Form 8-K STANDARD DIVERSIFIED For: Dec 10

Delaware	001-36696	56-1581761
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

155 Mineola Boulevard Mineola, NY		11501
(Address of principal executive offices)		(Zip Code)

Exhibit Number		Description
2.1#		Stock Purchase Agreement
99.1		Press Release dated December 10, 2018.

	STANDARD DIVERSIFIED INC.
Date:  December 10, 2018	By:	/s/ Ian Estus
	Name:  Ian Estus
	Title:  President and Chief Executive Officer

Exhibit 2.1

	Table of Contents
		Page
	ARTICLE I
	DEFINITIONS
Section 1.1	Definitions	1
Section 1.2	Other Defined Terms and Rules of Construction	12
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1	Purchase and Sale	15
Section 2.2	Purchase Price	15
Section 2.3	Closing	16
Section 2.4	Closing Deliveries	16
Section 2.5	Purchase Price Allocation	17
Section 2.6	Withholding	17
Section 2.7	Closing Payment	17
Section 2.8	Surplus Purchase Price Adjustment	18
Section 2.9	Loss Development Purchase Price Adjustment	21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE Stockholders
Section 3.1	Organization and Qualification	24
Section 3.2	Authority; Non-Contravention; Approvals	24
Section 3.3	Capital Stock of the Company and its Subsidiaries	25
Section 3.4	Corporate Organization of the Company and its Subsidiaries	26
Section 3.5	Taxes	27
Section 3.6	Financial Statements.	29
Section 3.7	Undisclosed Liabilities	30
Section 3.8	Absence of Certain Changes, Events and Conditions	30
Section 3.9	Labor Relations	30
Section 3.10	Compliance with Laws	31
Section 3.11	Litigation and Proceedings	32
Section 3.12	Permits	32
Section 3.13	Contracts and Other Agreements	33
Section 3.14	Intellectual Property	35
Section 3.15	Real Property	38
Section 3.16	Reinsurance Matters	39
Section 3.17	Insurance Coverage	39
Section 3.18	Employee Benefits and Related Matters	40
Section 3.19	Environmental Laws	41
Section 3.20	Anti-Money Laundering, OFAC and Anti-Bribery Compliance	42

Section 3.21	Transactions with Affiliates	42
Section 3.22	Actuarial Memoranda and Reserves	42
Section 3.23	Insurance Contracts	43
Section 3.24	Producers	44
Section 3.25	Title to Assets	44
Section 3.26	Sufficiency of Assets	44
Section 3.27	Debt	44
Section 3.28	Bank Accounts; Powers of Attorney	44
Section 3.29	Investment Intent	45
Section 3.30	Brokers	45
Section 3.31	Miscellaneous	45
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 4.1	Organization and Qualification	45
Section 4.2	Authority; Non-Contravention; Approvals	45
Section 4.3	Financing	46
Section 4.4	Capitalization	47
Section 4.5	SEC Reports, Material Changes, and Other Public Company Matters	47
Section 4.6	Investment Intent	48
Section 4.7	Accredited Investor	49
Section 4.8	Brokers	49
Section 4.9	Independent Investigation	49
ARTICLE V
COVENANTS
Section 5.1	Conduct of the Business	50
Section 5.2	Access to Information	53
Section 5.3	Reasonable Efforts	54
Section 5.4	Notification	56
Section 5.5	Employee Matters	58
Section 5.6	Public Announcements	59
Section 5.7	Insurance	59
Section 5.8	Further Assurances; Post-Closing Cooperation	60
Section 5.9	Contact with Customers and Suppliers	61
Section 5.10	Restriction on Use of Company Information	61
Section 5.11	Interim Financial Statements and Financial Statement Cooperation	62
Section 5.12	Resignations	63
Section 5.13	Consultation	63
Section 5.14	No Solicitation	64
Section 5.15	Stockholders’ Representative	64
Section 5.16	Payment of Company Debt; Discharge of Encumbrances	65
Section 5.17	Extraordinary Dividend	65

Section 5.18	Intercompany Accounts and Related Party Contracts	65
Section 5.19	Release by the Stockholders	66
Section 5.20	144 Act Reporting	66
Section 5.21	Board Seat	66
ARTICLE VI
CONDITIONS
Section 6.1	Conditions to Purchaser’s Obligations	67
Section 6.2	Conditions to Stockholders’ Obligations	68
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1	Survival of Representations, Warranties, Covenants and Agreements	69
Section 7.2	Indemnification of Purchaser	69
Section 7.3	Indemnification of the Stockholders	70
Section 7.4	Effect of Materiality Qualifier	70
Section 7.5	Limitations	70
Section 7.6	Method of Asserting Claims	72
Section 7.7	Character of Indemnity Payments	74
Section 7.8	Reservation of Rights	74
Section 7.9	Exclusive Remedy	74
ARTICLE VIII
TAXES
Section 8.1	Tax Indemnity	74
Section 8.2	Post-Closing Tax Matters	75
Section 8.3	Transfer Taxes	77
Section 8.4	Tax Sharing Agreements	77
Section 8.5	Overlap	77
ARTICLE IX
TERMINATION OF AGREEMENT
Section 9.1	Termination – General	77
Section 9.2	Termination – Due Diligence	78
Section 9.3	Effect of Termination	79

ARTICLE X
MISCELLANEOUS
Section 10.1	Notices	79
Section 10.2	Entire Agreement	81
Section 10.3	Expenses	81
Section 10.4	Waiver	81
Section 10.5	Amendment	81
Section 10.6	No Third Party Beneficiary	81
Section 10.7	Assignment; Binding Effect	81
Section 10.8	CONSENT TO JURISDICTION AND SERVICE OF PROCESS	82
Section 10.9	Waiver	82
Section 10.10	Specific Performance	83
Section 10.11	Invalid Provisions	83
Section 10.12	Governing Law	83
Section 10.13	Counterparts	83
Section 10.14	Conflict Waiver; Attorney-Client Privilege	83

Exhibit A	knowledge of the Stockholders
Exhibit B	Certificate of Designation
Exhibit C	Commitment Letter

(e)           The signature of the Stockholders’ Representative shall be deemed to be the signature of all or any Stockholders, and the Stockholders shall be bound by the terms of any documents and agreements executed and delivered by the Stockholders’ Representative on their behalf as though they were actual signatories thereto.

(f)           Purchaser is entitled to deal exclusively with the Stockholders’ Representative on all authorized matters (as set forth in Section 5.15(b)) relating to the Stockholders.  With respect to such matters, (i) Purchaser and all other Persons shall be entitled to rely, without any investigation or inquiry, upon all actions taken by the Stockholders’ Representative as having been taken upon the authority of the Stockholders, (ii) any action by the Stockholders’ Representative shall be conclusively deemed to be the action of the Stockholders, and Purchaser shall not have any liability or responsibility to any Stockholder for any action taken in reliance thereon , (iii) Purchaser may rely entirely on its dealings with, and notices to and from, the Stockholders’ Representative to satisfy any obligations Purchaser might have to any Stockholder with respect to such matters, and (iv) Stockholders jointly and severally agree to pay, and to indemnify and hold harmless Purchaser and its directors, shareholders, officers, employees, agents, Affiliates, successors and assigns from and against any and all Losses that they may suffer or sustain as a result of any claim by any Person that an action taken by the Stockholders’ Representative on behalf of the Stockholders with respect to such matters is not binding on, or enforceable against, the Stockholders.  Purchaser will not have any liability or obligation arising out of the acts or omissions of the Stockholders’ Representative or any disputes between or among the Stockholders and the Stockholders’ Representative.

Section 5.16          Payment of Company Debt; Discharge of Encumbrances.  At or immediately before the Closing, the Company shall, and the Stockholders shall cause the Company to, (a) fully pay and discharge, or cause to be fully paid and discharged all outstanding Closing Debt, and (b) obtain the release of all Encumbrances (other than Permitted Encumbrances) against any of the assets or properties of the Business or the Shares; provided, however, that the Stockholders can cause such payment of Closing Debt to be made from (and Purchaser shall pay out of) the Closing Payment pursuant to Section 2.2(c)(i).

Section 5.17          Extraordinary Dividend.  Prior to the Closing, the Stockholders shall cause (i) the Insurance Company to declare the Extraordinary Dividend and authorize the payment of the Extraordinary Dividend to the Company and (ii) the Company to declare the Extraordinary Dividend and the Hart Dividend and authorize the distribution of the Extraordinary Dividend to WT and the payment of the Hart Dividend to Hart.  Immediately prior to Closing, the Stockholders shall cause (y) the Insurance Company to distribute the Extraordinary Dividend to the Company and (z) the Company to the distribute the Extraordinary Dividend to WT and pay the Hart Dividend to Hart.

Section 5.18          Intercompany Accounts and Related Party Contracts. On or before the Closing Date, the Stockholders shall cause the Company and its Subsidiaries to take such actions with respect to the Related Party Contracts as described in Section 3.21 of the Stockholders Disclosure Schedule and, except as otherwise described Section 3.21 of the Stockholders Disclosure Schedule, all accounts between the Company or any of its Subsidiaries, on the one hand, and the Stockholders or any of their respective Affiliates, on the other hand, will be settled on terms reasonably satisfactory to Purchaser and the Stockholders.

