Exhibit 10.1

 
SECOND
 
AMENDED AND RESTATED
 
AGREEMENT AND PLAN OF MERGER
 
BY AND AMONG
 
KEYSTONE SOLUTIONS, INC.,
 
a Delaware corporation,
 
NOVUME SOLUTIONS, INC.,
 
a Delaware corporation,
 
KEYSTONE MERGER SUB, LLC,
 
a Delaware limited liability company,
 
BREKFORD MERGER SUB, INC.,
 
a Delaware corporation,
 
and
 
BREKFORD TRAFFIC SAFETY, INC.,
 
a Delaware corporation
 
DATED AS OF JULY 12, 2017
 
 
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TABLE OF CONTENTS
 
ARTICLE I
THE MERGERS
32
Section 1.1.
The Mergers
32
Section 1.2.
Effective Time
32
Section 1.3.
Effects of the Mergers
32
Section 1.4.
Subsequent Actions
33
Section 1.5.
Organizational Documents; Directors and Officers of Surviving Companies
33
Section 1.6.
Company Names
33
Section 1.7.
Company Stockholders’ Agreement
33
ARTICLE II
EFFECT ON THE STOCK OF NOVUME, THE SURVIVING COMPANIES AND THE MERGED COMPANIES
34
Section 2.1.
Conversion of Securities
34
Section 2.2.
Conversion of Shares
34
Section 2.3.
Cancellation of Treasury Shares and of Outstanding Novume Common Stock
34
Section 2.4.
Conversion of Common Stock and Preferred Stock of the Merged Companies into
Common Stock of the Surviving Companies
35
Section 2.5.
Exchange of Shares Other Than Treasury Shares
35
Section 2.6.
Transfer Books
36
Section 2.7.
No Fractional Shares
36
Section 2.8.
Options to Purchase Common Stock
37
Section 2.9.
Certain Adjustments
38
ARTICLE III
CERTAIN MATTERS WITH RESPECT TO NOVUME
38
Section 3.1.
Certificate of Incorporation of Novume
38
Section 3.2.
Officers and Directors of Novume
38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BREKFORD
39
Section 4.1.
Organization and Qualification; Subsidiaries
39
Section 4.2.
Organizational Documents
39
Section 4.3.
Capitalization
39
Section 4.4.
Authority Relative to this Agreement
40
Section 4.5.
No Conflict; Required Filings and Consents
41

 
 
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Section 4.6.
SEC Filings; Financial Statements
41
Section 4.7.
No Undisclosed Liabilities; Absence of Certain Changes or Events
42
Section 4.8.
Litigation
42
Section 4.9.
No Violation of Law; Permits
43
Section 4.10.
Registration Statement; Information Statement
43
Section 4.11.
Employee Matters; ERISA
44
Section 4.12.
Labor Matters
45
Section 4.13.
Environmental Matters
46
Section 4.14.
Board Action; Vote Required
48
Section 4.15.
Brokers
48
Section 4.16.
Tax Matters
48
Section 4.17.
Intellectual Property
50
Section 4.18.
Insurance
51
Section 4.19.
Ownership of Securities
51
Section 4.20.
Certain Contracts
51
Section 4.21.
Investment Company
52
Section 4.22.
Certain Plans
52
ARTICLE V
REPRESENTATIONS OF THE COMPANY AND THE MERGER SUBSIDIARIES
52
Section 5.1.
Organization and Qualification; Subsidiaries
52
Section 5.2.
Organizational Documents
53
Section 5.3.
Capitalization
53
Section 5.4.
Authority Relative to this Agreement
54
Section 5.5.
No Conflict; Required Filings and Consents
54
Section 5.6.
SEC Filings; Financial Statements
55
Section 5.7.
No Undisclosed Liabilities; Absence of Certain Changes or Events
55
Section 5.8.
No Violation of Law; Permits
56
Section 5.9.
Registration Statement; Information Statement
56
Section 5.10.
Board Action; Vote Required
57
Section 5.11.
[Reserved]
57
Section 5.12.
Brokers
57

 
 
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Section 5.13.
Ownership of Securities
57
Section 5.14.
Activities of Merger Subsidiaries
58
Section 5.15.
Litigation
58
Section 5.16.
Employee Matters; ERISA
58
Section 5.17.
Tax Matters
59
Section 5.18.
Intellectual Property
61
Section 5.19.
Certain Contracts
61
Section 5.20.
Investment Company
62
Section 5.21.
Certain Plans
62
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
62
Section 6.1.
Conduct of Business of Brekford
62
Section 6.2.
Conduct of Business of the Company
65
Section 6.3.
Exclusivity
68
Section 6.4.
Subsequent Financial Statements
69
Section 6.5.
Control of Operations
69
ARTICLE VII
ADDITIONAL AGREEMENTS
69
Section 7.1.
Registration Statement; Information Statement
69
Section 7.2.
Stockholders’ Approval; Consummation of the Mergers
69
Section 7.3.
Additional Agreements
70
Section 7.4.
Notification of Certain Matters
70
Section 7.5.
Access to Information
71
Section 7.6.
Public Announcements
72
Section 7.7.
Indemnification; Directors’ and Officers’ Insurance
72
Section 7.8.
Employee Benefit Plans
72
Section 7.9.
Management and Employment Arrangements
73
Section 7.10.
Stock Exchange Listing
73
Section 7.11.
Sale of Upfitting Business
73
Section 7.12.
Post-Merger Novume Board of Directors
73
Section 7.13.
Registration Rights
74
Section 7.14.
Affiliates
74
Section 7.15.
Blue Sky
74
Section 7.16.
Compliance
74

 
 
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Section 7.17.
Key Stockholder Agreements
74
Section 7.18.
Continuation of Historic Business
75
ARTICLE VIII
CONDITIONS TO MERGERS
75
Section 8.1.
Conditions to the Obligations of Each Party to Effect the Mergers
75
Section 8.2.
Additional Conditions to Obligations of the Company
76
Section 8.3.
Additional Conditions to Obligations of Brekford
77
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
78
Section 9.1.
Termination
78
Section 9.2.
Effect of Termination
79
Section 9.3.
Amendment
80
Section 9.4.
Waiver
80
ARTICLE X
GENERAL PROVISIONS
80
Section 10.1.
Non-Survival of Representations, Warranties and Agreements
80
Section 10.2.
Notices
80
Section 10.3.
Expenses
81
Section 10.4.
Certain Definitions
81
Section 10.5.
Headings
82
Section 10.6.
Severability
82
Section 10.7.
Entire Agreement; No Third-Party Beneficiaries
83
Section 10.8.
Assignment
83
Section 10.9.
Governing Law
83
Section 10.10.
Counterparts
83

 
 
 
 
v

 

 
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
 
THIS SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of July
12, 2017 (the “Agreement”), is entered into by and among KeyStone Solutions,
Inc., a Delaware corporation (the “Company”), Novume Solutions, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Company (“Novume”), KeyStone
Merger Sub, LLC , a Delaware limited liability company and a wholly-owned
subsidiary of Novume previously existing as KeyStone Merger Sub, Inc. (“Company
Merger Sub”), Brekford Merger Sub, Inc., a Delaware corporation and a
wholly-owned subsidiary of Novume (“Brekford Merger Sub”), and Brekford Traffic
Safety, Inc. (formerly known as Brekford Corp.), a Delaware corporation
(“Brekford” and, together with the Company, Novume, Company Merger Sub and
Brekford Merger Sub, each a “Party” and collectively the “Parties”).
 
WHEREAS, the Parties originally entered into that certain Agreement and Plan of
Merger dated as of February 10, 2017 (the “Original Agreement”), and entered
into that certain Amendment No. 1 to the Original Agreement dated as of May 9,
2017 (the “Amendment”) in order to extend the Termination Date (as defined
below) from June 1, 2017 until July 31, 2017;
 
WHEREAS, the Parties subsequently entered into that certain Amended and Restated
Agreement and Plan of Merger dated as of June 7, 2017 (the “First Amended and
Restated Agreement”), in order to, among other things, incorporate the extension
of the Termination Date, amend the Company Exchange Ratio (as defined in the
Original Agreement), alter the treatment of fractional shares, and reflect
appropriate tax provisions;
 
WHEREAS, the Parties wish to effect certain other amendments to the First
Amended and Restated Agreement;
 
WHEREAS, the Parties have previously agreed that for federal income tax
purposes, it is intended that the formation of Novume and the Mergers shall
constitute one or more integrated tax-free transactions under Section 368 of the
Internal Revenue Code of 1986, as amended (the “Code”) and this Agreement is a
“plan of reorganization” within the meaning of Treasury Regulations Section
1.368-2(g)and, in connection therewith, it was advantageous to convert KeyStone
Merger Sub from a Delaware corporation to a Delaware limited liability company,
and such conversion is intended to constitute a tax-free liquidation under Code
Section 332 and this Agreement is a “plan of liquidation” for that purpose;
 
WHEREAS, the Boards of Directors of the Company and Brekford have each
determined that it is in the best interests of the stockholders of the Company
and Brekford, respectively, that each such corporation become a subsidiary of
Novume pursuant to the Mergers (as defined in Section 1.1 hereof) and desire to
make certain representations, warranties and agreements in connection with the
Mergers;
 
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, the Parties hereby agree as follows:
 
 
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ARTICLE I
THE MERGERS
 
Section 1.1. The Mergers. At the Effective Time, and subject to and upon the
terms and conditions of this Agreement, (a) the Company shall be merged with and
into Company Merger Sub in accordance with the Delaware General Corporation Law
and the Delaware Limited Liability Company Act (collectively, “Delaware Law”),
the separate corporate existence of the Company shall cease, and Company Merger
Sub shall continue as the surviving company (the “Company Merger”), and (b)
Brekford Merger Sub shall be merged with and into Brekford in accordance with
Delaware Law, the separate corporate existence of Brekford Merger Sub shall
cease, and Brekford shall continue as the surviving company (the “Brekford
Merger”).The Company Merger and the Brekford Merger are herein collectively
referred to as the “Mergers” and each individually as a “Merger.” The Company
Merger Sub and Brekford as the surviving companies after the Mergers are herein
sometimes collectively referred to as the “Surviving Companies” and each
individually as a “Surviving Company” and the Company and Brekford Merger Sub as
the non-surviving companies after the Mergers are herein sometimes collectively
referred to as the “Merged Companies” and each individually as a “Merged
Company.”
 
Section 1.2. Effective Time. As promptly as practicable after the satisfaction
or waiver of the conditions set forth in ARTICLE VIII hereof and the
consummation of the Closing referred to in Section 7.2(c) hereof, the Parties
shall cause the Mergers to be consummated concurrently by filing a Certificate
of Merger with the Secretary of State of the State of Delaware with respect to
each of the Mergers, in such form as required by, and executed in accordance
with, the relevant provisions of Delaware Law (the effective time of such
filings being the “Effective Time”).
 
Section 1.3. Effects of the Mergers. At the Effective Time, the effect of the
Mergers shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, (a) all of the property, rights, privileges, powers and
franchises of the Company and Company Merger Sub shall continue with, or vest
in, as the case may be, Company Merger Sub as the Surviving Company, and all
debts, liabilities and duties of the Company and Company Merger Sub shall be, or
become, as the case may be, the debts, liabilities and duties of Company Merger
Sub as the Surviving Company; provided, that, Novume shall assume the debts and
liabilities described in Section 7.19 and (b) all of the property, rights,
privileges, powers and franchises of Brekford and Brekford Merger Sub shall
continue with, or vest in, as the case may be, Brekford as the Surviving
Company, and all debts, liabilities and duties of Brekford and Brekford Merger
Sub shall continue to be, or become, as the case may be, the debts, liabilities
and duties of Brekford as the Surviving Company. As of the Effective Time, each
of the Surviving Companies shall be a direct, wholly-owned subsidiary of Novume.
 
 
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Section 1.4. Subsequent Actions. If, at any time after the Effective Time,
either of the Surviving Companies shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of record or
otherwise in such Surviving Company its right, title or interest in, to or under
any of the rights, properties, privileges, franchises or assets of either of its
constituent corporations acquired or to be acquired by such Surviving Company as
a result of, or in connection with, one of the Mergers or otherwise to carry out
this Agreement, the officers and directors of such Surviving Company shall be
directed and authorized to execute and deliver, in the name and on behalf of
either of such constituent corporations, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties, privileges, franchises or
assets in such Surviving Company or otherwise to carry out this Agreement.
 
Section 1.5. Organizational Documents; Directors and Officers of Surviving
Companies. At the Effective Time:
 
(a) the Certificate of Formation of Company Merger Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Formation of Company
Merger Sub as a Surviving Company, and the Certificate of Incorporation of
Brekford Merger Sub as in effect immediately prior to the Effective Time shall
be the Certificate of Incorporation of Brekford as a Surviving Company, in each
case until thereafter amended as provided by law and each such Organizational
Document;
 
(b) the Operating Agreement of Company Merger Sub as in effect immediately prior
to the Effective Time shall be the Limited Liability Company Agreement of
Company Merger Sub as a Surviving Company, and the Bylaws of Brekford Merger Sub
as in effect immediately prior to the Effective Time shall be the Bylaws of
Brekford, as a Surviving Company, immediately prior to the Effective Time, in
each case until thereafter amended as provided by law and the Organizational
Documents of each such Surviving Company; and
 
(c) the officers of each of Company Merger Sub and Brekford, respectively, as
Surviving Companies, shall be designated and appointed upon mutual agreement of
the Parties prior to the Effective Time. Such persons shall serve as the
officers of Company Merger Sub and Brekford, respectively, as Surviving
Companies from and after the Effective Time until their successors are elected
or appointed and qualified or until their resignation or removal.
 
Section 1.6. Company Names. At the Effective Time, the name of KeyStone Merger
Sub shall be changed to “KeyStone Solutions, LLC”.
 
Section 1.7. Company Stockholders’ Agreement. As of the Effective Time, that
certain stockholders’ agreement dated March 16, 2016, as amended, by and among
Robert Berman, Avon Road Partners, L.P., James McCarthy, Richard Nathan, Gregory
McCarthy and Kevin Berrigan shall be terminated.
 
 
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ARTICLE II
EFFECT ON THE STOCK OF NOVUME, THE SURVIVING
COMPANIES AND THE MERGED COMPANIES
 
Section 2.1. Conversion of Securities. The manner and basis of converting the
shares of common stock of Novume, the Surviving Companies and of the Merged
Companies at the Effective Time, by virtue of the Mergers and without any action
on the part of any of the Parties or the holder of any of such securities, shall
be as hereinafter set forth in this ARTICLE II.
 
Section 2.2. Conversion of Shares.
 
(a) Each share of the common stock, par value $0.0001 per share, of the Company
(“Company Common Stock”) issued and outstanding immediately before the Effective
Time (other than those held in the treasury of the Company) and all rights in
respect thereof, shall at the Effective Time, without any action on the part of
any holder thereof, forthwith cease to exist and be converted into and become
exchangeable for, 1.9399449 shares of common stock, par value $0.0001 per share
(“Novume Common Stock”), of Novume (the “Company Common Exchange Ratio”), and
each share of Series A Cumulative Convertible Redeemable Preferred Stock
(“Company Preferred Stock”) of the Company issued and outstanding immediately
before the Effective Time and all rights in respect thereof, shall at the
Effective Time, without any action on the part of any holder thereof, forthwith
cease to exists and be converted into and become exchangeable for, 1 share of
Series A Cumulative Convertible Redeemable Preferred Stock (“Novume Preferred
Stock”), of Novume (collectively, the “Company Merger Consideration”, and such
ratio of Company Preferred Stock to Novume Preferred Stock the “Company
Preferred Exchange Ratio”). Fractional shares of Novume Common Stock and Novume
Preferred Stock will not be issued in connection with the Company Merger. For a
discussion of the treatment of fractional shares that would otherwise be issued,
see Section 2.7.
 
(b) Each share of the common stock, par value $0.0001 per share, of Brekford
(“Brekford Common Stock”) issued and outstanding immediately before the
Effective Time (other than those held in the treasury of Brekford) and all
rights in respect thereof, shall at the Effective Time, without any action on
the part of any holder thereof, forthwith cease to exist and be converted into
and become exchangeable for the right to receive 1/15th of one share (the
“Brekford Exchange Ratio”) of Novume Common Stock (the “Brekford Merger
Consideration”). Fractional shares of Novume Common Stock will not be issued in
connection with the Brekford Merger. For a discussion of the treatment of
fractional shares that would otherwise be issued, see Section 2.7.
 
(c) Commencing immediately after the Effective Time, each certificate which,
immediately prior to the Effective Time, represented issued and outstanding
shares of Company Common Stock or Company Preferred Stock (together, “Company
Shares”) or Brekford Common Stock (“Brekford Shares” and, together with the
Company Shares, the “Shares”), shall evidence the right to receive the Company
Merger Consideration or the Brekford Merger Consideration, as the case may be,
on the basis hereinbefore set forth, but subject to the limitations set forth in
Sections 2.3, 2.5, 2.7, 2.8 and 2.9 hereof.
 
 
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Section 2.3. Cancellation of Treasury Shares and of Outstanding Novume Common
Stock.
 
(a) At the Effective Time, each share of Company Common Stock and Company
Preferred Stock held in the treasury of the Company immediately prior to the
Effective Time, and each share of Brekford Common Stock held in the treasury of
Brekford immediately prior to the Effective Time, shall be cancelled and retired
and no shares of stock or other securities of Novume or either of the Surviving
Companies shall be issuable, and no payment or other consideration shall be
made, with respect thereto.
 
(b) At the Effective Time, the shares of Novume Common Stock held by the Company
shall be cancelled and retired and no shares of stock or other securities of
Novume or any other corporation shall be issuable, and no payment or other
consideration shall be made, with respect thereto.
 
Section 2.4. Conversion of Common Stock and Preferred Stock of the Merged
Companies into Common Stock of the Surviving Companies.
 
