Execution Copy

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of April 3,
2018, (the “Effective Date”) by and among JOSEPH KNIERIEM, ROBERT BAKER (each a
“Seller,” and collectively the “Sellers”), TRICO WELDING SUPPLIES, INC., a
California corporation (the “Company”), MAGNEGAS CORPORATION, a Delaware
corporation (the “Purchaser”), and MagneGas Welding Supply, LLC, a Delaware
limited liability company and wholly owned subsidiary of Purchaser (the
“Purchaser Designee”).

 

RECITALS:

 

WHEREAS, subject to the terms and conditions set forth in this Agreement the
Sellers desires to sell to the Purchaser, and the Purchaser desires to purchase
from the Sellers, securities of the Company, as more fully described in this
Agreement.

 

WHEREAS, the Purchaser has designated the Purchaser Designee as the entity that
will receive the Securities (defined below).

 

AGREEMENT:

 

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

 

1) PURCHASE AND SALE OF SECURITIES.

 

a) Purchase of Shares of Common Stock. Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 7 and 8 below, the Sellers will sell to
the Purchaser, and the Purchaser agrees to purchase from the Sellers, on the
Closing Date (as defined below) (i) such aggregate number of shares of Common
Stock as are set forth opposite such Purchaser’s name in column (3) on the
Schedule of Purchasers (the “Securities”).

 

b) Closing. The closing (the “Closing”) of the purchase of the Securities by the
Purchaser shall occur remotely through the electronic exchange of documents on
the Effective Date (the “Closing Date”), subject to the conditions to the
Closing set forth in Sections 7 and 8 below having been satisfied or waived (or
such other date as is mutually agreed to by the Sellers and the Purchaser).

 

c) Purchase Price. The aggregate purchase price for the Securities to be
purchased by the Purchaser shall be the amount set forth opposite such
Purchaser’s name in column (3) on the Schedule of Purchasers. The purchase price
for the Securities will be US$2,000,000 (the “Purchase Price”) in cash and
payable as set forth on the Schedule of Purchasers. The Sellers acknowledge and
confirm that the Purchaser made a US$1,000,000 deposit toward the Purchase Price
on March 21, 2018.

 

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d) Form of Payment. On the Closing Date, (i) the Purchaser shall pay the balance
of the Purchase Price by wire transfer of immediately available funds and (ii)
the Sellers shall deliver to the Purchaser stock certificates duly endorsed to
effect the transfer of the Securities to the Purchaser Designee.

 

2) PURCHASER’S REPRESENTATIONS AND WARRANTIES.

 

The Purchaser represents and warrants to each of the Sellers that, as of the
date hereof and as of the Closing Date:

 

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

 

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

 

c) No Conflicts. The execution, delivery and performance by the Purchaser of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
organizational documents of the Purchaser, or (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Purchaser is a party, or (iii) result in a violation of any order, judgment
or decree applicable to the Purchaser.

 

d) Purchaser Status. At the time the Purchaser was offered the Securities, it
was, and as of the date hereof it is an “Accredited Investor”) as defined in
Rule 501(a) under the Securities Act of 1933, as amended (“Securities Act”).

 

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

 

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

 

g) Investment Intent. Purchaser is purchasing the Securities for Purchaser’s own
account and not with a view to or for sale in connection with any distribution
of the Securities.

 

h) Brokers. Any brokerage or finder’s fees or commissions owed by Purchaser to
any broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Document will be paid in full at the time of the Closing.

 

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

 

3) REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND COMPANY.

 

The Sellers and Company represent and warrant, joint and severally, to the
Purchaser that, as of the date hereof and as of the Closing Date:

 

