Exhibit 10.1

 

AGREEMENT OF MERGER

THIS AGREEMENT OF MERGER (this “Agreement”), dated January 23, 2020, is by and
among Red Cat Holdings, Inc. f/k/a TimefireVR, Inc., a Nevada corporation
(“Purchaser”), Rotor Riot Acquisition Corp., an Ohio corporation and wholly
owned subsidiary of Purchaser (“Sub”), Rotor Riot, LLC, an Ohio limited
liability company (“Company”), and the selling holder signatories hereto (the
“Selling Holders”). Each of Purchaser, Sub, Company and Selling Stockholders are
referred to herein as a “Party” and collectively as the “Parties”.

RECITALS

WHEREAS, the board of managers of the Company and the boards of directors or the
manager(s), as applicable, of Sub and Purchaser have determined that it would be
advisable, fair to and in the best interests of, their respective companies and
the securityholders of their respective companies that Sub merge with and into
the Company (the “Merger”), with the Company to survive the Merger and to become
a wholly owned subsidiary of Purchaser, on the terms and subject to the
conditions set forth in this Agreement, and, in furtherance thereof, have
approved the Merger, this Agreement and the other transactions contemplated by
this Agreement;

WHEREAS, pursuant to the Merger, among other things, the issued and outstanding
Interests (as such term is defined below) shall be converted into the right to
receive the Shares (as such term is defined below) in the manner set forth
herein;

WHEREAS, Purchaser, Sub, the Company and each of the Selling Holders desire to
make certain representations, warranties, covenants and other agreements in
connection with the Merger as set forth herein; and

WHEREAS, (i) Brains Riding in Tanks, LLC, an Ohio limited liability company
(“BRIT”) owns 7,200,000 Class A Units of membership interests in the Company,
(ii) Tyler Brenner owns 800,000 Class A Units of membership interest in the
Company, and (iii) Andrew Camden owns 1 Class A Unit in the Company
(collectively, the “Interests”).

AGREEMENT

NOW, THEREFORE, in consideration of the premises and of the mutual covenants of
the Parties hereinafter expressed, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, and intending to be
legally bound by this Agreement, it is hereby agreed as follows:

Article I.
DEFINITIONS

Section 1.1 Defined Terms. As used herein, the terms below shall have the
following meanings.

(a) “Affiliate” means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person. For these purposes,
“controlling”, “controlled by”, or “under common control with” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management of such Person, whether through ownership of voting
securities, by Contract, or otherwise.

(b) “Contract” means any written or oral contract, subcontract, or other legally
binding agreement, understanding, commitment, arrangement or instrument, and
each and every amendment, extension, exhibit, attachment, schedule, addendum,
appendix, statement of work, change order and any other similar instrument or
document relating thereto.

(c) “Conversion Rate” means the VWAP for the twenty (20) trading days ending on
the date immediately prior to Closing.

(d) “Dissenting Holder” means a Selling Holder which or who is entitled to
relief as a dissenting member pursuant to Section 41 of the Ohio Law.

(e) “Fraud” means the actual and intentional common law fraud (and not a
promissory fraud, equitable fraud, constructive fraud, negligent
misrepresentation or omission, or any form of fraud based on recklessness or
negligence) by a Party to this Agreement with respect to the making of a
representation or warranty set forth in Article III, Article IV or Article V of
this Agreement.

(f) “Governmental Authority” means any federal, state, local, municipal, county,
foreign or other governmental, quasi-governmental, administrative or regulatory
authority, body, agency, court, tribunal, commission or other similar
governmental entity (including any branch, department, agency or political
subdivision thereof), any self-regulating body of similar standing or any
arbitrator or arbitral body.

(g) “Indemnitees” means, as applicable, the Seller Indemnitees or the Purchaser
Indemnitees.

(h) “Intellectual Property” means all intellectual property rights and other
proprietary rights and protections, including (i) patents and statutory
invention registrations (including any continuations, continuations-in-part,
divisions, extensions, provisionals, reexaminations, reissues, renewals and
revisions), inventions, discoveries, improvements, methods and processes; (ii)
copyrights and other published and unpublished works of authorship, including
audiovisual works, collective works, software, compilations, databases,
derivative works, literary works, mask works, and sound recordings; (iii)
trademarks, service marks, trade dress, trade names, corporate names and other
source identifiers, together with all goodwill associated therewith; (iv)
Internet domain names; and (v) confidential information, proprietary
information, technical information, know-how and trade secrets under applicable
law, in each case including all applications, disclosures, registrations,
issuances and extensions with respect thereto.

(i) “Knowledge” means, (i) with respect to the Company, (a) the actual knowledge
of Chad Kapper (the “Seller Knowledgeable Person” or “CK”), and (b) such
knowledge as would be obtained by the Seller Knowledgeable Person upon
reasonable inquiry, (ii) with respect to Purchaser (a) the actual knowledge of
Jeff Thompson (the “Purchaser Knowledgeable Person”), and (b) such knowledge as
would be obtained by the Purchaser Knowledgeable Person upon reasonable inquiry,
and (iii) with respect to a Selling Holder, (a) the actual knowledge of such
Selling Holder, and (b) such knowledge as would be obtained by such Selling
Holder upon reasonable inquiry.

(j) “Liability” means any direct or indirect liability, indebtedness,
obligation, guarantee or endorsement, whether known or unknown, whether accrued
or unaccrued, whether absolute or contingent, whether due or to become due, or
whether liquidated or unliquidated.

(k) “Liens” means all liens, mortgages, options, leases, covenants,
restrictions, claims, security interests, encumbrances or third-party rights of
any nature, including without limitation, any agreement, understanding or
restriction affecting the incidents of record or beneficial ownership pertaining
thereto.

(l) “Loss” means losses, damages, liabilities, deficiencies, actions, judgments,
awards, penalties, fines, costs or expenses of whatever kind, including
reasonable attorneys’ fees and the cost of enforcing any right to
indemnification hereunder; but excluding, in each case, any exemplary, punitive
or unforeseeable consequential damages, except to the extent such damages are
finally awarded and actually paid by an Indemnitee to an un-Affiliated third
party in connection with a legal proceeding against such Indemnitee.

(m) “Ohio Law” means the Ohio Limited Liability Company Act.

(n) “Operating Agreement” means the Third Amended and Restated Operating
Agreement of the Company dated as of March 1, 2019 among the Company and the
Selling Holders.

(o) “Payables” shall mean that certain debt and other payables of the Company as
set forth on Schedule 2.2 attached hereto and made a part hereof.

(p) “Person” means any person or entity, whether an individual, trustee,
corporation, partnership, limited partnership, limited liability company, trust,
unincorporated organization, business association, firm, joint venture or other
juridical person or Governmental Authority.

(q) “Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date and, with respect to any Straddle Period, the portion of such
Straddle Period ending on and including the Closing Date.

(r) “Proceeding” means any action, audit, lawsuit, litigation, investigation or
arbitration (in each case, whether civil, criminal or administrative) pending by
or before any Governmental Authority or arbitrator.

(s) “Promissory Note” means the Promissory Note dated as of the Closing issued
by the Purchaser to BRIT in the principal amount of $175,000, substantially in
the form annexed hereto as Exhibit A.

(t) “Purchaser Indemnitees” means (i) Purchaser, (ii) Purchaser’s shareholders,
directors, officers, parents, employees, agents, and representatives, (iii) the
Affiliates of the Persons listed in clauses (i) and (ii), and (iv) Purchaser’s
successors and assigns.

(u) “SEC” means the Securities and Exchange Commission.

(v) “SEC Documents” means all reports, schedules, forms, statements and other
documents required to be filed by the Purchaser with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended.

(w) “Securities Act” means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

(x) “Seller Indemnitees” means (i) each Selling Holder, (ii) each Selling
Holder’s members, managers, officers, parents, employees, agents, and
representatives, (iii) the Affiliates of the Persons listed in clauses (i) and
(ii), and (iv) each Selling Holder’s successors and assigns and heirs and
representatives.

(y) “Share Number” means, for a Selling Holder, the number of Shares determined
by multiplying the Total Merger Consideration Shares by the percentage which
such Selling Holder’s Class A Units of membership interest in the Company
represents of all of the issued and outstanding Class A Units of membership
interest in the Company as of the Effective Time. The number of Shares each
Selling Holder is entitled to receive for the Interest held by such Selling
Holder shall be rounded to the nearest Share.

(z) “Straddle Period” means a taxable period that begins on or before and ends
after the Closing Date.