Section 5.19          Release by the Stockholders.  Effective as of the Closing Date, each Stockholder, on behalf of itself and each of its Affiliates, hereby absolutely, irrevocable and unconditionally releases, remises and forever discharges, fully, finally and forever, the Company, each of its Subsidiaries, and their respective past, present and future Affiliates, equity holders, employees, managers, partners, directors, officers, agents, attorneys, plan administrators, consultants, advisors, representatives and Subsidiaries and the respective heirs, successors and assigns of each of the foregoing (individually, a “Company Released Party”) from any and all claims, demands, rights, causes of action, proceedings, orders, remedies, obligations, damages, Losses and Liability of any kind or character whatsoever arising as a result of any event or condition, or action or inaction of the Company Released Parties, from the beginning of time, whether known or unknown, absolute or contingent, both at law and in equity, which such Stockholder ever had, now has or ever may have against any Company Released Party to the extent resulting or arising from or relating to such Stockholder being a stockholder of the Company or, solely with respect to WT, having any other relationship with the Company or its Subsidiaries prior to the Closing Date; provided that the foregoing shall not apply to, or restrict in any way any claims under this Agreement or any Transaction Document or with respect to any indemnification obligations by the Company or its Subsidiaries owed to any such Stockholder or any of its Affiliates in its capacity as an officer or director prior to the Closing Date.

Section 5.20          144 Act Reporting.  Purchaser shall, following the date on which any Preferred Shares are issued, (i) comply with the current public information requirements of Rule 144(c)(1) under the Securities Act or (ii) if Purchaser is not at any time during such period required to file current and periodic reports under the Exchange Act, upon the request of any holder of Preferred Shares (or the common stock into which they have converted), make publicly available other information and will take such further action as any holder of Preferred Shares (or the common stock into which they have converted) may reasonably request, all to the extent required from time to time to enable such holder to sell the common stock into which the Preferred Shares have or may be converted without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Preferred Shares (or the common stock into which they have converted), Purchaser will deliver to such holder a written statement as to whether it has complied with the requirements of this Section 5.20.  The covenants set forth in this Section 5.20 shall terminate at such time, following the first anniversary of the date of issuance of the Preferred Shares, that no holder of the Preferred Shares is an “affiliate” of Purchaser as defined in Rule 144(a)(1), or has been an “affiliate” during the preceding three (3) months, such determination to be made by each such holder on a reasonable basis promptly following the request of Purchaser.

Section 5.21          Board Seat.  For as long as WT is a holder of either (i) no less than 49% of the Preferred Shares issued to WT at Closing or (ii) 2.5% or more of the Class A Common Stock (or its equivalent) in Purchaser, WT shall be entitled to appoint, remove and replace one director to the board of directors of Purchaser and Purchaser shall cause such director to be (y) elected and appointed to its board of directors and (z) removed or replaced pursuant to WT’s instructions.  Such director, during his or her tenure in office, shall have the same right to receive copies of all notices, minutes, consents and other material as provided to Purchaser’s other directors.

ARTICLE VI

(a)         All consents and approvals of any Governmental Authority required for the consummation of the transactions contemplated by this Agreement shall have been obtained and shall remain in full force and effect, and any waiting period applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated, in each case without the imposition of a Purchaser Burdensome Condition.

(b)          No statute, rule, regulation, order, decree, proceeding or injunction shall have been issued, enacted, entered, promulgated, initiated, proposed or enforced by a Governmental Authority that prohibits, restricts or makes illegal the consummation of the transactions contemplated by this Agreement or the other Transaction Documents, and no proceeding initiated by any Governmental Authority or other Person seeking an injunction against the transactions contemplated by this Agreement or the other Transaction Documents shall be pending.

(c)         The representations or warranties made by the Stockholders in this Agreement, including any Updated Schedules permitted pursuant to Section 5.4(c), shall be (i) true and correct in all respects (in the case of any representations or warranties made by the Stockholders in this Agreement that is qualified as to materiality or Business Material Adverse Effect, as applicable) and (ii) true and correct in all material respects (in the case of any representations or warranties made by the Stockholders in this Agreement that is not qualified as to materiality), in any case at and as of the Closing Date as though made on the Closing Date (except that representations or warranties that expressly relate to an earlier date need only be true and correct on and as of such earlier date).

(d)           The Stockholders shall have performed and complied in all material respects with the agreements, covenants and obligations required by this Agreement to be so performed or complied with by the Stockholders at or before the Closing.

(e)           Purchaser will have received a certificate, dated the Closing Date and in form and substance reasonably satisfactory to Purchaser, to the effect that the conditions specified in Sections 6.1(c) and (d) have been fulfilled.

(f)           All consents or approvals required of the Stockholders and listed in Section 6.1(f) of the Stockholders Disclosure Schedule other than the consents and approvals contemplated by Section 6.2(a) shall have been obtained and shall remain in full force and effect.

(g)           Since the Interim Balance Sheet Date, no event occurrence, fact, circumstance, condition, effect or change shall have occurred that has had a Business Material Adverse Effect.

(h)           The Stockholders shall have made the deliveries required under Section 2.4.

Section 6.2            Conditions to the Stockholders’ Obligations.  The obligations of the Stockholders to effect the Closing are further subject to the satisfaction or waiver at or prior to the Closing of the following conditions:

(a)         All consents and approvals of any Governmental Authority required for the consummation of the transactions contemplated by this Agreement shall have been obtained and shall remain in full force and effect, and any waiting period applicable to the consummation of the transactions contemplated hereby shall have expired or been terminated, in each case without the imposition of a Stockholders Burdensome Condition.

(b)          No statute, rule, regulation, order, decree, proceeding or injunction shall have been issued, enacted, entered, promulgated, initiated, proposed or enforced by a Governmental Authority that prohibits, restricts or makes illegal the consummation of the transactions contemplated by this Agreement or the Transaction Documents, and no proceeding initiated by any Governmental Authority or any other Person seeking an injunction against the transactions contemplated by this Agreement or the Transaction Documents shall be pending.

(c)           The Fundamental Representations made by Purchaser in this Agreement shall be true and correct in all respects as of the Closing Date as if made on that date (except that representations or warranties that expressly speak as of a specified date or time need only be true and correct as of such specified date and time).  The representations and warranties made by Purchaser in this Agreement (other than any Fundamental Representations and without giving effect to any limitation set forth therein as to materiality or Purchaser Material Adverse Effect, as applicable) shall be true and correct as of the Closing Date as though made on the Closing Date (except that representations or warranties that expressly relate to an earlier date need only be true and correct on and as of such earlier date), in each case except for breaches as to matters that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Purchaser Material Adverse Effect.

(d)           Purchaser shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Purchaser at or before the Closing.

(e)           the Stockholders will have received a certificate, dated the Closing Date and duly executed by an authorized officer of Purchaser, in form and substance reasonably satisfactory to the Stockholders, to the effect that the conditions specified in Sections 6.2(c) and (d) have been fulfilled.

(f)           Purchaser shall have made the deliveries required under Section 2.4.

Section 7.1            Survival of Representations, Warranties, Covenants and Agreements.

(a)       The representations and warranties of the Stockholders and Purchaser contained in this Agreement will survive the Closing as follows:  (i) the representations and warranties contained in Sections 3.1 Organization and Qualification, 3.2 Authority; Non-Contravention; Approvals, 3.3 Capital Stock of the Company and its Subsidiaries; Ownership of Shares, 3.4 Corporate Organization of the Company and its Subsidiaries, 3.20 Brokers; 4.1 Organization and Qualification, 4.2 Authority; Non-Contravention; Approvals, 4.3 Financing, 4.4 Capitalization, and 4.7 Brokers (collectively, the “Fundamental Representations”) and the representations and warranties contained in Section 3.5 Taxes shall survive until 60 days after the expiration of the applicable statute of limitations and (ii) all other representations and warranties shall survive the Closing until 5:00 p.m. New York time on the date which is two (2) years following the Closing Date.

(b)           The covenants contained in this Agreement which are required to be performed post-Closing shall survive in accordance with their respective terms (or until the applicable statute of limitations has expired, if no term for performance is specified).

(c)           Notwithstanding anything to the contrary contained herein, any breach of representation, warranty, covenant or agreement in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to this Section 7.1, if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the Party against whom such indemnity may be sought prior to such time in accordance with Section 7.6.

Section 7.2            Indemnification of Purchaser.  From and after the Closing Date, subject to the limitations and requirements set forth in this Article VII, the Stockholders shall, severally (based on their Pro Rata Percentages) and not jointly, indemnify and hold harmless Purchaser, its Affiliates (including the Company and its Subsidiaries) and their respective successors and their respective shareholders and Representatives (collectively, the “Purchaser Indemnified Parties”) from and against Losses incurred by any Purchaser Indemnified Party to the extent resulting or arising from or relating to (i) any inaccuracy in or any breach of any representation or warranty made by the Stockholders in this Agreement (other than a Fundamental Representation) or in the certificate delivered by or on behalf of the Stockholders pursuant to Section 6.1(e) of this Agreement (other than with respect to a Fundamental Representation); (ii) any inaccuracy in or any breach of any Fundamental Representation made by the Stockholders in this Agreement or in the certificate delivered by or on behalf of the Stockholders pursuant to Section 6.1(e) of this Agreement with respect to a Fundamental Representation; (iii) any breach of any covenant, agreement or obligation to be performed by the Stockholders pursuant to this Agreement, (iv) to the extent the Losses exceed the applicable case Reserves set forth on the Final Closing Date Balance Sheet, the Weathers Matter or the Superstorm Sandy Matter, (v) any matter set forth on  Section 3.10 of the Stockholders Disclosure Schedule, only with respect to facts, circumstances, events or actions prior to the Closing Date, including, for the avoidance of doubt, the failure of the Insurance Company to timely respond to, take corrective measures, certify or otherwise comply with any request or demand by the Domiciliary Regulator or otherwise cooperate with the Domiciliary Regulator in connection with its exercise of its authority, or (vi) only with respect to facts, circumstances, events or actions prior to the Closing Date, the matter set forth on  Section 3.11 of the Stockholders Disclosure Schedule relating to Rikki Studley. Notwithstanding the foregoing, the obligations of either Stockholder with respect to any of the Stockholder Specific Representations or any breach, violation or nonfulfillment of any covenant, agreement or obligation by a Stockholder solely in her or its capacity as a Stockholder shall be solely the responsibility of such Stockholder.