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a) Organization and Qualification. The Company is an entity duly organized and
validly existing and in good standing under the laws of the jurisdiction in
which it is formed, and has the requisite power and authority to own its
property and to carry on business as now being conducted and as presently
proposed to be conducted. The Company is duly qualified as a foreign entity to
do business and is in good standing in every jurisdiction in which its ownership
of property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect (as defined below). As used in this Agreement, “Material
Adverse Effect” means any material adverse effect on (i) the business,
properties, assets, liabilities, results of operations, condition (financial or
otherwise), individually or taken as a whole, (ii) the transactions contemplated
hereby or in any of the other Transaction Documents or any other agreements or
instruments to be entered into in connection herewith or therewith or (iii) the
authority or ability of the Company to enter into or perform any of its
obligations under any of the Transaction Documents (as defined below), and shall
specifically not include (x) changes in laws, GAAP or enforcement or
interpretation thereof, (y) changes that generally affect the industries and
markets, general economic conditions or political conditions, or (z) any action
taken or failed to be taken pursuant to or in accordance with this Agreement or
at the request of, or consented to by, the Purchaser. Other than the Persons (as
defined below) set forth on Schedule 3), the Company has no Subsidiaries.
“Subsidiaries” means any Person in which the Company, directly or indirectly,
(I) owns any of the outstanding capital stock or holds any equity or similar
interest of such Person or (II) controls or operates all or any part of the
business, operations or administration of such Person. As used in this
Agreement, “actual knowledge of the Sellers” or “actual knowledge of any
Sellers” refers to the actual knowledge of Joseph Knieriem and Robert Baker,
both in the individual capacities and in their respective roles with the Company
as of the Closing Date.

 

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

 

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

 

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

 

e) Consents. The Company is not required to obtain any consent from,
authorization or order of, or make any filing or registration with any
Governmental Entity (as defined below) in order for it to execute, deliver or
perform any of its respective obligations under or contemplated by the
Transaction Documents, in each case, in accordance with the terms hereof or
thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
or will be obtained or effected on or prior to the Closing Date. “Governmental
Entity” means any federal, state, county, city, town, village, district, or
other political jurisdiction of any nature, federal, state, local, municipal,
foreign, or other government, governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).

 

f) Acknowledgment Regarding Purchaser’s Purchase of Securities. The Sellers and
Company acknowledge and agree that Purchaser is acting solely in the capacity of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and that Purchaser is not (i) an
officer or director of the Company, (ii) an “affiliate” (as defined in Rule 144
promulgated under the Securities Act (or successor rule thereto) (collectively,
“Rule 144”)) of the Company, or (iii) to its knowledge, a “beneficial owner” of
more than 10% of the shares representing the Securities (as defined for purposes
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)). The Sellers and Company further acknowledges that Purchaser is not
acting as a financial advisor or fiduciary of the Sellers or Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby, and any advice given by the Purchaser or any of
its representatives or agents in connection with this Agreement and the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Purchaser’s purchase of the Securities. The Sellers and
Company further represent to the Purchaser that the Company’s decision to enter
into the Transaction Documents to which it is a party has been based solely on
the independent evaluation by the Sellers, Company and their respective
representatives.

 

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g) Fees. No brokerage or finder’s fees or commissions are or will be payable by
the Sellers or Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents.

 

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

 

i) Financial Statements. The Company’s fiscal year end is June 30th. The Company
has previously delivered to Purchaser the following: un-audited balance sheet
and statements of income, and cash flow of the Company as of and for the last
three (3) fiscal years (collectively the “Financial Statements”). The Financial
Statements were prepared in accordance with United States Generally Accepted
Accounting Principles (“U.S. GAAP”) applied on a consistent basis throughout the
periods covered thereby, present fairly and accurately the financial condition
of the Company as of such dates and the results of operations for such periods
and are correct and complete, and are consistent with the books and records of
the Company. The Company is not currently contemplating to amend or restate any
of the Financial Statements (including, without limitation, any notes or any
letter of the independent accountants of the Company with respect thereto), nor
is the Company currently aware of facts or circumstances which would require the
Company to amend or restate any of the Financial Statements, in each case, in
order for any of the Financials Statements to be in compliance with GAAP. The
Company has not been informed by its accountants that they recommend that the
Company amend or restate any of the Financial Statements or that there is any
need for the Company to amend or restate any of the Financial Statements.

 

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j) Absence of Certain Changes. Since the date of the Company’s most recent
financial statement provided to Purchaser, there has been no Material Adverse
Change in the business, assets, liabilities, properties, operations (including
results thereof), or condition (financial or otherwise) of the Company. Since
the date of the Company’s most recent financial statement provided to Purchaser,
the Company has not (i) declared or paid any dividends (except for the purpose
of redeeming certain shareholder interests on or before the Closing Date and
making other distributions at or immediately prior to the Closing which Buyer is
aware of), (ii) sold any assets, individually or in the aggregate, outside of
the ordinary course of business or (iii) made any capital expenditures,
individually or in the aggregate, outside of the ordinary course of business.
The Company has not taken any steps to seek protection pursuant to any law or
statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company have any knowledge or reason to
believe that any of its respective creditors intend to initiate involuntary
bankruptcy proceedings or any actual knowledge of any fact which would
reasonably lead a creditor to do so. The Company is not as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at the
Closing, will not be Insolvent (as defined below). For purposes of this Section,
“Insolvent” means, with respect to the Company, on a consolidated basis: (i) the
present fair saleable value of the Company’s assets is less than the amount
required to pay its respective total Indebtedness (as defined below), or (ii)
the Company is unable to pay its respective debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured.