(a)           At the Effective Time, each share of common stock of Brekford
Merger Sub issued and outstanding immediately prior to the Effective Time, and
all rights in respect thereof, shall, without any action on the part of Novume,
forthwith cease to exist and be converted into 1,000 validly issued, fully paid
and nonassessable shares of common stock of Brekford, as one of the Surviving
Companies (or such greater number as the Company shall determine prior to the
Effective Time). Immediately after the Effective Time and upon surrender by
Novume of the certificate representing the shares of the common stock of
Brekford Merger Sub, Brekford as one of the Surviving Companies shall deliver to
Novume an appropriate certificate or certificates representing the common stock
of Brekford created by conversion of the common stock of Brekford Merger Sub
owned by Novume as aforesaid.
 
 
5

 
 
Section 2.5. Exchange of Shares Other Than Treasury Shares. Subject to the terms
and conditions hereof, at or prior to the Effective Time, Novume shall appoint
an exchange agent to effect the exchange of Shares for Novume Common Stock and
Novume Preferred Stock, and issue cash payments (which cash payments will be
paid by Novume) in lieu of fractional shares, in accordance with the provisions
of this ARTICLE II (the “Exchange Agent”). From time to time after the Effective
Time, Novume shall deposit, or cause to be deposited, (i) certificates
representing Novume Common Stock for conversion of Shares in accordance with the
provisions of Section 2.2 hereof, (ii) certificates representing Novume
Preferred Stock for conversion of Shares in accordance with the provisions of
Section 2.2 hereof and (iii) checks to each applicable recipient of cash in lieu
of fractional shares in accordance with the provisions of Section 2.2 hereof
(such certificates and checks, together with any dividends or distributions with
respect thereto, being herein referred to collectively as the “Exchange Fund”).
Commencing immediately after the Effective Time and until the appointment of the
Exchange Agent shall be terminated, each holder of a certificate or certificates
theretofore representing Shares may surrender the same to the Exchange Agent,
and, after the appointment of the Exchange Agent shall be terminated, any such
holder may surrender any such certificate to Novume. Such holder shall be
entitled upon such surrender to receive in exchange therefor a certificate or
certificates representing the number of full shares of Novume Common Stock or
Novume Preferred Stock, as applicable, into which the Shares theretofore
represented by the certificate or certificates so surrendered shall have been
converted in accordance with the provisions of Section 2.2 hereof, together with
a cash payment in lieu of fractional shares, if any, in accordance with Section
2.7 hereof. All such shares of Novume Common Stock or Novume Preferred Stock, as
applicable, issued in accordance with the immediately preceding sentence shall
be deemed to have been issued at the Effective Time. Until so surrendered and
exchanged, each outstanding certificate which, prior to the Effective Time,
represented issued and outstanding Shares shall be deemed for all corporate
purposes of the Parties, other than the payment of dividends and other
distributions, if any, to represent the right to receive the Company Merger
Consideration or the Brekford Merger Consideration, as the case may be. Unless
and until any such certificate theretofore representing Shares is so
surrendered, no dividend or other distribution, if any, payable to the holders
of record of Novume Common Stock or Novume Preferred Stock as of any date
subsequent to the Effective Time shall be paid to the holder of such certificate
in respect thereof. Upon the surrender of any such certificate theretofore
representing Shares, however, the record holder of the certificate or
certificates representing shares of Novume Common Stock or Novume Preferred
Stock issued in exchange therefor shall receive from the Exchange Agent or from
Novume, as the case may be, payment of the amount of dividends and other
distributions, if any, which as of any date subsequent to the Effective Time and
until such surrender shall have become payable with respect to such number of
shares of Novume Common Stock or Novume Preferred Stock (“Pre-Surrender
Dividends”). No interest shall be payable with respect to the payment of
Pre-Surrender Dividends or cash in lieu of fractional shares, upon the surrender
of certificates theretofore representing Shares. After the appointment of the
Exchange Agent shall have been terminated, such holders of Novume Common Stock
that have not received payment of Pre- Surrender Dividends or cash in lieu of
fractional shares, shall look only to Novume for payment thereof.
Notwithstanding the foregoing provisions of this Section 2.5, neither the
Exchange Agent nor any Party shall be liable to a holder of Shares for any
Novume Common Stock or Novume Preferred Stock or dividends or distributions
thereon delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law or to a transferee pursuant to Section 2.6
hereof.
 
 
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Section 2.6. Transfer Books. The stock transfer books of the Company with
respect to the Company Shares and the stock transfer books of Brekford with
respect to the Brekford Shares shall each be closed at the Effective Time and no
transfer of any Shares will thereafter be recorded on any of such stock transfer
books. In the event of a transfer of ownership of Shares that is not registered
in the stock transfer records of the Company or Brekford, as the case may be, at
the Effective Time, cash and/or a certificate or certificates representing the
number of full shares of Novume Common Stock or Novume Preferred Stock, as
applicable, into which such Shares shall have been converted in accordance with
Section 2.2 hereof shall be issued to the transferee together with a cash
payment in lieu of fractional shares, if any, in accordance with Section 2.7
hereof, and a cash payment in the amount of Pre-Surrender Dividends, if any, in
accordance with Section 2.5 hereof, if the certificate or certificates
representing such Shares is or are surrendered as provided in Section 2.5
hereof, accompanied by all documents required to evidence and effect such
transfer and by evidence of payment of any applicable stock transfer tax.
 
Section 2.7. No Fractional Shares.
 
(a) No scrip or fractional share certificate for Novume Common Stock or Novume
Preferred Stock will be issued upon the surrender for exchange of certificates
evidencing Shares, and an outstanding fractional share interest will not entitle
the owner thereof to vote, to receive dividends or to any rights of a
stockholder of Novume or of either of the Surviving Companies with respect to
such fractional share interest.  Each holder of shares of Company Common Stock
otherwise entitled to a fractional share of Novume Common Stock will be entitled
to receive, from the Exchange Agent in accordance with the provisions of
this Section 2.7, a cash payment in lieu of such fractional share of Novume
Common Stock in an amount determined by multiplying the fractional share
interest to which such holder would otherwise be entitled (after taking into
account all shares of Company Common Stock owned by such holder at the Effective
Time) by the Closing Date Novume Share Price. No such holder shall be entitled
to dividends, voting rights or any other rights in respect of any fractional
share.
 
(b) None of Novume, the Company or Brekford shall be liable to any holder of
Shares or Novume Common Stock or Novume Preferred Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
 
Section 2.8. Options and Warrants to Purchase Common Stock.
 
(a) At the Effective Time, each option granted by the Company to purchase shares
of Company Common Stock (each, a “Company Option”), or by Brekford to purchase
shares of Brekford Common Stock (each, a “Brekford Option” and, together with
the Company Options, “Options”), which is outstanding and unexercised
immediately prior to the Effective Time, shall be assumed by Novume and
converted into an option (a “Novume Option”) to purchase shares of Novume Common
Stock in such amount and at such exercise price as provided below and otherwise
having the same terms and conditions as are in effect immediately prior to the
Effective Time:
 
 
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(i) the number of shares of Novume Common Stock to be subject to the Novume
Option shall be equal to the product of (x) the number of shares of Company
Common Stock or Brekford Common Stock subject to the original Option and (y) the
Company Common Exchange Ratio or the Brekford Exchange Ratio, as applicable;
 
(ii) the exercise price per share of Novume Common Stock under the Novume Option
shall be equal to (x) the exercise price per share of the Company Common Stock
or Brekford Common Stock under the original Option divided by (y) the Company
Common Exchange Ratio or the Brekford Exchange Ratio, as applicable; and
 
(iii) upon each exercise of Novume Options by a holder thereof, the aggregate
number of shares of Novume Common Stock deliverable upon such exercise shall be
rounded down, if necessary, to the nearest whole share and the aggregate
exercise price shall be rounded up, if necessary, to the nearest cent. The
adjustments provided herein with respect to any Options shall be effected in a
manner consistent with Section 424(a) of the Code.
 
(b) Novume shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of Novume Common Stock for delivery upon exercise of
Novume Options in accordance with this Section 2.8. As soon as practicable (and
in no event later than thirty (30) days) after the Effective Time, Novume shall
file a registration statement on Form S-8 (or any successor or other appropriate
forms), or another appropriate form with respect to the shares of Novume Common
Stock subject to the Novume Options and shall use its best efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as the Novume Options remain outstanding.
 
(c) At the Effective Time, each outstanding warrant to purchase shares of
Company Common Stock (each, a “Company Warrant”), or to purchase shares of
Brekford Common Stock (each, a “Brekford Warrant” and, together with the Company
Warrants, the “Warrants”), which is outstanding and unexercised immediately
prior to the Effective Time, shall be assumed by Novume and converted into a
warrant to purchase shares of Novume Common Stock (a “Novume Warrants”) in such
amount and at such exercise price as provided below and otherwise having the
same terms and conditions as are in effect immediately prior to the Effective
Time:
 
(i) the number of shares of Novume Common Stock issuable upon exercise of each
Novume Warrant shall be equal to the product of (x) the number of shares of
Company Common Stock or Brekford Common Stock issuable upon exercise of the
original Warrant and (y) the Company Common Exchange Ratio or the Brekford
Exchange Ratio, as applicable;
 
(ii) the exercise price per share of Novume Common Stock under the Novume
Warrants shall be equal to (x) the exercise price per share of the Company
Common Stock or Brekford Common Stock under the original Warrant divided by (y)
the Company Common Exchange Ratio or the Brekford Exchange Ratio, as applicable;
and
 
(iii)     upon each exercise of Novume Warrants by a holder thereof, the
aggregate number of shares of Novume Common Stock deliverable upon such exercise
shall be rounded down, if necessary, to the nearest whole share and the
aggregate exercise price shall be rounded up, if necessary, to the nearest cent.
 
 
8

 
 
Section 2.9. Certain Adjustments. Without limiting any other provision of this
Agreement, if, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Common Stock or of Brekford Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, the exchange ratio established pursuant to the
provisions of Section 2.2 hereof shall be adjusted accordingly to provide to the
holders of Company Common Stock and Brekford Common Stock the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or dividend.
 
ARTICLE III
CERTAIN MATTERS WITH RESPECT TO NOVUME
 
Section 3.1. Certificate of Incorporation of Novume. Prior to the Effective
Time, the Company shall cause the Certificate of Incorporation of Novume to be
amended and restated to read substantially as set forth in Appendix I hereto,
and shall cause Novume to file with the Secretary of State of the State of
Delaware a Certificate of Designations of the Novume Preferred Stock containing
terms substantially identical to the Certificate of Designations of the Company
Preferred Stock filed with the Secretary of State of the State of Delaware as of
the date hereof, but in any event, which shall provide rights, preferences and
privileges to the holders of Novume Preferred Stock that are no less favorable
to such holders than those currently provided to the holders of Company
Preferred Stock.
 
Section 3.2. Officers and Directors of Novume.
 
(a) At the Effective Time, Robert A. Berman shall have been appointed the Chief
Executive Officer of Novume; such other persons shall have been appointed
officers of Novume as are designated by the Board of Directors of the Company as
it exists immediately prior to the Effective Time.
 
(b) At the Effective Time or as soon as practicable thereafter, the Novume Board
shall consist of seven (7) members, four (4) of whom shall be independent within
the meaning of the 1934 Act, and the national stock exchange to which the
Company has applied or intends to apply for the listing of Novume Common Stock
as described in Section 7.10. Six (6) members of the Novume Board shall be
designated by the Company, and one (1) member of the Novume Board shall be
designated by Brekford, subject to the approval of KeyStone. The members
designated by the Company are James McCarthy, who shall serve as Chairman,
Robert A. Berman, Dr. Richard Nathan, Glenn Goord, Paul DeBary and one
additional independent director who shall be designated by the Company . The
member to be designated by Brekford shall be independent, as provided herein,
and shall be subject to the approval by the Company. As of the date hereof,
Glenn Goord and Paul DeBary are independent as provided herein, and shall so
remain, as and at the Effective Time.
 
 
9

 
 
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BREKFORD
 
Brekford hereby represents and warrants to the Company and Novume as follows:
 
Section 4.1. Organization and Qualification; Subsidiaries. Each of Brekford and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization.
Each of Brekford and its Subsidiaries has the requisite corporate power and
authority and any necessary governmental authority, franchise, license or permit
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except for such failure which, when taken together with all other such failures,
would not reasonably be expected to have a Material Adverse Effect on Brekford.
Brekford’s Subsidiaries are listed on Schedule 4.1 hereto.
 
Section 4.2. Organizational Documents. Brekford has heretofore furnished, or
otherwise made available, to the Company complete and correct copies of the
Organizational Documents, each as amended as of the date hereof, of Brekford and
each of its Subsidiaries. Such Organizational Documents are in full force and
effect. Neither Brekford nor any of its Subsidiaries is in violation of any of
the provisions of its respective Organizational Documents.
 
Section 4.3. Capitalization.
 
(a) The authorized capital stock of Brekford consists of (i) 20,000,000 shares
of preferred stock, par value $0.0001 per share, none of which are outstanding
and none of which are reserved for issuance and (ii) 150,000,000 shares of
Brekford Common Stock, of which, as of July 11, 2017, 49,311,264 shares were
issued and outstanding, 840,000 shares were issuable upon the exercise of
warrants, and 475,000 shares were issuable upon the exercise of options
outstanding under the Brekford option plans listed on Schedule 4.3 hereto. Since
January 1, 2017, no shares of Brekford Common Stock have been issued, except
upon the exercise of options described in the immediately preceding sentence.
Except as set forth on Schedule 4.3, there are no outstanding Brekford Equity
Rights. For purposes of this Agreement, “Brekford Equity Rights” shall mean
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Brekford or any of Brekford’s Subsidiaries at any time,
or upon the happening of any stated event, any shares of the capital stock of
Brekford. Schedule 4.3 sets forth a complete and accurate list with respect to
all outstanding Brekford Equity Rights of the holder thereof, the date of grant,
the number of shares for which each such Brekford Equity Right is exercisable,
the respective dates upon which each such Brekford Equity Right vests, becomes
exercisable and expires, and the exercise price of each such Brekford Equity
Right.
 
(b) There are no outstanding obligations of Brekford or any of Brekford’s
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of Brekford or any such Subsidiary.
 
 
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(c) All of the issued and outstanding shares of Brekford Common Stock are
validly issued, fully paid and nonassessable.
 
(d) All of the outstanding capital stock of each of Brekford’s Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable, and, except as
set forth on Schedule 4.3, is owned by Brekford free and clear of any liens,
security interests, pledges, agreements, claims, charges or encumbrances. Except
as set forth on Schedule 4.3, there are no existing subscriptions, options,
warrants, calls, commitments, agreements, conversion rights or other rights of
any character (contingent or otherwise) to purchase or otherwise acquire from
Brekford or any of Brekford’s Subsidiaries at any time, or upon the happening of
any stated event, any shares of the capital stock of any of Brekford’s
Subsidiaries, or any securities convertible into or exercisable for shares of
the capital stock of any of Brekford’s Subsidiaries, whether or not presently
issued or outstanding and there are no outstanding obligations of Brekford or
any of Brekford’s Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of any of Brekford’s Subsidiaries. Except for equity
interests disclosed on Schedule 4.3 hereto and Subsidiaries listed on Schedule
4.1 hereto, Brekford does not directly or indirectly own any equity interest in
any other person. Each of Brekford’s Subsidiaries is a wholly-owned Subsidiary.
 
(e) Except as disclosed on Schedule 4.3 hereto, there are no stockholder
agreements, voting trusts or other agreements or understandings to which
Brekford is a party or to which it is bound relating to the voting or
registration of any shares of capital stock of Brekford. Brekford has not taken
any action that would result in, nor is Brekford a party to any agreement,
arrangement or understanding not disclosed on Schedule 4.3 hereto that would
result in, any Options to purchase Brekford Common Stock that are unvested
becoming vested in connection with or as a result of the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
 
Section 4.4. Authority Relative to this Agreement. Brekford has the necessary
corporate power and authority to enter into this Agreement. The execution and
delivery of this Agreement by Brekford and the consummation by Brekford of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Brekford, including the approval of this
Agreement by Brekford’s stockholders as required by the Delaware Law. This
Agreement has been duly executed and delivered by Brekford and, assuming the due
authorization, execution and delivery thereof by the other Parties, constitutes
a legal, valid and binding obligation of Brekford, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity (the “Bankruptcy Exception”).
 
 
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Section 4.5. No Conflict; Required Filings and Consents.
 
(a) Except as listed on Schedule 4.5 hereto, the execution and delivery of this
Agreement by Brekford do not, and the performance of this Agreement by Brekford
will not, (i) violate or conflict with the Certificate of Incorporation or
Bylaws of Brekford, (ii) conflict with or violate any Legal Requirement, or
conflict with or violate any Permit, applicable to Brekford or any of its
Subsidiaries or by which any of their respective property is bound or affected,
(iii) violate or conflict with the Certificate of Incorporation or Bylaws (or
comparable governing documents) of any of Brekford’s Subsidiaries or (iv) result
in any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Brekford or any of its
Subsidiaries pursuant to, result in the loss of any material benefit under, or
require the consent of any other party to, any contract, instrument, permit,
license or franchise to which Brekford or any of its Subsidiaries is a party or
by which Brekford, each Subsidiary or any of their respective property is bound
or affected, except, in the case of clauses (ii), (iii) or (iv) above, for
conflicts, violations, breaches, defaults, results or consents which,
individually or in the aggregate, would not have a Material Adverse Effect on
Brekford.
 
(b) Except as listed on Schedule 4.5 and except for applicable requirements, if
any, of the Exchange Act (as defined on Section 10.4 hereof), filing and
recordation of appropriate merger or other documents as required by Delaware Law
and any filings required pursuant to any state securities or “blue sky” laws or
the rules of any applicable stock exchanges, neither Brekford nor its any of its
Subsidiaries is required to submit any notice, report or other filing with any
governmental authority, domestic or foreign, in connection with the execution,
delivery or performance of this Agreement. Except as set forth in the
immediately preceding sentence, no waiver, consent, approval or authorization of
any governmental or regulatory authority, domestic or foreign, is required to be
obtained by Brekford or any of its Subsidiaries in connection with its
execution, delivery or performance of this Agreement.
 
