have executed and delivered this Agreement to Lender;
NOW, THEREFORE, in
consideration of the premises and to induce the Lender to enter into the Loan Documents and to induce the Lender to make its extension
of credit to the Borrower thereunder, each Grantor hereby agrees with Lender as follows:
ARTICLE
I
DEFINED
TERMS
Section 1.1 Definitions.
(a) Capitalized terms used herein without definition are used as defined in the Note.
(b) The
following terms have the meanings given to them in the UCC and terms used herein without definition that are defined in the UCC
have the meanings given to them in the UCC (such meanings to be equally applicable to both the singular and plural forms of the
terms defined): “account”, “account debtor”, “as-extracted collateral”,
“certificated security”, “chattel paper”, “commercial tort claim”, “commodity
contract”, “deposit account”, “electronic chattel paper”, “equipment”,
“farm products”, “fixture”, “general intangible”, “goods”,
“health-care-insurance receivable”, “instruments”, “inventory”, “investment
property”, “letter-of-credit right”, “proceeds”, “record”, “securities
account”, “security”, “supporting obligation” and “tangible chattel paper”.
(c) The
following terms shall have the following meanings:
“Agreement”
means this Guaranty and Security Agreement.
“Applicable
IP Office” means the United States Patent and Trademark Office, the United States Copyright Office or any similar office
or agency within or outside the United States.
“Cash Collateral
Account” means a deposit account or securities account subject, in each instance, to a Control Agreement.
“Cash Equivalents”
means (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guaranteed or insured by the
United States federal government or (ii) issued by any agency of the United States federal government the obligations of which
are fully backed by the full faith and credit of the United States federal government, (b) any readily-marketable direct obligations
issued by any other agency of the United States federal government, any state of the United States or any political subdivision
of any such state or any public instrumentality thereof, in each case having a rating of at least “A-1” from S&P
or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by S&P or “P-1”
by Moody’s and issued by any Person organized under the laws of any state of the United States, (d) any Dollar-denominated
time deposit, insured certificate of deposit, overnight bank deposit or bankers’ acceptance issued or accepted by (i) any
Lender or (ii) any commercial bank that is (A) organized under the laws of the United States, any state thereof or the District
of Columbia, (B) “adequately capitalized” (as defined in the regulations of its primary federal banking regulators)
and (C) has Tier 1 capital (as defined in such regulations) in excess of $250,000,000 and (e) shares of any United States money
market fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause
(a), (b), (c) or (d) above with maturities as set forth in the proviso below, (ii) has net assets in excess of $500,000,000 and
(iii) has obtained from either S&P or Moody’s the highest rating obtainable for money market funds in the United States;
provided, however, that the maturities of all obligations specified in any of clauses (a), (b), (c) or (d) above shall not exceed
365 days.
“Collateral”
has the meaning specified in Section 3.1.
“Contractual
Obligations” means, as to any Person, any provision of any security (whether in the nature of Stock, Stock Equivalents
or otherwise) issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument,
document or agreement (other than a Loan Document) to which such Person is a party or by which it or any of its Property is bound
or to which any of its Property is subject.
“Control Agreement”
means each agreement establishing control over such bank accounts and lockboxes of the Grantors with financial institutions reasonably
satisfactory to Lender,
“Controlled
Securities Account” means each securities account (including all financial assets held therein and all certificates and
instruments, if any, representing or evidencing such financial assets) that is the subject of an effective Control Agreement.
“Copyright License”
means any agreement now or hereafter in existence, providing for the grant by, or to, any rights (including, without limitation,
the grant of rights for a party to be designated as an author or owner and/or to enforce, defend, use, display, copy, manufacture,
distribute, exploit and sell, make derivative works, and require joinder in suit and/or receive assistance from another party)
covered in whole or in part by a Copyright.
“Copyrights”
means, collectively, all of the following of any Grantor: (i) all copyrights, works protectable by copyright, copyright registrations
and copyright applications anywhere in the world, (ii) all derivative works, counterparts, extensions and renewals of any of the
foregoing, (iii) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing or
with respect to any of the foregoing, including, without limitation, damages or payments for past, present and future infringements,
violations or misappropriations of any of the foregoing, (iv) the right to sue for past, present and future infringements, violations
or misappropriations of any of the foregoing and (v) all rights corresponding to any of the foregoing throughout the world.
“Domestic Subsidiary”
means any Subsidiary incorporated, organized or otherwise formed under the laws of the United States, any state thereof or the
District of Columbia.
“Excluded Equity”
means any voting stock in excess of 65% of the outstanding voting stock of any Excluded Foreign Subsidiary. For the purposes of
this definition, “voting stock” means, with respect to any issuer, the issued and outstanding shares of each
class of Stock of such issuer entitled to vote (within the meaning of Treasury Regulations § 1.956-2(c)(2)).
“Excluded Foreign
Subsidiary” means a Foreign Subsidiary which is (a) a controlled foreign corporation (as defined in the Code) that has
not guaranteed or pledged any of its assets to secure, or with respect to which there shall not have been pledged two-thirds or
more of the voting Stock and Stock Equivalents to secure, any Indebtedness (other than the Loan) of a Grantor or (b) a Foreign
Subsidiary owned by a Foreign Subsidiary described in clause (a) of this definition.
“Excluded Property”
means, collectively, (i) Excluded Equity, (ii) any permit or license or any Contractual Obligation entered into by any Grantor
(A) that prohibits or requires the consent of any Person other than the Borrower and its Affiliates which has not been obtained
as a condition to the creation by such Grantor of a Lien on any right, title or interest in such permit, license or Contractual
Obligation or any Stock or Stock Equivalent related thereto or (B) to the extent that any Requirement of Law applicable thereto
prohibits the creation of a Lien thereon, but only, with respect to the prohibition in (A) and (B), to the extent, and for as long
as, such prohibition is not terminated or rendered unenforceable or otherwise deemed ineffective by the UCC or any other Requirement
of Law, (iii) Property owned by any Grantor that is subject to a purchase money Lien or a capital lease permitted under the Note
if the Contractual Obligation pursuant to which such Lien is granted (or in the document providing for such capital lease) prohibits
or requires the consent of any Person other than the Borrower and its Affiliates which has not been obtained as a condition to
the creation of any other Lien on such equipment and (iv) any “intent to use” Trademark applications for which a statement
of use has not been filed (but only until such statement is filed); provided, however, “Excluded Property”
shall not include any proceeds, products, substitutions or replacements of Excluded Property (unless such proceeds, products, substitutions
or replacements would otherwise constitute Excluded Property).
“Foreign Subsidiary”
means, with respect to any Person, a Subsidiary of such Person, which Subsidiary is not a Domestic Subsidiary.
“Fraudulent
Transfer Laws” has the meaning set forth in Section 2.2.
“Governmental
Authority” means any nation, sovereign or government, any state or other political subdivision thereof, any agency, authority
or instrumentality thereof and any entity or authority exercising executive, legislative, taxing, judicial, regulatory or administrative
functions of or pertaining to government, including any state attorney general, state Medicaid fraud unit, central bank, stock
exchange, regulatory body, arbitrator, public sector entity, supra-national entity (including the European Union and the European
Central Bank), any self-regulatory organization (including the National Association of Insurance Commissioners) and any Medicare
administrator or other contractor acting on behalf of a Governmental Authority, including any recovery audit contractor or zone
program integrity contractor.
“Guaranteed
Obligations” has the meaning set forth in Section 2.1.
“Guarantor”
means each Grantor.
“Guaranty”
means the guaranty of the Guaranteed Obligations made by the Guarantors as set forth in this Agreement.
“Intellectual
Property” means, collectively, all of the following of any Grantor: (i) all systems software and applications software
(including source code and object code), all documentation for such software, including, without limitation, user manuals, flowcharts,
functional specifications, operations manuals, and all formulas, processes, ideas and know-how embodied in any of the foregoing,
(ii) concepts, discoveries, improvements and ideas, know-how, technology, reports, design information, Trade Secrets, practices,
specifications, test procedures, maintenance manuals, research and development, inventions (whether or not patentable), blueprints,
drawings, data, customer lists, catalogs, and all physical embodiments of any of the foregoing, (iii) Patents and Patent Licenses,
Copyrights and Copyright Licenses, Trademarks and Trademark Licenses and (iv) other agreements with respect to any rights in any
of the items described in the foregoing clauses (i), (ii), and (iii).
“Internet Domain
Name” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law
in or relating to Internet domain names.
“IP Agreement”
means any license or other written agreement under which any Grantor’s right to use any Material Intellectual Property arose
or pursuant to which such Grantor licenses or otherwise distributes any Material Intellectual Property to any third party, including,
without limitation, all Copyright Licenses, Patent Licenses and Trademark Licenses.
“Loan Documents”
means this Agreement, the Note, the Control Agreement and any other agreement, document, certificate or other instrument delivered
in connection with the transactions contemplated hereby and thereby to which the Lender is a party.
“Material Intellectual
Property” means (i) all Intellectual Property consisting of patents and related items listed in Schedule 5 hereto
and (ii) all Intellectual Property that is owned by or licensed to a Grantor and used in the Grantor’s business.
“Ordinary Course
of Business” means, in respect of any transaction involving any Person, the ordinary course of such Person’s business,
as conducted by any such Person in accordance with past practice and undertaken by such Person in good faith and not for purposes
of evading any covenant or restriction in any Loan Document.
“Organization
Documents” means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred shareholders of such corporation, and any shareholder rights
agreement, (b) for any partnership, the partnership agreement and, if applicable, certificate of limited partnership, (c) for any
limited liability company, the operating agreement and articles or certificate of formation or (d) any other document setting forth
the manner of election or duties of the officers, directors, managers or other similar persons, or the designation, amount or relative
rights, limitations and preference of the Stock of a Person.
“Patent License”
means any agreement, now or hereafter in existence, providing for the grant by, or to, any Grantor of any rights (including, without
limitation, the right for a party to be designated as an owner and/or to enforce, defend, make, have made, make improvements, manufacture,
use, sell, import, export, and require joinder in suit and/or receive assistance from another party) covered in whole or in part
by a Patent.
“Patents”
means collectively, all of the following of any Grantor: (i) all patents, all inventions and patent applications anywhere in the
world, (ii) all improvements, counterparts, reissues, divisional, re-examinations, extensions, continuations (in whole or in part)
and renewals of any of the foregoing and improvements thereon, (iii) all income, royalties, damages or payments now or hereafter
due and/or payable under any of the foregoing or with respect to any of the foregoing, including, without limitation, damages or
payments for past, present or future infringements, violations or misappropriations of any of the foregoing, (iv) the right to
sue for past, present and future infringements, violations or misappropriations of any of the foregoing and (v) all rights corresponding
to any of the foregoing throughout the world.
“Person”
means any individual, partnership, corporation (including a business trust and a public benefit corporation), professional corporation
or association, joint stock company, estate, association, firm, enterprise, trust, limited liability company, unincorporated association,
joint venture and any other entity or Governmental Authority.
“Pledged Certificated
Stock” means all certificated securities and any other Stock or Stock Equivalent of any Person evidenced by a certificate,
instrument or other similar document (as defined in the UCC), in each case owned by any Grantor, and any distribution of property
made on, in respect of or in exchange for the foregoing from time to time, including all Stock and Stock Equivalents listed on
Schedule 4. Pledged Certificated Stock excludes any Excluded Property and any Cash Equivalents that are not held in
Controlled Securities Accounts to the extent permitted by Section 5.10 hereof.
“Pledged Collateral”
means, collectively, the Pledged Stock and the Pledged Debt Instruments.
“Pledged Debt
Instruments” means all right, title and interest of any Grantor in instruments evidencing any Indebtedness owed to such
Grantor or other obligations owed to such Grantor, and any distribution of property made on, in respect of or in exchange for the
foregoing from time to time, including all Indebtedness described on Schedule 4, issued by the obligors named therein.
Pledged Debt Instruments excludes any Cash Equivalents that are not held in Controlled Securities Accounts to the extent permitted
by Section 5.10 hereof.
“Pledged Investment
Property” means any investment property of any Grantor, and any distribution of property made on, in respect of or in
exchange for the foregoing from time to time, other than any Pledged Stock or Pledged Debt Instruments. Pledged Investment Property
excludes any Cash Equivalents that are not held in Controlled Securities Accounts to the extent permitted by Section 5.10
hereof.
“Pledged Stock”
means all Pledged Certificated Stock and all Pledged Uncertificated Stock.
“Pledged Uncertificated
Stock” means any Stock or Stock Equivalent of any Person that is not Pledged Certificated Stock, including all right,
title and interest of any Grantor as a limited or general partner in any partnership not constituting Pledged Certificated Stock
or as a member of any limited liability company, all right, title and interest of any Grantor in, to and under any Organization
Document of any partnership or limited liability company to which it is a party, and any distribution of property made on, in respect
of or in exchange for the foregoing from time to time, including in each case those interests set forth on Schedule 4,
to the extent such interests are not certificated. Pledged Uncertificated Stock excludes any Excluded Property and any Cash Equivalents
that are not held in Controlled Securities Accounts to the extent permitted by Section 5.10 hereof.
“Property”
means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible.
“Requirement
of Law” means, with respect to any Person, the common law and any federal, state, local, foreign, multinational or international
laws, statutes, codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions,
decrees (including administrative or judicial precedents or authorities) and the interpretation or administration thereof by, and
other determinations, directives, requirements or requests of, any Governmental Authority, in each case whether or not having the
force of law and that are applicable to or binding upon such Person or any of its Property or to which such Person or any of its
Property is subject.
“Related Persons”
means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, agent, sub-agent, trustee,
representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor (including those retained
in connection with the satisfaction or attempted satisfaction of any condition set forth in Article III) and other consultants
and agents of or to such Person or any of its Affiliates.
“Secured Obligations”
has the meaning set forth in Section 3.2.
“Securities
Act” means the Securities Act of 1933 (as amended).
“Software”
means (a) all computer programs, including source code and object code versions, (b) all data, databases and compilations of data,
whether machine readable or otherwise, and (c) all documentation, training materials and configurations related to any of the foregoing.
“Stock”
means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership
or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless
of how designated) of or in a Person (other than an individual), whether voting or non-voting.
“Stock Equivalents”
means all securities convertible into or exchangeable for Stock or any other Stock Equivalent and all warrants, options or other
rights to purchase, subscribe for or otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible,
exchangeable or exercisable.
“Stock Purchase
Agreement” means that certain Stock Purchase Agreement entered into as of November ___, 2016, by and between the Lender (as
Seller thereunder) and the Borrower (as Purchaser thereunder), pursuant to which the Note was issued.
“Trademark License”
means any agreement, now or hereafter in existence, providing for the grant by, or to, any Grantor of any rights in (including,
without limitation, the right for a party to be designated as an owner and/or to enforce, defend, use, mark, police, and require
joinder in suit and/or receive assistance from another party) covered in whole, or in part, by a Trademark.
“Trademarks”
means, collectively, all of the following of any Grantor: (i) all trademarks, trade names, corporate names, company names, business
names, fictitious business names, internet domain names, trade styles, service marks, logos, other business identifiers, whether
registered or unregistered, all registrations and recordings thereof, and all applications in connection therewith (other than
each United States application to register any trademark or service mark prior to the filing under applicable Law of a verified
statement of use for such trademark or service mark) anywhere in the world, (ii) all counterparts, extensions and renewals of any
of the foregoing, (iii) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing
or with respect to any of the foregoing, including, without limitation, damages or payments for past, present or future infringements,
violations, dilutions or misappropriations of any of the foregoing, (iv) the right to sue for past, present or future infringements,
violations, dilutions or misappropriations of any of the foregoing and (v) all rights corresponding to any of the foregoing (including
the goodwill) throughout the world.
“Trade Secret
License” means any agreement, now or hereafter in existence, providing for the grant by, or to, any Grantor of any rights
in (including without limitation, the right for a party to be designated as an owner and/or to enforce, defend, use, mark, police,
and require joinder in suit and/or receive assistance from another party) covered in whole, or in part, by a Trade Secret.
“Trade Secrets”
mean all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing and production
processes and techniques, inventions, research and development information, databases and data, including, without limitation,
technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer
and supplier lists and information.
“UCC”
means the Uniform Commercial Code as from time to time in effect in the State of Delaware; provided, however, that,
in the event that, by reason of mandatory provisions of any applicable Requirement of Law, any of the attachment, perfection or
priority of Lender’s security interest in any Collateral is governed by the Uniform Commercial Code of a jurisdiction other
than the State of Delaware, “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of the definitions related
to or otherwise used in such provisions.
“Vehicles”
means all vehicles covered by a certificate of title law of any state.
Section 1.2 Certain
Other Terms.
(a) The
meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. References
herein to an Annex, Schedule, Article, Section or clause refer to the appropriate Annex or Schedule to, or Article, Section or
clause in this Agreement. Where the context requires, provisions relating to any Collateral when used in relation to a Grantor
shall refer to such Grantor’s Collateral or any relevant part thereof.
(b) Other
Interpretive Provisions.
(i) Defined
Terms. Unless otherwise specified herein or therein, all terms defined in this Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto.
(ii) The
Agreement. The words “hereof”, “herein”, “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(iii) Certain
Common Terms. The term “including” is not limiting and means “including without limitation.”
(iv) Performance;
Time. Whenever any performance obligation hereunder shall be stated to be due or required to be satisfied on a day other than
a Business Day, such performance shall be made or satisfied on the next succeeding Business Day. In the computation of periods
of time from a specified date to a later specified date, the word “from” means “from and including”; the
words “to” and “until” each mean “to but excluding”, and the word “through” means
“to and including.” If any provision of this Agreement refers to any action taken or to be taken by any Person, or
which such Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect,
of taking, or not taking, such action.
(v) Contracts.
Unless otherwise expressly provided herein, references to agreements and other contractual instruments, including this Agreement,
the Note and any other Loan Documents, shall be deemed to include all subsequent amendments, thereto, restatements and substitutions
thereof and other modifications and supplements thereto which are in effect from time to time, but only to the extent such amendments
and other modifications are not prohibited by the terms of any Loan Document.
(vi) Laws.
References to any statute or regulation are to be construed as including all statutory and regulatory provisions related thereto
or consolidating, amending, replacing, supplementing or interpreting the statute or regulation.
ARTICLE
II
GUARANTY
Section 2.1 Guaranty.
To induce the Lender to enter into the Loan Documents and to make the Loan to or for the benefit of one or more Grantors, each
Guarantor hereby, jointly and severally, absolutely, unconditionally and irrevocably guarantees, as primary obligor and not merely
as surety, the full and punctual payment when due, whether at stated maturity or earlier, by reason of acceleration, mandatory
prepayment or otherwise in accordance with any Loan Document, of all the Obligations of the Borrower whether existing on the date
hereof or hereinafter incurred or created (the “Guaranteed Obligations”). This Guaranty by each Guarantor hereunder
constitutes a guaranty of payment and not of collection.
Section 2.2 Limitation
of Guaranty. Any term or provision of this Guaranty or any other Loan Document to the contrary notwithstanding, the
maximum aggregate amount for which any Guarantor shall be liable hereunder shall not exceed the maximum amount for which such Guarantor
can be liable without rendering this Guaranty or any other Loan Document, as it relates to such Guarantor, subject to avoidance
under applicable Requirements of Law relating to fraudulent conveyance or fraudulent transfer (including the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act and Section 548 of title 11 of the United States Code or any applicable
provisions of comparable Requirements of Law) (collectively, “Fraudulent Transfer Laws”).Any analysis of the
provisions of this Guaranty for purposes of Fraudulent Transfer Laws shall take into account the right of contribution established
in Section 2.3 and, for purposes of such analysis, give effect to any discharge of intercompany debt as a result of
any payment made under the Guaranty.
Section 2.3 Contribution.
To the extent that any Guarantor shall be required hereunder to pay any portion of any Guaranteed Obligation exceeding the greater
of (a) the amount of the value actually received by such Guarantor and its Subsidiaries from the Loan and other Obligations
and (b) the amount such Guarantor would otherwise have paid if such Guarantor had paid the aggregate amount of the Guaranteed Obligations
(excluding the amount thereof repaid by the Borrower that received the benefit of the funds advanced that constituted Guaranteed
Obligations) in the same proportion as such Guarantor’s net worth on the date enforcement is sought hereunder bears to the
aggregate net worth of all the Guarantors on such date, then such Guarantor shall be reimbursed by such other Guarantors for the
amount of such excess, pro rata, based on the respective net worth of such other Guarantors on such date.
Section 2.4 Authorization;
Other Agreements. Lender is hereby authorized, without notice to or demand upon any Guarantor and without discharging
or otherwise affecting the obligations of any Guarantor hereunder and without incurring any liability hereunder, from time to time,
to do each of the following:
(a) (i)
modify, amend, supplement or otherwise change, (ii) accelerate or otherwise change the time of payment or (iii) waive or otherwise
consent to noncompliance with, any Guaranteed Obligation or any Loan Document (to the extent the Lender may do so under the Note);
(b) apply
to the Guaranteed Obligations any sums by whomever paid or however realized to any Guaranteed Obligation in such order as provided
in the Loan Documents;
(c) refund
at any time any payment received by any Secured Party in respect of any Guaranteed Obligation;
(d) (i)
sell, exchange, enforce, waive, substitute, liquidate, terminate, release, abandon, fail to perfect, subordinate, accept, substitute,
surrender, exchange, affect, impair or otherwise alter or release any Collateral for any Guaranteed Obligation or any other guaranty
therefor in any manner, (ii) receive, take and hold additional Collateral to secure any Guaranteed Obligation, (iii) add, release
or substitute any one or more other Guarantors, makers or endorsers of any Guaranteed Obligation or any part thereof and (iv) otherwise
deal in any manner with the Borrower or any other Guarantor, maker or endorser of any Guaranteed Obligation or any part thereof;
and
(e) settle,
release, compromise, collect or otherwise liquidate the Guaranteed Obligations.
Section 2.5 Guaranty
Absolute and Unconditional. Each Guarantor (other than the Borrower) hereby waives and agrees not to assert any defense,
whether arising in connection with or in respect of any of the following or otherwise, and hereby agrees that its obligations under
this Guaranty are irrevocable, absolute and unconditional and shall not be discharged as a result of or otherwise affected by any
of the following (which may not be pleaded and evidence of which may not be introduced in any proceeding with respect to this Guaranty,
in each case except as otherwise agreed in writing by Lender):
(a) the
invalidity or unenforceability of any obligation of the Borrower or any other Guarantor under any Loan Document or any other agreement
or instrument relating thereto (including any amendment, consent or waiver thereto), or any security for, or other guaranty of,
any Guaranteed Obligation or any part thereof, or the lack of perfection or continuing perfection or failure of priority of any
security for the Guaranteed Obligations or any part thereof; provided, however, that none of the Borrower’s
rights of set-off or recoupment under the Stock Purchase Agreement are hereby waived;
(b) the
absence of (i) any attempt to collect any Guaranteed Obligation or any part thereof from the Borrower or any other Guarantor or
other action to enforce the same or (ii) any action to enforce any Loan Document or any Lien thereunder;
(c) the
failure by any Person to take any steps to perfect and maintain any Lien on, or to preserve any rights with respect to, any Collateral;
(d) any
workout, insolvency, bankruptcy proceeding, reorganization, arrangement, liquidation or dissolution by or against the Borrower,
any other Guarantor or any of the Borrower’s other Subsidiaries or any procedure, agreement, order, stipulation, election,
action or omission thereunder, including any discharge or disallowance of, or bar or stay against collecting, any Guaranteed Obligation
(or any interest thereon) in or as a result of any such proceeding;
(e) any
foreclosure, whether or not through judicial sale, and any other sale or other disposition of any Collateral or any election following
the occurrence of an Event of Default by any Secured Party to proceed separately against any Collateral in accordance with such
Secured Party’s rights under any applicable Requirement of Law; or
(f) any
other defense, setoff, counterclaim or any other circumstance that might otherwise constitute a legal or equitable discharge of
the Borrower, any other Guarantor or any other Subsidiary of the Borrower, in each case other than the payment in full of the Guaranteed
Obligations.
Section 2.6 Waivers.
Each Guarantor (other than the Borrower) hereby unconditionally and irrevocably waives and agrees not to assert any claim, defense,
setoff or counterclaim based on diligence, promptness, presentment, requirements for any demand or notice hereunder including
any of the following: (a) any demand for payment or performance and protest and notice of protest; (b) any notice of acceptance;
(c) any presentment, demand, protest or further notice or other requirements of any kind with respect to any Guaranteed Obligation
(including any accrued but unpaid interest thereon) becoming immediately due and payable; and (d) any other notice in respect of
any Guaranteed Obligation or any part thereof, and any defense arising by reason of any disability or other defense of the Borrower
or any other Guarantor. Each Guarantor (other than the Borrower) further unconditionally and irrevocably agrees not to (x) enforce
or otherwise exercise any right of subrogation or any right of reimbursement or contribution or similar right against the Borrower
or any other Guarantor by reason of any Loan Document or any payment made thereunder or (y) assert any claim, defense, setoff or
counterclaim it may have against any other Grantor or set off any of its obligations to such other Grantor against obligations
of such Grantor to such Guarantor. No obligation of any Guarantor hereunder shall be discharged other than by complete performance.
Each Guarantor further waives any right such Guarantor may have under any applicable Requirement of Law to require any Secured
Party to seek recourse first against the Borrower or any other Person, or to realize upon any Collateral for any of the Obligations,
as a condition precedent to enforcing such Guarantor’s liability and obligations under this Guaranty.
Section 2.7 Reliance.
Each Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of the Borrower, each other
Guarantor and any other guarantor, maker or endorser of any Guaranteed Obligation or any part thereof, and of all other circumstances
bearing upon the risk of nonpayment of any Guaranteed Obligation or any part thereof that diligent inquiry would reveal, and each
Guarantor hereby agrees that no Secured Party shall have any duty to advise any Guarantor of information known to it regarding
such condition or any such circumstances. In the event any Secured Party, in its sole discretion, undertakes at any time or from
time to time to provide any such information to any Guarantor, such Secured Party shall be under no obligation to (a) undertake
any investigation not a part of its regular business routine, (b) disclose any information that such Secured Party, pursuant
to accepted or reasonable commercial finance or banking practices, wishes to maintain confidential or (c) make any future
disclosures of such information or any other information to any Guarantor.
ARTICLE
III
GRANT OF SECURITY INTEREST
Section 3.1 Collateral.
For the purposes of this Agreement, all of the following property now owned or at any time hereafter acquired by a Grantor or in
which a Grantor now has or at any time in the future may acquire any right, title or interests is collectively referred to as the
“Collateral”:
(a) all
accounts, chattel paper, deposit accounts, documents (as defined in the UCC), equipment, goods, money, general intangibles, instruments,
Intellectual Property, inventory, investment property, letter of credit rights, Software, all insurance policies covering the Collateral,
and any supporting obligations related to any of the foregoing;
(b) the
commercial tort claims described on Schedule 1 and on any supplement thereto received by Lender pursuant to Section 5.9;
(c) all
books and records pertaining to the other property described in this Section 3.1;
(d) all
property of such Grantor held by any Secured Party, including all property of every description, in the custody of or in transit
to such Secured Party for any purpose, including safekeeping, collection or pledge, for the account of such Grantor or as to which
such Grantor may have any right or power, including but not limited to cash;
(e) all
other goods (including but not limited to fixtures) and personal property of such Grantor, whether tangible or intangible and wherever
located; and
(f) to
the extent not otherwise included, all proceeds of the foregoing;
Section 3.2 Grant
of Security Interest in Collateral. Each Grantor, as collateral security for the prompt and complete payment and performance
when due (whether at stated maturity, by acceleration or otherwise) of the Obligations (the “Secured Obligations”),
hereby mortgages, pledges and hypothecates to Lender, for the benefit of the Lender, and grants to Lender, for the benefit of the
Lender, a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral of such Grantor;
provided, however, notwithstanding the foregoing, no Lien or security interest is hereby granted on any Excluded
Property; provided, further, that if and when any property shall cease to be Excluded Property, a Lien on and security
interest in such property shall be deemed granted therein. Each Grantor hereby represents and warrants that the Excluded Property,
when taken as a whole, is not material to the business operations or financial condition of the Grantors, taken as a whole.
ARTICLE
IV
Representations
and Warranties
To induce the Lender to enter into the Loan
Documents, each Grantor hereby represents and warrants each of the following to Lender:
Section 4.1 Title;
No Other Liens. Except for the Lien granted to Lender pursuant to this Agreement and other Permitted Liens (except for
those Permitted Liens not permitted to exist on any Collateral) under any Loan Document (including Section 4.2), such
Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. Such Grantor (a) is the sole,
record and beneficial owner of the Collateral pledged by it hereunder constituting instruments or certificates and (b) has rights
in or the power to transfer each other item of Collateral in which a Lien is granted by it hereunder, free and clear of any other
Lien other than Permitted Liens. Such Grantor is the sole and exclusive owner of all Intellectual Property pledged by it hereunder
and no Intellectual Property pledged by such Grantor is jointly owned.
Section 4.2 Perfection
and Priority. The security interest granted pursuant to this Agreement constitutes a valid and continuing perfected
security interest in favor of Lender in all Collateral subject, for the following Collateral, to the occurrence of the following:
(a) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the UCC,
the completion of the filings and other actions specified on Schedule 2 (which, in the case of all filings and other
documents referred to on such schedule, have been delivered to Lender in completed and duly authorized form), (b) with respect
to any deposit account, the execution of Control Agreements, (c) in the case of all Copyrights, Trademarks and Patents for
which UCC filings are insufficient, all appropriate filings having been made with the United States Copyright Office or the United
States Patent and Trademark Office, as applicable, and all required fees and taxes to maintain and protect such Grantor’s
interest in the Intellectual Property having been paid, (d) in the case of letter-of-credit rights that are not supporting obligations
of Collateral, the execution of a Contractual Obligation granting control to Lender over such letter-of-credit rights, (e) in the
case of electronic chattel paper, the completion of all steps necessary to grant control to Lender over such electronic chattel
paper and (f) in the case of Vehicles, the actions required under Section 5.1(e). Such security interest shall be prior
to all other Liens on the Collateral except for Permitted Liens having priority over Lender’s Lien by operation of law upon
(i) in the case of all Pledged Certificated Stock, Pledged Debt Instruments and Pledged Investment Property, the delivery thereof
to Lender of such Pledged Certificated Stock, Pledged Debt Instruments and Pledged Investment Property consisting of instruments
and certificates, in each case properly endorsed for transfer to Lender or in blank, (ii) in the case of all Pledged Investment
Property not in certificated form, the execution of Control Agreements with respect to such investment property and (iii) in the
case of all other instruments and tangible chattel paper that are not Pledged Certificated Stock, Pledged Debt Instruments or Pledged
Investment Property, the delivery thereof to Lender of such instruments and tangible chattel paper. Except as set forth in this
Section 4.2, all actions by each Grantor necessary or desirable to protect and perfect the Lien granted hereunder on
the Collateral have been duly taken.
Section 4.3 Locations
of Inventory, Equipment and Books and Records. On the date hereof, such Grantor’s inventory and equipment (other
than inventory or equipment in transit) and books and records concerning the Collateral are kept at the locations listed on Schedule 3.
Section 4.4 Pledged
Collateral. (a) The Pledged Stock pledged by such Grantor hereunder (i) is listed on Schedule 4 and constitutes
that percentage of the issued and outstanding equity of all classes of each issuer thereof as set forth on Schedule 4,
(ii) has been duly authorized, validly issued and is fully paid and non-assessable (other than Pledged Stock in limited liability
companies and partnerships) and (iii) constitutes the legal, valid and binding obligation of the obligor with respect thereto,
enforceable in accordance with its terms.
(b) As
of the Closing Date, all Pledged Collateral (other than Pledged Uncertificated Stock) and all Pledged Investment Property consisting
of instruments and certificates has been delivered to Lender in accordance with Section 5.3(a).
(c) Upon
the occurrence and during the continuance of an Event of Default, Lender shall be entitled to exercise all of the rights of the
Grantor granting the security interest in any Pledged Stock, and a transferee or assignee of such Pledged Stock shall become a
holder of such Pledged Stock to the same extent as such Grantor and be entitled to participate in the management of the issuer
of such Pledged Stock and, upon the transfer of the entire interest of such Grantor, such Grantor shall, by operation of law, cease
to be a holder of such Pledged Stock.
Section 4.5 Instruments
and Tangible Chattel Paper Formerly Accounts. No amount payable to such Grantor under or in connection with any account
is evidenced by any instrument or tangible chattel paper that has not been delivered to Lender, properly endorsed for transfer,
to the extent delivery is required by Section 5.6(a).
Section 4.6 Intellectual
Property
(a) Schedule 5
sets forth a true and complete list of the following Intellectual Property such Grantor owns, licenses or otherwise has the right
to use: (i) Intellectual Property that is registered or subject to applications for registration, (ii) Internet Domain Names and
(iii) Material Intellectual Property and Software, separately identifying that owned and licensed to such Grantor and including
for each of the foregoing items (1) the owner, (2) the title, (3) the jurisdiction in which such item has been registered or otherwise
arises or in which an application for registration has been filed, (4) as applicable, the registration or application number and
registration or application date and (5) any IP Agreements or other rights (including franchises) granted by the Grantor with respect
thereto.
(b) On
the Closing Date, all Material Intellectual Property owned by such Grantor is valid, in full force and effect, subsisting, unexpired
and enforceable, and no Material Intellectual Property has been abandoned.
(c) No
breach or default of any IP Agreement shall be caused by any of the following, and none of the following shall limit or impair
the ownership, use, validity or enforceability of, or any rights of such Grantor in, any Intellectual Property: (i) the consummation
of the transactions contemplated by any Loan Document or (ii) any holding, decision, judgment or order rendered by any Governmental
Authority.
(d) There
are no pending (or, to the knowledge of such Grantor, threatened) actions, investigations, suits, proceedings, audits, claims,
demands, orders or disputes challenging the ownership, use, validity, enforceability of, or such Grantor’s rights in, any
Material Intellectual Property of such Grantor.
(e) To
such Grantor’s knowledge, no Person has been or is infringing, misappropriating, diluting, violating, conflicting with or
otherwise impairing any Intellectual Property of such Grantor.
(f) Such
Grantor, and to such Grantor’s knowledge each other party thereto, is not in breach or default of any IP Agreement.
(g) All
applications pertaining to the Copyrights, Patents and Trademarks of each Grantor have been duly and properly filed, and all registrations
or letters pertaining to such Copyrights, Patents and Trademarks have been duly and properly filed and issued.
(h) No
Grantor has made an assignment or agreement in conflict with the security interest in the Intellectual Property of any Grantor
hereunder.
(i) Each
Grantor and each of its Subsidiaries, own, or possess the right to use, all of the Intellectual Property that is reasonably necessary
for the operation of their respective businesses, without conflict with the rights of any other Person.
(j) No
slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated
to be employed by any Grantor or any of its Subsidiaries infringes upon any rights held by any other Person.
(k) With
respect to each IP Agreement, (i) such IP Agreement is valid and binding and in full force and effect and represents the entire
agreement between such Grantor and, to such Grantor’s knowledge, the other parties thereto with respect to the subject matter
thereof, (ii) such IP Agreement will not cease to be valid and binding and in full force and effect on terms identical to those
currently in effect as a result of the rights and interest granted herein, nor will the grant of such rights and interest constitute
a breach or default under such IP Agreement or otherwise give any party thereto a right to terminate such IP Agreement, (iii) such
Grantor has not received any written notice of termination or cancellation under such IP Agreement, (iv) such Grantor has not received
any notice of a breach or default under such IP Agreement, which breach or default has not been cured, (v) such Grantor has not
granted to any other third party any rights, adverse or otherwise, under such IP Agreement, except duly authorized licenses and
sublicenses and as permitted under the Loan Documents, and (vii) neither such Grantor nor, to such Grantor’s knowledge, any
other party to such IP Agreement is in breach or default thereof in any respect, and no event has occurred that, with notice or
lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such
IP Agreement. Except as set forth in Schedule 5, none of the Intellectual Property owned or used by such Grantor in the
operation of such Grantor’s business as presently conducted or intended to be conducted is the subject of any IP Agreement.
Section 4.7 Commercial
Tort Claims. The only commercial tort claims of any Grantor existing on the date hereof (regardless of whether the amount,
defendant or other facts can be determined and regardless of whether such commercial tort claim has been asserted, threatened or
has otherwise been made known to the obligee thereof or whether litigation has been commenced for such claims) are those listed
on Schedule 1, which sets forth such information separately for each Grantor.
Section 4.8 Specific
Collateral. None of the Collateral is or is proceeds or products of farm products, as-extracted collateral, health-care-insurance
receivables or timber to be cut.
