Exhibit No. 10.1

 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

EFACTOR GROUP CORP.,
as Buyer

 

EFACTOR MERGER SUB INC.,
as Merger Sub

 

ROCKETHUB INC.,
as the Company

 

THE STOCKHOLDERS OF THE COMPANY NAMED HEREIN,
as Sellers

 

and

 

ERIC SCHNEIDER,
as Seller Representative

 

Dated as of April 15, 2015

 

 

 

 

 

TABLE OF CONTENTS:

  

I. THE MERGER 1     1.1. The Merger 1 1.2. Effective Time 1 1.3. Effect of the
Merger 2 1.4. Merger Consideration 2 1.5. Effect of Merger on Company Securities
2 1.6. Governing Documents and Officers and Directors 3 1.7. Seller Consent 3
1.8. Section 368 Reorganization 3 1.9. Further Actions 3     II. CLOSING 3    
2.1. Closing 3 2.2. Closing Deliveries by Sellers 4 2.3. Closing Deliveries by
Buyer 5     III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 5     3.1.
Organization and Qualification 5 3.2. Authorization; Corporate Documentation 6
3.3. Capitalization 6 3.4. Non-Contravention 7 3.5. Financial Statements 7 3.6.
Absence of Liabilities 7 3.7. Absence of Certain Changes 7 3.8. Title to and
Sufficiency of Assets 7 3.9. Properties 7 3.10. Intellectual Property 8 3.11.
Compliance with Laws 9 3.12. Permits 10 3.13. Litigation 10 3.14. Contracts 10
3.15. Tax Matters 11 3.16. Employees and Labor Matters 12 3.17. Insurance 13
3.18. Transactions with Related Persons 13 3.19. Bank Accounts 14 3.20. No
Brokers 14 3.21. No Other Representations and Warranties 14     IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS 14     4.1. Organization and
Authorization 14 4.2. Title to Company Shares 15 4.3. Non-Contravention 15 4.4.
Litigation 15 4.5. Investment Representations 15 4.6. No Brokers 16 4.7. No
Other Representations and Warranties 16     V. REPRESENTATIONS AND WARRANTIES OF
THE BUYER PARTIES 16     5.1. Organization and Qualification 16 5.2.
Authorization 16 5.3. Non-Contravention 17 5.4. The Buyer Shares 17

 

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5.5. SEC Filings; Financial Statements 17 5.6. Compliance with Laws 18 5.7. No
Brokers 18 5.8. Litigation 18 5.9. Tax Matters 18 5.10. Independent
Investigation 20 5.11. No Other Representations and Warranties 20     VI. OTHER
AGREEMENTS 20     6.1. Further Assurances 20 6.2. Confidentiality 20 6.3.
Publicity 21 6.4. Litigation Support 21 6.5. Agreement Regarding Intellectual
Property 21 6.6. Release and Covenant Not to Sue 22 6.7. Lock-Up 22 6.8. Audited
Financial Statements 23 6.9. Termination of Certain Agreements 23 6.10. Certain
Tax Matters 23     VII. INDEMNIFICATION 25     7.1. Survival 25 7.2.
Indemnification by Sellers 25 7.3. Indemnification by Buyer 25 7.4.
Indemnification Procedures 26 7.5. Limitations on Indemnification 27 7.6.
General Indemnification Provisions 27 7.7. Indemnification Payment Method 28
7.8. Exclusive Remedy 29     ViII. GENERAL PROVISIONS 29     8.1. Expenses 29
8.2. Notices 29 8.3. Sellers Not Authorized to Act on Behalf of a Buyer Party 30
8.4. Severability 30 8.5. Assignment 30 8.6. No Third-Party Beneficiaries 30
8.7. Amendment; Waiver 31 8.8. Entire Agreement 31 8.9. Remedies 31 8.10.
Dispute Resolution 31 8.11. Governing Law; Jurisdiction 32 8.12. Waiver of Jury
Trial 32 8.13. Interpretation 33 8.14. Mutual Drafting 33 8.15. Counterparts 33
8.16. Seller Representative 33

  

EXHIBITS:   A Sellers B Definitions C Form of Non-Competition Agreement D Form
of Employment Agreements E Form of Spousal Consent and Assignment F Form of
Legal Opinion G Form of Certificate of Merger

 

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AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (this “Agreement”), is made and entered into
as of April 15, 2015, by and among (i) EFactor Group Corp., a Nevada corporation
(“Buyer”), (ii) EFactor Merger Sub Inc., a New York corporation and a
wholly-owned Subsidiary of Buyer (“Merger Sub” and, together with Buyer, the
“Buyer Parties”), (iii) RocketHub Inc., a New York corporation (the “Company”),
(iv) each of the stockholders of the Company named on Exhibit A hereto
(together, “Sellers” and together with the Company, the “Seller Parties”) and
(v) Eric Schneider in the capacity as the Seller Representative in accordance
with the terms hereof (the “Seller Representative”).

 

RECITALS

 

WHEREAS, Sellers own all of the issued and outstanding capital stock of the
Company;

 

WHEREAS, subject to the terms and conditions set forth herein, the parties
intend to enter into a business combination transaction pursuant to which Merger
Sub will merge with and into the Company, with the Company being the surviving
entity (the “Merger”), as a result of which the Company will become a wholly
owned Subsidiary of Buyer;

 

WHEREAS, for federal income tax purposes, it is intended by that (i) the Merger
will qualify as a “reorganization” with the meaning of Section 368(a) of the
Code, (ii) this Agreement will constitute a “plan of reorganization” (within the
meaning of Treasury Regulations Section 1.368-2(g)), and (iii) each party hereto
will be a party to such reorganization with the meaning of Section 368(b) of the
Code; and

 

WHEREAS, certain capitalized terms used herein are defined in Exhibit B.

 

NOW, THEREFORE, in consideration of the premises set forth above and the
respective representations, warranties, covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:

 

ARTICLE I
THE MERGER

 

1.1.          The Merger. At the Effective Time and subject to and upon the
terms and conditions of this Agreement and the applicable provisions of the New
York Business Corporation Law, as amended (the “NYBCL”), Merger Sub and the
Company shall consummate the Merger, pursuant to which Merger Sub shall merge
with and into the Company, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving corporation in the Merger.
The Company, as the surviving corporation after the Merger, is hereinafter
sometimes referred to as the “Surviving Entity”.

 

1.2.          Effective Time. Subject to the conditions of this Agreement, the
parties shall cause the Merger to be consummated by filing a certificate of
merger in the form attached as Exhibit G hereto (the “Certificate of Merger”)
with the Secretary of State of the State of New York in accordance with the
applicable provisions of the NYBCL, with the parties agreeing that the Merger
shall be consummated and effective at 11:59 p.m. (New York City time) on the
Closing Date (the “Effective Time”).

 

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1.3.          Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the NYBCL and other applicable Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
agreements, privileges, powers and franchises of Merger Sub and the Company
shall vest in the Surviving Entity, and all debts, liabilities, obligations and
duties of Merger Sub and the Company shall become the debts, liabilities,
obligations and duties of the Surviving Entity, including in each case the
rights and obligations of each such party under this Agreement and the other
Ancillary Documents from and after the Effective Time.

 

1.4.          Merger Consideration. As consideration for the Merger, Buyer shall
deliver to the Sellers an aggregate of Twenty-One Million Four Hundred
Twenty-Eight Thousand Five Hundred Seventy-One (21,428,571) shares of Buyer
Common Stock (the “Buyer Shares”), with each Buyer Share valued at the Buyer
Common Stock Price. Each Seller shall receive its pro rata share of the Buyer
Shares based on the number of shares of Company Common Stock owned by such
Seller as compared to the total number of shares of Company Common Stock owned
by all Sellers (with any shares of Company Preferred Stock calculated on an
as-converted to Company Common Stock basis) as of immediately prior to the
Effective Time (such proportion being such Seller’s “Pro Rata Share”).

 

1.5.          Effect of Merger on Merger Sub and Company Securities. At the
Effective Time, by virtue of the Merger and without any action on the part of
any party hereto or any other Person:

 

(a)          Subject to Section 1.5(b), all shares of capital stock of the
Company issued and outstanding immediately prior to the Effective Time will be
cancelled and automatically deemed for all purposes to represent the right to
receive, in the aggregate for all shares of capital stock of the Company, the
Buyer Shares, with each Seller receiving its Pro Rata Share of the Buyer Shares
with respect to its shares of capital stock of the Company, without interest.
All shares of Company Preferred Stock will be treated on an as-converted to
Company Common Stock basis. As of the Effective Time, each Seller shall cease to
have any other rights with respect to the capital stock of the Company, except
the right to receive is Pro Rata Share of the Buyer Shares in accordance with
and subject to the terms and conditions set forth in this Agreement.

 

(b)          Notwithstanding Section 1.5(a) or any other provision of this
Agreement to the contrary, at the Effective Time, if there are any shares of
capital stock of the Company that are owned by the Company as treasury shares or
by any direct or indirect Subsidiary of the Company immediately prior to the
Effective Time, such shares of Company capital stock shall be canceled and
extinguished without any conversion thereof or payment therefor.

 

(c)          Other than the Convertible Notes, all options, warrants and other
rights to acquire shares of capital stock of the Company, and all other
securities that are convertible into or exchangeable for shares of capital stock
of the Company, in each case, that are issued and outstanding immediately prior
to the Effective Time will be cancelled and terminated as of the Effective Time
and the holders thereof shall no longer have the right to acquire, convert into
or be exchanged for shares of capital stock of the Company.

 

(d)          The Convertible Notes that are issued and outstanding as of
immediately prior to the Effective Time will remain outstanding as of the
Effective Time, but from and after the Effective Time, the Convertible Notes
will no longer be convertible into shares of capital stock of the Company and
will instead convert into shares of Buyer Common Stock in accordance with the
terms of the Convertible Notes.

 

(e)          Each share of capital stock of Merger Sub outstanding immediately
prior to the Effective Time shall be converted into an equal number of shares of
common stock of the Surviving Entity, and shall constitute the only outstanding
shares of capital stock of the Surviving Entity.

 

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1.6.          Governing Documents and Officers and Directors. At the Effective
Time, upon the consummation of the Merger, each of the Certificate of
Incorporation and Bylaws of the Company, each as amended and in effect
immediately prior to the Effective Time, shall become the Certificate of
Incorporation and Bylaws of the Surviving Entity. At the Effective Time, (i) the
directors of the Surviving Entity shall be the directors of Merger Sub
immediately prior to the Merger and (ii) the executive officers of the Surviving
Entity shall be the executive officers of the Company immediately prior to the
Merger.

 

1.7.          Seller Consent. Each Seller hereby consents to the Merger and the
other transactions contemplated by this Agreement and the other Ancillary
Documents. Each Seller acknowledges and agrees that the consents set forth
herein are intended and shall constitute such consent of the Sellers as may be
required pursuant to the provisions of Sections 601, 803 and 903 of the NYBCL
and other applicable provisions of the NYBCL. Each Seller hereby further waives
any appraisal or dissenters rights that they might otherwise have under the
NYBCL in connection with the Merger.

 

1.8.          Section 368 Reorganization. For U.S. federal income Tax purposes,
the Merger is intended to constitute a “reorganization” within the meaning of
Section 368(a) of the Code. The parties hereby (a) adopt this Agreement as a
“plan of reorganization” within the meaning of Section 1.368-2(g) of the
Treasury Regulations, (b) agree to file and retain such information as shall be
required under Section 1.368-3 of the Treasury Regulations, and (c) agree to
file all Tax and other informational returns on a basis consistent with such
characterization. Each party acknowledges and agrees that such party (i) has had
the opportunity to obtain independent legal and tax advice with respect to the
transactions contemplated by this Agreement, and (ii) subject to Section
6.10(a), is responsible for paying its own Taxes, including any adverse Tax
consequences that may result if the Merger is determined not to qualify as a
reorganization under Section 368 of the Code.

 

1.9.          Further Actions. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Entity with full right, title and possession
to all assets, property, rights, privileges, powers and franchises of Merger Sub
and the Company, the officers and directors of Surviving Entity are fully
authorized in the name of the Surviving Entity, Merger Sub and the Company to
take, and will take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.

 

ARTICLE II
CLOSING

 

2.1.          Closing. The closing of the transactions contemplated by this
Agreement (the “Closing”) will take place simultaneously with the execution and
delivery of this Agreement at the offices of Ellenoff, Grossman & Schole LLP,
1345 Avenue of the Americas, New York, NY 10105, commencing at 10:00 am (New
York City time). By mutual agreement of the parties the Closing may take place
by conference call and facsimile (or other electronic transmission of signature
pages) with exchange of original signatures by overnight mail. The date on which
the Closing actually occurs will be referred to as the “Closing Date”. The
parties agree that to the extent permitted by applicable Law and GAAP, the
Closing will be deemed effective as of the Effective Time on the Closing Date.

 

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2.2.          Closing Deliveries by Sellers. At or prior to the Closing, Sellers
and the Company will deliver or cause to be delivered to Buyer the following,
each in form and substance reasonably acceptable to Buyer:

 

(a)          a letter of transmittal for each Seller, duly executed by such
Seller;

 

(b)          the books and records of the RHI Companies;

 

(c)          the required notices, consents, Permits, waivers, authorizations,
orders and other approvals listed in Schedule 2.2(c), and all such notices,
consents, Permits, waivers, authorizations, orders and other approvals will be
in full force and effect and not be subject to the satisfaction of any condition
that has not been satisfied or waived;

 

(d)          release and extinguishment of all (i) Indebtedness of the RHI
Companies other than the Convertible Notes and (ii) Liens on any of the assets
or capital stock of the RHI Companies, and documentation evidencing the same;

 

(e)          a letter agreement with the holder of each Convertible Note
providing that after the Closing, such Convertible Note shall be convertible
into shares of Buyer Common Stock and not the capital stock of the Company and,
if agreed by the holder, an amendment to the Convertible Note to extend the
maturity date of the Convertible Note in exchange for a conversion price equal
to the Buyer Common Stock Price, in each case duly executed by each such holder
and the Company;

 

(f)          a Non-Competition and Non-Solicitation Agreement by each Seller set
forth on Schedule 2.2(f) in favor of Buyer and the Company in the form attached
as Exhibit C hereto (the “Non-Competition Agreement”), duly executed by each
such Seller and the Company;

 

(g)          the Employment Agreements by and between the Company and each of
Brian Meece, Jed Cohen and Alon Hillel-Tuch in the forms attached as Exhibit D
hereto (the “Employment Agreements”), duly executed by the Company and each such
employee party thereto;

 

(h)          a Spousal Consent and Agreement in the form attached hereto as
Exhibit E for each Seller that is a married individual, duly executed by such
Seller and such Seller’s spouse;

 

(i)          a written opinion of the counsel the Company, substantially in the
form of Exhibit F hereto, duly executed by such counsel;

 

(j)          a good standing certificate for each RHI Company certified as of a
date no later than thirty (30) days prior to the Closing Date from the proper
Governmental Authority in its jurisdiction of organization;

 

(k)          a certificate from the Company’s secretary certifying to (i) copies
of the Company’s Governing Documents as in effect as of the Closing immediately
prior to the Effective Time, (ii) the resolutions of the Company’s board of
directors authorizing the execution, delivery and performance of this Agreement
and each of the Ancillary Documents to which it is a party or by which it is
bound and the consummation of the Merger and each of the other transactions
contemplated hereby and thereby, and (iii) the incumbency of officers authorized
to execute this Agreement or any Ancillary Document to which the Company is or
is required to be a party or by which the Company is or is required to be bound;

 

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(l)          a consolidated balance sheet of the RHI Companies as of a date no
later than thirty (30) days prior to the Closing, prepared in good faith and in
accordance with the same accounting principles, methods and procedures used to
prepare the Financial Statements, as defined in Section 3.5(a), and separately a
schedule showing the Net Working Capital based on such balance sheet (together,
the “Closing Balance Sheet”);

 

(m)          evidence that the Certificate of Merger has been filed with and
accepted by the Secretary of State of the State of New York;

 

(n)          suitable documentation to add additional employees of Buyer or its
Affiliates as signatories to the Bank Accounts of the Company set forth on
Schedule 3.19, as prescribed by Buyer; and

 

(o)          evidence of the termination of each contract or arrangement set
forth on Schedule 2.2(o) in each case effective at or prior to the Closing.