Section 4.6. SEC Filings; Financial Statements.
 
(a) Brekford has filed all forms, reports and documents required to be filed
with the SEC since January 1, 2016, and has heretofore delivered or made
available to the Company, in the form filed with the SEC, together with any
amendments thereto, its (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 2015, (ii) all proxy statements relating to Brekford’s meetings of
stockholders (whether annual or special) held since January 1, 2016, (iii)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017, and
(iv) all other reports or registration statements filed by Brekford with the SEC
since January 1, 2016 (collectively, the “Brekford SEC Reports”). The Brekford
SEC Reports (i) were prepared substantially in accordance with the requirements
of the 1933 Act (as defined in Section 10.4 hereof), or the Exchange Act as the
case may be, and the rules and regulations promulgated under each of such
respective acts, and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
 
 
12

 
 
(b) The financial statements, including all related notes and schedules,
contained in the Brekford SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of Brekford and each of its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of Brekford and each of its Subsidiaries for the
periods indicated in accordance with United States generally accepted accounting
principles (“GAAP”) applied on a consistent basis throughout the periods
involved (except for changes in accounting principles disclosed in the notes
thereto) and subject, in the case of interim financial statements, to normal
year-end adjustments.
 
(c) Brekford has heretofore made available to the Company a complete and correct
copy of any material amendments or modifications, which have not yet been filed
with the SEC, to agreements, documents or other instruments which previously had
been filed by Brekford with the SEC pursuant to the Exchange Act.
 
Section 4.7. No Undisclosed Liabilities; Absence of Certain Changes or Events.
Except as and to the extent publicly disclosed by Brekford in the Brekford
SEC Reports filed prior to the date of this Agreement, as of January 1, 2016,
neither Brekford nor any of its Subsidiaries had any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be required
by GAAP to be reflected in, reserved against or otherwise described in the
consolidated balance sheet of Brekford (including the notes thereto) as of such
date or which could reasonably be expected to have a Material Adverse Effect on
Brekford. Except as disclosed on Schedule 4.7 hereto, since September 30, 2016,
neither Brekford nor any of its Subsidiaries has incurred any material
liability, except in the ordinary course of their respective businesses
consistent with their past practices, and there has not been any change, or any
event involving a prospective change, in the business, financial condition or
results of operations of Brekford or any of its Subsidiaries which has had, or
is reasonably likely to have, a Material Adverse Effect on Brekford, and
Brekford and each of its Subsidiaries has conducted their respective businesses
in the ordinary course consistent with their past practices.
 
Section 4.8. Litigation. Except as disclosed in Schedule 4.8 hereto, there are
no claims, actions, suits, proceedings or, to Brekford’s knowledge,
investigations pending or, to Brekford’s knowledge, threatened against Brekford
or any of its Subsidiaries, or any properties or rights of Brekford or any of
its Subsidiaries, before any court, administrative, governmental, arbitral,
mediation or regulatory authority or body, domestic or foreign, (a) as of the
date hereof, as to which there is more than a remote possibility of an adverse
judgment or determination against Brekford or any of its Subsidiaries or any
properties or rights of Brekford or any of its Subsidiaries in excess of
$100,000 or which otherwise is reasonably likely to have a Material Adverse
Effect on Brekford, (b) as of the date hereof, which questions the validity of
this Agreement or any action to be taken by Brekford in connection with the
consummation of the transactions contemplated by this Agreement or could
otherwise prevent or delay the consummation of the transactions contemplated by
this Agreement, or (c) as to which there is reasonably likely to be an adverse
judgment or determination against Brekford or any of its Subsidiaries or any
properties or rights of Brekford or any of its Subsidiaries in excess of
$100,000 or which otherwise could reasonably be expected to have a Material
Adverse Effect on Brekford.
 
 
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Section 4.9. No Violation of Law; Permits. The business of Brekford and each of
its Subsidiaries is not being conducted in violation of any statute, law,
ordinance, rule, regulation, judgment, order or decree of any domestic or
foreign governmental, regulatory or judicial entity (including any stock
exchange or other self-regulatory body) (“Legal Requirements”), or in violation
of any permits, franchises, licenses, approvals, tariffs and other
authorizations or consents that are granted by any domestic or foreign
government or regulatory or judicial entity (including any stock exchange or
other self-regulatory body) (“Permits”), except for possible violations of any
Legal Requirements, or violations of any Permits, none of which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on Brekford. Brekford and each of its Subsidiaries have all Permits that are
required in connection with the operation of their businesses (collectively,
“Required Permits”), and no proceedings are pending or, to the knowledge of
Brekford, threatened to revoke or limit any Required Permit, except, in each
case, those the absence or violation of which do not and will not have a
Material Adverse Effect on Brekford. Except as set forth on Schedule 4.9 hereto,
(a) to Brekford’s knowledge, no investigation or review by any domestic or
foreign governmental or regulatory entity (including any stock exchange or other
self-regulatory body) with respect to Brekford or any of its Subsidiaries in
relation to any alleged violation of law or regulation is pending or threatened,
and (b) no governmental or regulatory entity (including any stock exchange or
other self-regulatory body) has notified Brekford of its intention to conduct
the same, except for such investigations which, if they resulted in adverse
findings, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Brekford. Except as set forth on
Schedule 4.9 hereto, neither Brekford nor any of its Subsidiaries is subject to
any cease and desist or other order, judgment, injunction or decree issued by,
or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of, any court, governmental entity or
regulatory agency that materially restricts the conduct of its business or which
could reasonably be expected to have a Material Adverse Effect on Brekford, or
would prevent or delay the consummation of the transactions contemplated by this
Agreement, nor has Brekford or any of its Subsidiaries been advised that any
court, governmental entity or regulatory agency is considering issuing or
requesting any of the foregoing. Brekford and each of its Subsidiaries and
affiliates has complied with all material federal and state regulatory reporting
requirements necessary for the lawful provision of services or products
currently offered by Brekford or such Subsidiaries or affiliate.
 
 
 
14

 
 
Section 4.10. Registration Statement; Information Statement. None of the
information supplied or to be supplied by or on behalf of Brekford for inclusion
or incorporation by reference in the Registration Statement on Form S-4 (the
“Registration Statement”) to be filed with the SEC by Novume in connection with
the issuance of shares of Novume Common Stock and Novume Preferred Stock in the
Mergers will, at the time the Registration Statement becomes effective under the
1933 Act, contain any 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. None of the information supplied or to be supplied by or on behalf
of Brekford for inclusion or incorporation by reference in the information
statement, in definitive form, relating to the approval of the Mergers by the
required Brekford stockholders (the “Information Statement”) will, at any time
prior to the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event with respect to Brekford, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Registration Statement or the Information Statement,
Brekford shall promptly so advise the Company and such event shall be so
described, and such amendment or supplement (which the Company shall have a
reasonable opportunity to review) shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of Brekford. The Registration
Statement and the Information Statement (except for information relating to or
provided by the Company) will each comply as to form in all material respects
with the provisions of the 1933 Act and the Exchange Act, as applicable, and the
rules and regulations promulgated thereunder, as applicable.
 
Section 4.11. Employee Matters; ERISA.
 
(a) Set forth on Schedule 4.11 hereto is a true and complete list of all
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), all deferred
compensation, bonus or other incentive compensation, stock options, restricted
stock, stock purchase or other equity-based, severance or change in control,
salary continuation, tuition assistance, disability, leave of absence plans,
policies or agreements, and all employment, consulting, management or other
individual compensation agreements with respect to any current or former
employee of Brekford or any of its Brekford ERISA Affiliates, which in each case
Brekford or any of its Brekford ERISA Affiliates has any obligation or
liability, contingent or otherwise (collectively, the “Brekford Benefit Plans“).
 
(b) All contributions and other payments required to be made by Brekford or any
Brekford ERISA Affiliate to or under any Brekford Benefit Plan (or to any person
pursuant to the terms thereof) have been timely made in accordance with
applicable law. No Brekford Benefit Plan is subject to Section 412 of the Code
or Section 302 of ERISA.
 
(c) Each of the Brekford Benefit Plans intended to be “qualified” within the
meaning of Section 401(a) of the Code has been determined by the Internal
Revenue Service (the “IRS”) to be so qualified, and, to the knowledge of
Brekford or any Brekford ERISA Affiliate, no circumstances exist that could
reasonably be expected by Brekford or any Brekford ERISA Affiliate to result in
the revocation of any such determination. Brekford is in compliance with, and
each of the Brekford Benefit Plans is and has been operated in compliance with,
all applicable Legal Requirements governing such plan, including, without
limitation, ERISA and the Code.
 
 
15

 
 
(d) Brekford has made available to the Company with respect to each Brekford
Benefit Plan a true, correct and complete copy of each of the following
documents where applicable (i) such plan, summary plan description and summary
of material modifications, (ii) the most recent annual report filed with the
IRS, (iii) each related trust agreement, (iv) the most recent determination of
the IRS with respect to the qualification under any provision of the Code and
(v) the most recent IRS Form 5500 and actuarial report or valuation.
 
(e) Except as set forth on Schedule 4.11 hereto, the consummation or
announcement of any transaction contemplated by this Agreement will not either
alone or upon the occurrence of any additional or further acts or events) result
in any (i) payment (whether of severance pay or otherwise) becoming due from
Brekford or any Brekford ERISA Affiliate to any current or former officer,
employee, former employee or director thereof, or to any other person for the
benefit of any such officer, employee or director, or (ii) acceleration, vesting
or establishment of any benefit under any Brekford Benefit Plan, or (iii)
disqualification of any of the Brekford Benefit Plans intended to be qualified
under, result in a prohibited transaction or breach of fiduciary duty under, or
otherwise violate, ERISA or the Code.
 
(f) Neither Brekford nor any of its Brekford ERISA Affiliates has incurred, and
neither of such entities reasonably expects to incur, any material liability to
the PBGC (other than premiums which are not overdue) or pursuant to Title IV of
ERISA with respect to any Brekford Benefit Plan. Neither Brekford nor any
Brekford ERISA Affiliate is an employer with respect to, and neither has
incurred or reasonably expects to incur, any withdrawal liability with respect
to, any “multiemployer plan” (as defined in Section 3(37) of ERISA).
 
(g) There are no pending or, to the knowledge of Brekford or any Brekford ERISA
Affiliate, threatened actions, claims or proceedings against any Brekford
Benefit Plan or its assets, plan sponsor, plan administrator or fiduciaries with
respect to the operation of such plan (other than routine benefit claims).
 
Section 4.12. Labor Matters. Except as disclosed on Schedule 4.12 hereto,
neither Brekford nor any of its Subsidiaries is party to any collective
bargaining agreement or other labor agreement with any union or labor
organization and no union or labor organization has been recognized by Brekford
or any of its Subsidiaries as an exclusive bargaining representative for
employees of Brekford or any of its Subsidiaries. Except as disclosed on
Schedule 4.12 hereto, there is no current union representation question
involving employees of Brekford or any of Brekford’s Subsidiaries, nor does
Brekford have knowledge of any significant activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any such
employees. Neither Brekford nor any of its Subsidiaries has made any commitment
not in collective bargaining agreements listed on Schedule 4.12 hereto that
would require the application of the terms of any collective bargaining
agreements entered into by Brekford or any of its Subsidiaries to the Company,
Novume, or any Subsidiary or joint venture of either the Company or Novume.
Except as disclosed on Schedule 4.12 hereto, (i) there is no material active
arbitration under any collective bargaining agreement involving Brekford or any
of its Subsidiaries, (ii) there is no material unfair labor practice, grievance,
employment discrimination or other labor or employment related charge, complaint
or claim against Brekford or any of its Subsidiaries pending before any court,
arbitrator, mediator or governmental agency or tribunal, or threatened, (iii)
there is no material strike, picketing or work stoppage by, or any lockout of,
employees of Brekford or its Subsidiaries pending or, to Brekford’s knowledge,
threatened, against or involving Brekford or any of its Subsidiaries, (iv) there
is no significant active arbitration under any collective bargaining agreement
involving Brekford or any of its Subsidiaries regarding the employer’s right to
move work from one location or entity to another, or to consolidate work
locations, or involving other similar restrictions on business operations, and
(v) there is no material proceeding, claim, suit, action or, to Brekford’s
knowledge, governmental investigation pending or, to Brekford’s knowledge,
threatened, in respect of which any director, officer, employee or agent of
Brekford or any of its Subsidiaries is or may be entitled to claim
indemnification from Brekford or any Brekford Subsidiary pursuant to their
respective charters or bylaws or as provided in the indemnification agreements,
if any, listed on Schedule 4.12 hereto. For purposes of this Section 4.12,
“material” refers to any liability which could reasonably be expected to exceed
$100,000. A true, correct and complete copy has been made available to the
Company of each current or last, in the case where there is no current, expired
collective bargaining agreement to which Brekford or any of its Subsidiaries is
a part or under which Brekford or any of its Subsidiaries has obligations.
 
 
16

 
 
Section 4.13. Environmental Matters. Environmental Matters. Except as set forth
on Schedule 4.13 hereto:
 
(a) Brekford and each of its Subsidiaries are and have been in compliance with
all applicable Environmental Laws (as defined below) and neither Brekford nor
any of its Subsidiaries has received any written or oral communication from any
person or governmental authority that alleges that Brekford or any of its
Subsidiaries is not in compliance with applicable Environmental Laws, except for
such non-compliance which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Brekford.
 
(b) Brekford and each of its Subsidiaries have obtained or have applied for all
environmental, health and safety permits, licenses, variances, approvals and
authorizations (collectively, the “Environmental Permits”) necessary for the
construction of their facilities or the conduct of their operations, and all
such Environmental Permits are effective or, where applicable, a renewal
application has been timely filed and is pending agency approval, and Brekford
and each of its Subsidiaries are in compliance with all terms and conditions of
such Environmental Permits except for such non-compliance which, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Brekford. There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans that may
materially interfere with, or prevent, future continued compliance on the part
of Brekford or any of its Subsidiaries with such Environmental Permits. Neither
Brekford nor any of its Subsidiaries has knowledge of matters or conditions that
would preclude reissuance or transfer of any such Environmental Permit,
including amendment of such instrument, to Novume or one of its Subsidiaries,
where such action is necessary to maintain material compliance with
Environmental Laws.
 
(c) To Brekford’s knowledge, there is no requirement to be imposed in the future
by any Environmental Law or Environmental Permit which could reasonably be
expected to result in the incurrence of a material cost by Brekford or any of
its Subsidiaries.
 
(d) There is no Environmental Claim (as defined below) pending or, to Brekford’s
knowledge, threatened (i) against Brekford or any of its Subsidiaries, (ii)
against any person whose liability for any Environmental Claim Brekford or any
of its Subsidiaries has or may have retained or assumed either contractually or
by operation of law, or (iii) against or associated with any real or personal
property or operations which Brekford or any of its Subsidiaries currently or
previously owned, leased or operated, in whole or in part.
 
(e) There have been no Releases (as defined below) of any Hazardous Material (as
defined below) that would be reasonably likely to form the basis of any
Environmental Claim against Brekford or any of its Subsidiaries, or against any
person whose liability for any Environmental Claim Brekford or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
 
(f) With respect to any predecessor of Brekford or any of its Subsidiaries,
there is no Environmental Claim pending or, to Brekford’s knowledge, threatened,
or any Release of Hazardous Materials that would be reasonably likely to form
the basis of any Environmental Claim against Brekford or any of its
Subsidiaries.
 
 
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(g) Brekford has disclosed to the Company all material facts which Brekford
reasonably believes form the basis of a material current or future cost relating
to any environmental matter affecting Brekford and each of its Subsidiaries.
 
(h) None of the properties currently or formerly owned, leased or operated by
Brekford, any of its Subsidiaries or any predecessor thereof are now, or were in
the past, listed on the National Priorities List of Superfund Sites (the “NPL”),
the Comprehensive Environmental Response, Compensation and Liability Information
System (“CERCLIS”), or any other comparable state or local environmental
database, including those that are triggered by sales or transfers of businesses
or real property.
 
(i) Brekford has delivered, or caused to be delivered, to the Company copies of
all written environmental audit reports, written site assessments performed by
environmental professionals, asbestos surveys, written claims and complaints,
and consent decrees and other similar documents with respect to Brekford or any
of its Subsidiaries, which are in the possession or control of Brekford or any
of its Subsidiaries, related to compliance with Environmental Laws,
Environmental Claims, or Releases of Hazardous Materials.
 
For purposes of this Section 4.13:
 
(i) “Environmental Claim” means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any person (including any federal, state, local or foreign governmental
authority) alleging potential liability (including, without limitation,
potential responsibility for or liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs, remedial costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (A) the presence, or Release or
threatened Release into the environment, of any Hazardous Materials at any
location, whether or not owned, operated, leased or managed by Brekford or any
of its Subsidiaries (including but not limited to obligations to clean up
contamination resulting from leaking underground storage tanks); or (B)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law; or (C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
 
(ii) “Environmental Laws” means all applicable foreign, federal, state and local
laws (including the common law), rules, requirements and regulations relating to
pollution, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials or relating to management of
asbestos in buildings.
 
 
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(iii) “Hazardous Materials” means (A) any petroleum or any by-products or
fractions thereof, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, any form of natural gas, explosives, and
polychlorinated biphenyls (“PCBs”); (B) any chemicals, materials or substances,
whether waste materials, raw materials or finished products, which are now
defined as or included in the definition of “hazardous substances,” “hazardous
wastes,” “hazardous materials,” “extremely hazardous substances,” “restricted
hazardous wastes,” “toxic substances,” “toxic pollutants,” “pollutants,”
“contaminants,” or words of similar import under any Environmental Law; and (C)
any other chemical, material or substance, whether waste materials, raw
materials or finished products, regulated or forming the basis of liability
under any Environmental Law.
 
