Execution Copy

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of October 26,
2018, (the “Effective Date”) between TYLER WELDERS SUPPLY, INC., a Texas
corporation (collectively, the “Seller”), and UNITED WELDING SPECIALITIES OF
LONGVIEW, INC., a Texas corporation (the “Corporation”), and MAGNEGAS APPLIED
TECHNOLOGY SOLUTIONS, INC., a Delaware corporation (including its successors and
assigns, the “Purchaser”).

 

RECITALS:

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to an exemption from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the “Securities Act”), the Seller(s) desires
to sell to the Purchaser, and the Purchaser desires to purchase from the
Seller(s), securities of the Corporation, as more fully described in this
Agreement.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Seller(s), Corporation and each
Purchaser agree as follows:

 

1) PURCHASE AND SALE OF SECURITIES.

 

a) Purchase of Shares of Common Stock. Subject to the satisfaction (or waiver)
of the conditions set forth in Section 6 below, the Seller(s) will sell to the
Purchaser, and the Purchaser agrees to purchase from the Seller(s) on the
Closing Date (as defined below) (i) such aggregate number of shares of Common
Stock set forth opposite such Purchaser’s name in column (3) on the Schedule of
Purchasers (“Securities”).

 

b) Closing. The closing (the “Closing”) of the purchase of the Securities by the
Purchasers shall occur at 3539 US HWY 271, Tyler, Texas 75708. The date and time
of the Closing (the “Closing Date”) shall be 10:00 a.m., Pacific Standard Time,
on the first (1st) Business Day (as defined below) on which the conditions to
the Closing set forth in Sections 5 and 6 below are satisfied or waived (or such
other date as is mutually agreed to by the Seller(s) and the Purchaser). As used
herein “Business Day” means any day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to remain closed.

 

c) Purchase Price. The aggregate purchase price for the Securities to be
purchased by the Purchaser shall be the amount set forth opposite such
Purchaser’s name in column (3) on the Schedule of Purchasers. The purchase price
for the Securities will be US $750,000 (the “Purchase Price”) in cash and
payable as set forth on the Schedule of Purchasers.

 

d) Form of Payment. On the Closing Date, (i) the Purchaser shall pay the
Purchase Price by wire transfer of immediately available funds and (ii) the
Seller(s) shall deliver to the Purchaser stock certificates duly executed to
effect the transfer of the Securities to the Purchaser or its designee.

 

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2) PURCHASER’S REPRESENTATIONS AND WARRANTIES.

 

The Purchaser represents and warrants to the Seller(s) that, as of the date
hereof and as of the Closing Date:

 

a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents (as
defined below) to which it is a party and otherwise to carry out its obligations
hereunder and thereunder.

 

b) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Purchaser and shall constitute the
legal, valid and binding obligations of the Purchaser enforceable against the
Purchaser in accordance with its respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

 

c) No Conflicts. The execution, delivery and performance by the Purchaser of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of the Purchaser, or (ii) conflict with, 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, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Purchaser is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to the Purchaser, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which could not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Purchaser to perform its obligations
hereunder.

 

d) Purchaser Status. At the time the Purchaser was offered the Securities, it
was, and as of the date hereof it is (i) an “Accredited Investor” as defined in
Rule 501(a) under the Securities Act.

 

e) Purchasers Investment Experience. The Purchaser, together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities and has so evaluated the merits and
risks of such investment. The Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

 

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f) No General Solicitation. The Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented ay any seminar or any other
general solicitation or general advertisement.

 

The Corporation acknowledges and agrees that the representations contained in
this Section 2 shall not modify, amend or affect such Purchaser’s right to rely
on the Corporation’s representations and warranties contained in this Agreement
or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in
connection with this Agreement or the consummation of the transactions
contemplated hereby.

 

3) REPRESENTATIONS AND WARRANTIES OF THE SELLER(S) AND CORPORATION.

 

The Seller(s) and Corporation represent and warrant, joint and severally, to the
Purchasers that, as of the date hereof and as of the Closing Date:

 

a) Organization and Qualification. The Corporation is an entity duly organized
and validly existing and in good standing under the laws of the jurisdiction in
which it is formed, and has the requisite power and authority to own its
property and to carry on business as now being conducted and as presently
proposed to be conducted. The Corporation is duly qualified as a foreign entity
to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect (as defined below). As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, operations (including results thereof),
condition (financial or otherwise) or prospects of the Corporation, individually
or taken as a whole, (ii) the transactions contemplated hereby or in any of the
other Transaction Documents or any other agreements or instruments to be entered
into in connection herewith or therewith or (iii) the authority or ability of
the Corporation to perform any of its obligations under any of the Transaction
Documents (as defined below). Other than the Persons (as defined below) set
forth on Schedule 3(a), the Corporation has no Subsidiaries. “Subsidiaries”
means any Person in which the Corporation, directly or indirectly, (I) owns any
of the outstanding capital stock or holds any equity or similar interest of such
Person or (II) controls or operates all or any part of the business, operations
or administration of such Person, and each of the foregoing, is individually
referred to herein as a “Subsidiary.”

 

b) Authorization; Enforcement; Validity. The Seller(s) and the Corporation have
the requisite power and authority to enter into and perform their obligations
under this Agreement and the other Transaction Documents in accordance with the
terms hereof and thereof. The execution and delivery of this Agreement and the
other Transaction Documents by the Seller(s) and the Corporation, and the
consummation by the Seller(s) and the Corporation of the transactions
contemplated hereby and thereby have been duly consented to by the Corporation’s
board of directors or other governing body, as applicable, and no further
filing, consent or authorization is required by the Corporation, its board of
directors or its stockholders or other governing body. This Agreement has been,
and the other Transaction Documents to which it is a party will be prior to the
Closing, duly executed and delivered by the Seller(s) and the Corporation, and
constitutes the legal, valid and binding obligations of the Seller(s) and
Corporation, enforceable against each in accordance with its respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies and except as rights to indemnification and to
contribution may be limited by federal or state securities law. “Transaction
Documents” means, collectively, this Agreement and each of the other agreements
and instruments entered into or delivered by any of the parties hereto in
connection with the transactions contemplated hereby and thereby, as may be
amended from time to time.

 

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c) Original Issuance of Securities. The Securities when originally issued were
duly authorized, validly issued, fully paid and non-assessable and free from all
preemptive or similar rights, mortgages, defects, claims, liens, pledges,
charges, taxes, rights of first refusal, encumbrances, security interests and
other encumbrances (collectively “Liens”) with respect to the issuance thereof.
The original issuance by the Corporation of the Securities was effected pursuant
to an exemption from the registration requirements of Section 5 of the
Securities Act.

 

d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Corporation and the consummation by the Corporation of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Certificate of Incorporation (as defined below) (including, without
limitation, any certificate of designations contained therein), Bylaws (as
defined below), certificate of formation, memorandum of association, articles of
association, bylaws or other organizational documents of the Corporation, or any
capital stock or other securities of the Corporation, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Corporation is a party, or (iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including,
without limitation, foreign, federal and state securities laws and including all
applicable foreign, federal and state laws, rules and regulations) applicable to
the Corporation or by which any property or asset of the Corporation is bound or
affected.

 

e) Consents. The Corporation is not required to obtain any consent from,
authorization or order of, or make any filing or registration with any
Governmental Entity (as defined below) or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or perform any of
its respective obligations under or contemplated by the Transaction Documents,
in each case, in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Corporation is
required to obtain pursuant to the preceding sentence have been or will be
obtained or effected on or prior to the Closing Date. “Governmental Entity”
means any nation, state, county, city, town, village, district, or other
political jurisdiction of any nature, federal, state, local, municipal, foreign,
or other government, governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal), multi-national organization or body; or body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature or
instrumentality of any of the foregoing, including any entity or enterprise
owned or controlled by a government or a public international organization or
any of the foregoing.