Section 7.3          Indemnification of the Stockholders.  From and after the Closing Date, subject to the limitation and requirements set forth in this Article VII, Purchaser shall indemnify and hold harmless the Stockholders and their respective heirs, executors, personal representatives, successors, assigns, Affiliates, shareholders and Representatives (collectively, the “Stockholders Indemnified Parties”) from and against Losses incurred by any of the Stockholders Indemnified Party to the extent resulting or arising from or relating to (i) the inaccuracy of any representation or warranty made by Purchaser in this Agreement (other than a Fundamental Representation) or in the certificate delivered by or on behalf of Purchaser pursuant to Section 6.2((e) of this Agreement (other than with respect to a Fundamental Representation); (ii) any inaccuracy in or any breach of any Fundamental Representation made by Purchaser in this Agreement or in the certificate delivered by or on behalf of the Stockholders pursuant to Section 6.2(e) of this Agreement with respect to a Fundamental Representation; or (ii) any breach of any covenant, agreement or obligation to be performed by Purchaser pursuant to this Agreement.

Section 7.4            Effect of Materiality Qualifier.  Notwithstanding anything in this Agreement to the contrary, for purposes of this Article VII, all of the representations and warranties set forth in this Agreement or any certificate delivered pursuant to Sections 6.1(e) or 6.2(e) that are qualified as to “materiality”, “materiality”, “Purchaser Material Adverse Effect”, “Business Material Adverse Effect” or words of similar import or effect shall be deemed to have been made without any such qualification solely for purposes of determining the amount of Losses resulting from, arising out of, relating to or caused by any such breach of representation or warranty.

Section 7.5             Limitations.

(a)         Subject to the additional limitations set forth below in this Article VII, the Stockholders shall not be liable to Purchaser Indemnified Parties for indemnification under Section 7.2(i) and Purchaser shall not be liable to the Stockholders Indemnified Parties for indemnification under Section 7.3(i) unless and until Purchaser Indemnified Parties have incurred Losses in excess of $300,000 (the “Deductible”) in the aggregate, in which case Purchaser Indemnified Parties or the Stockholders Indemnified Parties, as applicable, shall be entitled to bring a claim for only such Losses in excess of the Deductible.

(b)          Notwithstanding anything to the contrary contained in this Agreement, Purchaser Indemnified Parties or the Stockholders Indemnified Parties, as applicable, shall have no right to indemnification for any Losses for which Purchaser Indemnified Parties are entitled pursuant to Section 7.2(i) or the Stockholders Indemnified Parties are entitled pursuant to Section 7.3(i), as applicable, with respect to, and the amount of Losses for purposes of determining whether the Deductible has been reached shall exclude, any Losses attributable to any individual claim (or series of claims arising from the same events, facts or circumstances) that is indemnifiable under Section 7.2(i) or Section 7.3(i) unless such Losses exceed $20,000, whereupon, subject to the terms, conditions and limitations set forth in this Agreement (including the Deductible and the Cap), Purchaser Indemnified Parties or the Stockholders Indemnified Parties, as applicable, shall be indemnified for such Losses.

(c)           Notwithstanding anything to the contrary contained in this Agreement, (i) the maximum aggregate liability of the Stockholders or Purchaser under this Article VII for Losses indemnified under Section 7.2(i) or Section 7.3(i), as applicable, shall not exceed $5,800,000, (ii) the maximum aggregate liability of the Stockholders under Section 7.2(iv) with respect to the Weathers Matter shall not exceed the sum $700,000 minus the amount of the case Reserves set forth on the Final Closing Date Balance Sheet with respect to the Weathers Matter, (iii)  the maximum aggregate liability of the Stockholders under Section 7.2(iv) with respect to the Superstorm Sandy Matter shall not exceed the sum $980,000 minus the amount of the case Reserves set forth on the Final Closing Date Balance Sheet with respect to the Superstorm Sandy Matter, and (iv) the maximum aggregate liability of the Stockholders or Purchaser for all Losses under Section 7.2 or Section 7.3, as, as applicable, shall not exceed fifty percent (50%) of the Base Purchase Price.

(d)           Notwithstanding the foregoing, the limitations set forth in Section 7.5(a)through (b), inclusive, shall not apply to Losses resulting from any inaccuracy in or breach of any Fundamental Representation.

(e)           Payments by an Indemnifying Party pursuant to Section 7.2 or Section 7.3 in respect of any Losses shall be reduced by the amount of (i) any Tax Benefit realized as a result of, and as a result of the circumstances giving rise to, such Losses by the Indemnified Party and (ii) any amounts actually recovered by the Indemnified Party under insurance policies, indemnities or other reimbursement arrangements with respect to such Losses less the amount of any costs of obtaining such recovery, including any resulting increase in premium or other costs of insurance.  If the Indemnified Party receives a Tax Benefit after an indemnification payment is made to it that was not taken into account at the time the indemnification payment was made, the Indemnified Party shall promptly pay over to the Stockholders the amount of such Tax Benefit at such time or times as, and to the extent that, such Tax Benefit is realized by the Indemnified Party, but not in excess of the amount of the related indemnification payment.  In the event that an insurance or other recovery is made by any Indemnified Party with respect to any Losses for which any such Person has been indemnified hereunder, then a refund equal to the aggregate amount of the recovery shall be promptly made to the applicable Indemnifying Party.

(f)            Each Indemnified Party shall take, and cause its Affiliates to take, all commercially reasonable steps to mitigate any Losses upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto.

(g)          Notwithstanding anything to the contrary contained in this Agreement, upon the final resolution of the Weathers Matter or the Superstorm Sandy Matter, as applicable, to the extent that any of the case Reserves attributed to such matter in the Final Closing Date Balance Sheet has not been applied to Losses with respect to such matter, Purchaser shall pay such unapplied case Reserves amount to the Stockholders (based on their Pro Rata Percentages) by wire transfer of immediately available funds within ten (10) Business Days following the final resolution of such matter to an account or accounts designated by the Stockholders’  Representative.

Section 7.6            Method of Asserting Claims.  All claims for indemnification by any Indemnified Party under this Article VII shall be asserted and resolved as follows:

(a)           If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “Third Party Claim”) against such Indemnified Party with respect to which indemnification is being sought against an Indemnifying Party under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure or is otherwise adversely impacted or prejudiced. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Losses that have been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party within 30 calendar days after receiving the Indemnified Party’s notice of claim, to assume the defense of any Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that if the Indemnifying Party is the Stockholders, such Indemnifying Party shall not have the right to defend or direct the defense of any such Third Party Claim that (x) is asserted directly by or on behalf of a Person that is a supplier or customer of Purchaser or the Company, or (y) seeks an injunction or other equitable relief against the Indemnified Parties.  The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party; provided, that if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party determines counsel is required. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third Party Claim, the Indemnified Party may, subject to Section 7.6(b), pay, compromise or defend such Third Party Claim and, as provided in this Article VII, seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. The Stockholders and Purchaser shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.

(b)          Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed), except as provided in this Section 7.6(b).  If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party may enter into such settlement without any consent of the Indemnified Party, provided, that Indemnifying Party shall give written notice to that effect to the Indemnified Party. Notwithstanding any other provision of this Agreement, the Indemnified Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed), unless the Indemnified Party fully releases the Indemnifying Party with respect to all Losses (or any indemnification obligation) that might in any way arise from such Third Party Claim or related matters.

(c)           Any Action by an Indemnified Party on account of Losses which do not result from a Third Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure or is otherwise adversely impacted or prejudiced.  Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Losses that have been or may be sustained by the Indemnified Party.  The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim.  The Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Company’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request.  If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

(d)           Nothing in this Section 7.6 shall operate to in any way to restrict or limit the ability and timing for the Stockholders or Purchaser to seek specific performance as provided in Section 10.10 for a Party’s failure to comply with any term or provision of this Agreement.

Section 7.7            Character of Indemnity Payments.  The Parties agree that any indemnification payments made with respect to this Agreement shall be treated for all Tax purposes as an adjustment to the Purchase Price unless otherwise required by Law.

Section 7.8           Reservation of Rights. The representations, warranties and covenants of the Stockholders and Purchaser’s rights to indemnification with respect thereto shall not be affected or deemed waived by reason of any investigation made by or on behalf of Purchaser (including by any of its advisors, consultants or representatives) or by reason of the fact that Purchaser or any of such advisors, consultants or representatives knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of Purchaser’s waiver of any condition set forth in Section 6.1.