Section 4.9 Enforcement.
No Permit, notice to or filing with any Governmental Authority or any other Person or any consent from any Person is required for
the exercise by Lender of its rights (including voting rights) provided for in this Agreement or the enforcement of remedies in
respect of the Collateral pursuant to this Agreement, including the transfer of any Collateral, except (i) as may be required in
connection with the disposition of any portion of the Pledged Collateral by laws affecting the offering and sale of securities
generally or any approvals that may be required to be obtained from any bailees or landlords to collect the Collateral, and (ii)
any restrictions on foreclosure and transfer of any IP Agreements under which Grantors are licensees or any other Contractual Obligations
of Grantors (not in any event applying to Intellectual Property owned by any Grantor) which require third party consents for transfer
of Grantors’ rights and obligations thereunder.
Section 4.10 Exception.
Notwithstanding anything in this Agreement or any other Loan Document to the contrary, no misrepresentation or breach of any representation
or warranty made by the Borrower, or any other Grantor in this Agreement or in any of the other Loan Documents shall constitute
an Event of Default if such misrepresentation or breach was due to (in whole or in part) a misrepresentation or breach of any representation
or warranty made by the Lender in the Stock Purchase Agreement.
ARTICLE
V
Covenants
Each Grantor agrees
with Lender to the following, as long as any Obligation remains outstanding (other than contingent indemnification Obligations
to the extent no claim giving rise thereto has been asserted):
Section 5.1 Maintenance
of Perfected Security Interest; Further Documentation and Consents. (a) Generally. Such Grantor shall (i) not
use or permit any Collateral to be used unlawfully or in violation of any provision of any Loan Document, any Requirement of Law
or any policy of insurance covering the Collateral and (ii) not enter into any Contractual Obligation or undertaking restricting
the right or ability of such Grantor or Lender to sell, assign, convey or transfer any Collateral.
(b) Such
Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority
described in Section 4.2 and shall defend such security interest and such priority against the claims and demands of
all Persons.
(c) Such
Grantor shall furnish to Lender from time to time statements and schedules further identifying and describing the Collateral and
such other documents in connection with the Collateral as Lender may reasonably request, all in reasonable detail and in form and
substance satisfactory to Lender.
(d) At
any time and from time to time, upon the written request of Lender, such Grantor shall, for the purpose of obtaining or preserving
the full benefits of this Agreement and of the rights and powers herein granted, (i) promptly and duly execute and deliver, and
have recorded, such further documents, including an authorization to file (or, as applicable, the filing) of any financing statement
or amendment under the UCC (or other filings under similar Requirements of Law) in effect in any jurisdiction with respect to the
security interest created hereby and (ii) take such further action as Lender may reasonably request, including (A) using its commercially
reasonable best efforts to secure all approvals necessary or appropriate for the assignment to or for the benefit of Lender of
any Contractual Obligation, including any IP Agreement, held by such Grantor and to enforce the security interests granted hereunder
and (B) executing and delivering any Control Agreements with respect to deposit accounts and securities accounts.
(e) If
requested by Lender, the Grantor shall arrange for Lender’s first priority security interest to be noted on the certificate
of title of each Vehicle and shall file any other necessary documentation in each jurisdiction that Lender shall deem advisable
to perfect its security interests in any Vehicle.
(f) To
ensure that a Lien and security interest is granted on any of the Excluded Property set forth in clause (ii) of the definition
of “Excluded Property”, such Grantor shall use its commercially reasonable best efforts to obtain any required
consents from any Person other than the Borrower and its Affiliates with respect to any permit or license or any Contractual Obligation
with such Person entered into by such Grantor that requires such consent as a condition to the creation by such Grantor of a Lien
on any right, title or interest in such permit, license or Contractual Obligation or any Stock or Stock Equivalent related thereto.
Section 5.2 Changes
in Locations, Name, Etc. Except upon 20 days’ prior written notice to Lender and delivery to Lender of (a) all
documents reasonably requested by Lender to maintain the validity, perfection and priority of the security interests provided for
herein and (b) if applicable, a written supplement to Schedule 3 showing any additional locations at which inventory
or equipment shall be kept, such Grantor shall not do any of the following:
(i) permit
any inventory or equipment to be kept at a location other than those listed on Schedule 3, except for inventory or
equipment in transit; or
(ii) change
its legal name or organizational identification number, if any, or corporation, limited liability company, partnership or other
organizational structure to such an extent that any financing statement filed in connection with this Agreement would become misleading.
Section 5.3 Pledged
Collateral. (a) Delivery of Pledged Collateral. Such Grantor shall (i) deliver to Lender, in suitable form for transfer
and in form and substance satisfactory to Lender, (A) all Pledged Certificated Stock, (B) all Pledged Debt Instruments and (C)
all certificates and instruments evidencing Pledged Investment Property and (ii) maintain all other Pledged Investment Property
in a Controlled Securities Account.
(b) Event
of Default. During the continuance of an Event of Default, Lender shall have the right, at any time in its discretion and without
notice to the Grantor, to (i) transfer to or to register in its name or in the name of its nominees any Pledged Collateral or any
Pledged Investment Property and (ii) exchange any certificate or instrument representing or evidencing any Pledged Collateral or
any Pledged Investment Property for certificates or instruments of smaller or larger denominations.
(c) Cash
Distributions with respect to Pledged Collateral. Except as provided in Article VI and subject to the limitations
set forth in the Note, such Grantor shall be entitled to receive all cash distributions paid in respect of the Pledged Collateral.
(d) Voting
Rights. Except as provided in Article VI, such Grantor shall be entitled to exercise all voting, consent and corporate,
membership, partnership, limited liability company and similar rights with respect to the Pledged Collateral; provided,
however, that no vote shall be cast, consent given or right exercised or other action taken by such Grantor that would impair
the Collateral or be inconsistent with or result in any violation of any provision of any Loan Document.
(e) UCC
Section 8. To the extent any of the Pledged Collateral constitutes an “uncertificated security” (as defined in
Section 8-102(a)(18) of the UCC), each Grantor shall cause the issuer thereof to acknowledge to the Lender the registration on
the books of such issuer of the pledge and security interest hereby created in the manner required by Section 8-301(b) of the UCC.
(f) Membership
Interest.
(i) No
Pledged Stock that is Stock or Stock Equivalent in any limited liability company (the “Pledged Membership Interest”)
shall be (i) held in a securities account as defined under Article 8 of the Uniform Commercial Code as in effect from time to time
in the jurisdiction applicable to such limited liability company, (ii) dealt in or traded on an securities exchange or in a securities
market, or (iii) an investment company security as defined under Article 8 of the Uniform Commercial Code as in effect from time
to time in the jurisdiction applicable to such limited liability company. The pledge of any Pledged Membership Interest made by
a Grantor hereunder shall be a pledge not only of profits and losses of the Person having issued the Pledged Membership Interest
(the “Pledged LLC Entity”), but also a pledge of all rights and obligations of the Pledged LLC Entity. Such
pledge or assignment shall include all voting, management and control rights and is not limited to economic rights.
(ii) No
Pledged Membership Interest by its terms expressly provides that it is a “security” within the meaning of (i) Section
8-102(a)(15) of the Uniform Commercial Code as in effect from time to time in the State of Delaware and (ii) the Uniform Commercial
Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof
as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the
American Bar Association on February 14, 1995.
(iii) Notwithstanding
anything contained to the contrary in the LLC Agreement, until such time as the Obligations under the Note have been repaid in
full:
(1) Lender
(or its designee) may, upon a foreclosure, sale or other transfer of any Pledged Membership Interest pursuant to this Agreement,
(A) become a substitute member with respect to the Pledged Membership Interest subject to this Agreement, (B) exercise any and
all voting rights allowed to the holder of any Pledged Membership Interest subject to this Agreement, (C) transfer its interest
in the Pledged LLC Entity, subject to the provisions of this Agreement, and/or (D) succeed to all other rights or interests associated
with any Pledged Membership Interest subject to this Agreement, or any part thereof, as may be provided in this Agreement;
(2) no
new or additional membership interest shall be created, issued, redeemed, exchanged, diluted or modified;
(3) no
Grantor shall sell, convey, transfer, assign, pledge, encumber, grant a security interest in or otherwise dispose of any Pledged
Membership Interest, except as permitted by the LLC Agreement subject to the terms of the Loan Documents;
(4) a
Grantor shall give Lender not fewer than thirty (30) days prior written notice of any proposed change in the name of the Pledged
LLC Entity or such Grantor and any proposed change in the location of any Pledged Membership Interest or of such records, and no
Grantor will, without the prior written consent of Lender, move any Pledged Membership Interest or such records to a location not
previously identified to Lender or keep duplicate records with respect to any Pledged Membership Interest at any address outside
such county; and
(5) except
as it relates to Lender and as otherwise may be permitted under the LLC Agreement subject to the terms of the Loan Documents, no
Grantor shall consent to or permit to occur the admission of any new member in the Pledged LLC Entity, or the issuance of any additional
membership interests or any other equity interest in the Pledged LLC Entity that would have the effect of diluting such Grantor’s
interest in the Pledged LLC Entity.
(iv) Without
limiting the generality of anything in the LLC Agreement, none of the following types of provisions will be deemed to restrict,
or be applicable to, Lender or any other Secured Party in any way:
(1) confidentiality
clauses;
(2) transfer
restrictions, including without limitation: (A) requirements to offer interests to the Pledged LLC Entity, to other members or
to affiliates; (B) provisions that trigger offers or deem offers of interests to have been made; (C) provisions related to the
purchase price of interests or the payment terms of a sale of interests; (D) provisions requiring consent from other members or
managers to transfer interests; (E) drag along rights and tag along rights; (F) restrictions on transferring only a portion of
a member’s interests; and (G) restrictions on transferring voting rights;
(3) provisions
waiving rights to maintain an action for dissolution or partition;
(4) provisions
requiring the consent of any person other than a member of the Pledged LLC Entity to amend the limited liability company operating
agreement of the Pledged LLC Entity; or
(5) clauses
that provide: (A) that a creditor will have no rights under such LLC Agreement; or (B) that none of the provisions of such LLC
Agreement are for the benefit of creditors or enforceable by a creditor.
Section 5.4 Accounts.
(a) Such
Grantor shall not, other than in the Ordinary Course of Business, (i) grant any extension of the time of payment of any account,
(ii) compromise or settle any account for less than the full amount thereof, (iii) release, wholly or partially, any Person
liable for the payment of any account, (iv) allow any credit or discount on any account or (v) amend, supplement or modify any
account in any manner that could adversely affect the value thereof.
(b) So
long as an Event of Default is continuing, Lender shall have the right to make test verifications of the Accounts in any
manner and through any medium that it reasonably considers advisable, and such Grantor shall furnish all such assistance and information
as Lender may reasonably require in connection therewith. Upon Lender’s reasonable request, such Grantor shall cause independent
public accountants or others satisfactory to Lender to furnish to Lender reports showing reconciliations, aging and test verifications
of, and trial balances for, the accounts.
Section 5.5 Commodity
Contracts. Such Grantor shall not have any commodity contract unless subject to a Control Agreement.
Section 5.6 Delivery
of Instruments and Tangible Chattel Paper and Control of Investment Property, Letter-of-Credit Rights and Electronic Chattel Paper.
(a) If any amount in excess of $10,000 payable under or in connection with any Collateral owned by such Grantor shall be or become
evidenced by an instrument or tangible chattel paper other than such instrument delivered in accordance with Section 5.3(a)
and in the possession of Lender, such Grantor shall mark all such instruments and tangible chattel paper with the following legend:
“This writing and the obligations evidenced or secured hereby are subject to the security interest of Imation Corp., as Lender”
and, at the request of Lender, shall immediately deliver such instrument or tangible chattel paper to Lender, duly indorsed in
a manner satisfactory to Lender.
(b) Such
Grantor shall not grant “control” (within the meaning of such term under Article 9-106 of the UCC) over any
investment property to any Person other than Lender.
(c) If
such Grantor is or becomes the beneficiary of a letter of credit that is (i) not a supporting obligation of any Collateral
and (ii) in excess of $10,000, such Grantor shall promptly, and in any event within 2 Business Days after becoming a beneficiary,
notify Lender thereof and enter into a Contractual Obligation with Lender, the issuer of such letter of credit or any nominated
person with respect to the letter-of-credit rights under such letter of credit. Such Contractual Obligation shall assign such letter-of-credit
rights to Lender and such assignment shall be sufficient to grant control for the purposes of Section 9-107 of the UCC (or any
similar section under any equivalent UCC). Such Contractual Obligation shall also direct all payments thereunder to a Cash Collateral
Account. The provisions of the Contractual Obligation shall be in form and substance reasonably satisfactory to Lender.
(d) If
any amount in excess of $10,000 payable under or in connection with any Collateral owned by such Grantor shall be or become evidenced
by electronic chattel paper, such Grantor shall take all steps necessary to grant Lender control of all such electronic chattel
paper for the purposes of Section 9-105 of the UCC (or any similar section under any equivalent UCC) and all “transferable
records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National
Commerce Act.
Section 5.7 Intellectual
Property. (a) Within 30 days after any change to Schedule 5 for such Grantor, such Grantor shall provide
Lender notification thereof and the short-form intellectual property agreements and assignments as described in this Section 5.7
and any other documents that Lender reasonably requests with respect thereto.
(b) Such
Grantor shall (and shall cause all its licensees to): (i) (1) continue to use each Trademark included in the Material Intellectual
Property in order to maintain such Trademark in full force and effect with respect to each class of goods for which such Trademark
is currently used, free from any claim of abandonment for non-use, (2) maintain at least the same standards of quality of products
and services offered under such Trademark as are currently maintained, (3) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law, (4) not adopt or use any other mark that is confusingly
similar or a colorable imitation of such Trademark unless Lender shall obtain a perfected security interest in such mark pursuant
to this Agreement and (ii) not do any act or omit to do any act whereby (A) such Trademark (or any goodwill associated therewith)
may become destroyed, invalidated, impaired or harmed in any way, (B) any Patent included in the Material Intellectual Property
may become forfeited, misused, unenforceable, abandoned or dedicated to the public, (C) any Trade Secret that is Material Intellectual
Property may become publicly available or otherwise unprotectable, or (D) any Copyright may become invalidated, otherwise impaired
or injected into the public domain.
(c) Such
Grantor shall not make any assignment or agreement in conflict with the security interest in the Intellectual Property of each
Grantor hereunder (except as permitted by the Note).
(d) Such
Grantor shall notify Lender immediately if it knows, or has reason to know, that any application or registration relating to any
Intellectual Property may become forfeited, misused, unenforceable, abandoned or dedicated to the public, injected into the public
domain or of any adverse determination or development regarding the validity or enforceability or such Grantor’s ownership
of, interest in, right to use, register, own or maintain any Intellectual Property (including the institution of, or any such determination
or development in, any proceeding relating to the foregoing in any Applicable IP Office). Such Grantor, at its own expense, shall
take all actions that are necessary or reasonably requested by Lender, including, without limitation, in the Applicable IP Office,
to maintain and pursue each application (and to obtain the relevant registration or recordation) and to maintain each registration
and recordation included in the Material Intellectual Property, including, without limitation, the payment of required fees and
taxes, the filing of responses to office actions issued by the Applicable IP Office or other Governmental Authorities, the filing
of applications for renewal or extension, the filing of affidavits under Sections 8 and 15 of the U.S. Trademark Act, the filing
of divisional, continuation, continuation-in-part, reissue and renewal applications or extensions, the payment of maintenance fees
and the participation in interference, reexamination, opposition, cancellation, infringement and misappropriation proceedings.
(e) Such
Grantor shall not knowingly do any act or omit to do any act to infringe, misappropriate, dilute, violate or otherwise impair the
Intellectual Property of any other Person. In the event that any Intellectual Property of such Grantor is or has been infringed,
misappropriated, violated, diluted or otherwise impaired by a third party, such Grantor shall notify Lender immediately and take
such action as it or the Lender reasonably deems appropriate under the circumstances in response thereto, including promptly bringing
suit and recovering all damages therefor.
(f) Grantor
shall not sell or transfer any Intellectual Property.
(g) Such
Grantor shall execute and deliver to Lender in form and substance reasonably acceptable to Lender and suitable for (i) filing
in the Applicable IP Office the short-form intellectual property security agreements in the form attached hereto as Annex 3
for all Copyrights, Trademarks, Patents and IP Agreements of such Grantor and (ii) recording with the appropriate Internet
domain name registrar, a duly executed form of assignment for all Internet Domain Names of such Grantor (together with appropriate
supporting documentation as may be requested by Lender).
(h) Upon
the request of Lender, such Grantor shall execute and deliver, and have recorded, any and all agreements, instruments, documents,
and papers as Lender may request to evidence Lender’s Lien upon such registered Intellectual Property and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby consistent with the terms of this Agreement.
(i) Such
Grantor shall promptly notify Lender in writing if any Intellectual Property owned now or in the future ceases to be owned solely
and exclusively by such Grantor.
Section 5.8 Notices.
Such Grantor shall promptly notify Lender in writing of its acquisition of any interest hereafter in property that is of a type
where a security interest or lien must be or may be registered, recorded or filed under, or notice thereof given under, any federal
statute or regulation.
Section 5.9 Notice
of Commercial Tort Claims. Such Grantor agrees that, if it shall acquire any interest in any commercial tort claim (whether
from another Person or because such commercial tort claim shall have come into existence), (i) such Grantor shall, immediately
upon such acquisition, deliver to Lender, in each case in form and substance satisfactory to Lender, a notice of the existence
and nature of such commercial tort claim and a supplement to Schedule 1 containing a specific description of such commercial
tort claim, (ii) Section 3.1 shall apply to such commercial tort claim and (iii) such Grantor shall execute and deliver
to Lender, in each case in form and substance satisfactory to Lender, any document, and take all other action, deemed by Lender
to be reasonably necessary or appropriate for Lender to obtain a perfected security interest having at least the priority set forth
in Section 4.2 in all such commercial tort claims. Any supplement to Schedule 1 delivered pursuant to this
Section 5.9 shall, after the receipt thereof by Lender, become part of Schedule 1 for all purposes hereunder
other than in respect of representations and warranties made prior to the date of such receipt.
Section 5.10 Controlled
Securities Account. Each Grantor shall deposit all of its Cash Equivalents in securities accounts that are Controlled
Securities Accounts except for Cash Equivalents the aggregate value of which does not exceed $10,000.
ARTICLE
VI
Remedial
Provisions
Section 6.1 Code
and Other Remedies. (a) UCC Remedies. During the continuance of an Event of Default, Lender may exercise, in
addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing
or relating to any Secured Obligation, all rights and remedies of a secured party under the UCC or any other applicable law.
(b) Disposition
of Collateral. Without limiting the generality of the foregoing, Lender may, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), during the
continuance of any Event of Default (personally or through its agents or attorneys), (i) enter upon the premises where any Collateral
is located, without any obligation to pay rent, through self-help, without judicial process, without first obtaining a final judgment
or giving any Grantor or any other Person notice or opportunity for a hearing on Lender’s claim or action, (ii) collect,
receive, appropriate and realize upon any Collateral and (iii) sell, assign, convey, transfer, grant option or options to purchase
and deliver any Collateral (enter into Contractual Obligations to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker’s board or office of any Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption
of any credit risk. Lender shall have the right, upon any such public sale or sales and, to the extent permitted by the UCC and
other applicable Requirements of Law, upon any such private sale, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption of any Grantor, which right or equity is hereby waived and released.
(c) Management
of the Collateral. Each Grantor further agrees, that, during the continuance of any Event of Default, (i) at Lender’s
request, it shall assemble the Collateral and make it available to Lender at places that Lender shall reasonably select, whether
at such Grantor’s premises or elsewhere, (ii) without limiting the foregoing, Lender also has the right to require that each
Grantor store and keep any Collateral pending further action by Lender and, while any such Collateral is so stored or kept, provide
such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain such Collateral in
good condition, (iii) until Lender is able to sell, assign, convey or transfer any Collateral, Lender shall have the right
to hold or use such Collateral to the extent that it deems appropriate for the purpose of preserving the Collateral or its value
or for any other purpose deemed appropriate by Lender and (iv) Lender may, if it so elects, seek the appointment of a receiver
or keeper to take possession of any Collateral and to enforce any of Lender’s remedies, with respect to such appointment
without prior notice or hearing as to such appointment. Lender shall not have any obligation to any Grantor to maintain or preserve
the rights of any Grantor as against third parties with respect to any Collateral while such Collateral is in the possession of
Lender.
(d) Application
of Proceeds. Lender shall apply the cash proceeds of any action taken by it pursuant to this Section 6.1, after
deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping
of any Collateral or in any way relating to the Collateral or the rights of Lender and any other Secured Party hereunder, including
reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Secured Obligations, as set forth
in the Note, and only after such application and after the payment by Lender of any other amount required by any Requirement of
Law, need Lender account for the surplus, if any, to any Grantor.
(e) Direct
Obligation. Neither Lender nor any other Secured Party shall be required to make any demand upon, or pursue or exhaust any
right or remedy against, any Grantor or any other Person with respect to the payment of the Obligations or to pursue or exhaust
any right or remedy with respect to any Collateral therefor or any direct or indirect guaranty thereof. All of the rights and remedies
of Lender and any other Secured Party under any Loan Document shall be cumulative, may be exercised individually or concurrently
and not exclusive of any other rights or remedies provided by any Requirement of Law. To the extent it may lawfully do so, each
Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against Lender
or any other Secured Party, any valuation, stay, appraisement, extension, redemption or similar laws and any and all rights or
defenses it may have as a surety, now or hereafter existing, arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of any Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition.
(f) Commercially
Reasonable. To the extent that applicable Requirements of Law impose duties on Lender to exercise remedies in a commercially
reasonable manner, each Grantor acknowledges and agrees that it is not commercially unreasonable for Lender to do any of the following:
(i) fail
to incur significant costs, expenses or other Liabilities reasonably deemed as such by Lender to prepare any Collateral for disposition
or otherwise to complete raw material or work in process into finished goods or other finished products for disposition;
(ii) fail
to obtain Permits, or other consents, for access to any Collateral to sell or for the collection or sale of any Collateral, or,
if not required by other Requirements of Law, fail to obtain Permits or other consents for the collection or disposition of any
Collateral;
(iii) fail
to exercise remedies against account debtors or other Persons obligated on any Collateral or to remove Liens on any Collateral
or to remove any adverse claims against any Collateral;
(iv) advertise
dispositions of any Collateral through publications or media of general circulation, whether or not such Collateral is of a specialized
nature, or to contact other Persons, whether or not in the same business as any Grantor, for expressions of interest in acquiring
any such Collateral;
(v) exercise
collection remedies against account debtors and other Persons obligated on any Collateral, directly or through the use of collection
agencies or other collection specialists, hire one or more professional auctioneers to assist in the disposition of any Collateral,
whether or not such Collateral is of a specialized nature, or, to the extent deemed appropriate by Lender, obtain the services
of other brokers, investment bankers, consultants and other professionals to assist Lender in the collection or disposition of
any Collateral, or utilize Internet sites that provide for the auction of assets of the types included in the Collateral or that
have the reasonable capacity of doing so, or that match buyers and sellers of assets to dispose of any Collateral;
(vi) dispose
of assets in wholesale rather than retail markets;
(vii) disclaim
disposition warranties, such as title, possession or quiet enjoyment; or
(viii) purchase
insurance or credit enhancements to insure Lender against risks of loss, collection or disposition of any Collateral or to provide
to Lender a guaranteed return from the collection or disposition of any Collateral.
Each Grantor acknowledges that the purpose
of this Section 6.1 is to provide a non-exhaustive list of actions or omissions that are commercially reasonable when
exercising remedies against any Collateral and that other actions or omissions by any Secured Party shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section 6.1. Without limitation upon the foregoing, nothing
contained in this Section 6.1 shall be construed to grant any rights to any Grantor or to impose any duties on Lender
that would not have been granted or imposed by this Agreement or by applicable Requirements of Law in the absence of this Section 6.1.
(g) IP
Agreements. For the purpose of enabling Lender to exercise rights and remedies under this Section 6.1 (including
in order to take possession of, collect, receive, assemble, process, appropriate, remove, realize upon, sell, assign, convey, transfer
or grant options to purchase any Collateral) at such time as Lender shall be lawfully entitled to exercise such rights and remedies,
each Grantor hereby grants to Lender (i) an irrevocable, nonexclusive, worldwide license (exercisable without payment of royalty
or other compensation to such Grantor), including in such license the right to sublicense, use and practice any Intellectual Property
now owned or hereafter acquired by such Grantor and access to all media in which any of the licensed items may be recorded or stored
and to all Software and programs used for the compilation or printout thereof and (ii) an irrevocable license (without payment
of rent or other compensation to such Grantor) to use, operate and occupy all real Property owned, operated, leased, subleased
or otherwise occupied by such Grantor.
Section 6.2 Accounts
and Payments in Respect of General Intangibles. (a) In addition to, and not in substitution for, any similar requirement
in the Note, if required by Lender at any time during the continuance of an Event of Default, any payment of accounts or payment
in respect of general intangibles, when collected by any Grantor, shall be promptly (and, in any event, within 2 Business Days)
deposited by such Grantor in the exact form received, duly indorsed by such Grantor to Lender, in a Cash Collateral Account, subject
to withdrawal by Lender as provided in Section 6.4. Until so turned over, such payment shall be held by such Grantor
in trust for Lender, segregated from other funds of such Grantor. Each such deposit of proceeds of accounts and payments in respect
of general intangibles shall be accompanied by a report identifying in reasonable detail the nature and source of the payments
included in the deposit.
(b) At
any time during the continuance of an Event of Default:
(i) each
Grantor shall, upon Lender’s request, deliver to Lender all original and other documents evidencing, and relating to, the
Contractual Obligations and transactions that gave rise to any account or any payment in respect of general intangibles, including
all original orders, invoices and shipping receipts and notify account debtors that the accounts or general intangibles have been
collaterally assigned to Lender and that payments in respect thereof shall be made directly to Lender;
(ii) Lender
may, without notice, at any time, limit or terminate the authority of a Grantor to collect its accounts or amounts due under general
intangibles or any thereof and, in its own name or in the name of others, communicate with account debtors to verify with them
to Lender’s satisfaction the existence, amount and terms of any account or amounts due under any general intangible. In addition,
Lender may at any time enforce such Grantor’s rights against such account debtors and obligors of general intangibles; and
(iii) each
Grantor shall take all actions, deliver all documents and provide all information necessary or reasonably requested by Lender to
ensure any Internet Domain Name is registered.
(c) Anything
herein to the contrary notwithstanding, each Grantor shall remain liable under each account and each payment in respect of general
intangibles to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto. No Secured Party shall have any obligation or liability under any agreement
giving rise to an account or a payment in respect of a general intangible by reason of or arising out of any Loan Document or the
receipt by any Secured Party of any payment relating thereto, nor shall any Secured Party be obligated in any manner to perform
any obligation of any Grantor under or pursuant to any agreement giving rise to an account or a payment in respect of a general
intangible, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to
the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance
or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.
Section 6.3 Pledged
Collateral. (a) Voting Rights. During the continuance of an Event of Default, upon notice by Lender to the relevant
Grantor or Grantors, Lender or its nominee may exercise (A) any voting, consent, corporate and other right pertaining to the
Pledged Collateral at any meeting of shareholders, partners or members, as the case may be, of the relevant issuer or issuers of
Pledged Collateral or otherwise and (B) any right of conversion, exchange and subscription and any other right, privilege or option
pertaining to the Pledged Collateral as if it were the absolute owner thereof (including the right to exchange at its discretion
any Pledged Collateral upon the merger, amalgamation, consolidation, reorganization, recapitalization or other fundamental change
in the corporate or equivalent structure of any issuer of Pledged Stock, the right to deposit and deliver any Pledged Collateral
with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as Lender may
determine), all without liability except to account for property actually received by it; provided, however, that
Lender shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure
to do so or delay in so doing.
(b) Proxies.
In order to permit Lender to exercise the voting and other consensual rights that it may be entitled to exercise pursuant hereto
and to receive all dividends and other distributions that it may be entitled to receive hereunder, (i) each Grantor shall promptly
execute and deliver (or cause to be executed and delivered) to Lender all such proxies, dividend payment orders and other instruments
as Lender may from time to time reasonably request and (ii) without limiting the effect of clause (i) above, such Grantor
hereby grants to Lender an irrevocable proxy to vote all or any part of the Pledged Collateral and to exercise all other rights,
powers, privileges and remedies to which a holder of the Pledged Collateral would be entitled (including giving or withholding
written consents of shareholders, partners or members, as the case may be, calling special meetings of shareholders, partners or
members, as the case may be, and voting at such meetings), which proxy shall be effective, automatically and without the necessity
of any action (including any transfer of any Pledged Collateral on the record books of the issuer thereof) by any other person
(including the issuer of such Pledged Collateral or any officer or agent thereof) during the continuance of an Event of Default
and which proxy shall only terminate upon the payment in full of the Secured Obligations (other than contingent indemnification
obligations to the extent no claim giving rise thereto has been asserted).
(c) Authorization
of Issuers. Each Grantor hereby expressly and irrevocably authorizes and instructs, without any further instructions from such
Grantor, each issuer of any Pledged Collateral pledged hereunder by such Grantor to (i) comply with any instruction received by
it from Lender in writing that states that an Event of Default is continuing and is otherwise in accordance with the terms of this
Agreement and each Grantor agrees that such issuer shall be fully protected from Liabilities to such Grantor in so complying and
(ii) unless otherwise expressly permitted hereby or the Note, pay any dividend or make any other payment with respect to the
Pledged Collateral directly to Lender.
Section 6.4 Proceeds
to be Turned over to and Held by Lender. Unless otherwise expressly provided in the Note or this Agreement, all proceeds
of any Collateral received by any Grantor hereunder in cash or Cash Equivalents shall be held by such Grantor in trust for Lender,
segregated from other funds of such Grantor, and shall, promptly upon receipt by any Grantor, be turned over to Lender in the exact
form received (with any necessary endorsement). All such proceeds of Collateral and any other proceeds of any Collateral received
by Lender in cash or Cash Equivalents shall be held by Lender in a Cash Collateral Account. All proceeds being held by Lender in
a Cash Collateral Account (or by such Grantor in trust for Lender) shall continue to be held as collateral security for the Secured
Obligations and shall not constitute payment thereof until applied as provided in the Note.
Section 6.5 Sale
of Pledged Collateral. (a) Each Grantor recognizes that Lender may be unable to effect a public sale of any Pledged
Collateral by reason of certain prohibitions contained in the Securities Act and applicable state or foreign securities laws or
otherwise or may determine that a public sale is impracticable, not desirable or not commercially reasonable and, accordingly,
may resort to one or more private sales thereof to a restricted group of purchasers that shall be obliged to agree, among other
things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof.
Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. Lender shall be under no obligation to delay a sale of any Pledged Collateral for the
period of time necessary to permit the issuer thereof to register such securities for public sale under the Securities Act or under
applicable state securities laws even if such issuer would agree to do so.
(b) Each
Grantor agrees to use its commercially reasonable best efforts to do or cause to be done all such other acts as may be necessary
to make such sale or sales of any portion of the Pledged Collateral pursuant to Section 6.1 and this Section 6.5
valid and binding and in compliance with all applicable Requirements of Law. Each Grantor further agrees that a breach of any covenant
contained herein will cause irreparable injury to Lender, that Lender has no adequate remedy at law in respect of such breach and,
as a consequence, that each and every covenant contained herein shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defense against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Note. Each Grantor waives any and all rights of contribution or subrogation
upon the sale or disposition of all or any portion of the Pledged Collateral by Lender.
Section 6.6 Deficiency.
Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of any Collateral are insufficient
to pay the Secured Obligations and the fees and disbursements of any attorney employed by Lender or any other Secured Party to
collect such deficiency.
ARTICLE
VII
Agent
Section 7.1 Lender’s
Appointment as Attorney-in-Fact. (a) Each Grantor hereby irrevocably constitutes and appoints Lender and any Related
Person thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the
terms of the Loan Documents, to take any appropriate action and to execute any document or instrument that may be necessary or
desirable to accomplish the purposes of the Loan Documents, and, without limiting the generality of the foregoing, each Grantor
hereby gives Lender and its Related Persons the power and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any of the following when an Event of Default shall be continuing:
(i) in
the name of such Grantor, in its own name or otherwise, take possession of and indorse and collect any check, draft, note, acceptance
or other instrument for the payment of moneys due under any account or general intangible or with respect to any other Collateral
and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Lender
for the purpose of collecting any such moneys due under any account or general intangible or with respect to any other Collateral
whenever payable;
(ii) in
the case of any Intellectual Property owned by or licensed to such Grantor, execute, deliver and have recorded any document that
Lender may request to evidence, effect, publicize or record Lender’s security interest in such Intellectual Property and
the goodwill and general intangibles of such Grantor relating thereto or represented thereby;
(iii) pay
or discharge taxes and Liens levied or placed on or threatened against any Collateral, effect any repair or pay any insurance called
for by the terms of the Note (including all or any part of the premiums therefor and the costs thereof);
(iv) execute,
in connection with any sale provided for in Section 6.1 or Section 6.5, any document to effect or otherwise
necessary or appropriate in relation to evidence the sale of any Collateral; or
(v) (A)
direct any party liable for any payment under any Collateral to make payment of any moneys due or to become due thereunder directly
to Lender or as Lender shall direct, (B) ask or demand for, and collect and receive payment of and receipt for, any moneys, claims
and other amounts due or to become due at any time in respect of or arising out of any Collateral, (C) sign and indorse any invoice,
freight or express bill, bill of lading, storage or warehouse receipt, draft against debtors, assignment, verification, notice
and other document in connection with any Collateral, (D) commence and prosecute any suit, action or proceeding at law or in equity
in any court of competent jurisdiction to collect any Collateral and to enforce any other right in respect of any Collateral, (E)
defend any actions, suits, proceedings, audits, claims, demands, orders or disputes brought against such Grantor with respect to
any Collateral, (F) settle, compromise or adjust any such actions, suits, proceedings, audits, claims, demands, orders or disputes
and, in connection therewith, give such discharges or releases as Lender may deem appropriate, (G) assign any Intellectual Property
owned by such Grantor or any IP Agreements of such Grantor throughout the world on such terms and conditions and in such manner
as Lender shall in its sole discretion determine, including the execution and filing of any document necessary to effectuate or
record such assignment and (H) generally, sell, assign, convey, transfer or grant a Lien on, make any Contractual Obligation
with respect to and otherwise deal with, any Collateral as fully and completely as though Lender were the absolute owner thereof
for all purposes and do, at Lender’s option, at any time or from time to time, all acts and things that Lender deems necessary
to protect, preserve or realize upon any Collateral and the Secured Parties’ security interests therein and to effect the
intent of the Loan Documents, all as fully and effectively as such Grantor might do.
(vi) If
any Grantor fails to perform or comply with any Contractual Obligation contained herein, Lender, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such Contractual Obligation.
(b) The
expenses of Lender incurred in connection with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate set forth in the Note, from the date of payment by Lender to the date reimbursed by the relevant Grantor, shall
be payable by such Grantor to Lender on demand.
(c) Each
Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue of this Section 7.1.
All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are released.
Section 7.2 Authorization
to File Financing Statements. Each Grantor authorizes Lender and its Related Persons, at any time and from time to time,
to file or record financing statements, amendments thereto, and other filing or recording documents or instruments with respect
to any Collateral in such form and in such offices as Lender reasonably determines appropriate to perfect, or continue or maintain
perfection of, the security interests of Lender under this Agreement, and such financing statements and amendments may describe
the Collateral covered thereby as “all assets of the debtor” or words of similar import. A copy of this Agreement
shall be sufficient as a financing statement or other filing or recording document or instrument for filing or recording in any
jurisdiction. Such Grantor also hereby ratifies its authorization for Lender to have filed any initial financing statement or amendment
thereto under the UCC (or other similar laws) in effect in any jurisdiction if filed prior to the date hereof. Each Grantor hereby
(i) waives any right under the UCC or any other Requirement of Law to receive notice and/or copies of any filed or recorded financing
statements, amendments thereto, continuations thereof or termination statements and (ii) releases and excuses each Secured Party
from any obligation under the UCC or any other Requirement of Law to provide notice or a copy of any such filed or recorded documents.
Section 7.3 Authority
of Lender. Each Grantor acknowledges that the rights and responsibilities of Lender under this Agreement with respect
to any action taken by Lender or the exercise or non-exercise by Lender of any option, voting right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this Agreement shall, as between Lender and the other Secured
Parties, be governed by the Note and by such other agreements with respect thereto as may exist from time to time among them, but,
as between Lender and any Grantor, Lender shall be conclusively presumed to be acting as agent for the Secured Parties with full
and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation or entitlement to make any inquiry
respecting such authority.