(iv) “Release” means any release, spill, emission, leaking, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the environment
(including without limitation ambient air, atmosphere, soil, surface water,
groundwater or property).
 
Section 4.14. Board Action; Vote Required
 
(a) The Board of Directors of Brekford has determined that the transactions
contemplated by this Agreement are in the best interests of Brekford and its
stockholders and has recommended to such stockholders that they vote in favor
thereof.
 
(b) The approval of the Merger of Brekford Merger Sub into Brekford by a
majority of the votes entitled to be cast by all holders of Brekford Common
Stock (the “Brekford Stockholders’ Approval”) was received on February 9, 2017,
and, as of the date hereof, such approval remains in full force and effect and
has not been amended or rescinded. No further vote of the holders of any class
or series of the capital stock of Brekford is required to approve this
Agreement, the Mergers and the other transactions contemplated hereby, in
accordance with the provisions of Delaware Law, any applicable United States
federal and state securities laws, and the Organizational Documents of Brekford,
each as amended and as currently in effect.
 
Section 4.15. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s, investment banking or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Brekford or any of its Subsidiaries.
 
Section 4.16. Tax Matters. Except as set forth on Schedule 4.16 hereto:
 
(a) Brekford and each of its Subsidiaries, and each affiliated group (within the
meaning of Section 1504 of the Code) of which Brekford or any of its
Subsidiaries is or has been a member, has timely filed all federal state, local,
foreign, income and franchise Tax Returns (as defined below), and all other
material Tax Returns required to be filed by them. All such Tax Returns are true
and correct in all material respects. Except to the extent adequately reserved
for in accordance with GAAP, all material Taxes due and payable by Brekford and
each of its Subsidiaries have been timely paid in full. The most recent
consolidated financial statements contained in the Brekford SEC Reports reflect
an adequate reserve (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) in accordance with GAAP
for all Taxes payable by Brekford and each of its Subsidiaries for all taxable
periods and portions thereof through the date of such financial statements.
 
 
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(b) No material deficiencies for any Taxes have been proposed, asserted or
assessed in writing against Brekford or any of its Subsidiaries that have not
been fully paid or adequately provided for in the appropriate financial
statements of Brekford and its Subsidiaries, no requests for waivers of the time
to assess any Taxes are pending, and no power of attorney with respect to any
Taxes has been executed or filed with any taxing authority. No material issues
relating to Taxes have been raised in writing by any governmental authority
during any presently pending audit or examination. For any open taxable period,
neither Brekford nor any of its Subsidiaries has waived or extended the statute
of limitations applicable to any Tax or Tax Return or consented to any extension
of time with respect to any material tax assessment or deficiency.
 
(c) There are no material liens or encumbrances for Taxes on any of the assets
of Brekford or any of its Subsidiaries (other than for current Taxes not yet due
and payable).
 
(d) Brekford and each of its Subsidiaries have complied in all material respects
with all applicable Legal Requirements relating to the payment and withholding
of Taxes.
 
(e) Neither of Brekford nor any of its Subsidiaries has made any payments, nor
are any of them obligated to make any payments, and none of them is a party to
any agreement that could obligate it to make any payments that would not be
deductible by reason of Sections 280G or 162(m) of the Code as a result of the
transactions contemplated by this Agreement.
 
(f) Neither Brekford nor any of its Subsidiaries is a party to any tax
allocation agreement, tax sharing agreement, tax indemnity agreement or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority but excluding in each case any contract entered into in the
ordinary course of business and the primary subject of which is not Taxes).
Neither Brekford nor any of its Subsidiaries (i) has been a member of an
affiliated group for federal income tax purposes other than a group of which
Brekford is the common parent or (ii) has any liability for the Taxes of any
person other than itself under Treasury Regulations Section 1.1502-6 (or any
similar provision of U.S. state or local or non-U.S. Tax Law), or as a
transferee or successor.
 
(g) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of Brekford or any of its Subsidiaries and neither Brekford nor
any of its Subsidiaries has received a written notice of any pending audit or
proceeding.
 
(h) Neither Brekford nor any of its Subsidiaries has agreed to or is required to
make any adjustment under Section 481(a) of the Code as a result of a “closing
agreement” as described in Section 7121 of the Code (or any similar or
corresponding provision of U.S. state or local or non-U.S. Tax Law) that, in
either case, would result in the inclusion of a material amount of income in, or
the exclusion of a material amount of deductions from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date.
 
(i) No property owned by Brekford or any of its Subsidiaries (i) constitutes
“tax exempt use property” within the meaning of Section 168(h)(1) of the Code;
or (ii) is tax exempt bond financed property within the meaning of Section
168(g) of the Code.
 
 
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(j) Neither Brekford nor any of its Subsidiaries has (i) in the two (2) years
prior to the date of this Agreement, distributed stock of another person, or has
had its stock distributed by another person, in a transaction that was purported
or intended to be governed in whole or in part by Sections 355 or 361 of the
Code or (ii) engaged in any “reportable transaction” within the meaning of
Treasury Regulation Section 1.6011-4(b) (or any similar provision of U.S. state
or local or non-U.S. Tax Law).
 
(k) For purpose of this Agreement, (A) the terms “Tax” or “Taxes” shall mean all
taxes, charges, fees, imposts, levies or other assessments, including, without
limitation, all net income, gross receipts, capital, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, together with any interest
and any penalties, fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any transferee
liability in respect of Taxes, any liability in respect of Taxes imposed by
contract, tax sharing agreement, tax indemnity agreement or any similar
agreement and (B) the term “Tax Return” shall mean any report, return, document,
declaration or any other information or filing required to be supplied to any
taxing authority or jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any document with respect to
or accompanying payments or estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return
document, declaration or other information.
 
Section 4.17. Intellectual Property. Brekford and each of its Subsidiaries owns
or possess all necessary licenses or other valid rights to use all material
computer software and firmware, patents, trademarks, trade names, brand names,
copyrights, trade secrets, applications for trademarks and for patents, domain
names, know-how and other proprietary rights and information used or held for
use in connection with the business of Brekford and each of its Subsidiaries as
currently conducted or as contemplated to be conducted, and, to the knowledge of
Brekford, except as described on Schedule 4.17 hereto, as of the date hereof,
there has been no assertion or claim challenging the ownership or validity of
any of the foregoing. Except as disclosed on Schedule 4.17 hereto, the conduct
of the business of Brekford and each of its Subsidiaries as currently conducted
does not to the knowledge of Brekford, in any material respect, conflict with or
infringe any patent, license, trademark, trade name, service mark, copyright,
domain name or any other intellectual property right of any third party. To the
knowledge of Brekford, except as described on Schedule 4.17 hereto, there are no
infringements of any proprietary rights owned by or licensed by or to Brekford
or any of its Subsidiaries.
 
Section 4.18. Insurance. Except as set forth on Schedule 4.18 hereto, each of
Brekford and each of its Subsidiaries is, and has been continuously since
January 1, 2016 (or such later date as each such Subsidiary was organized or
acquired by Brekford), insured with financially responsible insurers in such
amounts and against such risks and losses as are customary for companies
conducting the business as conducted by Brekford and each of its Subsidiaries
during such time period. Except as set forth on such Schedule 4.18, since
January 1, 2016 neither Brekford nor any of its Subsidiaries has received notice
of cancellation or termination with respect to any material insurance policy of
Brekford or any of its Subsidiaries. The insurance policies of Brekford and each
of its Subsidiaries are valid and enforceable policies.
 
 
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Section 4.19. Ownership of Securities. As of the date hereof, neither of
Brekford nor any of its Subsidiaries nor any of their affiliates or associates
(as such terms are defined under the Exchange Act), (a)(i) beneficially owns,
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of the Company, which in the aggregate
represent 10% or more of the outstanding shares of Company Common Stock, or (b)
is an “interested stockholder” of the Company within the meaning of Section 203
of the Delaware Law. Except as set forth on Schedule 4.19 hereto, neither
Brekford nor any of its Subsidiaries owns any shares of Company Common Stock.
 
Section 4.20. Certain Contracts.
 
(a) Brekford has delivered or otherwise made available to the Company true,
correct and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which Brekford is
a party affecting the obligations of any party thereunder) to which Brekford or
any of its Subsidiaries is a party or by which any of its properties or assets
are bound that are material to the business, properties or assets of Brekford
and each of its Subsidiaries taken as a whole, including, without limitation,
all: (i) employment, consulting, non-competition, severance, golden parachute or
indemnification contracts (including, without limitation, any contract to which
Brekford is a party involving employees of Brekford); (ii) contracts granting a
right of first refusal or first negotiation; (iii) partnership or joint venture
agreements; (iv) agreements for the acquisition, sale or lease of material
properties or assets of Brekford (by merger, purchase or sale of assets or stock
or otherwise); (v) contracts or agreements with any governmental entity; (vi)
contracts or arrangements limiting or restraining Novume, Brekford, any of
Brekford’s Subsidiaries or any successor thereto from engaging or competing in
any business; and (vii) all commitments and agreements to enter into any of the
foregoing (collectively, together with any such contracts entered into in
accordance with Section 6.1 hereof, the “Brekford Contracts”).
 
(b) Except as set forth on Schedule 4.20(b):
 
(i) There is no default under any Brekford Contract either by Brekford or any of
its Subsidiaries or, to the knowledge of Brekford, by any other party thereto,
and no event has occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder by Brekford or any of its
Subsidiaries or, to the knowledge of Brekford, any other party, in any such case
in which such default or event could reasonably be expected to have a Material
Adverse Effect on Brekford.
 
(ii) No party to any such Brekford Contract has given notice to Brekford of or
made a claim against Brekford with respect to any breach or default thereunder,
in any such case in which such breach or default could reasonably be expected to
have a Material Adverse Effect on Brekford.
 
(c) Set forth on Schedule 4.20(c) hereto is a list of each material contract,
agreement or arrangement to which Brekford or any of its Subsidiaries is a party
or may be bound and under the terms of which any of the rights or obligations of
a party thereto will be modified or altered (including, without limitation, any
acceleration of rights or obligations thereunder pursuant to the terms of any
such contract, agreement or arrangement) as a result of the transactions
contemplated hereby.
 
 
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Section 4.21. Investment Company. Brekford is not and will be not an “investment
company” within the meaning of Code Section 368(a)(2)(F)(ii) immediately before
the Effective Time.
 
Section 4.22. Certain Plans. Immediately following the Effective Time, Brekford,
as the Surviving Company in the Brekford Merger, will own substantially all of
the assets of Brekford immediately prior to the Brekford Merger.  There is no
plan or intention for Brekford Merger Sub, as the Surviving Company of the
Brekford Merger, to transfer any material assets or businesses or to cease any
existing business of the Brekford after the Effective Time. There is no plan or
intention for the Novume stock issued in the Brekford Merger to be redeemed.
 
ARTICLE V
REPRESENTATIONS OF THE COMPANY AND THE MERGER SUBSIDIARIES
 
 
The Company and each Merger Subsidiary (as defined below) hereby represent and
warrant to Brekford as follows:
 
Section 5.1. Organization and Qualification; Subsidiaries. Each of the Company
and each of Novume, Company Merger Sub and Brekford Merger Sub (collectively,
the “Merger Subsidiaries” and each individually a “Merger Subsidiary”) is a
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation, as applicable. Each of the
Company and each of the Merger Subsidiaries has the requisite corporate or
limited liability company power and authority and any necessary governmental
authority, franchise, license or permit to own, operate or lease the properties
that it purports to own, operate or lease and to carry on its business as it is
now being conducted, and is duly qualified as a foreign corporation or foreign
limited liability company, as applicable, to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failure which, when taken together with all other
such failures, would not reasonably be expected to have a Material Adverse
Effect on the Company. The Company’s Subsidiaries are listed on Schedule 5.1
hereto.
 
Section 5.2. Organizational Documents. The Company has heretofore furnished, or
otherwise made available, to Brekford complete and correct copies of the
Organizational Documents, each as amended as of the date hereof, of the Company
and each of the Merger Subsidiaries, and a complete and correct copy of the
Certificates of Designations, each as amended as of the date hereof, for each
class of the Company Preferred Stock and Novume Preferred Stock. Such
Organizational Documents are in full force and effect. Neither the Company nor
any of the Merger Subsidiaries is in violation of any of the provisions of its
respective Organizational Documents.
 
 
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Section 5.3. Capitalization.
 
(a) The authorized capital stock of the Company consists of (i) 7,500,000 shares
of Preferred Stock, par value $0.0001 per share, 505,000 shares of which have
been designated Series A Cumulative Convertible Redeemable Preferred Stock,
502,327 shares of which are issued and outstanding and none of which are
reserved for issuance, and (ii) 25,000,000 shares of Company Common Stock, of
which, as of July 11, 2017, 5,488,094 shares were issued and outstanding, no
shares were held in the treasury of the Company, 456,660 shares were issuable
upon the conversion of Company Preferred Stock, 513,480 shares were issuable
upon the exercise of warrants, 500,900 shares were issuable upon the exercise of
options outstanding under the Company option plans listed on Schedule 5.3(a)
hereto. Except as set forth on Schedule 5.3 hereto, (i) from February 9, 2017
through the date hereof, no shares of Company Common Stock have been issued,
except upon the exercise of options described in the immediately preceding
sentence, and (ii) as of the date hereof, there are no outstanding Company
Equity Rights. For purposes of this Agreement, “Company Equity Rights” shall
mean subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise) to
purchase or otherwise acquire from the Company or any of the Company’s
Subsidiaries at any time, or upon the happening of any stated event, any shares
of the capital stock of the Company). Schedule 5.3 hereto sets forth a complete
and accurate list with respect to all outstanding Company Equity Rights as of
February 9, 2017 of the holder thereof, the date of grant, the number of shares
for which each such Company Equity Right is exercisable, the respective dates
upon which each such Company Equity Right vests, becomes exercisable and
expires, and the exercise price of each such Company Equity Right.
 
(b) Except as set forth on Schedule 5.3(b), there are no outstanding obligations
of the Company or any of the Company’s Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company.
 
(c) All of the issued and outstanding shares of Company Common Stock and Company
Preferred Stock are validly issued, fully paid and nonassessable.
 
(d) The authorized capital stock of Novume consists of 30,000,000 shares of
Novume Common Stock, par value $0.0001 per share, of which 1,000 shares are
validly issued and outstanding, and 2,000,000 shares of Novume Preferred Stock,
none of which are issued and outstanding. All of the issued and outstanding
capital stock of Novume is, and at the Effective Time will be, owned by the
Company free and clear of any liens, security interests, pledges, agreements,
claims, charges or encumbrances, and there are (i) no other shares of capital
stock or other voting securities of Novume, (ii) no securities of Novume
convertible into or exchangeable for shares of capital stock or other voting
securities of Novume and (iii) no options or other rights to acquire from
Novume, and no obligations of Novume to issue, any capital stock, other voting
securities or securities convertible into or exchangeable for capital stock or
other voting securities of Novume. All of the issued and outstanding capital
stock of each of Company Merger Sub and Brekford Merger Sub is duly authorized,
validly issued, fully paid and nonassessable, and is owned by Novume free and
clear of any liens, security interests, pledges, agreements, claims, charges or
encumbrances.
 
 
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(e) Except as disclosed on Schedule 5.3 hereto, there are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or to which it is bound relating to the voting or
registration of any shares of capital stock of the Company. The Company has not
taken any action that would result in, nor is the Company a party to any
agreement, arrangement or understanding not disclosed on Schedule 5.3 hereto,
that would result in any Options to purchase Company Common Stock that are
unvested becoming vested in connection with or as a result of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
 
Section 5.4. Authority Relative to this Agreement. Each of the Company and each
Merger Subsidiary has the necessary corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by the Company and each Merger Subsidiary and the
consummation by each such Party of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of each such
Party. This Agreement has been duly executed and delivered by each of the
Company and each Merger Subsidiary and, assuming the due authorization,
execution and delivery thereof by the other Parties, constitutes a legal, valid
and binding obligation of each such Party, enforceable against it in accordance
with its terms, subject to the Bankruptcy Exception.
 
Section 5.5. No Conflict; Required Filings and Consents.
 
(a) Except as listed on Schedule 5.5 hereto, the execution and delivery of this
Agreement by each of the Company and each Merger Subsidiary does not, and the
performance of this Agreement by each of the Company and each Merger Subsidiary
will not, (i) violate or conflict with the Certificate of Incorporation or
Bylaws of the Company, (ii) conflict with or violate any law, regulation, court
order, judgment or decree applicable to the Company or any of its Subsidiaries
or by which any of their respective property is bound or affected, (iii) violate
or conflict with the Articles or Certificate of Incorporation or Bylaws (or
comparable governing documents) of any of the Company’s Subsidiaries, or (iv)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or any of its
Subsidiaries pursuant to, result in the loss of any material benefit under, or
require the consent of any other party to, any contract, instrument, permit,
license or franchise to which the Company or any of its Subsidiaries is a party
or by which the Company, any of such Subsidiaries or any of their respective
property is bound or affected except, in the case of clauses (ii), (iii) or (iv)
above, for conflicts, violations, breaches, defaults, results or consents which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
 
(b) Except as listed on Schedule 5.5 and except for applicable requirements, if
any, of the Exchange Act, filing and recordation of appropriate merger or other
documents as required by Delaware Law and any filings required pursuant to any
state securities or “blue sky” laws or the rules of any applicable stock
exchanges, neither the Company nor any of its Subsidiaries is required to submit
any notice, report or other filing with any governmental authority, domestic or
foreign, in connection with the execution, delivery or performance of this
Agreement. Except as set forth in the immediately preceding sentence, no waiver,
consent, approval or authorization of any governmental or regulatory authority,
domestic or foreign, is required to be obtained by the Company or any of its
Subsidiaries in connection with its execution, delivery or performance of this
Agreement.
 
