Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

dated as of July 31, 2018

 

among

 

VICTORY OILFIELD TECH, INC.

 

PRO-TECH HARDBANDING SERVICES, INC.

 

AND

 

STEWART MATHESON

 

 

 

 

TABLE OF CONTENTS

 

 

Page 

ARTICLE I DEFINITIONS 1 1.1 Certain Definitions. 1       ARTICLE II PURCHASE AND
SALE OF THE SHARES 5 2.1 Purchase and Sale of the Shares. 5 2.2 Adjustment for
Outstanding Indebtedness. 6 2.3 Closing. 6 2.4 Transactions to be Effected at
the Closing. 6       ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER 7
3.1 Authority and Enforceability. 7 3.2 Noncontravention. 7 3.3 The Shares. 8
3.4 Brokers’ Fees. 8       ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY 8 4.1 Organization, Qualification and Corporate Power; Authority and
Enforceability. 8 4.2 Subsidiaries. 9 4.3 Capitalization. 9 4.4
Noncontravention. 10 4.5 Financial Statements. 10 4.6 Taxes.. 11 4.7 Compliance
with Laws and Orders; Permits. 11 4.8 No Undisclosed Liabilities. 11 4.9
Tangible Personal Assets. 12 4.10 Real Property. 12 4.11 Intellectual Property.
12 4.12 Absence of Certain Changes or Events. 13 4.13 Contracts. 14 4.14
Litigation. 15 4.15 Employee Benefits. 15 4.16 Labor and Employment Matters. 15
4.17 Environmental. 16 4.18 Insurance. 16 4.19 Brokers’ Fees. 16 4.20 Equipment.
16 4.21 Inventories. 16 4.22 Vendors. 17 4.23 Potential Conflicts of Interest.
17 4.24 Product Warranty; Product Liability. 17 4.25 Officers and Directors;
Bank Accounts, Signing Authority, Powers of Attorney. 17 4.26 Accounts
Receivable. 18 4.27 Disclosure. 18       ARTICLE V REPRESENTATIONS AND
WARRANTIES OF THE BUYER 18 5.1 Organization. 18 5.2 Authorization. 18 5.3
Noncontravention. 18

 

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TABLE OF CONTENTS

 

    Page 5.4 Brokers’ Fees. 19 5.5 Sufficiency of Funds. 19 5.6 Litigation. 19
5.7 Capitalization. 19 5.8 SEC Reports and Financial Statements. 20      
ARTICLE VI COVENANTS 20 6.1 Consents. 20 6.2 Operation of the Company’s
Business. 20 6.3 Access. 21 6.4 Transfer of Cash and Cash Equivalents. 21 6.5
Ongoing Operations and Employment Benefits Matters. 21 6.6 Notice of
Developments. 22 6.7 No Solicitation. 22 6.8 Covenant not to Compete. 22 6.9
Financial Information. 23 6.10 Taking of Necessary Action; Further Action. 23
6.11 Collection of Closing Receivables. 23 6.12 Public Reporting and Restrictive
Legend. 23       ARTICLE VII CONDITIONS TO OBLIGATIONS TO CLOSE 23 7.1
Conditions to Obligation of the Buyer. 23 7.2 Conditions to Obligation of the
Seller. 25       ARTICLE VIII TERMINATION; AMENDMENT; WAIVER 26 8.1 Termination
of Agreement. 26 8.2 Effect of Termination. 26 8.3 Amendments. 27 8.4 Waiver. 27
      ARTICLE IX INDEMNIFICATION 27 9.1 Survival. 27 9.2 Indemnification by the
Seller. 28 9.3 Indemnification by Buyer. 28 9.4 Limitations. 28 9.5
Indemnification Procedure. 28 9.6 Failure to Give Timely Notice. 29 9.7 Sole and
Exclusive Remedy. 29 9.8 Payments. 29 9.9 Recoupment under Deferred Portion. 29
      ARTICLE X MISCELLANEOUS 30 10.1 Press Releases and Public Announcement. 30
10.2 No Third-Party Beneficiaries. 30 10.3 Entire Agreement. 30 10.4 Succession
and Assignment. 30 10.5 Construction. 30 10.6 Notices. 31 10.7 Governing Law. 31
10.8 Consent to Jurisdiction and Service of Process. 31 10.9 Headings. 32 10.10
Severability. 32 10.11 Expenses. 32 10.12 Incorporation of Exhibits and
Schedules. 32 10.13 Limited Recourse. 32 10.14 Specific Performance. 32 10.15
Counterparts. 32

 

Disclosure Schedule

Exhibit A – Consulting Agreement

Exhibit B – Pledge and Security Agreement

 

 ii

 

 

STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT, dated as of July 31, 2018 (the “Agreement”), among
Victory Oilfield Tech, Inc., a Nevada corporation (the “Buyer”), Pro-Tech
Hardbanding Services, Inc., an Oklahoma corporation (the “Company”), and Stewart
Matheson (the “Seller”).

 

BACKGROUND

 

The Seller is the record and beneficial owner of 517 shares (the “Shares”) of
the Common Stock, $1.00 par value per share (the “Common Stock”), of the Company
constituting 100% of the issued and outstanding shares of Common Stock of the
Company. The Seller desires to sell all of the Shares to the Buyer, and the
Buyer desires to purchase all of the Shares from the Seller, upon the terms and
subject to the conditions set forth in this Agreement (such sale and purchase of
the Shares, the “Acquisition”).

 

On June 21, 2018, the Buyer and the Seller entered into an escrow agreement (the
“Escrow Agreement”) with UMB Bank, N.A., as escrow agent (the “Escrow Agent”),
pursuant to which the Buyer deposited $150,000 (the “Deposit”) into an escrow
account, which shall be applied towards the Purchase Price (as defined below) as
described below.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing premises and the respective
representations and warranties, covenants and agreements contained herein, the
parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS

 

1.1 Certain Definitions.

 

(a) When used in this Agreement, the following terms will have the meanings
assigned to them in this Section 1.1(a):

 

“Accounting Principles” means the accounting methods, principles or calculations
historically used by the Company and its Subsidiaries and as set forth in
Section 4.5 of the Disclosure Schedule, consistently applied.

 

“Action” means any claim, action, suit, inquiry, hearing, proceeding or other
investigation.

 

“Affiliate” means, with respect to a Person, any other Person that, directly or
indirectly, through one or more intermediaries, Controls, is Controlled by or is
under common Control with, such Person. For purposes of this definition,
“Control” (including the terms “Controlled by” and “under common Control with”)
means possession of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of stock, as trustee or
executor, by Contract or otherwise.

 

 1 

 

 

“Benefit Plan” means any “employee benefit plan” as defined in ERISA Section
3(3), including any (i) nonqualified deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan (as defined in ERISA
Section 3(2)), (ii) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (iii) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan (as defined in ERISA Section 3(37)), (iv)
Employee Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material
fringe benefit plan or program, or (v) stock purchase, stock option, severance
pay, employment, change-in-control, vacation pay, company award, salary
continuation, sick leave, excess benefit, bonus or other incentive compensation,
life insurance, or other employee benefit plan, contract, program, policy or
other arrangement, whether or not subject to ERISA, under which any present or
former employee of the Company has any present or future right to benefits
sponsored or maintained by the Company or any ERISA Affiliate.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which
banks located in New York, NY are authorized or required by Law to close.

 

“Change in Control” means an event or series of events by which (a) any “person”
or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange
Act, but excluding any employee benefit plan of such person or its subsidiaries,
and any person or entity acting in its capacity as trustee, agent or other
fiduciary or administrator of any such plan) becomes the “beneficial owner” (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or
group shall be deemed to have “beneficial ownership” of all securities that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time (such right, an “option right”)),
directly or indirectly, of more than 50% of the equity securities of the
Company, as applicable, entitled to vote for members of the board of directors
or equivalent governing body of the Company, as applicable, on a fully-diluted
basis (and taking into account all such securities that such “person” or “group”
has the right to acquire pursuant to any option right) or (b) during any period
of 24 consecutive months, a majority of the members of the board of directors or
other equivalent governing body of the Company, as applicable, cease to be
composed of individuals (i) who were members of that board or equivalent
governing body on the first day of such period, (ii) whose election or
nomination to that board or equivalent governing body was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body. For the avoidance of doubt,
the transactions contemplated by this Agreement shall not constitute a Change of
Control.

 

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

 

“Contract” means any written agreement, contract, commitment, arrangement or
understanding.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

 2 

 

 

“ERISA Affiliate” means any Person who is, or at any time was, a member of a
“controlled group of corporations” within the meaning of Section 414(b) or (c)
of the Code and, for the purpose of Section 302 of ERISA and/or Section 412,
4971, 4977, 4980D, 4980E and/or each “applicable section” under Section
414(f)(2) of the Code, within the meaning of Section 412(n)(6) of the Code that
includes, or at any time included, the Company or any Affiliate thereof, or any
predecessor of any of the foregoing.

 

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

 

“GAAP” means United States generally accepted accounting principles of Company
in effect as of the date of Closing.

 

“Governmental Entity” means any entity or body exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to United States federal, state or local government or foreign, international,
multinational or other government, including any department, commission, board,
agency, bureau, official or other regulatory, administrative or judicial
authority thereof.

 

“Intellectual Property” means (i) trade secrets, inventions, confidential and
proprietary information, know-how, formulae and processes, (ii) patents
(including all provisionals, reissues, divisions, continuations and extensions
thereof) and patent applications, (iii) trademarks, trade names, trade dress,
brand names, domain names, trademark registrations, trademark applications,
service marks, service mark registrations and service mark applications (whether
registered, unregistered or existing at common law, including all goodwill
attaching thereto), (iv) copyrights, including copyright registrations,
copyright applications and unregistered common law copyrights; (v) and all
licenses for the Intellectual Property listed in items (i) – (iv) above.

 

“IRS” means the Internal Revenue Service.

 

“Knowledge of the Seller” or any similar phrase means the actual knowledge of
the Seller, without obligation of inquiry.

 

“Law” means any statute, law, ordinance, rule, regulation of any Governmental
Entity.

 

“Liability” means all indebtedness, obligations and other liabilities and
contingencies of a Person, whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due.