Section 7.9           Exclusive Remedy.  Subject to Section 10.10, and except with respect to the matters covered by Sections 2.8 and 2.9, the Parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud or criminal activity on the part of a Party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in Article VIII (Taxes) and this Article VII.  In furtherance of the foregoing, each Party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other Parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in Article VIII and this Article VII and except for claims arising from fraud or criminal activity on the part of a Party in connection with the transactions contemplated by this Agreement.  Nothing in this Section 7.9 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled or to seek any remedy on account of any Party’s fraudulent or criminal misconduct.  In no event shall the mere breach of a representation or warranty be used as evidence of deemed to constitute fraud.

Section 8.1            Tax Indemnity.

(a)           The Stockholders severally (based on their Pro Rata Percentages), and not jointly, shall indemnify and hold harmless Purchaser Indemnified Parties from and against Losses in respect of Taxes that are Covered Taxes.

(b)          The Stockholders’ obligations in paragraph (a) above shall be without regard to any disclosures that may have been made with respect to Article III or otherwise.  The indemnification obligations provided for herein shall apply even if the additional Tax liability results from the filing of a Tax Return or amended Tax Return with respect to a pre-Closing Date transaction or period (or portion of a period) by Purchaser, provided, however, that Purchaser shall not cause or permit the Company or any of its Subsidiaries to file an amended Tax Return with respect to any taxable period ending on or prior to the Closing Date or any Straddle Period unless Stockholders’ Representative consents, which consent shall not be unreasonably withheld, conditioned or delayed.

(c)           For purposes of this Agreement:

(i)           Except as otherwise provided in clause (ii) below, in the case of any Taxes that are payable with respect to a Straddle Period, the portion of such Taxes allocable to (A) the Pre-Closing Tax Period and (B) the portion of the Straddle Period beginning on the day next succeeding the Closing Date (the “Post-Closing Tax Period”) shall be determined on the basis of a deemed closing at the end of the Closing Date of the books and records of the Company or the applicable Subsidiary.

(ii)         In the case of any personal or real property Taxes that are payable with respect to a Straddle Period, the portion of such Taxes allocable to the Pre-Closing Tax Period shall be equal to the product of the sum of all such Taxes multiplied by a fraction the numerator of which is the number of days in the Straddle Period from the commencement of the Straddle Period through and including the Closing Date and the denominator of which is the number of days in the entire Straddle Period.

(iii)         All payments due from the Stockholders with respect to Taxes for which the Stockholders have provided an indemnity therefor pursuant to this Agreement shall be made upon the earlier to occur of:  (i) ten (10) Business Days following an agreement by the Stockholders and Purchaser as to the Stockholders’ liabilities for such Taxes, (ii) five (5) Business Days prior to the due date of the payment for the Taxes allocable to the Stockholders pursuant to this Section 8.1, provided that Purchaser has notified the Stockholders of such due date at least fifteen (15) Business Days prior to such due date or (iii) the Stockholders’ receipt of notice of an assessment of such a Tax liability by a Tax Authority.

(iv)        Notwithstanding anything herein to the contrary, the Stockholders shall not be responsible for, and Purchaser shall not be entitled to recover from the Stockholders, any Taxes to the extent such Taxes were taken into account in the calculation of any Purchase Price adjustment.

Section 8.2            Post-Closing Tax Matters.

(a)           The Stockholders shall prepare and file, or cause to be prepared and filed, all Tax Returns of the Company and any of its Subsidiaries that are required to be filed on or before the Closing Date.  All such Tax Returns shall be prepared in a manner consistent with past practice, except as otherwise required by Law. Purchaser shall prepare or cause to be prepared and filed or cause to be filed all other Tax Returns of the Company or any of its Subsidiaries.  Purchaser shall deliver or cause to be delivered to the Stockholders any such Tax Return described in the previous sentence, to the extent it relates to a Pre-Closing Tax Period, within a reasonable period of time prior to the due date for any such Tax Return (after giving effect to any applicable extensions of time for filing) so that the Stockholders, to the extent practical, have a meaningful opportunity to review and comment on such Tax Return.  Purchaser shall consider such comments in good faith.  In the event that Purchaser and the Stockholders are unable to agree on the reporting of any item on such Tax Returns, Purchaser and the Stockholders shall mutually choose an independent public accounting firm to resolve such dispute, and the decision of such firm shall be final.  Expenses of such independent public accounting firm shall be born evenly between Purchaser and the Stockholders.

(b)           Any Taxes for Straddle Periods shall be apportioned between the Stockholders and Purchaser in the manner set forth in Section 8.1(c) hereof.

(c)           Purchaser and the Stockholders shall cooperate with each other in connection with the filing of any Tax Returns and any audit, litigation or other proceeding with respect to Taxes.  Such cooperation shall include the retention and (upon the other Party’s request) the provision of records and information reasonably relevant to any such audit, litigation, or other proceeding and making their respective employees, outside consultants, and advisors available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder and the cost of the requesting Party.  Purchaser and the Stockholders agree (i) 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 by Purchaser or the Stockholders, any extensions of the statute of limitations) of the respective taxable periods, and to abide by all record retention agreements entered into with any Tax Authority, and (ii) to give the other Parties reasonable written notice prior to transferring, destroying or discarding any such books and records and, if any of the other Parties so requests, Purchaser or the Stockholders, as the case may be, shall allow the other Party to take possession of such books and records.

(d)          Purchaser agrees to give prompt notice to the Stockholders of any Taxes or the assertion of any claim, or the commencement of any Action in respect of which indemnity may be sought under Section 8.1 (a “Tax Proceeding”), and will give the Stockholders such information with respect thereto as the Stockholders may reasonably request, provided that Purchaser’s failure to provide such notice or to deliver such information to the Stockholders shall not limit Purchaser’s rights under this Article VIII except to the extent the Stockholders is materially prejudiced by such failure.  The Stockholders agrees to give prompt notice to Purchaser upon the receipt of any written notice by the Stockholders of any pending or threatened audits or proceedings or other Actions relating to Pre-Closing or Straddle Period Taxes of the Company or any of its Subsidiaries.  Notwithstanding anything to the contrary contained in this Agreement, Purchaser shall have the sole right to control and make all decisions regarding any Tax Proceeding for a Straddle Period or Post-Closing Tax Period, including selection of counsel and selection of a forum for such contest, provided, however, that in the event such audit or proceeding relates to Taxes for which the Stockholders has indemnified Purchaser or may have an indemnity obligation under Section 8.1, (i) Purchaser and the Stockholders shall cooperate in the conduct of any audit or proceeding relating to such period, (ii) the Stockholders shall have the right (but not the obligation) to participate in such audit or proceeding at the Stockholders’ expense, (iii) Purchaser shall not enter into any agreement with the relevant Tax Authority pertaining to Taxes for which the Stockholders may have an indemnity obligation under Section 8.1 without the written consent of the Stockholders, which consent shall not unreasonably be withheld, conditioned or delayed, and (iv) Purchaser may, without the written consent of the Stockholders, enter into such an agreement, provided that Purchaser shall have agreed to accept liability for the payment of such Taxes and to forego any indemnification or other claim under this Agreement with respect to the portion of Pre-Closing Taxes for which the Stockholders otherwise would be responsible under Section 8.1.  The Stockholders shall have the right (but not the obligation) upon written request to Purchaser, to control and make all decisions regarding any Tax Proceeding for any Pre-Closing Tax Period (excluding, for the avoidance of doubt, a Tax Proceeding relating to the Pre-Closing portion of any Straddle Period); provided, however, that (i) Purchaser and the Stockholders shall cooperate in the conduct of any audit or proceeding relating to such period, (ii) the Stockholders shall consult with Purchaser with respect to such Tax Proceeding and Purchaser shall have the right (but not the obligation) to participate and employ counsel, at its own expense, separate from counsel employed by the Stockholders, (iii) the Stockholders shall not enter into any agreement with the relevant Tax Authority pertaining to Taxes not indemnified by the Stockholders (including but not limited to any such agreement that would increase the Company’s or any of the Company’s Subsidiaries’ Taxes for a Post-Closing Tax Period) without the written consent of Purchaser, which consent shall not unreasonably be withheld, conditioned or delayed. Notwithstanding any other provision in Section 8.1, Stockholders shall not be liable under Section 8.1 with respect to any Taxes resulting from a Tax Proceeding with respect to which Purchaser did not comply with its obligations under this Section 8.2(d) to notify the Stockholders or to provide the Stockholders the opportunity to control or participate, to the extent the Stockholders is adversely affected as a result thereof.

Section 8.3          Transfer Taxes.  The Stockholders shall be responsible for 100 percent (100%) of any transfer taxes imposed by any foreign, federal, state, local or other taxing body as a result of the consummation of the transactions contemplated by this Agreement. The Stockholders shall timely file all necessary Tax Returns and other documentation with respect to such Transfer Taxes, and, if required by Law, Purchaser shall join in the execution of such filings.  The expense of such filings shall be paid solely by the Stockholders.

Section 8.4            Tax Sharing Agreements.  All tax sharing agreements or arrangements among and between any Stockholder and its Affiliates on the one hand and the Company or its Subsidiaries on the one hand, whether or not written, if any, shall be terminated immediately prior to the Closing Date and shall have no continuing force or effect. The Stockholders and the Company or its Subsidiaries shall, unless otherwise directed by Purchaser, terminate any power of attorney granted by or on behalf of the Stockholders or the Company or its Subsidiaries, and any such terminated power of attorney shall have no continuing force or effect after the Closing Date.