(aa) “Transaction Expenses” means all of the following amounts, without
duplication, to the extent not paid before Closing: all outstanding legal,
financial advisory and accounting fees and expenses incurred by Company in
connection with the negotiation and consummation of the transactions
contemplated hereby.

(bb) “Taxes” means any and all taxes fees, duties and other assessments,
including income, license, registration, excise, severance, occupation, premium,
windfall profits, ad valorem, environmental, capital stock, franchise, profits,
payroll or employment, withholding, health insurance, social security (or
similar), unemployment, disability, real property, personal property,
alternative or add-on minimum or estimated taxes imposed by any Governmental
Authority, including any related interest, fines or penalties.

(cc) “VWAP” means the daily volume weighted average price of the common stock of
Purchaser for such date (or the nearest preceding date) on the primary trading
market on which the common stock is then listed or quoted for trading as
reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. (New
York City time) to 4:02 p.m. (New York City time).

Article II.
THE MERGER

Section 2.1 The Merger. At the Effective Time, on the terms and subject to the
conditions set forth in this Agreement, the Certificate of Merger in
substantially the form attached hereto as Exhibit B (the “Certificate of
Merger”) and the applicable provisions of Ohio Law, Sub shall merge with and
into the Company, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving company and shall become a wholly owned
subsidiary of Purchaser. The Company, as the surviving company after the Merger,
is hereinafter sometimes referred to herein as the “Surviving Company.”

Section 2.2 Merger Consideration. The merger consideration shall be such number
of shares (the “Total Merger Consideration Shares”) of common stock of the
Purchaser (the “Shares”), calculated at Closing using the following formula:

X = A - B

 C

 

with:

 

X = the total number of Shares to be issued to the Selling Holders

 

A = $3,700,000

 

B = the aggregate amount of the Payables

 

C = the Conversion Rate

 

Section 2.3 Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place at such date and time as agreed to by
the Parties, subject to Section 2.14 below. The Closing may take place remotely
via the exchange of documents and signatures related to the transactions
contemplated hereby. The date on which the Closing occurs is herein referred to
as the “Closing Date.”

Section 2.4 Closing Deliveries of the Selling Holders and the Company. At or
before the Closing, in addition to any other documents required to be delivered
under other provisions of this Agreement, the Selling Holders and/or the
Company, as applicable, shall deliver (or cause to be delivered) to the
Purchaser the following:

(a) the consents and approvals of third parties set forth on Section 3.7(b) of
the Company Disclosure Schedules;

(b) a Membership Interest Assignment from each of the Selling Holders,
substantially in the form attached hereto as Exhibit C (the “Assignment”), duly
executed by such Selling Holder;

(c) an agreement (the “Make Whole Agreement”) pursuant to which the Purchaser
will agree that, in connection with the Merger, the Purchaser will agree to pay
the obligations comprising the Payables, substantially in the form attached
hereto as Exhibit D, duly executed on behalf of the Company, BRIT and CK;

(d) if any of the Interests are certificated, the certificates evidencing such
Interests, duly endorsed for transfer;

(e) a certificate executed by the manager of the Company certifying that each of
the representations and warranties of the Company set forth in Article III is
accurate in all respects as of the Closing Date and that the conditions set
forth in this Agreement to be satisfied by the Company and the Selling Holders
have been duly satisfied;

(f) a certificate executed by the manager of the Company, certifying the consent
or resolutions of the manager and the members of the Company authorizing the
execution of this Agreement by the Company and the consummation of the
transactions contemplated hereby;

(g) a good standing certificate of the Company dated within three business days
of the Closing Date; and

(h) the Certificate of Merger.

Section 2.5 Closing Deliveries of Purchaser. At or before Closing, in addition
to any other documents required to be delivered under other provisions of this
Agreement, the Purchaser shall deliver (or cause to be delivered) to the Selling
Holders the following:

(a) the Shares;

(b) the Make Whole Agreement, duly executed on behalf of the Purchaser;

(c) the Promissory Note;

(d) the Certificate of Merger;

(e) a certificate executed by an officer of Purchaser, certifying that each of
the representations and warranties of the Purchaser set forth in Article IV is
accurate in all respects as of the Closing Date and that the conditions set
forth in this Agreement to be satisfied by the Purchaser have been duly
satisfied;

(f) a certificate certified by an officer of Purchaser, certifying as to the
resolutions of the Board of Directors of the Purchaser authorizing the execution
of this Agreement by the Purchaser and the consummation of the transactions
contemplated hereby; and

(g) a good standing certificate of the Purchaser dated within three business
days of the Closing Date.

Section 2.6 Effective Time. At the Closing, Sub and the Company shall cause the
Certificate of Merger to be filed with the Secretary of State of the State of
Ohio, in accordance with the relevant provisions of Ohio Law (the time of
acceptance by the Secretary of State of the State of Ohio of such filing or such
later time as may be agreed to by Purchaser and the Company in writing (and set
forth in the Certificate of Merger) being referred to herein as the “Effective
Time”).

Section 2.7 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Ohio Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company and Sub shall vest in the
Surviving Company, and all debts, liabilities and duties of the Company and Sub
shall become debts, liabilities and duties of the Surviving Company.

Section 2.8 Operating Agreement. At the Effective Time, the Operating Agreement
of the Surviving Company shall be amended in its entirety to reflect the
Purchaser as the sole member of the Sub.

Section 2.9 Managers and Officers.

(a) At the Effective Time, the director (s) of Sub immediately prior to the
Effective Time shall be appointed as the manager(s) of the Surviving Company
immediately after the Effective Time until their respective successors are duly
elected or appointed and qualified.

(b) At the Effective Time, the officers of Sub immediately prior to the
Effective Time shall be appointed as the officers of the Surviving Company
immediately after the Effective Time until their respective successors are duly
appointed.

Section 2.10 Effect on Company Membership Interests. On the terms and subject to
the conditions set forth in this Agreement, and without any action on the part
of any Selling Holder, at the Effective Time, the Interest held by each Selling
Holder issued and outstanding immediately prior to the Effective Time shall
automatically be converted into, subject to and in accordance with Section 2.13,
the right of such Selling Holder to receive a number of Shares equal to the
Share Number for such Selling Holder. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the aggregate consideration paid
by Purchaser to the Selling Holders in their role as securityholders of the
Company exceed the Total Merger Consideration Shares. The rights of the Selling
Holders as of immediately prior to the Effective Time are personal to each such
Selling Holder and shall not be transferable for any reason otherwise than by
operation of law, will or the laws of descent and distribution. Any attempted
transfer of such right by any holder thereof (otherwise than as permitted by the
immediately preceding sentence) shall be null and void.

Section 2.11 Membership Interests of Sub. Each outstanding share of Sub that is
issued and outstanding immediately prior to the Effective Time will, by virtue
of the Merger and without further action on the part of the Company or the
Purchaser as the sole member of Sub, be converted into and become the sole
membership interest of the Surviving Company (and the membership interest of
Surviving Company into which the membership interests of Sub are so converted
shall be the only membership interest of the Surviving Company’s membership
interest that are issued and outstanding immediately after the Effective Time).

Section 2.12 Dissenter Rights. Notwithstanding anything to the contrary
contained herein, any Interest held by a Dissenting Holder shall be subject to
the number of Shares equal to the Share Number for such Selling Holder as
provided for in Section 11.7 of the Operating Agreement. The Company shall give
Purchaser (i) prompt notice of any demands for relief as a dissenting member,
withdrawals of such demands, and any other instruments served pursuant to Ohio
Law and received by the Company and (ii) the right to direct all negotiations
and proceedings with respect to dissenting members under Ohio Law. The Company
shall not, except with the prior written consent of Purchaser, or as otherwise
required under Ohio Law, voluntarily make any payment or offer to make any
payment with respect to, or settle or offer to settle, any claim or demand in
respect of any Interest held by a Dissenting Holder. The payment of
consideration under this Agreement to the Selling Holders (other than to
Dissenting Holders who shall be treated as provided in this Section 2.12 and
under Ohio Law) shall not be affected by the exercise or potential exercise of
dissenters’ rights under Ohio Law by any other Selling Holder.

Section 2.13 Payment Procedures. At the Closing, the Purchaser (or to such agent
or agents as may be appointed by Purchaser), upon receipt of a properly
completed and duly executed Assignment and delivery, if applicable, of any
certificate(s) representing the Interest of a Selling Holder, shall issue and
deliver to each Selling Holder (including a Dissenting Holder) certificate or
certificate representing the number of Shares that such Selling Holder has the
right to receive pursuant to Section 2.10 which Shares shall be, upon such
delivery, duly and validly issued, fully paid and non-assessable.