 

“Lien” means, with respect to any property or asset, any mortgage, lien, pledge,
charge, security interest, hypothecation or other encumbrance in respect of such
property or asset.

 

“Material Adverse Effect” means any material adverse effect on the assets,
properties, condition (financial or otherwise), operations of the Company and
any of its Subsidiaries, taken as a whole, provided, however, that a Material
Adverse Effect shall not include: (i) changes in the national or world economy
or financial markets as a whole or changes in general economic conditions that
affect the industries in which the Company and its Subsidiaries conduct their
business, so long as such changes or conditions do not adversely affect the
Company and its Subsidiaries, taken as a whole, in a materially disproportionate
manner relative to other similarly situated participants in the industries or
markets in which they operate; (ii) acts of war, sabotage or terrorism, military
actions, or the escalation thereof; (iii) Acts of God, force majeure, or natural
disasters; (iv) any change in applicable Law or GAAP or interpretation thereof
after the date hereof, so long as such changes do not adversely affect the
Company and its Subsidiaries, taken as a whole, in a materially disproportionate
manner relative to other similarly situated participants in the industries or
markets in which they operate; (v) the transactions contemplated by this
Agreement becoming public; or (vi) compliance with the terms of, and taking any
action required by, this Agreement, or the taking or not taking any actions at
the request of, or with the consent of, the Buyer.

 

 3 

 

 

“Order” means any award, injunction, judgment, decree, order, ruling, subpoena
or verdict or other decision issued, promulgated or entered by or with any
Governmental Entity of competent jurisdiction.

 

“Permit” means any authorization, approval, consent, certificate, license,
permit or franchise of or from any Governmental Entity of competent jurisdiction
or pursuant to any Law.

 

“Person” means an individual, a corporation, a partnership, a limited liability
company, a trust, an unincorporated association, a Governmental Entity or any
agency, instrumentality or political subdivision of a Governmental Entity, or
any other entity or body.

 

“Representatives” means, with respect to any Person, the respective directors,
officers, employees, counsel, accountants and other representatives of such
Person.

 

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

 

“Subsidiary” means, with respect to any Person, any corporation, partnership,
joint venture or other legal entity of which such Person (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
more than 50% of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of a non-corporate Person.

 

“Taxes” means all federal, state, local and foreign income, profits, franchise,
gross receipts, environmental, customs duty, capital stock, severance, stamp,
payroll, sales, transfer, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy and other taxes, duties
or assessments of any nature whatsoever.

 

“Taxing Authority” means any Governmental Entity having or purporting to
exercise jurisdiction with respect to any Tax.

 

“Tax Returns” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Transaction Proposal” means any unsolicited written bona fide proposal made by
a third party relating to (i) any direct or indirect acquisition or purchase of
all or substantially all assets of the Company, (ii) any direct or indirect
acquisition or purchase of a majority of the combined voting power of the
Shares, (iii) any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company in which
the other party thereto or its stockholders will own 51% or more of the combined
voting power of the parent entity resulting from any such transaction, or (iv)
any other transaction that is inconsistent with the intent and purpose of this
Agreement.

 

 4 

 

 

“$” means United States dollars.

 

(b) For purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires: (i) the meaning assigned to
each term defined herein will be equally applicable to both the singular and the
plural forms of such term and vice versa, and words denoting any gender will
include all genders as the context requires; (ii) where a word or phrase is
defined herein, each of its other grammatical forms will have a corresponding
meaning; (iii) the terms “hereof”, “herein”, “hereunder”, “hereby” and
“herewith” and words of similar import will, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement; (iv) when a reference is made in this Agreement to
an Article, Section, paragraph, Exhibit or Schedule without reference to a
document, such reference is to an Article, Section, paragraph, Exhibit or
Schedule to this Agreement; (v) a reference to a subsection without further
reference to a Section is a reference to such subsection as contained in the
same Section in which the reference appears, and this rule will also apply to
paragraphs and other subdivisions; (vi) the word “include”, “includes” or
“including” when used in this Agreement will be deemed to include the words
“without limitation”, unless otherwise specified; (vii) a reference to any party
to this Agreement or any other agreement or document will include such party’s
predecessors, successors and permitted assigns; (viii) a reference to any Law
means such Law as amended, modified, codified, replaced or reenacted as of the
date hereof, and all rules and regulations promulgated thereunder as of the date
hereof; and (ix) all accounting terms used and not defined herein have the
respective meanings given to them under GAAP.

 

ARTICLE II
PURCHASE AND SALE OF THE SHARES

 

2.1 Purchase and Sale of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing the Seller will sell,
transfer and deliver, and the Buyer will purchase from the Seller, all of the
Shares for an aggregate purchase price of $1,600,000 (the “Purchase Price”)
payable as described below.

 

(a) At the Closing, the Deposit shall be released to the Seller.

 

(b) In addition to the release of the Deposit to the Seller, $350,000 (the “Cash
Portion”) shall be paid by the Buyer to the Seller at the Closing through the
delivery to the Seller of cash in immediately available funds.

 

(c) The life insurance policies described in Section 2.1 of the Disclosure
Schedule (the “Seller Policies”), which are owned by the Seller, for which the
Seller is the named insured, and the named beneficiary of which has heretofore
been the Company, shall be modified such that the Seller shall name a
beneficiary of his choosing, which shall not be the Company.

 

 5 

 

 

(d) At the Closing, the Buyer shall issue to the Seller 11,000 shares (the “New
Shares”) of the common stock, par value $0.001 per share, of the Buyer (the
“Buyer Common Stock”), which shares shall be duly authorized and validly issued,
fully paid and nonassessable, and free of preemptive rights (the “Share
Issuance”).

 

(e) On the 60th day following the Closing Date, the Buyer shall pay to the
Seller an amount of cash in immediately available funds equal to $300,000 (the
“Closing Receivables Payment”), to the extent that such amount of accounts
receivable exist as of the Closing Date, without regard to whether the Buyer
collects such accounts receivable at any time. For the avoidance of doubt, the
Closing Receivables Payment shall be made by the Buyer to the Seller regardless
of whether the Company is able to collect at least $300,000 of the accounts
receivable during such 60-day period following the Closing Date.

 

(f) The remaining $700,000 of the Purchase Price (the “Deferred Portion”) shall
be paid by the Buyer to the Seller over a period of two (2) years following the
Closing in equal quarterly installments of $87,500 each, with the first such
payment being made on October 31, 2018, and the last such payment being made on
July 31, 2020; provided, however, that, upon a Change in Control of the Company
after the Closing (and not as a result of the Closing), the Deferred Portion
shall become immediately due and payable.

 

(g) The Buyer’s obligations to pay the Seller the Closing Receivables Payment
and to pay to the Seller the Deferred Portion shall be secured by a first lien
on the Shares and all of the assets of the Company pursuant to the pledge and
security agreement described in Section 7.2(j).

 

2.2 Adjustment for Outstanding Indebtedness. The Cash Portion shall be decreased
by the amount of any outstanding indebtedness for borrowed money of the Company
existing as of the Closing Date and the deducted amount shall be utilized to pay
off such outstanding indebtedness for borrowed money at the Closing. For the
avoidance of doubt, indebtedness for borrowed money specifically
includes the approximately $60,000 in liabilities that are guaranteed by the
Seller and described in Section 6.4 of the Disclosure Schedule and specifically
excludes accounts payable of the Company incurred in the ordinary course of
business.

 

2.3 Closing. The consummation of the Acquisition (the “Closing”) will take place
by the reciprocal delivery of closing documents by electronic mail, regular
mail, fax or any other means mutually agreed upon by the parties hereto on a
date that is no later than two (2) Business Days immediately following the day
on which the last of the conditions to closing contained in Article VII (other
than any conditions that by their nature are to be satisfied at the Closing) is
satisfied or waived in accordance with this Agreement or at such other location
or on such other date as the Buyer and the Company may mutually determine (the
date on which the Closing actually occurs is referred to as the “Closing Date”).

 

2.4 Transactions to be Effected at the Closing.

 

(a) At the Closing, the Buyer will (i) pay to the Seller the Cash Portion of the
Purchase Price, adjusted in accordance with Section 2.2, by paying such sum to
the Seller by transfer of immediately available funds in accordance with
instructions provided by the Seller and (ii) deliver to the Seller all other
documents, instruments or certificates required to be delivered by the Buyer at
or prior to the Closing pursuant to this Agreement.

 

 6 

 

 

(b) At the Closing, the Seller will deliver to the Buyer (i) a certificate or
certificates representing his Shares duly endorsed or accompanied by stock
powers duly endorsed in blank and (ii) all other documents, instruments or
certificates required to be delivered by the Seller at or prior to the Closing
pursuant to this Agreement.

 

(c) Immediately prior to or at Closing, the Company will transfer title to the
2013 Ford F-150 FWD Super Crew Limited bearing vehicle identification number
1FTFW1ET1DFD55313 to Seller, free and clear of all Liens and will transfer to
Seller ownership of the cellular phones currently used by the Seller and his
spouse and the phone numbers associated therewith, which are (405) 615-8874 and
(405) 627-1545.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER

 

The Seller represents and warrants to the Buyer that each statement contained in
this Article III is true and correct as of the date hereof.

 

3.1 Authority and Enforceability. The Seller has the requisite legal capacity to
execute and deliver this Agreement, to perform his obligations hereunder and to
consummate the Acquisition and the other transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Seller and, assuming the
due authorization, execution and delivery by each other party hereto,
constitutes a legal, valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except as limited by (a)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar Laws relating to creditors’ rights generally and (b) general
principles of equity, whether such enforceability is considered in a proceeding
in equity or at Law.

 

3.2 Noncontravention.

 

(a) Neither the execution and the delivery of this Agreement nor the
consummation of the Acquisition or the other transactions contemplated by this
Agreement will, with or without the giving of notice or the lapse of time or
both, (i) to the actual knowledge of the Seller and assuming compliance with the
filing and notice requirements set forth in Section 3.2(b)(i), violate any Law
applicable to the Seller or (ii) violate any Contract to which the Seller is a
party, except to the extent that any such violation would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
the assets, properties, or condition (financial or otherwise) of the Seller.