 

2.3.          Closing Deliveries by Buyer. At or prior to the Closing, Buyer
will deliver or cause to be delivered to the Seller Representative the
following, each in form and substance reasonably acceptable to the Seller
Representative:

 

(a)          evidence that the Certificate of Merger has been filed with and
accepted by the Secretary of State of the State of New York;

 

(b)          a copy of an instruction letter to Buyer’s transfer agent executed
by Buyer instructing such transfer agent to issue the Buyer Shares to Sellers
effective as of the Closing and to deliver one or more stock certificates to
each Seller for their Pro Rata Share of the Buyer Shares; and

 

(c)          the Non-Competition Agreements with each Seller set forth on
Schedule 2.2(f), duly executed by Buyer.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Buyer Parties that the statements
contained in this ARTICLE III, and the information in the Disclosure Schedules
that relates to and modifies the Sections within this ARTICLE III to the extent
it is reasonably apparent on the face of such disclosure that such disclosure is
applicable to such Section, are true and correct as of the Closing Date, except
to the extent that a representation and warranty contained in this ARTICLE III
expressly states that such representation and warranty is current as of an
earlier date and then such statements contained in this ARTICLE III are true and
correct as of such earlier date:

 

3.1.          Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York, and each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it was
organized. Each RHI Company has full corporate power and authority to own the
assets owned by it and conduct its business as and where it is being conducted
by it, and is duly licensed or qualified to do business and in good standing as
a foreign entity in all jurisdictions in which its assets or the operation of
its business makes such licensing or qualification necessary, except for such
failures to be licensed or qualified or in good standing that individually or in
the aggregate that has not and would not reasonably be expected to have a
Material Adverse Effect. Other than RocketHub Payments Corp., which is a
wholly-owned Subsidiary of the Company, the Company does not have and has never
had any Subsidiaries, and does not own or have any rights to acquire, directly
or indirectly, any capital stock or other equity interests of any Person, and
except as set forth in Schedule 3.1A, no RHI Company is a participant in any
joint venture, partnership or similar arrangement. During the past five (5)
years, no RHI Company has been known by or used any corporate, fictitious or
other name in the conduct of its business or in connection with the use or
operation of its assets. Schedule 3.1B lists all current directors and officers
of each RHI Company, showing each such Person’s name and positions.

 

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3.2.          Authorization; Corporate Documentation. The Company has full
corporate power and authority to enter into this Agreement and the Ancillary
Documents to which it is or is required to be a party and to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part of the
Company, including requisite board of directors and shareholder approval of the
Company. Each of this Agreement and each Ancillary Document to which the Company
is or is required to be a party has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as the
enforceability thereof may be limited by the Enforceability Exceptions. The
copies of the Governing Documents of each RHI Company, as amended to date,
copies of which have heretofore been delivered to Buyer, are true, complete and
correct copies of the Governing Documents of such RHI Company, as amended
through and in effect on the date hereof. The minute books and records of the
proceedings of each RHI Company, copies of which have been delivered to Buyer,
are true, correct and complete in all material respects.

 

3.3.          Capitalization. Prior to giving effect to the transactions
contemplated by this Agreement, Sellers are the legal, beneficial and record
owner of all of the issued and outstanding capital stock of the Company, with
each Seller owning the capital stock of the Company set forth on Exhibit A, and
the shares of Company Common Stock set forth on Exhibit A constitute all of the
issued and outstanding capital stock of the Company. All of the issued and
outstanding capital stock of the Company (i) have been duly and validly issued,
(ii) are fully paid and non-assessable and (iii) were not issued in violation of
any preemptive rights or rights of first refusal or first offer. Except for the
Convertible Notes, there are no issued or outstanding options, warrants or other
rights to subscribe for or purchase any equity interests of the Company or
securities convertible into or exchangeable for, or that otherwise confer on the
holder any right to acquire any equity securities of the Company, or preemptive
rights or rights of first refusal or first offer with respect to the equity
securities of the Company, nor are there any Contracts, commitments,
understandings, arrangements or restrictions to which the Company, or to the
Knowledge of the Company, any Seller, is a party or bound relating to any equity
securities of the Company, whether or not outstanding. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to the Company, nor are there any voting trusts, proxies, shareholder agreements
or any other agreements or understandings with respect to the voting of the
equity securities of the Company. All of the equity securities of the Company
have been granted, offered, sold and issued in compliance with all applicable
corporate and securities Laws.

 

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3.4.          Non-Contravention. Except as set forth on Schedule 3.4, neither
the execution, delivery and performance of this Agreement or any Ancillary
Documents by the Company or any Seller, nor the consummation of the transactions
contemplated hereby or thereby, will (a) violate or conflict with, any provision
of the Governing Documents of any RHI Company, (b) violate or conflict with any
Law or Order to which any RHI Company, its assets or equity interests are bound
or subject, (c) with or without giving notice or the lapse of time or both,
breach or conflict with, constitute or create a default under, or give rise to
any right of termination, cancellation or acceleration of any obligation or
result in a loss of a material benefit under, or give rise to any obligation of
any RHI Company to make any payment under, or to the increased, additional,
accelerated or guaranteed rights or entitlements of any Person under, any of the
terms, conditions or provisions of any Contract, agreement, or other commitment
to which any RHI Company is a party or by which any RHI Company, its assets or
equity interests may be bound, (d) result in the imposition of a Lien (other
than a Permitted Lien) on any equity interests or any assets of any RHI Company
or (e) require any filing with, or Permit, consent or approval of, or the giving
of any notice to, any Governmental Authority or other Person; except with
respect to clauses (b), (c), (d) and (e) where such violations, conflicts,
defaults, Liens and failures to obtain Permits and consents, individually and in
the aggregate, are not and would not reasonably be expected to have a Material
Adverse Effect.

 

3.5.          Financial Statements.

 

(a)          Attached to Schedule 3.5(a) are copies of the unaudited
consolidated balance sheet and income statement for the RHI Companies prepared
in good faith as of and for the fiscal years ended December 31, 2014 and
December 31, 2013 (such financial statements, collectively with the Closing
Balance Sheet, the “Financial Statements”).

 

(b)          The Net Working Capital of the RHI Companies as of the date of the
Closing Balance Sheet is not less than zero dollars ($0). The RHI Companies do
not have any Indebtedness as of the Closing other than the Indebtedness, and in
such amounts (including principal and any accrued but unpaid interest or other
obligations with respect to such Indebtedness), as set forth on Schedule 3.5(b).

 

3.6.          Absence of Liabilities. The RHI Companies do not have any material
Liabilities except (a) Liabilities that are accrued and reflected on the balance
sheet of the RHI Companies as of December 31, 2014, (b) Liabilities that are
listed on Schedule 3.6, (c) Liabilities that have arisen in the Ordinary Course
of Business (other than liabilities for breach of any Contract or violation of
any Law) since December 31, 2014, and (d) obligations to be performed after the
date hereof under any Contracts, which if such Contracts are Material Contracts
are disclosed on Schedule 3.14(a).

 

3.7.          Absence of Certain Changes. Except as set forth on Schedule 3.7,
since December 31, 2014: (a) each RHI Company has conducted its business only in
the Ordinary Course of Business, and (b) there has not been a Material Adverse
Effect. Without limiting the foregoing, except as set forth on Schedule 3.7,
since December 31, 2014, no RHI Company has entered into any Material Contract,
made any commitment or incurred any Liability in excess of $25,000.

 

3.8.          Title to and Sufficiency of Assets. Each RHI Company has good and
marketable title to all of its assets, free and clear of all Liens other than
Permitted Liens. The assets (including Contractual rights and Intellectual
Property rights) of each RHI Company constitute all of the assets, rights and
properties that are used in the operation of such RHI Company’s business as it
is now conducted or that are used or held by such RHI Company for use in the
operation of its business, and taken together, are adequate and sufficient for
the operation of such RHI Company’s business as currently conducted. Immediately
following the Closing, all of the assets of each RHI Company will be owned,
leased or available for use by such RHI Company on terms and conditions
substantially identical to those under which, immediately prior to the Closing,
such RHI Company owns, leases, uses or holds available for use such assets.

 

3.9.          Properties. No RHI Company currently owns or leases or has ever
owned or leased any real property. No RHI Company owns or leases any Personal
Property.

 

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3.10.         Intellectual Property.

 

(a)          Schedule 3.10(a) sets forth a true and complete list of (i) all
registrations of Intellectual Property (and applications therefor) necessary to
conduct the business of the RHI Companies as presently conducted, specifying as
to each item, as applicable: (A) the nature of the item, including the title,
(B) the owner of the item, (C) the jurisdictions in which the item is issued or
registered or in which an application for issuance or registration has been
filed and the status of each such application and (D) the issuance, registration
or application numbers and dates; and (ii) all unregistered material
Intellectual Property necessary to conduct the business of the RHI Companies as
presently conducted (clauses (i) and (ii), collectively with any immaterial
unregistered Intellectual Property owned by a RHI Company that may not be set
forth on Schedule 3.10(a), “Owned IP”). All registered Owned IP has been duly
registered with, filed in, issued by or applied for with, as the case may be,
the United States Patent and Trademark Office or such other appropriate domestic
filing offices, and all such registrations, filings, issuances, applications and
other actions remain valid, in full force and effect, and are current, not
abandoned, and not expired.

 

(b)          Schedule 3.10(b) sets forth a true and complete list of all
Software developed in whole or in part by or on behalf of a RHI Company,
including such developed Software and databases that are operated or used by a
RHI Company in the RHI Platform or on its other websites or used by a RHI
Company or otherwise material to a RHI Company’s business (collectively, “RHI
Software”). Except for “click wrapped”, “shrink wrapped” or “off-the-shelf”
software that is generally available to the public for use for a license of
$2,000 or less (“Click Wrapped Software”), the RHI Software is the only Software
that is used or held for use by or otherwise material to the business of any RHI
Company.

 

(c)          The Owned IP and RHI Software includes all of the material
Intellectual Property used in the RHI Platform. No RHI Company licenses any
Intellectual Property which is material to the RHI Platform or the business of
any RHI Company. Except as otherwise set forth on Schedule 3.10(c), to the
Knowledge of the Company, the RHI Companies’ ownership and use in the Ordinary
Course of Business of the Owned IP, the RHI Software and the RHI Platform do not
infringe upon or misappropriate the valid Intellectual Property rights, privacy
rights or right of publicity of any third party. To the Knowledge of the
Company, a RHI Company is the owner of the entire and unencumbered right, title
and interest in and to each item of the Owned IP, the RHI Software and the RHI
Platform, and the RHI Companies are entitled to use, and are using in their
businesses, the Owned IP, the RHI Software and the RHI Platform, in the Ordinary
Course of Business. To the Knowledge of the Company, each of the Owned IP, the
RHI Software and the RHI Platform is subsisting, valid and enforceable, and has
not been adjudged invalid or unenforceable in whole or in part.

 

(d)          Except as otherwise set forth on Schedule 3.10(d), no Actions have
been asserted against any RHI Company and are not disposed of, or are pending
or, to the Knowledge of the Company, threatened against any RHI Company: (i)
based upon or challenging or seeking to deny, enjoin or restrict, in whole or in
part, the use by any RHI Company of any Owned IP, the RHI Software or the RHI
Platform; (ii) alleging that a RHI Company’s products or services provided by or
processes used by a RHI Company infringe upon or misappropriate any Intellectual
Property right or Software of any third party; (iii) alleging that any
Intellectual Property licensed to a RHI Company infringes upon any Intellectual
Property right or Software of any third party or is being licensed or
sublicensed to a RHI Company in conflict with the terms of any license or other
agreement; or (iv) challenging a RHI Company’s ownership, or the validity or
enforceability, of the Owned IP, RHI Software or the RHI Platform. To the
Knowledge of the Company, no Person is engaged in any activity that illegally
infringes upon the Owned IP, the RHI Software or the RHI Platform. Except as set
forth on Schedule 3.10(d) or licenses granted in the Ordinary Course of Business
(i) to customers under the Company’s standard click-through terms of use
licenses on the RHI Platform or (ii) for open application programming interfaces
(API), no RHI Company has granted any license or other right currently
outstanding to any third party with respect to the Owned IP, the RHI Software or
the RHI Platform.

 

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(e)          To the Knowledge of the Company, each RHI Company has the right to
use all Software development tools, processing tools, library functions,
compilers and other third party Software, source code, object code and/or
documentation that is material to such RHI Company’s business or that is
required to operate or modify the RHI Software and the RHI Platform.

 

(f)          The RHI Companies have taken commercially reasonable steps to
maintain the confidentiality of their Trade Secrets and other confidential
Intellectual Property and, to the Company’s Knowledge, (i) there has been no
misappropriation of any Trade Secrets or other material confidential
Intellectual Property of any RHI Company by any current or former employee,
independent contractor or agent of a RHI Company, or to the Knowledge of the
Company, by any other Person; (ii) no current or former employee, independent
contractor or agent of a RHI Company has misappropriated any trade secrets of
any other Person in the course of his or her performance as an employee,
independent contractor or agent of a RHI Company or has any claim to any of the
Intellectual Property of a RHI Company; and (iii) no current or former employee,
independent contractor or agent of a RHI Company is in default or breach of any
term of any employment agreement, non-disclosure agreement, assignment of
invention agreement, work-for-hire agreement, non-compete obligation or similar
agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.

 

(g)          To the Knowledge of the Company, each RHI Company’s collection,
storage, use, processing and dissemination of personal computer information and
personally identifiable information in connection with its business has been
conducted in accordance with all applicable Laws relating to privacy, data
security and data protection that are binding on such RHI Company and all
applicable privacy policies adopted by or on behalf of such RHI Company.

 

3.11.         Compliance with Laws.

 

(a)          Each RHI Company is in compliance with, and has complied with all
Laws, including consumer protection Laws, and Orders applicable to such RHI
Company, its assets, business, employees or equity securities, except to the
extent that such non-compliance, individually and in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect. None of
the operation, activity, conduct and transactions of any RHI Company or the
ownership, operation, use or possession of its assets or the employment of its
employees violates, or with or without the giving of notice or passage of time,
or both, will violate, conflict with or result in a default, right to accelerate
or loss of rights under, any terms or provisions of any Law or Order to which
any RHI Company is a party or by which any RHI Company or its assets, business,
employees or equity securities may be bound or affected, except to the extent
that such violations, conflicts and defaults, individually and in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect. No RHI Company has received any written or, to the Knowledge of the
Company, oral notice of any actual or alleged violation of or non-compliance
with applicable Laws by any RHI Company, except to the extent that such
violations and non-compliance, individually and in the aggregate, has not had
and would not reasonably be expected to have a Material Adverse Effect.

 

(b)          No RHI Company, nor any of its directors or officers, nor, to the
Knowledge of the Company, any other Representative acting on behalf of a RHI
Company, is currently identified on the specially designated nationals or other
blocked person list or otherwise currently subject to any U.S. sanctions
administered by OFAC. No RHI Company, nor any of its officers, directors or
employees, nor to the Knowledge of the Company, any other Representative acting
on its behalf, has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (ii)
made any unlawful payment or offered anything of value to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns, (iii) made any other unlawful payment or (iv) violated any applicable
money laundering or anti-terrorism law or regulation, nor have any of them
otherwise taken any action which would reasonably cause a RHI Company to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
applicable Law of similar effect.

 

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3.12.         Permits. There are no Permits required to be owned or possessed by
an RHI Company to own its assets or to conduct its business as now being
conducted and as presently proposed to be conducted, except to the extent that
the failure to have any such Permits, individually or in the aggregate, has not
and would not reasonably be expected to have a Material Adverse Effect

 

3.13.         Litigation. Except as described on Schedule 3.13, there is no (a)
Action of any nature pending or, to the Knowledge of the Company, threatened or
(b) Order now pending or previously rendered by a Governmental Authority, in
either case of clauses (a) or (b), by or against any RHI Company, any of their
respective directors, officers or equity holders (provided, that any litigation
involving the directors, officers or equity holders of a RHI Company must be
related to such RHI Company’s business, assets or equity securities) or any RHI
Company’s business, assets or equity securities. During the past five (5) years,
no RHI Company’s current or former officers, senior management or directors have
been charged with, indicted for, arrested for, or convicted of any felony or any
crime involving fraud. No RHI Company has any material Action pending against
any other Person.

 

3.14.         Contracts.

 

(a)          Schedule 3.14(a) contains a complete, current and correct list of
all of the following types of Contracts to which a RHI Company is a party, by
which any of its properties or assets are bound, or under which a RHI Company
otherwise has material obligations (each Contract required to be listed on
Schedule 3.14(a), a “Material Contract”): (i) any Contract or group of related
Contracts which involve expenditures or receipts by a RHI Company that require
payments or yield receipts of more than $25,000 in any twelve (12) month period
or more than $50,000 in the aggregate; (ii) any Contract with any of its
officers, directors, employees or Affiliates (other than at-will employment
arrangements with employees entered into the Ordinary Course of Business),
including all non-competition, severance, and indemnification agreements; (iii)
any partnership, joint venture, profit-sharing or similar agreement entered into
with any Person; (iv) all Contracts relating to any merger, consolidation or
other business combination with any other Person or the acquisition or
disposition of any other entity or its business, its equity securities or its
material assets or the sale of a RHI Company, its business, its equity
securities or its material assets outside of the Ordinary Course of Business;
(v) any loan agreement, promissory note, security agreement, guarantee or other
document relating to Indebtedness, borrowing of money or extension of credit by
or to a RHI Company in excess of $25,000; and (vi) any other Contract that is
material to a RHI Company and entered into outside the Ordinary Course of
Business. True and correct copies of each Material Contract (including any
amendments, modifications or supplements thereto) have been provided to Buyer.

