Exhibit 10.1

CONFIDENTIAL

EXECUTION VERSION

 

 

 

ASSET PURCHASE AGREEMENT

By and Among

IDENTIV, INC.,

VISCOUNT ACQUISITION ULC,

VISCOUNT SYSTEMS, INC. AND THE SELLING SUBSIDIARIES

Dated as of December 19, 2018

 

 

 

 

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TABLE OF CONTENTS

Page

 

ARTICLE I DEFINITIONS

     1  

1.1

  Definitions      1  

ARTICLE II THE TRANSACTION

     8  

2.1

  Purchased and Excluded Assets      8  

2.2

  Limited Assumed Liabilities and Excluded Liabilities      11  

2.3

  Consideration      12  

2.4

  Cash Consideration Adjustment      13  

2.5

  Payment Schedule      15  

2.6

  Closing Transactions      15  

2.7

  Earnout Consideration      16  

2.8

  Exemption from Registration      23  

2.9

  Nonassignable Assets      23  

2.10

  Post-Closing Amounts Received and Paid      24  

2.11

  Withholding      24  

2.12

  Adjustments for Capital Changes      24  

ARTICLE III CONDITIONS TO CLOSING AND CLOSING DELIVERABLES

     25  

3.1

  Conditions to Closing      25  

3.2

  Seller’s Closing Deliverables      26  

3.3

  Purchaser’s Closing Deliverables      27  

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER

     27  

4.1

  Organization and Power      27  

4.2

  Subsidiaries      28  

4.3

  Authorization of Transaction      28  

4.4

  Absence of Conflicts      28  

4.5

  Financial Schedules      29  

4.6

  Absence of Undisclosed Liabilities      29  

4.7

  Absence of Certain Developments      29  

4.8

  Title to Properties; Sufficiency of Assets      30  

4.9

  Accounts Receivable      30  

4.10

  Inventory      30  

4.11

  No Acceleration of Rights or Benefits      31  

4.12

  Taxes      31  

4.13

  Material Contracts and Commitments      31  

4.14

  Proprietary Rights      32  

4.15

  Litigation; Proceedings      34  

4.16

  Brokerage      34  

4.17

  Governmental Licenses and Permits      34  

4.18

  Employees and Independent Contractors      34  

4.19

  Employee Benefit Plans      36  

4.20

  Insurance      37  

4.21

  Affiliate Transactions      37  

 

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4.22

  Compliance with Laws      37  

4.23

  Environmental Matters      37  

4.24

  Customers and Suppliers      37  

4.25

  Products and Services      38  

4.26

  Brokers      38  

4.27

  No Other Representations      38  

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER

     39  

5.1

  Organization and Corporate Power      39  

5.2

  Authorization of Transaction      39  

5.3

  No Violation      39  

5.4

  Governmental Authorities and Consents      39  

5.5

  Litigation      39  

5.6

  Solvency      39  

5.7

  No Conflicts; Consents      40  

5.8

  Brokers      40  

5.9

  Sufficiency of Funds; Solvency      40  

5.10

  S-3 Eligible      40  

5.11

  Nasdaq      40  

5.12

  Parent Common Stock      40  

5.13

  SEC Reports      40  

5.14

  Exclusivity of Seller Representations; No Reliance; Forward-Looking
Information      41  

ARTICLE VI COVENANTS OF SELLER PRIOR TO CLOSING

     41  

6.1

  Conduct of Business of the Seller      41  

6.2

  Restrictions on Conduct of Business of the Seller      42  

6.3

  No Solicitation      45  

ARTICLE VII INDEMNIFICATION AND RELATED MATTERS

     46  

7.1

  Indemnification Holdback      46  

7.2

  Survival      46  

7.3

  Indemnification      47  

ARTICLE VIII ADDITIONAL AGREEMENTS

     52  

8.1

  Tax Matters      52  

8.2

  Press Releases and Announcements      53  

8.3

  Further Transfers      53  

8.4

  Expenses      53  

8.5

  Post-Closing Covenants of Seller      53  

8.6

  Non-Competition, Non-Solicitation and Confidentiality Covenants of Seller     
54  

8.7

  Access to Information      55  

8.8

  Discharge of Liabilities      55  

8.9

  Trademarks      55  

8.10

  Registration and Certain Other Rights      56  

8.11

  Lock-Up      61  

8.12

  Rule 144 Compliance      62  

8.13

  Legends; Securities Act Compliance      62  

 

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8.14

  Purchaser Confidentiality      63  

ARTICLE IX TERMINATION, AMENDMENTS, WAIVERS AND MISCELLANEOUS

     63  

9.1

  Termination      63  

9.2

  Amendment and Waiver      64  

9.3

  Notices      64  

9.4

  Binding Agreement; Assignment      65  

9.5

  Severability      65  

9.6

  Construction      65  

9.7

  Captions      66  

9.8

  Entire Agreement      66  

9.9

  Counterparts      66  

9.10

  Governing Law; Arbitration      66  

9.11

  Parties in Interest      67  

9.12

  Delivery by Facsimile or Electronic Transmission      67  

9.13

  Successor Liability      67  

9.14

  Special Rule for Fraud      67  

9.15

  Specific Performance      68  

9.16

  Prompt Transfer of shares of Parent Stock      68  

9.17

  Cooperation Post-Closing by Yvonne      68  

9.18

  Further Assurances; Post-Closing Cooperation      68  

9.19

  Remedies      68  

9.20

  Waiver of Jury Trial      68  

 

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INDEX OF SCHEDULES

Schedule 2.1(a) Purchased Assets

Schedule 2.2(a) Limited Assumed Liabilities

Schedule 2.2(b) Excluded Liabilities

Schedule 2.4 Sample Closing Net Working Capital Statement

 

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INDEX OF EXHIBITS

 

Exhibit A

   Assignment and Assumption Agreement

Exhibit B

   Bill of Sale

Exhibit C

   Investment Representation Letter

Exhibit D

   Holdback Share Agreement

Exhibit E

   Purchaser Officer’s Certificate

Exhibit F-1

   Seller Officer’s Certificate

Exhibit F-2

   Seller Secretary’s Certificate

 

 

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made as of December 18,
2018, by and among Identiv, Inc., a Delaware corporation (“Parent”), Viscount
Acquisition ULC, a British Columbia unlimited liability company and a
wholly-owned subsidiary of Parent (“Acquisition Sub” and together with Parent,
collectively, the “Purchaser”), Viscount Systems, Inc., a Nevada corporation
(“VSI”) and the Selling Subsidiaries (together with VSI, collectively, the
“Seller”), and VS225 LLC, a Delaware limited liability company and a special
purpose vehicle, solely for the purposes of Article VII. Purchaser and Seller
are collectively referred to herein as the “Parties” and individually as a
“Party.”

On the terms and subject to the conditions set forth in this Agreement,
Purchaser desires to purchase from Seller, and Seller desires to sell to
Purchaser, the Purchased Assets (as defined herein), and Purchaser desires to
purchase from Seller, the Purchased Assets (as defined herein), more fully set
forth herein.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein at other good and valuable considering the sufficiency of which is hereby
acknowledged, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:

“Affiliate” means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with, that Person.
For the purposes of this definition, “control” (including with correlative
meanings, the terms “controlling,” “controlled by,” and “under common control
with”) as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through ownership of voting securities or by contract or
otherwise.

“Assumption Agreement” means an Assignment and Assumption Agreement in the form
attached hereto as Exhibit A.

“Bill of Sale” means a Bill of Sale and Assignment and Assumptions in the form
attached hereto as Exhibit B.

“Books and Records” means all files, documents, instruments, papers, books and
records relating to the business, condition (financial or otherwise), results of
operations or assets and properties of a Person, including financial statements,
internal reports, Tax Returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, licenses, customer lists, computer files and programs (including data
processing files and records), retrieval programs, operating data and plans and
environmental studies and plans.

“Business” means Seller’s business of developing, marketing and selling access
control identity management applications, associated hardware and third party
components, developing, marketing and selling telephone entry applications,
associated hardware and third party components and installation and services of
telephone entry, access control and third party technologies in the greater
Vancouver area, as currently conducted and existing at Closing.

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“Business Combination” means, with respect to any Person, (a) any merger,
consolidation, share exchange reorganization, plan of arrangement or other
business combination transaction to which such Person is a party, (b) any sale,
dividend or other disposition of all or substantially all of the capital stock,
assets and properties of such Person (including by way of exclusive license or
joint venture formation, but excluding non-exclusive licenses in connection with
the sale of Company products in the ordinary course of business consistent with
past practice) or (c) the entering into of any agreement or understanding, the
granting of any rights or options, with respect to any of the foregoing.

“Business Day” means any day, other than a Saturday, Sunday, or any other day on
which banks located in the State of New York are authorized or required to be
closed for business.

“Business Website” means http://www.viscount.com/.

“CASL” means an act to promote the efficiency and adaptability of the Canadian
economy by regulating certain activities that discourage reliance on electronic
means of carrying out commercial activities, and to amend the Canadian
Radio-Television and Telecommunications Commission Act, the Competition Act, the
Personal Information Protection and Electronic Documents Act and the
Telecommunications Act (Canada) and the regulations made thereunder.

“Closing Cash Consideration” has the meaning set forth in Section 2.3(a)(i).

“Closing Consideration” has the meaning set forth in Section 2.3(a).

“Closing Share Consideration” has the meaning set forth in Section 2.3(a)(ii).

“COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the
Code, and any similar state Law.

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

“Contract” means any legally binding contract, license, mortgage, purchase
order, indenture, loan agreement, note, lease or other agreement, in each case,
whether written or oral.

“CY 2019 Earnout Amount” means the dollar amount of the CY 2019 Earnout Payment
as calculated pursuant to Section 2.7(a).

“CY 2020 Earnout Amount” means the dollar amount of the CY 2020 Earnout Payment
as calculated pursuant to Section 2.7(a).

“Earnout Amount” has the meaning set forth in Section 2.7(a).

“Earnout Consideration” has the meaning set forth in Section 2.3(c).

“Earnout Period” means the period commencing on the Closing Date and terminating
on December 31, 2020.

“Eligible Products” means the Freedom Products and Services and the EMPS
products (whether hardware or software and including service and maintenance)
including, but not limited to, those set forth on Schedule 2.1(a), and any new
versions, enhancements or derivatives thereof.

“EMPS” means the Enterphone Mesh Products and Services, including all ancillary
third party products.

 

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“Environmental and Safety Requirements” means, whenever in effect, all federal,
state, provincial, local, municipal and foreign statutes, regulations,
ordinances, codes and other provisions having the force or effect of Law, all
judicial and administrative orders and determinations, and all common law, in
each case, concerning public or worker health or safety, pollution or protection
of the environment, including all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any Hazardous Materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.

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

“Freedom Products and Services” means the Freedom Products and Services,
including all ancillary third party products.

“GAAP” means generally accepted accounting principles in the United States, as
in effect from time to time, consistently applied.

“Governmental Authority” means any federal, state, provincial, local, municipal
or foreign court or other governmental, administrative or regulatory authority,
agency or body exercising executive, legislative, judicial, regulatory or
administrative functions, or any arbitrator.

“Hazardous Materials” means any substance, material or waste that is listed,
defined, designated or classified as hazardous, toxic, or corrosive or as a
pollutant or contaminant, or is otherwise regulated under Environmental and
Safety Requirements or other Law or by a Government Authority because of its
dangerous, hazardous, or deleterious properties or characteristics, or that may
serve as a basis for Liability under Environmental and Safety Requirements.

“Holdback Share Agent” has the meaning set forth in the Holdback Share
Agreement.

“Holdback Share Agreement” means the agreement between the Purchaser, Seller and
the Holdback Share Agent, pursuant to which the Holdback Share Agent shall hold
and release the Holdback Shares.

“Incurred” means, in relation to claims under a Seller Plan, the date on which
the event giving rise to such claim occurred and, in particular (i) with respect
to a death or dismemberment claim, the date of the death or dismemberment,
(ii) with respect to a short-term or long-term disability claim, the date that
the period of short-term or long-term disability commenced, (iii) with respect
to an extended health care claim, including, without limitation, dental and
medical treatments, the date of the treatment, and (iv) with respect to a
prescription drug or vision care claim, the date that the prescription was
filled.

“Indebtedness” means, without duplication (i) any indebtedness for borrowed
money or issued in substitution for or exchange of indebtedness for borrowed
money, (ii) any indebtedness or other Liabilities evidenced by any note, bond,
debenture or other debt security, (iii) any indebtedness or Liabilities for the
deferred purchase price of property or services with respect to which a Person
is liable, contingently or otherwise, as obligor or otherwise, including any
Liabilities in respect of any earn-out, consulting or non-compete arrangement
incurred in connection with the acquisition of another Person or business,
(iv) any commitment by which a Person assures a creditor against loss (including
contingent reimbursement Liabilities with respect to letters of credit), (v) any
indebtedness or other Liabilities guaranteed in any manner by a Person
(including guarantees in the form of an agreement to repurchase or reimburse),
(vi) any

 

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Liabilities under leases capitalized or required to be capitalized under GAAP,
(vii) any indebtedness or other Liabilities secured by a Lien on a Person’s
assets, (viii) any Liabilities in respect of any off-balance sheet financing,
(ix) any Liabilities (including increased obligations) arising in whole or in
part from the transactions contemplated hereby (including transaction bonuses,
retention bonuses and severance obligations) and from any bonus earned by
employees relating to performance prior to Closing, (x) any financial
instruments intended to hedge against risk, (xi) any Liabilities for accrued and
unpaid management fees, and (xii) any Liabilities for accrued and unpaid
insurance deductibles; together with, in the case of each of the foregoing, all
fees, accrued and unpaid interest, penalties redemption premiums, and prepayment
obligations in connection therewith calculated assuming repayment thereof on the
later of the Closing Date and the earliest date permitted therefor by the
instrument or agreement governing such indebtedness or other Liabilities. For
avoidance of doubt, those Liens listed on Schedule 4.8 shall not be considered
Indebtedness of the Seller.

“Indemnified Party” has the meaning set forth in Section7.3(f)(i).

“Indemnifying Party” has the meaning set forth in Section 7.3(f)(i).

“Independent Accounting Firm” means a nationally or regionally recognized
independent accounting firm mutually agreed to by Seller and Parent.

“Knowledge” as used in the phrases “to the Knowledge of Seller”, “to Seller’s
Knowledge” or phrases of similar import means the actual knowledge or awareness
(after reasonable inquiry) of (i) with regard to the Seller, Scott Sieracki and
Yvonne Zheng, and (ii) with regard to the Purchaser, the respective officers
thereof.

“Law” means any law, statute, regulation, code, constitution, ordinance, treaty,
or rule of common law, administered or enforced by or on behalf of, any
Governmental Authority.

“Leased Real Property” means all leasehold or subleasehold estates and other
rights to use or occupy any land, buildings, structures, improvements, fixtures
or other interest in real property held by Seller for the Business.

“Leases” means all leases, subleases, licenses, concessions and other Contracts
pursuant to which Seller holds any Leased Real Property.

“Legal Requirements” means any national, federal, state, provincial, foreign,
local, municipal or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity and any orders,
writs, injunctions, awards, judgments and decrees applicable to such party or to
any of their respective assets, properties or businesses.

“Letter of Intent” means that certain letter agreement by and between Purchaser
and Seller, effective as of October 16, 2018, as further amended, modified,
supplemented or waived from time to time.

“Liability” or “liability” means any liability, debt, obligation, deficiency,
Tax, penalty, assessment, fine, claim or other loss, fee, cost or expense of any
kind or nature whatsoever, whether asserted or unasserted, absolute or
contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated,
and whether due or to become due and regardless of when asserted.

“Liens” means any mortgage, pledge, security interest, encumbrance, license,
claim, Indebtedness, Tax, lien or charge of any kind.

 

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“Liquidation Event” means, with respect to a given Person, whether in a single
transaction or series of transactions, (i) any voluntary or involuntary
liquidation, dissolution or winding-up of a Person or (ii) the sale,
distribution or other disposition of all or substantially all of a Person’s
assets.

“Losses” means losses, damages, liabilities, deficiencies, actions, judgments,
interest, awards, penalties, fines, costs or expenses of whatever kind,
including reasonable attorneys’ fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance providers;
provided, however, that “Losses” shall not include consequential, special or
punitive damages, except to the extent punitive damages are actually awarded to
a Governmental Entity or other third party.