Section 8.5            Overlap.  Notwithstanding any other provision of this Agreement, neither the limitations under Section 7.5 (other than those contained in paragraph (e) thereof) nor the procedures under Section 7.6 shall apply to claims arising under this Article VIII. To the extent of any inconsistency between this Article VIII and Article VII, this Article VIII shall control as to Tax matters.

Section 9.1             Termination – General.  This Agreement may be terminated, and the transactions contemplated by this Agreement may be abandoned, at any time prior to the Closing by:

(a)           the mutual written agreement of the Stockholders’ Representative and Purchaser;

(b)         either the Stockholders’ Representative or Purchaser if any court of competent jurisdiction or other Governmental Authority shall have issued a statute, rule, regulation, order, decree or injunction or taken any other action restraining, enjoining or otherwise prohibiting all or any portion of the transactions contemplated by this Agreement and such statute, rule, regulation, order, decree or injunction or other action shall have become final and nonappealable; provided, however, that the Party seeking to terminate this Agreement pursuant to this Section 9.1(b) shall have performed in all material respects its obligations under this Agreement at the time of such termination;

(c)          either the Stockholders’ Representative or Purchaser (but only so long as the Stockholders or Purchaser, as applicable, is not in material breach of its obligations under this Agreement at such time), in the event of a material breach by the non-terminating Party of any representation, warranty, covenant or agreement contained in this Agreement, which breach (i) cannot be or has not been cured by such non-terminating Party within twenty (20) Business Days following written notification thereof by the terminating Party or (ii) would entitle the terminating Party not to consummate the transactions contemplated hereby under Article VI; or

(d)          either Purchaser or the Stockholders’ Representative if the Closing shall not have been consummated on or before the Termination Date; provided, however, that this Agreement shall not be terminated pursuant to this Section 9.1(d) by any Party whose breach of any of its obligations under this Agreement in any material respect results in the failure of the Closing to be consummated prior to the Termination Date; and provided, further, that if, as of the Termination Date, all of the conditions to the obligations of the respective Parties under this Agreement (other than those that are to be satisfied by action taken at Closing) have been satisfied or waived, other than the approvals required by the Domiciliary Regulator as described in Section 5.3(d), then Purchaser or the Stockholders may by written notice to the other Parties extend the Termination Date to the date six (6) calendar months from the Termination Date.

Section 9.2            Termination – Due Diligence.  This Agreement may be terminated, and the transactions contemplated by this Agreement may be abandoned, no later than seventy-five (75) days after the date of this Agreement, upon written notice from Purchaser to Stockholders’ Representative given no later than 5:00 pm eastern time on the 75^th day following the date of this Agreement, if (i) Purchaser shall not have completed its due diligence review of the Company, its Subsidiaries and the Business to its sole satisfaction, (ii) Purchaser determines in Purchaser’s sole discretion that the business, results of operations, condition (financial or otherwise) or assets of the Company or its Subsidiaries are not satisfactory or will not become satisfactory before the Closing Date, or (iii) Standard General L.P. shall have terminated the Commitment Letter.  In the event that Purchaser does not give notice as required under this Section 9.2, Purchaser shall be deemed to have waived its right to terminate pursuant to this Section 9.2. If this Agreement is terminated pursuant to this Section 9.2, this Agreement will forthwith become null and void, and have no further effect, without any liability on the part of any Party hereto or its Affiliates or Representatives, and to the fullest extent provided by law, each Party hereto and its Affiliates and Representatives hereby waive any and all rights to sue and all other rights and remedies at law and in equity with respect to the transactions contemplated by, and under the provisions of, this Agreement, other than all rights and remedies at law and in equity with respect to the provisions of this Section 9.2, Section 5.2(a) and Article X hereof (excluding Section 10.10 except with respect to the enforcement of provisions of Section 5.2(a)).

Section 9.3         Effect of Termination.  If this Agreement is validly terminated pursuant to Section 5.4(c) or Section 9.1, this Agreement will forthwith become null and void, and have no further effect, without any liability on the part of any Party hereto or its Affiliates or Representatives, other than (i) the provisions of this Section 9.3, Section 5.2(a) and Article X hereof, and (ii) all rights and remedies at law and in equity based on any Party’s intentionally fraudulent or criminal misconduct.  If this Agreement is validly terminated pursuant to Section 9.1(c), the defaulting/non-terminating Party shall reimburse the terminating/non-defaulting Party for such actual and documented third party out-of-pocket costs and expenses relating to the transactions contemplated by this Agreement, but in no event exceeding $300,000 in the aggregate.  For purposes of this Section 9.3, a written statement from a third party setting forth the aggregate amount of such costs and expenses shall be sufficient documentation.  Payment to or from the Stockholders under this Section 9.3 shall be several, not joint, and based on their Pro Rata Percentages.

Section 10.1         Notices.  All notices, requests, consents, waivers, demands and other communications under this Agreement shall be in writing and will be deemed to have been duly given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (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 (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.  Such communications must be sent to the respective Parties at the following addresses or email addresses (or at such other addresses or email addresses for a Party as shall be specified by the notice given in accordance with this Section 10.1):

Section 10.2          Entire Agreement.  This Agreement, the Exhibits and Schedules hereto, the Confidentiality Agreement and the Transaction Documents supersede all prior and contemporaneous discussions and agreements, both written and oral, among the Parties with respect to the subject matter of this Agreement and the other Transaction Documents and constitute the sole and entire agreement among the Parties to this Agreement with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous agreements and understandings, written or oral, with respect to the subject matter hereof.

Section 10.3          Expenses.  Except as otherwise expressly provided in this Agreement (or as between the Stockholders, any other agreement to which they are parties), whether or not the transactions contemplated by this Agreement are consummated, each Party will pay its own costs and expenses incurred in connection with the negotiation, execution and closing of this Agreement and the other Transaction Documents and the transactions contemplated by this Agreement and the other Transaction Documents.

Section 10.4          Waiver.  Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition.  No waiver by any Party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver (a) of the same or any other term or condition of this Agreement on any future occasion or (b) in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver.  No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 10.5          Amendment.  This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Purchaser and the Stockholders.

Section 10.6         No Third Party Beneficiary.  Except for the rights of Purchaser Indemnified Parties and the Stockholders Indemnified Parties pursuant to Articles VII and VIII and such directors, officer and other Person as provided for in Section 5.12, as to which they are express third-party beneficiaries, and except as otherwise provided in Section 10.14, the terms and provisions of this Agreement are intended solely for the benefit of each Party hereto and their respective heirs, executors, personal representatives, successors or permitted assigns, and it is not the intention of the Parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Article VII or Section 5.12 or as otherwise provided in Section 10.14.

Section 10.7         Assignment; Binding Effect.  Neither this Agreement nor any right, interest or obligation under this Agreement may be assigned by any Party to this Agreement by operation of law (other than, in the case of an individual Stockholder, as a result of death) or otherwise without the prior written consent of the other Parties to this Agreement and any attempt to do so will be void.  Subject to the foregoing, this Agreement is binding upon, inures to the benefit of and is enforceable by the Parties to this Agreement and their respective heirs, executors, personal representatives, successors and assigns.

Section 10.8         CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY COURT OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW YORK IN RESPECT OF ANY ACTION ARISING IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY, AND AGREES THAT ANY SUCH ACTION SHALL BE BROUGHT ONLY IN SUCH COURT (AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS OR ANY OTHER OBJECTION TO VENUE THEREIN); PROVIDED, HOWEVER, THAT SUCH CONSENT TO JURISDICTION IS SOLELY FOR THE PURPOSE REFERRED TO IN THIS SECTION 10.8 AND SHALL NOT BE DEEMED TO BE A GENERAL SUBMISSION TO THE JURISDICTION OF SAID COURTS OR IN THE STATE OF NEW YORK OTHER THAN FOR SUCH PURPOSE.  Any and all process may be served in any Action arising in connection with this Agreement by complying with the provisions of Section 10.1.  Such service of process shall have the same effect as if the Party being served were a resident in the State of New York and had been lawfully served with such process in such jurisdiction.  The Parties hereby waive all claims of error by reason of such service.  Nothing herein shall affect the right of any Party to service process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the other in any other jurisdiction to enforce judgments or rulings of the aforementioned courts.

Section 10.9          Waiver.

(a)        THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO RECOVER ANY DAMAGES OR LOSSES THAT ARE EXEMPLARY, IN THE NATURE OF LOST PROFITS, DIMINUTION IN THE VALUE OF PROPERTY, SPECIAL OR PUNITIVE OR OTHERWISE NOT ACTUAL DAMAGES IN ANY ARBITRATION, LAWSUIT, LITIGATION OR PROCEEDING ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (EXCEPT WITH RESPECT TO THE EXTENT OWED TO A THIRD PARTY IN RESPECT OF A THIRD PARTY CLAIM).

(b)          EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY OR CLAIM WHICH MAY ARISE OUT OF OR RELATE TO THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(c)         EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER; (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER; (iii) IT MAKES SUCH WAIVER VOLUNTARILY; AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.9.

Section 10.10        Specific Performance.  The Parties hereto agree that if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, irreparable damage would occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or equity.

 

Section 10.11        Invalid Provisions.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of any Party will not be materially and adversely affected thereby, (a) such provision will be fully severable; (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof; (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom; and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

Section 10.12        Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD FOR THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

Section 10.13        Counterparts.  This Agreement may be executed in any number of counterparts, all of which will constitute one and the same instrument.  Each Party may deliver its executed counterpart by electronic mail, and such delivery shall have the same legal effect as hand delivery of an originally executed counterpart.