 

(b) The execution and delivery of this Agreement by the Seller does not, and the
performance of this Agreement by the Seller will not, require any consent,
approval, authorization or Permit of, or filing with or notification to, any
Governmental Entity, except where the failure to take such action would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the assets, properties, or condition (financial or otherwise),
of the Seller.

 

 7 

 

 

3.3 The Shares. The Seller holds of record and owns beneficially all of the
Shares free and clear of all Liens. The Seller is not party to any Contract
obligating the Seller to vote or dispose of any shares of the capital stock of,
or other equity or voting interests in, the Company. The Seller has the full
right to sell, convey, transfer, assign and deliver the Shares, without the need
to obtain the consent or approval of any third party. At and as of the Closing,
the Seller will convey the Shares to the Buyer by instruments of assignment and
transfer effective to vest in the Buyer, and the Buyer will have, good and valid
record and marketable title to the Shares, free and clear of all Liens.

 

3.4 Brokers’ Fees. The Seller does not have any Liability to pay any fees or
commissions to any broker, finder or agent with respect to this Agreement, the
Acquisition or the transactions contemplated by this Agreement.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY

 

The Seller represents and warrants to the Buyer that each statement contained in
this Article IV is true and correct as of the date hereof, except as set forth
in the schedule accompanying this Agreement (the “Disclosure Schedule”). The
Disclosure Schedule has been arranged for purposes of convenience only, in
sections corresponding to the Sections of this Article IV. Each section of the
Disclosure Schedule will be deemed to incorporate by reference all information
disclosed in any other section of the Disclosure Schedule. Any representation or
warranty concerning the Company shall be deemed to be a representation
concerning the Company and its Subsidiaries as a whole unless the context
specifically requires otherwise.

 

4.1 Organization, Qualification and Corporate Power; Authority and
Enforceability.

 

(a) The Company and each of its Subsidiaries is a corporation, limited liability
company or other legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions that recognize the concept of good
standing) under the Laws of its jurisdiction of organization, and has the
requisite corporate, limited liability company or other organizational, as
applicable, power and authority to own, lease and operate its assets and to
carry on its business as now conducted. Each of the Company and its Subsidiaries
is duly qualified or licensed to do business as a foreign corporation, limited
liability company or other legal entity and is in good standing (with respect to
jurisdictions that recognize the concept of good standing) in each jurisdiction
where the character of the assets and properties owned, leased or operated by it
or the nature of its business makes such qualification or license necessary,
except where the failure to be so qualified or licensed or to be in good
standing, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

(b) The Company has the requisite power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance by the
Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Company, and no other action is necessary on the part
of the Company to authorize this Agreement or to consummate the Acquisition or
the other transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by each other party hereto, constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws relating
to creditors’ rights generally and (ii) general principles of equity, whether
such enforceability is considered in a proceeding in equity or at Law.

 

 8 

 

 

4.2 Subsidiaries. Section 4.2 of the Disclosure Schedule sets forth for each
Subsidiary of the Company (i) its name and jurisdiction of incorporation, (ii)
the number of shares of authorized capital stock of each class of its capital
stock, (iii) the number of issued and outstanding shares of each class of its
capital stock, the names of the holders thereof, and the number of shares held
by each such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of each
Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. One of the Company and its Subsidiaries holds of
record and owns beneficially all of the outstanding shares of each Subsidiary of
the Company, free and clear of any restrictions on transfer (other than
restrictions under the federal and state securities laws), Taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants,
preemptive rights, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require any of the
Company and its Subsidiaries to sell, transfer, or otherwise dispose of any
capital stock of any of its Subsidiaries or that could require any Subsidiary of
the Company to issue, sell, or otherwise cause to become outstanding any of its
own capital stock. There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to any Subsidiary of the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of the Company. Except as set forth in Section 4.2 of the Disclosure Schedule,
none of the Company and its Subsidiaries controls directly or indirectly or has
any direct or indirect equity participation in any corporation, partnership,
trust, or other business association which is not a Subsidiary of the Company.

 

4.3 Capitalization.

 

(a) The authorized capital stock of the Company consists of 50,000 shares of
Common Stock, par value $1.00 per share, of which 517 shares are issued and
outstanding. No other capital stock of the Company is authorized, issued or
outstanding.

 

(b) Except as set forth in Section 4.3 of the Disclosure Schedule, there are no
outstanding options, warrants or other securities or subscription, preemptive or
other rights convertible into or exchangeable or exercisable for any shares of
capital stock or other equity or voting interests of the Company and there are
no “phantom stock” rights, stock appreciation rights or other similar rights
with respect to the Company. There are no Contracts of any kind to which the
Company is a party or by which the Company is bound, obligating the Company to
issue, deliver, grant or sell, or cause to be issued, delivered, granted or
sold, additional shares of capital stock of, or other equity or voting interests
in, or options, warrants or other securities or subscription, preemptive or
other rights convertible into, or exchangeable or exercisable for, shares of
capital stock of, or other equity or voting interests in, the Company, or any
“phantom stock” right, stock appreciation right or other similar right with
respect to the Company, or obligating the Company to enter into any such
Contract.

 

 9 

 

 

(c) There are no securities or other instruments or obligations of the Company,
the value of which is in any way based upon or derived from any capital or
voting stock of the Company or having the right to vote (or convertible into, or
exchangeable or exercisable for, securities having the right to vote) on any
matters on which the Company’s stockholders may vote.

 

(d) There are no Contracts, contingent or otherwise, obligating the Company to
repurchase, redeem or otherwise acquire any shares of capital stock of, or other
equity or voting interests in, the Company. There are no voting trusts,
registration rights agreements or stockholder agreements to which the Company is
a party with respect to the voting of the capital stock of the Company or with
respect to the granting of registration rights for any of the capital stock of
the Company. There are no rights plans affecting the Company.

 

(e) Except as set forth in Section 4.3 of the Disclosure Schedule, there are no
bonds, debentures, notes or other indebtedness of the Company.

 

4.4 Noncontravention.

 

(a) Neither the execution and delivery of this Agreement nor the consummation of
the Acquisition and the other transactions contemplated by this Agreement will,
with or without the giving of notice or the lapse of time or both, (i) violate
any provision of the articles of incorporation or bylaws (or comparable
organization documents, as applicable) of the Company, (ii) to the Knowledge of
the Seller and assuming compliance with the filing and notice requirements set
forth in Section 4.4(b)(i), violate any Law applicable to the Company on the
date hereof or (iii) except as set forth in Section 4.4(a) of the Disclosure
Schedule, violate any Contract to which the Company is a party, except in the
case of clauses (ii) and (iii) to the extent that any such violation would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

(b) To the Knowledge of the Seller, the execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement by the Company
will not, require any consent, approval, authorization or Permit of, or filing
with or notification to, any Governmental Entity, except for (i) the filings set
forth in Section 4.4(b) of the Disclosure Schedule or (ii) where the failure to
take such action would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.

 

4.5 Financial Statements. Section 4.5 of the Disclosure Schedule contains true
and complete copies of (i) the unaudited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 2017 and the related unaudited
consolidated statements of income and cash flows for the two years ended
December 31, 2017 and December 31, 2016 (the “Annual Financial Statements”) and
(ii) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of March 31, 2018 and the related statements of income and cash
flows for the three-month period ended March 31, 2018 (the “Interim Financial
Statements” and, together with the Annual Financial Statements, the “Financial
Statements”). Except as set forth in Section 4.5 of the Disclosure Schedule, the
Financial Statements have been prepared in accordance with the Accounting
Principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and, on that basis, fairly present, in
all material respects, the financial condition and results of operations of the
Companies and their Subsidiaries as of the indicated dates and for the indicated
periods (subject to normal year-end adjustments and the absence of notes).
Section 4.5 of the Disclosure Schedule indicates the material differences
between Accounting Principles and GAAP.

 

 10 

 

 

4.6 Taxes. Except as set forth in Section 4.6 of the Disclosure Schedule:

 

(a) All material Tax Returns required to have been filed by the Company have
been filed, and each such Tax Return reflects the liability for Taxes in all
material respects. All Taxes shown on such Tax Returns as due have been paid or
accrued.

 

(b) To the Knowledge of the Seller, there is no audit pending against the
Company in respect of any Taxes. There are no Liens on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax, other than Liens for Taxes not yet due and payable.

 

 

(c) The Company has withheld and paid or accrued for all material Taxes required
to have been withheld and paid or accrued for in connection with amounts paid or
owing to any third party.

 

(d) The Company has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(e) The Company is not a party to any Tax allocation or sharing agreement.

 

4.7 Compliance with Laws and Orders; Permits. To the Knowledge of the Seller:

 

(a) The Company is in compliance with all Laws and Orders to which the business
of the Company is subject, except where such failure to comply would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

(b) The Company owns, holds, possesses or lawfully uses in the operation of its
business all Permits that are necessary for it to conduct its business as now
conducted, except where such failure to own, hold, possess or lawfully use such
Permit would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

4.8  No Undisclosed Liabilities. Except as set forth in Section 4.8 of the
Disclosure Schedule, the Company does not have any Liability, except for (a)
Liabilities set forth on the Interim Financial Statements (rather than in any
notes thereto) and (b) Liabilities which have arisen since the date of the
Interim Financial Statements in the ordinary course of business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
Law).

 

 11 

 

 

4.9 Tangible Personal Assets.

 

(a) The Company has good title to, or a valid interest in, all of its tangible
personal assets, free and clear of all Liens, other than (i) Liens for current
real or personal property Taxes that are not yet due and payable or that may
hereafter be paid without material penalty or that are being contested in good
faith, (ii) statutory Liens of landlords and workers’, carriers’ and mechanics’
or other like Liens incurred in the ordinary course of business or that are
being contested in good faith, (iii) Liens and encroachments which do not
materially interfere with the present or proposed use of the properties or
assets they affect, (iv) Liens that will be released prior to or as of the
Closing, (v) Liens arising under this Agreement, (vi) Liens created by or
through the Buyer, (vii) Liens set forth on Section 4.9 of the Disclosure
Schedule or (viii) Liens that, individually or in the aggregate, do not
materially interfere with the ability of the Company thereof to conduct its
business as currently conducted and do not adversely affect the value of, or the
ability to sell, such personal properties and assets (the “Permitted Liens”).