Section 2.14 Termination for Failure to Close. This Agreement shall
automatically terminate if the Closing shall not have occurred prior to 11:59
p.m. Eastern time on January 14, 2020, as such date may be extended by mutual
consent of the Parties. In the event of termination of this Agreement pursuant
to this Section 2.14, this Agreement shall forthwith become void and there shall
be no liability on the part of any Party; provided, however, that Section 8.7
shall survive such termination.

Article III.
REPRESENTATIONS AND WARRANTIES OF COMPANY

Company hereby represents and warrants to Purchaser as of the Closing, except as
set forth in the Disclosure Schedules delivered to Purchaser dated as of the
date of the Closing (the “Company Disclosure Schedules”), as follows:

Section 3.1 Organization; Capitalization. Company is a limited liability company
duly formed and validly existing and in good standing under the laws of the
State of Ohio with full limited liability company power and authority to conduct
its business as it is presently being conducted, to own or lease, as applicable,
and operate its assets and properties. Company is duly qualified or licensed to
do business as a foreign entity in each state of the United States in which it
is required to be so qualified or licensed, except as would not result in a
material Liability to Company. The authorized number of units of membership
interest in Company is 10,000,000 Class A Units, 8,000,001 of which are
outstanding, 7,200,000 of which are owned by BRIT, 800,000 of which are owned by
TB and 1 of which is owned by AC, and 2,000,000 Profits Units, none of which are
issued and outstanding. Except for the Selling Holders, no Person holds any
equity interests, debt securities, convertible securities (including options),
equity securities and/or any other securities of the Company.

The Interests constitute 100% of the total and issued interests in the Company.
The Interests have been duly authorized and are validly issued. On Closing,
Purchaser shall own all of the membership interests of the Company, free and
clear of all Liens. The Interests were issued in compliance with the
organizational documents of the Company, including without limitation, the
Operating Agreement, and all applicable laws. The Interests were not issued in
violation of any Contract to which the Company is a party and are not subject to
or in violation of any preemptive or similar right of any Person. There are no
outstanding options, warrants, convertible securities or other rights or
Contracts of any character relating to any membership interests or other
interest of Company or obligating the Company to issue or sell any membership
interests (including the Interests) or other interests in the Company. There is
no right of first refusal or other restriction on transfer or sale of the
Interests other than as provided in the Operating Agreement.

Section 3.2 Authority. Company has all requisite limited liability company power
and authority to enter into this Agreement and the Make Whole Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Company of this Agreement and the Make Whole Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of Company and no further action
is required on the part of Company to authorize this Agreement and the Make
Whole Agreement and the transactions contemplated hereby and thereby. This
Agreement and the Make Whole Agreement have been duly executed and delivered by
Company and, assuming the due authorization, execution and delivery by the other
parties hereto, constitute the valid and binding obligations of Company
enforceable against Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors’
rights and general principles of equity.

Section 3.3 Title to Assets. Company has good and marketable title to all of its
assets, free and clear of all Liens.

Section 3.4 Intellectual Property.

(a) Section 3.4(a) of the Company Disclosure Schedule sets forth a list of all
Intellectual Property of Company (collectively, the “Company Intellectual
Property”). Company owns or is the licensee of the Company Intellectual
Property.

(b) Company has taken all commercially reasonable steps necessary to maintain
the secrecy of its confidential information comprising Company Intellectual
Property.

(c) Except as set forth on Section 3.4(c) of the Company Disclosure Schedule,
Company has not received written notice that the any Company Intellectual
Property as used in the business of Company infringes, misappropriates, or
otherwise violates the Intellectual Property rights of a third party, and
Company has not received written notice of any facts that would indicate the
foregoing. To Company’s Knowledge, no Person is infringing, misappropriating or
otherwise violating any Intellectual Property right of Company.

(d) Section 3.4(d) of the Company Disclosure Schedule: (i) lists all patents,
patent applications, registered copyrights and copyright applications,
registered trademarks and trademark applications included in the Company
Intellectual Property (“Company’s Registered Intellectual Property”); and (ii)
identifies all third parties that share rights to Company’s Registered
Intellectual Property with Company, including, without limitation, joint owners
and/or co-applicants.

(e) Company has not granted any license or other right in the Company
Intellectual Property to any third party.

Section 3.5 Contracts. Section 3.5 of the Company Disclosure Schedule lists each
Contract to which Company is a party or by which Company or any of its assets
are bound (each a “Company Contract”), including without limitation, those
Company Contracts relating directly or indirectly to the Company Intellectual
Property. Each Company Contract is a legal, valid and binding obligation of
Company, is in full force and effect, and is enforceable against Company, and,
to the Knowledge of Company, the other parties thereto. Company is not in
breach, violation or default under any Company Contract and no event has
occurred that, with notice or lapse of time or both, would constitute such a
breach, violation or default by Company or, to the Knowledge of Company, the
other parties thereto.

Section 3.6 Insurance. Company has at all times maintained insurance in full
force and effect as required by law or under any agreement to which Company is
or has been a party in connection with the operation of its business. Section
3.6 of the Company Disclosure Schedule contains a list of all policies of
insurance held by Company, or for the benefit of Company as of the Closing
relating to the assets, business, operations, employees, officers or directors
of Company, including any self-insurance or co-insurance programs. There are
currently no claims pending against Company under any insurance policies
currently in effect and covering any of the assets, business, operations,
employees, members, managers or officers of Company as to which coverage has
been questioned, denied or disputed, and all premiums due and payable with
respect to the policies maintained by Company have been paid to date. To
Company’s Knowledge, there is no threatened termination of any such policies or
arrangements.

Section 3.7 Compliance with Law, Governing Documents and Other Agreements.

(a) Company has, in all material respects, conducted its business in compliance
with, and is not in material default under or in material breach or material
violation of (i) any applicable statute, law, ordinance, decree, order, rule, or
regulation of any Governmental Authority or the provisions of any franchise,
permit or license with respect to the operation of its business, or (ii) any
lease, Contract, instrument, license, agreement or other document affecting its
business or its assets.

(b) The execution and the delivery by Company of this Agreement and the Make
Whole Agreement, does not, and the consummation of the transactions contemplated
herein and therein and compliance with the provisions hereof and thereof will
not (i) conflict with, result in a breach of, constitute a default (with or
without notice or lapse of time, or both) under or violation of, or result in
the creation of any Lien pursuant to (A) any provision of the organizational
documents of Company, or (B) any mortgage, indenture, lease, Contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Company
or any of its assets, (ii) require on the part of Company any filing with, or
any permit, authorization, consent or approval of, any Governmental Authority,
(iii) require any notice, consent or waiver under any Company Contract, (iv)
result in the imposition of any Lien upon any of Company’s assets, (v) violate
any order, writ, injunction, or decree applicable to Company, or (vi) violate
any statute, rule, regulation or other law applicable to Company.

(c) Section 3.7(c) of the Company Disclosure Schedule sets forth a complete and
accurate list of all permits, licenses, authorizations, consents and/or
approvals of any Governmental Authority (each, a “Permit” and collectively, the
“Permits”) that are used or held by Company in connection with the operation of
its business.

Section 3.8 Broker’s Fees. Company has not retained any broker, finder or agent
or agreed to pay any brokerage fees, finder’s fees or commissions with respect
to the transactions contemplated by this Agreement.

Section 3.9 Taxes. Except as set forth on Section 3.9 of the Company Disclosure
Schedule, Company has timely filed all U.S. federal, state, local and non-U.S.
tax returns, estimates, declarations, reports, forms, claims for refund,
information returns or statements relating to Taxes, including any Schedule or
attachment thereto, and including any amendment thereof (“Tax Returns”) required
to be filed by Company on or before the Closing. All such Tax Returns were true,
correct and complete in all material respects when filed or made. Except as set
forth on Section 3.9 of the Company Disclosure Schedule, all Taxes of Company
which are due and payable (whether or not shown on any Tax Return) have been
paid in full by Company. There are no Liens on any of Company’s assets that
arose in connection with any failure (or alleged failure) to pay or withhold any
Tax. There are no pending audits, disputes, examinations, actions, Proceedings,
investigations, assessments or claims with respect to any Tax Returns filed by
Company, and there have been no audits, disputes, examinations, actions,
Proceedings, investigations, assessments or claims with respect to Company or
its business by or with any taxing authority.