 

k) No Undisclosed Events, Liabilities, Developments or Circumstances. To any
Sellers’ actual knowledge, no event, liability, development or circumstance has
occurred or exists, or is reasonably expected to exist or occur with respect to
the Company or its respective businesses, properties, liabilities, prospects,
operations (including results thereof) or condition (financial or otherwise),
that could have a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

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

 

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o) Equity Capitalization.

 

i) Definition. “Common Stock” means (i) the Company’s shares of common stock,
and (ii) any capital stock into which such common stock shall have been changed
or any share capital resulting from a reclassification of such common stock.

 

ii) Authorized and Outstanding Capital Stock. As of the Effective Date hereof,
the authorized capital stock of the Company consists of 10,000 shares of Common
Stock, of which, 6,000 are issued and outstanding. All of the share of Common
Stock outstanding are owned, collectively, by the Sellers.

 

iii) Valid Issuance; Available Shares. All of such outstanding shares are duly
authorized and have been validly issued and are fully paid and non-assessable.
Schedule 3(o)(iii) sets forth the number of shares of Common Stock that are
reserved for issuance pursuant to warrants, options, convertible securities or
other similar instruments.

 

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

 

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v) Organizational Documents. The Sellers and the Company have furnished to the
Purchasers true, correct and complete copies of the Company’s Articles of
Incorporation, as amended and as in effect on the date hereof (the “Articles of
Incorporation”), and the Company’s bylaws, as amended and as in effect on the
date hereof (the “Bylaws”).

 

p) Indebtedness and Other Contracts. The Company, except as disclosed on
Schedule 3(p), does not have any outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments,
other than in the ordinary course of business, evidencing Indebtedness of the
Company or by which the Company is or may become bound, including the guaranty
of any debt of another Person.

 

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

 

r) Insurance. The Company has not been refused any insurance coverage sought or
applied for, and the Company has no any reason to believe that it will be unable
to renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect. The
Company has followed the advice of its insurance agent, DCD insurance services,
in selecting insurers, losses and risks to be insured against, and coverage
amounts.

 

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

 

t) Title.

 

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

 

ii) Fixtures and Equipment. The Company (as applicable) has good title to, or a
valid leasehold interest in, the tangible personal property, equipment,
improvements, fixtures, and other personal property and appurtenances that are
used by the Company in connection with the conduct of its business (the
“Fixtures and Equipment”). The Company owns all of its Fixtures and Equipment
free and clear of all Liens except for (a) liens for current taxes not yet due
and (b) zoning laws and other land use restrictions that do not impair the
present or anticipated use of the property subject thereto.

 

iii) Intellectual Property Rights. Each patent owned by the Company is listed on
Schedule 3(t)(iii). The Company has not received notice of any infringement of
the Intellectual Property Rights of others. There is no claim, action or
proceeding being made or brought, or to the actual knowledge of any Seller,
being threatened, against the Company regarding any trademarks, trade names,
service marks, service mark registrations, service names, original works of
authorship, patents, patent rights, copyrights, inventions, licenses, trade
secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”) necessary to conduct its
business as now conducted and presently proposed to be conducted. To the actual
knowledge of the Sellers, there are no facts or circumstances which might give
rise to any of the foregoing infringements or claims, actions or proceedings.

 

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u) Environmental Laws.

 

i) The Company (A) is, to the actual knowledge of the Sellers, in compliance
with any and all Environmental Laws (as defined below), (B) has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its businesses and (C) is in compliance with all
terms and conditions of any such permit, license or approval where, in each of
the foregoing clauses (A), (B) and (C), the failure to so comply could be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. No governmental inspection concerning Environmental Laws has
resulted in a finding of any violations of Environmental Laws by the Company.
The term “Environmental Laws” means all federal, state, or local laws relating
to pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.