 

(b) The Company’s tangible personal assets are in operating condition and
working order and repair, when taken as a whole, subject to ordinary wear and
tear and repairs from time to time in the ordinary course of business and are
suitable for the purposes for which they are currently being used.

 

4.10 Real Property.

 

(a) Owned Real Property.

 

The Company does not own any real property.

 

(b) Leased Real Property.

 

Section 4.10(b) of the Disclosure Schedule contains a list of all leases and
subleases (collectively, the “Real Property Leases”) under which the Company is
either lessor or lessee. The Seller has heretofore made available to the Buyer
true and complete copies of each Real Property Lease. To the Knowledge of the
Seller, (i) all Real Property Leases are valid and binding Contracts of the
Company and are in full force and effect (except for those that have terminated
or will terminate by their own terms), and (ii) neither the Company or any other
party thereto, is in violation or breach of or default (or with notice or lapse
of time, or both, would be in violation or breach of or default) under the terms
of any such Contract, in each case, except where such default would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

4.11 Intellectual Property.

 

(a) Section 4.11 of the Disclosure Schedule sets forth a list that includes all
material Intellectual Property owned by the Company (the “Company-Owned
Intellectual Property”) that is registered or subject to an application for
registration (including the jurisdictions where such Company-Owned Intellectual
Property is registered or where applications have been filed, and all
registration or application numbers, as appropriate).

 

(b) As of the date hereof, all necessary registration, maintenance and renewal
fees have been paid and all necessary documents have been filed with the United
States Patent and Trademark Office or foreign patent and trademark office in the
relevant foreign jurisdiction for the purposes of maintaining the registered
Company-Owned Intellectual Property.

 

 12 

 

 

(c) Except as set forth on Section 4.11 of the Disclosure Schedule, (i) the
Company is the exclusive owner of the Company-Owned Intellectual Property free
and clear of all Liens (other than Permitted Liens); (ii) to the Knowledge of
the Seller no proceedings have been instituted, are pending or are threatened
that challenge the rights of the Company in or the validity or enforceability of
the Company-Owned Intellectual Property; (iii) to the Knowledge of the Seller,
neither the use of the Company-Owned Intellectual Property as currently used by
the Company in the conduct of the Company’s business, nor the conduct of the
business as presently conducted by the Company infringes, dilutes,
misappropriates or otherwise violates in any material respect the Intellectual
Property rights of any Person; and (iv) as of the date of this Agreement, the
Company has made no claim of a violation, infringement, misuse or
misappropriation by any Person, of their rights to, or in connection with, the
Company-Owned Intellectual Property.

 

(d) Except as set forth in Section 4.11 of the Disclosure Schedule, the Company
has not permitted or licensed any Person to use any Company-Owned Intellectual
Property.

 

(e) Section 4.11 of the Disclosure Schedule sets forth a complete and accurate
list of all licenses, other than “off the shelf” commercially available software
programs, pursuant to which the Company licenses from a Person Intellectual
Property that is material to and used in the conduct of the business by the
Company.

 

(f) To the Knowledge of the Seller, the Company is not in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any Contract pursuant to which any third party is authorized to use
any Company-Owned Intellectual Property or pursuant to which the Company is
licensed to use Intellectual Property owned by a third party, except where such
default would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.

 

4.12 Absence of Certain Changes or Events.

 

Except as set forth in Section 4.12 of the Disclosure Schedule, since the date
of the Interim Financial Statements, no event has occurred that has had,
individually or in the aggregate, a Material Adverse Effect. Without limiting
the generality of the foregoing, except as set forth in Section 4.12 of the
Disclosure Schedule, since that date:

 

(a) the Company has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
ordinary course of business;

 

(b)       the Company has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
either involving more than $50,000 or outside the ordinary course of business;

 

(c)       no party (including the Company) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than $50,000
to which the Company is a party or by which any of them is bound;

 

(d)       the Company has not imposed any Liens upon any of its assets, tangible
or intangible;

 

 13 

 

 

(e)       the Company has not made any capital expenditure (or series of related
capital expenditures) either involving more than $50,000 or outside the ordinary
course of business;

 

(f)       the Company has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions) either involving more than
$50,000 or outside the ordinary course of business;

 

(g) the Company has not transferred, assigned, or granted any license or
sublicense of any rights under or with respect to any Intellectual Property;

 

(h) there has been no change made or authorized in the certificate of
incorporation or bylaws of the Company;

 

(i) the Company has not issued, sold, or otherwise disposed of any of its
capital stock, or granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its capital
stock;

 

(j) the Company has not made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees outside the ordinary course
of business;

 

(k) the Company has not entered into any employment contract or modified the
terms of any existing such contract or agreement;

 

(l) the Company has not granted any increase in the base compensation of any of
its directors, officers, and employees outside the ordinary course of business;
and

 

(m) the Company has not committed to any of the foregoing.

 

4.13 Contracts.

 

(a) Except as set forth in Section 4.13 of the Disclosure Schedule, as of the
date hereof, the Company is not a party to or bound by any: (i) Contract not
contemplated by this Agreement that materially limits the ability of the Company
to engage or compete in any manner of the business presently conducted by the
Company; (ii) Contract that creates a partnership or joint venture or similar
arrangement with respect to any material business of the Company; (iii)
indenture, credit agreement, loan agreement, security agreement, guarantee,
note, mortgage or other evidence of indebtedness or agreement providing for
indebtedness in excess of $50,000; (iv) Contract that relates to the acquisition
or disposition of any material business (whether by merger, sale of stock, sale
of assets or otherwise) other than this Agreement; and (v) Contract that
involves performance of services or delivery of goods or materials by or to the
Company in an amount or with a value in excess of $50,000 in any 12-month period
(which period may extend past the Closing).

 

(b) The Seller has heretofore made available to the Buyer true and complete
copies of each of the Contracts set forth in Section 4.13 of the Disclosure
Schedule. To the Knowledge of the Seller, (i) all such Contracts are valid and
binding, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or other law affecting or relating to creditors’
rights generally and general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), (ii) all such
Contracts are in full force and effect (except for those that have terminated or
will terminate by their own terms), and (iii) neither the Company nor any other
party thereto, is in violation or breach of or default under (or with notice or
lapse of time, or both, would be in violation or breach of or default under) the
terms of any such Contract, in each case, except where such default would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

 14 

 

 

4.14 Litigation. Except as set forth in Section 4.14 of the Disclosure Schedule,
there is no Action pending or, to the Knowledge of the Seller, threatened
against the Company that (a) challenges or seeks to enjoin, alter or materially
delay the Acquisition or (b) would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

4.15 Employee Benefits.

 

(a) Section 4.15 of the Disclosure Schedule includes a list of all Benefit Plans
maintained or contributed to by the Company or any of its Subsidiaries (the
“Company Benefit Plans”). The Seller has delivered or made available to the
Buyer copies of (i) each Company Benefit Plan, (ii) the most recent summary plan
description for each Company Benefit Plan for which such a summary plan
description is required and (iii) the most recent favorable determination
letters from the IRS with respect to each Company Benefit Plan intended to
qualify under Section 401(a) of the Code.

 

(b) Except as set forth in Section 4.15 of the Disclosure Schedule, (i) none of
the Company Benefit Plans is subject to Title IV of ERISA; (ii) each Company
Benefit Plan that is intended to be qualified under Section 401(a) of the Code
is subject to a favorable determination letter from the IRS and, to the
Knowledge of the Seller, no event has occurred and no condition exists that is
reasonably likely to result in the revocation of any such determination; and
(iii) each Company Benefit Plan is in compliance with all applicable provisions
of ERISA and the Code, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.

 

(c) Neither the execution or delivery of this Agreement nor the consummation of
the transactions contemplated by this Agreement could reasonably be expected to,
either alone or in conjunction with any other event (whether contingent or
otherwise), (i) result in any payment or benefit becoming due or payable, or
required to be provided, to any current or former director, employee or
independent contractor of the Company, (ii) increase the amount or value of any
benefit or compensation otherwise payable or required to be provided to any such
current or former director, employee or independent contractor, or result in the
acceleration of the time of payment, vesting or funding of any such benefit or
compensation, or (iii) result in any amount failing to be deductible by reason
of Section 280G of the Code.

 

4.16 Labor and Employment Matters. Section 4.16 of the Disclosure Schedule sets
forth a list of all written employment agreements that obligate the Company to
pay an annual salary of $50,000 or more and to which the Company is a party. To
the Knowledge of the Seller, there are no pending labor disputes, work
stoppages, requests for representation, pickets, work slow-downs due to labor
disagreements or any actions or arbitrations that involve the labor or
employment relations of the Company. The Company is not party to any collective
bargaining agreement. The Company is in compliance with all foreign, federal and
state laws respecting employment and employment practices, terms and conditions
of employment, wages and hours and nondiscrimination in employment, and are not
engaged in any unfair labor practice. There is no charge pending or, to the
Knowledge of the Seller, threatened against the Company alleging unlawful
discrimination in employment practices before any court or agency and there is
no charge of or proceeding with regard to any unfair labor practice against the
Company pending before the National Labor Relations Board or any similar entity.
The Company (i) has properly classified and treated all of its workers as
independent contractors or employees and (ii) has, to the extent permitted by
Law, properly classified and treated all of its employees as “exempt” or
“nonexempt” from overtime requirements under applicable Law.

 

 15 

 

 

4.17 Environmental. Except (a) as set forth in Section 4.17 of the Disclosure
Schedule or (b) for any matter that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, to the Knowledge of
the Seller (i) the Company is in compliance with all applicable Laws relating to
protection of the environment (“Environmental Laws”), (ii) the Company possesses
and is in compliance with all Permits required under any Environmental Law for
the conduct of its operations and (iii) there are no Actions pending against the
Company alleging a violation of any Environmental Law.

 

4.18 Insurance. Section 4.18 of the Disclosure Schedule sets forth a list of
each insurance policy that covers the Company or its businesses, properties,
assets, directors, officers or employees (the “Policies”). Such Policies are in
full force and effect in all material respects and the Company is not in
violation or breach of or default under any of its obligations under any such
Policy, except where such default would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

4.19 Brokers’ Fees. Except as set forth in Section 4.19 of the Disclosure
Schedule, which such fees shall be paid prior to or at Closing with the
Company’s cash, the Company has no Liability to pay any fees or commissions to
any broker, finder or agent with respect to this Agreement, the Acquisition or
the transactions contemplated by this Agreement.