“Material Adverse Effect” A violation, circumstance, change, effect or other
matter is deemed to have a “Material Adverse Effect” on (a) the Purchaser, if
such violation, circumstance, change, effect or other matter, either
individually or in the aggregate with all other violations, circumstances,
changes, effects and other matters, has a material adverse effect on the
Purchaser and its subsidiaries, taken as a whole, or would impair, prevent or
delay the Purchaser’s performance of its obligations under this Agreement or on
the ability of the Purchaser to consummate the transaction contemplated hereby,
or (b) the Seller, if such violation, circumstance, change, effect or other
matter, either individually or in the aggregate with all other violations,
circumstances, changes, effects and other matters, has a material adverse effect
on the Business, results of operations, condition (financial or otherwise) or
assets of the Seller, or would impair, prevent or delay the Seller’s performance
of its obligations under this Agreement or on the ability of the Seller to
consummate the transaction contemplated hereby; provided, that for purposes of
this Agreement, a Material Adverse Effect on either the Purchaser or the Seller
shall not include the effect of (i) changes to the industry or markets in which
the business of a party or its subsidiaries operates, (ii) the execution and
delivery, of this Agreement and the transactions contemplated herein,
(iii) general economic, regulatory or political conditions or changes,
(iv) changes in or the condition of financial, banking or securities markets,
(v) military action or any act of terrorism, (vi) changes in Legal Requirement
or GAAP after the date hereof, or (vii) compliance with the terms of this
Agreement; provided, however, for subsections (i), (iii), (iv), and (v) above,
except with respect to changes that disproportionately affect the Seller or
Purchaser or its respective subsidiaries relative to other participants in the
industries in which the party and its subsidiaries operate.

“Open Source Materials” means any software or other technology or content
(“Materials”) (i) that is distributed as “free software”, “open source software”
or under a similar licensing or distribution model (including without limitation
any of the licenses listed at http://www.opensource.org/licenses), or (ii) that
contain, or are derived in any manner (in whole or in part) from, any Materials
that are distributed pursuant to any license that requires, as a condition of
use, modification and/or distribution of such Materials, that Materials
(“Derivative Materials”) incorporated into, derived from, or distributed with
such Materials be: (A) disclosed or distributed in source code form;
(B) licensed for the purpose of making modifications or derivate works;
(C) reproduced and/or redistributed at no or minimal charge; (D) permitted to be
reverse engineered; (E) used only for non-commercial purposes; (F) distributed
pursuant to specified license terms or accompanied by specified notices
(including without limitation terms regarding limitations of liability,
attribution, and/or ownership of incorporated materials); or (G) otherwise
distributed on terms that impede the ability to distribute and license such
Derivative Materials as the licensor of such Derivative Materials sees fit.

“Owned Business Proprietary Rights” means all Proprietary Rights that is owned
by or created by or on behalf of the Seller and used primary in or primarily
related to the Business.

“Parent Stock” means the Parent’s common stock, par value $0.001 per share, and
any other class of securities into which such securities may hereafter be
reclassified or changed including securities of any other Person, including any
successor or acquiring entity, as a result of a Business Combination.

 

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“Parent Stock Maximum” means such number of shares of Parent Stock equal to
19.9% of the total issued and outstanding Parent Stock as of immediately prior
to the Closing.

“Parent Stock Price” means $4.77.

“Permitted Liens” means: (i) statutory liens for Taxes that are not yet due and
payable or liens for Taxes being contested in good faith by any appropriate
proceedings for which adequate reserves have been established; (ii) statutory
liens to secure obligations to landlords, lessors or renters under leases or
rental agreements; (iii) deposits or pledges made in connection with, or to
secure payment of, workers’ compensation, unemployment insurance or similar
programs mandated by applicable law; and (iv) statutory liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies and other like liens.

“Person” means an individual, a partnership, a limited liability company, a
corporation, a cooperative, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental authority, body
or entity or any department, agency or political subdivision thereof.

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date and the portion through the end of the Closing Date for any
Straddle Period. In the case of any taxable period that includes (but does not
end on) the Closing Date (a “Straddle Period”), the amount of any Taxes (other
than Taxes based upon income, receipts, sales, payroll, or payments) for a
Straddle Period that relates to the Pre-Closing Tax Period shall be deemed to be
the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days in the taxable period ending on the
Closing Date and the denominator of which is the number of days in such Straddle
Period and the amount of any Taxes based upon income, receipts, sales, payroll
or payments for a Straddle Period that relates to the Pre-Closing Tax Period
shall be determined based upon an interim closing of the books as of the close
of Business on the Closing Date.

“Proceeding” means any action, arbitration, audit, claim, charge, complaint,
dispute, demand, cause of action, grievance, inquiry, investigation, litigation
or other proceeding by or before (or that could come before) any Governmental
Authority.

“Proprietary Rights” means all of the following in any jurisdiction throughout
the world: (i) patents, patent applications and patent disclosures;
(ii) trademarks, service marks, trade dress, trade names, corporate names, logos
and slogans (and all translations, adaptations, derivations and combinations of
the foregoing) and Internet domain names, together with all goodwill associated
with each of the foregoing; (iii) copyrights and copyrightable works;
(iv) registrations and applications for any of the foregoing; (v) trade secrets,
confidential information (including ideas, formulae, compositions, know-how,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, financial, business and marketing plans, and customer
and supplier lists and related information), know-how and inventions;
(vi) computer software (including source code, executable code, data, databases
and documentation); and (vii) all other intellectual property and industrial
rights.

“Purchaser Change of Control” means any direct and/or indirect (i) a
reorganization, merger, consolidation, stock sale or other corporate transaction
involving the Purchaser or its parent entity, in each case, with respect to
which the stockholders of the Purchaser immediately prior to such transaction do
not, immediately after the transaction, own more than fifty percent (50%) of the
combined voting power of the Purchaser (or its parent entity) or the entity
resulting from such transaction, excluding any transaction between Affiliates of
the Purchaser or its parent entity after which Parent remains the ultimate
beneficial owner of more than fifty percent (50%) of the combined voting power
of the Purchaser or the entity resulting from such transaction; or (ii) a sale,
liquidation or distribution of all or substantially all of the assets of the
Purchaser; provided, however, nothing in this definition of “Purchaser Change of
Control” shall permit and/or otherwise authorize any transaction relating to the
Business and/or the Purchased Assets otherwise restricted and/or prohibited
elsewhere in this Agreement or elsewhere.

 

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“Representatives” means of any Person, such Person’s officers, directors,
partners, trustees, executors, employees, agents, attorneys, accountants,
auditors and advisors.

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

“Seller Plan” or “Seller Plans” has the meaning set forth in Section 4.19(a).

“Seller Severance Obligation Amount” shall mean the sum of any cash severance
payments owed or paid to any employees of the Seller pursuant to Contracts
entered into prior to Closing.

“Selling Subsidiaries” means Viscount Communications and Control Systems Inc., a
British Columbia company (“VCCS”), and Freedom Access and Indemnity, LLC, a
Florida limited liability company.

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

“Tax” or “Taxes” means (i) any federal, state, provincial, local or foreign
income, gross receipts, capital gains, franchise, alternative or add-on minimum,
estimated, sales, use, goods and services, transfer, escheat, registration,
value added, excise, natural resources, severance, stamp, occupation, premium,
windfall profit, environmental, customs, duties, real property, personal
property, capital stock, social security, unemployment, employment, disability,
payroll, license, employee or other withholding, contribution or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing whether disputed or not; (ii) any
liability for the payment of any amount of a type described in clause
(i) arising as a result of being or having been a member of any consolidated,
combined, unitary or other group or being or having been included or required to
be included in any Tax Return related thereto; and (iii) any liability for the
payment of any amount of a type described in clause (i) or clause (ii) as a
result of any obligation to indemnify or otherwise assume or succeed to the
liability of any other Person as a result of transferee or successor liability,
a contractual obligation or otherwise.

“Tax Returns” means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any Laws, regulations or administrative
requirements relating to any Taxes, including any amendments thereof.

 

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“Trading Day” means a day on which the Trading Market is open for trading.

“Trading Market” means the Nasdaq Capital Market.

“Transferred Employees” means those employees of the Seller who as of the
Closing have entered into employment letter agreements with Purchaser.

“Transaction Documents” means this Agreement, the Holdback Share Agreement and
any other agreement or document contemplated hereby to which Purchaser or any of
its Affiliates is a party in respect of the transactions contemplated hereby
including all Closing documents.

“Transaction Expenses” means all fees, costs, expenses, payments and
expenditures paid, pre-paid, incurred or accrued by the Seller prior to the
Closing with respect to this Agreement and the transactions contemplated hereby,
whether or not billed, accrued or previously paid, including the expenses and
fees of Seller’s own accountants, attorneys, investment bankers and other
professionals.

“VWAP” means for any Trading Day, the daily volume weighted average price of the
Parent Stock for such Trading Day (or the nearest preceding date) on the Trading
Market, as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m.
(New York City time) to 4:02 p.m. (New York City time)).

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988,
as amended, and any related or similar Law.

ARTICLE II

THE TRANSACTION

2.1 Purchased and Excluded Assets.

(a) Purchased Assets. On the terms and subject to the conditions contained in
this Agreement, at the Closing (as defined below), Purchaser shall purchase from
Seller, and Seller shall sell, convey, assign, transfer and deliver to
Purchaser, free and clear of all Liens (except for the Permitted Liens), all of
Seller’s right, title and interest in and to the following assets that the
Seller owns and are related to the Business including, without limitation, all
those relating to the (i) Freedom Products and Services, and (ii) EMPS as well
as all other software, tangible assets and additional assets of the Seller, as
listed on Schedule 2.1(a) (collectively, the “Purchased Assets”), but excluding
all Excluded Assets (as defined below):

(i) all accounts receivable, trade accounts, notes receivable, book debts and
other debts due or accruing to the Business, all rights to receive payments, and
the benefit of all security for such accounts, notes and debts, including but
not limited to, the receivables set forth on Schedule 2.1(a)(i) relating to the
Business;

(ii) all Contracts entered into primarily in connection with the operation of
the Business, including those listed on Schedule 2.1(a)(ii) (collectively, the
“Included Contracts”), and all rights under the Included Contracts but
excluding, for the avoidance of doubt, the Excluded Contracts);

(iii) all inventories of any nature, supplies, works-in-process and finished
goods of the Business;

 

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(iv) all market research reports, industry analyses, and other reports, papers
and documents (electronic or otherwise), including unfinished reports in
progress, produced primarily by and/or for the Business (collectively, the
“Reports”) for the prior three (3) years;

(v) all collections or complications of identifiable information about Customers
of the Business generated or collected, or caused to be generated or collected,
by Seller, including but not limited to, Customers’ names, addresses, e-mail
addresses, phone numbers, Customer purchase history, Customer preferences and
tendencies, financial transaction data (in each case, whether written or
electronic) (collectively, “Customer Data”) for the prior three (3) years;

(vi) all rights, whether arising under Contract or otherwise, primarily related
to the Business;

(vii) all rights, whether arising under Contract or otherwise, primarily related
to the Customers, partners or re-sellers of the Business;

(viii) all content, images, design, domain names, and URL of the Business
Website, including those listed on Schedule 2.1(a)(viii).

(ix) all distribution systems and networks of the Business (including all rights
to employ sales representatives) and all rights to hire employees;

(x) all lists, records, supporting documentation and calculations pertaining to
customer accounts, accounts receivables and rebates (whether past or current),
suppliers, distributors, personnel and agents and all other books, ledgers,
files, documents, correspondence and business records (including copies of all
current purchase orders and bills of lading) for the prior three (3) years;

(xi) all claims, deposits, prepayments, warranties, guarantees, refunds, causes
of action, rights of recovery, rights of set-off and rights of compensation of
every kind and nature, other than those relating primarily to Excluded Assets or
Excluded Liabilities;

(xii) all Business Proprietary Rights, including any and all Proprietary Rights
in the items set forth in Schedule 4.14(a) and in the Business Marks, together
with (A) all issuances or registrations or applications for issuance or
registration for or with respect to any of the of the foregoing (B) all
divisions, continuations, continuations-in-part, re-examinations, renewals,
reissues, or extensions of any of the foregoing, (C) all income, royalties,
damages and payments due or payable at the Closing or thereafter (including,
without limitation, damages and payments for past or future infringements or
misappropriations thereof), (D) the right to sue and recover for past
infringements or misappropriations thereof, (E) any and all corresponding rights
that, now or hereafter, may be secured throughout the world, and (F) all copies
and tangible embodiments of any such Business Proprietary Rights;

(xiii) to the extent assignable, all Licenses, including those Licenses listed
on the attached Schedule 4.17 and all data and records pertaining thereto;

 

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(xiv) all rights to receive mail and other communications addressed to Seller
relating to the Business, the Purchased Assets and/or the Assumed Liabilities,
including accounts receivable payments;

(xv) all goodwill associated with the Purchased Assets or Business, and to the
extent assignable, IP addresses, telephone and fax numbers and listings; and

(xvi) the fixed assets and other assets, properties and rights of Seller set
forth on Schedule 2.1(a)(xvi).

(b) Excluded Assets. Notwithstanding the foregoing, the following assets of
Seller are expressly excluded from the purchase and sale contemplated hereby
(collectively, the “Excluded Assets”) and, as such, are not included in the
Purchased Assets and Seller shall retain all of its right, title and interest
thereto:

(i) all of Seller’s rights and remedies under or pursuant to this Agreement and
the other Transaction Documents, including all indemnification rights, Closing
Consideration, Holdback Shares and the Earnout Consideration;

(ii) Seller’s organizational documents, minute books, Tax Returns and other
documents relating to the organization and existence of Seller as an entity;

(iii) any right to receive mail and other communications addressed to Seller to
the extent relating to the Excluded Assets or the Excluded Liabilities;

(iv) all Contracts of Seller that are not Included Contracts (the “Excluded
Contracts”);

(v) any records relating to the operation of the Business that Seller is
required by Law to retain in its possession (provided that copies of any such
records that are not otherwise listed as Excluded Assets in this Section 2.1(b)
will, to the extent permitted by Law, be provided to Purchaser at the Closing);

(vi) all equity and other ownership interests in Seller and the Selling
Subsidiaries;

(vii) all Tax refunds and related rights and claims owing to Seller (or rights
of Seller thereto) relating to Taxes for a Pre-Closing Tax Period (other than in
respect of any Taxes to be paid by Purchaser pursuant to Section 8.1(a));

(viii) the sponsorship of, all rights, title and interests in, and all assets
maintained pursuant to or in connection with, any Seller Plan, or any Plan or
any other compensation or benefit program, plan, policy, agreement, Contract or
arrangement relating thereto at any time maintained, sponsored, contributed or
required to contributed to by any of Seller’s Affiliates or with respect to
which Seller or any of its Affiliates has any Liability;

(ix) all cash and cash equivalents as of the Closing Date, all bank accounts and
deposits into such bank accounts following Closing;

(x) all rights, title and interest of Seller with respect to any real property,
whether owned or leased;

 

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(xi) all insurance policies and rights to insurance claims, related refunds and
proceeds including, but not limited to, all D&O policies and tail policies;

(xii) all rights, claims, causes of action, lawsuits, judgments, and demands of
any nature of Seller or any of the Selling Subsidiaries or any of their
respective Affiliates to the extent arising out of any Excluded Asset or any
Excluded Liability; and

(xiii) all other assets of Seller that are not Purchased Assets.

2.2 Limited Assumed Liabilities and Excluded Liabilities.

(a) Limited Assumed Liabilities. Subject to the terms of this Agreement (and
excluding the Excluded Liabilities), at, from and after the Closing Date,
Purchaser will assume and agree to pay, defend, discharge and perform, as and
when due, all Liabilities of Seller related to the Purchased Assets including
all Included Contracts, to the extent arising and to be performed after the
Closing Date and any Liability expressly set forth in Schedule 2.2(a)
(collectively, the “Assumed Liabilities”). For clarification, Purchaser is not
assuming any Liabilities arising from or related to any facts or circumstances
before the Closing and all such Liabilities shall be Excluded Liabilities.
Assumed Liabilities associated with deferred revenue shall be limited to those
set forth on Schedule 4.5(b).