 

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f) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Seller(s)
and Corporation acknowledge and agree that each Purchaser is acting solely in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby and that no
Purchaser is (i) an officer or director of the Corporation, (ii) an “affiliate”
(as defined in Rule 144 promulgated under the Securities Act (or successor rule
thereto) (collectively, “Rule 144”)) of the Corporation, or (iii) to its
knowledge, a “beneficial owner” of more than 10% of the shares representing the
Securities (as defined for purposes of Rule 13d-3 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)). The Seller(s) and Corporation further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Seller(s) or Corporation (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Purchaser or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser’s purchase of the
Securities. The Seller(s) and Corporation further represent to the Purchaser
that the Corporation’s decision to enter into the Transaction Documents to which
it is a party has been based solely on the independent evaluation by the
Seller(s), Corporation and their respective representatives.

 

g) Fees. No brokerage or finder’s fees or commissions are or will be payable by
the Seller(s) or Corporation to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The Purchasers shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this Section
3(g) that may be due in connection with the transactions contemplated by the
Transaction Documents.

 

h) Application of Takeover Protections; Rights Agreement. The Corporation and
its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, interested stockholder,
business combination, poison pill (including, without limitation, any
distribution under a rights agreement), stockholder rights plan or other similar
anti-takeover provision under its organizational documents or the laws of the
jurisdiction of its incorporation or otherwise which is or could become
applicable to any Purchaser as a result of the transactions contemplated by this
Agreement, including, without limitation, any Purchaser’s ownership of the
Securities. The Corporation and its board of directors have taken all necessary
action, if any, in order to render inapplicable any stockholder rights agreement
or similar arrangement relating to accumulations of beneficial ownership of the
Securities or a change in control of the Corporation.

 

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i) Financial Statements. The Corporation’s fiscal year end is July 31. The
Corporation has previously delivered to Purchaser the following: audited balance
sheet and statements of income, and cash flow of the Corporation as of and for
the last three (3) fiscal years (collectively the “Financial Statements”). The
Financial Statements were prepared in accordance with United States Generally
Accepted Accounting Principles (“U.S. GAAP”) applied on a consistent basis
throughout the periods covered thereby, present fairly and accurately the
financial condition of the Corporation as of such dates and the results of
operations for such periods and are correct and complete, and are consistent
with the books and records of the Corporation. The Corporation is not currently
contemplating to amend or restate any of the Financial Statements (including,
without limitation, any notes or any letter of the independent accountants of
the Corporation with respect thereto), nor is the Corporation currently aware of
facts or circumstances which would require the Corporation to amend or restate
any of the Financial Statements, in each case, in order for any of the
Financials Statements to be in compliance with GAAP. The Corporation has not
been informed by its independent accountants that they recommend that the
Corporation amend or restate any of the Financial Statements or that there is
any need for the Corporation to amend or restate any of the Financial
Statements.

 

j) Absence of Certain Changes. Since the date of the Corporation’s most recent
Financial Statement, there has been no Material Adverse Change and no material
adverse development in the business, assets, liabilities, properties, operations
(including results thereof), condition (financial or otherwise) or prospects of
the Corporation. Since the date of the Corporation’s most recent Financial
Statement, the Corporation has not (i) declared or paid any dividends, (ii) sold
any assets, individually or in the aggregate, outside of the ordinary course of
business or (iii) made any capital expenditures, individually or in the
aggregate, outside of the ordinary course of business. The Corporation has not
taken any steps to seek protection pursuant to any law or statute relating to
bankruptcy, insolvency, reorganization, receivership, liquidation or winding up,
nor does the Corporation have any knowledge or reason to believe that any of
their respective creditors intend to initiate involuntary bankruptcy proceedings
or any actual knowledge of any fact which would reasonably lead a creditor to do
so. The Corporation is not as of the date hereof, and after giving effect to the
transactions contemplated hereby to occur at the Closing, will not be Insolvent
(as defined below). For purposes of this Section, “Insolvent” means, (i) with
respect to the Corporation, on a consolidated basis, (A) the present fair
saleable value of the Corporation’s assets is less than the amount required to
pay the Corporation’s total Indebtedness (as defined below), (B) the Corporation
is unable to pay their debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured or (C) the
Corporation intends to incur or believe that they will incur debts that would be
beyond their ability to pay as such debts mature; and (ii) with respect to the
Corporation (A) the present fair saleable value of the Corporation’s assets is
less than the amount required to pay its respective total Indebtedness, (B) the
Corporation is unable to pay its respective debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured or (C) the Corporation intends to incur or believes that it will incur
debts that would be beyond its respective ability to pay as such debts mature.
The Corporation has not engaged in any business or in any transaction, and is
not about to engage in any business or in any transaction, for which the
Corporation’s remaining assets constitute unreasonably small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

 

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k) No Undisclosed Events, Liabilities, Developments or Circumstances. No event,
liability, development or circumstance has occurred or exists, or is reasonably
expected to exist or occur with respect to the Seller(s), Corporation or any of
their respective businesses, properties, liabilities, prospects, operations
(including results thereof) or condition (financial or otherwise), that (i)
could have a Material Adverse Effect on the Purchaser’s purchase hereunder or
(ii) could have a Material Adverse Effect, generally.

 

l) Conduct of Business; Regulatory Permits. The Corporation is not in violation
of any term of or in default under its organizational documents, any certificate
of designations, preferences or rights of any other outstanding series of
preferred stock of the Corporation or Bylaws or its organizational charter,
certificate of formation, memorandum of association, articles of association,
certificate of incorporation or articles of incorporation or bylaws,
respectively. The Corporation is not in violation of any judgment, decree or
order or any statute, ordinance, rule or regulation applicable to the
Corporation, and the Corporation will not conduct its business in violation of
any of the foregoing, except in all cases for possible violations which could
not, individually or in the aggregate, have a Material Adverse Effect. The
Corporation possesses all certificates, authorizations and permits issued by the
appropriate regulatory authorities necessary to conduct its business, except
where the failure to possess such certificates, authorizations or permits would
not have, individually or in the aggregate, a Material Adverse Effect, and the
Corporation has not received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit.
There is no agreement, commitment, judgment, injunction, order or decree binding
upon the Corporation or to which the Corporation is a party which has or would
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Corporation, any acquisition of property by the
Corporation or the conduct of business by the Corporation as currently conducted
other than such effects, individually or in the aggregate, which have not had
and would not reasonably be expected to have a Material Adverse Effect on the
Corporation.

 

m) Foreign Corrupt Practices. Neither the Seller(s), Corporation, or any
director, officer, agent, employee, nor any other person acting for or on behalf
of the foregoing (individually and collectively, a “Corporation Affiliate”) have
violated the U.S. Foreign Corrupt Practices Act (the “FCPA”) or any other
applicable anti-bribery or anti-corruption laws, nor has any Corporation
Affiliate offered, paid, promised to pay, or authorized the payment of any
money, or offered, given, promised to give, or authorized the giving of anything
of value, to any officer, employee or any other person acting in an official
capacity for any Governmental Entity to any political party or official thereof
or to any candidate for political office (individually and collectively, a
“Government Official”) or to any person under circumstances where such
Corporation Affiliate knew or was aware of a high probability that all or a
portion of such money or thing of value would be offered, given or promised,
directly or indirectly, to any Government Official, for the purpose of:

 

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i) (A) influencing any act or decision of such Government Official in his/her
official capacity, (B) inducing such Government Official to do or omit to do any
act in violation of his/her lawful duty, (C) securing any improper advantage, or
(D) inducing such Government Official to influence or affect any act or decision
of any Governmental Entity, or

 

ii) assisting the Corporation in obtaining or retaining business for or with, or
directing business to, the Corporation.

 

o) Sarbanes-Oxley Act. The Corporation is in compliance with, or is exempt from,
any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as
amended, and any and all applicable rules and regulations promulgated
thereunder.

 

p) Transactions With Affiliates. Except as set forth on Schedule 3(p) attached
hereto, no current or former employee, partner, director, officer or stockholder
(direct or indirect) of the Corporation, or any associate, or, to the knowledge
of the Corporation, any affiliate of any thereof, or any relative with a
relationship no more remote than first cousin of any of the foregoing, is
presently, or has ever been, (i) a party to any transaction with the Corporation
(including any contract, agreement or other arrangement providing for the
furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such director, officer or stockholder or
such associate or affiliate or relative (other than for ordinary course services
as employees, officers or directors of the Corporation)) or (ii) the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a competitor, supplier or customer of the Corporation, nor
does any such Person receive income from any source other than the Corporation
which relates to the business of the Corporation or should properly accrue to
the Corporation. No employee, officer, stockholder or director of the
Corporation or member of his or her immediate family is indebted to the
Corporation, as the case may be, nor is the Corporation indebted (or committed
to make loans or extend or guarantee credit) to any of them, other than (i) for
payment of salary for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Corporation, and (iii) for other standard
employee benefits made generally available to all employees or executives
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Corporation).