Section 3.10 Financial Statements. Company has furnished to Purchaser copies of
its unaudited balance sheet and profit and loss statement for the year ended
December 31, 2018 and for the period ended September 30, 2019 (collectively
referred to as the “Company Financial Statements”), which are attached as
Section 3.10 of the Company Disclosure Schedule. The Financial Statements,
including, to the extent applicable, the notes or schedules thereto, (a)
although not prepared in accordance with generally accepted accounting
principles (“GAAP”), otherwise present fairly, in all material respects, the
financial position, results of operations and changes in financial position of
Company as of such dates and for the periods then ended, and (b) are materially
complete, correct and in accordance in all material respects with the books of
account and records of Company.

Section 3.11 Litigation. There are no actions pending before any Governmental
Authority, or to Company’s Knowledge, threatened or reasonably expected, against
Company. There is no judgment, decree or order against Company or any of its
assets.

Section 3.12 No Undisclosed Liabilities. Company has no Liabilities except (a)
the Transaction Expenses, which are itemized on Section 3.12 of the Company
Disclosure Schedule, (b) to the extent specifically reflected and accrued for or
specifically reserved against in Company’s most recent Financial Statement, (c)
for current Liabilities incurred subsequent to the most recent Financial
Statement in the ordinary course of business consistent with past practice, (d)
Liabilities that would not reasonably be expected to be material, individually
or in the aggregate, to Company, and (e) the amounts reflected in the Payables.

Article IV.
REPRESENTATIONS AND WARRANTIES OF SELLING HOLDERS

Each Selling Holder hereby severally but not jointly represents and warrants to
Purchaser as of the date of the Closing, as follows:

Section 4.1 Title, No Liens, etc. Such Selling Holder owns of record and
beneficially (with good, valid and indefeasible title to) all right, title and
interest in and to the Interest owned by such Selling Holder and as set forth in
Section 3.1 herein, free and clear of all Liens. There are no existing options,
rights, warrants, Contracts or instruments of any kind to which such Selling
Holder’s Interest is subject, under or pursuant to which any Person shall be
given, provided or otherwise afforded the right, option, occasion, possibility
or opportunity to purchase, encumber, foreclose upon, acquire or obtain all or
any portion of the Selling Holder’s Interest. Other than as provided in the
Operating Agreement, there is no right of first refusal or other restriction on
transfer or sale of the Selling Holder’s Interest.

Section 4.2 Organization. If such Selling Holder is an entity, such Selling
Holder is duly formed and validly existing and in good standing under the laws
of its state of organization.

Section 4.3 Authority. If such Selling Holder is an entity, such Selling Holder
has all requisite company power and authority to enter into this Agreement and
the Assignment and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by such Selling Holder of this Agreement,
the Assignment and, if applicable to such Selling Holder, the Make Whole
Agreement, and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of such
Selling Holder and no further action is required on the part of such Selling
Holder to authorize this Agreement, the Assignment, and, if applicable to such
Selling Holder, the Make Whole Agreement, and the transactions contemplated
hereby and thereby. Each of this Agreement, and the Assignment and, if
applicable to such Selling Holder, the Make Whole Agreement, has been duly
executed and delivered by such Selling Holder and assuming the due
authorization, execution and delivery by the other parties hereto and thereto
and thereto, constitutes the valid and binding obligations of such Selling
Holder enforceable against such Selling Holder in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors’ rights and general principles of
equity.

Section 4.4 Compliance with Law and Other Instruments. The execution and
delivery of this Agreement and the Assignment, and, if applicable to such
Selling Holder, the Make Whole Agreement, the consummation of the transactions
contemplated hereby and thereby and the performance of such Selling Holder’s
obligations hereunder and thereunder will not (and will not, with the passage of
time or the giving of notice or both) conflict with, or result in any breach,
violation of or default under, any provision of any governing instrument
applicable to such Selling Holder, or any applicable Contract or instrument to
which such Selling Holder is a party or by which such Selling Holder, such
Selling Holder’s Interest or such Selling Holder’s properties are bound, or any
permit, franchise, judgment, decree, statute, rule or regulation applicable to
such Selling Holder, such Selling Holder’s Interest or such Selling Holder’s
business or properties.

Section 4.5 Litigation. There are no actions pending before any Governmental
Authority, or to such Selling Holder’s Knowledge, threatened or reasonably
expected, against such Selling Holder, which questions or challenges the
validity of this Agreement or the Assignment, or any of the transactions
contemplated herein or therein.

Section 4.6 Securities Laws Representations.

(a) Such Selling Holder is acquiring the Shares for its own account with the
present intention of holding such Shares for purposes of investment and such
Selling Holder is not acquiring the Shares with a view to or for distribution
thereof, within the meaning of the Securities Act. Such Selling Holder is
acquiring the Shares for its own account as principal, not as a nominee or
agent, for investment purposes only, and not with a view to, or for, resale,
distribution or fractionalization thereof in whole or in part, and no other
Person has a direct or indirect beneficial interest in the restricted Shares
such Selling Holder is acquiring herein. Further, such Selling Holder does not
have any Contract with any Person to sell, transfer or grant participations to
such person or to any third person, with respect to the Shares such Selling
Holder is acquiring.

(b) At no time was such Selling Holder presented with or solicited by any
leaflet, newspaper or magazine article, radio or television advertisement, or
any other form of general advertising or solicited or invited to attend a
promotional meeting otherwise than in connection and concurrently with such
communicated offer.

(c) Such Selling Holder acknowledges and understands that the Shares have not
been registered under the Securities Act or qualified under the securities or
“blue sky” laws of applicable states in reliance upon exemptions from
registration or qualification thereunder and the Shares may not be sold,
offered, transferred, assigned, pledged, hypothecated or otherwise disposed of
or encumbered, except in compliance with the Securities Act and such rules and
regulations.

(d) Such Selling Holder has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Shares.

(e) Such Selling Holder has received and reviewed the SEC Documents and all
information regarding Purchaser and the Shares and has, to the extent it has
deemed necessary or advisable, reviewed the aforementioned information and this
Agreement with its investment, tax, accounting and legal advisors. Such Selling
Holder and such advisors have been given a reasonable opportunity to ask
questions of and to receive answers from Purchaser concerning the acquisition of
the Shares and have received or been given access to such information and
documents as such Selling Holder believes, in the context of the information
provided by Purchaser, are necessary to verify the accuracy of the information
furnished to such Selling Holder concerning the Shares as such Selling Holder or
such advisors have requested, it being understood and agreed that the foregoing
does not constitute a representation by such Selling Holder as to the
completeness or accuracy of information provided to it by Purchaser.

(f) Such Selling Holder is an accredited investor as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act.

(g) Such Selling Holder understands that the Purchaser is under no obligation to
register the Shares under the Securities Act, or to assist such Selling Holder
in complying with the Securities Act or the securities laws of any state of the
United States or of any foreign jurisdiction.

(h) Such Selling Holder understands that an investment in the Shares is a
speculative investment which involves a high degree of risk and the potential
loss of its entire investment.

(i) The Shares are “restricted” (as that term is defined in Rule 144 promulgated
under the Securities Act), and the certificate representing the Shares shall be
endorsed with one or more of the following restrictive legends, in addition to
any other legend required to be placed thereon by applicable federal or state
securities laws:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED OR UNLESS TRANSFERRED PURSUANT TO ANY VALID
EXEMPTION FROM REGISTRATION AVAILABLE UNDER SUCH ACT.”

 

Article V.
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB

Purchaser and Sub hereby represent and warrant to the Selling Holders as of the
Closing, except as set forth in the Disclosure Schedules delivered to the
Selling Holders dated as of the date of the Closing (the “Purchaser Disclosure
Schedules”), as follows:

For purposes of these representations and warranties (other than those in
Sections 5.2 and 5.3), the term “Purchaser” shall include Red Cat Propware, Inc.
a Nevada corporation (“Red Cat”), to the extent Red Cat is a subsidiary of, or
otherwise an Affiliate of Purchaser and a separate entity from Purchaser, unless
otherwise noted herein.

Section 5.1 Organization. Purchaser is a corporation duly formed and validly
existing and in good standing under the laws of the State of Nevada with full
power and authority to conduct its business as it is presently being conducted,
to own or lease, as applicable, and operate its assets and properties. Purchaser
is duly qualified or licensed to do business as a foreign entity in each state
of the United States in which it is required to be so qualified or licensed,
except as would not result in a material Liability to Purchaser. Sub is a
corporation duly formed and validly existing and in good standing under the laws
of the State of Ohio.

Section 5.2 Capitalization. The authorized capital stock of Purchaser consists
of 500,000,000 shares of common stock, of which 16,929,048 are issued and
outstanding; 2,200,000 shares of Series A Preferred Stock, of which 208,704 are
issued and outstanding; and 4,300,000 shares of Series B Preferred Stock, of
which 3,972,645 are issued and outstanding. The rights, privileges and
preferences of the capital stock of each class and series of the Purchaser are
as set forth in the Articles of Incorporation of Purchaser.

