Agreement and Plan of Merger

 

among

 

nFüsz, Inc., as the Parent

 

NF Merger Sub, Inc., as Merger Sub No. 1,

 

NF Acquisition Company, LLC, as Merger Sub No. 2,

 

Sound Concepts, Inc., as the Company,

 

the Shareholders of Sound Concepts, Inc.,

 

and

 

the Shareholders’ Representative

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS 8     ARTICLE II the merger 18     Section 2.01 The
Merger. 18     Section 2.02 Closing. 19     Section 2.03 Closing Deliverables.
19     Section 2.04 Effective Time. 21     Section 2.05 Effects of the Merger.
21     Section 2.06 Organization; Operating Agreement. 21     Section 2.07
Directors and Officers. 21     Section 2.08 Effect of the Merger on Capital
Stock of the Company and Merger Sub No. 1 and the Equity of Merger Sub No. 2. 21
    Section 2.09 Surrender and Payment. 22     Section 2.10 Escrow Shares. 23  
  Section 2.11 No Further Ownership Rights in Company Shares. 23     Section
2.12 Adjustments. 23     Section 2.13 Withholding Rights. 23     Section 2.14
Tax-Free Merger. 23     Section 2.15 Waiver of Dissenters’ Rights. 23    
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE Company and the sHAREholders
23     Section 3.01 Authority of the Shareholders; No Conflicts or Consents in
Respect of the Shareholders. 24     Section 3.02 Organization and Qualification
of the Company; Authority of the Company. 24     Section 3.03 Capitalization. 25
    Section 3.04 No Subsidiaries. 26

 

2

 

 

Section 3.05 No Conflicts or Consents in Respect of the Company. 26     Section
3.06 Financial Statements. 26     Section 3.07 No Undisclosed Liabilities. 27  
  Section 3.08 Absence of Certain Changes. 28     Section 3.09 Material
Contracts. 30     Section 3.10 Title to Assets; No Real Property. 31     Section
3.11 Condition and Sufficiency of Assets. 32     Section 3.12 Intellectual
Property. 33     Section 3.13 Inventory. 34     Section 3.14 Accounts
Receivable. 34     Section 3.15 Customers and Suppliers. 34     Section 3.16
Insurance. 35     Section 3.17 Legal Proceedings; Governmental Orders. 35    
Section 3.18 Compliance With Laws; Permits. 36     Section 3.19 Environmental
Matters. 36     Section 3.20 Employee Benefit Matters. 37     Section 3.21
Employee Matters. 40     Section 3.22 Taxes. 41     Section 3.23 Books and
Records. 44     Section 3.24 Brokers. 44     Section 3.25 Affiliate Agreements.
44     Section 3.26 Investment Representations. 44     Section 3.27 No Other
Representations or Warranties. 45   Section 3.28 Absence of Company Material
Adverse Effect; Investigation. 45     ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PARENT and merger sub 46     Section 4.01 Organization and Authority. 46

 

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Section 4.02 No Conflicts; Consents. 46     Section 4.03 No Prior Merger Sub
Operations. 47     Section 4.04 Brokers. 47     Section 4.05 Sufficiency of
Funds. 47     Section 4.06 Legal Proceedings. 47     Section 4.07 SEC Reports.
47     Section 4.08 Capitalization. 48     Section 4.09 Financial Statements. 48
    Section 4.10 Permits; Compliance with Applicable Laws. 49     Section 4.11
Absence of Material Adverse Effect. 49     Section 4.12 Independent
Investigation. 49     ARTICLE V COVENANTS 49     Section 5.01 Conduct of
Business Prior to the Closing. 49     Section 5.02 Access to Information. 50    
Section 5.03 No Solicitation of Other Bids. 50     Section 5.04 Notice of
Certain Events. 51     Section 5.05 Confidentiality. 52     Section 5.06
Non-competition; Non-solicitation. 53     Section 5.07 Resignations. 54    
Section 5.08 Governmental Approvals and Consents. 54     Section 5.09 Directors’
and Officers’ Indemnification and Insurance. 55     Section 5.10 Closing
Conditions. 56     Section 5.11 Public Announcements. 57     Section 5.12
Affiliate Agreements. 57     Section 5.13 Audited Financial Statements. 57    
Section 5.14 Further Assurances. 57

 

4

 

 

ARTICLE VI TAX MATTERS 57     Section 6.01 Taxes. 57     Section 6.02 Certain
Tax Covenants. 57     Section 6.03 Termination of Existing Tax Indemnity, Tax
Sharing, and Tax Allocation Agreements. 58     Section 6.04 Tax Returns. 58    
Section 6.05 Straddle Period. 59     Section 6.06 Closing Date Taxes. 59    
Section 6.07 Cooperation and Exchange of Information. 60     Section 6.08 Tax
Indemnities. 60     Section 6.09 Control of Audit or Tax Litigation. 61    
Section 6.10 Tax Refunds. 61   Section 6.11 No Tax Return Amendments. 61    
Section 6.12 Survival. 61     Section 6.13 Overlap. 61     ARTICLE VII
CONDITIONS TO CLOSING 62     Section 7.01 Conditions to Obligations of the
Parent, Merger Sub No.1, and Merger Sub No. 2. 62     Section 7.02 Conditions to
Obligations of the Company and the Shareholders. 63     ARTICLE VIII
INDEMNIFICATION 64     Section 8.01 Survival. 64     Section 8.02
Indemnification By the Shareholders. 64     Section 8.03 Indemnification By the
Parent. 65     Section 8.04 Certain Limitations. 65     Section 8.05
Indemnification Procedures. 66     Section 8.06 Payments. 69     Section 8.07
Tax Treatment of Indemnification Payments. 69

 

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Section 8.08 Effect of Investigation. 69     Section 8.09 Exclusive Remedies. 69
    Section 8.10 No Circular Recovery. 69     ARTICLE IX TERMINATION 70    
Section 9.01 Termination. 70     Section 9.02 Effect of Termination. 70    
ARTICLE X MISCELLANEOUS 71     Section 10.01 Expenses. 71     Section 10.02
Notices. 71     Section 10.03 Interpretation. 72     Section 10.04 Headings. 72
    Section 10.05 Severability. 72     Section 10.06 Entire Agreement. 73    
Section 10.07 Successors and Assigns. 73     Section 10.08 No Third-party
Beneficiaries. 73     Section 10.09 Amendment and Modification; Waiver. 73    
Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
73     Section 10.11 Specific Performance. 74     Section 10.12 Counterparts. 74
    Section 10.13 Shareholders’ Representative. 74     Section 10.14
Acknowledgement. 76

 

6

 

 

Index of Exhibits

 

Exhibit A – Form of Escrow Agreement

 

Exhibit B – Form of Lock-up Agreement

 

Exhibit C – Directors and Officers of the Surviving Entity

 

7

 

 

AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this “Agreement”), dated as of November 8,
2018, is entered into by and among nFüsz, Inc., a Nevada corporation (the
“Parent”), NF Merger Sub, Inc., a Utah corporation and a wholly-owned subsidiary
of the Parent (“Merger Sub No. 1”), NF Acquisition Company, LLC, a Utah limited
liability company and a wholly-owned subsidiary of the Parent (“Merger Sub No.
2”), Sound Concepts, Inc., a Utah corporation (the “Company”), the undersigned
shareholders of the Company (each, a “Shareholder,” and, collectively, the
“Shareholders”), and the Shareholders’ Representative (as defined below).

 

RECITALS

 

WHEREAS, (i) the respective Boards of Directors and Board of Managers of the
Parent, Merger Sub No. 1, Merger Sub No. 1, and the Company have deemed it
advisable and in the best interests of their respective stockholders, members,
and shareholders that the Company be acquired by the Parent, which acquisition
is to be effected by a two-step merger, consisting of merging Merger Sub No. 1
with and into the Company, with the Company surviving the “first step” of the
Merger as a wholly-owned subsidiary of the Parent and, immediately thereafter,
merging the Company with and into Merger Sub No. 2, with Merger Sub No. 2
surviving the “second step” of the Merger (collectively, the “Merger”), all on
the terms and subject to the conditions set forth herein, (ii) such Boards of
Directors and Board of Managers have approved this Agreement and the Merger, and
(iii) the Board of Directors of the Company (the “Company Board”) has
recommended the approval of this Agreement and the Merger by the Shareholders;

 

WHEREAS, the Shareholders own all of the issued and outstanding Company Shares
(as defined below) and, by their execution of this Agreement, hereby approve
this Agreement, the Merger, and the transactions contemplated hereby by written
consent in accordance with the applicable provisions of the URBCA (as defined
below);

 

WHEREAS, the parties hereto intend that the Merger shall qualify as a
“reorganization” under the provisions of Section 368(a) of the Code (as defined
below) and for this Agreement to constitute a “plan of reorganization” within
the meaning of Treasury Regulations promulgated thereunder.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

ARTICLE I
Definitions

 

The following terms have the meanings specified or referred to in this ARTICLE
I:

 

“Acquisition Proposal” has the meaning set forth in Section 5.03(a).

 

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena, or investigation of any nature, civil, criminal, administrative,
regulatory, or otherwise, whether at law or in equity, by or before any
Governmental Authority.

 

8

 

 

“Affiliate” of a Person means any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.

 

“Affiliate Agreement” has the meaning set forth in Section 3.25.

 

“A.G.P.” means A.G.P. / Alliance Global Partners, a unit of Euro Pacific
Capital, Inc.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Annual Financial Statements” has the meaning set forth in Section 3.06.

 

“Articles of Merger,” “First Step Articles of Merger,” and “Second Step Articles
of Merger,” have the meanings set forth in Section 2.04.

 

“Audited Financial Statements” has the meaning set forth in Section 5.13.

 

“Basket” has the meaning set forth in Section 8.04(a).

 

“Benefit Plan” has the meaning set forth in Section 3.20(a).

 

“Business Day” means any day except Saturday, Sunday, or any other day on which
commercial banks located in the State of Utah or the State of California are
authorized or required by Law to be closed for business.

 

“Cash Consideration” means an amount in cash equal to $15,000,000.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

 

“Closing” has the meaning set forth in Section 2.02.

 

“Closing Date” has the meaning set forth in Section 2.02.

 

“Closing Indebtedness Amount” means, as of immediately prior to the Effective
Time, the aggregate amount of Indebtedness of the Company, including all accrued
and unpaid interest, prepayment penalties or fees, and other unpaid fees and
expenses payable in respect of such Indebtedness through the Effective Time.

 

“Closing Merger Consideration” means the sum of (a) the Net Cash Consideration
plus (b) the Closing Parent Shares.

 

9

 

 

“Closing Parent Shares” means the sum of (a) the Parent Shares less (b) the
Escrow Shares.

 

“Code” means the Internal Revenue Code of 1986, as amended, or any successor
law, and regulations issued by the Internal Revenue Service pursuant thereto.

 

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

 

“Company” has the meaning set forth in the preamble to this Agreement.

 

“Company Board” has the meaning set forth in the recitals to this Agreement.

 

“Company Common Stock” means the common stock, no par value per share, of the
Company.

 

“Company Intellectual Property” means all Intellectual Property that is owned or
held for exclusive use by the Company.

 

“Company IP Agreements” means all licenses, sublicenses, consent to use
agreements, settlements, coexistence agreements, covenants not to sue,
permissions, and other Contracts (including any right to receive or obligation
to pay royalties or any other consideration), whether written or oral, relating
to Intellectual Property to which the Company is a party, beneficiary, or
otherwise bound.

 

“Company IP Registrations” means all Company Intellectual Property that is
subject to any issuance registration, application, or other filing by, to, or
with any Governmental Authority or authorized private registrar in any
jurisdiction, including registered trademarks, domain names, and copyrights,
issued and reissued patents, and pending applications for any of the foregoing.

 

“Company Material Adverse Effect” means any event, occurrence, fact, condition,
or change that is, or would reasonably be expected to become, individually or in
the aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise), or assets of the Company or (b) the ability
of the Company or any Shareholder to consummate the transactions contemplated
hereby on a timely basis; provided, however, that “Company Material Adverse
Effect” shall not include any of the following, or any event, occurrence, fact,
condition, or change, directly or indirectly, arising out of or attributable to:
(i) general economic or political conditions; (ii) conditions generally
affecting the industries in which the Company operates; (iii) any changes in
financial or securities markets in general; (iv) acts of war (whether or not
declared), armed hostilities, or terrorism, or the escalation or worsening
thereof; (v) natural disasters, acts of God or other force majeure events; (vi)
any action required or permitted by this Agreement, except pursuant Section 3.05
and Section 5.08; (vii) any changes in applicable Laws or accounting rules,
including GAAP, or the interpretation or enforcement thereof; or (viii) the
public announcement, pendency, or completion of the transactions contemplated by
this Agreement; provided, further, however, that any event, occurrence, fact,
condition, or change referred to in clauses (i) through (v) immediately above
shall be taken into account in determining whether a Company Material Adverse
Effect has occurred or would reasonably be expected to occur to the extent that
such event, occurrence, fact, condition, or change has a disproportionate effect
on the Company compared to other participants in the industries in which the
Company conducts its businesses.

 

“Company Shares” means shares of Company Common Stock.

 

10

 

 

“Company Transaction Expenses” means all (a) costs, fees, and expenses incurred
(whether or not invoiced or accrued) by the Company prior to the Closing in
connection with this Agreement and the transactions contemplated hereby,
including fees and expenses of advisors and consultants (including investment
bankers, brokers, lawyers, and accountants) arising out of, relating to, or
incidental to the discussion, evaluation, negotiation, and documentation of the
transactions contemplated hereby; (b) transactional bonuses that become due as a
result of the Merger and are actually paid or accrued by virtue of obligations
created by the Company prior to the Closing Date; and (c) severance payments
that become due as a result of the Merger and are actually paid or accrued by
virtue of obligations created by the Company prior to the Closing Date.

 

“Contracts” means all contracts, leases, deeds, mortgages, licenses,
instruments, notes, undertakings, indentures, joint ventures, and all other
legally binding agreements, commitments, and arrangements, whether written or
oral.

 

“D&O Indemnified Party” has the meaning set forth in Section 5.09(a).

 

“D&O Indemnifying Parties” has the meaning set forth in Section 5.09(b).

 

“Direct Claim” has the meaning set forth in Section 8.05(c).

 

“Disclosure Schedules” means the Schedules delivered by the Company under
ARTICLE III concurrently with the execution and delivery of this Agreement.

 

“Disputed Amounts” has the meaning set forth in Section 2.16(c)(iii).

 

“Dollars” or “$” means the lawful currency of the United States of America.

 

“Effective Time” has the meaning set forth in Section 2.04.

 

“Encumbrance” means any charge, valid claim, community property interest,
pledge, condition, equitable interest, lien (statutory or other), option,
security interest, mortgage, easement, encroachment, right of way, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.

 

“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty,
or, as to each, any settlement or judgment arising therefrom, by or from any
Person alleging liability of whatever kind or nature (including liability or
responsibility for the costs of enforcement proceedings, investigations,
cleanup, governmental response, removal or remediation, natural resources
damages, property damages, personal injuries, medical monitoring, penalties,
contribution, indemnification, and injunctive relief) arising out of, based on,
or resulting from: (a) the presence, Release of, or exposure to, any Hazardous
Materials or (b) any actual or alleged non-compliance with any Environmental Law
or term or condition of any Environmental Permit.

 

“Environmental Law” means any applicable Law or binding agreement with any
Governmental Authority: (a) relating to pollution (or the cleanup thereof) or
the protection of natural resources, endangered or threatened species, human
health or safety, or the environment (including ambient air, soil, surface water
or groundwater, or subsurface strata); or (b) concerning the presence of,
exposure to, or the management, manufacture, use, containment, storage,
recycling, reclamation, reuse, treatment, generation, discharge, transportation,
processing, production, disposal, or remediation of any Hazardous Materials.

 

11

 

 

“Environmental Notice” means any written directive, notice of violation or
infraction, or notice respecting any Environmental Claim relating to actual or
alleged non-compliance with any Environmental Law or any term or condition of
any Environmental Permit.

 

“Environmental Permit” means any Permit, letter, clearance, consent, waiver,
closure, exemption, decision, or other action required under, or issued,
granted, given, authorized by, or made pursuant to, Environmental Law.

 

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

 

“ERISA Affiliate” means all employers (whether or not incorporated) that would
be treated together with the Company or any of its Affiliates as a “single
employer” within the meaning of Section 414 of the Code.

 

“Escrow Agent” means ●.

 

“Escrow Agreement” means the Escrow Agreement to be entered into by the Parent,
the Shareholders’ Representative, and the Escrow Agent at the Closing,
substantially in the form of Exhibit A.

 

“Escrow Shares” means twenty-five percent (25%) of the number of Parent Shares,
which shall have all of the attributes of Parent Shares (e.g., the rights to
receive dividends, if, when, and as declared by the Company and the rights to
vote) and, subject to the provisions of the Escrow Agreement, the Shareholders
shall be the record and beneficial owners thereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, and the rules and regulations of the Commission promulgated thereunder.

 

“Financial Statements” has the meaning set forth in Section 3.06.

 

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

 

“Government Contracts” has the meaning set forth in Section 3.09(a)(viii).

 

“Governmental Authority” means any federal, state, local, or foreign government
or political subdivision thereof, any agency or instrumentality of such
government or political subdivision, any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations, or orders of such organization or authority
have the force of Law), or any arbitrator, court, or tribunal of competent
jurisdiction.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination, or award entered by or with any Governmental
Authority.

 

12

 

 

“Hazardous Materials” means: (a) any material, substance, chemical, waste,
product, derivative, compound, mixture, solid, liquid, mineral, or gas, in each
case, whether naturally occurring or manmade, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect under
Environmental Laws and (b) any petroleum or petroleum-derived products, radon,
radioactive materials or wastes, asbestos in any form, lead or lead-containing
materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

 

“Indebtedness” means, without duplication and with respect to the Company, (a)
all indebtedness for borrowed money, (b) all obligations for the deferred
purchase price of property or services, (c) all obligations evidenced by notes,
bonds, debentures, or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations as lessee under leases that have
been or should be, in accordance with GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, under acceptance, letter of credit, or
similar facilities, (g) all obligations under any interest rate, currency swap,
or other hedging agreement or arrangement, (h) all obligations in the nature of
guarantees made by the Company on behalf of any third party in respect of the
obligations described in clauses (a) through (g), above, but only to the extent
of amounts actually due by or from the Company pursuant to such guaranties, and
(i) any unpaid interest or prepayment, exit, or rescheduling or other penalties,
premiums, costs, and/or fees that would arise or become due as a result of the
prepayment of any of the obligations referred to in the foregoing clauses (a)
through (h).

 

“Indemnified Party” has the meaning set forth in Section 8.05.

 

“Indemnifying Party” has the meaning set forth in Section 8.05.

 

“Independent Accountant” has the meaning set forth in Section 2.16(c)(iii).

 

“Insurance Policies” has the meaning set forth in Section 3.16.

 

“Intellectual Property” means all intellectual property and industrial property
rights and assets, and all rights, interests, and protections that are
associated with, similar to, or required for the exercise of, any of the
foregoing, however arising, pursuant to the Laws of any jurisdiction throughout
the world, whether registered or unregistered, including any and all: (a)
trademarks, service marks, trade names, brand names, logos, trade dress, design
rights, and other similar designations of source, sponsorship, association, or
origin, together with the goodwill connected with the use of and symbolized by,
and all registrations, applications, and renewals for, any of the foregoing; (b)
internet domain names, whether or not trademarks, registered in any top-level
domain by any authorized private registrar or Governmental Authority, web
addresses, web pages, websites and related content, accounts with Twitter,
Facebook and other social media companies and the content found thereon and
related thereto, and URLs; (c) works of authorship, expressions, designs, and
design registrations, whether or not copyrightable, including copyrights,
author, performer, moral, and neighboring rights, and all registrations,
applications for registration, and renewals of such copyrights; (d) inventions,
discoveries, trade secrets, business and technical information and know-how,
databases, data collections, and other confidential and proprietary information
and all rights therein; (e) patents (including all reissues, divisionals,
provisionals, continuations and continuations-in-part, re-examinations,
renewals, substitutions, and extensions thereof), patent applications, and other
patent rights and any other Governmental Authority-issued indicia of invention
ownership (including inventor’s certificates, petty patents, and patent utility
models); (f) software and firmware, including data files, source code, object
code, application programming interfaces, architecture, files, records,
schematics, computerized databases, specifications, and documentation related to
such software and firmware; and (g) semiconductor chips and mask works.

 

13

 

 

“Interim Balance Sheet” has the meaning set forth in Section 3.06.

 

“Interim Balance Sheet Date” has the meaning set forth in Section 3.06.

 

“Interim Financial Statements” has the meaning set forth in Section 3.06.

 

“Key Employees” means McKinley J. Oswald, Jason Matheny, Colby Allen, and JJ
Oswald.

 

“Knowledge” means, when used with respect to the Company, the actual or
constructive knowledge of any Shareholder or any director or officer of the
Company.

 

“Law” means any statute, law, ordinance, regulation, rule, code, constitution,
treaty, common law, rule of law, Governmental Order, or other requirement of any
Governmental Authority.

 

“Liabilities” means any liabilities, obligations, or commitments of any nature
whatsoever, asserted or unasserted, known or unknown, absolute or contingent,
accrued or unaccrued, matured or unmatured, or otherwise.

 

“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments,
interest, awards, penalties, fines, costs, or expenses of whatever kind,
including reasonable attorneys’ fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance providers;
provided, however, that “Losses” shall not include (i) punitive damages, except
in the case of fraud or to the extent actually awarded to a Governmental
Authority or other third party, (ii) any incidental, indirect, exemplary, or
other special damages, or (iii) damages based on any multiple; provided,
further, however, that, in the case of fraud, “Losses” shall include each of the
items itemized in the immediately preceding proviso.

 

“Material Contracts” has the meaning set forth in Section 3.09(a).

 

“Material Customers” has the meaning set forth in Section 3.15(a).

 

“Material Suppliers” has the meaning set forth in Section 3.15(b).

 

“Merger” has the meaning set forth in the recitals to this Agreement.

 

“Merger Consideration” the sum of (a) the Closing Merger Consideration plus (b)
the portion, if any, of the Escrow Shares that the Shareholders become entitled
to receive pursuant to the terms of this Agreement and the Escrow Agreement.

 

“Merger Consideration Certificate” means a certificate signed by the Company and
the Shareholders that sets forth, as of the Closing Date and immediately prior
to the Effective Time, (a) the names and addresses of all Shareholders and the
number of Company Shares held by such Shareholders; (b) a calculation of the
Closing Merger Consideration; (c) each Shareholder’s Pro Rata Share (as a
percentage interest and the interest in dollars in respect of the Net Cash
Consideration and number of shares in respect of the Closing Parent Shares) of
the Closing Merger Consideration; and (d) each Shareholder’s Pro Rata Share (as
a percentage interest and the interest in number of shares) of the Escrow
Shares. The Parent will be entitled to rely conclusively on the amounts and
other information set forth in the Merger Consideration Certificate.