 

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q) Equity Capitalization.

 

(1) Definitions:

 

(a) “Common Stock” means (x) the Corporation’s shares of common stock, no par
value per share, and (y) any capital stock into which such common stock shall
have been changed or any share capital resulting from a reclassification of such
common stock.

 

(2) Authorized and Outstanding Capital Stock. As of the Effective Date hereof,
the authorized capital stock of the Corporation consists of 1,000,000 shares of
Common Stock, of which, 100 are issued and outstanding.

 

(3) Valid Issuance; Available Shares; Affiliates. All of such outstanding shares
are duly authorized and have been validly issued and are fully paid and
non-assessable. Schedule 3(q)(iii) sets forth the number of shares of Common
Stock that are (A) reserved for issuance pursuant to warrants, options,
convertible securities or other similar instruments and (B) that are, as of the
date hereof, owned by Persons who are “affiliates” (as defined in Rule 405 of
the Securities Act and calculated based on the assumption that only officers,
directors and holders of at least 10% of the Corporation’s issued and
outstanding Common Stock are “affiliates” without conceding that any such
Persons are “affiliates” for purposes of federal securities laws) of the
Corporation. To the Corporation’s knowledge, no Person owns 10% or more of the
Corporation’s issued and outstanding shares of Common Stock (calculated based on
the assumption that all convertible securities, whether or not presently
exercisable or convertible, have been fully exercised or converted (as the case
may be) taking account of any limitations on exercise or conversion (including
“blockers”) contained therein without conceding that such identified Person is a
10% stockholder for purposes of federal securities laws).

 

(4) Existing Securities; Obligations. Except as disclosed on Schedule 3(q)(iii),
(A) none of the Corporation’s shares, interests or capital stock is subject to
preemptive rights or any other similar rights or Liens suffered or permitted by
the Corporation; (B) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or exchangeable for,
any shares, interests or capital stock of the Corporation, or contracts,
commitments, understandings or arrangements by which the Corporation is or may
become bound to issue additional shares, interests or capital stock of the
Corporation or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, or exercisable or exchangeable for, any shares, interests or
capital stock of the Corporation; (C) there are no agreements or arrangements
under which the Corporation is obligated to register the sale of any of their
securities under the Securities Act; (D) there are no outstanding securities or
instruments of the Corporation which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Corporation is or may become bound to redeem a
security of the Corporation; (E) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the securities; and (F) the Corporation does not have any stock
appreciation rights or “phantom stock” plans or agreements or any similar plan
or agreement.

 

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(5) Organizational Documents. The Seller(s) and the Corporation have furnished
to the Purchasers true, correct and complete copies of the Corporation’s
Articles of Incorporation, as amended and as in effect on the date hereof (the
“Articles of Incorporation”), and the Corporation’s bylaws, as amended and as in
effect on the date hereof (the “Bylaws”), and the terms of all convertible
securities and the material rights of the holders thereof in respect thereto.

 

r) Indebtedness and Other Contracts. The Corporation, (i) except as disclosed on
Schedule 3(r), does not have any outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Corporation or by which the Corporation is or may
become bound, (ii) is a party to any contract, agreement or instrument, the
violation of which, or default under which, by the other party(ies) to such
contract, agreement or instrument could reasonably be expected to result in a
Material Adverse Effect, (iii) has any financing statements securing obligations
in any amounts filed in connection with the Corporation; (iv) is in violation of
any term of, or in default under, any contract, agreement or instrument relating
to any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (v) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Corporation’s officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
“Indebtedness” of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (including, without limitation,
“capital leases” in accordance with GAAP) (other than trade payables entered
into in the ordinary course of business consistent with past practice), (C) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(E) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the Seller(s) or bank under such agreement in
the event of default are limited to repossession or sale of such property), (F)
all monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses (A)
through (F) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien upon or
in any property or assets (including accounts and contract rights) owned by any
Person, even though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness, and (H) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (A) through (G) above; and (y) “Contingent
Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any Indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto. For purposes of this Agreement,
“Person” means an individual, a limited liability Corporation, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization, any other
entity and any Governmental Entity or any department or agency thereof.

 

10

 

 

s) Litigation. There is no action, suit, arbitration, proceeding, inquiry or
investigation before or by any court, public board, other Governmental Entity,
self-regulatory organization or body pending or, to the knowledge of the
Corporation and Seller(s), threatened against or affecting the Seller(s), the
Corporation, the Securities or any of the Corporation’s officers or directors,
whether of a civil or criminal nature or otherwise, in their capacities as such,
except as set forth in Schedule 3(s). No director, officer or employee of the
Corporation has willfully violated 18 U.S.C. §1519 or engaged in spoliation in
reasonable anticipation of litigation. Without limitation of the foregoing,
there has not been, and to the knowledge of the Corporation and Seller(s), there
is not pending or contemplated, any investigation by the U.S Securities and
Exchange Commission (“SEC”) involving the Seller(s), Corporation, or any current
or former director or officer of the Corporation. The SEC has not issued any
stop order or other order suspending the effectiveness of any registration
statement filed by the Corporation under the Securities Act or the Exchange Act.
After reasonable inquiry of its employees, the Corporation is not aware of any
fact which might result in or form the basis for any such action, suit,
arbitration, investigation, inquiry or other proceeding. The Corporation is not
subject to any order, writ, judgment, injunction, decree, determination or award
of any Governmental Entity.

 

t) Insurance. The Corporation is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Corporation believes to be prudent and customary in the businesses in
which the Corporation is engaged. The Corporation has not been refused any
insurance coverage sought or applied for, and the Corporation has no any reason
to believe that it will be unable to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
have a Material Adverse Effect.

 

u) Employee Relations. The Corporation is not a party to any collective
bargaining agreement or employs any member of a union. The Corporation believes
that its relations with its employees is good. No executive officer or other key
employee of the Corporation has notified the Corporation that such officer
intends to leave the Corporation or otherwise terminate such officer’s
employment with the Corporation. No executive officer or other key employee of
the Corporation is, or is now expected to be, in violation of any material term
of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment of each such
executive officer or other key employee (as the case may be) does not subject
the Corporation to any liability with respect to any of the foregoing matters.
The Corporation is in compliance with all federal, state, local and foreign laws
and regulations respecting labor, employment and employment practices and
benefits, terms and conditions of employment and wages and hours, except where
failure to be in compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.

 

11

 

 

v) Title.

 

i) Real Property. The Corporation holds good title to all real property, leases
in real property, facilities or other interests in real property owned or held
by the Corporation (the “Real Property”) owned by the Corporation (as
applicable). The Real Property is free and clear of all Liens and is not subject
to any rights of way, building use restrictions, exceptions, variances,
reservations, or limitations of any nature except for (a) Liens for current
taxes not yet due and (b) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto. Any
Real Property held under lease by the Corporation is held by it under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
buildings by the Corporation.

 

ii) Fixtures and Equipment. The Corporation (as applicable) has good title to,
or a valid leasehold interest in, the tangible personal property, equipment,
improvements, fixtures, and other personal property and appurtenances that are
used by the Corporation in connection with the conduct of its business (the
“Fixtures and Equipment”). The Fixtures and Equipment are structurally sound,
are in good operating condition and repair, are adequate for the uses to which
they are being put, are not in need of maintenance or repairs except for
ordinary, routine maintenance and repairs and are sufficient for the conduct of
the Corporation’s business (as applicable) in the manner as conducted prior to
the Closing. The Corporation owns all of its Fixtures and Equipment free and
clear of all Liens except for (a) liens for current taxes not yet due and (b)
zoning laws and other land use restrictions that do not impair the present or
anticipated use of the property subject thereto.