Section 5.3 Authority; Issuance of Purchaser Shares. Purchaser has all requisite
corporate power and authority to enter into this Agreement, the Make Whole
Agreement and the Promissory Note, and to consummate the transactions
contemplated hereby and thereby, including to issue the Shares at the Closing.
The execution and delivery by Purchaser of this Agreement, the Make Whole
Agreement and the Promissory Note, and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of Purchaser and no further action is required on the part of
Purchaser to authorize this Agreement, the Make Whole Agreement and the
Promissory Note, and the transactions contemplated hereby and thereby. This
Agreement, the Make Whole Agreement and the Promissory Note have been duly
executed and delivered by Purchaser and assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitutes the
valid and binding obligations of Purchaser enforceable against Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors’ rights and
general principles of equity. Sub has all requisite corporate power and
authority to enter into this Agreement, and to consummate the transactions
contemplated hereby. The execution and delivery by Sub of this Agreement, and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary limited liability company action on the part of Sub
and no further action is required on the part of Sub to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Sub and assuming the due authorization, execution and delivery
by the other parties hereto and thereto, constitutes the valid and binding
obligation of Sub enforceable against Sub in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors’ rights and general principles of equity. The Shares, when issued
in accordance with the terms of this Agreement, shall be validly issued, fully
paid and nonassessable, and free of restrictions on transfer other than
restrictions on transfer under applicable state and federal securities laws.
Assuming the accuracy of the representations of the Selling Holders in Section
4.6 of this Agreement, the Shares will be issued in compliance with all
applicable federal and state securities laws.

Section 5.4 Title to Assets. Other than as provided in the SEC Documents,
Purchaser has good and marketable title to all of its assets, free and clear of
all Liens. Sub has not conducted any business operations, owns no assets, is not
a party to any Contracts (other than this Agreement) and has no Liabilities.

Section 5.5 Intellectual Property.

(a) The SEC Documents contain all Intellectual Property of Purchaser
(collectively, the “Purchaser Intellectual Property”). Purchaser owns or is the
licensee of the Purchaser Intellectual Property.

(b) Purchaser has taken all commercially reasonable steps necessary to maintain
the secrecy of its confidential information comprising Purchaser Intellectual
Property.

(c) Except as otherwise provided in the SEC Documents, Purchaser has not
received written notice that the any Purchaser Intellectual Property as used in
the business of Purchaser infringes, misappropriates, or otherwise violates the
Intellectual Property rights of a third party, and Purchaser has not received
written notice of any facts that would indicate the foregoing. To Purchaser’s
Knowledge, no Person is infringing, misappropriating or otherwise violating any
Intellectual Property right of Purchaser.

(d) The SEC Documents contain all (i) patents, patent applications, registered
copyrights and copyright applications, registered trademarks and trademark
applications included in the Purchaser Intellectual Property (“Purchaser’s
Registered Intellectual Property”); and (ii) third parties that share rights to
Purchaser’s Registered Intellectual Property with Purchaser, including, without
limitation, joint owners and/or co-applicants.

(e) Purchaser has not granted any license or other right in the Purchaser
Intellectual Property to any third party other than as provided in the SEC
Documents.

Section 5.6 Contracts. The SEC Documents contain all material Contracts to which
Purchaser is a party or by which Purchaser or any of its assets are bound (each
a “Purchaser Contract’). Each Purchaser Contract is a legal, valid and binding
obligation of Purchaser, is in full force and effect, and is enforceable against
Purchaser, and, to the Knowledge of Purchaser, the other parties thereto.
Purchaser is not in breach, violation or default under any Purchaser Contract
and no event has occurred that, with notice or lapse of time or both, would
constitute such a breach, violation or default by Purchaser or, to the Knowledge
of Purchaser, the other parties thereto.

Section 5.7 Insurance. Purchaser has at all times maintained insurance in full
force and effect as required by law or under any agreement to which Purchaser is
or has been a party in connection with the operation of its business. There are
currently no claims pending against Purchaser under any insurance policies
currently in effect and covering any of the assets, business, operations,
employees, members, managers or officers of Purchaser as to which coverage has
been questioned, denied or disputed, and all premiums due and payable with
respect to the policies maintained by Purchaser have been paid to date. To
Purchaser’s Knowledge, there is no threatened termination of any such policies
or arrangements.

Section 5.8 Compliance with Law, Governing Documents and Other Agreements.

(a) Other than as provided in the SEC Documents, Purchaser has, in all material
respects, conducted its business in compliance with, and is not in material
default under or in material breach or material violation of (i) any applicable
statute, law, ordinance, decree, order, rule, or regulation of any Governmental
Authority or the provisions of any franchise, permit or license with respect to
the operation of its business, or (ii) any lease, Contract, instrument, license,
agreement or other document affecting its business or its assets.

(b) The execution and the delivery by Purchaser of this Agreement, the Make
Whole Agreement and the Promissory Note does not, and the consummation of the
transactions contemplated herein and therein and compliance with the provisions
hereof and thereof will not (i) conflict with, result in a breach of, constitute
a default (with or without notice or lapse of time, or both) under or violation
of, or result in the creation of any Lien pursuant to (A) any provision of the
organizational documents of Purchaser, or (B) any mortgage, indenture, lease,
Contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Purchaser or any of its assets, (ii) require on the part of
Purchaser any filing with, or any permit, authorization, consent or approval of,
any Governmental Authority, other than the filing of a Current Report on a Form
8-K to be filed with the SEC (iii) require any notice, consent or waiver under
any Purchaser Contract, (iv) result in the imposition of any Lien upon any of
Purchaser’s assets, (v) violate any order, writ, injunction, or decree
applicable to Purchaser, or (vi) violate any statute, rule, regulation or other
law applicable to Purchaser. The execution and the delivery by Sub of this
Agreement, does not, and the consummation of the transactions contemplated
herein and compliance with the provisions hereof will not (i) conflict with,
result in a breach of, constitute a default (with or without notice or lapse of
time, or both) under or violation of, or result in the creation of any Lien
pursuant to (A) any provision of the organizational documents of Sub, or (B) any
mortgage, indenture, lease, Contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Sub or any of its assets, (ii)
require on the part of Sub any filing with, or any permit, authorization,
consent or approval of, any Governmental Authority (iii) require any notice,
consent or waiver under any Contract, (iv) result in the imposition of any Lien
upon any of Sub’s assets, (v) violate any order, writ, injunction, or decree
applicable to Sub, or (vi) violate any statute, rule, regulation or other law
applicable to Sub.

(c) The SEC Documents list a complete and accurate list of all material Permits
that are used or held by Purchaser in connection with the operation of its
business (other than immaterial and customary building occupancy certificates).

Section 5.9 Broker’s Fees. Neither of Purchaser nor Sub has retained any broker,
finder or agent or agreed to pay any brokerage fees, finder’s fees or
commissions with respect to the transactions contemplated by this Agreement.

Section 5.10 Taxes. Purchaser has timely filed all Tax Returns required to be
filed by Purchaser on or before the Closing. All such Tax Returns were true,
correct and complete in all material respects when filed or made. All Taxes of
Purchaser which are due and payable (whether or not shown on any Tax Return)
have been paid in full by Purchaser. There are no Liens on any of Purchaser’s
assets that arose in connection with any failure (or alleged failure) to pay or
withhold any Tax. There are no pending audits, disputes, examinations, actions,
Proceedings, investigations, assessments or claims with respect to any Tax
Returns filed by Purchaser, and there have been no audits, disputes,
examinations, actions, Proceedings, investigations, assessments or claims with
respect to Purchaser or its business by or with any taxing authority.

Section 5.11 Financial Statements. The SEC Documents contain financial
statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated and fairly present in all material
respects the financial condition and operating results of Purchaser as of the
dates, and for the periods, indicated therein. Purchaser maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP.

Section 5.12 Litigation. Other than as provided in the SEC Documents, there are
no actions pending before any Governmental Authority, or to Purchaser’s
Knowledge, threatened or reasonably expected, against Purchaser. There is no
judgment, decree or order against Purchaser or any of its assets.

Section 5.13 No Undisclosed Liabilities. Purchaser has no Liabilities except as
provided for in the SEC Documents (a) to the extent specifically reflected and
accrued for or specifically reserved against in Purchaser’s most recent
Financial Statement, (b) for current Liabilities incurred subsequent to the most
recent Financial Statement in the ordinary course of business consistent with
past practice, and (c) Liabilities that would not reasonably be expected to be
material, individually or in the aggregate, to Purchaser.