 

14

 

 

“Merger Sub No. 1” has the meaning set forth in the preamble to this Agreement.

 

“Merger Sub No. 2” has the meaning set forth in the preamble to this Agreement.

 

“Multiemployer Plan” has the meaning set forth in Section 3.20(c).

 

“Net Cash Consideration” means the sum of the Cash Consideration.

 

“Organizational Documents” means (a) in the case of a Person that is a
corporation, its articles or certificate of incorporation and its by-laws,
regulations, or similar governing instruments required by the laws of its
jurisdiction of formation or organization; (b) in the case of a Person that is a
partnership, its articles or certificate of partnership, formation, or
association and its partnership agreement (in each case, limited, limited
liability, general, or otherwise); (c) in the case of a Person that is a limited
liability company, its articles or certificate of formation or organization and
its limited liability company agreement or operating agreement; and (d) in the
case of a Person that is none of a corporation, partnership (limited, limited
liability, general, or otherwise), limited liability company, or natural person,
its governing instruments as required or contemplated by the laws of its
jurisdiction of organization.

 

“Parent” has the meaning set forth in the preamble to this Agreement.

 

“Parent Common Stock” means the common stock, par value $0.0001 per share, of
the Parent.

 

“Parent Material Adverse Effect” means any event, occurrence, fact, condition,
or change that is, or could reasonably be expected to become, individually or in
the aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise), or assets of the Parent or (b) the ability
of the Parent to consummate the transactions contemplated hereby on a timely
basis; provided, however, that “Parent Material Adverse Effect” shall not
include any event, occurrence, fact, condition, or change, directly or
indirectly, arising out of or attributable to: (i) general economic or political
conditions; (ii) conditions generally affecting the industries in which the
Parent operates; (iii) any changes in financial or securities markets in
general; (iv) acts of war (whether or not declared), armed hostilities, or
terrorism, or the escalation or worsening thereof; (v) any action required or
permitted by this Agreement; (vi) any changes in applicable Laws or accounting
rules, including GAAP; or (vii) the public announcement, pendency, or completion
of the transactions contemplated by this Agreement; provided, further, however,
that any event, occurrence, fact, condition, or change referred to in clauses
(i) through (iv) immediately above shall be taken into account in determining
whether a Parent Material Adverse Effect has occurred or could reasonably be
expected to occur to the extent that such event, occurrence, fact, condition, or
change has a disproportionate effect on the Parent compared to other
participants in the industries in which the Parent conducts its businesses.

 

“Parent Indemnitees” has the meaning set forth in Section 8.02.

 

15

 

 

“Parent Public Offering” means the sale and issuance, no earlier than three
Business Days prior to the Closing Date, in a public offering pursuant to the
Registration Statement, of shares of Parent Common Stock.

 

“Parent SEC Reports” has the meaning set forth in Section 4.07(b).

 

“Parent Share Price” means the price per share of Parent Common Stock as of the
Closing.

 

“Parent Shares” means the number of shares of Parent Common Stock obtained by
dividing $10,000,000 by the Parent Share Price.

 

“Permits” means all permits, licenses, franchises, approvals, authorizations,
registrations, certificates, variances, and similar rights, in each case,
obtained, or required to be obtained, from Governmental Authorities.

 

“Permitted Encumbrances” has the meaning set forth in Section 3.10(a).

 

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association, or other entity.

 

“Post-Closing Tax Period” means any taxable period beginning after the Closing
Date and, with respect to any taxable period beginning before and ending after
the Closing Date, the portion of such taxable period beginning after the Closing
Date.

 

“Post-Closing Taxes” means Taxes of the Company for any Post-Closing Tax Period.

 

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date and, with respect to any taxable period beginning on or before and
ending after the Closing Date, the portion of such taxable period ending on and
including the Closing Date.

 

“Pre-Closing Taxes” means Taxes of the Company for any Pre-Closing Tax Period.

 

“Pro Rata Share” means, with respect to any Shareholder, such Shareholder’s
ownership interest in the Company as of immediately prior to the Effective Time,
determined by dividing (a) the number of Company Shares owned of record by such
Shareholder as of immediately prior to the Effective time, by (b) the aggregate
number of Company Shares issued and outstanding immediately prior to the
Effective Time.

 

“Qualified Benefit Plan” has the meaning set forth in Section 3.20(c).

 

“Real Property” means the real property owned, leased, or subleased by the
Company, together with all buildings, structures, and facilities located
thereon.

 

“Registration Statement” means that certain Registration Statement on Form S-1,
file number 333-226840, filed by the Parent with the Commission on August 14,
2018 in connection with the Parent Public Offering, and all amendments thereto.

 

16

 

 

“Release” means any actual or threatened release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing, or allowing to escape or migrate into or
through the environment (including ambient air, surface water, groundwater, land
surface, or subsurface strata or within any building, structure, facility, or
fixture).

 

“Representative” means, with respect to any Person, any and all directors,
managing members, managers, officers, employees, consultants, financial
advisors, counsel, accountants, and other agents of such Person.

 

“Resolution Period” has the meaning set forth in Section 2.16(c)(ii).

 

“Restricted Business” means any business that would be directly or indirectly
competitive with the Company as of the Closing Date.

 

“Restricted Period” has the meaning set forth in Section 5.06(a).

 

“Review Period” has the meaning set forth in Section 2.16(c)(i).

 

“Securities Act” means the Securities Act of 1933, as amended from time to time,
and the rules and regulations of the Commission promulgated thereunder.

 

“Shareholder” and “Shareholders” have the respective meanings set forth in the
preamble to this Agreement.

 

“Shareholder Indemnitees” has the meaning set forth in Section 8.03.

 

“Shareholders’ Representative” means McKinley J. Oswald, an individual.

 

“Side Letter” means that certain letter by and among the parties hereto, dated
the date of this Agreement.

 

“Statement of Objections” has the meaning set forth in Section 2.16(c)(ii).

 

“Straddle Period” has the meaning set forth in Section 6.05.

 

“Surviving Entity” has the meaning set forth in Section 2.01.

 

“Taxes” means all national or multinational, federal, state, local, foreign, and
other taxes, fees, tariffs, stamp taxes, duties (including any customs duties,
tariffs, fees and processing charges), charges, levies, or assessments imposed
by any Governmental Authority, including those characterized as income,
corporation, capital gains, excise, gross receipts, ad valorem, sales and use,
goods and services, harmonized sales, use, employment, franchise, profits,
gains, property (real or personal), transfer, payroll, social security
contributions, Medicare, Medicaid, license, severance, occupation, premium,
windfall profits, environmental, capital stock, withholding, unemployment,
disability, registration, value added, estimated, alternative or add on minimum,
or intangibles taxes, of any kind whatsoever (whether payable directly or by
withholding), whether disputed or not, together with any interest and any
penalties, fines, additions to tax, or additional amounts imposed by any
Governmental Authority with respect thereto, whether disputed or not, and any
liability for the payment of any amounts of the type described above as a result
of being a member of an affiliated, consolidated, combined, or unitary group for
any period, as a result of a tax sharing, tax allocation, or tax indemnification
contract, or as a result of being liable for another Person’s taxes, as a
transferee or successor, by contract or otherwise.

 

17

 

 

“Taxing Authority” means the United States Internal Revenue Service and any
other Governmental Authority responsible for the administration of any Tax.

 

“Tax Return” means any return, declaration, report, claim for refund,
declaration of estimated Tax, information return or statement, or other document
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof, and including, where permitted or required, combined,
consolidated, or unitary returns for any group of entities that includes the
Company or any of its Affiliates.

 

“Territory” means each state and territory of the United States of America.

 

“Third-party Claim” has the meaning set forth in Section 8.05(a).

 

“Third-party Payment” has the meaning set forth in Section 8.05(f).

 

“Undisputed Amounts” has the meaning set forth in Section 2.16(c)(iii).

 

“Union” has the meaning set forth in Section 3.21(b).

 

“URBCA” shall mean the Utah Revised Business Corporation Act, as amended.

 

“URULLCA” shall mean the Utah Revised Uniform Limited Liability Company Act, as
amended.

 

“Utah Division” means the Division of Corporations and Commercial Code of the
Utah Department of Commerce.

 

“WARN Act” means the federal Worker Adjustment and Retraining Notification Act
of 1988, and similar state, local and foreign laws related to plant closings,
relocations, mass layoffs, and employment losses.

 

ARTICLE II
the merger

 

Section 2.01 The Merger. On the terms and subject to the conditions set forth in
this Agreement and in accordance with the applicable provisions of the URBCA and
the URULLCA, at the Effective Time, (a) the Company shall merge with and into
Merger Sub No. 1 with the Company surviving the “first step” of the Merger as a
wholly-owned subsidiary of the Parent (and the separate corporate existence of
Merger Sub No. 1 shall cease) and, immediately thereafter, the Company shall
merge with and into Merger Sub No. 2, with Merger Sub No. 2 surviving the
“second step” of the Merger such that (b) upon the conclusion of the “second
step” of the Merger, the separate corporate existence of the Company shall cease
and Merger Sub No. 2 shall continue its limited liability company existence
under Utah law as the Surviving Entity in the Merger (sometimes referred to
herein as the “Surviving Entity”) and as a wholly-owned subsidiary of the
Parent. The Merger shall have the effects set forth in the applicable provisions
of the URBCA and the URULLCA.

 

18

 

 

Section 2.02 Closing. Subject to the conditions of this Agreement, the closing
of the transactions contemplated by this Agreement, including the Merger (the
“Closing”), shall occur by electronic exchange of documents no later than three
Business Days after the last of the conditions to Closing set forth in ARTICLE
VII has been satisfied or waived (other than conditions, which, by their nature,
are to be satisfied on the Closing Date) (the date on which the Closing takes
place being the “Closing Date”) and shall be deemed effective as of the
Effective Time.

 

Section 2.03 Closing Deliverables.

 

(a) At or prior to the Closing, the Company shall deliver to the Parent the
following:

 

(i) the Escrow Agreement duly executed by the Shareholders’ Representative;

 

(ii) resignations of the directors and officers of the Company pursuant to
Section 5.07;

 

(iii) a certificate, dated the Closing Date and signed by a duly authorized
officer of the Company, that each of the conditions set forth in Section 7.01(a)
and Section 7.01(b) has been satisfied;

 

(iv) a certificate of the Secretary or an Assistant Secretary (or equivalent
officer) of the Company certifying that (A) attached thereto are true and
complete copies of all resolutions adopted by the Company Board authorizing the
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated hereby and (B) all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby;

 

(v) a certificate of the Secretary or an Assistant Secretary (or equivalent
officer) of the Company certifying the names and signatures of the officers of
the Company authorized to sign this Agreement and the other documents to be
delivered hereunder;

 

(vi) a good standing certificate (or its equivalent) for the Company from the
Utah Division;

 

(vii) the Merger Consideration Certificate;

 

(viii) a certificate from the Company, dated as of the Closing Date, certifying
to the effect that either (A) no interest in the Company is a U.S. real property
interest or (B) the Corporation is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (such certificate in the form
required by Treasury Regulation Section 1.897-2(h) and 1.1445-3(c));

 

19

 

 

(ix) the “lock-up” agreements, each substantially in the form of Exhibit B
hereto, duly executed by each of the Shareholders; and

 

(x) such other documents or instruments as the Parent reasonably requests and
are reasonably necessary to consummate the transactions contemplated by this
Agreement.

 

(b) At the Closing, the Parent shall deliver:

 

(i) to each Shareholder (and subject to Section 2.09(b)):

 

(A) payment by wire transfer of immediately available funds of the amount of
such Shareholder’s Pro Rata Share of the Net Cash Consideration payable pursuant
to Section 2.08(a) and in accordance with the Merger Consideration Certificate;
and

 

(B) stock certificates representing such Shareholder’s Pro Rata Share of Closing
Parent Shares issuable pursuant to Section 2.08(a) and in accordance with the
Merger Consideration Certificate;

 

(ii) to the Escrow Agent, stock certificate(s) representing the Escrow Shares;

 

(iii) to the Company:

 

(A) the Escrow Agreement duly executed by the Parent;

 

(B) a certificate, dated the Closing Date and signed by a duly authorized
officer of the Parent, that each of the conditions set forth in Section 7.02(a)
and Section 7.02(b) has been satisfied;

 

(C) a certificate of the Secretary or an Assistant Secretary (or equivalent
officer) of the Parent, Merger Sub No. 1, and Merger Sub No. 2 certifying that
attached thereto are true and complete copies of all resolutions adopted by the
Boards of Directors or Board of Managers, as relevant, of Parent, Merger Sub No.
1, and Merger Sub. No. 2 authorizing the execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated hereby, and
that all such resolutions are in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated hereby;

 

(D) a certificate of the Secretary or an Assistant Secretary (or equivalent
officer) of the Parent, Merger Sub No. 1, and Merger Sub No. 2 certifying the
names and signatures of the officers or managers, as relevant, of the Parent,
Merger Sub No. 1, and Merger Sub No. 2 authorized to sign this Agreement and the
other documents to be delivered hereunder; and

 

20

 

 

(E) such other documents or instruments as the Company reasonably requests and
are reasonably necessary to consummate the transactions contemplated by this
Agreement.

 

Section 2.04 Effective Time. Subject to the provisions of this Agreement, on the
Closing Date, the Company, the Parent, Merger Sub No. 1, and Merger Sub No. 2
shall cause the “first step” Articles of Merger (the “First Step Articles of
Merger”) and the “second step” Articles of Merger (the “Second Step Articles of
Merger”; collectively, with the “First Step Articles of Merger, the “Articles of
Merger”) to be executed and filed with the Utah Division in accordance with the
relevant provisions of the URBCA and the URULLCA, as applicable, and shall make
all other filings or recordings required by the URBCA and the URULLCA in
connection with the Merger. The Merger shall become effective at such time as
the Second Step Articles of Merger have been duly filed with the Utah Division
in accordance with the URULLCA or at such later date or time as may be agreed by
the Company and the Parent in writing and specified in the Second Step Articles
of Merger in accordance with the URULLCA (the effective time of the Merger being
hereinafter referred to as the “Effective Time”).

 

Section 2.05 Effects of the Merger. The Merger shall have the effects set forth
herein and in the applicable provisions of the URBCA and the URULLCA. Without
limiting the generality of the foregoing, from and after the Effective Time, all
property, rights, privileges, immunities, powers, franchises, licenses, and
authority of the Company and Merger Sub No. 2 shall vest in the Surviving
Entity, and all debts, liabilities, obligations, restrictions, and duties of
each of the Company and Merger Sub No. 2 shall become the debts, liabilities,
obligations, restrictions, and duties of the Surviving Entity.

 

Section 2.06 Articles of Organization; Operating Agreement. At the Effective
Time, (a) the Articles of Organization of the Surviving Entity shall be amended
as a result of the Merger to change the name of the Surviving Entity to a name
virtually identical to the name in the Company’s Articles of Incorporation as in
effect immediately prior to the Effective Time, and such amended Articles of
Organization shall remain in effect until thereafter amended in accordance with
the terms thereof or as provided by applicable Law and (b) the Operating
Agreement of the Surviving Entity shall remain in effect, except that the name
of the Surviving Entity shall be virtually identical to the name of the Company
and such amended Operating Agreement shall remain in effect until thereafter
amended in accordance with the terms thereof, the Articles of Organization of
the Surviving Entity, or as provided by applicable Law.

 

Section 2.07 Directors and Officers. From and after the Effective Time, the
directors and officers of the Surviving Entity shall be as set forth on Exhibit
C hereto until their respective successors have been duly elected or appointed
and qualified or until their respective earlier death, resignation, or removal
in accordance with the Articles of Organization and Operating Agreement of the
Surviving Entity.

 

Section 2.08 Effect of the Merger on Capital Stock of the Company and Merger Sub
No. 1 and the Equity of Merger Sub No. 2. At the Effective Time, as a result of
the Merger and without any action on the part of the Parent, Merger Sub No. 1,
Merger Sub No. 2, the Company, or any Shareholder:

 

21

 

 

(a) Conversion of Company Shares. Each Company Share issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive a proportionate share of the Closing Merger Consideration, together with
any amounts that may become payable in respect of such Company Share in the
future from the Escrow Shares as provided in this Agreement and the Escrow
Agreement, at the respective times and subject to the contingencies specified
herein and therein. No fractional Parent Common Stock shall be issued as a
result of the Merger. If any fractional Parent Common Stock would otherwise
result from the Merger, the number of securities required to be issued to the
applicable Shareholder shall be rounded up to the nearest whole number of Parent
Shares.

 

(b) Conversion of Merger Sub No. 1 Capital Stock and Merger Sub No. 2 Membership
Units. Each share of common stock, par value $0.001 per share, of Merger Sub No.
1 issued and outstanding immediately prior to the filing of the First Step
Articles of Merger shall be converted into and become one newly issued, fully
paid, and non-assessable share of common stock of the Company and, immediately
thereafter, in connection with the filing of the Second Step Articles of Merger,
such remaining issued and outstanding share shall be converted into and become
one newly issued, fully paid, and non-assessable membership unit of the
Surviving Entity (Merger Sub No. 2).

 

(c) Treasury Stock. Any Company Shares held by the Company as treasury shares or
by the Parent immediately prior to the filing of the First Step Articles of
Merger shall automatically be canceled and cease to exist as upon such filing
and no consideration shall be delivered or deliverable therefor.

 

Section 2.09 Surrender and Payment.

 

(a) At the Effective Time, all Company Shares outstanding immediately prior to
the Effective Time shall automatically be cancelled and retired and shall cease
to exist and each Shareholder (and any other holder of a certificate formerly
representing any Company Shares) shall cease to have any rights as a shareholder
of the Company.

 

(b) The Parent shall, no the later than (i) the Closing Date or (ii) the second
Business Day following Parent’s or Parent’s counsel’s receipt from a Shareholder
of a stock certificate or certificates representing such Shareholder’s Company
Shares, together with any other customary documents that the Parent may
reasonably require in connection therewith, pay to such Shareholder such
Shareholder’s Pro Rata Share of the Closing Merger Consideration not previously
paid to such shareholder with respect to the Company Shares represented by the
stock certificate(s) so delivered, and such stock certificate(s) shall forthwith
be cancelled. No interest shall be paid or shall accrue on any Merger
Consideration payable upon surrender of any stock certificate representing
Company Shares. After the Closing and until surrendered in accordance with this
Section 2.09(b), each outstanding stock certificate that, prior to the Effective
Time represented Company Shares, shall be deemed from and after the Effective
Time, for all purposes, to evidence the right to receive the portion of the
Merger Consideration as provided in Section 2.08(a).

 

22

 

 

Section 2.10 Escrow Shares. In accordance with the Escrow Agreement, at the
Closing, the Parent shall deposit, or cause to be deposited, the Escrow Shares
with the Escrow Agent, to be held for the purpose of securing in part the
indemnification obligations of the Shareholders set forth in this Agreement. The
Shareholders acknowledge that the Escrow Shares do not constitute the Parent’s
sole or primary source of satisfaction of the Shareholders’ indemnification
obligations hereunder. Further, in the event that the Parent utilizes the Escrow
Shares in satisfaction of any or all of the Shareholders’ indemnifications
obligations, for indemnification purposes only, each Escrow Share so utilized
shall be valued at the Parent Share Price.

 

Section 2.11 No Further Ownership Rights in Company Shares. All Merger
Consideration paid or payable in accordance with the terms hereof shall be
deemed to have been paid or payable in full satisfaction of all rights
pertaining to the Company Shares formerly represented by stock certificates
formerly representing Company Shares, and from and after the Effective Time,
there shall be no further registration of transfers of Company Shares or
membership units on the equity transfer books of the Surviving Entity.

 

Section 2.12 Adjustments. Without limiting the other provisions of this
Agreement, if at any time during the period between the date of this Agreement
and the Effective Time, any change in the outstanding shares of capital stock of
the Company shall occur, including by reason of any reclassification,
recapitalization, stock split (including reverse stock split), or combination,
exchange, or readjustment of shares, or any stock dividend or distribution paid
in stock, the Merger Consideration and any other amounts payable pursuant to
this Agreement shall be appropriately adjusted to reflect such change.

 

Section 2.13 Withholding Rights. The Parent shall be entitled to deduct and
withhold from the consideration otherwise payable to any Person pursuant to this
ARTICLE II such amounts as may be required to be deducted and withheld with
respect to the making of such payment under any provision of Tax Law. To the
extent that amounts are so deducted and withheld by the Parent, and actually
paid by the Parent to the recipient thereof pursuant to such applicable Tax Law,
such amounts shall be treated for all purposes of this Agreement as having been
paid to the Person in respect of whom the Parent made such deduction and
withholding.

 

Section 2.14 Reserved.

 

Section 2.15 Waiver of Dissenters’ Rights. Each Shareholder hereby waives any
rights of dissent or other similar rights that such Shareholder may have as a
result of, or otherwise in connection with, the Merger or any of the other
transactions contemplated by this Agreement.

 

ARTICLE III
Representations and warranties of THE company and the sHAREholders

 

Except as set forth in the correspondingly numbered Schedule that relates to
such Section or in another Schedule to the extent that it is reasonably apparent
on the face of such disclosure that such disclosure is applicable to such
Section, the Company and the Shareholders, jointly and severally (except in
respect of Section 3.01 and Section 3.26, which representations and warranties
are made by each of the Shareholders, severally and not jointly, as to such
Shareholder and not by the Company), represent and warrant to the Parent, Merger
Sub No. 1, and Merger Sub No. 2 that the statements contained in this ARTICLE
III are true and correct as of the date hereof.

 

23

 

 

Section 3.01 Authority of the Shareholders; No Conflicts or Consents in Respect
of the Shareholders.

 

(a) Each Shareholder has full capacity, power, and authority to enter into this
Agreement and to carry out such Shareholder’s obligations hereunder. This
Agreement has been duly executed and delivered by each Shareholder and (assuming
due authorization, execution, and delivery by each other party hereto) this
Agreement constitutes a legal, valid, and binding obligation of each Shareholder
enforceable against such Shareholder in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium, and
other similar laws affecting creditors’ rights generally and by general
principles of equity.

 

(b) The execution, delivery, and performance by each Shareholder of this
Agreement and the consummation of the transactions contemplated hereby, do not
and will not: (i) conflict with or result in a violation or breach of, or
default under, any provision of the Organizational Documents of any Shareholder
(ii) conflict with or result in a violation or breach of any provision of any
Law applicable to any Shareholder; or (iii) require the consent of, notice to,
or other action by, any Person under, conflict with, result in a violation or
breach of, constitute a default or an event that, with or without notice or
lapse of time or both, would constitute a default under, result in the
acceleration of, or create in any party the right to accelerate, terminate,
modify, or cancel, any Contract to which any Shareholder is a party or by which
any Shareholder is bound or to which any Company Shares held by such Shareholder
is subject. No consent, approval, Permit, Governmental Order, declaration, or
filing with, or notice to, any Governmental Authority is required by or with
respect to each Shareholder in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.