 

4.20 Equipment. Section 4.20 of the Disclosure Schedule sets forth a complete
and accurate list of all plants, fixtures, machinery, installations, equipment,
furniture, tools, spare parts, supplies, materials and other personal property
(but excluding inventories, including raw materials, parts, work in process,
packaging and finished goods) (collectively, the “Equipment”), owned by the
Company other than items having a net book or market value individually of less
than five thousand dollars ($5,000) or expensed for tax purposes, as of the date
of the Interim Financial Statements. The Company has not acquired an item of
Equipment for in excess of such amount since such date. The Equipment, and all
personal property held by the Company, are utilized by the Company in the
ordinary course of business.

 

4.21 Inventories. All of the Company’s inventories, including raw materials,
parts, work in process, packaging and finished goods, consist solely of, and
will consist solely of, material and goods of a quality and quantity which are
usable or saleable in the normal course of the business carried on by the
Company. Such inventories are adequate for present needs of the business of the
Company, and shall be fairly reflected on the books of account of the Company in
accordance with best practices and consistent with the Company’s previous
accounting methods.

 

 16 

 

 

4.22 Vendors. Section 4.22 of the Disclosure Schedule lists the five (5) largest
vendors of the Company based on the dollar amount of purchases and sales for the
fiscal year ended December 31, 2017. The relationships of the Company with such
vendors are good commercial working relationships, and no vendor of material
importance to the Company has (a) cancelled or otherwise terminated, or
threatened to cancel or otherwise to terminate, its relationship with the
Company, or (b) during the last twelve (12) months decreased materially, or
threatened to decrease or limit materially, its services, supplies or materials
for use in the business of the Company.

 

4.23 Potential Conflicts of Interest. Except as set forth in Section 4.23 of the
Disclosure Schedule, no officer, director, stockholder (or Affiliate thereof)
or, to the Knowledge of the Seller, employee of the Company (a) owns, directly
or indirectly, any interest in (excepting not more than 1% stock or other equity
securities for investment purposes in securities of publicly held and traded
companies) or is an officer, director, manager, employee or consultant of any
Person which is a competitor, lessor, lessee, customer or supplier of any of the
Company; (b) owns, directly or indirectly, in whole or in part, any tangible or
intangible property which the Company is using or the use of which is necessary
for their business; (c) has any cause of action or other claim whatsoever
against, or owes any amount to, the Company, except for claims in the ordinary
course of business, such as for accrued vacation pay, accrued benefits under any
Company Benefit Plan and similar matters and agreements; or (d) is party to any
agreement, contract or commitment with the Company or has received any loan,
advance or investment from the Company that has not been repaid in full prior to
the date hereof.

 

4.24 Product Warranty; Product Liability. The Company does not manufacture any
products. To the Knowledge of the Seller, (a) each product sold, leased, or
delivered by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and (b) the Company has no
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due and regardless of when or by whom asserted) for
replacement or repair thereof or other damages in connection therewith, in
excess of the reserve for product warranty claims (if any) that are set forth in
the Interim Financial Statements. No product sold or delivered by the Company is
subject to any guaranty, warranty, or other indemnity by the Company beyond the
applicable standard terms and conditions of sale. The Company has no liability
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product sold or delivered by the Company,
except liabilities for which appropriate reserves have been established in
accordance with best practices and consistent with the Company’s previous
accounting methods.

 

4.25 Officers and Directors; Bank Accounts, Signing Authority, Powers of
Attorney. Section 4.25 of the Disclosure Schedule lists all officers and
directors of the Company. Except as set forth in Section 4.25 of the Disclosure
Schedule, the Company does not have an account or safe deposit box in any bank
and no Person has any power, whether singly or jointly, to sign any checks on
behalf of the Company, to withdraw any money or other property from any bank,
brokerage or other account of the Company or to act under any power of attorney
granted by the Company at any time for any such purpose. Section 4.25 of the
Disclosure Schedule also sets forth the names of all Persons authorized to
borrow money or sign notes on behalf of the Company.

 

 17 

 

 

4.26 Accounts Receivable. All accounts and notes receivable of the business of
the Company arose in the ordinary and usual course of the business, represent
valid obligations due, and except for instalment loan contracts and customer
side notes either have been collected in full or, to the Knowledge of the
Seller, are collectable in full not later than 60 days after the invoice or due
date of such receivables.

 

4.27 Disclosure. The representations and warranties contained in this Article IV
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Article IV not misleading.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Seller that each statement contained in
this Article V is true and correct as of the date hereof.

 

5.1 Organization. The Buyer is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Nevada.

 

5.2 Authorization. The Buyer has the requisite power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by the Buyer of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
action, and no other action on the part of the Buyer or the shareholders of the
Buyer is necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Buyer and, assuming the due authorization, execution and delivery by each of the
other parties hereto, constitutes a legal, valid and binding obligation of the
Buyer enforceable against the Buyer in accordance with its terms, except as
limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws relating to creditors’ rights generally and (b)
general principles of equity, whether such enforceability is considered in a
proceeding in equity or at Law.

 

5.3 Noncontravention.

 

(a) Neither the execution and the delivery of this Agreement, nor the
consummation of the Acquisition and the other transactions contemplated by this
Agreement, will, with or without the giving of notice or the lapse of time or
both, (i) violate any provision of the articles of incorporation or bylaws of
the Buyer, (ii) violate any Law applicable to the Buyer on the date hereof or
(iii) violate any Contract to which the Buyer is a party, including, without
limitation, the Buyer’s lending arrangements, except in the case of clauses (ii)
and (iii) to the extent that any such violation would not reasonably be expected
to prevent or materially delay the consummation of the Acquisition and the other
transactions contemplated by this Agreement.

 

(b) The execution and delivery of this Agreement by the Buyer does not, and the
performance of this Agreement by the Buyer will not, require any consent,
approval, authorization or Permit of, or filing with or notification to, any
Governmental Entity, except for (i) the filings set forth in Section 4.4(b)(i),
(ii) post-closing securities filings or notifications required to be made under
federal securities laws, or (ii) where the failure to take such action would not
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the assets, properties, condition (financial or otherwise),
operations of the Buyer and any of its Subsidiaries, taken as a whole.

 

 18 

 

 

5.4 Brokers’ Fees. The Buyer has no Liability to pay any fees or commissions to
any broker, finder or agent with respect to this Agreement, the Acquisition or
the transactions contemplated by this Agreement that could result in any
Liability being imposed on the Seller or the Company.

 

5.5 Sufficiency of Funds. The Buyer has sufficient cash on hand or other sources
of immediately available funds to enable it to make the payment of the Cash
Portion and the Closing Receivables and consummate the transactions contemplated
by this Agreement.

 

5.6 Litigation. There is no Action pending or threatened against the Buyer that
challenges or seeks to enjoin, alter or materially delay the Acquisition or the
other transactions contemplated by this Agreement. To the Buyer’s Knowledge, no
event has occurred or circumstances exist that may give rise or serve as a basis
for any such Action.

 

5.7 Capitalization. As of the date of this Agreement, the authorized capital
stock of the Buyer consists of (i) 300,000,000 shares of the Buyer Common Stock,
28,026,713 of which are issued and outstanding, and (ii) 20,000 shares of Series
D Preferred Stock, par value $0.001 per share (the “Series D Preferred Shares”),
6,666.67 of which are issued and outstanding.  As of the date of this Agreement,
(i) no shares of the Buyer Common Stock are held in the treasury of Buyer, (ii)
83,405 shares of the Buyer Common Stock are reserved for issuance upon the
conversion of the outstanding Series D Preferred Shares, (iii) 221,713 shares of
Buyer Common Stock are reserved for issuance upon exercise of outstanding
options, (iv) 2,361,713 shares of Buyer Common Stock are reserved for issuance
upon exercise of outstanding warrants, and (v) 15,000,000 shares of the Buyer
Common Stock are reserved for issuance under employee benefit plans of the
Buyer. The issued and outstanding shares of the Buyer Common Stock and the
Series D Preferred Stock have been, and the New Shares to be issued hereunder
will be, duly authorized and validly issued, fully paid and nonassessable, and
free of preemptive rights. The Buyer has not, subsequent to March 31, 2018,
declared or paid any dividend, or declared or made any distribution on, or
authorized the creation or issuance of, or issued, or authorized or effected any
split-up or any other recapitalization of, any of its capital stock, or directly
or indirectly redeemed, purchased or otherwise acquired any of its outstanding
capital stock. Except for the Series D Preferred Shares, the Buyer has not
heretofore agreed to take any such action, and there are no outstanding
contractual obligations of the Buyer of any kind to redeem purchase or otherwise
acquire any outstanding shares of capital stock of the Buyer. There are no
outstanding bonds, debentures, notes or other indebtedness or securities of the
Buyer having the right to vote on any matters on which stockholders of the Buyer
may vote. Except as set forth above in this Section 5.8, no shares of capital
stock or other voting securities of the Buyer are issued, reserved for issuance
or outstanding, and there are no outstanding securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which the Buyer is a party or by which any of them is bound obligating the
Buyer to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of the Buyer or
obligating the Buyer to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.

 

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5.8 SEC Reports and Financial Statements. The Buyer has filed with the
Securities and Exchange Commission (the “SEC”) all forms, reports, schedules,
registration statements, definitive proxy statements and other documents
(collectively, including all exhibits thereto, the “Buyer SEC Reports”) required
to be filed by the Buyer with the SEC. As of their respective dates, and giving
effect to any amendments or supplements thereto filed prior to the date of this
Agreement, the Buyer SEC Reports complied in all material respects with the
requirements of the Exchange Act, as amended, and the respective rules and
regulations of the SEC promulgated thereunder applicable to such Buyer SEC
Reports, and none of the Buyer SEC Reports contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. There are no
outstanding comments from the Staff of the SEC with respect to any of the Buyer
SEC Reports.

 

ARTICLE VI
COVENANTS

 

6.1 Consents. The Company will use its commercially reasonable efforts to obtain
any required third-party consents to the Acquisition and the other transactions
contemplated by this Agreement in writing from each Person.