Article VI.
COVENANTS

Section 6.1 Confidentiality. From and after the date hereof, Selling Holders and
Purchaser shall, and shall cause their respective agents, advisors, Affiliates
and representatives (collectively with Selling Holders and Purchaser, the
“Recipients”) to, keep confidential any information relating to the Parties,
this Agreement, and the transactions contemplated hereunder, except for any such
information that (i) is available to the public as of the Closing other than as
a result of a breach by a Party of the provisions herein, (ii) thereafter
becomes available to the public other than as a result of a disclosure by a
Recipient, or (iii) is or becomes available to a Recipient on a non-confidential
basis from a source that to such Recipient’s Knowledge is not prohibited from
disclosing such information to Recipient by a legal, contractual or fiduciary
obligation to any other Person. If a Recipient is required to disclose any such
information in response to a governmental order or as otherwise required by law,
it shall inform the other Party in writing of such request or obligation as soon
as possible after Recipient is informed of it and, if possible, before any
information is disclosed, so that a protective order or other appropriate remedy
may be obtained by the disclosing party. If such Recipient is obligated to make
such disclosure, it shall only make such disclosure to the extent to which it is
so obligated, but not further or otherwise.

Section 6.2 Public Disclosure. Without limiting any other provision of this
Agreement, neither the Selling Holders, on the one hand, nor Purchaser on the
other hand, nor any of the respective directors, officers or employees shall,
without the prior written consent of the other Party, disclose the terms of this
Agreement or the transactions contemplated hereby or make or issue any press
release or public statement (including communications with employees, customers,
suppliers and other business relations of Selling Holders) with respect to this
Agreement or the transactions contemplated hereby. Notwithstanding anything
contained herein to the contrary, Purchaser shall disclose this Agreement and
other public statements as required under applicable law, including without
limitation, the filing of a Current Report on Form 8-K.

Section 6.3 Tax Matters. Purchaser shall pay to Selling Holders any refund or
rebate received (whether by payment, credit, offset or otherwise) by it or any
of its Affiliates in respect of any Taxes of the Company that relate to any
Pre-Closing Tax Period, within ten (10) days after receipt of such refund or
rebate.

Section 6.4 Cooperation. Each Party shall, from time to time at the reasonable
request of the other Party or Parties hereto, and without further consideration,
execute and deliver such other instruments of sale, transfer, conveyance,
assignment, clarification and termination, and take such other action as the
Party making the request may reasonably require to effectuate the intentions of
the Parties and the transactions contemplated hereunder and related hereto.

Section 6.5 Tax Covenants.

(a) Tax Returns. Purchaser shall prepare and file, or cause to be prepared and
filed, all Tax Returns required to be filed by Company after the Closing Date
with respect to a Pre-Closing Tax Period (including, for the avoidance of doubt,
any Straddle Period). Any such Tax Return shall be prepared in a manner
consistent with past practice of Company (unless otherwise required by law). Any
such Tax Returns shall be submitted by Purchaser to CK, as representative of the
Selling Holders (together with schedules, statements and, to the extent
requested by Seller, supporting documentation) at least 30 days prior to the due
date (including extensions) of such Tax Return for CK’s review and approval. To
the extent the Parties cannot resolve any disputes with respect to any such Tax
Return, the dispute shall be referred to a nationally recognized accounting firm
mutually agreeable to the Parties, whose determination will be final. If the
accounting firm is unable to resolve any dispute before the due date for filing
such Tax Return, the Tax Return shall be filed as initially prepared by
Purchaser and then amended to reflect the accounting firm’s resolution. The
costs of the accounting firm shall be borne by the Party that loses the dispute.

(b) Straddle Period. In the case of Taxes that are payable with respect to a
Straddle Period, the portion of any such Taxes that are attributable to the
pre-Closing portion of such Straddle Period for purposes of this Agreement shall
be:

(i) in the case of Taxes (i) based upon, or related to, income, receipts,
profits, wages, capital or net worth, (ii) imposed in connection with the sale,
transfer or assignment of property, or (iii) required to be withheld, deemed
equal to the amount which would be payable if the taxable year ended with the
Closing Date; provided, however, that exemptions, allowances or deductions that
are calculated on an annual basis (such as the deductions for depreciation and
real estate taxes) will be apportioned between the pre-Closing portion and the
post-Closing portion of the Straddle Period in a manner consistent with the
methodology described in clause (ii) below; and

(ii) in the case of other Taxes, deemed to be the amount of such Taxes for the
entire period multiplied by a fraction the numerator of which is the number of
days in the period ending on the Closing Date and the denominator of which is
the number of days in the entire period.

(c) Pre-Closing Tax Periods. Purchaser and its Affiliates shall not permit or
cause the Company to (i) amend any Tax Returns filed by the Company with respect
to any Tax period beginning on or before the Closing Date, (ii) make or change
any Tax election of the Company that has retroactive effect to any Tax period
beginning on or before the Closing Date, (iii) file any private letter ruling or
similar request with respect to Taxes or Tax Returns of the Company for any Tax
period beginning on or before the Closing Date, or (iv) initiate any voluntary
disclosure or similar process with respect to the Company for any Tax period
beginning on or before the Closing Date, in each case without CK’s prior written
approval (such approval not to be unreasonably withheld, conditioned or
delayed).

(d) Extraordinary Transactions. Purchaser shall not and shall ensure that its
Affiliates do not cause to be made any extraordinary transaction or event on the
Closing Date (other than the transactions contemplated by this Agreement) that
would reasonably be expected to result in any increased Tax liability for which
the Selling Holders would be liable.

(e) Tax Treatment. The Parties intend for the Merger to qualify as a
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code. No
party shall take any position on any Tax Return or in any dispute, examination,
Proceeding, or assessment with respect to Taxes that is inconsistent with such
Tax treatment, unless otherwise required by applicable law.

(f) Continuity of Business Enterprise. Purchaser shall continue at least one
significant historic business line of the Company, or use at least a significant
portion of the Company’s historic business assets in a business, in each case
within the meaning of Section 1.368-1(d) of the Treasury Regulations.

(g) Continuity of Interest. Neither Purchaser nor any Person related to
Purchaser within the meaning of Section 1.368-1(e)(4) of the Treasury
Regulations intends to reacquire any of the Shares issued to the Selling Holders
in the Merger.

Section 6.6 Restrictions on Transfer.

(a) The Shares shall not be sold, pledged, or otherwise transferred, and the
Purchaser may determine not to recognize and may issue stop-transfer
instructions to its transfer agent with respect to any such sale, pledge, or
transfer, except upon the conditions specified in this Section 6.6, which
conditions are intended to ensure compliance with the provisions of the
Securities Act. Each Selling Holder will cause any proposed purchaser, pledgee,
or transferee of the Shares held by such Selling Holder to agree to take and
hold such securities subject to the provisions and upon the conditions specified
in this Section 6.6.

(b) The holder of the Shares, by acceptance of ownership thereof, agrees to
comply in all respects with the provisions of applicable securities laws and
this Section 6.6. Before any proposed sale, pledge, or transfer of any Shares,
unless there is in effect a registration statement under the Securities Act
covering the proposed transaction, holder thereof shall give notice to Purchaser
of such holder’s intention to effect such sale, pledge, or transfer. Each such
notice shall describe the manner and circumstances of the proposed sale, pledge,
or transfer in sufficient detail and, if reasonably requested by Purchaser,
shall be accompanied at such holder’s expense by either (i) a written opinion of
legal counsel acceptable to Purchaser who shall, and whose legal opinion shall,
be reasonably satisfactory to Purchaser, addressed to Purchaser, to the effect
that the proposed transaction may be effected without registration under the
Securities Act; (ii) a “no action” letter from the SEC to the effect that the
proposed sale, pledge, or transfer of such Shares without registration will not
result in a recommendation by the staff of the SEC that action be taken with
respect thereto; or (iii) any other evidence reasonably satisfactory to counsel
to Purchaser to the effect that the proposed sale, pledge, or transfer of the
Shares may be effected without registration under the Securities Act, whereupon
such holder shall be entitled to sell, pledge, or transfer such Shares in
accordance with the terms of the notice given by such holder to Purchaser.