 

w) Intellectual Property Rights. The Corporation owns or possess adequate rights
or licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, original works of authorship, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights and all
applications and registrations therefor (“Intellectual Property Rights”)
necessary to conduct its business as now conducted and presently proposed to be
conducted. Each of patents owned by the Corporation is listed on Schedule
3(w)(i). Except as set forth in Schedule 3(w)(ii), none of the Corporation’s
Intellectual Property Rights have expired or terminated or have been abandoned
or are expected to expire or terminate or are expected to be abandoned, within
three (3) years from the date of this Agreement. The Corporation does not have
any knowledge of any infringement by the Corporation of Intellectual Property
Rights of others. There is no claim, action or proceeding being made or brought,
or to the knowledge of the Corporation, being threatened, against the
Corporation regarding its Intellectual Property Rights. The Corporation is not
aware of any facts or circumstances which might give rise to any of the
foregoing infringements or claims, actions or proceedings. The Corporation has
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of its Intellectual Property Rights.

 

12

 

 

x) Environmental Laws.

 

i) The Corporation (A) is in compliance with any and all Environmental Laws (as
defined below), (B) has received all permits, licenses or other approvals
required of it under applicable Environmental Laws to conduct its businesses and
(C) is in compliance with all terms and conditions of any such permit, license
or approval where, in each of the foregoing clauses (A), (B) and (C), the
failure to so comply could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. The term “Environmental Laws” means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

 

ii) No Hazardous Materials:

 

(1) have been disposed of or otherwise released from any Real Property of the
Corporation in violation of any Environmental Laws; or

 

(2) are present on, over, beneath, in or upon any Real Property or any portion
thereof in quantities that would constitute a violation of any Environmental
Laws. No prior use by the Corporation of any Real Property has occurred that
violates any Environmental Laws, which violation would have a material adverse
effect on the business of the Corporation.

 

iii) The Corporation does not know of any other person who or entity which has
stored, treated, recycled, disposed of or otherwise located on any Real Property
any Hazardous Materials, including, without limitation, such substances as
asbestos and polychlorinated biphenyls.

 

iv) No Real Property is on any federal or state “Superfund” list or Liability
Information System (“CERCLIS”) list or any state environmental agency list of
sites under consideration for CERCLIS, nor subject to any environmental related
Liens.

 

13

 

 

aa) Tax Status. The Corporation (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has timely paid all
taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Corporation know of no
basis for any such claim. The Corporation is not operated in such a manner as to
qualify as a passive foreign investment Corporation, as defined in Section 1297
of the Internal Revenue Code of 1986, as amended (the “Code”). The net operating
loss carryforwards (“NOLs”) for United States federal income tax purposes of the
consolidated group of which the Corporation is the common parent, if any, shall
not be adversely effected by the transactions contemplated hereby. The
transactions contemplated hereby do not constitute an “ownership change” within
the meaning of Section 382 of the Code, thereby preserving the Corporation’s
ability to utilize such NOLs.

 

bb) Investment Corporation Status. The Corporation is not an “investment
Corporation,” an affiliate of an “investment Corporation,” a Corporation
controlled by an “investment Corporation” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment Corporation” as such
terms are defined in the Investment Corporation Act of 1940, as amended.

 

cc) U.S. Real Property Holding Corporation. The Corporation is not, or has never
been a U.S. Real Property Holding Corporation within the meaning of Section 897
of the Code, and the Corporation shall so certify upon any Purchaser’s request.

 

dd) Transfer Taxes. On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) which are required to be paid in connection
with the sale and transfer of the Securities to be sold to the Purchaser
hereunder will be, or will have been, fully paid or provided for by the
Corporation, and all laws imposing such taxes will be or will have been complied
with.

 

ee) Bank Holding Corporation Act. The Corporation is not subject to the Bank
Holding Corporation Act of 1956, as amended (the “BHCA”) and to regulation by
the Board of Governors of the Federal Reserve System (the “Federal Reserve”).
Neither the Corporation nor any of its affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of any class of
voting securities or twenty-five percent (25%) or more of the total equity of a
bank or any entity that is subject to the BHCA and to regulation by the Federal
Reserve. Neither the Corporation nor any of its affiliates exercises a
controlling influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal Reserve.

 

14

 

 

ff) Illegal or Unauthorized Payments; Political Contributions. Neither the
Seller(s), nor the Corporation, to the best of the Corporation’s knowledge
(after reasonable inquiry of its officers and directors), any of the officers,
directors, employees, agents or other representatives of the Corporation or any
other business entity or enterprise with which the Seller(s) or Corporation is
or has been affiliated or associated, has, directly or indirectly, made or
authorized any payment, contribution or gift of money, property, or services,
whether or not in contravention of applicable law, (i) as a kickback or bribe to
any Person or (ii) to any political organization, or the holder of or any
aspirant to any elective or appointive public office except for personal
political contributions not involving the direct or indirect use of funds of the
Corporation.

 

gg) Money Laundering. The Seller(s) and the Corporation are in compliance with,
and have not previously violated, the USA Patriot Act of 2001 and all other
applicable U.S. and non-U.S. anti-money laundering laws and regulations,
including, without limitation, the laws, regulations and Executive Orders and
sanctions programs administered by the U.S. Office of Foreign Assets Control,
including, but not limited, to (i) Executive Order 13224 of September 23, 2001
entitled, “Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001));
and (ii) any regulations contained in 31 CFR, Subtitle B, Chapter V.

 

hh) Management. Except as set forth in Schedule 3(hh) hereto, during the past
five (5) year period, no current or former officer or director or, to the
knowledge of the Corporation, no current ten percent (10%) or greater
stockholder of the Corporation has been the subject of:

 

i) a petition under bankruptcy laws or any other insolvency or moratorium law or
the appointment by a court of a receiver, fiscal agent or similar officer for
such Person, or any partnership in which such person was a general partner at or
within two (2) years before the filing of such petition or such appointment, or
any corporation or business association of which such person was an executive
officer at or within two (2) years before the time of the filing of such
petition or such appointment;

 

ii) a conviction in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations that do not relate to driving
while intoxicated or driving under the influence);

 

iii) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining any such person from, or otherwise limiting, the following activities:

 

(1) acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction
merchant, any other person regulated by the United States Commodity Futures
Trading Commission or an associated person of any of the foregoing, or as an
investment adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment Corporation, bank,
savings and loan association or insurance Corporation, or engaging in or
continuing any conduct or practice in connection with such activity;

 

(2) engaging in any particular type of business practice; or

 

15

 

 

(3) engaging in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of securities laws or
commodities laws;

 

iv) any order, judgment or decree, not subsequently reversed, suspended or
vacated, of any authority barring, suspending or otherwise limiting for more
than sixty (60) days the right of any such person to engage in any activity
described in the preceding sub-paragraph, or to be associated with persons
engaged in any such activity;

 

v) a finding by a court of competent jurisdiction in a civil action or by the
SEC or other authority to have violated any securities law, regulation or decree
and the judgment in such civil action or finding by the SEC or any other
authority has not been subsequently reversed, suspended or vacated; or

 

vi) a finding by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal commodities
law, and the judgment in such civil action or finding has not been subsequently
reversed, suspended or vacated.

 

ii) Reserved.

 

jj) No Disagreements with Accountants and Lawyers. There are no material
disagreements of any kind presently existing, or reasonably anticipated by the
Corporation to arise, between the Corporation and the accountants and lawyers
formerly or presently employed by the Corporation and the Corporation is current
with respect to any fees owed to its accountants and lawyers which could affect
the Corporation’s ability to perform any of its obligations under any of the
Transaction Documents.

 

ll) No Additional Agreements. The Corporation does not have any agreement or
understanding with any Purchasers with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.

 

mm) Public Utility Holding Act. The Corporation is not a “holding Corporation,”
or an “affiliate” of a “holding Corporation,” as such terms are defined in the
Public Utility Holding Act of 2005.

 

nn) Federal Power Act. The Corporation is not subject to regulation as a “public
utility” under the Federal Power Act, as amended.

 

oo) Registration Rights. No holder of Securities of the Corporation has rights
to the registration of any securities of the Corporation.