(b) Excluded Liabilities. Except for Assumed Liabilities as expressly provided
in Section 2.2(a) above, Purchaser will not assume or be liable for any
Liabilities of Seller or any other Liabilities whatsoever related to the
Business and/or the Excluded Assets (all such Liabilities, other than the
Assumed Liabilities, the “Excluded Liabilities”). Without limiting the
generality of the foregoing, the “Excluded Liabilities” include, without
limitation, the following Liabilities:

(i) all Liabilities in respect of any Included Contract as a result of (A) any
transaction, status, event, condition, occurrence or situation existing,
occurring or arising on or prior to the Closing Date, (B) any breach of any
Contracts occurring on or prior to the Closing Date, (C) any violation of law,
breach of warranty, tort or infringement occurring on or prior to the Closing
Date, or (D) any charge, complaint, action, suit or other Proceeding related to
any of the matters or items described in (A), (B) or (C) of this subclause (i);

(ii) (A) all liabilities relating to Taxes attributable to or imposed upon
Seller (or for which Seller may otherwise be liable, including as a transferee,
successor, by contract or otherwise), for any Pre Closing Tax Period (or
portions thereof) ending on or prior to the Closing Date, except as provided in
Section 8.1(a), (B) all liabilities and obligations relating to Taxes
attributable or imposed on or with respect to the Purchased Assets for any
Pre-Closing Tax Period (including, in each case and without limitation, all
liabilities of Seller for Taxes related to the transactions contemplated by this
Agreement or thereafter), (C) all liabilities of Seller for the unpaid Taxes of
any Person under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or non-U.S. law), by contract, as a transferee or successor, or
otherwise, and (D) any liability for Taxes of another Person as a result of a
contract or agreement entered into on or prior to the Closing;

(iii) all Liabilities of Seller for costs and expenses incurred by Seller in
connection with the negotiation, documentation and consummation of the
transactions contemplated hereby;

(iv) all Liabilities of Seller under or pursuant to the Transaction Documents;

 

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(v) all Liabilities arising out of or relating to the Excluded Assets;

(vi) any Liability or obligation arising out of, relating to, resulting from or
caused by any transaction, status, event, condition, occurrence or situation
existing, arising or occurring in connection with the ownership or operation of
the Business and/or the Purchased Assets on or prior to the Closing, including,
but not limited to, any Liabilities arising in connection with the employment,
engagement, or service with, or termination of employment, engagement, or
service from, Seller or any of its Affiliates of any Person (including
Liabilities arising in connection with the employment, engagement or termination
of any Transferred Employee on or prior to the Closing);

(vii) any Liability to any current or former equityholder of Seller;

(viii) all Liabilities arising out of or relating to any Seller Plan including,
for greater certainty and without limiting the generality of the foregoing, any
Liability or obligation arising out of, relating to, resulting from or caused by
the sponsorship or administration of any Seller Plan or the participation of
Seller or any Transferred Employee in any Seller Plan, and any Liability at any
time arising under, pursuant to, in respect of, resulting from, attributable to,
or in connection with any Seller Plan including under any related contract,
agreement, plan or insurance policy, and the sponsorship of and any Liability at
any time arising under, pursuant to or in connection with any Plan or any other
compensation or benefit program, plan, policy, Contract, agreement or
arrangement at any time maintained, sponsored, contributed or required to
contributed to by any of Seller’s Affiliates or with respect to which Seller or
any of its Affiliates has any Liability;

(ix) all Liabilities for any Indebtedness of Seller or the Business (including
under any Contract evidencing or relating to any such Indebtedness);

(x) all warranty or product liability claims to the extent related to,
associated with or arising out of the ownership, operation, use or control of
the Purchased Assets prior to the Closing;

(xi) any and all Liabilities and obligations relating to any businesses retained
by Seller and/or any of its Affiliates, including as may relate to or arise from
the conduct of their respective business(es) from and after the date Closing
Date;

(xii) any Liability expressly set forth in Schedule 2.2(b); and

(xiii) all Liabilities and obligations with respect to any of the matters and/or
Contracts set forth on Schedule 2.2(b)(xi).

For purposes of this Section 2.2(b), “Seller” shall be deemed to include any
predecessors to Seller and any Person with respect to which Seller is a
successor in interest (including by operation of law, merger, liquidation,
consolidation, assignment, assumption or otherwise).

2.3 Consideration. The consideration to be paid by Purchaser to Seller for the
Purchased Assets shall consist of the Closing Consideration, the Holdback Shares
and the Earnout Consideration (collectively, the “Consideration”).

(a) Closing Consideration. The “Closing Consideration” shall mean the Cash
Consideration and the Closing Share Consideration, collectively.

 

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(i) Cash Consideration. “Closing Cash Consideration” shall mean $1,000,000 less
the $50,000 good faith, non-refundable deposit (the “Deposit”), previously made
by Purchaser to Seller, which Deposit is credited towards the Closing Cash
Consideration, as adjusted based on the Seller’s Closing Net Working Capital, as
set forth in Section 2.4 below; provided, however, notwithstanding anything to
the contrary provided herein or elsewhere, in the event the Closing for any
reason does not occur, the Deposit shall be retained by the Seller.

(1) At Closing, the Cash Consideration shall be first used to pay any
Transaction Expenses, and second to pay any Seller Severance Obligation Amount,
in each case if any such amounts remain unpaid at Closing, in the amounts and to
the Persons as indicated by the Payment Schedule; and

(2) After payment of any remaining unpaid Transaction Expenses and Severance
Obligation Amount, the remaining portion of the Cash Consideration shall be
distributed to the Seller and/or its designees as indicated by the Payment
Schedule.

(ii) Closing Share Consideration. “Closing Share Consideration” shall mean a
number of shares of Parent Stock equal to (x) $2,000,000 divided by the Parent
Stock Price, rounded up to the nearest whole share of Parent Stock minus (y) the
Holdback Shares. At Closing, the Closing Share Consideration shall be issued to
the Seller and/or its designees as indicated by the Payment Schedule.

(b) Holdback Shares. “Holdback Shares” shall mean a number of shares of Parent
Stock equal to $150,000 divided by the Parent Stock Price, rounded up to the
nearest whole share.

(i) At Closing, the Holdback Shares will be issued to the Holdback Share Agent,
which shall hold and release such Holdback Shares pursuant to and in accordance
with the Holdback Share Agreement. At any Holdback Distribution Date (as defined
in Section 7.1), the Holdback Shares shall be distributed to the Seller and/or
its designees.

(c) Earnout Consideration. “Earnout Consideration” shall mean a number of shares
of Parent Stock equal to the CY 2019 Earnout Amount and the CY 2020 Earnout
Amount (as the case may be) divided by the Parent Stock Price, rounded up to the
nearest whole share; provided, however, if the calculation would result in the
issuance of a total number of shares of Parent Stock issued pursuant to this
Agreement in excess of the Parent Stock Maximum, then the Earnout Consideration
instead will be paid out in shares of Parent Stock up to the Parent Stock
Maximum, after which any remaining Earnout Amount will be paid out in cash in
immediately available funds through a wire transfer to a bank account designated
by the Seller in writing to the Purchaser. All Earnout Amounts shall be
calculated as provided in Section 2.7 hereof.

2.4 Cash Consideration Adjustment.

(a) Definitions. As used in this Section 2.4 the following terms have the
following meanings:

(i) “Accounts Receivable” means gross accounts receivable for products shipped
and services rendered as of the Closing, less sales returns and allowances,
rebates and discounts.

 

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(ii) “Closing Net Working Capital” means (A) the Current Assets of the Seller,
less (B) the Current Liabilities of the Seller, determined as of the open of
business on the Closing Date, and excluding, without duplication or double
counting, any Transaction Expense or any Seller Severance Obligation Amount.

(iii) “Current Assets” means Accounts Receivable, inventory and prepaid expenses
that constitute and/or relate to Purchased Assets, but excluding deferred Tax
assets, each determined in accordance with GAAP applied using the same
accounting methods, practices, principles, policies and procedures, with
consistent classifications, judgments and valuation and estimation methodologies
that were used in the preparation of the annual Financial Statements for the
most recent fiscal year end as if such accounts were being prepared and audited
as of a fiscal year end. The Current Assets of the Seller shall equal the amount
set forth in the Closing Net Working Capital Statement (as defined below).

(iv) “Current Liabilities” means accounts payable, accrued Taxes whether or not
due (including the employer portion of employment-related Taxes with respect to
any transaction consideration payable to Seller employees at, prior to or
substantially contemporaneous with the Closing and in connection with the
Closing, that constitute Assumed Liabilities (other than Transaction Expenses
and the Seller Severance Obligation Amount)), and accrued expenses, determined
in accordance with GAAP applied using the same accounting methods, practices,
principles, policies and procedures, with consistent classifications, judgments
and valuation and estimation methodologies that were used in the preparation of
the annual Financial Statements for the most recent fiscal year end as if such
accounts were being prepared and audited as of a fiscal year end. The Current
Liabilities of the Seller shall equal the amount set forth in the Closing Net
Working Capital Statement.

(b) Adjustment Amount. The Cash Consideration shall be adjusted as follows:

(i) If the Closing Net Working Capital equals a number that is a positive
number, the Cash Consideration shall be increased by such amount.

(ii) If the Closing Net Working Capital equals zero, the Cash Consideration
shall not be adjusted.

(iii) If the Closing Net Working Capital equals a number that is a negative
number, the Cash Consideration shall be reduced by such amount.

(iv) At least two (2) Business Days before the Closing, the Seller shall prepare
and deliver to Purchaser (A) a statement setting forth its good faith estimate
of Closing Net Working Capital, along with an estimated balance sheet of the
Seller as of the Closing Date (without giving effect to the transactions
contemplated herein) (the “Closing Net Working Capital Statement”), and (B) a
certificate of the Chief Financial Officer (or the functional equivalent) of
Seller that the Closing Net Working Capital Statement was prepared in accordance
with GAAP applied using the same general accounting methods, practices,
principles, policies and procedures, with consistent classifications, judgments
and valuation and estimation methodologies that were used in the preparation of
the annual Financial Statements for the most recent fiscal year end as if such
Closing Net Working Capital Statement was being prepared and audited as of a
fiscal year end.

 

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(c) Schedule 2.4; Currency Conversion. Attached hereto as Schedule 2.4, for
illustrative purposes only, is a sample Closing Net Working Capital Statement
using historical unaudited numbers reflecting agreed line items to be used in
the actual Closing Net Working Capital Statement to be prepared and delivered
pursuant to this Section 2.4. The Parties agree that, notwithstanding anything
to the contrary provided herein or elsewhere, the actual financial and other
information and figures set forth on Schedule 2.4, are not to be considered
representations, warranties, projections, estimates and/or disclosures by Seller
for any purpose including, but not limited to, for determining Current Assets,
Current Liabilities, Closing Net Working Capital or otherwise, and Seller makes
no representation, warranty, covenant and/or agreement regarding such items.
Notwithstanding Section 9.6(b)(v) hereof, Seller may elect to prepare the
Closing Net Working Capital Statement in Canadian dollars, in which case the
adjustment amount, if any will be calculated based on the applicable exchange
rate as reported by the Wall Street Journal on the Business Day immediately
prior to the Closing.

2.5 Payment Schedule. At least three (3) Business Days prior to the Closing
Date, Seller shall deliver to the Purchaser a definitive Payment Schedule (the
“Payment Schedule”), certified by the President of the Seller and accurately
setting forth:

(a) all information necessary to allow the Purchaser to pay or issue (or cause
to be paid or issued), as applicable, the Consideration as set forth in
Section 2.3, including the Closing Consideration, Cash Consideration, Company
Severance Obligation Amount, Closing Share Consideration, Purchaser Stock Price,
Earnout Consideration (presented as if the maximum Earnout Consideration is
paid) and Transaction Expenses (including an indication of which Transaction
Expenses will remain unpaid at Closing);

(b) the name, address and email address (to the extent available) of each Person
receiving a portion of the Consideration and the portion of the Closing
Consideration, Holdback Shares and Earnout Consideration each such Person or
entity may be entitled to receive (with the Holdback Shares and Earnout
Consideration presented as if the maximum amounts are paid out to the Person(s)
listed); and

(c) detail with regard to the flow of cash funds that are required to be made on
or within one (1) Business Day following the Closing Date, including recipient
name, wire instructions, and amount to be paid.

2.6 Closing Transactions.

(a) Closing. On the terms contained in this Agreement, the closing of the
transactions contemplated by this Agreement (the “Closing”) shall take place
remotely on the date and time as may be mutually agreeable to the Parties and
currently anticipated to be at 10:00 a.m. Pacific Time on or around January 2,
2019. The date and time of the Closing are herein referred to as the “Closing
Date”.

(b) Closing Transactions. On the terms contained in this Agreement, the Parties
shall consummate the following “Closing Transactions” on the Closing Date:

(i) Seller shall convey all of the Purchased Assets to Purchaser and Seller
shall deliver to Purchaser the duly executed Bill of Sale and such other
appropriately executed instruments of sale, transfer, assignment, conveyance and
delivery, assignments, Lien releases and all other instruments of conveyance
which are reasonably necessary or desirable to effect transfer to Purchaser of
good and marketable title to the Purchased Assets (free and clear of all Liens
(other than Permitted Liens)), it being understood that all of the foregoing
shall be reasonably satisfactory in form and substance to Purchaser, Seller and
each of their respective legal counsel;

 

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(ii) Purchaser shall assume from Seller all of the Assumed Liabilities pursuant
to the Assumption Agreement and Purchaser shall deliver to Seller the duly
executed Assumption Agreement and such other appropriately executed instruments
which are reasonably necessary or desirable to effect Purchasers assumption from
Seller of the Assumed Liabilities;

(iii) Purchaser shall deliver to Seller and/or its designees (i) by wire
transfer of immediately available funds to an account or accounts designated by
Seller the Closing Cash Consideration and (ii) the Closing Share Consideration
and the Holdback Shares, which shall be simultaneously delivered to the Holdback
Share Agent, in each case as presented in the Payment Schedule; and

(iv) Seller and Purchaser shall deliver the certificates, documents and
instruments required to be delivered by or on behalf of such Person under
Article III hereof.

2.7 Earnout Consideration.

(a) General. Seller (and/or its designees as provided in the Payment Schedule),
shall be entitled to receive additional payments (each an “Earnout Payment”),
based upon aggregate Eligible Products revenues for (i) calendar year 2019
(January 1, 2019 – December 31, 2019) (“CY 2019”), and (ii) calendar year 2020
(January 1, 2020 – December 31, 2020) (“CY 2020”). The dollar value of each
Earnout Payment (each an “Earnout Amount”), shall be calculated as provided in
this Section 2.7. The Earnout Amount payable to Seller for CY 2019, shall be the
“CY 2019 Earnout Amount” and for CY 2020 shall be the “CY 2020 Earnout Amount.”

(b) Eligible Product Targets.

(i) the Freedom Products and Services target is $1,035,000 (the “Freedom
Target”); and

(ii) the EMPS target is $4,336,000 (the “EMPS Target” and together with the
Freedom Target, collectively, the “Targets.”)

(c) Earnout Amounts. The CY 2019 Earnout Amount and the CY 2020 Earnout Amount
shall be based on revenues from Freedom Products and Services and EMPS for CY
2019 and CY 2020 against the respective Targets as provided below.