Article VII.
INDEMNIFICATION

Section 7.1 Survival. All representations and warranties of Company and Selling
Holders contained in this Agreement shall survive the Closing until the date
that is twelve (12) months after the Closing; provided, that, the
representations and warranties of Company contained in Section 3.1, Section 3.2
and Section 3.3 and the representations and warranties of Selling Holders
contained in Section 4.1, Section 4.2 and Section 4.3 shall survive the Closing
until the expiration of the applicable statute of limitations. All
representations and warranties of Purchaser and Sub contained in this Agreement
shall survive the Closing. All covenants and agreements contained in this
Agreement shall survive the Closing until performed and satisfied in accordance
with its terms. An Indemnitee shall have no right to assert a claim after
expiration of the foregoing survival periods.

Section 7.2 Indemnification Obligations of Selling Holders. Selling Holders,
severally but not jointly (the “Seller Indemnitors”) shall indemnify and hold
harmless the Purchaser Indemnitees from, against, for and in respect of any and
all Losses asserted against, relating to, imposed upon or incurred by a
Purchaser Indemnitee by reason of, resulting from, based upon or arising out of
any of the following:

(a) the breach or inaccuracy of any representation or warranty of a Selling
Holder or Company contained in or made pursuant to this Agreement;

(b) the breach or nonperformance of any covenant or agreement of a Selling
Holder or Company contained in this Agreement;

(c) all Taxes of Company for any Pre-Closing Tax Period;

(d) Fraud by a Selling Holder or Company in connection with this Agreement and
the transactions contemplated hereby; and

(e) all claims, actions, suits, Proceedings, demands, assessments, judgments,
costs and expenses incident to any of the foregoing.

Section 7.3 Indemnification Obligations of Purchaser. Purchaser shall indemnify
and hold harmless the Seller Indemnitees from, against, for and in respect of
any and all Losses asserted against, relating to, imposed upon or incurred by a
Seller Indemnitee by reason of, resulting from, based upon or arising out of any
of the following:

(a) the breach or inaccuracy of any representation or warranty of Purchaser or
Sub contained in or made pursuant to this Agreement;

(b) the breach or nonperformance of any covenant or agreement of Purchaser or
Sub contained in this Agreement, the Make Whole Agreement or the Promissory
Note;

(c) Fraud by Purchaser, Sub or any other of Purchaser’s Affiliates in connection
with this Agreement and the transactions contemplated hereby; and

(d) all claims, actions, suits, Proceedings, demands, assessments, judgments,
costs and expenses incident to any of the foregoing.

Section 7.4 Limitations.

(a) Liability Cap. Subject to Section 7.4(b), the maximum aggregate amount that
the Purchaser Indemnitees are entitled to recover from Seller Indemnitors under
Section 7.2(a) is an amount equal to seven- and one-half percent (7.5%) of the
Purchase Price.

(b) Applicability Liability Cap. The limitations set forth in Sections 7.4(a)
shall not apply in the case of Fraud or to the representations and warranties of
Company in Section 3.1, Section 3.2 and Section 3.3 and the representations and
warranties of Selling Holders contained in Section 4.1, Section 4.2 and Section
4.3, in each which case, the maximum aggregate amount that the Purchaser
Indemnitees are entitled to recover from Seller Indemnitors is an amount equal
to the Purchase Price. Subject to the other limitations set forth herein, each
Seller Indemnitor shall be liable only for (i) breaches of or inaccuracies in
his or its own representations and warranties and breaches or nonperformance of
his or its own covenants (and not those of any other Selling Holder); (ii)
breaches of or inaccuracies in the Company’s representations and warranties and
breaches or nonperformance of Company covenants; (iii) his or its own Fraud or
Fraud of the Company (and not Fraud of any other Selling Holder); (iv) Taxes of
the Company for any Pre-Closing Tax Period.

(c) Exclusive Remedy. Claims for indemnification, compensation and reimbursement
brought in accordance with and subject to this Article VII shall be the sole and
exclusive remedy of any Indemnitee for monetary claims from and after the
Closing with respect to breaches of this Agreement by the applicable party.
Without limiting the generality of the foregoing, nothing contained in this
Agreement shall limit the rights of any Indemnitee to seek or obtain injunctive
relief, including specific performance, or any other equitable remedy to which
such Indemnitee is otherwise entitled, and attorney’s fees and costs. The
parties acknowledge that, other than as expressly provided in this Agreement,
(i) no current or former member, manager, officer, employee, Affiliate or
advisor of Company or Selling Holders has made or is making any representations
or warranties whatsoever regarding Company or Selling Holders or the subject
matter of this Agreement, express or implied, and (ii) except as expressly
provided in Article III and Article IV, the Company and Selling Holders have not
made and are not making, and Purchaser is not relying upon, any representations
or warranties whatsoever regarding the Company, the Selling Holders or the
subject matter of this Agreement, express or implied.

(d) Tax Benefits. The amount of any claim that any Indemnitee may recover
pursuant to this Article VII shall be reduced by an amount equal to any tax
benefit actually realized by way of a reduction in cash taxes payable as a
result of such claim by such Indemnitee within or for the tax year in which such
claim occurred.

(e) Insurance. The amount of any claim that any Indemnitee may recover pursuant
to this Article VII shall be reduced by an amount equal to any insurance
proceeds received by such Indemnitee resulting from any insurance policy
relating to such claim.

Section 7.5 Indemnification Procedure. Whenever any claim shall arise for
indemnification hereunder, the Indemnitee shall promptly provide written notice
of such claim to the indemnifying Party (the “Indemnifying Party”). In
connection with any claim giving rise to indemnity hereunder resulting from or
arising out of any action by a Person who is not a party to this Agreement, the
Indemnifying Party, at its sole cost and expense and upon written notice to the
Indemnitee, may assume the defense of any such action with counsel reasonably
satisfactory to the Indemnitee; provided, however, that the Indemnifying Party
shall not be entitled to defend a third party claim that (a) involves an actual
conflict of interest, (b) seeks an injunction or other equitable relief against
an Indemnitee or (c) is asserted by a Person who is a customer, supplier,
partner or reseller of the Indemnitee or any Affiliate thereof. The Indemnitee
shall be entitled to participate in the defense of any such action, with its
counsel and at its own cost and expense. If the Indemnifying Party does not
assume the defense of any such action, the Indemnitee may, but shall not be
obligated to, defend against such action in such manner as it may deem
appropriate, including settling such action, after giving notice of it to the
Indemnifying Party, on such terms as the Indemnitee may deem appropriate and no
action taken by the Indemnitee in accordance with such defense and settlement
shall relieve the Indemnifying Party of its indemnification obligations herein
provided with respect to any damages resulting therefrom. The Indemnifying Party
shall not settle any action without the Indemnitee’s prior written consent
(which consent may be withheld in the Indemnitee’s sole discretion).

Section 7.6 Tax Treatment. The Parties shall treat for Tax purposes any
indemnity payment made pursuant to this Agreement as an adjustment to the total
purchase price, unless otherwise required by applicable law.

Section 7.7 No Duplication of Recovery. Any claim for which any Indemnitee is
entitled to indemnification hereunder shall be determined without duplication of
recovery by reason of the state of facts giving rise to such claim constituting
a breach of more than one representation, warranty, covenant or agreement.

Section 7.8 Further Limitation on Indemnification. The Purchaser Indemnitors’
rights to indemnification, payment, reimbursement or any other remedy based upon
a breach of or inaccuracy in any representation, warranty, covenant, agreement
or obligation contained in this Agreement will be deemed to have been waived to
the extent that Selling Holders can reasonably demonstrate that Purchaser had
Knowledge of such breach or inaccuracy prior to the Closing.

Section 7.9 Other Matters. Notwithstanding anything in this Agreement to the
contrary, no party will be entitled to indemnification or reimbursement under
any provision of this Agreement for any amount to the extent such party or its
Affiliate has been indemnified or reimbursed for such amount under any other
provision of this Agreement, or any other document executed in connection with
this Agreement

Article VIII.
MISCELLANEOUS

Section 8.1 Assignment; Binding Agreement.

(a) Neither this Agreement nor any of the rights or obligations hereunder may be
assigned by Selling Holders or Purchaser without the prior written consent of
the other, except that Purchaser can assign this Agreement to a wholly-owned
subsidiary.

(b) This Agreement shall be binding upon and shall inure to the benefit of the
Parties and to their respective successors and permitted assigns and heirs and
representatives.

Section 8.2 Entire Agreement, Modification and Waivers. This Agreement, together
with any agreement related to the transactions contemplated hereby and the other
documents and instruments referred to herein and all exhibits and schedules
hereto, constitutes the entire agreement among the Parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties. This
Agreement may be supplemented, modified or amended by the written agreement of
Purchaser, Company and Selling Holders. No supplement, modification or other
amendment or waiver of this Agreement shall be binding unless executed in
writing by the Party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.