 

ii) To the actual knowledge of the Sellers, no Hazardous Materials:

 

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

 

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

 

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

 

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

 

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v) Tax Status. The Company (i) has timely made or filed all foreign, federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has timely paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and (iii) has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction. The Company is not operated in such a manner as to qualify as
a passive foreign investment company, as defined in Section 1297 of the Internal
Revenue Code of 1986, as amended (the “Code”).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

cc) Registration Rights. No holder of Securities of the Company has rights to
the registration of any securities of the Company.

 

dd) Disclosure. The Sellers and Company understand and confirm that the
Purchaser will rely on the foregoing representations in effecting transactions
in Securities of the Company. All disclosure provided to the Purchaser regarding
the Sellers and the Company, their businesses and the transactions contemplated
hereby, including the schedules to this Agreement, furnished by or on behalf of
the Sellers and the Company is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. All of the written information furnished
after the date hereof by or on behalf of the Sellers and the Company to the
Purchaser pursuant to or in connection with this Agreement and the other
Transaction Documents, taken as a whole, will be true and correct in all
material respects as of the date on which such information is so provided and
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. The Sellers and
Company acknowledge and agree that the Purchaser does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section Error! Reference
source not found..

 

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ee) Private Placement. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 2, no registration under the Securities Act
is required for the offer and sale of the Securities.

 

ff) No General Solicitation. Neither the Sellers, the Company nor any person
acting on behalf of the Sellers or Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.

 

gg) Material Contracts; Customers; Suppliers.

 

i) Schedule 3(gg)(i) attached hereto lists and briefly describes all Material
Contracts as of the Closing Date. As used herein, the term “Material Contract”
shall mean a contract, agreement, instrument, arrangement, understanding, lease,
or rental agreement, whether written or verbal, to which the Company is a party,
which (i) provides for aggregate payments by or to the Company of U.S.
$25,000.00 or more, or (ii) by its terms extends for a period ending (or is not
otherwise terminable for a period of) more than one year after the Closing Date.
To the actual knowledge of any Seller, each such contract is enforceable
pursuant to its terms and the Company has not received any notice alleging that
it is in material breach or violation of, or in default under, any provision of
such Material Contracts. To the actual knowledge of the Sellers, with respect to
any specific Material Contract, the Closing of the transactions contemplated by
this Agreement do not require prior notice to or consent from the counterparty
to any Material Contract.

 

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

 

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

 

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

 

ii) Receivables. The Company’s receivables, including all contracts in transit,
manufacturer’s warranty receivables, notes receivable, accounts receivable,
trade account receivables, and insurance proceeds receivable (“Receivables”)
relate to the business of the Company, represent bona fide transactions, arose
in the Company’s ordinary course of business and are properly reflected on the
Company’s books and records. No customer or supplier of the Company is entitled
to any payment terms other than terms in the Company’s ordinary course of
business. To the actual knowledge of Sellers, except as set forth on Schedule
3(ii), all of the Receivables are expected to be good and collectible
receivables, collectible in accordance with past practice and the terms of such
Receivables without any right to setoff or counterclaim.

 

4) REPRESENTATIONS AND WARRANTIES OF SELLERS.

 

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

 

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b) Authorization. Each Seller that is a natural person has full right, capacity
and authority to enter into this Agreement and the Transaction Documents
(defined below) and to sell, assign, transfer and deliver the Securities to be
sold by such Seller hereunder and to perform its other obligations under this
Agreement and each Transaction Document to which Seller is a party. Upon proper
execution and delivery by such Seller, this Agreement constitutes the valid and
binding obligation of the Sellers, enforceable in accordance with its terms,
except as the enforceability hereof may be subject to or limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting
creditors’ rights generally and to general principles of equity being applied at
the discretion of the courts.

 

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

 

5) PRE-CLOSING COVENANTS.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

x) pay the attorneys and accountants or other consultants fees for their
reasonable work in connection with this Agreement and the related transactions
described herein; and

 

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

 

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

 

6) COVENANTS.

 

a) Best Efforts. The Purchaser shall use its best efforts to timely satisfy each
of the covenants hereunder and conditions to be satisfied by it as provided in
Section 6 of this Agreement. The Company shall use its best efforts to timely
satisfy each of the Pre-Closing Covenants, the covenants hereunder and
conditions to be satisfied by it as provided in Section 7 of this Agreement.

 

b) Blue Sky. To the extent applicable, the Sellers shall, on or before the
Closing Date, take such action as the Sellers shall reasonably determine is
necessary in order to obtain or claim an exemption for, or to, qualify the
Securities for sale to the Purchaser at the Closing pursuant to this Agreement
under applicable securities or “Blue Sky” laws of the states of the United
States (or to obtain an exemption from such qualification).