 

16

 

 

pp) Disclosure. The Seller(s) and Corporation understand and confirm that the
Purchaser will rely on the foregoing representations in effecting transactions
in Securities of the Corporation. All disclosure provided to the Purchaser
regarding the Seller(s) and the Corporation, their businesses and the
transactions contemplated hereby, including the schedules to this Agreement,
furnished by or on behalf of the Seller(s) and the Corporation is true and
correct and does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
All of the written information furnished after the date hereof by or on behalf
of the Seller(s) and the Corporation to the Purchaser pursuant to or in
connection with this Agreement and the other Transaction Documents, taken as a
whole, will be true and correct in all material respects as of the date on which
such information is so provided and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. All financial projections and forecasts that have been
prepared by or on behalf of the Seller(s) and the Corporation and made available
to the Purchaser have been prepared in good faith based upon reasonable
assumptions and represented, at the time each such financial projection or
forecast was delivered to each Purchaser, the Corporation’s best estimate of
future financial performance (it being recognized that such financial
projections or forecasts are not to be viewed as facts and that the actual
results during the period or periods covered by any such financial projections
or forecasts may differ from the projected or forecasted results). The Seller(s)
and Corporation acknowledge and agree that the Purchaser does not make or has
not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.

 

qq) Private Placement. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3(c), no registration under the Securities
Act is required for the offer and sale of the Securities.

 

rr) No General Solicitation. Neither the Seller(s), the Corporation nor any
person acting on behalf of the Seller(s) or Corporation has offered or sold any
of the Securities by any form of general solicitation or general advertising.

 

ss) Material Contracts; Customers; Suppliers.

 

i) Schedule 3(ss)(i) attached hereto lists and briefly describes all Material
Contracts as of the Closing Date. As used herein, the term “Material Contract”
shall mean a contract, agreement, instrument, arrangement, understanding, lease,
or rental agreement, whether written or verbal, to which the Corporation is a
party, which (i) provides for aggregate payments by or to the Corporation of
U.S. $25,000.00 or more, or (ii) by its terms extends for a period ending (or is
not otherwise terminable for a period of) more than one year after the Closing
Date. To the best knowledge of the Seller(s) and Corporation, each such contract
is enforceable pursuant to its terms and neither the Corporation nor any of the
counter-parties to any such contract is in material breach or violation of, or
in default under, any provision of such Material Contracts. Except as set forth
on Schedule 3(ss)(i) with respect to any specific Material Contract, the Closing
of the transactions contemplated by this Agreement do not require prior notice
to or consent from the counterparty to any Material Contract.

 

17

 

 

ii) Schedule 3(ss)(ii) sets forth a list of customers of the Corporation, who
have generated at least U.S. $25,000.00 or more in sales for the Corporation
during each of the fiscal years ending 2015 and 2016. Unless otherwise listed
under Material Contracts in Schedule 3(ss)(i), these customers are not subject
to any contract with the Corporation that currently extends more than one (1)
year after the Closing Date.

 

iii) Schedule 3(ss)(iii) sets forth a list of vendors or suppliers to the
Corporation, based on the value of purchases in excess of U.S. $25,000.00 or
more made from such suppliers during the 2016 and 2017 fiscal years. Unless
otherwise listed under Material Contracts in Schedule 3(ss)(i), these vendors
and suppliers are not subject to any contract with the Corporation that
currently extends more than one (1) year after the Closing Date.

 

tt) Employee Benefits. Schedule 3(tt) lists each non-qualified deferred
compensation plan, qualified defined contribution retirement plan, qualified
defined benefit retirement plan or other material fringe benefit plan or program
that the Corporation maintains or to which the Corporation contributes with
regard to any individual employed with the Corporation (“Employee Benefit
Plans”). With respect to any Employee Benefit Plan, within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”),
which is subject to ERISA and which is sponsored, maintained or contributed to,
or has been sponsored, maintained or contributed to, since December 31, 2013, by
the Corporation or any person deemed to be affiliated or aggregated with the
Corporation under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986 (the “Code”) or Section 4001(a)(14) of ERISA: (a) no unsatisfied
withdrawal liability or obligation, within the meaning of Section 4201 of ERISA,
has been incurred, (b) no unsatisfied liability or obligation to the Pension
Benefit Guaranty Corporation has been incurred by the Corporation or any ERISA
Affiliate, (c) no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (d) all contributions (including installments) to such plan
required by Section 302 of ERISA and Section 412 of the Code have been timely
made. With respect to any Employee Benefit Plan, such plan has been funded and
maintained in compliance with all laws applicable thereto and the requirements
of such plan’s governing documents.

 

uu) Receivables. The Corporation’s receivables, including all contracts in
transit, manufacturer’s warranty receivables, notes receivable, accounts
receivable, trade account receivables, and insurance proceeds receivable
(“Receivables”) relate to the business of the Corporation, represent bona fide
transactions, arose in the Corporation’s ordinary course of business and are
properly reflected on the Corporation’s books and records. No customer or
supplier of the Corporation is entitled to any payment terms other than terms in
the Corporation’s ordinary course of business. Except as set forth on Schedule
3(uu), all of the Receivables are good and collectible receivables, are current
and be collected in accordance with past practice and the terms of such
Receivables (and in any event within six (6) months following the Closing Date)
without any right to setoff or counterclaim.

 

18

 

 

4) REPRESENTATIONS AND WARRANTIES OF SELLER(S).

 

a) Ownership of Securities and Capacity to Sell. Each Seller identified on
Schedule 4(a) beneficially and of record the amount and type of Securities set
forth next to each respective Seller’s name, and each Seller has the full legal
right, power, and authority to sell, convey, assign, and transfer such Seller’s
respective Securities to the Purchaser pursuant to this Agreement free and clear
of any Lien, claim, charge, encumbrance, or restriction whatsoever, so that upon
delivery of such Securities to the Purchaser, good, and valid title to such
Securities will vest in Purchaser free and clear of any lien, claim, charge,
encumbrance, or restriction whatsoever.

 

b) Authorization. Each Seller that is a natural person has full right, capacity
and authority to enter into this Agreement and the Transaction Documents
(defined below) and to sell, assign, transfer and deliver the Securities to be
sold by such Seller hereunder and to perform its other obligations under this
Agreement and each Transaction Document to which Seller is a party. Each Seller
that is a corporation or other legal person, has full corporate or partnership
right, power and authority to enter into this Agreement and the Transaction
Documents and to consummate the transactions contemplated hereby, and all
corporate resolutions required to authorize such Sellers to consummate the
transactions contemplated hereby have been now or will, as of the Closing Date,
have been adopted. Each Seller that is the trustee of a trust or executor of an
estate has been duly designated as trustee under the trust instruments or as
fiduciary or power of attorney for such estate, and is properly authorized under
such documents or instruments to enter into this Agreement and the Transaction
Documents and to consummate the transactions contemplated hereby on behalf of
each such Seller. Upon proper execution and delivery by such Seller, this
Agreement constitutes the valid and binding obligation of the Sellers,
enforceable in accordance with its terms, except as the enforceability hereof
may be subject to or limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors’ rights generally and
to general principles of equity being applied at the discretion of the courts.

 

c) Consents and Approvals. Neither the execution and delivery by any Seller of
this Agreement, nor the consummation by any Seller of the transactions
contemplated hereby, nor compliance by any Seller with any of the provisions
hereof will: (i) conflict with or result in a breach of any provision of the
Articles or Certificate of Incorporation or Bylaws or other governing document
of such Seller; (ii) violate any order, writ, injunction, decree, judgment,
ruling, law, rule or regulation of any court or governmental authority,
applicable to such Seller, or any of their respective properties or assets;
(iii) require any consent, approval, or authorization of, or notice to, or
declaration, filing, or registration with, any governmental or regulatory
authority; or (iv) violate or conflict with, or result in a breach of, or
constitute a default under, or require consents from any other party to, or
result in a right of termination or cancellation of, or result in acceleration
of any right or creation of any lien under, any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, lease, contract, agreement, or other
instrument or commitment or obligation relating to which any Seller is or was a
party or by which they or any of their respective properties or assets may be or
was bound or affected. The Securities constitute all of the Sellers’ equity
ownership interests in the Corporation.

 

19

 

 

5) PRE-CLOSING COVENANTS.