Section 10.14        Conflict Waiver; Attorney-Client Privilege.

(a)           Each of the Parties hereto acknowledges and agrees, on its own behalf and on behalf of its directors, shareholders, partners, officers, employees and Affiliates, that:

(i)          Wyatt, Tarrant & Combs, LLP has acted as counsel to WT and its Affiliates (individually and collectively, the “WT Group”) and the Company and its Subsidiaries, and Breslow & Walker, LLP has acted as counsel to Hart, in connection with the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. Purchaser agrees, and shall cause the Company and its Subsidiaries to agree, that, following consummation of the transactions contemplated hereby, such representation and any prior representation of the Company or its Subsidiaries by Wyatt, Tarrant & Combs, LLP or Breslow & Walker, LLP  (or any successor) (each a “Stockholders’ Group Law Firm”) shall not preclude any Stockholders’ Group Law Firm from serving as counsel to the any of the WT Group or any director, shareholder, partner, officer or employee of any of the WT Group, or Hart in connection with any litigation, claim or obligation arising out of or relating to this Agreement or the transactions contemplated hereby.

(ii)         Purchaser shall not, and shall cause the Company and its Subsidiaries not to, seek or have a Stockholders’ Group Law Firm disqualified from any such representation based upon the prior representation of the Company or its Subsidiaries by a Stockholders’ Group Law Firm. Each of the Parties hereto hereby consents thereto and waives any conflict of interest arising from such prior representation, and each of such Parties shall cause any of its Affiliates to consent to waive any conflict of interest arising from such representation. Each of the Parties acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that the Parties have consulted with counsel or have been advised they should do so in connection herewith. The covenants, consent and waiver contained in this Section 10.14 shall not be deemed exclusive of any other rights to which a Stockholders’ Group Law Firm is entitled whether pursuant to law, contract or otherwise.

(b)         All communications between any of the WT Group. Hart, or the Company and its Subsidiaries, on the one hand, and a Stockholders’ Group Law Firm, on the other hand, relating to the negotiation, preparation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby (the “Privileged Communications”) shall be deemed to be attorney-client privileged and the expectation of client confidence relating thereto shall belong solely to the WT Group or Hart, as applicable, and shall not pass to or be claimed by Purchaser or the Company or its Subsidiaries. Accordingly, Purchaser and the Company and its Subsidiaries shall not have access to any Privileged Communications or to the files of a Stockholders’ Group Law Firm relating to such engagement from and after Closing. Without limiting the generality of the foregoing, from and after the Closing, (i) the WT Group or Hart, as applicable, (and not Purchaser or the Company or its Subsidiaries) shall be the sole holders of the attorney-client privilege with respect to such engagement, and none of Purchaser or the Company or its Subsidiaries shall be a holder thereof, (ii) to the extent that files of a Stockholders’ Group Law Firm in respect of such engagement constitute property of the client, only the WT Group or Hart, as applicable, (and not Purchaser nor the Company nor its Subsidiaries) shall hold such property rights and (iii) a Stockholders’ Group Law Firm shall have no duty whatsoever to reveal or disclose any such attorney-client communications or files to Purchaser or the Company or its Subsidiaries by reason of any attorney-client relationship between such Stockholders’ Group Law Firm and the Company or its Subsidiaries or otherwise. Notwithstanding the foregoing, in the event that a dispute arises between Purchaser or its Affiliates (including the Company and its Subsidiaries), on the one hand, and a third party other than any of the WT Group or Hart, on the other hand, Purchaser and its Affiliates (including the Company and its 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 the Company and its Subsidiaries) may waive such privilege without the prior written consent of the WT Group or Hart, as applicable, which consent shall not be unreasonably withheld, conditioned or delayed. In the event that Purchaser or any of its Affiliates (including the Company and its Subsidiaries) is legally required by order of any Governmental Authority 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 Purchaser’s counsel, then Purchaser shall immediately (and, in any event, within five (5) Business Days) notify applicable Stockholder in writing so that the WT Group or Hart can seek a protective order.

(c)           This Section 10.14 is intended for the benefit of, and shall be enforceable by, any Stockholders’ Group Law Firm. This Section 10.14 shall be irrevocable, and no term of this Section 10.14 may be amended, waived or modified, without the prior written consent of the applicable Stockholders’ Group Law Firm.

I.            He is the duly elected and acting President and Chief Executive Officer of Standard Diversified Inc., a Delaware corporation (the “Company”).

II.           The Sixth Amended and Restated Certificate of Incorporation of the Company (the “Certificate of Incorporation”) authorizes Fifty Million (50,000,000) shares of preferred stock, par value $0.01 per share.

III.         The following is a true and correct copy of the resolutions duly adopted by the Board of Directors of the Company (the “Board of Directors”) at a meeting on ___________, 20__, which constituted all requisite actions on the part of the Company with respect to the authorization of the filing of this Certificate of Designation (this “Certificate of Designation”).

1.            Designation and Number.  The shares of such series shall be designated as the Series A Convertible Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”).  The number of shares initially constituting the Series A Preferred Stock shall be ___________ (________).

2.           Priority.  The Series A Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up or dissolution, whether voluntary or involuntary, rank (i) on a parity with any other series of preferred stock established hereafter by the Board of Directors, the terms of which shall specifically provide that such series shall rank on parity with the Series A Preferred Stock with respect to dividend rights and rights on liquidation, winding up or dissolution (all of such series of preferred stock to which the Series A Preferred Stock ranks on a parity are at all times collectively referred to as “Parity Securities”), (ii) junior to any series of preferred stock established hereafter by the Board of Directors (subject to the voting and protective provisions, if applicable, set forth in Section 5), the terms of which shall specifically provide that such series shall rank senior to the Series A Preferred Stock with respect to dividend rights and rights on liquidation, winding up or dissolution (all of such series of preferred stock to which the Series A Preferred Stock ranks junior are at times collectively referred to herein as the “Senior Securities”), and (iii) senior to the Company’s Class A Common Stock, $0.01 par value per share (the “Class A Common Stock”) and the Company’s Class B Common Stock, $0.01 par value per share (the “Class B Common Stock”, together with the Class A Common Stock, the “Common Stock”), and, subject to clauses (i) and (ii) hereof, any other capital stock or equity securities of the Company, with respect to dividend rights and rights on liquidation, winding up or dissolution (all of such capital stock or other equity securities of the Company to which the Series A Preferred Stock ranks senior, including the Common Stock, are at times collectively referred to herein as the “Junior Securities”). 

3.            Dividends.

(a)           From and after the Issue Date and so long as shares of the Series A Preferred Stock remain outstanding, cumulative dividends shall accrue on the outstanding shares of Series A Preferred Stock at the annual rate (the “Rate”) of six percent (6.0%) of the Accrued Value, except to the extent otherwise provided below.  Dividends on Series A Preferred Stock shall accrue on each share beginning on the date of issuance, shall be payable in equal semi-annual payments on each ________ and _________ (each, a “Dividend Payment Date”) for the six (6) months or, in the case of the six-month period in which such share is issued, portion of the six (6) months, then ended, and shall be cumulative and shall accrue, whether or not earned or declared, and whether or not there are funds available therefor, from and after the date of issuance of such share.  Accumulated and unpaid dividends shall compound semi-annually from the applicable Dividend Payment Date, whether or not declared by the Board, and shall remain accumulated, compounding dividends until paid at the Rate.  All compounding or accruing of dividends shall be on the basis of a 360-day year of twelve 30-day months.  Payment by the Company of dividends on the Series A Preferred Stock shall be mandatory and the Board of Directors of the Company shall take all necessary action to cause the Company to promptly pay such dividends subject, in each case, to restrictions set forth in the Delaware General Corporation Law. Dividends payable on the Series A Preferred Stock shall be payable fifty percent (50%) in cash and fifty percent (50%) in fully-paid and non-assessable shares of Series A Preferred Stock.  Notwithstanding the foregoing, the Company will have a one-time only option, upon prior notice to the holders of Series A Preferred Stock, to elect to pay the dividends on the Series A Preferred Stock at any Dividend Payment Date and for up to the immediately succeeding three (3) Dividend Payment Dates (i.e., for up to one twenty-four (24) consecutive month period only) one hundred percent (100%) in fully-paid and non-assessable shares of Series A Preferred Stock; provided, however, that the Rate during such entire twenty-four (24) month period at which cumulative dividends shall accrue on the outstanding shares of Series A Preferred Stock shall be ten percent (10.0%) of the Accrued Value.  With respect to the dividends paid in Series A Preferred Stock, the number of shares of Series A Preferred Stock shall be based on the amount of such dividends divided by the Original Purchase Price and each share of Series A Preferred Stock issued in payment of such dividends shall be deemed to have a value equal to the then effective Liquidation Preference (as defined in Section 4) of the Series A Preferred Stock.  The Company warrants that all Series A Preferred Stock issued in such manner will be duly authorized and issued and fully paid and non‑assessable upon issue by the Company and free from any taxes that may be payable upon issuance of the Series A Preferred Stock.  Fractions of shares of Series A Preferred Stock shall be issuable in connection with any such issuance of Series A Preferred Stock for the purpose of causing to be paid in full all of the dividends to be paid by the issuance thereof.  On any Dividend Payment Date on which shares of Series A Preferred Stock are to be so issued, the Company shall issue and deliver to the holders of the shares of Series A Preferred Stock to be so issued a certificate or certificates for the number of additional shares of Series A Preferred Stock to be so issued.  The issue of such certificates for Series A Preferred Stock shall be made without charge to the recipient thereof.  In the event that the Company does not have a sufficient number of shares of Series A Preferred Stock authorized and unissued to effect the payment of such dividend by the issuance of additional shares of Series A Preferred Stock, such dividend shall cumulate and compound as provided above.  Any payment made by the Company on the unpaid cumulative dividends, if less than the total amount of such dividends, shall be applied first to those dividends which have been accrued for the longest time.  No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Preferred Stock which may be in arrears.