 
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Section 5.6. SEC Filings; Financial Statements.
 
(a) The Company has filed all forms, reports and documents required to be filed
with the SEC since March 15, 2016, and has heretofore delivered or made
available to Brekford, in the form filed with the SEC, together with any
amendments thereto (collectively, the “Company SEC Reports”). The Company SEC
Reports (i) were prepared substantially in accordance with the requirements of
the 1933 Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated under each of such respective acts, and (ii) did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
 
(b) The financial statements, including all related notes and schedules,
contained in the Company SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of the Company and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its Subsidiaries for the periods
indicated in accordance with GAAP applied on a consistent basis throughout the
periods involved (except for changes in accounting principles disclosed in the
notes thereto) and subject in the case of interim financial statements to normal
year-end adjustments.
 
(c) The Company has heretofore made available to Brekford a complete and correct
copy of any material amendments or modifications, which have not yet been filed
with the SEC, to agreements, documents or other instruments which previously had
been filed by the Company with the SEC pursuant to the Exchange Act.
 
Section 5.7. No Undisclosed Liabilities; Absence of Certain Changes or Events.
Except as and to the extent publicly disclosed by the Company in the Company
SEC Reports filed prior to the date of this Agreement, as of March 15, 2016,
none of the Company or its Subsidiaries had any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, and
whether due or to become due or asserted or unasserted, which would be required
by GAAP to be reflected in, reserved against or otherwise described in the
consolidated balance sheet of the Company (including the notes thereto) as of
such date or which could reasonably be expected to have a Material Adverse
Effect on the Company. Except as disclosed on Schedule 5.7 hereto, since March
15, 2016, there has not been any change, or any event involving a prospective
change, in the business, financial condition or results of operations of the
Company or any of its Subsidiaries which has had, or is reasonably likely to
have, a Material Adverse Effect on the Company and the Company and each of its
Subsidiaries has conducted its and their business in the ordinary course
consistent with past practices.
 
 
26

 
 
Section 5.8. No Violation of Law; Permits. The business of the Company and each
of its Subsidiaries is not being conducted in violation of any Legal
Requirements, or in violation of any Permits, except for possible violations
none of which, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Company. The Company and each of its
Subsidiaries have all Permits that are required in connection with the operation
of their businesses (collectively, “Company Required Permits”), and no
proceedings are pending or, to the knowledge of the Company, threatened to
revoke or limit any Company Required Permit, except, in each case, those the
absence or violation of which do not and will not have a Material Adverse Effect
on the Company. Except as set forth on Schedule 5.8 hereto, (a) to the Company’s
knowledge, no investigation or review by any domestic or foreign governmental or
regulatory entity (including any stock exchange or other self-regulatory body)
with respect to the Company or its Subsidiaries in relation to any alleged
violation of law or regulation is pending or threatened, and (b) no governmental
or regulatory entity (including any stock exchange or other self-regulatory
body) has notified the Company of its intention to conduct the same, except for
such investigations which, if they resulted in adverse findings, would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Except as set forth on Schedule 5.8 hereto,
neither the Company nor any of its Subsidiaries is subject to any cease and
desist or other order, judgment, injunction or decree issued by, or is a party
to any written agreement, consent agreement or memorandum of understanding with,
or is a party to any commitment letter or similar undertaking to, or is subject
to any order or directive by, or has adopted any board resolutions at the
request of, any court, governmental entity or regulatory agency that materially
restricts the conduct of its business or which could reasonably be expected to
have a Material Adverse Effect on the Company, or would prevent or delay the
consummation of the transactions contemplated by this Agreement, nor has the
Company or any of its Subsidiaries been advised that any court, governmental
entity or regulatory agency is considering issuing or requesting any of the
foregoing.
 
Section 5.9. Registration Statement . None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Registration Statement will, at the time the Registration
Statement becomes effective under the 1933 Act, contain any 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. If at any time prior to the Effective Time
any event with respect to the Company, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Registration Statement, the Company shall promptly so
advise Brekford and such event shall be so described, and such amendment or
supplement (which the Company shall have a reasonable opportunity to review)
shall be promptly filed with the SEC and, as required by law, disseminated to
the shareholders of Brekford. The Registration Statement (except for information
relating to or provided by Brekford) will each comply as to form in all material
respects with the provisions of the 1933 Act and the Exchange Act, as
applicable, and the rules and regulations promulgated thereunder, as applicable.
 
 
27

 
 
Section 5.10. Board Action; Vote Required.
 
(a) The Board of Directors of the Company has unanimously determined that the
transactions contemplated by this Agreement are in the best interests of the
Company and its stockholders and has recommended to such stockholders that they
vote in favor thereof.
 
(b) The approval of the Merger of Company into the Company Merger Sub by a
majority of the votes entitled to be cast by all holders of Company Common Stock
(the “Company Stockholders’ Approval”) was received on February 9, 2017, and, as
of the date hereof, such approval remains in full force and effect and has not
been amended or rescinded. No further vote of the holders of any class or series
of the capital stock of the Company required to approve this Agreement, the
Mergers and the other transactions contemplated hereby, in accordance with the
provisions of Delaware Law, any applicable United States federal and state
securities laws and the Organizational Documents of the Company, each as amended
and as currently in effect.
 
Section 5.11.  [Reserved]
 
Section 5.12. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s, investment banking or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company or any of its Subsidiaries.
 
Section 5.13. Ownership of Securities. As of the date hereof, neither the
Company nor, to the Company’s knowledge, any of its affiliates or associates (as
such terms are defined under the Exchange Act), (a) (i) beneficially owns,
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of Brekford, which in the aggregate represent
10% or more of the outstanding shares of Brekford Common Stock. The Company owns
no shares of Brekford Common Stock.
 
Section 5.14. Activities of Merger Subsidiaries. None of the Merger Subsidiaries
have conducted any activities other than in connection with the organization
thereof, the negotiation and execution of this Agreement and the consummation of
the transactions contemplated hereby.
 
Section 5.15. Litigation. Except as disclosed in Schedule 5.16 hereto, there are
no claims, actions, suits, proceedings or, to the Company’s knowledge,
investigations pending or, to the Company’s knowledge, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, before any court, administrative, governmental,
arbitral, mediation or regulatory authority or body, domestic or foreign, (a) as
of the date hereof, as to which there is more than a remote possibility of an
adverse judgment or determination against the Company or any of its Subsidiaries
or any properties or rights of the Company or any of its Subsidiaries in excess
of $100,000 or which otherwise could have a Material Adverse Effect on the
Company, (b) as of the date hereof, which questions the validity of this
Agreement or any action to be taken by the Company in connection with the
consummation of the transactions contemplated by this Agreement or could
otherwise prevent or delay the consummation of the transactions contemplated by
this Agreement, or (c) as to which there is reasonably likely to be an adverse
judgment or determination against the Company or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect on the Company.
 
 
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Section 5.16. Employee Matters; ERISA.
 
(a) Set forth on Schedule 5.16 hereto is a true and complete list of all
employee benefit plans within the meaning of Section 3(3) of ERISA, all deferred
compensation, bonus or other incentive compensation, stock options, restricted
stock, stock purchase or other equity-based, severance or change in control,
salary, continuation, tuition assistance, disability, leave of absence plans,
policies or agreements, and all employment, consulting, management or other
individual compensation agreements with respect to any current or former
employee of the Company or any of its Company ERISA Affiliates, which, in each
case, the Company or any of its Company ERISA Affiliates has any obligation or
liability, contingent or otherwise (collectively, the “Company Benefit Plans”).
 
(b) All contributions and other payments required to be made by the Company or
any Company ERISA Affiliate to or under any Company Benefit Plan maintained (or
to any person pursuant to the terms thereof) have been timely made. No Company
Benefit Plan is subject to Section 412 of the Code or Section 302 of ERISA.
 
(c) Each of the Company Benefit Plans intended to be “qualified” within the
meaning of Section 401(a) of the Code has been determined by the IRS to be so
qualified, and, to the knowledge of the Company or any Company ERISA Affiliate,
no circumstances exist that could reasonably be expected by the Company or any
Company ERISA Affiliate to result in the revocation of any such determination.
The Company is in compliance with, and each of the Company Benefit Plans is and
has been operated in compliance with, all applicable Legal Requirements
governing such plan, including, without limitation, ERISA and the Code.
 
(d) Except as set forth on Schedule 5.16 hereto, the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (i) payment (whether of severance pay or otherwise) becoming due from the
Company or any Company ERISA Affiliate to any current or former officer,
employee, former employee or director thereof, or to any other person for the
benefit of any such officer, employee or director, or (ii) acceleration, vesting
or establishment of any benefit under any Company Benefit Plan, or (iii)
disqualification of any of the Company Benefit Plans intended to be qualified
under, result in a prohibited transaction or breach of fiduciary duty under, or
otherwise violate, ERISA or the Code.
 
(e) Neither the Company nor any Company ERISA Affiliate has incurred, and none
of such entities reasonably expects to incur, any material liability to the PBGC
(other than premiums which are not overdue) or pursuant to Title IV of ERISA
with respect to any Company Benefit Plan. Neither the Company nor any Company
ERISA Affiliate is an employer with respect to, and neither has incurred or
reasonably expects to incur, any withdrawal liability with respect to any
“multiemployer plan” (as defined in Section 3(37) of ERISA).
 
(f) There are no pending or, to the Company’s knowledge, threatened actions,
claims or proceedings against any Company Benefit Plan or its assets, plan
sponsor, plan administrator or fiduciaries with respect to the operation of such
plan (other than routine benefit claims).
 
 
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(g) Each Company Benefit Plan that constitutes in any part a nonqualified
deferred compensation plan within the meaning of Section 409A of the Code has
been operated and maintained in operational and documentary compliance with
Section 409A of the Code and applicable guidance thereunder. No payment to be
made under any Company Benefit Plan is, or to the knowledge of the Company, will
be, subject to the penalties of Section 409A(a)(1) of the Code.
 
Section 5.17. Tax Matters. Except as set forth on Schedule 5.17 hereto:
 
(a) The Company and each of its Subsidiaries, and each affiliated group (within
the meaning of Section 1504 of the Code) of which the Company or any Subsidiary
is or has been a member, has timely filed all federal state, local, foreign,
income and franchise Tax Returns (as defined below), and all other material Tax
Returns required to be filed by them. All such Tax Returns are true and correct
in all material respects. Except to the extent adequately reserved for in
accordance with GAAP, all material Taxes due and payable by the Company and each
of its Subsidiaries have been timely paid in full. The most recent consolidated
financial statements contained in the Company SEC Reports reflect an adequate
reserve (other than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in accordance with GAAP for all Taxes
payable by the Company and its Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements.
 
(b) No material deficiencies for any Taxes have been proposed, asserted or
assessed in writing against the Company or any of its Subsidiaries that have not
been fully paid or adequately provided for in the appropriate financial
statements of the Company and each of its Subsidiaries, no requests for waivers
of the time to assess any Taxes are pending, and no power of attorney with
respect to any Taxes has been executed or filed with any taxing authority. No
material issues relating to Taxes have been raised in writing by any
governmental authority during any presently pending audit or examination. For
any open taxable period, the Company and each of its Subsidiaries have not
waived or extended the statute of limitations applicable to any Tax or Tax
Return or consented to any extension of time with respect to any material tax
assessment or deficiency.
 
(c) There are no material liens or encumbrances for Taxes on any of the assets
of the Company or any of its Subsidiaries (other than for current Taxes not yet
due and payable).
 
(d) The Company and each of its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes.
 
(e) Neither the Company nor any of its Subsidiaries has made any payments, nor
are any of them obligated to make any payments, and none of them is a party to
any agreement that could obligate it to make any payments that would not be
deductible by reason of Sections 280G or 162(m) of the Code as a result of the
transactions contemplated by this Agreement.
 
(f) Neither the Company nor any of its Subsidiaries is a party to any tax
allocation agreement, tax sharing agreement, tax indemnity agreement or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any taxing authority but excluding in each case any contract entered into in the
ordinary course of business and the primary subject of which is not Taxes).
Neither the Company nor any of its Subsidiaries (i) has been a member of an
affiliated group for federal income tax purposes other than a group of which the
Company is the common parent or (ii) has any liability for the Taxes of any
person other than itself under Treasury Regulations Section 1.1502-6 (or any
similar provision of U.S. state or local or non-U.S. Tax Law), or as a
transferee or successor.
 
 
30

 
 
(g) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of the Company or its Subsidiaries and neither the Company nor
any of its Subsidiaries has received a written notice of any pending audit or
proceeding, in any such case involving a material issue with respect to Taxes.
 
(h) Neither the Company nor any of its Subsidiaries has agreed to or is required
to make any material adjustment under Section 481(a) of the Code as a result of
a “closing agreement” as described in Section 7121 of the Code (or any similar
or corresponding provision of U.S. state or local or non-U.S. Tax Law) that, in
either case, would result in the inclusion of a material amount of income in, or
the exclusion of a material amount of deductions from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date.
 
(i) No property owned by the Company or any of its Subsidiaries (i) constitutes
“tax exempt use property” within the meaning of Section 168(h)(1) of the Code;
or (ii) is tax exempt bond financed property within the meaning of Section
168(g) of the Code.
 
(j) Neither the Company nor any of its Subsidiaries has (i) in the two (2) years
prior to the date of this Agreement, distributed stock of another person, or has
had its stock distributed by another person, in a transaction that was purported
or intended to be governed in whole or in part by Sections 355 or 361 of the
Code or (ii) engaged in any “reportable transaction” within the meaning of
Treasury Regulation Section 1.6011-4(b) (or any similar provision of U.S. state
or local or non-U.S. Tax Law).
 
Section 5.18. Intellectual Property. The Company and each of its Subsidiaries
owns or possesses all necessary licenses or other valid rights to use all
material computer software and firmware, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, brand names, copyrights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information used or held for use in
connection with the business of the Company and each of its Subsidiaries as
currently conducted or as contemplated to be conducted, and, to the knowledge of
the Company, except as described on Schedule 5.18 hereto, as of the date hereof,
there has been no assertion or claim challenging the ownership or validity of
any of the foregoing. To the knowledge of the Company, except as disclosed on
Schedule 5.18 hereto, the conduct of the business of the Company and each of its
Subsidiaries as currently conducted does not, in any material respect, conflict
with or infringe any patent, patent right, license, trademark, trademark right,
trade name, trade name right, service mark, copyright or any other intellectual
property right of any third party. To the knowledge of the Company, except as
described on Schedule 5.18 hereto, there are no infringements of any proprietary
rights owned by or licensed by or to the Company or any of its Subsidiaries.
 
 
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Section 5.19. Certain Contracts.
 
(a) Except for such contracts as are filed publicly in the Company SEC Reports,
the Company has delivered or otherwise made available to Brekford true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which the Company
is a party affecting the obligations of any party thereunder) to which the
Company or any of its Subsidiaries is a party or by which any of its properties
or assets are bound that are material to the business, properties or assets of
the Company and its Subsidiaries taken as a whole, including, without
limitation, all: (i) employment, consulting, non-competition, severance, golden
parachute or indemnification contracts (including, without limitation, any
contract to which the Company is a party involving employees of the Company);
(ii) contracts granting a right of first refusal or first negotiation; (iii)
partnership or joint venture agreements; (iv) agreements for the acquisition,
sale or lease of material properties or assets of the Company (by merger,
purchase or sale of assets or stock or otherwise); (v) contracts or agreements
with any governmental entity; (vi) contracts or arrangements limiting or
restraining Novume, the Company, any of the Company’s Subsidiaries or any
successor thereto from engaging or competing in any business; and (vii) all
commitments and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with Section 6.2
hereof, the “Company Contracts”).
 
(b) Except as set forth on Schedule 5.19(b):
 
(i) There is no default under any Company Contract either by the Company or any
of its Subsidiaries or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by the Company or any of
its Subsidiaries or, to the knowledge of the Company, any other party, in any
such case in which such default or event could reasonably be expected to have a
Material Adverse Effect on the Company.
 
(ii) No party to any such Company Contract has given notice to the Company of or
made a claim against the Company with respect to any breach or default
thereunder, in any such case in which such breach or default could reasonably be
expected to have a Material Adverse Effect on the Company.
 
(c) Set forth on Schedule 5.19(c) hereto is a list of each material contract,
agreement or arrangement to which the Company or any of its Subsidiaries is a
party or may be bound and under the terms of which any of the rights or
obligations of a party thereto will be modified or altered (including, without
limitation, any acceleration of rights or obligations thereunder pursuant to the
terms of any such contract, agreement or arrangement) as a result of the
transactions contemplated hereby.
 
Section 5.20. Investment Company. None of Novume, the Merger Subsidiaries or the
Company, is or will be an “investment company” within the meaning of Code
Section 368(a)(2)(F)(ii) immediately before the Effective Time.
 
 
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Section 5.21. Certain Plans. Immediately following the Effective Time, Company
Merger Sub, as the Surviving Company in the Company Merger, will own
substantially all of the assets of the Company immediately prior to the Company
Merger.  There is no plan or intention for Company Merger Sub, as the Surviving
Company of the Company Merger, to transfer any material assets or businesses or
to cease any existing business of the Company after the Effective Time. There is
no plan or intention for the Novume stock issued in the Company Merger to be
redeemed.
 