Section 7.4 Duty;
Obligations and Liabilities. (a) Duty of Lender. Lender’s sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession shall be to deal with it in the same manner as Lender deals with
similar property for its own account. The powers conferred on Lender hereunder are solely to protect Lender’s interest in
the Collateral and shall not impose any duty upon Lender to exercise any such powers. Lender shall be accountable only for amounts
that it receives as a result of the exercise of such powers, and neither it nor any of its Related Persons shall be responsible
to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. In addition, Lender shall not be liable or responsible for any loss or damage
to any Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehousemen, carrier, forwarding
agency, consignee or other bailee if such Person has been selected by Lender in good faith.
(b) Obligations
and Liabilities with respect to Collateral. No Secured Party and no Related Person thereof shall be liable for failure to demand,
collect or realize upon any Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to any
Collateral. The powers conferred on Lender hereunder shall not impose any duty upon any other Secured Party to exercise any such
powers. The other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise
of such powers, and neither they nor any of their respective officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct as finally determined
by a court of competent jurisdiction.
ARTICLE
VIII
Miscellaneous
Section 8.1 Reinstatement.
Each Grantor agrees that, if any payment made by any Grantor or other Person and applied to the Secured Obligations is at any time
annulled, avoided, set aside, rescinded, invalidated, declared to be fraudulent or preferential or otherwise required to be refunded
or repaid, or the proceeds of any Collateral are required to be returned by any Secured Party to such Grantor, its estate, trustee,
receiver or any other party, including any Grantor, under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, any Lien or other Collateral securing such liability shall be and remain in full
force and effect, as fully as if such payment had never been made. If, prior to any of the foregoing, (a) any Lien or other Collateral
securing such Grantor’s liability hereunder shall have been released or terminated by virtue of the foregoing or (b) any
provision of the Guaranty hereunder shall have been terminated, cancelled or surrendered, such Lien, other Collateral or provision
shall be reinstated in full force and effect and such prior release, termination, cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of any such Grantor in respect of any Lien or other Collateral securing
such obligation or the amount of such payment.
Section 8.2 Release
of Collateral. (a) At the time provided in the Note, the Collateral shall be released from the Lien created hereby and
this Agreement and all obligations (other than those expressly stated to survive such termination) of Lender and each Grantor hereunder
shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral
shall revert to the Grantors. Each Grantor is hereby authorized to file UCC amendments at such time evidencing the termination
of the Liens so released. At the request of any Grantor following any such termination, Lender shall deliver to such Grantor any
Collateral of such Grantor held by Lender hereunder and execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.
(b) If
Lender shall be directed or permitted pursuant to the Note to release any Lien or any Collateral, such Collateral shall be released
from the Lien created hereby to the extent provided under, and subject to the terms and conditions set forth in, such subsection.
In connection therewith, Lender, at the request of any Grantor, shall execute and deliver to such Grantor such documents as such
Grantor shall reasonably request to evidence such release.
(c) At
the time provided in the Note and at the request of the Borrower Representative, a Grantor shall be released from its obligations
hereunder in the event that all the Stock and Stock Equivalents of such Grantor shall be sold to any Person that is not an Affiliate
of the Borrower or the Subsidiaries of the Borrower in a transaction permitted by the Loan Documents.
Section 8.3 Independent
Obligations. The obligations of each Grantor hereunder are independent of and separate from the Secured Obligations
and the Guaranteed Obligations. If any Secured Obligation or Guaranteed Obligation is not paid when due, or upon any Event of Default,
Lender may, at its sole election, proceed directly and at once, without notice, against any Grantor and any Collateral to collect
and recover the full amount of any Secured Obligation or Guaranteed Obligation then due, without first proceeding against any other
Grantor, or any other Collateral and without first joining any other Grantor in any proceeding.
Section 8.4 No
Waiver by Course of Conduct. No Secured Party shall by any act (except by a written instrument pursuant to Section 8.5
hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced
in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of any Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver
by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy
that such Secured Party would otherwise have on any future occasion.
Section 8.5 Amendments
in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with the consent of the Lender and the Borrower; provided, however, that annexes to this Agreement
may be supplemented (but no existing provisions may be modified and no Collateral may be released) through Pledge Amendments and
Joinder Agreements, in substantially the form of Annex 1 and Annex 2, respectively, in each case duly executed
by Lender and each Grantor directly affected thereby.
Section 8.6 Additional
Grantors; Additional Pledged Collateral. (a) Joinder Agreements. If, at the option of the Borrower or as required
pursuant to the Note, the Borrower shall cause any Subsidiary that is not a Grantor to become a Grantor hereunder, such Subsidiary
shall execute and deliver to Lender a Joinder Agreement substantially in the form of Annex 2 (each, a “Joinder
Agreement”) and shall thereafter for all purposes be a party hereto and have the same rights, benefits and obligations
as a Grantor party hereto on the Closing Date.
(b) Pledge
Amendments. To the extent any Pledged Collateral has not been delivered as of the Closing Date, such Grantor shall deliver
a pledge amendment duly executed by the Grantor in substantially the form of Annex 1 (each, a “Pledge Amendment”).
Such Grantor authorizes Lender to attach each Pledge Amendment to this Agreement.
Section 8.7 Notices.
All notices, requests and demands to or upon Lender or any Grantor hereunder shall be effected in the manner provided for in the
Note; provided, however, that any such notice, request or demand to or upon any Grantor shall be addressed to the
Borrower’s notice address set forth in the Note.
Section 8.8 Successors
and Assigns. This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the
benefit of each Secured Party and their successors and assigns; provided, however, that no Grantor may assign, transfer
or delegate any of its rights or obligations under this Agreement without the prior written consent of Lender.
Section 8.9 Counterparts.
This Agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature
pages may be detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature
page of this Agreement by facsimile transmission or by Electronic Transmission shall be as effective as delivery of a manually
executed counterpart hereof.
Section 8.10 Severability.
Any provision of this Agreement being held illegal, invalid or unenforceable in any jurisdiction shall not affect any part of such
provision not held illegal, invalid or unenforceable, any other provision of this Agreement or any part of such provision in any
other jurisdiction.
Section 8.11 Governing
Law. This Agreement and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted
in accordance with, the law of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than
the State of Delaware.
Section 8.12 No
Effect on Stock Purchase Agreement; No Waiver of Rights. Notwithstanding anything in this Agreement or any other Loan Document
to the contrary, no term or provision of this Agreement or any other Loan Document shall have the effect of modifying or amending
any of the rights of the Borrower (as Purchaser) under the Stock Purchase Agreement, including, without limitation, any rights
to set-off or recoup amounts under the Note or any of the obligations, including, without limitation, the indemnity obligations,
of the Lender (as Seller) under the Stock Purchase Agreement.
Section 8.13 Waiver
of Jury Trial. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION
CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.
EACH GRANTOR AGREES
TO BE BOUND BY THE PROVISIONS OF SECTION (29) OF THE NOTE.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF,
each of the undersigned has caused this Guaranty and Security Agreement to be duly executed and delivered as of the date first
above written.
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BORROWER: |
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NXSN ACQUISITION CORP. |
[Signature Page to Guaranty and Security
Agreement – [SP Holdco]]
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NEXSAN TECHNOLOGIES, INC. |
[Signature Page to Guaranty and Security
Agreement –[SP Holdco]]
ACCEPTED AND AGREED
as of the date first above written:
IMATION CORP.,
as Lender
[Signature Page to Guaranty and Security
Agreement –[SP Holdco]]
ANNEX 1
TO
GUARANTY AND SECURITY AGREEMENT1
FORM OF PLEDGE AMENDMENT
This Pledge Amendment,
dated as of __________ __, 201_, is delivered pursuant to Section 8.6 of the Guaranty and Security Agreement,
dated as of [Closing Date under SPA] by NXSN Acquisition Corp. and the other Grantors party thereto, the undersigned Grantor and
the other Affiliates of the Borrower from time to time party thereto as Grantors in favor of Imation Corp., as Lender (the “Guaranty
and Security Agreement”). Capitalized terms used herein without definition are used as defined in the Guaranty and Security
Agreement.
The undersigned hereby
agrees that this Pledge Amendment may be attached to the Guaranty and Security Agreement and that the Pledged Collateral listed
on Annex 1-A to this Pledge Amendment shall be and become part of the Collateral referred to in the Guaranty and Security
Agreement and shall secure all of the Secured Obligations.
The undersigned hereby
represents and warrants that each of the representations and warranties contained in Sections 4.1, 4.2, 4.4
and 4.9 of the Guaranty and Security Agreement is true and correct on and as of the date hereof as if made on and as of
such date.
1
Separate agreements should be executed relating to each Grantor’s respective Copyrights, Patents, and Trademarks.
Annex 1-A
ISSUER |
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CLASS |
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CERTIFICATE
NO(S). |
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PAR VALUE |
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NO. OF
SHARES,
UNITS OR
INTERESTS |
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ISSUER |
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DESCRIPTION OF
DEBT |
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CERTIFICATE
NO(S). |
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FINAL
MATURITY |
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PRINCIPAL
AMOUNT |
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ACKNOWLEDGED AND AGREED
as of the date first above written:
IMATION
CORP.,
as Lender
ANNEX 2
TO
GUARANTY AND SECURITY AGREEMENT
FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT,
dated as of _________ __, 201_, is delivered pursuant to Section 8.6 of the Guaranty and Security Agreement, dated
as of [Closing Date under SPA], by NXSN Acquisition Corp. and the other Persons from time to time party thereto as Grantors in
favor of Imation Corp., as Lender (as such agreement may be amended, restated, supplemented and/or otherwise modified from time
to time, the “Guaranty and Security Agreement”). Capitalized terms used herein without definition are used as
defined in the Guaranty and Security Agreement.
By executing and delivering
this Joinder Agreement, the undersigned, as provided in Section 8.6 of the Guaranty and Security Agreement, hereby
becomes a party to the Guaranty and Security Agreement as a Grantor thereunder with the same force and effect as if originally
named as a Grantor therein and, without limiting the generality of the foregoing, as collateral security for the prompt and complete
payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, hereby
mortgages, pledges and hypothecates to Lender and grants to Lender a lien on and security interest in, all of its right, title
and interest in, to and under the Collateral of the undersigned and expressly assumes all obligations and liabilities of a Grantor
thereunder. The undersigned hereby agrees to be bound as a Grantor for the purposes of the Guaranty and Security Agreement.
The information set
forth in Annex 1-A is hereby added to the information set forth in Schedules 1 through 5 to the Guaranty
and Security Agreement. By acknowledging and agreeing to this Joinder Agreement, the undersigned hereby agrees that this Joinder
Agreement may be attached to the Guaranty and Security Agreement and that the Collateral listed on Annex 1-A to this
Joinder Amendment shall be and become part of the Collateral referred to in the Guaranty and Security Agreement and shall secure
all Secured Obligations of the undersigned.
The undersigned hereby
represents and warrants that each of the representations and warranties contained in Article IV of the Guaranty and
Security Agreement applicable to it is true and correct on and as of the date hereof as if made on and as of such date.
In
witness whereof, the undersigned has caused this Joinder Agreement to be duly executed and delivered as of the date first above
written.
ACKNOWLEDGED AND AGREED
as of the date first above written:
IMATION
CORP.,
as Lender
ANNEX 3
TO
GUARANTY AND SECURITY AGREEMENT
FORM OF INTELLECTUAL PROPERTY SECURITY
AGREEMENT1
THIS [COPYRIGHT] [PATENT]
[TRADEMARK] SECURITY AGREEMENT, dated as of _________ __, 201_, is made by each of the entities listed on the signature pages hereof
(each a “Grantor” and, collectively, the “Grantors”), in favor of Imation Corp (“Lender”),
as lender.
WITNESSETH:
WHEREAS, pursuant to
the Senior Secured Convertible Note dated as of [Closing Date under SPA] (as the same may be amended, restated, supplemented and/or
modified from time to time, the “Note”) issued by the Borrower for the benefit of the Lender, the Lender has
agreed to enter into the Loan Documents and to make a loan to the Borrower upon the terms and subject to the conditions set forth
in the Note;
WHEREAS, each Grantor
has agreed, pursuant to a Guaranty and Security Agreement dated [Closing Date under SPA], in favor of Lender (as such agreement
may be amended, restated, supplemented or otherwise modified from time to time, the “Guaranty and Security Agreement”),
to guarantee the Obligations of Borrower;
WHEREAS, all of the
Grantors are party to the Guaranty and Security Agreement pursuant to which the Grantors are required to execute and deliver this
[Copyright] [Patent] [Trademark] Security Agreement; and
WHEREAS, it is a condition
precedent to the obligation of the Lender to enter into the Loan Documents and make the loan to the Borrower that the Borrower
shall have executed and delivered this Agreement to Lender;
NOW, THEREFORE, in
consideration of the premises and to induce the Lender and Lender to enter into the Loan Documents and to induce the Lender to
make its loan to the Borrower, each Grantor hereby agrees with Lender as follows:
Section 1. Defined
Terms. Capitalized terms used herein without definition are used as defined in the Guaranty and Security Agreement.
Section 2. Grant
of Security Interest in [Copyright] [Trademark] [Patent] Collateral. Each Grantor, as collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations
(as defined in the Guaranty and Security Agreement), hereby mortgages, pledges and hypothecates to Lender and grants to Lender
a Lien on and security interest in, all of its right, title and interest in, to and under the following Collateral of such Grantor
(the “[Copyright] [Patent] [Trademark] Collateral”):
1
Separate agreements should be executed relating to each Grantor’s respective Copyrights, Patents, and Trademarks.
(a) [all
of its Copyrights and all IP Agreements providing for the grant by or to such Grantor of any right under any Copyright, including,
without limitation, those referred to on Schedule 1 hereto;
(b) all
renewals, reversions and extensions of the foregoing; and
(c) all
income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing,
including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement,
misappropriation, dilution, violation or other impairment thereof.]
or
(a) [all
of its Patents and all IP Agreements providing for the grant by or to such Grantor of any right under any Patent, including, without
limitation, those referred to on Schedule 1 hereto;
(b) all
reissues, reexaminations, continuations, continuations-in-part, divisionals, renewals and extensions of the foregoing; and
(c) all
income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing,
including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement,
misappropriation, dilution, violation or other impairment thereof.]
or
(a) [all
of its Trademarks and all IP Agreements providing for the grant by or to such Grantor of any right under any Trademark, including,
without limitation, those referred to on Schedule 1 hereto;
(b) all
renewals and extensions of the foregoing;
(c) all
goodwill of the business connected with the use of, and symbolized by, each such Trademark; and
(d) all
income, royalties, proceeds and Liabilities at any time due or payable or asserted under and with respect to any of the foregoing,
including, without limitation, all rights to sue and recover at law or in equity for any past, present and future infringement,
misappropriation, dilution, violation or other impairment thereof.]
Section 3. Guaranty
and Security Agreement. The security interest granted pursuant to this [Copyright] [Patent] [Trademark] Security Agreement
is granted in conjunction with the security interest granted to Lender pursuant to the Guaranty and Security Agreement and each
Grantor hereby acknowledges and agrees that the rights and remedies of Lender with respect to the security interest in the [Copyright]
[Patent] [Trademark] Collateral made and granted hereby are more fully set forth in the Guaranty and Security Agreement, the terms
and provisions of which are incorporated by reference herein as if fully set forth herein.
Section 4. Grantor
Remains Liable. Each Grantor hereby agrees that, anything herein to the contrary notwithstanding, such Grantor shall assume
full and complete responsibility for the prosecution, defense, enforcement or any other necessary or desirable actions in connection
with their [Copyrights] [Patents] [Trademarks] and IP Agreements subject to a security interest hereunder.
Section 5. Counterparts.
This [Copyright] [Patent] [Trademark] Security Agreement may be executed in any number of counterparts and by different parties
in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Signature pages may be detached from multiple separate counterparts and attached to a single
counterpart.
Section 6. Governing
Law. This [Copyright] [Patent] [Trademark] Security Agreement and the rights and obligations of the parties hereto shall be
governed by, and construed and interpreted in accordance with, the law of the State of Delaware without giving effect to any choice
or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Delaware.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF,
each Grantor has caused this [Copyright] [Patent] [Trademark] Security Agreement to be executed and delivered by its duly authorized
officer as of the date first set forth above.
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ACCEPTED AND AGREED
as of the date first above written:
imation
corp.,
as Lender
SCHEDULE I
TO
[COPYRIGHT] [PATENT] [TRADEMARK] SECURITY
AGREEMENT
[Copyright] [Patent] [Trademark] Registrations
1. REGISTERED
[COPYRIGHTS] [PATENTS] [TRADEMARKS]
[Include Registration Number and Date]
2. [COPYRIGHT]
[PATENT] [TRADEMARK] APPLICATIONS
[Include Application Number and Date]
3. IP
AGREEMENTS
[Include complete legal description of
agreement (name of agreement, parties and date)]
Schedule 1 to Guaranty and Security
Agreement
Commercial Tort Claims
None.
Schedule 2 to Guaranty and Security
Agreement
Filings
ENTITY |
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Nexsan Corporation |
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Delaware |
Nexsan Technologies, Inc. |
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Connected Data, Inc. |
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Schedule 3
Location of Inventory, Equipment, Books
and Records
All books and records are located either the locations set forth
below or located at ____________. All inventory and equipment is located at the following:
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Schedule 4 to Guaranty and Security
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Schedule 5 to Guaranty and Security
Agreement
Intellectual Property
Exhibit 10.2
SUBSCRIPTION AGREEMENT
This Subscription Agreement
is entered into and dated as of November 22, 2016 (this “Agreement”), by and between Imation Corp., a Delaware
corporation with offices located at 1099 Helmo Avenue N, Suite 250, Oakdale, Minnesota 55128 (the “Company”)
and Clinton Group, Inc., a Delaware corporation (the “Subscriber”). Capitalized terms not defined below shall
have the meaning as set forth in Section 1.1.
RECITALS
A. The
Company and the Subscriber are each executing and delivering this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506 of
Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the
“SEC”) under the Securities Act.
B. On
the Initial Closing Date (as defined below), the Company, the Subscriber and North Stars Technologies LLC, a Delaware limited liability
company (the “Imation RIA”) shall enter into a Capacity and Services Agreement, in the form attached hereto
as Exhibit A (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Capacity
and Services Agreement”), pursuant to which the Company together with each of its Affiliates, including without limitation,
the Imation RIA, desire to retain the Subscriber to provide certain services and investment capacity in accordance with the terms
and conditions set forth therein.
C. To
induce the Subscriber to provide the Capacity and the Capacity Expansion (each as defined below), the Company wishes to sell and
the Subscriber wishes to purchase, upon the terms and conditions stated in this Agreement, the Capacity Shares (as defined below).
D. In
connection with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit B (as amended, amended and restated, supplemented or otherwise modified
from time to time, the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide
certain registration rights with respect to the Registrable Securities (as defined below) under the Securities Act and the rules
and regulations promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Subscriber agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings set forth in this Section 1.1:
“Affiliate”
of a Person means any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by
or is under common control with the first Person, as such terms are used in and construed under Rule 144 promulgated under the
Securities Act.
“Bloomberg”
means Bloomberg Financial Markets.
“Business Day”
means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
“Capacity Expansion”
has the meaning as set forth in the Capacity and Services Agreement.
“Capacity Shares”
means the Initial Capacity Shares and/or the Subsequent Capacity Shares, as applicable.
“Capacity”
has the meaning as set forth in the Capacity and Services Agreement.
“Closing Bid
Price” means, for any security as of any date, the last closing bid price for such security on the Principal Market,
as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing
bid price, then the last bid price of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price of such
security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg,
the average of the bid prices of any market makers for such security as reported in the OTC Link or “pink sheets” by
OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Bid Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually
determined by the Company and the Subscriber. If the Company and the Subscriber are unable to agree upon the fair market value
of such security, then such dispute shall be resolved pursuant to Section 6.15. All such determinations to be appropriately
adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable
calculation period.
“Common Stock”
means (a) the Company’s shares of Common Stock, par value $0.01 per share, and (b) any share capital into which such Common
Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
“Eligible Market”
means the Principal Market, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, The NYSE MKT
LLC or any OTC listing or quotation.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Governmental
Authority” shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, provincial, local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental division, department, agency, commission, commissioner,
bureau, tribunal, instrumentality, official, ministry, fund, foundation, center, organization, board, unit, body or Person and
any court or other tribunal); or (d) regulatory or self-regulatory organization (including the Principal Market or other applicable
Eligible Market).
“Imation Board
Approval” shall mean the approval of the board of directors of the Company, with any directors who are interested in
the Capacity and Services Agreement or the transactions contemplated thereby or otherwise in the matter being approved recusing
themselves from the discussion and voting on such matter.
“Initial Capacity
Shares” means 12,500,000 shares of Common Stock (as adjusted for any stock split, stock dividend, stock split, stock
combination, reclassification or similar transaction occurring after the date hereof) issuable to the Subscriber on the Initial
Closing Date.
“Lien”
means any mortgage, deed of trust, lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right
or other restrictions of any kind.
“Market Value”
means the Weighted Average Price of the Common Stock on the Trading Day immediately preceding the applicable date of determination.
“Material Adverse
Effect” means any material adverse effect on (i) the business, properties, assets, liabilities, operations, results of
operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole, (ii) the transactions
contemplated hereby, by the Capacity and Services Agreement or by the Registration Rights Agreement or (iii) the authority or ability
of the Company to perform any of its obligations under this Agreement, the Registration Rights Agreement or the Capacity and Services
Agreement.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Principal Market”
means The New York Stock Exchange.
“Registrable
Securities” has the meaning as set forth in the Registration Rights Agreement.
“Services”
has the meaning as set forth in the Capacity and Services Agreement.
“Subsequent
Capacity Shares” means 2,500,000 shares of Common Stock (as adjusted for any stock split, stock dividend, stock split,
stock combination, reclassification or similar transaction occurring after the date hereof) issuable to the Subscriber on the Subsequent
Closing Date.
“Subsidiary”
means any joint venture or entity in which the Company, directly or indirectly, owns any of the capital stock or holds an equity
or similar interest.
“Superior Agreement”
means a written agreement for the provision by a third party registered investment advisor to Imation RIA of services that are
comparable, in all material respects, to the Services (as defined in the Capacity and Services Agreement), which the Company determines,
upon Imation Board Approval, to be more favorable to Imation RIA than the terms of the Capacity and Services Agreement.
“Trading Day”
means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded;
provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade on such exchange
or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on
such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange
or market, then during the hour ending at 4:00:00 p.m., New York time).
“Transaction
Documents” means this Agreement, the Registration Rights Agreement and any other documents, certificates or agreements
executed or delivered in connection with the transactions contemplated by this Agreement.
“Weighted Average
Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal
Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces
is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly
announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” function or, if
the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic
bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as such market
publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as such market
publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price
is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing
ask price of any of the market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets
Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Subscriber. If the Company and the Subscriber are unable to agree upon the fair market
value of such security, then such dispute shall be resolved pursuant to Section 6.15. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable
calculation period.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase
of Capacity Shares. Subject to the satisfaction (or waiver) of the terms and conditions set forth in this Agreement and the
Capacity and Services Agreement, the Company shall issue and sell to the Subscriber, and the Subscriber agrees to purchase from
the Company on the Initial Closing Date (as defined below), the Initial Capacity Shares (the “Initial Closing”).
Subject to the satisfaction (or waiver) of the terms and conditions set forth in this Agreement and the Capacity and Services Agreement,
the Company shall issue and sell to the Subscriber, and the Subscriber agrees to purchase from the Company on the Subsequent Closing
Date (as defined below), the Subsequent Capacity Shares (the “Subsequent Closing” and together with the Initial
Closing, the “Closing”).
2.2 Closings.
The date of the Initial Closing (the “Initial Closing Date”) shall be such date as is mutually agreed to by
the Company and the Subscriber that is within five (5) Business Days of the Stockholder Approval Date (as defined in Section
4.10) after notification of satisfaction (or waiver) of the conditions to the Initial Closing set forth in this Agreement,
at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York 10022. The date of the Subsequent Closing
(the “Subsequent Closing Date” and together with the Initial Closing Date, the “Closing Date”)
shall be the date of the consummation of the Capacity Expansion (as defined in the Capacity and Services Agreement) (or such other
date as is mutually agreed to by the Company and the Subscriber) after notification of satisfaction (or waiver) of the conditions
to the Subsequent Closing set forth in this Agreement, at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York,
New York 10022.
2.3 Issue
Price. The Initial Capacity Shares are being issued to the Subscriber as consideration for the execution and delivery of the
Capacity and Services Agreement by the Subscriber, the Capacity provided by the Subscriber to the Company pursuant to the Capacity
and Services Agreement, and the performance of all obligations thereunder (including, without limitation, the Services) by the
Subscriber. The Subsequent Capacity Shares, if any, are being issued to the Subscriber as consideration for the Capacity Expansion
provided by the Subscriber to the Company pursuant to the Capacity and Services Agreement.
2.4 Form
of Payment. On the Initial Closing Date, the Company shall deliver to the Subscriber one or more stock certificates, evidencing
the Initial Capacity Shares the Subscriber is purchasing, duly executed on behalf of the Company and registered in the name of
the Subscriber or its designee. On the Subsequent Closing Date, if any, the Company shall deliver to the Subscriber one or
more stock certificates, evidencing the Subsequent Capacity Shares the Subscriber is purchasing, duly executed on behalf of the
Company and registered in the name of the Subscriber or its designee.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. The Company hereby represents and warrants as of the date hereof and as of the applicable Closing
Date (except for representations and warranties that speak as of a specific date, which shall be made as of such date) to the Subscriber:
(a) Organization
and Qualification. The Company is a corporation duly organized and validly existing and in good standing under the laws of
the State of Delaware, and has the requisite power and authorization to own its properties and to carry on its business as now
being conducted and as presently proposed to be conducted. The Company is duly qualified as a foreign entity to do business and
is in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not reasonably
be expected to have a Material Adverse Effect.
(b) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated
by each of the Transaction Documents and otherwise to carry out its respective obligations hereunder and thereunder. Other than
the Required Approvals (as defined in Section 3.1(d)), the execution and delivery by the Company of each of the Transaction
Documents to which it is a party and the consummation by it of the transactions contemplated hereunder and thereunder have been
duly authorized by a committee of independent directors of the Company’s Board of Directors and by all other necessary action
on the part of the Company, including, without limitation, by (i) the Company’s Board of Directors determination that the
transactions contemplated by the Transaction Documents and the Capacity and Services Agreement constitute an Exempt Transaction
(as defined in that certain 382 Rights Agreement, dated as of August 7, 2015, between the Company and Wells Fargo Bank, N.A., a
national banking association (the “382 Rights Plan”)) and (ii) the approval of the applicable Capacity Shares
pursuant to Rule 16b-3 as an exempt issuance to a director by deputization (the approvals required by the foregoing clauses (i)
and (ii) are referred to herein as the “Board Approvals”), and other than the Stockholder Approval, no further
consent or action is required by the Company, or its Board of Directors or stockholders. Each Transaction Document has been (or
upon delivery will have been) duly executed by the Company, and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company, enforceable against the Company, in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies
and except as rights to indemnification and to contribution may be limited by federal or state securities law. Assuming, the Subscriber's
representations and warranties set forth in Section 3.2(l) hereof are true and correct as of immediately prior to the Initial
Closing, the transactions contemplated both by the Initial Closing and the Subsequent Closing do not require the approval of the
Continuing Directors (as defined in the Company’s Restated Certificate of Incorporation), and are not deemed a Business Transaction
(as defined in the Company’s Restated Certificate of Incorporation) with a Related Person (as defined in the Company’s
Restated Certificate of Incorporation).
(c) No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Capacity Shares)
do not and will not (i) conflict with or violate any provision of the Company’s or any of its Subsidiaries’ certificate
or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any
of the properties or assets of the Company or any of its Subsidiaries, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or any of its Subsidiaries’ debt or otherwise) or other understanding to which the Company
or any of its Subsidiaries is a party or by which any property or asset of the Company or any of its Subsidiaries is bound or affected,
or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any
Governmental Authority to which the Company or any of its Subsidiaries is subject (including, without limitation, foreign, federal
and state securities laws and regulations and the rules and regulations of the Principal Market), or by which any property or asset
of the Company or any of its Subsidiaries is bound or affected; except in the case of clause (ii) or (iii) above, as would not,
reasonably be expected to result in a Material Adverse Effect.
(d) Filings,
Consents and Approvals. Neither the Company nor any of its Subsidiaries is required to obtain any consent, waiver, authorization,
permit or order of, give any notice to, or make any filing or registration with, any Governmental Authority or other Person in
connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the Stockholder
Approval, the filing by the Company of a Notice of Sale of Securities on Form D with the SEC under Regulation D and state and applicable
Blue Sky (if any) and the filing of any requisite notices and/or applications(s) to the Principal Market for the issuance and sale
of the Capacity Shares and the listing of the Capacity Shares for trading thereon (collectively, the “Required Approvals”).
All Required Approvals have been obtained or effected on or prior to the Initial Closing Date, and neither the Company or any of
its Subsidiaries are aware of any facts or circumstances which might prevent the Company nor any of its Subsidiaries from obtaining
or effecting any of the registration, application or filings contemplated by the Transaction Documents. Except as set forth in
the public filings filed with the SEC that are available to the public through the EDGAR system (the “Public Filings”),
the Company is not in violation of the requirements of the Principal Market and has no Knowledge of any facts or circumstances
which would reasonably be expected to result in the delisting or suspension of the Common Stock in the foreseeable future. The
issuance by the Company of the Capacity Shares shall not have the effect of delisting or suspending the Common Stock from the Principal
Market.
(e) Issuance
of the Capacity Shares. The issuance of the Capacity Shares is duly authorized and, upon issuance in accordance with the terms
of the Transaction Documents. The Capacity Shares will be validly issued, fully paid and non-assessable and free from all preemptive
or similar rights, taxes, Liens and charges with respect to the issue thereof.
(f) Acknowledgment
Regarding Subscriber’s Purchase of Securities. The Company acknowledges and agrees that the Subscriber is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
hereby and thereby. The Company further acknowledges that the Subscriber is not acting as a financial advisor or fiduciary of the
Company or any of its Subsidiaries (or in any similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby.
(g) Equity
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 100,000,000 shares of Common
Stock, of which as of the date hereof, 44,438,778 are issued and outstanding, 790,525 shares are reserved for issuance pursuant
to the Company’s stock option and purchase plans and no shares are reserved for issuance pursuant to securities (other than
the aforementioned options) exercisable or exchangeable for, or convertible into, shares of Common Stock and (ii) 25,000,000 shares
of preferred stock, par value $0.01 per share, of which none are issued and outstanding. 7,308,146 shares of Common Stock are held
in treasury. As of the date hereof, there are 55,561,222 shares of Common Stock authorized and unissued. No securities of the Company
are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the Transaction Documents. All of such outstanding shares
are duly authorized and have been, or upon issuance will be, validly issued and are fully paid and nonassessable. There are no
securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Capacity
Shares. The Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar
plan or agreement.
(h) Certain
Fees. The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’
commissions (other than for persons engaged by the Subscriber or its investment advisor) to any placement agent, broker, financial
advisor or consultant, finder, investment banker, bank or other Person engaged by the Company, the Board of Directors or any committee
thereof relating to or arising out of the transactions contemplated hereby. The Subscriber shall have no obligation with respect
to any fees or with respect to any claims (other than such fees or commissions owed by the Subscriber pursuant to written agreements
executed by the Subscriber which fees or commissions shall be the sole responsibility of the Subscriber) made by or on behalf of
other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(i) Private
Placement; No Integrated Offering; No General Solicitation. Assuming in part the accuracy of the Subscriber’s representations
and warranties set forth in Section 3.2(c)-(g), (i) no registration under the Securities Act is required for the
offer and sale of the Capacity Shares by the Company to the Subscriber under the Transaction Documents, and (ii) the issuance
and sale of the Capacity Shares hereunder does not contravene the rules and regulations of the Principal Market. Assuming in part
the accuracy of the Subscriber’s representations and warranties set forth in Section 3.2, neither the Company nor
any of its Subsidiaries, any of their respective Affiliates, nor any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would require
registration of the issuance of any of the Capacity Shares under the Securities Act, whether through integration with prior offerings
or otherwise or cause this offering of the Capacity Shares to require approval of stockholders of the Company for purposes of the
Securities Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations
of any exchange or automated quotation system on which any of the securities of the Company are listed or designated. Neither the
Company nor any of its Subsidiaries nor their Affiliates, nor any Person acting on its or their behalf, has engaged in any form
of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the
Capacity Shares.
(j) No
Disqualification Events. With respect to the Capacity Shares to be offered and sold hereunder in reliance on Rule 506(b) under
the 1933 Act (“Regulation D Securities”), none of the Company, any of its predecessors, any affiliated issuer,
any director, executive officer, other officer of the Company participating in the offering hereunder, any beneficial owner of
20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter
(as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each,
an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject to any of
the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification
Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished to the Subscriber a copy of any disclosures provided
thereunder.
(k) Application
of Takeover Protections. The Company and its Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, interested stockholder, business combination, poison pill (including any distribution
under a rights agreement, or similar arrangement or plan or other similar anti-takeover provision under the Company’s certificate
or articles of incorporation, bylaws or other organizational or charter documents or the provisions of the Delaware General Corporation
Law (including Section 203 thereof) that is or could become applicable to the Subscriber as a result of the Subscriber and the
Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as
a result of the Company’s issuance of the Capacity Shares and the Subscriber’s ownership of the Capacity Shares. The
Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any stockholder rights
plan, the 382 Rights Plan, or similar arrangement relating to accumulations of beneficial ownership of shares of Common Stock or
a change in control of the Company or any of its Subsidiaries.
(l) Transfer
Taxes. On the applicable Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required
to be paid in connection with the sale and transfer of the Capacity Shares to be sold to the Subscriber hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.
(m) Shell
Company Status. The Company is not, and has never been, an issuer identified in, or subject to, Rule 144(i).
(n) Absence
of Litigation. Except as disclosed in the Public Filings, there is no action, suit, proceeding, inquiry or investigation before
or by the Principal Market, any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any of the
Company’s Subsidiaries or any of the Company’s or its Subsidiaries’ officers or directors, whether of a civil
or criminal nature or otherwise, in their capacities as such, that would reasonably be expected to have a Material Adverse Effect.
(o) Investment
Company Status. Neither the Company nor any of its Subsidiaries is, and upon consummation of the sale of the Securities, will
not be, an “investment company,” an affiliate of an “investment company,” a company controlled by an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter” for,
an “investment company” as such terms are defined in the Investment Company Act of 1940, as amended.
(p) Acknowledgement
Regarding the Subscriber’s Trading Activity. The Company acknowledges and agrees that except as set forth in Section
4.11, (i) the Subscriber has not been asked to agree, nor has the Subscriber agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company
or to hold the Capacity Shares for any specified term; (ii) the Subscriber, and counter-parties in “derivative” transactions
to which any the Subscriber is a party, directly or indirectly, presently may have a “short” position in the Common
Stock and (iii) the Subscriber shall not be deemed to have any affiliation with or control over any arm’s length counter-party
in any “derivative” transaction. The Company further understands and acknowledges that except as set forth in Section
4.11 (a) the Subscriber may engage in hedging and/or trading activities at various times during the period that the Capacity
Shares are outstanding and (b) such hedging and/or trading activities, if any, can reduce the value of the existing stockholder’s
equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted. The Company
acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach of this Agreement, the other
Transaction Documents, the Capacity and Services Agreement or any of the documents executed in connection herewith.
(q) Manipulation
of Price. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of any of the Capacity Shares, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the Capacity Shares, or (iii) paid or agreed to pay to
any person any compensation for soliciting another to purchase any other securities of the Company.
(r) Transfer
Taxes. On the applicable Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are
required to be paid in connection with the issuance, sale and transfer of the Capacity Shares to be sold to the Subscriber hereunder,
if any, will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will
have been complied with.
(s) No
Additional Agreements. The Company does not have any agreement or understanding with the Subscriber with respect to the transactions
contemplated by the Transaction Documents and the Capacity and Services Agreement other than as specified in the Transaction Documents
and the Capacity and Services Agreement.
(t) Disclosure.
Each Public Filing made since January 1, 2012, at the time filed, did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since January 1, 2012, no material event or material circumstance has occurred or material
information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects,
operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation,
requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed
in the Public Filings.
(u) No
Other Representations or Warranties. The Company makes no representations or warranties to the Subscriber in connection with
the transactions contemplated by this Agreement other than those expressly set forth in this Section 3.1.