 

c) None of the covenants to take actions or not take actions set forth in this
Section 6 shall survive Closing.

 

7) CONDITIONS TO THE SELLERS OBLIGATION TO SELL.

 

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

 

i) The Purchaser shall have executed each of the other Transaction Documents to
which it is a party and delivered the same to the Sellers and the Company, as
applicable.

 

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

 

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

 

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

 

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

 

vi) The Purchaser shall have delivered to the Sellers or the Company (as
applicable) such other documents, instruments or certificates relating to the
transactions contemplated by this Agreement as Seller or the Company or their
counsel may reasonably request.

 

8) CONDITIONS TO PURCHASER’S OBLIGATION TO PURCHASE.

 

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

 

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

 

ii) The Company shall have delivered to the Purchaser a certificate evidencing
the formation and good standing of the Company in such entity’s jurisdiction of
formation issued by the Secretary of State (or comparable office) of such
jurisdiction of formation as of a date within fifteen (15) days of the Closing
Date.

 

iii) The Company shall have delivered to such Purchaser a copy of its Articles
of Incorporation (including any Certificate of Designations).

 

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

 

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

 

vi) The Sellers shall have obtained all governmental, regulatory or third-party
consents and approvals, if any, necessary for the sale of the Securities, if
any.

 

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

 

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

 

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

 

9) TERMINATION.

 

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

 

i) By mutual consent of Purchaser and Sellers; or

 

ii) By either the Sellers, or Purchaser if, without fault of the terminating
party, the Closing shall not have occurred by [April 30, 2018], which date may
be extended only by mutual agreement of Purchaser and Sellers.

 

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

 

b) Effect of Termination. Except for the obligations contained in Section 9(c)
and Section 9(d) below, all obligations of the parties hereto under this
Agreement shall terminate as of the Termination Date, and there shall be no
liability, except liability for any breach of this Agreement prior to such
termination, of any party to another party.

 

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

 

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d) Confidentiality. Upon termination of this Agreement without Closing, the
Purchaser, Sellers and Company will, and will cause each of their respective
affiliates, and their directors, officers, employees, agents, representatives
and similarly situated persons to: (a) treat and hold as confidential, and not
use or disclose, all of the information concerning the Sellers, the Company and
the business, the negotiation or existence and terms of this Agreement
(“Confidential Information”), and (b) deliver promptly to the Company or
destroy, at the option and request of Sellers, all tangible embodiments (and all
copies) of the Confidential Information which are in such Purchaser’s or
Purchaser affiliated persons’ possession. If the Purchaser is ever requested or
required (by oral question or request for information or documents) to disclose
any Confidential Information, such Purchaser will notify the Sellers and the
Company promptly of the request or requirement so that the Sellers or the
Company may seek an appropriate protective order from a court with competent
jurisdiction or waive compliance with this 9(d).

 

10) MISCELLANEOUS.

 

a) Governing Law; Jurisdiction; Jury Trial; Venue. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of Delaware, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Delaware. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER
TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, ANY
OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
The parties agree to submit to the exclusive jurisdiction over all disputer
hereunder to the federal and state courts in the State of California located in
Sacramento or Yolo Counties.

 

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

 

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

 

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

 

e) Entire Agreement; Amendments. This Agreement, the other Transaction Documents
and the schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein supersede all other prior oral or written
agreements between the Purchaser, the Sellers, the Company, their affiliates and
Persons acting on their behalf, including, without limitation, any transactions
by any Purchaser with respect to the Securities, and the other matters contained
herein and therein, and this Agreement, the other Transaction Documents, the
schedules and exhibits attached hereto and thereto and the instruments
referenced herein and therein contain the entire understanding of the parties
solely with respect to the matters covered herein and therein. Except as
specifically set forth herein or therein, neither the Sellers, the Company nor
any Purchaser makes any representation, warranty, covenant or undertaking with
respect to such matters. For clarification purposes, the Recitals are part of
this Agreement. No provision of this Agreement may be amended or waived other
than by an instrument in writing signed by the Sellers or Company and the
Purchaser, and any amendment or waiver to any provision of this Agreement made
in conformity with the provisions of this Section 10(e) shall be binding on the
Purchaser and holders of Securities, as applicable. The Company has not,
directly or indirectly, made any agreements with the Purchaser relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.

