Exhibit 10.1

 

 

SHARE PURCHASE AGREEMENT

This Share Purchase Agreement (this “Agreement”) is entered into as of September
30, 2020, by and among Fat Shark Holdings, LTD., a Cayman Islands Exempted
Company (“Holdings” or the “Company”), Fat Shark Tech. LTD., a Cayman Islands
Exempted Company (“Trading”), and Fat Shark Technology SEZC, a Cayman Island
Special Economic Zone Company (“Tech”), and together with the Company and
Holdings, the “Companies”), Greg French, the sole shareholder of Holdings
(“Seller”), and Red Cat Holdings, Inc., a Nevada corporation (“Parent”), and FS
Acquisition, Corp., a Nevada corporation and wholly-owned subsidiary of Parent
(the “Buyer”).

Preliminary Statements

A.Holdings is the parent company of Tech and Trading.

B.Trading produces niche first person view (“FPV”) headsets and other products
for the drone market segment worldwide.

C.Tech designs and develops new FPV products as well as provides management
services to Holdings and Trading. It is located in the Special Economic Zone of
the Cayman Islands jurisdiction.

D.Seller owns all of the issued and outstanding shares of Holdings which owns
all of the issued and outstanding shares of each of Trading and Tech, and Seller
desires to sell to Buyer, and Buyer desires to purchase, on the terms and
subject to the conditions set forth in this Agreement, all of such shares.

Agreement

NOW, THEREFORE, in consideration of the preliminary statements and the
respective mutual covenants, representations and warranties contained in this
Agreement, the parties agree as set forth below.

ARTICLE 1

Definitions

In addition to terms defined elsewhere in this Agreement, the following terms
when used in this Agreement shall have the meanings indicated below:

 “Affiliate” of a specified Person means a Person who (at the time when the
determination is to be made) directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
the specified Person. As used in the foregoing sentence, the term “control”
(including, with correlative meaning, the terms “controlling,” “controlled by”
and “under common control with”) means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise, or such other relationships as, in fact, constitutes actual control.

“Aggregate Closing Date Working Capital” is defined in Section 2.3(b).

“Agreed Parent Share Price” is defined in Section 2.2(a).

“Agreed Aggregate Working Capital” is defined in Section 5.27.

“Agreement” is defined in the Preamble and includes all exhibits and schedules
referred to herein.

“Applicable Laws” means, in relation to any Person or Persons, applicable
Securities Laws and all other statutes, regulations, statutory rules, orders,
by-laws, codes, ordinances, decrees, the terms and conditions of any grant of
approval, permission, authority or license, or any judgment, order, decision,
ruling, award, policy or guideline, of any Governmental Entity that are
applicable to such person or persons or its or their business, undertaking,
property or securities and emanate from a Governmental Entity, having
jurisdiction over such person or persons or its or their business, undertaking,
property or securities;

“Approved Exchange” means, with respect to the Stock Consideration, any major
securities exchange, the NASDAQ or any other exchange or quotation system
maintained by OTC Markets or if not available, any quotation system or service
providing regularly published securities prices designated by Parent.

“Basket Amount” is defined in Section 7.5(b).

“Buyer” is defined in the Preamble.

“Claim” is defined in Section 7.4(d)(i).

“Closing” is defined in Section 2.1(b).

“Closing Date” means October 30, 2020 or such other closing date as may be
mutually agreed to among the parties in writing.

“Closing Date Balance Sheets” is defined in Section 2.3(b).

“Closing Date Working Capital” is defined in Section 2.3(b).

“Closing Shares” is defined in Section 2.2(a)(ii).

“Closing Trial Balance” is defined in Section 2.3(a).

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” and “Companies” are defined in the Preamble.

“Contracts” is defined in Section 5.19(a).

“Corporate Minute Books” is defined in Section 5.6.

“Costs” is defined in Section 10.7.

“Disclosure Schedules” is defined in the Article 5.

“Disposition” is defined in Section 6.4(b).

“Disputed Amounts” is defined in Section 2.3(c).

“Dr. Goggle Business” is defined in Section 9.1(l).

“Environmental Laws” means any applicable statute, law, ordinance, regulation,
rule, code or order and any enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, relating to pollution or protection of the environment or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.

“Escrow” means all the Escrow Shares or other funds or property deposited with
the Escrow Agent under the Escrow Agreement.

“Escrow Agent” means the escrow agent specified in the Escrow Agreement.

“Escrow Agreement” means the escrow agreement to be entered into as of the
Closing Date among the Seller, Buyer and the escrow agent, in substantially the
form attached as Exhibit A.

“Escrow Shares” is defined in Section 2.2(a)(i).

“Estimated Working Capital” is defined in Section 2.3(a).

“Estimated Working Capital Deficiency Amount” is defined in Section 2.3(a).

“Estimated Working Capital Excess Amount” is defined in Section 2.3(a).

“Estimated Working Capital Statement” is defined in Section 2.3(a).

“Final Working Capital” is defined in Section 2.3(b).

“Final Working Capital Deficiency Amount” is defined in Section 2.3(b).

“Final Working Capital Excess Amount” is defined in Section 2.3(b).

“Financial Statements” is defined in Section 5.9.

“GAAP” means U.S. generally accepted accounting principles, consistently
applied.

“Hazardous Materials” means (a) any petroleum, petroleum products, by-products
or breakdown products, radioactive materials, asbestos-containing materials or
polychlorinated byphenyls or (b) any chemical, material or substance defined or
regulated as toxic or hazardous or as a pollutant or contaminant or waste under
any applicable Environmental Laws.

“Holdings” is defined in the Preamble.

“Indemnified Losses” is defined in Section 7.4(a)(i)(A).

“Indemnified Party” is defined in Section 7.4(c).

“Indemnifying Party” is defined in Section 7.4(c).

“Independent Accounting Firm” is defined in Section 2.3(c).

“Initial Leak Out Shares” is defined in Section 6.4(b)

“Intellectual Property” means any or all of the following owned, licensed, used,
controlled by or residing in either Company prior to the Closing Date: (a) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof; (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith; (c) all
copyrightable works, all copyrights in both published and unpublished works, and
all applications, registrations, and renewals in connection therewith; (d) all
Know-How; (e) all computer programs and software (including data and source and
object codes and related documentation); (f) all other property rights and all
licenses and sublicenses granted by or to either Company that relate to any of
the foregoing; and (g) all copies and tangible embodiments thereof (in whatever
form or medium).

“IRS” means the Internal Revenue Service.

“Know-How” means all trade secrets and confidential business information
(including, without limitation, databases, ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, plans, drawings, specifications,
blueprints, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals).

“Lock-Up Period” is defined in Section 6.4(b).

“Knowledge” means, with respect to any representation or warranty or other
statement in this Agreement qualified by knowledge, the actual knowledge,
information or belief of any party as to the matters that are the subject of
such representation, warranty or other statement, or any knowledge, information,
or belief that such party should have after a due and diligent investigation.
Where reference is made to the knowledge of the Seller or either Company, such
reference shall be deemed to include the directors, officers and managerial
employees of such Company as well as the Seller, all of whom shall be deemed to
have conducted the investigation required by this definition.

“Law” means any applicable law, statute, ordinance, rule, regulation, order,
writ, judgment or decree.

“Liabilities” means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated and whether due or to become due).

“Liens” means any liens, claims, charges, rights, pledges, security interests,
mortgages, options, title defects or other encumbrances, restrictions or
limitations of any nature whatsoever.

“Material Adverse Effect” means any change in or effect on the business of
either Company that is, or could reasonably be expected to be, materially
adverse to the business, assets (including intangible assets), liabilities
(contingent or otherwise), condition (financial or otherwise), prospects or
results of operations of such Company.

“Noncompete Period” is defined in Section 6.1(a).

“Parent Common Stock” means the common stock of Parent, par value US$0.001 per
share.

“Organizational Documents” means any and all documents pursuant to which an
entity is organized and/or operates under the applicable laws of its
jurisdiction.

“Permits” is defined in Section 5.15.

“Person” means any natural person, corporation, company, unincorporated
organization, partnership, association, joint stock company, joint venture,
trust or government, or any agency or political subdivision of any government,
or any other entity.

“Personally Identifiable Information” means any information that alone or in
combination with other information held by the Companies, as applicable, can be
used to specifically identify a person’s name, street address, telephone number,
e-mail address, photograph, social insurance number, driver’s license number,
passport number, credit or debit card number or customer or financial account
number or any similar information that is treated as “Personally Identifiable
Information” under any Applicable Laws.

“Plans” is defined in Section 5.17(c).

“Product Data” means all manufacturing information and data, and all submissions
and correspondence with or to any governmental or regulatory authority regarding
any Product, all as any of the above may be in the possession or control of
either Company or Seller.

“Product Inventory” all inventory owned as of the Closing Date by each Company
(including sample inventory) thereof of finished Product or works in progress or
materials used in the manufacture of finished Product, whether held at a
location or facility of either Company (or of any other Person on behalf of
either Company) or in transit to or from either Company.

“Products” is defined in Section 5.24(a).

“Purchase Price” is defined in Section 2.2(a).

“Purchased Assets” is defined in Section 2.5(a).

“Purchased Shares” is defined in Section 5.7.

“Qualified Financing” means a private placement or public offering of debt,
equity, or convertible securities in one or more transactions whereby on a
cumulative basis on or prior to the three (3) year anniversary of the Closing
Date, a minimum of $6.0 million gross proceeds of Parent securities are sold (at
which Seller shall have an opportunity to sell up to $1,000,000 of Seller’s
Stock Consideration in such offering).

“Real Property” is defined in Section 5.14(a).

“Registration Rights” is defined in Section 6.4(d).

“Regulatory Approvals” means the applications or approvals of the US Federal
Aviation Authority (“FAA”) and equivalent foreign agencies or authorities
charged with regulating the manufacture, design or operation of unmanned aerial
vehicles (“UAV”) without a human pilot, which utilize a ground based controller
and a system of communications between the two, generally referred to as drones,
and all other Permits required by the FAA or such agencies or authorities to
conduct the business as it is currently conducted.

“SEC” is defined in Section 3.9.

“SEC Documents” is defined in Section 3.9.

“Secured Note” is defined in Section 8.6

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

“Seller” is defined in the Preamble.

“Seller’s Percentage” is defined in Section 2.2(b)(iii).

“Serious Adverse Event” means, with respect to any Product, any Adverse
Experience that results in any of the following outcomes: death, a
life-threatening Adverse Experience, hospitalization, a persistent or
significant disability or incapacity, or any other effect that may otherwise
jeopardize the business as it is currently conducted or may require intervention
to prevent one of the aforementioned outcomes.

“Stock Consideration” is defined in Section 2.2(a)(ii).

“Subsidiary” of any Person means any Person, whether or not capitalized, in
which such Person owns, directly or indirectly, an equity interest of 50% or
more, or any Person which may be controlled, directly or indirectly, by such
Person, whether through the ownership of voting securities, by contract, or
otherwise.

“Tax(es)” means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, all gross receipts, ad valorem, value added, excise, natural
resources, severance, stamp, occupation, premium, windfall profit, assets,
minimum income, environmental, customs duties, fees, real property, personal
property, capital stock, social security obligations or contributions,
unemployment, disability, payroll, license, employee or other withholding, or
other tax or governmental charge, of any kind whatsoever, including any
interest, penalties or additions to tax or additional amounts in respect of the
foregoing, or credit or reimbursement in respect of the foregoing; the foregoing
shall include any transferee or secondary liability for a Tax and any liability
assumed by agreement or arising as a result of being (or ceasing to be) a member
of any affiliated group (or being included, or required to be included, in any
Tax Return relating thereto).

“Tax Returns” means all material Federal, state, foreign and local tax reports,
returns, information returns, declarations, statements, and other documents
relating to Taxes.

“Tech” is defined in the Preamble.

“Transaction Documents” means this Agreement, the Escrow Agreement, the Secured
Note and all other documents to be executed and delivered by either party
pursuant to or in connection with this Agreement and consummation of the
transactions contemplated hereby.

“Transfer Taxes” is defined in Section 6.6(g).

“Trading” is defined in the Preamble.

“VWAP” means the average of the Daily VWAP for the thirty trading days ending on
and including the closing date of the Transaction, (such period, the “30 Day
VWAP Period”). “Daily VWAP” means, for any trading day, the per share
volume-weighted average price of Buyer’s common stock as displayed on Bloomberg,
L.P. (or its equivalent successor if such service is not available) in respect
of the period from the scheduled open of trading until the scheduled close of
trading of the primary trading session on such trading day on the Nasdaq Capital
Market or, if unavailable, on the OTC Markets (or if unavailable on either
exchange, the Daily VWAP shall be the fair market value of Buyer’s common stock
on such date as determined by Buyer’s board of directors in good faith) but not
less than $1.00 nor greater than $1.50 per share. The Daily VWAP will be
determined without regard to after-hours trading or any other trading outside of
the regular trading session trading hours.

“Working Capital” means current assets of a Company (including without
limitation, cash, cash equivalents, accounts receivable, inventory and prepaid
expense) less current liabilities of such Company, determined in accordance with
GAAP. In addition, the amount of Working Capital shall be reduced by the amount
of any losses associated with the wind-down and termination of the Dr. Goggle
Business.

“Working Capital Calculations” is defined in Section 2.3(b).

ARTICLE 2

Purchase of Securities; Consideration

2.1      Securities to be Purchased; Closing.

(a)            Subject to the terms and conditions set forth herein, on the
Closing Date, Seller shall sell and transfer to Buyer, and Buyer shall purchase
from Seller, all of Seller’s right, title and interest in and to such Seller’s
Seller Percentage of the Purchased Shares of Holdings (which owns all of the
issued and outstanding Purchased Shares of Trading and Tech), free and clear of
all Liens, which Purchased Shares shall in the aggregate represent all of the
issued and outstanding shares of Holdings as of the Closing Date.

(b)           Subject to the terms and conditions of this Agreement, the sale
and purchase of the Purchased Shares contemplated hereby and the transfers and
deliveries to be made pursuant to this Agreement shall take place at a closing
at the offices of Buyer at 607 Ponce de Leon Avenue, Suite 407, San Juan, Puerto
Rico 85251 (the “Closing”) at 12:00 p.m. local time, on the Closing Date, or at
such other place as may be agreed to by the parties in writing. All proceedings
to be taken and all documents to be executed at the Closing shall be deemed to
have been taken, delivered and executed simultaneously, and no proceeding shall
be deemed taken nor documents deemed executed or delivered until all have been
taken, delivered and executed.

(c)            At the Closing, the Seller shall deliver or cause to be delivered
to Buyer (i) executed share transfer instruments relating to One Hundred Percent
(100%) of the Purchased Shares of Holdings, sufficient to convey to Buyer good
title to the Purchased Shares of Holdings, free and clear of any and all claims
or Liens of any nature whatsoever and together with all accrued benefits and
rights attaching thereto, (ii) such other documents as may be specified, or
required to satisfy the conditions set forth, in Sections 9.1 and 9.2, and (iii)
the Seller shall cause a board meeting of Holdings approving the transfer of the
Purchased Shares, the updating of the share register of Holdings, appointment of
representatives of Parent to such offices and as directors of Holdings, Tech and
Trade as requested by Parent, with such authorizations (banking and otherwise)
as required by Parent, and any other ancillary matters.

2.2      Closing Consideration.

(a)            In consideration of the sale, assignment, transfer and delivery
of the Purchased Shares by the Seller to Buyer, at the Closing, Parent shall on
behalf of Buyer deliver Seven Million Dollars (US$7,000,000), as adjusted in
accordance with Section 2.3 below (the “Purchase Price”) payable Five Million
Seven Hundred Fifty Thousand Dollars ($5,750,000) in shares of Parent Common
Stock (the “Stock Consideration”) at an agreed upon value based upon the VWAP
(the “Agreed Parent Share Price”), a senior secured promissory note of Holdings
(the “Secured Note”) in the amount of One Million Dollars ($1,000,000), secured
by the assets of Holdings (subject to adjustment as provided in section 2.3(c)
for the amount of working capital balance, if any, on the Closing Date) (the
“Final Working Capital”) and Two Hundred Fifty Thousand Dollars ($250,000) cash
(the “Cash Purchase Amount”, and together with the Stock Consideration and
Secured Note, the “Purchase Price”) to the Seller as follows:

(i)           delivery to the Seller of an aggregate of (A) the Stock
Consideration less the Escrow Shares minus (B) the number of shares equal to the
Estimated Working Capital Deficiency Amount divided by the Agreed Parent Share
Price (the “Closing Shares”); (C) the Secured Note plus (D) the value equal to
the Estimated Working Capital Excess Amount and (E) the Cash Purchase Amount;
and

(ii)           delivery to the Escrow Agent of Fifteen (15%) percent of the
Stock Consideration (the “Escrow Shares”).

(b)           One Hundred (100%) Percent (the “Seller Percentage”) of the
Closing Shares and the Escrow Shares (upon release under the terms of the Escrow
Agreement) shall be distributed to Seller.

(c)            In the event of a Qualified Financing, twenty-five (25%) percent
of the net proceeds thereof shall be applied to repayment of principal and
interest due under the Secured Note unless Seller shall have previously sold at
least one-million ($1,000,000) of Stock Consideration on or prior to the date of
closing of the Qualified Financing.

2.3      Post Closing Audit; Purchase Price Adjustment; Dispute.

(a)            No more than ten and no later than three days prior to the
Closing Date, the Seller shall cause each Company to prepare and deliver to
Parent and the Buyer (i) an unaudited preliminary balance sheet of such Company
as of the Closing Date and a preliminary unaudited profit and loss statement for
the period ending on the Closing Date, in accordance GAAP (collectively, the
“Closing Trial Balance”), (ii) a statement (the “Estimated Working Capital
Statement”) setting forth the Seller’s reasonable and good faith estimate of the
Closing Date Working Capital and the components and calculations thereof in
reasonable detail, by reference to the foregoing Closing Trial Balance and (iii)
a statement setting forth the calculation of the amount by which the estimated
Closing Date Working Capital as shown on the Estimated Working Capital Statement
(the “Estimated Working Capital”) either exceeds the Agreed Aggregate Working
Capital (such amount, the “Estimated Working Capital Excess Amount”) or is less
than the Agreed Aggregate Working Capital (such amount, the “Estimated Working
Capital Deficiency Amount”).

(b)           Within sixty (60) days after the Closing Date or as soon
thereafter as is reasonably practical using commercially reasonable efforts,
Buyer will prepare and deliver to the Seller (i) closing balance sheets (the
“Closing Date Balance Sheets”) of each of the Companies on a consolidated basis,
as of the Closing Date, in accordance with GAAP, (ii) the calculations (the
“Working Capital Calculations”) of the Working Capital of each of the Companies
as of the Closing Date (the “Closing Date Working Capital”), and (iii) a
statement setting forth the calculation of the amount by which the aggregate
Closing Date Working Capital of both Companies added together (the “Aggregate
Closing Date Working Capital”) as set forth in the Working Capital Calculations
or, if disputed, as finally determined pursuant to Section 2.3(c) (the “Final
Working Capital”) either exceeds the Agreed Aggregate Working Capital (such
amount, the “Final Working Capital Excess Amount”) or is less than the Agreed
Aggregate Working Capital (such amount, the “Final Working Capital Deficiency
Amount”). The Seller shall have the right, at their expense, to have a certified
public accountant audit the Closing Date Balance Sheets and the calculations of
the Closing Date Working Capital within ten (10) days of the Seller’s receipt
thereof.

(c)            If there was an Estimated Working Capital Excess Amount and there
is a Final Working Capital Deficiency Amount, the aggregate Purchase Price shall
be adjusted downward dollar-for-dollar in the amount of the sum of the Final
Working Capital Deficiency, first applied to the Secured Note Amount and any
additional amount applied as a reduction in the Cash Purchase Amount and any
additional amount applied thereafter as a reduction in the Stock Consideration.
If there was an Estimated Working Capital Deficiency Amount and there is a Final
Working Capital Deficiency Amount, then the aggregate Purchase Price shall be
adjusted downward dollar-for-dollar in the amount of the sum of the Final
Working Capital Deficiency less any prior amounts already paid to Parent based
on the Estimated Working Capital Deficiency Amount, first applied to the Secured
Note Amount and any additional amount applied as a reduction in the Cash
Purchase Amount and any additional amount applied thereafter as a reduction in
the Stock Consideration. If there was an Estimated Working Capital Deficiency
Amount and there is a Final Working Capital Excess Amount, the principal amount
of Secured Note (and aggregate Purchase Price) shall be adjusted upward
dollar-for-dollar in the amount of the sum of the Final Working Capital Excess
plus any prior amounts already paid to the Parent Based on the Estimated Working
Capital Deficiency Amount. If there was an Estimated Working Capital Excess
Amount and there is a Final Working Capital Excess Amount, then the principal
amount of Secured Note (and aggregate Purchase Price) shall be adjusted upward
dollar-for-dollar in the amount of the sum of the Final Working Capital Excess.
Any payments to be made by the Seller to Parent shall be satisfied from Escrow
pursuant to Section 2.4. Any payments to be made by Parent on behalf of Buyer to
the Seller shall be made by a combination of wire transfer of immediately
available funds (in U.S. Dollars) and by increasing the value of the Secured
Note, at Parent’s sole discretion. The Secured Note shall mature on the three
(3) year anniversary of the date of issuance and shall bear interest at a rate
of three (3%) percent per annum.

(d)           If the Seller disputes the Closing Date Balance Sheets or the
Closing Date Working Capital as set forth in the Working Capital Calculations,
then, within the ten (10) day period referred to in paragraph (b) above, the
Seller shall give Buyer a detailed written statement identifying all disputed
items (collectively, the “Disputed Amounts”). Buyer and the Seller shall use
reasonable efforts to resolve any such dispute. If Buyer and the Seller are
unable to finally resolve such dispute within ten (10) days after Buyer’s
receipt of the Seller’ statement of Disputed Amounts, then the dispute shall be
resolved by a US national independent certified public accounting firm that is
reasonably acceptable to Buyer and the Seller (the “Independent Accounting
Firm”) considering recent past, current and anticipated future engagements.
Buyer and the Seller shall retain the Independent Accounting Firm within ten
(10) days of the end of the ten (10) day period for Buyer and the Seller to
resolve their dispute. The determination of the Independent Accounting Firm
shall be made as promptly as practicable and shall be final and binding on Buyer
and the Seller. The fees and expenses of the Independent Accounting Firm shall
be allocated between Buyer and the Seller so that the Seller’s aggregate share
of such fees and expenses bears the same proportion to the total amount of such
fees and expenses as the Disputed Amounts unsuccessfully contested by the Seller
bears to the total of the Disputed Amounts submitted to the Independent
Accounting Firm.

2.4      Escrow Shares.

(a)            The Escrow shall provide security of the Seller’s payments to
Buyer of all amounts due as a result of (i) the indemnification obligations in
Article 7, (ii) any Purchase Price adjustments pursuant to Section 2.3,
including without limitation monies due to Buyer due to a Final Working Capital
Deficiency, and (iii) any other claims or expenses arising under this Agreement.

(b)           Any Claim against the Escrow must be made within eighteen (18)
months following Closing.

(c)            Amounts to be satisfied from the Escrow pursuant to Section
2.4(a) will be satisfied by the cancellation of Escrow Shares having a value
equal to the amount to be satisfied pursuant to Section 2.4(a), with such Escrow
Shares valued at the lower of (i) the Agreed Parent Share Price and (ii) the
closing price of such shares on the Approved Exchange on the date on which a
final determination is made by the Escrow Agent with respect to a claim under
Section 2.4(a) to cancel such shares in accordance with this Section 2.4 and the
terms of the Escrow Agreement.

(d)           Except to the extent of the limitations provide in Section 7.5,
the Seller’s liability to Buyer for amounts due as a result of (i) the
indemnification obligations in Article 7, (ii) any Purchase Price adjustments
pursuant to Section 2.3, including without limitation monies due to Buyer due to
a Final Working Capital Deficiency, and (iii) any other claims or expenses
arising under this Agreement, shall not be limited to amounts or assets in the
Escrow.

ARTICLE 3 

Representations and Warranties regarding Buyer and Parent

In order to induce the Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer and Parent make the representations and
warranties set forth below to Seller on the date hereof, except as set forth in
the filings and reports of Parent made with the Securities and Exchange
Commission (the “Parent SEC Documents”) if reasonably apparent that any event,
item or occurrence disclosed in such Parent SEC Documents is an event, item or
occurrence that relates to a matter covered by any representation or warranty
set forth in this Article 3) or in a Disclosure Schedule delivered by the Parent
to the Seller (the “Parent Disclosure Schedule”).

3.1      Organization. Buyer is a corporation duly organized and validly
existing under the laws of the State of Nevada. Parent is a corporation duly
organized and validly existing under the laws of the State of Nevada.

3.2      Authorization; Enforceability. Each of Buyer and Parent has all
requisite right, power and authority to execute and deliver the Transaction
Documents and to consummate the transactions contemplated thereby. The execution
and delivery of the Transaction Documents by each of Buyer and Parent and the
consummation by Buyer and Parent of the transactions contemplated thereby have
been duly authorized by all requisite corporate action. This Agreement has been
duly executed and delivered by each of Buyer and Parent, and constitutes the
legal, valid and binding obligation of Buyer and Parent, enforceable in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar Laws affecting creditors’ rights generally and
subject to the effect of general principles of equity, whether considered in a
proceeding in equity or at law.