The Company acknowledges and agrees that it is not relying on any oral or written
representations or warranties of the Subscriber, express or implied, in connection with the transactions contemplated by this Agreement
other than expressly those set forth in this Agreement or in the Capacity and Services Agreement.
3.2 Representations
and Warranties of the Subscriber. The Subscriber hereby represents and warrants as of the date hereof and as of the applicable
Closing Date (except for representations and warranties that speak as of a specific date, which shall be made as of such date)
to the Company as follows:
(a) Organization;
Authority. The Subscriber is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution, delivery and performance
by the Subscriber of the Transaction Documents to which it is a party have been duly authorized by all necessary action on the
part of the Subscriber. Each of the Transaction Documents to which the Subscriber is a party has been duly executed by the Subscriber
and, when delivered by the Subscriber in accordance with terms hereof, will constitute the valid and legally binding obligation
of the Subscriber, enforceable against it in accordance with its terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of applicable creditors’ rights and remedies.
(b) No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Subscriber and the consummation by the
Subscriber of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision
of the Subscriber’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the
Subscriber is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any Governmental Authority to which the Subscriber is subject (including, without limitation, foreign, federal
and state securities laws and regulations); except in the case of clause (ii) or (iii) above, as would not, reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the ability of the Subscriber to perform its obligations
thereunder.
(c) Investment
Intent. The Subscriber is acquiring the Capacity Shares as principal for its own account for investment purposes and not
with a view to distributing or reselling such Capacity Shares or any part thereof in violation of applicable securities laws,
without prejudice, however, to the Subscriber’s right at all times to sell or otherwise dispose of all or any part of
such Capacity Shares in compliance with applicable federal and state securities laws and Section 4.11 hereof. Nothing
contained herein shall be deemed a representation or warranty by the Subscriber to hold the Capacity Shares for any period of
time. The Subscriber understands that the Capacity Shares have not been registered under the Securities Act, and therefore
the Capacity Shares may not be sold, assigned or transferred unless pursuant to (i) an effective registration statement under
the Securities Act with respect thereto or (ii) an available exemption from the registration requirements of the Securities
Act.
(d) Subscriber
Status. At the time the Subscriber was offered the Capacity Shares, it was, and at the date hereof or as of the applicable
Closing Date, as applicable, it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
(e) Experience
of the Subscriber. The Subscriber, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Capacity Shares, and has so evaluated the merits and risks of such investment. The Subscriber is able to bear the economic
risk of an investment in the Capacity Shares and, at the present time, is able to afford a complete loss of such investment.
(f) General
Solicitation. The Subscriber is not purchasing the Capacity Shares as a result of any advertisement, article, notice or other
communication regarding the Capacity Shares published in any newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or, to the Subscriber’s knowledge, any other general solicitation or general advertisement.
(g) Access
to Data. The Subscriber has received and reviewed information about the Company and has had an opportunity to discuss the Company’s
business, management and financial affairs with its management and to review the Company’s facilities. The Subscriber acknowledges
that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the offering of the Capacity Shares and the merits
and risks of investing in the Capacity Shares; (ii) access to information about the Company and its respective financial condition,
results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense
that is necessary to make an informed investment decision with respect to the investment. The foregoing, however, does not limit
or modify the representations and warranties made by the Company in this Agreement or any other provision in this Agreement or
the right of the Subscriber to rely thereon. The Subscriber has sought such accounting, legal and tax advice as it has considered
necessary to make an informed decision with respect to its acquisition of the Capacity Shares.
(h) Transfer
or Resale. The Subscriber understands that except as provided in the Registration Rights Agreement: (i) the Capacity Shares
have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Subscriber shall have delivered to the Company
(if requested by the Company) an opinion of counsel to the Subscriber, in a generally acceptable form, to the effect that such
Capacity Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration,
or (C) the Subscriber provides the Company with reasonable assurance that such Capacity Shares can be sold, assigned or transferred
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule
144”); (ii) any sale of the Capacity Shares made in reliance on Rule 144 may be made only in accordance with the terms
of Rule 144; and (iii) neither the Company nor any other Person is under any obligation to register the Capacity Shares under the
Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.
(i) Reliance
on Exemptions. The Subscriber understands that the Capacity Shares being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon
the truth and accuracy of, and the Subscriber’s compliance with, the representations, warranties, agreements, acknowledgements
and understandings of the Subscriber set forth herein in order to determine the availability of such exemptions and the eligibility
of such Subscriber to acquire the Capacity Shares.
(j) No
Governmental Review. The Subscriber understands that no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Capacity Shares or the fairness or suitability of the investment
in the Capacity Shares nor have such authorities passed upon or endorsed the merits of the offering of the Capacity Shares.
(k) Legends.
The Subscriber understands that the certificates or other instruments representing the Capacity Shares, except as set forth below,
shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of
such stock certificates):
“THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL 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. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCKUP PURSUANT TO THE TERMS OF A SUBSCRIPTION AGREEMENT,
DATED AS OF NOVEMBER 22, 2016, BY AND BETWEEN IMATION CORP. AND CLINTON GROUP INC., AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED DURING THE TERM OF THE LOCKUP, EXCEPT IN ACCORDANCE WITH SUCH SUBSCRIPTION AGREEMENT.”
The legend
set forth above shall be removed (in whole or in part, as applicable), and the Company shall issue a certificate or certificates
with a legend or without such legend to the holder of the Capacity Shares upon which it is stamped or issue to such holder by electronic
delivery at the applicable balance account at The Depository Trust Company (“DTC”), if (i) in connection with
a sale, assignment or other transfer of such Capacity Shares, such holder provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that such sale, assignment or transfer of the Capacity Shares may be made without registration
under the applicable requirements of the Securities Act or (ii) in connection with a sale, assignment or other transfer of such
Capacity Shares pursuant to an effective registration statement or Rule 144, in either case so long as the Lockup (as defined herein)
has lapsed. If the Company shall fail for any reason or for no reason to issue to the holder of the Capacity Shares within three
(3) Trading Days after the occurrence of any of (i) through (ii) above (the initial date of such occurrence, the “Legend
Removal Date”), a certificate without such legend or to issue such Capacity Shares to such holder by electronic delivery
at the applicable balance account at DTC, and if on or after such Trading Day such holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such holder of such Capacity Shares that the holder
anticipated receiving without legend from the Company (a “Buy-In”), then the Company shall, within three (3)
Trading Days after the holder’s request and in the holder’s discretion, either (i) pay cash to the holder in an amount
equal to such holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased
(the “Buy-In Price”), at which point the Company’s obligation to deliver such unlegended Capacity Shares
shall terminate, or (ii) promptly honor its obligation to deliver to such holder such unlegended Capacity Shares as provided above
and pay cash to such holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Bid Price of the Common Stock on the applicable Legend Removal Date. The Company
shall be responsible for the fees of its transfer agent and all DTC fees associated with such issuance.
(l) Holdings
of Subscriber. Assuming the representations and warranties provided by the Company set forth in Section 3.1(g) hereof
are true and correct, as of immediately prior to the Initial Closing, the Subscriber and its Affiliates beneficially own no more
than 10% of the issued and outstanding Common Stock.
(m) No
Other Representations or Warranties. The Subscriber makes no representations or warranties to the Company in connection with
the transactions contemplated by this Agreement other than those expressly set forth in this Section 3.2. The Subscriber
acknowledges and agrees that it is not relying on any oral or written representations or warranties of the Company, express or
implied, in connection with the transactions contemplated by this Agreement other than expressly those set forth in this Agreement
or in the Capacity and Services Agreement.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Register;
Pledge.
(a) The
Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by
notice to each holder of Capacity Shares), a register for the Capacity Shares in which the Company shall record the name and address
of the Person in whose name the Capacity Shares have been issued (including the name and address of each transferee). The Company
shall keep the register open and available at all times during business hours for inspection of the Subscriber or its legal representatives.
(b) The
Company acknowledges and agrees that the Subscriber may from time to time pledge or grant a security interest in some or all of
the Capacity Shares in connection with a bona fide loan pursuant to which all of the Subscriber’s assets are pledged to secure
such loan and, if required under the terms of such agreement, the Subscriber may transfer pledged or secured Capacity Shares to
the pledgees or secured parties, subject to the terms of this Agreement. Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of the pledgee, secured party or pledgor shall be required in connection therewith. Further,
no notice shall be required of such pledge. At the Subscriber’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Capacity Shares may reasonably request in connection with a pledge or transfer of
the Capacity Shares.
4.2 Integration.
None of the Company, its Subsidiaries, their affiliates nor any Person acting on their behalf will take any action or steps that
would require registration of the issuance of any of the Securities under the Securities Act or cause the offering of any of the
Securities to be integrated with other offerings for purposes of any such applicable stockholder approval provisions of the Principal
Market.
4.3 Reporting
Period. Until the date on which the Subscriber shall have sold all of the Capacity Shares (the “Reporting Period”),
the Company shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall
not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would no longer require or otherwise permit such termination.
4.4 Financial
Information. The Company agrees to send the following to each Investor (as defined in the Registration Rights Agreement) during
the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through the
EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, any
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K (or any analogous reports under the Exchange Act) and any registration
statements (other than on Form S-8) or amendments filed pursuant to the Securities Act, (ii) on the same day as the release thereof,
facsimile or e-mailed copies of all press releases issued by the Company or any of its Subsidiaries and (iii) copies of any notices
and other information made available or given to the stockholders of the Company generally, contemporaneously with the making available
or giving thereof to the shareholders.
4.5 Listing
of Capacity Shares. The Company shall (a) prepare and timely file with the Principal Market an additional shares listing
application covering all of the Capacity Shares, (b) cause the Capacity Shares to be approved for listing on the Principal
Market as soon as practicable thereafter, (c) provide to the Subscriber evidence of such listing, and (d) maintain the
listing of the Common Stock on the Principal Market or another Eligible Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligations
under this Section 4.5.
4.6 Form
D and Blue Sky. The Company shall file a Form D with respect to the Capacity Shares as required under Regulation D and to provide
a copy thereof to the Subscriber. The Company shall, on or before the Initial Closing Date, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Capacity Shares for sale to the Subscriber
at each Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification), and shall provide evidence of any such action (if any) so taken to
the Subscriber on or prior to the Initial Closing Date. Without limiting any other obligation of the Company under this Agreement,
the Company shall timely make all filings and reports (if any) relating to the offer and sale of the Capacity Shares required under
all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue
Sky” laws), and the Company shall comply with all applicable federal, state and local laws, statutes, rules, regulations
and the like relating to the offering and sale of the Capacity Shares to the Subscriber.
4.7 Indemnification.
In consideration of the Subscriber’s execution and delivery of the Transaction Documents and acquiring the Capacity Shares
thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Subscriber and each other holder of the Capacity Shares and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’ agents
or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this
Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether
any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising
out of, or relating to (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement
or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated
hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee by a third party (including
for these purposes a derivative action brought on behalf of the Company) and arising out of or resulting from the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or
thereby; provided, that, solely with respect to the Company’s indemnification of the Indemnitees pursuant to the foregoing
clause (c), the Company shall not be required to indemnify Indemnitees for the first $400,000 of such Indemnified Liabilities incurred
by the Indemnitees and shall not be required to indemnify Indemnitees to the extent such cause of action, suit or claim resulted
from the fraud, gross negligence or willful misconduct of any Indemnitee. The Company shall not be obligated to reimburse the Indemnitees
under this Section 4.7 for any Indemnified Liabilities that exceed, in the aggregate, the dollar amount equal to the sum
of (x)(A) the number of Initial Capacity Shares; multiplied by (B) the Closing Bid Price of the Common Stock on the Initial
Closing Date; plus to the extent the Indemnified Liabilities were incurred on or prior to the Subsequent Closing Date, (y),
(A) the number of Subsequent Capacity Shares, multiplied by (B) the Closing Bid Price of the Common Stock on the Subsequent
Closing Date. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. Except as otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under
this Section 4.7 shall be the same as those set forth in Section 6 of the Registration Rights Agreement.
4.8 Stockholders
Rights Plan. No claim will be made or enforced by the Company or any other Person that the Subscriber is an “Acquiring
Person” or any similar term under any stockholders rights plan or similar plan or arrangement in effect or hereafter adopted
by the Company, or that the Subscriber could be deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Capacity Shares under the Transaction Documents or under any other agreement between the Company and the Subscriber.
4.9 Public
Information. At any time during the period commencing from the six (6) month anniversary of the applicable Closing Date and
ending at such time that all of the Capacity Shares, if a registration statement is not available for the resale of all of the
Capacity Shares, may be sold without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance
with Rule 144(c)(1), if the Company shall (i) fail for any reason to satisfy the requirements of Rule 144(c)(1), including, without
limitation, the failure to satisfy the current public information requirements under Rule 144(c) or (ii) if the Company has ever
been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the future, and the Company shall fail to satisfy any
condition set forth in Rule 144(i)(2) (each, a “Public Information Failure”) then, as partial relief for the
damages to any holder of such Capacity Shares by reason of any such delay in or reduction of its ability to sell such Capacity
Shares (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each
such holder an amount in cash equal to one percent (1.0%) of the aggregate Market Value of such Capacity Shares of such holder
on the day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter
until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such Public Information Failure
no longer prevents a holder of such Capacity Shares from selling such Capacity Shares pursuant to Rule 144 without any restrictions
or limitations. The payments to which a holder shall be entitled pursuant to this Section 4.9 are referred to herein as
“Public Information Failure Payments.” Public Information Failure Payments shall be paid on the earlier
of (I) the last day of the calendar month during which such Public Information Failure Payments are incurred and (II) the
third Business Day after the event or failure giving rise to the Public Information Failure Payments is cured. In the event
the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments
shall bear interest at the rate of one percent (1.0%) per month (prorated for partial months) until paid in full. Notwithstanding
anything to the contrary herein or in the Registration Rights Agreement, in no event shall (i) the aggregate amount of Public Information
Failure Payments to a holder of Capacity Shares exceed, in the aggregate, ten percent (10%) of the aggregate Market Value of such
holder’s Capacity Shares on the applicable Closing Date and (ii) the Company be obligated to make both Public Information
Failure Payments and Registration Delay Payments (as defined in the Registration Rights Agreement) in respect of the same securities
and for any same period of time in which a failure giving rise to such payments is deemed to have occurred. Notwithstanding anything
to the contrary herein or in the Registration Rights Agreement, in no event shall the Company be obligated to make a Public Information
Failure Payment if such Public Information Failure resulted solely from the fraud, gross negligence or willful misconduct of the
Subscriber or its stockholders, partners, members, officers, directors or employees.
4.10 Stockholder
Approval. The Company shall provide each stockholder entitled to vote at a special or annual meeting of stockholders of the
Company (the “Stockholder Meeting”), which shall be called as promptly as practicable after the date hereof,
but in no event later than February 15, 2017, or such later date as agreed by the Company and the Subscriber (the “Stockholder
Meeting Deadline”), a proxy statement (the “Proxy Statement”) at the expense of the Company, which
shall be in a form reasonably acceptable to the Subscriber after review by Schulte Roth & Zabel LLP (which fees shall be borne
by the Subscriber), soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of resolutions
(the “Resolutions”) providing for the issuance of all of the Initial Capacity Shares and Subsequent Capacity
Shares as described in the Transaction Documents in accordance with applicable law, the provisions of the Company’s certificate
of incorporation and bylaws and the rules and regulations of the Principal Market (such affirmative approvals being referred to
herein, collectively, as the “Stockholder Approval” and the date such approval is obtained, the “Stockholder
Approval Date”), and the Company shall use its reasonable best efforts to solicit its stockholders’ approval of
such Resolutions and to cause the Board of Directors of the Company to recommend to the stockholders that they approve the Resolutions.
The Company shall be obligated to use its reasonable best efforts to obtain the Stockholder Approval by the Stockholder Meeting
Deadline. The Company shall file the Proxy Statement with the SEC on or prior to December 13, 2016.
4.11 Lock-Up.
For a period of three (3) years from the applicable Closing Date, the Subscriber shall not (a) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of, directly or indirectly, any Capacity Shares or (b) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of the Capacity Shares, whether any
such transaction described in clause (a) or (b) above is to be settled by delivery of Capacity Shares or such other securities,
in cash or otherwise (the “Lockup”). Notwithstanding the foregoing, the Subscriber may transfer Capacity Shares
to any of its Affiliates, provided that such Affiliate(s) agree to be bound in writing by the restrictions set forth in this Section
4.11. For the avoidance of doubt, any shares of Common Stock held by the Subscriber prior to the date hereof and any shares
of Common Stock that the Subscriber may from time to time acquire after the date hereof shall not be subject to the lock-up provisions
of this Section 4.11.
4.12 Notice
of Disqualification Events. The Company will notify the Subscriber in writing, prior to the Closing Date of (i) any Disqualification
Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of time, become a Disqualification
Event relating to any Issuer Covered Person.
4.13 Investment
Company Status. For so long as the Subscriber holds any Capacity Shares, the Company will not be, an “investment company,”
an affiliate of an “investment company,” a company controlled by an “investment company” or an “affiliated
person” of, or “promoter” or “principal underwriter” for, an “investment company” as
such terms are defined in the Investment Company Act of 1940, as amended.
4.14 Break-Up
Fee. In the event the Company does not obtain the Stockholder Approval by the Stockholder Meeting Deadline, the Company shall
promptly pay the Subscriber, in cash by wire transfer of immediately available funds pursuant to wire instructions delivered by
the Subscriber in writing to the Company, a break-up fee equal to $500,000, intended to cover the Subscriber's expenses and the
time devoted by the Subscriber's personnel in connection with the negotiation and execution of the Transaction Documents and the
Capacity and Services Agreement. In addition, the Company may elect not to consummate the Initial Closing if it enters into a Superior
Agreement, provided that in such case the Company shall promptly pay the Subscriber, in cash by wire transfer of immediately available
funds pursuant to wire instructions delivered by the Subscriber in writing to the Company, a break-up fee equal to $1,500,000 (and
shall not be required to pay any break-up fee pursuant to the immediately preceding sentence or pursuant to Section 7.C of the
Capacity and Services Agreement).
4.15 Registration
Eligibility. The Company shall be eligible to register the Registrable Securities for resale by the Subscriber using Form S-3
promulgated under the Securities Act on or prior to the Initial Filing Deadline (as defined in the Registration Rights Agreement).
ARTICLE V.
CLOSING CONDITIONS
5.1 Initial
Closing.
(a) Conditions
to the Subscriber’s Obligation to Close. At the Initial Closing, the following conditions precedent shall have been satisfied
in a manner satisfactory to the Subscriber:
(i) Representations
and Warranties. The representations and warranties of the Company set forth herein and in the Capacity and Services Agreement
shall be true and correct in all respects as of the date when made and as of the Initial Closing Date as though made at that time
and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by the Transaction Documents and the Capacity and Services Agreement to be performed, satisfied or complied with by the
Company at or prior to the Initial Closing Date. The Subscriber shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Initial Closing Date, to the foregoing effect in the form attached hereto as Exhibit
C.
(ii) Transaction
Documents. The Company shall have duly executed and delivered to the Subscriber (i) each of the Transaction Documents
to which it is a party and (ii) the Company shall have duly executed and delivered to the Subscriber the Initial Capacity Shares.
(iii) Legal
Opinion. The Subscriber shall have received the opinion of Winston & Strawn LLP, the Company’s outside counsel, dated
as of the Initial Closing Date, in substantially the form of Exhibit D attached hereto.
(iv) Secretary’s
Certificate. The Company shall have delivered to the Subscriber a certificate, executed by the Secretary of the Company and
dated as of the Initial Closing Date, as to (i) the resolutions consistent with Section 3.1(b), including, without limitation,
the Board Approvals, as adopted by the Company’s Board of Directors in a form reasonably acceptable to the Subscriber, (ii)
the Company’s Restated Certificate of Incorporation and (iii) the Company’s Bylaws, each as in effect at the Initial
Closing, in the form attached hereto as Exhibit E.
(v) Capacity
and Services Agreement. The Company and the Imation RIA shall have duly executed and delivered to the Subscriber the Capacity
and Services Agreement.
(vi) Listing.
The Common Stock (i) shall be designated for quotation or listed on an Eligible Market and (ii) shall not have been suspended,
as of the Initial Closing Date, by the SEC or the applicable Eligible Market from trading on such Eligible Market nor shall suspension
by the SEC have been threatened, as of the Initial Closing Date, in writing by the SEC.
(vii) Listing
of Additional Shares. The Company shall have submitted to the Principal Market a Listing of Additional Shares notification
or such corresponding notification to such other applicable Eligible Market, if applicable, in connection with the transactions
contemplated hereby and the applicable Eligible Market shall have approved, orally or in writing, the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the Initial Capacity Shares, if applicable.
(viii) Stockholder
Approval. The Company shall have obtained the Stockholder Approval.
(ix) No
MAE. No Material Adverse Effect has occurred.
(x) Fairness
Opinion. The Company shall have received an opinion as to the fairness to the Company of the transaction contemplated by the
Transaction Documents and the Capacity and Services Agreement from a financial point of view, issued by an independent accounting,
appraisal or investment banking firm of national standing (the “Fairness Opinion”).
(xi) Good
Standing. The Company shall have delivered to the Subscriber a certificate evidencing the formation and good standing of the
Company in the State of Delaware issued by the Secretary of State of such jurisdiction, as of a date within ten (10) days of the
Initial Closing Date.
(xii) Consents
and Approvals. The Company shall have obtained all governmental, regulatory, corporate or third party consents and approvals,
if any, necessary for the consummation of the transactions contemplated by the Transaction Documents and the Capacity and Services
Agreement, including, without limitation, the issuance and sale of the Initial Capacity Shares.
(xiii) Payment
of Certain Fees. All fees, expenses and other amounts owed pursuant to that certain letter agreement dated as of April 29,
2016 by and between the Company and the Subscriber regarding Clinton Lighthouse Equity Strategies Fund (Offshore), Ltd. shall have
been paid and the Company shall no longer owe any compensation to the Subscriber pursuant thereto.
(xiv) Other
Documents. The Company shall have delivered to the Subscriber such other documents relating to the transactions contemplated
by this Agreement as to the Subscriber or its counsel may reasonably request.
(b) Conditions
to the Company’s Obligation to Close. At the Initial Closing, the following conditions precedent shall have been satisfied
in a manner satisfactory to the Company:
(i) Representations
and Warranties. The representations and warranties of the Subscriber set forth herein and in the Capacity and Services Agreement
shall be true and correct in all respects as of the date when made and as of the Initial Closing Date as though made at that time
and the Subscriber shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by the Transaction Documents and the Capacity and Services Agreement to be performed, satisfied or complied with by the
Subscriber at or prior to the Initial Closing Date.
(ii) Transaction
Documents. The Subscriber shall have duly executed and delivered to the Company each of the Transaction Documents to which
it is a party.
(iii) Stockholder
Approval. The Company shall have obtained the Stockholder Approval.
(iv) Fairness
Opinion. The Company shall have received the Fairness Opinion.
(v) Capacity
and Services Agreement. The Subscriber shall have duly executed and delivered to the Company and the Imation RIA the Capacity
and Services Agreement.
5.2 Subsequent
Closing.
(a) Conditions
to the Subscriber’s Obligation to Close. At the Subsequent Closing, the following conditions precedent shall have been
satisfied in a manner satisfactory to the Subscriber:
(i) Representations
and Warranties. The representations and warranties of the Company set forth herein and in the Capacity and Services Agreement
shall be true and correct in all respects as of the date when made and as of the Subsequent Closing Date as though made at that
time and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions
required by the Transaction Documents and the Capacity and Services Agreement to be performed, satisfied or complied with by the
Company at or prior to the Subsequent Closing Date. The Subscriber shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Subsequent Closing Date, to the foregoing effect in the form attached hereto as Exhibit
C.
(ii) Transaction
Documents. The Company shall have duly executed and delivered to the Subscriber (i) each of the Transaction Documents
to which it is a party and (ii) the Company shall have duly executed and delivered to the Subscriber the Subsequent Capacity Shares.
(iii) Legal
Opinion. The Subscriber shall have received the opinion of Winston & Strawn LLP, the Company’s outside counsel, dated
as of the Subsequent Closing Date, in substantially the form of Exhibit D attached hereto.
(iv) Secretary’s
Certificate. The Company shall have delivered to the Subscriber a certificate, executed by the Secretary of the Company and
dated as of the Subsequent Closing Date, as to (i) the resolutions consistent with Section 3.1(b), including, without limitation,
the Board Approvals, as adopted by the Company’s Board of Directors in a form reasonably acceptable to the Subscriber, (ii)
the Company’s Restated Certificate of Incorporation and (iii) the Company’s Bylaws, each as in effect at the Subsequent
Closing, in the form attached hereto as Exhibit E.
(v) Listing.
The Common Stock (i) shall be designated for quotation or listed on an Eligible Market and (ii) shall not have been suspended,
as of the Subsequent Closing Date, by the SEC or the applicable Eligible Market from trading on such Eligible Market nor shall
suspension by the SEC have been threatened, as of the Subsequent Closing Date, in writing by the SEC.
(vi) Listing
of Additional Shares. The Company shall have submitted to the Principal Market a Listing of Additional Shares notification
or such corresponding notification to such other applicable Eligible Market in connection with the transactions contemplated hereby
and the applicable Eligible Market shall have approved, orally or in writing, the transactions contemplated by this Agreement and
the other Transaction Documents and the issuance of the Subsequent Capacity Shares.
(vii) Stockholder
Approval. The Company shall have obtained the Stockholder Approval.
(viii) No
MAE. No Material Adverse Effect has occurred.
(ix) Fairness
Opinion. The Company shall have received the Fairness Opinion.
(x) Good
Standing. The Company shall have delivered to the Subscriber a certificate evidencing the formation and good standing of the
Company in the State of Delaware issued by the Secretary of State of such jurisdiction, as of a date within ten (10) days of the
Subsequent Closing Date.
(xi) Consents
and Approvals. The Company shall have obtained all governmental, regulatory, corporate or third party consents and approvals,
if any, necessary for the consummation of the transactions contemplated by the Transaction Documents and the Capacity and Services
Agreement, including, without limitation, the issuance and sale of the Subsequent Capacity Shares.
(xii) Other
Documents. The Company shall have delivered to the Subscriber such other documents relating to the transactions contemplated
by this Agreement as to the Subscriber or its counsel may reasonably request.
(b) Conditions
to the Company’s Obligation to Close. At the Subsequent Closing, the following conditions precedent shall have been satisfied
in a manner satisfactory to the Company:
(i) Representations
and Warranties. The representations and warranties of the Subscriber set forth herein and in the Capacity and Services Agreement
shall be true and correct in all respects as of the date when made and as of the Subsequent Closing Date as though made at that
time and the Subscriber shall have performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by the Transaction Documents and the Capacity and Services Agreement to be performed, satisfied or complied
with by the Subscriber at or prior to the Subsequent Closing Date.
(ii) Transaction
Documents. The Subscriber shall have duly executed and delivered to the Company each of the Transaction Documents to which
it is a party.
(iii) Stockholder
Approval. The Company shall have obtained the Stockholder Approval.
(iv) Fairness
Opinion. The Company shall have received the Fairness Opinion.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees
and Expenses. Each party to this Agreement shall bear its own expenses in connection with the sale of the Capacity Shares to
the Subscriber.
6.2 Entire
Agreement; Amendments. This Agreement and the other Transaction Documents supersede all other prior oral or written agreements
between the Subscriber, the Company, their Affiliates and Persons acting on their behalf with respect to the matters discussed
herein, and this Agreement, the other Transaction Documents and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and therein. There are no restrictions, promises, warranties
or undertakings, other than those set forth or referred to herein and therein. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the Subscriber, and any amendment to this Agreement made in conformity
with the provisions of this Section 6.2 shall be binding on the Subscriber and all holders of Capacity Shares. No provision
hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. No such amendment
shall be effective to the extent that it applies to less than all of the holders of the Capacity Shares then outstanding. The Company
has not, directly or indirectly, made any agreements with the Subscriber relating to the terms or conditions of the transactions
contemplated by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the
Company confirms that, except as set forth in this Agreement and the Capacity and Services Agreement, the Subscriber has not made
any commitment or promise or has any other obligation to the Company. No consideration shall be offered or paid to any Person to
amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the same consideration
(other than the reimbursement of legal fees) also is offered to all of the parties to the Transaction Documents.
6.3 Notices.
Any and all notices or other communications or deliveries required or permitted to be provided under this Agreement shall be in
writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Section prior to 6:30 p.m.
(New York City time) on a Trading Day, (b) the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Agreement later than 6:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (c) the Trading Day following
the date of mailing, if sent by nationally recognized overnight courier service, specifying next Business Day delivery or (d) upon
actual receipt by the party to whom such notice is required to be given if delivered by hand, in each case properly addressed to
the party to receive the same. The address for such notices and communications shall be as follows:
If to the Company: |
Imation Corp.
1099 Helmo Avenue N, Suite 250
Oakdale, Minnesota 55128
Telephone: 651-340-8062
Attention: Tavis Morello, General Counsel
Email: tmorello@imation.com |
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With copies (for information purposes only) to: |
Winston & Strawn LLP
200 Park Avenue
New York, New York 10166-4193
Telephone: (212) 294-5336
Facsimile: (212) 294-4700
Attention: Joel L. Rubinstein, Esq.
Email: jrubinstein@winston.com |
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Weinberg Zareh & Geyerhahn LLP
45 Rockefeller Plaza, Suite 2000
New York, New York 10111
Attention: Seth B. Weinberg, Esq.
Email: seth@wzgllp.com |
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If to the Transfer Agent |
Wells Fargo Shareowner Services
1110 Centre Pointe Curve Suite 101
Mendota Heights MN 55120
MAC N9173-010
Telephone: 1-855-217-6361
Attention: Lindsey Fischer
Email: wfssrelationshipmanagement@wellsfargo.com |
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If to the Subscriber: |
Clinton Group, Inc.
510 Madison Ave., 9th Floor
New York, New York 10022
Attention: George
Hall
Daniel Strauss
Telephone: (212) 825-0400
Facsimile: (646) 346-5650
E-mail: geh@clinton.com
dstrauss@clinton.com |
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With a copy (for information purposes only) to: |
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Attention: David Efron, Esq.
Eleazer Klein, Esq.
Email: david.efron@srz.com
eleazer.klein@srz.com |
, or to such other address,
facsimile number and/or email address to the attention of such other Person as the recipient party has specified by written notice
given to each other party two (2) days prior to the effectiveness of such change in accordance with this Section 6.3.
Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically
or electronically generated by the sender’s facsimile machine or e-mail transmission containing the time, date, recipient
facsimile number or e-mail address and an image of the first page of such transmission or (iii) provided by a courier or overnight
courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (a), (b), (c) or (d) above, respectively.
6.4 Construction.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. No specific representation or warranty shall limit the generality or applicability of a more general
representation or warranty. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity
to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.
6.5 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
the Subscriber. The Subscriber may assign its rights under this Agreement to any Person to whom the Subscriber assigns or transfers
any Capacity Shares, provided such transferee agrees in writing to be bound, with respect to the transferred Capacity Shares, by
the provisions hereof and of the applicable Transaction Documents that apply to the Subscriber. Notwithstanding anything to the
contrary herein, the Capacity Shares may be pledged in accordance with Section 4.1(b) hereof.
6.6 No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except that
each Indemnitee is an intended third party beneficiary of Section 4.7 and may enforce the provisions of such Section directly
against the parties with obligations thereunder.
6.7 Governing
Law; Venue; Waiver of Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.8 Survival.
The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Capacity
Shares, as applicable.
6.9 Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being
understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by an e-mail which contains a portable document format (.pdf) filed of an executed signature page, such signature page shall
create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the
same force and effect as if such signature page were an original thereof.
6.10 Severability.
If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
6.11 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever the Subscriber exercises a right, election, demand or option under a Transaction Document and
the Company does not timely perform its related obligations within the periods therein provided, then the Subscriber may rescind
or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election
in whole or in part without prejudice to its future actions and rights.
6.12 Remedies.
In addition to being entitled to exercise all rights provided herein, in any of the other Transaction Documents or granted by law,
including recovery of damages, the Subscriber and the Company will be entitled to specific performance under the Transaction Documents.
Any Person having any rights under any provision of this Agreement or in any of the other Transaction Documents shall be entitled
to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement or such other Transaction Documents and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under any of
the Transaction Documents, any remedy at law may prove to be inadequate relief to the Subscriber. The Company therefore agrees
that the Subscriber shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other
equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and
without posting a bond or other security. Failure of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
6.13 Payment
Set Aside. To the extent that the Company makes a payment or payments to the Subscriber hereunder or pursuant to any of the
other Transaction Documents or the Subscriber enforces or exercises its rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company
or any of its Subsidiaries by a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation
or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment
had not been made or such enforcement or setoff had not occurred.
6.14 Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
6.15 Dispute
Resolution. In the case of a dispute as to the determination of the Closing Bid Price or Weighted Average Price, the Company
shall submit the disputed determinations via facsimile or electronic mail within three (3) Business Days of the event giving rise
to such dispute to the Subscriber. If the Subscriber and the Company are unable to agree upon such determination of the Closing
Bid Price or Weighted Average Price, within three (3) Business Days of such disputed determination being submitted to the Subscriber,
then the Company shall, within three (3) Business Days submit via facsimile or electronic mail the disputed determination of the
Closing Bid Price or Weighted Average Price to an independent, reputable investment bank selected by the Subscriber and approved
by the Company, such approval not to be unreasonably withheld, conditioned or delayed. The Company shall cause at its expense the
investment bank to perform the determinations and notify the Company and the Subscriber of the results no later than five (5) Business
Days from the time it receives the disputed determinations. Such investment bank’s determination shall be binding upon all
parties absent demonstrable error.
[Remainder of Page Intentionally Left
Blank]
IN WITNESS WHEREOF,
the Subscriber and the Company have caused their respective signature page to this Agreement to be duly executed as of the date
first written above.
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COMPANY: |
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IMATION CORP. |
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By: |
/s/ Robert
B. Fernander |
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Name: Robert B. Fernander |
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Title: Interim Chief Executive Officer |
[Signature Page to Subscription Agreement]
IN WITNESS WHEREOF,
the Subscriber and the Company have caused their respective signature page to this Agreement to be duly executed as of the date
first written above.
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SUBSCRIBER: |
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CLINTON GROUP, INC. |
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By: |
/s/ George
Hall |
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Name: George Hall |
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Title: Chief Executive Officer |
[Signature Page to Subscription Agreement]
EXHIBITS
Exhibit A |
Form of Capacity and Services Agreement |
Exhibit B |
Form of Registration Rights Agreement |
Exhibit C |
Form of Officer’s Certificate |
Exhibit D |
Form of Opinion of Company Counsel |
Exhibit E |
Form of Secretary’s Certificate |
EXHIBIT A
Form of Capacity and Services
Agreement
CAPACITY AND SERVICES AGREEMENT
By and Among
CLINTON GROUP, INC., IMATION
CORP. AND North Stars Technologies LLC
________________ ____, 2017
CAPACITY AND SERVICES AGREEMENT,
dated as of ______________ ____, 2017, by and among:
CLINTON GROUP, INC.,
a Delaware corporation (the “Service Provider”);
IMATION
CORP., a Delaware corporation (“Imation”);
and
North
Stars Technologies LLC, a Delaware limited liability company (“Imation RIA”).
WITNESSETH:
WHEREAS, Imation
RIA intends to manage certain assets of Imation and certain assets of third party clients (“Imation Capital”);
and
WHEREAS, Imation
RIA desires to retain the Service Provider to provide certain services and investment capacity to Imation RIA, and the Service
Provider desires to provide such services and investment capacity to Imation RIA, in accordance with the terms and conditions of
the Transaction Documents (as defined below);
NOW, THEREFORE,
in consideration of the premises and of the mutual covenants and agreements herein contained, the Service Provider, Imation and
Imation RIA (the “Parties” and each a “Party”) agree as follows:
In this Agreement, the following words and phrases
shall have the following respective meanings, unless the context otherwise requires.
“Account” shall have the meaning
set forth in Section 10.A.
“Advisers Act” shall mean the Investment
Advisers Act of 1940, as amended, and the rules promulgated thereunder.
“Affiliate”
shall mean as to any Person, any other Person, that controls, is controlled by, or is under common control with, such Person. For
these purposes, “control” means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement”
shall mean this Capacity and Services Agreement, dated as of __________ ____, 2017, by and among the Service Provider, Imation
and Imation RIA.
“Bloomberg”
means Bloomberg Financial Markets.
“Business Day”
means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
“Capacity”
shall have the meaning set forth in Section 3.B.
“Capacity Expansion”
shall have the meaning set forth in Section 3.B.