 

(b)          Except as set forth on Schedule 3.14(b), no RHI Company is a party
to or bound by any Contract containing any covenant (i) limiting in any respect
the right of any RHI Company or its Affiliates to engage in any line of
business, to make use of any of its Intellectual Property or compete with any
Person in any line of business or in any geographic region, (ii) imposing
non-solicitation restrictions on any RHI Company or its Affiliates, (iii)
granting to the other party any exclusivity or similar provisions or rights,
including any covenant by any RHI Company that includes an organizational
conflict of interest prohibition, restriction, representation, warranty or
notice provision or any other restriction on future contracting, (iv) providing
“most favored customers” or other preferential pricing terms for the services of
a RHI Company or its Affiliates, or (v) otherwise limiting or restricting the
right of any RHI Company to sell or distribute any Intellectual Property of any
RHI Company or to purchase or otherwise obtain any software or Intellectual
Property license.

 

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(c)          All of the Contracts to which a RHI Company is a party, by which
any of its properties or assets are bound, or under which a RHI Company
otherwise has material obligations are in full force and effect, and are valid,
binding, and enforceable in accordance with their terms, subject to performance
by the other party or parties to such Contract, except as the enforceability
thereof may be limited by the Enforceability Exceptions. There exists no breach,
default or violation on the part of a RHI Company or, to the Knowledge of the
Company, on the part of any other party to any such Contract nor has any RHI
Company received written or, to the Knowledge of the Company, oral notice of any
breach, default or violation. No RHI Company has received notice of an intention
by any party to any such Contract that provides for a continuing obligation by
any party thereto on the date hereof to terminate such Contract or amend the
terms thereof, other than modifications in the Ordinary Course of Business that
do not adversely affect any RHI Company. No RHI Company has waived any rights
under any such Contract. To the Knowledge of the Company, no event has occurred
which either entitles, or would, with notice or lapse of time or both, entitle
any party to any such Contract to declare breach, default or violation under any
such Contract or to accelerate, or which does accelerate, the maturity of any
Indebtedness of any RHI Company under any such Contract. To the Knowledge of the
Company, there is no reason to believe that any such Contract with a customer of
a RHI Company will not remain in effect after the Closing through the remainder
of its term or continue to generate substantially the same or more revenue after
the Closing through the remainder of its term as it currently generates.

 

3.15.         Tax Matters. Except as set forth on Schedule 3.15:

 

(a)          each RHI Company has timely filed all income and other material Tax
Returns required to have been filed by it, and all such Tax Returns are accurate
and complete in all material respects;

 

(b)          each RHI Company has paid all Taxes owed by it which were due and
payable (whether or not shown on any Tax Return), except for Taxes being
contested in good faith and for which adequate reserves have been established
and maintained;

 

(c)          the charges, accruals and reserves with respect to Taxes included
within the Financial Statements are adequate for the payment of all Taxes not
yet due and payable or that are being contested in good faith;

 

(d)          no RHI Company has filed for an extension of time within which to
file any Tax Return which extension is currently in effect;

 

(e)          there is no current Action against any RHI Company in writing by a
Governmental Authority in a jurisdiction where such RHI Company does not file
Tax Returns that such RHI Company is or may be subject to taxation by that
jurisdiction;

 

(f)          there are no currently pending or ongoing Tax audits or other
administrative proceedings of an RHI Company's Tax Returns by any Governmental
Authority, for which written notice has been received, with regard to any Taxes
for which such RHI Company would be liable;

 

(g)          no RHI Company has requested or received any ruling from, or signed
any binding agreement with, any Governmental Authority that would apply to any
Tax periods ending after the Closing Date;

 

(h)          there are no Liens for Taxes (other than liens for Taxes not yet
due and payable or for Taxes that are being contested in good faith) on any of
the assets of any RHI Company;

 

(i)          no unpaid Tax deficiency has been asserted in writing against or
with respect to any RHI Company by any Governmental Authority which Tax either
remains unpaid or that has not been properly reflected in the Financial
Statements;

 

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(j)          each RHI Company has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes and has, within
the time and manner prescribed by Law, paid over to the proper Governmental
Authority in all material respects all amounts required to be withheld and paid
over under all applicable Laws;

 

(k)          no RHI Company has granted or is subject to, any outstanding waiver
of the period of limitations for the assessment of any Tax for any currently
open taxable period;

 

(l)          no RHI Company is a party to any Tax allocation, sharing or
indemnity agreement or otherwise has any potential or actual material Liability
for the Taxes of another Person (other than another RHI Company), whether by
applicable Tax Law, as a transferee or successor or by contract, indemnity or
otherwise;

 

(m)          no RHI Company will be required to include in taxable income for
any period ending after the Closing Date any amount as a result of any change in
method of accounting for any period beginning on or prior to the Closing Date
pursuant to Section 481 of the Code;

 

(n)          there is no Contract or employee benefit plan covering any Person
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible by any RHI Company by reason of Section 280G or
Section 162(m) of the Code, and no Person is entitled to receive any “gross-up”
payment from any RHI Company in the event that the excise Tax of Section 4999(a)
of the Code is imposed on such Person;

 

(o)          no RHI Company has participated in any transaction identified as a
(i) “listed transaction,” within the meaning of Treasury Regulations Sections
1.6011-4(b)(2), (ii) a “transaction of interest,” within the meaning of Treasury
Regulations Section 1.6011-4(b)(6), or (iii) any transaction that is
“substantially similar” (within the meaning of Treasury Regulations Section
1.6011-4(c)(4)) to a “listed transaction” or “transaction of interest”;

 

(p)          no RHI Company has a “permanent establishment” in any country other
than the country in which it was established, as defined in any applicable Tax
treaty or convention between the United States of America and such other
country, or has engaged in a trade or business in any country other than the
country in which it was established; and

 

(q)          no written power of attorney which is currently in force has been
granted by any RHI Company with respect to any matter relating to Taxes.

 

3.16.         Employees and Labor Matters.

 

(a)          Schedule 3.16(a) sets forth a complete and accurate list of all
employees of any RHI Company as of the Closing Date showing for each as of that
date (i) the employee’s name, employer, job title or description, location,
salary level (including any bonus, commission, deferred compensation or other
remuneration payable (other than any such arrangements under which payments are
at the discretion of the RHI Companies)) and (ii) any bonus, commission or other
remuneration other than salary paid during the RHI Companies’ fiscal year ending
December 31, 2014 or during the 2015 fiscal year prior to the Closing Date.
Except as set forth on Schedule 3.16(a), no employee is a party to a written
employment agreement or contract with a RHI Company and each is employed “at
will”. Each RHI Company has paid in full to all employees all wages, salaries,
commission, bonuses and other compensation due, including overtime compensation,
and there are no severance payments which are or could become payable by a RHI
Company to any employee under the terms of any written or, to the Knowledge of
the Company, oral agreement, or commitment or any Law, custom, trade or
practice. The RHI Companies do not have and have never had any employees that
are not Sellers under this Agreement.

 

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(b)          Schedule 3.16(b) contains a list of all independent contractors
(including consultants) currently engaged by any RHI Company, along with the
position, date of retention and rate of remuneration, most recent increase (or
decrease) in remuneration and amount thereof, for each such Person. All of such
independent contractors are a party to a written agreement or contract with the
engaging RHI Company. Each such independent contractor has entered into
customary covenants regarding confidentiality, non-competition and assignment of
inventions and copyrights in such Person’s agreement with the engaging RHI
Company, true and correct copies of which have been provided to Buyer. For the
purposes of applicable Law, all independent contractors who are currently, or
within the last six (6) years have been, engaged by a RHI Company are bona fide
independent contractors and not employees of such RHI Company. Each independent
contractor is terminable on fewer than thirty (30) days’ notice, without any
obligation of any RHI Company to pay severance or a termination fee.

 

(c)          Each RHI Company is, to its Knowledge, in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the case
may be, has had or would reasonably be expected to have, a Material Adverse
Effect. There is no unfair labor practice complaint pending or, to the Knowledge
of the Company, threatened against a RHI Company.

 

3.17.         Insurance. Schedule 3.17 lists all insurance policies held by a
RHI Company relating to a RHI Company or the business, assets, properties,
directors, officers or employees of a RHI Company, copies of which have been
provided to Buyer. Each such insurance policy (i) is legal, valid, binding,
enforceable and in full force and effect as of the Closing and (ii) will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms immediately following the Closing. No RHI Company is in
default with respect to its obligations under any insurance policy, nor has any
RHI Company ever been denied insurance coverage for any reason. No RHI Company
has any self-insurance or co-insurance programs. No RHI Company has made any
claim against an insurance policy as to which the insurer is denying coverage.
Schedule 3.17 identifies each individual insurance claim made by a RHI Company
since January 1, 2010. Each RHI Company has reported to its insurers all Actions
and pending circumstances that would reasonably be expected to result in an
Action, except where such failure to report such Actions, individually or in the
aggregate, has not and would not reasonably be expected to have a Material
Adverse Effect. To the Knowledge of the Company, no event has occurred, and no
condition or circumstance exists, that would reasonably be expected to (with or
without notice or lapse of time) give rise to or serve as a basis for the denial
of any such insurance claim.

 

3.18.         Transactions with Related Persons. Except as set forth on Schedule
3.18, no Seller nor any of its Affiliates, nor any officer, director, manager,
employee, trustee or beneficiary of any RHI Company or any Affiliate of a
Seller, nor any immediate family member of any of the foregoing (whether
directly or indirectly through an Affiliate of such Person) (each of the
foregoing, a “Related Person”) is presently, or in the past three (3) years has
been, a party to any transaction with a RHI Company, including any Contract or
other arrangement (a) providing for the furnishing of services by (other than as
officers, directors or employees of such RHI Company), (b) providing for the
rental of real or personal property from or (c) otherwise requiring payments to
(other than for services or expenses as directors, officers or employees of such
RHI Company in the Ordinary Course of Business) any Related Person or any Person
in which any Related Person has an interest as an owner, officer, manager,
director, trustee or partner or in which any Related Person has any direct or
indirect interest. Except as set forth on Schedule 3.18, no RHI Company has any
outstanding Contract or other arrangement or commitment with any Related Person,
and no Related Person owns any real or personal property, or right, tangible or
intangible (including Intellectual Property) which is used in any Company’s
business. The RHI Companies’ assets do not include any receivable or other
obligation from a Related Person, and the Liabilities of the RHI Companies do
not include any payable or other obligation or commitment to any Related Person.
Schedule 3.18 specifically identifies all Contracts, arrangements or commitments
set forth on Schedule 3.18 that cannot be terminated upon sixty (60) days’
notice by the RHI Company party thereto without cost or penalty.

 

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3.19.         Bank Accounts. Schedule 3.19 lists the names and locations of all
banks and other financial institutions with which a RHI Company maintains an
account (or at which an account is maintained to which a RHI Company has access
as to which deposits are made on behalf of a RHI Company) (each, a “Bank
Account”), in each case listing the type of Bank Account, the Bank Account
number therefor, and the names of all Persons authorized to draw thereupon or
have access thereto and lists the locations of all safe deposit boxes used by a
RHI Company. All cash in such Bank Accounts is held on demand deposit and is not
subject to any restriction or limitation as to withdrawal.

 

3.20.         No Brokers. No RHI Company, nor any of their respective
Representatives on their behalf, has employed any broker, finder or investment
banker or incurred any liability for any brokerage fees, commissions, finders’
fees or similar fees in connection with the transactions contemplated by this
Agreement.

 

3.21.         No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement and the Ancillary
Documents, no RHI Company makes any express or implied representations or
warranties, and each RHI Company hereby disclaims any other representations and
warranties, whether made orally or in writing, by or on behalf of a RHI Company
by any Person.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Sellers severally and not jointly represent and warrant to the Buyer Parties
that the statements contained in this ARTICLE IV, and the information in the
Disclosure Schedules referenced therein, are true and correct as of the Closing
Date, except to the extent that a representation and warranty contained in this
ARTICLE IV expressly states that such representation and warranty is current as
of an earlier date and then such statements contained in this ARTICLE IV are
true and correct as of such earlier date:

 

4.1.          Organization and Authorization. Each Seller, if not an individual
person, is an entity duly organized, validly existing and in good standing under
the Laws of the jurisdiction of its formation and has full power and authority
to own the assets owned by it and conduct its business as and where it is being
conducted by it. Each Seller has full power and authority to enter into this
Agreement and the Ancillary Documents to which it is or is required to be a
party and to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery of
this Agreement and the Ancillary Documents and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of each Seller. Each of this Agreement and each
Ancillary Document to which a Seller is or is required to be a party has been
duly executed and delivered by each such Seller and constitutes a legal, valid
and binding obligation of such Seller, enforceable against such Seller in
accordance with its terms, except as the enforceability thereof may be limited
by the Enforceability Exceptions.

 

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4.2.          Title to Company Shares. Each Seller owns good, valid and
marketable title to the shares of the Company’s capital stock set forth on
Exhibit A, free and clear of any and all Liens. No Seller is a “foreign person”
for purposes of Section 1445 of the Code.

 

4.3.          Non-Contravention. Except as set forth on Schedule 4.3, neither
the execution, delivery and performance of this Agreement or any Ancillary
Documents by any Seller, nor the consummation of the transactions contemplated
hereby or thereby, will (a) violate or conflict with, any provision of the
Governing Documents of any Seller that is not a natural person, (b) violate or
conflict with any Law or Order to which any Seller or its assets are bound or
subject, (c) with or without giving notice or the lapse of time or both, breach
or conflict with, constitute or create a default under, or give rise to any
right of termination, cancellation or acceleration of any obligation or result
in a loss of a material benefit under, or give rise to any obligation of any
Seller to make any payment under, or to the increased, additional, accelerated
or guaranteed rights or entitlements of any Person under, any of the terms,
conditions or provisions of any Contract, agreement, or other commitment to
which a Seller is a party or by which a Seller or its assets may be bound, (d)
result in the imposition of a Lien (other than a Permitted Lien) on any of the
shares of the Company’s capital stock or the Buyer Shares or (e) require any
filing with, or Permit, consent or approval of, or the giving of any notice to,
any Governmental Authority or other Person.

 

4.4.          Litigation. Except as set forth on Schedule 4.4, there is no
Action pending or, to the Knowledge of such Seller, threatened, nor any Order of
any Governmental Authority is outstanding, against or involving any Seller or
any of its officers, directors, stockholders, properties, assets or businesses,
whether at law or in equity, before or by any Governmental Authority, which
would reasonably be expected to adversely affect the ability of such Seller to
consummate the transactions contemplated by, and discharge its obligations
under, this Agreement and the Ancillary Documents to which such Seller is a
party.

 

4.5.          Investment Representations. Each Seller (i) is acquiring its
portion of the Buyer Shares for itself for investment purposes only, and not
with a view towards any resale or distribution of such Buyer Shares, (ii) has
been advised and understands that the Buyer Shares (A) are being issued in
reliance upon one or more exemptions from the registration requirements of the
Securities Act and any applicable state securities Laws, (B) have not been and
shall not be registered under the Securities Act or any applicable state
securities Laws and, therefore, must be held indefinitely and cannot be resold
unless such Buyer Shares are registered under the Securities Act and all
applicable state securities Laws, unless exemptions from registration are
available and (C) are subject to additional restrictions on transfer pursuant to
Section 6.7, (iii) is aware that an investment in Buyer is a speculative
investment and is subject to the risk of complete loss, (iv) has not seen,
received, been presented with, or been solicited by any leaflet, public
promotional meeting, newspaper or magazine article or advertisement, radio or
television advertisement, or any other form of advertising or general
solicitation with respect to the sale of shares of Buyer’s capital stock, and
(v) acknowledges that Buyer is under no obligation hereunder to register the
Buyer Shares under the Securities Act. Each Seller has carefully read and
understands all materials provided by or on behalf of Buyer or its
Representatives to such Seller or such Seller’s Representatives pertaining to an
investment in Buyer and has consulted, as such Seller has deemed advisable, with
its own attorneys, accountants or investment advisors with respect to the
investment contemplated hereby and its suitability for such Seller. Each Seller
acknowledges that the Buyer Shares are subject to dilution for events not under
the control of such Seller. Such Seller does not have any Contract with any
Person to sell, transfer, or grant participations to such Person, or to any
third Person, with respect to the Buyer Shares. Each Seller has completed its
independent inquiry and has relied fully upon the advice of its own legal
counsel, accountant, financial and other Representatives in determining the
legal, tax, financial and other consequences of this Agreement and the
transactions contemplated hereby and the suitability of this Agreement and the
transactions contemplated hereby for such Seller and its particular
circumstances, and, except as set forth herein, has not relied upon any
representations or advice by Buyer or its Representatives. Each Seller
acknowledges and agrees that, except as set forth in ARTICLE V, no
representations or warranties have been made by Buyer or any of its
Representatives, and that such Seller has not been guaranteed or represented to
by any Person, (i) any specific amount or the event of the distribution of any
cash, property or other interest in Buyer or (ii) the profitability or value of
the Buyer Shares in any manner whatsoever. Each Seller: (a) has been represented
by independent counsel (or has had the opportunity to consult with independent
counsel and has declined to do so); (b) has had the full right and opportunity
to consult with such Seller’s attorneys and other advisors and has availed
itself of this right and opportunity; (c) has carefully read and fully
understands this Agreement in its entirety and has had it fully explained to it
or him by such counsel; (d) is fully aware of the contents hereof and the
meaning, intent and legal effect thereof; and (e) is competent to execute this
Agreement and has executed this Agreement free from coercion, duress or undue
influence.