 

a) At all times during the period between the execution of this Agreement and
the Closing, each Seller shall or shall cause the Corporation and the
Corporation shall do (or refrain from doing) the following:

 

i) continue to operate the Corporation’s business in the same manner as the
business was operated prior to the date of this Agreement, and the Sellers who
are employees of the Corporation shall devote One Hundred Percent (100%) of
their working time and attention to the conduct of the business;

 

ii) not start any new business, or accept or undertake any employment or provide
any services related to any business of any other person or entity (other than
in the Corporation’s ordinary course of business);

 

iii) not remove, sell or otherwise dispose of any assets, property or equipment
of any nature of the Corporation used in the business, except for the sale of
its products, inventory and equipment and the payment of payables and other
obligations in the ordinary course of business consistent with past custom and
practice;

 

iv) not allow any unlawful activity to be conducted on or about the premises
upon which the business is conducted or at any other place where business
activity is being conducted by the Corporation;

 

v) maintain its general liability and property insurance carried as of the date
hereof;

 

vi) not change, alter or revise its employee manual (if any) for the employees
of the Corporation;

 

vii) not purchase any equipment out of the ordinary course of business
consistent with past custom and practice;

 

viii) not grant any options or warrants in Common Stock of the Corporation, nor
issue any additional Common Stock or Preferred Stock of the Corporation;

 

ix) not make any distributions of cash, property or other dividends to the
Sellers;

 

20

 

 

x) Pay off or cancel any inter-company loans or obligations owed by the Company
to the Seller(s) or any affiliate of the Seller(s) or any affiliate of the
Company;

 

xi) pay the attorneys and accountants or other consultants fees for work in
connection with this Agreement and the related transactions described herein
which are performed prior to the execution of this Agreement, up to a maximum of
$3,000 in legal fees (work following the Closing of this Agreement shall be the
responsibility of the Company; and,

 

xii) continue to make payments to third parties in the normal course of business
consistent with past custom and practice, including, without limitation, to
suppliers, on leases, and the payment of employee payroll type taxes and
estimated or final payments with respect to federal and state income or
franchise and sales taxes, including establishing an escrow for taxes due with
respect to periods prior to the Closing.

 

b) Termination of Incentive Equity Plans. During the period between the
execution of this Agreement and the Closing, the Seller(s) and the Corporation
shall take all necessary action to terminate all incentive equity plans of the
Corporation, such termination to be effective concurrently with the Closing.

 

c) Continuation of 401(k) Plan and other Employee Benefit Plans. The Corporation
shall be entitled to continue its existing 401(k) plan and other Employee
Benefit Plans until such time as similar plans are established by the Purchaser
which cover the Corporation’s employees.

 

d) None of the covenants to take actions or not take actions set forth in this
Section 5 shall survive Closing.

 

6) COVENANTS.

 

a) Best Efforts. Each Purchaser shall use its best efforts to timely satisfy
each of the covenants hereunder and conditions to be satisfied by it as provided
in Section 7 of this Agreement. The Corporation shall use its best efforts to
timely satisfy each of the Pre-Closing Covenants, the covenants hereunder and
conditions to be satisfied by it as provided in Section 8 of this Agreement.

 

b) Blue Sky. The Seller(s) shall, on or before the Closing Date, take such
action as the Seller(s) shall reasonably determine is necessary in order to
obtain an exemption for, or to, qualify the Securities for sale to the Purchaser
at the Closing pursuant to this Agreement under applicable securities or “Blue
Sky” laws of the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action so taken to
the Purchasers on or prior to the Closing Date. Without limiting any other
obligation of the Corporation under this Agreement, the Corporation shall timely
make all filings and reports relating to the offer and sale of the Securities
required under all applicable securities laws (including, without limitation,
all applicable federal securities laws and all applicable “Blue Sky” laws), and
the Seller(s) shall comply with all applicable foreign, federal, state and local
laws, statutes, rules, regulations and the like relating to the offering and
sale of the Securities to the Purchaser.

 

21

 

 

c) Passive Foreign Investment Corporation. The Corporation shall conduct its
business in such a manner as will ensure that the Corporation will not be deemed
to constitute a Passive Foreign Investment Corporation within the meaning of
Section 1297 of the Code.

 

7) CONDITIONS TO THE SELLER(S) OBLIGATION TO SELL.

 

a) The obligation of the Seller(s) hereunder to sell the Securities to the
Purchaser at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for the Seller(s)’ sole benefit and may be waived by the
Seller(s) at any time in its sole discretion by providing each Purchaser with
prior written notice thereof:

 

i) Such Purchaser shall have executed each of the other Transaction Documents to
which it is a party and delivered the same to the Seller(s) and the Corporation,
as applicable.

 

ii) Such Purchaser shall have delivered to the Seller(s) the Purchase Price for
the Securities being purchased by such Purchaser at the Closing by wire transfer
of immediately available funds.

 

iii) The representations and warranties of such Purchaser shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though originally made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specific date, and except for representations and warranties that are
qualified by materiality, in which case such representations and warranties
shall be true and correct in all respects), and such Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by such Purchaser at or prior to the Closing Date.

 

8) CONDITIONS TO PURCHASER’S OBLIGATION TO PURCHASE.

 

a) The obligation of the Purchaser hereunder to purchase the Securities at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Purchaser’s sole benefit and may be waived by the Purchaser at any time in its
sole discretion by providing the Seller(s) or the Corporation (as applicable)
with prior written notice thereof:

 

i) The Seller(s) and Corporation shall have duly executed and delivered to such
Purchaser each of the Transaction Documents to which it is a party and the
Seller(s) shall have duly executed and delivered to such Purchaser the aggregate
number of Securities set forth on the Purchase Schedule, being purchased by the
Purchaser at the Closing pursuant to this Agreement.

 

22

 

 

ii) Such Purchaser shall have received the opinion of Corporation’s Attorney,
the Corporation’s counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to such Purchaser.

 

iii) The Corporation shall have delivered to such Purchaser a certificate
evidencing the formation and good standing of the Corporation in such entity’s
jurisdiction of formation issued by the Secretary of State (or comparable
office) of such jurisdiction of formation as of a date within ten (10) days of
the Closing Date.

 

iv) The Corporation shall have delivered to such Purchaser a certificate
evidencing the Corporation’s qualification as a foreign corporation and good
standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Corporation conducts business and is required to so
qualify, as of a date within ten (10) days of the Closing Date.

 

v) The Corporation shall have delivered to such Purchaser a certified copy of
its Articles of Incorporation (including any Certificate of Designations) as
certified by the Texas Secretary of State within ten (10) days of the Closing
Date.

 

vi) The Corporation shall have delivered to such Purchaser a certificate, in
form and substance reasonably acceptable to such Purchaser, executed by the
Secretary of the Corporation and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Corporation’s board
of directors in form and substance reasonably acceptable to such Purchaser, (ii)
the Articles of Incorporation of the Corporation and (iii) the Bylaws of the
Corporation, each as in effect at the Closing.

 

vii) Each and every representation and warranty of the Seller(s) and the
Corporation shall be true and correct as of the date when made and true and
correct in all material respects as of the Closing Date as though originally
made at that time (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such specific date, and
except for representations and warranties that are qualified by materiality, in
which case such representations and warranties shall be true and correct in all
respects) and the Seller(s) and the Corporation shall have performed, satisfied
and complied in all respects with the covenants, agreements and conditions
required to be performed, satisfied or complied with by the Seller(s) and
Corporation at or prior to the Closing Date. Such Purchaser shall have received
a certificate, duly executed by the Chief Executive Officer of the Corporation,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Purchaser in form and substance
reasonably acceptable to such Purchaser.

 

23

 

 

viii) The Corporation shall have delivered to such Purchaser a letter from the
Corporation’s transfer agent certifying the number of shares of Common Stock
outstanding on the Closing Date immediately prior to the Closing.

 

ix) The Seller(s) shall have obtained all governmental, regulatory or
third-party consents and approvals, if any, necessary for the sale of the
Securities, including without limitation, if any.

 

x) No statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any court or
Governmental Entity of competent jurisdiction that prohibits the consummation of
any of the transactions contemplated by the Transaction Documents.

 

xi) Since the date of execution of this Agreement, no event or series of events
shall have occurred that reasonably would have or result in a Material Adverse
Effect.

 

xii) Such Purchaser shall have received a letter from the Seller(s), duly
executed by the Seller(s), setting forth the wire amounts of each Purchaser and
the wire transfer instructions of the Seller(s) (the “Flow of Funds Letter”).