 

6.2 Operation of the Company’s Business. During the period commencing on the
date hereof and ending at the earlier of the Closing and the termination of this
Agreement in accordance with Article VIII, the Company, except (i) as otherwise
contemplated by this Agreement, (ii) as required by applicable Law or (iii) with
the prior written consent of the Buyer (which consent will not be unreasonably
withheld or delayed), will use commercially reasonable efforts to carry on its
business in a manner consistent with past practice and not take any action or
enter into any transaction that would result in the following:

 

(a) any change in the articles of incorporation or bylaws of the Company or any
amendment of any material term of any outstanding security of the Company;

 

(b) any issuance or sale of any additional shares of, or rights of any kind to
acquire any shares of, any capital stock of any class of the Company (whether
through the issuance or granting of options or otherwise);

 

(c) any incurrence, guarantee or assumption by the Company of any indebtedness
for borrowed money other than in the ordinary course of business in amounts and
on terms consistent with past practice;

 

(d) any change in any method of accounting, accounting principle or accounting
practice by the Company which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect;

 

(e) except in the ordinary course of business (i) any adoption or material
amendment of any Company Benefit Plan, (ii) any entry into any collective
bargaining agreement with any labor organization or union, (iii) any entry into
an employment agreement or (iv) any increase in the rate of compensation to any
employee in an amount that exceeds 10% of such employee’s current compensation;
provided, that the Company may (A) take any such action for employees in the
ordinary course of business or pursuant to any existing Contracts or Company
Benefit Plans and (B) adopt or amend any Company Benefit Plan if the cost to
such Person of providing benefits thereunder is not materially increased;

 

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(f) except in the ordinary course of business, any cancellation, modification,
termination or grant of waiver of any material Permits or Contracts to which the
Company is a party, which cancellation, modification, termination or grant of
waiver would, individually or in the aggregate, have a Material Adverse Effect;

 

(g) any change in the Tax elections made by the Company or in any accounting
method used by the Company for Tax purposes, where such Tax election or change
in accounting method may have a material effect upon the Tax Liability of the
Company for any period or set of periods, or the settlement or compromise of any
material income Tax Liability of the Company;

 

(h) except in the ordinary course of business, any acquisition or disposition of
any business or any material property or asset of any Person (whether by merger,
consolidation or otherwise) by the Company;

 

(i) any grant of a Lien on any properties and assets of the Company that would
have, individually or in the aggregate, a Material Adverse Effect; provided,
however, Company may grant a Lien on its assets in the ordinary course of
business; or

 

(j) any entry into any agreement or commitment to do any of the foregoing.

 

6.3 Access. The Company will permit the Buyer and its Representatives to have
reasonable access at all reasonable times during normal business, and in a
manner so as not to interfere with the normal business operations of the
Company, to the premises, properties, personnel, books, records (including Tax
records), Contracts and documents of or pertaining to the Company.

 

6.4 Transfer of Cash and Cash Equivalents. At Closing and subject to the last
sentence of this Section 6.4, the Company and Seller will transfer, or cause to
be distributed all cash and cash equivalents of the Company to, among other
things, pay any fees owed by Company to brokers or advisors (including
termination fees under any advisory agreement) and extinguish any indebtedness
for borrowed money, including approximately $60,000 in liabilities that are
guaranteed by the Seller and described in Section 6.4 of the Disclosure
Schedule. Notwithstanding the foregoing, the Company shall have an amount in
cash in its corporate bank account at the Closing that is equal to at least
$200,000 in the aggregate.

 

6.5 Ongoing Operations and Employment Benefits Matters. For a period of three
(3) years after the Closing Date, (a) the Company shall provide the current or
equivalent health insurance plan of the Company to the Seller and his spouse on
a basis consistent with the terms, conditions and overall administration of such
plan and consistent with Section 7.1(j) of this Agreement, and (b) the Buyer and
the Company will use their reasonable best efforts to operate the Company’s
business in the geographic area where the Company has operated its business
heretofore and to employ for that purpose the current employees of the Company
other than the Seller. For a period of two (2) years following the Closing Date,
the Company shall automatically forward all emails sent to the corporate email
address smatheson@pt-hb.com to the following personal email address:
stewptech@yahoo.com.

 

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6.6 Notice of Developments. The Seller and the Company will give prompt written
notice to the Buyer of any event that would reasonably be expected to give rise
to, individually or in the aggregate, a Material Adverse Effect or would
reasonably be expected to cause a breach of any of its respective
representations, warranties, covenants or other agreements contained herein. The
Buyer will give prompt written notice to the Seller and the Company of any event
that could reasonably be expected to cause a breach of any of its
representations, warranties, covenants or other agreements contained herein or
could reasonably be expected to, individually or in the aggregate, prevent or
materially delay the consummation of the Acquisition and the other transactions
contemplated by this Agreement. The delivery of any notice pursuant to this
Section 6.6 will not limit, expand or otherwise affect the remedies available
hereunder (if any) to the party receiving such notice.

 

6.7 No Solicitation.

 

(a) The Seller and the Company will, and will cause each of their
Representatives to, cease immediately any existing discussions regarding a
Transaction Proposal.

 

(b) From and after the date of this Agreement, without the prior consent of the
Buyer, neither the Seller nor the Company will, nor will they authorize or
permit any of their respective Representatives to, directly or indirectly
through another Person to, (i) solicit, initiate or encourage (including by way
of furnishing information), or take any other action designed to facilitate any
inquiries, proposals or offers from any Person that constitute, or would
reasonably be expected to constitute, a Transaction Proposal, (ii) participate
in any discussions or negotiations (including by way of furnishing information)
regarding any Transaction Proposal or (iii) otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other Person to do or seek any of the foregoing.

 

(c) In addition, the Seller shall immediately communicate to the Buyer the terms
of any Transaction Proposal received by the Seller or the Company, or any of
their Representatives.

 

6.8 Covenant not to Compete. For a period of five years from and after the
Closing, or, if sooner, until any failure by the Buyer to satisfy its
obligations under Article II hereof (the “Noncompetition Period”), the Seller
shall not engage directly or indirectly in any business that is competitive with
the current business of the Company (the “Business”) in any geographic area in
which the Business is conducted; provided, however, that no owner of less than
1% of the outstanding stock of any publicly-traded corporation shall be deemed
to engage solely by reason thereof in any of its businesses. During the
Noncompetition Period, the Seller shall not induce or attempt to induce any
customer, or supplier of the Buyer or any affiliate of the Buyer to terminate
its relationship with the Buyer or any Affiliate of the Buyer or to enter into
any business relationship to provide or purchase the same or substantially the
same services as are provided to or purchased from the Business which might harm
the Buyer or any Affiliate of the Buyer. During the Noncompetition Period, the
Seller shall not, on behalf of any entity other than the Buyer or an Affiliate
of the Buyer, hire or retain, or attempt to hire or retain, in any capacity any
Person who is, or was at any time during the preceding twelve (12) months, an
employee or officer of the Buyer or an Affiliate of the Buyer. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section 6.8 is invalid or unenforceable, the parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.

 

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6.9 Financial Information. The Seller shall cooperate with the Buyer and the
Buyer’s independent certified public accounting firm in order to enable the
Buyer to create audited financial statements prepared in accordance with the
GAAP for the two full fiscal years preceding the Closing Date, by making
available the Seller’s records as they are maintained in the ordinary course of
business and answering reasonable questions.

 

6.10 Taking of Necessary Action; Further Action. Subject to the terms and
conditions of this Agreement, each of the Seller, the Company and the Buyer will
take all such reasonable and lawful action as may be necessary or appropriate in
order to effectuate the Acquisition in accordance with this Agreement as
promptly as practicable.

 

6.11 Collection of Closing Receivables. If and to the extent requested by the
Buyer, the Seller shall take such actions as may be reasonably necessary or
advisable to facilitate the collection of any Closing Receivables.

 

6.12 Public Reporting and Restrictive Legend. The Buyer shall, until the one
year anniversary of the date of the Share Issuance, during any period in which
the Buyer (a) is not subject to Section 13 or 15(d) of the Exchange Act, make
available, upon request of the Seller, in connection with any sale thereof, the
information required by Rule 144(c)(1) under the Securities Act, and (b) is
subject to Section 13 or 15 (d) of the Exchange Act, make all filings required
thereby in a timely manner. On the one year anniversary of the Share Issuance,
or, if earlier, upon the delivery by the Seller of an opinion of counsel that
the New Shares are being transferred pursuant to an exemption from registration
under the Securities Act, Buyer shall, at the request of the Seller, remove from
any certificate representing the New Shares any legend restricting their
transfer.

 

ARTICLE VII
CONDITIONS TO OBLIGATIONS TO CLOSE

 

7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the Acquisition is subject to the satisfaction or waiver by the Buyer
of the following conditions:

 

(a) The representations and warranties of the Seller set forth in this Agreement
will be true and correct in all respects as of the date of this Agreement and as
of the Closing Date (except to the extent such representations and warranties
speak as of another date, in which case such representations and warranties will
be true and correct as of such other date), except where the failure of such
representations and warranties to be so true and correct (without giving effect
to any limitation as to “materiality” or “Material Adverse Effect” set forth
therein) does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The Buyer will have
received a certificate signed by the Seller to such effect.

 

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(b) Each of the Seller and the Company will have performed all of the covenants
required to be performed by it under this Agreement at or prior to the Closing,
except where the failure to perform does not have, and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
materially adversely affect the ability of each of the Seller and the Company to
consummate the Acquisition or perform its other obligations hereunder. The Buyer
will have received a certificate signed by the Seller to such effect.

 

(c) The Buyer shall have completed its legal due diligence review of the Company
and the Business, its assets and liabilities, and the results thereof shall be
reasonably satisfactory to the Buyer.

 

(d) There shall not have been any occurrence, event, incident, action, failure
to act, or transaction since the date of the Interim Financial Statements which
has had or is reasonably likely to cause a Material Adverse Effect.

 

(e) All applicable waiting periods (and any extensions thereof) will have
expired or otherwise been terminated, and the parties hereto will have received
all other authorizations, consents and approvals of all Governmental Entities in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.

 

(f) No temporary, preliminary or permanent restraining Order preventing the
consummation of the Acquisition will be in effect.