3.3      No Consent, Violation or Conflict. The execution and delivery of the
Transaction Documents by Buyer, the consummation by each of Buyer and Parent of
the transactions contemplated thereby, and compliance by each with the
provisions hereof: (a) do not and will not violate or, if applicable, conflict
with any provision of Law, or any provision of ‘such party’s Organizational
Documents; and (b) do not and will not, with or without the passage of time or
the giving of notice, result in the breach of, cause the acceleration of
performance or constitute a default or require any consent under, any instrument
or agreement to which Buyer or Parent is a party or by which Buyer, Parent or
their respective properties may be bound or affected, other than instruments or
agreements as to which consent shall have been obtained at or prior to the
Closing Date or any breaches or defaults which would not affect Buyer’s and
Parent’s ability to consummate the transactions contemplated thereby.

3.4      Brokers. Neither Buyer nor Parent has employed any financial advisor,
broker or finder and each has not incurred and will not incur any broker’s,
finder’s, investment banking or similar fees, commissions or expenses, in
connection with the transactions contemplated by this Agreement, which would be
payable by the Seller.

3.5      Consent of Governmental Authorities. Each of Buyer and Parent has
obtained, or will have obtained prior to the Closing, all necessary
authorizations and no further consent, approval or authorization of, or
registration, qualification or filing with any governmental or regulatory
authority, or any other Person, is required to be made or obtained by Buyer or
Parent in connection with the execution and delivery of the Transaction
Documents by each of Buyer and Parent, or the consummation by Buyer and Parent
of the transactions contemplated thereby.

3.6      Legal Proceedings. There is no action, claim, dispute, suit,
investigation or proceeding pending or, to Buyer’s and Parent’s Knowledge,
threatened against either Buyer or Parent or any of their respective properties
or rights, nor any judgment, order, injunction or decree before any court,
arbitrator or administrative or governmental body which might adversely affect
or restrict the ability of Buyer or Parent to consummate the transactions
contemplated by the Transaction Documents, or to perform its obligations
thereunder.

3.7           Knowledge. Each of Buyer and Parent has sufficient knowledge,
experience and sophistication in business matters, and is capable of evaluating
the merits and risks of its purchase of the Purchased Shares and of making an
informed investment decision with respect thereto. Buyer and Parent further
confirm that the Closing shall indicate that each of Buyer and Parent and their
advisors were given the opportunity to examine the financial and business
situation of each Company, and to ask questions and receive answers from the
management of each Company.

3.8           Validity of Stock Consideration. When issued and delivered in
accordance with this Agreement, the Stock Consideration shall be (a) duly and
validly authorized, issued and outstanding, fully paid and non-assessable and
(b) free and clear of any Liens, except as provided in the escrow provisions
specified in this Agreement and the lock-up provisions specified in Section 6.4.

3.9           SEC Documents and Compliance. Since September 1, 2019, Parent has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the U.S. Securities and Exchange Commission (“SEC”),
pursuant to the reporting requirements of all applicable federal and securities
laws (all of the foregoing that were scheduled to be filed prior to the Closing
Date, and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, are hereinafter
referred to as the “SEC Documents”). The SEC Documents comply in all material
respects with the requirements of all applicable federal securities laws, rules
and regulations. The SEC Documents do not contain any untrue statement of a
material fact of omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

ARTICLE 4 

Representations and Warranties regarding the Seller

In order to induce Buyer and Parent to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller makes the
representations and warranties set forth below to Buyer and Parent as of the
date hereof.

4.1      Authorization; Enforceability. Seller has all requisite right, power
and capacity to execute and deliver the Transaction Documents to which it is a
party and consummate the transactions contemplated thereby. The execution and
delivery of the Transaction Documents to which it is a party by Seller and the
consummation by Seller of the transactions contemplated thereby have been duly
authorized by all requisite action. This Agreement has been duly executed and
delivered by Seller and constitutes the legal, valid and binding obligations of
such party, enforceable in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar Laws affecting creditors’
rights generally and subject to the effect of general principles of equity,
whether considered in a proceeding in equity or at law.

4.2      No Consent, Violation or Conflict. The execution and delivery of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated thereby, and compliance by Seller with the provisions
hereof, (a) do not and will not violate or, if applicable, conflict with any
provision of Law and (b) do not and will not, with or without the passage of
time or the giving of notice, result in the breach of, cause the acceleration of
performance or constitute a default or require any consent under, or result in
the creation of any Lien upon any property or assets of Seller pursuant to any
instrument or agreement to which such Seller is a party or by which Seller’s
properties may be bound or affected.

4.3      Consent of Governmental Authorities. Seller has obtained all necessary
authorizations and no further consent, approval or authorization of, or
registration, qualification or filing, with any governmental or regulatory
authority, or any other Person, is required to be made or obtained by Seller in
connection with the execution and delivery of the Transaction Documents to which
it is a party by Seller or the consummation by Seller of the transactions
contemplated thereby.

4.4      Brokers. Seller has not incurred and will not incur any broker’s,
finder’s, investment banking or similar fees, commissions or expenses in
connection with the transactions contemplated by this Agreement, which would be
payable by Buyer or either Company after the Closing Date.

4.5      Capitalization. Seller is and will immediately prior to the Closing be
the legal, record and beneficial owner of Seller’s Seller Percentage of the
Purchased Shares, and such Purchased Shares is and will immediately prior to the
Closing be owned free and clear of any Liens whatsoever, including, without
limitation, claims or rights under any voting trust agreements, proxies,
shareholder agreements or other agreements. At the Closing, Seller will transfer
and convey and Buyer will acquire good and valid title to the Purchased Shares
free and clear of all Liens. No written or oral agreement or understanding with
respect to the disposition of Seller’s Purchased Shares or any rights therein,
other than this Agreement, exists.

4.6      Rights, Warrants, Options. Other than this Agreement, there are no
options, warrants or other rights, arrangements or commitments of any character
to which Seller is a party or by which Seller is bound relating to the Purchased
Shares or obligating Seller to sell any shares, or other equity interests in,
any Company.

ARTICLE 5 

Representations and Warranties of regarding the COMPANIES

In order to induce Buyer and Parent to enter into this Agreement and to
consummate the transactions contemplated hereby, the Seller and the Companies,
jointly and severally, make the representations and warranties set forth below
to Buyer and Parent as of the date hereof, except as otherwise noted herein or
as set forth in the disclosure schedules attached hereto (the “Disclosure
Schedules”). All information set forth in the Disclosures Schedules shall
clearly identify the specific Company or Companies to which it applies.

5.1      Organization. Each Company is a corporation duly organized and validly
existing under the laws of the Cayman Islands. Each Company is duly qualified or
licensed to do business in each jurisdiction where the character of the
properties owned or operated by it or the nature of its business makes such
qualification or licensing necessary. Each Company has all requisite right,
power and authority to (a) own and operate its properties, (b) conduct its
business as presently conducted in accordance with local business practices and
(c) engage in and consummate the transactions contemplated hereby. Each Company
is not in default under its Organizational Documents.

5.2      Authorization; Enforceability. Each Company has all requisite right,
power and authority to execute and deliver the Transaction Documents to which it
is a party and consummate the transactions contemplated thereby. The execution
and delivery of the Transaction Documents to which it is a party by each Company
and the consummation by each Company of the transactions contemplated thereby
have been duly authorized by all requisite corporate or other action. This
Agreement has been duly executed and delivered by each Company and constitutes
the legal, valid and binding obligation of such party, enforceable in accordance
with its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other similar Laws affecting creditors’ rights generally and subject to the
effect of general principles of equity, whether considered in a proceeding in
equity or at law.

5.3      No Consent, Violation or Conflict. With respect to each Company, the
execution and delivery of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated thereby, and compliance by
each Company with the provisions hereof, (a) do not and will not violate or, if
applicable, conflict with any provision of Law, or any provision of such
Company’s Organizational Documents, and (b) do not and will not, with or without
the passage of time or the giving of notice, result in the breach of, cause the
acceleration of performance or constitute a default or require any consent
under, or result in the creation of any Lien upon any property or assets of such
Company pursuant to any instrument or agreement to which such Company is a party
or by which such Company’s properties may be bound or affected.

5.4      Consent of Governmental Authorities. Each Company has obtained all
necessary authorizations and no further consent, approval or authorization of,
or registration, qualification or filing, with any governmental or regulatory
authority, or any other Person, is required to be made or obtained by such
Company in connection with the execution and delivery of the Transaction
Documents by such Company to which it is a party or the consummation by the
Companies of the transactions contemplated thereby.

5.5      Brokers. No Company has incurred or will incur any broker’s, finder’s,
investment banking or similar fees, commissions or expenses in connection with
the transactions contemplated by this Agreement, which would be payable by Buyer
or such Company after the Closing Date.

5.6      Organizational Documents and Corporate Records. A true and complete
copy of the Organizational Documents of each Company, as amended, will be
delivered to Buyer on the Closing Date. The minute book of each Company (the
“Corporate Minute Books”) will also be delivered to Buyer on the Closing Date.
Such Corporate Minute Books contain complete and accurate records of all
meetings and other corporate actions of the board of directors and/or the
shareholders of each Company from the date of its incorporation to the date
hereof. All matters requiring the authorization or approval of the board of
directors and/or the shareholders of each Company have been duly and validly
authorized and approved by them.

5.7      Capitalization. The authorized share capital of Holdings is
US$50,000.00 consisting of 700,000 Series A Preferred Shares of a nominal or par
value of US$0.05 each and 300,000 Common Shares of a nominal or par value of
US$0.05 each. All 700,000 Series A Preferred Shares of Holdings are in issue and
outstanding and no Common Shares of Holdings are in issue or outstanding.

As of the date hereof the authorized share capital of Trading is US$50,000.00
consisting of 50,000 shares of US$1.00 each. 100 shares of Trading are issued
and outstanding as of the date hereof in the name of Holdings.

As of the date hereof the authorized share capital of Tech is US$50,000.00
consisting of 50,000 shares of US$1.00 each. 100 shares of Tech are issued and
outstanding as of the date hereof in the name of Holdings (together, for
Holdings, Trading and Tech, the “Purchased Shares”).

All of the Purchased Shares, including all Purchased Shares issued prior to the
Closing Date has been and will be duly authorized and are and will be validly
issued, fully paid and nonassessable. The Seller is and immediately prior to the
Closing will, directly or indirectly, be the legal, record and beneficial owners
of One Hundred Percent (100%) of the Purchased Shares, and such Purchased Shares
is and immediately prior to the Closing will be owned free and clear of any
Liens whatsoever, including, without limitation, claims or rights under any
voting trust agreements, shareholder agreements or other agreements. The
Purchased Shares represents One Hundred Percent (100%) of the issued and
outstanding shares of each Company, directly with respect to Holdings and
indirectly with respect to Trading and Tech. Each Company has no investment or
equity interest in any other Person. None of the Purchased Shares was or will be
issued in violation of any law, preemptive right, right of first refusal or
similar agreement. No written or oral agreement or understanding with respect to
the disposition of the Purchased Shares or any rights therein, other than this
Agreement, exists.

5.8      Rights, Warrants, Options. There are no options, warrants or other
rights, arrangements or commitments of any character to which either Company is
a party or by which either Company is bound relating to the issued or unissued
shares of such Company or obligating such Company to issue or sell any shares,
or other equity interests in, such Company. There are no outstanding obligations
of either Company to redeem or otherwise acquire any of the Purchased Shares and
there are no outstanding contractual obligations of either Company to provide
funds to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any other Person.

5.9      Financial Statements. Schedule 5.9 includes a true and complete copy of
the unaudited balance sheet of each Company as of December 31, 2018 and 2019,
and the unaudited consolidated profit and loss statement, statement of cash flow
and statement of changes in shareholders’ equity of each Company for the period
ending on such dates, certified by such Company’s chief executive officer
(collectively, the “Financial Statements”). The Financial Statements: (a) have
been prepared in accordance with the books of account and records of each
Company; (b) fairly present, and are true, correct and complete statements in
all material respects of the consolidated financial condition of each Company
and the results of its operations at the dates and for the periods specified in
those statements; and (c) have been prepared in accordance with GAAP
consistently applied with prior periods. In addition, Schedule 5.9 includes the
Financial Statements delivered in accordance with GAAP. The Closing Trial
Balance will (a) be prepared in accordance with the books of account and records
of each Company and delivered on an estimated basis in accordance with GAAP and
(b) fairly present, and are true, correct and complete statements in all
material respects of the consolidated financial condition of each Company as the
Closing Date.

5.10   Absence of Undisclosed Liabilities. As of the Closing Date, each Company
has no debts, claims, Liabilities, commitments or obligations of any nature
whatsoever, whether accrued, absolute, contingent or otherwise, other than as
provided for in this Agreement or disclosed and accrued for or reserved against
in the Financial Statements or in the Closing Trial Balance. There is no basis
for assertion against either Company of any such debt, claim, Liability,
commitment, obligation or loss. For the avoidance of doubt, the Seller
acknowledges that Buyer is not assuming any such debts, claims, Liabilities,
commitments, obligations or losses not disclosed and accrued for or reserved
against in the Closing Trial Balance, and Buyer will be indemnified for such
pursuant to Section 7.4.

5.11   Compliance with Laws.

(a)            Each Company is in compliance with all Laws applicable to it or
its properties or has made all necessary filings to be in compliance with all
such Laws, including, without limitation, those relating to (i) the development,
testing, manufacture, packaging and labeling of products, (ii) employment,
occupational safety and employee health, (iii) building, zoning and land use;
and (iv) the Foreign Corrupt Practices Act and all applicable anti-bribery,
anti-kickback and related laws and regulations. No Company has received
notification from any governmental or regulatory authority asserting that it is
not in compliance with or has violated any of the Laws which such governmental
or regulatory authority enforces, or threatening to revoke any authorization,
consent, approval, franchise, license, or permit, and each Company is not
subject to any agreement or consent decree with any governmental or regulatory
authority arising out of previously asserted violations.

(b)           Each Company has at all times been in compliance with all legal
requirements applicable to it, relating to export control, trade embargoes, and
anti-boycott prohibitions. No product sold or services provided by any Company
during the last five (5) years has been, directly or indirectly, sold to or
performed on behalf of any country subject to the restricted list of the Office
of Foreign Assets Control Regulations (OFAC), or International Traffic In Arms
Regulations (ITAE), or similar restrictions of the United States, including
Cuba, Iraq, Iran, Libya or North Korea or customers in such countries.

5.12   Legal Proceedings. (a) No Company is a party to any pending or threatened
legal, administrative or other proceeding, arbitration, mediation, out-of-court
settlement negotiation or investigation, and (b) no Person who is or was within
the last five years a director or officer of either Company is a party to any
pending, or threatened, legal, administrative or other proceeding, arbitration,
mediation, out-of-court settlement negotiation or investigation in their
capacity as directors or officers of such Company, which adversely affects such
Company. No Company is subject to any order, writ, injunction, decree or other
judgment of any court. No Company is subject to any decree or other similar
judgment of any governmental authority. There are no suits or proceedings
pending or threatened before any court or by or before any governmental or
regulatory authority, commission, or agency or public regulatory body against
Seller which, if adversely determined, would interfere with Seller’s ability to
consummate the transactions contemplated hereby.

5.13   Title to and Condition of Personal Property.

(a)            Each Company has and will have good and marketable title or
leasehold interest to each item of equipment and other personal property worth
more than $10,000 included as an asset in the Closing Trial Balance and/or used
in connection with the operation of its business.

(b)           The buildings, structures, appurtenances, leasehold improvements,
equipment, machinery, rolling stock and other tangible property owned or used by
each Company (i) are not, and as of the Closing Date, will not be in need of
substantial maintenance or repairs (except for ordinary or routine maintenance
or repairs), (ii) are, and as of the Closing Date will be, free of structural or
non-structural defects, and (iii) have access to adequate water, sewer, gas,
telephone and electric utilities which are in good working order; in each
instance as is sufficient to conduct the business of such Company as currently
conducted.

(c)            Each item of equipment, personal property and asset of each
Company, included as an asset in the Closing Trial Balance and/or used in
connection with the operation of its business shall remain with such Company.
The parties agree that Schedule 5.13(c) sets forth the full and complete list of
all assets owned by each Company as of the Closing Date. Except as set forth on
such Schedule 5.13(c), none of the items of equipment, personal property and
assets included therein was imported under a temporary import or similar
regulatory regime that would restrict the transfer, or would cause either
Company to owe additional Taxes as a result of the transfer, of such property.

5.14   Real Property.

(a)            Schedule 5.14(a) sets forth the street address of each parcel of
real property leased by each Company (the “Real Property”). Buyer has been
delivered true and complete copies of all of the lease agreements relating to
the Real Property. Each Company enjoys peaceful and undisturbed possession of
the Real Property.

(b)           No Company owns any real property.

(c)            All construction and improvements made on the Real Property are,
as of the Closing Date, not in need of substantial repairs except for ordinary
or routine maintenance or repairs.

(d)           Tech is exempted from Customs Import Duties and impositions and
operates in the Special Economic Zone pursuant to the Special Economic Zones Law
of the Caymans Island under Identification No. 101259659, which is in full force
and effect. There is no action or proceeding by any governmental or regulatory
authority pending or, to the Knowledge of Tech, threatened seeking the revoke or
suspend the exemption from Customs import duties and impositions.

5.15   Governmental Authorizations. Each Company has all authorizations,
consents, approvals, franchises, licenses and permits required under applicable
Law for the ownership of such Company’s properties and operation of its business
as presently operated (the “Permits”). No suspension, nonrenewal or cancellation
of any of the Permits is pending or, to any Seller’s Knowledge, threatened, and
there is no reasonable basis therefor. Neither Company is in conflict with, or
in default or violation of any Permits.

5.16   Compliance with Environmental Laws. Each Company is in compliance with
all applicable Environmental Laws. Except as set forth in Schedule 5.16, there
have been no governmental claims, citations, notices of violation, judgments,
decrees or orders issued against either Company for impairment or damage, injury
or adverse effect to the environment or public health and there have been no
private complaints with respect to any such matters. There is no condition
relating to any properties of either Company that would require any type of
remediation, clean-up, response or other action under applicable Environmental
Laws and each Company has complied with Environmental Laws in the generation,
treatment, storage and disposal of toxic and hazardous substances, as defined
under any applicable Environmental Laws.

5.17   Employment Matters.

(a)        There are no employment, consulting, severance or indemnification
arrangements, arrangements which contain change of control provisions,
agreements, or understandings between either Company and any officer, director,
consultant or employee. Schedule 5.17(a) contains the names, job descriptions
and annual salary rates and other compensation of all officers, directors,
employees and consultants of each Company (including compensation paid or
payable by such Company under the Plans (as hereafter defined)), and a list of
all employee policies (written or otherwise), employee manuals or other written
statements of rules or policies concerning employment, including working
conditions, vacation and sick leave, a complete copy of each of which (or a
description, if unwritten) has been delivered to Buyer.

(b)       Each Company has complied with all applicable employment Laws,
including payroll and related obligations, benefits, and social security, and
does not have any obligation in respect of any amount due to employees of such
Company or government agencies, other than normal salary, other fringe benefits
and contributions accrued but not payable on the date hereof.

(c)       Schedule 5.17(c) sets forth a complete list of all pension,
retirement, share purchase, share bonus, share ownership, share option, profit
sharing, savings, medical, disability, hospitalization, insurance, deferred
compensation, bonus, incentive, welfare or any other material employee benefit
plan, policy, agreement, commitment, arrangement or practice currently or
previously maintained by each Company for any of its directors, officers,
consultants, employees or former employees (the “Plans”).

Without limiting the generality of Section 5.11, each Plan has been administered
in accordance with its terms and applicable Law. With respect to the Plans, (i)
no event has occurred and there exists no condition, facts or circumstances,
which could give rise to any liability of either Company under the terms of such
Plans or any applicable Law, (ii) each Company has paid or accrued all amounts
required under applicable Law and any Plan to be paid as a contribution to each
Plan through the date hereof, (iii) each Company has set aside adequate reserves
to meet contributions which are not yet due under any Plan, (iv) the fair market
value of the assets of each funded Plan, the liability of each insurer for any
Plan funded through insurance or the book reserve established for any Plan,
together with accrued contributions, is sufficient to procure or provide for the
accrued benefit obligations, as of the Closing Date, with respect to all current
and former participants in such Plan according to the actuarial assumptions and
valuations most recently used to determine employee contributions to such Plan
and no transaction contemplated by this Agreement shall cause such assets or
insurance obligations to be less than such benefit obligations, and (v) each
Plan required to be registered has been registered and has been maintained in
good standing with applicable regulatory authorities.

On or after the date hereof, no Plan has been, or will be, (i) terminated, (ii)
amended in any manner which would directly or indirectly increase the benefits
accrued, or which may be accrued, by any participant thereunder or (iii) amended
in any manner which would materially increase the cost to either Company or
Buyer of maintaining such Plan. No Plan provides retiree medical or retiree
insurance benefits to any Person. Except as disclosed or noted in the Financial
Statements, there are no amounts due or owing to any employee of either Company
for any accrued salary, remuneration, compensation and/or benefit, including,
without limitation, amounts due for accrued vacation, sick leave or commissions.

5.18   Labor Relations. There is no strike or dispute pending or threatened
involving any employees of either Company. None of the employees of either
Company is a member of any labor union and neither Company is a party to,
otherwise bound by, or threatened with any labor or collective bargaining
agreement. None of the employees of either Company are known to be engaged in
organizing any labor union or other employee group that is seeking recognition
as a bargaining unit. Without limiting the generality of Section 5.11, (a) no
unfair labor practice complaints are pending or threatened against either
Company, and (b) no Person has made any claim, and there is no basis for any
claim, against either Company under any statute, regulation or ordinance
relating to employees or employment practices, including without limitation
those relating to age, sex and racial discrimination, conditions of employment,
and wages and hours.

5.19   Contracts.

(a)            Schedule 5.19 sets forth a list of all material written
agreements, arrangements or commitments to which each Company is a party or by
which any of its assets is bound or affected (all such contracts, agreements,
arrangements or commitments as are required to be set forth on Schedule 5.19
being referred to herein collectively as the “Contracts”), including, without
limitation with respect to each Company:

(b)           each partnership, joint venture or similar agreement of such
Company with another Person;

(c)            each contract or agreement under which such Company has created,
incurred, assumed or guaranteed (or may create, incur, assume or guarantee)
indebtedness of more than US$25,000 in principal amount or under which such
Company has imposed (or may impose) a Lien on any of its assets, whether
tangible or intangible securing indebtedness in excess of US$25,000;

(d)           each contract or agreement which involves an aggregate payment or
commitment per contract or agreement on the part of such Company of more than
US$25,000 per year;

(e)            each contract or agreement which involves or contributes to such
Company, aggregate annual remuneration which exceeds 5% of such Company’s
consolidated annual net revenues for the twelve months ended December 31, 2018
and 2019;

(f)            all leases and subleases from any third person to such Company,
in each case requiring annual lease payments in excess of US$25,000;

(g)           each contract or agreement to which such Company or any of its
Affiliates is a party limiting the right of such Company (i) to engage in, or to
compete with any person in, any business, including each contract or agreement
containing exclusivity provisions restricting the geographical area in which, or
the method by which, any business may be conducted by such Company or (ii) to
solicit any customer or client;

(h)           fire, casualty, liability, title, worker’s compensation and all
other insurance policies and binders maintained by such Company;

(i)             all collective bargaining or other labor union contracts or
agreements to which such Company is a party or applicable to persons employed by
such Company;

(j)             all licenses, licensing agreements and other agreements
providing in whole or part for the use of any Intellectual Property of such
Company; and

(k)           all other contracts or agreements which individually or in the
aggregate are material to such Company or the conduct of its business, other
than those which are terminable upon no more than 30 days’ notice by such
Company without penalty or other adverse consequence.

Schedule 5.19 further identifies each of the Contracts which contain
anti-assignment, change of control or notice of assignment provisions. The
Contracts are each in full force and effect and are the valid and legally
binding obligations of each Company which is a party thereto and are valid and
binding obligations of the other parties thereto. To the Knowledge of the Seller
and the Companies, no Company is a party to, nor is its business or any of its
assets bound by, any oral agreement. No Company is in default under its
Organizational Documents or in default under any Contract to which it is a
party, and no event has occurred which with the giving of notice or lapse of
time or both would constitute such a default.

5.20   Tax Matters. Except as set forth on Schedule 5.20:

(a)            All Tax Returns required to be filed on or before the Closing
Date by or with respect to the Companies and their Subsidiaries have (or by the
Closing Date will have) been duly filed or the time for filing such Tax Returns
shall have been validly extended to a date after the Closing Date.  Except for
Taxes reflected or reserved against in the Financial Statements, the Companies
and their Subsidiaries have paid all Taxes due and with respect to Taxes not yet
due, all such Taxes not yet paid have been appropriately reserved against in
accordance with GAAP. Neither the Companies nor their Subsidiaries is subject to
any joint venture, partnership, or other arrangement or Contract which is
treated as a partnership for federal income tax purposes.  Neither the Companies
nor their Subsidiaries is a party to any tax sharing agreement.

(b)           As of the date hereof, there is no agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any Taxes of the Companies or their Subsidiaries, and no power of
attorney with respect to any such Taxes, has been executed or filed with the IRS
or any other taxing authority that remains in force.