 

xiii) Purchaser shall have obtained cash proceeds from a financing transaction
sufficient to pay the Purchase Price to Seller(s).

 

xiv) The Corporation shall have delivered to such Purchaser such other
documents, instruments or certificates relating to the transactions contemplated
by this Agreement as such Purchaser or its counsel may reasonably request.

 

9) RESERVED.

 

10) TERMINATION.

 

a) This Agreement may be terminated at any time prior to the Closing:

 

i) By mutual consent of Purchaser and Seller(s); or

 

ii) By either the Seller(s), or Purchaser if, without fault of the terminating
party, the Closing shall not have occurred by the date for such Closing, which
date may be extended only by mutual agreement of Purchaser and Seller(s).

 

iii) By Seller(s) if Purchaser is unable to obtain the required financing or
before Closing.

 

24

 

 

iv) The date on which this Agreement is terminated pursuant to this Section is
herein referred to as the “Termination Date.”

 

b) Effect of Termination. Except for the obligations contained in Section 10(c)
and Section 10(d) below, all obligations of the parties hereto under this
Agreement shall terminate as of the Termination Date, and there shall be no
liability, except liability for any breach of this Agreement prior to such
termination, of any party to another party.

 

c) Expenses on Termination. Each party hereto shall bear its own costs and
expenses incurred by it in connection with the termination of this Agreement in
the event this Agreement is terminated.

 

d) Confidentiality. Upon termination of this Agreement without Closing, the
Purchaser, Seller(s) and Corporation will, and will cause each of their
respective affiliates, and their directors, officers, employees, agents,
representatives and similarly situated persons to: (a) treat and hold as
confidential, and not use or disclose, all of the information concerning the
Seller(s), the Corporation and the business, the negotiation or existence and
terms of this Agreement (“Confidential Information”), and (b) deliver promptly
to the Corporation or destroy, at the option and request of Seller(s), all
tangible embodiments (and all copies) of the Confidential Information which are
in such Purchaser’s or Purchaser affiliated persons’ possession. If the
Purchaser is ever requested or required (by oral question or request for
information or documents) to disclose any Confidential Information, such
Purchaser will notify the Seller(s) and the Corporation promptly of the request
or requirement so that the Seller(s) or the Corporation may seek an appropriate
protective order from a court with competent jurisdiction or waive compliance
with this 10(d).

 

11) MISCELLANEOUS.

 

a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Delaware, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Delaware. The Corporation
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in Delaware, for the adjudication of any dispute
hereunder or in connection herewith or under any of the other Transaction
Documents or with any transaction contemplated hereby or thereby, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law. Nothing contained herein
shall be deemed or operate to preclude any Purchaser from bringing suit or
taking other legal action against the Corporation in any other jurisdiction to
collect on the Corporation’s obligations to such Purchaser or to enforce a
judgment or other court ruling in favor of such Purchaser. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER
TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY
OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

 

25

 

 

b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.

 

c) Headings; Gender. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Unless the context clearly indicates otherwise, each pronoun herein
shall be deemed to include the masculine, feminine, neuter, singular and plural
forms thereof. The terms “including,” “includes,” “include” and words of like
import shall be construed broadly as if followed by the words “without
limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import
refer to this entire Agreement instead of just the provision in which they are
found.

 

d) Severability. If any provision of this Agreement is prohibited by law or
otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

26

 

 

e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents
and the schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Purchaser, the Seller(s), the Corporation, their
affiliates and Persons acting on their behalf, including, without limitation,
any transactions by any Purchaser with respect to the Securities, and the other
matters contained herein and therein, and this Agreement, the other Transaction
Documents, the schedules and exhibits attached hereto and thereto and the
instruments referenced herein and therein contain the entire understanding of
the parties solely with respect to the matters covered herein and therein.
Except as specifically set forth herein or therein, neither the Seller(s), the
Corporation nor any Purchaser makes any representation, warranty, covenant or
undertaking with respect to such matters. For clarification purposes, the
Recitals are part of this Agreement. No provision of this Agreement may be
amended or waived other than by an instrument in writing signed by the Seller(s)
or Corporation and the Purchaser, and any amendment or waiver to any provision
of this Agreement made in conformity with the provisions of this Section 11(e)
shall be binding on the Purchaser and holders of Securities, as applicable. The
Corporation has not, directly or indirectly, made any agreements with the
Purchaser relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
As a material inducement for the Purchaser to enter into this Agreement, the
Seller(s) and the Corporation expressly acknowledges and agrees that (x) no due
diligence or other investigation or inquiry conducted by the Purchaser, any of
its advisors or any of its representatives shall affect such Purchaser’s right
to rely on, or shall modify or qualify in any manner or be an exception to any
of, the Seller(s)’ and Corporation’s representations and warranties contained in
this Agreement or any other Transaction Document.

 

f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party) or electronic mail; or (iii) one (1) Business Day after deposit
with an overnight courier service with next day delivery specified, in each
case, properly addressed to the party to receive the same. The addresses,
facsimile numbers and e-mail addresses for such communications shall be:

 

If to the Corporation:

 

UNITED WELDING SPECIALITIES OF LONGVIEW, INC.

103 E. Niblick

Longview, Texas 75604

Telephone: (903) 593-7343

Attention: Ronald Jered Ruyle, President

E-Mail: jered@tylerweldersgroup.com

 

27

 

 

If to the Seller(s):

 

TYLER WELDER’S SUPPLY, INC.

3539 U.S. Hwy 271

Tyler, Texas 75708

(903) 360-8977

Attention: Ronald Jered Ruyle, President

E-Mail: jered@tylerweldersgroup.com

 

If to the Purchaser:

 

MagneGas Applied Technology Solutions, Inc.

11885 44th Street North

Clearwater, FL 33762

Attention: General Counsel

E-mail: tylerwilson@magnegas.com

 

or to such other address, e-mail address and/or facsimile number and/or to the
attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine or e-mail containing
the time, date, recipient facsimile number and, with respect to each facsimile
transmission, an image of the first page of such transmission or (C) provided by
an overnight courier service shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iii) above, respectively.

 

g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. The parties
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other parties.

 

h) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, other than the Indemnitees referred to in Section 11(k).

 

i) Survival. The representations, warranties, agreements and covenants shall
survive the Closing. Each Purchaser shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

 

j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

 

28

 

 

k) Indemnification.

 

i) In consideration of the Purchaser’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Corporation’s other obligations under the Transaction Documents, the Seller(s)
and Corporation shall defend, protect, indemnify and hold harmless the Purchaser
and each holder of any Securities and all of their stockholders, partners,
members, officers, directors, employees and direct or indirect investors and any
of the foregoing Persons’ agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the “Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys’ fees and disbursements
(the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Seller(s) and Corporation in any of the
Transaction Documents, (ii) any breach of any covenant, agreement or obligation
of the Seller(s) or Corporation contained in any of the Transaction Documents or
(iii) any cause of action, suit, proceeding or claim brought or made against
such Indemnitee by a third party, including for these purposes a derivative
action brought on behalf of the Seller(s) or Corporation or which otherwise
involves such Indemnitee that arises out of or results from (A) the execution,
delivery, performance or enforcement of any of the Transaction Documents, or (B)
the status of such Purchaser or holder of the Securities either as an investor
in the Corporation pursuant to this Agreement. To the extent that the foregoing
undertaking by the Corporation may be unenforceable for any reason, the
Corporation shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.