(b)          The Board of Directors may fix a record date for the determination of holders of shares of the Series A Preferred Stock entitled to receive payment of a dividend declared thereon, which record date shall be no more than sixty (60) days and no less than ten (10) days prior to the date fixed for the payment thereof.

4.           Liquidation, Dissolution or Winding Up.

(a)          In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or any Deemed Liquidation Event (each, a “Liquidation Event”), the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, pari passu with any Parity Securities and before any payment shall be made to any of the holders of any of the Junior Stock by reason of their ownership thereof, an amount (the “Liquidation Preference”) in cash per share of Series A Preferred Stock equal to the Original Purchase Price plus all accrued and unpaid dividends thereon pursuant to Section 3(a) (and if applicable, any accrued and unpaid default interest or other amounts owed pursuant to Section 7(e)).  If upon any such Liquidation Event, the remaining assets of the Company available for distribution to the Company’s stockholders shall be insufficient to pay the holders of shares of the Series A Preferred Stock and any Parity Securities the full amount to which they shall be entitled pursuant to this Section 4(a), the holders of shares of Series A Preferred Stock and any Parity Securities shall share ratably in any distribution of the remaining assets and funds of the Company in proportion to the respective amounts which would otherwise be payable in respect of such shares of Series A Preferred Stock and any Parity Securities held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full and the Company shall not make or agree to make any payments to the holders of Junior Securities.

(b)           After the payment of all preferential amounts required to be paid to the holders of any class or series of stock of the Company ranking on liquidation prior to and in preference to the Common Stock (including, for the avoidance of doubt, the Series A Preferred Stock), upon any such Liquidation Event, the remaining assets and funds of the Company available for distribution to its stockholders shall be distributed ratably among the holders of shares of Common Stock.

(c)           If the amount to be distributed to the holders of Series A Preferred Stock upon any Liquidation Event shall be other than cash, the fair market value of the property, rights, or securities distributed to such holders shall be determined in good faith by the Board of Directors and mutually agreed to in good faith by the holders of Series A Preferred Stock. The holders of shares of Series A Preferred Stock shall share ratably in any distribution pursuant to this Section 4, whether in cash, amounts other than cash or a combination of both.

(d)          The Company shall mail written notice of a Liquidation Event to each holder of record of Series A Preferred Stock at least ten (10) days prior to the date for payment or distribution to shareholders stated in the Company’s notice.

(e)           Any (i) sale, lease, exclusive license, exchange, conveyance or other disposition of all or substantially all of the assets of the Company or a Subsidiary of the  Company constituting twenty-five percent (25%)  of the total assets of the Company on a consolidated basis, (ii) consolidation or merger of the Company or a Subsidiary of the Company constituting twenty-five percent (25%) of the total assets of the Company on a consolidated basis, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization, directly or indirectly own less than fifty percent (50%) of the voting power of the surviving entity immediately after such consolidation, merger or reorganization or (iii) any transaction or series of related transactions to which the Company is a party in which in excess of fifty percent (50%) of the Company’s voting power is transferred (each a “Deemed Liquidation Event”) shall be deemed to be a Liquidation Event for purposes of this Section 4; provided that a Deemed Liquidation Event shall not include any transaction (y) where the holders of at least eighty-five percent (85%) of the Series A Preferred Stock, voting as a separate series affirmatively elect and determine that any such transaction shall not be considered a Deemed Liquidation Event or (z) that involves only a change in the state of incorporation of the Company or any Subsidiary of the Company.

5.          Voting and Protective Provisions. Except as otherwise required by law or set forth herein, the holders of Series A Preferred Stock shall have no voting rights. Subject to applicable law, the Company shall not (in each case whether by amendment, merger, consolidation or otherwise), without first having obtained the affirmative vote or written consent of the holders of at least eighty-five percent (85%) of the outstanding Series A Preferred Stock, voting as a separate class:

(a)           Amend, alter or change the rights, preferences and privileges of the Series A Preferred Stock;

(b)           Amend, alter or repeal any provision of this Certificate of Designation, or amend, alter or repeal any provision of the Company’s By-laws or Certificate of Incorporation that might have the effect of amending, altering or repealing any provision of this Certificate of Designation; or

(c)           During such time that the Total Consolidated Debt of the Company is greater than fifty percent (50%) of the TPB Stock Value and for six (6) months following any such period of time, take any of the following actions:

(i)           Increase or decrease the number of shares of Series A Preferred Stock (other than as contemplated in Section 3(a)) or the designated number of shares of Series A Preferred Stock;

(ii)          Redeem, repurchase or otherwise acquire, or set aside any sums for the redemption, repurchase or other acquisition of, any capital stock or options to purchase capital stock of the Company, or any obligations or securities convertible into shares of capital stock (other than (A) the redemption of the Series A Preferred Stock pursuant to Section 7  or (B) the repurchase of shares of stock from employees, consultants and advisors pursuant to agreements which permit the Company to repurchase such shares at cost or, if lower, fair market value, as such agreement may provide therein, upon termination of services to the Company or in exercise of the Company’s right of first refusal upon a proposed transfer);

(iii)         Authorize or designate (whether by reclassification or otherwise) or issue any new class or series of capital stock of the Company or any obligations or securities convertible into equity securities of the Company having relative rights or preferences superior to or on a parity with the Series A Preferred Stock with respect to voting, dividends, conversion, anti-dilution or liquidation preference, or effect an increase in the authorized or designated number of any such new class or series;

(iv)         Declare or pay a dividend or other distribution on the Common Stock or on any other class or series of capital stock (other than the Series A Preferred Stock), or any other action that results in a dividend or other distribution on the Common Stock or on any other class or series of capital stock (other than the Series A Preferred Stock); or

(v)          Pledge, hypothecate or create any lien, security interest in or encumbrance on assets of the Company or any of its Subsidiaries in the aggregate in excess of $50,000,000, or incur any Indebtedness obligation in excess of $5,000,000 individually.

6.           Conversion.  The Series A Preferred Stock shall be convertible into shares of Class A Common Stock (the “Conversion Rights”) as follows:

(a)           Right to Convert; Mandatory Conversion.  Each share of Series A Preferred Stock shall be convertible (i) at the option of the holder thereof, at any time and from time to time on or after the Issue Date (such conversion, an “Optional Conversion”), (ii) at the option of the Company, at any time after the Price-Based Mandatory Conversion Conditions (as defined below) have been satisfied, and from time to time thereafter (such conversion, a “Price-Based Mandatory Conversion”) and (iii) at the option of the Company, at any time after the Transaction-Based Mandatory Conversion Conditions (as defined below) have been satisfied, and from time to time thereafter (such conversion, a “Transaction-Based Mandatory Conversion” and, together with a Price-Based Mandatory Conversion, a “Mandatory Conversion”), and in each case without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Class A Common Stock as is determined by dividing (a) the sum of (1) (X) the Original Purchase Price, in the case of a Price-Based Mandatory Conversion or (Y) the Adjusted Purchase Price, in the case of a Transaction-Based Mandatory Conversion plus (2) all accrued and unpaid dividends thereon, by (b) the Conversion Price (as defined below) in effect at the time of conversion (as so determined, the “Conversion Shares”).  The “Price-Based Mandatory Conversion Conditions” shall be satisfied if and when: (x) the Common Stock Closing Price shall, for any twenty (20) Trading Days in any period of thirty (30) consecutive Trading Days, be equal to or greater than the Hurdle Price on each such Trading Day, and (y) concurrent with the Price-Based Mandatory Conversion, the Company consummates a Qualifying Offering (including the receipt of funds for all shares sold in such offering).   The “Transaction-Based Mandatory Conversion Conditions” shall be satisfied if and when (A) the Company enters into a binding definitive agreement to consummate a transaction or series of transactions involving the Company and one or more of its Subsidiaries in which stockholders of the Company immediately prior to such transaction(s) receive interests in the entities resulting from such transaction(s) and (B) the closing of such transaction or transactions actually occurs; provided, that the effectiveness of the Transaction-Based Mandatory Conversion shall be immediately prior to such closing.

(b)           Conversion Price.  The “Conversion Price” shall initially be equal to an amount equal to one hundred twenty percent (120%) of the 30-day Trailing VWAP, determined as of the Issue Date.  The Conversion Price shall be subject to adjustment as provided otherwise in this Section 6.

(c)           Fractional Shares.  No fractional shares of Class A Common Stock shall be issued upon conversion of the Series A Preferred Stock.  In lieu of any fractional shares to which the holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the then effective Conversion Price.

(d)           Mechanics of Conversion.