(c)            During the last 5 years there has been no and as of the date
hereof there are no presently pending audits or other administrative proceedings
or court proceedings with respect to any Taxes of the Companies or their
Subsidiaries.  No claim has ever been made by a governmental entity in a
jurisdiction where a Company does not file a Tax Return that any of the
Companies is or may be subject to taxation by that jurisdiction. 

(d)           All Taxes required to be withheld by the Companies or their
Subsidiaries have been duly and timely withheld, and such withheld Taxes have
been duly and timely paid to the appropriate governmental entity.

(e)            There are no Tax liens upon the assets of the Companies or their
Subsidiaries except liens for Taxes not yet due and payable.

(f)            The Companies and the Subsidiaries do not have any potential
liability for Tax.

5.21   Guaranties. No Company is a party to any guaranty, and no Person is a
party to any guaranty for the benefit of either Company.

5.22   Insurance. Set forth on Schedule 5.22 is a list of all insurance policies
providing insurance coverage of any nature to each Company. Each Company has
previously delivered to Buyer a true and complete copy of all of such insurance
policies as amended. Such policies are sufficient for the compliance by each
Company with all requirements of Law and all Contracts. All of such policies are
in full force and effect and are valid and enforceable in accordance with their
terms, and each Company has complied with all terms and conditions of such
policies, including the payment of premium payments. None of the insurance
carriers has indicated to any Company an intention to cancel any such policy. No
Company has any claim pending or anticipated against any of the insurance
carriers under any of such policies and there has been no actual or alleged
occurrence of any kind which may give rise to any such claim.

5.23   Inventories. The inventories of each Company shown on the balance sheets
included in the Financial Statements and the inventories of each Company as of
the Closing Date are stated and will be stated at not more than the lower of
cost (on a first-in first-out basis) or market, and are fit for their particular
use, do not and will not include any items below standard quality, defective,
damaged or spoiled, obsolete or of a quality or quantity not usable or salable
in the ordinary course of the business of each Company as currently conducted or
any items whose expiration date has passed or will pass within twelve months of
the date hereof and of Closing (which, with respect to items which do not have
an expiration date, shall in any event not include quantities of items not
usable or salable within twelve months from the date hereof), the value of which
has not been fully written down or reserved against in the Financial Statements.
Each Company has and will continue to have adequate quantities and types of
inventory to enable it to conduct its business consistent with past practices
and anticipated operations. Schedule 5.23 sets forth a list of all of each
Company’s inventory as of the Closing Date.

5.24   Regulatory Compliance.

(a)            Each Company is in compliance with all applicable Laws, rules,
regulations, and policies administered or enforced by the U.S. FAA, any state or
municipality and similar agencies in which such Company’s products or services
are offered or sold, and any other governmental entity that regulates the
development of UAV or educational products in any jurisdiction, including,
without limitation, relating to state or federal anti-kickback sales and
marketing practices, insurance and bonding, advertising and promotion, pre- and
post-marketing reporting, and all other pre- and post-marketing reporting
requirements, as applicable.

(b)           Schedule 5.24(b) lists each product developed, manufactured,
licensed, distributed or sold by each Company (collectively, the “Products”).
Each Product manufactured by or on behalf of each Company has been manufactured
in accordance with (i) the product registration applicable to such Product, (ii)
the specifications under which the Product is normally and has normally been
manufactured, (iii) the applicable provisions of current “CE” or “UL” good
manufacturing practices or other governmental authority and (iv) without
limiting the generality of Section 5.11, the provisions of all applicable Laws.

(c)            Each Company has obtained all registrations or submissions
required for the Products and all amendments and supplements thereto, and all
other Permits required by the FAA to conduct the business as it is currently
conducted (the “Regulatory Approvals”). All of the Regulatory Approvals have
been duly and validly issued and are in full force and effect, and each Company
is in compliance with each such permit held by or issued to it. Except as listed
on Schedule 5.24(c), each Company is the sole and exclusive owner of the
Regulatory Approvals and holds all right, title and interest in and to all such
Regulatory Approvals. Neither Company has granted any third party any right or
license to use, access or reference any of the Regulatory Approvals, including
without limitation, any of the know-how contained in any of the Regulatory
Approvals or rights (including any regulatory exclusivities) associated with
each such Regulatory Approvals.

(d)           There is no action or proceeding by any governmental or regulatory
authority pending or, to the Knowledge of each Company, Seller or any of their
Affiliates, threatened seeking the recall of any of the Products or the
revocation or suspension of any Regulatory Approval. Each Company has made
available to Buyer complete and correct copies of all Regulatory Approvals. In
addition, (i) each Company has made available to Buyer a complete and correct
copy of the Product Data; (ii) to the Knowledge of the Companies and the Seller,
all laws and regulations applicable to the preparation and submission of the
Regulatory Approvals to the relevant regulatory authorities have been complied
with; (iii) to the Knowledge of the Companies and the Seller, each Company has
filed with the relevant regulatory authorities all required notices,
supplemental applications, and annual or other reports, including adverse
experience reports, with respect to the Regulatory Approvals.

(e)            There exist no set of facts: (i) which could furnish a basis for
the recall, withdrawal or suspension of any product registration, product
license, manufacturing license, wholesale dealers license, export license or
other license, approval or consent of any domestic or foreign governmental or
regulatory authority with respect to either Company or any of the Products; or
(ii) which could furnish a basis for the recall, withdrawal or suspension of any
Product from the market, the termination or suspension of any testing of any
Product, or the change in marketing classification of any Product.

(f)            Except as set forth in Schedule 5.24(h), all Products which have
been sold through either Company have been merchantable and free from defects in
material or workmanship for the term of any applicable warranties and under the
conditions of any express or implied specifications and warranties arising under
Law and as set forth in the specific order. Except as disclosed in Schedule
5.24(h) hereto, neither Company has received any claims based on alleged failure
to meet the specifications or breach of product warranty arising from any
applicable manufacture or sale of their Products.

(g)           As of the Closing Date, all Product Inventory will conform to the
specifications therefor contained in the Regulatory Approvals and to the
Regulatory Approvals and with the requirements of all applicable governmental or
regulatory authorities, and is capable of maintaining such until the expiration
date therefor.

(h)           Each Company is and has been in compliance with all Laws requiring
the maintenance or submission of reports or records under requirements
administered by the FAA or any other governmental authority. No Company, nor any
of their respective employees or agents, have made an untrue or fraudulent
statement to the FAA or any other applicable governmental authorities, or in any
records and documentation prepared or maintained to comply with the applicable
Laws, or failed to disclose a fact required to be disclosed to the FAA or any
other similar governmental authorities.

(i)             No Company nor Seller has been convicted of any crime or engaged
in any conduct that could result or resulted in debarment, exclusion or
disqualification by the FAA or any other governmental authority and there are no
proceedings pending or, to the Knowledge of either Company or Seller, threatened
that reasonably might be expected to result in criminal or civil liability or
debarment, exclusion or disqualification by the FAA or any other governmental
authority. No Company has received written notice of or been subject to any
other enforcement action involving the FAA or any other governmental
authorities, including any suspension, consent decree, notice of criminal
investigation, indictment, sentencing memorandum, plea agreement, court order or
target or no-target letter, and none of the foregoing are pending or, to any
Company’s or Seller’s Knowledge, threatened in writing against any Company.

(j)             Each Company has security measures and safeguards in place to
protect Personally Identifiable Information it collects from customers and other
parties from illegal or unauthorized access or use by its personnel or third
parties or access or use by its personnel or third parties in a manner that
violates the privacy rights of third parties. To the knowledge of Seller, the
Companies have complied in all material respects with all Applicable Laws
relating to privacy and consumer protection and neither has collected, received,
stored, disclosed, transferred, used, misused or permitted unauthorized access
to any information protected by Applicable Laws related to privacy, whether
collected directly or from third parties, in an unlawful manner. The Companies
have taken all reasonable steps to protect Personally Identifiable Information
against loss or theft and against unauthorized access, copying, use,
modification, disclosure or other misuse.

(k)           Neither Company is party to any corporate integrity agreements,
monitoring agreements, consent decrees, settlement orders or similar agreements
with or imposed by any governmental authority.

(l)             True and complete copies of all information, data, protocols,
study reports, safety reports and/or other relevant documents and materials have
been made available to Buyer.

5.25   Intellectual Property Rights.

(a)            Schedule 5.25 sets forth a complete and correct list of all
Intellectual Property that is owned by each Company and the Intellectual
Property that each Company has a license, sublicense or other permission to use.
Except as set forth in Schedule 5.25, each Company owns all right, title and
interest in and to, or has a license, sublicense or other permission to use, all
of the Intellectual Property, free and clear of all Liens or other encumbrances.
All necessary registration, maintenance and renewal fees in connection with such
Intellectual Property have been paid and all necessary documents and
certificates in connection with such Intellectual Property have been filed with
the relevant copyright, trademark or other governmental or regulatory
authorities for the purposes of maintaining such Intellectual Property.

(b)           The Intellectual Property constitutes all patents and patent
applications, and technology, know-how and information owned or licensed to each
Company relating to the manufacture, use or sale of the Products. There have
been no claims made against either Company or any of their respective Affiliates
asserting the invalidity, abuse, misuse, or unenforceability of any of the
Intellectual Property, and, to the Knowledge of each Company and Seller, no
grounds for any such claims exist. No Company, Seller nor any of their
respective Affiliates has made any claim of any violation or infringement by
others of its rights in the Intellectual Property, and, to the Knowledge of each
Company, Seller and its respective Affiliates, no grounds for any such claims
exist. Neither each Company, Seller nor any of its respective Affiliates has
received any notice that it is in conflict with or infringing upon the asserted
rights of others in connection with the Intellectual Property and, to the
Knowledge of each Company, Seller and their respective Affiliates, the use of
the Intellectual Property by each Company, Seller or any of its Affiliates is
not infringing and has not infringed upon any rights of any other Person. No
interest in any of the Intellectual Property has been assigned, transferred,
licensed or sublicensed by either Company or any of their respective Affiliates
to any Person. No Company, neither Seller nor any of its respective Affiliates
has Knowledge of any act or failure to act by any of them or any of their
respective directors, officers, employees, attorneys or agents during the
prosecution or registration of, or any other proceeding relating to, any of the
Intellectual Property or of any other fact which could render invalid or
unenforceable, or negate the right to issuance of any of any of the Intellectual
Property.

(c)            Each Company has taken reasonable steps to protect the
confidentiality and value of all trade secrets and any other confidential
information that are owned, used, or held by such Company in confidence,
including entering into licenses and Contracts that require employees,
licensees, contractors, and other Persons with access to trade secrets or other
confidential information to safeguard and maintain the secrecy and
confidentiality of such trade secrets. To the Knowledge of each Company and
Seller, such trade secrets have not been used, disclosed to, or discovered by
any Person except pursuant to valid and appropriate non-disclosure, license, or
any other appropriate Contract which has not been breached.

5.26   Power of Attorney. Neither Company has issued, granted or executed any
powers of attorney on behalf of such Company which is in force at the Closing
Date, other than in connection with routine legal filings.

5.27   Agreed Aggregate Working Capital. As of the Closing Date, the Companies
will have, in the aggregate, at least One Dollar (US$1.00) of Working Capital
(the “Agreed Aggregate Working Capital”), of which at least One Dollar (US$1.00)
will consist of cash and cash equivalents on hand.

5.28   Absence of Material Adverse Effects. Since December 31, 2017, each
Company has conducted its business only in the ordinary and usual course and in
a manner consistent with past practices and, since such date there has been no
Material Adverse Effect and such Company has not engaged or agreed to engage in
any actions described in Section 8.1(b)(i)–(xxiii).

5.29   Accounts and Notes Receivable and Payable. Set forth on Schedule 5.29 is
a true and complete aged list of unpaid accounts and notes receivable owing to
and owed by each Company as of the date hereof. All of such accounts and notes
receivable and payable constitute bona fide, valid and binding claims arising in
the ordinary course of such Company’s business. Except as set forth on Schedule
5.29, there is no agreement for deduction, free goods, discounts, or other
deferred price or adjustment to such receivables. Except as set forth on
Schedule 5.29, (i) all receivables owing to each Company are less than ninety
(90) days old, are fully collectible and (ii) will be collected in the ordinary
course of business.

5.30   Related Parties. Except as disclosed in Schedule 5.30, neither Seller,
nor any other officer, director, or employee of either Company, or any of their
respective spouses or family Seller has, directly or indirectly, (a) any
ownership interest in, or is a director, officer, employee, consultant or agent
of, any Person which is a competitor, supplier or customer of either Company;
(b) any ownership interest in any property or asset, tangible or intangible,
including any Intellectual Property, used in the conduct of either Company’s
business; (c) any interest in or is, directly or indirectly, a party to, any
Contract; (d) any contractual or other arrangement with either Company, or any
competitor, supplier or customer of either Company; (e) any cause of action or
claim whatsoever against, or owes any amount to, either Company or (f) any
Liability to either Company. Except as disclosed in Schedule 5.30, neither
Company nor any Subsidiary thereof has any Liability to Seller.

5.31        Banks. Schedule 5.31 sets forth (i) the name of each bank, trust
corporation or other financial institution and stock or other broker with which
each Company has an account, credit line or safe deposit box or vault, (ii) the
names of all Persons authorized to draw thereon or to have access to any safe
deposit box or vault, (iii) the purpose of each such account, safe deposit box
or vault, and (iv) the names of all Persons authorized by proxies, powers of
attorney or other like instrument to act on behalf of each Company in matters
concerning their business or affairs. Except as otherwise set forth in Schedule
5.31, no such proxies, powers of attorney or other like instruments are
irrevocable.

5.32        Accuracy of Information Furnished. To the knowledge of Seller, no
representation, statement or information contained in this Agreement (including
the various exhibits attached hereto) or any agreement executed in connection
herewith or in any certificate or other document delivered pursuant hereto or
thereto or made or furnished to Buyer or its representatives by any Company or
Seller, contains or shall contain any untrue statement of a material fact or
omits or shall omit any material fact necessary to make the information
contained herein and therein not misleading. Copies of all documents listed or
described in the various exhibits attached hereto and provided by any Company or
Seller to Buyer are true, accurate and complete.

ARTICLE 6

Additional agreements

6.1      Noncompetition.

(a)            The Seller acknowledges that in order to assure Buyer that Buyer
will retain the value of each Company as a “going concern,” the Seller (on its
own behalf and on behalf of each of its Affiliates) agrees not to utilize their
special knowledge of the business of any Company and their relationships with
customers, suppliers and others to compete with either Parent, and of its
Subsidiaries, or any Company in a Prohibited Business. For a period of three (3)
years beginning on the Closing Date (the “Noncompete Period”), neither Seller
nor any of Seller’s Affiliates shall engage or have an interest in (directly or
indirectly) any entity that is engaged in a Prohibited Business anywhere in the
United States or any other geographic area where Parent, any of its
Subsidiaries, or any Company does business, alone or in association with others,
as principal, officer, agent, employee, director, partner or shareholder, or
through the investment of capital, lending of money or property, rendering of
services or otherwise. “Prohibited Business” means engaging in any activities in
providing products, services and solutions to the drone industry, first person
view (“FPV”) business, and software solutions that provide analytics, storage or
services for or in conjunction with the drone industry in the geographical area
in which Parent, and Subsidiary or any Company conducts such business as of the
Closing Date. Seller acknowledges and agrees that the limitations imposed by
this Section 6.1 as to time, geographical area, and scope of activity being
restrained are reasonable and do not impose a greater restraint than is
necessary to protect the goodwill or other business interests of Parent, any
Subsidiary and the Companies.

(b)           During the Noncompete Period, except in connection with services
to a Company, neither Seller nor any of Seller’s successors, assigns or
Affiliates shall, knowingly or intentionally, permit any of their respective
directors, officers, employees, agents or others under its or their control to,
directly or indirectly, (i) call upon, accept business from, or solicit the
business of any Person who is, or who had been at any time during the preceding
two (2) years, a customer of any Company, or otherwise divert or attempt to
divert sales from any Company or any such successor; or (ii) recruit or
otherwise solicit or induce any person who is an employee of, independent
contractor or otherwise engaged by, any Company or any successor to the business
of any Company to terminate his or her employment or other relationship with any
Company or such successor, or hire any person who has left the employ of any
Company or any such successor during the preceding two (2) years. Except in
connection with services to any Company, Seller shall at any time, directly or
indirectly, use or purport to authorize any Person to use any name, mark, logo,
trade dress or other identifying words or images which are the same as or
similar to those used currently or in the past by Parent any of its
Subsidiaries, or any Company in connection with any product or service, whether
or not such use would be in a business competitive with that of Parent, any of
its Subsidiaries or any Company.

(c)            Notwithstanding anything herein to the contrary, the provisions
of Section 6.1(a) and Section 6.1(b) shall terminate and be of no force and
effect in the event the Secured Note is not paid in full on or prior to the
maturity date thereof.

6.2      Confidentiality. Seller acknowledges that all confidential or
proprietary information with respect to the business and operations of each
Company is valuable, special and unique. Seller shall not, at any time before or
after the Closing Date (except as required in connection with his services to
either Company) disclose, directly or indirectly, to any Person, or use or
purport to authorize any Person to use any confidential or proprietary
information with respect to any Company, Parent and of Parent’s Subsidiaries or
Buyer, whether or not for Seller’s own benefit, without the prior written
consent of Parent, including without limitation, information as to the financial
condition, results of operations, customers, suppliers, products, products under
development, inventions, sources, leads or methods of obtaining new products or
business, pricing methods or formulas, cost of supplies, marketing strategies or
any other information relating to any Company, Parent and of Parent’s
Subsidiaries which could reasonably be regarded as confidential, but not
including information which is or shall become generally available to the public
other than as a result of an unauthorized disclosure by Seller or a Person to
whom Seller has provided such information. Seller acknowledges that Parent and
Buyer would not enter into this Agreement without the assurance that all such
confidential and proprietary information will be used for the exclusive benefit
of Parent, Buyer and the Companies.

6.3      Continuing Obligations. The restrictions set forth in Sections 6.1 and
6.2 are considered by the parties to be reasonable for the purposes of
protecting the value of the business and goodwill of each Company, Parent and
Buyer. Parent, Buyer and Seller acknowledge that Parent and Buyer would be
irreparably harmed and that monetary damages would not provide an adequate
remedy in the event the covenants contained in Sections 6.1 and 6.2 were not
complied with in accordance with their terms. Accordingly, Parent, Buyer and
Seller agree that any breach or threatened breach of any provision of Sections
6.1 and 6.2 shall entitle Parent and Buyer to injunctive and other equitable
relief, without requirement of posting a bond or other surety, to secure the
enforcement of these provisions, in addition to any other remedies which may be
available to Parent and Buyer, and that Parent and Buyer shall be entitled to
receive from the breaching parties reimbursement for all attorneys’ fees and
expenses incurred by Parent and Buyer in enforcing these provisions. In addition
to its other rights and remedies, Parent and Buyer shall have the right to
require any party who breaches any of the covenants contained in Sections 6.1
and 6.2 to account for and pay over to Parent and Buyer all compensation,
profits, money, accruals and other benefits derived or received, directly or
indirectly, by such breaching party from the action constituting such breach. If
a party breaches the covenants set forth in Section 6.1, the running of the
Noncompete Period shall be tolled with respect to such party for so long as such
breach continues. It is the desire and intent of the parties that the provisions
of Sections 6.1, 6.2 and 6.3 be enforced to the fullest extent permissible under
the laws and public policies of each jurisdiction in which enforcement is
sought. If any provisions of Sections 6.1, 6.2 and 6.3 relating to the time
period, scope of activities or geographic area of restrictions is declared by a
court of competent jurisdiction to exceed the maximum permissible time period,
scope of activities or geographic area, the maximum time period, scope of
activities or geographic area, as the case may be, shall be reduced to the
maximum which such court deems enforceable. If any provisions of Sections 6.1,
6.2 and 6.3 other than those described in the preceding sentence are adjudicated
to be invalid or unenforceable, the invalid or unenforceable provisions shall be
deemed amended (with respect only to the jurisdiction in which such adjudication
is made) in such manner as to render them enforceable and to effectuate as
nearly as possible the original intentions and agreement of the parties.

6.4      Investment Intent; Accredited Investor Status; Restrictions on Sale;
Registration of Securities.

(a)            Seller represents that it has such knowledge and experience in
business or financial matters that it is capable of evaluating the merits and
risks of an investment in the Stock Consideration. Seller understands and
acknowledges that the Stock Consideration has not been registered with the SEC
and that Seller may not sell, transfer or otherwise dispose of all or any
portion of the Stock Consideration except (i) in accordance with the provisions
of Rule 144 under the Securities Act, (ii) pursuant to an effective registration
statement under the Securities Act or (iii) upon receipt by Buyer of an opinion
of counsel acceptable to Buyer to the effect that such sale, transfer or
disposition is otherwise exempt from registration under the Securities Act.
Certificates representing the Stock Consideration shall bear a restrictive
legend.

(b)           In order to induce Parent and Buyer to enter into this Agreement
and consummate the transactions contemplated hereby, Seller hereby agrees that
it will not, except in connection with a Qualified Financing, and will not
permit any of its successors or assigns to offer, pledge, sell, contract to
sell, assign or otherwise transfer or dispose of, directly or indirectly
(collectively, a “Disposition”) for a two (2) year period beginning on the
Closing Date (the “Lock-Up Period”), all of the shares of the Stock
Consideration issuable in the transaction to Seller (the “Locked-Up Shares”);
provided, however, that (i) the Seller shall be permitted to sell an aggregate
of up to the greater of twenty (20%) percent or One Million Dollars ($1,000,000)
of the Parent Common Stock not subject to Escrow paid as part of the Purchase
Price prior to the twelve (12) month anniversary of the Closing in privately
negotiated transactions, subject in each case to compliance with applicable
securities law requirements (the “Initial Leak Out Shares”) and a joinder
agreement under which the purchaser agrees to be bound by the provisions of this
Section 6.4(b), and (ii) Seller is permitted to Dispose of no more than Ten
Percent (10%) of the average daily volume during the prior ten (10) trading days
as reported on the Approved Exchange (net of the Initial Leak Out Shares)
following the first year of the Lock-Up Period. The foregoing restriction is
also expressly agreed to preclude Seller from engaging in any hedging or other
transaction which is designed to or reasonably expected to lead to or result in
a Disposition of the Stock Consideration during the Lock-Up Period, other than
as permitted in this Section 6.4. Such prohibited hedging or other transactions
would include without limitation any short sale or any purchase, sale or grant
of any right (including without limitation any put or call option) with respect
to any Stock Consideration or with respect to any security that includes,
relates to or derives any significant part of its value from the Stock
Consideration.

(c)            At any time the Seller wishes to effect a Disposition of Initial
Leak-Out Shares in one of more transactions, Seller shall deliver a written
notice to the Parent (“Transfer Notice”) specifying in reasonable detail the
number of Initial Leak-Out Shares proposed to be disposed, the identity of the
proposed transferee (the “Transferee”), the price for such Initial-Leak Out
Shares, and any other material terms of the proposed Disposition. At any time on
or prior to the fifteenth (15th) business day after delivery of the Transfer
Notice, the Parent, or its assignee, may elect to acquire all or any portion of
the Initial Leak-Out Shares proposed to be disposed from the Seller by
delivering written notice to the Seller, which shall state that the parties are
electing to purchase the Initial Leak-Out Share on the terms and subject to the
conditions set forth in the Transfer Notice and shall include the proposed
closing date (which must be no later than ninety (90) days following the
delivery of the Transfer Notice.

(d)           Seller agrees that in the event that Parent elects to engage an
underwriter or placement agent in connection with a firm commitment or best
efforts public offering or private placement that Seller shall, at the request
of Parent, agree to the terms for an offering by Parent and inclusion of the
Initial Leak-Out Shares in such offering, in whole or in part, as determined by
Parent and such underwriter or placement agent and to accept such price, net of
selling commissions and pro-rata fees and expenses of the offering, as is agreed
by Parent. In the event that Seller declines to participate in such offering,
the right of Seller to receive proceeds of a Qualified Financing provided by
Section 2.2(c) hereof, shall terminate and be of no further force or effect.

(e)            In addition to the restrictions of Section 6.4 (a) and (b)
hereof, in connection with any underwritten or best efforts registered offering
by the Parent of its equity securities pursuant to an effective registration
statement filed under the Securities Act, Seller (and any transferees) shall not
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose or transfer for value or otherwise agree
to engage in any of the foregoing transactions with respect to, any Stock
Consideration without the prior written consent of the Parent or its
underwriters. Such limitations shall be in effect for such period of time from
and after the effective date of such registration statement as may be requested
by the Parent or such underwriters; provided, however, that in no event shall
such period exceed one hundred-eighty (180) days (or such other period as may be
requested by the Company or an underwriter to accommodate regulatory
restrictions on (i) the publication or other distribution of research reports
and (ii) analyst recommendations and opinions, including, but not limited to,
the restrictions contained in NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or
any successor provisions or amendments thereto).

(f)            Seller and Parent agree that the provisions of Exhibit C annexed
hereto shall apply to the Stock Consideration.

6.5      Change in Control Payments. Notwithstanding anything in this Agreement
to the contrary, the Seller shall retain all liability with respect to, and
shall indemnify and hold harmless the Buyer, the Companies, and their respective
Affiliates, for, any change in control payment, severance payment, transaction
bonus, retention bonus or similar payment to which any director, member,
manager, employee or former employee of the Companies may be entitled in
connection with the transactions contemplated by this Agreement (whether
contingent or otherwise).

6.6      Tax Matters.

(a)            Intentionally omitted.