Section 8.3 Severability. If any provision of this Agreement is deemed or held
to be illegal, invalid or unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the extent it is deemed to be
illegal, invalid or unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any provision
of this Agreement is deemed or held to be illegal, invalid or unenforceable the
Parties agree to replace such illegal, invalid or unenforceable provision with a
provision that is legal, valid and enforceable that achieves the original intent
of the Parties as closely as possible. Further, if any provision contained in
this Agreement is reformed or rewritten by any judicial body of competent
jurisdiction, such provision, as so reformed or rewritten, shall be binding upon
all Parties.

Section 8.4 Counterparts; Electronic Signatures. This Agreement may be executed
in two or more identical counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument. This
Agreement, any and all agreements and instruments executed and delivered in
accordance herewith, along with any amendments hereto and thereto, to the extent
signed and delivered by means of email or other electronic transmission, shall
be treated in all manner and respects and for all purposes as an original
signature, agreement or instrument and shall be considered to have the same
binding legal effect as if it were the original signed version thereof delivered
in Person.

Section 8.5 Headings; Interpretation. In this Agreement, unless the context
otherwise requires, references: (a) to the recitals, articles, sections,
exhibits or schedules are to a Recital, Article or Section of, or Exhibit or
Schedule to, this Agreement; (b) to any agreement (including this Agreement),
Contract, statute, regulation or law are to the agreement, Contract, statute,
regulation or law as amended, modified, supplemented or replaced from time to
time, and to any Section of any statute or law are to any successor to the
section; (c) to any Governmental Authority include any successor to that
Governmental Authority and (d) to this Agreement are to this Agreement and the
exhibits and schedules to it, taken as a whole. The headings contained herein
are for reference purposes only and do not limit or otherwise affect any of the
provisions of this Agreement. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”. Whenever the words “herein” or “hereunder” are
used in this Agreement, they shall be deemed to refer to this Agreement as a
whole and not to any specific Section, unless otherwise indicated. The terms
defined in the singular shall have a comparable meaning when used in the plural,
and vice versa, and words denoting any gender include all genders. The terms
“dollars” and “$” shall mean dollars of the United States of America.

Section 8.6 Governing Law. This Agreement shall be construed, interpreted and
the rights of the Parties determined in accordance with the laws of the State of
Ohio (without reference to any choice of law rules that would require the
application of the laws of any other jurisdiction).

Section 8.7 Payment of Fees and Expenses. Except as explicitly provided for
herein, the Company and the Selling Holders, on the one hand, and Purchaser, on
the other hand, shall be responsible for their own fees and expenses incurred in
connection with the negotiation, preparation and execution of this Agreement and
the consummation of the transaction contemplated hereby.

Section 8.8 Notices. All notices, requests, demands and other communications
under this Agreement will be in writing and will be deemed to have been duly
given (a) on the date of service if served personally on the Party to whom
notice is to be given, (b) on the date sent by email (with confirmation of
transmission) or (c) one Business Day after delivery to a reputable overnight
delivery service for next Business Day delivery. If the day on which a notice or
other communication is deemed given under this Section 8.8 is not a Business
Day, then such notice or other communication will instead be deemed given on the
next Business Day. Such notices, requests, demands and other communications will
be addressed to the Parties as follows:

If to Purchaser:

 

Jeffrey M. Thompson

Red Cat Holdings, Inc.

Cobian’s Plaza

1607 Avenida Juan Ponce de Leon

San Juan, PR 00909

Email: jeff@redcatpropware.com

 

With copy (which shall not constitute notice) to:

 

The Crone Law Group, P.C.

500 Fifth Avenue, Suite 938

New York, New York 10110

Attn: Eric Mendelson, Esq.

Email: emendelson@cronelawgroup.com

 

If to Selling Holders:

 

At the address or e-mail set forth on the signature page hereto

 

With a copy (which shall not constitute notice) to:

 

Holland & Hart LLP

222 Main St #2200, Salt Lake City, UT 84101

Attention: Jeffrey P. Steele, Esq.

Email: jpsteele@hollandhart.com

 

Any Party may, from time to time, designate any other address to which any such
notice to such Party shall be sent. Any such notice shall be deemed to have been
delivered upon receipt.

Section 8.9 Schedules. The Schedules and the Exhibits referenced in this
Agreement are a material part hereof and shall be treated as if fully
incorporated into the body of the Agreement.

Section 8.10 No Third-Party Beneficiaries. Nothing expressed or referred to in
this Agreement will be construed to give any Person other than the Parties (and
their successors and assigns) any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement.

Section 8.11 Submission to Jurisdiction; Waivers; Consent to Service of Process.
Except as otherwise provided in this Agreement, each Party irrevocably agrees
that any legal action or Proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by another
Party or its successors or assigns shall be brought exclusively in the state and
federal courts of the State of Ohio and each of the Parties hereby (x)
irrevocably submits with regard to any such action or Proceeding for itself and
in respect to its property, generally and unconditionally, to the exclusive
personal jurisdiction of the aforesaid courts in the event any dispute arises
out of this Agreement or any transaction contemplated hereby, (y) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (z) agrees that it will not bring any
action relating to this Agreement or any transaction contemplated hereby in any
court other than the aforesaid courts. Any service of process to be made in such
action or Proceeding may be made by delivery of process in accordance with the
notice provisions contained in Section 8.8. Each of the Parties hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or Proceeding with respect to this
Agreement, (a) the defense of sovereign immunity, (b) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to serve process in accordance with this Section 8.11,
(c) that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (d) to the fullest extent
permitted by applicable laws and regulations that (i) the action or Proceeding
in any such court is brought in an inconvenient forum, (ii) the venue of such
action or Proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.

Section 8.12 Other Remedies. Any and all remedies expressly conferred under this
Agreement upon a Party will be deemed cumulative with, and not exclusive of, any
other remedy conferred by law or equity upon such Party, and the exercise by a
Party of any one remedy will not preclude the exercise of any other remedy.

Section 8.13 No Strict Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. If an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement.

Section 8.14 Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE REGULATIONS, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT 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 THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION

Section 8.15 Waiver of Conflict. Purchaser and Company agree that Purchaser
shall not, and shall cause Company not to, seek to have Holland & Hart LLP
(“H&H”) disqualified from representing the Selling Holders or any of his or its
Affiliates in connection with any dispute that may arise between the Selling
Holders or any of his or its Affiliates, on the one hand, and the Purchaser or
any of its Affiliates, on the other, in connection with this Agreement or the
transactions contemplated hereby. In the event of any such dispute, the Selling
Holders and/or any of his or its Affiliates shall have the right to decide
whether or not to waive the attorney-client privilege (the “Retained Privilege”)
that may apply to any communications between the Company and H&H that occurred
before the Closing; provided, that nothing in this Section 8.15 shall be
construed as a waiver of any attorney-client privilege. Nothing in this Section
8.15 shall be construed as a waiver of any privilege controlled by Purchaser
after the Closing (which for the avoidance of doubt excludes the Retained
Privilege), nor shall anything herein be construed to permit H&H to communicate
with the Selling Holders or any of his or its Affiliates after the Closing any
information subject to a privilege controlled by Purchaser or the Company (which
for the avoidance of doubt excludes the Retained Privilege). Notwithstanding any
other provision herein, this Section 8.15 shall be irrevocable, and no term of
this Section 8.15 may be amended, waived or modified, without the prior written
consent of the Selling Holders and H&H.

[Remainder of page intentionally left blank.]

 

 

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement of Merger or caused
this Agreement to be duly executed on their respective behalf, by their
respective duly authorized officers, all as of the day and year first above
written.

PURCHASER:

 

Red Cat Holdings, Inc.

 

By: /s/ Jeffrey Thompson                      

Name: Jeffrey Thompson

Title: Chief Executive Officer

 

SUB:

 

ROTOR RIOT ACQUISITION CORP

 

By: /s/ Jeffrey Thompson                       

Name: Jeffrey Thompson

Title: President

 

 

 

SELLING HOLDERS:

 

Brains Riding in Tanks, LLC

 

By: /s/ Chad Kapper                              

Name: Chad Kapper                              

Title: CEO                                              

Address: ________________________

_______________________________ 

E-Mail: _________________________

 

 

 

/s/ Tyler Brennan                                     

Tyler Brennan

Address: ________________________

_______________________________ 

E-Mail: _________________________

 

 

/s/ Andrew Camden                                

Andrew Camden

Address: ________________________

_______________________________ 

E-Mail: _________________________

 

 

COMPANY:

 

Rotor Riot, LLC

 

By: /s/ Chad Kapper                              

Name: Chad Kapper                              

Title: CEO