 

(g) Each party, as appropriate, shall have obtained any required consents,
permits, licenses, approvals or notifications of any lenders, lessors,
suppliers, customers or other third parties for which the Buyer will assume
responsibility for properly completing any and all necessary forms required when
applying for and securing any necessary transfers.

 

(h) The Seller shall have (i) obtained releases of any liens or (ii) a payoff
letter confirming the payoff due from Company at Closing reasonably acceptable
to the Buyer, regarding charges or encumbrances against any of the assets of the
Company, at the Seller’s expense.

 

(i) The Buyer shall have received such pay-off letters and releases relating to
the indebtedness described on Section 4.3 of the Disclosure Schedule as it shall
have requested and such pay-off letters shall be in form and substance
reasonably satisfactory to it.

 

(j) The Company and the Seller shall have entered into a strategic advisor
consulting agreement in the form set forth as Exhibit A to this Agreement (the
“Consulting Agreement”) for a term of two years that includes annual
compensation of $40,000.

 

(k) Company employees identified on Section 7.1 of the Disclosure Schedule shall
have entered into non-competition and non-solicitation agreements in form and
substance satisfactory to the Buyer.

 

 24 

 

 

(l) The Company shall have delivered evidence reasonably satisfactory to the
Buyer of the Company’s corporate organization and proceedings and its existence
in the jurisdiction in which it is incorporated, including evidence of such
existence as of the Closing.

 

(m) All actions to be taken by the Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be satisfactory in form and substance to the Buyer.

 

7.2 Conditions to Obligation of the Seller. The obligation of the Seller to
consummate the Acquisition is subject to the satisfaction or waiver by the
Seller of the following conditions:

 

(a) The representations and warranties of the Buyer set forth in this Agreement
will be true and correct in all respects as of the date of this Agreement and as
of the Closing Date (except to the extent such representations and warranties
speak as of another date, in which case such representations and warranties will
be true and correct as of such other date), except where the failure of such
representations and warranties to be so true and correct does not adversely
affect the ability of the Buyer to consummate the Acquisition and the other
transactions contemplated by this Agreement. The Seller will have received a
certificate signed on behalf of the Buyer by a duly authorized officer of the
Buyer to such effect.

 

(b) The Buyer will have performed in all material respects all of the covenants
required to be performed by it under this Agreement at or prior to the Closing
except such failures to perform as do not materially adversely affect the
ability of the Buyer to consummate the Acquisition and the other transactions
contemplated by this Agreement. The Seller will have received a certificate
signed on behalf of the Buyer by a duly authorized officer of the Buyer to such
effect.

 

(c) All applicable waiting periods (and any extensions thereof) will have
expired or otherwise been terminated and the parties hereto will have received
all other authorizations, consents and approvals of all Governmental Entities in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.

 

(d) No temporary, preliminary or permanent restraining Order preventing the
consummation of the Acquisition will be in effect.

 

(e) Each party, as appropriate, shall have obtained any required consents,
permits, licenses, approvals or notifications of any Governmental Entities,
lenders, lessors, suppliers, customers or other third parties for which the
Buyer will assume responsibility for properly completing any and all necessary
forms required when applying for and securing any necessary transfers.

 

(f) The Company and the Seller shall have entered into the Consulting Agreement.

 

(g) The Cash Portion, subject to adjustment as set forth in this Agreement,
shall have been paid to the Seller.

 

 25 

 

 

(h) The Buyer and the Seller shall have provided written instruction to the
Escrow Agent for release of the Deposit in accordance with the terms of the
Escrow Agreement.

 

(i) The Company shall have transferred the Seller Policies to the Seller.

 

(j) The Buyer, the Company and the Seller shall have entered into a pledge and
security agreement in the form of Exhibit B to this Agreement that grants to the
Seller a first priority security interest in the Shares and the assets of the
Company to secure the Buyer’s obligation to pay the Seller the Closing
Receivables Payment and to pay to the Seller the Deferred Portion.

 

(k) All actions to be taken by the Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby will
be satisfactory in form and substance to the Seller.

 

ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER

 

8.1 Termination of Agreement. This Agreement may be terminated as follows:

 

(a) by mutual written consent of the Buyer and the Seller at any time prior to
the Closing;

 

(b) by either the Buyer or the Seller if any Governmental Entity will have
issued an Order or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by this Agreement;

 

(c) by either the Buyer or the Seller if the Closing does not occur on or before
July 31, 2018; provided that the right to terminate this Agreement under this
Section 8.1(c) will not be available to any party whose breach of any provision
of this Agreement results in the failure of the Closing to occur by such time;

 

(d) by the Buyer if the Seller has breached his representations and warranties
or any covenant or other agreement to be performed by him in a manner such that
the Closing conditions set forth in Section 7.1(a) or 7.1(b) would not be
satisfied; or

 

(e) by the Seller if the Buyer has breached its representations and warranties
or any covenant or other agreement to be performed by it in a manner such that
the Closing conditions set forth in Section 7.2(a) or 7.2(b) would not be
satisfied.

 

8.2 Effect of Termination. In the event of termination of this Agreement by
either the Seller or the Buyer as provided in Section 8.1, this Agreement will
forthwith become void and have no effect, without any Liability (other than with
respect to any suit for breach of this Agreement) on the part of the Buyer, the
Company or the Seller (or any stockholder, agent, consultant or Representative
of any such party); provided, that the provisions of Sections 10.1, 10.6, 10.7,
10.8, 10.11, 10.14 and this Section 8.2 will survive any termination hereof
pursuant to Section 8.1.

 

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8.3 Amendments. This Agreement may not be amended except by an instrument in
writing signed on behalf of the Buyer, the Company and the Seller.

 

8.4 Waiver. At any time prior to the Closing, the Buyer may (a) extend the time
for the performance of any of the covenants, obligations or other acts of the
Seller and the Company or (b) waive any inaccuracy of any representations or
warranties or compliance with any of the agreements, covenants or conditions of
the Seller or any conditions to his own obligations. Any agreement on the part
of the Buyer to any such extension or waiver will be valid only if such waiver
is set forth in an instrument in writing signed on its behalf by its duly
authorized officer. At any time prior to the Closing, the Seller and the
Company, may (a) extend the time for the performance of any of the covenants,
obligations or other acts of the Buyer or (b) waive any inaccuracy of any
representations or warranties or compliance with any of the agreements,
covenants or conditions of the Buyer or any conditions to their own obligations.
Any agreement on the part of the Seller and the Company to any such extension or
waiver will be valid only if such waiver is set forth in an instrument in
writing signed by the Seller and the Company. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights. The waiver of any such right with respect to
particular facts and other circumstances will not be deemed a waiver with
respect to any other facts and circumstances, and each such right will be deemed
an ongoing right that may be asserted at any time and from time to time.

 

ARTICLE IX
INDEMNIFICATION

 

9.1 Survival. The representations and warranties made herein and in any
certificate delivered in connection herewith shall survive for a period of
eighteen (18) months following the Closing Date, at which time they shall
expire; provided, however, that (i) the representations and warranties set forth
in Sections 3.1, 3.3, 3.4, 4.1, 4.3, and 4.19 of this Agreement shall survive
until the expiration of the applicable statute of limitations and (ii) the
representations and warranties in Section 4.6 of this Agreement shall survive
until the expiration of the applicable statute of limitations. If written notice
of a claim has been given prior to the expiration of the applicable
representations and warranties, then notwithstanding any statement herein to the
contrary, the relevant representations and warranties shall survive as to such
claim, until such claim is finally resolved. Unless a specified period is set
forth in this Agreement (in which event such specified period will control), all
agreements and covenants contained in this Agreement will survive the Closing
and remain in effect until thirty (30) days after the expiration of the
applicable statutes of limitations. To avoid any doubt, the parties agree that
the time limitations herein limit the time in which a claim may be brought even
though such time limits may be less than those otherwise afforded under
applicable statutes of limitations. In the event that a claim has been brought
within such time periods, the running of such time prior to the final
adjudication of such claim shall not time bar the continuation of such claim.
Notwithstanding the foregoing, Buyer and acknowledges and agrees that neither
the Seller nor the Company has made or is making any representations or
warranties whatsoever regarding the subject matter of this Agreement, express or
implied, except as provided in Article III hereof, and that it is not relying
and has not relied on any presentation or warranty whatsoever regarding the
subject matter of this Agreement, express or implied, except fort the
representations and warranties in such Article III.

 

 27 

 

 

9.2 Indemnification by the Seller. From and after the Closing, the Seller agrees
to indemnify, defend and save Buyer and its Affiliates, stockholders, officers,
directors, employees, agents and representatives (each, a “Buyer Indemnified
Party” and collectively, the “Buyer Indemnified Parties”) harmless from and
against any and all liabilities, deficiencies, demands, claims, Actions,
assessments, losses, costs, expenses, interest, fines, penalties and damages
(including fees and expenses of attorneys and accountants and costs of
investigation) (individually and collectively, the “Losses”; provided, however,
that the Losses shall not include consequential, punitive or exemplary damages,
except in the case of fraud or to the extent actually awarded to a Governmental
Entity, suffered, sustained or incurred by any Buyer Indemnified Party arising
out of or otherwise by virtue of: (a) any breach of any of the representations
or warranties of the Seller contained in Article III or IV of this Agreement or
(b) the failure of the Seller to perform any of his covenants or obligations
contained in this Agreement.

 

9.3 Indemnification by Buyer. From and after the Closing, the Buyer agrees to
indemnify, defend and save the Seller and to the extent applicable, the Seller’s
Affiliates, employees, agents and representatives (each, a “Seller Indemnified
Party” and collectively the “Seller Indemnified Parties”) harmless from and
against any and all Losses sustained or incurred by any Seller Indemnified Party
arising out of or otherwise by virtue of: (a) any breach of any of the
representations and warranties of Buyer contained in Article V of this Agreement
or (b) the failure of Buyer to perform any of its covenants or obligations
contained in this Agreement.

 

9.4 Limitations. In no event shall the indemnification obligations provided for
in Section 9.2(a) above exceed the sum of (a) the cash value of the Seller
Policies and (b) to the extent actually paid to the Seller, the Deposit, the
Cash Portion, the Closing Receivables Payment and the Deferred Portion.