(b)           In the case of any taxable period that includes (but does not end
on) the Closing Date (a "Straddle Period"), the amount of any Taxes based on or
measured by income or receipts of the Companies and their Subsidiaries for the
portion of the Straddle Period ending on the Closing Date shall be determined
based on an interim closing of the books as of the close of business on the
Closing Date (and for such purpose, the taxable period of any partnership or
other pass-through entity in which the Companies or Subsidiaries holds a
beneficial interest shall be deemed to terminate at such time) and the amount of
other Taxes of the Companies for a Straddle Period that relates to the portion
of the Straddle Period ending on the Closing Date shall be deemed to be the
amount of such Tax for the entire taxable period multiplied by a fraction the
numerator of which is the number of days in the taxable period ending on the
Closing Date and the denominator of which is the number of days in such Straddle
Period.

(c)            From the date of this Agreement through and after the Closing
Date, the Seller shall prepare and file as required by applicable Law with the
appropriate taxing authority (or cause to be prepared and filed) in a timely
manner (i) all consolidated, combined, unitary, affiliated or similar Tax
Returns that include the Companies or any of their Subsidiaries, on the one
hand, and any Seller or any Affiliate, on the other hand, for all periods ending
on or prior to the Closing Date and (ii) all other Tax Returns of the Companies
and any of their Subsidiaries that are required to be filed on or prior to the
Closing Date and will provide Buyer such Tax Returns no later than 30 days prior
to the due date for filing such Tax Returns to provide Buyer with a meaningful
opportunity to analyze and comment on such Tax Returns and for such Tax Returns
to be modified, as appropriate, before filing. Seller will consider any comments
of Buyer relating to Tax Returns described in the preceding sentence.

(d)           Buyer shall prepare and file as required by applicable Law with
the appropriate taxing authority (or cause to be prepared and filed) in a timely
manner all Tax Returns of the Companies and their Subsidiaries, other than those
described in Section 6.6(c).  Buyer shall prepare any Tax Returns relating to
Taxes for which the Seller may have an indemnification obligation to Buyer under
this Agreement consistent with the Seller’ recent past practices, except as
otherwise required by applicable Law, and make any Tax Returns relating to Taxes
for which the Seller may have an indemnification obligation under this Agreement
available for review by the Seller no later than 30 days prior to the due date
for filing such Tax Returns to provide the Seller with a meaningful opportunity
to analyze and comment on such Tax Returns and for such Tax Returns to be
modified, as appropriate, before filing.  Buyer will consider any comments of
the Seller relating to Tax Returns described in the preceding sentence. 

(e)            After the Closing, Buyer and its Affiliates shall not amend any
Tax Return of the Companies or their Subsidiaries that could impact any Seller,
including any indemnification obligation of the Seller pursuant to this
Agreement, without the Seller’ consent, not to be unreasonably withheld;
provided however that Buyer and its Affiliates may file any such amendment that
is required by Law or regulation to be filed.

(f)            Buyer and the Seller shall (and shall cause their respective
Affiliates to) (i) provide the other party and its Affiliates with such
assistance as may be reasonably requested in connection with the preparation of
any Tax Return or any audit or other examination by any taxing authority or any
judicial or administrative proceeding relating to Taxes, which shall include
Buyer’s obligation to provide the Seller, consistent with past practice
(including with respect to timing for delivery), the information needed for the
preparation of all consolidated, combined, unitary, affiliated or similar Tax
Returns that include either of the Companies or any of their Subsidiaries, on
the one hand, and any Seller or any Seller Affiliate, on the other hand, through
the Closing Date and (ii) retain (and provide the other party and its Affiliates
with reasonable access to) all records or information which may be relevant to
such Tax Return, audit, examination or proceeding, provided that the foregoing
shall be done in a manner so as not to interfere unreasonably with the conduct
of the business of the parties.  The Seller shall not destroy any records or
information relating to any Tax compliance matter or Tax liability of the
Companies or any of their Subsidiaries without first notifying Buyer and
offering Buyer the opportunity to make copies or to take possession of such
records or information.  Notwithstanding the above, the Seller shall have no
obligation to share with Buyer any consolidated, combined or unitary return or
associated forms, documents or workpapers, that include the Seller or any Seller
Affiliate.

(g)           All refunds of Taxes (including interest actually received thereon
from a relevant taxing authority) paid prior to the Closing, or for which the
Seller have provided indemnification pursuant to this Agreement shall be for the
account of the Seller, and Buyer shall pay such amounts, less Buyer’s reasonable
out-of-pocket expenses, including professional fees, incurred in connection with
obtaining any such refund and less any Taxes incurred by Buyer, its Affiliates,
the Companies or any of their Subsidiaries in connection with the receipt of any
such refund or interest, to the Seller if such refunds are received by Buyer,
the Companies or any of their Subsidiaries.

(h)           All tax sharing agreements or similar agreements with respect to
or involving the Companies or any of their Subsidiaries shall be terminated as
of the Closing Date and, after the Closing Date, the Companies and their
Subsidiaries shall not be bound thereby or have any liability thereunder.

(i)             The Seller shall be liable for all transfer, documentary, sales,
use, stamp, registration, value added and other similar Taxes and fees
(including any penalties and interest) incurred in connection with transactions
contemplated by this Agreement (including any real property transfer tax and any
similar Tax) (“Transfer Taxes”) and Seller shall, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such Taxes,
fees and charges, and, if required by applicable law, Buyer will, and will cause
its affiliates to, join in the execution of any such Tax Returns and other
documentation.

6.7      Company Assets. Following Closing retirement of the Secured Note,
without the consent of Seller, Buyer and Parent shall preserve the assets of the
Companies and shall not transfer or assign assets of the Companies (other than
in the ordinary course of business) to Buyer or Parent, until or any Affiliate.

6.8        Drag Along Rights. If Stockholders of Parent (the “Selling
Stockholders”) holding a Stockholder Majority (as defined below) propose to sell
all their shares of Parent Common Stock to any unaffiliated or unrelated person
in an arm’s length transaction then the Selling Stockholders may elect to
require (a “Drag-Along Right”) that Seller sell all of his shares of the Parent
Common Stock in such sale transaction(s) for the same price per share as the
Selling Stockholders (a “Drag-Along Transaction”). If the Selling Stockholders
desire to exercise such Drag-Along Right, they shall give written notice to the
Seller of the proposed Drag-Along Transaction giving rise to the Drag-Along
Right at least twenty (20) days prior to the consummation thereof (a “Drag-Along
Notice”). The Drag-Along Notice shall set forth the principal terms of such
proposed transaction including the amount of Parent Common Stock to be sold by
the Selling Stockholders, the price per shares to be paid, the name and address
of the prospective buyer and any other material terms and conditions (in
reasonable detail) pertaining to such proposed transfer, including without
limitation, the proposed closing date (the “Drag-Along Terms”). If the Selling
Stockholders consummate the proposed transaction to which reference is made in
the Drag-Along Notice, the Seller shall be bound and obligated to sell all of
his Parent Common Stock in the proposed transaction on the same terms and
conditions as the Selling Stockholders. If properly exercised, the Seller is
hereby deemed to have consented to the transaction.

6.9         Tag Along. If Selling Stockholders holding a Stockholder Majority
propose to sell a number of shares equal to a Stockholder Majority to any
unaffiliated or unrelated person in an arm’s length transaction (a “Tag-Along
Transaction”) then the Selling Stockholders must give written notice to the
Seller of the proposed Tag-Along Transaction giving rise at least twenty (20)
days prior to the consummation thereof (a “Tag-Along Notice”). The Tag-Along
Notice shall set forth the principal terms of such proposed transaction
including the amount of Parent Common Stock to be sold by the Selling
Stockholders, the price per shares to be paid, the name and address of the
prospective buyer and any other material terms and conditions (in reasonable
detail) pertaining to such proposed transfer, including without limitation, the
proposed closing date (the “Tag-Along Terms”). Within twenty (20) days after
receipt of the Tag-Along Notice, Seller may elect by written notice to the
Selling Stockholders, to require that the Selling Stockholders include a pro
rata portion of Seller’s Parent Common Stock in the Tag-Along Transaction (the
“Tag-Along Right”). The purchaser shall have the right to either increase the
total number of shares of Parent Common Stock being purchased or reduce the
numbers of share being purchased form the Selling Stockholders by an amount
necessary to include Seller’s shares in the Tag-Along Transaction. If Seller
exercises its Tag-Along Right, the Selling Stockholders may not consummate the
proposed transaction to which reference is made in the Tag-Along Notice, without
including the Seller. Notwithstanding anything herein to the contrary, a
Tag-Along Transaction shall exclude a transaction in which an underwriter or
placement agent proposes to offer or sell any shares in an underwritten or best
efforts offering unless Seller shall have complied with the Registration
Provisions set forth on Exhibit C annexed hereto.

ARTICLE 7 

Survival; Indemnification

7.1      Intentionally omitted.

7.2      Survival of the Representations and Warranties. The representations and
warranties and indemnification obligations of the Seller, the Companies and
Buyer shall survive the Closing Date for a period of two (2) years from the
Closing Date; provided, however, that (i) the representations in Section 4.1
(Authorization; Enforceability), Section 4.2 (No Consent, Violation or
Conflict), Section 4.5 (Capitalization), Section 4.6 (Rights, Warrants,
Options), Section 5.1 (Organization), Section 5.2 (Authorization;
Enforceability); Section 5.3 (No Consent, Violation or Conflict), Section 5.7
(Capitalization) and 5.8 (Rights, Warrants, Options) shall survive indefinitely
and (ii) the representations and warranties set forth in Sections 5.16
(Compliance with Environmental Laws), 5.17 (Employment Matters) and 5.20 (Tax
Matters) shall survive the Closing Date until the expiration of the period
specified in the applicable statute of limitations.

7.3      General Release. Other than for obligations of any Company for payment
of the Purchase Price as set forth herein, Seller hereby unconditionally and
irrevocably releases and forever discharges, effective as of the Closing Date,
each Company and its officers, directors, employees and agents, from any and all
rights, claims, demands, judgments, obligations, liabilities and damages,
whether accrued or unaccrued, asserted or unasserted, and whether known or
unknown, relating to such Company which ever existed, now exist, or may
hereafter exist, by reason of any tort, breach of contract, violation of law or
other act or failure to act which shall have occurred at or prior to the Closing
Date, or in relation to any other liabilities of such Company to Seller. None of
the information supplied by each Company or its professional advisors to Seller
or its agents, representatives or advisors in connection with the
representations and warranties set forth in Article 5 or otherwise in relation
to the business or affairs of such Company shall be deemed a representation,
warranty or guarantee of its accuracy by such Company to such Seller, and such
Seller waives any claims against such Company which it might otherwise have in
respect of it.

7.4      Indemnification.

(a)            Indemnification by the Seller. The Seller agrees to defend,
indemnify and hold harmless Parent, Buyer and their respective Affiliates
(which, after the Closing shall include the Companies) and their respective
directors, officers, employees and agents from, against and in respect of, the
full amount of:

(i)           (A) any and all actions, suits, proceedings, demands, liabilities,
damages, claims, deficiencies, fines, penalties, interest, assessments,
judgments, losses, Taxes, costs and expenses, including, without limitation,
reasonable fees and disbursements of counsel (collectively, the “Indemnified
Losses”) arising from or in connection with any breach or violation of any of
the representations and warranties of any Company or Seller contained in this
Agreement or (B) any and all Indemnified Losses arising from or in connection
with any breach or violation of the covenants or agreements of Seller or any
Company contained in this Agreement;

(ii)           any and all Indemnified Losses for Taxes attributable to all Tax
years or portions thereof ending on or prior to the Closing Date imposed on any
Company;

(iii)           any and all capital or other Taxes related to or arising from
the sale and transfer of shares contemplated hereby by reason of any Liability
of any Company or its shareholders for such Taxes as assessed by any taxing
authority against Seller and/or any Company either before or after the Closing
Date;

(iv)           any and all Indemnified Losses related to or arising from claims
for breach of contract existing on or prior to the Closing Date, and/or which
are brought after the Closing Date for acts and omissions of any Company or
Seller, which occurred prior to the Closing Date;

(v)           any and all Indemnified Losses related to or arising from any
products delivered by either Company prior to the Closing Date, including
without limitation, Indemnified Losses for product recalls, product defects,
warranty claims, personal injury or death;

(vi)           any and all Indemnified Losses which relate to any legal and/or
governmental proceedings which are not set forth on Schedule 5.12(a) and (b),
existing on or prior to the Closing Date, and/or which are brought after the
Closing Date for acts and omissions of any Company or Seller, which occurred
prior to the Closing Date; and

(vii)           any and all Indemnified Losses not reserved for on the Closing
Trial Balance related to the business or operations of any Company prior to the
Closing Date.

(b)           Indemnification by Buyer. Buyer agrees to defend, indemnify and
hold harmless Seller and its Affiliates and their respective directors,
officers, employees and agents from, against and in respect of, the full amount
of

(i)           any and all Indemnified Losses arising from or in connection with
any breach or violation of any of the representations or warranties of Buyer
contained in this Agreement, and

(ii)           any and all Indemnified Losses arising from or in connection with
any breach or violation of any of the covenants or agreements of Buyer contained
in this Agreement.

(c)            Indemnification Procedure. Any party seeking indemnification
under this Agreement (the “Indemnified Party”) will give prompt written notice
to the party or parties against whom indemnity is sought (the “Indemnifying
Party”) of any Indemnified Losses which it discovers or of which it receives
notice after the Closing, stating the nature, basis (including the section of
this Agreement that has been or will be breached, if any, and the facts giving
rise to the claim that a breach has or will occur), and (to the extent known)
amount thereof; provided, however, that no delay on the part of Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying Party
from any liability hereunder unless (and then solely to the extent) the
Indemnifying Party is prejudiced by such delay.

(d)           Indemnification Procedure as to Third Party Claims.

(i)           Promptly after any Indemnified Party obtains knowledge of the
commencement of any third party claim, action, suit or proceeding or of the
occurrence of any event or the existence of any state of facts which may become
the basis of a third party claim (any such claim, action, suit or proceeding or
event or state of facts being hereinafter referred to in this Section 7.4 as a
“Claim”), in respect of which an Indemnified Party is entitled to
indemnification under this Agreement, such Indemnified Party shall promptly
notify the Indemnifying Party of such Claim in writing; provided, however, that
any failure to give notice (A) will not waive any rights of the Indemnified
Party except to the extent that the rights of the Indemnifying Party are
actually prejudiced thereby and (B) will not relieve the Indemnifying Party of
its obligations as hereinafter provided in this Section 7.4 after such notice is
given. With respect to any Claim as to which such notice is given by the
Indemnified Party to the Indemnifying Party, the Indemnifying Party will,
subject to the provisions of Section 7.4(d)(ii), assume the defense or otherwise
settle such Claim with counsel reasonably satisfactory to the Indemnified Party
and experienced in the conduct of Claims of that nature at the Indemnifying
Party’s sole risk and expense, provided, however, that the Indemnified Party (1)
shall be permitted to join the defense and settlement of such Claim and to
employ counsel reasonably satisfactory to the Indemnifying Party, and at the
Indemnified Party’s own expense, (2) shall cooperate fully with the Indemnifying
Party in the defense and any settlement of such Claim in any manner reasonably
requested by the Indemnifying Party; and (3) shall not compromise or settle any
such Claim without the prior written approval of the Indemnifying Party;

(ii)           If (A) the Indemnifying Party fails to assume the defense of such
Claim or, having assumed the defense and settlement of such Claim, fails
reasonably to contest such Claim in good faith, or (B) the remedy sought by the
claimant with respect to such Claim is not solely for money damages, the
Indemnified Party, without waiving its right to indemnification, may, but is not
required to, assume the defense and settlement of such Claim, provided, however,
that (1) the Indemnifying Party shall be permitted to join in the defense and
settlement of such Claim and to employ counsel at its own expense, (2) the
Indemnifying Party shall cooperate with the Indemnified Party in the defense and
settlement of such Claim in any manner reasonably requested by the Indemnified
Party, and (3) the Indemnified Party shall not settle such Claim without the
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.

(iii)           As used in this Section 7.4, the terms Indemnified Party and/or
Indemnifying Party shall be deemed to include the plural thereof where the
rights or obligations of more than one Indemnified Party and/or Indemnifying
Party may be involved.

(e)            Tax-free Indemnification Payments. All sums payable by an
Indemnifying Party as indemnification under this Section 7.4 shall be paid free
and clear of all deductions or withholdings (including any taxes or governmental
charges of any nature) unless the deduction or withholding is required by law,
in which event or in the event the Indemnified Party shall incur any liability
for taxes chargeable or assessable in respect of any such payment, the
Indemnifying Party shall pay such additional amounts as shall be required to
cause the net amount received by the Indemnified Party to equal the full amount
which would otherwise have been received by it had no such deduction or
withholding been made or no such liability for taxes been incurred.

(f)            No Contribution. The obligations of the Seller to indemnify
Parent and Buyer pursuant to the terms of this Agreement are primary obligations
of the Seller, subject to the limitations set forth herein. The Seller hereby
waive any right to seek or obtain indemnification or contribution from the
Companies for Indemnified Losses as a result of any breach by the Companies of
any representation, warranty or covenant contained in this Agreement.

7.5      Limitations on Liabilities.

(a)            Notwithstanding anything to the contrary contained herein, in no
event shall the aggregate sums payable by the Seller under Section 7.4 (other
than sums payable as a result of fraud or breaches of the representations and
warranties set forth in the Sections enumerated in Section 7.2) exceed the
aggregate amount of the Cash Purchase Price plus the amount of the Seller Note
issued at Closing.

(b)           Notwithstanding anything to the contrary contained herein, no
party shall be obligated to indemnify and hold harmless any other under Section
7.4 for breaches of representations and warranties unless and until all
Indemnified Losses in respect of which such party is obligated to provide
indemnification exceed Twenty-Five Thousand Dollars (US$25,000) (the “Basket
Amount”) following which (subject to the provisions of this Section 7.5) such
party shall be obligated to indemnify and hold harmless, the other party for all
such Indemnified Losses (not merely the amount by which the Indemnified Losses
exceed the Basket Amount); provided however that the Basket Amount shall not
apply to indemnity obligations for Indemnified Losses arising as a result of
fraud or breaches of the representations and warranties in Sections 5.7, 5.8.
and 5.27.

(c)            Notwithstanding anything to the contrary set forth herein, none
of the limitations on indemnification set forth in this Section 7.5 shall apply
to matters relating to intentional or fraudulent breaches, violations or
misrepresentations.

ARTICLE 8 

interim covenants

8.1      Interim Operations of the Companies.

(a)            Each Company and Seller covenants and agrees that, from the date
hereof until the Closing Date each Company shall operate the business in
accordance with its ordinary course and past practice. In addition during the
period commencing on the date hereof and until the Closing Date, each Company
shall and Seller shall cause such Company to, except to the extent Buyer
specifically gives its prior written consent to the contrary (provided Seller
acknowledges agrees that Buyer’s consent shall not be provided and payments not
allowed under the provisions of (iv), (ix) and (xii) if there is an Estimated
Working Capital Deficiency Amount and any such payments are not made in the
ordinary course consistent with past practice or if such payments in the
aggregate exceed any Estimated Working Capital Excess Amount):

(i)            use its best efforts to preserve intact its business organization
and the goodwill of its customers, suppliers and others having business
relations with it;

(ii)            use its best efforts to keep available to Buyer the services of
such Company’s officers, employees, independent contractors and agents;

(iii)            promptly furnish to Buyer a copy of any correspondence received
from or delivered to any governmental authority;

(iv)            maintain and keep its properties and assets in the same repair
and condition as they were on the date of this Agreement;

(v)            continue and maintain the approval process in the ordinary course
of business with respect to the Products and any products being developed by
such Company; and

(vi)            continuously maintain insurance coverage substantially
equivalent to the insurance coverage in existence on the date of this Agreement.

(b)           Additionally, during the period from the date of this Agreement to
the Closing Date, except with the prior consent of Parent and Buyer, no Company
shall and Seller shall not permit such Company to, directly or indirectly:

(i)           amend or otherwise change such Company’s Organizational Documents;

(ii)           issue, sell or authorize for issuance or sale, shares of any
class of its securities (including, but not limited to, by way of share split or
dividend) or any subscriptions, options, warrants, rights or convertible
securities, or enter into any agreements or commitments of any character
obligating it to issue or sell any such securities;

(iii)           redeem, purchase or otherwise acquire directly or indirectly any
shares of its authorized share capital or any option, warrant or other right to
purchase or acquire any such shares;

(iv)           declare or pay any dividend or other distribution;

(v)           sell, transfer, surrender, abandon or dispose of any of its assets
or property rights (tangible or intangible), except for sales or dispositions of
inventory in the ordinary course of business consistent with past practice;

(vi)           grant, make or subject itself or any of its assets or properties
to any Lien;

(vii)           create, incur or assume any liability or indebtedness which
would remain with such Company after the Closing Date, except in the ordinary
course of business consistent with past practice;

(viii)           enter into, amend or terminate any Contract;

(ix)           commit to make any capital expenditures in excess of
US---$10,000, which would be payable by such Company after the Closing Date;

(x)           grant any guaranty;

(xi)           waive, release, assign, settle or compromise any material claim
or litigation;

(xii)           except as required by Law, increase the compensation payable or
to become payable to directors, officers, employees, consultants or agents or
grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with any of the foregoing Persons or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, share option, restricted share, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any of
the foregoing Persons;

(xiii)           acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization, Person or any division
thereof or any assets;

(xiv)           alter the manner of keeping its books, accounts or records, or
change in any manner the accounting practices therein reflected;

(xv)           make any Tax election or settle or compromise any material
federal, state or local or federal income Tax Liability;

(xvi)           change its accounting practices, methods or assumptions or write
down any of its assets;

(xvii)           enter into any commitment or transaction, which would survive
the Closing Date, except in the ordinary course of business consistent with past
practice;

(xviii)           accelerate, terminate, modify or cancel any Contract;

(xix)           grant any license or sublicense of any right under or with
respect to any Intellectual Property or disclose any proprietary or confidential
information to any third party;

(xx)           take or omit to take any action which would render any of such
Company’s or any of any Seller’s representations or warranties untrue or
misleading, or which would be a breach of any of such Company’s or any Seller’s
covenants;

(xxi)           enter into any Contract, transaction or arrangement with any
Affiliate;

(xxii)           take any action which could have a Material Adverse Effect; or

(xxiii)           agree, whether in writing or otherwise, to do any of the
foregoing.

8.2      Maintenance of Personnel. During the period from the date of this
Agreement to the Closing Date, each Company and Seller agree to cooperate and
provide adequate personnel to permit the conduct of the activity contemplated in
Section 8.1(a)(i).

8.3      Consent of Governmental Authorities and Others. Each of Buyer, on the
one hand, and each Company and Seller, on the other, agree to file, submit or
request (or cause to be filed, submitted or requested) promptly after the date
of this Agreement and to prosecute diligently any and all (a) applications or
notices required to be filed or submitted to any governmental or regulatory
authorities, and (b) in the case of each Company, requests for consents and
approvals of Persons required to be obtained in connection with the transactions
contemplated by this Agreement. Each of Buyer, on the one hand, and each Company
and Seller on the other, shall promptly make available to the other or to a
relevant governmental authority, as the case may be, such information as each of
them may reasonably request relative to its business, assets and property as may
be required by each of them to prepare and file or submit such applications and
notices and any additional information requested by any governmental authority,
and shall update by amendment or supplement any such information given in
writing. Each of Buyer on the one hand and each Company and Seller on the other,
represent and warrant to the other that such information, as amended or
supplemented, shall be true in all material respects and not misleading.

8.4      Due Diligence Review. Each Company shall (and shall cause its
directors, officers, employees, auditors, counsel and agents to) afford Buyer
and Buyer’s officers, employees, auditors, counsel and agents reasonable access
at all reasonable times to its properties, offices, and other facilities, to its
officers and employees and to all books and records, and shall furnish such
persons with all financial, operating and other data and information as may be
requested. Neither the due diligence investigation made by Buyer in connection
with the transactions contemplated hereby nor information provided to or
obtained by Buyer shall affect any representation or warranty in this Agreement.

8.5      Exclusivity. Except for the transactions contemplated by the
Transaction Documents, unless and until this Agreement shall have been
terminated, Seller will not (and Seller will not cause or permit each Company
to) (i) solicit, initiate, or encourage the submission of any proposal or offer
from any Person relating to the acquisition of any shares or other voting
securities, or any substantial portion of the assets, of either Company
(including any acquisition structured as a merger, consolidation, or share
exchange), (ii) participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing or enter into any
agreement related to any of the foregoing, or (iii) except as required by law,
disclose any information not customarily disclosed to any Person concerning the
business and properties of either Company, afford to any Person (other than
Buyer or its designees) access to the properties, books or records of either
Company or otherwise assist or encourage any Person, in connection with any of
the foregoing. Seller will notify Buyer immediately if any Person makes any
indication of interest, proposal, offer, inquiry, or contract with respect to
any of the foregoing.

8.6      Debt. On or prior to the Closing, each Company shall have eliminated
any and all debt, including that certain loan from Seller to Holdings in the
estimated amount of $936,271.47 which shall be replaced with the Secured Note
and Floating Charge Agreement at Closing pursuant to a Secured Note and Floating
Charge Agreement substantially in the form of Exhibit B annexed hereto.