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
 
Section 6.1. Conduct of Business of Brekford. Brekford covenants and agrees
that, between the date of this Agreement and the Effective Time, unless the
Company shall otherwise consent in writing, and except as described on Schedule
6.1 hereto or as otherwise expressly contemplated hereby, the business of
Brekford and each of its Subsidiaries shall be conducted only in, and such
entities shall not take any action except in, the ordinary course of business
and in a manner consistent with past practice; and Brekford and each of its
Subsidiaries will use their commercially reasonable efforts to preserve
substantially intact their business organizations, to keep available the
services of those of their present officers, employees and consultants who are
integral to the operation of their businesses as presently conducted and to
preserve their present relationships with significant customers, significant
suppliers and with other persons with whom they have significant business
relations. By way of amplification and not limitation, except as set forth on
Schedule 6.1 hereto or as otherwise expressly contemplated by this Agreement,
Brekford agrees on behalf of itself and each of its Subsidiaries that they will
not, between the date of this Agreement and the Effective Time, directly or
indirectly, do any of the following without the prior written consent of the
Company:
 
(a) (i) except for (A) the issuance of Brekford Common Stock in order to satisfy
obligations under employee benefit plans disclosed in Schedule 4.11; (B) grants
of Brekford Options as set forth in Schedule 6.1; (C) the issuance of securities
by any of Brekford’s Subsidiaries to any person which is directly or indirectly
wholly-owned by Brekford; and (D) the issuance of Brekford Common Stock to
satisfy the exercise of outstanding Brekford Warrants or outstanding Brekford
Options, issue, sell, pledge, dispose of, encumber, authorize, or propose the
issuance, sale, pledge, disposition, encumbrance or authorization of any shares
of capital stock of any class, or any options, warrants, convertible securities
or other rights of any kind to acquire any shares of capital stock of, or any
other ownership interest in, Brekford or any of its Subsidiaries; (ii) amend or
propose to amend the Certificate of Incorporation or Bylaws of Brekford or any
of its Subsidiaries or adopt any shareholder rights plan or related rights
agreement; (iii) split, combine or reclassify any outstanding shares of Brekford
Common Stock, or declare, set aside or pay any dividend or distribution payable
in cash, stock, property or otherwise with respect to such shares; (iv) redeem,
purchase or otherwise acquire or offer to redeem, purchase or otherwise acquire
any shares of its capital stock; or (v) authorize or propose or enter into any
contract, agreement, commitment or arrangement with respect to any of the
matters prohibited by this Section 6.1(a);
 
 
33

 
 
(b) (i) acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or make any investment in another entity other than an entity which is a
wholly-owned subsidiary of Brekford as of the date hereof, except for
investments which do not exceed $50,000 for any single investment or series of
related investments, or $100,000 in the aggregate for all such investments in
any twelve (12)-month period; (ii) except in the ordinary course of business and
in a manner consistent with past practice, sell, pledge, dispose of, or encumber
or authorize or propose the sale, pledge, disposition or encumbrance of any
assets of Brekford or any of its Subsidiaries; (iii) authorize or make capital
expenditures which are in excess of the amounts shown in Schedule 6.1 hereto;
(iv) enter into any agreement, contract or commitment which involves payments by
Brekford or any of its Subsidiaries in an amount in excess of $50,000
individually or as part of a series of related transactions, except for
agreements, contracts and commitments of a type referred to in another clause of
this subsection (b) and not prohibited thereby because of the amount of such
contract; or (v) authorize, enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 6.1(b);
 
(c) (i) incur any indebtedness for borrowed money or assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or issue or sell any debt
securities or warrants or rights to acquire any debt securities of Brekford or
any of its Subsidiaries or guarantee any debt securities of others (other than
Brekford or any of its wholly-owned Subsidiaries) or enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
foregoing, other than (A) in replacement for existing or maturing debt, (B)
borrowings by Brekford under its lines of credit existing on the date hereof up
to the maximum amount permitted thereunder (as such maximum amount may be
reduced from time to time in accordance with the terms thereof) or (C) capital
leases or other vendor financing for capital assets the acquisition of which is
otherwise permitted under this Agreement; (ii) make any loans, advances or
capital contributions to, or investments in, any other person (other than to the
wholly-owned subsidiaries of Brekford or customary loans or advances to
employees in the ordinary course of business consistent with past practice and
in amounts not material to the maker of such loan or advance); or (iii) mortgage
or pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material lien thereupon;
 
(d) enter into (i) leveraged derivative contracts (defined as contracts that use
a factor to multiply the underlying index exposure), or (ii) other derivative
contracts except for the purpose of hedging known interest rate and foreign
exchange exposures or otherwise reducing such Party’s cost of financing;
 
(e) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of
Brekford or any of its Subsidiaries (other than the Brekford Merger);
 
(f) alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any of Brekford’s
Subsidiaries;
 
 
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(g) except as may be required by law or as contemplated by this Agreement, enter
into, adopt or amend or terminate any Brekford Benefit Plan, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to Brekford, and as required under existing
agreements or in the ordinary course of business generally consistent with past
practice) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any Brekford
Benefit Plan] as in effect as of the date hereof;
 
(h) make any payments (except in the ordinary course of business and in amounts
and in a manner consistent with past practice or as otherwise required by Legal
Requirements or the provisions of any Brekford Benefit Plan) under any Brekford
Benefit Plan to any director or employee of, or independent contractor or
consultant to, Brekford or its Subsidiaries;
 
(i) change in any material respect its tax or accounting policies, methods or
procedures except as required by GAAP;
 
(j) do any act or omit to do any act which would cause a material breach of any
material contract, commitment or obligation;
 
(k) take any action which could reasonably be expected to adversely affect or
delay the ability of any of the Parties to obtain any approval of any
governmental or regulatory body required to consummate the transactions
contemplated hereby;
 
(l) other than pursuant to this Agreement, take any action to cause the Brekford
Common Stock to cease to be quoted on the OTCQX;
 
(m) (i) issue SARs, new performance shares, restricted stock, or similar equity
based rights; (ii) materially modify (with materiality to be determined with
respect to the Brekford Benefit Plan in question) any actuarial cost method,
assumption or practice used in determining benefit obligations, annual expense
and funding for any Brekford Benefit Plan, except to the extent required by
GAAP; (iii) materially modify (with materiality to be determined with respect to
the Brekford Benefit Plan trust in question) the investment philosophy of the
Brekford Benefit Plan trusts or maintain an asset allocation which is not
consistent with such philosophy, subject to any ERISA fiduciary obligation; (iv)
subject to any ERISA fiduciary obligation, enter into any outsourcing agreement,
or any other material contract relating to the Brekford Benefit Plans or
management of the Brekford Benefit Plan trusts; (v) offer any new or extend any
existing retirement incentive, “window” or similar benefit program; (vi) grant
any ad hoc pension increase; (vii) establish any new or fund any existing
“rabbi” or similar trust (except in accordance with the current terms of such
trust), or enter into any other arrangement for the purpose of securing
non-qualified benefits or deferred compensation; (viii) adopt or implement any
corporate owned life insurance; or (ix) adopt, implement or maintain any “split
dollar” life insurance program;
 
 
35

 
 
(n) take any action which would cause its representations and warranties
contained herein to become inaccurate in any material respect;
 
(o) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business or as required by GAAP;
 
(p) make or revoke any tax election or settle or compromise any tax liability
material to Brekford and/or any of its Subsidiaries taken as a whole or change
(or make a request to any taxing authority to change) any material aspect of its
method of accounting for tax purposes, other than as required by applicable
Legal Requirements;
 
(q) pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of Brekford and its
Subsidiaries or incurred in the ordinary course of business consistent with past
practice;
 
(r) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
 
(s) make any significant distribution or redemption of its securities.
 
Section 6.2. Conduct of Business of the Company. The Company covenants and
agrees that, between the date of this Agreement and the Effective Time, unless
Brekford shall otherwise consent in writing, and except as described on Schedule
6.2 hereto or as otherwise expressly contemplated hereby, the Company and each
of its Subsidiaries will use their commercially reasonable efforts to preserve
substantially intact their business organizations, to keep available the
services of those of their present officers, employees and consultants who are
integral to the operation of their businesses as presently conducted and to
preserve their present relationships with significant clients and with other
persons with whom they have significant business relations. By way of
amplification and not limitation, except as set forth on Schedule 6.2 hereto or
as otherwise expressly contemplated by this Agreement, the Company agrees on
behalf of itself and each of its Subsidiaries that they will not, between the
date of this Agreement and the Effective Time, directly or indirectly, do any of
the following without the prior written consent of Brekford:
 
 
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(a) (i) except for (A) the issuance of Company Common Stock in order to satisfy
obligations under employee benefit plans disclosed in Schedule 5.16; (B) grants
of Company Options as set forth in Schedule 6.2; (C) the issuance of securities
by any of the Company’s Subsidiaries to any person which is directly or
indirectly wholly-owned by the Company; and (D) the issuance of Company Common
Stock to satisfy the exercise of outstanding Company Warrants or outstanding
Company Options, issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or authorization of
any shares of capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital stock
of, or any other ownership interest in, the Company or any of its Subsidiaries;
(ii) amend or propose to amend the Certificate of Incorporation or Bylaws of the
Company or any of its Subsidiaries or adopt any shareholder rights plan or
related rights agreement; (iii) split, combine or reclassify any outstanding
shares of Company Common Stock, or declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise with respect to such
shares; (iv) redeem, purchase or otherwise acquire or offer to redeem, purchase
or otherwise acquire any shares of its capital stock; or (v) authorize or
propose or enter into any contract, agreement, commitment or arrangement with
respect to any of the matters prohibited by this Section 6.2(a);
 
(b) (i) other than as set forth on Schedule 2(b)(i)(B) hereto, acquire (by
merger, consolidation, or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
investment in another entity other than an entity which is a wholly-owned
Subsidiary of the Company as of the date hereof, except for investments which do
not exceed $50,000 for any single investment or series of related investments,
or $100,000 in the aggregate for all such investments in any twelve (12)-month
period; (ii) except in the ordinary course of business and in a manner
consistent with past practice, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any assets
of the Company or any of its Subsidiaries; (iii) authorize or make capital
expenditures which are in excess of the amounts shown in Schedule 6.2 hereto;
(iv) enter into any agreement, contract or commitment which involves payments by
the Company or any of its Subsidiaries in an amount in excess of $50,000
individually or as part of a series of related transactions, except for
agreements, contracts and commitments of a type referred to in another clause of
this subsection (b) and not prohibited thereby because of the amount of such
contract; or (v) authorize, enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 6.2(b); or
 
(c) (i) incur any indebtedness for borrowed money or assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the Company
or any of its Subsidiaries or guarantee any debt securities of others (other
than the Company or any of its wholly-owned Subsidiaries) or enter into or amend
any contract, agreement, commitment or arrangement with respect to any of the
foregoing, other than (A) in replacement for existing or maturing debt, (B)
borrowings by the Company under its lines of credit existing on the date hereof
up to the maximum amount permitted thereunder (as such maximum amount may be
reduced from time to time in accordance with the terms thereof) or (C) capital
leases or other vendor financing for capital assets the acquisition of which is
otherwise permitted under this Agreement; (ii) make any loans, advances or
capital contributions to, or investments in, any other person (other than to the
wholly-owned subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past practice and
in amounts not material to the maker of such loan or advance); or (iii) mortgage
or pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material lien thereupon;
 
 
37

 
 
(d) enter into (i) leveraged derivative contracts (defined as contracts that use
a factor to multiply the underlying index exposure), or (ii) other derivative
contracts except for the purpose of hedging known interest rate and foreign
exchange exposures or otherwise reducing such Party’s cost of financing;
 
(e) adopt a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries (other than the Company Merger);
 
(f) alter through merger, liquidation, reorganization, restructuring or in any
other fashion the corporate structure or ownership of any of the Company’s
Subsidiaries;
 
(g) except as may be required by law or as contemplated by this Agreement, enter
into, adopt or amend or terminate any Company Benefit Plan, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, and as required under existing
agreements or in the ordinary course of business generally consistent with past
practice) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any Company
Benefit Plan as in effect as of the date hereof;
 
(h) make any payments (except in the ordinary course of business and in amounts
and in a manner consistent with past practice or as otherwise required by Legal
Requirements or the provisions of any Company Benefit Plan) under any Company
Benefit Plan to any director or employee of, or independent contractor or
consultant to, the Company or its Subsidiaries;
 
(i) change in any material respect its tax or accounting policies, methods or
procedures except as required by GAAP;
 
(j) change in any material respect its tax or accounting policies, methods or
procedures except as required by GAAP;
 
(k) do any act or omit to do any act which would cause a material breach of any
material contract, commitment or obligation;
 
(l) take any action which could reasonably be expected to adversely affect or
delay the ability of any of the Parties to obtain any approval of any
governmental or regulatory body required to consummate the transactions
contemplated hereby;
 
(m) (i) issue SARs, new performance shares, restricted stock, or similar equity
based rights; (ii) materially modify (with materiality to be determined with
respect to the Company Benefit Plan in question) any actuarial cost method,
assumption or practice used in determining benefit obligations, annual expense
and funding for any Company Benefit Plan, except to the extent required by GAAP;
(iii) materially modify (with materiality to be determined with respect to the
Company Benefit Plan trust in question) the investment philosophy of the Company
Benefit Plan trusts or maintain an asset allocation which is not consistent with
such philosophy, subject to any ERISA fiduciary obligation; (iv) subject to any
ERISA fiduciary obligation, enter into any outsourcing agreement, or any other
material contract relating to the Company Benefit Plans or management of the
Company Benefit Plan trusts; (v) offer any new or extend any existing retirement
incentive, “window” or similar benefit program; (vi) grant any ad hoc pension
increase; (vii) establish any new or fund any existing “rabbi” or similar trust
(except in accordance with the current terms of such trust), or enter into any
other arrangement for the purpose of securing non-qualified benefits or deferred
compensation; (viii) adopt or implement any corporate owned life insurance; or
(ix) adopt, implement or maintain any “split dollar” life insurance program;
 
 
38

 
 
(n) take any action which would cause its representations and warranties
contained herein to become inaccurate in any material respect;
 
(o) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business or as required by GAAP;
 
(p) make or revoke any tax election or settle or compromise any tax liability
material to the Company and/or any of its Subsidiaries taken as a whole or
change (or make a request to any taxing authority to change) any material aspect
of its method of accounting for tax purposes, other than as required by
applicable Legal Requirements;
 
(q) pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
Subsidiaries or incurred in the ordinary course of business consistent with past
practice;
 
(r) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby; or
 
(s) make any significant distribution or redemption of its securities.
 
Section 6.3. Exclusivity. During the period commencing on the date hereof,
Brekford, without the prior written consent of the Company, will not, and will
not authorize or permit any of its Party Representatives (as defined in Section
7.5(b) hereof) to, directly or indirectly, solicit, initiate, entertain or
encourage or support (including by way of furnishing information) or take any
other action to facilitate any inquiries or the making of any proposal or offer
which constitutes or may reasonably be expected to lead to an Acquisition
Proposal (as defined below) from any person, or engage in any discussion or
negotiations relating thereto or accept any Acquisition Proposal, unless the
Board of Directors of Brekford shall conclude in good faith, after considering
applicable law, on the basis of oral or written advice of outside counsel, that
such action is necessary for the Board of Directors to act in a manner
consistent with its fiduciary duties. Consistent with the foregoing provisions
of this Section 6.3, Brekford shall immediately cease and terminate any
currently existing solicitation, initiation, encouragement, activity, discussion
or negotiation with any persons conducted heretofore by Brekford or its
Representatives with respect to the foregoing. Brekford agrees not to release
any third party from, or waive any provision of, any standstill agreement to
which it is a party or any confidentiality agreement between it and another
person who has made, or who may reasonably be considered likely to make, an
Acquisition Proposal, unless the Board of Directors of Brekford shall conclude
in good faith, after considering applicable law, on the basis of oral or written
advice of outside counsel, that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties. As used
herein, “Acquisition Proposal” shall mean a proposal or offer for a tender or
exchange offer, merger, consolidation or other business combination involving
Brekford or any proposal to acquire in any manner a substantial equity interest
in, or all or substantially all of the assets of, Brekford.
 
 
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Section 6.4. Subsequent Financial Statements. Prior to the Effective Time,
Brekford shall (a) prior to making publicly available its financial results for
any period, provide a copy of such financial results to the Company and (b)
timely file with the SEC each Annual Report on Form 10-K, Quarterly Report on
Form 10-Q and Current Report on Form 8-K required to be filed by it under the
Exchange Act and the rules and regulations promulgated thereunder, and, prior to
the filing thereof, provide a copy to the Company, and will promptly deliver to
the Company copies of each such report filed with the SEC. As of their
respective dates, none of such reports shall contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The respective audited financial
statements and unaudited interim financial statements of Brekford included in
such reports will fairly present the financial position of Brekford and each of
its Subsidiaries as at the dates thereof and the results of their operations and
cash flows for the periods then ended in accordance with GAAP applied on a
consistent basis and, subject, in the case of unaudited interim financial
statements, to normal year-end adjustments and any other adjustments described
therein.
 
Section 6.5. Control of Operations. Nothing contained in this Agreement shall
give the Company or Brekford, directly or indirectly, the right to control or
direct the operations of the other prior to the Effective Time. Prior to the
Effective Time, each of the Company and Brekford shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision
over its respective operations.
 
ARTICLE VII
ADDITIONAL AGREEMENTS
 
Section 7.1. Registration Statement; Information Statement. As promptly as
practicable after the execution and delivery of this Agreement, the Parties
shall prepare and file with the SEC, and shall use all reasonable efforts to
have cleared by the SEC, the Registration Statement on Form S-4 under the
Securities Act of 1933, and the Information Statement, and Brekford shall
promptly thereafter mail to the holders of record of Brekford Common Stock the
Information Statement in accordance with the requirements of the applicable
rules and regulations of the Exchange Act.
 
Section 7.2. Stockholders’ Approval; Consummation of the Mergers.
 
(a) From the date hereof until and including the Closing Date (as defined
below), each of the Parties shall take any further action necessary or, in the
opinion of the other Parties, reasonably advisable to promptly and expeditiously
secure any vote or consent of stockholders, if any shall be required, beyond the
Company Stockholders’ Approval and the Brekford Stockholders’ Approval,by
Delaware Law and each such Party’s Organizational Documents, each as amended and
as currently in effect, to adopt this Agreement and effect the Mergers and any
other transactions contemplated hereby.
 