(i) CY 2019 Earnout Amount. The CY 2019 Earnout Amount shall equal the sum of
(A) Freedom Products and Services Earnout Amounts for CY 2019, plus (B) the EMPS
Earnout Amounts for CY 2019 calculated as follows:

 

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A. CY 2019 Freedom

Products and

Services Earnout

Amount Calculations

  

Revenues from Freedom

Products and Services

for CY 2019

  

Freedom Products and

Services Earnout Amounts

for CY 2019

A1.    Equal to or greater than $1,035,000 (100% of Freedom Target), but less
than $1,552,000 (150% of Freedom Target)    $750,000 (if only A1 achieved) A2.
   Equal to or greater than $1,552,500 (150% of Freedom Target), but less than
$4,524,000   

An additional $250,000

($1,000,000 in the aggregate resulting from A1 and A2 being achieved)

A3.    Equal to or greater than $4,524,000   

An additional $1,500,000

($2,500,000 in the aggregate resulting from A1, A2 and A3 being achieved)

Total Potential Maximum Earnout Amount from Freedom Products and Services for CY
2019      

$2,500,000

(If A1, A2 and A3 are achieved)

B. CY 2019 EMPS

Earnout Amount

Calculations

  

EMPS Revenues for CY

2019

  

EMPS Earnout Amount

for CY 2019

B1.    Equal to or greater than $4,366,000 (100% of EMPS Target), but less than
$6,549,000 (150% of EMPS Target)    $500,000 B2.    Equal to or greater than
$6,549,000 (150% of EMPS Target)    An additional $500,000 ($1,000,000 in the
aggregate resulting from B1 and B2 being achieved) Total Potential Maximum
Earnout Amount from EMPS for CY 2019       $1,000,000

C. CY 2019

Aggregate Earnout

Amount Calculations

  

CY 2019 Earnout Amount

  

Conditions to be Met in CY 2019 to Earn
Applicable CY 2019 Earnout Amount

   $500,000    If B1 only is achieved    $750,000    If A1 only is achieved   
$1,000,000    If A1 and A2 are achieved; or if B1 and B2 are achieved

 

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   $1,250,000    If A1 and B1 are achieved    $1,500,000    If A1, A2 and B1
achieved    $1,750,000    If A1, B1 and B2 are achieved    $2,000,000    If A1,
A2, B1 and B2 are achieved    $2,500,000    If A1, A2 and A3 are achieved   
$3,000,000    If A1, A2, A3 and B1 are achieved Total Potential Aggregate
Maximum Earnout for Eligible Products in CY 2019    $3,500,000    If A1, A2, A3,
B1 and B2 are achieved    $0    If neither A1 or B1 achieved

(ii) CY 2020 Earnout Amount. The CY 2020 Earnout Amount shall equal the sum of
(A) the Freedom Products and Services Earnout Amount for CY 2020, plus (B) the
EMPS Earnout Amount for CY 2020, calculated as follows:

 

A. CY 2020 Freedom

Products and Services

Earnout Amount

Calculations

  

Revenues from Freedom

Products and Services

for CY 2020

  

Freedom Products and

Services Earnout Amounts

for CY 2020

If Freedom Products and Services revenues for CY 2019 are (1) less than
$1,035,000 (100% of Freedom Target) and as a result no Earnout Amount for
Freedom Products and Services is earned for CY 2019, (2) greater than $1,035,000
(100% of Freedom Target), but less than $1,552,500 (150% of Freedom Target), and
as a result only $750,000 Earnout Amount is earned for Freedom Products and
Services for CY 2019, or (3) greater than $1,552,500 (150% of Freedom target),
but less than $4,524,000, and as a result only $1,000,000 of Earnout Amount for
Freedom Products and Services is earned for CY 2019, then, subject to
Section 2.7(d)(iii), up to $1,750,000 of additional Earnout Amount for Freedom
Products and Services can be earned for CY 2020 as follows: A1.    $1,552,500
(150% of Freedom Target) but less than $4,524,000    $250,000 A2.    $4,524,000
or greater    An additional $1,500,000 ($1,750,000 in the aggregate) earned in
CY 2019

 

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Total Potential Maximum Earnout Amount from Freedom Products and Services for CY
2020       $1,750,000

B. CY 2020 EMPS

Earnout Amount

Calculations

  

EMPS Revenues for CY

2020

  

EMPS Earnout Amount

for CY 2020

If EMPS revenues for CY 2019 are (1) less than $4,366,000 (100% of EMPS Target),
and as a result no Earnout Amount for EMPS is paid in CY 2019, or (2) greater
than $4,366,000 (150% of EMPS), but less than $6,549,000 (150% of EMPS) for CY
2019, and as a result only $500,000 of Earnout Amount is earned for EMPS in CY
2019, then, subject to Section 2.7(d)(iii), up to $500,000 of additional Earnout
Amount for EMPS can be earned for CY 2020 as follows: B1.    $6,549,000 (150% of
EMPS Target) or greater    $500,000

C. CY 2019

Aggregate Earnout

Amount for Eligible

Product Calculations

  

CY 2020 Earnout

Amount

  

Conditions to be Met in CY

2020 to Earn Applicable

CY 2020 Earnout Amount

   $250,000    If A1 only achieved    $500,000    If B1 only achieved   
$750,000    If A1 and B1 are achieved    $1,750,000    If A1 and A2 are achieved
Total Potential Aggregate Maximum Earnout Amount for Eligible Products in CY
2020    $2,250,000    If A1, A2 and B1only are achieved    $0    If A1 and B1
not achieved

(d) Certain Clarifications Related to Section 2.7(c). For avoidance of doubt and
for clarification purposes:

(i) If revenues from Freedom Products and Services are less than: (1) $1,035,000
(100% of Freedom Target) for CY 2019, no Earnout Amount from Freedom Products
and Services will be earned for CY 2019, or (2) $1,552,000 (150% of Freedom
Target) for CY 2020, no Earnout Amount from Freedom Products and Services will
be earned for CY 2020;

 

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(ii) If revenues from EMPS are less than (1) $4,366,000 (100% of EMPS Target)
for CY 2019, no Earnout Amount from EMPS will be earned for CY 2019, or (2)
$6,549,000 (150% of EMPS Target) for CY 2020, no Earnout Amount from EPMS will
be earned for CY 2020;

(iii) No Earnout Amount earned in CY 2019 from Freedom Products and Services or
EMPS can be earned again in CY 2020.

(e) Revenues for Eligible Products. Revenue from Eligible Products shall mean
the sum of the following (the calculation and determination of which shall be
based on GAAP):

(i) With respect to the Eligible Products that constitute hardware, the dollar
value of such Eligible Products that (A) shipped, or (B) could reasonably have
been shipped based on the satisfaction of the applicable shipping conditions and
customary shipping lead times of the Purchaser, with respect to this clause (B),
consistent with Purchaser’s standard terms and conditions, credit conditions and
pricing conditions (which conditions shall be generally consistent with such
applicable conditions for the industry of the Business) industry standard terms
and conditions consistent with such applicable conditions for the industry in
which the Purchaser conducts business), in each case of clauses (A) and (B), at
any time during the CY 2019 or CY 2020 and with such dollar value based on the
aggregate amounts set forth on the applicable purchase orders and applicable
supporting price lists.

(ii) With respect to the Eligible Products that constitute software, the dollar
value of such Eligible Products for which a software license key (or similar
access code) (A) has been provided, or (B) could reasonably have been provided
based on the satisfaction of the applicable conditions, with respect to this
clause (B), consistent with Purchaser’s standard terms and conditions, credit
conditions and pricing conditions (which conditions shall be generally
consistent with such applicable conditions for the industry of the Business), in
each case of clauses (A) and (B), at any time during the CY 2019 or CY 2020 and
with such dollar value based on the aggregate amounts set forth on the
applicable purchase orders and applicable supporting price lists.

(iii) With respect to services (including any non-recurring engineering services
or other consulting services) provided by Purchaser or any of its Affiliates in
respect of any Eligible Product, the dollar value of such services (A) provided,
or (B) which could reasonably have been provided based on the satisfaction of
applicable conditions, with respect to this clause (B), consistent with
Purchaser’s standard terms and conditions, credit conditions and pricing
conditions (which conditions shall be generally consistent with such applicable
conditions for the industry of the Business), in each case of clauses (A) and
(B), at any time during the CY 2019 or CY 2020 and with such value based on the
amounts set forth on the applicable contract underlying such applicable service
(and to the extent that any such services are required to be provided over a
period of time pursuant to which a portion of such services were provided during
the CY 2019 or CY 2020 and the remainder of such services will be provided
thereafter, the prorated dollar value of such services provided during the CY
2019 or CY 2020 will constitute value that will count towards the revenue for
the Eligible Products for the CY 2019 or CY 2020, as applicable).

 

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(f) “Earnout Acceleration Event” shall mean the occurrence of any of the
following prior to the expiration of the Earnout Period (for clarity purposes,
while no Earnout Acceleration Amount (as defined below), shall be payable more
than once, Earnout Acceleration Amounts not previously paid in connection with
an Earnout Acceleration Event set forth in Section 2.7(f)(i), can be earned and
payable as a result of a subsequent Earnout Acceleration Event):

(i) a direct or indirect sale, assignment, disposition and/or other transfer of
(A) all or substantially all of the Business and/or the Purchased Assets; (B) a
portion of the Eligible Freedom Products and Services that contributes
substantial value thereto that reasonably could be expected to make it unlikely
that the Freedom Products and Services Earnout Amounts for CY 2019 or the
Freedom Products and Services Earnout Amounts for CY 2020 could be achieved; or
(C) a portion of the Eligible EMPS that contributes substantial value thereto
that reasonably could be expected to make it unlikely that the EMPS Earnout
Amounts for CY 2019 or the EMPS Earnout Amounts for CY 2020 could be achieved,
including with respect to each of clauses (A), (B) and (C) the granting of an
exclusive license to the Eligible Products; provided, however, that for the
avoidance of doubt, this Section 2.7(f)(i) shall not apply to a Purchaser Change
of Control, which is addressed in Section 2.7(f)(ii).

(ii) a Purchaser Change of Control following which within six months thereafter
Purchaser or its successor (as the case may be) discontinues the Freedom
Products and Services or the EMPS, in each case other than due to market demand
– i.e., such discontinuance is due to the advent of competing alternative
products not developed by Purchaser or its successor (as the case may be) that
are materially superior with respect to cost and performance as compared to the
Freedom Products and Services or the EMPS;

(iii) Notwithstanding anything to the contrary provided in this Section 2.7 or
elsewhere, if at the time of an Earnout Acceleration Event, Parent Stock is no
longer being traded and/or listed on the Trading Market and/or in connection
with such event within a specific period of time after an Earnout Acceleration
Event, will no longer be traded and/or listed on the Trading Market, the Earnout
Consideration representing the Earnout Acceleration Amount), shall (A) be paid
within the time period set forth in Section 2.7(l) below, and (B) be paid in
(I) cash if any Earnout Acceleration Event is not in connection with a Purchaser
Change of Control transaction, and (II) such cash and/or securities as were
issuable to all holders of shares of Parent Stock if such Earnout Acceleration
Event is in connection with a Purchaser Change of Control transaction.

(g) “Eligible Products” means collectively (i) the products (whether hardware or
software and including service, maintenance and shipping revenue thereon) of the
Freedom Products and Services and any new versions, enhancements, or derivatives
thereof, including without limitation new SKUs not listed on such schedule (the
“Eligible Freedom Products and Services”); and (ii) the products (whether
hardware or software and including service, maintenance and shipping revenue
thereon) of the EMPS and any new versions, enhancements, or derivatives thereof,
including without limitation new SKUs not listed on such schedule (the “Eligible
EMPS”).

(h) Earnout Calculation Statement. Within ninety (90) days of each of
December 31, 2019 and December 31, 2020, Purchaser shall prepare and deliver to
the Seller a certificate setting forth in reasonable detail Purchaser’s good
faith calculations of (i) revenues for: Freedom Products and Services, EMPS and
aggregate Eligible Products, (ii) Earnout Amounts for: Freedom Products and
Services, EMPS and aggregate for Eligible Products, (iii) the Earnout Payments,
and (iv) Earnout Consideration all for CY 2019 and CY 2020 (as the case may be)
and a copy of all final information used in making all such

 

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calculations and determinations (the “Earnout Calculation Certificate”). Each
Earnout Consideration Certificate shall be signed by the Parent’s chief
financial officer as to the accuracy of all such information and calculations.
Purchaser shall provide to the Seller and its Representatives, reasonable access
(and copies) during normal business hours to Purchaser and Purchaser’s
Representatives including its independent accountant, and the Books and Records
of Purchaser and its relevant Subsidiaries and such other information, documents
and Persons as Seller and/or its Representatives may reasonably request in order
to verify all amounts, calculations, determinations and/or all other information
set forth and/or required to be set forth in the applicable Earnout Calculation
Certificate. Purchaser shall and shall ensure that all of its Representatives
provide reasonable cooperation to the Seller and its Representatives.

(i) Disputes. The Seller shall notify Purchaser in writing within thirty
(30) calendar days of actual receipt by Seller of the applicable Earnout
Calculation Certificate as to whether the Seller disputes any of the amounts,
calculations, determinations and/or other information set forth or required to
be set forth in the applicable Earnout Calculation Certificate, setting forth in
reasonable detail the items in dispute and the basis for the dispute (“Earnout
Dispute Notice”). For clarity, a communication from the Seller that does not
dispute the amount or method of any determination, calculation and/or other
information included and/or required to be included in any Earnout Calculation
Certificate but disputes any right of set-off Purchaser is requesting under
Section 7.3(i) for Losses that the Seller is required to indemnify a Purchaser
Party against, shall not be an Earnout Dispute Notice for the purposes of this
Section 2.7(i), and any such dispute shall be resolved solely as set forth in
Section 9.10. If (i) the Seller does not deliver an Earnout Dispute Notice
within thirty (30) calendar days of actual receipt of an applicable Earnout
Calculation Certificate, or (ii) the Seller accepts the amounts set forth in
such Earnout Calculation Certificate in writing (the earlier of (i) or (ii) the
“Preliminary Earnout Resolution Date”), the applicable Earnout Calculation
Certificate shall be deemed final and binding on Purchaser and the Seller. In
the event an Earnout Dispute Notice is delivered, Purchaser and the Seller (or
the designated representative of the Seller) shall meet within twenty
(20) Business Days of the delivery of such Earnout Dispute Notice to attempt to
resolve such dispute in good faith. If a final resolution of such dispute is
reached as reflected in an agreement in writing signed by the Seller and the
Purchaser, such writing shall be deemed final and binding on Purchaser and the
Seller (the date thereof, the “Party Earnout Resolution Date”). If no final
resolution is reached within twenty (20) Business Days of the delivery of such
Earnout Dispute Notice after good faith negotiation, either Purchaser or the
Seller may require that the dispute be resolved in accordance with the dispute
resolution mechanism set forth in Section 9.10 (the date of such resolution, the
“Arbitration Earnout Resolution Date”)

(j) Payment of Earnout Consideration. Once the Earnout Payment, Earnout Amount
and the Earnout Consideration for CY 2019 and CY 2020 (as applicable) is finally
determined on the earliest to occur of the Preliminary Earnout Resolution Date,
the Party Earnout Resolution Date and the Arbitration Earnout Resolution Date,
Purchaser shall within three (3) Business Days thereafter issue or cause to be
issued the applicable Earnout Consideration to the Seller and/or its designees
in accordance with this Agreement.

(k) During the Earnout Period, Purchaser shall and shall cause its Subsidiaries
and all of their respective officers, managers and employees to (i) maintain the
Business as a separate business unit, capable of being audited in accordance
with GAAP, and (ii) maintain separate Books and Records for the Business.
Subject to the above sentence and the other terms of this Agreement, subsequent
to the Closing, the Company shall have sole discretion with regard to all
matters relating to the operation of the Business, provided, that from Closing
through (and including) December 31, 2020, Purchaser agrees to (i) conduct the
Business of the Purchaser (and its Subsidiaries) in good faith with respect to
the achievement of the maximum Earnout Amount for CY 2019 and CY 2020, and
(ii) not to take any action or omit to take any action with the intent or
purpose of avoiding or reducing the likelihood of the Seller achieving the
maximum Earnout Amount for CY 2019 and CY 2020.

 

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(l) In the event that prior to the expiration of the Earnout Period an Earnout
Acceleration Event shall occur, Purchaser shall, within ten (10) Business Dates
of the occurrence of the Earnout Acceleration Event, issue or cause to be issued
the Earnout Consideration to the Seller or its designees (pursuant to the
Payment Schedule), which Earnout Consideration shall be calculated using the
Earnout Acceleration Amount.

(m) The “Earnout Acceleration Amount” shall be the full Earnout Amount and
Earnout Consideration for CY 2019 and CY 2020 payable to the Seller and/or its
designees, pursuant to Section 2.7 (whether or not actually earned and
regardless of whether it was, is or could be earned in the future, subject to
subsections (i) and (ii) of this Section 2.7(m)), less any Earnout Amounts
already paid to the Seller and/or its designees, provided however:

(i) In the case of an Earnout Acceleration Event under Section 2.7(f)(i)(B) only
the Freedom Products and Services Earnout Amounts for CY 2019 and/or CY 2020, as
applicable, shall be included in the calculation of the Earnout Acceleration
Amount, and in the case of an Earnout Acceleration Event under
Section 2.7(f)(i)(C) only the EMPS Earnout Amounts for CY 2019 and/or CY 2020,
as applicable, shall be included in the calculation of the Earnout Acceleration
Amount;

(ii) In the case of an Earnout Acceleration Event under Section 2.7(f)(ii) with
respect to the discontinuance of only the Eligible Freedom Products and
Services, only the Freedom Products and Services Earnout Amounts for CY 2019
and/or CY 2020, as applicable, shall be included in the calculation of the
Earnout Acceleration Amount, and in the case of an Earnout Acceleration Event
under Section 2.7(f)(ii) with respect to the discontinuance of only the Eligible
EMPS, only the EMPS Earnout Amounts for CY 2019 and/or CY 2020, as applicable,
shall be included in the calculation of the Earnout Acceleration Amount.