 

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4.6.          No Brokers. No Seller, nor any of their respective Representatives
on their behalf, has employed any broker, finder or investment banker or
incurred any liability for any brokerage fees, commissions, finders’ fees or
similar fees in connection with the transactions contemplated by this Agreement.

 

4.7.          No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement and the Ancillary
Documents, no Seller Party makes any express or implied representations or
warranties, and each Seller Party hereby disclaims any other representations and
warranties, whether made orally or in writing, by or on behalf of a Seller Party
by any Person.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES

 

Each Buyer Party represents and warrants to Sellers the following matters as of
the Closing Date (except to the extent that a representation and warranty
contained in this ARTICLE V expressly states that such representation and
warranty is current as of an earlier date and then such statements contained in
this ARTICLE V are true and correct as of such earlier date), in each case,
except as set forth in the Disclosure Schedules or the SEC Reports:

 

5.1.          Organization and Qualification. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada, and Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York. Merger Sub is a
wholly-owned Subsidiary of Buyer. Each Buyer Party is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction where such qualification or license is required, except where the
failure to be so qualified or be so licensed would not have a material and
adverse effect on the ability of a Buyer Party to consummate the transactions
contemplated by, and discharge its obligations under, this Agreement and the
Ancillary Documents to which a Buyer Party is a party (a “Buyer Material Adverse
Effect”).

 

5.2.          Authorization. Each Buyer Party has full corporate power and
authority to enter into this Agreement and the Ancillary Documents to which it
is a party and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Ancillary Documents to
which a Buyer Party is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of such Buyer Party. This Agreement has been duly
executed and delivered by each Buyer Party. This Agreement and each Ancillary
Document to which a Buyer Party is a party constitutes a legal, valid and
binding obligation of such Buyer Party, enforceable against such Buyer Party in
accordance with its terms, except as the enforceability thereof may be limited
by the Enforceability Exceptions.

 

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5.3.          Non-Contravention. Neither the execution and delivery of this
Agreement or any Ancillary Document by a Buyer Party, nor the consummation of
the transactions contemplated hereby or thereby, will violate or conflict with
or (with or without notice or the passage of time or both) constitute a breach
or default under (a) any provision of the Governing Documents of a Buyer Party,
(b) any Law or Order to which a Buyer Party or any of its business or assets are
bound or subject or (c) any Contract or Permit to which a Buyer Party is a party
or by which a Buyer Party or any of its properties may be bound or affected,
other than, in the cases of clauses (a) through (c), such violations and
conflicts which would not reasonably be expected to have a Buyer Material
Adverse Effect.

 

5.4.          The Buyer Shares. As of the Closing Date, the authorized capital
stock of Buyer consists of 175,000,000 shares of Buyer Common Stock and
20,000,000 shares of Buyer Preferred Stock, of which 148,503,318 shares of Buyer
Common Stock and 2,500,000 shares of Buyer Preferred Stock are issued and
outstanding prior to giving effect to the Closing. Buyer has reserved from its
duly authorized capital stock the Buyer Shares issuable at the Closing pursuant
to this Agreement. When issued by Buyer to Sellers in accordance with the terms
of this Agreement, assuming the accuracy of the representations and warranties
of Sellers contained in this Agreement, (a) Sellers will acquire good and
marketable title to the Buyer Shares, and the Buyer Shares will be issued, free
and clear of all Liens except (i) those imposed by applicable securities Laws,
(ii) the rights of the Buyer Indemnified Parties under this Agreement (including
under ARTICLE VII), (iii) those incurred by Sellers or their Affiliates and (iv)
as set forth in Section 6.7; (b) the Buyer Shares will be validly and duly
issued and fully paid and non-assessable; and (c) the Buyer Shares will not be
subject to any preemptive or similar rights of a shareholder of Buyer to
subscribe for or purchase additional securities of Buyer as a result of such
issuance.

 

5.5.          SEC Filings; Financial Statements.

 

(a)          In the past six (6) years, Buyer has filed with, or otherwise
transmitted to, the SEC all forms, reports, schedules, statements,
certifications and other documents (including all exhibits, amendments and
supplements thereto) required by it to be filed with or otherwise transmitted to
(as applicable) the SEC (such documents, the “SEC Reports”), and such SEC
Reports are available on the SEC’s website through EDGAR. As of their respective
dates, each of the SEC Reports complied in all material respects with the
applicable requirements of all applicable Laws, including the Securities Act and
the Exchange Act, as the case may be, and the respective rules and regulations
promulgated thereunder, each as in effect on the date so filed. Except to the
extent amended or superseded by a subsequent filing with the SEC, as of their
respective dates (and if so amended or superseded, then on the date of such
subsequent filing), none of the SEC Reports contained any untrue statement of a
material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. There are no outstanding or unresolved comments in any comment
letters of the staff of the SEC received by Buyer relating to the SEC Reports.
Buyer has heretofore made available to the Seller Parties, through EDGAR or
otherwise, true, correct and complete copies of all material written
correspondence between Buyer and the SEC. None of the SEC Reports is, to the
Knowledge of Buyer, the subject of ongoing SEC review.

 

(b)          The financial statements (including in all cases the notes thereto,
if any) of Buyer and its Subsidiaries included in the SEC Reports (i) in all
material respects, were prepared consistent with the books and records of Buyer
and its Subsidiaries, (ii) in all material respects, present fairly the
consolidated financial position of Buyer and its Subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows of Buyer and its Subsidiaries for the periods thereof, (iii) have been
prepared in accordance with GAAP; provided, that, any unaudited, interim period
financial statements need not include footnote disclosures and other
presentation items or year-end adjustments that are required by GAAP to be
included in year-end financial statements, and (iv) comply in all material
respects with the applicable accounting requirements of the SEC, the Securities
Act and the Exchange Act, and the rules and regulations promulgated thereunder.

 

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(c)          Buyer maintains disclosure controls and procedures that satisfy the
requirements of Rule 13a-15 under the Exchange Act, and such disclosure controls
and procedures are designed to ensure that all material information concerning
Buyer is made known on a timely basis to the individuals responsible for the
preparation of Buyer’s filings with the SEC and other public disclosure
documents.

 

5.6.          Compliance with Laws. Buyer and its Subsidiaries are in compliance
with, and have complied, with all Laws and Orders applicable to them, their
assets, employees or business or the Buyer Shares, except to the extent that
such non-compliance, individually and in the aggregate, has not had and would
not reasonably be expected to have a Buyer Material Adverse Effect. None of the
operation, activity, conduct and transactions of Buyer and its Subsidiaries or
the ownership, operation, use or possession of their assets or the employment of
their employees materially violates, or with or without the giving of notice or
passage of time, or both, will materially violate, conflict with or result in a
material default, right to accelerate or loss of rights under, any terms or
provisions of any Law or Order to which Buyer or its Subsidiaries is a party or
by which any of Buyer or its Subsidiaries or their respective assets, business
or employees or the Buyer Shares may be bound or affected, except to the extent
that such violations, conflicts and defaults, individually and in the aggregate,
have not had and would not reasonably be expected to have a Buyer Material
Adverse Effect. None of Buyer or its Subsidiaries have received any written or,
to the Knowledge of Buyer, oral notice of any actual or alleged violation of or
non-compliance with applicable Laws in any material respect by Buyer or any of
its Subsidiaries, except to the extent that such violations and non-compliance,
individually and in the aggregate, has not had and would not reasonably be
expected to have a Buyer Material Adverse Effect.

 

5.7.          No Brokers. Neither Buyer, nor any Representative of Buyer on its
behalf, has employed any broker, finder or investment banker or incurred any
liability for any brokerage fees, commissions, finders’ fees or similar fees in
connection with the transactions contemplated by this Agreement.

 

5.8.          Litigation. There is no Action pending or, to the Knowledge of
Buyer, threatened, nor any Order of any Governmental Authority is outstanding,
against or involving a Buyer Party or any of its officers, directors,
stockholders, properties, assets or businesses, whether at law or in equity,
before or by any Governmental Authority, which would reasonably be expected to
have a Buyer Material Adverse Effect.

 

5.9.          Tax Matters.

 

(a)          Each of Buyer and its Subsidiaries has timely filed all income and
other material Tax Returns required to have been filed by it, and all such Tax
Returns are accurate and complete in all material respects;

 

(b)          each of Buyer and its Subsidiaries has paid all Taxes owed by it
which were due and payable (whether or not shown on any Tax Return), except for
Taxes being contested in good faith and for which adequate reserves have been
established and maintained in accordance with GAAP;

 

(c)          the charges, accruals and reserves with respect to Taxes included
within the financial statements of Buyer and its Subsidiaries are adequate for
the payment of all Taxes not yet due and payable or that are being contested in
good faith;

 

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(d)          none of Buyer or its Subsidiaries has filed for an extension of
time within which to file any Tax Return which extension is currently in effect;

 

(e)          there is no current Action against Buyer or any of its Subsidiaries
in writing by a Governmental Authority in a jurisdiction where Buyer or such
Subsidiary does not file Tax Returns that Buyer or such Subsidiary is or may be
subject to taxation by that jurisdiction;

 

(f)          there are no currently pending or ongoing Tax audits or other
administrative proceedings of the Tax Returns of Buyer or any of its
Subsidiaries by any Governmental Authority, for which written notice has been
received, with regard to any Taxes for which Buyer or such Subsidiary would be
liable;

 

(g)          none of Buyer or its Subsidiaries has requested or received any
ruling from, or signed any binding agreement with, any Governmental Authority
that would apply to any Tax periods ending after the Closing Date;

 

(h)          there are no Liens for Taxes (other than liens for Taxes not yet
due and payable or for Taxes that are being contested in good faith) on any of
the assets of Buyer or its Subsidiaries;

 

(i)          no unpaid Tax deficiency has been asserted in writing against or
with respect to Buyer or any of its Subsidiaries by any Governmental Authority
which Tax either remains unpaid or that has not been properly reflected in the
financial statements of Buyer and its Subsidiaries;

 

(j)          each of Buyer and its Subsidiaries has complied in all material
respects with all applicable Laws relating to the payment and withholding of
Taxes and has, within the time and manner prescribed by Law, paid over to the
proper Governmental Authority in all material respects all amounts required to
be withheld and paid over under all applicable Laws;

 

(k)          none of Buyer or its Subsidiaries has granted or is subject to, any
outstanding waiver of the period of limitations for the assessment of any Tax
for any currently open taxable period;

 

(l)          none of Buyer or its Subsidiaries is a party to any Tax allocation,
sharing or indemnity agreement or otherwise has any potential or actual material
Liability for the Taxes of another Person (other than Buyer or its
Subsidiaries), whether by applicable Tax Law, as a transferee or successor or by
contract, indemnity or otherwise;

 

(m)          none of Buyer or its Subsidiaries will be required to include in
taxable income for any period ending after the Closing Date any amount as a
result of any change in method of accounting for any period beginning on or
prior to the Closing Date pursuant to Section 481 of the Code;

 

(n)          there is no Contract or employee benefit plan covering any Person
that, individually or collectively, could give rise to the payment of any amount
that would not be deductible by Buyer or any of its Subsidiaries by reason of
Section 280G or Section 162(m) of the Code, and no Person is entitled to receive
any “gross-up” payment from Buyer or any of its Subsidiaries in the event that
the excise Tax of Section 4999(a) of the Code is imposed on such Person;

 

(o)          none of Buyer or any of its Subsidiaries has participated in any
transaction identified as a (i) “listed transaction,” within the meaning of
Treasury Regulations Sections 1.6011-4(b)(2), (ii) a “transaction of interest,”
within the meaning of Treasury Regulations Section 1.6011-4(b)(6), or (iii) any
transaction that is “substantially similar” (within the meaning of Treasury
Regulations Section 1.6011-4(c)(4)) to a “listed transaction” or “transaction of
interest”;

 

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(p)          none of Buyer or any of its Subsidiaries has a “permanent
establishment” in any country other than the country in which it was
established, as defined in any applicable Tax treaty or convention between the
United States of America and such other country, or has engaged in a trade or
business in any country other than the country in which it was established; and

 

(q)          no written power of attorney which is currently in force has been
granted by Buyer or any of its Subsidiaries with respect to any matter relating
to Taxes.

 

5.10.         Independent Investigation. Buyer has conducted its own independent
investigation, review and analysis of the business, results of operations,
prospects, condition (financial or otherwise) or assets of the RHI Companies,
and acknowledges that it has been provided adequate access to the personnel,
properties, assets, premises, books and records and other documents and data of
the RHI Companies for such purpose. Buyer acknowledges and agrees that in making
its decision to enter into this Agreement and the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby, Buyer has relied
solely upon its own investigation and the express representations and warranties
of the Company set forth in ARTICLE III of this Agreement and of the Sellers set
forth in ARTICLE IV of this Agreement (including the related portions of the
Disclosure Schedules).

 

5.11.         No Other Representations and Warranties. Except for the
representations and warranties contained in this Agreement and the Ancillary
Documents, no Buyer Party makes any express or implied representations or
warranties, and each Buyer Party hereby disclaims any other representations and
warranties, whether made orally or in writing, by or on behalf of a Buyer Party
by any Person. Buyer acknowledges and agrees that the Seller Parties, in making
their decision to enter into this Agreement and the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby, has relied upon the
SEC Reports and the express representations and warranties of the Buyer set
forth in ARTICLE V of this Agreement

 

ARTICLE VI
OTHER AGREEMENTS

 

6.1.          Further Assurances. In the event that at any time after the
Closing any further action is reasonably necessary to carry out the purposes of
this Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
parties reasonably may request, at the sole cost and expense of the requesting
party (unless otherwise specified herein or unless such requesting party is
entitled to indemnification therefor under ARTICLE VII in which case, the costs
and expense will be borne by the parties as set forth in ARTICLE VII). Each
Seller acknowledges and agrees that from and after the Closing, Buyer will be
entitled to possession of, and Sellers will provide to Buyer, all documents,
books, records (including Tax records), agreements, corporate minute books and
financial data of any sort relating to the RHI Companies.

 

6.2.          Confidentiality. Each Seller will, and will cause its
Representatives to: (a) treat and hold in strict confidence any Confidential
Information, and will not use for any purpose (except in furtherance of their
authorized duties on behalf of Buyer, the RHI Companies or their Affiliates),
nor directly or indirectly disclose, distribute, publish, disseminate or
otherwise make available to any third party any of the Confidential Information
without Buyer’s prior written consent; (b) in the event that a Seller becomes
legally compelled to disclose any Confidential Information, to provide Buyer
with prompt written notice of such requirement so that Buyer or an Affiliate
thereof may seek a protective order or other remedy or that Buyer may waive
compliance with this Section 6.2; (c) in the event that such protective order or
other remedy is not obtained, or Buyer waives compliance with this Section 6.2,
to furnish only that portion of such Confidential Information which is legally
required to be provided as advised in writing by outside counsel and to exercise
their commercially reasonable efforts to obtain assurances that confidential
treatment will be accorded such Confidential Information; and (d) to promptly
furnish to Buyer any and all copies (in whatever form or medium) of all such
Confidential Information and to destroy any and all additional copies of such
Confidential Information and any analyses, compilations, studies or other
documents prepared, in whole or in part, on the basis thereof; provided,
however, that Confidential Information will not include any information which,
at the time of disclosure by a Seller or its Representatives, is generally
available publicly and was not disclosed in breach of this Agreement by a Seller
or its Representatives.

 

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6.3.          Publicity. No party hereto shall, and each shall cause their
respective Representatives not to, disclose, make or issue, any statement or
announcement concerning this Agreement or the Ancillary Documents or the
transactions contemplated hereby or thereby (including the terms, conditions,
status or other facts with respect thereto) to any third parties (other than its
Representatives who need to know such information in connection with carrying
out or facilitating the transactions contemplated hereby) without the prior
written consent of the other parties (such consent not to be unreasonably
withheld, delayed or conditioned), except (i) in the case of the Company or the
Sellers, as required by applicable Law after conferring with the other parties
concerning the timing and content of such required disclosure, and (ii) in the
case of Buyer, as may be required of Buyer or its Affiliates by applicable Law
(including any SEC position) or securities listing or trading requirement.