 
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(b) At the earliest reasonably practicable time following the execution and
delivery of this Agreement, Brekford take all action as may be necessary and
appropriate to distribute the Information Statement to the holders of record of
Brekford Common Stock in accordance with the applicable rules and regulations of
the Exchange Act.
 
(c) Upon the terms and subject to the conditions hereof and as soon as
practicable after the conditions set forth in ARTICLE VIII hereof have been
fulfilled or waived, each of the Parties shall execute in the manner required by
Delaware Law and deliver to and file with the Secretary of State of the State of
Delaware such instruments and agreements as may be required by Delaware Law, and
the Parties shall take all such other and further actions as may be required by
law to make the Mergers effective. Prior to the filings referred to in this
Section 7.2(c), a closing (the “Closing”) will be held at the offices of Crowell
& Moring LLP, 1001 Pennsylvania Ave NW, Washington, D.C. 20004 (or such other
place as the Company and Brekford may mutually agree upon), for the purpose of
confirming all the foregoing. The Closing will take place upon the fulfillment
or waiver of all of the conditions to closing set forth in ARTICLE VIII of this
Agreement, or as soon thereafter as practicable (the date of the Closing being
herein referred to as the “Closing Date”).
 
Section 7.3. Additional Agreements. Each of the Parties will comply in all
material respects with all applicable Legal Requirements of any governmental
authority in connection with its execution, delivery and performance of this
Agreement and the transactions contemplated hereby. Each of the Parties agrees
to use all commercially reasonable efforts to obtain in a timely manner all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings, and to use all commercially reasonable efforts to
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement. The
Parties shall cooperate in responding to inquiries from, and making
presentations to, regulatory authorities.
 
Section 7.4. Notification of Certain Matters. Each of the Company and Brekford
shall give prompt notice to the other of the following:
 
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either:
 
(i) any representation or warranty of such Party contained in this Agreement to
be untrue or inaccurate in any material respect at any time from the date hereof
to the Effective Time, or (ii) directly or indirectly, any Material Adverse
Effect with respect to such Party;
 
(b) any material failure of such Party, or any officer, director, employee or
agent of any thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder;
 
(c) any facts relating to such Party which would make it necessary or advisable
to amend the Registration Statement or the Information Statement in order to
make the statements therein not misleading or to comply with applicable law;
 
 
41

 
 
(d) any notice of, or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default, received by it or
any of its Subsidiaries subsequent to the date of this Agreement and prior to
the Effective Time, under any contract or agreement material to the financial
condition, properties, businesses or results of operations of it and its
Subsidiaries taken as a whole to which it or any of its Subsidiaries is a party
or is subject; and
 
(e) any notice or other communication from any third party alleging that the
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement;
 
provided, however, that the delivery of any notice pursuant to this Section 7.4
shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
 
Section 7.5. Access to Information.
 
(a) From the date hereof to the Effective Time, each of the Company and Brekford
shall, and shall cause its respective Subsidiaries, and its and their officers,
directors, employees, auditors, counsel and agents to afford the officers,
employees, auditors, counsel and agents of the other Party complete access at
all reasonable times to such Party’s and its Subsidiaries’ officers, employees,
auditors, counsel agents, properties, offices and other facilities and to all of
their respective books and records, and shall furnish the other with all
financial, operating and other data and information as such other Party may
reasonably request.
 
(b) Each of the Company and Brekford agrees that all information so received
from the other Party shall be deemed received pursuant to the Mutual
Non-Disclosure Agreement between the Company and Brekford dated as of October
10, 2016, heretofore executed and delivered by the Company and Brekford (the
“Confidentiality Agreement”) and such Party shall, and shall cause its
Subsidiaries and each of its and their respective officers, directors,
employees, financial advisors and agents (“Party Representatives”), to comply
with the provisions of the Confidentiality Agreement with respect to such
information and the provisions of the Confidentiality Agreement are hereby
incorporated herein by reference with the same effect as if fully set forth
herein; provided, that, the Company, on one hand, and Brekford, on the other
hand, shall be permitted to disclose the contents of this Agreement and the
Mergers in appropriate filings with the SEC, upon consultation with and
agreement by Brekford, on the one hand, and the Company, on the other hand.
 
Section 7.6. Public Announcements. Except as required by applicable law or stock
exchange requirements, the Company and Brekford shall provide the other Party
with a reasonable opportunity to review and comment on all press releases and
other public statements with respect to the transactions contemplated hereby.
 
Section 7.7. Indemnification; Directors’ and Officers’ Insurance.
 
(a) For a period of six (6) years after the Effective Time, Novume and the
Company jointly and severally shall indemnify the directors and officers of the
Company who hold such positions at any time during the period from the date
hereof through the Effective Time to the fullest extent to which the Company is
permitted to indemnify such officers and directors under its Certificate of
Incorporation and Bylaws, each as amended and as currently in effect, and
applicable law.
 
 
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(b) Prior to the Effective Time, Brekford will purchase a “tail” on its
directors’ and officers’ liability insurance policy (“Brekford Insurance
Policies”), which shall be at no less broad coverage and limits than Brekford’s
currently existing Brekford Insurance Policies and which shall cover the period
from the Closing Date until such date as is six (6) years following the Closing
Date, provided that, nothing shall prevent Novume, from and after the Closing
Date, from purchasing, at its sole option and at its expense, an additional
limit on the “tail” policy.
 
Section 7.8. Employee Benefit Plans.
 
(a) Except as otherwise set forth in Section 2.8 and Section 2.9 hereof, in the
case of the Company Benefit Plans listed on Schedule 7.8(a)(i) hereto (“Company
Stock Plans”) and the Brekford Benefit Plans listed on Schedule 7.8(b)(i) hereto
(“Brekford Stock Plans”), to the extent the employees’ interests are based upon
Company Common Stock or Brekford Common Stock, as applicable, or the market
prices thereof (but which interests do not constitute Options), as applicable,
each of the Company and Brekford agrees that such interests shall, from and
after the Effective Time, be based on Novume Common Stock in accordance with the
Company Common Exchange Ratio (with respect to Company Stock Plans) and the
Brekford Exchange Ratio (with respect to Brekford Benefit Plans).
 
(b) With respect to any Company Stock Plans or Brekford Stock Plans maintained
or contributed to persons outside the United States for the benefit of
non-United States citizens or residents, the principles set forth in this
Section 7.8, and on Schedule 6.1 or Schedule 6.2, as applicable, shall apply to
the extent the application of such principles does not violate applicable
foreign law.
 
(c) Without limiting the applicability of Sections 2.8 and 2.9 hereof, each of
the Parties shall take all actions as are necessary to ensure that the Company
and Brekford will not be at the Effective Time bound by any stock options,
warrants, stock appreciation rights (“SARs”), or other awards, rights or
agreements which would entitle any person, other than Novume, to own any capital
stock of the Surviving Companies or to receive any payment in respect thereof,
and all Company Stock Plans and Brekford Benefit Plans conferring any rights
with respect to Company Common Stock, Company Preferred Stock or other capital
stock of the Company, or Brekford Common Stock or other capital stock of
Brekford, as the case may be, shall be deemed hereby to be amended to be in
conformity with this Section 7.8.
 
Section 7.9. Management and Employment Arrangements.
 
(a) The Parties agree and acknowledge that Robert A. Berman has been appointed
the Chief Executive Officer of Novume, and will so remain at the Effective Time.
The Parties further agree and acknowledge that an executive team of Novume has
been appointed, consisting of such individuals as have been designated by the
Board of Directors of the Company, in accordance with the provisions of the
Original Agreement.
 
 
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(b) The Parties agree and acknowledge that, in accordance with the provisions of
the Original Agreement, each of Scott Rutherford and Rodney Hillman (together,
the "Brekford Officers") has entered into separate five (5)-year employment
agreements (the "Employment Agreements") in the form attached as Exhibit A
hereto, pursuant to which they shall be engaged to serve as the Chief Technology
Officer and President/Chief Operating Officer, respectively. The Employment
Agreements shall remain in effect at and as of the Effective Time. Further,
prior to the Effective Time, each of the Brekford Officers shall enter into
proprietary rights agreements (“Proprietary Rights Agreements”) in such form and
substance as is satisfactory to the Company, with Brekford,. None of the
Brekford Officers shall have any right, remedy or cause of action under this
Section 7.9, nor shall they be third party beneficiaries of this Section 7.9. In
addition to the forgoing, the Parties intend that key executives of the Company
and of Brekford, as shall be mutually agreed by the Parties, will enter into
employment agreements with Novume or one or more of its subsidiaries.
 
Section 7.10. Stock Exchange Listing. The Company shall use its best efforts to
obtain, prior to the Effective Time, or as soon as reasonably practicable
thereafter, the approval for listing on a national stock exchange of the shares
of Novume Common Stock into which the Shares will be converted pursuant to
ARTICLE II hereof and which will be issuable upon exercise of options pursuant
to Section 2.8 hereof; provided, that, if such listing is not obtained within
ninety (90) days of the Effective Time, the Board of Directors of Novume will
use its best efforts to take further actions as appropriate to achieve such
listing as soon as is reasonably practicable.
 
Section 7.11. Sale of Upfitting Business. The Parties agree and acknowledge
that, in accordance with the provisions of the Original Agreement, Brekford has
completed the sale of not more than 81% of the ownership of its Rugged
Information Technology Solutions and 360° Vehicle Solution Upfitting Business
(collectively, the “Upfitting Business”); Brekford retains, and shall retain at
and as of the Closing Date, not less than 19% ownership interest in the
Upfitting Business; and Brekford has used all proceeds from such disposition to
repay in full any and all indebtedness of Brekford such that, as of the Closing,
Brekford shall have no indebtedness other than as permitted by the Company.
 
Section 7.12. Post-Merger Novume Board of Directors. At the Effective Time or as
soon as reasonably practicable thereafter, the Novume Board shall consist of
seven (7) members, four (4) of whom shall be independent within the meaning of
the 1934 Act, and the national stock exchange to which the Company has applied
for the listing of Novume Common Stock as described in Section 7.10. Six (6)
members of the Novume Board shall be designated by the Company, and one (1)
member of the Novume Board shall be designated by Brekford, subject to the
approval of KeyStone. The members designated by the Company are James McCarthy,
who shall serve as Chairman, Robert A. Berman, Dr. Richard Nathan, Glenn Goord,
Paul DeBary and one additional independent director who shall be designated by
the Company. The member to be designated by Brekford shall be independent, as
provided herein, and shall be subject to the approval by the Company. As of the
date hereof, Glenn Goord and Paul DeBary are independent as provided herein, and
shall so remain, as and at the Effective Time.
 
 
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Registration Rights. Novume shall not be required to amend or maintain the
effectiveness of the Registration Statement for the purpose of permitting resale
of the shares of Novume Common Stock received pursuant hereto by the persons who
may be deemed to be “affiliates” of the Company or Brekford within the meaning
of Rule 145 promulgated under the 1933 Act, as amended.
 
Section 7.13. Affiliates. Prior to the Closing Date, each of the Company and
Brekford (i) shall have disclosed to the other all persons who are, or may be,
at the time this Agreement is executed its “affiliates” for purposes of Rule 145
under the 1933 Act, and (ii) shall have delivered, or caused each person who is
so identified as an “affiliate” of it to deliver, to the other as promptly as
practicable but in no event later than the Closing Date, a letter (each, an
“Affiliate Letter”) relating to (i) the transfer, prior to the Effective Time
(as defined in Section 1.2 hereof), of the shares of Brekford Common Stock or
Company Common Stock, as the case may be, beneficially owned by such affiliate
on the Closing Date, (ii) the transfer of the shares of Novume Common Stock to
be received by such affiliate in the Brekford Merger or the KeyStone Merger, as
the case may be, and (iii) the obligations of each such affiliate to deliver to
Sichenzia Ross Ference Kesner LLP, counsel to Brekford, or Crowell & Moring LLP,
counsel to the Company, as the case may be, a certificate requested by such firm
(if requested). The Company and Brekford shall notify each other from time to
time of any other persons who then are, or may be, such an “affiliate” and use
all reasonable efforts to cause each additional person who is identified as an
“affiliate” to execute an Affiliate Letter.
 
Section 7.14. Blue Sky. The Company and Brekford will use their best efforts to
obtain prior to the Effective Time all necessary blue sky permits and approvals
required to permit the distribution of the shares of Novume Common Stock to be
issued in accordance with the provisions of this Agreement.
 
Section 7.15. Compliance.
 
(a) In consummating the Brekford Merger and the transactions contemplated
hereby, Brekford shall comply in all material respects with the provisions of
the Exchange Act and the 1933 Act, and shall comply, and/or cause its
subsidiaries to comply or to be in compliance, in all material respects, with
all other applicable Legal Requirements.
 
(b) In consummating the Company Merger and the transactions contemplated hereby,
the Company shall comply in all material respects with the provisions of the
Exchange Act and the 1933 Act, and shall comply, and/or cause its subsidiaries
to comply or to be in compliance, in all material respects, with all other
applicable Legal Requirements.
 
Section 7.16. Key Stockholder Agreements. Each of C.B. Brechin, Scott Rutherford
and Robert West (the “Brekford Key Stockholders”) have entered into a Key
Stockholder Agreement with Brekford, and each of Robert A. Berman, James
McCarthy and Dr. Richard Nathan (the “Company Key Stockholders” and collectively
with the Brekford Key Stockholders, the “Key Stockholders”), have entered into
an agreement Key Stockholder Agreement with the Company, pursuant to which each
such Key Stockholder agreed to vote all of his voting securities in the Company
or Brekford, as applicable, in favor of this Agreement and the Mergers; against
any action that could reasonably be expected to impede, delay or materially
adversely affect the transactions contemplated by this Agreement; and against
any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Brekford or
the Company, as the case may be, under this Agreement. Each such Key Stockholder
Agreement shall remain in full force and effect until and including the Closing
Date.
 
 
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Section 7.17. Continuation of Historic Business. After the Effective Time
Brekford, as the Surviving Company of the Brekford Merger, will continue
Brekford’s historic business or use a significant portion of Brekford’s historic
assets in a business.  Company Merger Sub, as the Surviving Company of the
Company Merger, will continue the Company’s historic business or use a
significant portion of the Company’s historic assets in a business.
 
Section 7.19      Certain Indebtedness. As of the Effective Time, each of the
following instruments of indebtedness of the Company shall be assigned to and
assumed by Novume: (a) that certain Loan and Security Agreement dated August 11,
2016, by and among the Company, AOC KeySolutions, Inc., a wholly-owned
subsidiary of the Company and Sandy Spring Bank, and any term loan notes issued
thereunder that are outstanding at the Effective Time (collectively, the “Sandy
Spring Debt Documents”), and (b) that certain promissory note in the principal
amount of $500,000 issued in favor of Avon Road Partners, L.P. (the “Avon Road
Note”).
 
ARTICLE VIII
CONDITIONS TO MERGERS
 
Section 8.1. Conditions to the Obligations of Each Party to Effect the Mergers.
The respective obligations of each Party to effect the Mergers shall be subject
to the following conditions:
 
(a) Stockholder Approval. The Mergers, this Agreement and all transactions
contemplated hereby shall have been approved and adopted by the requisite vote
of the stockholders of each of the Company and Brekford, in accordance with
Section 7.2(a), and each of the Merger Subsidiaries in accordance with Delaware
Law, applicable United States state and federal securities laws, and the
Certificate of Incorporation and Bylaws, each as amended and as currently in
effect, of each such entity;
 
(b) Legality. No federal, state or foreign statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has the
effect of making the Mergers illegal or otherwise prohibiting the consummation
of the Mergers;
 
(c) Required Consents. All authorizations, licenses, Permits, consents, orders
or approvals of, or declarations, filings with or notices to, any governmental
body, agency or official, or any non-governmental third party (all of the
foregoing, “Required Consents”), which are necessary for the consummation of the
transactions contemplated hereby, other than immaterial Required Consents the
failure to obtain which would have no material adverse effect on the
consummation of the transactions contemplated hereby and no Material Adverse
Effect on Novume or either of the Surviving Companies, shall have been, as
applicable, made, filed, shall have occurred or shall have been obtained and all
such Required Consents shall be in full force and effect, provided, however,
that a Required Consent shall not be deemed to have been obtained if in
connection with the grant thereof there shall have been an imposition by any
state or federal governmental body, agency or official of any condition,
requirement, restriction or change of regulation, or any other action directly
or indirectly related to such grant taken by such governmental body, which would
reasonably be expected to either (i) have a Material Adverse Effect on any of
Novume or either of the Surviving Companies, or (ii) prevent the Parties from
realizing in all material respects the economic benefits of the transactions
contemplated by this Agreement that such Parties currently anticipate receiving
therefrom;
 
 
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(d) Registration Statement Effective. The Registration Statement shall have
become effective, no stop order suspending the effectiveness of the Registration
Statement shall then be in effect, and no proceedings for that purpose shall
then be threatened by the SEC or shall have been initiated by the SEC and not
concluded or withdrawn;
 
(e) Blue Sky. All state securities or blue sky permits or approvals required to
carry out the transactions contemplated hereby shall have been received; and
 
(f) Key Stockholder Agreements. Each of the Key Stockholders shall have entered
into a Key Stockholder Agreement with the Company or Brekford, as applicable,
and Brekford shall have received copies of each such agreement with the Company
Key Stockholders duly executed by Brekford and the applicable Key Stockholder,
and the Company shall have received copies of each such agreement with the
Brekford Key Stockholders duly executed by Brekford and the applicable Key
Stockholder.
 
Section 8.2. Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the Mergers are also subject to the
fulfillment of the following conditions:
 
(a) Representations and Warranties. The representations and warranties of
Brekford contained in this Agreement shall be true and correct on the date
hereof and (except to the extent such representations and warranties speak as of
an earlier date) shall also be true and correct on and as of the Closing Date,
except for changes expressly contemplated by this Agreement, with the same force
and effect as if made on and as of the Closing Date;
 
(b) Agreements, Conditions and Covenants. Brekford shall have performed or
complied in all material respects with all agreements, conditions and covenants
required by this Agreement to be performed or complied with by Brekford on or
before the Effective Time;
 
(c) Certificates.
 