2.8 Exemption from Registration. The shares of Parent Stock to be issued as
Closing Share Consideration, Holdback Shares and Earnout Consideration in
connection with the transactions contemplated by this Agreement are being issued
in a transaction exempt from registration under the Securities Act, by reason of
Section 4(a)(2) thereof and/or Regulation D promulgated thereunder (a “Private
Placement”) and, therefore, may not be re-offered or resold other than in
conformity with the registration and/or qualification requirements of the
Securities Act and other applicable state blue sky securities laws and
regulations or pursuant to an exemption therefrom. Subject to the Registration
Rights provided under Section 8.10 of this Agreement, the certificates issued by
Purchaser with respect to the shares of Parent Stock issued hereunder shall be
legended to the effect described above and shall include such additional legends
as necessary to comply with applicable U.S. federal securities laws, state blue
sky securities laws and such other restrictions as shall be set forth in an
Investment Representation Letter in the form attached hereto as Exhibit C.

2.9 Nonassignable Assets. Seller shall use its commercially reasonable efforts
to obtain all consents and approvals necessary to assign to Purchaser any
Purchased Asset. To the extent that the assignment hereunder by Seller to
Purchaser of any such Purchased Asset is not permitted or is not permitted
without the consent of another Person, this Agreement shall not be deemed to
constitute an assignment of any such Purchased Asset if such consent is not
given or obtained, and Purchaser shall assume no Liabilities thereunder. Without
in any way limiting Seller’s obligations to obtain all consents and waivers
necessary for the sale, transfer, assignment and delivery of the Purchased
Assets to the Purchaser hereunder, if any such consent is not obtained or if
such assignment is not permitted irrespective of consent

 

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and the Closing hereunder is consummated, after the Closing, Seller shall
continue to use its commercially reasonable efforts to obtain such consents and
shall cooperate with Purchaser in any reasonable arrangement designed to provide
Purchaser with the rights and benefits of any and all such Purchased Assets
which are not so assigned by Seller to Purchaser at the Closing, provided that
Purchaser performs all obligation and is otherwise responsible for all
Liabilities related to any such Purchased Assets after the Closing, which
obligations and Liabilities shall be deemed Assumed Liabilities.

2.10 Post-Closing Amounts Received and Paid. All cash collected on or after the
Closing Date from receivables and sales which constitute Purchased Assets and
receivables and sales relating to the conduct of the Business by Purchaser or
its Affiliates on or after the Closing Date shall belong to, and if received by
Seller or any of its Affiliates, shall be received for the benefit and the
account of, Purchaser, and Seller shall (and cause its Affiliates to, if
applicable), within three (3) Business Days, transfer and remit to Purchaser all
such amounts received by or paid to Seller or any of its Affiliates on or after
the Closing Date. Furthermore, Seller shall take, and shall cause its Affiliates
to take, any action and execute any additional document(s) or instrument(s) of
transfer reasonably requested by Purchaser to reflect the transfer of the
Purchased Assets and if, after the Closing, is in possession of any Purchased
Asset shall deliver such Purchased Asset to Purchaser at Purchaser’s premises.
From and after the Closing Date, to the extent that Purchaser or any of its
Affiliates receives any check or any other evidence of indebtedness, payable to
the order of Seller, on account of any accounts or notes receivable which are
included in the Purchased Assets, Seller shall, at Purchaser’s election,
promptly endorse any check or other evidence of indebtedness over to Purchaser
or otherwise take any and all commercially reasonable steps requested by
Purchaser to cause such check or other evidence of indebtedness to be deposited
into Purchaser’s, or its Affiliate’s, bank account.

2.11 Withholding. Notwithstanding any other provision in this Agreement,
Purchaser shall be entitled to withhold and deduct from the consideration
otherwise payable pursuant to this Agreement such amounts as Purchaser is
required to deduct and withhold with respect to the making of such payment under
the Code or any provision of state, local or foreign Tax law. To the extent that
amounts are so withheld and paid over to the appropriate Tax authority, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding were made.

2.12 Adjustments for Capital Changes. If, between the date hereof and the
Closing (as to the Closing Share Consideration), between the date hereof and the
Holdback Distribution Date (as to the Holdback Shares), and between the date
hereof and the payment of all Earnout Payments, Earnout Amounts and Earnout
Consideration for CY 2019 and CY 2020, Parent (i) recapitalizes either through a
split up of its outstanding shares of Parent Stock into a greater number of
shares of Parent Stock or through a combination of its outstanding shares of
Parent Stock into a lesser number of shares of Parent Stock, (ii) reorganizes,
reclassifies or otherwise changes its outstanding shares of Parent Stock into
the same or a different number of shares of Parent Stock of other classes (other
than through a split up or combination of shares of Parent Stock provided for in
the previous clause), or (iii) declares a dividend on its outstanding shares of
Parent Stock payable in shares of Parent Stock or securities convertible into
shares of Parent Stock, the Closing Share Consideration, the Holdback Shares and
the Earnout Consideration, as applicable, will be proportionally and equitably
adjusted.

 

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ARTICLE III

CONDITIONS TO CLOSING AND CLOSING DELIVERABLES

3.1 Conditions to Closing.

(a) Conditions to Obligations of Each Party to Effect the Closing.

(i) Governmental and Regulatory Approvals. Approvals from any Governmental
Entity (if any) necessary for consummation of the transactions contemplated
hereby shall have been timely obtained.

(ii) No Injunctions or Regulatory Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental Entity or other legal or
regulatory restraint or prohibition preventing the consummation of the
transactions contemplated by this Agreement shall be in effect; nor shall there
be any action taken, or any Legal Requirement or Order enacted, entered,
enforced or deemed applicable to the transactions contemplated by this Agreement
that would prohibit the consummation such transactions or which would permit
consummation of such transactions only if certain divestitures were made or if
Purchaser were to agree to limitations on its business activities or operations.

(iii) Legal Proceedings. No Governmental Entity shall have notified either party
to this Agreement that such Governmental Entity intends to commence proceedings
to restrain or prohibit the transactions contemplated hereby or force
rescission, unless such Governmental Entity shall have withdrawn such notice and
abandoned any such proceedings prior to the time which otherwise would have been
the Closing Date.

(iv) Stockholder Approval. Seller shall have obtained the written consent or
vote of stockholders owning at least a majority of the outstanding shares of the
Company for the sale of the Purchased Assets to the Purchaser on the terms and
conditions set forth in this Agreement.

(b) Additional Conditions to Obligation of the Seller.

(i) Representations and Warranties. The representations and warranties of the
Purchaser contained in Article V of this Agreement shall be true and correct in
all respects (in the case of any representation or warranty qualified by
materiality or Material Adverse Effect) or in all material respects (in the case
of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date of this Agreement and on and as of the
Closing Date with the same effect as though made on such date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate in all material respects as
of such specified earlier date).

(ii) Performance. Purchaser shall have performed and complied with in all
material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Purchaser at or before the
Closing.

(iii) Officers’ Certificate. Purchaser shall have delivered to the Seller a
certificate, dated the Closing Date and executed by its Chief Executive Officer,
substantially in the form set forth in Exhibit E hereto.

(iv) No Material Adverse Effect. No Material Adverse Effect shall have occurred
with respect to the Purchaser since the date of this Agreement.

(c) Additional Conditions to the Obligations of the Purchaser.

 

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(i) Representations and Warranties. The representations and warranties of the
Seller contained in Article IV of this Agreement shall be true and correct in
all respects (in the case of any representation or warranty qualified by
materiality or Material Adverse Effect) or in all material respects (in the case
of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date of this Agreement and on and as of the
Closing Date with the same effect as though made on such date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be accurate in all material respects as
of such specified earlier date).

(ii) Performance. Seller shall have performed and complied with in all material
respects each agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Seller on or before the Closing Date.

(iii) Officers’ Certificates. Seller shall have delivered to Purchaser a
certificate, dated the Closing Date and executed by the President of Seller,
substantially in the form set forth in Exhibit F-1 hereto, and a certificate,
dated the Closing Date and executed by the Secretary of Seller, substantially in
the form set forth in Exhibit F-2 hereto.

(iv) Payment Schedule. Purchaser shall have received the Payment Schedule.

(v) No Material Adverse Effect. No Material Adverse Effect shall have occurred
with respect to Seller, the Business or the Purchased Assets since the date of
this Agreement.

(vi) Written Consent. Purchaser shall have received signatures to the Seller’s
stockholder consent to the transactions contemplated by this Agreement, and the
Investment Representation Letter from the Seller and/or its designees.

(vii) Employment Agreement. Purchaser shall have received a duly executed
employment agreement between the Purchaser and Scott Sieracki, the President of
the Seller.

3.2 Seller’s Closing Deliverables. At the Closing, Seller shall deliver or cause
to be delivered to Purchaser, as applicable, each of the following:

(a) evidence of all third party and governmental consents, approvals, filings,
releases, terminations, filings, etc. set forth on Schedule 3.1(a), if any,
required in connection with the transfer of the Purchased Assets and the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents, including without limitation, releases (in form
reasonably acceptable to Purchaser) of any and all Liens with respect to any of
the Purchased Assets;

(b) executed copies of the resolutions of (i) Seller’s, and Seller
Subsidiaries’, boards of directors or similar governing body, and (ii) Seller’s
and Seller Subsidiaries’ stockholders, authorizing the execution, delivery and
performance of this Agreement and the other Transaction Documents, and approving
the consummation of the transactions contemplated hereby and thereby;

(c) certificates of the secretary of state (or similar governing body) of the
jurisdiction in which Seller is incorporated and each jurisdiction where it is
qualified to do business (including the jurisdictions listed on Schedule 4.1)
stating that Seller is in good standing;

 

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(d) a duly executed non-foreign person affidavit from VSI dated as of the
Closing Date, sworn under penalty of perjury and in form and substance required
under the Treasury Regulations issued pursuant to Section 1445 of the Code,
stating that Seller is not a “foreign person” as defined in Section 1445 of the
Code;

(e) evidence, reasonably satisfactory to Purchaser, that the Purchased Assets
are being delivered to Purchaser at the Closing free and clear of any and all
Liabilities relating to Indebtedness of any of Seller or the Business;

(f) the Bill of Sale duly executed by Seller;

(g) an assignment and assumption agreement duly executed by the Seller (the
“Assumption Agreement”);

(h) completed Investment Representation Letters, substantially in the form
attached hereto as Exhibit C; and

(i) all other documents required to be delivered to Purchaser pursuant to
Section 2.6(b).

3.3 Purchaser’s Closing Deliverables. At the Closing, Purchaser shall deliver or
cause to be delivered to Seller (i) the Cash Consideration by wire transfer of
immediately available federal funds to an account specified by Seller in a
writing delivered to Purchaser on the Closing Date, (ii) the Closing Share
Consideration, (iii) certified copies of the resolutions of Purchaser’s board of
directors approving the transactions contemplated by this Agreement, (iv) a
Certificate of the Chief Executive Officer of the Purchaser certifying that each
of the Closing Conditions set forth in this Article III have been satisfied,
(v) the Assumption Agreement duly executed by the Purchaser, and (vi) all such
other documents, instruments and certificates required to be delivered to Seller
pursuant to Section 2.6(b).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in any disclosure schedules delivered to Purchaser by Seller
concurrently with the Parties’ execution of this Agreement, the “Disclosure
Schedule”), Seller represents and warrants to the Purchaser that the
representations and warranties contained in this Article IV by Seller are true
and correct as of the date hereof and as of the Closing Date as if made on the
Closing Date. Each item and information disclosed in the Disclosure Schedule
shall constitute an exception to the representation and warranty to which it
makes reference, shall be deemed to be disclosed to the Purchaser and shall also
constitute an exception to each other representation and warranty of Seller
herein without the necessity of cross reference and/or repetitive disclosure to
the extent that the relevance to other representations and warranties is readily
apparent from the text of the disclosures. The inclusion of the items and
information in the Disclosure Schedule shall not be construed as an admission by
Seller that such information is or is not material.

4.1 Organization and Power. Each of VSI and the Selling Subsidiaries is a
corporation or limited liability company duly formed and organized, validly
existing and in good standing under the Laws of its jurisdiction of organization
and is qualified to do business in every jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification, except where the
failure to so qualify has not had or would not reasonably be expected to have a
Material Adverse Effect. Each jurisdiction in which each of VSI and the Selling
Subsidiaries is qualified to do business is set forth on Schedule 4.1. Each of
VSI and the Selling Subsidiaries has full corporate power and authority and all
Licenses necessary to own and operate the Purchased Assets owned and operated by
Seller, and to carry on the Business as now conducted.

 

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4.2 Subsidiaries. Schedule 4.2 sets forth a true, correct and complete list of
all of the Subsidiaries of Seller and sets forth, with respect to each such
Subsidiary, the jurisdiction in which it is incorporated or organized, the
number of shares of its authorized capital stock or interests, and the number
and class of shares or interests thereof duly issued and outstanding. Other than
the Subsidiaries set forth on Schedule 4.2, Seller does not own, beneficially or
otherwise, any equity interest of, direct or indirect equity interests in, or
other financial interest in any other Person. There are no outstanding options,
warrants, calls, puts, subscriptions or other rights to acquire, issue, sell,
deliver, transfer, repurchase or redeem from any Subsidiary of Seller any equity
interests of such Subsidiary. Seller is not, nor are any of its Subsidiaries
(i) a participant in any joint venture, partnership, or similar arrangement with
any Person and (ii) required to make any investment (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with respect to the
obligations of, any other Person.

4.3 Authorization of Transaction. Subject to stockholder approval, VSI and each
of the Selling Subsidiaries has full entity power and authority to execute and
deliver the Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The board of directors of VSI and
each of the Selling Subsidiaries has duly approved this Agreement and all other
Transaction Documents to which VSI and each of the Selling Subsidiaries is a
party and have duly authorized the execution and delivery of this Agreement and
all other Transaction Documents to which it is a party and the consummation of
the transactions contemplated hereby and thereby. No other organizational,
equityholder or other proceedings on the part of Seller (or any of its
equityholders) are necessary to approve and authorize the execution and delivery
of this Agreement and/or any of the other Transaction Documents to which VSI and
each of the Selling Subsidiaries is a party and the consummation of the
transactions contemplated hereby and thereby. This Agreement and all other
Transaction Documents to which VSI and each of the Selling Subsidiaries is a
party have been duly executed and delivered by Seller and (assuming the due
execution and delivery hereof and thereof by the other parties thereto)
constitute the valid and binding agreements of Seller, enforceable against VSI
and each of the Selling Subsidiaries in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar Laws affecting creditors’ rights generally and subject,
as to enforceability, to general principles of equity.

4.4 Absence of Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby by VSI and each of the Selling
Subsidiaries do not (i) materially conflict with or result in any material
breach of any of the terms, conditions or provisions of, (ii) constitute a
material default under, (iii) result in a material violation of, (iv) give any
third party the right to modify, terminate or accelerate any material obligation
under, (v) result in the creation of any Lien upon the Purchased Assets, or
(vi) require any material authorization, consent, approval, exemption or other
action by or notice or declaration to, or filing with, any Governmental
Authority or any other Person or group of Persons, under the provisions of the
certificate of formation or operating agreement of VSI and each of the Selling
Subsidiaries (or any of its other organizational documents) or any Contract,
Law, License, judgment, order or decree to which VSI and each of the Selling
Subsidiaries, any of the Purchased Assets and/or the Business are subject, bound
or affected the result of which would have a Material Adverse Effect.

 

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4.5 Financial Schedules.

(a) Schedule 4.5(a) sets forth the unaudited statements of the Seller as at and
for (i) the years ended December 31, 2017 and December 31, 2016 and (ii) for the
nine (9) month period ended September 30, 2018, including in each of clauses
(i) and (ii), a balance sheet and statement of income (collectively, the
“Financial Statements”). Each of the Financial Statements is complete and
correct in all material respects and each of the Financial Statements have been
prepared in accordance with GAAP (except no footnotes have been prepared related
thereto) applied on a consistent basis throughout the periods indicated and
present fairly, in all material respects, the financial condition of Seller at
their respective dates. For the purposes hereof, September 30, 2018 is referred
to as the “Balance Sheet Date.”

(b) Schedule 4.5(b) lists all deferred revenue of the Business associated with
the Assumed Liabilities.

(c) The Seller, and its Subsidiaries make and keep books, records and accounts
which, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of its assets. Seller maintains systems of internal accounting
controls sufficient to provide reasonable assurances that transactions are
recorded as necessary to permit the preparation of financial statements in
conformity with GAAP.