8.7      Escrow Agreement. At the Closing, Seller, Buyer and the Escrow Agent
shall execute and deliver the Escrow Agreement in form and substance reasonably
acceptable to the parties.

8.8      Notice of Developments. During the period from the date of this
Agreement to the Closing Date, each party will give prompt written notice after
discovery thereof to the others of any material adverse development causing a
breach of any of such party’s representations, warranties and covenants set
forth herein. No disclosure by any party pursuant to this Section 8.8, however,
shall be deemed to amend or supplement the Disclosure Schedules or to prevent or
cure any misrepresentation or breach of warranty.

8.9      Delivery of Audited Financial Statements; Closing Trial Balance. On or
prior to the Closing Date, unless waived by the Parties, the Companies shall
have prepared and delivered to Parent US GAAP audited financial statements for
the Companies prepared by a PCAOB (Public Company Accounting Oversight Board)
firm in such form and for such periods as is required to be filed in a Current
Report on Form 8-K by Parent to be filed with the SEC following Closing (the
“Audited Financial Statements”).

ARTICLE 9 

Conditions Precedent; Termination

9.1      Conditions Precedent to the Obligations of Buyer and Parent. The
obligations of Buyer and Parent to consummate the transactions contemplated by
this Agreement are subject to the satisfaction at or prior to the Closing of the
following conditions:

(a)            Representations and Warranties True. The representations and
warranties of the Seller and the Companies contained in this Agreement, as
excepted in the relevant Disclosure Schedules, shall be true and correct in all
material respects (except for representations and warranties which are by their
terms qualified by materiality, which shall be true and correct to the extent of
such materiality) as of the Closing Date with the same force and effect as
though made on and as of such date and shall have been true as of the date
hereof.

(b)           Covenants Performed. The covenants of the Seller and the Companies
contained in this Agreement to be performed or complied with on or before the
Closing Date shall have been duly performed or complied with.

(c)            No Material Adverse Effect. There shall not have occurred any
Material Adverse Effect, the impact of which the parties have not been able to
resolve to the satisfaction of the parties, acting in good faith and in a
commercially reasonable manner.

(d)           Company’s Certificate. Each Company shall have delivered to Buyer
a certificate executed by an authorized representative of such Company, on
behalf of such Company and of Seller, dated the Closing Date, certifying in such
detail as Buyer may reasonably request, that the conditions specified in this
Section have been fulfilled.

(e)            No Litigation. No litigation, arbitration or other proceeding
shall be pending or threatened by or before any court, arbitration panel or
governmental authority; no law or regulation shall have been enacted after the
date of this Agreement; and no judicial or administrative decision shall have
been rendered; in each case, which enjoins, prohibits or materially restricts,
or seeks to enjoin, prohibit or materially restrict, the consummation of the
transactions contemplated by this Agreement.

(f)            Consents. Buyer, Seller and each Company shall have obtained all
authorizations, waivers, consents and approvals of, and made all filings,
applications and notices with, Persons which are necessary or advisable to
consummate the transactions contemplated by this Agreement, each of which shall
have been obtained without the imposition of any adverse term or condition.

(g)           Organizational Documents. The Seller shall have delivered to Buyer
certified Organizational Documents and good standing certificates for each
Company.

(h)           Escrow Agreement. The Seller and the Escrow Agent shall have
executed and delivered to Buyer the Escrow Agreement.

(i)             Delivery of Audited Financial Statements; Closing Trial Balance.
The Sellers shall have delivered the Audited Financial Statements and the
Closing Trial Balance, which shall not reflect any debt.

(j)             Employment. The Chief Executive Officer shall be subject to an
agreement with Holdings in form and substance satisfactory to Parent providing
for the continued services of the Chief Executive Officer for protection from
disclosure of confidential information, protection of intellectual property and
trade secrets, compliance with law, and non-competition substantially on the
terms applicable to Seller herein, for a minimum term of 12 months.

(k)           Satisfactory Due Diligence. The Buyer and Parent shall have
completed and be satisfied in all respects with, the results of their ongoing
due diligence investigation of the business, assets, operations, properties,
financial condition, contingent liabilities, prospects and material agreements
of the Companies.

(l)             Dr. Goggle Business. Seller and Holdings shall have caused to be
cancelled and terminated all licenses of any Intellectual Property, including
without limitation that certain Non-Exclusive Field Of Use License Agreement by
and between Holdings and Doctor Goggle SEZC, a Cayman Islands corporation, (“Dr.
Goggle”) and the cessation and termination of Dr. Goggle business, and winding
up and liquidation of such business on or prior to December 31, 2020.

9.2      Conditions Precedent to the Obligations of the Seller. The obligations
of the Seller to consummate the transactions contemplated by this Agreement are
subject to the satisfaction at or prior to the Closing of the following
conditions:

(a)            Representations and Warranties True. The representations and
warranties of Parent and Buyer contained in this Agreement or in any certificate
or other document delivered pursuant to this Agreement shall be true and correct
in all material respects (except for representations and warranties which are by
their terms qualified by materiality, which shall be true and correct to the
extent of such materiality) as of the Closing Date with the same force and
effect as though made on and as of such date and shall have been true as of the
date hereof.

(b)           Covenants Performed. The covenants of Parent and Buyer contained
in this Agreement to be performed or complied with on or before the Closing Date
shall have been duly performed or complied with.

(c)            No Litigation. No litigation, arbitration or other proceeding
shall be pending or threatened by or before any court, arbitration panel or
governmental authority; no law or regulation shall have been enacted after the
date of this Agreement; and no judicial or administrative decision shall have
been rendered; in each case, which enjoins, prohibits or materially restricts,
or seeks to enjoin, prohibit or materially restrict, the consummation of the
transactions contemplated by this Agreement.

(d)           Buyer’s Certificate. Parent and Buyer shall have delivered to the
Seller a certificate executed by an authorized officer of Buyer dated the
Closing Date certifying that the conditions specified in this Section above have
been fulfilled.

(e)            Escrow Agreement. Parent and Buyer shall have executed and
delivered to the Seller the Escrow Agreement.

(f)            Holdings shall have executed and delivered the Secured Note.

9.3      Termination.

(a)            Anything herein or elsewhere to the contrary notwithstanding,
this Agreement may be terminated at any time before the Closing Date only as
follows:

(i)            by mutual consent of the Seller and Parent or if Closing is
prohibited by change in law;

(ii)            by Buyer and Parent, if there has been a material breach by any
Seller at any time before the Closing of any representation, warranty, covenant
or agreement contained in this Agreement that is not curable or, if curable, is
not cured within thirty days or such other time as may be agreed by the parties
in writing after written notice of such breach is given by Buyer to the party
committing such breach;

(iii)            by any Seller if there has been a material breach by Buyer or
Parent at any time before the Closing of any representation, warranty, covenant
or agreement contained in this Agreement that is not curable or, if curable, is
not cured within thirty days after written notice of such breach is given by
such Seller to the party committing such breach;

(iv)            by Buyer and Parent, on the one hand, or any Seller, on the
other hand, upon notice given to all parties if the Closing shall not have taken
place within ninety (90) days of the date this Agreement has been fully executed
by all parties hereto; or

(v)            by Buyer and Parent, on the one hand, or any Seller, upon notice
given to all parties if any court (i) shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable or (ii)
shall have failed to issue an order, decree or ruling or to take any other
action, as applicable, and such denial of a request to issue such order, decree,
ruling or take such other action shall have become final and nonappealable, in
the case of each of (i) and (ii) which is necessary to fulfill the conditions
set forth in Article 9; provided, however, that the right to terminate this
Agreement under this Section 9.3 shall not be available to any party whose
failure to comply with Section 8.3 has been the cause of such action or
inaction.

(b)           In the event of the termination of this Agreement as provided in
Section 9.3(a), this Agreement shall forthwith become wholly void and of no
further force and effect (except as set forth in this Section 9.3, Sections 7.4,
7.5, 10.7, 10.11, 10.12, 10.13, 10.14 and 10.15).

9.4           No Waiver. Notwithstanding anything in this Agreement to the
contrary, in the event that Buyer consummates the transactions contemplated
hereunder and effectuates the Closing, such actions shall in no way and at no
time be considered a waiver or release of any breach of any representation,
warranty or covenant of any Seller or any Company, including, without
limitation, the right to indemnification pursuant to Article 7.

ARTICLE 10 

Miscellaneous

10.1   Notices. Any notice or other communication under this Agreement shall be
in writing and shall be delivered personally or sent by certified mail, return
receipt requested, postage prepaid, or sent by facsimile or prepaid overnight
courier to the parties at the addresses set forth below their names on the
signature pages of this Agreement (or at such other addresses as shall be
specified by the parties by like notice). Such notices and other communications
shall be deemed given when actually received or (a) in the case of delivery by
overnight service with guaranteed next day delivery, the next day or the day
designated for delivery, (b) in the case of facsimile, the date upon which the
transmitting party received confirmation of receipt by facsimile, telephone or
otherwise. A copy of any notices delivered to Parent of Buyer shall also be sent
to: Red Cat Holdings, Inc. Attn: Jeffrey Thompson, CEO, Jeff@Redcat.red. A copy
of any notices delivered to the Seller, or the Companies prior to the Closing,
shall be sent to Greg French, theshark@fatshark.com.

10.2   Entire Agreement. This Agreement, together with the Escrow Agreement, its
schedules and exhibits contain every obligation and understanding between the
parties relating to the subject matter hereof, and merges all prior discussions,
negotiations and agreements, if any, between them, and none of the parties shall
be bound by any representations, warranties, covenants, or other understandings,
other than as expressly provided or referred to herein or therein.

10.3   Assignment. This Agreement may not be assigned by any party without the
written consent of the other party; provided that Buyer may assign this
Agreement to one of Buyer’s Affiliates, whether such Affiliate currently exists
or is formed in the future, so long as such Affiliate of Buyer agrees in writing
to be bound by the terms of this Agreement and Buyer agrees to guarantee such
Affiliate’s obligations under this Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, heirs, personal representatives, legal representatives, and
permitted assigns.

10.4   No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any Person
other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.

10.5   Waiver and Amendment. Any representation, warranty, covenant, term or
condition of this Agreement which may legally be waived, may be waived at any
time by the party entitled to the benefit thereof, and any term, condition or
covenant hereof may be amended by the parties hereto at any time by written
agreement. Any such waiver or amendment shall be evidenced by an instrument in
writing executed on behalf of the appropriate party by a person who, to the
extent applicable, has been authorized by its board of directors to execute
waivers, extensions or amendments on its behalf. No waiver by any party hereto,
whether express or implied, of its rights under any provision of this Agreement
shall constitute a waiver of such party’s rights under such provisions at any
other time or a waiver of such party’s rights under any other provision of this
Agreement. No failure by any party hereto to take any action against any breach
of this Agreement or default by another party shall constitute a waiver of the
former party’s right to enforce any provision of this Agreement or to take
action against such breach or default or any subsequent breach or default by
such other party.

10.6   Severability. In the event that any one or more of the provisions
contained in this Agreement shall be declared invalid, void or unenforceable,
the remainder of the provisions of this Agreement shall remain in full force and
effect, and such invalid, void or unenforceable provision shall be interpreted
as closely as possible to the manner in which it was written.

10.7   Expenses. Each party agrees to pay, without right of reimbursement from
the other party, the costs (hereafter referred to as “Costs”) incurred by it
incident to the performance of its obligations under this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, costs incident to the preparation of this Agreement, and the fees
and disbursements of counsel, accountants and consultants employed by such party
in connection herewith. The Seller covenants to Buyer that in no event shall any
Seller Costs be paid by either Company.

10.8   Headings and References. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of any provisions of this Agreement. References in this Agreement
to clauses, subclauses, sections, articles or schedules are references to
clauses, subclauses, sections, articles or schedules of this Agreement so
numbered.

10.9   Time of Essence. With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.

10.10     Counterparts. This Agreement may be executed in any number of
counterparts (including facsimile or PDF), each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

10.11     Litigation; Prevailing Party. In the event of any litigation with
regard to this Agreement, the prevailing party shall be entitled to receive from
the non-prevailing party and the non-prevailing party shall pay upon demand all
reasonable fees and expenses of counsel for the prevailing party; provided,
however, to the extent that both parties prevail on claims filed against the
other, in a consolidated action, then the aggregate amount of fees and expenses
of counsel to both parties shall be allocated between Buyer and the Seller so
that each party’s aggregate share of such fees and expenses bears the same
proportion to the total amount of such fees and expenses as the amount awarded
each party on their prevailing claim bears to the total amount awarded in the
litigation on all prevailing claims and any party that has paid less than its
allocated expenses shall immediately remit to the other party the difference
between the amount allocated and the amount previously paid.

10.12     Governing Law. This Agreement has been entered into and shall be
construed and enforced in accordance with the laws of the State of Delaware,
without reference to the choice of law principles thereof.

10.13     Jurisdiction and Venue. This Agreement shall be subject to the
exclusive jurisdiction of the U.S. District Court for the District of Delaware.
The parties to this Agreement agree that any breach of any term or condition of
this Agreement shall be deemed to be a breach occurring in the State of Delaware
by virtue of a failure to perform an act required to be performed in the State
of Delaware and irrevocably, unconditionally and expressly agree to submit to
the jurisdiction of the U.S. District Court for the District of Delaware sitting
in Wilmington, Delaware for the purpose of resolving any disputes among the
parties relating to this Agreement or the transactions contemplated hereby. The
parties irrevocably waive, to the fullest extent permitted by law, any objection
or immunities to jurisdiction which they may now or hereafter have (including
sovereign immunity, immunity to pre-judgment attachment, post-judgment
attachment and execution) to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, or any judgment entered by any court in respect hereof
brought in the State of Delaware, and further irrevocably waive any claim that
any suit, action or proceeding brought in Delaware has been brought in an
inconvenient forum. To the extent that any party hereto has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, it hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the transactions contemplated hereby to the
extent permitted by law.

10.14     Publicity. The parties shall agree to the content of any press release
or other public announcement concerning this Agreement or the transactions
contemplated hereby before issuing the same. Nothing contained herein shall
prevent any party from at any time furnishing any information to any
governmental authority which it is by law or otherwise so obligated to disclose
or from making any disclosure which its counsel deems necessary or advisable in
order to fulfill such party’s disclosure obligations under applicable U.S. law
or the rules of the any stock exchange to which the party is subject.

10.15     Construction. The language in all parts of this Agreement shall in all
cases be construed simply, according to its fair meaning, and not strictly for
or against any of the parties. Without limitation, there shall be no presumption
against any party on the ground that such party was responsible for drafting
this Agreement or any part thereof, and any rule of law, or any legal decision
that would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived.

(Signature Page Follows)

 

 

NOW, THEREFORE, the parties hereto have each executed and delivered this
Agreement as of the day and year first above written.

Buyer:

 

FS ACQUISITION CORP.

 

 

By:                                                     

Name: Jeffrey Thompson

Title: Chief Executive Officer

Address:

 

PARENT:

RED CAT HOLDINGS, INC.

 

 

By:                                                      

Name: Jeffrey Thompson

Title: Chief Executive Officer

Address:

 

Companies:

 

FAT SHARK HOLDINGS, LTD.

 

 

By:                                                     

Name: Allan Evans

Title: Chief Executive Officer

Address:

 

FAT SHARK Trading LTD.

 

 

By:                                                     

Name: Allan Evans

Title: Chief Executive Officer

Address:

 

FAT SHARK TECHNOLOGY SEZC, LTD

 

 

By:                                                     

Name: Allan Evans

Title: Chief Executive Officer

Address:

 

 

Seller:

GREG FRENCH, individually

 

 

_____________________________

 

 

 

 

 

 

 

 

 

 

DISCLOSURE SCHEDULES

See attached.

 

 

Exhibit A

 

 

EQITY STOCK TRANSFER ESCROW AGREEMENT

This Escrow Agreement dated September __, 2020 (this “Escrow Agreement”), is
entered into by and among:

 

1.Red Cat Holdings, Inc., a Nevada corporation (“RC”);

 

2.Gregory French., a Canadian citizen (the “Seller”);

 

3.Equity Stock Transfer, LLC, as escrow agent (“Escrow Agent”).

 

RC and Seller are each a “Party” and together are “Parties” and capitalized
terms used but not otherwise defined herein shall have the meanings ascribed to
them in the SPA (defined below).

 

RECITALS

 

WHEREAS, the Parties entered into that certain Securities Purchase Agreement
pursuant to which Seller agreed to sell, and Parent and Buyer agreed to
Purchase, one hundred (100%) percent of the issued and outstanding shares of Fat
Shark Holdings, Ltd., a Cayman exempted corporation, dated as of the date
hereof. (the “SPA”);

 

WHEREAS, capitalized terms not otherwise defined herein shall have the meaning
set forth in that certain SPA;

 

WHEREAS, Section 2.2 of the SPA provides that at Closing, RC shall deliver to
the Escrow Agent, Fifteen (15%) percent of the Stock Consideration (the “Escrow
Shares”);

 

WHEREAS, the Parties hereto acknowledge that the Escrow Agent is not a party to,
is not bound by, and has no duties or obligations under the SPA, that all
references in this Escrow Agreement to the SPA are for convenience or clarity,
and that the Escrow Agent shall have no implied duties beyond the express duties
set forth in this Escrow Agreement; and

 

WHEREAS, the Parties have agreed to appoint Escrow Agent to hold the Escrow
Shares in escrow, and Escrow Agent agrees to hold and distribute the Escrow
Shares, in accordance with the terms and provisions of this Escrow Agreement.

 

NOW, THEREFORE, in consideration of the promises and agreements of the Parties
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties and Escrow Agent agree as follows:

 

ARTICLE 1 ESCROW DEPOSIT

 

Section 1.1     Appointment of Escrow Agent. The Parties hereby designate and
appoint Escrow Agent as their agent to receive, hold in escrow, and disburse the
Escrow Shares in accordance with the term of this Escrow Agreement, and Escrow
Agent accepts such appointment.

 

Section 1.2     Receipt and Deposit of the Escrow Shares; Commencement of
Duties; Dividends and Distributions; Certain Rights of Seller.

 

(a)            Receipt and Deposit of the Escrow Shares and Blank Stock Powers;
Commencement of Duties.

 

(i)                  Upon execution hereof and pursuant to the SPA, RC shall
deliver to Escrow Agent stock certificates (the “Certificates”) representing the
Escrow Shares and Seller shall deliver in the name of Seller fully executed and
notarized blank stock powers with respect to the Escrow Shares that are duly
endorsed in form for transfer to RC together with a copy of the passport of
Seller (the “Stock Powers”), and Escrow Agent shall promptly acknowledge receipt
of the Certificates and the Stock Powers. Upon receipt of the Escrow Shares and
the Stock Powers by the Escrow Agent, the duties and obligations of the Escrow
Agent and the Parties to this Agreement shall commence.

 

(ii)                The Escrow Shares shall be delivered by RC to Escrow Agent
free and clear of all liens, claims and encumbrances (except as may be created
by this Escrow Agreement and the SPA or otherwise provided for by state and
federal securities laws). Until the Termination Date, Seller will not sell,
assign, transfer or otherwise dispose of any part of the Escrow Shares.

 

(b)           Dividends and Distributions. All dividends and distributions
declared by RC on the Escrow Shares and payable to RC’s shareholders of record
(“Dividends and Distributions”) at any time after the date hereof until the
Termination Date (as defined below), shall be payable to Seller as record holder
of the Escrow Shares, and will not be deposited with Escrow Agent. If RC
declares a stock split, subdivision, combination, reclassification or any other
change in its capital structure affecting the Escrow Shares, Fifteen (15%)
percent of the certificates or other instruments relating thereto shall be
immediately deposited by RC with Escrow Agent as additional Escrow Shares to be
held and distributed by Escrow Agent in accordance with this Escrow Agreement.

 

(c)            Certain Rights of Seller. Notwithstanding anything to the
contrary contained herein and for so long as the Escrow Shares remain in escrow,
Seller shall have the right to (i) vote all Escrow Shares that are not disbursed
to RC pursuant to the terms hereof, (ii) receive any dividends and distributions
in respect of the Escrow Shares that are not disbursed to RC pursuant to the
terms hereof, and (iii) to exercise any and all other rights of a shareholder of
RC with respect to the Escrow Shares that are not disbursed to RC pursuant to
the terms hereof; provided however, that Seller may not sell the Escrow Shares
to third parties until the Termination Date

 

(d)           Deposit of Escrow Shares. Seller and RC agree that Escrow Agent,
in connection with any Certificate deposited pursuant to Section 1.2(a), shall
have

(i)  no responsibility to monitor the value of the Escrow Shares; (ii) no
responsibility to collect Dividends and Distributions; (iii) no responsibility
to sell or otherwise trade the Escrow Shares, but shall otherwise deliver the
Escrow Shares on written instructions only; and (iv) no responsibility to ensure
the legality of the registration of the Escrow Shares.

 

Section 1.3     Indemnified Losses and Dispute Resolution.

 

(a)            The Escrow Shares shall provide non-exclusive security for any
amounts due as a result of a claim asserted with respect to any breach of any
representation or warranty, covenant of condition by Seller or Companies in the
SPA.

 

(b)           Seller’s liability to RC for amounts due as a result of the
indemnification obligations in the SPA shall not be limited to amounts of the
Escrow Shares in Escrow and Seller shall be responsible for amounts due as a
result of its obligations under the terms of the SPA in excess of the amount of
the Escrow.

 

(c)            Unless a claim has been asserted by RC or Buyer against the
Escrow (a “Claimed Amount”) and (i) RC has provided the Escrow Agent and Seller
with written evidence of the claim prior to the Survival date set forth in
Section 7.2 of the SPA (the “Termination Date”) (ii) Seller has not provided
evidence of the settlement of the Claimed Amount (a “Settled Claim”) within
thirty (30) days of notice thereof, the balance of the Escrow Shares shall be
released from the Escrow and delivered to Seller upon the later of (A) the
thirtieth (30th) day from the Termination Date, and (B) the first business day
following the date of the Settled Claim(s); provided, however that if evidence
of a claim is not provided by RC prior to the thirtieth (30th) day from the
Termination Date, the Escrow Agent Consideration shall be released from Escrow
and delivered to Seller on the thirtieth (30th) day from the Termination Date.
“Indemnified Loss” means any and all actions, suits, proceedings, demands,
liabilities, damages, claims, deficiencies, fines, penalties, interest,
assessments, judgments, losses, Taxes, costs and expenses, including, without
limitation, reasonable fees and disbursements of counsel with respect to a Claim
under Article 7 of the SPA.

 

(d)           RC may make a claim at any time prior to the Termination Date for
a Claimed Amount by written notice (“Claims Notice”) in form and substance as
set forth in Annex I and attached hereto, to Seller and to the Escrow Agent
together with evidence of the claim. If Seller does not provide RC and the
Escrow Agent with written notice (“Response Notice”) in form and substance as
set forth in Annex II and attached hereto, of denial of liability or dispute of
the Claimed Amount or evidence of payment of the claim within thirty (30) days
of receipt of a Claims Notice, the Escrow Agent shall disburse Escrowed Shares
in the Claimed Amount as if the Escrow Agent had received a Conceded Amount
Notice (defined below) for the full Claimed Amount pursuant to Section 1.4(c) on
the thirtieth (30th) day after the Escrow Agent received such certain Claims
Notice from RC regarding the Claimed Amount (a “Deemed Concession”).

 

(e)            If Seller has denied liability for, or otherwise disputes the
Claimed Amount, in whole or in part, Seller and RC, on behalf of the applicable
claimant, shall attempt to resolve such dispute within thirty (30) days unless
Seller provides evidence of settlement of the claim and then RC shall no longer
have any right to the Claimed Amount. If the Parties resolve such dispute and
amounts are owed to the claimant, they shall deliver to Escrow Agent a written
notice signed by each of them (the “Conceded Amount Notice”) in form and
substance as set forth in Annex III and attached hereto. Such Conceded Amount
Notice shall instruct Escrow Agent to deliver to RC the amount, if any, of
Escrow Shares agreed to by both the Parties in settlement of such dispute (the
“Conceded Amount”). If the Parties cannot resolve such dispute, the Parties
shall attempt to use mutually agreeable third-party methods such as mediation to
resolve the dispute in order to obtain a Final Decision (defined below).

 

(f)            Payment of Claims. Escrow Agent promptly shall deliver the
applicable portion of the Escrow Shares and Stock Powers, no later than the
fifth (5th) business day following the determination of a Payment Event (as such
term is defined below), to RC from the Escrow Shares: (i) following any
concession of liability by Seller, in whole or in part, the Conceded Amount as
set forth in the Conceded Amount Notice; (ii) following any Deemed Concession of
liability by Seller, the Claimed Amount; or (iii) following receipt by Escrow
Agent of any final decision by an arbitrator, mediator or judge and the
expiration of any time to appeal or seek to vacate any amount, as the case may
be (a “Final Decision”), the amount awarded in the Final Decision (the “Ordered
Amount”) to RC (collectively, clauses (i) (ii) and (iii), the “Payment Events”).
Upon the occurrence of a Payment Event, in the event that Escrow Agent must
deliver a portion of the Escrow Shares to RC from the Escrow Shares and the
applicable Stock Powers, Escrow Agent shall return to RC the Certificates then
held by Escrow Agent (the “Primary Certificates”), and RC shall deliver the
Primary Certificates to Equity Stock Transfer,, LLC the transfer agent of RC
(the “Transfer Agent”), with a letter of instruction and any other document
required by the Transfer Agent in connection therewith, from RC directing the
Transfer Agent to: (i) cancel the Primary Certificates; (ii)   if elected by RC,
issue a new stock certificate registered to RC representing the number of Escrow
Shares of the Conceded Amount or Ordered Amount, as applicable, relating to the
Payment Event, which shall be delivered by the Transfer Agent to RC; and (iii) 
issue new stock certificates registered to Seller representing the Escrow Shares
less the shares of the Conceded Amount, or Ordered Amount, as applicable,
relating to such Payment Event, which shall be delivered by the Transfer Agent
to Escrow Agent to be held in escrow in accordance with the terms set forth
herein. At RC’s or the Escrow Agent’s written request, Seller shall deliver with
three (3) business days of such request additional Stock Powers to the Escrow
Agent with respect to any remaining Escrow Shares.