 

Section 3.02 Organization and Qualification of the Company; Authority of the
Company.

 

(a) The Company is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Utah and has full corporate power and
authority to own, operate, or lease the properties and assets now owned,
operated, or leased by it and to carry on its business as it has been and is
currently conducted. Schedule 3.02(a) sets forth each jurisdiction in which the
Company is licensed or qualified to do business, and the Company is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business as currently conducted makes such licensing or qualification
necessary, except where the failure to be so licensed, qualified, or in good
standing would not have a Company Material Adverse Effect.

 

24

 

 

(b) The Company has full corporate power and authority to enter into and perform
its obligations under this Agreement 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 requisite corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery, and performance of
this Agreement or to consummate the Merger and the other transactions
contemplated hereby. The affirmative vote or consent of the Shareholders
representing a majority of the outstanding Company Shares is the only vote or
consent of the holders of any class or series of the Company’s capital stock
required to approve this Agreement and the Merger. This Agreement has been duly
executed and delivered by the Company and (assuming due authorization,
execution, and delivery by each other party hereto) this Agreement constitutes a
legal, valid, and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, and other similar laws affecting
creditors’ rights generally and by general principles of equity.

 

(c) The Company Board, by resolutions duly adopted by unanimous written consent,
has (i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to, and in the best interests of, the
Shareholders, (ii) approved and declared advisable this Agreement and the
transactions contemplated hereby, including the Merger, in accordance with the
applicable provisions of the URBCA, (iii) directed that this Agreement and the
Merger be submitted to the Shareholders for their approval, and (iv) recommended
that the Shareholders approve this Agreement and the Merger.

 

Section 3.03 Capitalization.

 

(a) The authorized capital stock of the Company consists of 150,000 Company
Shares, of which 122,413 Company Shares are issued and outstanding. All of the
issued and outstanding Company Shares are (i) duly authorized, validly issued,
fully paid, and non-assessable; (ii) not subject to any preemptive rights
created by statute, the Organizational Documents of the Company, or any
agreement to which the Company or any Shareholder is a party; (iii) free and
clear of any Encumbrances (other than restrictions on transfer imposed by state
and federal securities Laws); and (iv) owned of record and beneficially by the
Shareholders in the respective amounts set forth in Schedule 3.03(a).

 

(b) All of the issued and outstanding Company Shares were issued in compliance
with applicable Laws. The issued and outstanding Company Shares were not issued
in violation of the Organizational Documents of the Company or any other
agreement, arrangement, or commitment to which any Shareholder or the Company is
a party.

 

(c) No subscription, warrant, option, convertible or exchangeable security, or
other right (contingent or otherwise) to purchase or otherwise acquire equity
securities of the Company is issued and outstanding. There is no commitment by
the Company to issue shares, subscriptions, warrants, options, convertible or
exchangeable securities, or other such rights or to distribute to holders of any
of its equity securities any evidence of indebtedness or asset, to repurchase or
redeem any securities of the Company, or to grant, any warrant, option,
convertible or exchangeable security, or other such right. There are no declared
or accrued unpaid dividends with respect to any Company Shares. Except as set
forth on Schedule 3.03(c), there are no voting trusts, shareholder agreements,
proxies, or other agreements or understandings in effect with respect to the
voting or transfer of any of the Company Shares. No outstanding Company Shares
are subject to vesting or forfeiture rights or repurchase by the Company. There
are no outstanding or authorized stock appreciation, dividend equivalent,
phantom stock, profit participation, or other similar rights with respect to the
Company or any of its securities.

 

25

 

 

(d) All distributions, dividends, repurchases, and redemptions of the capital
stock (or other equity interests) of the Company were undertaken in compliance
with the Organizational Documents of the Company then in effect, any agreement
to which the Company then was a party, and in compliance with applicable Law.

 

(e) There are no shares of treasury stock held by the Company.

 

Section 3.04 No Subsidiaries. The Company does not own, have any interest in any
shares or other securities of, or have an ownership interest in, any other
Person.

 

Section 3.05 No Conflicts or Consents in Respect of the Company. The execution,
delivery, and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby, including the Merger, do not and will
not: (a) conflict with or result in a violation or breach of, or default under,
any provision of the Organizational Documents of the Company; (b) conflict with
or result in a violation or breach of any provision of any Law applicable to the
Company; (c) except as set forth in Schedule 3.05, require the consent of,
notice to, or other action by, any Person under, conflict with, result in a
violation or breach of, constitute a default or an event that, with or without
notice or lapse of time or both, would constitute a default under, result in the
acceleration of, or create in any party the right to accelerate, terminate,
modify, or cancel, any Contract to which the Company is a party or by which the
Company is bound or to which any of its properties and assets are subject
(including any Material Contract) or any Permit affecting the properties,
assets, or business of the Company; or (d) result in the creation or imposition
of any Encumbrance other than Permitted Encumbrances on any properties or assets
of the Company. No consent, approval, Permit, Governmental Order, declaration,
or filing with, or notice to, any Governmental Authority is required by or with
respect to the Company in connection with the execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except for the filing of the Articles of Merger with the
Utah Division.

 

Section 3.06 Financial Statements; Indebtedness.

 

(a) Complete copies of the Company’s audited financial statements, consisting of
(i) the balance sheets of the Company as at December 31, 2016 and December 31,
2017 and the related statements of income and retained earnings, shareholders’
equity, and cash flow for the years then ended (the “Annual Financial
Statements”) and (ii) the balance sheets of the Company as at June 30, 2018 and
June 30, 2017, and the related statements of income and retained earnings,
shareholders’ equity, and cash flow for the three- and six-month periods then
ended (the “Interim Financial Statements”; and, together with the Annual
Financial Statements, the “Financial Statements”), have been delivered to the
Parent. The Annual Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the period involved, subject, in
the case of the Interim Financial Statements, to normal and recurring year-end
adjustments (the effect of which will not be materially adverse) and, in the
case of all of the Interim Financial Statements, the absence of notes. The
Financial Statements are based on the books and records of the Company and
fairly present in all material respects the financial condition of the Company
as of the respective dates they were prepared and the results of the operations
of the Company for the periods indicated. The balance sheet of the Company as at
June 30, 2018 is referred to herein as the “Interim Balance Sheet” and the date
thereof as the “Interim Balance Sheet Date.” There are no off-balance sheet
transactions, arrangements, or obligations of or involving the Company.

 

26

 

 

(b) The Company makes and keeps accurate financial books and records reflecting
its assets and maintains commercially reasonable internal accounting controls
that provide reasonable assurance that (i) transactions are executed with
management’s authorization; (ii) transactions are recorded to maintain
accountability for the Company’s assets; (iii) access to the assets of the
Company is permitted only in accordance with management’s authorization; and
(iv) accounts are recorded accurately in all material respects and commercially
reasonable procedures are implemented to effect the collection thereof on a
current and timely basis.

 

(c) The financial books and records of the Company are sufficient such that the
Annual Financial Statements can be audited without a scope limitation by an
independent certified public accounting firm that is registered under the Public
Company Accounting Oversight Board, which audited Annual Financial Statements
and unaudited Interim Financial Statements, the Shareholders understand are to
be included in the Registration Statement and thereafter are to be consolidated
into the Parent’s periodic reports to be filed under the Exchange Act.

 

(d) Schedule 3.06(d) sets forth a true and complete list of all Indebtedness of
the Company and provides (i) the name(s) of the current lender(s) and (ii) the
outstanding principal balance(s) and all accrued and unpaid interest as of the
date hereof. As of the Closing, there will be no outstanding Indebtedness of the
Company arising from obligations created by or on behalf of the Company or any
Shareholder prior to the Closing, other than Indebtedness that was incurred in
the ordinary course of business consistent with past practice since the Interim
Balance Sheet Date and that is not, individually or in the aggregate, material
in amount.

 

Section 3.07 No Undisclosed Liabilities. Except as set forth on Schedule 3.07,
the Company has no Liabilities required by GAAP to be set forth on a balance
sheet, except (a) those that are adequately reflected or reserved against in the
Interim Balance Sheet as of the Interim Balance Sheet Date, (b) those that have
been incurred in the ordinary course of business consistent with past practice
since the Interim Balance Sheet Date and that are not, individually or in the
aggregate, material in amount, or (c) Liabilities arising under any Material
Contracts identified on Schedule 3.09(a), Schedule 3.10(b) or Schedule 3.12(b),
or under any other Contract of the Company that is not a Material Contract
(other than Liabilities for breach of such Contract occurring prior to the
Closing).

 

27

 

 

Section 3.08 Absence of Certain Changes. Since the Interim Balance Sheet Date,
and other than in the ordinary course of business consistent with past practice,
there has not been, with respect to the Company, any:

 

(a) event, occurrence, or development that has had, or would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect;

 

(b) amendment of the Organizational Documents of the Company (except for the
amendment and restatement of its Articles of Incorporation filed on November 8,
2018);

 

(c) split, combination, or reclassification of any shares of its capital stock;

 

(d) issuance, sale, or other disposition of, or creation of any Encumbrance on,
any shares of its capital stock, or grant of any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any shares of its capital stock;

 

(e) declaration or payment of any dividends or distributions on or in respect of
any shares of its capital stock or redemption, purchase, or acquisition of any
shares of its capital stock;

 

(f) material change in any method of accounting or accounting practice of the
Company, except as required by GAAP or as disclosed in the notes to the
Financial Statements;

 

(g) entry into any Contract that is or, if it were in effect as of the date of
this Agreement, would be a Material Contract;

 

(h) incurrence, assumption, or guarantee of any Indebtedness except unsecured
current obligations and Liabilities incurred in the ordinary course of business
consistent with past practice;

 

(i) actual or accrual for any transfer, assignment, sale, or other disposition
of any of the assets shown or reflected in the Interim Balance Sheet (other than
sales of inventory in the ordinary course of business consistent with past
practice) or cancellation of any debts or entitlements;

 

(j) transfer, assignment, or grant of any license or sublicense of any material
rights under or with respect to any Company Intellectual Property or Company IP
Agreements, other than customer Contracts entered into in the ordinary course of
business;

 

(k) material damage, destruction, or loss (whether or not covered by insurance)
to its property in excess of $10,000;

 

(l) any capital investment in, or any loan to, any other Person, other than
accounts receivable arising in the ordinary course of business;

 

(m) acceleration, termination, or cancellation of, or material modification to,
any Material Contract to which the Company is a party or by which it is bound;

 

(n) any material capital expenditures, other than base and sustaining capital
expenditures in the ordinary course of business;

 

28

 

 

(o) imposition of any Encumbrance, other than a Permitted Encumbrance, upon any
of the Company’s properties, capital stock, or assets, tangible or intangible;

 

(p) (i) grant of any bonuses, whether monetary or otherwise, or increase in any
wages, salary, severance, pension, or other compensation or benefits in respect
of its current or former employees, officers, directors, independent
contractors, or consultants, other than as provided for in any written
agreements or required by applicable Law, (ii) change in the terms of employment
for any employee or any termination of any employees for which the aggregate
costs and expenses exceed $10,000, or (iii) action to accelerate the vesting or
payment of any compensation or benefit for any current or former employee,
officer, director, independent contractor, or consultant;

 

(q) hiring or promoting any person as or to an officer or any key employee below
officer except to fill a vacancy in the ordinary course of business;

 

(r) adoption, modification, or termination (except for the termination of the
Company’s 2018 Stock Incentive Plan) of any: (i) employment, severance,
retention, or other agreement with any current or former employee, officer,
director, independent contractor, or consultant, (ii) Benefit Plan, or (iii)
collective bargaining or other agreement with a Union, in each case whether
written or oral;

 

(s) any loan to (or forgiveness of any loan to), or entry into any other
transaction with, any of its shareholders or current or former directors,
officers, and employees;

 

(t) entry into a new line of business or abandonment or discontinuance of
existing lines of business;

 

(u) except for the Merger, adoption of any plan of merger, consolidation,
reorganization, liquidation, or dissolution or filing of a petition in
bankruptcy under any provisions of federal or state bankruptcy Law or consent to
the filing of any bankruptcy petition against it under any similar Law;

 

(v) purchase, lease, or other acquisition or any amendment, modification, or
exchange of the right to own, use, or lease (A) any personal property or assets
for an amount in excess of $10,000, individually (in the case of a personal
property lease, per annum) or $25,000 in the aggregate in a series of related
transactions (in the case of a personal property lease, for the entire term of
the lease, not including any option term), except for purchases of inventory or
supplies in the ordinary course of business consistent with past practice or (B)
any real property;

 

(w) acquisition by merger or consolidation with, or by purchase of a substantial
portion of the assets, stock, or other equity of, or by any other manner, any
business or any Person or any division thereof;

 

(x) action by the Company to: (i) make, change, or rescind any Tax election,
(ii) amend any Tax Return, or (iii) take any position on any Tax Return, take
any action, omit to take any action, or enter into any other transaction that,
in any case, would have the effect of increasing the Tax liability or reducing
any Tax asset of the Parent in respect of any Post-Closing Tax Period; or

 

(y) any Contract to do any of the foregoing, or any action or omission that
would result in any of the foregoing.

 

29

 

 

Section 3.09 Material Contracts.

 

(a) Schedule 3.09(a) lists each of the following Contracts to which the Company
is a party as of the date of this Agreement or by which its properties or assets
are subject as of the date of this Agreement (such Contracts, collectively with
all Contracts concerning the occupancy, management, or operation of any Real
Property required to be listed in Schedule 3.10(b) and all Company IP Agreements
required to be listed in Schedule 3.12(b), the “Material Contracts”):

 

(i) each Contract of the Company involving aggregate consideration in excess of
$20,000 and which, in each case, cannot be cancelled by the Company without
penalty or without more than 90 days’ notice;

 

(ii) all Contracts that require the Company to purchase its total requirements
of any product or service from a third party or that contain “take or pay”
provisions;

 

(iii) all Contracts that provide for the indemnification by the Company of any
Person or the assumption of any Tax, environmental, or other Liability of any
Person;

 

(iv) all Contracts that relate to the acquisition or disposition of any
business, equity, or substantially all of the assets of any other Person
(whether by merger, sale of stock or other equity interests, sale of assets, or
otherwise);

 

(v) all broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing, consulting, and advertising
Contracts to which the Company is a party;

 

(vi) all employment agreements and Contracts with independent contractors or
consultants (or similar arrangements) to which the Company is a party and that
are not cancellable without material penalty or without more than 90 days’
notice;

 

(vii) all Contracts relating to Indebtedness of the Company;

 

(viii) all Contracts with any Governmental Authority to which the Company is a
party (“Government Contracts”);

 

(ix) all Contracts that limit or purport to limit the ability of the Company to
compete in any line of business or with any Person or in any geographic area or
during any period of time;

 

30

 

 

(x) any Contract to which the Company is a party that provides for any joint
venture, partnership, or similar arrangement by the Company;

 

(xi) all Contracts between or among the Company, on the one hand, and any
Shareholder or any Affiliate of any Shareholder, on the other hand;

 

(xii) all collective bargaining agreements or Contracts with any Union to which
the Company is a party; and

 

(xiii) any other Contract that is material to the Company and not previously
required to be disclosed pursuant to this Section 3.09(a).

 

(b) Each Material Contract is valid and binding on the Company in accordance
with its terms and, to the Knowledge of the Company, is in full force and
effect. None of the Company or, to the Company’s Knowledge, any other party
thereto is in breach of or default under (or is alleged to be in breach of or
default under) in any material respect, or has provided or received any notice
of any intention to terminate, any Material Contract. To the Company’s
Knowledge, no event or circumstance has occurred that, with notice or lapse of
time or both, would constitute an event of default under any Material Contract
or result in a termination thereof or would cause or permit the acceleration or
other changes of any right or obligation or the loss of any benefit thereunder.
Complete and correct copies of each Material Contract (including all
modifications, amendments, and supplements thereto and waivers thereunder) have
been made available to the Parent.

 

Section 3.10 Title to Assets; No Real Property.

 

(a) The Company has good and valid (and, in the case of owned Real Property,
good and marketable fee simple) title to, or a valid leasehold interest in, all
Real Property and personal property and other assets reflected in the Interim
Financial Statements or acquired after the Interim Balance Sheet Date, other
than properties and assets sold or otherwise disposed of in the ordinary course
of business consistent with past practice since the Interim Balance Sheet Date.
All such properties and assets (including leasehold interests) are free and
clear of Encumbrances except for the following (collectively, “Permitted
Encumbrances”):

 

(i) liens for Taxes not yet due and payable and for which adequate reserves have
been set aside by the Company;

 

(ii) mechanics, carrier’s, workmen’s, repairmen’s, or other like liens arising
or incurred in the ordinary course of business consistent with past practice for
amounts that are not delinquent and that are not, individually or in the
aggregate, material to the business of the Company;

 

(iii) easements, rights of way, zoning ordinances, and other similar
encumbrances affecting Real Property that are not, individually or in the
aggregate, material to the business of the Company;

 

31

 

 

(iv) other than with respect to owned Real Property, liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business consistent with
past practice that are not, individually or in the aggregate, material to the
business of the Company; or

 

(v) those items set forth in Schedule 3.10(a)(v);

 

(b) Schedule 3.10(b) lists (i) the street address of each parcel of Real
Property; (ii) if such property is leased or subleased by the Company, the lease
or sublease with respect to such property, the landlord under the lease, the
rental amount currently being paid, and the expiration of the term of such lease
or sublease for each leased or subleased property; and (iii) the current use of
such property. With respect to owned Real Property, the Company has delivered or
made available to Parent true, complete, and correct copies of the deeds and
other instruments (as recorded) by which the Company acquired such Real
Property, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of the Company and relating to the Real Property. With
respect to leased Real Property, the Company has delivered or made available to
Parent true, complete, and correct copies of any leases affecting the Real
Property. The Company is not a sublessor or grantor under any sublease or other
instrument granting to any other Person any right to the possession, lease,
occupancy, or enjoyment of any leased Real Property. The use and operation of
the Real Property in the conduct of the Company’s business do not violate in any
material respect any Law, covenant, condition, restriction, easement, license,
permit, or agreement applicable to the Company or its historic, current, or
expected future business operations. No material improvements constituting a
part of the Real Property encroach on real property owned or leased by a Person
other than the Company. There are no Actions pending nor, to the Company’s
Knowledge, threatened against or affecting the Real Property or any portion
thereof or interest therein in the nature or in lieu of condemnation or eminent
domain proceedings.

 

Section 3.11 Condition and Sufficiency of Assets. Except as set forth in
Schedule 3.11, the buildings, plants, structures, furniture, fixtures,
machinery, equipment, vehicles, and other items of tangible personal property of
the Company are structurally sound, are in good operating condition and repair,
ordinary wear and tear excepted, and are adequate for the uses to which they are
being put as of the date of this Agreement, and none of such buildings, plants,
structures, furniture, fixtures, machinery, equipment, vehicles, and other items
of tangible personal property is in need of deferred maintenance or repairs as
of the date of this Agreement except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The buildings, plants,
structures, furniture, fixtures, machinery, equipment, vehicles and other items
of tangible personal property currently owned or leased by the Company, together
with all other properties and assets of the Company, are sufficient for the
continued conduct of the Company’s business after the Closing in substantially
the same manner as conducted prior to the Closing and constitute all of the
rights, properties, and assets necessary to conduct the business of the Company
as currently conducted.

 

32

 

 

Section 3.12 Intellectual Property.

 

(a) Schedule 3.12(a) lists all (i) Company IP Registrations and (ii) Company
Intellectual Property (including software) that is not registered but that is
material to the Company’s business or operations. All required filings and fees
related to the Company IP Registrations have been timely filed with and paid to
the relevant Governmental Authorities and authorized registrars, and all Company
IP Registrations are otherwise in good standing. The Company has provided the
Parent with true and complete copies of file histories, documents, certificates,
office actions, correspondence, and other materials related to all Company IP
Registrations.

 

(b) Schedule 3.12(b) lists all Company IP Agreements. The Company has provided
the Parent with true and complete copies of all such Company IP Agreements,
including all modifications, amendments, and supplements thereto and waivers
thereunder. Each Company IP Agreement is valid and binding on the Company in
accordance with its terms and is in full force and effect. Neither the Company
nor any other party thereto (i) is in breach of or default under (or is alleged
to be in breach of or default under), or (ii) has provided or received any
notice of breach or default of or any intention to terminate, any Company IP
Agreement.

 

(c) The Company is the sole and exclusive legal and beneficial, and with respect
to the Company IP Registrations, record, owner of all right, title, and interest
in and to, or has a valid right to use, the Company Intellectual Property, and
has the valid right to use all other Intellectual Property used in or necessary
for the conduct of the Company’s current business or operations, in each case,
free and clear of Encumbrances other than Permitted Encumbrances. Without
limiting the generality of the foregoing, the Company has entered into binding,
written agreements with every current and former employee of the Company, and
with every current and former independent contractor, who has participated in
the development of Company Intellectual Property, whereby such employees and
independent contractors (i) assign to the Company any ownership interest and
right they may have in the Company Intellectual Property and (ii) acknowledge
the Company’s exclusive ownership of all Company Intellectual Property. The
Company has provided the Parent with true and complete copies of all such
agreements.

 

(d) The consummation of the transactions contemplated hereunder will not result
in the loss or impairment of, or payment of any additional amounts with respect
to, nor require the consent of any other Person in respect of, the Company’s
right to own, use, or hold for use any Intellectual Property as owned, used, or
held for use in the conduct of the Company’s business or operations as currently
conducted.

 

(e) The Company’s rights in the Company Intellectual Property are valid,
subsisting, and enforceable. The Company has taken all reasonable steps to
maintain the Company Intellectual Property and to protect and preserve the
confidentiality of all trade secrets included in the Company Intellectual
Property, including requiring all Persons having access thereto to execute
written non-disclosure agreements.

 

(f) The conduct of the Company’s business as currently and formerly conducted,
and the products, processes, and services of the Company, have not infringed,
misappropriated, diluted, or otherwise violated, and do not and will not
infringe, dilute, misappropriate, or otherwise violate, the Intellectual
Property or other rights of any Person. To the Company’s Knowledge, no Person
has infringed, misappropriated, diluted, or otherwise violated, or is currently
infringing, misappropriating, diluting, or otherwise violating, any Company
Intellectual Property.

 

33

 

 

(g) There are no Actions (including any oppositions, interferences, or
re-examinations) settled during the 2018 calendar year prior to the date of this
Agreement, pending, or threatened (including in the form of offers to obtain a
license): (i) alleging any infringement, misappropriation, dilution, or
violation of the Intellectual Property of any Person by the Company; (ii)
challenging the validity, enforceability, registrability, or ownership of any
Company Intellectual Property or the Company’s rights with respect to any
Company Intellectual Property; or (iii) by the Company or any other Person
alleging any infringement, misappropriation, dilution, or violation by any
Person of the Company Intellectual Property. The Company is not subject to any
outstanding or, to the Company’s Knowledge, prospective Governmental Order
(including any motion or petition therefor) that does or would restrict or
impair the use of any Company Intellectual Property.