4.6 Absence of Undisclosed Liabilities. The Business does not have any material
obligations or Liabilities of any nature at or as of the Closing Date, except
(i) those incurred in the conduct of the Seller’s Business and/or relating to
the Purchased Assets since the Seller Balance Sheet Date in the ordinary course,
consistent with past practice, which are of the type that ordinarily recur and,
individually or in the aggregate, are not material in nature or amount and do
not result from any breach of Contract, warranty, infringement, tort or
violation of Legal Requirement, (ii) those incurred by Seller in connection with
the execution and performance of this Agreement, the other Transaction documents
and the transactions contemplated hereby and thereby, (iii) obligations under
executory Contracts, and (iv) other Liabilities and obligations to the extent
expressly disclosed in this Agreement or the Schedules attached hereto
(including the Financial Statement).

4.7 Absence of Certain Developments. Since December 31, 2017 and other than as a
result of and/or with respect to the transactions contemplated hereby and/or
previously disclosed to the Purchaser in writing including in Financial
Statements made available to Purchaser, neither the Business nor any Purchased
Assets has: (a) suffered a Material Adverse Effect or suffered any material
theft, damage, destruction or casualty loss that is not covered by insurance;
(b) sold, leased, assigned, distributed, licensed, sublicensed, transferred or
otherwise encumbered a portion of its assets or properties (tangible or
intangible), except for sales of inventory or services in the ordinary course of
business to unaffiliated third Persons on an arm’s length basis, or canceled
without fair consideration any material debts or claims owing to or held by it;
(c) entered into, amended or terminated any material Contract or License or
materially changed any business practice; (d) made, granted or promised any
bonus, severance, retention or other incentive amount or any wage, salary,
compensation or benefit increase to any current or former director, officer,
employee or sales representative, group of employees, individual service
provider or consultant; (e) adopted, entered into, amended or terminated any
Plan, other than as required by Law; (f) entered into any transaction with any
Insider (or any Affiliate of any Insider); (g) conducted its cash management
customs and practices other than in the ordinary course of business (including
with respect to maintenance of working capital balances, maintenance of
inventory levels, collection of accounts receivable and payment of accounts
payable); (h) failed to make any material capital expenditures that were
previously budgeted or scheduled to be made; (i) offered any discounts on any of
its products or services or any promotions, rebates, coupons or special offers
with respect to any of its products or services with terms and conditions that
differ materially from the terms and conditions previously offered by Seller
with respect to the Business; (j) changed in any material respect any of the
terms and conditions with respect to the pricing of any of its products or
services (including any terms and conditions that are ancillary to, or otherwise
affect, the aggregate price paid for any of its products or services) that
differ from the terms and conditions previously offered by Seller with respect
to the Business; and/or (k) committed or agreed to any of the foregoing.

 

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4.8 Title to Properties; Sufficiency of Assets.

(a) Seller does not own any real property.

(b) Schedule 4.8(b) sets forth the address of each Leased Real Property, and a
true and complete list of all Leases (including all amendments, extensions,
renewals, guaranties and other agreements with respect thereto) for each such
Leased Real Property. Seller has made available to Purchaser true, correct,
complete and accurate copies of each of the Leases described in Schedule 4.8(b)
With respect to each Lease listed on the Schedule 4.8(b): (i) such Lease is
legal, valid, binding, enforceable and in full force and effect; (ii) to
Seller’s Knowledge, no party to such Lease has repudiated and/or is in material
breach of any provision thereof; (iii) to Seller’s Knowledge, there are no
disputes as to such Lease; (iv) such Lease has not been modified in any respect,
except to the extent that such modifications are disclosed by the documents made
available to Purchaser; and (v) Seller has not assigned, transferred or
encumbered (other than a Permitted Lien) any interest in such Lease.

(c) Other than Liens that will be removed at or prior to Closing, as set forth
on Schedule 4.8(c)(i), Seller owns valid title, free and clear of all Liens, to,
or has valid Contract rights to use, all of the personal property and assets
used by or on behalf of the Business (including the Purchased Assets) and all
intangible personal property and assets of Seller included within the Purchased
Assets, except for Permitted Liens. At the Closing, Seller will convey to
Purchaser valid title or Contract rights to all personal property and assets
included within the Purchased Assets, free and clear of all Liens (other than
Permitted Liens). All material personal property of Seller used in the operation
of the Business are in good condition and repair in all material respects,
ordinary wear and tear expected, and are useable in the ordinary course of
business of the Business and no material personal property of Seller used in the
operation of the Business requires any repair or replacement except for
maintenance in the ordinary course of business. Except as set forth on Schedule
4.8(c)(ii), the Purchased Assets so conveyed and the rights granted to Purchaser
under this Agreement will include all of those assets, properties, rights titles
and interests of every kind and nature owned, licensed or leased by Seller used
in the Business as conducted at the Closing and will enable Purchaser to operate
the Business in the same manner as operated by Seller prior to and as of the
Closing Date.

4.9 Accounts Receivable. All of the accounts receivable of the Business
reflected on Schedule 2.1(a)(i) arise from work actually performed in the
ordinary course of business, are good and valid and represent bona fide claims
against debtor for sales and/or other charges, less allowances for doubtful
accounts. Such receivables will be paid in the ordinary course of business, and
are not subject to any defenses, counterclaims or offsets. As of the Closing
Date, (x) except as set forth on Schedule 4.9 no Person shall have any Lien on
such receivables or any part thereof (other than pursuant to any Liens granted
by Purchaser in connection with the Closing), and (y) no agreement for
deduction, free goods, services, discount or other deferred price or quantity
adjustment shall have been made with respect to any such receivables as of
September 30, 2018, other than in the or any course of business.

4.10 Inventory. All of the Reports of the Business are listed on Schedule 4.10
(the “Inventory”). The Inventory of the Business is usable and saleable in the
ordinary course of business within a reasonable period of time and without
discount outside of the ordinary course of business, and are not slow moving or
obsolete, except for Inventory which has been written down through September 30,
2018 to realizable market value. None of the Inventory is subject to any
consignment, bailment, warehousing or similar contract. As of the Closing Date,
no person shall have any Lien on such Inventory or any part thereof (other than
pursuant to any Liens granted by Purchaser in connection with Closing).

 

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4.11 No Acceleration of Rights or Benefits. (i) Neither Seller nor the Business
has made, and neither of them is obligated to make, any payment to any Person in
connection with the transactions contemplated by this Agreement and (ii) no
rights, benefits or obligations of any Person have been (or will be) accelerated
or increased as a result of the consummation of the transactions contemplated by
this Agreement.

4.12 Taxes. All Tax Returns required to be filed with respect to the Purchased
Assets, the Business, and Seller or any affiliated, consolidated, combined,
unitary or similar group of which Seller (in its capacity as owner of the
Business) is or was a member have been duly and timely filed in all required
jurisdictions, and all such Tax Returns are true, correct and complete in all
material respects and were prepared in substantial compliance with all
applicable laws and regulations. Seller has duly and timely paid all Taxes
(including estimated taxes) and other charges for which it is liable (whether or
not shown on any Tax Return) and all Taxes payable with respect to the Purchased
Assets or the Business (whether or not shown on any Tax Return) have been paid,
other than certain employer portion of employment related Taxes which will
constitute Current Liabilities as provided in Section 2.4. There are no liens
with respect to Taxes (except for liens with respect to current Taxes not yet
due) upon any of the Purchased Assets or other assets used in the Business. None
of the Purchased Assets constitute equity interests in an entity or arrangement
treated as a partnership or joint venture for U.S. federal income Tax purposes.
No written claim has been made in the prior five (5) years by an authority in a
jurisdiction where Seller does not file Tax Returns that Seller is or may be
subject to taxation by that jurisdiction. Seller has, as applicable, withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party and has timely and accurately filed all related
forms (including Forms W-2 and equivalent state forms). Seller is not a party to
nor bound by any Tax allocation or sharing agreement and Seller has no Liability
for the Taxes of any Person, as a transferee or successor, by Contract, by
applicable Law, or otherwise. Schedule 4.12 contains a list of states,
territories and jurisdictions (whether foreign or domestic) in which, to
Seller’s Knowledge, Seller is required to file Tax Returns with respect to the
Business and/or the Purchased Assets. There is no dispute or claim concerning
any Tax liability of Seller claimed or raised by any authority in writing or
otherwise to the knowledge of Seller. Seller has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency. Purchaser will not be required to include any
item of income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of
any prepaid amount received by Seller on or prior to the Closing Date. Seller
(A) has not been a member of an affiliated Group filing a consolidated federal
income Tax Return and (B) has no liability for the Taxes of any Person under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local,
or non-U.S. law), as a transferee or successor, by contract, or otherwise. With
respect to the Business and the Purchased Assets, Seller has properly collected
and remitted sales, value added and similar Taxes with respect to sales made or
services provided to its customers for which Taxes were required to be collected
and remitted, and for all sales or services that are exempt from sales, value
added and similar Taxes and that were made without charging or remitting sales,
value added or similar Taxes, received and retained any appropriate tax
exemption certificates and other documentation qualifying such sale as exempt.

4.13 Material Contracts and Commitments.

(a) Except for this Agreement and the other Transaction Documents, or those set
forth on Schedule 4.13, as of the date of this Agreement, none of the Purchased
Assets are bound by, whether written or oral, any (i) Excluded Contract,
(ii) Contract with Seller, any Insider and/or any of its Affiliates,
(iii) Contract which prohibits Seller from freely engaging in the Business
anywhere in the world, and/or (iv) Contract relating to the acquisition or sale
of the Business (or any material portion thereof).

(b) Schedule 4.13(b) sets forth a complete list of all material Contracts
relating to the Business between Seller and any consultant or independent
contractors with respect to creation or development of a Report.

 

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(c) (i) To Seller’s Knowledge, no Contract required to be disclosed on Schedule
4.13(b) has been materially breached or canceled by the other party, and Seller
has no Knowledge of any material anticipated breach by any other party to any
Contract set forth on Schedule 4.13(b), (ii) Seller has performed all the
obligations required to be performed by it prior to the Closing in connection
with the Contracts required to be disclosed on Schedule 4.13(b) in all material
respects and is not in material default under or in material breach of any
Contract required to be disclosed on Schedule 4.13(b), and, to Seller’s
Knowledge, no event has occurred which with the passage of time or the giving of
notice or both would result in a default or breach thereunder, and (iii) each
material Contract is legal, valid, binding, enforceable and in full force and
effect.

(d) Seller has made available to Purchaser true and correct copies of all
written Contracts which are required to be disclosed on Schedule 2.1(a)(ii) and
Schedule 4.13(b), in each case together with all amendments, waivers or other
changes thereto (all of which are disclosed on Schedule 4.13(b)). Schedule
4.13(b) contains an accurate and complete description of all material terms of
all oral Contracts referred to therein, if any.

4.14 Proprietary Rights.

(a) Schedule 4.14(a) sets forth a complete and correct list of all of the Owned
Business Proprietary Rights, including: (i) all patented or registered
Proprietary Rights and all pending patent applications or other applications for
registration of Proprietary Rights; and (ii) all material (x) trade names,
(y) industrial designs, (z) unregistered trademarks, and (aa) unregistered
copyright. The Owned Business Proprietary Rights are valid and the rights of the
Seller in the Owned Business Proprietary Rights are enforceable. The Owned
Business Proprietary Rights comprising granted or issued patents, registered
trademarks, industrial design registrations and copyright registrations or any
applications thereof are valid, enforceable and subsisting.

(a) Seller (i) exclusively owns and possesses all right, title and interest in
and to all of the Owned Business Proprietary Rights and (ii) has a valid and
enforceable license to use pursuant to a written license agreement set forth on
Schedule 4.14(b), all other Proprietary Rights of Seller used primarily in the
operation of the Business as conducted as of the Closing Date (the “Licensed
Business Proprietary Rights” and, collectively with the Owned Business
Proprietary Rights, the “Business Proprietary Rights”), in each case of items
(i) and (ii), free and clear of all Liens (other than Permitted Liens).

(b) All of the Business Proprietary Rights are valid and enforceable, and no
claim by any third party contesting the validity, enforceability, use or
ownership of any of the Business Proprietary Rights has, been made, is currently
outstanding or is threatened, and, to Seller’s Knowledge, there are no grounds
for same. To the Seller’s Knowledge, no loss or expiration of any of the
Business Proprietary Rights is threatened, pending or reasonably foreseeable.

(c) To Seller’s Knowledge, Seller has not, in the operation of the Business, and
the operation of the Business has not, infringed, misappropriated or otherwise
made any unlawful or unauthorized use of any Proprietary Right of any Person. To
Seller’s Knowledge, neither the conduct of the Business, nor the products and
services sold or performed by Seller in connection with the Business, nor the
use, sale or performance of such products, services, or any Business Proprietary
Rights infringes, misappropriates or otherwise makes any unlawful or
unauthorized use of, nor has infringed, misappropriated, or otherwise made
unlawful or unauthorized use of, any Proprietary Right of any Person. To
Seller’s Knowledge, no other Person is infringing, misappropriating or otherwise
making any unlawful or unauthorized use of any Business Proprietary Rights.

 

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(d) The Seller is not in breach, violation or default under any license for any
Licensed Business Proprietary Rights and no event has occurred that, with notice
or lapse of time or both, would constitute such a material breach, violation or
default by the Seller or, to the knowledge of the Seller, the other parties
thereto.

(e) All developers, at the time they created or developed the Owned Business
Proprietary Rights, (the “Developers”) were either (i) full-time employees of
the Seller or (ii) contractors, all of which assigned all rights in the Owned
Business Proprietary Rights to the Seller pursuant to valid and enforceable
written agreements, and the Developers did not incorporate any previously
existing work product or other materials proprietary to the Developers or any
third party in such creation or development. The Developers have waived in
writing their moral rights in and to the Owned Business Proprietary Rights.

(f) The Business Proprietary Rights constitutes all of the Proprietary Rights
that are necessary or otherwise required for the proper carrying on of the
Business.

(g) No (i) government funding; (ii) facilities of a university, college, other
educational institution or research center; or (iii) funding from any Persons
(other than funds received in consideration for shares in the capital of the
Seller) was used in the development of the Owned Business Proprietary Rights.

(h) In connection with its collection, use, storage, retention, disclosure, and
transfer (including, without limitation, any transfer across national borders)
and/or use of any personally identifiable information from any individuals,
including, without limitation, any customers, prospective customers, employees
and/or other third parties (collectively, “Personal Information”), including as
part of operation of the Business, the Seller is and has been in compliance with
all applicable laws in all relevant jurisdictions, the Seller’s privacy policies
and the requirements of any contract or codes of conduct to which the Seller is
a party. The Seller has commercially reasonable physical, technical,
organizational and administrative security measures and policies in place to
protect all Personal Information collected by it or on its behalf from and
against unauthorized access, use and/or disclosure. The Seller is and has been
in compliance in all material respects with all laws relating to data loss,
theft and breach of security notification obligations.

(i) The consummation of the transactions contemplated under this Agreement shall
not alter, impair or otherwise affect any rights or obligations of the Seller in
any of the Business Proprietary Rights, and, from and after the consummation of
the transactions contemplated hereby, the Seller shall maintain all of the
rights thereto without modification or impairment.

(j) The Seller has taken commercially reasonable steps to maintain and protect
each item of Owned Business Proprietary Rights, including all trade secret
rights therein, and has taken reasonable steps to maintain the confidentiality
of all portions of the trade secret information included in the Owned Business
Proprietary Rights.

(k) All use, modification, distribution and licensing by the Seller of Open
Source Materials has been done in accordance with the terms of the applicable
license(s) for such Open Source Materials, and, no such use, modification,
distribution or licensing will make the Owned Business Proprietary Rights (or
any portion thereof) subject to a license for Open Source Materials (including
claims of infringement in connection with such license), or otherwise result in
the loss or impairment of the Seller’s rights to commercialize the Owned
Business Proprietary Rights.

 

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(l) All source code in respect of any Owned Business Proprietary Rights embodied
in software (the “Owned Source Code”) (i) is currently stored in, and has never
been removed from, the Seller’s premises (ii) has remained exclusively under the
control and safekeeping of the Seller, and (iii) is not in the possession of any
former employee or consultant of the Seller. The Owned Source Code has not been
delivered or made available to any Person and the Seller has not agreed to or
undertaken to or in any other way promised to provide such Source Code to any
person.

(m) The Seller is, and, since July 1, 2014, has been, in compliance with CASL.
The Company has not received any inquiries, notices of investigation, or
enforcement actions with respect to its compliance with CASL from the Canadian
Radio-television and Telecommunications Commission (“CRTC”), or been assessed
any administrative monetary penalties by the CRTC as a result of non-compliance
with CASL, and no complaints have been filed with the CRTC with respect to the
compliance with CASL by the Seller.