 

(g)           For each claim of a Claimed Amount made prior to the Termination
Date for which (i) RC has provided the Escrow Agent and Seller with written
evidence of the claim and (ii) Seller has not provided evidence of the
settlement of the Claim Amount on the Termination Date, the amount of Escrow
Shares equal to the maximum amount of the claim shall continue to be held in
escrow (a “Maximum Claimed Amount”). On the thirtieth (30th) day from the
Termination Date, the balance in escrow less the aggregate of all Maximum
Claimed Amounts not otherwise resolved under the terms of this Agreement shall
be released and delivered to Seller.

 

Section 1.4     Disbursements.

 

(a)            Upon the earlier of termination of this Escrow Agreement pursuant
to Section 1.6 hereof or joint written notice from the Parties, Escrow Agent
shall release from the Escrow Shares to Seller any portion of the Escrow Shares
then remaining less the aggregate Maximum Claimed Amounts for all then
outstanding claims for any losses (“Outstanding Claims”) pursuant Section 1.3 of
this Agreement asserted within the Escrow Period.

 

(b)           Upon receipt of a Conceded Amount Notice with respect to a
particular Outstanding Claim, Escrow Agent shall promptly deliver to RC, the
Conceded Amount in accordance with Section 1.3(e) herein.

 

(c)            Upon receipt of a Final Decision with respect to a particular
Outstanding Claim, Escrow Agent shall promptly deliver to RC or Seller, as the
case may be, the Ordered Amount, if any, in accordance with Section 1.3(f)
herein. Any court or arbitrator order shall be accompanied by an opinion of
counsel for the presenting party that such order is final and non-appealable.

 

(d)           In the event that the Parties jointly instruct Escrow Agent to
disburse the Escrow Shares to any party, Escrow Agent shall comply with such
instructions, any provision herein to the contrary notwithstanding.

 

Section 1.5     Section 1.5 Value of Escrow Shares. For purposes of this
Agreement, the value of each Escrow Share shall be equal to the issuance price
of the Stock Consideration on the Closing Date under the SPA.

 

Section 1.6     Termination. This Escrow Agreement shall terminate on the later
of (i) the ninetieth (90th) day from the Termination Date or (ii) the
disbursement of all of the Escrow Shares to RC or Seller pursuant to Section
1.3(c) of this Agreement, if applicable by the Escrow Agent (the “Termination
Date”), at which time Escrow Agent is authorized and directed to disburse the
Escrow Shares in accordance with Section 1.3(c) or Section 1.4, as applicable,
and this Escrow Agreement shall be of no further force and effect except that
the provisions of Sections 3.1 and 3.2 hereof shall survive termination.

 

ARTICLE 2

DUTIES OF THE ESCROW AGENT

 

Section 2.1     Scope of Responsibility. Notwithstanding any provision to the
contrary, Escrow Agent is obligated only to perform the duties specifically set
forth in this Escrow Agreement, which shall be deemed purely ministerial in
nature. Under no circumstances will Escrow Agent be deemed to be a fiduciary to
any Party or any other person under this Escrow Agreement. Escrow Agent will not
be responsible or liable for the failure of any Party to perform in accordance
with this Escrow Agreement. Escrow Agent shall neither be responsible for, nor
chargeable with, knowledge of the terms and conditions of any other agreement,
instrument, or document other than this Escrow Agreement, whether or not an
original or a copy of such agreement has been provided to Escrow Agent; and
Escrow Agent shall have no duty to know or inquire as to the performance or
nonperformance of any provision of any such agreement, instrument, or document.
References in this Escrow Agreement to any other agreement, instrument, or
document are for the convenience of the Parties, and Escrow Agent has no duties
or obligations with respect thereto. This Escrow Agreement sets forth all
matters pertinent to the escrow contemplated hereunder, and no additional
obligations of Escrow Agent shall be inferred or implied from the terms of this
Escrow Agreement or any other agreement.

 

Section 2.2     Attorneys and Agents. Escrow Agent shall be entitled to rely on
and shall not be liable for any action taken or omitted to be taken by Escrow
Agent in accordance with the advice of counsel or other professionals retained
or consulted by Escrow Agent. Escrow Agent shall be reimbursed as set forth in
Section 3.1 herein for any and all reasonable compensation (fees, expenses and
other costs) paid and/or reimbursed to such counsel and/or professionals. Escrow
Agent may perform any and all of its duties through its agents, representatives,
attorneys, custodians, and/or nominees.

 

Section 2.3     Reliance. Escrow Agent shall not be liable for any action taken
or not taken by it in accordance with the direction or consent of the Parties or
their respective agents, representatives, successors, or assigns. Escrow Agent
shall not be liable for acting or refraining from acting upon any notice,
request, consent, direction, requisition, certificate, order, affidavit, letter,
or other paper or document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, without further inquiry
into the person’s or persons’ authority.

 

Section 2.4     Right Not Duty Undertaken. The permissive rights of Escrow Agent
to do things enumerated in this Escrow Agreement shall not be construed as
duties.

 

Section 2.5     No Financial Obligation. No provision of this Escrow Agreement
shall require Escrow Agent to risk or advance its own funds or otherwise incur
any financial liability or potential financial liability in the performance of
its duties or the exercise of its rights under this Escrow Agreement.

 

ARTICLE 3

PROVISIONS CONCERNING ESCROW AGENT

 

Section 3.1     Indemnification. The Parties, jointly and severally, shall
indemnify, defend and hold harmless Escrow Agent from and against any and all
loss, liability, cost, damage and expense, including, without limitation,
reasonable attorneys’ fees and expenses or other professional fees and expenses
which Escrow Agent may suffer or incur by reason of any action, claim or
proceeding brought against Escrow Agent, arising out of or relating in any way
to this Escrow Agreement or any transaction to which this Escrow Agreement
relates, unless such loss, liability, cost, damage or expense shall have been
finally adjudicated to have been directly caused by the willful misconduct or
gross negligence of Escrow Agent. The provisions of this Section 3.1 shall
survive the resignation or removal of Escrow Agent and the termination of this
Escrow Agreement.

 

Section 3.2     Limitation of Liability. ESCROW AGENT SHALL NOT BE LIABLE,
DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF
THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH
HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY RESULTED FROM ESCROW AGENT’S
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT
LIMITATION LOST PROFITS), EVEN IF ESCROW AGENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION.

 

Section 3.3     Resignation or Removal. Escrow Agent may resign by furnishing
written notice of its resignation to the Parties, and the Parties may remove
Escrow Agent by furnishing to the Escrow Agent a joint written notice of its
removal along with payment of all fees and expenses to which it is entitled
through the date of termination. Such resignation or removal, as the case may
be, shall be effective thirty (30) days after the delivery of such notice or
upon the earlier appointment of a successor, and Escrow Agent’s sole
responsibility thereafter shall be to safely keep the Escrow Shares and to
deliver the same to a successor escrow agent as shall be appointed by the
Parties, as evidenced by a joint written notice filed with Escrow Agent or in
accordance with a court order. If the Parties have failed to appoint a successor
escrow agent prior to the expiration of thirty (30) days following the delivery
of such notice of resignation or removal, Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor escrow agent or for
other appropriate relief, and any such resulting appointment shall be binding
upon the Parties.

 

Section 3.4     Compensation. Escrow Agent shall be entitled to compensation for
its services contemplated as set forth on Exhibit A to this Agreement, which
compensation shall be paid by RC. The Parties agree that RC shall be responsible
for all of the expenses or other amounts owed to Escrow Agent hereunder. The fee
agreed upon for the services rendered hereunder is intended as full compensation
for Escrow Agent's services as contemplated by this Escrow Agreement; provided,
however, that in the event that the conditions for the disbursement of funds
under this Escrow Agreement are not fulfilled, or Escrow Agent renders any
service not contemplated in this Escrow Agreement, or there is any assignment of
interest in the subject matter of this Escrow Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or Escrow
Agent is made a party to any litigation pertaining to this Escrow Agreement or
the subject matter hereof, then Escrow Agent shall be compensated for such
extraordinary services and reimbursed for all reasonable costs and expenses,
including reasonable attorneys’ fees and expenses, occasioned by any such delay,
controversy, litigation or event.

 

Section 3.5     Disagreements. If any conflict, disagreement or dispute arises
between, among, or involving any of the parties hereto concerning the meaning or
validity of any provision hereunder or concerning any other matter relating to
this Escrow Agreement, or Escrow Agent is in doubt as to the action to be taken
hereunder, Escrow Agent is authorized to retain the Escrow Shares until Escrow
Agent (a) receives a final non-appealable order of a court of competent
jurisdiction or a final non-appealable arbitration decision directing delivery
of the Escrow Shares, (b) receives a written agreement executed by each of the
parties involved in such disagreement or dispute directing delivery of the
Escrow Shares, in which event Escrow Agent shall be authorized to disburse the
Escrow Shares in accordance with such final court order, arbitration decision,
or agreement, or (c) files an interpleader action in any court of competent
jurisdiction, and upon the filing thereof, Escrow Agent shall be relieved of all
liability as to the Escrow Shares and shall be entitled to recover attorneys’
fees, expenses and other costs incurred in commencing and maintaining any such
interpleader action. Escrow Agent shall be entitled to act on any such
agreement, court order, or arbitration decision without further question,
inquiry, or consent.

 

Section 3.6     Merger or Consolidation. Any corporation or association into
which Escrow Agent may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer all or substantially all of
its corporate trust business and assets as a whole or substantially as a whole,
or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which Escrow Agent is a party, shall be and
become the successor escrow agent under this Escrow Agreement and shall have and
succeed to the rights, powers, duties, immunities and privileges as its
predecessor, without the execution or filing of any instrument or paper or the
performance of any further act.

 

Section 3.7     Attachment of Escrow Shares; Compliance with Legal Orders. In
the event that any of the Escrow Shares shall be attached, garnished or levied
upon by any court order, or the delivery thereof shall be stayed or enjoined by
an order of a court, or any order, judgment or decree shall be made or entered
by any court order affecting the Escrow Shares, Escrow Agent is hereby expressly
authorized, in its sole discretion, to respond as it deems appropriate or to
comply with all writs, orders or decrees so entered or issued, or which it is
advised by legal counsel of its own choosing is binding upon it, whether with or
without jurisdiction. In the event that Escrow Agent obeys or complies with any
such writ, order or decree it shall not be liable to any of the Parties or to
any other person, firm or corporation, should, by reason of such compliance
notwithstanding, such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.

 

Section 3.8     Force Majeure. Escrow Agent shall not be responsible or liable
for any failure or delay in the performance of its obligation under this Escrow
Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control, including, without limitation, acts of God;
earthquakes; fire; flood; wars; acts of terrorism; civil or military
disturbances; sabotage; epidemic; riots; interruptions, loss or malfunctions of
utilities, computer (hardware or software) or communications services;
accidents; labor disputes; acts of civil or military authority or governmental
action; it being understood that Escrow Agent shall use commercially reasonable
efforts which are consistent with accepted practices in the banking industry to
resume performance as soon as reasonably practicable under the circumstances.

 

ARTICLE 4 MISCELLANEOUS

 

Section 4.1     Successors and Assigns. This Escrow Agreement shall be binding
on and inure to the benefit of the Parties and Escrow Agent and their respective
successors and permitted assigns. No other persons shall have any rights under
this Escrow Agreement. No assignment of the interest of any of the Parties shall
be binding unless and until written notice of such assignment shall be delivered
to the other Party and Escrow Agent and shall require the prior written consent
of the other Party and Escrow Agent (such consent not to be unreasonably
withheld).

 

Section 4.2     Escheat. The Parties are aware that under applicable state law,
property which is presumed abandoned may under certain circumstances escheat to
the applicable state. Escrow Agent shall have no liability to the Parties, their
respective heirs, legal representatives, successors and assigns, or any other
party, should any or all of the Escrow Shares escheat by operation of law.

 

Section 4.3     Notices. All notices, requests, demands, and other
communications required under this Escrow Agreement (each, a “Notice”) shall be
in writing, in English, and shall be deemed to have been duly given if delivered
(a) personally, (b) by facsimile transmission with written confirmation of
receipt, (c) by overnight delivery with a reputable national overnight delivery
service, or (d) by mail or by certified mail, return receipt requested, and
postage prepaid. If any Notice is mailed, it shall be deemed given five business
days after the date such notice is deposited in the United States mail. Any
Notice given shall be deemed given upon the actual date of such delivery. If any
Notice is given to a party, it shall be given at the address for such party set
forth below. It shall be the responsibility of the Parties to notify Escrow
Agent and the other Party in writing of any name or address changes. In the case
of any Notice delivered to Escrow Agent, such Notice shall be deemed to have
been given on the date received by the Escrow Agent.

 

If to Seller: At the addresses provided on the signature pages hereto.

If to RC:

Red Cat Holdings, Inc.

607 Ponce de Leon Ave, Suite 407

San Juan, PR 85251

Attention: Jeffrey Thompson, CEO

Tel: (833) 373-3228

Jeff@redcat.red

 

If to Seller or any of the Sellers:

 

Gregory French

                               

 

 

 

 

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

 

 

 

If to Escrow Agent:

 

Equity Stock Transfer, LLC

237 W 37th St.

Suite 602

New York, NY 10018

Attention: Mohit Bhansali, CEO

Facsimile: 347.584.3644 Mohit@equitystock.com

 

With a copy to Seller, if RC is giving the Notice to Escrow Agent

With a copy to RC, if Seller is giving the Notice to Escrow Agent

Section 4.4     Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
reference to principles of conflicts of laws.

 

Section 4.5     Entire Agreement. This Escrow Agreement, together with the SPA,
sets forth the entire agreement and understanding of the parties related to the
Escrow Shares.

 

Section 4.6     Amendment. This Escrow Agreement may be amended, modified,
superseded, rescinded, or canceled only by a written instrument executed by the
Parties and Escrow Agent.

 

Section 4.7     Waivers. The failure of any party to this Escrow Agreement at
any time or times to require performance of any provision under this Escrow
Agreement shall in no manner affect the right at a later time to enforce the
same performance. A waiver by any party to this Escrow Agreement of any such
condition or breach of any term, covenant, representation, or warranty contained
in this Escrow Agreement, in any one or more instances, shall neither be
construed as a further or continuing waiver of any such condition or breach nor
a waiver of any other condition or breach of any other term, covenant,
representation, or warranty contained in this Escrow Agreement.

 

Section 4.8     Headings. Section headings of this Escrow Agreement have been
inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions of this Escrow Agreement.

 

Section 4.9     Counterparts. This Escrow Agreement may be executed in one or
more counterparts, each of which when executed shall be deemed to be an
original, and such counterparts shall together constitute one and the same
instrument. Counterparts delivered by facsimile, e-mail or other electronic
transmission shall be deemed to have the same legal effect as delivery of an
original signed copy of this Agreement.

 

 

 

[The remainder of this page left intentionally blank.]

 

 

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

 

 

RED CAT HOLDINGS, INC. GREGORY FRENCH     By:
                                                 
                                       Name: Jeffrey Thompson   Title: Chief
Executive Officer  

 

 

ESCROW AGENT:

 

EQUITY STOCK TRANSFER, LLC

 

By:                                                           

Name: Mohit Bhansali

Title: Chief Executive Officer

 

 

 

EXHIBIT A

 

FEES OF ESCROW AGENT

 

Acceptance Fee:     $1,500

 

Initial Fees as they relate to Equity Stock Transfer acting in the capacity of
Escrow Agent – includes creation and examination of the Escrow Agreement;
acceptance of the Escrow appointment; setting up of the Escrow Account.

 

Annual Administration Fee:     $1,500

 

For ordinary administration services by Escrow Agent – includes receiving,
investing and disbursing funds pursuant to the requirements set forth in the
escrow agreement.

 

Fees are due at the time of Escrow Agreement execution and annually thereafter.
Fees will not be prorated in case of early termination.

 

Out-of-Pocket Expenses:     At Cost

 

We only charge for out-of-pocket expenses in response to specific tasks assigned
by the client. Therefore, we cannot anticipate what specific out-of-pocket items
will be needed or what corresponding expenses will be incurred. Possible
expenses would be, but are not limited to, express mail and messenger charges,
travel expenses to attend closing or other meetings.

 

There are no charges for indirect-out-of-pocket expenses.

 

This fee schedule is based upon the assumptions listed above which pertain to
the responsibilities and risks involved in Equity Stock undertaking the role of
Escrow Agent. These assumptions are based on information provided to us as of
the date of this fee schedule. Our fee schedule is subject to review and
acceptance of the final documents. Should any of the assumptions, duties or
responsibilities change, we reserve the right to affirm, modify or rescind our
fee schedule. If the Account(s) does not open within three (3) months of the
date shown below, this proposal will be deemed null and void. Interest shall
accrue on all late payments at a rate of one (1%) percent per month until paid.

 

 

Annex I

 

CLAIMS NOTICE

 

Equity Stock Transfer, LLC

237 W 37th St.

Suite 602

New York, NY 10018

Attention: Mohit Bhansali, CEO

Facsimile: 347.584.3644 Mohit@equitystock.com

 

Ladies and Gentlemen:

 

The undersigned, pursuant to Section 1.3(a) of the Escrow Agreement, dated as of
, by and among Red Cat Holdings, Inc., a Nevada corporation (“RC”); Seller, a
Canadian citizen; and Equity Stock Transfer, LLC, as escrow agent (terms defined
in the Escrow Agreement have the same meanings when used herein), hereby
certifies that RC is or may be entitled to indemnification pursuant to Article 7
of the SPA in an amount equal to $                   (the “Claimed Amount”). RC
further certifies that the nature of the Claim is as follows: [
                  ].

 

 

 

Dated:_______, 20__.

 

 

 

Red Cat Holdings, Inc.

 

By:                                                      

Name:                                             

Title:                                                

 

 

cc:     Gregory French

 

 

Annex II

 

RESPONSE NOTICE

 

Equity Stock Transfer, LLC

237 W 37th St.

Suite 602

New York, NY 10018

Attention: Mohit Bhansali, CEO

Facsimile: 347.584.3644 Mohit@equitystock.com

 

Ladies and Gentlemen:

 

The undersigned, pursuant to Section 1.3(a) of the Escrow Agreement, dated as
of     , by and among Red Cat Holdings, Inc. a Nevada corporation (“RC”);
Gregory French, a Canadian citizen; and Equity Stock Transfer, LLC, as escrow
agent (terms defined in the Escrow Agreement have the same meanings when used
herein), hereby :

 

(a)            concede liability [in whole for] [in part in respect of $
        of] the Claimed Amount (the “Conceded Amount”), referred to in the
Claims Notice dated                 , 20__; [and] [or]

 

(b)           deny liability [in whole for] [in part in respect of $       of]
the Claimed Amount referred to in the Claims Notice dated                 ,
20__.

 

Attached hereto is a description of the basis for the foregoing.

Dated:                , 20__. 

GREGORY FRENCH

_________________________________ 

  

 

cc:      Red Cat Holdings, Inc.

 

 

Annex III

 

CONCEDED AMOUNT NOTICE

 

Equity Stock Transfer, LLC

237 W 37th St.

Suite 602

New York, NY 10018

Attention: Mohit Bhansali, CEO

Facsimile: 347.584.3644 Mohit@equitystock.com

 

Ladies and Gentlemen:

 

The undersigned, pursuant to Section 1.3(a) of the Escrow Agreement, dated as of
, by and among Red Cat Holdings, Inc. a Nevada corporation (“RC”); Gregory
French, LLC, a Canadian citizen; and Equity Stock Transfer, LLC, as escrow agent
(terms defined in the Escrow Agreement have the same meanings when used herein),
hereby jointly:

 

(a)            certify that [a portion of] the Claimed Amount with respect to
the matter described in the attached in the amount of $[               ] (the
“Conceded Amount”) is owed to [              ]; and

 

(b)           instruct you to promptly pay to [               ] from the Escrow
Shares [insert amount pursuant to paragraph (a)] as soon as practicable
following your receipt of this notice and, in any event, no later than five (5)
business days following the date hereof.

 

Dated:              , 20__.

 

Red Cat Holdings, Inc.

 

By:                                             

Name:                                            

Title:                                            

 

Gregory French 

                                                          

 

 

 

EXHIBIT B

 

 

 

 

 

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATES. THESE SECURITIES MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS
PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE
COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

 

FAT SHARK HOLDINGS, LTD. SECURED PROMISSORY NOTE

US$1,000,000 __________, 2020

 

 

 

FOR VALUE RECEIVED, Fat Shark Holdings, Ltd., a Cayman Islands Exempted Company
(the “Company”), promises to pay to Greg French, or his permitted assigns
(“Purchaser”), in lawful money of the United States of America the principal sum
of One Million Dollars ($1,000,000), or such lesser amount as shall equal the
outstanding principal amount hereof, together with interest from the date of
this Secured Promissory Note (this “Note”) on the unpaid principal balance at a
rate equal to three (3%) percent per annum, computed on the basis of the actual
number of days elapsed and a year of 365 days. All unpaid principal, together
with any then unpaid and accrued interest and other amounts payable hereunder,
shall be due and payable on the earlier of (i) November 1, 2023 (the “Maturity
Date”), (ii) when specified in Section 1(c) in connection with a Put Prepayment
(as defined below) or (iii) when, upon the acceleration of an Event of Default
after giving effect to any applicable grace periods, such amounts are declared
due and payable by Purchaser or made automatically due and payable, in each
case, in accordance with the terms hereof. This Note is the “Secured Note”
issued pursuant to the Share Purchase Agreement (as defined below). Capitalized
terms not defined herein shall have the meaning ascribed to such terms in the
Purchase Agreement.

 

THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT (THE
“SECURITY AGREEMENT”) DATED AS OF THE DATE HEREOF AND EXECUTED BY THE COMPANY
FOR THE BENEFIT OF PURCHASER. ADDITIONAL RIGHTS OF PURCHASER ARE SET FORTH IN
THE SECURITY AGREEMENT.

 

·NOTWITHSTANDING ANY CONTRARY PROVISION SET FORTH HEREIN OR IN THE PURCHASE
AGREEMENT, THE SECURED PARTY ACKNOWLEDGES THAT THE NOTE IS ISSUED UPON THE
SIMULTANEOUS CANCELLATION AND IN REPLACEMENT OF THE INDEBTEDNESS OF COMPANY TO
PURCHASER PURSUANT TO THE PURCHASE AGREEMENT.

 

The following is a statement of the rights of Purchaser and the conditions to
which this Note is subject, and to which Purchaser, by the acceptance of this
Note, agrees:

 

1.              Payments.

 

(a)            Interest. Accrued interest on this Note shall be payable at
maturity.

 

(b)            Voluntary Prepayment. The Company may prepay this Note at any
time, in whole or in part, without penalty or premium.

 

(c)            Purchaser Put Prepayment. At any time following a Qualified
Financing or Change of Control, unless Purchaser shall have previously sold at
least One million ($1,000,000) of Stock Consideration, until the Maturity Date,
Purchaser, at the sole election of the Purchaser and only if specified by the
Purchaser to Parent in a writing given in accordance with Section 5(c) (the “Put
Notice”), shall have the right to require the Company to repay, in lawful money
of the United States of America and immediately available funds, all unpaid
principal, together with any then unpaid and accrued interest and other amounts
payable under the Note then outstanding (the “Put Prepayment”) up to the amount
that shall equal twenty-five (25%) percent of the net proceeds of the Qualified
Financing. Upon Purchaser’s election of a Put Prepayment, the Company shall
repay the Note pursuant to this Section 1(c) within thirty (30) days from the
date the Put Notice is given by the Purchaser to the Parent (as determined
pursuant to Section 5(c)). For purposes hereof, a “Change of Control” shall mean
the date of the consummation of a merger, reorganization or consolidation of the
Parent or any Subsidiary with any other corporation that has been approved by
the stockholders of the Parent or such Subsidiary, by means of any transaction
or series of related transactions, other than a merger or consolidation which
would result in the voting securities of Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty (50%)
percent of the total voting power represented by the voting securities of such
company or such surviving entity outstanding immediately after such merger or
consolidation or a transaction or series of related transactions undertaken for
the purpose of changing the jurisdiction of incorporation of Company; or the
date of the consummation of the sale or disposition of all or substantially all
of such Company’s assets.