 

9.5 Indemnification Procedure.

 

(a) If a Buyer Indemnified Party or a Seller Indemnified Party seeks
indemnification under this Article IX, such party (the “Indemnified Party”)
shall give written notice to the other party (the “Indemnifying Party”) of the
facts and circumstances giving rise to the claim. In that regard, if any Action,
Liability or obligation shall be brought or asserted by any third party which,
if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article IX (a “Third-Party Claim”), the Indemnified Party shall
promptly notify the Indemnifying Party of such Third-Party Claim in writing,
specifying the basis of such claim and the facts pertaining thereto, and the
Indemnifying Party, if the Indemnifying Party so elects, shall assume and
control the defense thereof (and shall consult with the Indemnified Party with
respect thereto), including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all necessary expenses. If the
Indemnifying Party elects to assume control of the defense of a Third-Party
Claim, the Indemnified Party shall have the right to employ counsel separate
from counsel employed by the Indemnifying Party in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the Indemnifying Party has been advised by the Indemnifying
Party’s counsel that a reasonable likelihood exists of a conflict of interest
between the Indemnifying Party and the Indemnified Party, or (ii) the
Indemnifying Party has failed to assume the defense and employ counsel; in which
case the fees and expenses of the Indemnified Party’s counsel shall be paid by
the Indemnifying Party. All claims other than Third-Party Claims (a “Direct
Claim”) may be asserted by the Indemnified Party giving notice to the
Indemnifying Party. Absent an emergency or other extenuating circumstance, the
Indemnified Party shall give written notice to the Indemnifying Party of such
Direct Claim prior to taking any material actions to remedy such Direct Claim.

 

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(b) In no event shall the Indemnified Party pay or enter into any settlement of
any claim or consent to any judgment with respect to any Third-Party Claim
without the prior written consent of the Indemnifying Party (which consent shall
not be unreasonably withheld, conditioned or delayed) if such settlement or
judgment would require the Indemnifying Party to pay any amount. The
Indemnifying Party may enter into a settlement or consent to any judgment
without the consent of the Indemnified Party so long as (i) such settlement or
judgment involves monetary damages only and (ii) a term of the settlement or
judgment is that the Person or Persons asserting such Third-Party Claim
unconditionally release all Indemnified Parties from all liability with respect
to such claim; otherwise the consent of the Indemnified Party shall be required
in order to enter into any settlement of, or consent to the entry of a judgment
with respect to, any Third-Party Claim, which consent shall not be unreasonably
withheld, conditioned or delayed.

 

9.6 Failure to Give Timely Notice. A failure by an Indemnified Party to provide
notice as provided in Section 9.4 will not affect the rights or obligations of
any Person except and only to the extent that, as a result of such failure, any
Person entitled to receive such notice was damaged as a result of such failure
to give timely notice. Nothing contained in this Section 9.6 shall be deemed to
extend the period for which the Seller’s representations and warranties will
survive Closing as set forth in Section 9.1 above.

 

9.7 Sole and Exclusive Remedy. Except with respect to claims for specific
performance or other equitable remedies and for claims based upon fraud, in
respect of any breach of any representations, warranties, covenant agreements or
obligations required to be performed on or after Closing pursuant to this
Agreement, this Article IX shall be the sole and exclusive remedy for Losses of
any Indemnified Party and each party waives all statutory common law and other
claims with respect thereto, other than claims for indemnification under this
Article IX from and after the Closing with respect to breaches of this
Agreement.

 

9.8 Payments. Payments of all amounts owing by an Indemnifying Party under this
Article IX shall be made promptly upon the determination in accordance with this
Article IX that an indemnification obligation is owing by the Indemnifying Party
to the Indemnified Party.

 

9.9 Recoupment under Deferred Portion.

 

(a) If the Seller is obligated to indemnify the Buyer or any other Buyer
Indemnified Party for any indemnification claim in accordance with this Article
IX, Buyer shall have the right to set-off the amount of such claim against the
Deferred Portion.

 

(b) If the Buyer intends to set-off any amount hereunder, the Buyer shall
provide not less than thirty (30) days’ prior written notice to the Seller of
its intention to do so, together with a reasonably detailed explanation of the
basis therefor (a “Set-Off Notice”). If, within ten (10) days of its receipt of
a Set-Off Notice, the Seller provides the Buyer with written notice of such
Seller’s dispute with Buyer’s right to make such set-off, Buyer and such Seller
(and their respective representatives and advisors) shall meet (which may be
accomplished telephonically) in good faith within five (5) days to attempt to
resolve their dispute. If such dispute remains unresolved despite Buyer’s good
faith attempt to meet with the Seller and resolve such dispute, Buyer may
set-off under this Section 9.9 only (a) with respect to those indemnification
claims that have been Finally Determined (as defined below), (b) as described in
the first sentence of Section 9.9(c) with the prior written consent of the
Seller.

 

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(c) In the event of a dispute with respect to any indemnification claim against
Seller made in good faith pursuant to this Article IX, and the liability for and
amount of Losses therefore, Buyer may withhold any payments of the Deferred
Portion up to the disputed amount, but only if the Buyer deposits such withheld
amounts into escrow in accordance with a mutually agreed upon escrow agreement,
provided that if the parties cannot agree upon the terms of the escrow agreement
or the escrow agent, the Buyer shall deposit the withheld payments with a court
of competent jurisdiction in the State of Oklahoma. For purposes of this
Agreement, the term “Finally Determined” shall mean with respect to any
indemnification claim made, and the liability for and amount of Losses therefor,
when the parties to such claim have so determined by mutual agreement or, if
disputed, when a final, non-appealable judgment has been issued by a court
having proper jurisdiction.

 

ARTICLE X
MISCELLANEOUS

 

10.1 Press Releases and Public Announcement. Neither the Buyer on the one hand,
nor the Seller or the Company on the other, will issue any press release or make
any public announcement relating to this Agreement, the Acquisition or the other
transactions contemplated by this Agreement without the prior written approval
of the other party; provided, however, that the Buyer may make regulatory
filings referring to this Agreement or attaching a copy hereof as may be
required by applicable law.

 

10.2 No Third-Party Beneficiaries. This Agreement will not confer any rights or
remedies upon any Person other than the parties hereto and their respective
successors and permitted assigns.

 

10.3 Entire Agreement. This Agreement (including the Exhibits and the Schedules
hereto) constitutes the entire agreement among the parties hereto and supersedes
any prior understandings, agreements or representations by or among the parties
hereto, written or oral, to the extent they related in any way to the subject
matter hereof.

 

10.4 Succession and Assignment. This Agreement will be binding upon and inure to
the benefit of the parties named herein and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval, in the case of assignment by the Buyer, by the Seller, and, in the
case of assignment by the Seller or the Company, the Buyer.

 

10.5 Construction. The parties have participated jointly in the negotiation and
drafting of this Agreement, and, in the event an ambiguity or question of intent
or interpretation arises, this Agreement will be construed as if drafted jointly
by the parties, and no presumption or burden of proof will arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.

 

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10.6 Notices. All notices, requests and other communications hereunder must be
in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission or mailed (by
registered or certified mail, postage prepaid, return receipt requested) or
delivered by reputable overnight courier, fee prepaid, to the parties hereto at
the addresses of the parties as specified below:

 

If to the Buyer:            3355 Bee Caves Road, Suite 608

Austin, Texas 78746

Attention: Chief Executive Officer

Fax: 866-234-9806

 

With a copy to:           BEVILACQUA PLLC

1050 Connecticut Avenue, NW, Suite 500

Washington, DC 20036

Attention: Louis A Bevilacqua

Fax: (202) 869-0889

 

If to the Company:      P.O. Box 6920

Moore, OK 73153

Attention: Stewart Matheson

 

If to the Seller:             Stewart Matheson

21700 Villagio Drive

Edmond, OK 73012

 

with a copy to:             Rischard, Carsey & Byrne, PLLC

100 Park Avenue, Suite, 700

Oklahoma City, OK 73102

Attention: Justin Byrne

Fax: (405) 231-2830

 

Any party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other parties
notice in the manner set forth herein.

 

10.7 Governing Law. This Agreement will be governed by, and construed in
accordance with, the Laws of the State of Oklahoma, without giving effect to any
choice of Law or conflict of Law provision or rule that would cause the
application of the Laws of any jurisdiction other than the State of Oklahoma.

 

10.8 Consent to Jurisdiction and Service of Process. EACH OF THE PARTIES HERETO
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE
STATE OF OKLAHOMA AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE ACQUISITION OR THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF THE
PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS RESPECTIVE
PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY FINAL AND NONAPPEALABLE JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT, THE ACQUISITION OR THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.

 

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10.9 Headings. The descriptive headings contained in this Agreement are included
for convenience of reference only and will not affect in any way the meaning or
interpretation of this Agreement.

 

10.10 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future Law (a) such provision will
be fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms of such
illegal, invalid or unenforceable provision as may be possible.

 

10.11 Expenses. Except as otherwise provided in this Agreement, whether or not
the Acquisition is consummated, all expenses incurred in connection with this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such expenses. As used in this Agreement, “expenses” means the
out-of-pocket fees and expenses of the financial advisor, counsel and
accountants incurred in connection with this Agreement and the transactions
contemplated hereby.

 

10.12 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.

 

10.13 Limited Recourse. Notwithstanding anything in this Agreement to the
contrary, the obligations and Liabilities of the parties hereunder will be
without recourse to any stockholder of such party or any of such stockholder’s
affiliates (other than such party), or any of their respective Representatives
or agents (in each case, in their capacity as such).

 

10.14 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any provision of this Agreement was not performed
in accordance with the terms hereof and that the parties will be entitled to
specific performance of the terms hereof in addition to any other remedy at Law
or equity.

 

10.15 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, e.g.,
www.docusign.com) or other transmission method and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.

 

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

 

  BUYER:         VICTORY OILFIELD TECH, INC.         By: /s/ Kenneth Hill  
Name: Kenneth Hill   Title: Chief Executive Officer         COMPANY:        
PRO-TECH HARDBANDING SERVICES, INC.         By: /s/ Stewart Matheson   Name:
Stewart Matheson   Title: President         SELLER:         /s/ Stewart Matheson
  STEWART MATHESON