(n) The Seller is under no obligation, and the transactions contemplated by this
Agreement shall not create any obligation, that would require the Owned Business
Proprietary Rights to be licenced to or licenced back to any third party.

4.15 Litigation; Proceedings. There are no Proceedings pending or, to Seller’s
Knowledge, threatened against or affecting Seller or otherwise with respect to
the Business or the Purchased Assets at law or in equity. Neither Seller nor the
Business is subject to any outstanding order, judgment or decree issued by any
Governmental Authority.

4.16 Brokerage. There are no claims for brokerage commissions, finders’ fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any Contract made by or on behalf of Seller, and Purchaser
will have no Liabilities in respect thereof.

4.17 Governmental Licenses and Permits. Schedule 4.17 contains a complete
listing and summary description of all permits, licenses, orders, approvals,
consents, certificates, registrations and other authorizations of any
Governmental Authority or other similar rights (collectively, the “Licenses”)
necessary for, used in or related to the Business. Seller owns or possesses all
right, title and interest in and to all Licenses which to Seller’s knowledge are
necessary to own and operate the Purchased Assets and to conduct the Business as
conducted on the Closing Date. Seller is in material compliance with the terms
and conditions of such Licenses. No loss or expiration of any License is pending
or, to Seller’s Knowledge, threatened or reasonably foreseeable (including as a
result of the transactions contemplated hereby) other than expiration in
accordance with the terms thereof, which terms do not expire as a result of the
consummation of the transactions contemplated hereby.

4.18 Employees and Independent Contractors.

(a) Seller is not a party to or bound by any collective bargaining agreement or
other Contract or relationship with any labor union or similar employee
representative with respect to the Business, Transferred Employees, or Purchased
Assets. There are no pending or, to the Knowledge of Seller threatened, unfair
labor practice complaints, strikes, work stoppages, slow downs, walkouts or
other material labor disputes affecting the Business or Transferred Employees,
and there have been no such disputes for the past three (3) years. To the
Knowledge of Seller, no union organizing or decertification activities are
underway or threatened with respect to Transferred Employees, and no such
activities have occurred within the last three (3) years. Seller has not engaged
in any unfair labor practice. Neither Seller nor the Business is and, to the
Knowledge of Seller, no employee of Seller is subject to any non-compete,
nondisclosure, confidentiality, employment, consulting or similar Contract
relating to, affecting or in conflict with the business

 

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activities of the Business, other than non-competes, nondisclosures,
confidentiality, employment, consulting or similar Contracts signed with the
Seller. Seller has not implemented any plant closing or mass layoff of employees
that could implicate the WARN Act, and no plant closings or employee layoffs
will be implemented by Seller within the ninety (90) days immediately following
the Closing Date. Except as would not result in material liability to the
Business or the Purchased Assets: (i) Seller has fully and timely paid all
wages, salaries, wage premiums, commissions, bonuses, overtime pay, vacation
pay, fees, and other compensation which have accrued to its current and, for the
past two (2) years, to former employees and independent contractors under
applicable Law, Contract or Seller policy; and (ii) each individual who is
providing or within the past three (3) years has provided services to Seller and
is or was classified and treated by Seller as an independent contractor,
consultant, or other non-employee service provider is or was (as applicable)
properly so classified and treated for all purposes. Schedule 4.18(a) sets forth
all Contracts between Seller and each Transferred Employee, including any
non-competes, nondisclosures, confidentiality, employment, consulting or similar
Contracts between Seller and each Transferred Employee (“Restrictive
Contracts”). Seller has released each Transferred Employee from any such
Restrictive Contracts that would prevent Seller from facilitating this
Transaction, and Seller hereby assigns the rights arising under such Restrictive
Contracts to Purchaser and Seller may not enforce such rights on and after
Closing.

(b) Schedule 4.18(b) sets out: the names of all employees; their position or
title; their status (e.g. full time, part time, temporary, casual, or seasonal);
their total annual renumeration, including a breakdown of (A) salary and
(B) bonus or other incentive compensation, it any; other terms and conditions of
their employment; their age; their total length of employment including any
prior employment that would affect calculation of years of service for any
purpose, including statutory entitlements, contractual entitlements (express or
implied) benefit entitlement or pension entitlement; and whether any employees
are on any approved or statutory leave of absence and, if so, the reason for
such absence and the expected date of return.

(c) Each Person classified as independent contractors that performs, or has
performed in the past three (3) years, services for or on behalf of the Business
(collectively, “Business Contractors”) do satisfy and have satisfied the
requirements of Law to be so classified. Seller or the Business (as applicable)
have fully and accurately reported their compensation on IRS Forms 1099 when and
if required to do so, and the name, annual compensation and the applicable term
for which such services were or are anticipated to be provided of each such
individual who provided services during the period beginning on January 1, 2017
and through the Closing Date is listed on Schedule 4.18(c).

(d) All the Transferred Employees and Business Contractors in the past three
(3) years who have had access to Confidential Information have executed forms of
confidentiality agreement which effectively restrict the use and disclosure of
Confidential Information so that Confidential Information may not be disclosed
and may be used for the benefit of the Business only. Each Person who is or was
involved in the creation or development of any product or service with respect
to the Business and on which Seller owns (or purports to own) any Proprietary
Rights has executed a valid and enforceable written agreement with Seller that
assigns to Seller all rights, title and interest in and to any and all such
Proprietary Rights with respect to such creation or development. To Seller’s
knowledge, no current or former stockholder, officer, director, employee,
consultant or contractor of Seller has any claim, right (whether or not
currently exercisable), or ownership interest in any Proprietary Right that is
material to the operation of the Business.

 

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(e) In the last twelve (12) months, none of the Transferred Employees and
Business Contractors have terminated or materially modified any of the terms of
their respective employment or engagement, as applicable, and to the Seller’s
Knowledge, none of the Transferred Employees and Business Contractors who are
currently performing services for or on behalf of the Business have any plans to
terminate or materially modify their respective employment or engagement, as
applicable.

(f) Each of VSI and the Selling Subsidiaries is in compliance with applicable
workers’ compensation laws and regulations made pursuant thereto and there are
no outstanding assessments, levies or penalties thereunder.

4.19 Employee Benefit Plans.

(a) Schedule 4.19(a) sets forth a correct, up to date and complete list of each
“employee benefit plan” (within the meaning of Section 3(3) of ERISA) (whether
or not subject to ERISA), and each other employee benefit, fringe benefit,
supplemental unemployment benefit, bonus, incentive, equity incentive, equity
compensation, profit sharing, termination, savings, change of control, pension,
retirement, post-employment, post-retirement, stock option, stock purchase,
stock appreciation, phantom stock, health, welfare, medical, dental, disability,
death, life insurance and similar plans, programs, arrangements, agreements or
practices provided for the benefit of the current or former directors, officers
or employees of the Seller, or any spouse, dependent or beneficiary of such
Persons, whether established, administered, maintained, contributed to,
sponsored, invested or funded by the Seller or any of its Affiliates or with
respect to which Seller or any of its Affiliates has any Liability, and whether
written or oral, funded or unfunded, insured or self-insured, registered or
unregistered (each a “Seller Plan”, and collectively, “Seller Plans”). Each
Seller Plan has been established, administered, maintained, contributed to,
sponsored, invested or funded in all material respects, in accordance with its
terms and in compliance with all applicable Law, including ERISA, the Code and
the Income Tax Act (Canada). Each Seller Plan that is intended to be qualified
within the meaning of Section 401(a) of the Code is so qualified, and nothing
has occurred with respect to the operation of such Seller Plan that could
reasonably be expected to cause the loss of such qualification.

(b) No Seller Plan is, and none of the Sellers nor any of their ERISA Affiliates
have at any time had any Liability with respect to, (i) an “employee pension
benefit plan” (as defined in Section 3(2) of ERISA), subject to Title IV of
ERISA, Section 302 of ERISA or Section 412 of the Code, including, a
“multiemployer plan” (as defined in Section 3(37) of ERISA), or (ii) a plan or
arrangement providing for, post-employment health or life insurance benefits or
coverage, or other retiree welfare benefits, to any Person (other than as
required under Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the
Code, or any similar state Laws, and at the sole expense of such Person). No
individual who has performed services for either Seller has been improperly
excluded from participation in any Seller Plan.

(c) All contributions (including all employer contributions and employee
salary-reduction contributions), premiums and other payments under or in
connection with each Seller Plan required to have been made under the terms of
such Seller Plan or pursuant to applicable Laws have been timely made.

(d) Any obligation or Liability of the Seller under the Seller Plans shall
remain the obligation and Liability of the Seller from and after the Closing
Date according to the terms of the Seller Plans and, without limiting the
generality of the foregoing, the Seller will have the sole responsibility for
satisfying any Liability arising in respect of the Seller Plans, including for
the avoidance of doubt, any claim Incurred or accrued by a Transferred Employee,
or a or any spouse, dependent or beneficiary of such Persons, on or prior to the
Closing Date.

 

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4.20 Insurance. Schedule 4.20 lists and describes each insurance policy
maintained by or on behalf of Seller with respect to the Business, the Purchased
Assets and/or the Assumed Liabilities. All of such insurance policies are in
full force and effect, and Seller is not and has not been in material default
with respect to its obligations under any such insurance policies.

4.21 Affiliate Transactions. No current or former officer, director, employee,
stockholder of Seller, or any Affiliate of any of the foregoing or any
individual related by marriage or adoption to any such individual or any entity
in which any such Person owns any beneficial interest (collectively, the
“Insiders”), (a) owns, directly or indirectly, in whole or in part, any property
or asset (tangible or intangible) that are used in the operation of the Business
and/or is included in the Purchased Assets, other than Excluded Assets;
(b) other than Liens on the Transferred Assets which will be removed prior to
the Closing as set forth in Schedule 4.8(c)(i), has any cause of action or other
claim whatsoever against, or owes any amount to, Seller in respect of the
Business or the Purchased Assets; and/or (c) is a party to any Contract or
material transaction with Seller and/or the Business (except in connection with
any employment or consulting engagement in the ordinary course) or owns any
interest in any material financial or ownership interest in any customer,
supplier or other material business relation of Seller and/or the Business.

4.22 Compliance with Laws. Seller, and to Seller’s Knowledge, Seller’s officers,
directors, agents and employees (in their capacities working on behalf of
Seller) are (and during the past three (3) years have been), in compliance, in
all material respects, with all Laws applicable to the Business and no claims or
other Proceedings have been filed against Seller alleging a material violation
of any such Laws, and Seller has not received written notice of any such
violations.

4.23 Environmental Matters. With respect to the Business, the Purchased Assets,
and the Leased Real Property, Seller, to its knowledge, is, and during the past
two (2) years has been, in compliance in all material respects with all
applicable Environmental and Safety Requirements. Seller has not (i) received
any written or, to the Knowledge of Seller, oral notice, report or other
information regarding any actual or alleged material violation of or Liabilities
under any Environmental and Safety Requirements with respect to the Business,
the Purchased Assets or the Leased Real Property, (ii) treated, stored, disposed
of, arranged for or permitted the disposal of, transported, handled, released,
or exposed any Person to, any Hazardous Materials, or owned, operated or leased
any property or facility contaminated by (and none of the Leased Real Property
contains or is contaminated by) any Hazardous Materials, so as would rise to any
Liabilities pursuant to any Environmental and Safety Requirements, or
(iii) manufactured, sold, repaired, marketed, installed, or distributed products
containing Hazardous Materials, so as would give rise to any Liabilities
pursuant to any Environmental and Safety Requirements. Neither Seller nor the
Business is subject to any outstanding order, judgment or decree pursuant to any
Environmental and Safety Requirements or relating to any Hazardous Materials.
Seller has made available to Purchaser all environmental reports, audits, and
other information materially bearing on environmental, health and safety matters
associated with the Business or the Purchased Assets that are in its possession
or reasonable control.

4.24 Customers and Suppliers. Schedule 4.24 sets forth: (a) each of the
customers of the Business (“Customers”) and the amount of revenue of the
Business generated from each Customer during the twelve (12) month period ended
September 30, 2018 categorized by (i) customers who have purchased
subscription-based services (with the revenue categorized per type of
subscription purchased), and (ii) customers who have purchased other products or
services of the Business on a per-transaction basis; and (b) each of the
ten (10) largest suppliers of the Business taken as a whole, determined by
purchases for the twelve (12) months ended September 30, 2018 (the “Material
Suppliers”), together with (by Material Supplier) the amount of purchases of the
Business from each such Material Supplier during the twelve (12) months ended
September 30, 2018. In the last twelve (12) months, no Customer has cancelled,
terminated or materially modified any of the terms or conditions (including,
without limitation, any pricing term) of any Contract between such Customer and
Seller, or, to the Knowledge of Seller, threatened to cancel,

 

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terminate or materially modify any of the terms or conditions (including,
without limitation, any pricing term) of any Contract between such Customer and
Seller, or, to the Knowledge of Seller, submitted any complaints or grievances
(including, without limitation, formal, informal, written or oral complaints)
regarding any Contract between such Customer and Seller or regarding the
Business in general. Seller has not received from any Customer any notice,
written or otherwise, and Seller has no Knowledge, that any Customer intends, to
cancel or otherwise materially modify its relationship with the Business. In the
last twelve (12) months, no Material Supplier has cancelled, terminated or
materially modified any of the terms or conditions (including, without
limitation, any pricing term) of any Contract between such Material Supplier and
Seller, or, to the Knowledge of Seller, threatened to cancel, terminate or
materially modify any of the terms or conditions (including, without limitation,
any pricing term) of any Contract between such Material Supplier and Seller.
Seller has not received any notice, written or otherwise, and Seller has no
Knowledge, that any Material Supplier or Customer intends to cancel or otherwise
materially modify its relationship with the Business (whether as a result of the
consummation of the transactions contemplated hereby or otherwise). Seller, to
its Knowledge, is and for the prior two (2) years has been in material
compliance with all applicable privacy and other Laws and regulations relating
to protection, collection, use, and distribution of Customer Data.

4.25 Products and Services. All products and services manufactured, sold or
delivered with respect to the Business have been in material conformity with all
applicable contractual commitments and applicable Law and all express and
implied warranties, and neither Seller nor the Business has had any liability
(and, to the Seller’s Knowledge, there is no reasonable basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against it giving rise to any such liability) for replacement
thereof or other damages in connection therewith (including arising out of any
injury to individuals or property as a result of the ownership, possession, use
or consumption thereof) in excess of any reserve specifically established with
respect thereto. No products or services manufactured, sold or delivered with
respect to the Business are subject to any guaranty, warranty or other indemnity
beyond the applicable standard terms and conditions of Seller’s standard
warranty or terms and conditions (including as a result of any course of conduct
between Seller and any Person or as a result of any statements in any of
Seller’s product or promotional literature). Seller has not been notified of any
claims for (and to Seller’s Knowledge there are no threatened claims for) any
extraordinary product returns or warranty obligations relating to any products
or services manufactured, sold or delivered with respect to the Business. There
has been no recall or withdrawal of any product or service manufactured, sold or
delivered with respect to the Business or other similar action by a Governmental
Authority or private action with respect to any such product or service.

4.26 Brokers. No broker, or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement and/or any of the Transaction Documents based
upon arrangements made by or on behalf of Seller or its Affiliates.

4.27 No Other Representations. Except for the representations and warranties
contained in this Article IV as and to the extent modified by the Disclosure
Schedule, none of the Seller or any other Person has made or makes any other
express or implied representation or warranty, either written or oral, on behalf
of the Seller including any representation or warranty as to the accuracy or
completeness of the information regarding the Seller, the Business, the
Purchased Assets, and/or the Assumed Liabilities furnished or made available to
the Purchaser, its Affiliates and/or its Representatives (including any
information, documents, projections, forecasts or other material made available
to Purchaser, its Affiliates and/or its Representatives in any “data rooms.” The
Seller disclaims any and all other representations and warranties.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

As a material inducement to Seller to enter into this Agreement, Purchaser
hereby represents and warrants to Seller that:

5.1 Organization and Corporate Power. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, with full corporate power and authority to enter into this
Agreement and the other Transaction Documents to which it is a party and perform
its obligations hereunder and thereunder.

5.2 Authorization of Transaction. The execution, delivery and performance of
this Agreement and the other Transaction Documents to which Purchaser is a party
have been duly and validly authorized by all requisite corporate action on the
part of Purchaser, and no other corporate proceedings on its part are necessary
to authorize the execution, delivery or performance of this Agreement and/or the
other Transaction Documents. This Agreement constitutes, and each of the other
Transaction Documents to which Purchaser is a party shall when executed
constitute, a valid and binding obligation of Purchaser, enforceable in
accordance with their terms.