 

2.     Events of Default. The occurrence of any of the following shall
constitute an “Event of Default” under this Note:

 

(a)            Failure to Pay. The Company shall fail to pay (i) when due any
principal payment on the due date hereunder or (ii) any interest payment or
other payment required under the terms of this on the date due and such payment
shall not have been made within ten (10) business days of the Company’s receipt
of written notice from Purchaser of such failure to pay; or

 

(b)            Breaches of Covenants. The Company shall fail to observe or
perform any other covenant, obligation, condition or agreement in any material
respect contained in this Note or the Security Agreement (other than those
specified in Section 2(a)) and such failure shall continue for ten (10) business
days after the Company’s receipt of written notice to the Company of such
failure; or

 

(c)            Representations and Warranties. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of the Parent to Purchaser in writing in connection with this Note,
including, without limitation, the representations and warranties of the Parent
in the Purchase Agreement, or as an inducement to Purchaser to enter into this
Note, shall be false, incorrect, incomplete or misleading in any material
respect when made or furnished; or

 

(d)            Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii)
admit in writing its inability to pay its debts generally as they mature, (iii)
make a general assignment for the benefit of any of its creditors, (iv) be
dissolved or liquidated, (v) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
proceeding commenced against it, or (vi) take any action for the purpose of
effecting any of the foregoing; or

 

(e)            Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of the Company,
or of all or a substantial part of the property thereof, or an involuntary case
or other proceedings seeking liquidation, reorganization or other relief with
respect to the Company, if any, or the debts thereof under any bankruptcy,
insolvency or other similar law now or hereafter in effect shall be commenced
and an order for relief entered or such proceeding shall not be dismissed or
discharged within thirty (30) days of commencement.

 

3.              Rights of Purchaser upon Default. Upon the occurrence of any
Event of Default (other than an Event of Default described in Sections 2(d) or
2(e)) and at any time thereafter during the continuance of such Event of
Default, Purchaser may, by written notice to the Company, declare all
outstanding Obligations payable by the Company hereunder to be immediately due
and payable without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived, anything contained herein or in
the other Transaction Documents to the contrary notwithstanding. Upon the
occurrence of any Event of Default described in Sections 2(d) or 2(e),
immediately and without notice, all outstanding Obligations payable by the
Company hereunder shall automatically become immediately due and payable,
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Security
Agreement to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence and during the continuance of any Event of
Default, Purchaser may exercise any other right, power or remedy granted to it
by the Security Agreement or otherwise permitted to it by law, either by suit in
equity or by action at law, or both.

 

4.              Definitions. As used in this Note, the following capitalized
terms have the following meanings:

 

“Affiliate” shall mean, with respect to any Person, any other Person directly or
indirectly controlling, directly or indirectly controlled by, or under direct or
indirect common control with, such Person or a member of such Person’s immediate
family; or, if such Person is a partnership or a limited liability company, any
general partner or managing member, as applicable, of such Person or a Person
controlling any such general partner or managing member. For purposes of this
definition, “control” (including the correlative terms “controlling”,
“controlled by” and “under common control with”) shall mean the power, directly
or indirectly, to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract or
otherwise.

 

“Event of Default” has the meaning given in Section 2 hereof.

 

“Obligations” shall mean and include all loans, advances, debts, liabilities and
obligations, howsoever arising, owed by the Company to Purchaser of every kind
and description, now existing or hereafter arising under or pursuant to the
terms of this Note and the Security Agreement, including, all interest, fees,
charges, expenses, attorneys’ fees and costs and accountants’ fees and costs
chargeable to and payable by the Company hereunder and thereunder, in each case,
whether direct or indirect, absolute or contingent, due or to become due, and
whether or not arising after the commencement of a proceeding under Title 11 of
the United States Code (11 U. S. C. Section 101 et seq.), as amended from time
to time (including post-petition interest) and whether or not allowed or
allowable as a claim in any such proceeding.

 

“Person” shall mean and include an individual, a partnership, a corporation
(including a business trust), a joint stock company, a limited liability
company, an unincorporated association, a joint venture or other entity or a
governmental authority.

 

“Purchase Agreement” shall mean the Stock Purchase Agreement, dated as of the
date hereof, by and among the Seller, the Companies, Buyer and Parent (as
defined in the Purchase Agreement).

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Security Agreement” has the meaning given in the introductory paragraphs to
this Note. “Share Charge Agreements” shall mean the Share Charge Agreements,
each dated as of the

date hereof, by and among Purchaser, and the Company concerning the shares of
Fat Shark Tech. LTD., a Cayman Islands Exempted Company (“Trading”), and Fat
Shark Technology SEZC, a Cayman Islands Special Economic Zone Company (“Tech”)
wholly owned by the Company.

 

5.Miscellaneous.

 

(a)            Successors and Assigns; Transfer of this Note; No Transfers to
Bad Actors; Notice of Bad Actor Status.

 

(i)          Subject to the restrictions on transfer described in this Section
5(a), the rights and obligations of the Company and Purchaser shall be binding
upon and benefit the successors, assigns, heirs, administrators and transferees
of the parties.

 

(ii)          With respect to any offer, sale or other disposition of this Note
to any Person other than an Affiliate of Purchaser, Purchaser will give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of Purchaser’s counsel, or other evidence if
reasonably satisfactory to the Company, to the effect that such offer, sale or
other distribution may be effected without registration or qualification (under
any federal or state law then in effect). Upon receiving such written notice and
reasonably satisfactory opinion, if so requested, or other evidence, the
Company, as promptly as practicable, shall notify Purchaser that Purchaser may
sell or otherwise dispose of this Note, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this Section 5(a) that the opinion of counsel for Purchaser, or other evidence,
is not reasonably satisfactory to the Company, the Company shall so notify
Purchaser promptly after such determination has been made. Each Note thus
transferred shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act, unless in
the opinion of counsel for the Company such legend is not required in order to
ensure compliance with the Securities Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions.
Notwithstanding the foregoing, Purchaser may transfer the Note to an Affiliate
of Purchaser.

 

(iii)          Subject to Section 5(a)(ii), transfers of this Note shall be
registered upon registration books maintained for such purpose by or on behalf
of the Company as provided in the Purchase Agreement. Prior to presentation of
this Note for registration of transfer, the Company shall treat the registered
holder hereof as the owner and holder of this Note for the purpose of receiving
all payments of principal and interest hereon and for all other purposes
whatsoever, whether or not this Note shall be overdue and the Company shall not
be affected by notice to the contrary.

 

(iv)          Neither this Note nor any of the rights, interests or obligations
hereunder may be assigned, by operation of law or otherwise, in whole or in
part, by the Company without the prior written consent of Purchaser.

 

(b)            Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the written consent of the Company and Purchaser.

 

Notices. All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall in writing and faxed,
mailed, emailed or delivered to each party as follows: (i) if to Purchaser, at
[Address], [telephone], [facsimile], [email] or at such other address as
Purchaser shall have furnished the Company in writing, or (ii) if to the
Company, to Greg French at                                     with a copy to
HSM Corporate Services Ltd., 68 Fort Street, George Town, Grand Cayman KY1-1207,
Cayman Islands, Telephone: 345-815-7355 Att: Lisa Shemwell and Red Cat Holdings,
Inc., Ponce de Leon Ave, Suite 407, San Juan Puerto Rico 85251, Att: Jeffrey
Thompson, CEO, telephone (939) 200-9400 email Jeff@redcat.red with a copy to Law
Office of Harvey J. Kesner, 500 Fifth Avenue, Suite 938, New York, NY 10036
telephone (646) 678-2543 email (pdox74@gmail.com), or at such other address as
the Company shall have furnished to Purchaser in writing. All such notices and
communications shall be effective (i) when sent by Federal Express or other
overnight service of recognized standing, on the business day following the
deposit with such service; (ii) when mailed by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (iii) when delivered by hand, upon delivery; and
(d) when faxed or emailed, upon receipt.

 

(c)Payment. Payment shall be made in lawful tender of the United States.

 

(d)            Usury. In the event any interest is paid on this Note which is
deemed to be in excess of the then legal maximum rate, then that portion of the
interest payment representing an amount in excess of the then legal maximum rate
shall be deemed a payment of principal and applied against the principal of this
Note.

 

(e)            Expenses; Waivers. If action is instituted to collect this Note,
the Company promises to pay all reasonable and documented costs and expenses,
including, without limitation, reasonable attorneys’ fees and costs, incurred in
connection with such action. The Company hereby waives notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor
and all other notices or demands relative to this instrument.

 

(f)             Governing Law; Venue. This Note and all actions arising out of
or in connection with this Note shall be governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to the conflicts
of laws principles thereof. Each of Purchaser and the Company irrevocably submit
to the exclusive jurisdiction of the courts of the State of Delaware and the
federal courts of the United States located in the City of Wilmington, State of
Delaware, in respect of any dispute arising from the subject matter hereof.

(g)            Waiver of Jury Trial. By acceptance of this Note, Purchaser
hereby agrees and the Company hereby agrees to waive their respective rights to
a jury trial of any claim or cause of action based upon or arising out of this
Note or the Purchase Agreement.

 

(Signature Page Follows)

 

 

 

 

 

 

The Company has caused this Note to be issued as of the date first written
above.

 

 

FAT SHARK HOLDINGS, LTD.

 

 

By:                                               

Name: Allan Evans

Title: Chief Executive Officer

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Senior Secured Promissory Note]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated                                        2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Floating Charge

 

by

 

Fat Shark Holdings, Ltd.

 

in favour of

 

Mr. Gregory French

 

 

 

 

 

 

 

 

 

 

 

 

HSM Chambers

68 Fort Street

PO Box 31726

George Town

Grand Cayman, KY1-1207

Cayman Islands

 

 

 

 

FLOATING CHARGE

 

This Floating Charge is made by:-

 

 

(1)Fat Shark Holdings, Ltd. and Exempted Company incorporated and registered in
the Cayman Islands with company number 327385 whose registered office is c/o HSM
Corporate Services Ltd., 68 Fort Street, George Town, Grand Cayman (hereinafter
referred to as the "Company"); and

(2)                Mr. Gregory French of 280 Raleigh Quay, Grand Cayman, Cayman
Islands (the "Lender"). WHEREAS:

(A)Pursuant to a Share Purchase Agreement of even date herewith (the "Share
Purchase Agreement") the Company has issued a secured promissory note (the
“Promissory Note”) to the Lender in the amount of US$1,000,000 (one million US
dollars) ; and

 

(B)In security of the performances of the Company's obligations under the
Promissory Note, the Company is required to grant this Floating Charge.

 

1.DEFINITIONS AND INTERPRETATION

 

1.1.Words and expressions defined in the Promissory Note or whose definitions
are imported into the Promissory Note shall bear the same meanings in this
Floating Charge (including the recitals and schedule hereto) unless otherwise
defined herein or unless the context otherwise requires.

 

1.2.In this Floating Charge, the following words and expressions shall be
defined as follows:

 

"Assets" means the whole of the property (including uncalled capital) assets and
rights which is or may be from time to time comprised in the property and
undertaking of the Company.

 

"Business Day" means a day other than a Saturday or Sunday when banks are open
for ordinary business in the United States of America.

 

"Secured Liabilities" means all present and future obligations and liabilities
of the Company to the Lender under the Promissory Note and/or this Floating
Charge together with:

 

(i)any refinancing, novation, refunding, deferral or extension of or increase in
any of those obligations or liabilities;

(ii)any further obligations and liabilities which may be made by the Lender to
the Company under any agreement expressed to be supplemental to the Promissory
Note and all interest, fees, and costs in connection therewith;

(iii)all costs, charges and expenses properly incurred by the Lender in
connection with the protection, preservation or enforcement of its respective
rights under the Promissory Note and/or this Floating Charge;

(iv)any claim for damages or restitution in the event of recission of any of
those obligations or liabilities or otherwise in connection with the Promissory
Note;

(v)any claim against the Company flowing from the recovery by the Company of a
payment or discharge in respect of any of those obligations or liabilities on
grounds of preference or otherwise; and

(vi)any amounts which would be included in any of the foregoing but for any
discharge, non-provability, unenforceability or non-allowability of the same in
any insolvency or other proceedings.

 

 

1.3.References to:

 

 

1.3.1.statutes, statutory provisions and other legislation shall include all
amendments, substitutions, modifications and re-enactments for the time being in
force and shall include any orders, regulations, instruments or other
subordinate legislation made under the relevant legislation;

1.3.2."including" shall not be construed as limiting the generality of the words
preceding it;

1.3.3.any term or phrase defined in the Companies Law of the Cayman Islands (as
amended from time to time) shall bear the same meaning in this Floating Charge;

1.3.4.words importing the singular shall include the plural and vice versa and
words denoting any gender shall include all genders;

1.3.5.this "Floating Charge" and to any provisions of it or to any other
document referred to in this Floating Charge shall be construed as references to
it in force for the time being as amended, varied, supplemented, restated,
substituted or novated from time to time;

1.3.6.any person are to be construed to include references to a corporation,
firm, company, partnership, joint venture, unincorporated body of persons,
individual or any state or agency of a state, whether or not a separate legal
entity;

1.3.7.any person are to be construed to include that person's assignees or
transferees or successors in title, whether direct or indirect;

1.3.8.clause headings are for ease of reference only and are not to affect the
interpretation of this Floating Charge;

 

 

1.4.The use of bold type shall be ignored in the construction of this Floating
Charge.

 

2.PAYMENT OBLIGATION

 

2.1.The Company hereby undertakes to the Lender that it will pay and discharge
the Secured Liabilities to the Lender in accordance with the terms of the
Promissory Note and this Floating Charge.

 

2.2.All payments under this Floating Charge will be made in immediately
available funds in the currency and to the account specified by the Lender in
any demand.

 

3.CHARGING PROVISION

 

3.1.The Company grants a floating charge over the Assets to the Lender as a
continuing security for the payment or discharge of the Secured Liabilities.

 

4.NEGATIVE PLEDGE AND RANKING OF FLOATING CHARGE

 

4.1.The Company agrees that it shall be prohibited from granting or creating
subsequent to the date of this Floating Charge any fixed security or any other
floating charge over the Assets or any part or parts of them, other than in
favour of the Lender or in favour or another person and with the prior written
consent of the Lender provided always that the Lender shall consent to the
granting of a pledge, security, interest, mortgage, debenture, charge, lien or
encumbrance in accordance with and subject to the terms of the Promissory Note .

 

4.2.Subject to the provisions of Clause 4.1 above, this Floating Charge shall
rank in priority for the Secured Liabilities over any assets of the Company and
ahead of any fixed security created by the Company after its execution of this
Floating Charge and in priority to any other floating charge created by the
Company after its execution of this Floating Charge.

 

5.PROTECTION OF SECURITY

 

5.1.The Company agrees that this Floating Charge is and shall be in addition and
without prejudice to any other security or rights which the Lender holds or may
hold in respect of all or any of the Secured Liabilities;

 

5.2.This Floating Charge will be a continuing security for the Secured
liabilities notwithstanding any intermediate payment or settlement of all or any
part of the Secured liabilities or any other matter or thing whatsoever.

 

5.3.The Lender shall be entitled, at its own expense, to have a valuation of the
Assets or any part or parts of them carried out from time to time by an
independent surveyor or valuer and the Company consents to any such valuation
report being prepared and agrees to provide such access and other assistance as
may be reasonably required by the Lender for such purposes.

 

5.4.If for any reason the security constituted hereby ceases to be a continuing
security or the Lender receives or is deemed to have received notice (whether
actual or constructive) of any subsequent security affecting all or any part of
the Assets and/or the proceeds of sale thereof, the Lender may open a new
account with or continue any existing account with the Company and the liability
of the Company in respect of the Secured Liabilities at the date of such
cessation shall remain regardless of any payments in or out of any such account.

 

6.LIABILITY TO PERFORM

 

6.1.In the event of failure of the Company to fulfil any of its obligations
under this Floating Charge, the Lender may make such payments or perform or
fulfil any of the obligations of the Company on behalf of the Company. Any
amounts expended or costs incurred by the Lender under this provision (and
interest thereon) shall be deemed properly paid, shall be recoverable from the
Company and, until recovered, shall form part of the Secured Liabilities and
shall be secured by this Floating Charge.

 

7.ENFORCEMENT

 

7.1.This Floating Charge shall only be enforceable following written notice from
the Lender to the Company pursuant to clause 5(c) of the Promissory Note.

 

7.2.No purchaser or other person shall be bound or concerned to see or enquire
whether the rights of the Lender to exercise any of the powers hereby conferred
has arisen or not or be concerned with notice to the contrary or of the
propriety of the exercise or purported exercise of such powers.

 

7.3.The Lender shall not be liable to account to the Company for any sums or be
liable to the Company for any loss or damage arising:

 

7.3.1.from any realisation by the Lender of the Assets or any part thereof in
the exercise of its rights or powers hereunder; or

 

7.3.2.from any act, default or omission of the Lender in relation to the
exercise of its powers hereunder; or

 

7.3.3.from the exercise or non-exercise by the Lender of any power, authority or
discretion conferred upon the Lender in relation to the Assets or any part
thereof by or pursuant to this Floating Charge.

 

8.INDEMNITY

 

8.1.The Company hereby indemnifies and undertakes to keep indemnified the Lender
in respect of all liabilities and expenses incurred by it or them in good faith
in the proper execution or purported execution of any rights, powers or
discretions vested in it or them pursuant hereto as a result of being the
possessor of the Assets from whatsoever cause arising, provided that this
indemnity shall not apply to the extent of any loss arising as a result of the
gross negligence or wilful default of the Lender.

 

8.2.The Lender shall not be liable for any losses arising in connection with the
exercise or purported exercise of any of its rights, powers and discretions in
good faith hereunder.

 

9.AVOIDANCE

 

Where any discharge (whether in respect of the Secured Liabilities, this
Floating Charge, any security therefor or otherwise) is made in whole or in part
or any arrangement is made in whole or in part on the faith of any payment,
security or other disposition which may be avoided or repaid on the bankruptcy,
insolvency, liquidation, administration or otherwise without limitation of the
Company, the liability of the Company under this Floating Charge shall continue
as if there had been no such discharge or arrangement. The Lender shall be
entitled to concede or compromise any claim that any such payment, security or
other disposition is liable to avoidance or repayment.

 

10.SUSPENSE ACCOUNT

 

Until the Secured Liabilities have been irrevocably and unconditionally paid and
discharged in full, the Lender may:

 

(i)refrain from applying or enforcing any other security, moneys or rights held
or received by the Lender in respect of the Secured Liabilities or apply and
enforce the same in such manner and order as the Lender sees fit (whether
against such amounts or otherwise) and the Company shall not be entitled to the
benefit of the same; and

 

(ii)hold in suspense account any moneys received from the Company on account of
the Secured Liabilities by way of a partial payment, it being hereby agreed that
interest shall be payable on the amount from time to time standing to the credit
of such suspense account at such rate as the Lender from time to time determines
and that any amounts of interest so paid shall be added to the principal amount
held in such suspense account and be applied accordingly.

 

11.NO CONTRIBUTION

 

The Company shall not, by virtue of any enforcement of the security constituted
hereby, or any payment made by it hereunder or otherwise, be entitled at any
time to exercise, claim or have the benefit of any right of contribution or
similar rights against the Lender, and all rights of contribution or similar
rights against the Lender are hereby expressly waived by the Company.

 

12.PRESERVATION OF RIGHTS

 

Other than as provided in this Floating Charge, the Lender shall not be obliged
before exercising any of the rights, powers, discretions or remedies conferred
upon it by this Floating Charge or by law:

 

(i)to take any action, including but not limited to the giving of notice to, or
making of any demand upon, the Company or any other person or the obtaining or
enforcement of any judgment, decree or order in any court against the Company or
any other person;

 

(ii)to make or file any claim or proof in a winding-up or liquidation of the
Company or any other person;

 

(iii)to enforce or seek to enforce any of its rights, powers, discretions or
remedies under any other security in respect of the Secured Liabilities.

 

13.FURTHER ASSURANCE

 

The Company hereby irrevocably undertakes to the Lender that it shall take all
steps that the Lender may require to perfect under any appropriate law the
security intended to be constituted by or pursuant to this Floating Charge in
respect of all or any part of its property, assets and rights for the purposes
of protecting such security or (upon such security becoming enforceable)
facilitating the realisation of such property and/or the enforcement of the
security constituted by or pursuant to, and/or the exercise of any rights of the
Lender or the receiver under, this Floating Charge.

 

14.REMEDIES AND WAIVERS

 

14.1No waiver

 

No failure to exercise and no delay in exercising on the part of the Lender any
right, power, discretion or remedy under this Floating Charge shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power,
discretion or remedy preclude any other or further exercise thereof, or the
exercise of any other right, power, discretion or remedy hereunder. The rights
and remedies provided in this Floating Charge are cumulative and not exclusive
of any rights or remedies provided by law or otherwise. Any waiver and any
consent by the Lender under this Floating Charge must be made in writing and may
be given subject to any conditions thought fit by the Lender.

 

14.2No prejudice

 

This Floating Charge and the security constituted hereby shall not be affected
by any amendment, novation, variation or replacement of the Promissory Note at
any time after the date hereof or any other act, omission or other circumstances
which, but for this provision, would or might discharge this Floating Charge or
the security hereby created.

 

14.3Application to Court

 

The Company hereby agrees that the Lender shall have an express and absolute
right to apply to court for directions in connection with this Floating Charge
including (without limitation) to seek judicial determination with respect to,
inter alia, interpretation of the terms and provisions of this Floating Charge,
the release of any security constituted hereby, the enforcement of any security
constituted hereby and all such other issues in relation to this Floating Charge
as the Lender may consider necessitates judicial determination. The Company
further agrees that it shall not and shall not be entitled to apply for any
costs award to be made against the Lender in connection with any such
application.

 

15.PARTIAL INVALIDITY

 

If any provision of this Floating Charge shall to any extent be illegal, invalid
or unenforceable, the remainder of this Floating Charge shall not be affected
thereby and each provision of this Floating Charge shall be valid and
enforceable to the fullest extent permitted by law and a substitute provision
shall be negotiated by the parties hereto to preserve as nearly as possible the
original intent of this Floating Charge. This Floating Charge shall remain in
full force and effect to secure the Secured Liabilities notwithstanding
termination of Share Purchase Agreement .

 

16.ATTORNEY

 

The Company hereby irrevocably appoints the Lender (acting by a duly authorised
official) to be its attorney and on its behalf and in its name or otherwise
generally to sign, seal, execute and deliver and otherwise perfect this Floating
Charge or any other documents required for the purpose of any enforcement action
by the Lender in connection therewith and which the Company has not done, and
generally to use the name of the Company in the exercise of all or any of the
powers hereby conferred on the Lender.

 

The Company hereby undertakes that it shall on request by the Lender ratify and
confirm the actions of any such attorney.

 

17.ASSIGNATION

 

17.1       Lender

 

This Floating Charge shall be binding upon and inure to the benefit of the
Company and the Lender, the successors and permitted assignees of the Lender and
the successors of the Company. References to the Lender hereunder include any
permitted assignee or transferee of the Lender of its rights and obligations
hereunder. Any successor to or permitted assignee of the Lender shall be
entitled to the full benefit, subject to the burden, hereof.

 

17.2        Company

 

The Company may not assign or transfer all or any part of its rights or
obligations hereunder

 

18.CERTIFICATE

 

Any account or certificate signed by an officer of the Lender or other signing
official authorised by the Lender shall, in the absence of manifest error,
ascertain, specify and constitute the sums for which the Company is liable
hereunder and the Company hereto consents to the registration of this Floating
Charge and of any such account or certificate for preservation and execution.

 

19.NOTICES

 

19.1Any communication to be made under or in connection with this Floating
Charge shall be made in writing and, unless otherwise stated, may be made by fax
or letter.

 

19.2The address and fax number (and the department or officer, if any, for whose
attention the communication is to be made) of each party for any communication
or document to be made or delivered under or in connection with this Floating
Charge is:

 

(i)in the case of the Company:   Address:   Fax:   Attention:

 

 

(ii)in the case of the Lender:   Address:   Fax:   Attention:

 

or any substitute address, fax number or department or officer as the Company
may notify the Lender, if a change is made by the Company or the Lender may
notify to the Company, if a change is made by the Lender by not less than five
Business Days' notice.

 

19.3Any communication or document made or delivered by one person to another
under or in connection with this Floating Charge will only be effective:

 

(a)if by way of fax or email, immediately provided that an affirmative
transmission report of such fax or email is obtained; or

(b)if by way of letter, when it has been left at the relevant address or five
Business Days after being deposited in the post postage prepaid in an envelope
addressed to it at that address.

 

19.4Any notice given under or in connection with this Floating Charge must be in
English.

 

All other documents provided under or in connection with this Floating Charge
must be:

 

(a)in English; or

(b)if not in English, and if so required by the Lender, accompanied by a
certified English translation and, in this case, the English translation will
prevail unless the document is a constitutional, statutory or other official
document.

 

20.CONSENT TO REGISTRATION

 

The Company consents to the registration of this Floating Charge in the Register
of Mortgages and Charges of the Company above for preservation.

 

21.GOVERNING LAW

 

This Floating Charge shall be governed by and construed in all respects in
accordance with the laws of the Cayman Islands and the parties hereby submit to
the non-exclusive jurisdiction of the Cayman Islands Courts.

 

IN WITNESS WHEREOF the Company has executed this Floating Charge:

 

 

 

Signed by                                             

for and on behalf of Fat Shark Holdings, Ltd.

 

 

 

 

 

..............................................