“Capacity Extension”
shall have the meaning set forth in Section 3.B.
“Capacity-Related Consultation
Services” shall have the meaning set forth in Section 4.A.
“Clinton Fund”
shall have the meaning set forth in Section 3.B.
“Clinton Indemnified
Party” shall have the meaning set forth in Section 11.C.
“Common Stock”
means (a) Imation’s shares of Common Stock, par value $0.01 per share, and (b) any share capital into which such Common Stock
shall have been changed or any share capital resulting from a reclassification of such Common Stock.
“Confidential Information”
shall have the meaning set forth in Section 10.A.
“Designated Persons”
shall have the meaning set forth in Section 10.B.
“Disclosing Party”
shall have the meaning set forth in Section 10.A.
“Governmental Authority”
shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any
nature; (b) federal, state, provincial, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department, agency, commission, commissioner, bureau, tribunal, instrumentality,
official, ministry, fund, foundation, center, organization, board, unit, body or Person and any court or other tribunal); or (d)
regulatory or self-regulatory organization.
“Imation”
shall have the meaning set forth in the preamble of this Agreement.
“Imation Board Approval”
shall mean the approval of the board of directors of Imation, with any directors who are interested in this Agreement or the transactions
contemplated hereby or otherwise in the matter being approved recusing themselves from the discussion and voting on such matter.
“Imation Capital”
shall have the meaning set forth in the recitals to this Agreement.
“Imation Indemnified
Party” shall have the meaning set forth in Section 11.D.
“Imation RIA”
shall have the meaning set forth in the preamble of this Agreement.
“Imation RIA Launch-Related
Services” shall have the meaning set forth in Section 4.B.
“Initial Closing Date”
shall have the meaning set forth in the Subscription Agreement.
“Initial Term”
shall have the meaning set forth in Section 3.B.
“Invested Equity”
shall mean the aggregate gross asset value of the funds made available to the Service Provider by Imation and Imation RIA for discretionary
management by the Service Provider, taking into account net capital appreciation and net capital depreciation thereon, and disregarding
any leverage applied to such funds.
“Lien” means
any mortgage, deed of trust, lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other
restrictions of any kind.
“Losses” shall
have the meaning set forth in Section 11.C.
“Party” and
“Parties” shall have the meanings set forth in the recitals to this Agreement.
“Person” shall
mean any individual, partnership, corporation, limited liability company, unincorporated organization or association, trust (including
the trustees thereof in their capacity as such) or other entity (including any governmental entity) organized under the laws of
(or, in the case of individuals, resident in) any jurisdiction.
“Principal Market”
means The New York Stock Exchange.
“Proceeding”
shall mean an action, claim, suit, inquiry, investigation or proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or, to the applicable Party’s knowledge, threatened in writing.
“Registration Rights
Agreement” means a Registration Rights Agreement between the Service Provider and Imation, in the form attached hereto
as Exhibit A to the Subscription Agreement.
“Required Approvals”
shall have the meaning set forth in Section 8.A.e.
“Revenue Share Transaction”
shall have the meaning set forth in Section 6.
“SEC” shall
mean the United States Securities and Exchange Commission.
“Service Provider”
shall have the meaning set forth in the preamble of this Agreement.
“Services”
means the Investment Management Services, the Capacity-Related Consultation Services and the Imation RIA Launch-Related Services.
“Subscription Agreement”
means the subscription agreement between the Service Provider and Imation dated as of November ___, 2016.
“Subsidiary”
means any joint venture or entity in which Imation, directly or indirectly, owns any of the capital stock or holds an equity or
similar interest.
“Transaction Documents”
means this Agreement, the Subscription Agreement, the Registration Rights Agreement and any other documents, certificates or agreements
executed or delivered in connection with the transactions contemplated hereby and thereby, including without limitation any further
agreements entered into between the Service Provider and Imation RIA pursuant to which Invested Equity is invested in accordance
with this Agreement.
| 2. | APPOINTMENT OF SERVICE PROVIDER; GOVERNANCE AND MANAGEMENT OF IMATION RIA. |
| A. | Appointment of Service Provider. Imation RIA hereby appoints the Service Provider to provide
the Services and the Capacity to Imation RIA, and the Service Provider hereby agrees to provide the Services and the Capacity to
Imation RIA, in accordance with this Agreement. |
| B. | Imation RIA Governance and Management. Upon the Initial Closing Date, Imation RIA’s
initial board of directors will be comprised of Joseph De Perio, Daniel Strauss, Donald H. Putnam, Alex Spiro and one additional
or substitute director, as shall be mutually agreed upon by the Parties in a separate writing. The Service Provider shall, upon
request from Imation RIA, provide reasonable assistance and consultation to Imation RIA regarding the selection and retention of
the executive management team for Imation RIA. For the avoidance of doubt, Imation RIA will determine the leverage and underlying
strategies in which the Imation Capital is invested, and will have complete discretion over how the Imation Capital will be invested
and the structure in which it will be held, provided that the provision of Investment Management Services by the Service Provider
shall be subject to the terms of this Agreement, including without limitation Section 3A. The Imation Capital, including the Invested
Equity, may be held in one or more private investment funds or similar investment vehicles managed by Imation RIA and/or one or
more separately managed accounts managed by Imation RIA. The Imation Capital may utilize a single investment strategy or a combination
of investment strategies. |
| 3. | INVESTMENT MANAGEMENT SERVICES; CAPACITY |
| A. | Investment Management Services. During the Term, Imation RIA may place under the Service
Provider’s management from time to time, subject at all times to the supervision of the Service Provider, the Invested Equity
which shall be held in a private investment fund or a similar investment vehicle sponsored by Imation RIA or a managed account
established by Imation RIA, subject to the terms of this Agreement, with terms not specified in this Agreement to be as mutually
agreed in writing by the Parties. The services provided by the Service Provider with respect to such Invested Equity pursuant to
this Agreement are referred to herein as the “Investment Management Services.” |
If and to the extent Imation
RIA requests the Service Provider to provide Investment Management Services for Invested Equity, the Service Provider shall, subject
to the supervision of Imation RIA, manage such Invested Equity, on a discretionary basis, using the Service Provider’s quantitative
equity strategy, split evenly between long and short, with a leverage ratio not to exceed 5X per side, unless otherwise approved
by the Service Provider and Imation RIA in writing (subject to Imation Board Approval).
Imation RIA shall give the Service
Provider at least 45 days’ prior written notice of the date that it first allocates Invested Equity to the Service Provider
so that the Service Provider may attend to the necessary arrangements to manage the Invested Equity. Imation RIA shall give the
Service Provider prior written notice of all additional contributions of Invested Equity to the Service Provider’s management.
The Service Provider agrees
that it shall not knowingly accept any investments in any investment vehicle or account managed by the Service Provider or any
of its Affiliates directly from Imation RIA’s third party clients with whom the Service Provider does not have a pre-existing
relationship, without the prior written consent of Imation RIA.
At all times during the Term,
the Service Provider shall maintain sufficient personnel and facilities to perform its obligations under this agreement in accordance
with industry standards.
| B. | Capacity. Subject to the exceptions set forth below in this paragraph, the Invested Equity
shall not exceed $1 billion in the aggregate (the “Capacity”). For the avoidance of doubt, Imation’s current
investment in Clinton Lighthouse Equity Strategies Fund (Offshore), Ltd. (the “Clinton Fund”), as the amount
of such investment is adjusted to reflect net profits, losses, redemptions and subscriptions, counts towards Imation’s and
Imation RIA’s usage of the Capacity. |
Imation RIA shall be permitted
to cause the Invested Equity to exceed the Capacity by any amount up to an additional $500 million for a maximum Capacity of up
to $1.5 billion upon Imation Board Approval and at least 45 days prior written notice to the Service Provider (the “Capacity
Expansion”). The Capacity rights shall survive for up to five years from the Initial Closing Date (the “Initial
Term”); provided that Imation RIA will have the option to extend the Capacity for two subsequent one-year periods upon
Imation Board Approval and at least 45 days’ prior written notice to the Service Provider (individually, each a “Capacity
Extension,” collectively, the “Capacity Extensions”; the Initial Term and the Capacity Extensions,
to the extent triggered, are collectively referred to as the “Term”).
In the event that the Invested
Equity (for the avoidance of doubt, including returns from such investment) must be reduced in order to avoid exceeding the Capacity,
(i) Imation’s assets will be withdrawn before the capital of Imation RIA’s third party investors is withdrawn, (ii)
the Service Provider shall identify and offer capacity in other strategies managed by the Service Provider at commercially reasonable
rates no greater than would be charged another client of Service Provider having the same amount invested as such excess, and (iii)
at the election of Imation RIA, its third party clients may continue to invest with the Service Provider such that the Capacity
is exceeded, provided only that such excess capacity shall be provided by the Service Provider as needed on commercially reasonable
terms at no greater fees and performance compensation than would be charged to another client of the Service Provider having the
same amount invested as such excess.
The calculation of the amount
of Capacity utilized shall be based on the fair value of the Invested Equity, as calculated by a nationally recognized third-party
fund administrator (“Administrator”), in consultation with the Service Provider, and in accordance with the Service
Provider’s valuation policies and U.S. generally accepted accounting principles, as issued and amended from time to time.
For the avoidance of doubt, the Administrator shall be a third-party service provider to Imation RIA. Imation RIA shall have the
right to review (i) the Service Provider’s valuation policies and/or (ii) the valuation of any specific investment. The Service
Provider will provide Imation RIA with a written estimate of the amount of Capacity utilized based on the Administrator’s
valuation of Invested Equity on a monthly basis, as soon as reasonably practicable following its receipt of the Administrator’s
calculation of fair value of the Invested Equity.
| A. | Capacity-Related Consultation Services. During the Term and for a 3-month transition period
thereafter, upon the request of Imation RIA, the Service Provider will consult with Imation RIA regarding operational, management
and other matters relating to the enumerated responsibilities of Imation RIA set forth in this Section 4.A, solely to the extent
that the following directly relate to Imation RIA’s use of the Capacity. Imation RIA and its third party service providers
shall in all cases, remain solely responsible for the following: (i) account reconciliation, (ii) P&L reporting, (iii) position
monitoring, (iv) cash management, (v) collateral management, (vi) liaising with the administrator, counsel and auditor engaged
by Imation RIA, (vii) fund formation documentation, (viii) regulatory filing assistance, (ix) IT support and maintenance and (x)
investor relations (such services, the “Capacity-Related Consultation Services”). For the avoidance of doubt,
the Service Provider shall have no responsibility for the management, compliance, operation and administration of Imation RIA. |
| B. | Imation RIA Launch-Related Services. Upon the request of Imation RIA, the Service Provider
will consult with Imation RIA regarding Imation RIA’s management and compliance functions for up to one year commencing no
later than 90 days from the date hereof (such services, the “Imation RIA Launch-Related Services”), provided
that Imation RIA shall remain solely responsible for such functions. |
| C. | Meetings with Imation RIA. During the Term, at the request of Imation RIA, the Service Provider
shall make one of its representatives available to address questions that Imation RIA may have regarding the Service Provider’s
obligations with respect to the Capacity and/or the Services. |
| D. | Provision of Information. The Service Provider shall furnish such reports, evaluations,
certifications, financial statements, information or analyses to Imation RIA with respect to the Invested Equity as Imation RIA
and the Service Provider may agree following Imation RIA’s request from time to time. For the avoidance of doubt, the Service
Provider is not obligated to provide Imation RIA with any information with respect to any discretionary investment funds or accounts
managed by the Service Provider or its Affiliates (whether discretionary or non-discretionary) of the Service Provider’s
other individual or institutional clients. Imation RIA acknowledges and agrees that the Service Provider shall provide the types
of information described above to Imation RIA only to the extent that such provision does not conflict with confidentiality agreements,
confidentiality considerations or privacy requirements. |
| E. | No Legal Advice. The Parties (i) agree that the Services provided by the Service Provider
pursuant to this Agreement shall not constitute legal advice, and (ii) acknowledge that Imation RIA shall consult with its legal,
tax or other advisors, as deemed necessary in its discretion. |
| F. | Exclusivity. During the Initial Term (and any Capacity Extension) the Service Provider will
not provide opportunities or services substantially similar to the Capacity-Related Consultation Services (regardless of pricing)
to any other publicly traded or quoted entity, or any Affiliate thereof. |
| 5. | COMPENSATION
AND EXPENSES. |
As consideration for the Capacity
and the Services, the Parties shall enter into, and perform their respective obligations set forth in, the other Transaction Documents,
which obligations include the obligation for Imation to make the following payments:
| (i) | Imation shall issue to the Service Provider
12,500,000 shares of Common Stock (as adjusted for any stock split, stock dividend, stock combination, reclassification or similar
transaction occurring after the date hereof) on the Initial Closing Date, pursuant to, and subject to the terms and conditions
of, the Subscription Agreement. |
| (ii) | If Imation RIA triggers the Capacity Expansion, Imation
shall issue to the Service Provider 2,500,000 shares of Common Stock (as adjusted for any stock split, stock dividend, stock combination,
reclassification or similar transaction occurring after the date hereof) within 10 Business Days of receipt of an invoice
from the Service Provider, pursuant to, and subject to the terms and conditions
of, the Subscription Agreement. |
| (iii) | If Imation RIA triggers the first Capacity Extension, Imation shall pay the Service Provider $1.75
million for the first Capacity Extension ($2.5 million if Imation RIA has previously opted for the Capacity Expansion) within 10
Business Days of receipt of an invoice from the Service Provider. Further, if Imation RIA triggers the second Capacity Extension,
Imation shall pay the Service Provider an additional $1.75 million for the first Capacity Extension ($2.5 million if Imation RIA
has previously opted for the Capacity Expansion) within 10 Business Days of receipt of an invoice from the Service Provider. |
| B. | No Other Fees. Except as provided in Section 5.A., none of the Service Provider or its Affiliates
shall be entitled to any asset-based fee, performance-based fee or any other fee or form of compensation, payable in cash or Common
Stock, from Imation, Imation RIA or their Affiliates, for its provision of the Capacity and the Services, nor shall the Invested
Equity be subject to any asset-based fee, performance-based fee/allocation or any other fee payable or allocable to the Service
Provider or its Affiliate(s) from the Clinton Fund. Nothing in this Agreement shall be construed as prohibiting any Party from
pursuing any remedies available at law or in equity for breach or threatened breach, including the recovery of damages. |
| C. | Expenses. Each of the Parties shall pay its own legal and other expenses relating to the
negotiation and execution of this Agreement. The Service Provider shall bear its own operating and overhead expenses, including
any expenses attributable to the Capacity and Services provided hereunder (such as salaries, bonuses, rent, office, utilities and
administrative expenses, depreciation and amortization, and auditing expenses), and Imation RIA shall not be responsible for such
expenses. Except to the extent constituting operating and overhead expenses of the Service Provider, Imation RIA will be responsible
for, and will promptly reimburse the Service Provider for, the following reasonable third-party direct expenses borne by the Service
Provider attributable to its performance of the Services and provision of the Capacity: legal, marketing, administrative and accounting
costs and expenses and research costs and expenses excluding data. |
| A. | This Agreement shall commence as of the date hereof and, subject to the rights of the Parties to
terminate this Agreement as set forth below, shall remain in full force and effect until the termination of the Term; provided
that Sections 10 through 14 and 18 through 20 hereof shall survive any termination of this Agreement, including any termination
contemplated under Sections 7.B and 7.C below. |
| B. | Notwithstanding Section 7.A above, Imation and Imation RIA may terminate this Agreement at any
time upon 30 days prior written notice to the Service Provider upon the occurrence of any of the following events: (i) if the Service
Provider’s registration as an investment adviser with the SEC is revoked, suspended, terminated, or not renewed, or limited
or qualified in any respect; (ii) if the Service Provider sells or otherwise transfers its advisory business, or all or a substantial
portion of its assets, all or a substantial portion of its trading systems or methods, or its goodwill, to any individual or entity
that is not an Affiliate of the Service Provider; (iii) if the Service Provider fails in a material manner to perform any of its
obligations under this Agreement or the other Transaction Documents and, after being given written notice thereof by Imation RIA,
fails to cure such breach within 30 days of such notice, (iv) if the Service Provider engages in any act of fraud or embezzlement
in connection with the Services; (v) the Service Provider’s gross negligence or willful misconduct in connection with the
Services; or (vi) the Service Provider makes a general assignment for the benefit of its creditors, institutes proceedings to be
adjudicated voluntarily bankrupt, consents to the filing of a petition of bankruptcy against it, is adjudicated by a court of competent
jurisdiction as being bankrupt or insolvent, seeks reorganization under any bankruptcy law or consents to the filing of a petition
seeking such reorganization or has a decree entered against it by a court of competent jurisdiction appointing a receiver liquidator,
trustee, or assignee in bankruptcy or in insolvency; provided that in the event that Imation and Imation RIA terminate this Agreement
in accordance with clause (i) or clause (vi) of this paragraph, the Service Provider shall promptly pay to Imation, in cash by
wire transfer of immediately available funds pursuant to wire instructions delivered by Imation in writing to the Service Provider,
an amount equal to $2,000,000. |
| C. | Notwithstanding Section 7.A above, the Service Provider may terminate this Agreement at any time
upon reasonable prior written notice to Imation RIA upon the occurrence of any of the following events: (i) a breach of Section
8.A.g or 8.A.h; (ii) if, at such time when Imation RIA is required under applicable state law or the Advisers Act to be registered
as an investment adviser, Imation RIA is not so registered or, if after and during such time when Imation RIA is required to be
registered as an investment adviser, Imation RIA’s registration with the applicable state securities authority or the SEC
is revoked, suspended, terminated, or not renewed, or limited or qualified in any respect; (iii) if Imation RIA sells or otherwise
transfers its advisory business, or all or a substantial portion of its assets, all or a substantial portion of its trading systems
or methods, or its goodwill, to any individual or entity that is not an Affiliate of Imation; (iv) if Imation or Imation RIA fails
in a material manner to perform any of its obligations under the Transaction Documents and, after being given written notice thereof
by the Service Provider, fails to cure such breach within 30 days of such notice; or (v) Imation or Imation RIA makes a general
assignment for the benefit of its creditors, institutes proceedings to be adjudicated voluntarily bankrupt, consents to the filing
of a petition of bankruptcy against it, is adjudicated by a court of competent jurisdiction as being bankrupt or insolvent, seeks
reorganization under any bankruptcy law or consents to the filing of a petition seeking such reorganization or has a decree entered
against it by a court of competent jurisdiction appointing a receiver liquidator, trustee, or assignee in bankruptcy or in insolvency. |
8. REPRESENTATIONS,
WARRANTIES AND COVENANTS.
A. Each of Imation and Imation
RIA, as set forth below, hereby represents, warrants and covenants to the Service Provider that:
| (a) | Imation RIA (i) has the sole discretion and responsibility to direct the allocation of the Invested
Equity, and (ii) has received a copy of the Service Provider’s Form ADV Part 2 prior to its execution of this Agreement. |
| | |
| (b) | Imation RIA has the sole responsibility for all aspects of its business, including management,
compliance, operation and administration, and has retained the Service Provider to provide it with the Services as set forth herein. |
| | |
| (c) | Each of Imation and Imation RIA has the requisite corporate power and authority to enter into and
to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its respective obligations
hereunder and thereunder. Other than the Required Approvals, as defined below, the execution and delivery by Imation and Imation
RIA of this Agreement and the consummation by it of the transactions contemplated hereunder have been duly authorized by all necessary
action on the part of Imation and Imation RIA, and no further consent or action is required by Imation or its board of directors.
This Agreement has been duly executed by, and, when delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of, Imation and Imation RIA, enforceable against Imation and Imation RIA, in accordance with its terms, except
as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies
and except as rights to indemnification and to contribution may be limited by federal or state securities law. |
| | |
| (d) | The execution, delivery and performance of this Agreement by Imation and Imation RIA and the consummation
by Imation and Imation RIA of the transactions contemplated hereby, do not and will not (i) conflict with or violate any provision
of Imation’s or Imation RIA’s certificate or articles of incorporation, bylaws or other organizational or charter documents,
(ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, indenture or instrument to which Imation or Imation RIA is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Authority to which Imation
or Imation RIA is subject (including, without limitation, foreign, federal and state securities laws and regulations and the rules
and regulations of the Principal Market); except in the case of clause (ii) or (iii) above, as would not, reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the ability of Imation or Imation RIA to perform fully
on a timely basis its obligations under this Agreement. |
| (e) | Neither Imation nor Imation RIA is required to obtain any consent, waiver, authorization, permit
or order of, give any notice to, or make any filing or registration with, any Governmental Authority or other Person in connection
with the execution, delivery and performance by Imation and Imation RIA of this Agreement, other than any filings required in connection
with Imation RIA’s registration with the SEC or any state securities authority as a registered investment adviser, such filings
with the SEC and pursuant to state securities laws as may be required in the determination of its counsel and other than any filings
that may be required under the Registration Rights Agreement (collectively, the “Required Approvals”). All Required
Approvals have been obtained or effected timely, and neither Imation nor Imation RIA are aware of any facts or circumstances which
might prevent Imation or Imation RIA from obtaining or effecting any of the registration, application or filings contemplated by
the Transaction Documents. Imation RIA is registered as an investment adviser to the extent required by applicable state law and
the Advisers Act and shall remain so registered throughout the Term. |
| | |
| (f) | To the best of Imation’s and Imation RIA’s knowledge, there has not been and there
is not pending any Proceeding to which Imation or Imation RIA is or was a party, or to which any of the assets of Imation or Imation
RIA are or were subject and which resulted in or would reasonably be expected to result in a material adverse effect on the condition,
financial or otherwise, or business of Imation or Imation RIA. |
| | |
| (g) | The conduct of the business of Imation RIA, its investment advisory affiliates, and the vehicles
and accounts managed by Imation RIA, complies, and shall at all times comply, with applicable law, except where the failure to
so comply would not reasonably be expect to have a material adverse effect on the Service Provider, Imation RIA, its investment
advisory affiliates, or the vehicles or accounts managed by Imation RIA. |
| | |
| (h) | Each of Imation and Imation RIA shall inform the Service Provider promptly as soon as Imation or
Imation RIA is notified that it has become subject to a Proceeding materially affecting (or which may, with the passage of time,
materially affect) the business of Imation or Imation RIA. |
| | |
| (i) | Imation RIA represents, warrants and covenants that the Invested Equity shall not, and, for the
duration of this Agreement, such Invested Equity will not constitute “plan assets” for the purpose of Section 3(42)
of the Employee Retirement Income Security Act of 1974, as amended and any regulations promulgated thereunder, without the prior
written consent of the Service Provider. |
| | |
| (j) | Imation RIA represents, warrants and covenants that the Invested Equity shall not, and, for the
duration of this Agreement, such Invested Equity will not constitute assets of an investment company registered under the U.S.
Investment Company Act of 1940, as amended, without the prior written consent of the Service Provider. |
| (k) | Each of Imation and Imation RIA understands that the representations, warranties, agreements, undertakings
and acknowledgments made by Imation and Imation RIA in this Agreement shall be relied upon by the Service Provider for its compliance
with various securities laws. If this Agreement or the Services contemplated herein gives rise to any compliance obligations for
the Service Provider other than its requirement to be a registered investment adviser, each of Imation and Imation RIA shall upon
reasonable request by the Service Provider cooperate with the Service Provider to address and resolve any such issues in good faith. |
| | |
| (l) | Each of Imation and Imation RIA shall inform the Service Provider promptly if Imation, Imation
RIA or any of their respective officers becomes aware of any change in the foregoing representations, warranties and covenants,
or of any material breach of this Agreement by Imation. |
B. The Service Provider hereby
represents, warrants and covenants to Imation and Imation RIA that:
| (a) | The Service Provider is an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization with the requisite power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution,
delivery and performance by the Service Provider of this Agreement and the consummation by it of the transactions contemplated
hereunder have been duly authorized by all necessary action on the part of the Service Provider. This Agreement has been duly executed
by the Service Provider, and, when delivered by the Service Provider in accordance with the terms hereof, will constitute the valid
and legally binding obligation of the Service Provider, enforceable against it in accordance with its terms, except as such enforceability
may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies. |
| | |
| (b) | The execution, delivery and performance of this Agreement by the Service Provider and the consummation
by the Service Provider of the transactions contemplated hereby does not and will not (i) conflict with or violate any provision
of the Service Provider’s certificate or articles of incorporation, bylaws or other organizational or charter documents,
(ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, indenture or instrument to which the Service Provider is a party, or (iii) result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Authority to which the Service
Provider is subject (including, without limitation, foreign, federal and state securities laws and regulations); except in the
case of clause (ii) or (iii) above, as would not, reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the ability of the Service Provider to perform its obligations thereunder. |
| (c) | The Service Provider (i) has all federal, state and foreign governmental, regulatory and exchange
licenses, approvals and memberships and has effected all filings and registrations with federal, state and foreign governmental
and regulatory agencies required to perform its obligations under this Agreement and to at all times comply in all respects with
all applicable laws, rules and regulations, and (ii) shall maintain all such registrations, licenses, approvals and memberships
to the extent that the failure to so comply would have a materially adverse effect on the Service Provider’s ability to act
as described herein. |
| | |
| (d) | To the best of the Service Provider’s knowledge, there has not been and there is not pending
any Proceeding to which the Service Provider is or was a party, or to which any of the assets of the Service Provider are or were
subject and which resulted in or might reasonably be expected to result in any material adverse change in the condition, financial
or otherwise, business or prospects of the Service Provider. |
| | |
| (e) | The Service Provider shall inform Imation and Imation RIA promptly as soon as the Service Provider
is notified that it has become subject to a Proceeding materially affecting (or which may, with the passage of time, materially
affect) the business of the Service Provider. |
| | |
| (f) | The Service Provider understands that the representations, warranties, agreements, undertakings
and acknowledgments made by the Service Provider in this Agreement shall be relied upon by Imation and Imation RIA for their compliance
with various securities laws. |
| | |
| (g) | The Service Provider shall inform Imation or Imation RIA promptly if the Service Provider or any
of its officers becomes aware of any change in the foregoing representations, warranties and covenants, or of any material breach
of this Agreement by the Service Provider. |
| 9. | INDEPENDENT
CONTRACTOR. |
For all purposes of this Agreement,
the Service Provider shall be an independent contractor and not an employee or dependent agent of Imation RIA; nor shall anything
herein be construed as making Imation RIA a partner or co-venturer with the Service Provider or any of its Affiliates or clients.
Except as expressly provided in this Agreement, the Service Provider shall have no authority to bind, obligate or represent Imation
RIA.
| 10. | CONFIDENTIALITY
AND DATA PROTECTION. |
| A. | Each Party covenants that, subject to the proviso at the end of this sentence, during the effectiveness
of this Agreement and for two (2) years following the termination of this Agreement in accordance with its terms, it will (a) hold
in strictest confidence non-public and proprietary information, whether written, oral or otherwise, recorded and transmitted by
any means, relating to this Agreement or received by a Party from the Disclosing Party (as defined below) or its Affiliates (whether
or not marked as confidential), including, without limitation, the terms hereof; trade secrets of the Disclosing Party; software
of the Disclosing Party; proprietary technology of the Disclosing Party; information relating to historical and current performance,
investments, processes, procedures, clients, investors, trading positions, models, financial and investment strategies, and other
activities of the Disclosing Party or its Affiliates and any accounts or vehicles managed by any Disclosing Party (each, an “Account”);
the terms and structure of each Account; the clients of or Accounts managed by any Disclosing Party or its Affiliates; organizational,
financial, accounting, operational or other information relating to the Disclosing Party or its Affiliates or its Accounts and
their respective directors, officers, members, partners, shareholders, affiliates, employees, agents, representatives or service
providers; information relating to transactions hereunder considered and/or effected by either Party; the business, policies, and
plans of Imation and/or the Service Provider, and any other aspects of the Parties’ performance or compensation under this
Agreement (“Confidential Information”), whether received prior or subsequent to the execution of this Agreement;
(b) exercise reasonable care to safeguard the confidentiality of the Confidential Information under all circumstances; (c) not
disclose Confidential Information to any third party without the express written consent of the Party that initially disclosed
the same (“Disclosing Party”); (d) not use the Confidential Information for any purpose other than to fulfill
its obligations pursuant to this Agreement or, with respect to Imation or any of its Designated Persons (as defined below), for
evaluation or investment purposes, and (e) not use the Disclosing Party’s Confidential Information to copy or reverse engineer,
or attempt to derive the composition or underlying information or structure of the Disclosing Party; provided, that the restriction
set forth in this clause (e) shall survive the termination of this Agreement indefinitely. Notwithstanding the foregoing, “Confidential
Information” does not include any information which: (i) is in the public domain at the time of disclosure or becomes
available thereafter to the public without restriction, and in either case not as a result of the act or omission of the receiving
party; (ii) is rightfully obtained by the receiving party from a third party without restriction as to disclosure pursuant to applicable
law or written agreement; (iii) is lawfully in the possession of the receiving party at the time of disclosure by the Disclosing
Party and not otherwise subject to restriction on disclosure by written agreement; (iv) is approved for disclosure by prior written
authorization of the Disclosing Party; or (v) is demonstrated by the receiving party to have been previously developed independently
and separately by the receiving party without use of the Disclosing Party’s Confidential Information. |
| B. | Each Party agrees to restrict the disclosure of Confidential Information to its partners, directors,
officers, employees, representatives, advisors or service providers that (a) “need to know” and (b) have an employment,
contractual or professional duty to keep Confidential Information confidential (collectively the “Designated Persons”)
and to cause the Designated Persons to hold Confidential Information in strictest confidence. Each Party shall be responsible for
any breach of this Section 10 by any of its Designated Persons. |
| C. | When disclosure of Confidential Information of the Disclosing Party is required by law (including
legal process), governmental regulation (including, without limitation, any applicable securities exchange regulations), any self-regulatory,
regulatory or taxing authority having jurisdiction over either Party, the receiving party required to disclose such Confidential
Information shall, to the extent permitted by law or regulation, promptly give the Disclosing Party notice of such requirements
and, to the extent reasonable under the circumstances and permitted by law or regulation, (i) consult with the Disclosing Party
in advance of disclosure as to the form, nature, and purpose of such disclosure, (ii) only disclose such Confidential Information
as is required to be disclosed by applicable laws, (iii) to the extent permissible, request to restrict the further disclosure
of the Confidential Information required to be disclosed, and (iv) cooperate in any legal action initiated by the Disclosing Party,
provided that such cooperation shall not be unduly burdensome, to seek a protective order to prevent such disclosure. |
| D. | Each Party shall only use the other Parties’ names, in any written materials or oral discussion
(in connection with the Invested Equity or this Agreement) with the other Parties’ prior written consent, which shall not
be unreasonably withheld, save for the documentation or other communications which are for the other Parties’ internal purposes
only, unless required for legal or regulatory reasons, or required by the other Party’s advisors and/or service providers
in order to render service to such Party. |
| 11. | SCOPE OF LIABILITY; INDEMNIFICATION. |
| A. | No Clinton Indemnified Party (as defined in Section 11.C below) shall be liable, responsible or
accountable in damages or otherwise to Imation or its shareholders for any action taken or failure to act on behalf of Imation
within the scope of the Services to be provided by the Service Provider pursuant to this Agreement, unless such action or omission
was performed or omitted fraudulently, or constituted willful misconduct or gross negligence. |
| B. | No Imation Indemnified Party (as defined in Section 11.D below) shall be liable, responsible or
accountable in damages or otherwise to the Service Provider or its Affiliates for any action taken or failure to act pursuant to
this Agreement, unless such action or omission was performed or omitted fraudulently, or constituted willful misconduct or gross
negligence. |
| C. | Imation will, to the maximum extent permitted under applicable law, indemnify and hold harmless
the Service Provider, any Person controlling, controlled by or under common control with the Service Provider or any of its Affiliates
and each of their respective members, partners, principals, managers, officers, employees, agents, consultants and the legal representatives
of any of them (each, a “Clinton Indemnified Party”), from and against any loss or expense suffered or sustained
by a Clinton Indemnified Party arising out of the Services and/or Capacity provided hereunder, including, without limitation, any
judgment, settlement, attorneys’ fees and other costs or expenses incurred in connection with the defense of any actual or
threatened Proceeding (collectively, “Losses”), provided that such Losses did not result from the fraud, gross
negligence or willful misconduct of a Clinton Indemnified Party. Clinton Indemnified Parties will be indemnified with respect to
gross negligence, dishonesty or bad faith of any broker or agent of such Clinton Indemnified Party, provided that such broker or
agent was selected, engaged or retained by such Clinton Indemnified Party in good faith. Imation will advance to any Clinton Indemnified
Party attorneys’ fees and other costs and expenses incurred in connection with the defense of any Proceeding for which such
Clinton Indemnified Party is entitled to be indemnified by Imation pursuant to this Agreement; provided, that it receive a written
acknowledgement in form and substance reasonably acceptable to Imation that such Clinton Indemnified Party shall promptly repay
to Imation the amount of any such advance paid to it if it shall be determined by a court order that such Clinton Indemnified Party
was not entitled to be indemnified by Imation in connection with such action or proceeding. The Clinton Indemnified Parties may
consult with counsel and accountants in respect of the services provided to Imation hereunder, and be fully protected and justified
in any action or inaction which is taken in accordance with the advice or opinion of such counsel or accountants, provided that
they will have been selected in good faith. The foregoing provisions will survive the termination of this Agreement. |
| D. | The Service Provider will, to the maximum extent permitted under applicable law, indemnify and
hold harmless Imation, Imation RIA, their Affiliates and each of their respective members, partners, principals, managers, officers,
employees, agents, consultants and the legal representatives of any of them (each, an “Imation Indemnified Party”),
from and against any Losses suffered or sustained by an Imation Indemnified Party arising out of the fraud, gross negligence or
willful misconduct of a Clinton Indemnified Party. The Service Provider and/or its Affiliate(s) will advance to any Imation Indemnified
Party attorneys’ fees and other costs and expenses incurred in connection with the defense of any Proceeding for which such
Imation Indemnified Party is entitled to be indemnified by the Service Provider pursuant to this Agreement; provided, that they/it
receive a written acknowledgement in form and substance reasonably acceptable to the Service Provider and/or its Affiliate(s) that
such Imation Indemnified Party shall promptly repay to the Service Provider and/or its Affiliate(s) the amount of any such advance
paid to it if it shall be determined by a court order that such Imation Indemnified Party was not entitled to be indemnified by
the Service Provider in connection with such Proceeding. The Imation Indemnified Parties may consult with counsel and accountants
in respect of its obligations under this Agreement, and be fully protected and justified in any action or inaction which is taken
in accordance with the advice or opinion of such counsel or accountants, provided that they will have been selected in good faith.
The foregoing provisions will survive the termination of this Agreement. |
| E. | Notwithstanding any of the foregoing to the contrary, the provisions of this Section 11 will not
be construed so as to provide for the indemnification of any Clinton Indemnified Party or any Imation Indemnified Party for any
liability (including liability under U.S. Federal securities laws which, under certain circumstances, impose liability even on
Persons that act in good faith), to the extent (but only to the extent) that such indemnification would be in violation of applicable
law, but will be construed so as to effectuate the foregoing provisions to the fullest extent permitted by law. |
| 12. | ENTIRE AGREEMENT; AMENDMENTS. |
This Agreement and the other
Transaction Documents supersede all other prior oral or written agreements between the Service Provider, Imation, Imation RIA,
their respective Affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement,
the other Transaction Documents and the instruments referenced herein and therein contain the entire understanding of the Parties
with respect to the matters covered herein and therein. There are no representations, promises, warranties or undertakings, other
than as set forth or referred to herein and therein. No provision of this Agreement may be amended other than by an instrument
in writing signed by Imation, Imation RIA and the Service Provider, and any amendment to this Agreement made in conformity with
the provisions of this Section 12 shall be binding on the Service Provider. No provision hereof may be waived other than by an
instrument in writing signed by the Party against whom enforcement is sought. Neither Imation nor Imation RIA has, directly or
indirectly, made any agreements with the Service Provider relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, each of Imation
and the Imation RIA confirms that, except as set forth in the Transaction Documents, the Service Provider has not made any commitment
or promise or has any other obligation to Imation or the Imation RIA. The only duties and obligations of the Parties are as specifically
set forth in the Transaction Documents, and no other duties or obligations shall be implied in fact, law or equity, or under any
principle of fiduciary obligation. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents unless the same consideration (other than the reimbursement of legal fees)
also is offered to all of the Parties to the Transaction Documents.
The rights and obligations hereunder
shall not, except as otherwise expressly provided herein, be assignable, transferable or delegable without the written consent
of the other Party hereto and any attempted assignment, transfer or delegation thereof without such consent shall be void; provided,
that a Party will not unreasonably withhold consent for an assignment by a Party to its Affiliate. For purposes of this Section
13, with respect to the Service Provider, the term “assignment” shall have the meaning defined in Section 202(a)(1)
of the Advisers Act.