 

6.4.          Litigation Support. Following the Closing, in the event that and
for so long as any party is actively contesting or defending against any third
party or Governmental Authority Action in connection with any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction that existing on or prior to the
Closing Date involving any RHI Company, each of the other parties will (i)
reasonably cooperate with the contesting or defending party and its counsel in
the contest or defense, (ii) make available its personnel at reasonable times
and upon reasonable notice and (iii) provide (A) such testimony and (B) access
to its non-privileged books and records as may be reasonably requested in
connection with the contest or defense, at the sole cost and expense of the
contesting or defending party (unless such contesting or defending party is
entitled to indemnification therefor under ARTICLE VII in which case, the costs
and expense will be borne by the parties as set forth in ARTICLE VII).

 

6.5.          Agreement Regarding Intellectual Property. Each Seller has already
disclosed or will disclose to the RHI Companies as of the Closing any and all
Intellectual Property developed by such Seller on behalf of a RHI Company or
relating to the business of a RHI Company, including Intellectual Property used
in a RHI Company’s business, and Intellectual Property intended for future use
in a RHI Company’s business, and each does hereby forever and irrevocably
assign, convey, transfer and grant to the applicable RHI Company, without
further consideration, and in perpetuity, any and all right, title and interest
that such Seller may have in and to such Intellectual Property, including any
and all rights to file applications to register any such Intellectual Property
anywhere in the world, any and all rights to claim any rights of priority
bestowed by any domestic or foreign laws in connection with such Intellectual
Property, and to sue and recover damages or any other available relief based on
any claims or causes of action for past or future infringement(s) of such
Intellectual Property rights. Each Seller represents that it has not made any
assignment of, or granted any rights in any such Intellectual Property to any
Person other than the applicable RHI Company, and has not disclosed such
Intellectual Property to any third party. Upon Buyer’s or the applicable RHI
Company’s request at any time, including any time after the Closing, such Seller
will execute and deliver to Buyer or the applicable RHI Company such other
documents as Buyer or such RHI Company deems necessary or desirable to vest in
such RHI Company the sole ownership of and exclusive worldwide perpetual rights
in and to, all of such Intellectual Property. Each Seller will deliver to the
applicable RHI Company all copies or embodiments of such Intellectual Property
in any media in such Seller’s possession at or prior to the Closing.

 

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6.6.          Release and Covenant Not to Sue. Effective as of the Closing, each
Seller hereby releases and discharges each RHI Company from and against any and
all Actions, obligations, agreements, debts and Liabilities whatsoever, whether
known or unknown, both at law and in equity, which such Seller now has, has ever
had or may hereafter have against such RHI Company arising on or prior to the
Closing Date or on account of or arising out of any matter occurring on or prior
to the Closing Date, including any rights to indemnification or reimbursement
from such RHI Company, whether pursuant to its Governing Documents, Contract or
otherwise, and whether or not relating to claims pending on, or asserted after,
the Closing Date. From and after the Closing, each Seller hereby irrevocably
covenants to refrain from, directly or indirectly, asserting any Action, or
commencing or causing to be commenced, any Action of any kind against a RHI
Company or its Affiliates, based upon any matter purported to be released
hereby. Notwithstanding anything herein to the contrary, the releases and
restrictions set forth herein shall not apply to the rights of any Seller (i)
pursuant to the terms and conditions of this Agreement or any Ancillary Document
or (ii) under the Convertible Notes.

 

6.7.          Lock-Up.

 

(a)          Except for Buyer Shares transferred as an indemnification payment
in accordance with Section 7.7, each Seller hereby agrees not to, without the
prior written consent of Buyer, during the period commencing from the Closing
and ending on the six (6) month anniversary of the Closing: (i) lend, offer,
pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any Buyer Shares; (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of any Buyer Shares; or (iii) publicly disclose the
intention to do any of the foregoing; whether any such transaction described in
clauses (i), (ii) or (iii) above is to be settled by delivery of Buyer Shares or
other securities, in cash or otherwise (any of the foregoing described in
clauses (i), (ii), or (iii), a “Prohibited Transfer”). After the six (6) month
anniversary of the Closing and until the one (1) year anniversary of the
Closing, during each ninety (90) day period, a Seller may transfer up to five
percent (5%) of the average daily volume of the Buyer Shares during the prior
ninety (90) day period, and will otherwise continue to be subject to the
restrictions with respect to the other Buyer Shares owned by such Seller and any
transfer of such other Buyer Shares will be a Prohibited Transfer. After the one
(1) year anniversary of the Closing, the Sellers’ restrictions under this
Section ‎6.7(a) with respect to the Buyer Shares shall lapse. Notwithstanding
the foregoing, the transfer restrictions in this Section ‎6.7(a) shall cease
upon the consummation of a liquidation, merger, share exchange or other similar
transaction following the Closing that results in all of Buyer’s shareholders
having the right to exchange their equity holdings in Buyer for cash, securities
or other property.

 

(b)          Notwithstanding Section ‎6.7(a), no Seller may transfer any Buyer
Shares, and any transfer of Buyer Shares in such case will be a Prohibited
Transfer, in the event that the aggregate amount of outstanding claims (both
pending claims and those that have been finally resolved, but not yet paid) by
the Buyer Indemnified Parties against the Sellers under this Agreement and the
Ancillary Documents exceeds the aggregate value of the Buyer Shares held by the
Sellers at such time (valued at the Buyer Common Stock Price).

 

(c)          Each Seller further agrees to execute such agreements as may be
reasonably requested by Buyer, in form and substance reasonably satisfactory to
such Seller, that are consistent with the foregoing or that are necessary to
give further effect thereto. If any Prohibited Transfer is made or attempted
contrary to the provisions of this Section ‎6.7, such purported Prohibited
Transfer shall be null and void ab initio, and Buyer shall refuse to recognize
any such purported transferee of the Buyer Shares as one of its equity holders
for any purpose. In order to enforce this Section ‎6.7, Buyer may impose
stop-transfer instructions with respect to the Buyer Shares until the end of the
restriction period described in the this Section ‎6.7.

 

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6.8.          Audited Financial Statements. Each Seller hereby agrees to
cooperate and cause its Representatives to cooperate with Buyer and the RHI
Companies in their efforts from and after the Closing to have an auditor
selected by Buyer conduct an audit of the RHI Companies for periods prior to the
Closing as determined by Buyer, including the fiscal years ended December 31,
2013 and December 31, 2014, and to issue within seventy (70) days after the
Closing Date an audit opinion with respect to such periods on the financial
statements of the RHI Companies, as modified for audit adjustments.

 

6.9.          Termination of Certain Agreements. Without limiting the provisions
of Section 6.6, the parties hereby agree that, effective at the Effective Time,
(i) any shareholders agreement among the Company and any of the Sellers or among
the Sellers with respect to the Company’s capital stock, including the
Shareholder Agreement, dated as of August 11, 2011, as amended (the “Shareholder
Agreement”), by and among the Company and the shareholders of the Company named
therein, and (ii) any registration rights between the Company and its
shareholders, in each case of clauses (i) and (ii), shall automatically, and
without any further action of the parties, terminate in full and become null and
void and of no further force and effect. Further, each Seller and the Company
hereby waive any obligations of the parties under the Shareholder Agreement with
respect to the transactions contemplated by this Agreement and the Ancillary
Documents, and any failure of the parties to comply with the terms thereof in
connection with the transactions contemplated by this Agreement and the
Ancillary Documents.

 

6.10.         Certain Tax Matters.

 

(a)          Buyer and the Company shall each use its best efforts to cause the
Merger to qualify as a “reorganization” within the meaning of Section 368(a) of
the Code. Neither Buyer nor the Company, nor their respective Affiliates, shall
directly or indirectly (without the consent of the other) take any action (or
fail to take any action) that would reasonably be expected to adversely affect
the Merger from qualifying as a “reorganization” within the meaning of Section
368(a) of the Code.

 

(b)          Buyer shall be responsible for, and shall pay, fifty percent (50%)
of, and the Sellers shall be responsible for, and shall pay, fifty percent (50%)
of all sales, use, real property transfer or gains tax, stamp tax, stock
transfer tax, or other similar Tax imposed on the Company or any of its
Subsidiaries or the Sellers or Buyer or any of their respective Affiliates as a
result of the transactions contemplated by this Agreement and any penalties or
interest (or addition to Tax) with respect to such Taxes (collectively,
“Transfer Taxes”). Any Tax Returns that must be filed in connection with
Transfer Taxes shall be prepared and filed on or prior to the due date by the
party primarily and customarily responsible under applicable Law for filing such
Tax Returns, and the parties (and their respective Affiliates) agree to
cooperate with each other in the filing of any such Tax Returns, including
promptly supplying any information in their possession that is reasonably
necessary to complete such Tax Returns.

 

(c)          For purposes of this Agreement, whenever it is necessary to
determine the liability for Taxes for a Straddle Period relating to:

 

(i)          property Taxes and other ad valorem or similar Taxes of any of the
RHI Companies for a Straddle Period, the determination of the Taxes of any RHI
Company for the portion of the Straddle Period ending on and including, and the
portion of the Straddle Period beginning the day after, the Closing Date shall
be calculated by allocating to the periods before and after the Closing Date pro
rata, based on the number of the days of the Straddle Period in the period
before and ending on the Closing Date, on the one hand, and the number of days
in the Straddle Period in the period beginning the day after the Closing Date,
on the other hand; and

 

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(ii)         Taxes of any of the RHI Companies not described in Section
6.10(c)(i) (including Taxes (A) based on the income or receipts of any RHI
Company for a Straddle Period, (B) imposed in connection with any sale or other
transfer or assignment of property (including sales, use and transfer Taxes),
other than Transfer Taxes, for a Straddle Period and (C) withholding and
employment Taxes, the determination of the Taxes of any RHI Company for the
portion of the Straddle Period ending on and including, and the portion of the
Straddle Period beginning the day after, the Closing Date shall be calculated by
assuming that the Straddle Period consisted of two taxable periods, one which
ended at the close of the Closing Date and the other which began at the
beginning of the day following the Closing Date and items of income, gain,
deduction, loss or credit of the RHI Companies for the Straddle Period shall be
allocated between such taxable years or periods on a “closing of the books
basis” by assuming that the books of the RHI Companies were closed at the close
of the Closing Date; provided, however, that exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
amortization and depreciation, shall be apportioned between such two taxable
years or periods on a daily basis (notwithstanding that such exemptions,
allowances or deductions may under applicable Law be determined solely at the
end of the taxable period).

 

(d)          Any refunds or credits of Taxes, plus any interest attributable
thereto, that are received by Buyer (or its Affiliates) or any of the RHI
Companies, and any amounts credited against Taxes, plus any interest
attributable thereto, to which Buyer (or its Affiliates) or any of the RHI
Companies become entitled, that relate to Pre-Closing Periods and Straddle
Periods of the RHI Companies (such refund and credit for a Straddle Period to be
allocated in accordance with the principles of Section 6.10(c)), shall be for
the account of the Sellers, and Buyer shall pay (or cause to be paid) to the
Sellers as an indemnification payment under ARTICLE VII subject to Section 7.7,
any such refund or the amount of such credit within fifteen (15) days after
receipt or entitlement thereto (or utilization thereof), provided, however, that
the Sellers shall not be entitled to any such refund or credit (i) to extent
such amounts were reflected on the Financial Statements or (ii) relating to a
net operating loss carryback or credit carryback relating to any taxable period
beginning after the Closing Date. For purposes of this Section 6.10(d), Buyer
(or its Affiliates) and any RHI Company shall be deemed to have received a
refund or credit of Taxes to the extent that Buyer (or its Affiliates) and any
RHI Company, as applicable, elects to apply such refund or credit, which it
would otherwise would have been entitled to receive, to offset or reduce Taxes
relating to any taxable period (or portion of any Straddle Period, determined in
accordance with the principles of Section 6.10(c)) beginning after the Closing
Date. Buyer shall, and shall cause the RHI Companies, to cooperate with the
Sellers in obtaining refunds and credits of the RHI Companies relating to
Pre-Closing Periods and Straddle Periods (including through amendment of Tax
Returns).

 

(e)          The Sellers, the RHI Companies and Buyer (and its Affiliates) shall
reasonably cooperate, and shall cause their respective affiliates, officers,
employees, agents, auditors and representatives to reasonably to cooperate, in
preparing and filing all Tax Returns, including maintaining and making available
to each other all records necessary in connection with Taxes and in resolving in
good faith all disputes and audits with respect to all taxable periods relating
to Taxes.

 

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ARTICLE VII
INDEMNIFICATION

 

7.1.          Survival. All representations and warranties contained in this
Agreement (including all Schedules and Exhibits hereto and all certificates,
documents, instruments and undertakings furnished pursuant to this Agreement)
shall survive the Closing through and until the eighteen (18) month anniversary
of the Closing Date; provided, however, that (i) the representations and
warranties contained in Section 3.15 (Tax Matters) and 5.9 (Tax Matters) shall
survive until sixty (60) days after the expiration of the applicable statute of
limitations, and (ii) the representations and warranties contained in Sections
3.1 (Organization and Qualification), 3.2 (Authorization; Corporate
Documentation), 3.3 (Capitalization), (Subsidiaries), 3.20 (No Brokers), 3.21
(No Other Representations and Warranties), 4.1 (Organization and Authorization)
4.2 (Title to Company Shares), 4.5 (Investment Representations), 4.6 (No
Brokers), 4.7 (No Other Representations and Warranties), 5.1 (Organization and
Qualification), 5.2 (Authorization), 5.4 (Buyer Shares), 5.7 (No Brokers), 5.10
(Independent Investigation) and 5.11 (No Other Representations and Warranties)
will survive indefinitely (such representations and warranties in clauses (i)
through (ii), collectively, the “Special Reps”). For purposes of this Agreement,
the “Survival Date” with respect to any representation or warranty shall mean
the date when such representation or warranty shall survive in accordance with
this Section 7.1. If written notice of a claim for breach of any representation
or warranty has been given on or before the applicable Survival Date for such
representation or warranty, then the relevant representations and warranties
shall survive as to such claim, until the claim has been finally resolved. All
covenants, obligations and agreements of the parties contained in this Agreement
(including all Schedules and Exhibits hereto and all certificates, documents,
instruments and undertakings furnished pursuant to this Agreement), including
any indemnification obligations, shall survive the Closing and continue until
fully performed in accordance with their terms. No claim for breaches of
representations and warranties may be brought after the Survival Date except for
Fraud Claims. Fraud Claims shall survive until the applicable statute of
limitations. For the avoidance of doubt, a claim for indemnification under any
subsection of Section 7.2 or 7.3 other than clauses (a) or (b) thereof may be
made at any time.

 

7.2.          Indemnification by Sellers. Except as otherwise limited by this
ARTICLE VII, Sellers shall jointly and severally indemnify, defend and hold
harmless the Buyer Parties and their respective Representatives and any assignee
or successor thereof (collectively, the “Buyer Indemnified Parties”) from and
against, and pay or reimburse the Buyer Indemnified Parties for, any and all
losses, Actions, Orders, Liabilities, damages (including consequential damages
(but, except to the extent claimed by a third party in a third party claim, only
to the extent reasonably foreseeable), but in each instance excluding punitive
damages, except to the extent claimed by a third party in a third-party claim),
diminution in value, Taxes, interest, penalties, Liens, amounts paid in
settlement, costs and expenses (including reasonable expenses of investigation
and court costs and reasonable attorneys’ fees and expenses), (any of the
foregoing, a “Loss”) suffered or incurred by, or imposed upon, any Buyer
Indemnified Party arising in whole or in part out of or resulting directly or
indirectly from: (a) any inaccuracy in or breach of any representation or
warranty made by a Seller Party in this Agreement (including all Schedules and
Exhibits hereto) or any Ancillary Document; (b) any non-fulfillment or breach of
any unwaived covenant, obligation or agreement made by or on behalf of a Seller
or, at or prior to the Closing, the Company contained in this Agreement
(including all Schedules and Exhibits hereto) or any Ancillary Document; (c) any
Pre-Closing Taxes; (d) any Liability of an RHI Company as of the Closing or
incurred by an RHI Company in the operation of the business of the RHI Companies
prior to the Closing (other than (i) the obligations of the RHI Companies under
the Convertible Note, (ii) $25,000 in Transaction Expenses incurred by the
Company and the Sellers in connection with this Agreement and the transactions
contemplated hereby and (iii) an aggregate of $25,000 in Liabilities incurred in
the Ordinary Course of Business (other than liabilities for breach of any
Contract or violation of any Law)); or (e) enforcing any Buyer Indemnified
Party’s indemnification rights provided for under this Section 7.2 in connection
with a successful indemnification claim.