(i) The Company shall have received a certificate of an executive officer of
Brekford to the effect set forth in paragraphs (a) and (b) above; and
 
(ii)           The Company shall have received a certificate of the Secretary of
Brekford with respect to certain corporate matters, including a true, correct
and complete copy of Brekford’s certificate of incorporation, as currently in
effect, a true, correct and complete copy of Brekford’s bylaws, as currently in
effect, certificate(s) as to Brekford’s formation and good standing in its
jurisdiction of formation and each other jurisdiction in which it is qualified
to do business, and attaching thereto a true, correct and complete copy of
resolutions and consents, as applicable, of the stockholder(s) and board of
Brekford authorizing, in each case, the execution, delivery and performance of
this Agreement, the filing and distribution of the Information Statement, and
the consummation of the transactions contemplated hereby.
 
 
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(d) Opinions.
 
(i) The Company shall have received an opinion of Crowell & Moring LLP, counsel
to the Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company, substantially to the effect that, on the basis of
the facts, representations and assumptions set forth in such opinion: (A) no
gain or loss should be recognized for federal income tax purposes by Novume, the
Company or Company Merger Sub as a result of the formation of Novume and Company
Merger Sub and the Merger of the Company with and into the Company Merger Sub;
and (B) no gain or loss should be recognized for federal income tax purposes by
the stockholders of the Company upon their exchange of Company Common Stock or
Company Preferred Stock, as applicable, solely for Novume Common Stock or Novume
Preferred Stock, as applicable, pursuant to such Merger, except with respect to
cash received in lieu of a fractional share interest in Novume Common Stock. In
rendering such opinion, Crowell & Moring LLP may require and rely upon
representations and covenants including those contained in certificates of
officers of Novume, the Company, Brekford and others, as may be requested by
Crowell & Moring LLP and shall be provided by Novume, the Company, Brekford; and
 
(ii) Brekford shall have received the opinion described in Section 8.3(d)(i)
hereof, in form and substance reasonably satisfactory to the Company.
 
(e) Affiliate Letters. The Company shall have received the Affiliate Letters
required by Section 7.14, duly executed by each “affiliate” of Brekford;
 
(f) No Material Adverse Change. Since September 30, 2016, there shall not have
occurred any event that has had or could reasonably be expected to have a
Material Adverse Effect on Brekford or Novume;
 
(g) Consents Under Brekford Agreements. Brekford shall have obtained the
consents listed on Schedule 8.2(g) hereto, as well as the consent or approval of
each other person whose consent or approval shall be required under any
agreement or instrument in order to permit the consummation of the transactions
contemplated hereby except those which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Novume or
either of the Surviving Companies; and
 
(h) Employment Agreements; Proprietary Rights Agreements. The Employment
Agreements and Proprietary Rights Agreements shall be in full force and effect.
 
(i) Sale of Upfitting Business. The sale of the Upfitting Business as described,
and on the terms and conditions set forth, in Section 7.11 shall have been
consummated in accordance with the requirements of Delaware Law and Brekford’s
Certificate of Incorporation and Bylaws, each as amended and as currently in
effect.
 
Section 8.3. Additional Conditions to Obligations of Brekford. The obligations
of Brekford to effect the Mergers are also subject to the fulfillment of the
following conditions:
 
 
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(a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement shall be true and correct on the date hereof
and (except to the extent such representations and warranties speak as of an
earlier date) shall also be true and correct on and as of the Closing Date,
except for changes expressly contemplated by this Agreement, with the same force
and effect as if made on and as of the Closing Date;
 
(b) Agreements, Conditions and Covenants. The Company shall have performed or
complied in all material respects with all agreements, conditions and covenants
required by this Agreement to be performed or complied with by the Company on or
before the Effective Time;
 
(c) Certificates.
 
(i) Brekford shall have received a certificate of an executive officer of the
Company to the effect set forth in paragraphs (a) and (b) above; and
 
(ii) Brekford shall have received a certificate of the Secretary of the Company
with respect to certain corporate matters, including a true, correct and
complete copy of the Company’s certificate of incorporation, as currently in
effect, a true, correct and complete copy of the Company’s bylaws, as currently
in effect, certificate(s) as to the Company’s formation and good standing in its
jurisdiction of formation and each other jurisdiction in which it is qualified
to do business, and attaching thereto a true, correct and complete copy of
resolutions and consents, as applicable, of the stockholder(s) and board of the
Company authorizing, in each case, the execution, delivery and performance of
this Agreement, the filing and distribution of the Information Statement, and
the consummation of the transactions contemplated hereby.
 
(d) Tax Opinion.
 
(i) Brekford shall have received an opinion of counsel, such counsel to be
determined, dated as of the Closing Date, in form and substance reasonably
satisfactory to Brekford, substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such opinion: (A) no gain or
loss should be recognized for federal income tax purposes by Novume, Brekford or
Brekford Merger Sub as a result of the formation of Novume and Brekford Merger
Sub and the Merger of Brekford Merger Sub with and into Brekford; and (B) no
gain or loss should be recognized for federal income tax purposes by the
stockholders of Brekford upon their exchange of Brekford Common Stock for the
Brekford Merger Consideration pursuant to such Merger, except with respect to
cash received in lieu of a fractional share interest in Novume Common Stock;
 
(ii) the Company shall have received the opinion described in Section 8.2(d)(i)
hereof, in form and substance reasonably satisfactory to Brekford;
 
(e) Affiliate Letters. Brekford shall have received the Affiliate Letters
required by Section 7.14 hereof, duly executed by each “affiliate” of the
Company;
 
(f) No Material Adverse Change. Since September 30, 2016, there shall not have
occurred any event that has had or could reasonably be expected to have a
Material Adverse Effect on the Company or Novume; and
 
 
49

 
 
(g) Consents Under the Company Agreements. The Company shall have obtained the
consent or approval of each person whose consent or approval shall be required
under any agreement or instrument in order to permit the consummation of the
transactions contemplated hereby except those which the failure to obtain would
not, individually or in the aggregate, have a Material Adverse Effect on Novume
or either of the Surviving Companies.
 
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
 
Section 9.1. Termination. This Agreement may be terminated at any time before
the Effective Time in each case as authorized by the respective Board of
Directors of the Company or Brekford:
 
(a) By mutual written consent of each of the Company and Brekford;
 
(b) By either the Company or Brekford if the Mergers shall not have been
consummated on or before August 31, 2017 (the “Termination Date”); provided,
however, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any Party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date; and provided,
further, that if on the Termination Date the conditions to the Closing set forth
in Section 8.1(d) shall not have been fulfilled, but all other conditions to the
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be extended to a date mutually agreed upon by the parties
hereto;
 
(c) By either the Company or Brekford if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order, decree
or ruling the Parties shall use their commercially reasonable efforts to lift),
in each case 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;
 
(d) By either the Company or Brekford if the other shall have breached, or
failed to comply with, in any material respect any of its obligations under this
Agreement or any representation or warranty made by such other Party shall have
been incorrect in any material respect when made or shall have since ceased to
be true and correct in any material respect, and such breach, failure or
misrepresentation is not cured within thirty (30) days after notice thereof and
such breaches, failures or misrepresentations, individually or in the aggregate
and without regard to materiality qualifiers contained therein, results or would
reasonably be expected to result in a Material Adverse Effect on Novume, the
Company or Brekford;
 
(e) By either the Company or Brekford upon the occurrence of a Material Adverse
Effect on the other or on Novume or an event which could reasonably be expected
to result in a Material Adverse Effect on the other or on Novume;
 
 
50

 
 
(f) By either the Company or Brekford if the Board of Directors of the other or
any committee of the Board of Directors of the other (i) shall withdraw or
modify in any adverse manner its approval or recommendation of this Agreement,
the Mergers or any other transaction contemplated hereby, (ii) shall fail to
reaffirm such approval or recommendation upon such Party’s request, (iii)
approve or recommend any acquisition of the other or a material portion of its
assets or any tender offer for shares of its capital stock, in each case, other
than by a Party or an affiliate thereof, or (iv) shall resolve to take any of
the actions specified in clause (i) above; or
 
(g) By either the Company or Brekford if the Company Stockholders’ Approval or
the Brekford Stockholders’ Approval, as applicable, is withdrawn or modified in
any adverse manner, or any further required stockholder approval is not
provided, such that the transactions contemplated by this Agreement, in whole or
in part, are not authorized by all stockholder approval required under Delaware
Law and each applicable Party’s Organizational Documents; provided, however,
that no termination by Brekford shall be effective pursuant to Sections 9.1(f)
or (g) under circumstances in which a Termination Fee is payable by Brekford
under Section 9.2(b) unless concurrently with such termination, such Termination
Fee is paid in full by Brekford in accordance with the provisions of Section
9.2(b).
 
Section 9.2. Effect of Termination.
 
(a) In the event of termination of this Agreement as provided in Section 9.1
hereof, and subject to the provisions of Section 10.1 hereof, this Agreement
shall forthwith become void and there shall be no liability on the part of any
of the Parties, except (i) as set forth in this Section 9.2 and in Sections
4.10, 4.16, 5.9, 5.12 and 10.3 hereof, and (ii) nothing herein shall relieve any
Party from liability for any willful breach hereof.
 
(b) If (i) this Agreement (A) is terminated by the Company pursuant to Section
9.1(f) hereof, or the Company or Brekford pursuant to Section 9.1(g) hereof
because of the failure to maintain the Brekford Stockholders’ Approval or obtain
any further required stockholder approval, as the case may be, or (B) is
terminated as a result of Brekford’s material breach of Section 7.2 hereof which
is not cured within thirty (30) days after notice thereof to Brekford, and (ii)
at the time of such termination there shall have been an Acquisition Proposal
involving Brekford or any of its subsidiaries (whether or not such offer shall
have been rejected or shall have been withdrawn prior to the time of such
termination), Brekford shall pay to the Company a termination fee of $250,000
(the “Termination Fee”). The Termination Fee payable under this Section 9.2(b)
shall be payable in cash at the date of termination.
 
(c) Brekford agrees that the agreements contained in Section 9.2(b) above are an
integral part of the transactions contemplated by this Agreement and constitute
liquidated damages and not a penalty. If Brekford fails to promptly pay to the
Company any fee due under such Section 9.2(b), Brekford shall pay the costs and
expenses (including reasonable legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on the amount of any unpaid fee at the
publicly announced prime rate as reported by The Wall Street Journal's bank
survey
 
from the date such fee was required to be paid.
 
 
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Section 9.3. Amendment. This Agreement may be amended by the Parties pursuant to
a writing adopted by action taken by all of the Parties at any time before the
Effective Time; provided, however, that, no amendment may be made which would
(a) alter or change the amount or kinds of consideration to be received by the
holders of Shares upon consummation of the Mergers, (b) alter or change any term
of the Certificate of Incorporation or Certificate of Formation, as applicable,
of either of the Surviving Companies or Novume, or (c) alter or change any of
the terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of securities of the Company
or Brekford. This Agreement may not be amended except by an instrument in
writing signed by the Parties.
 
Section 9.4. Waiver. At any time before the Effective Time, any Party may (a)
extend the time for the performance of any of the obligations or other acts of
the other Parties, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein;
provided, that, the conditions to closing enumerated under Sections 8.1(a) -
(e), Section 8.2(d), and Section 8.3(d) shall not be waivable hereunder; and,
provided, further, that each Party’s obligations under Section 7.1, 7.2, 7.3,
7.16 and 7.19 of the Agreement shall not be waivable hereunder. Any agreement on
the part of a Party to any such extension or waiver shall be valid only as
against such Party and only if set forth in an instrument in writing signed by
such Party.
 
ARTICLE X
GENERAL PROVISIONS
 
Section 10.1. Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
9.1 hereof, as the case may be, except that (a) the agreements set forth in
ARTICLE I and Sections 2.4, 2.5, 2.6, 2.7, 2.8, 7.7, 7.8 and 7.11 hereof and
this Section 10.1 shall survive the Effective Time indefinitely, (b) the
agreements and representations set forth in Sections 4.10, 4.16, 5.9, 5.12,
7.5(b), 9.2 and 10.3 hereof and this Section 10.1 shall survive termination
indefinitely and (c) nothing contained herein shall limit any covenant or
agreement of the Parties which by its terms contemplates performance after the
Effective Time.
 
Section 10.2. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, to the Parties at the following
addresses or telecopy numbers (or at such other address or telecopy number for a
Party as shall be specified by like notice):
 
 
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(a) if to the Company or any Merger Subsidiary:
 
KeyStone Solutions, Inc.
14420 Albemarle Point Place, Suite 200
Chantilly, VA 20151
Attn: Robert Berman
Email : rberman@keystonewins.com
with a copy to:
Crowell & Moring LLP
1001 Pennsylvania Ave NW
Washington, D.C. 20004
Attention: Morris DeFeo, Esq.
Email: mdefeo@crowell.com
Telephone.: (202) 624-2925
(b) if to Brekford:
 
Brekford Traffic Safety, Inc.
7020 Dorsey Road
Hanover, Maryland 21076
Attn: Rodney Hillman
Email: rhillman@brekford.com
with a copy to:
Sichenzia Ross Ference Kesner LLP
61 Broadway
New York, NY 10006
Attention: Thomas A. Rose, Esq.
Email: trose@srfkllp.com
Telephone: (212) 930-9700
 
Section 10.3. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring such costs and
expenses, whether or not the transactions contemplated by this Agreement are
consummated, and any actions taken by either party in furtherance thereof shall
be at such Party’s sole risk and expense.
 
Section 10.4. Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
 
(a) “1933 Act” means the U.S. Securities Act of 1933, as the same may be amended
from time to time, and “Exchange Act” means the U.S. Securities Exchange Act of
1934, as the same may be amended from time to time.
 
 
53

 
 
(b) “affiliate” of a person means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person.
 
(c) “Brekford ERISA Affiliate” means any entity that would have ever been
considered a single employer with Brekford under Section 4001(b) of ERISA or
part of the same “controlled group” as Brekford for purposes of Section
302(d)(3) of ERISA.
 
(d) “Closing Date Novume Share Price” means the fair market value of such a
share of Novume Common Stock at the Effective Time, as determined in good faith
by the Novume Board.
 
(e) “Company ERISA Affiliate” means any entity that would have ever been
considered a single employer with the Company under Section 4001(b) of ERISA or
part of the same “controlled group” as the Company for purposes of Section
302(d)(3) of ERISA.
 
(f) “control” (including the terms “controlled by” and “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit arrangement or
otherwise.
 
(g) “knowledge” of any Party shall mean the actual knowledge of the executive
officers of such Party.
 
(h) “Material Adverse Effect” means any change in or effect on the business of
the referenced corporation or any of its Subsidiaries that is or will be
materially adverse to the business, operations (including the income statement),
properties (including intangible properties), condition (financial or
otherwise), assets, liabilities or regulatory status of such referenced
corporation and its Subsidiaries taken as a whole, but shall not include the
effects of changes that are generally applicable in (A) the United States
economy or (B) the United States securities markets if, in any of (A) or (B),
the effect on the Company or Brekford (as the case may be) and its respective
Subsidiaries, taken as a whole, is not disproportionate relative to the effect
on the other and its Subsidiaries, taken as a whole.
 
(i) “Organizational Documents” means (a) with respect to any corporation, its
certificate or articles of incorporation or organization, as amended, and its
by-laws, as amended, and (b) with respect to any limited liability company, its
certificate of formation, as amended and its operating agreement, as amended.
 
(j) “person” means an individual, corporation, partnership, association, trust,
unincorporated organization, entity or group (as defined in the Exchange Act).
 
(k) “Subsidiary” means any corporation or other legal entity of which the
Company or Brekford, as the case may be (either alone or through or together
with any other Subsidiary or Subsidiaries), owns, directly or indirectly, more
than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.
 
 
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Section 10.5. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
 
Section 10.6. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
 
Section 10.7. Entire Agreement; No Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and, except as expressly set forth herein,
supersedes any and all other prior agreements and undertakings, both written and
oral, among the Parties, or any of them, with respect to the subject matter
hereof and, except for Section 7.7 (Indemnification; Directors’ and Officers’
Insurance), is not intended to confer upon any person other than the Company,
Brekford, Novume, Company Merger Sub and Brekford Merger Sub and, after the
Effective Time, their respective stockholders, any rights or remedies hereunder.
 
Section 10.8. Assignment. This Agreement shall not be assigned by operation of
law or otherwise.
 
Section 10.9. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware applicable to contracts
executed in and to be performed entirely within that State, without regard to
the conflicts of laws provisions thereof.
 
Section 10.10. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
 
[Signature Page to Follow]
 
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their respective officers hereunto duly authorized, all as of the date first
written above.
 
KeyStone Solutions, Inc.,
a Delaware corporation
/s/ Robert A. Berman

 

Name:

Robert A. Berman
Title:
 
Chief Executive Officer

 
 
Brekford Traffic Safety, Inc.,
a Delaware corporation
/s/ Rodney W. Hillman

 

Name:             

Rodney W. Hillman
 
 
Title:
President and COO
 
 
 

 
Novume Solutions, Inc.,
a Delaware corporation

/s/ Robert A. Berman

 

Name:
Robert A. Berman
Title:
 
Chief Executive Officer

 
 
KeyStone Merger Sub, LLC,
a Delaware corporation

/s/ Robert A. Berman

 

Name:
Robert A. Berman
Title:
 
President

 
 
Brekford Merger Sub, Inc.,
a Delaware corporation

/s/ Robert A. Berman

 

Name:
Robert A. Berman
Title:
 
President

[Signature page to the Agreement and Plan of Merger]

 

 
APPENDIX I
 
Certificate of Incorporation of Novume