 

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f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) if a facsimile number or email address is provided for below,
upon receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party)
or electronic mail; or (iii) one (1) Business Day after deposit with an
overnight courier service with next day delivery specified, in each case,
properly addressed to the party to receive the same. As used herein “Business
Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to
remain closed. The addresses, facsimile numbers and e-mail addresses for such
communications shall be:

 

If to the Company:

 

TriCo Welding Supplies, Inc.

1590 East Kentucky Avenue

Woodland, CA 95776

Attention: Mr. Joseph Knieriem

 

If to the Sellers:

 

Joseph Knieriem

6151 Quincewood Circle

Citrus Heights, CA 95621

 

Robert Baker

9737 Dynasty Way

Elk Grove, CA 95624

 

If to the Purchaser:

 

MagneGas Corporation

11885 44th Street North

Clearwater, FL 33762

Attention: Legal Department

 

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

 

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

 

h) No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, other than the Indemnitees referred to in Section 10(k).

 

i) Survival. Except as specifically provided herein, the representations,
warranties, agreements and covenants shall survive the Closing and shall remain
in full force and effect until the date that is twelve (12) months from the
Closing Date. Notwithstanding the foregoing, any claims asserted in good faith
with specificity and in writing by notice from the non-breaching party to the
breaching party prior to the expiration date of the applicable survival period
shall not thereafter be barred by the expiration of the relevant representation
or warrant and such claims shall survive until finally resolved.

 

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

 

k) Indemnification.

 

i) Sellers and Company shall defend, protect, indemnify and hold harmless the
Purchaser and each holder of any Securities and all of their stockholders,
partners, members, officers, directors, employees and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Purchaser Indemnitees”) from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such person seeking indemnification hereunder is a party to the
action for which indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by
any Purchaser Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Sellers and Company in any of the Transaction Documents, or (ii) any breach of
any covenant, agreement or obligation of the Sellers or Company contained in any
of the Transaction Documents (in the case of the Company, only for such breaches
occurring prior to the Closing).

 

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ii) Purchaser shall defend, protect, indemnify and hold harmless each of the
Sellers and the Company, and each of the forgoing’s stockholders, partners,
members, officers, directors, and employees and any of the foregoing Persons’
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Seller Indemnitees”) from and against any and all
Indemnified Liabilities, incurred by any Seller Indemnitee as a result of, or
arising out of, or relating to (i) any misrepresentation or breach of any
representation or warranty made by the Purchaser in any of the Transaction
Documents, or (ii) any breach of any covenant, agreement or obligation of the
Purchaser contained in any of the Transaction Documents (in the case of the
Company, only for such breaches occurring prior to the Closing).

 

iii) Promptly after receipt by a Purchaser Indemnitee or Seller Indemnitee under
this Section 10(k) (in either case, an “Indemnitee”) of notice of the
commencement of any action or proceeding (including any governmental action or
proceeding) involving an Indemnified Liability, such Indemnitee shall, if a
claim in respect thereof is to be made against the Sellers, the Company or
Purchaser under this Section 10(k) (an “Indemnitor” as applicable), deliver to
such Indemnitor a written notice of the commencement thereof, and Indemnitor
shall have the right to participate in, and, to the extent Indemnitor so
desires, to assume control of the defense thereof with counsel mutually
satisfactory to the Indemnitor and Indemnitee; provided, however, that an
Indemnitee shall have the right to retain its own counsel with the fees and
expenses of such counsel to be paid by Indemnitor if: (A) the Indemnitor has
agreed in writing to pay such fees and expenses; (B) the Indemnitor shall have
failed promptly to assume the defense of such Indemnified Liability and to
employ counsel reasonably satisfactory to such Indemnitee in any such
Indemnified Liability; or (C) the named parties to any such Indemnified
Liability (including any impleaded parties) include both such Indemnitee and
Indemnitor, and such Indemnitee shall have been advised by counsel that a
conflict of interest exists if the same counsel were to represent such
Indemnitee and the Indemnitor (in which case, if such Indemnitee notifies the
Indemnitor in writing that it elects to employ separate counsel at the expense
of the Indemnitor, then the Indemnitor shall not have the right to assume the
defense thereof and such counsel shall be at the expense of the Indemnitor),
provided further, that in the case of clause (C) above the Indemnitor shall not
be responsible for the reasonable fees and expenses of more than one (1)
separate legal counsel for the Indemnitees. The Indemnitee shall reasonably
cooperate with the Indemnitor in connection with any negotiation or defense of
any such action or Indemnified Liability by the Indemnitor and shall furnish to
the Indemnitor all information reasonably available to the Indemnitee which
relates to such action or Indemnified Liability. The Indemnitor shall keep the
Indemnitee reasonably apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. The Indemnitor shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the Indemnitor shall not
unreasonably withhold, delay or condition its consent. The Indemnitor shall not,
without the prior written consent of the Indemnitee, consent to entry of any
judgment or enter into any settlement or other compromise which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnitee of a release from all liability in respect to such Indemnified
Liability or litigation, and such settlement shall not include any admission as
to fault on the part of the Indemnitee. Following indemnification as provided
for hereunder, the Indemnitor shall be subrogated to all rights of the
Indemnitee with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure to deliver
written notice to the Indemnitor within a reasonable time of the commencement of
any such action shall not relieve the Indemnitor of any liability to the
Indemnitee under this Section 10(k), except to the extent that Indemnitor is
prejudiced in its ability to defend such action.

