FLUENT — M&A Activity 2020

Jan 22, 2020

AMENDMENT NO. 2 TO SMITH TRANSACTION AGREEMENT

This Amendment No. 2 to the Smith Transaction Agreement (“ Second Amendment ”) is entered into as of January 16, 2020, and is by and among William M. Smith, individually (“ Smith ”), Fluent Servicing, LLC f/k/a Knox Servicing, LLC (“ Servicing ”), Cansortium Florida, LLC (“ Cansortium Florida ”), Cansortium Holdings LLC (“ Cansortium Holdings ”) Cansortium, Inc. (“ Cansortium ”, and together with Servicing, Cansortium Florida and Cansortium Holdings, the “ Cansortium Entities ”), Can Endeavour LLC (“ Can Endeavour ”), Endeavour Holdings LLC (“ Endeavour Holdings ”), and Sage Investing LLC (“ Sage ”, and together with Smith, Can Endeavour, and Endeavour Holdings, the “ Smith Entities ”) (each of the foregoing, a “ Party ”, and collectively, the “ Parties ”).

WHEREAS , the Cansortium Entities (other than Cansortium) and the Smith Entities (other than Sage and Endeavour Holdings) entered into that certain Smith Transaction Agreement, dated as of August 13, 2018 (the “ Smith Transaction Agreement ”), pursuant to which the Cansortium Florida acquired all of Can Endeavour’s rights, title and interest in the units in Servicing held by Can Endeavour (the “ KS Units ”) in exchange for $23,325,000, which consideration was comprised of units in Cansortium Holdings (“ CH Units ”) and cash to be paid out pursuant to an original promissory note;

WHEREAS, the Cansortium Entities (other than Cansortium) and the Smith Entities (including Sage but not Endeavour Holdings) entered into an Amendment No. 1 to the Smith Transaction Agreement dated as of January 1, 2019 (“ Amendment No. 1 ”);

WHEREAS, in connection with Amendment No. 1: (a) Cansortium Florida issued a Secured Promissory Note dated January 1, 2019 (the “ Note ”) to Can Endeavour; (b) Cansortium Florida and Can Endeavour entered into a Security Agreement, dated as of January 1, 2019 (the “ Security Agreement ”); (c) Cansortium Holdings, Servicing and Can Endeavour entered into a Guaranty, dated as of January 1, 2019 (the “ Guaranty ”); (d) Servicing, Cansortium Holdings, Sage and each of Sage’s unitholders entered into a Termination Agreement, dated as of January 1, 2019 (the “ Termination Agreement ”); (e) Cansortium Florida and Sage entered into a consulting agreement, dated as of January 1, 2019 (the “ Consulting Agreement ”); and (f) Cansortium and Can Endeavour entered into a Guaranty, dated as of March 22, 2019 (the “ Cansortium Guaranty ”, and together with Amendment No. 1, the Note, the Security Agreement, the Guaranty, the Termination Agreement and the Cansortium Guaranty, the “ 2019 Transaction Documents ”);

WHEREAS , in connection with a restructuring of the obligations of the Cansortium Entities to the Smith Entities, the Parties desire to amend the terms contemplated by the Note and further amend the Smith Transaction Agreement to provide for the restructuring of all such obligations to the extent expressly provided for herein;

NOW, THEREFORE , in consideration of the terms and conditions set forth in this Second Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1. Defined Terms.

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the 2019 Transaction Documents.

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2. Promissory Note.

In order to accommodate certain cash flow needs of the Cansortium Entities, the Parties agree that the Note and repayment terms contemplated in the Note shall be amended and restated as set forth in the amended promissory note attached as Exhibit A hereto (the “ Amended Note ”). The aggregate principal amount of the Amended Note shall be $12,933,290.02 which, for greater certainty, includes all accrued interest from the date of the Note to December 16, 2019 converted into principal. The Amended Note shall be exchangeable into common shares of Cansortium (“ Common Shares ”) as set forth therein.

3. Smith Transaction Agreement.

• (a) Cansortium, Sage and Endeavour Holdings are hereby added as Parties to the Smith Transaction Agreement.

• (b) Section 1(a), subsections (1) and (2) of the Smith Transaction Agreement are hereby replaced in their entirety with the following:

  • “(1) an amended promissory note in the form attached as Exhibit A;

  • (2) issuance and/or transfer to Endeavour Holdings (as Can Endeavour’s designee) of 14,215,385 additional common shares (or equivalent proportionate voting shares) of Cansortium Inc. (the “ Additional Shares ”, and together with the 4,400,000 common shares of Cansortium already issued to Endeavour Holdings pursuant to the Smith Transaction Agreement issued to Endeavour Holdings as Can Endeavour’s designee, the “ Common Shares ”), which number of Common Shares is based on a value of $0.65 per Common Share. Such Common Shares shall be subject to a price “ Floor ” of $0.65 per share and shall be secured by the Security Agreement, the Guaranty and the Cansortium Guaranty. The Floor shall expire at 5:00 P.M. (Miami time) on May 31, 2023. If during that time period, Endeavour Holdings elects to sell some or all of its Common Shares subject to the Floor, and the purchase price is less than $0.65 per share, then Cansortium (or its designee) shall have the first right to purchase all or any portion of the contemplated Common Shares to be sold for $0.65 per Common Share. Alternatively, Cansortium may elect to pay in cash to Endeavour Holdings on the date of such sale the difference between $0.65 and the actual sale price per Common Share. Endeavour Holdings shall provide 5 business days notice to Cansortium of the contemplated sale of any Common Shares subject to the Floor below the $0.65 per Common Share Floor. The price Floor shall be cancelled if the closing price of the Common Shares is $4.13 per Common Shares or more for twenty (20) consecutive trading days while maintaining a trading volume of at least three (3) million Common Shares each trading day of such period.”