 

Section 3.13 Inventory. All inventory of the Company reflected in the Interim
Balance Sheet or arising after the date thereof consists of a quality and
quantity usable and salable in the ordinary course of business consistent with
past practice, except for obsolete, damaged, defective, or slow-moving items
that have been written off or written down to fair market value or for which
adequate reserves have been established. All such inventory is owned by the
Company free and clear of all Encumbrances, and no inventory is held on a
consignment basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company, except for obsolete,
damaged, defective, or slow-moving items that have been written off or written
down to fair market value or for which adequate reserves have been established.

 

Section 3.14 Accounts Receivable. The accounts receivable reflected on the
Interim Balance Sheet and the accounts receivable arising after the date thereof
(a) have arisen from bona fide transactions entered into by the Company
involving the sale of goods or the rendering of services in the ordinary course
of business consistent with past practice; (b) constitute only valid, undisputed
claims of the Company not subject to claims of set-off or other defenses or
counterclaims other than normal cash discounts accrued in the ordinary course of
business consistent with past practice; and (c) subject to a reserve for bad
debts shown on the Interim Balance Sheet or, with respect to accounts receivable
arising after the Interim Balance Sheet Date, on the accounting records of the
Company, are collectible in full (net of reserves and allowances for bad debt or
doubtful accounts) within 90 days after billing. The reserve for bad debts shown
on the Interim Balance Sheet or, with respect to accounts receivable arising
after the Interim Balance Sheet Date, on the accounting records of the Company,
have been determined in accordance with GAAP, consistently applied, subject to
normal year-end adjustments and the absence of disclosures normally made in
footnotes.

 

Section 3.15 Customers and Suppliers.

 

(a) Schedule 3.15(a) sets forth a list of (i) the top ten (10) customers of the
Company, based upon aggregate consideration paid to the Company for goods or
services rendered, for each of the two most recent fiscal years and the
six-month period ended June 30, 2018 (collectively, the “Material Customers”)
and (ii) the amount of consideration paid by each Material Customer during such
periods. Except as set forth in Schedule 3.15(a), the Company has not received
any written notice, and has no reason to believe, that any of its Material
Customers has ceased, or intends to cease after the Closing, to use its goods or
services or to otherwise terminate or materially reduce its relationship with
the Company.

 

34

 

 

(b) Schedule 3.15(b) sets forth (i) the top ten (10) suppliers of the Company,
based upon aggregate consideration paid by the Company for goods or services
rendered, for each of the two most recent fiscal years and the six-month period
ended June 30, 2018 (collectively, the “Material Suppliers”) and (ii) the amount
of purchases from each Material Supplier during such periods. Except as set
forth in Schedule 3.15(b), the Company has not received any written notice that
any of its Material Suppliers has ceased, or intends to cease, to supply goods
or services to the Company or to otherwise terminate or materially reduce its
relationship with the Company.

 

Section 3.16 Insurance. Schedule 3.16 sets forth a true and complete list of all
current policies or binders of fire, liability, product liability, umbrella
liability, real and personal property, workers’ compensation, vehicular,
directors’ and officers’ liability, fiduciary liability, and other casualty and
property insurance maintained by the Company (collectively, the “Insurance
Policies”) and true and complete copies of such Insurance Policies have been
made available to the Parent. Such Insurance Policies are in full force and
effect and shall remain in full force and effect until the Closing. The Company
has not received any written notice of cancellation of, premium increase with
respect to, or alteration of coverage under, any of such Insurance Policies. All
premiums due on such Insurance Policies have either been paid or, if due and
payable prior to Closing, will be paid prior to Closing in accordance with the
payment terms of each Insurance Policy. The Insurance Policies do not provide
for any retrospective premium adjustment or other experience-based liability on
the part of the Company. All such Insurance Policies (a) are valid and binding
in accordance with their terms; (b) are provided by carriers who are financially
solvent; and (c) have not been subject to any lapse in coverage. Except as set
forth in Schedule 3.16, there are no claims related to the business of the
Company pending under any such Insurance Policies as to which coverage has been
questioned, denied, or disputed or in respect of which there is an outstanding
reservation of rights. The Company is not in default under, and has not
otherwise failed to comply with, in any material respect, any provision
contained in any such Insurance Policy. The Insurance Policies are of the type
and in the amounts customarily carried by companies of comparable size in the
industry in which the Company operates and are sufficient for compliance with
all applicable Laws and Contracts to which the Company is a party or by which it
is bound.

 

Section 3.17 Legal Proceedings; Governmental Orders.

 

(a) Except as set forth in Schedule 3.17(a), there are no Actions pending or, to
the Company’s Knowledge, threatened (a) against or by the Company affecting any
of its properties or assets or (b) against or by the Company that challenge or
seek to prevent, enjoin, or otherwise delay the transactions contemplated by
this Agreement. No event has occurred or circumstances may exist that would
reasonably be expected to give rise to, or serve as a basis for, any such
Action.

 

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(b) Except as set forth in Schedule 3.17(b), there are no outstanding
Governmental Orders and no unsatisfied judgments, penalties, or awards against
or affecting the Company or any of its properties or assets. The Company is in
compliance with the terms of each Governmental Order set forth in Schedule
3.17(b). No event has occurred or circumstances exist that may constitute or
would reasonably be expected to result in (with or without notice or lapse of
time) a violation of any such Governmental Order.

 

Section 3.18 Compliance With Laws; Permits.

 

(a) Except as set forth in Schedule 3.18(a), during the preceding three (3)
years, the Company has materially complied, and is now in material compliance
with, all Laws applicable to it or its business, properties, or assets, except
where the failure comply has not had and would not reasonably be expected to
have a Company Material Adverse Effect.

 

(b) All Permits required for the Company to conduct its business have been
obtained by it and are valid and in full force and effect. All fees and charges
with respect to such Permits have been paid in full, except where the failure to
hold such Permit or to pay such fees or assessments has not had and would not
reasonably be expected to have a Company Material Adverse Effect. Schedule
3.18(b) lists all current Permits issued to the Company, including the names of
the Permits and their respective dates of issuance and expiration. To the
Company’s Knowledge, no event has occurred that, with or without notice or lapse
of time or both, would reasonably be expected to result in the revocation,
suspension, lapse, or limitation of any Permit set forth in Schedule 3.18(b).

 

Section 3.19 Environmental Matters.

 

(a) The Company is currently and has been in compliance with all Environmental
Laws and has not received from any Person any: (i) Environmental Notice or
Environmental Claim or (ii) written request for information pursuant to
Environmental Law, which, in each case, either remains pending or unresolved, or
is the source of ongoing obligations or requirements.

 

(b) The Company has obtained and is in material compliance with all
Environmental Permits (each of which is disclosed in Schedule 3.19(b)) necessary
for the ownership, lease, operation, or use of the business or assets of the
Company and all such Environmental Permits are in full force and effect and
shall be maintained in full force and effect by the Company through the Closing
Date in accordance with, and to the extent required by, Environmental Law, and
the Company is not aware of any condition, event, or circumstance that might
prevent or impede, after the Closing Date, the ownership, lease, operation, or
use of the business or assets of the Company as currently carried out.

 

(c) No real property currently or formerly owned, operated, or leased by the
Company is listed on, or has been proposed for listing on, the National
Priorities List (or CERCLIS) under CERCLA, or any similar state list.

 

(d) There has been no Release of Hazardous Materials in contravention of
Environmental Law with respect to the business or assets of the Company or any
real property currently or formerly owned, operated, or leased by the Company,
and the Company has not received an Environmental Notice that any real property
currently or formerly owned, operated, or leased in connection with the business
of the Company (including soils, groundwater, surface water, buildings, and
other structure located on any such real property) has been contaminated with
any Hazardous Material that would reasonably be expected to result in an
Environmental Claim against, or a violation of Environmental Law or term of any
Environmental Permit by, the Company.

 

36

 

 

(e) Schedule 3.19(e) contains a complete and accurate list of all active or
abandoned aboveground or underground storage tanks owned or operated by the
Company as of the date of this Agreement.

 

(f) Schedule 3.19(f) contains a complete and accurate list of all off-site
Hazardous Materials treatment, storage, or disposal facilities or locations used
by the Company and any predecessors as to which the Company may retain
liability, and none of these facilities or locations has been placed or proposed
for placement on the National Priorities List (or CERCLIS) under CERCLA, or any
similar state list, and the Company has not received any Environmental Notice
regarding potential liabilities with respect to such off-site Hazardous
Materials treatment, storage, or disposal facilities or locations used by the
Company.

 

(g) The Company has not retained or assumed, by Contract or operation of Law,
any liabilities or obligations of third parties under Environmental Law.

 

(h) The Company has provided or otherwise made available to the Parent and
listed in Schedule 3.19(h): (i) any and all environmental reports, studies,
audits, records, sampling data, site assessments, risk assessments, economic
models, and other similar documents with respect to the business or assets of
the Company or any currently or formerly owned, operated, or leased real
property that are in the possession of the Company related to compliance with
Environmental Laws, Environmental Claims, or an Environmental Notice or the
Release of Hazardous Materials and (ii) any and all material documents
concerning planned or anticipated capital expenditures required to reduce,
offset, limit, or otherwise control pollution and/or emissions, manage waste, or
otherwise ensure compliance with current or future Environmental Laws (including
costs of remediation, pollution control equipment, and operational changes).

 

(i) The Company is not aware of any condition, event, or circumstance concerning
the Release or regulation of Hazardous Materials that might, after the Closing
Date, prevent, impede, or materially increase the costs associated with the
ownership, lease, operation, performance, or use of the business or assets of
the Company as currently carried out.

 

Section 3.20 Employee Benefit Matters.

 

(a) Schedule 3.20(a) contains a true and complete list of each pension, benefit,
retirement, compensation, employment, consulting, profit-sharing, deferred
compensation, incentive, bonus, performance award, phantom equity, stock or
stock-based, change in control, retention, severance, vacation, paid time off,
welfare, fringe-benefit, and other similar agreement, plan, policy, program, or
arrangement (and any amendments thereto), in each case whether or not reduced to
writing and whether funded or unfunded, including each “employee benefit plan”
within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and
whether or not subject to ERISA, that is or has been maintained, sponsored,
contributed to, or required to be contributed to, by the Company for the benefit
of any current or former employee, officer, director, retiree, independent
contractor, or consultant of the Company or any spouse or dependent of such
individual, or under which the Company or any of its ERISA Affiliates has or
would reasonably be expected to have any Liability, or with respect to which the
Parent or any of its Affiliates would reasonably be expected to have any
Liability, contingent or otherwise (as required to be listed in Schedule
3.20(a), each, a “Benefit Plan”). The Company has separately identified in
Schedule 3.20(a) any Benefit Plan that contains a change in control provision.
As of the date of this Agreement, the Company does not have any Stock Incentive
Plans, each of which, if ever extant, was terminated or discontinued on or
before June 30, 2018, and no participants in respect of any such plan have any
rights therein.

 

37

 

 

(b) With respect to each Benefit Plan, the Company has made available to the
Parent accurate, current, and complete copies of each of the following: (i)
where the Benefit Plan has been reduced to writing, the plan document together
with all amendments; (ii) where the Benefit Plan has not been reduced to
writing, a written summary of all material plan terms; (iii) where applicable,
copies of any trust agreements or other funding arrangements, custodial
agreements, insurance policies and contracts, administration agreements and
similar agreements, and investment management or investment advisory agreements,
now in effect or required in the future as a result of the transactions
contemplated by this Agreement or otherwise; (iv) copies of any summary plan
descriptions, summaries of material modifications, employee handbooks, and any
other written communications relating to any Benefit Plan; (v) in the case of
any Benefit Plan that is intended to be qualified under Section 401(a) of the
Code, a copy of the most recent determination, opinion, or advisory letter from
the Internal Revenue Service; (vi) in the case of any Benefit Plan for which a
Form 5500 is required to be filed, copies of the two most recently filed Forms
5500, with schedules and financial statements attached; (vii) actuarial
valuations and reports related to any Benefit Plans with respect to the two most
recently completed plan years; (viii) the most recent nondiscrimination tests
performed under the Code; and (ix) copies of material notices, letters, or other
correspondence from the Internal Revenue Service, Department of Labor, Pension
Benefit Guaranty Corporation, or other Governmental Authority relating to the
Benefit Plan.

 

(c) Except as set forth in Schedule 3.20(c), each Benefit Plan and any related
trust (other than any multiemployer plan within the meaning of Section 3(37) of
ERISA (each a “Multiemployer Plan”)) has been established, administered, and
maintained in accordance with its terms and in compliance in all material
respects with all applicable Laws (including ERISA and the Code). Each Benefit
Plan that is intended to be qualified within the meaning of Section 401(a) of
the Code (a “Qualified Benefit Plan”) is so qualified and has received a
favorable and current determination letter from the Internal Revenue Service, or
with respect to a prototype plan, can rely on an opinion letter from the
Internal Revenue Service to the prototype plan sponsor, to the effect that such
Qualified Benefit Plan is so qualified and that the plan and the trust related
thereto are exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and to the Company’s Knowledge, no event has occurred
that would reasonably be expected to affect adversely the qualified status of
any Qualified Benefit Plan. To the Company’s Knowledge, no event has occurred
with respect to any Benefit Plan that has subjected, or would reasonably be
expected to subject, the Company or any of its ERISA Affiliates to a penalty
under Section 502 of ERISA or to tax or penalty under Section 4975 of the Code.
Except as set forth in Schedule 3.20(c), all benefits, contributions, and
premiums relating to each Benefit Plan have been timely paid in accordance with
the terms of such Benefit Plan and all applicable Laws and accounting
principles, and all benefits accrued under any unfunded Benefit Plan have been
paid, accrued, or otherwise adequately reserved to the extent required by, and
in accordance with, GAAP.

 

38

 

 

(d) Neither the Company nor any of its ERISA Affiliates has (i) incurred, either
directly or indirectly, any material Liability under Title I or Title IV of
ERISA or related provisions of the Code or applicable local Law relating to
employee benefit plans; (ii) failed timely to pay premiums to the Pension
Benefit Guaranty Corporation; (iii) withdrawn from any Benefit Plan; or (iv)
engaged in any transaction that would reasonably be expected to give rise to
liability under Section 4069 or Section 4212(c) of ERISA.

 

(e) With respect to each Benefit Plan (i) no such plan is a Multiemployer Plan;
(ii) no such plan is a “multiple employer plan” within the meaning of Section
413(c) of the Code or a “multiple employer welfare arrangement” (as defined in
Section 3(40) of ERISA); (iii) no Action has been initiated by the Pension
Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee
for any such plan; (iv) no such plan is subject to the minimum funding standards
of Section 412 of the Code or Title IV of ERISA, and none of the assets of the
Company or any ERISA Affiliate is, or may reasonably be expected to become, the
subject of any lien arising under Section 302 of ERISA or Section 412(a) of the
Code; and (v) no “reportable event,” as defined in Section 4043 of ERISA, has
occurred with respect to any such plan.

 

(f) Each Benefit Plan can be amended, terminated, or otherwise discontinued in
accordance with its terms, without material liabilities to the Company, or any
of its Affiliates other than ordinary administrative expenses typically incurred
in a termination event. The Company has no commitment or obligation, and has not
made any representations to any employee, officer, director, independent
contractor, or consultant, whether or not legally binding, to adopt, amend,
modify, or terminate any Benefit Plan or any collective bargaining agreement in
connection with the consummation of the transactions contemplated by this
Agreement or otherwise.

 

(g) Except as set forth in Schedule 3.20(g) and other than as required under
Section 601 et seq. of ERISA or other applicable Law, no Benefit Plan provides
post-termination or retiree welfare benefits to any individual for any reason,
and neither the Company nor any of its ERISA Affiliates has any Liability to
provide post-termination or retiree welfare benefits to any individual or ever
represented, promised, or contracted to any individual that such individual
would be provided with post-termination or retiree welfare benefits.

 

(h) Except as set forth in Schedule 3.20(h), there is no pending or, to the
Company’s Knowledge, threatened Action relating to a Benefit Plan (other than
routine claims for benefits), and no Benefit Plan has within the three years
prior to the date hereof been the subject of an examination or audit by a
Governmental Authority or the subject of an application or filing under, or is a
participant in, an amnesty, voluntary compliance, self-correction, or similar
program sponsored by any Governmental Authority.

 

39

 

 

(i) There has been no amendment to, announcement by the Company or any of its
Affiliates relating to, or change in employee participation or coverage under,
any Benefit Plan or collective bargaining agreement that would increase the
annual expense of maintaining such plan above the level of the expense incurred
for the most recently completed fiscal year with respect to any director,
officer, employee, independent contractor, or consultant, as applicable. Neither
the Company nor any of its Affiliates has any commitment or obligation, or has
made any representations, to any director, officer, employee, independent
contractor, or consultant, whether or not legally binding, to amend, modify, or
terminate any Benefit Plan or any collective bargaining agreement.

 

(j) Each Benefit Plan that is subject to Section 409A of the Code has been
administered in compliance with its terms and the operational and documentary
requirements of Section 409A of the Code and all applicable regulatory guidance
(including notices, rulings, and proposed and final regulations) thereunder. The
Company does not have any obligation to gross up, indemnify, or otherwise
reimburse any individual for any excise taxes, interest, or penalties incurred
pursuant to Section 409A of the Code.

 

(k) Each individual who is classified by the Company as an independent
contractor has been properly classified for purposes of participation and
benefit accrual under each Benefit Plan.

 

(l) Except as set forth in Schedule 3.20(l), neither the execution of this
Agreement nor any of the transactions contemplated by this Agreement will
(either alone or upon the occurrence of any additional or subsequent events):
(i) entitle any current or former director, officer, employee, independent
contractor, or consultant of the Company to severance pay or any other payment;
(ii) accelerate the time of payment, funding, or vesting, or increase the amount
of compensation due to any such individual; (iii) limit or restrict the right of
the Company to merge, amend, or terminate any Benefit Plan; (iv) increase the
amount payable under, or result in any other material obligation pursuant to,
any Benefit Plan; (v) result in “excess parachute payments” within the meaning
of Section 280G(b) of the Code; or (vi) require a “gross-up” or other payment to
any “disqualified individual” within the meaning of Section 280G(c) of the Code.
The Company has made available to the Parent true and complete copies of any
Section 280G calculations prepared (whether or not final) with respect to any
disqualified individual in connection with the transactions.

 

Section 3.21 Employee Matters.

 

(a) Schedule 3.21(a) contains a list of all persons who are employees,
independent contractors, or consultants of the Company as of October 31, 2018,
including any employee who is on a leave of absence of any nature, paid or
unpaid, authorized or unauthorized, and sets forth for each such individual the
following: (i) name; (ii) title or position (including whether full- or
part-time); (iii) hire date; (iv) current annual base compensation rate; (v)
commission, bonus, or other incentive-based compensation; and (vi) a description
of the fringe benefits provided to each such individual as of the date hereof.
Except as set forth in Schedule 3.21(a), all compensation, including wages,
commissions, and bonuses, payable to all employees, independent contractors, or
consultants of the Company for services performed have been paid in full (or
accrued in full on the Interim Balance Sheet) and there are no outstanding
agreements, understandings, or commitments of the Company with respect to any
compensation, commissions, or bonuses.

 

40

 

 

(b) Except as set forth in Schedule 3.21(b), the Company is not, and has not
been at any time during the three years prior to the date of this Agreement, a
party to, bound by, or negotiating any collective bargaining agreement or other
Contract with a union, works council, or labor organization (collectively,
“Union”), and there is not, and has not been at any time during the three years
prior to the date of this Agreement, any Union representing or purporting to
represent any employee of the Company, and, to the Company’s Knowledge, no Union
or group of employees is seeking or has at any time during the three years prior
to the date of this Agreement sought to organize employees for the purpose of
collective bargaining. Except as set forth in Schedule 3.21(b), during the three
years prior to the date of this Agreement, there has not been, nor, to the
Knowledge of the Company, has there been any threat of, any strike, slowdown,
work stoppage, lockout, concerted refusal to work overtime, or other similar
material labor disruption or dispute affecting the Company or any of its
employees. The Company has no duty to bargain with any Union.

 

(c) The Company is and has been during the three years prior to the date of this
Agreement in compliance in all material respects all applicable Laws pertaining
to employment and employment practices, including all Laws relating to labor
relations, equal employment opportunities, fair employment practices, employment
discrimination, harassment, retaliation, reasonable accommodation, disability
rights or benefits, immigration, wages, hours, overtime compensation, child
labor, hiring, promotion and termination of employees, working conditions, meal
and break periods, privacy, health and safety, workers’ compensation, leaves of
absence, and unemployment insurance. All individuals characterized and treated
by the Company as independent contractors or consultants are properly treated as
independent contractors under all applicable Laws. All employees of the Company
classified as exempt under the Fair Labor Standards Act and state and local wage
and hour laws are properly classified. Except as set forth in Schedule 3.21(c),
there are no Actions against the Company pending, or to the Company’s Knowledge,
threatened to be brought or filed, by or with any Governmental Authority in
connection with the employment of any current or former applicant, employee,
consultant, volunteer, intern, or independent contractor of the Company,
including any claim relating to unfair labor practices, employment
discrimination, harassment, retaliation, equal pay, wage and hours, or any other
employment-related matter arising under applicable Laws.

 

Section 3.22 Taxes.

 

(a) All Tax Returns required to be filed on or before the Closing Date by the
Company have been, or will be, timely filed. Such Tax Returns are, or will be,
true, complete, and correct in all material respects. All Taxes due and owing by
the Company (whether or not shown on any Tax Return) have been, or will be,
timely paid or, in the case of Taxes that are not yet due and payable as of the
Closing Date but that relate to a Pre-Closing Tax Period, accrued.

 

41

 

 

(b) The Company has withheld and paid each Tax required to have been withheld
and paid (or, in circumstances where such Taxes have not yet become due and
payable, have been set aside in segregated accounts to be paid to the proper
Taxing Authority) in connection with amounts paid or owing to any employee,
independent contractor, creditor, customer, shareholder, or other party, and
complied in all material respects with all information reporting and backup
withholding provisions of applicable Law.

 

(c) The Company has not received, within the past five (5) years, and, to the
Company’s Knowledge, has not received at any time, any written claim from any
Taxing Authority in any jurisdiction where the Company does not file Tax Returns
that it is, or may be, subject to Tax by that jurisdiction.

 

(d) No extensions or waivers of statutes of limitations have been given or
requested with respect to any Taxes of the Company for which the applicable
statute of limitations has not expired, other than extensions or waivers that
are the result of filing date extensions that do not require the affirmative
consent of the applicable Taxing Authority.

 

(e) The amount of the Company’s Liability for unpaid Taxes for all periods
covered by the Financial Statements and ending on or before the Interim Balance
Sheet Date does not, in the aggregate, materially exceed the amount of accruals
for Taxes (excluding reserves for deferred Taxes) reflected on the Financial
Statements.

 

(f) Schedule 3.22(f) sets forth:

 

(i) the taxable years of the Company as to which the applicable statutes of
limitations on the assessment and collection of income or other material Taxes
have not expired;

 

(ii) those years ending after December 31, 2012 for which examinations by the
Taxing Authorities have been completed; and

 

(iii) those taxable years for which examinations by Taxing Authorities are
currently being conducted.

 

(g) All deficiencies asserted, or assessments made, against the Company as a
result of any examinations by any Taxing Authority have been fully settled or
paid.

 

(h) The Company is not a party to any Action by any Taxing Authority. There are
no pending or, to the Company’s Knowledge, threatened Actions against the
Company by any Taxing Authority.

 

(i) The Company has delivered to the Parent copies of all federal, state, local,
and foreign income, franchise, and similar Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by, the Company for
all Tax periods ending after December 31, 2015.

 

42

 

 

(j) There are no Encumbrances for Taxes upon the assets of the Company (other
than for current Taxes not yet due and payable and for which adequate reserves
have been set aside by the Company).

 

(k) The Company is not a party to, or bound by, any Tax indemnity, Tax-sharing,
Tax allocation, or similar agreement, the principal subject of which is Tax.

 

(l) No private letter rulings, technical advice memoranda, or similar agreements
or rulings have been requested or entered into by the Company, or issued to the
Company by any Taxing Authority.

 

(m) The Company has not been a member of an affiliated, combined, consolidated,
or unitary Tax group for Tax purposes. The Company has no Liability for Taxes of
any Person (other than the Company) under Treasury Regulations Section 1.1502-6
(or any corresponding provision of state, local, or foreign Law), as transferee
or successor, by contract or otherwise.

 

(n) No Shareholder is a “foreign person” as that term is used in Treasury
Regulations Section 1.1445-2. The Company is not, nor has it been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code) during the applicable period specified in Section 897(c)(1)(a) of the
Code.

 

(o) The Company has not been, within the past five (5) years, a “distributing
corporation” or a “controlled corporation” in connection with a distribution
described in Section 355 of the Code.

 

(p) The Company is not, and has not been, at any time during the three years
prior to the date of this Agreement, a party to, or a promoter of, a “reportable
transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury
Regulations Section 1.6011-4(b).

 

(q) All individuals classified by the Company as independent contractors are
properly classified as such for applicable Tax purposes.

 

(r) The Company is not subject to, or required to register for, any value added
Taxes.

 

(s) The Company does not have and has not had a permanent establishment in any
foreign country, as defined in any applicable Tax treaty or convention between
the United States and such foreign country.

 

(t) All FinCEN Forms 114, Report of Foreign Bank Accounts, and IRS Forms TD F
90-22.1, Report of Foreign Bank and Financial Accounts, required to be filed by,
or on behalf of, the Company have been timely filed and all such forms were
true, correct, and complete when filed.

 

43

 

 

(u) The Company has during the three years prior to the date of this Agreement
(i) filed or caused to be filed with the appropriate Governmental Authority all
reports required to be filed with respect to any material unclaimed property and
has remitted to the appropriate Governmental Authority all material unclaimed
property required to be remitted or (ii) delivered or paid all material
unclaimed property to its original or proper recipient. No material asset or
property, or material amount of assets or properties, of the Company is
escheatable to any Governmental Authority under any applicable Law, including
uncashed checks to vendors or employees, nonrefunded over payments, credits,
unused gift certificates, or unused prepaid accounts.

 

(v) The Company has not participated in or cooperated with an international
boycott within the meaning of Section 999 of the Code and has not received any
written request to do so.

 

Section 3.23 Books and Records. The minute books and stock record books of the
Company have been made available to the Parent, are complete and correct, and
have been maintained in accordance with reasonable business practices. The
minute books of the Company contain accurate and complete records of all
meetings, and material actions taken by written consent of, the Shareholders,
the Company Board, and any committees of the Company Board, and no meeting, or
action taken by written consent, of any such Shareholders, Company Board, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.

 

Section 3.24 Brokers. No broker, finder, or investment banker is entitled to any
brokerage, finder’s, or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any Shareholder.

 

Section 3.25 Affiliate Agreements. None of the Shareholders or any of their
respective Affiliates or any officer, director, or equivalent of the Company or
any of his or her Affiliates or any individual in such officer’s, director’s, or
equivalent person’s immediate family: (a) owns or holds any interest in any
property or assets owned, leased, or used by the Company, (b) has a material
interest in any customer or supplier of the Company or any provider of products
or services to the Company, or (c) is a party to any Contract or other
arrangement with the Company (each, an “Affiliate Agreement”), other than
salaries, expense reimbursement, and employee benefits in respect of employment
in the ordinary course of business.

 

Section 3.26 Investment Representations.

 

(a) Each Shareholder is acquiring the Parent Shares for his or its own account
for the purpose of investment only, without any view toward sale or
distribution.

 

(b) Each Shareholder is an “accredited investor” within the meaning of Rule 501
of Regulation D promulgated under the Securities Act.

 

(c) Each Shareholder has such knowledge and experience in financial and business
matters so as to be able to evaluate the risks and merits of its investment in
the Parent and it is able financially to bear the risks thereof.

 

44

 

 

(d) Each Shareholder understands that (i) the Parent Shares have not been
registered under the Securities Act or qualified under any state securities or
blue sky laws by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act and the qualification
requirements of the various state securities or blue sky laws and, therefore,
cannot be resold unless they are registered under the Securities Act and
qualified under applicable state securities laws or unless exemptions from such
registration and qualification requirements are available, (ii) even if the
Parent Shares are subsequently registered under the Securities Act and qualified
under state securities or blue sky laws, or exemptions from such registration
and qualification requirements are available, the amount or percentage of the
Parent Shares that may be sold or transferred may be limited by applicable
federal and state laws, rules, and regulations, and (iii) no public agency has
reviewed the accuracy or adequacy of any information furnished to the
Shareholders and their respective Representatives in connection with the
Shareholders’ respective acquisitions of the Parent Shares. The Shareholders
agree that all stock certificates representing the Parent Shares shall bear the
following legend (or substantially equivalent language):

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THAT ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT AN EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE.”

 

(e) Each Shareholder acknowledges that such Shareholder has had access to such
financial and other information relating to the Parent, including the Parent SEC
Reports and the Parent’s other annual, quarterly, and current reports,
registration statements, prospectuses, proxy statements, information statements,
and other documents (including exhibits and amendments ) filed by the Parent
with the Commission and other publicly available information regarding the
Parent, required for such Shareholder to make an informed decision with respect
to such Shareholder’s acquisition of the Parent Shares hereby and that such
Shareholder has had an opportunity to discuss the Parent’s business, management,
and financial affairs with the Parent’s management, and has had all of such
Shareholder’s questions regarding the Parent or the Parent Shares answered to
such Shareholder’s satisfaction. Each Shareholder acknowledges that he or it
should carefully review the risk factors set forth in the Parent SEC Reports.

 

Section 3.27 No Other Representations or Warranties. Neither the Company nor any
Shareholder makes any representation or warranty, whether express or implied,
about the Company, its business or the Shareholders other than the
representations and warranties explicitly set forth in this ARTICLE III
(including, and as qualified by, the related portions of the Schedules).

 

Section 3.28 Absence of Company Material Adverse Effect; Investigation.
Notwithstanding anything to the contrary in this Agreement, since January 1,
2018, no event or events have occurred that have had or would reasonably be
expected to have, either individually or in the aggregate, a Company Material
Adverse Effect. Further, each of the Company and each of the Shareholders
acknowledges that no investigation by the Parent or other information received
by the Parent, unless provided in a writing prior to the Closing from the
Company or any of the Shareholders and, thereafter, but prior to the Closing,
acknowledged in a writing from the Parent to the Company and to each of the
Shareholders, shall operate as a waiver or otherwise affect any representation,
warranty, or agreement given or made by the Company and/or the Shareholders in
this Agreement.

 

45

 

 

ARTICLE IV
Representations and warranties of THE Parent and merger sub

 

Except as disclosed in the Parent SEC Reports, the Parent, Merger Sub No. 1, and
Merger Sub No. 2 represent and warrant to the Company and the Shareholders that
the statements contained in this ARTICLE IV are true and correct as of the date
hereof.

 

Section 4.01 Organization and Authority. Each of the Parent, Merger Sub No. 1,
and Merger Sub No. 2 is a corporation or a limited liability company, as
relevant, duly organized, validly existing, and in good standing under the Laws
of the jurisdiction of its incorporation. Each of the Parent, Merger Sub No. 1,
and Merger Sub No. 2 has full corporate or limited liability company power and
authority to enter into and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance by the Parent, Merger Sub No. 1, and Merger Sub No. 2 of this
Agreement and the consummation by the Parent, Merger Sub No. 1, and Merger Sub
No. 2 of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of the Parent, Merger Sub No. 1, and
Merger Sub No. 2 and no other entity proceedings on the part of the Parent,
Merger Sub No. 1, and Merger Sub No. 2 are necessary to authorize the execution,
delivery, and performance of this Agreement or to consummate the Merger and the
other transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Parent, Merger Sub No. 1, and Merger Sub No. 2, and
(assuming due authorization, execution, and delivery by each other party hereto)
this Agreement constitutes a legal, valid, and binding obligation of the Parent,
Merger Sub No. 1, and Merger Sub No. 2 enforceable against the Parent, Merger
Sub No. 1, and Merger Sub No. 2 in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium, and other
similar laws affecting creditors’ rights generally and by general principles of
equity.

 

Section 4.02 No Conflicts; Consents. The execution, delivery, and performance by
the Parent, Merger Sub No. 1, and Merger Sub No. 2 of this Agreement and the
consummation of the transactions contemplated hereby, do not and will not: (a)
conflict with or result in a violation or breach of, or default under, any
provision of the Organizational Documents of the Parent, Merger Sub No. 1, or
Merger Sub No. 2; (b) conflict with or result in a violation or breach of any
provision of any Law applicable to the Parent, Merger Sub No. 1, or Merger Sub
No. 2; or (c) require the consent, notice, or other action by any Person under
any Contract to which the Parent, Merger Sub No. 1, or Merger Sub No. 2 is a
party. No consent, approval, Permit, Governmental Order, or declaration of,
filing with, or notice to, any Governmental Authority is required by or with
respect to the Parent, Merger Sub No. 1, or Merger Sub No. 2 in connection with
the execution, delivery, and performance of this Agreement and the consummation
of the transactions contemplated hereby, except for (i) the filings of the
Articles of Merger with the Utah Division and (ii) such other consents,
approvals, authorizations, orders, registrations, filings, or qualifications
that shall have been obtained or made on or prior to the Closing Date as may be
required by the securities or blue sky laws of the various states and the
Securities Act in connection with the issuance of the Parent Shares.

 

46

 

 

Section 4.03 No Prior Merger Sub Operations. Each of Merger Sub No. 1 and Merger
Sub No. 2 was formed solely for the purpose of effecting the Merger and has not
engaged in any business activities or conducted any operations other than in
connection with the transactions contemplated hereby.

 

Section 4.04 Brokers. No broker, finder, or investment banker is entitled to any
brokerage, finder’s, or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Parent, Merger Sub No. 1, or Merger Sub No. 2 other than
A.G.P., the fees and expenses of which shall be paid by the Parent.

 

Section 4.05 Sufficiency of Funds. At the Closing, the Parent will have
sufficient cash on hand or other sources of immediately available funds to
enable it to consummate the transactions contemplated by this Agreement.

 

Section 4.06 Legal Proceedings. There are no Actions pending or, to the Parent’s
knowledge, threatened against or by the Parent or any Affiliate of the Parent
that (a) has had or would reasonably be expected to have a Parent Material
Adverse Effect or (b) challenge or seek to prevent, enjoin, or otherwise delay
the transactions contemplated by this Agreement. To the Parent’s knowledge, no
event has occurred or circumstances exist that may give rise or serve as a basis
for any such Action.

 

Section 4.07 SEC Reports.

 

(a) The Parent (i) has timely filed or furnished all reports, registration
statements, proxy statements, prospectuses, and other materials, together with
any amendments required to be made with respect thereto, that it was required to
file with or furnish to the Commission pursuant to the Securities Act or the
Exchange Act since January 1, 2017, and all such reports, registration
statements, proxy statements, prospectuses, other materials, and amendments have
complied in all material respects with all legal requirements relating thereto,
and (ii) has paid all fees and assessments due and payable in connection
therewith.

 

(b) An accurate and complete copy of each final registration statement,
prospectus, report, schedule, and definitive proxy statement filed with or
furnished to the SEC by the Parent pursuant to the Securities Act or the
Exchange Act since January 1, 2017 and prior to the date of this Agreement (the
“Parent SEC Reports”) is publicly available. No Parent SEC Report, at the time
filed, furnished, or communicated (and, in the case of registration statements
and proxy statements, on the dates of effectiveness and the dates of the
relevant meetings, respectively), and considering all amendments to any Parent
SEC Report filed prior to the date hereof, 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 made therein, in light of
the circumstances in which they were made, not misleading, except that
information filed as of a later date (but before the date of this Agreement)
shall be deemed to modify information as of an earlier date. As of their
respective dates, all of the Parent SEC Reports complied as to form in all
material respects with the published rules and regulations of the Commission
with respect thereto. No executive officer of the Parent has failed in any
respect to make the certifications required of him or her under Section 302 or
906 of the Sarbanes-Oxley Act.

 

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Section 4.08 Capitalization. The Parent has the authorized capitalization as set
forth in the Parent SEC Reports, and all of the issued and outstanding shares of
capital stock of the Parent have been duly authorized and validly issued and are
fully paid and non-assessable. Upon issuance pursuant to the terms hereof, the
Parent Shares shall be validly issued, fully paid, non-assessable, and
outstanding and will not have been issued in violation of or subject to any
preemptive or similar rights. No approval from the holders of outstanding shares
of Parent Common Stock is required in connection with the Parent’s issuance of
the Parent Shares to the Sellers or the consummation of the transactions
contemplated pursuant to this Agreement.

 

Section 4.09 Financial Statements.

 

(a) The financial statements of the Parent and its subsidiaries included (or
incorporated by reference) in the Parent SEC Reports (including the related
notes, where applicable) (i) have been prepared from, and are in accordance
with, the books and records of the Parent and its subsidiaries; (ii) fairly
present in all material respects the consolidated results of operations, cash
flows, changes in shareholders’ equity, and consolidated financial position of
the Parent and its subsidiaries for the respective fiscal periods or as of the
respective dates therein set forth (subject, in the case of unaudited
statements, to recurring year-end audit adjustments normal in nature and
amount); (iii) complied as to form, as of their respective dates of filing with
the Commission, in all material respects with applicable accounting requirements
and with the published rules and regulations of the Commission with respect
thereto; and (iv) have been prepared in accordance with GAAP consistently
applied during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto. As of the date hereof, the books and records
of the Parent and its subsidiaries have been maintained in all material respects
in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions. As of the date hereof,
Weinberg & Company, P.A. has not resigned (or informed the Parent that it
intends to resign) or been dismissed as independent public accountants of the
Parent as a result of or in connection with any disagreements with the Parent on
a matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure.

 

(b) Neither the Parent nor any of its subsidiaries has incurred any material
liability or obligation of any nature whatsoever (whether absolute, accrued,
contingent, determined, determinable, or otherwise and whether due or to become
due) that would be required to be reflected on, or reserved against in, a
consolidated balance sheet of the Parent and its subsidiaries or in the notes
thereto prepared in accordance with GAAP consistently applied, except for (i)
those liabilities that are reflected or reserved against on the consolidated
balance sheet of the Parent and its subsidiaries included in its Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2018 (including any
notes thereto), (ii) liabilities incurred in the ordinary course of business
consistent with past practice since June 30, 2018, or otherwise disclosed in any
Parent SEC Report filed since such Quarterly Report on Form 10-Q, or (iii) in
connection with this Agreement, the transactions contemplated hereby, and the
Parent Public Offering.

 

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Section 4.10 Permits; Compliance with Applicable Laws. The Parent and each of
its subsidiaries hold all Permits that are necessary for the lawful conduct of
their respective businesses and ownership of their respective properties,
rights, and assets under and pursuant to applicable Law (and have paid all fees
and assessments due and payable in connection therewith), except where the
failure to hold such Permit or to pay such fees or assessments has not had and
would not reasonably be expected, individually or in the aggregate, a Parent
Material Adverse Effect) and, to the knowledge of the Parent, no suspension or
cancellation of any such necessary Permit has, prior to the date hereof, been
threatened in writing. The Parent and each of its subsidiaries are in compliance
in all material respects with all applicable Laws relating to the Parent or any
of its subsidiaries, except where the failure to be in such compliance would not
reasonably be expected, individually or in the aggregate, to have a Parent
Material Adverse Effect.

 

Section 4.11 Absence of Material Adverse Effect. Since January 1, 2018, no event
or events have occurred that have had or would reasonably be expected to have,
either individually or in the aggregate, a Parent Material Adverse Effect.

 

Section 4.12 Independent Investigation. Subject to the provisions of Section
3.28, the Parent acknowledges that it (i) has conducted its own independent
investigation, review, and analysis of the Company and its business and (ii)
acknowledges that it has been provided adequate access to the personnel,
properties, assets, premises, books and records, and other documents and data of
the Company for such purpose.

 

ARTICLE V
Covenants

 

Section 5.01 Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as otherwise set forth in the Disclosure Schedules,
provided in this Agreement or consented to in writing by the Parent (which
consent shall not be unreasonably withheld, delayed, denied, or conditioned),
the Company shall (x) conduct the business of the Company in the ordinary course
of business consistent with past practice and (y) use reasonable best efforts to
maintain and preserve intact the current organization, business, and franchise
of the Company and to preserve the rights, franchises, goodwill, and
relationships of its employees, customers, lenders, suppliers, regulators, and
others having business relationships with the Company. Without limiting the
foregoing, except as set forth in the Disclosure Schedules, from the date hereof
until the Closing Date, the Company shall:

 

(a) preserve and maintain all of its Permits;

 

(b) pay all of its Taxes, and other obligations when due;

 

(c) maintain the properties and assets owned, operated, or used by it in
substantially the same condition as they were on the date of this Agreement,
subject to reasonable wear and tear;

 

(d) continue in full force and effect without modification all Insurance
Policies, except as required by applicable Law;

 

(e) defend and protect its properties and assets from infringement or
usurpation;

 

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(f) perform all of its material obligations under all Contracts relating to or
affecting its properties, assets, or business;

 

(g) maintain its books and records in accordance with past practice;

 

(h) comply in all material respects with all applicable Laws;

 

(i) not transfer, assign, distribute, or otherwise remove any assets of the
Company except in the ordinary course of business; and

 

(j) not knowingly take or permit any action that would cause any of the changes,
events, or conditions described in Section 3.08 to occur.

 

Section 5.02 Access to Information. From the date hereof until the Closing, the
Company shall (a) afford the Parent and its Representatives full and free
access(subject to such access not becoming a material impediment to the Company
conducting its business in the ordinary course) to and the right to inspect all
of the Real Property, properties, assets, premises, books and records, business
plans, Contracts, and other documents and data related to the Company; (b)
furnish the Parent and its Representatives with such financial, operating,
intellectual property, and other data and information related to the Company as
the Parent or any of its Representatives may reasonably request; and (c)
instruct the Representatives of the Company to cooperate with the Parent in its
investigation of the Company. Notwithstanding anything to the contrary in this
Agreement, the Company shall not be required to disclose any information to the
Parent, Merger Sub, or their respective Representatives if such disclosure
would, in the Company’s reasonable discretion (after consultation with Company
counsel): (x) jeopardize any attorney-client privilege of the Company
(determined in consultation with counsel to the Company) or (y) contravene any
applicable Law, fiduciary duty or Contract to which the Company is a party. In
such event, the Company shall promptly deliver to the Parent a reasonably
detailed description of the non-disclosed information and the Company’s reasons
why such information should not be disclosed to the Parent. Any investigation
pursuant to this Section 5.02 shall be conducted in such manner as not to
interfere unreasonably with the conduct of the business of the Company. The
Parent and the Company shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement, dated ●, 2018, between the Parent and the Company,
which shall survive the termination of this Agreement in accordance with the
terms set forth therein.

 

Section 5.03 No Solicitation of Other Bids.

 

(a) The Company and the Shareholders shall not, and shall not authorize or
permit any of their respective Affiliates or Representatives, directly or
indirectly, to (i) encourage, solicit, initiate, facilitate, or continue
inquiries regarding an Acquisition Proposal; (ii) enter into discussions or
negotiations with, or provide any information to, any Person concerning a
possible Acquisition Proposal; or (iii) enter into any agreements or other
instruments (whether or not binding) regarding an Acquisition Proposal. The
Company and the Shareholders shall immediately cease and cause to be terminated,
and shall cause their respective Affiliates and Representatives to immediately
cease and cause to be terminated, all existing discussions or negotiations with
any Persons conducted heretofore with respect to, or that could lead to, an
Acquisition Proposal. For purposes hereof, “Acquisition Proposal” shall mean any
inquiry, proposal, or offer from any Person (other than the Parent or any of its
Affiliates) concerning (A) a merger, consolidation, liquidation,
recapitalization, share exchange, or other business combination transaction
involving the Company; (B) the issuance or acquisition of shares of the capital
stock or other equity securities of the Company; or (B) the sale, lease,
exchange, or other disposition of any portion of the Company’s properties or
assets (other than sales of inventory in the ordinary course of business
consistent with past practice).

 

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(b) In addition to the other obligations under this Section 5.03, the Company
and the Shareholders shall promptly (and in any event within three Business Days
after receipt thereof by the Company, any Shareholder, or any of their
respective Representatives) advise the Parent orally and in writing of any
Acquisition Proposal, any request for information with respect to any
Acquisition Proposal, or any inquiry with respect to or which could reasonably
be expected to result in an Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the Person making the same.

 

(c) The Company and the Shareholders agree that the rights and remedies for
noncompliance with this Section 5.03 shall include having such provision
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach shall cause
irreparable injury to the Parent and that money damages would not provide an
adequate remedy to Parent.

 

Section 5.04 Notice of Certain Events.

 

(a) From the date hereof until the Closing, the Company, on the one hand, and
the Parent, on the other hand, shall promptly notify the other in writing of:

 

(i) any fact, circumstance, event, or action the existence, occurrence, or
taking of which (A) has had, or would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect (in which
event the Company shall notify Parent) or a Parent Material Adverse Effect (in
which event Parent shall notify the Company) or (B) has resulted in, or could
reasonably be expected to result in, any representation or warranty made by the
Company and/or the Shareholders or the Parent hereunder not being true and
correct, or (C) has resulted in, or could reasonably be expected to result in,
the failure of any of the conditions set forth in Section 7.01 to be satisfied;

 

(ii) any notice or other communication received by such party from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement;

 

(iii) any notice or other communication received by such party from any
Governmental Authority in connection with the transactions contemplated by this
Agreement; and

 

(iv) any Actions commenced or, to such party’s Knowledge, threatened against,
relating to or involving, or otherwise affecting the Company or its Affiliates
that, if pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 3.17 or Section 4.06 (as applicable), or that
relates to the consummation of the transactions contemplated by this Agreement.

 

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(b) The Parent’s receipt of information pursuant to this Section 5.04, unless
provided in a writing prior to the Closing from the Company or any of the
Shareholders and, unless thereafter, but prior to the Closing, acknowledged in a
writing from the Parent to the Company and to each of the Shareholders, shall
not operate as a waiver or otherwise affect any representation, warranty, or
agreement given or made by the Company and/or the Shareholders in this Agreement
(including Section 8.02 and Section 9.01(b)) and shall not be deemed to amend or
supplement the Disclosure Schedules.

 

Section 5.05 Confidentiality. From and after the Closing, the Shareholders
shall, and shall cause their respective Affiliates to, hold, and shall use their
respective reasonable best efforts to cause their respective Representatives to
hold, in confidence any and all information, whether written or oral, concerning
the Company, except to the extent that such information (a) is generally
available to and known by the public through no fault of any Shareholder, any of
his or its Affiliates, or their respective Representatives or (b) is lawfully
acquired by any Shareholder, any of his or its Affiliates, or their respective
Representatives from and after the Closing from sources that are not prohibited
from disclosing such information by a legal, contractual, or fiduciary
obligation. If any Shareholder or any of his or its Affiliates or their
respective Representatives are compelled to disclose any information by judicial
or administrative process or by other requirements of Law, the applicable
Shareholder shall promptly notify the Parent in writing and shall disclose only
that portion of such information that the applicable Shareholder is advised by
his or its counsel is legally required to be disclosed; provided, that such
Shareholder shall use reasonable best efforts to obtain an appropriate
protective order or other reasonable assurance that confidential treatment will
be accorded such information. Notwithstanding the foregoing, each Shareholder,
his or its Affiliates, and their respective shareholders, members, partners,
owners, and Representatives may disclose and use Confidential Information to or
for the purpose of any of the following: (i) to assist the Shareholders’
Representative in the performance of his duties and the exercise of his rights
under this Agreement; (ii) to perform or fulfill any obligation pursuant to this
Agreement and/or the other agreements and instruments executed or delivered in
connection herewith; and/or (iii) to (A) fulfill such Persons’ and their
respective Affiliates’ and Representatives’ obligations under applicable Laws,
(B) engage in research, analysis, planning, and structuring relating to Taxes,
investment, financial planning and/or estate planning, (C) prepare, review,
and/or file Tax returns, or participate in or defend any audit, review,
assessment, or Action relating to Taxes, and/or (D) investigate, assess, assert,
initiate, maintain, enforce, or defend any right, Action or Losses (including
those arising out of or in connection with this Agreement and/or the
transactions contemplated hereby); provided, that, prior to making any such
disclosure pursuant to subparts (i) through (iii) foregoing to any Person who is
not otherwise bound by a professional, fiduciary or contractual obligation of
confidentiality with respect to such information, each relevant Shareholder
and/or the Shareholders’ Representative (as applicable) shall (x) obtain written
confirmation from any Person to whom such disclosure is to be made that such
Person will comply with the provisions of this Section 5.05 and (y) deliver such
written confirmation to the Parent.

 

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Section 5.06 Non-competition; Non-solicitation.

 

(a) For a period of three years commencing on the Closing Date (the “Restricted
Period”), the Shareholders shall not, and shall not permit any of their
respective Affiliates, directly or indirectly, to (i) engage in or assist others
in engaging in the Restricted Business in the Territory; (ii) have an interest
in any Person (other than the Company) that engages directly or indirectly in
the Restricted Business in the Territory in any capacity, including as a
partner, shareholder, member, employee, principal, agent, trustee, or
consultant; or (iii) intentionally interfere in any material respect with the
business relationships (whether formed prior to or after the date of this
Agreement) between the Company and customers or suppliers of the Company.
Notwithstanding the foregoing, any Shareholder may own, directly or indirectly,
solely as an investment, securities of any Person traded on any national
securities exchange if such Shareholder is not a controlling Person of, or a
member of a group which controls, such Person and does not, directly or
indirectly, own five percent or more of any class of securities of such Person.

 

(b) During the Restricted Period, the Shareholders shall not, and shall not
permit any of their respective Affiliates, directly or indirectly, to hire or
solicit any employee of the Company or encourage any such employee to leave such
employment or hire any such employee who has left such employment, except
pursuant to a general solicitation that is not directed specifically to any such
employees; provided, that nothing in this Section 5.06(b) shall prevent any
Shareholder or any of his or its Affiliates from hiring (i) any employee whose
employment has been terminated by the Company or the Parent or (ii) after 180
days from the date of termination of employment, any employee whose employment
has been terminated by the employee.

 

(c) During the Restricted Period, the Shareholders shall not, and shall not
permit any of their respective Affiliates, directly or indirectly, to solicit or
entice, or attempt to solicit or entice, any clients or customers of the Company
or potential clients or customers of the Company for purposes of diverting their
business or services from the Company.

 

(d) The Shareholders acknowledge that a breach or threatened breach of this
Section 5.06 would give rise to irreparable harm to the Parent, for which
monetary damages would not be an adequate remedy, and hereby agree that in the
event of a breach or a threatened breach by any Shareholder of any such
obligations, the Parent shall, in addition to any and all other rights and
remedies that may be available to it in respect of such breach, be entitled to
seek equitable relief, including a temporary restraining order, an injunction,
specific performance, and any other relief that may be available from a court of
competent jurisdiction (without any requirement to post bond).

 

(e) The Shareholders acknowledge that the restrictions contained in this Section
5.06 are reasonable and necessary to protect the legitimate interests of the
Parent and constitute a material inducement to the Parent to enter into this
Agreement and consummate the transactions contemplated by this Agreement. In the
event that any covenant contained in this Section 5.06 should ever be
adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable Law in any jurisdiction, then any court is
expressly empowered to reform such covenant, and such covenant shall be deemed
reformed, in such jurisdiction to the maximum time, geographic, product or
service, or other limitations permitted by applicable Law. The covenants
contained in this Section 5.06 and each provision hereof are severable and
distinct covenants and provisions. The invalidity or unenforceability of any
such covenant or provision as written shall not invalidate or render
unenforceable the remaining covenants or provisions hereof, and any such
invalidity or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such covenant or provision in any other jurisdiction.

 

53

 

 

Section 5.07 Resignations. The Company shall deliver to the Parent written
resignations, effective as of the Closing Date, of the officers and directors of
the Company requested by the Parent at least five Business Days prior to the
Closing Date.

 

Section 5.08 Governmental Approvals and Consents.

 

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be
made, all filings and submissions required under any Law applicable to such
party or any of its or his Affiliates and (ii) use reasonable best efforts to
obtain, or cause to be obtained, all consents, authorizations, orders, and
approvals from all Governmental Authorities that may be or become necessary for
its execution and delivery of this Agreement and the performance of its or his
obligations pursuant to this Agreement. Each party shall cooperate fully with
the other party and its or his Affiliates in promptly seeking to obtain all such
consents, authorizations, orders, and approvals. The parties hereto shall not
intentionally take any action that will have the effect of delaying, impairing,
or impeding the receipt of any required consents, authorizations, orders, and
approvals.

 

(b) The Company and the Shareholders shall use reasonable best efforts to give
all notices to, and obtain all consents from, all third parties that are
described in Schedule 3.05.

 

(c) Without limiting the generality of the parties’ undertakings pursuant to
subsections (a) and (b) above, each of the parties hereto shall use all
reasonable best efforts to:

 

(i) respond to any inquiries by any Governmental Authority regarding antitrust
or other matters with respect to the transactions contemplated by this
Agreement;

 

(ii) avoid the imposition of any order or the taking of any action that would
restrain, alter, or enjoin the transactions contemplated by this Agreement; and

 

(iii) in the event any Governmental Order adversely affecting the ability of the
parties to consummate the transactions contemplated by this Agreement has been
issued, to have such Governmental Order vacated or lifted.

 

(d) If any consent, approval, or authorization necessary to preserve any right
or benefit under any Contract to which the Company is a party is not obtained
prior to the Closing, the Shareholders shall, subsequent to the Closing,
cooperate with the Parent and the Company in attempting to obtain such consent,
approval, or authorization as promptly thereafter as practicable. If such
consent, approval, or authorization cannot be obtained, the Shareholders shall
use their reasonable best efforts to provide the Company with the rights and
benefits of the affected Contract for the term thereof, and, if the Shareholders
provide such rights and benefits, the Company shall assume all obligations and
burdens thereunder.

 

54

 

 

(e) All analyses, appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of any party
hereto before any Governmental Authority or the staff or regulators of any
Governmental Authority in connection with the transactions contemplated
hereunder (but, for the avoidance of doubt, not including any interactions
between the Company with Governmental Authorities in the ordinary course of
business consistent with past practice, any disclosure which is not permitted by
Law, or any disclosure containing confidential information) shall be disclosed
to the other party hereunder in advance of any filing, submission, or
attendance, it being the intent that the parties will consult and cooperate with
one another and consider in good faith the views of one another in connection
with any such analyses, appearances, meetings, discussions, presentations,
memoranda, briefs, filings, arguments, and proposals. Each party shall give
notice to the other party with respect to any meeting, discussion, appearance,
or contact with any Governmental Authority or the staff or regulators of any
Governmental Authority, with such notice being sufficient to provide the other
party with the opportunity to attend and participate in such meeting,
discussion, appearance, or contact.

 

(f) Notwithstanding the foregoing, nothing in this Section 5.08 shall require,
or be construed to require, any party to this Agreement or any of such party’s
Affiliates to agree to (i) sell, hold, divest, discontinue, or limit, before or
after the Closing Date, any assets, businesses, or interests of the Parent, the
Company, or any of their respective Affiliates; (ii) pay any amounts (other than
the payment of filing fees and expenses and fees of counsel); (iii) commence or
defend any litigation; (iv) any limitation on, or changes or restrictions in,
the operations of any assets, businesses, or interests of the Parent’s or any of
its Affiliate’s businesses; or (v) any material modification or waiver of the
terms and conditions of this Agreement, including any waiver any of the
conditions set forth in ARTICLE VII.

 

Section 5.09 Directors’ and Officers’ Indemnification and Insurance.

 

(a) The Parent, Merger Sub No. 1, and Merger Sub No. 2 agree that all rights to
indemnification, advancement of expenses, and exculpation by the Company now
existing in favor of each Person who is now, or has been at any time prior to
the date hereof or who becomes prior to the Effective Time an officer or
director of the Company or any subsidiary of the Company, or any fiduciary of a
Benefit Plan, employee stock ownership plan or other similar plan established,
maintained or contributed to by the Company or any subsidiary of the Company
(each, a “D&O Indemnified Party”) as provided in the Organizational Documents of
the Company, in each case as in effect on the date of this Agreement, or
pursuant to any other Contracts in effect on the date hereof and disclosed in
Schedule 5.09, shall be assumed by the Surviving Entity in the Merger, without
further action, at the Effective Time and shall survive the Merger and shall
remain in full force and effect in accordance with their terms and, in the event
that any proceeding is pending or asserted or any claim made during such period,
until the final disposition of such proceeding or claim.

 

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(b) For six years after the Effective Time, to the fullest extent permitted
under applicable Law, the Parent and the Surviving Entity (the “D&O Indemnifying
Parties”) shall indemnify, defend, and hold harmless each D&O Indemnified Party
against all losses, claims, damages, liabilities, fees, expenses, judgments, and
fines arising in whole or in part out of actions or omissions in their capacity
as such occurring at or prior to the Effective Time (including in connection
with the transactions contemplated by this Agreement), and shall reimburse each
D&O Indemnified Party for any legal or other expenses reasonably incurred by
such D&O Indemnified Party in connection with investigating or defending any
such losses, claims, damages, liabilities, fees, expenses, judgments, and fines
as such expenses are incurred, subject to the Surviving Entity’s receipt of an
undertaking by such D&O Indemnified Party to repay such legal and other fees and
expenses paid in advance if it is ultimately determined in a final and
non-appealable judgment of a court of competent jurisdiction that such D&O
Indemnified Party is not entitled to be indemnified under applicable Law;
provided, however, that the Surviving Entity will not be liable for any
settlement effected without the Surviving Entity’s prior written consent (which
consent shall not be unreasonably withheld, delayed, denied, or conditioned).

 

(c) Reserved.

 

(d) The obligations of the Parent and the Surviving Entity under this Section
5.09 shall survive the consummation of the Merger and shall not be terminated or
modified in such a manner as to affect adversely any D&O Indemnified Party to
whom this Section 5.09 applies without the consent of such affected D&O
Indemnified Party (it being expressly agreed that the D&O Indemnified Parties to
whom this Section 5.09 applies shall be third-party beneficiaries of this
Section 5.09, each of whom may enforce the provisions of this Section 5.09).

 

(e) In the event the Parent, the Surviving Entity, or any of their respective
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or Surviving Entity or entity in such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any Person, then, and in either such case, proper provision shall be
made so that the successors and assigns of the Parent or the Surviving Entity,
as the case may be, shall assume all of the obligations set forth in this
Section 5.09. The agreements and covenants contained herein shall not be deemed
to be exclusive of any other rights to which any D&O Indemnified Party is
entitled, whether pursuant to Law, Contract, or otherwise. Nothing in this
Agreement is intended to, shall be construed to, or shall release, waive, or
impair any rights to directors’ and officers’ insurance claims under any policy
that is or has been in existence with respect to the Company or its officers,
directors, and employees, it being understood and agreed that the
indemnification provided for in this Section 5.09 is not prior to, or in
substitution for, any such claims under any such policies.

 

Section 5.10 Closing Conditions. From the date hereof until the Closing, each
party hereto shall use reasonable best efforts to take such actions as are
necessary to expeditiously satisfy the closing conditions set forth in ARTICLE
VII.

 

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Section 5.11 Public Announcements. Unless otherwise required by applicable Law
or stock exchange requirements (based upon the reasonable advice of counsel), no
party to this Agreement shall make any public announcements in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written consent of the other party (which
consent shall not be unreasonably withheld, delayed, denied, or conditioned),
and the parties shall cooperate as to the timing and contents of any such
announcement.

 

Section 5.12 Affiliate Agreements. Prior to the Closing, the Company shall
terminate all Affiliate Agreements set forth on Schedule 5.12 with respect to
which there could be further or continuing liability or obligation on the part
of the Parent or any of its Affiliates (including, after the Closing, the
Company) without any further or continuing liability on the part of the Parent
or any of its Affiliates (including, after the Closing, the Company).

 

Section 5.13 Audited Financial Statements. The Company and the Shareholders
acknowledge and agree that they shall provide reasonable access to an
independent certified public accounting firm that is registered under the Public
Company Accounting Oversight Board and acceptable to the Parent and the Company
to audit the Annual Financial Statements (such audited Annual Financial
Statements, the “Audited Financial Statements”) and provide Parent ant the
Company with such Audited Financial Statements and the audit report of such
certified public accounting firm related thereto.

 

Section 5.14 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Entity shall be authorized to execute and
deliver, in the name and behalf of the Company, Merger Sub No. 1, or Merger Sub
No. 2, any deeds, bills of sale, assignments, or assurances and to take and do,
in the name and on behalf of the Company, Merger Sub No. 1, or Merger Sub No. 2,
any other actions and things to vest, perfect, or confirm of record or otherwise
in the Surviving Entity any and all right, title, and interest in, to, and under
any of the rights, properties, or assets of the Company acquired or to be
acquired by the Surviving Entity as a result of, or in connection with, the
Merger.

 

ARTICLE VI
Tax matters

 

Section 6.01 Taxes. All Taxes on or with respect to the Company that are
attributable to any Pre-Closing Tax Period shall be for the sole accounts,
jointly and severally, of the Shareholders. All Taxes on or with respect to the
Company that are attributable to any Post-Closing Tax Period shall be for the
sole account of the Parent.

 

Section 6.02 Certain Tax Covenants.

 

(a) The parties hereto shall cooperate with each other and use their respective
reasonable best efforts in taking actions, including with respect to the filing
of any Tax Returns, to attempt to qualify the Merger as a tax-free
reorganization pursuant to Section 368(a) of the Code and that at least 40% of
the aggregate Merger Consideration paid to the Shareholders in exchange for the
Company Shares is properly treated, for U.S. federal income tax purposes, as
paid in Parent Shares, taking into account the effect of the anticipated mix of
Closing Parent Shares and Cash Consideration associated with (i) the Closing
Merger Consideration, (ii) Parent Shares or cash to be paid in connection with
any Escrow Agreement, (iii) any reacquisition by Parent of Parent Shares treated
as delivered in the Merger, and (iv) any similar arrangements.

 

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(b) Without the prior written consent of the Parent, which may be withheld,
delayed, denied, or conditioned, prior to the Closing, the Company, its
Representatives, and the Shareholders shall not, to the extent it may materially
adversely affect, or relate to, the Company, (i) make, change, or rescind any
affirmative Tax election other than in the ordinary course of business, (ii)
amend any Tax Return, or (iii) take any position on any material Tax Return,
take any action, omit to take any action, or enter into any other transaction;
in each case, other than in the ordinary course of business, and in each case,
that would have the effect of increasing the Tax liability or reducing any Tax
asset of the Parent or the Surviving Entity in respect of any Post-Closing Tax
Period.

 

(c) All transfer, documentary, sales, use, stamp, registration, value added, and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne and paid by the Parent when due.
The Parent shall, at its own expense, timely file any Tax Return or other
document with respect to such Taxes or fees (and the Shareholders shall
cooperate with respect thereto as necessary).

 

Section 6.03 Termination of Existing Tax Indemnity, Tax Sharing, and Tax
Allocation Agreements. Any and all existing, whether written or not, Tax
indemnity agreements, Tax sharing agreements, Tax allocation agreements, and any
similar agreement binding upon the Company, the principal subject of which is
Tax, shall be terminated as of the Closing Date and all payments thereunder
settled immediately prior to the Closing Date with no payments permitted to be
made thereunder on and after the Closing Date. After the Closing Date, neither
the Company nor the Parent, nor any of the Parent’s Affiliates and their
respective Representatives (other than the Shareholders), shall have any further
rights or liabilities thereunder.

 

Section 6.04 Tax Returns.

 

(a) The Company shall prepare and timely file, or cause to be prepared and
timely filed, all Tax Returns required to be filed by it that are due on or
before the Closing Date (taking into account any extensions), and shall timely
pay all Taxes that are due and payable on or before the Closing Date. Any such
Tax Return shall be prepared in a manner consistent with past practice (unless
otherwise required by Law). The Company shall provide the Parent with copies of
any income or other material Tax Return, together with appropriate supporting
information and schedules, at least 45 days prior to the due date (including
extensions) for the filing of any such Tax Return, and the Parent shall have the
right to review and comment on any such Tax Return prior to the filing thereof.

 

(b) The Parent shall prepare and timely file, or cause to be prepared and timely
filed, all Tax Returns required to be filed by the Company after the Closing
Date with respect to a Pre-Closing Tax Period and for any Straddle Period, and
all other Tax Returns of the Company for which the Shareholders could have
liability under this Agreement, including pursuant to an indemnification
obligation, and the Parent shall cause the Company to pay all taxes reflected on
all such tax Returns. Any such Tax Return shall be prepared in a manner
consistent with past practice (unless otherwise required by Law) and, if it is
an income or other material Tax Return, shall be submitted by the Parent to the
Shareholders’ Representative (together with schedules, statements, and, to the
extent requested by the Shareholders’ Representative, supporting documentation)
at least 45 days prior to the due date (including extensions) of such Tax
Return. If the Shareholders’ Representative objects to any item on any such Tax
Return that relates to a Pre-Closing Tax Period, it shall, within 10 days after
delivery of such Tax Return, notify the Parent in writing that it so objects,
specifying with particularity any such item and stating the specific factual or
legal basis for any such objection. If a notice of objection shall be duly
delivered, the Parent and the Shareholders’ Representative shall negotiate in
good faith and use their reasonable best efforts to resolve such items. If the
Parent and the Shareholders’ Representative are unable to reach such agreement
within 10 days after receipt by the Parent of such notice, the disputed items
shall be resolved by the Independent Accountant and any determination by the
Independent Accountant shall be final. The Independent Accountant shall resolve
any disputed items within 20 days of having the item referred to it pursuant to
such procedures as it may require. If the Independent Accountant is unable to
resolve any disputed items before the due date for such Tax Return, the Tax
Return shall be filed as prepared by the Parent and then amended to reflect the
Independent Accountant’s resolution. The costs, fees, and expenses of the
Independent Accountant shall be borne one-half by the Parent and one-half by the
Shareholders. The preparation and filing of any Tax Return of the Company that
does not relate to a Pre-Closing Tax Period or Straddle Period shall be
exclusively within the control of the Parent.

 

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Section 6.05 Straddle Period. In the case of Taxes that are payable with respect
to a taxable period that begins on or before and ends after the Closing Date
(each such period, a “Straddle Period”), the portion of any such Taxes that are
treated as Pre-Closing Taxes for purposes of this Agreement shall be:

 

(a) in the case of Taxes (i) based upon, or related to, income, receipts,
profits, wages, capital, or net worth, (ii) imposed in connection with the sale,
transfer, or assignment of property, or (iii) required to be withheld, deemed
equal to the amount that would be payable if the taxable year ended on the
Closing Date; and

 

(b) in the case of other Taxes, deemed to be the amount of such Taxes for the
entire period multiplied by a fraction, the numerator of which is the number of
days in the period ending on the Closing Date and the denominator of which is
the number of days in the entire period.

 

Section 6.06 Closing Date Taxes. Notwithstanding any other provision of this
Agreement, if any Tax shall arise out of an action taken by the Parent or the
Surviving Entity on the Closing Date (but after the Closing time on the Closing
Date), and if, and only if, such an action (i) was undertaken outside of the
ordinary course of business and (ii) was not expressly contemplated by this
Agreement, then, and only then, shall such action be deemed to have arisen in a
Post-Closing Tax Period and not in a Pre-Closing Tax Period and the Tax shall be
borne by the Parent.

 

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Section 6.07 Cooperation and Exchange of Information. The Shareholders’
Representative and the Parent shall provide each other with such cooperation and
information as either of them reasonably may request of the other in filing any
Tax Return pursuant to this ARTICLE VI or in connection with any audit or other
proceeding in respect of Taxes of the Company. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules, related work papers, and documents
relating to rulings or other determinations by Tax Authorities. Each of the
Shareholders and the Parent shall retain all Tax Returns, schedules and work
papers, records, and other documents in his or its possession relating to Tax
matters of the Company or Taxes of the Shareholders related to the Company for
any taxable period beginning on or before the Closing Date until the expiration
of the statute of limitations of the taxable periods to which such Tax Returns
and other documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the respective Tax
periods. Prior to transferring, destroying, or discarding any Tax Returns,
schedules and work papers, records, and other documents in its or his possession
relating to Tax matters of the Company for any taxable period beginning before
the Closing Date and for which the statute of limitations has not run, the
Shareholders or the Parent (as the case may be) shall provide the other party
with reasonable written notice and offer the other party the opportunity to take
custody of such materials.

 

Section 6.08 Tax Indemnities.

 

(a) Subject to the provisions of Section 8.04 through Section 8.10, the
Shareholders shall, jointly and severally, be responsible for and shall
indemnify and hold the Company, the Parent, the Surviving Entity, and each other
Parent Indemnitee harmless against (i) any and all Taxes imposed on or payable
by the Company for any Pre-Closing Tax Period; (ii) any and all Taxes
attributable to the Pre-Closing Tax Period for which the Company is held liable
under Treasury Regulation Section 1.1502-6; (iii) any and all Taxes of any
Person other than the Company imposed on the Company as a transferee,
indemnitor, or successor, by Contract, pursuant to any Tax law, or otherwise
which Taxes relate solely to an event or transaction occurring or relating to
the Pre-Closing Tax Period or the agreements referenced in Section 6.03; (iv)
any and all Losses incurred or sustained by, or imposed upon, any Parent
Indemnitee based upon, arising out of, with respect to, or by reason of any
breach or inaccuracy of any of the representations set forth in Section 3.22;
and (v) any and all costs and expenses incurred by any Parent Indemnitee in
connection with any and all Actions regarding any Taxes for which any
Shareholder is required to reimburse the Parent Indemnitees pursuant to this
Section 6.08. For clarity and without limitation, each of the parties to this
Agreement acknowledges and agrees that the phrase “Pre-Closing Tax Period”
includes, and shall be deemed to include, the two-step merger process
contemplated by this Agreement that the parties anticipate will result in the
Closing of the Merger, such that the Shareholders’ indemnification obligations
as set forth in this Agreement that are in favor of the Company, the Parent, the
Surviving Entity, and each other Parent Indemnitee in respect of the Merger will
be effective as of the date of this Agreement. The parties to this Agreement
acknowledge that the two-step structure of the Merger is at the request of and
for the benefit of the Shareholders. Accordingly, their indemnification
obligations herein are intentionally broad and intentionally are designed ensure
that the Shareholders, jointly and severally, shall be responsible for and shall
indemnify and hold the Company, the Parent, the Surviving Entity, and each other
Parent Indemnitee harmless against any Pre-Closing Tax Period liability in
respect of the transactions contemplated by the Merger.

 

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(b) Payment of any amount due under this Section 6.08 shall be made within 10
days following the Shareholders’ Representative’s receipt of written notice from
the Company or the Parent regarding the same. Subject to Section 6.02(a), the
Shareholders acknowledge that the Parent reserves the right to require that any
payment to be made hereunder not be made with any or all of the Escrow Shares.

 

(c) Except for Section 8.06, Section 8.07, Section 8.08, Section 8.09, and
Section 8.10, this Section 6.07 shall be the sole provision governing
indemnities for Taxes and the breach or inaccuracy of any of the representations
set forth in Section 3.22.

 

Section 6.09 Control of Audit or Tax Litigation.

 

(a) The Parent will control any and all Actions regarding any Taxes for which
any Shareholder is required to indemnify the Parent, the Company, or any other
Parent Indemnitee pursuant to Section 6.07. The Parent will (and will cause its
Affiliates to) (i) keep the Shareholders’ Representative reasonably informed and
consult in good faith with Shareholders’ Representative with respect to any
issue relating to such Action, (ii) permit the Shareholders’ Representative to
review and comment on any documents in connection with such Action and take any
reasonable comments into consideration before filing any document, (iii) obtain
the prior written consent of the Shareholders’ Representative (which consent
shall not be unreasonably withheld, delayed, denied, or conditioned) before
entering into any settlement of any such Action or ceasing to defend such
Action, and (iv) allow the Shareholders’ Representative, at its expense, to
participate in the defense of such claim and to employ counsel of its choice for
such purpose. If the Shareholders’ Representative or any Shareholder is subject
to or receives notice of an audit of any Shareholder or other Action against any
Shareholder relating to Taxes and such audit or other Action would reasonably be
expected to (a) have an adverse effect on the Parent, the Surviving Entity, or
the Surviving Entity’s assets or (b) subject the Parent or the Surviving Entity
to any liability, in each case as a result of such audit or other Action, then
the Shareholders’ Representative will promptly notify the Parent of the same in
writing upon receipt of such notice or upon becoming aware of such audit or
other Action and will keep the Parent timely apprised of any developments in any
such audit or litigation.

 

Section 6.10 Tax Refunds. If the Company receives any Tax refund attributable to
a Pre-Closing Tax Period, the amount of such refund shall be paid to the
Shareholders within 10 days of receipt thereof. Tax refund for this purpose
includes any amount that the Company or the Parent could elect to receive as a
refund but instead is applied to reduce the Company’s Taxes during any
Post-Closing Tax Period.

 

Section 6.11 No Tax Return Amendments. The Parent shall not amend any Tax Return
of the Company relating to a Pre-Closing Tax Period without the prior written
consent of the Shareholders’ Representative, which consent shall not be
unreasonably withheld, delayed, denied, or conditioned.

 

Section 6.12 Survival. Notwithstanding anything in this Agreement to the
contrary, the provisions of Section 3.22 and this ARTICLE VI shall survive for
the full period of all applicable statutes of limitations (giving effect to any
waiver, mitigation, or extension thereof) plus 60 days.

 

Section 6.13 Overlap. To the extent that any obligation or responsibility
pursuant to ARTICLE VIII may overlap with an obligation or responsibility
pursuant to this ARTICLE VI, the provisions of this ARTICLE VI shall govern.

 

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ARTICLE VII
Conditions to closing

 

Section 7.01 Conditions to Obligations of the Parent, Merger Sub No.1, and
Merger Sub No. 2. The obligations of the Parent, Merger Sub No. 1, and Merger
Sub No. 2 to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or the Parent’s waiver, at or prior to the Closing,
of each of the following conditions:

 

(a) Other than the representations and warranties of the Company and/or the
Shareholders contained in Section 3.01, Section 3.02, Section 3.03, and Section
3.24, the representations and warranties of the Company and/or the Shareholders
contained in this Agreement and any certificate or other writing delivered
pursuant hereto shall be true and correct in all respects (in the case of any
representation or warranty qualified by materiality or Company Material Adverse
Effect) or in all material respects (in the case of any representation or
warranty not qualified by materiality or Company Material Adverse Effect) on and
as of the date hereof and on and as of the Closing Date with the same effect as
though made at and as of such date (except those representations and warranties
that address matters only as of a specified date, the accuracy of which shall be
determined as of that specified date in all respects). The representations and
warranties of the Company and/or the Shareholders contained in Section 3.01,
Section 3.02, Section 3.03, and Section 3.24 shall be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date with the
same effect as though made at and as of such date (except those representations
and warranties that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all respects).

 

(b) The Company and the Shareholders shall have duly performed and complied in
all material respects with all agreements, covenants, and conditions required by
this Agreement to be performed or complied with by them prior to or on the
Closing Date; provided, that, with respect to agreements, covenants, and
conditions that are qualified by materiality, the Company and the Shareholders
shall have performed such agreements and covenants, as so qualified, in all
respects.

 

(c) No Action shall have been commenced against the Parent, Merger Sub No. 1,
Merger Sub No. 2, the Company, or any Shareholder that would prevent the
Closing. No Governmental Authority shall have enacted, issued, promulgated,
enforced, or entered any final, non-appealable Governmental Order that is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal, otherwise restraining or prohibiting consummation of such
transactions, or causing any of the transactions contemplated hereunder to be
rescinded following completion thereof.

 

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(d) All approvals, consents, and waivers that are required to be listed on
Schedule 7.01(d) shall have been received, and executed counterparts thereof
shall have been delivered to the Parent at or prior to the Closing.

 

(e) From the date of this Agreement, there shall not have occurred any Company
Material Adverse Effect, nor shall any event or events have occurred that,
individually or in the aggregate, with or without the lapse of time, would
reasonably be expected to result in a Company Material Adverse Effect.

 

(f) The Company shall have delivered each of the closing deliverables set forth
in Section 2.03(a).

 

(g) Employment agreements by and between the Company and each of the Key
Employees, in the forms mutually satisfactory to the parties thereto and the
Parent, shall have been duly executed by each of the Key Employees and the
Company, as applicable, and true and complete copies thereof shall have been
delivered to the Parent.

 

(h) The Parent Public Offering shall have been consummated.

 

Section 7.02 Conditions to Obligations of the Company and the Shareholders. The
obligations of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment or the
Company’s waiver, at or prior to the Closing, of each of the following
conditions:

 

(a) Other than the representations and warranties of the Parent, Merger Sub No.
1, and Merger Sub No. 2 contained in Section 4.01 and Section 4.04, the
representations and warranties of the Parent and Merger Sub contained in this
Agreement and any certificate or other writing delivered pursuant hereto shall
be true and correct in all respects (in the case of any representation or
warranty qualified by materiality or Parent Material Adverse Effect) or in all
material respects (in the case of any representation or warranty not qualified
by materiality or Parent Material Adverse Effect) on and as of the date hereof
and on and as of the Closing Date with the same effect as though made at and as
of such date (except those representations and warranties that address matters
only as of a specified date, the accuracy of which shall be determined as of
that specified date in all respects). The representations and warranties of the
Parent, Merger Sub No. 1, and Merger Sub No. 2 contained in Section 4.01 and
Section 4.04 shall be true and correct in all respects on and as of the date
hereof and on and as of the Closing Date with the same effect as though made at
and as of such date.

 

(b) The Parent, Merger Sub No. 1, and Merger Sub No. 2 shall have duly performed
and complied in all material respects with all agreements, covenants, and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date; provided, that, with respect to agreements,
covenants, and conditions that are qualified by materiality, the Parent, Merger
Sub No. 1, and Merger Sub No. 2 shall have performed such agreements, covenants,
and conditions, as so qualified, in all respects.

 

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(c) No Action shall have been commenced against the Parent, Merger Sub No. 1,
Merger Sub No. 2, the Company, or any Shareholder that would prevent the
Closing. No Governmental Authority shall have enacted, issued, promulgated,
enforced, or entered any final, non-appealable Governmental Order that is in
effect and has the effect of making the transactions contemplated by this
Agreement illegal, otherwise restraining or prohibiting consummation of such
transactions, or causing any of the transactions contemplated hereunder to be
rescinded following completion thereof.

 

(d) From the date of this Agreement, there shall not have occurred any Parent
Material Adverse Effect, nor shall any event or events have occurred that,
individually or in the aggregate, with or without the lapse of time, would
reasonably be expected to result in a Parent Material Adverse Effect.

 

(e) The Parent shall have delivered each of the closing deliverables set forth
in Section 2.03(b).

 

ARTICLE VIII
Indemnification

 

Section 8.01 Survival. Subject to the limitations and other provisions of this
Agreement, the representations and warranties contained herein (other than any
representations or warranties contained in Section 3.22 which are subject to
ARTICLE VI) shall survive the Closing and shall remain in full force and effect
until the date that is 15 months from the Closing Date; provided, that the
representations and warranties in Section 3.01(a), Section 3.02, Section 3.03,
Section 3.24, Section 4.01, and Section 4.04 (collectively, the “Fundamental
Representations”) shall survive indefinitely. All covenants and agreements of
the parties contained herein (other than any covenants or agreements contained
in ARTICLE VI, which are subject to ARTICLE VI) shall survive the Closing until
fully performed or for the period explicitly specified therein; provided that
covenants and agreements of the parties contained herein to be performed on or
prior to the Closing Date shall survive the Closing for a period of 39 months
from the Closing Date. Notwithstanding the foregoing, any claims asserted in
good faith with reasonable specificity (to the extent known at such time) and in
writing by notice from the Indemnified Party to the Indemnifying Party prior to
the expiration date of the applicable survival period shall not thereafter be
barred by the expiration of the relevant representation, warranty, covenant, or
agreement and such claims shall survive until finally resolved.

 

Section 8.02 Indemnification By the Shareholders. Subject to the other terms and
conditions of this ARTICLE VIII, from and after the Closing, the Shareholders,
jointly and severally, shall indemnify and defend each of the Parent and its
Affiliates (including the Company and the Surviving Entity) and their respective
Representatives (collectively, the “Parent Indemnitees”) against, and shall hold
each of them harmless from and against, and shall pay and reimburse each of them
for, any and all Losses incurred or sustained by, or imposed upon, the Parent
Indemnitees based upon, arising out of, with respect to, or resulting from:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
the Company and/or the Shareholders contained in this Agreement or in any
certificate or instrument delivered by or on behalf of the Company pursuant to
this Agreement (other than in respect of Section 3.22, it being understood that
the sole remedy for any such inaccuracy in or breach thereof shall be pursuant
to ARTICLE VI), as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing Date (except
for representations and warranties that expressly relate to a specified date,
the inaccuracy in or breach of which will be determined with reference to such
specified date);

 

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(b) any breach or non-fulfillment of any covenant, agreement, undertaking, or
obligation to be performed by the Company or any Shareholder pursuant to this
Agreement (other than any breach or violation of, or failure to fully perform,
any covenant, agreement, undertaking, or obligation in ARTICLE VI, it being
understood that the sole remedy for any such breach, violation, or failure shall
be pursuant to ARTICLE VI); or

 

(c) any claim made by any Person relating to such Person’s rights with respect
to the Merger Consideration or the calculations and determinations set forth in
the Merger Consideration Certificate.

 

Section 8.03 Indemnification By the Parent. Subject to the other terms and
conditions of this ARTICLE VIII, from and after the Closing, the Parent shall
indemnify and defend each Shareholder and its or his Affiliates and their
respective Representatives (collectively, the “Shareholder Indemnitees”)
against, and shall hold each of them harmless from and against, and shall pay
and reimburse each of them for, any and all Losses incurred or sustained by, or
imposed upon, the Shareholder Indemnitees based upon, arising out of, with
respect to, or resulting from:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
the Parent, Merger Sub No. 1, and Merger Sub No. 2 contained in this Agreement
or in any certificate or instrument delivered by or on behalf of the Parent,
Merger Sub No. 1, or Merger Sub No. 2 pursuant to this Agreement, as of the date
such representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for representations and
warranties that expressly relate to a specified date, the inaccuracy in or
breach of which will be determined with reference to such specified date); or

 

(b) any breach or non-fulfillment of any covenant, agreement, undertaking, or
obligation to be performed by the Parent, Merger Sub No. 1, or Merger Sub No. 2
pursuant to this Agreement (other than ARTICLE VI, it being understood that the
sole remedy for any such breach thereof shall be pursuant to ARTICLE VI).

 

Section 8.04 Certain Limitations. The indemnification provided for in ARTICLE
VI, Section 8.02 and Section 8.03 shall be subject to the following limitations:

 

(a) Subject to the provisions of Section 8.04(c), the Shareholders shall not be
liable to the Parent Indemnitees for indemnification under Section 8.02(a) until
the aggregate amount of all Losses in respect of indemnification under Section
8.02(a) exceeds $150,000 (the “Basket”), in which event the Shareholders shall
be required to pay or be liable for all such Losses from the first such dollar.
Subject to the provisions of Section 8.04(c), the aggregate liability of the
Shareholders for all Losses subject to indemnification under Section 8.02(a)
shall be limited to $2,500,000 (the “Cap”).

 

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(b) The Parent shall not be liable to the Shareholder Indemnitees for
indemnification under Section 8.03(a) until the aggregate amount of all Losses
in respect of indemnification under Section 8.03(a) exceeds the Basket, in which
event the Parent shall be required to pay or be liable for all such Losses from
the first dollar. The aggregate amount of all Losses for which the Parent shall
be liable pursuant to Section 8.03(a) shall not exceed the Cap.

 

(c) Notwithstanding the foregoing, the limitations set forth in Section 8.04(a)
and Section 8.04(b) shall not apply to Losses based upon, arising out of, with
respect to, or resulting from fraud or any inaccuracy in or breach of any of the
Fundamental Representations.

 

(d) Each Indemnified Party shall take, and cause each of its Affiliates to take,
all reasonable steps to mitigate any Losses subject to indemnification pursuant
to ARTICLE VI, Section 8.02 or 8.03, upon such time as the Indemnified Party or
its Affiliates becomes aware or reasonably should have become aware of the
facts, events or circumstances giving rise to or resulting in such Losses.

 

(e) In the event that one or more Indemnifying Party pays any Losses of an
Indemnified Party pursuant to this Agreement, the Indemnifying Party, on behalf
of itself and its Affiliates, hereby assigns and subrogates to such Indemnifying
Parties all claims, rights, causes of action and Actions that the Indemnified
Party or its Affiliates may have against any Person (other than an Affiliate of
the Indemnified Party) with respect to and to the extent of such Losses paid or
payable by the Indemnifying Parties, or the facts, events or circumstances
giving rise to such Losses. In the event any insurance proceeds, indemnity,
contribution or any other payments or amounts are received or recovered by an
Indemnified Party or its Affiliates with respect to Losses paid by one or more
Indemnifying Party, the Indemnified Party shall promptly pay such amounts to
each such Indemnifying Party pro rata, in proportion to the amount of such
Losses originally paid by such Indemnifying Parties.

 

(f) Notwithstanding anything to the contrary in this Agreement, an Indemnified
Party shall, promptly upon receipt of relevant insurance proceeds or other
indemnity, contribution, or other similar payment (a “Third-party Payment”) in
respect of a Loss, tender such Third-party Payment to the Indemnifying Parties
in respect of such Loss if, and only if, the Indemnified Party had previously
received full indemnification for such Loss from such Indemnifying Parties;
provided, that the Indemnified Party shall not be required to initiate
litigation to recover such insurance proceeds, other indemnity, contribution or
other similar payments.

 

Section 8.05 Indemnification Procedures. The party making a claim under this
ARTICLE VIII is referred to as the “Indemnified Party,” and the party against
whom such claims are asserted under this ARTICLE VIII is referred to as the
“Indemnifying Party.” For purposes of this ARTICLE VIII, (i) if the Parent (or
any other Parent Indemnitee) comprises the Indemnified Party, any references to
the Indemnifying Party (except provisions relating to an obligation to make
payments) shall be deemed to refer to the Shareholders’ Representative and (ii)
if the Parent comprises the Indemnifying Party, any references to the
Indemnified Party shall be deemed to refer to the Shareholders’ Representative.
Any payment received by the Shareholders’ Representative as the Indemnified
Party shall be distributed to the Shareholders entitled to such indemnification
in accordance with this Agreement.

 

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(a) Third-party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by, or discloses or
admits any Liability, Indebtedness or Encumbrance to or accruing in favor of,
any Person who is not a party to this Agreement or an Affiliate of a party to
this Agreement or a Representative of the foregoing (a “Third-party Claim”)
against such Indemnified Party with respect to which the Indemnifying Party is
obligated to provide indemnification under this Agreement, the Indemnified Party
shall give the Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 30 calendar days after receipt of such notice of
such Third-party Claim. The failure to give such prompt written notice shall
not, however, relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party is prejudiced or
forfeits rights or defenses by reason of such failure. Such notice by the
Indemnified Party shall describe the Third-party Claim in reasonable detail,
shall include copies of all material written evidence thereof, and shall
indicate the estimated amount, if reasonably practicable, of the Loss that has
been or may be sustained by the Indemnified Party. The Indemnifying Party shall
have the right to participate in, or by giving written notice to the Indemnified
Party, to assume the defense of, any Third-party Claim at the Indemnifying
Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified
Party shall cooperate in good faith in such defense; provided, that, if the
indemnifying Party is any Shareholder, such Indemnifying Party shall not have
the right to defend or direct the defense of any such Third-party Claim that (x)
is asserted directly by or on behalf of a Person that is a supplier or customer
of the Company or (y) seeks an injunction or other equitable relief against the
Indemnified Party. In the event that the Indemnifying Party assumes the defense
of any Third-party Claim, subject to Section 8.05(b), it shall have the right to
take such action as it deems necessary to avoid, dispute, defend, appeal, or
make counterclaims pertaining to any such Third-party Claim in the name and on
behalf of the Indemnified Party. The Indemnified Party shall have the right to
participate in the defense of any Third-party Claim with counsel selected by it
subject to the Indemnifying Party’s right to control the defense thereof. The
fees and disbursements of such counsel shall be at the expense of the
Indemnified Party; provided, that, if in the reasonable opinion of counsel to
the Indemnified Party, (A) there are legal defenses available to an Indemnified
Party that are different from or additional to those available to the
Indemnifying Party or (B) there exists a conflict of interest between the
Indemnifying Party and the Indemnified Party that cannot be waived, the
Indemnifying Party shall be liable for the reasonable fees and expenses of
counsel to the Indemnified Party. If the Indemnifying Party elects not to
compromise or defend such Third-party Claim, fails to promptly notify the
Indemnified Party in writing of its election to defend as provided in this
Agreement, or fails to diligently prosecute the defense of such Third-party
Claim, the Indemnified Party may, subject to Section 8.05(b), pay, compromise,
and defend such Third-party Claim and seek indemnification for any and all
Losses based upon, arising from, or resulting from such Third-party Claim. The
Shareholders and the Parent shall cooperate with each other in all reasonable
respects in connection with the defense of any Third-party Claim, including
making available records relating to such Third-party Claim and furnishing,
without expense (other than reimbursement of actual out-of-pocket expenses) to
the defending party, management employees of the non-defending party as may be
reasonably necessary for the preparation of the defense of such Third-party
Claim.

 

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(b) Settlement of Third-party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third-party Claim without the prior written consent of the Indemnified Party,
except as provided in this Section 8.05(b). If a firm offer is made to settle a
Third-party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnified Party and provides, in customary
form, for the unconditional release of each Indemnified Party from all
liabilities and obligations in connection with such Third-party Claim and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to that effect to the Indemnified Party. If the
Indemnified Party fails to consent to such firm offer within 10 days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third-party Claim and in such event, the maximum liability of the
Indemnifying Party as to such Third-party Claim shall not exceed the amount of
such settlement offer. If the Indemnified Party fails to consent to such firm
offer and also fails to assume defense of such Third-party Claim, the
Indemnifying Party may settle the Third-party Claim upon the terms set forth in
such firm offer to settle such Third-party Claim. If the Indemnified Party has
assumed the defense pursuant to Section 8.05(a), it shall not admit, take any
action that would cause the entry of a default judgement with respect to, or
agree to any settlement of, any Third-party Claim without the written consent of
the Indemnifying Party (which consent shall not be unreasonably withheld,
delayed, denied, or conditioned).

 

(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss that
does not result from a Third-party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than 30 days after the Indemnified
Party becomes aware of such Direct Claim. The failure to give such prompt
written notice shall not, however, relieve the Indemnifying Party of its
indemnification obligations, except and only to the extent that the Indemnifying
Party is prejudiced by reason of such failure. Such notice by the Indemnified
Party shall describe the Direct Claim in reasonable detail, shall include copies
of all material written evidence thereof, and shall indicate the estimated
amount, if reasonably practicable, of the Loss that has been or may be sustained
by the Indemnified Party. The Indemnifying Party shall have 30 days after its
receipt of such notice to respond in writing to such Direct Claim. The
Indemnified Party shall allow the Indemnifying Party and its professional
advisors to investigate the matter or circumstance alleged to give rise to the
Direct Claim, and whether and to what extent any amount is payable in respect of
the Direct Claim, and the Indemnified Party shall assist the Indemnifying
Party’s investigation by giving such information and assistance (including
access to the Company’s premises and personnel and the right to examine and copy
any accounts, documents, or records) as the Indemnifying Party or any of its
professional advisors may reasonably request. If the Indemnifying Party does not
so respond within such 30 day period, the Indemnifying Party shall be deemed to
have rejected such claim, in which case the Indemnified Party shall be free to
pursue such remedies as may be available to the Indemnified Party on the terms
and subject to the provisions of this Agreement.

 

(d) Tax Claims. Notwithstanding any other provision of this Agreement, the
control of any Action in respect of Taxes of the Company (including any such
claim in respect of a breach of the representations and warranties in Section
3.22 hereof or any breach or violation of or failure to fully perform any
covenant, agreement, undertaking, or obligation in ARTICLE VI) shall be governed
exclusively by ARTICLE VI hereof.

 

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Section 8.06 Payments.

 

(a) Once a Loss is agreed to by the Indemnifying Party or finally adjudicated in
a non-appealable Governmental Order to be payable pursuant to this ARTICLE VIII,
the Indemnifying Party shall satisfy its obligations within 15 Business Days of
such the effective date of such final, non-appealable adjudication in the manner
set forth in Subsection 8.06(b), below. The parties hereto agree that, should an
Indemnifying Party not make full payment of any such obligations within such 15
Business Day-period, any amount payable shall accrue interest from and including
the date of agreement of the Indemnifying Party or final, non-appealable
adjudication to, but excluding, the date such payment has been made at a rate
per annum equal to the lesser of 10% or the highest rate permitted by applicable
Law. Such interest shall be calculated daily on the basis of a 365 day year and
the actual number of days elapsed, without compounding.

 

(b) Any Loss payable to a Parent Indemnitee pursuant to ARTICLE VI or ARTICLE
VIII shall be satisfied as follows: (i) forty percent (40%) of such Loss shall
be satisfied with such number of the Escrow Shares, each such Escrow Share, for
the purposes hereof, shall be valued at the Parent Share Price (and, if Escrow
Shares are, for any reason, not then available, for any other method of
satisfaction then requested by Parent) determined by dividing forty percent
(40%) of the Loss by the Parent Share Price, and (ii) sixty percent (60%) of
such Loss shall be satisfied by the Shareholders (on a joint and several basis)
by wire transfer of immediately available funds in the aggregate amount of sixty
percent (60%) of such Loss to the relevant Parent Indemnitee.

 

(c) Upon the termination of the escrow of the Escrow Shares pursuant to the
Escrow Agreement, the Escrow Agent shall distribute any remaining Escrow Shares
to the Shareholders in accordance with their Pro Rata Shares and the Escrow
Agreement.

 

Section 8.07 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Merger Consideration for Tax purposes, unless otherwise
required by Law.

 

Section 8.08 Effect of Investigation. The representations, warranties, and
covenants of the Indemnifying Party, and the Indemnified Party’s right to
indemnification with respect thereto, shall not be affected or deemed waived by
reason of any investigation made by or on behalf of the Indemnified Party
(including by any of its Representatives) or by reason of any claim that the
Indemnified Party or any of its Representatives knew or should have known that
any such representation or warranty is, was, or might be inaccurate or by reason
of the Indemnified Party’s waiver of any condition set forth in Section 7.01 or
Section 7.02, as the case may be. Notwithstanding the above, this Section 8.08
shall be of no force or effect if such knowledge was the result of a writing
from the prospective Indemnifying Party to the prospective Indemnified Party
prior to the Closing and the prospective Indemnified Party in a writing to the
prospective Indemnifying Part acknowledged such potential inaccuracy prior to
the Closing.

 

Section 8.09 Exclusive Remedies. Subject to Section 5.06 and Section 10.11, the
parties acknowledge and agree that their sole and exclusive remedy with respect
to any and all claims (other than claims arising from fraud, criminal activity,
or willful misconduct on the part of a party hereto in connection with the
transactions contemplated by this Agreement) for any breach of any
representation, warranty, covenant, agreement, or obligation set forth herein or
otherwise relating to the subject matter of this Agreement, shall be pursuant to
the indemnification provisions set forth in ARTICLE VI and this ARTICLE VIII. In
furtherance of the foregoing, each party hereby waives, to the fullest extent
permitted under Law, any and all rights, claims, and causes of action for any
breach of any representation, warranty, covenant, agreement, or obligation set
forth herein or otherwise relating to the subject matter of this Agreement it
may have against the other parties hereto and their Affiliates and each of their
respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in ARTICLE VI and this ARTICLE VIII.
Nothing in this Section 8.09 shall limit any Person’s right to seek and obtain
any equitable relief to which any Person shall be entitled or to seek any remedy
on account of any party’s fraudulent, criminal, or intentional misconduct.

 

Section 8.10 No Circular Recovery. Each Shareholder hereby agrees that he or it
will not make any claim for indemnification against the Parent, the Company, or
the Surviving Entity by reason of the fact that such Shareholder was a
Representative of the Company or was serving as such for another Person at the
request of the Company (whether such claim is for Losses of any kind or
otherwise and whether such claim is pursuant to any Law, Organizational
Document, Contract, or otherwise) with respect to any claim brought by a Parent
Indemnitee against any Shareholder relating to this Agreement or any of the
transactions contemplated hereby. With respect to any claim brought by a Parent
Indemnitee against any Shareholder relating to this Agreement or any of the
transactions contemplated hereby, each Shareholder expressly waives any right of
subrogation, contribution, advancement, indemnification, or other claim against
the Company with respect to any amounts such Shareholder is liable for pursuant
to the indemnification provisions set forth in ARTICLE VI or this ARTICLE VIII.

 

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ARTICLE IX
Termination

 

Section 9.01 Termination. This Agreement may be terminated at any time prior to
the Closing:

 

(a) by the mutual written consent of the Company and the Parent;

 

(b) by the Parent by written notice to the Company if:

 

(i) none of the Parent, Merger Sub No. 1, or Merger Sub No. 2 is then in
material breach of any provision of this Agreement and there has been a breach,
inaccuracy in, or failure to perform any representation, warranty, covenant, or
agreement made by the Company or the Shareholders pursuant to this Agreement
that would give rise to the failure of any of the conditions specified in
ARTICLE VII and such breach, inaccuracy or failure has not been cured by the
Company or the Shareholders within 10 days of the Company’s receipt of written
notice of such breach from Parent; or

 

(ii) any of the conditions set forth in Section 7.01 shall not have been, or if
it becomes reasonably apparent that any of such conditions will not be,
fulfilled by January 31, 2019, unless such failure shall be due to the failure
of the Parent, Merger Sub No. 1, or Merger Sub No. 2 to perform or comply with
any of the covenants, agreements, or conditions hereof to be performed or
complied with by it prior to the Closing;

(c) by the Company by written notice to the Parent if:

 

(i) the Company and the Shareholders are not then in material breach of any
provision of this Agreement and there has been a breach, inaccuracy in, or
failure to perform any representation, warranty, covenant, or agreement made by
the Parent, Merger Sub No. 1, or Merger Sub No. 2 pursuant to this Agreement
that would give rise to the failure of any of the conditions specified in
ARTICLE VII and such breach, inaccuracy, or failure has not been cured by the
Parent, Merger Sub No. 1, or Merger Sub No. 2 within 10 days of the Parent’s
receipt of written notice of such breach from the Company; or

 

(ii) any of the conditions set forth in Section 7.02 shall not have been, or if
it becomes reasonably apparent that any of such conditions will not be,
fulfilled by January 31, 2019, unless such failure shall be due to the failure
of the Company or the Shareholders to perform or comply with any of the
covenants, agreements, or conditions hereof to be performed or complied with by
it or them prior to the Closing; or

 

(d) by the Parent or the Company in the event that (i) there shall be any Law
enacted that makes consummation of the transactions contemplated by this
Agreement illegal or otherwise prohibited or (ii) any Governmental Authority
shall have issued a Governmental Order restraining or enjoining the transactions
contemplated by this Agreement, and such Governmental Order shall have become
final and non-appealable.

 

Section 9.02 Effect of Termination. In the event of the termination of this
Agreement in accordance with this ARTICLE IX, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto
except:

(a) as set forth in Section 5.05, ARTICLE IX, and ARTICLE X; and

 

(b) that nothing herein shall relieve any party hereto from liability for any
willful breach of any provision hereof.

 

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ARTICLE X
Miscellaneous

 

Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs
and expenses, including fees and disbursements of counsel, financial advisors,
and accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred; provided, however,
that the Parent shall be responsible for the cost of the audit described in
Section 5.13, whether or not the Closing shall have occurred.

 

Section 10.02 Notices. All notices, requests, consents, claims, demands,
waivers, and other communications hereunder shall be in writing and shall be
deemed to have been given (a) when delivered by hand (with written confirmation
of receipt); (b) one Business Day after delivery to a nationally recognized
overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF
document (with confirmation of transmission) if sent during normal business
hours of the recipient, and on the next Business Day if sent after normal
business hours of the recipient; or (d) on the third day after the date mailed,
by certified or registered mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 10.02):

 

  (a) If to the Parent, Merger Sub No. 1, or Merger Sub No. 2:           nFüsz,
Inc.     344 South Hauser Boulevard     Suite 414     Los Angeles, California
90036     Attn: Rory Cutaia, President and CEO     E-mail: rory@nfusz.com      
    with a copy (which shall not constitute notice) to:           Baker &
Hostetler LLP     600 Anton Boulevard     Suite 900     Costa Mesa, California
92626     Attn: Randolf W. Katz, Esq.     E-mail: rwkatz@bakerlaw.com        
(b) If to the Company:           Sound Concepts, Inc.     782 S. Automall Drive
    Suite A     American Fork, Utah 84003     Attn: McKinley J. Oswald    
E-mail: mjo@soundconcepts.com

 

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    with a copy (which shall not constitute notice) to:           Stoel Rives
LLP     201 S. Main Street, Suite 1100     Salt Lake City, Utah 84111     Attn:
Nathan W. Jones     E-mail: nate.jones@stoel.com         (c) If to the
Shareholders or the Shareholders’ Representative:           McKinley J. Oswald  
  782 S. Automall Drive     Suite A     American Fork, Utah 84003     E-mail:
mjo@soundconcepts.com           with a copy (which shall not constitute notice)
to:           Stoel Rives LLP     201 S. Main Street, Suite 1100     Salt Lake
City, Utah 84111     Attn: Nathan W. Jones     E-mail: nate.jones@stoel.com

 

Section 10.03 Interpretation. For purposes of this Agreement, (a) the words
“include,” “includes,” and “including” shall be deemed to be followed by the
words “without limitation”; (b) the word “or” is not exclusive; and (c) the
words “herein,” “hereof,” “hereby,” “hereto,” and “hereunder” refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(x) to Articles, Sections, Schedules, and Exhibits mean the Articles and
Sections of, and the Schedules hereto and delivered concurrently herewith, and
the Exhibits to, this Agreement; (y) to an agreement, instrument, or other
document means such agreement, instrument, or other document as amended,
supplemented, and modified from time to time to the extent permitted by the
provisions thereof; and (z) to a statute means such statute as amended from time
to time and includes any successor legislation thereto and any regulations
promulgated thereunder. This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting an instrument or causing any instrument to be drafted. The Schedules
and Exhibits referred to herein shall be construed with, and as an integral part
of, this Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

 

Section 10.05 Severability. If any term or provision of this Agreement is
invalid, illegal, or unenforceable in any jurisdiction, such invalidity,
illegality, or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Except as provided in Section 5.06(e), upon such
determination that any term or other provision is invalid, illegal, or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.

 

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Section 10.06 Entire Agreement. This Agreement, including the Side Letter,
collectively constitutes the sole and entire agreement of the parties to this
Agreement with respect to the subject matter contained herein and supersedes all
prior and contemporaneous understandings and agreements, both written and oral,
with respect to such subject matter. In the event of any inconsistency between
the statements in the body of this Agreement, including the Side Letter, and
those in the Exhibits or the Schedules (other than an exception expressly set
forth as such in the Schedules), the statements in the body of this Agreement,
if and as modified by the Side Letter, will control.

 

Section 10.07 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither party may assign its rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld, delayed, denied, or conditioned. No
assignment shall relieve the assigning party of any of its obligations
hereunder.

 

Section 10.08 No Third-party Beneficiaries. Except as provided in Section 5.09,
Section 6.07, and ARTICLE VIII, this Agreement is for the sole benefit of the
parties hereto and their respective successors and permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other Person
or entity any legal or equitable right, benefit, or remedy of any nature
whatsoever under or by reason of this Agreement.

 

Section 10.09 Amendment and Modification; Waiver. This Agreement may only be
amended, modified, or supplemented by an agreement in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the party so
waiving. No waiver by any party shall operate or be construed as a waiver in
respect of any failure, breach, or default not expressly identified by such
written waiver, whether of a similar or different character and whether
occurring before or after that waiver. No failure to exercise, or delay in
exercising, any right, remedy, power, or privilege arising from this Agreement
shall operate or be construed as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power, or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power, or privilege.

 

Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Utah without giving effect to any choice or
conflict of law provision or rule (whether of the State of Utah or any other
jurisdiction).

 

(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY IRREVOCABLY AND, TO THE MAXIMUM EXTENT LEGALLY
PERMISSIBLE, UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE
FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(c).

 

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Section 10.11 Specific Performance. The parties hereto agree that irreparable
damage would occur if any provision of this Agreement were not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy to
which they are entitled at law or in equity.

 

Section 10.12 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by
facsimile, e-mail, or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Agreement.

 

Section 10.13 Shareholders’ Representative.

 

(a) By executing this Agreement, each Shareholder hereby irrevocably authorizes
and appoints the Shareholders’ Representative as such Person’s representative
and attorney-in-fact to act on behalf of such Person with respect to this
Agreement and the Escrow Agreement and to take any and all actions and make any
decisions required or permitted to be taken by the Shareholders’ Representative
pursuant to this Agreement or the Escrow Agreement, including

 

(i) give and receive notices and communications;

 

(ii) authorize delivery to the Parent of Escrow Shares in satisfaction of claims
for indemnification made by the Parent pursuant to ARTICLE VI and ARTICLE VIII;

 

(iii) agree to, negotiate, and enter into settlements and compromises in respect
of, and comply with orders or handle any other matters described in, Section
2.16, ARTICLE VI, or ARTICLE VIII;

 

(iv) litigate, arbitrate, resolve, settle, or compromise any claim for
indemnification pursuant to ARTICLE VI or ARTICLE VIII;

 

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(v) execute and deliver all documents necessary or desirable to carry out the
intent of this Agreement and the Escrow Agreement;

 

(vi) make all elections or decisions contemplated by this Agreement and the
Escrow Agreement to be made by the Shareholders;

 

(vii) engage, employ, or appoint any agents or representatives (including
attorneys, accountants, and consultants) to assist the Shareholders’
Representative in complying with his duties and obligations; and

 

(viii) take all actions necessary or appropriate in the good faith judgment of
the Shareholders’ Representative for the accomplishment of the foregoing.

 

(b) Notices or communications to or from the Shareholders’ Representative shall
constitute notice to or from each of the Shareholders. Further, each Shareholder
acknowledges that such Shareholder has specifically authorized the Shareholders’
Representative to accept service of process, summons, complaint, subpoena, or
initiation of other legal action related to this Agreement on behalf of such
Shareholder. The Shareholders’ Representative acknowledges that he will accept
such service of process, summons, complaint, subpoena, or initiation of other
legal action on behalf of each Shareholder. Any decision or action by the
Shareholders’ Representative hereunder, including any agreement between the
Shareholders’ Representative and the Parent relating to the defense, payment, or
settlement of any claims for indemnification hereunder, shall constitute a
decision or action of all Shareholders and shall be final, binding, and
conclusive upon each such Shareholder. No Shareholder shall have the right to
object to, dissent from, protest, or otherwise contest the same. The provisions
of this Section, including the power of attorney granted hereby, are independent
and severable, are irrevocable and coupled with an interest, and shall not be
terminated by any act of any one or Shareholders, or by operation of Law,
whether by death or other event.

 

(c) The Shareholders shall indemnify and hold harmless the Shareholders’
Representative from and against any Losses, Liability or expense (including the
hiring of legal counsel and the incurring of legal fees and costs) incurred
without gross negligence or willful misconduct on the part of the Shareholders’
Representative and arising out of or in connection with the acceptance or
administration of its duties hereunder; provided, that in no event shall the
indemnification obligation of any Shareholder exceed the Merger Consideration
actually received by or due to such Shareholder hereunder. The Shareholders
agree that any out-of-pocket costs and expenses incurred by the Shareholders’
Representative in connection with actions taken by the Shareholders’
Representative pursuant to the terms of this Agreement (including the hiring of
legal counsel and the incurring of legal fees and costs) shall be the
responsibility of the Shareholders based on their Pro Rata Shares.

 

(d) Those Shareholders whose Pro Rata Shares in the aggregate equals or exceeds
50% shall have the right at any time to remove the then-acting Shareholders’
Representative and to appoint a successor Shareholders’ Representative;
provided, however, that neither such removal of a then-acting Shareholders’
Representative nor such appointment of a successor Shareholders’ Representative
shall be effective until notice of such act has been provided to Parent and the
other Shareholders. The immunities and rights to indemnification of the
Shareholders’ Representative shall survive the resignation or removal of the
Shareholders’ Representative and the Closing or any termination of this
Agreement and the Escrow Agreement. Each successor Shareholders’ Representative
shall have all of the power, authority, rights, and privileges conferred by this
Agreement upon the original Shareholders’ Representative.

 

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Section 10.14 Acknowledgement. Recognizing that Stoel Rives LLP (“Stoel”), has
acted as legal counsel to the Company and to the Shareholders prior to date of
this Agreement, and that Stoel intends to act as legal counsel to certain of the
Shareholders, the Shareholders’ Representative, and their respective Affiliates
(which will not, after the Closing, include the Company, Merger No. 1, or Merger
Sub No. 2) after the Closing, the Parent, Merger Sub No. 1, and Merger Sub No. 2
hereby waive and, after the Closing, shall cause the Surviving Entity to waive,
any conflicts that may arise in connection with Stoel representing any
Shareholder, the Shareholders’ Representative, or their respective Affiliates
after the Closing as such representation may relate to this Agreement, the
Merger, or the transactions contemplated hereby. In addition, all
attorney-client privileged communications, whether marked as such or not,
between the Company, any Shareholder, and their respective agents,
representatives, accountants, brokers and Affiliates, on the one hand, and
Stoel, on the other hand, in the course of or with respect to the negotiation,
documentation, preparation, execution, delivery, or performance of (a) this
Agreement, the exhibits and schedules hereto (including the Disclosure
Schedules), (b) any document or instrument delivered pursuant to or in
connection with the transactions contemplated by this Agreement, or (c) any
prior proposed purchase of the Company, Company Shares, or Company assets; as
well as, any e-mails, correspondence, memoranda, summaries, work product, work
papers, or other such documentation or information relating to any of the
foregoing (collectively, the “Pre-Closing Materials”) shall be deemed to be
attorney-client confidences that belong solely to the Shareholders (and not the
Parent, Merger Sub No. 1, Merger Sub No. 2, the Company, or any of their
Affiliates) following the Closing. Accordingly, following Closing, the Parent,
Merger Sub No. 1, Merger Sub No. 2, and the Company shall not have access to the
Pre-Closing Materials, or those files of Stoel relating to Pre-Closing
Materials. Without limiting the generality of the foregoing, from and after the
Closing, the Shareholders (and not the Parent, Merger Sub No. 1, Merger Sub No.
2, the Company, or any of their Affiliates) shall be the sole holders of the
attorney-client privilege with Stoel with respect to Pre-Closing Materials. To
the extent that files of Stoel contain Pre-Closing Materials that constitute
property of the Shareholders, only the Shareholders and their respective
Affiliates (and not the Parent, Merger Sub No. 1, Merger Sub No. 2, the Company,
or their Affiliates) shall hold such property rights to such Pre-Closing
Materials, and Stoel shall not have any duty whatsoever to reveal or disclose
any such attorney-client privileged Pre-Closing Materials to the Parent, Merger
Sub No. 1, Merger Sub No. 2, the Company, or their respective Affiliates by
reason of any attorney-client relationship between Stoel, on the one hand, and
the Shareholders or any of their Affiliates (other than the Company), on the
other hand, or otherwise.

 

76

 

 

IN WITNESS WHEREOF, the parties hereto have, as of the date first written above,
(i) executed this Agreement or (ii) caused this Agreement to be executed by
their respective officers thereunto duly authorized, as applicable.

 

  THE PARENT:       nFÜSZ, INC.         By: /s/ Rory Cutaia     Rory Cutaia,
President and CEO         MERGER SUB NO. 1:       NF ACQUISITION COMPANY, LLC  
      By: /s/ Rory Cutaia     Rory Cutaia, Authorized signatory         MERGER
SUB NO. 1       NF MERGER SUB, INC.         By: /s/ Rory Cutaia     Rory Cutaia,
Authorized signatory         MERGER SUB NO. 2:       NF ACQUISITION COMPANY, LLC
        By: /s/ Rory Cutaia     Rory Cutaia, Authorized signatory

 

Signature Page to Agreement and Plan of Merger

 

77

 

 

  THE COMPANY:   SOUND CONCEPTS, INC.         By: /s/ McKinley J. Oswald   Name:
McKinley J. Oswald     Title: Chief Executive
Officer                                                              THE
SHAREHOLDERS:         /s/ McKinley J. Oswald   McKinley J. Oswald         /s/
McKinley M. Oswald   McKinley M. Oswald         /s/ Jason Matheny   Jason
Matheny         /s/ Colby Allen   Colby Allen         /s/ JJ Oswald   JJ Oswald
        THE SHAREHOLDERS’ REPRESENTATIVE:         /s/ McKinley J. Oswald  
McKinley J. Oswald

 

Signature Page 2 of 2 to Agreement and Plan of Merger

 

78

 

 

EXHIBIT A

 

Form of Escrow Agreement

 

79

 

 

EXHIBIT B

 

Form of Lock-up Agreement

 

80

 

 

EXHIBIT C

 

Directors and Officers of the Surviving Entity

 

Directors:

Name

Name

Name

 

Officers:

 

Chief Executive Officer Name Secretary Name Treasurer Name

 

81