(i)          (A) If a holder of Series A Preferred Stock elects to effect an Optional Conversion, such holder shall give written notice to the Company of such holder’s election to convert a stated number of shares of Series A Preferred Stock into shares of Class A Common Stock, at the Conversion Price then in effect, which notice shall be accompanied by the certificate or certificates representing such shares of Series A Preferred Stock that shall be converted into Class A Common Stock. The notice shall also contain a statement of the name or names in which the certificate or certificates for Class A Common Stock shall be issued. If required by the Company, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Company, duly executed by the registered holder or his or its attorney duly authorized in writing.  The date of receipt of such certificates and notice by the transfer agent (or by the Company if the Company serves as its own transfer agent) shall be the conversion date (in the case of an Optional Conversion, the “Conversion Date”).  The Company shall, as soon as practicable after the Conversion Date for an Optional Conversion, issue and deliver at such office to such holder of Series A Preferred Stock, or to his or its nominees, a certificate or certificates for the number of shares of Class A Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share.  On the Conversion Date for an Optional Conversion, each holder of record of shares of Series A Preferred Stock surrendered for conversion shall be deemed to be the holder of record of the Class A Common Stock issuable upon conversion of such Series A Preferred Stock, notwithstanding that the certificates representing such shares of Series A Preferred Stock shall not have been surrendered at the office of the Company, that notice from the Company shall not have been received by any holder of record of shares of such Series A Preferred Stock, or that the certificates evidencing such shares of Class A Common Stock shall not then be actually delivered to such holder.  If the number of shares of Series A Preferred Stock represented by the certificate or certificates surrendered for conversion shall exceed the number of shares to be converted, the Company shall issue and deliver to the person entitled thereto a certificate representing the balance of any unconverted shares of Series A Preferred Stock.  (B) If the Company is permitted to and elects to effect a Mandatory Conversion, all holders of record of shares of Series A Preferred Stock shall be given no less than five (5) business days prior written notice of the date on which such conversion shall occur (in the case of a Mandatory Conversion, the “Conversion Date”).  Such notice also shall specify the place designated for exchanging shares of Series A Preferred Stock for shares of Class A Common Stock.  On or before the Conversion Date for a Mandatory Conversion, each holder of Series A Preferred Stock shall surrender his, her or its certificate or certificates for all such shares to the Company or the transfer agent at the place designated in such notice.  On the Conversion Date for a Mandatory Conversion, all certificates representing shares of Series A Preferred Stock shall be deemed canceled by the Company and no longer outstanding.  As soon as practicable after the Mandatory Conversion shall have been effected, certificates representing the Class A Common Stock issued upon the Mandatory Conversion shall be delivered to those holders who delivered their certificate or certificates to the Company or the designated transfer agent as aforesaid, together with cash in lieu of any fraction of a share.

(ii)          The Company shall at all times when the Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number of its duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred Stock.  Before taking any action which would cause an adjustment reducing the Conversion Price below the then par value of the shares of Class A Common Stock issuable upon conversion of the Series A Preferred Stock, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Class A Common Stock at such adjusted Conversion Price, as applicable.

(iii)         Upon any such conversion, no adjustment to the Conversion Price shall be made for any accrued but unpaid dividends on the Series A Preferred Stock surrendered for conversion or on the Class A Common Stock delivered upon conversion (but such dividends shall be reflected in the calculation of the number of shares of Class A Common Stock issuable upon such conversion in accordance with Section 6(a)).

(iv)         All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding as of the Conversion Date and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Class A Common Stock in exchange therefor and payment of any dividends declared but unpaid on the Series A Common Stock (which such dividends are not accounted for in the calculation of the number of shares of Class A Common Stock issuable in exchange therefor), together with cash in lieu of any fraction of a share.  Any shares of Series A Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Company (without the need for stockholder action) may from time to time take such appropriate action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly.

(v)          The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Class A Common Stock upon conversion of shares of Series A Preferred Stock pursuant to this Section 6.  The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Class A Common Stock in a name other than that in which the shares of Series A Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.

(e)           Adjustment for Stock Splits and Combinations.  If the Company shall at any time or from time to time after the Issue Date effect a subdivision of any of the outstanding Common Stock or combine the outstanding shares of Series A Preferred Stock, the Conversion Price in effect immediately before that subdivision or combination shall be proportionately decreased and the number of Conversion Shares shall be proportionately increased.  If the Company shall at any time or from time to time after the Issue Date combine any of the outstanding shares of Common Stock or effect a subdivision of the outstanding shares of Series A Preferred Stock, the Conversion Price in effect immediately before the combination or subdivision shall be proportionately increased and the number of Conversion Shares shall be proportionately decreased.  Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective.

(f)            Adjustment for Certain Dividends and Distributions.  In the event the Company at any time or from time to time after the Issue Date shall make or issue, or fix a record date for the determination of holders of any of the Common Stock (or any other Stock Equivalents with respect to any Common Stock) entitled to receive, a dividend or other distribution payable in additional shares of any of the Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price, as applicable, then in effect by a fraction:

(1)          the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(2)          the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution;

(g)           Adjustment for Reclassification, Exchange, or Substitution.  If the Class A Common Stock issuable upon the conversion of the Series A Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification, or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation, or sale of assets provided for below), then and in each such event the holder of each such share of Series A Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable, upon such reorganization, reclassification, or other change, by holders of the number of shares of Class A Common Stock into which such shares of Series A Preferred Stock might have been converted immediately prior to such reorganization, reclassification, or change, all subject to further adjustment as provided herein.

(h)           Adjustment for Merger or Reorganization, etc.  If there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company in which the Common Stock (but not the Series A Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by paragraphs (e), (f) or (g) of this Section 6 or a transaction in which a Transaction-Based Mandatory Conversion has occurred), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock shall be convertible into the kind and amount of securities, cash or other property which a holder of the number of shares of Class A Common Stock of the Company issuable upon conversion of one share of Series A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 6 with respect to the rights and interests thereafter of the holders of the Series A Preferred Stock to the end that the provisions set forth in this Section 6 (including provisions with respect to changes in and other adjustments of the Conversion Price, as applicable) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Series A Preferred Stock. The provisions of this Section 6(h) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions.  The Company shall not affect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor person (if other than the Company) resulting from such transaction, shall assume, by written instrument in form and substance satisfactory to the holder of the shares of Series A Preferred Stock, the obligation to deliver to the holders of the shares of Series A Preferred Stock such shares of stock, securities or assets which, in accordance with the foregoing provisions, such holders shall be entitled to receive upon conversion of the Series A Preferred Stock. Notwithstanding anything to the contrary contained herein with respect to any corporate event or other transaction contemplated by the provisions of this Section 6(h), each holder of shares of Series A Preferred Stock shall have the right to elect, prior to the consummation of such event or transaction, to give effect to the provisions of Section 4(a) (if applicable to such event or transaction) hereunder, instead of giving effect to the provisions contained in this Section 6(h) with respect to such holder’s Series A Preferred Stock.

(i)            Issue of Securities Deemed Issue of Additional Shares of Common Stock.  In the event the Company at any time after the Closing Date shall issue any Stock Equivalents (other than Excluded Securities), then the maximum number of shares (as set forth in the instrument relating thereto without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise, conversion or exchange of such Stock Equivalents, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 6(j)(v) below) of such Additional Shares of Common Stock would be less than seventy-five percent (75%) of the applicable Conversion Price in effect immediately prior to such issue. In any such case in which Additional Shares of Common Stock are deemed to be outstanding:

(i)           Except as provided in clause (ii) below, no further adjustment in the applicable Conversion Price pursuant to Section 6(j) below shall be made upon the subsequent issue of Stock Equivalents or shares of Common Stock upon the exercise, conversion or exchange of such Stock Equivalents;

(ii)          If such Stock Equivalents by their terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of shares of Common Stock issuable upon the exercise, conversion or exchange thereof, the applicable Conversion Price computed pursuant to Section 6(j) below upon the original issue thereof, and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed pursuant to Section 6(j) below to reflect such increase or decrease insofar as it affects such Stock Equivalents or the rights of conversion or exchange under such Stock Equivalents;

(iii)         Upon the expiration of any such Stock Equivalents or any rights of conversion or exchange under such Stock Equivalents which shall not have been exercised, the applicable Conversion Price computed pursuant to Section 6(j) below upon the original issue thereof and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed pursuant to Section 6(j) below as if, in the case of Stock Equivalents, only the Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise, conversion or exchange of such Stock Equivalents and the consideration received therefor was the consideration actually received by the Company for the issue of all such Stock Equivalents, whether or not exercised, converted or exchanged, plus the consideration actually received by the Company upon such exercise, conversion or exchange.

(iv)         No readjustment pursuant to clause (ii) or (iii) above shall have the effect of increasing the applicable Conversion Price to an amount which exceeds the lower of (a) the applicable Conversion Price on the original adjustment date, or (b) the applicable Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock (except such Additional Shares of Common Stock as to which clause (ii) or (iii) above applies) between the original adjustment date and such readjustment date; and

(v)          In the case of any Stock Equivalents which expire by their terms not more than sixty (60) days after the date of issue thereof, no adjustment of the applicable Conversion Price shall be made until the expiration or exercise of all such Stock Equivalents, whereupon such adjustment shall be made in the same manner provided in clause (iii) above.

(j)            Adjustment Upon Issuance of Additional Shares of Common Stock.

(i)           In the event the Company shall issue Additional Shares of Common Stock (including, without limitation, Additional Shares of Common Stock deemed to be issued pursuant to Section 6(i), without consideration or for a consideration per share less than seventy five percent (75%) of the applicable Conversion Price in effect for the Series A Preferred Stock immediately prior to such issue, then and in such event, the Conversion Price for the Series A Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:

(I)          “CP2” shall mean the Conversion Price for the Series A Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock