--------------------------------------------------------------------------------

Exhibit 10.1
 
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
 
This First Amendment to Asset Purchase Agreement (this “First Amendment”) is
made and entered into this 25th day of July, 2014 by and among Vapor Corp., a
Delaware corporation (“Parent”), IVGI Acquisition, Inc., a Delaware corporation
(“Buyer”), and Nicolas Molina, David Epstein and David Herrera, each a Florida
resident and in his capacity as one of the Sellers’ Representatives.  All
capitalized terms used herein, but not otherwise defined herein, shall have the
meanings ascribed to them in Asset Purchase Agreement (as defined below).
 
RECITALS
 
WHEREAS, the parties hereto have entered into that certain Asset Purchase
Agreement dated May 14, 2014 (the “Asset Purchase Agreement”) by and among
Parent, Buyer, the Sellers and the Owners (of which the Sellers’ Representatives
are part) pursuant to which Buyer desires to purchase and assume from Sellers,
and Sellers desire to sell and assign to Buyer, the Acquired Assets and the
Assumed Liabilities;
 
WHEREAS, Section 10.5 of the Asset Purchase Agreement provides that the Asset
Purchase Agreement may be amended by a written instrument signed by Parent,
Buyer and the  Sellers’ Representatives on behalf of the Sellers and the Owners;
and
 
WHEREAS, the parties hereto desire to amend the Asset Purchase Agreement as set
forth in this First Amendment.
 
NOW, THEREFORE, in accordance with Section 10.5 of the Asset Purchase Agreement
and in consideration of the mutual covenants contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
 
1.           Amendment to Section 1.1.2 of the Asset Purchase
Agreement.  Section 1.1.2 of the Asset Purchase Agreement is hereby amended by
inserting the following clauses at the end of such section:
 
“(n) the trademark “VAPOR ZONE,” the domain names containing “VAPORZONE” and the
trade names “VaporZone”, all of the foregoing as set forth on Schedule 2.14
(collectively, the “Discontinued Brand”);
 
(o) all Contractual Obligations of the Sellers specifically pertaining to
Inventory bearing the Discontinued Brand and/or the development or promotion of
the Discontinued Brand; and
 
(p) all Inventory bearing the Discontinued Brand (the “Retained Inventory”).”
 
and deleting the word “and” after clause (l).
 

 

 

 

 
2.           Amendment to Section 1.1.4 of the Asset Purchase
Agreement.   Section 1.1.4 of the Asset Purchase Agreement is hereby amended by
inserting the following clauses at the end of such section:
 
“(k)  to the extent not included in the Net Working Capital calculation set
forth in Section 1.2.5, all Liabilities for the actual out of pocket costs
incurred by International Vapor prior to the Closing pursuant to and as limited
by Section 4.10 for rebranding with the New Brand (i) the Acquired Assets which
are branded with the Discontinued Brand and (ii) any and all aspects of the
Business that use the Discontinued Brand as of the date of this Agreement (the
“Pre-Closing Rebranding Costs”);
 
  (l) all Liabilities arising from or specifically relating to that Finder’s Fee
Agreement entered into as of January 26, 2013 by and between International Vapor
and Allan Rothstein (the “Rothstein Agreement”); and
 
(m)         all Liabilities arising from or specifically relating to any DB
Third Party Claim.”
 
and deleting the word “and” after clause (i).
 
3.           Amendment to Section 1.2.2 of the Asset Purchase
Agreement.  Section 1.2.2 of the Asset Purchase Agreement is hereby amended by
deleting the clause “$19,100,000 (the “Fixed Stock Purchase Price” and, together
with the Cash Purchase Price, the “Fixed Purchase Price”) with such Cash
Purchase Price being subject to adjustment as provided in Section 1.2.5.” and
inserting the following new clause in place thereof:
 
“$19,100,000 (the “Fixed Stock Purchase Price” and, together with the Cash
Purchase Price, the “Fixed Purchase Price”) with such Cash Purchase Price and
Fixed Stock Purchase Price being subject to adjustment as provided in Section
1.2.5  and Section 1.2.6, respectively.”
 
4.           Amendment to Section 1.2.4 of the Asset Purchase
Agreement.  Section 1.2.4 of the Asset Purchase Agreement is hereby amended by
deleting paragraph (a) of such section in its entirety and inserting the
following new paragraph (a):
 
“(a)        At the Closing, Buyer shall, out of the Fixed Stock Purchase Price
to be paid to International Vapor on behalf of the Sellers, deposit in the
Escrow Account on behalf of International Vapor on behalf of the Sellers
pursuant Section 1.3 (such deposit, the “Escrow Fund”), Two Million Seven
Hundred Twenty-Four Thousand Dollars ($2,724,000) worth of the Shares
(calculated in accordance with Section 1.2.2) (such Shares, the “Escrow
Shares”).  The Escrow Shares shall be specifically allocated to satisfy the
Sellers’ and Owners’ reimbursement obligations under Section 1.2.6 and their
indemnity obligations pursuant to Article 7 as follows:  (i) $100,000 worth of
the Escrow Shares for purposes of Section 1.2.6 (the “Rebranding Escrow Shares”
and the deposit thereof pursuant to Section 1.3, the “Rebranding Escrow Fund”),
(ii) $624,000 worth of the Escrow Shares for purposes of Section 7.17 (along
with any additional Escrow Shares deposited pursuant to Section 1.7.7, the
“Special Escrow Shares” and the deposit thereof pursuant to Section 1.3 and
Section 1.7.7, the “Special Escrow Fund”)) and (iii)  $2,000,000 of the Escrow
Shares for purposes of Article 7 other than Section 7.17 and Section 7.18 (the
“General Escrow Shares” and the deposit thereof pursuant to Section 1.3, the
“General Escrow Fund”).”
 

2

 

 

5.           Amendment to Section 1.2.5 of the Asset Purchase
Agreement.  Section 1.2.5 of the Asset Purchase Agreement is hereby amended by
deleting the last sentence of paragraph (a) of such section in its entirety and
replacing it with the following sentence:

 
“ “Target Net Working Capital” means negative Fifty Thousand Dollars
(-$50,000).”
 
6.           Amendment to Section 1.2 of the Asset Purchase Agreement.  Section
1.2 of the Asset Purchase Agreement is hereby amended by inserting the following
new Section 1.2.6 after Section 1.2.5:
 
“Section 1.2.6. Rebranding Adjustment.
 
(a)           On or prior to the date that is one hundred twenty (120) days
following the Closing Date, Buyer shall prepare, or cause to be prepared, and
deliver to Sellers’ Representatives a certificate executed by the Chief
Financial Officer of Buyer setting forth the Post-Closing Rebranding Costs and
the calculation thereof.  “Post-Closing Rebranding Costs” means the actual,
required and essential out of pocket costs incurred by Buyer, with the approval
of International Vapor, which approval shall not be unreasonably withheld,
delayed or conditioned, after the Closing and prior to the date of such
certificate, to complete the rebranding of the Acquired Assets and any and all
aspects of the Business with the New Brand to the extent International Vapor
does not do so to prior to the Closing in accordance with Section 4.10; provided
that Post-Closing Rebranding Costs shall not include (x) advertising or brand
marketing costs related to the New Brand to the extent that the aggregate amount
of such costs, when added to the New Brand Marketing Expense, would exceed
$50,000, (y) costs to replace inventory or packaging bearing the Discontinued
Brand, or (z) costs included in the Net Working Capital calculation set forth in
Section 1.2.5.
 
(b)           Sellers’ Representatives shall complete their review of the
Post-Closing Rebranding Costs within thirty (30) days after delivery thereof by
Buyer.  During such review period, Buyer shall provide Sellers’ Representatives
with access to all books and records reasonably requested by Sellers’
Representatives to review the Post-Closing Rebranding Costs, and Buyer shall
make reasonably available its representatives responsible for the preparation of
the Post-Closing Rebranding Costs in order to respond to the inquiries of
Sellers’ Representatives.  If Sellers’ Representatives object to the
Post-Closing Rebranding Costs for any reason (including, without limitation,
that any such costs were not required for and essential to the rebranding), they
shall, on or before the last day of such 30-day period, so inform Buyer in
writing (an “IVG Objection”), setting forth a specific description of the basis
of Sellers’ Representatives’ determination and the adjustments to the
Post-Closing Rebranding Costs that Sellers’ Representatives believe should be
made.  To the extent any disagreement therewith is not described in an IVG
Objection received by Buyer on or before the last day of such 30-day period,
then the Post-Closing Rebranding Costs set forth on the certificate delivered by
Buyer to Sellers’ Representative pursuant to Section 1.2.6(a) shall be deemed
agreed, final and binding on the parties.
 

3

 

 

 
(c)           On the date that is one hundred twenty (120) days following the
Closing Date or a date that is not less than five (5) Business Days prior to
such 120th day, Sellers’ Representatives shall prepare, or cause to be prepared,
and deliver to Buyer a certificate executed by the Sellers’ Representatives
setting forth the value (determined by reference to the actual cost paid by
Sellers for such Retained Inventory) of the Retained Inventory owned by
International Vapor as of the end of the one hundred twentieth (120th) day after
the Closing Date and the calculation thereof (the lesser of (x) such value and
(y) Two Hundred Fifty Thousand Dollars ($250,000), the “Retained Inventory
Value”).
 
(d)           Buyer shall complete its review of the Retained Inventory Value
within thirty (30) days after delivery thereof by Sellers’
Representatives.  During such review period, International Vapor shall provide
Buyer with the opportunity to view the Retained Inventory and access to all
books and records reasonably requested by Buyer to review the Retained Inventory
Value, and International Vapor shall make reasonably available its
representatives responsible for the preparation of the Retained Inventory Value
in order to respond to the inquiries of Buyer.  If Buyer objects to the Retained
Inventory Value for any reason, it shall, on or before the last day of such
30-day period, so inform the Sellers’ Representatives in writing (a “Buyer
Objection”), setting forth a specific description of the basis of Buyer’s
determination and the adjustments to the Retained Inventory Value that Buyer
believes should be made.  To the extent any disagreement therewith is not
described in a Buyer Objection received by the Sellers’ Representatives on or
before the last day of such 30-day period, then the Retained Inventory Value set
forth on the certificate delivered by the Sellers’ Representatives to Buyer
pursuant to Section 1.2.6(c) shall be deemed agreed, final and binding on the
parties.
 
(e)           If Sellers’ Representatives timely deliver an IVG Objection to
Buyer and/or Buyer timely delivers a Buyer Objection to Sellers’
Representatives, and Sellers’ Representatives and Buyer are unable to resolve
all of their disagreements with respect to the proposed adjustments set forth in
the IVG Objection and/or the Buyer Objection within thirty (30) days after the
later of the date that Buyer receives the IVG Objection and the date that the
Sellers’ Representatives receive the Buyer Objection, then any such unresolved
disagreement shall be submitted for resolution by arbitration in Fort
Lauderdale, Florida before one arbitrator, which arbitration shall be
administered by JAMS pursuant to its Comprehensive Arbitration Rules and
Procedures and in accordance with the Expedited Procedures in those Rules
notwithstanding anything to the contrary set forth in Section 10.14.   The
arbitrator shall be selected by mutual agreement of Buyer and the Sellers’
Representatives or, if the parties cannot agree, then by striking from a list of
arbitrators supplied by JAMS.  The arbitrator shall issue a written opinion
determining the definitive amount of the Post-Closing Rebranding Costs and/or
the Retained Inventory Value at issue in the arbitration, which determination
shall be final and binding upon the parties.  Each of Buyer and the Sellers’
Representatives, as a single party on behalf of the Sellers and Owners, shall be
responsible for fifty percent (50%) of the arbitrator’s fees and expenses and
each such party shall be responsible for its own attorneys’ fees and expenses
for the arbitration.
 

4

 

 

 
(f)           To the extent that the Post-Closing Rebranding Costs, as finally
determined in accordance with paragraphs (b) and (e), as applicable, of this
Section 1.2.6, exceed the Retained Inventory Value, as finally determined in
accordance with paragraphs (d) and (e), as applicable, of this Section 1.2.6,
then on or prior to the fifth (5th) Business Day following the date when the
Post-Closing Rebranding Costs and the Retained Inventory Value have both been
finally determined, International Vapor and Owners shall reimburse Parent for
the positive difference between the Post-Closing Rebranding Costs and the
Retained Inventory Value (the “Rebranding Cost Surplus”), first, from the
Rebranding Escrow Shares and  second, to the extent that the Rebranding Escrow
Shares shall be insufficient to reimburse Parent in full for the Rebranding Cost
Surplus,  the Buyer will have a right of offset against any earned but unpaid
portion of the Earn-Out; provided, however, if no such earned but unpaid portion
of the Earn-Out Payments shall be available to satisfy such remaining Rebranding
Cost Surplus or no portion of the Earn-Out Payments is then earned, the Sellers
and Owners shall satisfy such reimbursement claim by, at the Sellers’ and/or
Owners’ sole option, either a tender of Shares or Earn-Out Shares or a cash
payment to Parent.  For the avoidance of doubt and ambiguity, the Sellers and
the Owners may, at their sole option, satisfy any Rebranding Cost Surplus with
cash, and shall satisfy any such Rebranding Cost Surplus with a cash payment to
the extent the Rebranding Escrow Shares, the Shares and Earn-Out Shares then
owned by them (or earned as an Earn-Out Payment but not yet issued to them) are
not sufficient to do so in full.  The value ascribed to the Rebranding Escrow
Shares, the Earn-Out Shares or the Shares offset or tendered (as applicable) for
purposes of satisfaction of the Rebranding Cost Surplus shall be equal to the
quotient of the amount of the Rebranding Cost Surplus required to be paid
divided by the greater of (A) the 30-trading day weighted average closing price
per share of the Parent’s common stock, as reported on the primary exchange on
which the Parent’s common stock is traded or quoted, preceding the date of when
the reimbursement claim is required to be paid, or (B) the Volume Weighted
Average Closing Price.
 
(g)           To the extent that the Retained Inventory Value, as finally
determined in accordance with paragraphs (d) and (e), as applicable, of this
Section 1.2.6, exceeds the Post-Closing Rebranding Costs, as finally determined
in accordance with paragraphs (b) and (e), as applicable, of this Section 1.2.6,
then on or prior to the fifth (5th) Business Day following the date when the
Post-Closing Rebranding Costs and the Retained Inventory Value have both been
finally determined, Parent shall issue to International Vapor, for distribution
to the Owners pro rata based on each Owner’s Percentage Ownership, newly issued
unregistered shares of the Parent’s common stock, the number of which would be
equal to the quotient of (x) the positive difference between the Retained
Inventory Value and the Post-Closing Rebranding Costs divided by (y) the Volume
Weighted Average Closing Price.”
 

5

 

 

 
7.           Amendment to Section 1.3 of the Asset Purchase Agreement.  Section
1.3 of the Asset Purchase Agreement is hereby amended by deleting such section
in its entirety and inserting the following new section:
 
 “Section 1.3  Escrow.  To provide for an escrow account or accounts to secure
and to serve as a fund in respect of the indemnification obligations of the
Sellers and Owners under this Agreement, Buyer, the Sellers’ Representatives and
the Escrow Agent at Closing shall enter into an Escrow Agreement substantially
in the form of Exhibit B (the “Escrow Agreement”).  At Closing, the Buyer shall
deposit the Escrow Shares with the Escrow Agent to be held in an account or
accounts (the “Escrow Account”) pursuant to the terms of the Escrow
Agreement.  All Rebranding Escrow Shares remaining in the Escrow Account after
the Rebranding Cost Reimbursement shall be distributed to the Owners in
accordance with the Escrow Agreement on the third Business Day after the
Rebranding Cost Reimbursement. Except with respect to Special Escrow Shares
retained to fund Buyer Indemnified Persons’ indemnity claims made in accordance
with Article 7 on or before the twenty-seventh (27th) month anniversary
following the Closing Date (the “Escrow Period”), all Special Escrow Shares then
remaining in the Escrow Account shall be distributed to the Owners in accordance
with the Escrow Agreement on the third Business Day after the earlier of (a) the
final resolution, by settlement, litigation or otherwise, of the dispute between
International Vapor and Allan Rothstein regarding the Rothstein Agreement (the
“Rothstein Resolution”) and (b) the expiration of the Escrow Period; provided
that, the portion of the Special Escrow Shares deposited in the Escrow Account
pursuant to Section 1.7.7 shall be distributed to the Owners in accordance with
the proportions set forth in Section 1.7.7.  Except with respect to General
Escrow Shares retained to fund Buyer Indemnified Persons’ indemnity claims made
in accordance with Article 7 prior to the expiration of the Escrow Period, all
General Escrow Shares in the Escrow Account shall be distributed to the Owners
in accordance with the Escrow Agreement on the third Business Day after the
expiration of the Escrow Period. With respect to any pending claim, promptly
following resolution of such pending claim, the Special Escrow Shares or the
General Escrow Shares, as applicable and if any, retained to fund such pending
claim which have not been paid, which are not payable to any Buyer Indemnified
Person pursuant to Article 7 in connection with such resolution, and which are
not required to remain in the Escrow Account to satisfy other pending claims,
shall be distributed to the Owners.”
 
8.           Amendment to Section 1.7.7 of the Asset Purchase
Agreement.  Section 1.7.7 of the Asset Purchase Agreement is hereby amended by
deleting such section in its entirety and inserting the following new section:
 
“ 1.7.7  Manner of Payment. The Earn-Out, if any, shall be payable to the
Owners, in part as stockholders of International Vapor and in part, as to Molina
and Epstein, as employees of the Buyer, in newly issued unregistered shares of
the Parent’s common stock (“Earn-Out Shares”), the number of which would be
equal to the quotient of such earned portion of the Earn-Out Payment divided by
the Volume Weighted Average Closing Price.  The Earn-Out, if any, shall be paid
directly to the Owners by Buyer. 43.17% of the Earn-Out shall be paid to the
Owners pro rata based upon their respective Ownership Percentages (the aggregate
of all such payments, the “Equity Earn-Out”), 40.28% of the Earn-Out shall be
paid to Molina pursuant to the terms of his Employment Agreement and 16.55% of
the Earn-Out shall be paid to Epstein pursuant to the terms of his Employment
Agreement (the aggregate portion of the Earn-Out payable to Epstein and Molina
pursuant to their respective Employment Agreements, the “Employment Earn-Out”),
provided that prior to the Rothstein Resolution, 3% of the aggregate number of
Earn-Out Shares constituting each Earn-Out Payment that would otherwise be paid
by Buyer to the Owners shall instead be deposited by the Buyer in the Escrow
Account as Special Escrow Shares. Subject to Section 1.7.10, Section 1.7.11 and
Section 1.7.12, any Earn-Out Payments made by Buyer pursuant to this Section 1.7
shall be apportioned among the Owners as set forth in the preceding sentence.
Any payments owed by an Owner to the Buyer pursuant to Sections 1.7.6(a) or
1.7.6(c) shall be paid to the Buyer from the Shares and/or Earn-Out Shares
received by such Owner prior to the date thereof, the number of which would be
equal to the quotient of such payment divided by the Volume Weighted Average
Closing Price.”
 

6

 

 

 
9.           Amendment of Section 4.8.2 of the Asset Purchase
Agreement.  Section 4.8.2 of the Asset Purchase Agreement is hereby amended by
deleting the first and second sentences of such section and inserting the
following new sentences in place thereof:
 
“If International Vapor presents Parent with a valid invoice for expenses
incurred for (i) new E-Cig Products comprising Inventory other than with the
Discontinued Brand, (ii) attendance at trade shows or (iii) capital expenditures
for the Retail Operations and Parent approves such invoice in whole or in part,
which approval shall not be unreasonably withheld, delayed or conditioned,
Parent shall pay such approved portion of such invoice and such payment shall be
deemed to be a loan from Parent to International Vapor (each, a “Capex
Loan”).  Capex Loans may not exceed $500,000 in the aggregate, provided that no
more than $200,000 of the Capex Loans shall be for expenses incurred under
clauses (ii) and (iii) of the preceding sentence.”
 
10.         Amendment of Section 4 of the Asset Purchase Agreement. Article 4 of
the Asset Purchase Agreement is hereby amended by inserting the following new
Sections 4.10 and 4.11 after Section 4.9:
 
“4.10     Rebranding.
 
International Vapor shall use commercially reasonable efforts to resolve,
through settlement, litigation or otherwise, any and all third party claims
filed in court and still prosecutable (whether or not pending before any such
court) against any Seller at or prior to the Closing arising from a claim that
the Business’ use of the Discontinued Brand infringes on or is likely to cause
confusion with another’s mark or trade name (each a “DB Third Party Claim”), at
International Vapor’s sole cost and expense, provided that any such settlement
of a DB Third Party Claim that does not include a full and general release of
all Buyer Indemnified Persons from all Liabilities arising or relating to, or in
connection with, each such DB Third Party Claim shall be subject to Parent’s
prior written approval, which shall not be unreasonably withheld or delayed.
Subject to the last sentence of this Section 4.10, Sellers and Owners agree that
International Vapor shall use commercially reasonable efforts to cease using the
Discontinued Brand as soon as reasonably practicable and, at its sole cost and
expense, shall rebrand (i) the Acquired Assets which are branded with the
Discontinued Brand (including, without limitation, Vapor Zone Franchising) and
(ii) any and all aspects of the Business (including, without limitation, the
company-owned and franchised retail store line of business) using the
Discontinued Brand as of the date of this Agreement with one or more new brands,
which shall be mutually agreed upon by Parent and the Sellers’ Representatives
in writing no later than August 15, 2014 (collectively, the “New Brand”),
provided that International Vapor shall not implement any aspect of such
rebranding of the Acquired Assets and the Business prior to the Closing without
the prior written approval of Parent, which approval shall not be unreasonably
delayed, conditioned or withheld, and provided, further, that, prior to Closing,
International Vapor shall be obligated, at its sole cost and expense, to
advertise and brand market the New Brand in the  ordinary course of business
consistent with its past practice of advertising and brand marketing the
Discontinued Brand, and in addition to such ordinary course advertising and
brand marketing, International Vapor shall be obligated, at its sole cost and
expense, to actively advertise and brand market the New Brand by incurring costs
and expenses up to, but not in excess of, $50,000 (such costs, in excess of the
ordinary course advertising and brand marketing expenses, the “New Brand
Marketing Expense”). For the avoidance of doubt, International Vapor shall be
permitted to continue to sell, prior to Closing, Inventory bearing the
Discontinued Brand, provided that any such sale will be independent of, and
shall not involve, Parent, Buyer or their respective businesses and/or
operations. International Vapor shall be responsible for all the Pre-Closing
Rebranding Costs and such Pre-Closing Rebranding Costs shall be included as
current liabilities, to the extent required to be accrued pursuant to GAAP at
Closing, of the Companies on a consolidated basis, and any Inventory bearing the
Discontinued Brand shall not be included as current assets of the Companies on a
consolidated basis,  in the determination of Net Working Capital as of the
Closing Date notwithstanding anything to the contrary set forth in Section
1.2.5.  From and after the time, as contemplated under this Section 4.10, that
International Vapor ceases to use the Discontinued Brand, the Sellers and
Owners, severally and not jointly, hereby acknowledge and agree that no Seller
or Owner will ever use or allow the use of, directly or indirectly, the
Discontinued Brand in connection with any Competitive Business except that (x)
the Sellers and Owners may allow the use of the Discontinued Brand by any third
party with which none of them have an affiliation as a part of the settlement of
a DB Third Party Claim in accordance with the first sentence of this Section
4.10 and (y) during the period beginning on the Closing Date and ending one
hundred and twenty (120) days thereafter, International Vapor may, in its sole
discretion, sell any Retained Inventory, provided that any such sale will be
independent of, and shall not involve, Parent, Buyer or their respective
businesses and/or operations.
 

7

 

 

 
4.11           Leases.  If not later than ten (10) Business Days prior to the
Closing International Vapor presents Parent with a real estate lease for a new
retail store on terms and conditions reasonably satisfactory to Parent then
Parent shall, directly or indirectly, enter into such real estate lease subject
to the counterparty landlord’s consent and fund all associated lease security
deposits and expenses for the build out and opening of such store, provided,
however, that prior to the Closing (a) Parent shall not be required enter into
more than ten (10) such real estate leases (each a “Store Lease”)  and fund more
than $41,000 per Store Lease for the associated security deposits and expenses
for the build out of the applicable store and (b) Parent shall make no
expenditure pursuant to this sentence without the prior approval of
International Vapor, which approval shall not be unreasonably withheld, delayed
or conditioned. Should the Closing occur, any Store Lease then in effect shall
be included in the Acquired Assets and Assumed Liabilities, and notwithstanding
any language in the Agreement to the contrary, each store for which a Store
Lease is then in effect shall be deemed a Retail Store opened during the
Measurement Period for purposes of the calculation of the Retail Earn-Out
whether opened before or after the Closing Date.  In the event this Agreement is
terminated for any reason then Parent shall retain each such Store Lease then in
effect and operate the retail store thereunder, in its sole and absolute
discretion, either as (x) a franchised store of International Vapor pursuant to
the franchise agreement then in use by International Vapor or (y) a
non-franchised store, independent from International Vapor and which store shall
not use the Discontinued Brand or the New Brand, and in any manner Parent deems
appropriate in its sole and absolute discretion subject to the permitted use
specified in the applicable Store Lease.”
 

8

 

 

 
11.           Amendment to Section 6.7 of the Asset Purchase Agreement.  Section
6.7 of the Asset Purchase Agreement is hereby amended by deleting such section
in its entirety and inserting the following new section:
 
“6.7         Use of Name.  The Sellers and the Owners, severally and not
jointly, hereby acknowledge and agree that, upon the consummation of the
Contemplated Transactions, the Buyer shall have the sole right to use the names
“International Vapor”, “South Beach Smoke”, “Beach Wellness”, the New Brand or
any service marks, trademarks, trade names, identifying symbols, logos, emblems,
signs or insignia related thereto or containing or comprising the foregoing,
including any name or mark confusingly similar thereto.  Following the Closing,
no Seller or any Owner or any of their Affiliates will use the names
“International Vapor”, “South Beach Smoke”, “Beach Wellness”, the New Brand or
any confusingly similar names and each Seller shall at Closing terminate such
names or assumed names by making all necessary filings with the appropriate
Governmental Authorities.  In addition, no Seller or Owner will ever use or
allow the use of, directly or indirectly, the names “International Vapor”,
“South Beach Smoke”, “Beach Wellness”, or the New Brand  in connection with any
Competitive Business.”
 
12.           Amendment to Section 7.1.1 of the Asset Purchase Agreement.
 
a.  
Section 7.1.1 of the Asset Purchase Agreement is hereby amended by deleting
clauses (b), (c) and (d) of such section in its entirety and inserting the
following new clauses (b), (c), (d) and (e):

 
“(b) any breach or violation of any covenant or agreement of any Seller and/or
Owner contained in this Agreement or any Company Agreement (other than the
Employment Agreements) that is to be performed either prior to, on or after
Closing other than as specified in clause (e) of this Section 7.1.1;
 
(c)  any Retained Liabilities other than the Retained Liabilities specified in
Section 1.1.4 (l) (which shall be subject to the indemnity obligations of the
Sellers and Owners set forth in Section 7.17) and the Retained Liabilities
specified in Section 1.1.4 (m) (which shall be subject to the indemnity
obligations of the Sellers and Owners set forth in Section 7.18);
 
(d) any Liabilities associated with the (x) pre-Closing operations of Vapor Zone
Franchising that are not Retained Liabilities under Section 1.1.4(k), (y) the
pre and post-Closing operations of Nutricigs and/or (z) the pre-Closing actions
of any Seller or Owner under Section 4.10 that are not Retained Liabilities
under Section 1.1.4(m); or
 
(e)   any breach or violation of any covenant or agreement of any Seller or
Owner under Section 4.10 (for the avoidance of doubt, any Liabilities relating
to any DB Third Party Claim shall be subject to the indemnity obligations of the
Sellers and Owners set forth in Section 7.18).”
 
b.           Section 7.1.1 of the Asset Purchase Agreement is hereby amended by
adding the following sentence:
 
“Notwithstanding anything to the contrary contained in this Agreement,
International Vapor and the Owners shall have no indemnification obligation with
respect to the Post-Closing Rebranding Costs other than with respect to the
breach of a covenant or agreement of Sellers and/or Owners under Section 1.2.6.”
 

9

 

 

 
13.            Amendment to Section 7.1.2 of the Asset Purchase
Agreement.  Section 7.1.2 of the Asset Purchase Agreement is hereby amended by
inserting at the end of the last sentence of such section the following phrase:
 
“and Section 7.1.1(e);”
 
14.           Amendment to Section 7.1.3 of the Asset Purchase
Agreement.  Section 7.1.3 of the Asset Purchase Agreement is hereby amended by
inserting at the end of the last sentence of such section the following:
 
“and Section 7.1.1(e);”
 
15.           Amendment to Section 7.7.1 of the Asset Purchase
Agreement.   Section 7.7.1 of the Asset Purchase Agreement is hereby amended by
inserting the phrases “General Escrow Fund” and “General Escrow Shares” in place
of the phrases “Escrow Fund” and “Escrow Shares”, respectively, throughout such
section.
 
16.           Amendment to Article 7 of the Asset Purchase Agreement.  Article 7
of the Asset Purchase Agreement is hereby amended by inserting the following new
Sections 7.17 and 7.18 after Section 7.16:
 
“7.17  Special Indemnification.
 
7.17.1          From and after Closing, International Vapor and the Owners will
indemnify and hold harmless the Buyer Indemnified Persons from, against and in
respect of any and all Losses incurred or suffered by Buyer Indemnified Persons
or any of them (including any Losses sustained or incurred after the end of the
survival period specified in Section 7.17.2, provided that a claim is made in
writing to Sellers’ Representatives prior to the end of the survival period in
accordance with the terms of this Agreement) as a result of, arising out of or
directly or indirectly relating to all Liabilities arising from or relating to
the Rothstein Agreement.
 
7.17.2          International Vapor’s and the Owners’ aggregate indemnification
obligation pursuant to Section 7.17.1 shall be uncapped and their
indemnification obligations pursuant to Section 7.17.1 shall survive until
expiration of the applicable statute of limitations for Losses under Section
7.17.1.  Section 7.4.3, Section 7.5, and Section 7.8 through Section 7.16 shall
apply to this Section 7.17.   For the avoidance of doubt, Sections 7.1, 7.3, 7.4
(other than 7.4.3), 7.6, and 7.7 shall not apply to this Section 7.17.
 

10

 

 

 
7.17.3  Notwithstanding anything to the contrary contained herein, all of
Sellers’ and Owners’ indemnification obligations (including attorneys’ fees and
costs) pursuant to this Section 7.17 will be satisfied, first, from the Special
Escrow Shares except to the extent that a Seller and/or Owner shall elect, at
his/its sole option, to satisfy their respective portion with cash.  To the
extent that the Special Escrow Shares shall have been fully exhausted and,
therefore, shall be insufficient to satisfy a properly asserted indemnification
claim the Buyer would have (except to the extent that any Seller and/or Owner
shall elect to satisfy the same with cash) a right of offset against any earned
but unpaid portion of the Earn-Out, however, if no such earned but unpaid
portion of the Earn-Out Payments shall be available to satisfy such claim  or no
portion of the Earn-Out Payments is then earned, the Sellers and Owners shall
satisfy such indemnification claim by, at the Sellers’ and/or Owners’ sole
option, either a tender of Shares or Earn-Out Shares or a cash payment to the
Buyer.  For the avoidance of doubt and ambiguity, the Sellers and the Owners
shall satisfy any indemnity claim with a cash payment to the extent the Shares
and Earn-Out Shares then owned by them (or earned as an Earn-Out Payment but not
yet issued to them) are not sufficient to do so in full.  The value ascribed to
the Special Escrow Shares, the Earn-Out Shares or the Shares to be released from
the Special Escrow Fund, offset or tendered (as applicable) for purposes of
satisfaction of any Buyer Indemnified Person’s indemnification claim under this
Section 7.17 shall be equal to the quotient of the amount of the claims required
to be paid divided by the greater of (A) the 30-trading day weighted average
closing price per share of the Parent’s common stock, as reported on the primary
exchange on which the Parent’s common stock is traded or quoted, preceding the
date of when the claim is required to be paid, or (B) the Volume Weighted
Average Closing Price.  For the avoidance of doubt, in the event that a Seller
or Owner is obligated to pay legal fees, costs and expenses, whether of the
Sellers and/or Owners or any Buyer Indemnified Person, pursuant to the Sellers’
or Owners’ indemnification obligations as set forth in this Section 7.17, then
upon the request of the Sellers’ Representative, a sufficient number of Special
Escrow Shares then in the Special Escrow Fund shall be released to such Sellers
and/or Owners to fund the amount of such obligation based on the value ascribed
to such Special Escrow Shares as set forth in the preceding sentence; provided,
however, that not more than an aggregate of 50% of the Special Escrow Shares
held in the Special Escrow Fund on the Closing Date shall be released to fund
such obligations. Further, in the event that International Vapor enters into a
settlement agreement with Allan Rothstein regarding the Rothstein Agreement that
involves a payment to Allan Rothstein of Shares, a sufficient number of Special
Escrow Shares then in the Special Escrow Fund shall be released to International
Vapor to fund the amount of such obligation based on the value ascribed to such
Special Escrow Shares as set forth two sentences above. Buyer consents to Kozyak
Tropin & Throckmorton serving as counsel to International Vapor with respect to
the Rothstein Resolution, and consents to International Vapor and Owners
assuming the defense of, and engaging Kozyak Tropin & Throckmorton to serve as
counsel to the Buyer Indemnified Persons with respect to, any third party claim
against which International Vapor and the Owners are obligated to indemnify the
Buyer Indemnified Persons pursuant to Section 7.17.1; provided, however,  the
Buyer Indemnified Persons shall be entitled to separate counsel, at the expense
of the Sellers and Owners, in the event a conflict of interest arises by virtue
of such joint legal representation under the Florida Rules of Professional
Conduct and Buyer’s foregoing consent for Kozyak Tropin & Throckmorton to serve
as joint counsel shall not be deemed to constitute a waiver by it or any other
Buyer Indemnified Person of any such conflict of interest.”
 

11

 

 

 
“7.18  DB Third Party Claim Indemnification.
 
7.18.1          From and after Closing, International Vapor and the Owners will
indemnify and hold harmless the Buyer Indemnified Persons from, against and in
respect of any and all Losses incurred or suffered by Buyer Indemnified Persons
or any of them (including any Losses sustained or incurred after the end of the
survival period specified in Section 7.18.2, provided that a claim is made in
writing to Sellers’ Representatives prior to the end of the survival period in
accordance with the terms of this Agreement) as a result of, arising out of or
directly or indirectly relating to all Liabilities arising from or relating to
any DB Third Party Claim.
 
7.18.2          International Vapor’s and the Owners’ aggregate indemnification
obligation pursuant to Section 7.18.1 shall be uncapped and their
indemnification obligations pursuant to Section 7.18.1 shall survive until
expiration of the applicable statute of limitations for Losses under Section
7.18.1.  Section 7.4.3, Section 7.5, and Section 7.8 through Section 7.16 shall
apply to this Section 7.17.   For the avoidance of doubt, Sections 7.1, 7.3, 7.4
(other than 7.4.3), 7.6, and 7.7 shall not apply to this Section 7.18.
 
7.18.3          Buyer consents to Gallivan, White & Boyd P.A. serving as counsel
to International Vapor with respect to any DB Third Party Claim, and consents to
International Vapor and Owners assuming the defense of, and engaging Gallivan,
White & Boyd P.A. to serve as counsel to the Buyer Indemnified Persons with
respect to, any DB Third Party Claim against which International Vapor and the
Owners are obligated to indemnify the Buyer Indemnified Persons pursuant to
Section 7.18.1; provided, however,  the Buyer Indemnified Persons shall be
entitled to separate counsel, at the expense of the Sellers and Owners, in the
event a conflict of interest arises by virtue of such joint legal representation
under the Florida Rules of Professional Conduct or the South Carolina Rules of
Professional Conduct and Buyer’s foregoing consent for Gallivan, White & Boyd
P.A. to serve as joint counsel shall not be deemed to constitute a waiver by it
or any other Buyer Indemnified Person of any such conflict of interest.
Notwithstanding anything to the contrary contained herein, all of Sellers’ and
Owners’ indemnification obligations (including attorneys’ fees and costs)
pursuant to this Section 7.18 will be satisfied with cash payments.”
 
17.           Amendment of Section 9.1.2 of the Asset Purchase
Agreement.  Section 9.1.2 of the Asset Purchase Agreement is hereby amended by
deleting the date “July 31, 2014” contained in such section with the following
new date:
 
“September 30, 2014;”
 
18.           Joint and Several Obligations. All payment and indemnification
obligations of Owners set forth in this First Amendment shall be several (but
not joint), pro rata based on the formula set forth in the last paragraph of
Section 7.1.1.
 

12

 

 

 
19.           Amendment to Section 11.2 of the Asset Purchase
Agreement.  Section 11.2 of the Asset Purchase Agreement is hereby amended by
inserting the following new defined terms in the correct alphabetical order
within Section 11.2:
 
Term
 
Location
     
“Buyer Objection”
 
Section 1.2.6(d)
“DB Third Party Claim”
 
Section 4.10
“Discontinued Brand”
 
Section 1.1.2
“General Escrow Shares”
 
Section 1.2.4(a)
“General Escrow Fund”
 
Section 1.2.4(a)
“IVG Objection”
 
Section 1.2.6(b)
“New Brand”
 
Section 4.10
“New Brand Marketing Expense”
 
Section 4.10
“Pre-Closing Rebranding Costs”
 
Section 1.1.4(k)
“Post-Closing Rebranding Costs”
 
Section 1.2.6(a)
“Rebranding Cost Reimbursement”
 
Section 1.2.6(d)
“Rebranding Cost Surplus”
 
Section 1.2.6(f)
“Rebranding Escrow Shares”
 
Section 1.2.4(a)
“Rebranding Escrow Fund”
 
Section 1.2.4(a)
“Retained Inventory”
 
Section 1.1.2
“Retained Inventory Value”
 
Section 1.2.6(d)
“Rothstein Agreement”
 
Section 1.1.4(l)
“Rothstein Resolution”
 
Section 1.3
“Special Escrow Shares”
 
Section 1.2.4(a)
“Special Escrow Fund”
 
Section 1.2.4(a)
“Store Lease”
 
Section 4.11

 

13

 

 

 
20. Consent to Transfer. Each of Parent and Buyer consents to the transfer by
Molina prior to the Closing Date of all of the Equity Securities of
International Vapor held by Molina as of the date of the Agreement to Pegasus
Real Estate Investment Group, LLC, a Florida limited liability company
(“Pegasus”), which is owned in its entirety by the 2009 Pegasus Trust dated
2/25/2009 and the Nicolas Molina Revocable Trust dated 11/13/2009 (as amended
from time to time). Each of Parent and Buyer acknowledges that Pegasus is not an
“accredited investor” as such term is defined in Regulation D of the 1933 Act.
From and after the completion of such transfer (the “Transfer Effective Date”),
for purposes of the Agreement, “Owner” shall be deemed to refer to Pegasus
rather than Molina and Molina shall be deemed an “Affiliate” of Pegasus,  and on
or prior to the Transfer Effective Date Pegasus shall deliver to Buyer and
Parent a letter wherein, as an “Owner”, it shall make as of the Transfer
Effective Date the representations and warranties set forth in Section
2.2.2,  Section 2.2.5, Section 2.3, Section 2.4, Section 2.5, Section 2.15.4,
Section 2.20, Section 2.25.1, Section 2.29 and Section 2.32 (other than Section
2.32.8) (provided, for the avoidance of doubt, that Pegasus shall make only the
representations and warranties in such sections that specifically relate to
itself as an “Owner”) and agree to perform the covenants and agreements set
forth in the Agreement that an “Owner” is required to perform before and after
the Closing and such letter shall be deemed a part of and incorporated by
reference into the Agreement as if fully set forth therein; provided, however,
that the representations and warranties made by Molina in the Agreement as an
“Owner” shall be deemed to survive and continue  in full force and effect
notwithstanding the transfer of his Equity Securities of International Vapor to
Pegasus in accordance herewith; and provided, further, that Molina and Pegasus
shall be jointly and severally liable with respect to any indemnification
obligations of Pegasus as an “Owner” pursuant to Article 7 (and, for the
avoidance of doubt, the transfer of Molina’s Equity Securities of International
Vapor to Pegasus in accordance herewith shall not relieve Molina of his
obligations to perform the covenants and agreements set forth in the Agreement
that apply to him in a capacity other than as an “Owner”, including those set
forth in Section 4.8.2 and Section 6.2).
 
21.           Transfer of Earn-Out Payments. Each of Parent and Buyer consents
to the transfer by Molina to Pegasus of Molina’s right, pursuant to Section
1.7.7, to receive 40.28% of the Earn-Out in accordance with the terms of his
Employment Agreement. Each of Parent, Buyer and Molina acknowledges and agrees
that from and after the Transfer Effective Date, any Earn-Out Payment that would
otherwise have been paid to Molina pursuant to Section 1.7.7 shall instead be
paid directly to Pegasus. For the avoidance of doubt, from and after the
Transfer Effective Date, the portion of the 43.17% of the Earn-Out that would
otherwise have been paid to Molina as an “Owner” pursuant to Section 1.7.7 shall
also be paid directly to Pegasus in its capacity as an “Owner.”
 
22.           No Breach, No Delay. No claim, event, matter or occurrence, the
existence of which is directly or indirectly addressed in this First Amendment
shall be deemed a breach of the Agreement or a basis by any party to terminate
the Agreement under Section 9.1 after the entering into of this First Amendment,
nor shall such claim, event, matter or occurrence, or the action or inaction of
any affected party in connection therewith, be deemed to have been the cause of,
or resulted in, the failure of the Closing to occur on or before the date set
forth in Section 9.1.2.
 
23.           Effect of First Amendment. This First Amendment is not and shall
not be construed as an amendment, modification or waiver of any provision of the
Asset Purchase Agreement except as expressly provided herein, and in all other
respects the Asset Purchase Agreement remains in full force and effect in
accordance with its terms as of the date hereof.  To the extent that any term or
provision of this First Amendment conflicts with any term or provision of the
Asset Purchase Agreement or any of the Company Agreements, such term or
provision of this First Amendment shall govern.
 
24.           Entire Agreement. This First Amendment constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior oral or written understandings and agreements between the
parties hereto with respect to the subject matter hereof.
 

14

 

 

25.           Counterparts; General. This First Amendment may be executed and
delivered (by facsimile, e-mail or other electronic transmission) in any number
of counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute one and the same
agreement.  Sections 10.10 (Severability), 10.11 (Headings), Section 10.12
(Construction), 10.13 (Governing Law), 10.14 (Jurisdiction; Venue; Service of
Process) and 10.15 (Wavier of Jury Trial) of the Asset Purchase Agreement are
hereby incorporated by reference herein and made a part hereof as if fully set
forth herein.
 
[Intentionally Left Blank; Signature Page Follows]
 

15

 

 

 
IN WITNESS WHEREOF, the undersigned have executed and delivered this First
Amendment as of the date first above written.
 

         
PARENT
         
Vapor Corp.
          By:    /s/ Harlan Press     Name:  Harlan Press    
Title:
 Chief Financial Officer    
 
   
 
            BUYER           IVGI Acquisition, Inc.               By:   /s/
Harlan Press    
Name:
 Harlan Press
 
  Title:  President    

 
 

       
SELLERS’ REPRESENTATIVES
                /s/ David Epstein     DAVID EPSTEIN                   /s/ David
Herrera     DAVID HERRERA                  /s/ Nicolas Molina     NICOLAS MOLINA
 

 

16