 

7.3.          Indemnification by Buyer. Except as otherwise limited by this
ARTICLE VII, Buyer shall indemnify, defend and hold harmless each Seller and its
Representatives and any assignee or successor thereof (collectively, the “Seller
Indemnified Parties”) from and against, and pay or reimburse the Seller
Indemnified Parties for, any and all Losses, suffered or incurred by, or imposed
upon, any Seller Indemnified Party arising in whole or in part out of or
resulting directly or indirectly from: (a) any inaccuracy in or breach of any
representation or warranty made by a Buyer Party in this Agreement (including
all Schedules and Exhibits hereto) or any Ancillary Document; (b) any
non-fulfillment or breach of any unwaived covenant, obligation or agreement made
by or on behalf of a Buyer Party or, after the Closing, the Company contained in
this Agreement (including all Schedules and Exhibits hereto) or any Ancillary
Document; or (c) enforcing any Seller Indemnified Party’s indemnification rights
provided for under this Section 7.3 in connection with a successful
indemnification claim.

 

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7.4.          Indemnification Procedures.

 

(a)          For the purposes of this Agreement, (i) the term “Indemnitee” shall
refer to the Person or Persons indemnified, or entitled, or claiming to be
entitled, to be indemnified, pursuant to the provisions of Section 7.2 or 7.3,
as the case may be, and (ii) the term “Indemnitor” shall refer to the Person
having the actual or alleged obligation to indemnify pursuant to such
provisions. Notwithstanding anything to the contrary contained in this
Agreement, the Seller Representative will have the sole and exclusive right to
act on behalf of the Seller Indemnified Parties with respect to any
indemnification claims made pursuant to this ARTICLE VII, including bringing and
settling any claims hereunder and receiving any notices on behalf of the Seller
Indemnified Parties.

 

(b)          In the case of any claim for indemnification under this Agreement
arising from a claim of a third party (including any Governmental Authority), an
Indemnitee must give prompt written notice and, subject to the following
sentence, in no case later than thirty (30) days after the Indemnitee’s receipt
of notice of such claim, to the Indemnitor of any claim of which such Indemnitee
has knowledge and as to which it may request indemnification hereunder. The
failure to give such notice will not, however, relieve an Indemnitor of its
indemnification obligations except to the extent that the Indemnitor is
materially and adversely prejudiced thereby. The Indemnitor will have the right
to defend and to direct the defense against any such claim in its name and at
its expense, and with counsel selected by the Indemnitor unless: (i) the
Indemnitor fails to acknowledge fully its obligations to the Indemnitee within
fifteen (15) days after receiving notice of such third party claim or contests,
in whole or in part, its indemnification obligations therefor; (ii) if the
Indemnitee is a Buyer Indemnified Party, (A) the applicable third party claimant
is a Governmental Authority or a then-current customer of Buyer, any RHI Company
or any of their respective Affiliates, (B) an adverse judgment with respect to
the claim will establish a precedent materially adverse to the continuing
business interests of Buyer, any RHI Company or their respective Affiliates or
(C) the third party claim seeks indemnification for amounts greater than (I) the
aggregate value of the Buyer Shares held by the Sellers that are not subject to
other pending claims or (II) the Indemnification Cap when combined with all
other pending and completed indemnification claims; (iii) there is a conflict of
interest between the Indemnitee and the Indemnitor in the conduct of such
defense; (iv) the applicable third party alleges Fraud Claims; or (v) such claim
is criminal in nature, could reasonably be expected to lead to criminal
proceedings, or seeks an injunction or other equitable relief against the
Indemnitee. If the Indemnitor elects, and is entitled, to compromise or defend
such claim, it will within fifteen (15) days (or sooner, if the nature of the
claim so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee will, at the request and expense of the Indemnitor, cooperate in the
defense of such claim. If the Indemnitor elects not to, or is not entitled under
this Section 7.4(b) to, compromise or defend such claim, fails to notify the
Indemnitee of its election as herein provided or refuses to acknowledge or
contests its obligation to indemnify under this Agreement, the Indemnitee may
pay, compromise or defend such claim. Notwithstanding anything to the contrary
contained herein, the Indemnitor will have no indemnification obligations with
respect to any such claim which has been or will be settled by the Indemnitee
without the prior written consent of the Indemnitor (which consent will not be
unreasonably withheld, delayed or conditioned); provided, however, that
notwithstanding the foregoing, the Indemnitee will not be required to refrain
from paying any claim which has matured by a court judgment or decree, unless an
appeal is duly taken therefrom and exercise thereof has been stayed, nor will it
be required to refrain from paying any claim where the delay in paying such
claim would result in the foreclosure of a Lien upon any of the property or
assets then held by the Indemnitee or where any delay in payment would cause the
Indemnitee material economic loss. The Indemnitor’s right to direct the defense
will include the right to compromise or enter into an agreement settling any
claim by a third party; provided, that no such compromise or settlement will
obligate the Indemnitee to agree to any settlement that (i) requires the taking
or restriction of any action (including the payment of money and competition
restrictions) by the Indemnitee (other than the delivery of a release for such
claim and customary confidentiality obligations), except with the prior written
consent of the Indemnitee (such consent to be withheld, conditioned or delayed
only for a good faith reason) or (ii) if a Buyer Indemnified Party is the
Indemnitee, exceeds the aggregate value of the Buyer Shares held by the Sellers
that are not subject to other pending claims. Notwithstanding the Indemnitor’s
right to compromise or settle in accordance with the immediately preceding
sentence, the Indemnitor may not settle or compromise any claim over the
objection of the Indemnitee; provided, however, that consent by the Indemnitee
to settlement or compromise will not be unreasonably withheld, delayed or
conditioned. The Indemnitee will have the right to participate in the defense of
any claim with counsel selected by it subject to the Indemnitor’s right to
direct the defense. The fees and disbursements of such counsel will be at the
expense of the Indemnitee; provided, however, that, in the case of any claim
which seeks injunctive or other equitable relief against the Indemnitee, the
fees and disbursements of such counsel will be at the expense of the Indemnitor.

 

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(c)          Any indemnification claim that does not arise from a third party
claim must be asserted by a written notice to the Indemnitor setting forth with
reasonable specificity the amount claimed and the underlying facts supporting
such claim to the extent then known by the Indemnitee. The Indemnitor will have
a period of thirty (30) days after receipt of such notice within which to accept
or dispute such claim by providing written notice to the Indemnitee. If the
Indemnitor does not respond within thirty (30) days, the Indemnitor will be
deemed to have accepted responsibility for the Losses set forth in such notice
and will have no further right to contest the validity of such notice. If the
Indemnitor responds in such thirty (30) day period and rejects such claim in
whole or in part, the Indemnitee will be free to pursue such remedies as may be
available to it under this Agreement (subject to Section 8.10), any other
Ancillary Documents or applicable Law.

 

7.5.          Limitations on Indemnification. No Indemnitor shall be liable for
an indemnification claim made under clause (a) of Section 7.2 or 7.3, as the
case may be: (x) unless and until the Losses of the Buyer Indemnified Parties,
collectively, or the Seller Indemnified Parties, collectively, as applicable,
exceed an aggregate amount equal to Seventy-Five Thousand U.S. Dollars ($75,000)
(the “Basket”), in which case the applicable Indemnitor(s) shall be obligated to
the Indemnitee(s) for the amount of all Losses of the Indemnitee(s) (including
the first dollar of Losses of the Buyer Indemnified Parties or the Seller
Indemnified Parties, as applicable, required to reach the Basket); and (y) to
the extent Losses incurred by the Buyer Indemnified Parties in the aggregate
under clause (a) of Section 7.2 or by the Seller Indemnified Parties in the
aggregate under clause (a) of Section 7.3, as applicable, exceed an amount equal
to Three Million U.S. Dollars ($3,000,000) (the “Indemnification Cap”);
provided, that with respect to any claims for breaches of any Special Reps, the
Indemnification Cap shall be equal to the amount of the Purchase Price.
Notwithstanding the foregoing, (i) the Basket shall not apply with respect to
any claims for breaches of any Special Reps and (ii) Basket and the
Indemnification Cap shall not apply to (A) indemnification claims to the extent
amounts are actually paid under insurance maintained by the Indemnitor (or any
of its Affiliates) and (B) Fraud Claims. The Basket and the Indemnification Cap
shall apply only to indemnification claims made under clause (a) of Section 7.2
or 7.3 and shall not affect or apply to any other indemnification claim made
pursuant to this Agreement, including those asserted under any other clause of
Section 7.2 or 7.3.

 

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7.6.          General Indemnification Provisions. The amount of any Losses
suffered or incurred by any Indemnitee shall be reduced by (i) the amount of any
insurance proceeds or other cash receipts paid to the Indemnitee or any
Affiliate thereof as a reimbursement with respect to such Losses (and no right
of subrogation shall accrue to any insurer hereunder, except to the extent that
such waiver of subrogation would prejudice any applicable insurance coverage),
including any indemnification received by the Indemnitee or such Affiliate from
an unrelated party with respect to such Losses, net of the costs of collection
and any related future increases in insurance premiums resulting from such Loss
or insurance payment, and (ii) any Tax Benefits actually realized by the
Indemnitee from the incurrence or payment of any such Losses. To the extent that
any Tax Benefit is actually realized following the date that an indemnity
payment is made by the Indemnitor to the Indemnitee hereunder, then no later
than five (5) Business Days after a Tax Return of the Indemnitee has been filed
that takes into account the deduction, loss or other Tax attribute generated as
a result of the Losses that gave rise to the indemnification by the Indemnitor,
the Indemnitee shall pay to the Indemnitor as an indemnification payment under
this ARTICLE VII subject to Section 7.7, the amount of the Tax Benefit realized
as a result of the Losses that gave rise to the indemnification by the
Indemnitor. No investigation by a Buyer Party or its Representatives, on the one
hand, or the Seller Parties or their Representatives, on the other hand, or
knowledge by a Buyer Party or its Representatives, on the one hand, or the
Seller Parties or their Representatives, on the other hand, of a breach of a
representation or warranty of the other set of parties shall affect such other
set of parties’ representations and warranties or the recourse available to such
first party or any other Indemnitee of such first party under any provision of
this Agreement (including ARTICLE VII) with respect thereto. Notwithstanding
anything in this Agreement to the contrary, for purposes of application of the
indemnification provisions of this ARTICLE VII, the amount of any Loss arising
from the breach of any representation, warranty, covenant, obligation or
agreement contained in this Agreement shall be the entire amount of any Loss
actually incurred by the respective Indemnitee as a result of such breach and
not just that portion of the Loss that exceeds the relevant level of
materiality, if any. No Seller will have any right to seek contribution from a
RHI Company with respect to all or any part of such Seller’s indemnification
obligations under this ARTICLE VII. The Buyer Indemnified Parties will not be
required to make any claim against a RHI Company in respect of any
representation, warranty, covenant or any other obligation of the Company to a
Buyer Party hereunder or under any Ancillary Document to which the Company is a
party, and may solely seek action against Sellers.

 

7.7.          Indemnification Payment Method. Notwithstanding anything to the
contrary contained herein, except for Fraud Claims: (i) claims for
indemnification pursuant to this ARTICLE VII shall solely be paid by delivery of
shares of Buyer Common Stock to the Indemnified Parties; (ii) any
indemnification obligation of a Seller under this ARTICLE VII will be paid
within five (5) Business Days after the determination of such obligation in
accordance with Section 7.4, by delivery of the Buyer Shares (valued in each
case at the Buyer Common Stock Price) held by such Seller or its Affiliate,
subject to a maximum number of Buyer Shares for each Seller equal to the number
of Buyer Shares owned by such Seller and its Affiliate at such time; and (iii)
any indemnification obligation of Buyer under this ARTICLE VII will be paid
within five (5) Business Days after the determination of such obligation in
accordance with Section 7.4, by delivery of additional shares of Buyer Common
Stock (valued in each case at the trailing twenty (20) trading day volume
weighted average price of Buyer Common Stock as of the end of the last trading
day immediately prior to the date of the determination of such obligation in
accordance with Section 7.4). Without limiting any of the foregoing or any other
rights of the Buyer Indemnified Parties under this Agreement or any Ancillary
Document or at law or equity, in the event that a Seller or its Affiliate fails
to promptly transfer any such Buyer Shares pursuant to this Section 7.7, Buyer
shall be and hereby is authorized as the attorney-in-fact for such Seller or its
Affiliate to transfer such Buyer Shares to the proper recipient thereof as
required by this Section 7.7, and may transfer such Buyer Shares and cancel the
stock certificates for such Buyer Shares on its books and records and issue new
stock certificates to such transferee and may instruct its agents and any
exchanges on which shares of Buyer Common Stock are listed or traded to do the
same. The provisions of this ARTICLE VII notwithstanding, at its sole discretion
and without limiting any other rights of the Buyer Indemnified Parties under
this Agreement or any Ancillary Document or at law or equity, to the extent that
a Buyer Indemnified Party is determined in accordance with Section 7.4 to be
entitled to indemnification hereunder, if a Seller fails or refuses to promptly
indemnify such Buyer Indemnified Party as provided herein then Buyer (or any
other Buyer Indemnified Party) may offset the full amount to which such Buyer
Indemnified Party is entitled, in whole or in part, by reducing the amount of
any payment or other obligation due to such Seller pursuant to this Agreement,
including any amounts owed by Buyer pursuant to any outstanding indemnification
claim.

 

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7.8.          Exclusive Remedy. The remedies provided for in this ARTICLE VII
will be the sole and exclusive remedies of the Indemnitees for any breach of or
inaccuracy in any representation, warranty, covenant or agreement contained in
this Agreement; provided, however, that nothing in this Agreement is intended to
waive any claims for fraud in connection with the transactions contemplated by
this Agreement or prohibit a party from seeking any equitable remedies,
including the right to an injunction or specific performance, to which it may be
entitled.

 

ARTICLE VIII
GENERAL PROVISIONS

 

8.1.          Expenses. Except as otherwise expressly set forth elsewhere in
this Agreement, the Seller Parties will bear their respective legal and other
fees and expenses incurred in connection with their negotiating, executing and
performing this Agreement, including any related broker’s or finder’s fees
(collectively, “Transaction Expenses”), for periods on or before the Closing
Date, and each Buyer Party will bear its own Transaction Expenses; provided,
that Buyer will pay up to $25,000 of the legal fees incurred by the Company and
the Sellers prior to the Closing in negotiating, executing and performing this
Agreement and enacting any corporate restructuring required to complete the
transaction. Sellers will bear their own legal and other fees and expenses
incurred in connection with this Agreement, including any costs and expenses
incurred by the Seller Representative on their behalf, subject to the provisions
of this Agreement.

 

8.2.          Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (i) when received if given in person or by courier or a courier
service, (ii) on the date of transmission if sent by facsimile or email (with
affirmative confirmation of receipt, and provided, that the party providing
notice shall within two (2) Business Days provide notice by another method under
this Section 8.2) or (iii) three (3) Business Days after being deposited in the
U.S. mail, certified or registered mail, postage prepaid:

  

If to the Seller Representative, any Seller or, prior to the Closing, the
Company, to:   with a copy (which will not constitute notice) to: RocketHub Inc.
  Reed Smith LLP 340 West 42nd Street, #880   599 Lexington Avenue, 22nd Floor
New York, NY 10108   New York, NY 10022 Attn:  Brian Meece   Attn:  Aron Izower,
Esq. Facsimile No.:  (855) 243-2300   Facsimile No.:  (212) 521-5450 Telephone
No:  (646) 761-2205   Telephone No.:  (212) 549-0393 Email:  brian@rockethub.com
  Email:  aizower@reedsmith.com

  

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If to a Buyer Party or, after the Closing, the Company, to:   with a copy (which
will not constitute notice) to: EFactor Group Corp.   Ellenoff Grossman & Schole
LLP 1177 Avenue of the Americas, Suite 5060   1345 Avenue of the Americas, 11th
Floor New York, NY 10036   New York, New York  10105 Attention:  Adriaan
Reinders, CEO   Attention:  Richard Anslow, Esq. Email:  adrie@efactorgroup.com
  Facsimile No.:  (212) 370-7889 Telephone No.:  (650) 380-6813   Telephone
No.:  (212) 370-1300

 

or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.

 

8.3.          Sellers Not Authorized to Act on Behalf of a Buyer Party. In the
event that a Seller becomes a director, officer, employee or other authorized
agent of a Buyer Party or its Affiliates (including, after the Closing, any RHI
Company), such Seller shall have no authority, express or implied, to act or
make any determination on behalf of a Buyer Party or its Affiliates in
connection with this Agreement or any Ancillary Document or the consummation of
the transactions contemplated hereby and thereby or any dispute or Action with
respect thereto.

 

8.4.          Severability. In case any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality, and enforceability of the remaining provisions
will not in any way be affected or impaired. Any illegal or unenforceable term
will be deemed to be void and of no force and effect only to the minimum extent
necessary to bring such term within the provisions of applicable Law and such
term, as so modified, and the balance of this Agreement will then be fully
enforceable. The parties will substitute for any invalid, illegal or
unenforceable provision a suitable and equitable provision that carries out, so
far as may be valid, legal and enforceable, the intent and purpose of such
invalid, illegal or unenforceable provision.

 

8.5.          Assignment. This Agreement may not be assigned by any party
without the prior written consent of the other parties hereto, and any attempted
assignment in violation of this Section 8.5 will be null and void ab initio;
provided, however, that after the Closing, Buyer and the Company may assign its
rights and benefits hereunder (i) to any Affiliate of Buyer or the Company, as
applicable (provided, that Buyer or the Company, as applicable, shall remain
primarily responsible for its obligations hereunder), (ii) to any Person
acquiring all or substantially all of the assets of Buyer and its Subsidiaries
taken as a whole or all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole or a majority of the outstanding equity
securities of Buyer or the Company (whether by stock purchase, merger,
consolidation or otherwise); provided, that the assignee expressly assumes the
obligations of Buyer or the Company, as applicable, hereunder or (iii) as
security to any Person providing debt financing to Buyer or its Affiliates for
the transactions contemplated hereby. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon and inure to the
benefit of the successors and permitted assigns of each party hereto.
Notwithstanding the foregoing, the parties acknowledge that any replacement
Seller Representative shall automatically become a party to this Agreement in
place of the replaced Seller Representative upon his or her appointment and
acceptance in accordance with Section 8.16 hereof.

 

8.6.          No Third-Party Beneficiaries. Except for the indemnification
rights of the Buyer Indemnified Parties and the Seller Indemnified Parties set
forth herein, this Agreement is for the sole benefit of the parties hereto and
their successors and permitted assigns and nothing herein expressed or implied
shall give or be construed to give to any Person, other than the parties hereto
and such successors and permitted assigns, any legal or equitable rights
hereunder.

 

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8.7.          Amendment; Waiver. This Agreement may not be amended or modified
except by an instrument in writing signed by each of the parties hereto.
Notwithstanding anything to the contrary contained herein: (a) the failure of
any party at any time to require performance by the other of any provision of
this Agreement will not affect such party’s right thereafter to enforce the
same; (b) no waiver by any party of any default by any other party will be valid
unless in writing and acknowledged by an authorized representative of the
non-defaulting party, and no such waiver will be taken or held to be a waiver by
such party of any other preceding or subsequent default; and (c) no extension of
time granted by any party for the performance of any obligation or act by any
other party will be deemed to be an extension of time for the performance of any
other obligation or act hereunder.

 

8.8.          Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto, which are hereby incorporated herein by reference and deemed
part of this Agreement), together with the Ancillary Documents constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and undertakings, both written and
oral, with respect to the subject matter hereof.

 

8.9.          Remedies. Except as specifically set forth in this Agreement, any
party having any rights under any provision of this Agreement will have all
rights and remedies set forth in this Agreement and all rights and remedies
which such party may have been granted at any time under any other contract or
agreement and all of the rights which such party may have under any applicable
Law. Except as specifically set forth in this Agreement, any such party will be
entitled to (a) enforce such rights specifically, without posting a bond or
other security or proving damages or that monetary damages would be inadequate,
(b) to recover damages by reason of a breach of any provision of this Agreement
and (c) to exercise all other rights granted by applicable Law. The exercise of
any remedy by a party will not preclude the exercise of any other remedy by such
party.

 

8.10.        Dispute Resolution. Any and all disputes, controversies and claims
(other than applications for a temporary restraining order, preliminary
injunction, permanent injunction or other equitable relief or application for
enforcement of a resolution under this Section 8.10) arising out of, related to,
or in connection with this Agreement or the transactions contemplated hereby (a
“Dispute”) shall be governed by this Section 8.10. A party must, in the first
instance, provide written notice of any Disputes to the other parties subject to
such Dispute, which notice must provide a reasonably detailed description of the
matters subject to the Dispute. The parties involved in such Dispute shall seek
to resolve the Dispute on an amicable basis within ten (10) Business Days of the
notice of such Dispute being received by such other parties subject to such
Dispute; the “Resolution Period”); provided, that if any Dispute would
reasonably be expected to have become moot or otherwise irrelevant if not
decided within sixty (60) days after the occurrence of such Dispute, then there
shall be no Resolution Period with respect to such Dispute. Any Dispute that is
not resolved during the Resolution Period may immediately be referred to and
finally resolved by arbitration pursuant to the then-existing Expedited
Procedures of the Commercial Arbitration Rules (the “AAA Procedures”) of the
American Arbitration Association (the “AAA”). Any party involved in such Dispute
may submit the Dispute to the AAA to commence the proceedings after the
Resolution Period. To the extent that the AAA Procedures and this Agreement are
in conflict, the terms of this Agreement shall control. The arbitration shall be
conducted by one arbitrator nominated by the AAA promptly (but in any event
within five (5) Business Days) after the submission of the Dispute to the AAA
and reasonably acceptable to each party subject to the Dispute, which arbitrator
shall be a commercial lawyer with substantial experience arbitrating disputes
under acquisition agreements. The arbitrator shall accept his or her appointment
and begin the arbitration process promptly (but in any event within five (5)
Business Days) after his or her nomination and acceptance by the parties subject
to the Dispute. The proceedings shall be streamlined and efficient. The
arbitrator shall decide the Dispute in accordance with the substantive law of
the State of New York. Time is of the essence. Each party shall submit a
proposal for resolution of the Dispute to the arbitrator within twenty (20) days
after confirmation of the appointment of the arbitrator. The arbitrator shall
have the power to order any party to do, or to refrain from doing, anything
consistent with this Agreement, the Ancillary Documents and applicable Law,
including to perform its contractual obligation(s); provided, that the
arbitrator shall be limited to ordering pursuant to the foregoing power (and,
for the avoidance of doubt, shall order) the relevant party (or parties, as
applicable) to comply with only one or the other of the proposals. The
arbitrator’s award shall be in writing and shall include a reasonable
explanation of the arbitrator’s reason(s) for selecting one or the other
proposal. The seat of arbitration shall be in New York County, State of New
York, and the language of the arbitration shall be English.

 

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8.11.         Governing Law; Jurisdiction. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York (without
giving effect to its choice of law principles). Subject to Section 8.10, for
purposes of any Action arising out of or in connection with this Agreement or
any transaction contemplated hereby, each party hereto (a) irrevocably submits
to the exclusive jurisdiction and venue of any state or federal court located
within New York County, State of New York (or in any court in which appeal from
such courts may be taken), (b) agrees that service of any process, summons,
notice or document by U.S. registered mail to such party’s respective address
set forth in Section 8.2 shall be effective service of process for any Action
with respect to any matters to which it has submitted to jurisdiction in this
Section 8.11, (c) waives and covenants not to assert or plead, by way of motion,
as a defense or otherwise, in any such Action, any claim that it is not subject
personally to the jurisdiction of such court, that the Action is brought in an
inconvenient forum, that the venue of the Action is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
and hereby agrees not to challenge such jurisdiction or venue by reason of any
offsets or counterclaims in any such Action, and (d) waives any bond, surety or
other security that might be required of any other party with respect thereto.
Each party hereto agrees that a final judgment in any such Action shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law or in equity.

 

8.12.         Waiver of Jury Trial. The parties hereto hereby knowingly,
voluntarily and intentionally waive the right any may have to a trial by jury in
respect to any litigation based hereon, or arising out of, under, or in
connection with this Agreement and any agreement contemplated to be executed in
connection herewith, or any course of conduct, course of dealing, statements
(whether verbal or written) or actions of any party in connection with such
agreements, in each case whether now existing or hereafter arising and whether
sounding in tort or contract or otherwise. Each party hereto acknowledges that
it has been informed by the other parties hereto that this Section 8.12
constitutes a material inducement upon which they are relying and will rely in
entering into this Agreement. Any party hereto may file an original counterpart
or a copy of this Section 8.12 with any court as written evidence of the consent
of each such party to the waiver of its right to trial by jury.

 

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8.13.         Interpretation. The table of contents and the headings and
subheadings of this Agreement are for reference and convenience purposes only
and in no way modify, interpret or construe the meaning of specific provisions
of the Agreement. In this Agreement, unless the context otherwise requires: (i)
whenever required by the context, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa; (ii)
reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity; (iii) “including” (and with correlative meaning “include”) means
including without limiting the generality of any description preceding or
succeeding such term and shall be deemed in each case to be followed by the
words “without limitation”; (iv) the words “herein,” “hereto,” and “hereby” and
other words of similar import in this Agreement shall be deemed in each case to
refer to this Agreement as a whole and not to any particular Section or other
subdivision of this Agreement; (v) the word “if” and other words of similar
import when used herein shall be deemed in each case to be followed by the
phrase “and only if”; (vi) the term “or” means “and/or”; (vii) reference to
“dollars” or “$” shall mean United States Dollars; (viii) reference to any
statute includes any rules and regulations promulgated thereunder; (ix) any
agreement, instrument, insurance policy, Law or Order defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument, insurance policy, Law or Order as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes, regulations,
rules or orders) by succession of comparable successor statutes, regulations,
rules or orders and references to all attachments thereto and instruments
incorporated therein; and (x) except as otherwise indicated, all references in
this Agreement to the words “Section,” “Schedule” and “Exhibit” are intended to
refer to Sections, Schedules and Exhibits to this Agreement.

 

8.14.         Mutual Drafting. The parties acknowledge and agree that: (a) this
Agreement and the Ancillary Documents are the result of negotiations between the
parties and will not be deemed or construed as having been drafted by any one
party, (b) each party and its counsel have reviewed and negotiated the terms and
provisions of this Agreement (including any, Exhibits and Schedules attached
hereto) and the Ancillary Documents and have contributed to their revision, (c)
the rule of construction to the effect that any ambiguities are resolved against
the drafting party will not be employed in the interpretation of this Agreement
or the Ancillary Documents and (d) neither the drafting history nor the
negotiating history of this Agreement or the Ancillary Documents may be used or
referred to in connection with the construction or interpretation thereof.

 

8.15.         Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. A photocopy, faxed,
scanned and/or emailed copy of this Agreement or any Ancillary Document or any
signature page to this Agreement or any Ancillary Document, shall have the same
validity and enforceability as an originally signed copy.

 

8.16.         Seller Representative.

 

(a)          By the execution and delivery of this Agreement, each Seller hereby
irrevocably constitutes and appoints the Seller Representative as the true and
lawful agent, representative and attorney-in-fact of such Seller with full
powers of substitution to act in the name, place and stead of thereof with
respect to the performance on behalf of such Seller under the terms and
provisions of this Agreement and the Ancillary Documents, as the same may be
from time to time amended, and to do or refrain from doing all such further acts
and things, and to execute all such documents on behalf of such Seller, if any,
as the Seller Representative will deem necessary or appropriate in connection
with any of the transactions contemplated under this Agreement or any of the
Ancillary Documents, including: (i) act for Sellers with respect to all
indemnification matters referred to in this Agreement, including the right to
compromise on behalf of Sellers any indemnification claim made by or against
Sellers, if any; (ii) act for Sellers with respect to all post-Closing matters;
(iii) terminate, amend or waive any provision of this Agreement; provided, that
any such action, if material to the rights and obligations of Sellers in the
reasonable judgment of the Seller Representative, will be taken in the same
manner with respect to all Sellers unless otherwise agreed by each Seller who is
subject to any disparate treatment of a potentially adverse nature; (iv) employ
and obtain the advice of legal counsel, accountants and other professional
advisors as the Seller Representative, in his or her sole discretion, deems
necessary or advisable in the performance of his or her duties as the Seller
Representative and to rely on their advice and counsel; (v) incur and pay
expenses, including fees of brokers, attorneys and accountants incurred pursuant
to the transactions contemplated hereby, and any other fees and expenses
allocable or in any way relating to such transaction or any indemnification
claim, whether incurred prior or subsequent to Closing; (vi) receive all or any
portion of the Purchase Price and to distribute the same to Sellers pro rata in
proportion to their ownership interests; (vii) sign any releases or other
documents with respect to and dispute or remedy arising under this Agreement or
the Ancillary Documents; and (viii) do or refrain from doing any further act or
deed on behalf of Sellers which the Seller Representative deems necessary or
appropriate in his or her sole discretion relating to the subject matter of this
Agreement as fully and completely as any Seller could do if personally present
and acting. The Seller Representative hereby accepts his or her appointment and
authorization as the Seller Representative under this Agreement.

 

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(b)          The appointment of the Seller Representative will be deemed coupled
with an interest and will be irrevocable, and any other Person, including Buyer,
the Company and any other Buyer Indemnified Parties may conclusively and
absolutely rely, without inquiry, upon any actions of the Seller Representative
as the acts of Sellers hereunder or any Ancillary Document to which the Seller
Representative is a party. Each Buyer Indemnified Party shall be entitled to
rely conclusively on the instructions and decisions of the Seller Representative
as to (i) the settlement of any claims for indemnification by a Buyer
Indemnified Party pursuant to ARTICLE VII hereof, (ii) any payment instructions
provided by the Seller Representative or (iii) any other actions required or
permitted to be taken by the Seller Representative hereunder, and no Seller
Indemnified Party shall have any cause of action against any Buyer Indemnified
Party for any action taken by a Buyer Indemnified Party in reliance upon the
instructions or decisions of the Seller Representative. No Buyer Indemnified
Party shall have any liability to Sellers for any allocation or distribution
among Sellers by the Seller Representative of payments made to or at the
direction of the Seller Representative.

 

(c)          The Seller Representative will act for Sellers on all of the
matters set forth in this Agreement in the manner the Seller Representative
believes to be in the best interest of Sellers, but the Seller Representative
will not be responsible to Sellers for any loss or damage that any Seller may
suffer by reason of the performance by the Seller Representative of such Seller
Representative’s duties under this Agreement, other than loss or damage arising
from fraud, gross negligence or willful misconduct in the performance of the
Seller Representative’s duties under this Agreement. Sellers do hereby jointly
and severally agree to indemnify and hold the Seller Representative harmless
from and against any and all Losses reasonably incurred or suffered as a result
of the performance of the Seller Representative’s duties under this Agreement,
except for any such liability arising out of the fraud, gross negligence or
willful misconduct of the Seller Representative. The Seller Representative will
not be entitled to any fee, commission or other compensation for the performance
of his or her services hereunder, but will be entitled to the payment from
Sellers of all his or her expenses incurred as the Seller Representative.

 

(d)          If the Seller Representative shall die, become disabled, resign or
otherwise be unable or unwilling to fulfill his or her responsibilities as agent
of Sellers, then Sellers shall, within ten (10) days after such death or
disability, appoint a successor agent and, promptly thereafter (but in any event
within two (2) Business Days after such appointment), shall notify Buyer in
writing of the identity of such successor. Any such successor shall be appointed
by the written consent of Sellers, and any successor so appointed shall become
the “Seller Representative” for purposes of this Agreement.

 

(e)          All notices or other communications required to be made or
delivered by a Buyer Party to a Seller shall be made to the Seller
Representative for the benefit of such Seller, and any notices so made shall
discharge in full all notice requirements of a Buyer Party to such Seller with
respect thereto. All notices or other communications required to be made or
delivered by a Seller shall be made by the Seller Representative (except for a
notice under Section 8.16(d) of the replacement of the Seller Representative).

 

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[Remainder of Page Intentionally Left Blank; Signatures Appear on Following
Page]

 

-35-

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first written above.

 

  Buyer:       EFACTOR GROUP CORP.         By: /s/ Marion Freijsen    
Name:  Marion Freijsen     Title:  Chief Operating Officer         Merger Sub:  
    EFACTOR MERGER SUB INC.         By: /s/ Marion Freijsen     Name:  Marion
Freijsen     Title:  Vice President and Secretary         The Company:      
ROCKETHUB INC.         By: /s/ Brian Meece     Name:  Brian Meece     Title: CEO
        Seller Representative:       /s/ Eric Schneider   Eric Schneider, in the
capacity as the Seller Representative       Sellers:       /s/ Brian Meece  
Brian Meece       /s/ Jed Cohen   Jed Cohen

 

[Signature Page to Merger Agreement]

 

 

 

 

  /s/ Vladimir Vukicevic   Vladimir Vukicevic       /s/ Alon Hillel-Tuch   Alon
Hillel-Tuch       /s/ Phil Misiowiec   Phil Misiowiec       /s/ Chad Ingram  
Chad Ingram       /s/ Tony Fross   Tony Fross       /s/ S. Gregory Boyd   S.
Gregory Boyd       /s/ Gustavo Rodriguez   Gustavo Rodriguez       /s/ Darko
Lungulov   Darko Lungulov       /s/ Eric de Fontenay   Eric de Fontenay      
/s/ Eric Schneider   Eric Schneider       /s/ David Honig   David Honig      
/s/ James Portnow   James Portnow

 

[Signature Page to Merger Agreement]

 

 

 

 

Exhibit A
Sellers

 

      Number of   Percentage of        Shares of   Total Shares        Company  
of Company        Common Stock   Common  Seller Name  Seller Address 
Owned by Seller   Stock  Brian Meece     255,781.825    22.0928% Jed Cohen    
 255,781.825    22.0928% Vladimir Vukicevic      255,781.825    22.0928% Alon
Hillel-Tuch      255,781.825    22.0928% Phil Misiowiec      11,492.700  
 0.9927% Chad Ingram      11,492.700    0.9927% Tony Fross      5,000.000  
 0.4319% S. Gregory Boyd      5,000.000    0.4319% Gustavo Rodriguez    
 11,492.700    0.9927% Darko Lungulov      5,000.000    0.4319% Eric de
Fontenay      10,000.000    0.8637% Eric Schneider      67,328.180    5.8154%
David Honig      5,540.640    0.4786% James Portnow      2,289.000    0.1977%
TOTAL      1,157,763.220    100.0000%

 

A-1

 

 

Exhibit B
Definitions

 

1.          Certain Defined Terms. As used in the Agreement, the following terms
shall have the following meanings:

 

“Action” means any notice of noncompliance or violation, or any claim, demand,
charge, action, suit, litigation, audit, settlement, complaint, stipulation,
assessment or arbitration, or any request (including any request for
information), inquiry, hearing, proceeding or investigation, by or before any
Governmental Authority.