Any and all notices or other
communications or deliveries required or permitted to be provided under this Agreement shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile
or e-mail at the facsimile number or e-mail address specified in this Section 14 prior to 6:30 p.m. (New York City time) on a Trading
Day (as defined in the Subscription Agreement), (b) the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Agreement later than 6:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (c) the Trading Day following the
date of mailing, if sent by nationally recognized overnight courier service, specifying next Business Day delivery or (d) upon
actual receipt by the Party to whom such notice is required to be given if delivered by hand, in each case properly addressed to
the Party to receive the same. The address for such notices and communications shall be as follows:
If to Imation: |
Imation Corp.
1099 Helmo Avenue N, Suite
250
Oakdale, Minnesota 55128
Telephone: (651) 340-8062
Attention: Tavis Morello, General Counsel
Email: tmorello@imation.com
|
|
|
If to Imation RIA: |
North Stars Technologies LLC
1099 Helmo Avenue N, Suite
250
Oakdale, Minnesota 55128
Telephone: (651) 340-8062
Attention: Tavis Morello, General
Counsel
Email: tmorello@imation.com |
|
|
With copies (for information purposes only) to: |
Winston &
Strawn LLP
200 Park Avenue
New York, New York 10166-4193
Telephone: (212) 294-5336
Facsimile: (212) 294-4700
Attention: Joel L. Rubinstein,
Esq.
Email: jrubinstein@winston.com
Weinberg Zareh & Geyerhahn
LLP
45 Rockefeller Plaza, Suite
2000
New York, New York 10111
Attention: Seth B. Weinberg,
Esq.
Email: seth@wzgllp.com |
|
|
If to the Service Provider: |
Clinton Group,
Inc.
510 Madison Ave., 9th Floor
New York, New York 10022
Attention: George Hall
Daniel Strauss
Telephone: (212) 825-0400
Facsimile: (646) 346-5650
E-mail: geh@clinton.com
dstrauss@clinton.com |
With a copy (for information purposes only) to: |
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
Attention: David Efron,
Esq.
Eleazer Klein, Esq.
Email: david.efron@srz.com
eleazer.klein@srz.com
|
, or to such other address, facsimile
number and/or email address to the attention of such other Person as the recipient party has specified by written notice given
to each other party two (2) days prior to the effectiveness of such change in accordance with this Section 14. Written confirmation
of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically
generated by the sender’s facsimile machine or e-mail transmission containing the time, date, recipient facsimile number
or e-mail address and an image of the first page of such transmission, or (iii) provided by a courier or overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (a), (b), (c) or (d) above, respectively.
This Agreement may be executed
in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each Party and delivered to the other Party, it being understood that all Parties need not
sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains
a portable document format (.pdf) filed of an executed signature page, such signature page shall create a valid and binding obligation
of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature
page were an original thereof.
| 16. | NO IMPLIED
REPRESENTATIONS OR WARRANTIES. |
The Service
Provider makes no representations or warranties as to the sufficiency of the Capacity or the Services or its investment policies
and procedures or their suitability for any particular purpose which Imation may have. No express or implied warranty or representation
is given by the Service Provider as to the performance or profitability of any particular investments or other property forming
part of, or constituting the Invested Equity or any other investments of Imation with the Service Provider. It is possible that
Imation may incur losses at any time with respect to assets invested with the Service Provider. Imation makes no implied representations
or warranties except for those expressly provided herein.
| 17. | DISCLOSURE
OF CONFLICT OF INTERESTS. |
Imation acknowledges
that the Service Provider may engage, invest and participate in, and otherwise enter into, other business ventures of any kind,
nature and description with others, and Imation agrees that no additional disclosure shall be required in that regard, except as
may be required by law. The Service Provider and its Affiliates and any of their respective members, partners, officers, employees
shall devote so much of their time to the provision of Services hereunder as in the judgment of the Service Provider the provision
of such Services shall reasonably require, and none of the Service Provider or its Affiliates shall be obligated to do or perform
any act or thing in connection with this Agreement not expressly set forth herein. Nothing herein contained in this Section 17
shall be deemed to preclude the Service Provider or its Affiliates from exercising investment responsibility, from engaging directly
or indirectly in any other business or from directly or indirectly purchasing, selling, holding or otherwise dealing with any securities
and instruments for the account of any such other business, for their own accounts, for any of their family members or for other
clients. Persons associated with the Service Provider or its Affiliates have an ownership interest in Imation as well as Accounts
managed by the Service Provider. Furthermore, certain Affiliates of the Service Provider may have greater financial interest in
the performance of such other Accounts than the performance of the Invested Equity. Imation shall not have any right to participate
in any manner in any profits or income earned or derived by or accruing to the Service Provider or any Affiliate thereof from the
conduct of any business or from any transaction in securities or instruments effected by the Service Provider or such Affiliate
for any Account.
The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. No specific
representation or warranty shall limit the generality or applicability of a more general representation or warranty. The Parties
agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise this Agreement and, therefore,
the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments hereto.
| 19. | NO THIRD-PARTY
BENEFICIARIES. |
This Agreement is intended for
the benefit of the Parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may
any provision hereof be enforced by, any other Person, except that each Clinton Indemnified Party and each Imation Indemnified
Party is an intended third party beneficiary of the indemnification provisions hereof and may enforce such provisions directly
against the Parties with obligations thereunder.
| 20. | GOVERNING
LAW; VENUE; WAIVER OF JURY TRIAL. |
All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each
Party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York,
Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is improper. Each Party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such
Party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
[Signature page follows]
IN WITNESS WHEREOF,
the Parties have executed this Agreement as of the day and year first above written.
|
CLINTON GROUP, INC.
By:
Name: George Hall
Title: Chief Executive Officer
|
|
|
|
IMATION CORP.
By:
Name:
Title: |
|
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|
|
|
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NORTH STARS TECHNOLOGIES LLC
By:
Name:
Title: |
EXHIBIT B
Form of Registration Rights
Agreement
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS
AGREEMENT (this "Agreement"), dated as of [●], 2017, by and between Imation Corp., a Delaware corporation
with offices located at 1099 Helmo Avenue N, Suite 250, Oakdale, Minnesota 55128 (the "Company"), and Clinton
Group, Inc., a Delaware corporation (the "Subscriber").
RECITALS
A. In
connection with the Subscription Agreement by and among the parties hereto, dated as of November 22, 2016 (the "Subscription
Date") (as amended from time to time. the "Subscription Agreement"), the Company has agreed, upon the
terms and subject to the conditions of the Subscription Agreement, to issue and sell to the Subscriber (i) on the Initial Closing
Date (as defined below), 12,500,000 shares of the Company's common stock, par value $0.01 per share (the "Common Stock")
(as adjusted for any stock split, stock dividend, stock combination, reclassification or similar transaction occurring after the
Subscription Date) upon the consummation of the Capacity (as defined below) (the "Initial Capacity Shares") and
(ii) on the Subsequent Closing Date (as defined below), if any, an additional 2,500,000 shares of Common Stock (as adjusted for
any stock split, stock dividend, stock combination, reclassification or similar transaction occurring after the Subscription Date)
upon the consummation of the Capacity Expansion (the "Subsequent Capacity Shares").
B. In
accordance with the terms of the Subscription Agreement, the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended (the "1933 Act") and the rules and regulations thereunder, or any similar successor
statute, and applicable state securities laws.
NOW, THEREFORE,
in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and the Subscriber hereby agree as follows:
1. Definitions.
Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings set forth in the Subscription Agreement. As used in
this Agreement, the following terms shall have the following meanings:
(a) "Additional
Effective Date" means the date the Additional Registration Statement is declared effective by the SEC.
(b) "Additional
Effectiveness Deadline" means the date which is the earlier of (x) sixty (60) calendar days after the earlier of the Additional
Filing Date and the Additional Filing Deadline and (y) the fifth (5th) Business Day after the date the Company is notified (orally
or in writing, whichever is earlier) by the SEC that such Additional Registration Statement will not be reviewed or will not be
subject to further review; provided, however, that if the Additional Effectiveness Deadline falls on a Saturday,
Sunday or other day that the SEC is closed for business, the Additional Effectiveness Deadline shall be extended to the next Business
Day on which the SEC is open for business.
(c) "Additional
Filing Date" means the date on which the Additional Registration Statement is filed with the SEC.
(d) "Additional
Filing Deadline" means if Cutback Shares are required to be included in any Additional Registration Statement, the later
of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately
preceding Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date, the Subsequent Effective
Date or the most recent Additional Effective Date, as applicable.
(e) "Additional
Registrable Securities" means, (i) any Cutback Shares not previously included on a Registration Statement, and (ii) any
capital stock of the Company issued or issuable with respect to the Capacity Shares or the Cutback Shares, as applicable, as a
result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise.
(f) "Additional
Registration Statement" means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale any Additional Registrable Securities.
(g) "Additional
Required Registration Amount" means any Cutback Shares not previously included on a Registration Statement, all subject
to adjustment as provided in Section 2(g).
(h) "Business
Day" means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
(i) "Capacity"
has the meaning as set forth in the Capacity and Services Agreement.
(j) "Capacity
and Services Agreement" shall have the meaning set forth in the Subscription Agreement.
(k) "Capacity
Expansion" has the meaning as set forth in the Capacity and Services Agreement.
(l) "Capacity
Shares" means the Initial Capacity Shares and/or the Subsequent Capacity Shares, as applicable.
(m) "Cutback
Shares" means any of the Initial Required Registration Amount, the Subsequent Required Registration Amount or the Additional
Required Registration Amount of Registrable Securities not included in any Registration Statements previously declared effective
hereunder as a result of a limitation on the maximum number of shares of Common Stock permitted to be registered by the staff of
the SEC pursuant to Rule 415. The number of Cutback Shares shall be allocated pro rata among the Investors.
(n) "effective"
and "effectiveness" refer to a Registration Statement that has been declared effective by the SEC and is available
for the resale of the Registrable Securities required to be covered thereby.
(o) "Effective
Date" means the Initial Effective Date, the Subsequent Effective Date and the Additional Effective Date, as applicable.
(p) "Effectiveness
Deadline" means the Initial Effectiveness Deadline, the Subsequent Effectiveness Deadline and the Additional Effectiveness
Deadline, as applicable.
(q) "Eligible
Market" means the Principal Market, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market,
The NYSE MKT LLC or any OTC listing or quotation.
(r) "Filing
Deadline" means the Initial Filing Deadline, the Subsequent Filing Deadline and the Additional Filing Deadline, as applicable.
(s) "Initial
Closing Date" shall have the meaning set forth in the Subscription Agreement.
(t) "Initial
Effective Date" means the date that the Initial Registration Statement has been declared effective by the SEC.
(u) "Initial
Effectiveness Deadline" means the date which is the earlier of (x) the third (3rd) year anniversary of the
Initial Closing Date and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever
is earlier) by the SEC that such Initial Registration Statement will not be reviewed or will not be subject to further review;
provided, however, that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC
is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open
for business.
(v) "Initial
Filing Date" means the date on which the Initial Registration Statement is filed with the SEC.
(w) "Initial
Filing Deadline" means the date which one hundred fifty (150) calendar days immediately preceding the date that is the
third (3rd) year anniversary of the Initial Closing Date.
(x) "Initial
Registrable Securities" means (i) the Initial Capacity Shares issued and (ii) any capital stock of the Company issued
or issuable with respect to the Initial Capacity Shares as a result of any stock split, stock dividend, recapitalization, exchange
or similar event or otherwise.
(y) "Initial
Registration Statement" means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of Initial Registrable Securities.
(z) "Initial
Required Registration Amount" means the number of Initial Capacity Shares issued on the Initial Closing Date, subject
to adjustment as provided in Section 2(g).
(aa) "Investor"
means the Subscriber or any transferee or assignee thereof to whom the Subscriber assigns its rights in accordance with this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.
(bb) "Person"
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.
(cc) "Principal
Market" means The New York Stock Exchange.
(dd) "register,"
"registered," and "registration" refer to a registration effected by preparing and filing one
or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration
or ordering of effectiveness of such Registration Statement(s) by the SEC.
(ee) "Registrable
Securities" means the Initial Registrable Securities, the Subsequent Registrable Securities and the Additional Registrable
Securities; provided that Registrable Securities shall not include any securities that (i) have been sold either pursuant
to a registration statement or Rule 144, (ii) have been sold or otherwise transferred in a private transaction in which the transferor's
rights under this Agreement are not validly assigned in accordance with this Agreement, or (iii) may be sold without restriction
or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any similar provisions
then in force under the 1933 Act).
(ff) "Registration
Statement" means the Initial Registration Statement, the Subsequent Registration Statement and the Additional Registration
Statement, as applicable.
(gg) "Required
Holders" means the holders of at least a majority of the Registrable Securities then outstanding and shall include the
Subscriber so long as the Subscriber or any of its affiliates holds any Registrable Securities.
(hh) "Required
Registration Amount" means the Initial Required Registration Amount, the Subsequent Required Registration Amount
or the Additional Required Registration Amount, as applicable.
(ii) "Rule
415" means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous
or delayed basis.
(jj) "SEC"
means the United States Securities and Exchange Commission.
(kk) "Subsequent
Closing Date" shall have the meaning set forth in the Subscription Agreement.
(ll) "Subsequent
Effective Date" means the date that the Subsequent Registration Statement has been declared effective by the SEC.
(mm) "Subsequent
Effectiveness Deadline" means the date which is the earlier of (x) the third (3rd) year anniversary of the
Subsequent Closing Date and (y) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever
is earlier) by the SEC that such Subsequent Registration Statement will not be reviewed or will not be subject to further review;
provided, however, that if the Subsequent Effectiveness Deadline falls on a Saturday, Sunday or other day that the
SEC is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open
for business.
(nn) "Subsequent
Filing Date" means the date on which the Subsequent Registration Statement is filed with the SEC.
(oo) "Subsequent
Filing Deadline" means the date which is one hundred fifty (150) calendar days immediately preceding the date that is
the third (3rd) year anniversary of the Subsequent Closing Date.
(pp) "Subsequent
Registrable Securities" means (i) the Subsequent Capacity Shares issued and (ii) any capital stock of the Company issued
or issuable with respect to the Subsequent Capacity Shares as a result of any stock split, stock dividend, recapitalization, exchange
or similar event or otherwise.
(qq) "Subsequent
Registration Statement" means a registration statement or registration statements of the Company filed under the 1933
Act covering the Subsequent Registrable Securities, which may be in the form of a pre-effective amendment to the Initial Registration
Statement.
(rr) "Subsequent
Required Registration Amount" means the number of Subsequent Capacity Shares issued on the Subsequent Closing Date, subject
to adjustment as provided in Section 2(g).
(ss) "Trading
Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common
Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to
trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time
of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
(tt) "Transaction
Documents" shall have the meaning set forth in the Subscription Agreement.
2. Registration.
(a) Initial
Mandatory Registration. The Company shall prepare, and, as soon as practicable but in no event later than the Initial Filing
Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering the resale of all of the Initial Registrable
Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available
for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(f). The Initial Registration Statement prepared pursuant hereto shall register for resale at least the number of shares
of Common Stock equal to the Initial Required Registration Amount determined as of the date the Initial Registration Statement
is initially filed with the SEC, subject to adjustment as provided in Section 2(g). The Initial Registration Statement shall contain
(except if otherwise directed by the Required Holders) the "Plan of Distribution" and "Selling Stockholders"
sections in substantially the form attached hereto as Exhibit B. The Company shall use its reasonable best efforts to have
the Initial Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Initial
Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following the Initial Effective Date, the Company shall
file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant
to such Initial Registration Statement.
(b) Subsequent
Mandatory Registration. If Subsequent Capacity Shares have been issued pursuant to the terms of the Capacity and Services Agreement
and the Subscription Agreement, then the Company shall prepare, and, as soon as practicable but in no event later than the Subsequent
Filing Deadline, file with the SEC the Subsequent Registration Statement on Form S-3 covering the resale of all of the Subsequent
Registrable Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form
as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the
provisions of Section 2(f). The Subsequent Registration Statement prepared pursuant hereto shall register for resale at least the
number of shares of Common Stock equal to the Subsequent Required Registration Amount determined as of the date the Subsequent
Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(g). The Subsequent Registration
Statement shall contain (except if otherwise directed by the Required Holders) the "Plan of Distribution" and
"Selling Stockholders" sections in substantially the form attached hereto as Exhibit B. The Company shall
use its reasonable best efforts to have the Subsequent Registration Statement declared effective by the SEC as soon as practicable,
but in no event later than the Subsequent Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following the
Subsequent Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
to be used in connection with sales pursuant to such Subsequent Registration Statement.
(c) Additional
Mandatory Registrations. The Company shall prepare, and, as soon as practicable but in no event later than the Additional Filing
Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional Registrable
Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of the SEC does
not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement, the Company shall
file Additional Registration Statements successively trying to register on each such Additional Registration Statement the maximum
number of remaining Additional Registrable Securities until the Additional Required Registration Amount has been registered with
the SEC. In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available
for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(f). Each Additional Registration Statement prepared pursuant hereto shall register for resale at least that number of
shares of Common Stock equal to the Additional Required Registration Amount determined as of the date such Additional Registration
Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(g). Each Additional Registration Statement
shall contain (except if otherwise directed by the Required Holders) the "Plan of Distribution" and "Selling
Stockholders" sections in substantially the form attached hereto as Exhibit B. The Company shall use its reasonable
best efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable, but in no event
later than the Additional Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following the Additional Effective
Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection
with sales pursuant to such Additional Registration Statement.
(d) Allocation
of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number of Registrable
Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors which are covered by such Registration Statement. In no event shall the Company include any securities other
than Registrable Securities on any Registration Statement without the prior written consent of the Required Holders.
(e) Legal
Counsel. Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel to review any registration
pursuant to this Section 2 ("Legal Counsel"), which shall be Schulte Roth & Zabel LLP or such other counsel
as thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate with each other in performing
the Company's obligations under this Agreement.
(f) Ineligibility
for Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder,
the Company shall (i) register the resale of the Registrable Securities on another appropriate form reasonably acceptable to the
Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as reasonably practicable after
such form is available, provided that the Company shall use reasonable best efforts to maintain the effectiveness of the Registration
Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.
(g) Sufficient
Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to Section
2(a), Section 2(b) or Section 2(c) is insufficient to cover the Required Registration Amount of Registrable Securities required
to be covered by such Registration Statement or an Investor's allocated portion of the Registrable Securities pursuant to Section
2(d), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding
the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event
not later than twenty (20) days after the necessity therefor arises. The Company shall use its reasonable best efforts to cause
such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes
of the foregoing provision, the number of shares available under a Registration Statement shall be deemed "insufficient to
cover all of the applicable Required Registration Amount of Registrable Securities" if at any time the number of shares of
Common Stock available for resale under the Registration Statement is less than the product determined by multiplying (i) the Required
Registration Amount as of such time by (ii) 0.90.
(h) Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration Statement. If (i) a Registration Statement covering
all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement
is (A) not filed with the SEC on or before the applicable Filing Deadline (a "Filing Failure") or (B) not declared
effective by the SEC on or before the applicable Effectiveness Deadline, (an "Effectiveness Failure") or (ii)
on any day after the applicable Effective Date sales of all of the Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant to such Registration
Statement or otherwise (including, without limitation, because of the suspension of trading or any other limitation imposed by
an Eligible Market as a result of the Company’s failure to meet applicable listing requirements, a failure to keep such Registration
Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration
Statement, a failure to register a sufficient number of shares of Common Stock (other than as a result of a limitation on the maximum
number of shares of Common Stock permitted to be registered by the staff of the SEC pursuant to Rule 415) or a failure to maintain
the listing of the Common Stock) (a "Maintenance Failure") then, as partial relief for the damages to any holder
by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not
be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance or the additional
obligation of the Company to register any Cutback Shares), the Company shall pay to each holder of Registrable Securities relating
to such Registration Statement an amount in cash equal to one percent (1.0%) of the aggregate Market Value (as such term is defined
in the Subscription Agreement) of such Investor's Registrable Securities whether or not included in such Registration Statement
on each of the following dates: (i) the day of a Filing Failure; (ii) the day of an Effectiveness Failure; (iii) the initial day
of a Maintenance Failure; (iv) on the thirtieth day after the date of a Filing Failure and every thirtieth day thereafter (in each
case, pro rated for periods totaling less than thirty days) until such Filing Failure is cured; (v) on the thirtieth day after
the date of an Effectiveness Failure and every thirtieth day thereafter (in each case, pro rated for periods totaling less than
thirty days) until such Effectiveness Failure is cured; and (vi) on the thirtieth day after the initial date of a Maintenance Failure
and every thirtieth day thereafter (in each case, pro rated for periods totaling less than thirty days) until such Maintenance
Failure is cured. The payments to which a holder shall be entitled pursuant to this Section 2(h) are referred to herein as "Registration
Delay Payments." Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above and (II) the
third Business Day after the event or failure giving rise to the Registration Delay Payments is cured. In the event the Company
fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate
of one percent (1.0%) per month (prorated for partial months) until paid in full. Notwithstanding anything to the contrary herein
or in the Subscription Agreement, in no event shall (i) Registration Delay Payments be payable for any period after the expiration
of the Registration Period, (ii) the aggregate amount of Registration Delay Payments to an Investor exceed, in the aggregate, ten
percent (10%) of the aggregate Market Value of such Investor's Registrable Securities on the applicable Closing Date and (ii) the
Company be obligated to make both Public Information Failure Payments (as defined in the Subscription Agreement) and Registration
Delay Payments in respect of the same securities and for any same period of time in which a failure giving rise to such payments
is deemed to have occurred.
3. Related
Obligations.
At such time as the Company
is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(c), 2(f) or 2(g), the Company will
use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method
of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
(a) The
Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use
its reasonable best efforts to cause such Registration Statement relating to the Registrable Securities to become effective as
soon as practicable after such filing (but in no event later than the Effectiveness Deadline). The Company shall use reasonable
best efforts to keep each Registration Statement effective pursuant to Rule 415 at all times until the earliest of (i) the date
as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without restriction
or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto)
promulgated under the 1933 Act, (ii) the date on which the Investors shall have sold all of the Registrable Securities covered
by such Registration Statement or (iii) the date no Registrable Securities are outstanding (the "Registration Period").
The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained
therein) does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein (in the case of prospectuses, in light of the circumstances in which they were made)
not misleading. The term "reasonable best efforts" shall mean, among other things, that the Company shall submit to the
SEC, within two (2) Business Days after the later of the date that (i) the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff has no further comments on a particular Registration Statement,
as the case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c) (which approval is immediately sought), a request
for acceleration of effectiveness of such Registration Statement to a time and date not later than two (2) Business Days after
the submission of such request. The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement
as soon as practicable, but in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that
an amendment is required in order for a Registration Statement to be declared effective. The Company shall include the Legal Counsel
on all substantive communications with respect to, and to receive all drafts of the Registration Statement and any amendments and
supplements thereto to be filed with the SEC.
(b) The
Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule
424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by such Registration Statement until the expiration of the Registration Period. In the case of
amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant
to this Section 3(b)) by reason of the Company filing an Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report
on Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Company shall, if permissible under applicable securities laws, have incorporated such report by reference into such Registration
Statement, provided, that if the foregoing is not permitted by applicable securities laws, the Company shall file such amendments
or supplements with the SEC as soon as practicable after the day the Company files the 1934 Act report which created the requirement
for the Company to amend or supplement such Registration Statement.
(c) The
Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least four (4) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for amendments
and supplements filed solely to include information contained in Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC,
and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects.
The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld. The Company shall furnish
to Legal Counsel, without charge upon written request (including by email), (i) copies of any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) promptly after the same is
prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including financial statements
and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement and all amendments
and supplements thereto. The Company shall reasonably cooperate with Legal Counsel in performing the Company's obligations pursuant
to this Section 3.
(d) The
Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge,
to the extent requested by an Investor, (i) promptly after the same is filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference,
all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10) copies (or such
other number of copies as Legal Counsel or such Investor may reasonably request) of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and
(iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.
(e) The
Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification
applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities
or "blue sky" laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary
to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be reasonably necessary
to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to taxation in any such jurisdiction,
or (z) file a consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel and each
Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale under the securities or "blue sky" laws of
any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such
purpose.
(f) The
Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after
becoming aware of such event but in any event on the same Trading Day as becoming aware of such event, as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission
to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information),
and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or amendment to Legal Counsel and each Investor (or such
other number of copies as Legal Counsel or such Investor may reasonably request). The Company shall also promptly notify Legal
Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed,
and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall
be delivered to Legal Counsel and each Investor by facsimile or email on the same day of such effectiveness), (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information and (iii) of
the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. By 9:30
a.m. New York City time on the date following the date any post-effective amendment has become effective, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to
such Registration Statement.
(g) The
Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction.
If such an order or suspension is issued, the Company shall use reasonable best efforts to obtain the withdrawal of such order
or suspension as promptly as practicable and to notify Legal Counsel and each Investor who holds Registrable Securities being sold
of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
(h) If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an
Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, at the reasonable request
of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and
thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given
in an underwritten public offering, addressed to the Investors.
(i) If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an
Investor believes that it could reasonably be deemed to be an underwriter of Registrable Securities, the Company shall make available
for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors
(collectively, the "Inspectors"), all pertinent financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as shall be reasonably deemed necessary by each Inspector,
and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably request;
provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information
in such Records has been made generally available to the public other than by disclosure in violation of this Agreement. Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate
action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any
other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors' ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and regulations.
(j) The
Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless
(i) the Company determines in good faith that disclosure of such information is necessary to comply with federal or state securities
laws, (ii) the Company determines in good faith that the disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.
(k) The
Company shall use its reasonable best efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement
to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed,
if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) if the Company
is unsuccessful in satisfying clause (i), secure the inclusion for quotation of all of the Registrable Securities on another Eligible
Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its reasonable best efforts
to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. as such with respect
to such Registrable Securities. The Company shall pay all fees and expenses (other than the fees of Legal Counsel) in connection
with satisfying its obligation under this Section 3(k).
(l) The
Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the
case may be, as the Investors may reasonably request and registered in such names as the Investors may request.
(m) If
requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold,
the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to
be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration
Statement if reasonably requested by an Investor holding any Registrable Securities.
(n) The
Company shall use its reasonable best efforts to cause the Registrable Securities covered by a Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable
Securities.
(o) The
Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after
the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions
of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company's fiscal quarter
next following the applicable Effective Date of a Registration Statement.
(p) The
Company shall otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC in connection
with any registration hereunder.
(q) Within
two (2) Business Days after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the
Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.
(r) Notwithstanding
anything to the contrary herein, the Company (i) may delay the disclosure of material, non-public information concerning the Company
the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company, in the best interest
of the Company and, in accordance with advice of counsel to the Company, not otherwise required and may postpone effecting a registration
or (ii) may suspend the use of a Registration Statement for periods coinciding with any "blackout" period under the Company's
insider trading policy (a "Grace Period"); provided, that the Company shall promptly (i) notify the Investors
in writing of the existence of material, non-public information or the "blackout" period giving rise to a Grace Period
and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period
ends; and, provided further, that no Grace Period shall exceed sixty (60) consecutive days and during any three hundred sixty five
(365) day period such Grace Periods shall not exceed an aggregate of one hundred twenty (180) days and the first day of any Grace
Period must be at least five (5) Trading Days after the last day of any prior Grace Period (each, an "Allowable Grace Period").
For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable
during the period of any Allowable Grace Period. Upon expiration of the Allowable Grace Period, the Company shall again be bound
by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information
is no longer applicable. Notwithstanding anything to the contrary, subject to applicable securities laws, the Company shall cause
its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of
the Subscription Agreement in connection with any sale of Registrable Securities pursuant to an effective Registration Statement
with respect to which an Investor has entered into a contract for sale, prior to the Investor's receipt of the notice of a Grace
Period and for which the Investor has not yet settled.
(s) Neither
the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing
with the SEC, the Principal Market or any Eligible Market and any Investor being deemed an underwriter by the SEC shall not relieve
the Company of any obligations it has under this Agreement or any other Transaction Document; provided, however,
that the foregoing shall not prohibit the Company from including the disclosure found in the "Plan of Distribution" section
attached hereto as Exhibit B in the Registration Statement.
4. Obligations
of the Investors.
(a) At
least five (5) Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations
of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular
Investor that: (i) such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect
and maintain the effectiveness of the registration of such Registrable Securities and (ii) such Investor shall execute such documents
in connection with such registration as the Company may reasonably request.
(b) Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from such
Registration Statement.
(c) Each
Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of Section 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant
to any Registration Statement(s) covering such Registrable Securities until such Investor's receipt of copies of the supplemented
or amended prospectus as contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement
or amendment is required. Notwithstanding anything in this Agreement to the contrary, subject to applicable securities laws, the
Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Subscription Agreement in connection with any sale of Registrable Securities pursuant to an effective Registration
Statement with respect to which an Investor has entered into a contract for sale prior to the Investor's receipt of a notice from
the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f) and for which
the Investor has not yet settled.
(d) Each
Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it
or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.
(e) In
connection with any underwritten public offering by the Company for its own account or the account of a security holder or holders,
each Investor agrees to execute a market standoff agreement with the underwriters for such offering in customary form covering
all Registrable Securities held by such Investor, provided that all executive officers and directors of the Company and all other
holders of at least 5% of the Company’s voting securities enter into similar agreements requiring each Investor to be treated
no less favorably than any other party to such an agreement as to any releases or modifications. The underwriters in connection
with such registration are intended third-party beneficiaries of this Section 4(e) and shall have the right and power to enforce
the provisions of this Section 4(e) as though they were a party hereto.
5. Expenses
of Registration.
All reasonable expenses,
other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant
to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall also reimburse the
Investors for the fees and disbursements of Legal Counsel in connection with registration, filing or qualification pursuant to
Sections 2 and 3 of this Agreement which amount shall be limited to $10,000 for each such registration, filing or qualification.
6. Indemnification.
In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts paid in settlement or expenses,
joint or several (collectively, "Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a
party thereto ("Indemnified Damages"), to which any of them may become subject insofar as such Claims (or actions
or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction
in which Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state
a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement
or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof
or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant
to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly
as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection
with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon
a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified
Person or its representatives for such Indemnified Person expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; and (ii) shall not apply to amounts paid in settlement of any Claim
if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld
or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9. Notwithstanding anything
to the contrary in this Agreement, the Company shall not be required to reimburse the Investors for the expenses of more than one
counsel to all Investors.
(b) In
connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Party"), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection
with such Registration Statement; and, subject to Section 6(c), such Investor shall promptly reimburse the Indemnified Party for
any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such
Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that
the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed
the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel
with the fees and expenses of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable,
the representation by such counsel of the Indemnified Person or Indemnified Party, as the case may be, and the indemnifying party
would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to
in the immediately preceding sentence shall be selected by the Investors holding at least a majority in interest of the Registrable
Securities included in the Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall
reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or
Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided,
however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall,
without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into
any settlement or other compromise which: (i) does not include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim or litigation or (ii)
includes any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties,
firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party
of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying
party is prejudiced in its ability to defend such action.
(d) The
indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.
7. Contribution.
To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however,
that: (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved
in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller
of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the sale of such
Registrable Securities pursuant to such Registration Statement.
8. Reports
Under the 1934 Act.
With a view to making
available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144;
(b) file
with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements and the filing of such reports and other documents is required under the
applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company,
if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.
9. Assignment
of Registration Rights.
The rights under this
Agreement shall be assignable (but only with all related obligations) by the Subscriber to any transferee of all or any portion
of the Subscriber's Registrable Securities if: (i) the Subscriber agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company
is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the securities held by the transferee or assignee constitute Registrable
Securities; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) the Subscriber
demonstrates to the Company's reasonable satisfaction that such transfer has been made in accordance with the applicable requirements
of the Subscription Agreement. Upon the Company's receipt of the documents referenced in (i), (ii) and (iv) above, the transferee
shall thereafter be deemed to be an "Investor." Except for any assignment in accordance with this Section 9, this Agreement
and the rights and obligations hereunder may not be assigned by any party hereto without the prior written consent of each of the
other parties hereto.
10. Amendment
of Registration Rights.
Provisions of this Agreement
may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company and the Required Holders. Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Registrable Securities, unless all such holders agree in writing. No consideration
shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless
the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to this Agreement.
11. Miscellaneous.
(a) A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.
(b) Any
notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile or e-mail at the facsimile number or e-mail address specified in this Section prior to 6:30 p.m. (New
York City time) on a Trading Day, (b) the Trading Day after the date of transmission, if such notice or communication is delivered
via facsimile or e-mail at the facsimile number or e-mail address specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (c) the Trading Day following the date of mailing,
if sent by nationally recognized overnight courier service, specifying next Business Day delivery or (d) upon actual receipt by
the party to whom such notice is required to be given if delivered by hand, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such communications shall be as follows:
If to the Company:
Imation Corp.
1099 Helmo Avenue N, Suite 250
Oakdale, Minnesota 55128
Telephone: 651-340-8062
Attention: Tavis Morello, General
Counsel
Email: tmorello@imation.com
With a copy (for informational
purposes only) to:
Winston & Strawn LLP
200 Park Avenue
New York, New York 10166
(212) 294-5400
| Attention: | Joel L. Rubinstein, Esq. |
| Email: | jrubinstein@winston.com |
If to the Transfer Agent:
Wells Fargo Shareowner Services
1110 Centre Pointe Curve Suite 101
Mendota Heights MN 55120
MAC N9173-010
Telephone: 1-855-217-6361
Attention: Lindsey Fischer
Email: wfssrelationshipmanagement@wellsfargo.com
If the Subscriber:
Clinton Group, Inc.
510 Madison Ave., 9th Floor
New York, New York 10022
With a copy (for informational
purposes only) to Legal Counsel (see below)
If to Legal Counsel:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
| Attention: | Eleazer Klein, Esq. |
| Email: | eleazer.klein@srz.com |
, or to such other address, facsimile number
and/or email address to the attention of such other Person as the recipient party has specified by written notice given to each
other party two (2) days prior to the effectiveness of such change in accordance with this Section 11(b). Written confirmation
of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically
generated by the sender's facsimile machine or e-mail transmission containing the time, date, recipient facsimile number or e-mail
address and an image of the first page of such transmission or (iii) provided by a courier or overnight courier service shall be
rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service
in accordance with clause (a), (b), (c) or (d) above, respectively.
(c) In
addition to being entitled to exercise all rights provided herein, in any of the other Transaction Documents or granted by law,
including recovery of damages, the Investors and the Company will be entitled to specific performance under the Transaction Documents.
Any Person having any rights under any provision of this Agreement or in any of the other Transaction Documents shall be entitled
to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement or such other Transaction Documents and to exercise all other rights granted by law. Furthermore, the
Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under any of
the Transaction Documents, any remedy at law may prove to be inadequate relief to the Investors. The Company therefore agrees that
the Investors shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive or other equitable
relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages and without posting
a bond or other security. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a
party in exercising such right or remedy, shall not operate as a waiver thereof.
(d) All
questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the
State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding
is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) If
any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or
unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations
of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s),
the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
(f) This
Agreement, the other Transaction Documents and the instruments referenced herein and therein constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject
matter hereof and thereof.
(g) Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto. The Company may not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Required Holders.
(h) The
headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. No specific representation or warranty shall limit the generality or applicability of a more general
representation or warranty. The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity
to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments
hereto.
(i) This
Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or
by an e-mail which contains a portable document format (.pdf) filed of an executed signature page, such signature page shall create
a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force
and effect as if such signature page were an original thereof.
(j) Each
party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(k) All
consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders.
(l) This
Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any other Person, except that each Indemnified Person and Indemnified
Party is an intended third party beneficiary of Section 6 and may enforce the provisions of such Section directly against
the parties with obligations thereunder.
(m) The
obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of
this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained herein,
and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated herein.
(n) To
the extent that the Company makes a payment or payments to the Investors hereunder or pursuant to any of the other Transaction
Documents or the Investors enforce or exercise their respective rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company or any of its
Subsidiaries by a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, state
or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made
or such enforcement or setoff had not occurred.
* * * * * *
[Signature Page Follows]
IN WITNESS WHEREOF,
the Subscriber and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed
as of the date first written above.
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COMPANY: |
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IMATION CORP. |
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By: |
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Name: |
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Title: |
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF,
the Subscriber and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed
as of the date first written above.
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SUBSCRIBER: |
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CLINTON GROUP, INC. |
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By: |
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Name: |
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Title: |
[Signature Page to Registration Rights Agreement]
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Wells Fargo Shareowner Services
1110 Centre Pointe Curve Suite 101
Mendota Heights MN 55120
MAC N9173-010
Telephone: 1-855-217-6361
Attention: Lindsey Fischer
Email: wfssrelationshipmanagement@wellsfargo.com
Ladies and Gentlemen:
Reference
is made that certain Subscription Agreement, dated as of November 22, 2016 (the "Subscription
Agreement"), entered into by and among Imation Corp., a Delaware corporation (the "Company") and the
subscriber named therein (collectively, the "Holders") pursuant to which the Company issued to the Holders shares
(the "Capacity Shares") of the Company's common stock, par value $0.01 per share (the "Common Stock").
Pursuant to the Subscription Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the
"Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the resale
of the Registrable Securities (as defined in the Registration Rights Agreement), including the Capacity Shares under the Securities
Act of 1933, as amended (the "1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 201_, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________)
(the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating
to the Registrable Securities which names each of the Holders as a selling stockholder thereunder.
In connection with the
foregoing, [we][I] advise you that a member of the SEC's staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER
DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened
by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.
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Very truly yours, |
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[ISSUER'S COUNSEL] |
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By: |
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| CC: | [LIST NAMES OF HOLDERS] |
EXHIBIT B
SELLING STOCKHOLDER
The common stock being
offered by the selling stockholder are those previously issued to the selling stockholder. For additional information regarding
the issuances of those shares of common stock, see "Private Placement of Common Shares " above. We are registering the
shares of common stock in order to permit the selling stockholder to offer the shares for resale from time to time. The selling
stockholder has not had any material relationship with us within the past three years, except for (i) the ownership of the shares
of common stock, (ii) the entry into the Capacity and Services Agreement, (iii) the fact that Mr. Joseph A. DePerio, an employee
of the Selling Stockholder, serves as a member of our board of directors and (iv) the fact that the selling stockholder manages
$35 million of our excess cash for investment in Clinton Lighthouse Equities Strategy Fund (Offshore), a fund managed by the selling
stockholder.
The table below lists
the selling stockholder and other information regarding the beneficial ownership of the shares of common stock by the selling stockholder.
The second column lists the number of shares of common stock beneficially owned by the selling stockholder, based on its ownership
of the shares of common stock, as of ________, 201_.
The third column lists
the shares of common stock being offered by this prospectus by the selling stockholder.
In accordance with
the terms of a registration rights agreement with the selling stockholder, this prospectus generally covers the resale of at least
the maximum number of shares of common stock issued as of the trading day immediately preceding the applicable date of determination
and all subject to adjustment as provided in the registration right agreement. The fourth column assumes the sale of all
of the shares offered by the selling stockholder pursuant to this prospectus.
Name
of Selling Stockholder
| |
Number of shares of Common
Stock Owned Prior to Offering | | |
Maximum Number of shares
of Common Stock to be Sold Pursuant to this Prospectus | | |
Number of shares of Common
Stock Owned After Offering | |
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Clinton Group, Inc. (1) | |
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| 0 | |
(1) George Hall, as
the President of Clinton Group, Inc. ("CGI"), is deemed to have voting power and dispositive power with respect to all
shares as to which CGI has voting power or dispositive power. Accordingly, CGI and Mr. Hall are deemed to have shared voting and
shared dispositive power with respect to all of the Company's securities beneficially owned by CGI. Mr. Hall disclaim beneficial
ownership of any and all such securities in excess of his actual pecuniary interest therein.
PLAN OF DISTRIBUTION
We are registering
the shares of common stock previously issued to permit the resale of these shares of common stock by the holders thereof and holders
of the shares of common stock warrants from time to time after the date of this prospectus. We will not receive any of the proceeds
from the sale by the selling stockholder of the shares of common stock. We will bear all fees and expenses incident to our obligation
to register the shares of common stock.
The selling stockholder
may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling stockholder will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common
stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions,
| · | on any national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale; |
| · | in the over-the-counter market; |
| · | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| · | through the writing of options, whether such options are listed on an options exchange or otherwise; |
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | sales pursuant to Rule 144; |
| · | broker-dealers may agree with the selling securityholders to sell a specified number of such shares
at a stipulated price per share; |
| · | a combination of any such methods of sale; and |
| · | any other method permitted pursuant to applicable law. |
If the selling stockholder
effects such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholder
or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling
stockholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common
stock in the course of hedging in positions they assume. The selling stockholder may also sell shares of common stock short and
deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection
with such short sales. The selling stockholder may also loan or pledge shares of common stock to broker-dealers that in turn may
sell such shares.
The selling stockholder
may pledge or grant a security interest in some or all of the warrants or shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholder under this prospectus. The selling stockholder also may transfer and donate
the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
The selling stockholder
and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer
may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares
of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of
shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling stockholder and any discounts, commissions
or concessions allowed or reallowed or paid to broker-dealers.
Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that the selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling stockholder
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any other
participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability
of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the
shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ]
in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities
or "blue sky" laws; provided, however, that the selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholder against liabilities, including some liabilities under
the Securities Act, in accordance with the registration rights agreements, or the selling stockholders will be entitled to contribution.
We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that
may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance
with the related registration rights agreement, or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.
EXHIBIT C
Form of Officer’s
Certificate
IMATION
CORP.
OFFICER'S CERTIFICATE
The undersigned Chief
Executive Officer of Imation Corp., a Delaware corporation (the "Company"), hereby represents, warrants and certifies
to the Subscriber, pursuant to Section [5.1(a)(i)] [5.2(a)(i)] of the Subscription Agreement (as defined below), as follows:
| 1. | The representations and warranties of the Company set forth in Section 3.1 of the Subscription
Agreement, dated as of November 22, 2016, by and between the Company and the Subscriber (the "Subscription Agreement")
and in Section 8 of the Capacity and Services Agreement, are true and correct in all respects as of the date hereof (except
for representations and warranties that speak as of a specific date, which are true and correct as of such specified date). |
| 2. | The Company has performed, satisfied and complied in all respects with the covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company as of the date
hereof. |
Capitalized terms used but not otherwise defined herein shall
have the meaning set forth in the Subscription Agreement.
IN WITNESS WHEREOF, the undersigned
has executed this certificate this ___ day of _________, 201_.
|
|
|
Name: |
|
Title: Chief Executive Officer |
EXHIBIT D
Form of Opinion of Company
Counsel
EXHIBIT E
Form of Secretary’s
Certificate
IMATION CORP.
SECRETARY’S CERTIFICATE
The undersigned hereby
certifies that he is the duly elected, qualified and acting Secretary of Imation Corp., a Delaware corporation (the "Company"),
and that as such he is authorized to execute and deliver this certificate in the name and on behalf of the Company and in connection
with the Subscription Agreement, dated as of November 22, 2016, by and among the Company and the Subscriber (the "Subscription
Agreement"), and further certifies in his official capacity, in the name and on behalf of the Company, the items set forth
below. Capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Subscription Agreement.
| 1. | Attached hereto as Exhibit A is a true, correct and complete copy of the unanimous written
consent of the Board of Directors of the Company, dated November __, 2016. The resolutions contained in Exhibit A have not in any
way been amended, modified, revoked or rescinded, have been in full force and effect since their adoption to and including the
date hereof and are now in full force and effect. |
| 2. | Attached hereto as Exhibit B is a true, correct and complete copy of the Restated Certificate
of Incorporation of the Company, together with any and all amendments thereto, and no action has been taken to further amend, modify
or repeal such Restated Certificate of Incorporation, the same being in full force and effect in the attached form as of the date
hereof. |
| 3. | Attached hereto as Exhibit C is a true, correct and complete copy of the Bylaws of the Company
and any and all amendments thereto, and no action has been taken to further amend, modify or repeal such Bylaws, the same being
in full force and effect in the attached form as of the date hereof. |
| 4. | Each person listed below has been duly elected or appointed to the position(s) indicated opposite
his name and is duly authorized to sign the Subscription Agreement and each of the Transaction Documents on behalf of the Company,
and the signature appearing opposite such person’s name below is such person’s genuine signature. |
IN WITNESS WHEREOF, the
undersigned has hereunto set his hand as of this __ day of ___________ __ 201_.
I, [Name], [Title], hereby
certify that [Name] is the duly elected, qualified and acting Secretary of the Company and that the signature set forth above is
his true signature.
EXHIBIT A
Resolutions
EXHIBIT B
Restated Certificate of Incorporation
EXHIBIT C
Bylaws
Exhibit 10.3
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT
(this “Amendment”) is made and entered into as of November 22, 2016, by and among Imation Corp. (the “Company”)
and Robert B. Fernander (“Executive”). Any terms used but not defined herein shall have the same meaning set
forth in that certain Employment Agreement, effective as of October 14, 2015, amended as of October 14, 2016, by and between the
Company and Executive (the “Employment Agreement”).
RECITALS
WHEREAS, the Company
has entered into a Stock Purchase Agreement, dated November 22, 2016, with NXSN Acquisition Corp. (“Purchaser”),
pursuant to which the Company will contribute to Nexsan Corporation (“Nexsan”) all of the issued and outstanding
capital stock of Connected Data, Inc. and then sell all of the shares of common stock of Nexsan to Purchaser (the “Stock
Purchase Agreement”);
WHEREAS, Executive
has been employed by the Company as Interim Chief Executive Officer pursuant to the Employment Agreement, and the Company desires
to continue to employ Executive as Interim Chief Executive Officer on a month-to-month basis; and
WHEREAS, pursuant to
this Amendment, the Company and Executive desire to amend the Employment Agreement and the terms of Executive’s employment
from the date hereof through the closing of the transactions contemplated by the Stock Purchase Agreement (the “Closing”)
and following the Closing to reflect the arrangement described in the foregoing recitals.
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt
of which is mutually acknowledged, the Company and Executive agree as follows:
AGREEMENT
1. Amendment.
The Employment Agreement is hereby amended as follows, effective November 22, 2016:
(a) The
last sentence of Section 1 of the Employment Agreement is hereby deleted and replaced in its entirety with the following:
“Executive shall be employed
by the Company at will on a month-to-month basis (the ‘Term’). The Company may terminate the Executive’s
employment by providing Executive with thirty (30) days’ advance written notice of intent to terminate.”
(b) Section
2(b) of the Employment Agreement is amended by adding the following last sentence to the end of Section 2(b): “Notwithstanding
the foregoing, it shall not be a breach of this Section 2(b) for the Executive to be concurrently employed as the Interim CEO of
Nexsan Corporation (‘Nexsan’).”
(c) Section
3 of the Employment Agreement is hereby deleted and replaced in its entirety with the following:
“Base Salary. As compensation
for services rendered to the Company during the Term, the Company shall pay Executive a base salary at the annual rate of $600,000;
provided, that from and after the consummation (the ‘Closing’) of the transactions contemplated by that certain
Stock Purchase Agreement, dated November 22, 2016, between the Company and NXSN Acquisition Corp. (‘Purchaser’),
pursuant to which the Company will contribute to Nexsan all of the issued and outstanding capital stock of Connected Data, Inc.
and then sell all of the shares of common stock of Nexsan to Purchaser (the ‘2016 Stock Purchase Agreement’),
the Company shall instead pay Executive a base salary at the annual rate of $50,000 (such applicable amount, the ‘Base
Salary’). The Base Salary shall be payable in accordance with the Company’s standard payroll schedule and procedures
including applicable withholdings or deductions.”
(d) The
following new Section 4A is hereby added between Sections 4 and 5 of the Employment Agreement:
“Finder’s Fee.
(a) Executive
shall be eligible to receive a fee, equal to one and one-half percent (1.5%) of Total Enterprise Value (as defined below), less
applicable withholdings for taxes (the ‘Finder’s Fee’), upon an offer directly secured by Executive and
Geoff Barrall for the purchase of Nexsan that is accepted and consummated (the ‘Nexsan Sale’) during the period
between (i) the date of execution of the 2016 Stock Purchase Agreement and (ii) the Closing. For the avoidance of doubt, ‘Nexsan
Sale’ shall exclude, and Executive shall not be eligible to receive the Finder’s Fee in respect of, any offer that
is accepted and consummated for a purchase of Nexsan made by any party that executed a letter of intent with the Company with respect
to a Nexsan Sale prior to November 22, 2016 (a ‘Prior Offer’). The Finder’s Fee will be payable to Executive
within five (5) days following the consummation of the Nexsan Sale. Notwithstanding anything herein in the contrary, this Section
4A shall become null and void if a Prior Offer is accepted and consummated, or if the Closing occurs, in each case, prior to the
date of acceptance and consummation of any Nexsan Sale.
(b) For
purposes of this Section 4A, ‘Total Enterprise Value’ shall mean the market value of Nexsan, after taking into
account both holders of debt and equity.”
(e) The
section heading and first sentence of Section 8 of the Employment Agreement are hereby deleted in their entirety and replaced with
the following:
“Termination by the Company
for Cause or by Your Resignation Prior to the Closing. In the event that Executive’s
employment is terminated for Cause prior to the Closing, the Company shall have no further financial obligations to Executive under
this Agreement except for payment to Executive of (a) Executive’s accrued, but unpaid wages or other benefits earned through
the date of separation to which Executive is otherwise legally entitled, (b) any accrued but unused paid time off, (c) any unreimbursed
expenses in accordance with the Company’s policies, and (d) any matching contributions by the Company into any Company-sponsored
401(k) plan or other retirement or pension plan account benefits on the same basis as those benefits are generally made available
to other peer executives of the Company and in accordance with the terms of those plans as may be in existence from time to time
(collectively, ‘Accrued Rights’).”
(f) The
section heading and introduction to Section 9 of the Employment Agreement are hereby deleted in their entirety and replaced with
the following:
“Termination by the Company
Without Cause or by Executive for ‘Good Reason’ Prior to the Closing. In the event that Executive’s employment
is terminated by the Company without Cause prior to the Closing or by the Executive for ‘Good Reason’ (as defined below)
prior to the Closing, the Company shall have no further financial obligations to Executive (or, as the case may be, to Executive’s
heirs, devisees or estate) under this Agreement except for payment to Executive of the following as conditioned below:”
(g) Section
10 of the Employment Agreement is hereby deleted in its entirety and replaced with the following:
“Termination On or After
Closing. In the event that the Company terminates Executive’s employment for any reason
or no reason on or after the Closing and fulfillment of all terms supporting the inception of Executive’s Employment Agreement
with Nexsan, or Executive voluntarily resigns from the Company on or after the Closing, the Company shall have no further financial
obligations to Executive under this Agreement except for payment to Executive of Executive’s Accrued Rights. In addition,
upon and concurrently with any termination of Executive’s employment with the Company on or after the Closing, (a) Executive
hereby agrees that he shall resign as a member of the Board of Directors of the Company and (b) Executive agrees and acknowledges
that all deals with the Company involving Executive shall be eliminated; provided, however, that the first, second and third stock
grant tranches set forth in Section 4 hereof shall continue to vest in accordance with their terms, based on the Company’s
stock price, for six (6) months after the Closing, notwithstanding the requirement that Executive be employed by the Company at
the time the applicable stock price hurdle is achieved.”
2. Effectiveness
at Closing. Notwithstanding anything in this Amendment to the contrary, all obligations of the Company and Executive and references
in the Amendment that arise from or relate to the Closing shall only be effective as of and contingent
upon the Closing of the transactions contemplated by the Stock Purchase Agreement. If the Closing does not occur, such obligations
and references herein shall be null and void. For the avoidance of doubt, Executive shall not have any right to a Good Reason termination
under the Employment Agreement in the event that the Closing occurs and the Company abides by the terms of this Amendment.
3. Miscellaneous.
(a) Governing
Law. This Amendment shall be governed and construed in accordance with the laws of the State of Texas without giving effect
to its conflicts of law principles.
(b) Severability.
If any provision of this Amendment is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions of this Amendment, which shall be fully severable, and given full force and effect.
(c) Counterparts.
This Amendment may be signed in counterparts, each of which shall be deemed an original and all of which together shall be one
and the same instrument. A signature sent by facsimile or other electronic means shall be as effective as an original signature.
(d) References
to Employment Agreement. All references in any document or agreement to the Employment Agreement shall refer to the Employment
Agreement, as amended hereby.
(e) Supersession.
To the extent, if any, that a provision of this Amendment conflicts with or differs from any provision of the Employment Agreement,
such provision of this Amendment shall prevail and govern for all purposes.
(f) Full
Force and Effect. Except as otherwise specifically amended by this Amendment, the Employment Agreement shall remain in full
force and effect.
[Signature Page Follows]
IN WITNESS WHEREOF,
the parties hereto, intending to be legally bound hereby, have executed this Amendment as of the day and year first set forth above.
|
By: |
/s/ Joseph A. De Perio |
|
|
|
|
Name: |
Joseph A. De Perio |
|
|
|
|
Title: |
Non-Executive Chairman |
|
EXECUTIVE: |
|
|
|
/s/ Robert B. Fernander |
|
Robert B. Fernander |
[Signature Page to Employment Agreement
Amendment]
Exhibit 10.4
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into this November 22, 2016, by and among Nexsan Corporation (the “Company”), Robert B. Fernander (“Executive”),
and, solely as to Sections 3, 4, 9(b) and 10, Imation Corporation (“Imation”), effective as of the consummation
(the “Closing”) of the transactions contemplated by that certain Stock Purchase Agreement by and between Imation
and NXSN Acquisition Corp. (“Purchaser”) (the “Stock Purchase Agreement”).
RECITALS
WHEREAS, Imation has
entered into the Stock Purchase Agreement, pursuant to which Imation will contribute to the Company all of the issued and outstanding
capital stock of Connected Data, Inc. and then sell all of the shares of common stock of the Company to Purchaser;
WHEREAS, Executive
has substantial business knowledge and expertise in the conduct of the business of the Company, and the Company desires to retain
the knowledge, expertise and experience of Executive to assist in the operations and management of the Company; and
WHEREAS, the Company
desires to employ Executive, and Executive is willing to be employed by the Company as of the Closing, in each case on the terms
and conditions set forth herein, and with both Executive and the Company understanding that this Agreement and the terms and conditions
set forth herein are conditioned on the Closing and the full funding of the Severance Payment (as defined below) into escrow immediately
upon the Closing in accordance with Section 9(b) hereof, and if the Closing does not occur, or if the full funding into escrow
of the Severance Payment immediately upon the Closing does not occur, then this Agreement shall be null and void.
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt
of which is mutually acknowledged, the Company and Executive agree as follows:
1. Employment;
Term. The Company hereby agrees to employ Executive, and Executive hereby accepts such employment with the Company,
in each case, on the terms and subject to the conditions hereinafter set forth. Executive’s employment for purposes of this
Agreement shall commence on the Closing. Executive shall be employed by the Company at will for a period of six (6) months from
the Closing (“Term”), subject to the provisions of Sections 8, 9 and 10 below.
2. Position.
(a) During
the Term, Executive shall serve as the Interim Chief Executive Officer of the Company. In such position, Executive shall have such
executive duties and authority as shall be determined from time to time by the Board of Directors (the “Board”).
(b) During
the Term, Executive will devote his full business time and his best efforts to the performance of Executive’s duties hereunder
(except for paid time off provided for hereunder and periods of illness or incapacity) and will not engage in any other business,
profession or occupation for compensation or otherwise which would conflict or interfere with the rendition of such services to
the Company either directly or indirectly, without the prior written consent of the Board. Notwithstanding the foregoing, it shall
not be a breach of this Section 2(b) for the Executive to be concurrently employed as the Interim CEO of Imation.
3. Base
Salary. As compensation for services rendered to the Company during the Term, Executive shall receive a base salary
at the aggregate annual rate of $600,000, less applicable taxes and withholdings (hereinafter referred to as the “Base
Salary”). The Base Salary shall be payable in accordance with the Company’s standard payroll schedule and procedures
including applicable withholdings or deductions. The Base Salary will be subject to adjustment pursuant to the Company’s
employee compensation policies in effect from time to time or as otherwise determined by the Board. The Base Salary shall be payable
one-third (1/3, or $200,000) by Imation and two-thirds (2/3, or $400,000) by the Company. The Base Salary shall be paid through
the Company’s payroll, and Imation shall wire its portion to the payroll provider designated by the Company within three
(3) days prior to the date of payment thereof; and the Company and its agents shall hold any such wire transfers made to the Company
or its agents for the benefit of Executive until the net amounts of same are paid to Executive and any lawful deductions from same
are deposited as employment tax deposits with the appropriate depositary institution(s).
4. Change
in Control Payment. Upon the consummation of (a) a sale of all or substantially all of the assets of the Company; (b)
a transfer, merger, consolidation, or sale in which a majority of the outstanding equity immediately prior to the transaction is
held by another person or entity, or group of persons or entities, immediately after the transaction; (c) a refinancing that is
a deemed a “Liquidity Event” by the Board; or (d) the first public offering of the equity securities of the Company
or a successor thereto for cash pursuant to an effective registration statement under the Securities Act of 1933, as amended, registered
on Form S-1 (each, a “Liquidity Event”), in which the amount of the relevant purchase price, investment or transaction
or refinancing proceeds is between $7 million and $37 million, Executive shall be entitled to three percent (3%) of the Total Enterprise
Value (as defined below) with respect to the Liquidity Event (the “CIC Payment”) as long as Executive (i) is
employed by the Company at the time of the Liquidity Event; or (ii) was employed by the Company in the six (6) months preceding
the Liquidity Event; provided, however, with respect to the foregoing clause (ii), in the event of a Liquidity Event arising under
(c) or (d) above, that Executive shall be entitled to receive the CIC Payment to the extent payment thereof occurs prior to March
15 of the calendar year following the year in which the Liquidity Event occurs, and if payment of the CIC Payment would be made
later than such date, Executive shall only be entitled to receive the CIC Payment to the extent payment thereof would not result
in the assessment of taxes and/or penalties on Executive pursuant to Section 409A of the Code. For the avoidance of doubt, a Liquidity
Event shall not include refinancing through a new debt facility or a new equity investment, unless preferred shareholders of the
Company receive liquidation preferences in an event that is deemed a Liquidity Event by the Board. For purposes of this Section
4, “Total Enterprise Value” shall mean the market value of the Company, after taking into account both holders
of debt and equity. The CIC Payment shall be payable fifty percent (50%) by Imation and fifty percent (50%) by the Company. Such
CIC Payment shall be paid through the Company’s payroll, and Imation shall wire its fifty percent (50%) portion to the payroll
provider designated by the Company within three (3) days prior to the date of payment thereof; and the Company and its agents shall
hold any such wire transfers made to the Company or its agents for the benefit of Executive until the net amounts of same are paid
to Executive and any lawful deductions from same are deposited as employment tax deposits with the appropriate depositary institution(s).
5. Employee
Benefits and Paid Time Off. During the Term, Executive shall be entitled to participate in the Company’s employee
benefit plans as in effect from time to time, on the same basis as those benefits are generally made available to other peer executives
of the Company and in accordance with the terms of those plans as may be in existence from time to time. In addition to those employee
benefits, Executive will be entitled to accrue paid time off (“PTO”) in accordance with the Company’s
PTO policy. The Company hereby reserves the right to alter its policies and/or amend its employee benefits plans and programs at
its sole discretion.
6. Expense
Reimbursement. During the Term, reasonable business expenses (including travel expenses) incurred by Executive in the
performance of Executive’s duties hereunder shall be reimbursed by the Company in accordance with Company policies in effect
from time to time. Executive will be expected to reimburse the Company for any expenses paid by the Company that would not be eligible
for reimbursement if paid by Executive. The Company acknowledges that Executive resides and will primarily perform work in Austin,
Texas, and will regularly be travelling on Company business to and from his home base in Austin, Texas, and all travel expense
related to such business travel will be reimbursable travel expense.
7. Code
Section 409A. A termination of employment shall not be deemed to have occurred for purposes of any provision of
this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination
is also a “separation from service” within the meaning of Section 409A of the Code and, for purposes of any such
provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall
mean “separation from service.” Notwithstanding any other provision herein, if Executive is deemed on the date of termination
to be a “Specified Employee,” as that term is defined in Section 409A of the Code, then with regard to any payment
or the provision of any benefit under this Agreement that is considered deferred compensation under Section 409A of the Code
payable on account of a “separation from service” and that is not exempt from Section 409A of the Code as involuntary
separation pay or a short-term deferral (or otherwise), such payment or benefit shall be made or provided at the date which is
the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service”
of Executive, and (ii) the date that is ten (10) days after the date of Executive’s death (the “Delay Period”).
Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section (whether they would have
otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to Executive
in a lump sum without interest, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance
with the normal payment dates specified for them herein.
8. Termination
by the Company for Cause or by Your Resignation. In the event that Executive’s employment is terminated for Cause
during the Term or by Executive’s resignation during the Term, the Company shall have no further financial obligations to
Executive under this Agreement except for payment to Executive of (a) Executive’s accrued, but unpaid wages or other benefits
earned through the date of separation to which Executive is otherwise legally entitled, (b) any accrued but unused paid time off,
(c) any unreimbursed expenses in accordance with the Company’s policies, and (d) any other vested benefits or vested amounts
due and owed to Executive under the terms of any plan, program or arrangement of the Company on the same basis as those benefits
are generally made available to other peer executives of the Company and in accordance with the terms of those plans as may be
in existence from time to time (collectively, “Accrued Rights”). For purposes of this Agreement, “Cause”
shall mean (i) the willful and material failure by Executive to perform Executive’s material duties with respect to the Company
or its affiliates following Executive’s failure to correct such failure within thirty (30) days after Executive’s receipt
of written notice of breach from the Company specifying the particulars of such breach sufficiently to permit its cure; (ii) the
willful or intentional engaging by Executive in conduct within the scope of Executive’s employment that causes material and
demonstrable injury, monetarily or otherwise, to the Company; (iii) Executive’s conviction for, or a plea of nolo contendere
to, the commission of a felony of any type or any crime related to the Company involving dishonesty, misappropriation, breach of
fiduciary duty, or moral turpitude; (iv) Executive obtaining any personal profit not disclosed to and approved by the Board in
connection with any transaction entered into by, or on behalf of, or in relation to, the Company; or (v) a material breach of Executive’s
covenants set forth in this letter agreement or violating any of the terms of the Company’s established rules or policies
which, if curable, is not cured to the Board’s reasonable satisfaction within fifteen (15) days after written notice thereof
to Executive, it being agreed and understood that any such notice of material breach or violation shall specify the particulars
of any such breach or violation sufficiently to permit its cure.
9. Termination
by the Company Without Cause or by Executive for Good Reason. In the event that Executive’s employment is terminated
by the Company without Cause during the Term or by the Executive for Good Reason (as defined below) during the Term, the Company
shall have no further financial obligations to Executive (or, as the case may be, to Executive’s heirs, devisees or estate)
under this Agreement except for payment to Executive of the following as conditioned below:
(a) Executive’s
Accrued Rights; and
(b) Subject
to (i) the obligations and restrictions set forth in subparagraph (c) below, and (ii) Executive’s execution and return of
a severance agreement, which shall, among other things, release the Company (and its officers, directors, employees, agents, parents,
affiliated entities, and successors and assigns of any of them) from any and all claims, and which shall be in a form and containing
reasonable terms in the reasonable discretion of the Board (the “Severance Agreement”), within twenty-one (21)
days following the Company’s presenting Executive with such Severance Agreement; and (iii) Executive’s non-revocation
of and continued compliance with the Severance Agreement, Executive shall be entitled to a severance payment equal to $450,000,
subject to all applicable taxes and withholdings (“Severance Payment”), payable as a lump sum on the Company’s
next normal payroll processing at least five (5) days following the expiration date of any revocation period (if applicable) under
the Severance Agreement. The Severance Payment shall be payable fifty percent (50%) by Imation and fifty percent (50%) by the Company.
Such Severance Payment shall be paid through the Company’s payroll, and Imation shall wire its fifty percent (50%) portion
to the payroll provider designated by the Company within three (3) days prior to the date of payment thereof; and the Company and
its agents shall hold any such wire transfers to the Company or its agents for the benefit of Executive until the net amounts of
same are paid to Executive and any lawful deductions from same are deposited as employment tax deposits with the appropriate depositary
institution(s). Immediately upon Closing, the Company and Imation shall deposit the gross amounts of their respective portions
of the Severance Payment with an escrow agent acceptable to Executive; and the escrow agent’s maintaining and disbursement
of such monies shall be in accordance with and subject to escrow instructions acceptable to Executive. The parties shall work in
good faith to put in place an escrow agreement in connection with the foregoing.
(c) Continuing
Obligations. Notwithstanding the termination of Executive’s employment, Executive agrees that the Severance Payment is
intended solely to provide a financial cushion while Executive searches for new non-competitive employment and, therefore, Executive’s
entitlement to obtain or keep such monies is expressly conditioned upon and limited by the following:
(i) Non-Disparagement.
Following Executive’s employment with the Company, Executive agrees not to defame, disparage or criticize the Company, its
business plan, procedures, products, services, development, finances, financial condition, capabilities or other aspect of its
business, or any of its officers, directors, agents or assigns (and their direct and indirect shareholders, members and partners,
and directors and officers) in any medium (whether oral, written, electronic or otherwise, whether currently existing or hereafter
created), to any person or entity, without limitation in time. Notwithstanding the foregoing sentence, Executive may confer in
confidence with Executive’s advisors and make truthful statements as required by law or to the Board.
(ii) Non-Solicitation
and Non-Competition. Any right to receiving or keeping any portion of the Severance Payment is expressly conditioned on Executive
refraining from violating any of the restrictive covenants in this Agreement, including, but not limited to Sections 11 (Non-Solicitation)
and 12 (Non-Competition) below. Thus, for purposes of clarification and without limitation, if Executive were to violate the non-competition
provision below in Section 12 by commencing employment with a direct competitor in the data storage industry in a prohibited
geographic area during the Restricted Period, Executive would be required to return any part of the Severance Payment already received
(including any lump sum payment) and any right to receiving additional payments toward the maximum Severance Payment shall cease.
(iii) Proprietary
and Confidential Information. Any right to receiving or keeping any portion of the Severance Payment is further conditioned
on Executive continuing compliance with the Proprietary Information and Inventions Agreement and not otherwise misusing any Company
confidential, proprietary or trade secret information.
For purposes of this
Agreement, “Termination by the Company Without Cause” shall include but shall not be limited to the following
circumstances: (a) Executive’s death; or (b) Executive’s Disability, which shall be deemed to have occurred when in
the good faith judgment of the Board, Executive becomes physically or mentally incapacitated and is therefore unable for a period
of four (4) consecutive months or for an aggregate of six (6) months in any twelve (12) consecutive month period to perform Executive’s
duties (such incapacity is referred to herein as “Disability”). The Company will also comply with any applicable
federal and state disability and leave laws.
For purposes of this
Section 9 of the Agreement, Executive shall be entitled to terminate employment for “Good Reason” by written
notice to the Company of such termination within sixty (60) days after any of the following events occur: (a) a material diminution
occurs in the Executive’s title or duties as Interim Chief Executive Officer; (b) the Company requires that the Executive
change his primary residence away from Austin, Texas, without giving Executive at least nine (9) months’ advance notice,
or without a reasonable increase in Executive’s compensation commensurate with the increased cost of living in the new locale
to which the Company has requested the Executive to relocate, or without providing reasonable relocation benefits to make the Executive
whole for all reasonable costs relative to the requirement that he relocate his family residence from Austin, Texas to elsewhere;
or (c) a Change in Control (as defined below) occurs. If any such events occur, then Executive shall be deemed to have been constructively
discharged and Executive shall have the right to terminate his employment for Good Reason and receive the severance benefits described
in this Agreement, provided that Executive notifies the Board of his election to terminate employment for Good Reason within sixty
(60) days following any such event and the Board has not cured such event within ten (10) business days after the Board receives
such notification. Notwithstanding anything herein to the contrary, if Executive’s employment terminates during the Term
due to the Good Reason trigger set forth in the foregoing subsection (c), (i) Imation shall be solely responsible for payment of
the Severance Payment, (ii) such Severance Payment shall be paid through the Company’s payroll, and Imation shall wire the
Severance Payment to the payroll provider designated by the Company within three (3) days prior to the date of payment thereof,
and (iii) the Company and its agents shall hold any such wire transfers to the Company or its agents for the benefit of Executive
until the net amounts of same are paid to Executive and any lawful deductions from same are deposited as employment tax deposits
with the appropriate depositary institution(s).
For purposes of this
Section 9 of the Agreement, “Change in Control” means the occurrence of any of the following events that qualifies
as a “change in control event” (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i)) with respect to
the Company:
| (1) | a majority of the members of the Board is replaced during
any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board
before the date of the appointment or election; |
| (2) | any one person, or more than one person acting as a group
(as determined under Treasury Regulation Section 1.409A-3(i)(5)(vii)(C)) acquires substantially all of the Company’s assets
(an “Asset Sale”), unless the individuals who comprise the Board immediately prior to such Asset Sale constitute
a majority of the board of directors or other governing body of either the entity that acquired such assets in such Asset Sale
or its parent; or |
| (3) | any other transaction is consummated with respect to
the Company that qualifies as a “change in control event” (within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i)). |
10. Termination
Upon Expiration of Term. Executive’s employment under this Agreement shall automatically expire upon the expiration
of the Term. In the event of such termination upon the expiration of the Term, the Company shall have no further financial obligations
to Executive (or, as the case may be, to Executive’s heirs, devisees or estate) under this Agreement except for payment to
Executive of the Accrued Rights and the Severance Payment described in and pursuant to the terms and conditions of Section 9; provided,
that notwithstanding anything herein to the contrary, (i) Imation shall be solely responsible for payment of the Severance Payment
in the event of a termination of Executive’s employment upon expiration of the Term, (ii) such Severance Payment shall be
paid through the Company’s payroll, and Imation shall wire
the Severance Payment to the payroll provider designated by the Company within three (3) days prior to the date of payment thereof,
and (iii) the Company and its agents shall hold any such wire transfers to the Company or its agents for the benefit of Executive
until the net amounts of same are paid to Executive and any lawful deductions from same are deposited as employment tax deposits
with the appropriate depositary institution(s).
11. Non-Solicitation.
(a) During
the Restricted Period (as defined below), Executive shall not, whether on Executive’s own behalf or on behalf of or in conjunction
with any Person, directly or indirectly;
(i) solicit
or encourage any employee of the Company or its affiliates to leave the employment of the Company or its affiliates;
(ii) hire
any such employee who was employed by the Company or its affiliates as of the date of Executive’s termination of employment
with the Company or who left the employment of the Company or its affiliates coincident with, or within one (1) year prior to or
after, the termination of Executive’s employment with the Company;
(iii) solicit
or encourage any person that serves as a contractor or consultant of the Company or its affiliates to discontinue providing services
to the Company or any affiliate of the Company;
(iv) call
on, solicit or service any customer or client of the Company or its affiliates with the intent of selling or attempting to sell
any service or product the same or substantially similar to the services or products sold by the Company or its affiliates; or
(v) in
any way materially interfere with the relationship between the Company or its affiliates and any customer, supplier, licensee or
other business relation (or any prospective customer, supplier, licensee or other business relationship) of the Company or any
of its affiliates (including, without limitation, by making any negative or disparaging statements or communications regarding
the Company, any of its affiliates or any of their operations, officers, directors or investors).
(b) It
is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section to
be reasonable, if a final judicial determination is made by an arbitrator or court of competent jurisdiction that the time or territory
or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction
or arbitrator finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so
as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.
(c) For
purposes of this Agreement, “Restricted Period” shall mean the period commencing on the Closing and ending twelve
(12) months following the conclusion of Executive’s employment or the cessation of severance payments, whichever is
shorter, whether such employment ends prior to or at the conclusion of the Term.
(d) The
existence of any claim or cause of action by Executive against the Company or any of its affiliates, whether predicated on this
Agreement or otherwise, will not constitute a defense to the enforcement by the Company of the provisions of Sections 11, 12 or
13, which Sections will be enforceable notwithstanding the existence of any breach by the Company. Notwithstanding the foregoing,
Executive will not be prohibited from pursuing such claims or causes of action against the Company. Executive consents to the Company
notifying any future employer of Executive’s obligations under Section 11, 12 and 13 of this Agreement and Company agrees
to provide Executive copies of any such written notices contemporaneously with any such transmittal to others.