 

29

 

 

ii) Promptly after receipt by an Indemnitee under this Section 11(k) of notice
of the commencement of any action or proceeding (including any governmental
action or proceeding) involving an Indemnified Liability, such Indemnitee shall,
if a claim in respect thereof is to be made against the Seller(s) or Corporation
under this Section 11(k), deliver to the Seller(s) and Corporation a written
notice of the commencement thereof, and the Seller(s) and the Corporation shall
have the right to participate in, and, to the extent the Seller(s) or the
Corporation so desires, to assume control of the defense thereof with counsel
mutually satisfactory to the Seller(s) or the Corporation and the Indemnitee;
provided, however, that an Indemnitee shall have the right to retain its own
counsel with the fees and expenses of such counsel to be paid by the Seller(s)
or the Corporation if: (A) the Seller(s) or the Corporation has agreed in
writing to pay such fees and expenses; (B) the Seller(s) or Corporation shall
have failed promptly to assume the defense of such Indemnified Liability and to
employ counsel reasonably satisfactory to such Indemnitee in any such
Indemnified Liability; or (C) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and the
Corporation or the Seller(s), and such Indemnitee shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnitee and the Corporation or the Seller(s) (in which
case, if such Indemnitee notifies the Corporation or Seller(s) in writing that
it elects to employ separate counsel at the expense of the Seller(s) or the
Corporation, then the Seller(s) or Corporation shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
Seller(s) or the Corporation), provided further, that in the case of clause (C)
above the Seller(s) or Corporation shall not be responsible for the reasonable
fees and expenses of more than one (1) separate legal counsel for the
Indemnitees. The Indemnitee shall reasonably cooperate with the Seller(s) or the
Corporation in connection with any negotiation or defense of any such action or
Indemnified Liability by the Seller(s) or the Corporation and shall furnish to
the Seller(s) or the Corporation all information reasonably available to the
Indemnitee which relates to such action or Indemnified Liability. The Seller(s)
or the Corporation shall keep the Indemnitee reasonably apprised at all times as
to the status of the defense or any settlement negotiations with respect
thereto. The Seller(s) or the Corporation shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent,
provided, however, that the Seller(s) or the Corporation shall not unreasonably
withhold, delay or condition its consent. The Seller(s) or Corporation shall
not, without the prior written consent of the Indemnitee, consent to entry of
any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnitee of a release from all liability in respect to such
Indemnified Liability or litigation, and such settlement shall not include any
admission as to fault on the part of the Indemnitee. Following indemnification
as provided for hereunder, the Seller(s) or the Corporation shall be subrogated
to all rights of the Indemnitee with respect to all third parties, firms or
corporations relating to the matter for which indemnification has been made. The
failure to deliver written notice to the Seller(s) or Corporation within a
reasonable time of the commencement of any such action shall not relieve the
Seller(s) or Corporation of any liability to the Indemnitee under this Section
11(k), except to the extent that the Seller(s) or Corporation is materially and
adversely prejudiced in its ability to defend such action.

 

iii) The indemnification required by this Section 11(k) shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, within ten (10) days after bills are received or Indemnified
Liabilities are incurred.

 

iv) The indemnity agreement contained herein shall be in addition to (A) any
cause of action or similar right of the Indemnitee against the Seller(s), the
Corporation or others, and (B) any liabilities the Seller(s) or the Corporation
may be subject to pursuant to the law.

 

l) Construction. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty.

 

30

 

 

m) Remedies. Each Purchaser and in the event of assignment by Purchaser of its
rights and obligations hereunder, each holder of Securities, shall have all
rights and remedies set forth in the Transaction Documents and all rights and
remedies which such holders have been granted at any time under any other
agreement or contract and all of the rights which such holders have under any
law. Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or other
security), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. Furthermore, the
Seller(s) and the Corporation recognize that in the event that it fails to
perform, observe, or discharge any or all of its obligations under the
Transaction Documents, any remedy at law would inadequate relief to the
Purchasers. The Seller(s) and the Corporation therefore agree that the
Purchasers shall be entitled to specific performance and/or temporary,
preliminary and permanent injunctive or other equitable relief from any court of
competent jurisdiction in any such case without the necessity of proving actual
damages and without posting a bond or other security. The remedies provided in
this Agreement and the other Transaction Documents shall be cumulative and in
addition to all other remedies available under this Agreement and the other
Transaction Documents, at law or in equity (including a decree of specific
performance and/or other injunctive relief).

 

n) Withdrawal Right. Notwithstanding anything to the contrary contained in (and
without limiting any similar provisions of) the Transaction Documents, whenever
any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Seller(s) or Corporation does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Seller(s) or the Corporation, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

 

o) Payment Set Aside; Currency. To the extent that the Seller(s) or the
Corporation makes a payment or payments to the Purchaser hereunder or pursuant
to any of the other Transaction Documents or the Purchaser enforce or exercise
their rights hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Seller(s) or the Corporation, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, foreign, state
or federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred. Unless
otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“U.S.
Dollars”), and all amounts owing under this Agreement and all other Transaction
Documents shall be paid in U.S. Dollars.

 

p) Fees and Expenses. Except as otherwise expressly provided in this Agreement,
each party will bear its own costs and expenses incurred in connection with the
preparation, execution and performance of this Agreement and the transactions
contemplated hereunder, including all fees and expenses of agents,
representatives, financial advisors, legal counsel and accountants.

 

31

 

 

q) Confidentiality. The Seller(s) and the Corporation will, and will cause each
of its respective affiliates, and its and their directors, officers, employees,
agents, representatives and similarly situated persons to: (a) treat and hold as
confidential, and not use or disclose, all of the information concerning the
negotiation or existence and terms of this Agreement and the business affairs of
the Purchaser (“Confidential Information”), except for disclosures to their
respective professional advisors, and (b) deliver promptly to the Seller(s) or
the Corporation or the Purchasers, as appropriate or destroy, at the option and
request of a Purchaser, all tangible embodiments (and all copies) of the
Confidential Information which are in the Seller(s)’, Corporation’s, or its
affiliates possession. If the Seller(s) or the Corporation or its affiliates is
ever requested or required (by oral question or request for information or
documents) to disclose any Confidential Information, the Corporation will notify
the Purchaser promptly of the request or requirement so that the Purchaser may
seek an appropriate protective order from a court with competent jurisdiction or
waive compliance with this Section ‎11(q).

 

[Signature Pages Follow]

 

[The Remainder of This Page is Intentionally Blank]

 

32

 

 

IN WITNESS WHEREOF, each Seller(s), Purchaser and the Corporation have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

  CORPORATION:         TYLER WELDERS SUPPLY, INC.         By: /s/ Ronald
Ruyle                     Name:  Ronald Jered Ruyle   Title: President

 

33

 

 

IN WITNESS WHEREOF, each Seller(s), Purchaser and the Corporation have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

  SELLER:       TYLER WELDERS SUPPLY, INC.       /s/ Ronald Ruyle   RONALD JERED
RUYLE, PRESIDENT

 

34

 

 

IN WITNESS WHEREOF, each Seller(s), Purchaser and the Corporation have caused
their respective signature page to this Agreement to be duly executed as of the
date first written above.

 

 

  PURCHASER:        

MAGNEGAS APPLIED TECHNOLOGY SOLUTIONS, INC.

        By: /s/ Ermanno Santilli   Name:  Ermanno Santilli   Title: Chief
Executive Officer

 

35

 

 

PURCHASER SCHEDULE

 

(1)  (2)   (3)   (4)   (5)  (6) Purchaser  Seller   

Aggregate

Number of Securities

    

Date of Purchase

    

Purchase Price

  

Legal

Representative’s

Contact Information

MagneGas Applied Technology Solutions, Inc.  Tyler Welder’s Supply, Inc.   100  
     $750,000  

MagneGas Corporation
11885 44th Street N.
Clearwater, FL 33762
Telephone: (509) 953-3059
E-mail:

tylerwilson@magnegas.com
Attention: Tyler B. Wilson, Esq.

TOTAL      100        $750,000    

 

36

 

 

Schedule 3(p)

“Transactions with Affiliates”

 

37

 

 

Schedule 3(q)(iii)

“Valid Issuance; Available Shares; Affiliates”

 

38

 

 

Schedule 3(r)

“Other Indebtedness and Contracts”

 

39

 

 

Schedule 3(s)

“Litigation”

 

40

 

 

Schedule 3(w)(i)

“Intellectual Property”

 

41

 

 

Schedule 3(w)(ii)

“Expired Intellectual Property Rights”

 

42

 

 

Schedule 3(hh)

“Bad-Actor Disclosures”

 

43

 

 

Schedule 3(ss)(i)

“Material Contracts”

 

44

 

 

Schedule 3(ss)(ii)

“Customers”

 

45

 

 

Schedule 3(ss)(iii)

“Suppliers”

 

46

 

 

Schedule 3(tt)

“Employee Benefits”

 

47

 

 

Schedule 3(uu)

“Receivables”

 

48

 

 

Schedule 4(a)

“Selling Securities Holders”

 

49