 

“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations under the
Securities Exchange Act of 1934, as amended.

 

“Ancillary Documents” means each agreement, instrument or document attached
hereto as an Exhibit, including the Non-Competition Agreements, the Employment
Agreements and the other agreements, certificates and instruments to be executed
or delivered by any of the parties hereto in connection with or pursuant to this
Agreement.

 

“Business Day” means any day that is not a Saturday, Sunday or any other day on
which banks are required or authorized by Law to be closed in New York City, New
York.

 

“Buyer Common Stock” means shares of common stock, par value $0.001 per share,
of Buyer.

 

“Buyer Common Stock Price” means an amount equal to seventy U.S. cents ($0.70)
per share; provided, that in the event that any equity securities are issued or
issuable by Buyer (or its successor) after the Closing with respect to shares of
Buyer Common Stock (whether by way of any equity dividend, equity split or
reverse equity split or in exchange for or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger,
consolidation or other corporation reorganization), the Buyer Common Stock Price
thereafter will be equitably adjusted for any such events are reasonably
determined in good faith by Buyer.

 

“Buyer Preferred Stock” means shares of preferred stock, par value $0.001 per
share, of Buyer.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor
statute thereto, as amended. Reference to a specific section of the Code shall
include such section and any comparable provision of any future legislation
amending, supplementing or superseding such section.

 

“Company Common Stock” means the common stock, par value $0.01 per share, of the
Company.

 

“Company Preferred Stock” means the preferred stock, par value $0.01 per share,
of the Company.

 

“Confidential Information” means any information concerning the business and
affairs of a RHI Company or Buyer or its Affiliates that is not generally
available to the public, including know-how, trade secrets, customer lists,
details of customer or consultant contracts, pricing policies, operational
methods and marketing plans or strategies, and any information disclosed to a
RHI Company or Buyer or their respective Affiliates by third parties to the
extent that they have an obligation of confidentiality in connection therewith.

 

B-1

 

 

“Contract” means any contract, agreement, binding arrangement, commitment or
understanding, bond, note, indenture, mortgage, debt instrument, license (or any
other contract, agreement or binding arrangement concerning Intellectual
Property), franchise, lease or other instrument or obligation of any kind,
written or oral (including any amendments or other modifications thereto).

 

“Convertible Notes” means the Convertible Promissory Notes of the Company set
forth on Schedule B-1, which Convertible Promissory Notes have an aggregate
principal amount outstanding of $255,000.

 

“Copyrights” means all works of authorship, mask works and all copyrights
therein, including all renewals and extensions, copyright registrations and
applications for registration and renewal, and non-registered copyrights.

 

“Disclosure Schedules” means the disclosure schedules to this Agreement dated as
of the date hereof and forming a part of this Agreement.

 

“Enforceability Exceptions” means bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Fraud Claim” means any claim based in whole or in part upon fraud, willful
misconduct or intentional misrepresentation.

 

“GAAP” means United States generally accepted accounting principles applied on a
consistent basis.

 

“Governing Documents” means, with respect to any entity, its certificate of
incorporation, certificate of formation or similar charter document and its
bylaws, operating agreement or similar governing document.

 

“Governmental Authority” means any federal, state, local, foreign or other
governmental, quasi-governmental or administrative body, instrumentality,
department or agency or any court, tribunal, administrative hearing body,
arbitration panel, commission, or other similar dispute-resolving panel or body.
The term “Governmental Authority” includes any Person acting on behalf of a
Governmental Authority.

 

“Indebtedness” means, without duplication, (a) the outstanding principal of, and
accrued and unpaid interest on, all bank or other third party indebtedness for
borrowed money of a RHI Company, including indebtedness under any bank credit
agreement and any other related agreements and all obligations of a RHI Company
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which a RHI Company is responsible or liable, (b) all obligations of
a RHI Company for the reimbursement of any obligor on any line or letter of
credit, banker’s acceptance, guarantee or similar credit transaction, in each
case, that has been drawn or claimed against, (c) all obligations of a RHI
Company issued or assumed for deferred purchase price payments, (d) all interest
rate and currency swaps, caps, collars and similar agreements or hedging devices
under which payments are obligated to be made by a RHI Company, whether
periodically or upon the happening of a contingency, (e) all obligations of a
RHI Company secured by a Lien (other than a Permitted Lien) on any asset of a
RHI Company, whether or not such obligation is assumed by a RHI Company, (f) any
premiums, prepayment fees or other penalties, fees, costs or expenses associated
with payment of any Indebtedness and (g) all obligation described in clauses (a)
through (f) above of any other Person which is directly or indirectly guaranteed
by a RHI Company or which a RHI Company has agreed (contingently or otherwise)
to purchase or otherwise acquire or in respect of which it has otherwise assured
a creditor against loss. In no event shall Indebtedness include trade payables.

 

B-2

 

 

“Intellectual Property” means all of the following, including any applications
to register any of the following, as they exist in any jurisdiction throughout
the world: (a) Patents; (b) Trademarks; (c) Copyrights; (d) Trade Secrets; (e)
all domain name and domain name registrations, web sites and web pages and
related rights, registrations, items and documentation related thereto; (f)
Software; (g) rights of publicity and privacy, and moral rights, and (h) all
licenses, sublicenses, permissions, and other agreements related to the
preceding property.

 

“Knowledge” means: (i) with respect to the Company, the actual present knowledge
of a particular matter by any executive officer or director of the Company,
after reasonable inquiry of internal documents and communications in such
executive officer’s or director’s possession or control; (ii) with respect to
any Seller shall mean the actual present knowledge of a particular matter by
such Seller; and (iii) with respect to Buyer, the actual present knowledge of a
particular matter by any of the directors or executive officers of Buyer,
without independent inquiry.

 

“Law” means any federal, state, local, municipal, foreign or other law, statute,
legislation, principle of common law, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, directive, requirement,
writ, injunction, settlement, Permit or Order that is or has been issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Authority.

 

“Liabilities” means any and all debts, liabilities and obligations of any nature
whatsoever, whether accrued or fixed, absolute or contingent, mature or
unmatured or determined or determinable, including those arising under any Law,
Action, Order or Contract.

 

“Lien” means any interest (including any security interest), pledge, mortgage,
lien, encumbrance, charge, claim or other right of third parties, including any
spousal interests (community or otherwise), whether created by law or in equity,
including any such restriction on the use, voting, transfer, receipt of income
or other exercise of any attributes of ownership.

 

“Material Adverse Effect” means any event, fact, condition, change,
circumstance, occurrence or effect, which, either individually or in the
aggregate with all other events, facts, conditions, changes, circumstances,
occurrences or effects, (a) has had, or would reasonably be expected to have, a
material adverse effect on the business, properties, prospects, assets,
Liabilities, condition (financial or otherwise), operations, licenses or other
franchises or results of operations of any RHI Company, or materially diminish
the value of the Company’s capital stock or (b) does or would reasonably be
expected to materially impair or delay the ability of a Seller Party to perform
their respective obligations under this Agreement and the Ancillary Documents or
to consummate the transactions contemplated hereby and thereby; provided,
however, that with respect to any RHI Company, a Material Adverse Effect will
not include any adverse effect or change resulting from any change, circumstance
or effect relating to (A) the economy in general, (B) securities markets,
regulatory or political conditions in the United States (including terrorism or
the escalation of any war, whether declared or undeclared or other hostilities),
(C) changes in applicable Laws or GAAP or the application or interpretation
thereof, (D) with respect to each RHI Company, the industries in which such RHI
Company primarily operates and not specifically relating to such RHI Company or
(E) a natural disaster (provided, that in the cases of clauses (A) through (E),
the applicable RHI Company is not disproportionately affected by such event as
compared to other similar companies and businesses in similar industries and
geographic regions as such RHI Company).

 

B-3

 

 

“Net Working Capital” means, as of any specified date, an amount equal to the
difference (whether positive or negative) of (a) the current assets of the RHI
Companies as of such date, minus (b) the current liabilities of the RHI
Companies as of such date, in each case as determined on a consolidated basis in
good faith, in accordance with the same accounting principles, methods and
procedures used to prepare the Financial Statements; provided, however, that for
purposes of this definition of “Net Working Capital”, in each case without
duplication, (i) “current assets” will exclude (A) deposits or other funds held
in trust for customers and (B) deferred Tax assets and (ii) “current
liabilities” will exclude (A) deposits payable for funds held in trust for
customers, (B) the current portion of Indebtedness, (C) up to $25,000 of
Transaction Expenses for which Buyer has agreed to pay pursuant to Section 8.1
and (D) deferred Tax liabilities.

 

“OFAC” means the Office of Foreign Assets Control of the U.S. Treasury
Department.

 

“Order” means any order, writ, rule, judgment, injunction, decree, stipulation,
determination or award that is or has been made, entered, rendered or otherwise
put into effect by, with or under the authority of any Governmental Authority.

 

“Ordinary Course of Business” means, with respect to a Person, an action taken
by such Person if (a) such action is recurring in nature, is consistent with the
past practices of the Person and is taken in the ordinary course of the normal
day-to-day operations of the Person; (b) such action is not required to be
authorized by the equity holders of such Person, the board of directors (or
equivalent) of such Person or any committee of the board of directors (or
equivalent) of such Person and does not require any other special authorization
of any nature; and (c) such action is taken in accordance with sound and prudent
business practice. Unless the context or language herein requires otherwise,
each reference to Ordinary Course of Business will be deemed to be a reference
to Ordinary Course of Business of a RHI Company.

 

“Patents” means all patents, patent applications and the inventions, designs and
improvements described and claimed therein, patentable inventions, and other
patent rights (including any divisionals, continuations, continuations-in-part,
substitutions, or reissues thereof, whether or not patents are issued on any
such applications and whether or not any such applications are amended,
modified, withdrawn, or refiled).

 

“Permit” means any federal, state, local, foreign or other third-party permit,
grant, easement, consent, approval, authorization, exemption, license,
franchise, concession, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration or
qualification that is or has been issued, granted, given or otherwise made
available by or under the authority of any Governmental Authority or other
Person.

 

“Permitted Liens” means any (a) statutory Liens of landlords, carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by Law
in the Ordinary Course of Business for sums not yet due and payable; and (b)
Liens for current taxes not yet due and payable.

 

“Person” shall include any individual, trust, firm, corporation, limited
liability company, partnership, Governmental Authority or other entity or
association, whether acting in an individual, fiduciary or any other capacity.

 

B-4

 

 

“Personal Property” means all of the machinery, equipment, tools, vehicles,
furniture, leasehold improvements, office equipment, plant, spare parts, and
other tangible personal property which are owned, used or leased by any RHI
Company and used or useful, or intended for use, in the conduct or operations of
any RHI Company’s business and the lack of which, individually or in the
aggregate, has had or would reasonably be expected to have a Material Adverse
Effect.

 

“Pre-Closing Period” means any taxable period ending on or before the Closing
Date.

 

“Pre-Closing Taxes” all Taxes imposed on any RHI Company for all Pre-Closing
Periods, and with respect to any Straddle Period, the portion of such Straddle
Period ending on and including the Closing Date (as apportioned pursuant to
Section 6.10(c)).

 

“Purchase Price” means the purchase price for the purchase contemplated by this
Agreement, being an amount equal to the total number of Buyer Shares multiplied
by the Buyer Common Stock Price.

 

“Representative” means, as to any Person, such Person’s Affiliates and its and
their managers, directors, officers, employees, agents and advisors (including
financial advisors, counsel and accountants).

 

“RHI Company” means any of the Company or any of its Subsidiaries.

 

“RHI Platform” means the crowdfunding platforms and interfaces, including
websites and mobile applications, used by the RHI Companies in their
crowdfunding businesses.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Software” means all computer software, including all source code, object code,
and documentation related thereto and all software modules, assemblers, applets,
compilers, flow charts or diagrams, tools and databases.

 

“Straddle Period” means any taxable period beginning on or before and ending
after the Closing Date.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership,
association or other business entity of which (i) if a corporation, a majority
of the total voting power of shares of stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, association or other business
entity, a majority of the partnership or other similar ownership interests
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that Person or a combination thereof. For
purposes hereof, a Person or Persons will be deemed to have a majority ownership
interest in a partnership, association or other business entity if such Person
or Persons will be allocated a majority of partnership, association or other
business entity gains or losses or will be or control the managing director,
managing member, general partner or other managing Person of such partnership,
association or other business entity. Unless the context otherwise requires, any
reference to a Subsidiary in this Agreement will mean a Subsidiary of the
Company.

 

B-5

 

 

“Tax” means any federal, state, local or foreign income, gross receipts,
license, payroll, parking, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, natural resources, customs duties,
capital stock, franchise, profits, withholding, social security (or similar),
payroll, unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated
tax, or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, including such item for which
Liability arises from the application of Treasury Regulation 1.1502-6, as a
transferee or successor-in-interest, by contract or otherwise, or as a result of
any Tax indemnity, Tax sharing, Tax allocation or similar Contract.

 

“Tax Benefits” means the actual reduction in Taxes paid based on the actual
Taxes paid compared to a hypothetical calculation that omits the relevant item
of deduction or loss. Notwithstanding anything to the contrary contained in this
Agreement, a Tax Benefit shall not be treated as having been “actually realized”
prior to the date the annual Tax Return for the applicable taxable year has been
filed with the applicable Taxing Authority.

 

“Tax Return” means any return, report, information return, schedule,
certificate, statement or other document (including any related or supporting
information) filed or required to be filed with a Taxing Authority in connection
with any Tax.

 

“Taxing Authority” means any Governmental Authority responsible for the
imposition or collection of any Tax.

 

“Trademarks” means all trademarks, service marks, trade dress, trade names,
brand names, Internet domain names, designs, logos, or corporate/company names
(including, in each case, the goodwill associated therewith), whether registered
or unregistered, and all registrations and applications for registration and
renewal thereof.

 

“Trade Secrets” means any trade secrets, confidential business information,
concepts, ideas, designs, research or development information, processes,
procedures, techniques, technical information, specifications, operating and
maintenance manuals, engineering drawings, methods, know-how, data, mask works,
discoveries, inventions, modifications, extensions, improvements, and other
proprietary rights (whether or not patentable or subject to copyright,
trademark, or trade secret protection).

 

“Treasury Regulations” shall mean the Treasury regulations promulgated under the
Code, as such Treasury Regulations may be amended from time to time. Any
reference herein to a particular provision of the Treasury Regulations means,
where appropriate, the corresponding successor provision.

 

2.          Other Defined Terms. The following capitalized terms, as used in the
Agreement, have the respective meanings given to them in the Section as set
forth below adjacent to such terms:

 

Term   Section   Term   Section AAA   8.10   Buyer Material Adverse Effect   5.1
AAA Procedures   8.10   Buyer Parties   Preamble Agreement   Preamble   Buyer
Shares   1.4 Bank Account   3.19   Certificate of Merger   1.2 Basket   7.5  
Click Wrapped Software   3.10(b) Buyer   Preamble   Closing   2.1 Buyer
Indemnified Parties   7.2   Closing Balance Sheet   2.2(l)

 

B-6

 

 

Term   Section   Term   Section Closing Date   2.1   Pro Rata Share   1.4
Company   Preamble   Prohibited Transfer   6.7 Dispute   8.10   Related Person  
3.18 Effective Time   1.2   Resolution Period   8.10 Employment Agreements  
2.2(g)   RHI Software   3.10(b) Financial Statements   3.5(a)   SEC Reports  
5.5(a) Indemnification Cap   7.5   Seller Indemnified Parties   7.3 Indemnitee  
7.4(a)   Seller Parties   Preamble Indemnitor   7.4(a)   Seller Representative  
Preamble Loss   7.2   Sellers   Preamble Material Contract   3.14(a)  
Shareholder Agreement   6.9 Merger   Recitals   Special Reps   7.1 Merger Sub  
Preamble   Survival Date   7.1 Non-Competition Agreement   2.2(f)   Surviving
Entity   1.1 NYBCL   1.1   Transaction Expenses   8.1 Owned IP   3.10(a)  
Transfer Taxes   6.10(b)

 

B-7