(e) In
the event of any breach or violation by Executive of this Section 11, the Restricted Period will be tolled until such breach
or violation has been duly cured.1
12. Non-Competition.
(a) During
the Restricted Period, Executive shall not (without the express written agreement of the Board), whether on Executive’s own
behalf or on behalf of or in conjunction with any other person or entity, directly or indirectly whether as owner, partner, investor,
consultant, agent, executive, co-venturer or otherwise (other than through ownership of publicly-traded capital stock of a corporation
which represents less than two percent (2%) of the outstanding capital stock of such corporation), (i) compete with the Company
or any parent, subsidiary or affiliate hereof in any business activities relating to the data storage industry in any state in
the United States which the Company or any parent, subsidiary or affiliate thereof conducts business or sells products or services
relating to the data storage industry, or (ii) undertake any planning for any business competitive with the Company or any parent,
subsidiary or affiliate thereof relating to the data storage industry in any state in the United States which the Company or any
parent, subsidiary or affiliate thereof conducts such business or sells such products or services.
1 The
non-prevailing party to any action or proceeding to enforce any provision of this Agreement or to obtain damages as a result of
a breach of this Agreement or to enjoin any breach of this Agreement shall reimburse the prevailing party for any and all
reasonable costs and expenses (including attorneys’ fees) incurred by the prevailing party
in connection with such action or proceeding.
(b) It
is expressly understood and agreed that although Executive and the Company consider the restrictions contained in this Section to
be reasonable, if a final judicial determination is made by an arbitrator or court of competent jurisdiction that the time or territory’
or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this
Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction
or arbitrator finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so
as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein or
any other provision of this Agreement.
(c) The
existence of any claim or cause of action by Executive against the Company or any of its affiliates, whether predicated on this
Agreement or otherwise, will not constitute a defense to the enforcement by the Company of the provisions of Sections 11, 12 or
13, which Sections will be enforceable notwithstanding the existence of any breach by the Company. Notwithstanding the foregoing.
Executive will not be prohibited from pursuing such claims or causes of action against the Company. Executive consents to the Company
notifying any future employer of Executive’s obligations under Sections 11, 12, and 13 of this Agreement and Company agrees
to provide Executive copies of any such written notices contemporaneously with any such transmittal to others.
(d) In
the event of a breach or violation by Executive of this Section 12 the Restricted Period will be tolled until such breach
or violation has been duly cured.
(e) The
non-prevailing party to any action or proceeding to enforce any provision of this Agreement or to obtain damages as a result of
a breach of this Agreement or to enjoin any breach of this Agreement shall reimburse the prevailing party for any and all reasonable
costs and expenses (including attorneys’ fees) incurred by the prevailing party in connection with such action or proceeding.
13. Specific
Performance. Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach
of any of the provisions of Sections 11 or 12 would be inadequate and the Company would suffer irreparable damages as a result
of such breach or threatened breach. In recognition of this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law. the Company shall be entitled to equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other equitable remedy that may then be available under the
laws of the State of Texas.
14. Proprietary
Information and Inventions Agreement. Executive will be required, as a condition of employment with the Company, to
sign the Company’s Proprietary Information and Inventions Agreement, a copy of which is attached hereto as Exhibit A.
(a) For
the avoidance of doubt, the Proprietary Information and Inventions Agreement does not prohibit or restrict Executive (or Executive’s
attorney) from responding to any inquiry about the Agreement or its underlying facts and circumstances by the Securities and Exchange
Commission (SEC), the Financial Industry Regulatory Authority (FINRA), any other self-regulatory organization or governmental entity,
or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. Executive understands
and acknowledges that he does not need the prior authorization of the Company to make any such reports or disclosures and that
he is not required to notify the Company that he has made such reports or disclosures.
(b)
Executive understands that Executive may, without informing the Company prior to any such disclosure, disclose Proprietary Information,
as defined in the Proprietary Information and Inventions Agreement (i) in confidence to a federal, state, or local government official,
either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of
law or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally,
without informing the Company prior to any such disclosure, if Executive files a lawsuit against the Company for retaliation for
reporting a suspected violation of law, Executive may disclose Proprietary Information to his attorney and use the Proprietary
Information in the court proceeding or arbitration, provided that Executive files any document containing the Proprietary Information
under seal and does not otherwise disclose the Proprietary Information, except pursuant to court order. Without prior authorization
of the Company, however, the Company does not authorize Executive to disclose to any third party (including any government official
or any attorney Executive may retain) any communications that are covered by the Company’s attorney-client privilege.
15. Miscellaneous.
(a) Tax
Matters. All forms of compensation referred to in this letter agreement are subject to reduction to reflect applicable withholding
and payroll taxes and other deductions required by law. You are encouraged to obtain your own tax advice regarding your compensation
from the Company. You agree that the Company does not have a duty to design its compensation policies in a manner that minimizes
your tax liabilities, and you will not make any claim against the Company or the Board related to tax liabilities arising from
your compensation.
(b) Governing
Law; Arbitration.
(i) Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas or applicable federal
law, except that the Federal Arbitration Act shall govern the arbitration clauses of this Agreement.
(ii) Arbitration
of all Disputes. All complaints, causes of action, disputes, claims or controversies (“claims”) between
Executive and Company, including any past, present, or future claims, whether or not arising out of Executive’s employment
(or its termination), that the Company may have against Executive or that Executive may have against any the Company or its officers,
directors, employees or agents, parent, subsidiary affiliated entities, or successors and assigns of any of them, will be resolved
through binding arbitration. The claims covered by this arbitration agreement include all disputes that the Company or Executive
could otherwise pursue in state or federal court including, but not limited to, claims based on any state, federal, or local statute,
regulation or ordinance (including claims for employment discrimination, retaliation or harassment, claims for unpaid wages or
violation of state or federal wage and hour laws), as well as common law claims (including claims for breach of contract or breach
of the implied covenant of good faith and fair dealing, wrongful discharge, defamation, misrepresentation, fraud, and infliction
of emotional distress).
The following claims
are not subject to arbitration under this Agreement: (1) claims for workers’ compensation benefits, state disability benefits,
state unemployment benefits; (2) administrative charges filed with a federal, state or local government office or agency, such
as the Equal Employment Opportunity Commission (“EEOC”) or any comparable state anti-discrimination agency,
or the National Labor Relations Board (“NLRB”); and (3) any claims that, as a matter of law, cannot legally
be subject to arbitration. Nothing in these provisions shall preclude either Executive or the Company from seeking temporary or
injunctive relief in a court prior to determining the claim in arbitration.
To the maximum extent
permitted by law, Executive hereby waives any right to bring on behalf of persons other than Executive, or to otherwise participate
with other persons in, any class or collective action (a type of lawsuit in which one or several persons sue on behalf of a larger
group of persons).
The arbitration shall
be conducted by a single neutral arbitrator in accordance with the then-current Employment Arbitration and Mediation Procedures
of the American Arbitration Association (“AAA”), which can be viewed at http://www.adr.org/employment. The Company
will provide Executive with a copy of these rules upon request. The arbitration shall take place in the county of the state in
which Executive is or was last employed by the Company, with the understanding the such location is currently Austin, Texas. The
Company will pay the arbitrator’s fee and will bear all administrative charges by AAA. All parties shall be entitled to engage
in reasonable pre-hearing discovery to obtain information to prosecute or defend the asserted claims. Any disputes between the
parties regarding the nature or scope of discovery shall be decided by the arbitrator. The arbitrator shall hear and issue a reasoned
written ruling upon any dispositive motions brought by either party, including but not limited to, motions for summary judgment
or summary adjudication of issues.
After the hearing,
the arbitrator shall issue a reasoned written decision setting forth the award, if any, and explaining the basis therefore. The
arbitrator shall have the powder to award any type of relief that would be available in court. The arbitrator’s award shall
be final and binding upon the parties and may be entered as a judgment in any court of competent jurisdiction. In the event of
any conflict in the arbitration procedures set forth in this Agreement and the AAA rules specified above, the AAA rules shall control.
Notwithstanding the
foregoing, and regardless of what is provided by AAA’s rules, to the extent that it is legally permissible to do so, the
arbitrator will not have authority or jurisdiction to consolidate claims of different employees into one proceeding, nor shall
the arbitrator have authority or jurisdiction to hear the arbitration as a class action. As noted above, Executive has waived any
right to bring any class or collective action. To the extent that the class or collective action waiver described above is not
enforceable, the issue of whether to certify any alleged or putative class for a class action proceeding must be decided by a court
of competent jurisdiction. The arbitrator will not have authority or jurisdiction to decide class certification or collective action
issues. Until any class certification or collective action issues are decided by the court, all arbitration proceedings shall be
stayed, and the arbitrator shall take no action with respect to the matter. However, once any issues regarding class certification
or collective action have been decided by the court, the arbitrator will have authority to decide the substantive claims.
This arbitration provision
is governed by the Federal Arbitration Act (9 U.S.C. § 1, et seq.) and evidences a transaction involving commerce.
If the Federal Arbitration Act is held not to apply, the arbitration law of the State of Texas shall apply. We intend that this
Agreement be limited to those claims that may legally be subject to a pre-dispute arbitration agreement under applicable law. A
court or arbitrator construing this Agreement may therefore modify or interpret it to render it enforceable.
(c) Entire
Agreement/Amendments. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof
and those incorporated herein.
(d) No
Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party’s rights or deprive such party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement.
(e) Severability.
In the event that any one or more of the provisions of this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected thereby.
(f) Assignment.
This Agreement and all of Executive’s rights and duties hereunder, shall not be assignable or delegable by Executive. Any
purported assignment or delegation by Executive in violation of the foregoing shall be null and void ab initio and of no force
or effect. This Agreement may be assigned by the Company to a person or entity that, is an affiliate or a successor in interest
to substantially all of the business operations of the Company. Any assignment of this Agreement by the Company or Executive shall
not release the Company or Executive, respectively, of its or his obligations under this Agreement.
(g) Successors;
Binding Agreement. This Agreement shall inure to the benefit of and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees,
(h) Prior
Agreements. This Agreement supersedes all prior agreements and understandings (including verbal agreements) between Executive
and the Company or Imation and/or their affiliates regarding the terms and conditions of Executive’s employment with the
Company and/or its affiliates.
(i) Corporate
Opportunities. Executive will submit to the Board all business, commercial and investment opportunities or offers presented
to Executive or of which Executive becomes aware which relate to the businesses of the Company or its subsidiaries as such businesses
of the Company or its subsidiaries exist at any time during the period in which Executive is employed by the Company (“Corporate
Opportunities”). Unless approved by the Board, Executive will not accept or pursue, directly or indirectly, any Corporate
Opportunities on Executive’s own behalf.
(j) Counterparts.
This Agreement may be executed by facsimile or PDF signature and in two (2) or more counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same instrument.
(k) Executive’s
Representations. Executive hereby represents and warrants to the Company that (i) he has entered into this Agreement of his
own free will for no consideration other than as referred to herein, (ii) the execution, delivery and performance of this Agreement
by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument,
order, judgment or decree to which Executive is a party or by which Executive is bound, (iii) Executive is not a party to or bound
by any employment, noncompetition, confidentiality or other similar agreement with any other Person except prior employers, and
Executive represents and warrants that none of said prior agreements prohibit or in any way interfere with Executive’s performance
under this Agreement, and (iv) upon the execution and delivery of this Agreement by the Company, this Agreement will be the valid
and binding obligation of Executive, enforceable in accordance with its terms. Executive hereby acknowledges and represents that
Executive has had the opportunity to consult with independent legal counsel regarding Executive’s rights and obligations
under this Agreement and that Executive fully understands the terms and conditions contained herein, and that the parties have
participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
(l) Time
of the Essence. Time shall be of the essence in connection with all payments promised in this Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF,
the parties hereto have duly executed this Agreement as of the day and year first above written.
|
“COMPANY” |
|
|
|
Nexsan Corporation |
|
By: |
/s/ Danny Zheng |
|
Name: |
Danny Zheng |
|
Title: |
Secretary |
|
“IMATION” (solely as to Sections 3, 4, 9(b) and 10) |
|
|
|
Imation Corp. |
|
By: |
/s/ Joseph A. De Perio |
|
Name: |
Joseph A. De Perio |
|
Title: |
Non-Executive Chairman |
|
“EXECUTIVE” |
|
|
|
/s/ Robert B. Fernander |
|
Robert B. Fernander |
Exhibit
A
PROPRIETARY
INFORMATION AND INVENTIONS AGREEMENT
The following confirms
my agreement with Nexsan Corporation (“Company”) and I, Robert B. Fernander, that is a material part
of the consideration for my employment by Company:
1. I
have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement
or my employment with Company. I will not violate any agreement with or rights of any third party or. except as expressly
authorized by Company in writing hereafter, use or disclose any own or any third party’s confidential information or intellectual
property when acting within the scope of my employment or otherwise on behalf of Company. Further, I have not retained anything
containing any confidential information of a prior employer or other third party, whether or not created by me.
2. Company
shall own all right, title and interest (including all intellectual property rights of any sort throughout the world) relating
to any and all inventions, works of authorship, designs, know-how, ideas and information made or conceived or reduced to practice,
in whole or in part, by me in connection with my employment with Company to and only to the fullest extent allowed by law (“Inventions”)
and I will promptly disclose all Inventions to Company. This provisions in this Agreement requiring you to assign,
or offer to assign, any of your rights in an Invention shall not apply to an Invention that you developed entirely on your own
time without using the Company’s equipment, supplies, facilities, or trade secret information except for those inventions
that either (A) Relate at the time of conception or reduction to practice of the invention to the Company’s business, or
actual or demonstrably anticipated research or development of the Company; or (B) Result from any work performed by the you for
Company. Without disclosing any third party confidential information. I will disclose anything I believe is excluded by this Agreement
so that the Company can make an independent assessment. I hereby make all assignments necessary to accomplish the foregoing. I
shall assist Company, at Company’s expense, to further evidence, record and perfect such assignments, and to perfect, obtain,
maintain, enforce, and defend any rights specified to be so owned or assigned. I irrevocably designate and appoint Company as
my agent and attorney-in-fact, coupled with an interest and with full power of substitution; to act for and in my behalf to execute
and file any document and to do all other lawfully permitted acts to further the purposes of the foregoing. If I wish to clarify
anything created by me prior to my employment that relates to Company’s actual or proposed business, I have listed it on
the attached disclosure in a manner that does not violate any third party rights or disclose any confidential information. Without
limiting the above or Company’s other rights and remedies, if, when acting within the scope of my employment or otherwise
on behalf of Company, I use or disclose my own or any third party’s confidential information or intellectual property (or
if any Invention cannot be fully made, used, reproduced, or distributed without using or violating the foregoing). Company will
have and I hereby grant Company a perpetual, irrevocable, worldwide, royalty-tree, fully paid-up, non-exclusive, sublicensable
right and license to exploit and exercise all such confidential information and intellectual property rights.
3. To
the extent allowed by law, the foregoing paragraph includes all rights of paternity, integrity, disclosure and withdrawal and
any other rights that may be known as or referred to as “moral rights,” “artist’s rights,” “droit
moral” or the like (collectively “Moral Rights”). To the extent I retain any such Moral Rights under
applicable law, I hereby ratify and consent to any action that may be taken with respect to such Moral Rights by or authorized
by Company and agree not to assert any Moral Rights with respect thereto. I will confirm any such ratifications, consents and
agreements from time to time as requested by Company.
4. I
agree that all Inventions and all other business, technical and financial information (including, without limitation, the identity
of and information relating to customers or employees) I develop, learn or obtain during the my employment that relate to Company
or the business or demonstrably anticipated business of Company or that are received by or for Company in confidence, constitute
“Proprietary Information.” I will hold in confidence and not disclose or. except within the scope of my employment,
use any Proprietary Information. Upon termination of my employment, I will promptly return to Company all items containing or
embodying Proprietary Information (including all copies), except that I may keep my personal copies of (i) my compensation records,
(ii) materials distributed to shareholders or Directors generally (to the extent I remain a Director) and (iii) this Agreement.
I also recognize and agree that I have no expectation of privacy with respect to Company’s telecommunications, networking
or information processing systems (including, without limitation, stored computer files, email messages and voice messages) and
that my activity and any files or messages on or using any of those systems may be monitored at any time without notice.
5. I
agree that my obligations under this Agreement shall continue in effect after termination of my employment, regardless whether
such termination is voluntary or involuntary on my part, and that Company is entitled to communicate my obligations under this
Agreement to any future employer or potential employer of mine, provided that I receive a copy of such communications in a timely
manner.
6. This
Agreement is fully assignable and transferable by Company, but any purported assignment or transfer by me is void. I
also understand that any breach of this Agreement will cause irreparable harm to Company for which damages would not be an adequate
remedy, and, therefore, Company will be entitled to injunctive relief with respect thereto in addition to any other remedies and
without any requirement to post bond.
I HAVE READ THIS
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS WHICH IT IMPOSES UPON, ME
WITHOUT RESERVATION.
November 22, 2016 |
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/s/ Robert B. Fernander |
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Robert B. Fernander |
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Accepted and Agreed to: |
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/s/ Danny Zheng |
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By: Danny Zheng |
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Title: Secretary |
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Disclosure
of Inventions
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Disclosure
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__ No inventions or improvements
__ Additional Sheets Attached
Signature of Employee: |
/s/ Robert B. Fernander |
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Print Name of Employee: |
Robert B. Fernander |
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Date: November 22, 2016
Exhibit 99.1
Strictly Confidential. Not for Distribution. STOCKHOLDER PRESENTATION November 2016 ASSET MANAGEMEN T FinTECH
IMPORTANT DISCLOSURES AND DISCLAIMERS 1 Additional Information About the Transaction and Where to Find It In connection with the proposed issuance of shares of common stock (the “Capacity Shares”) of Imation Corp . (“Imation” or the “Company”) to Clinton Group, Inc . (“ Clinton G roup”) and the proposed sale of equity interests of Nexsan Corporation and its wholly owned subsidiaries and related subsidiary Connected Data, Inc . (collectively, “Nexsan”) ( the “Nexsan Transaction”) , the Company intends to file with the U . S . Securities and Exchange Commission (“SEC”) a preliminary proxy statement . When completed, the Company intends to mail a definitive proxy statement and other relevant documents to its stockholders in connection with its solicitation of proxies for the special meeting of stockholders to be held to approve the proposed issuance of Capacity Shares and the Nexsan Transaction . This presentation does not contain all the information that should be considered concerning the proposed issuance of Capacity Shares and the Nexsan Transaction . It is not intended to provide the basis for any investment decision or any other decision in respect to the proposed issuance of Capacity Shares and the Nexsan Transaction . The Company’s stockholders and other interested persons are advised to read, when available, the preliminary proxy statement, the amendments thereto, and definitive proxy statement in connection with the Company’s solicitation of proxies for the special meeting to be held to approve the proposed issuance of Capacity Shares and the Nexsan Transaction, as these materials will contain important information about the Company, the proposed issuance of Capacity Shares and the Nexsan Transaction . The definitive proxy statement will be mailed to stockholders of the Company as of a record date to be established for voting on the proposed issuance of Capacity Shares and the Nexsan Transaction . Stockholders will also be able to obtain copies of the proxy statement and other documents filed with the SEC that will be incorporated by reference in the proxy statement, without charge, once available, at the SEC’s web site at (www . sec . gov), or by directing a request to : Imation Corp . , 1099 Helmo Ave . N . , Suite 250 , Oakdale, Minnesota 55128 , Attn : Corporate Secretary, ( 651 ) 704 - 4000 . Participants in Solicitation The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the proposed issuance of Capacity Shares and the Nexsan Transaction . Information regarding the special interests of these directors and executive officers in the proposed issuance of Capacity Shares and the Nexsan Transaction will be included in the proxy statement referred to above . Additional information regarding the directors and executive officers of the Company is also included in the Company’s Annual Report on Form 10 - K for the year ended December 31 , 2015 , which is available free of charge at the SEC web site (www . sec . gov) and at the address described above and will also be included in the definitive proxy statement for the proposed issuance of Capacity Shares and the Nexsan Transaction when available . Forward Looking Statements This presentation may include “forward looking statements” within the meaning of the “safe harbor” provisions of the United Stated Private Securities Litigation Reform Act of 1995 . Forward - looking statements are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected . Words such as “expects”, “believes”, “anticipates”, “intends”, “estimates”, “seeks” and variations and similar words and expressions are intended to identify such forward - looking statements . Such forward - looking statements with respect to the transactions contemplated by the Subscription Agreement, the Capacity and Services Agreement and the Registration Rights Agreement relating to the issuance of the Capacity Shares and the Stock Purchase Agreement, Note and Stockholder’s Agreement related to the Nexsan Transaction (collectively, the “Transaction Documents”) are based on current expectations that are subject to risks and uncertainties . A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward - looking statements . These factors include, but are not limited to : ( 1 ) the occurrence of any event, change or other circumstances that could give rise to the termination of the Subscription Agreement or the Stock Purchase Agreement, ( 2 ) the outcome of any legal proceedings that may be instituted against the Company or others following announcement of the transactions contemplated by the Transaction Documents ; ( 3 ) the inability to complete the transactions contemplated by the Transaction Documents due to the failure to obtain approval of the stockholders of the Company or other conditions to closing in the Subscription Agreement or the Stock Purchase Agreement, ( 4 ) delays in obtaining, adverse conditions contained in, or the inability to obtain necessary regulatory approvals or complete regulatory reviews required to complete the transactions contemplated by the Transaction Documents ; ( 5 ) the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and consummation of the transactions described herein ; ( 6 ) the ability to recognize the anticipated benefits of the proposed transactions ; ( 7 ) costs related to the proposed transactions ; ( 8 ) changes in applicable laws or regulations ; ( 9 ) the possibility that Clinton Group may be adversely affected by other economic, business, and/or competitive factors ; and ( 10 ) other risks and uncertainties indicated from time to time in the proxy statement relating to the proposed issuance of Capacity Shares and the Nexsan Transaction, including those under “Risk Factors” therein, and other filings with the SEC by the Company . Readers are cautioned not to place undue reliance upon any forward - looking statements, which speak only as of the date made, and the Company undertakes no obligation to update or revise any forward - looking statements whether as a result of new information, future events or otherwise, except as required by law . Disclaimers This communication shall not constitute an offer to sell or the solicitation of an offer to buy the Capacity Shares or any other security . The Capacity Shares have not been registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements . Statements contained in this presentation relate to the historical experience of Clinton Group . An investment in the Company is not an investment in Clinton Group . The historical results of Clinton Group are not necessarily indicative of future performance of the Company or its subsidiaries
2015 2016 2017 RE - BIRTH OF IMATION | 2 Identify Problems Active Restructuring Execution & Growth • Three Directors replaced at 2015 Annual Meeting • CEO resigned in Q3 ‘15 • Profitability and capital requirements of all business lines were examined • Executive bonus compensation was frozen and board compensation was significantly reduced • Company began examining strategic alternatives for excess capital • Legacy businesses wound down • Sold non - core assets (IronKey, HQ real estate, Memorex trademarks) • Significantly reduced cash burn and staved off potential future insolvency • Actively manage cash and investment securities (including liquidation of Sphere3D shares) • Capital deployed to purchase Connected Data to give Nexsan “on - trend,” disruptive technology, and Nexsan positioned for growth and profitability • Imation consummates Nexsan Transaction while preserving potential equity value upside from their ongoing development and market penetration • Pre - money valuation of $25 million versus current market capitalization of Imation at $23 million • Nexsan’s UNITY ™ product line combines performance, scalability and value with private cloud file system synchronization and mobile data support and is the driver of future equity value • Imation enters into agreement with Clinton Group, Inc. (“ Clinton Group”) to jumpstart asset management business • Furthers the stated goal of developing a publicly traded asset management firm poised for long - term growth and capital appreciation • Previously established investment advisor will manage third party capital at closing Evolution of Imation over the Last 15 Months Phase 1 Eliminated money losing businesses, and harvested capital from non - core assets Investment in enhanced technology with Nexsan to create a disruptive product line Imation consummates Nexsan Transaction to sell Nexsan equity while maintaining upside Phase 2 Path Forward – Two Corporate Transactions Launch asset management business and further corporate vision
THE VISION | 3 Providing Financial Solutions Through Financial Technology THE ASSET MANAGEMENT WORLD CAN BENEFIT FROM INNOVATIVE THINKING Goal is to develop an in - house asset management business focused on financial technology Initially, “Newco,” Imation's subsidiary and an investment adviser, will innovate with proven strategies such as technology - driven trading Newco will be renamed and rebranded at closing Business plan contemplates multi - year growth through identified business models within asset management Numerous growth avenues going forward provide opportunities for sustained performance Business plan has a 3 year target for assets under management of $500 million and which we expect will result in profitability MULTIPLE AVENUES FOR GROWTH AND SUCCESS The company would act as both a principal (investing its own capital) to seed new investment programs, funds and products and as an asset manager for third - party investor capital “Alternative asset” classes include hedge funds and other non - traditional investment programs There is a significant amount of investment management talent seeking robust infrastructure and centralized services Recent regulatory changes, reporting requirements and demand for transparency make now an opportune time for launch PUBLIC COMPANY FORMAT AFFORDS NUMEROUS ADVANTAGES The visibility and scrutiny of a public company will give clients additional confidence The ability to use the public currency to attract managers or acquire firms is powerful Valuation of these firms – given the visible, recurring revenue – provides an attractive liquidity option for successful managers Imation will transition and become a publicly traded alternative asset manager and proprietary investor with financial technology at its core.
EXECUTIVE SUMMARY – NEXSAN TRANSACTION | 4 Transaction with Spear Point provides Nexsan additional runway for growth and puts Imation in a senior secured position in the capital structure with a conversion feature KEY TERMS FOR IMATION Pre - money valuation of $25 million NXSN Acquisition Corp. (“NXSN”), an affiliate of Spear Point Capital Management LLC, will purchase from Imation all of the common stock of Nexsan and its subsidiaries (including Connected Data) and thereafter will issue up to $10 million of convertible preferred equity, the proceeds of which will be used to provide additional capital to Nexsan. • PIK dividends at a rate of 5% per annum for the first two years and 8% per annum thereafter • Participating preferred equity with convertible feature at 120% of par In exchange for its Nexsan common stock, Imation will receive a $ 25 million senior secured convertible promissory note maturing three years from closing (the “Note”) • The Note will bear cash interest at a rate of 5% per annum for the first two years and 8% per annum thereafter • $10 million of the Note is convertible into common equity of NXSN at a premium of 25% 45 Day “Go Shop” to secure a superior proposal Board received financial advice from Cypress Associates, LLC IMPACT TO IMATION Transaction provides Nexsan with the additional capital necessary to continue its trajectory of value creation with its emerging technology in enterprise file, synch and share Transaction eliminates Imation’s need to fund Nexsan's ongoing requirements New equity holders may want the opportunity to enhance growth through additional capital investments or other bolt - on acquisitions Imation preserves potential upside from equity value creation at Nexsan and the growth of UNITY™ Transaction eliminates Imation’s need to fund Nexsan's ongoing requirements while preserving potential upside from equity value creation at Nexsan and the growth of UNITY™
EXECUTIVE SUMMARY – NEWCO TRANSACTION | 5 STRATEGIC AGREEMENT WITH CLINTON GROUP Imation has entered into a strategic agreement with Clinton Group Newco bypasses traditional seeding models with typical long roll out, by instantly operating with Clinton Group’s quantitative equity strategy (the “Strategy”) and assistance with certain services This transaction leverages Clinton Group’s infrastructure and intellectual property and will minimize the time to deliver profitability. Infrastructure includes select trading systems, fund raising and operations teams Clinton Group will reserve exclusive capacity for Imation within its Strategy Newco will work to deliver third - party investors in Newco’s offering at closing Transaction Milestones: • August 2015: Strategic Alternatives Committee formed to develop strategic value creation initiatives and make recommendations to the Board regarding the Company’s use of excess capital • July 2016: Board received a formal transaction proposal from Clinton Group and subsequently formed a ‘Special Committee’ of independent directors not directly or indirectly affiliated with Clinton Group and who are not members of Imation's management. Committee explored and retained advisors to independently review the transaction • Board received financial advice from Stifel Financial Corp. and Cypress Associates, LLC Transaction jumpstarts Imation’s transition into a diversified asset management firm Newco intends to provide solutions for institutional and retail investors that address the failure of most current hedge fund platforms to live up to the expectation of enhanced risk adjusted returns. Fixed and variable portions of revenue and expenses will match up well, and we expect a consistently profitable business. JUMPSTART ASSET MANAGEMENT The proposed structure will assist Imation in overseeing the assets currently on the Company’s balance sheet to build a sustainable, profitable business Newco will be able to disrupt conventional money management by using algorithms and other quant strategies designed with the goal of outperforming financial markets Start building its own track record with a combination of proprietary and strategic seed capital The Board believes the transaction will provide an attractive risk - adjusted return on capital for Newco Proven leadership team in place
Strictly Confidential. Not for Distribution. February 2016 August 2015 April 2016 October 2015 Imation employed best practices throughout the most recent joint venture. • Board of Imation forms a ‘Strategic Alternatives Committee’ • Goal is to develop strategic value creation initiatives and make recommendations to the Board regarding the Company’s use of excess capital • Company announces initiative to explore alternative uses of excess capital. • The Company amended its cash investment policy to permit investments into stocks, index funds, mutual funds and other investment funds. • Board approved plan to establish a Registered Investment Advisor. • The Board receives a formal transaction proposal from Clinton Group. • The Board forms a ‘Special Committee’ of independent directors to represent Imation. • The Company explores and retains advisors and consultant to independently review the transaction. • Imation enters into a term sheet with Clinton Group detailing the terms of a proposed transaction. • The Board, in conjunction with management, continued to explore and develop initiatives relating to developing revenue generating product offerings. • The Board is introduced to Robert Picard, a 25 Year Hedge Fund Industry Veteran who has built 4 separate multi - billion alternative investment platforms. • The Company evaluates several business opportunities. July 2016 - November 2016 • Imation Special Committee engages Weinberg, Zareh and Geyerhahn LLP as Counsel to the Special Committee in addition to Winston and Strawn who serves as counsel to Imation. • Special Committee engages Stifel Financial Corp. and Cypress Associates LLC as financial advisors. • Imation consultants perform independent reviews and due diligence on alternatives. • Imation sends feedback to Clinton Group and receives a revised transaction proposal • Term Sheet between Clinton Group and Imation is executed. TRANSACTION TIMELINE | 6
TRANSACTION: IMATION RECEIVES INVESTMENT CAPACITY AND SERVICES | 7 IMATION TRADING CAPACITY • Imation will receive $ 500 million long and $ 500 million short of investment capacity within Clinton Group’s Strategy • Clinton Group has historically experienced attractive returns with its use of the Strategy • The Strategy is market neutral and designed to provide returns that are not correlated to those of the overall stock market • The Strategy combines multiple layers of quantitative models and sophisticated risk management oversight that provides investors with consistent long term performance • Flexibility allows for optimal capital allocation as the Company can deploy capital as opportunities present themselves • In addition to investing its own capital, Imation will have the opportunity to raise additional third party capital to invest, thereby dramatically increasing its revenue potential • For the duration of the relationship, Clinton Group will provide administrative, marketing and support services CONSIDERATION TO CLINTON GROUP • Imation will issue 12 . 5 million primary common shares to Clinton Group upon the closing of the transaction, valued at approximately $ 7 . 8 million • In exchange for the shares, Imation will receive gross capacity within the Strategy of $ 1 billion - or $ 500 million long and $ 500 short – for five years (the “Capacity ”) which it can adapt or modify at its discretion • The Capacity is available for Imation to utilize at its discretion, with the intention of Imation launching and operating its own self - branded multi - strategy fund • At Imation’s option, it may expand its access to capacity at Clinton Group up to a total of $ 1 . 5 billion ( $ 750 million long and $ 750 million short) for an additional 2 . 5 million shares (the “Capacity Expansion”) • Following the fifth anniversary of the transaction, Imation will have the option to extend the term of the Capacity for two one - year periods in exchange for $ 1 . 75 million per year ( $ 2 . 5 million per year in each case if Imation has previously opted for the Capacity Expansion )
NEWCO: ASSET MANAGEMENT BUSINESS | 8 ASSET MANAGEMENT ▪ Manage capital for pension plan sponsors, institutional investors and high net worth individuals – Investment managers with strong, risk - adjusted returns and robust infrastructure are in demand ▪ Business model consists of a management fee tied to the amount of capital under management and a performance fee that rewards the manager for investment returns – Once gathered, assets are “sticky” and provide long - term, recurring revenue – At scale, fixed operating expenses are easily covered by management fees – Most of the expense – compensation for professionals – varies with performance, as does the performance - fee revenue, providing a good revenue - expense match ▪ Recurring revenue and profit visibility are attractive to public market investors ▪ Opportunistically execute acquisitions of other emerging managers or joint ventures or strategic partnerships PRINCIPAL INVESTING ▪ Invest off the Company’s balance sheet to enhance returns and aid in launching new strategies – With intimate knowledge of the investment strategies and their risk, the Company becomes the “best investor” in the strategies – Little to no additional cost associated with putting the Company’s own capital to work ▪ With Imation’s financial attributes, short - term investment strategies are very attractive ▪ As a result of new regulations, banks are being forced to exit proprietary investing, which has been a source of large profits – Investors who sought exposure to alternative investment classes through public stock have fewer choices – Proprietary investing aligns the interest of the company with its investment management clients
NEWCO: STRATEGY AT LAUNCH | 9 DAY 1: LAUNCH THE NEWCO MULTI - STRATEGY FUND • Will provide investors with Day 1 investment solution by launching multi - strategy fund with first allocation to a Clinton Group quantitative equity sub - advisory relationship during Q1 2017 • Goal of achieving consistent competitive risk - adjusted returns and structural flexibility to add new strategies over time • Newco will build its own independent organizational foundation, while still leveraging Clinton Group’s capabilities and infrastructure • Will work between signing and closing to deliver Day 1 investors NEAR - TERM DEVELOPMENT STRATEGY • Newco would act as both a principal (investing its own capital) and as a manager for third - party capital • Onboard investment talent under its umbrella • Opportunistically execute acquisitions of other emerging managers or joint venture deals • “Raise Third Party Capital, Expand Multi - Strategy Fund and Launch New Products” Newco will be able to provide solutions that can be tailored to the unique needs of individual investors
NEWCO: ACTIVITIES TO DATE | 10 INSTITUTIONAL POLICIES AND PROCESSES • Institutional quality investment policies and processes, including Investment Committees (portfolio management, investment policy, and risk management committees) have been established • Institutional asset management policies on asset allocation, strategy allocation, and portfolio construction • Risk management including guidelines for portfolio risk monitoring, portfolio risk corrective action and compliance monitoring • Detailed talent a cquisition road map developed to maintain constant pipeline of talented portfolio managers and analysts FUND GOVERNANCE • Newco will employ institutional policies and processes for fund set up and oversight • Newco will have an independent board of directors FRONT – MIDDLE – BACK - OFFICE ARCHITECTURE • Combine the latest technology for financial servicing with the experience of our investment and risk professionals to build, hedge and operate all strategies • Strategically acquire the technology for in - house FinTech and outsource systems for middle and back office activities • Outlined sub - advisor infrastructure architecture Newco endeavors to establish “best - in - class” policies and processes. Efficient administrative support architecture has been designed to provide flexibility.
IMATION: AUTHORIZED SHARE REPURCHASE PROGRAM | 11 SHARE REPURCHASE PROGRAM • Board recently authorized a share repurchase program • Up to 5 million shares of common stock approved to be repurchased • Authorization replaces the Board's previous share repurchase authorization from May 2, 2012 • To the extent Imation repurchases shares, the timing and manner of such repurchases, will depend on a variety of factors including market conditions, regulatory requirements and other corporate considerations, as determined by Imation’s Audit and Finance Committee • Imation is not obligated to repurchase any specific number of shares under the repurchase program, and repurchases may be suspended or discontinued at any time without prior notice • Imation expects to finance the repurchases with existing cash balances Imation’s Board of Directors authorized a share repurchase program under which Imation may repurchase up to 5 million of its outstanding shares of common stock Under the share repurchase program, Imation may repurchase shares from time to time using a variety of methods, which may include open market transactions and privately negotiated transactions
| 12 ATTRACTIVE STOCK We expect that the stock will be attractive to public market investors, providing current shareholders a solid return: - Will benefit from scarcity value as one of the only public alternative asset management firms - Stock can provide investors with a better liquidity option (and better financing) than a fund participation (LP) interest for investors seeking exposure to alternative investment strategies TRANSPARENCY Potential clients of the Company will take comfort in the scrutiny and published financials of a public company BUYING POWER The Company’s cash and assets can be used to promote economies of scale and growth through seeding new investment programs, building or buying new investment teams and making select proprietary investments FUNDRAISING BENEFITS The Company’s ability to raise additional investor capital for its fund family should serve as a natural accelerant to earnings TURNKEY Focused on establishing a business which can launch immediately with access to a robust infrastructure and improved capital allocation decisions INDUSTRY GROWTH Interest in quantitatively managed assets is growing and will provide a substantive tailwind VALUE CREATION FOR IMATION STOCKHOLDERS
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v453514_ex99-1.pdf
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