 

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

 

v) Subject to Section 10(m), the parties acknowledge and agree that their sole
and exclusive remedy with respect to any and all claims (other than claims
arising from fraud on the part of a party hereto in connection with the
transaction 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 this Section 10(k).

 

vi) Each Sellers’ aggregate liability for indemnification hereunder, shall be
limited in total to such Sellers’ portion of the Purchase Price (the “Indemnity
Cap”); provided, however, that the Indemnity Cap shall not apply to the breaches
of the representations contained in Sections 3(a), 3(b), 3(c), 3(d), 3(g), 3(u),
3(v), 4(a), 4(b), or 4(c), or to claims for indemnification to the extent based
on fraud by a Seller.

 

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

 

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m) Remedies. The Purchaser and in the event of an assignment by Purchaser of its
rights and obligations hereunder, each holder of Securities, shall have all
rights and remedies set forth in the Transaction Documents. Any Person having
any rights under any provision of this Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security).Furthermore,
the Sellers and the Company recognize that in the event that they fail to
perform, observe, or discharge any or all of their obligations under the
Transaction Documents, any remedy at law would inadequate relief to one or more
of the other parties for which monetary damages would not be an adequate remedy
the Purchaser. The Sellers and the Company therefore agree that the Purchaser
shall be entitled to specific performance and/or temporary, preliminary and
permanent injunctive or other equitable relief from any court of competent
jurisdiction, in any such case without the necessity of proving actual damages
and without posting a bond or other security.

 

n) Cumulative Remedies. The rights and remedies provided in this Agreement and
the other Transaction Documents shall be cumulative.

 

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

 

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

 

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

 

[Signature Pages Follow]

 

[The Remainder of This Page is Intentionally Blank]

 

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IN WITNESS WHEREOF, each Sellers, Purchaser and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.

 

  COMPANY:       TRICO WELDING SUPPLIES, INC.       By: /s/ Robert Baker   Name:
Robert Baker   Title: President

 

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IN WITNESS WHEREOF, each Sellers, Purchaser and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.

 

  SELLER:       JOSEPH KNIERIEM         By: /s/ Joseph Knieriem   Name: Joseph
Knieriem   Title:

Authorized Signatory

 

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IN WITNESS WHEREOF, each Sellers, Purchaser and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.

 

  SELLER:         ROBERT BAKER         By: /s/ Robert Baker   Name: Robert Baker
  Title: Authorized Signatory

 

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IN WITNESS WHEREOF, each Sellers, Purchaser and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.

 

  PURCHASER:         MAGNEGAS CORPORATION         By: /s/ Ermanno Santilli  
Name: Ermanno Santilli   Title: Chief Executive Officer

 

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SCHEDULE OF PURCHASERS

 

(1)   (2)   (3)   (4)                       Purchaser   Seller   Aggregate
Number of Securities   Purchase Price    

 

MagneGas Corporation

 

Purchaser Designee:

 

MagneGas Welding Supply, LLC

 

 

Joseph Knieriem

 

 

3,000

 

 

 

$1,000,000

 

   

 

MagneGas Corporation

 

Purchaser Designee:

 

MagneGas Welding Supply, LLC

 

 

Robert Baker

 

 

3,000

 

 

 

$1,000,000

 

    TOTAL       6,000   $2,000,000    

 

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