• (c) A new Subsection 1(a)(3) is hereby added to the Smith Transaction Agreement as follows:

  • “ (3) Endeavour Holdings hereby agrees that unless approved in advance in writing by the Board of Directors of Cansortium, neither it nor any of its

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affiliates will, until May 1, 2020, directly or indirectly, exercise its stock price Floor rights.

• (d) A new Subsection 1(a)(4) is hereby added to the Smith Transaction Agreement as follows:

Can Endeavour shall have the right, subject to regulatory approvals, to nominate two members to the Board of Directors of Cansortium, one of which initially shall be Bill Smith, and the other nominee or any replacement of Bill Smith subject to approval of the nominees in question by the Special Committee of the Board of Directors of Cansortium.

4. Transaction Documents.

Contemporaneous with the execution of this Second Amendment:

• (a) Cansortium Florida shall enter into the Amended Note;

• (b) Cansortium shall cause to be transferred, pursuant to a side letter agreement in the form previously agreed to by the Parties, 14,215,385 Common Shares from Jose Hidalgo, Henry Batievsky, Patrick Maloy, and Jeffrey Reath (collectively, the “ Founders ”) to Can Endeavour (or its designee) as additional common shares to be subject to the stock price Floor pursuant to Section 1(a)(2) of the Smith Transaction Agreement, as amended by Section 3(b) of this Second Amendment, and obtain a irrevocable voting proxy from the Founders, in effect through June 30, 2020, for all remaining Cansortium shares held by the Founders after such transfers; and

• (c) Cansortium shall enter into a financial consulting arrangement with Can Endeavour, in the form previously agreed to by the Parties..

The Parties hereby confirm that the Security Agreement, the Guaranty and the Cansortium Guaranty shall remain in full force and effect and shall be continuing security for the Amended Note and the Smith Transaction Agreement, as amended by Amendment No. 1 and this Second Amendment, as well as for all other Obligations (as that term is defined in the Security Agreement).

5. Miscellaneous .

5.1 Continuance of the Agreement.

Except as specifically amended by this Second Amendment, the Smith Transaction Agreement, as amended by Amendment No. 1, shall remain in full force and effect. 5.2 Counterparts.

This Second Amendment may be executed in counterparts, each of which shall be an original, and both of which together shall constitute one and the same document. Any counterpart may be executed by facsimile signature and such facsimile signature shall be deemed an original.

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5.3 Applicable Law.

This Second Amendment shall be construed and enforced in accordance with the laws of the State of Florida. Should any Party file suit to enforce its rights under this Amendment, the prevailing party (as determined by a court of competent jurisdiction) shall be entitled to its reasonable attorney’s fees and reasonable out-of-pocket costs.

[signatures on following pages]

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IN WITNESS WHEREOF , the parties hereto have executed this Amendment to be effective as of the date first written above.

William M. Smith

By: [ signed ] William M. Smith Name: William M. Smith, Individually

CAN ENDEAVOUR LLC

By: [ signed ] William M. Smith Name: William Smith Title: Managing Member

SAGE INVESTING LLC

[ signed ] William M. Smith By: Name: William Smith Title: Managing Member

FLUENT SERVICING, LLC F/K/A KNOX SERVICING, LLC

By: Name: Jose J. Hidalgo Title: Manager

CANSORTIUM INC.

By: Name: Jose J. Hidalgo Title: Chief Executive Officer

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IN WITNESS WHEREOF , the parties hereto have executed this Amendment to be effective as of the date first written above.

William M. Smith

By:

Name: William M. Smith, Individually

CAN ENDEAVOUR LLC

By: Name: William Smith Title: Managing Member

SAGE INVESTING LLC

By:

Name: William Smith Title: Managing Member

FLUENT SERVICING, LLC F/K/A KNOX SERVICING, LLC

[ signed ] ��se�����id��g� By: Name: Jose J. Hidalgo Title: Chief Executive Officer

CANSORTIUM INC.

[ signed ] ��se�����id��g� By: Name: Jose J. Hidalgo Title: Chief Executive Officer

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CANSORTIUM FLORIDA, LLC

By: [ signed ] ��se�����id��g Name: Jose J. Hidalgo Title: Chief Executive Officer

CANSORTIUM HOLDINGS LLC

[ signed ] ��se�����id��g� By: Name: Jose J. Hidalgo Title: Chief Executive Officer

ENDEAVOUR HOLDINGS LLC

By: Name: William M. Smith Title: Managing Member

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CANSORTIUM FLORIDA, LLC

By: Name: Jose J. Hidalgo Title: Manager

CANSORTIUM HOLDINGS LLC

By: Name: Jose J. Hidalgo Title: Manager

ENDEAVOUR HOLDINGS LLC

By: [ signed ] William M. Smith Name: William M. Smith Title: Managing Member

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