 

Director

 

 

 

Witness:                                              

 

Name: Occupation:

 

 

EXHIBIT C

[Registration Provisions]

10.1        Demand Registration Right.

(a)            At any time following a Qualified Financing, Seller (the “
Seller”), may make a written request (specifying the intended method of
disposition and the amount of Registrable Securities (as defined herein)
proposed to be sold) that the Parent effect, and the Parent shall use its
reasonable best efforts to effect, a registration (a “Demand Registration”) of
all or any requested portion of the Registrable Securities collectively held by
such Seller (subject to Section 10.4). The Parent shall not be obligated to
effect a Demand Registration if the Registrable Securities requested by the
Seller to be registered have (x) at any time prior to a Qualified Financing or
(y) at any time after a Qualified Financing, an estimated aggregate public
offering price (before deduction of any underwriting discounts and commissions)
of less than twenty five million dollars ($25,000,000). If the Board of
Directors, in its good faith judgment, determines that any registration of the
Registrable Securities should not be made or continued because it would
materially interfere with any material financing, acquisition, corporate
reorganization or merger or other material transaction involving the Parent (a
“Valid Business Reason”), the Parent may (i) postpone filing a Registration
Statement relating to a Demand Registration until such Valid Business Reason no
longer exists, but in no event for more than one hundred and eighty (180) days,
and (ii) in case a Registration Statement has been filed relating to a Demand
Registration, if the Valid Business Reason has not resulted from actions taken
by the Parent, the Parent, upon the approval of the Board of Directors, acting
in good faith, may cause such Registration Statement to be withdrawn and its
effectiveness terminated; provided, however, that a new Registration Statement
is filed within one hundred and eighty (180) days thereafter, or may postpone
amending or supplementing such Registration Statement, but in no event for more
than one hundred and eighty (180) days; provided, however, that if the
registration of Registrable Securities is postponed pursuant to clause (i), the
Parent shall not be permitted to register under the Securities Act any equity
Securities of the Parent owned by other Seller of the Parent during any such
postponement. The Parent shall give written notice of its determination to
postpone or withdraw a Registration Statement and of the fact that the Valid
Business Reason for such postponement or withdrawal no longer exists, in each
case, promptly after the occurrence thereof. Notwithstanding anything to the
contrary contained herein, the Parent may not postpone or withdraw a filing
under this Section 10.1(a) more than once in any twelve (12) month period. For
the avoidance of doubt, any postponement or withdrawal of a Registration
Statement shall result in the related registration of Registrable Securities not
constituting a Demand Registration for purposes of Section 10.3 hereof.

(b)           The Parent shall use its reasonable best efforts to cause such
Demand Registration to be in the form of a firm commitment underwritten offering
and the managing underwriter or underwriter selected for such offering shall be
selected by the Seller (the “IM Underwriter”), provided such IM Underwriter is a
nationally recognized firm and reasonably acceptable to the Board of Directors.
In connection with any Demand Registration under this Section 10.1 involving an
underwritten offering, none of the Registrable Securities held by an Seller
making a request for inclusion of such Registrable Securities shall be included
in such underwritten offering unless such Seller accepts the terms of the
offering as agreed upon by the Parent and the IM Underwriter, such terms to be
in an underwriting agreement in customary form, and then only in such quantity
as will not, in the reasonable determination of the Parent based on discussions
with the IM Underwriter, jeopardize the success of such offering.

(c)            Seller shall be entitled to a single demand registration.

10.2        Piggyback Registration Right. Within five (5) Business Days
following receipt by the Parent of a request from the Seller to effect a Demand
Registration that would register at least a majority of the Registrable
Securities held by such Seller, the Parent shall give written notice of such
request to each other Seller (the “Non- Seller”), which shall describe the
anticipated filing date, the proposed registration and plan of distribution, and
offer the Non- Seller the opportunity to register their Pro Rata Share (based on
the Pro Rata Share of the Non- Seller as compared to the Pro Rata Share of the
Seller) of Registrable Securities (an “Incidental Registration”) in such
registration. Following the receipt of such notice, each Non- Seller shall be
entitled, by delivery of a written request to the Parent delivered no later than
five (5) Business Days following receipt of notice from the Parent, to include
all or any portion of their applicable Pro Rata Share of their Registrable
Securities in such Demand Registration (subject to Section 10.4). The right of
each Non- Seller to have Registrable Securities included in a Demand
Registration pursuant to this Section 10.2 shall be conditioned upon each Non-
Seller entering into (together with the Seller) an underwriting agreement in
customary form with the IM Underwriter. Subject to Section 10.4, the Parent
shall use its reasonable best efforts (within five (5) Business Days of the
notice provided for above) to cause the IM Underwriter to permit the Non- Seller
to participate in the Incidental Registration to include its Registrable
Securities in such offering on the same terms and conditions as the Registrable
Securities being sold for the account of the Seller.

10.3        Effective Demand Registration. The Parent shall use its reasonable
commercial efforts to cause any Demand Registration to become effective not
later than one hundred and twenty (120) days after it receives a request under
Section 10.1(a) hereof and to remain effective for the lesser of (i) the period
during which all Units registered in the Demand Registration are sold and (ii)
one hundred and twenty (120) days, provided, however, that a registration shall
not constitute a Demand Registration if (x) after such Demand Registration has
become effective, such registration or the related offer, sale or distribution
of Registrable Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the Commission or other Governmental
Authority for any reason not solely attributable to the Seller and such
interference is not thereafter eliminated or (y) the conditions specified in the
underwriting agreement, if any, entered into in connection with such Demand
Registration are not satisfied or waived, other than by reason of a failure by
the Seller.

10.4        Cutback. If the Parent reasonably determines (after consultation
with the IM Underwriter) that the amount of Registrable Securities requested to
be included in such Demand Registration exceeds the amount which can be sold in
such offering without adversely affecting the distribution of the Registrable
Securities being offered, then the Parent will reduce the Registrable Securities
to be included in such offering pro rata based on the number of Registrable
Securities owned by each such Seller and Non- Seller.

10.5        Form S-3 Registration.

(a)            S-3 Registration. Upon Parent becoming eligible for use of Form
S-3 (or any successor form thereto) under the Securities Act in connection with
a public offering of its securities, in the event that the Parent shall receive
from any Seller or group of Seller, a written request that the Parent register,
under the Securities Act on Form S-3 (or any successor form then in effect) (an
“S-3 Registration”), all or a portion of the Stock owned by such S-3 Seller, the
Parent shall give written notice of such request to all of the other Seller
(other than S-3 Seller) at least twenty (20) Business Days before the
anticipated filing date of such Form S-3, and such notice shall describe the
proposed registration and offer such other Seller the opportunity to register
the number of shares of Stock as each other Seller may request in writing to the
Parent, given within five (5) Business Days after their receipt from the Parent
of the written notice of such registration. If requested by the S-3 Seller, such
S-3 Registration shall be for an offering on a continuous basis pursuant to Rule
415 under the Securities Act. The Parent shall use its reasonable best efforts
to (x) file such registration pursuant to this Section 10.5(a) as promptly as
practicable (but not later than thirty (30) days after it receives a request
therefor) and shall use its reasonable best efforts to cause such registration
statement to be declared effective under the Securities Act as promptly as
practicable after the filing thereof and (y) include in such offering the Stock
of the other Seller (other than S-3 Seller) (the “S-3 Non- Seller”) who have
requested in writing to participate in such S-3 Registration on the same terms
and conditions as the Stock of the S-3 Seller.

(b)           Delay of S-3 Registration. If the Board of Directors has a Valid
Business Reason, the Parent may (x) postpone filing a Registration Statement
relating to a S-3 Registration until such Valid Business Reason no longer
exists, but in no event for more than ninety (90) days, and (y) in case a
Registration Statement has been filed relating to a S-3 Registration, if the
Valid Business Reason has not resulted from actions taken by the Parent, the
Parent, upon the approval of a majority of the Board of Directors acting in good
faith, may cause such Registration Statement to be withdrawn and its
effectiveness terminated or may postpone amending or supplementing such
Registration Statement. The Parent shall give written notice to the Seller of
its determination to postpone or withdraw a Registration Statement and of the
fact that the Valid Business Reason for such postponement or withdrawal no
longer exists, in each case, promptly after the occurrence thereof.
Notwithstanding anything to the contrary contained herein, the Parent may not
postpone or withdraw a filing due to a Valid Business Reason more than once in
any twelve (12) month period. The Parent shall not be required to effect any
registration pursuant to this Section 10.5 (i) within ninety (90) days after the
effective date of any other Registration Statement of the Parent, (ii) if Form
S-3 is not available for such offering by the S-3 Seller or (iii) if the
Registrable Securities requested by the S-3 Seller to be registered have an
estimated aggregate public offering price of less than 10 million dollars
($10,000,000).

10.6        Holdback Agreements.

(a)            To the extent not inconsistent with applicable law and requested
by the underwriter, in the case of any public offering by the Parent or by the
Seller pursuant to this Agreement (an underwritten or best efforts offering),
each Seller agrees not to effect any public sale or distribution of any
Registrable Securities or of any securities convertible into or exchangeable or
exercisable for such Registrable Securities, including a sale pursuant to Rule
144 under the Securities Act, or offer to sell, contract to sell (including any
short sale), grant any option to purchase or enter into any hedging or similar
transaction with the same economic effect as a sale of Registrable Securities,
in each case, during the one-hundred eighty (180) day period (or such lesser
period as the underwriter may agree) beginning on the effective date of the
registration statement (except as part of such registration) for such public
offering (such period of time, the “Holdback Period”); provided, however, that
the Holdback Period shall be the same with respect to all Seller.

(b)           The Parent agrees not to effect any public sale or distribution of
any of its securities, or any securities convertible into or exchangeable or
exercisable for such securities (except pursuant to registrations on Form S-4 or
S-8 or any successor thereto), during the period beginning on the effective date
of any Registration Statement filed pursuant to Section 10.1 in which the Seller
are participating and ending on the earlier of (i) the date on which all
Registrable Securities on such registration statement are sold and (ii) ninety
(90) days (or such lesser period as the underwriter may agree) after the
effective date of such registration statement (except as part of such
registration).

10.7        Registration Procedures.

(a)            Whenever registration of Registrable Securities has been
requested pursuant to Section 10.1, Section 10.2 or Section 10.5, the Parent or
Parent, as applicable, shall use its reasonable best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof as quickly as practicable, and in
connection with any such request, the Parent shall, as expeditiously as possible
(as used in this Section 10.7, the term Parent shall also include Parent and
Registrable Securities shall also include Stock, as the case may be):

(i)                  prepare and file with the Commission a Registration
Statement on any form for which the Parent then qualifies or which counsel for
the Parent shall deem appropriate and which form shall be available for the sale
of such Registrable Securities in accordance with the intended method of
distribution thereof, and cause such Registration Statement to become effective;
provided, however, that (x) before filing a Registration Statement or prospectus
or any amendments or supplements thereto, the Parent shall provide one legal
counsel selected by holders of a majority of the Registrable Securities to be
included in such Registration Statement (“Seller’ Counsel”) with an adequate and
appropriate opportunity to review and comment on such Registration Statement and
each prospectus included therein (and each amendment or supplement thereto) to
be filed with the Commission, subject to such documents being under the Parent’s
control, and (y) the Parent shall promptly notify the Seller’ Counsel and each
seller of Registrable Securities of any stop order issued or threatened by the
Commission and promptly take all action required to prevent the entry of such
stop order or to remove it if entered;

(ii)                  prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective for
the lesser of (x) one hundred and twenty (120) days and (y) such shorter period
which will terminate when all Registrable Securities covered by such
Registration Statement have been sold; provided, however, that if the S-3 Seller
has requested that an S-3 Registration be for an offering on a continuous basis
pursuant to Rule 415 under the Securities Act, then the Parent shall keep such
Registration Statement effective until all Registrable Securities covered by
such Registration Statement have been sold; and shall comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
Registration Statement;

(iii)                  furnish to each seller of Registrable Securities, prior
to filing a Registration Statement, a reasonable number of copies of such
Registration Statement as is proposed to be filed, and thereafter such number of
copies of such Registration Statement, each amendment and supplement thereto (in
each case, including all exhibits thereto), and the prospectus included in such
Registration Statement (including each preliminary prospectus) and any
prospectus filed under Rule 424 under the Securities Act as each such seller may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;

(iv)                  register or qualify such Registrable Securities under such
other securities or “blue sky” laws of such jurisdictions as any seller of
Registrable Securities may request, and to continue such qualification in effect
in such jurisdiction for as long as permissible pursuant to the laws of such
jurisdiction, or for as long as any such seller requests or until all of such
Registrable Securities are sold, whichever is shortest, and do any and all other
acts and things which may be reasonably necessary or advisable to enable any
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; provided, however, that the Parent
shall not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 10.7(a)(iv), (y) subject itself to taxation in any such jurisdiction or
(z) consent to general service of process in any such jurisdiction;

(v)                  notify each seller of Registrable Securities at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration Statement contains
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading and the
Parent shall promptly prepare a supplement or amendment to such prospectus and
furnish to each seller of Registrable Securities a reasonable number of copies
of such supplement to or an amendment of such prospectus as may be necessary so
that, after delivery to the purchasers of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;

(vi)                  enter into and perform customary agreements (including an
underwriting agreement in customary form with the Parent underwriter) and take
such other actions as are prudent and reasonably required in order to expedite
or facilitate the disposition of such Registrable Securities, including causing
its officers to participate in “road shows” and other information meetings
organized by the IM Underwriter or the Parent underwriter;

(vii)                  upon execution of confidentiality agreements in form and
substance reasonably satisfactory to the Parent, which shall be consistent with
the due diligence and disclosure obligations under securities laws applicable to
the Parent and the Seller, make available at reasonable times for inspection by
any managing underwriter participating in any disposition of such Registrable
Securities pursuant to a Registration Statement, Seller’ Counsel and any
attorney, accountant or other agent retained by any managing underwriter, all
financial and other records, pertinent corporate documents and properties of the
Parent and its Subsidiaries (collectively, the “Records”) as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Parent’s and its Subsidiaries’ officers, directors and employees, and
the independent public accountants of the Parent, to supply all information
reasonably requested by any such Person in connection with such Registration
Statement;

(viii)                  if such sale is pursuant to an underwritten offering,
obtain “cold comfort” letters dated the effective date of the Registration
Statement and the date of the closing under the underwriting agreement from the
Parent’s independent public accountants in customary form and covering such
matters of the type customarily covered by “cold comfort” letters as Seller’
Counsel or the managing underwriter reasonably requests;

(ix)                  furnish, at the request of any seller of Registrable
Securities on the date such securities are delivered to the underwriters for
sale pursuant to such registration or, if such securities are not being sold
through underwriters, on the date the Registration Statement with respect to
such securities becomes effective, an opinion, dated such date, of counsel
representing the Parent for the purposes of such registration, addressed to the
underwriters, if any, and to the seller making such request, covering such legal
matters with respect to the registration in respect of which such opinion is
being given as the underwriters, if any, and such seller may reasonably request
and are customarily included in such opinions;

(x)                  comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon as
reasonably practicable but no later than fifteen (15) months after the effective
date of the Registration Statement, an earnings statement covering a period of
twelve (12) months beginning after the effective date of the Registration
Statement, in a manner which satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;

(xi)                  cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Parent are then
listed provided that the applicable listing requirements are satisfied;

(xii)                  keep Seller’ Counsel advised as to the initiation and
progress of any registration under Section 10.1, Section 10.2 or Section 10.5
hereunder;

(xiii)                  cooperate with each seller of Registrable Securities and
each underwriter participating in the disposition of such Registrable Securities
and their respective counsel in connection with any filings required to be made
with the FINRA; and

(xiv)                  take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.

10.8        Seller Information. The Parent may require each seller of
Registrable Securities as to which any registration is being effected to
furnish, and such seller shall furnish, to the Parent such information regarding
the distribution of such securities as the Parent may from time to time
reasonably request in writing, as a condition to including such Registrable
Securities in such Registration Statement.

10.9        Notice to Discontinue. Each Seller agrees that, upon receipt of any
notice from the Parent of the happening of any event of the kind described in
Section 10.7(a)(v), such Seller shall forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Seller’ receipt of the copies of the
supplemented or amended prospectus contemplated by Section 10.7(a)(v) and, if so
directed by the Parent, such Seller shall deliver to the Parent (at the Parent’s
expense) all copies, other than permanent file copies then in such Seller’
possession, of the prospectus covering such Registrable Securities which is
current at the time of receipt of such notice. If the Parent shall give any such
notice, the Parent shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Agreement (including
the period referred to in Section 10.7(a)(ii)) by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 10.7(a)(v) to and including the date when sellers of such Registrable
Securities under such Registration Statement shall have received the copies of
the supplemented or amended prospectus contemplated by and meeting the
requirements of Section 10.7(a)(v).

10.10     Registration Expenses. The Parent shall pay all expenses arising from
or incident to its performance of, or compliance with, this Agreement, including
(i) Commission, stock exchange and FINRA registration and filing fees, (ii) all
fees and expenses incurred in complying with securities or “blue sky” laws
(including reasonable fees, charges and disbursements of counsel to any
underwriter incurred in connection with “blue sky” qualifications of the
Registrable Securities as may be set forth in any underwriting agreement), (iii)
all printing, messenger and delivery expenses, (iv) the fees, charges and
expenses of counsel to the Parent and of its independent public accountants and
any other accounting fees, charges and expenses incurred by the Parent
(including any expenses arising from any “cold comfort” letters or any special
audits incident to or required by any registration or qualification) and the
reasonable legal fees, charges and expenses of a single counsel to the Seller
incurred by such Seller participating in any registration as a group, and (v)
any liability insurance or other premiums for insurance obtained in connection
with any Demand Registration or piggy-back registration thereon, Incidental
Registration or S-3 Registration pursuant to the terms of this Agreement,
regardless of whether such Registration Statement is declared effective. All of
the expenses described in the preceding sentence of this Section 10.10 are
referred to herein as “Registration Expenses.” The holder of Registrable
Securities sold pursuant to a Registration Statement shall bear the expense of
any broker’s commission or underwriter’s discount or commission relating to
registration and sale of such Seller’ Registrable Securities and, subject to
clause (iv) above, shall bear the fees and expenses of their own counsel.

10.11     Indemnification; Contribution.

(a)            Indemnification by the Parent. The Parent shall indemnify and
hold harmless each Seller, its partners, directors, officers, Affiliates and
each Person who controls (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) the Seller from and against any and all
claims, liabilities, damages, losses, costs and expenses (including amounts paid
in satisfaction of judgments, in compromises and settlements, as fines and
penalties and legal or other costs and reasonable expenses of investigating or
defending against any claim or alleged claim) (each, a “Liability” and
collectively, “Liabilities”), arising out of or based upon any untrue, or
allegedly untrue, statement of a material fact contained in any Registration
Statement, prospectus or preliminary prospectus (as amended or supplemented if
the Parent shall have furnished any amendments or supplements thereto) or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading (or in the case of any prospectus, in light of the
circumstances such statements were made), except insofar as such Liability
arises out of or is based upon any untrue statement or alleged untrue statement
or omission or alleged omission contained in such Registration Statement,
preliminary prospectus or final prospectus in reliance and in conformity with
information concerning any Seller furnished in writing to the Parent by such
Seller expressly for use therein, including the information furnished to the
Parent pursuant to Section 10.11(b). The Parent shall also provide customary
indemnities to any underwriters of the Registrable Securities, their officers,
directors and employees and each Person who controls such underwriters (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) to the same extent as provided above with respect to the indemnification of
the Seller.

(b)           Indemnification by the Seller. In connection with any Registration
Statement in which any Seller is participating pursuant to Section 10.1, Section
10.2 or Section 10.5 hereof, each Seller shall promptly furnish to the Parent in
writing such information with respect to such Seller as the Parent may
reasonably request or as may be required by law for use in connection with any
such Registration Statement or prospectus and all information required to be
disclosed in order to make the information previously furnished to the Parent by
such Seller not materially misleading or necessary to cause such Registration
Statement not to omit a material fact with respect to such Seller necessary in
order to make the statements therein not misleading. Each Seller agrees to
indemnify and hold harmless the Parent, its partners, directors, officers,
Affiliates, any underwriter retained by the Parent and each Person who controls
the Parent or such underwriter (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) from and against any and all
Liabilities arising out of or based upon any untrue, or allegedly untrue,
statement of a material fact contained in any Registration Statement, prospectus
or preliminary prospectus (as amended or supplemented if the Parent shall have
furnished any amendments or supplements thereto) or arising out of or based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading (or in
the case of any prospectus, in light of the circumstances such statements were
made), but if and only to the extent that such Liability arises out of or is
based upon any untrue statement or alleged omission or alleged untrue statement
or omission contained in such Registration Statement, preliminary prospectus or
final prospectus in reliance and in conformity with information concerning such
Seller furnished in writing by such Seller expressly for use therein, provided,
however, that the total amount to be indemnified by each Seller pursuant to this
Section 10.11(b) shall be limited to such Seller’ pro rata portion of the net
proceeds (after deducting the underwriters’ discounts and commissions) received
by such Seller in the offering to which the Registration Statement or prospectus
relates.

(c)            Conduct of Indemnification Proceedings. Any Person entitled to
indemnification under this Section 10.11 (the “Indemnified Party”) agrees to
give prompt written notice to the indemnifying party (the “Indemnifying Party”)
after the receipt by the Indemnified Party of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which the Indemnified Party intends to claim indemnification
or contribution pursuant to this Agreement; provided, however, that the failure
so to notify the Indemnifying Party shall not relieve the Indemnifying Party of
any Liability that it may have to the Indemnified Party hereunder (except to the
extent that the Indemnifying Party is prejudiced or otherwise forfeits
substantive rights or defenses by reason of such failure). If notice of
commencement of any such action is given to the Indemnifying Party as above
provided, the Indemnifying Party shall be entitled to participate in and, to the
extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and reasonably satisfactory to such Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party
agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense
of such action with counsel reasonably satisfactory to the Indemnified Party or
(iii) the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and the
Indemnified Party has been advised by such counsel that either (x)
representation of such Indemnified Party and the Indemnifying Party by the same
counsel would be inappropriate under applicable standards of professional
conduct or (y) there may be one or more legal defenses available to the
Indemnified Party which are different from or additional to those available to
the Indemnifying Party. In any of such cases, the Indemnifying Party shall not
have the right to assume the defense of such action on behalf of such
Indemnified Party, it being understood, however, that the Indemnifying Party
shall not be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all Indemnified Parties. No
Indemnifying Party shall be liable for any settlement entered into without its
written consent (such consent not to be unreasonably withheld or delayed). No
Indemnifying Party shall, without the consent of such Indemnified Party, effect
any settlement of any pending or threatened proceeding in respect of which such
Indemnified Party is a party and indemnity has been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability for claims that are the subject matter
of such proceeding.

(d)           Contribution. If the indemnification provided for in this Section
10.11 from the Indemnifying Party is held by a court of competent jurisdiction
to be unavailable to an Indemnified Party hereunder in respect of any
Liabilities referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Liabilities in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and Indemnified Party on the other in connection with the
statements or omissions which resulted in such Liabilities, as well as other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or Indemnified Party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
Liabilities referred to above shall be deemed to include, subject to the
limitations set forth in Sections 10.11(a), 10.11(b) and 10.11(c), any legal or
other fees, charges or expenses reasonably incurred by such party in connection
with any investigation or proceeding; provided, however, that the total amount
to be contributed by any Seller shall be limited to the net proceeds (after
deducting the underwriters’ discounts and commissions) received by the Seller in
the offering.

(e)            Fraud. The parties hereto agree that it would not be just and
equitable if contribution pursuant to Section 10.11(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.

10.12     Initial Public Offering.

(a)            In connection with an Initial Public Offering of the Parent, (i)
the Seller hereby grant a power of attorney to the Parent to act on their behalf
to effect the provisions of this Section 10.12, and (ii) all Seller shall and
shall cause their Affiliates to take all necessary or desirable actions in
connection with the consummation of such transaction, (A) to, as the Board of
Directors may reasonably request, (x) convert the Parent to a corporate form in
a tax-free transaction (except to the extent of taxable income or gain required
to be recognized by a Seller in an amount that does not exceed the amount of
cash or any property or rights (other than stock) received by such Seller upon
the consummation of such transaction and/or any concurrent transaction), (y)
accomplish the foregoing by effecting a transaction that is treated as the
contribution of the Registrable Securities of the Parent into a newly formed
“shell” corporation pursuant to Section 351 of the Code, with the result that
each Seller shall hold capital stock of such surviving corporation or business
entity (in each case, the “Parent”, and any reference in this Article X to the
Parent also being a reference to the Parent, as applicable) or (z) take such
action as is necessary to complete an offering in an up-C structure, and (B) to
cause the Parent to assume all of the obligations of the Parent under this
Article X.

(b)           Upon the approval of the Board of Directors that such action is
necessary to preserve the benefits of “tacking” under Rule 144 of the Securities
Act, such conversion or merger may be structured to occur without any action on
the part of any Seller, and each Seller hereby consents in advance to any action
that the Board of Directors shall deem necessary to accomplish such result.

(c)            In connection with an Initial Public Offering, all of the
outstanding Units of the Parent shall automatically convert into shares of
common stock of the Parent (the “Stock”) immediately prior to the consummation
of the Initial Public Offering or at such other time as the Board of Directors
may determine or shares of preferred stock that are the equivalent to shares of
common stock but also contain a 4.99% beneficial ownership blocker in customary
form so that the holder may neither convert or vote more than 4.99% of the
outstanding voting stock of the Parent.

10.13     Registration Rights Agreement. The Parent and each of the Seller
acknowledge and agree that in connection with and effective upon the
consummation of a transaction referenced in Section 10.12, the Parent or any
successor and each of the Seller will enter into a registration rights agreement
on substantially the terms and conditions set forth in this Article X, mutatis
mutandis.