5.3 No Violation. Purchaser is not subject to or obligated under its certificate
of formation or other organizational documents, any applicable Law of any
Governmental Authority, or any agreement or instrument to which it is a party or
bound, or any license, franchise or permit to which it is a party or bound, or
subject to any order, writ, injunction or decree to which it is a party or
bound, which would be breached or violated in any material respect by its
execution, delivery or performance of this Agreement and the other Transaction
Documents to which Purchaser is a party, other than any consents, approvals or
other actions which have been obtained and/or made by Purchaser on or prior to
the date hereof.

5.4 Governmental Authorities and Consents. Purchaser is not required to submit
any notice, report or other filing with any Governmental Authority in connection
with the execution or delivery by it of this Agreement and the other Transaction
Documents to which Purchaser is a party or the consummation of the transactions
contemplated hereby or thereby. No consent, approval or authorization of any
Governmental Authority or any other Person is required to be obtained by
Purchaser in connection with its execution, delivery and performance of this
Agreement and the other Transaction Documents to which Purchaser is a party or
the transactions contemplated hereby or thereby.

5.5 Litigation. There are no Proceedings or orders pending or, to Purchaser’s
knowledge, threatened against or affecting Purchaser which would adversely
affect Purchaser’s performance under this Agreement and the other Transaction
Documents to which Purchaser is a party or the consummation of the transactions
contemplated hereby or thereby.

5.6 Solvency. Purchaser is solvent and (a) able to pay its debts as they become
due; (b) owns property that has a fair saleable value greater than the amounts
required to pay its debts (including a reasonable estimate of the amount of all
contingent liabilities); and (c) has adequate capital to carry on its business.
No transfer of property is being made and no obligation is being incurred in
connection with the transactions contemplated hereby with the intent to hinder,
delay or defraud either present or future creditors of Purchaser. In connection
with the transactions contemplated hereby, Purchaser has not incurred, nor does
it plan to incur, debts beyond its ability to pay as they become absolute and
matured.

 

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5.7 No Conflicts; Consents. The execution, delivery and performance by Purchaser
of this Agreement and the documents to be delivered hereunder, and the
consummation of the transactions contemplated hereby, do not and will not:
(a) violate or conflict with the certificate of incorporation, by-laws or other
organizational documents of Purchaser; or (b) violate or conflicts with any
judgment, order decree, statute, law, ordinance, rule or regulation applicable
to Purchaser. Purchaser has obtained all consents, approvals, waivers and
authorization required to be obtained by Purchaser from any Person or entity
(including any governmental authority) in connection with the execution,
delivery and performance by Purchaser of its Agreement, the consummation of the
transactions contemplated hereby and the ownership and operation of the
Business.

5.8 Brokers. No broker, or investment banker is entitled to any brokerage,
finder’s or other fee or commission in connection with the transactions
contemplated by this Agreement and/or any of the Transaction Documents based
upon arrangements made by or on behalf of Purchaser or its Affiliates.

5.9 Sufficiency of Funds; Solvency. Purchaser has sufficient cash on hand or
other sources of immediately available funds to enable it to make payment of the
Consideration and consummate the transactions contemplated by this Agreement and
the other Transaction Documents. Immediately after giving effect to the
transactions contemplated hereby and in the other Transaction Documents,
Purchaser shall be solvent and shall (i) be able to pay its debts as they become
due; (ii) own property that has a fair saleable value greater than the amounts
required to pay its debts (including a reasonable estimate of the amount of all
contingent liabilities); and (iii) have adequate capital to carry on its
business.

5.10 S-3 Eligible. Parent is eligible to register for issuance to Seller and/or
resale by any Seller Person all Closing Share Consideration, the Holdback Shares
and all shares of Parent Stock required to be issued as Earnout Consideration.

5.11 Nasdaq. Parent is, and for the past two (2) years has been in compliance
with all listing and continued listing requirements and standards of the Trading
Market. The Parent Stock is listed on the Trading Market under the symbol
“INVE”. During such two-year period, Parent has not received any correspondence
from Nasdaq regarding a possible delisting of its shares of Common Stock on
Nasdaq and has no reason to believe Nasdaq has any reason now or in the
foreseeable future to commence delisting proceedings.

5.12 Parent Common Stock. The shares of Parent Stock issued to the Seller and/or
its designees pursuant to this Agreement including, but not limited to, the
Closing Share Consideration, Holdback Shares and Earnout Consideration shall be,
when issued in accordance with the terms of this Agreement, validly issued and
outstanding, fully paid, nonassessable, free and clear of all Liens other than
standard transfer restrictions under the federal securities laws.

5.13 SEC Reports.

(a) Parent has filed all documents, including all annual, quarterly and other
reports, registration statements, proxy statements and other statements,
reports, schedules, forms and other documents (including all exhibits, financial
statements and the schedules thereto, and all other information incorporated by
reference), required to be filed by it with the U.S. Securities and Exchange
Commission (“SEC”) since December 31, 2017 (collectively, the “SEC Reports”).
Since the date of the last SEC Report, there has not been the occurrence
or non-occurrence of any event, the occurrence or non-occurrence of which
resulted in, or would reasonably be likely to result in, a material adverse
effect with respect to Purchaser.

(b) The SEC Reports, including the financial statements and exhibits and
schedules contained therein, (i) at the time filed (or furnished), complied
(giving effect to any amendments or supplements thereto filed prior to the date
of this Agreement), and, in the case of registration statements, at the time of
effectiveness, in all material respects with the applicable requirements of the
Securities Act or

 

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the Securities Exchange Act of 1934, as amended, and (ii) at the time they were
filed (or if amended or superseded by a filing or amendment prior to the date of
this Agreement, then at the time of such filing or amendment), and, in the case
of registration statements, at the time of effectiveness, did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated in such SEC Reports or necessary in order to make the statements made
in such SEC Reports, in light of the circumstances under which they were made,
not misleading.

(c) The financial statements (including any related notes) contained in SEC
Reports (collectively, the “Parent Financial Statements”) (i) complied as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto and (ii) were prepared in accordance with GAAP,
consistently applied, and present fairly in all material respects the
consolidated financial position and results of operations of Parent and its
Subsidiaries (taken as a whole) as of the times and for the periods referred to
therein, subject in the case of the unaudited financial statements to the
absence of footnote disclosures and other presentation items and changes
resulting from normal year-end adjustments.

(d) To Parent’s knowledge, none of the SEC Reports is the subject of ongoing SEC
review and there are no inquiries or investigations by the SEC or any internal
investigations pending or threatened, in each case regarding any accounting
practices of Parent or any of its Subsidiaries.

5.14 Exclusivity of Seller Representations; No Reliance; Forward-Looking
Information.

(a) The representations and warranties of the Seller set forth in Article
IV constitute the sole and exclusive representations and warranties of the
Seller or any other Person in connection with the transactions contemplated
hereunder, and Purchaser understands, acknowledges and agrees that all other
representations and warranties of any kind or nature whether express, implied or
statutory are specifically disclaimed by the Seller, and Purchaser is not and
has not relied on any representations or warranties whatsoever regarding the
subject matter of this Agreement or in connection with the transactions
contemplated hereby, express or implied, except for the representations and
warranties expressly set forth in Article IV.

(b) In connection with the due diligence investigation of the Seller, the
Business, the Assumed Liabilities and the Purchased Assets by the Purchaser and
its Representatives, Purchaser and its Representatives have received and may
continue to receive after the date hereof from the Seller and its
Representatives certain estimates, projections, forecasts, business plans and
other forward-looking information, as well as certain business plan information,
regarding, among other items, the Seller, the Business, the Assumed Liabilities
and the Purchased Assets. Purchaser hereby acknowledges the uncertainty and
inherent risks in relying on such information and agrees that neither the Seller
nor any of its Representatives has made or is making any express or implied
representation or warranty with respect to any such information, except that
such information was prepared in good faith and on what Seller believes is a
reasonable basis.

ARTICLE VI

COVENANTS OF SELLER PRIOR TO CLOSING

6.1 Conduct of Business of the Seller. With respect to the Business and the
Purchased Assets, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
the terms hereof and the Closing:

(a) the Seller shall conduct the Business solely in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted (except
to the extent expressly provided otherwise in this Agreement or as consented to
in writing by Purchaser) and in compliance with all applicable Legal
Requirements;

 

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(b) the Seller shall (i) pay all of its debts and all Taxes when due, subject to
good faith disputes over such debts or Taxes, (ii) pay or perform its other
obligations when due, (iii) use commercially reasonable efforts consistent with
past practice and policies to collect accounts receivable when due and not
extend credit outside of the ordinary course of business consistent with past
practices, (iv) sell Company Products consistent with past practices as to
license, service and maintenance terms, incentive programs, and in accordance
with GAAP requirements as to revenue recognition and (v) use its commercially
reasonable efforts consistent with past practice and policies to preserve intact
its present business organizations, keep available the services of its present
officers and key employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, to the end that its goodwill and ongoing businesses shall be
unimpaired at the Closing;

(c) the Seller shall promptly notify the Purchaser of any change, occurrence or
event not in the ordinary course of its business, or of any change, occurrence
or event which, individually or in the aggregate with any other changes,
occurrences and events, would reasonably be expected to cause any of the
conditions to Closing set forth in Section 3.1 not to be satisfied;

(d) the Seller shall assure that each of its Contracts (other than with
Purchaser) entered into after the date of this Agreement will not require the
procurement of any consent, waiver or novation or provide for any change in the
obligations of any party in connection with, or terminate as a result of the
consummation of the transactions contemplated by this Agreement, and shall give
reasonable advance notice to Purchaser prior to allowing any material Contract
to lapse or terminate by its terms.

6.2 Restrictions on Conduct of Business of the Seller. Without limiting the
generality or effect of the provisions of Section 6.1, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to the terms hereof and the Closing, with respect to
the Business and the Purchased Assets, the Seller shall not do, cause or permit
any of the following (except to the extent expressly provided otherwise in this
Agreement or as consented to in writing by Purchaser):

(a) Charter Documents. Cause or permit any amendments to its articles of
incorporation or bylaws or equivalent organizational or governing documents;

(b) Material Contracts. Enter into any Contract that would constitute a material
Contract or other Contract requiring a novation or consent in connection with
the transactions contemplated by this Agreement or violate, terminate, amend, or
otherwise modify (including by entering into a new Contract with such party or
otherwise) or waive any of the terms of any of its material Contracts; provided,
however, that this provision shall not require the Seller to seek or obtain
Purchaser’s consent in order to set or change the prices at which the Seller
sells or provides Purchased Assets and its derivative products to customers in
the ordinary course of business or otherwise enter into Contracts with customers
in the ordinary course of business;

(c) Employees; Consultants; Independent Contractors.

(i) Hire any additional officers or other employees in connection with the
Business, or any consultants or independent contractors, other than the open
positions set forth in the Disclosure Schedules;

 

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(ii) terminate the employment, change the title, office or position, or
materially reduce the responsibilities of any management, supervisory or other
key personnel of the Business;

(iii) increase or modify the compensation or benefits payable or to become
payable to any of officers, employees, consultants or independent contractors of
the Business; or

(iv) enter into any Contract with a labor union or collective bargaining
agreement (unless required by applicable Legal Requirements) involving employees
of the Business.

(d) Loans and Investments.

(i) Make any loans or advances (other than routine expense advances to employees
of the Business consistent with past practice) to, or any investments in or
capital contributions to, any Person or forgive or discharge in whole or in part
any outstanding loans or advances, or prepay any indebtedness for borrowed
money, or

(ii) incur any indebtedness for borrowed money or guarantee any such
indebtedness.

(e) Intellectual Property. Transfer or license from any Person any rights to any
Intellectual Property Rights, or transfer or license to any Person any rights to
any Intellectual Property associated with the Business or the Purchased Assets
(other than under Standard Inbound IP Agreements, Standard Outbound IP
Agreements), or transfer or provide a copy of any source code and
specifications, in each case associated with the Business or the Purchased
Assets, to any Person (including any current or former employee or consultant of
the Seller or any contractor or commercial partner of the Seller) (other than
providing access to source code and specifications to current employees and
consultants of the Seller involved in the development of the Purchased Assets or
any derivative product thereof on a need to know basis, consistent with past
practices, or otherwise in the ordinary course of business consistent with past
practices);

(f) Exclusive Rights and Most Favored Party Provisions. Enter into or amend any
agreement pursuant to which any other party is granted exclusive rights or “most
favored party” rights of any type or scope with respect to any Purchased Assets
or any derivative products thereof, technology, Intellectual Property of the
Business or Purchased Assets, or Business, or containing any non-competition
covenants or other restrictions relating to its or Purchaser’s business
activities;

(g) Dispositions; Acquisitions.

(i) Sell, lease, license or otherwise dispose of any of its properties or
assets, other than sales and nonexclusive licenses of Purchased Assets in the
ordinary course of business consistent with its past practice, or enter into any
Contract with respect to the foregoing; or

(ii) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to its business, or
enter into any Contract with respect to a joint venture, strategic alliance or
partnership.

 

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(h) Leases. Enter into any operating lease or similar transaction.

(i) Payment of Obligations. Pay, discharge or satisfy any claim or Liability
arising otherwise than in the ordinary course of business, other than the
payment, discharge or satisfaction of Liabilities reflected or reserved against
in the Financial Statements and Transaction Expenses or Severance Obligation
Expenses, or defer payment of any accounts payable other than in the ordinary
course of business consistent with past practice.

(j) Insurance. Materially change the amount of any insurance coverage of the
Purchased Assets or Business.

(k) Termination or Waiver. Cancel, release or waive any material claims or
rights held by it as related to the Purchased Assets or Business.

(l) Severance Arrangements. Grant or pay, or enter into any Contract providing
for the granting of any severance, retention or termination pay, or the
acceleration of vesting or other benefits, to any Person (other than payments or
acceleration made pursuant to preexisting plans, policies or Contracts which
have been disclosed to Purchaser and are set forth on the Disclosure Schedules);

(m) Lawsuits; Settlements.

(i) Commence a lawsuit other than for the routine collection of bills or for a
breach of this Agreement, or

(ii) settle or agree to settle any pending or threatened lawsuit or other
dispute.

(n) Accounting; Taxes.

(i) Change financial accounting methods or practices (including any change in
depreciation or amortization policies) or revalue any of its assets (including
writing down the value of inventory or writing off notes or accounts receivable
otherwise than in the ordinary course of business), except in each case as
required by changes in GAAP as concurred with its independent accountants and
after notice to Purchaser,

(ii) make or change any election in respect of Taxes, file any amendment to a
federal, state, or foreign Tax Return, adopt or change any accounting method in
respect of Taxes, enter into any Tax sharing or similar agreement or closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes, or enter into intercompany transactions giving
rise to deferred gain or loss of any kind, or

(iii) accelerate the collection of any accounts receivable (or give anything of
value to induce same);

(o) Real Property; Encumbrances. Enter into any agreement for the purchase, sale
or lease of any real property, or place or allow the creation of any Encumbrance
(other than Permitted Encumbrances) on the Purchased Assets or Business;

 

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(p) Warranties, Discounts. Materially change the manner in which it provides
warranties, discounts or credits to customers, or give any discount,
accommodation or other concession other than in the ordinary course of business
consistent with past practice;

(q) Interested Party Transactions. Enter into any Contract in which any officer,
director, employee, agent or stockholder of the Seller (or any member of their
immediate families) under circumstances that, if entered immediately prior to
the Agreement Date, would require that such Contract be listed on the Disclosure
Schedules; and

(r) Other. Take or agree in writing or otherwise to take, any of the actions
described in clauses (a) through (r) in this Section 6.2, or any action which
would reasonably be expected to make any of the Seller’s representations or
warranties contained in this Agreement materially untrue or materially incorrect
(such that the condition set forth in Article III would not be satisfied) or
prevent the Seller from performing or cause the Seller not to perform one or
more covenants required hereunder to be performed by the Seller (such that the
condition set forth in Article III would not be satisfied).

6.3 No Solicitation. Until the earlier of the Closing and the date of
termination of this Agreement pursuant to the provisions of this Agreement, the
Seller will not take, nor will the Seller permit, any of the Seller’s
Representatives to (directly or indirectly), take any of the following actions
with any Person other than Purchaser and its designees (or Representatives):
(a) solicit, knowingly encourage, initiate, entertain, review any proposals or
offers from, or participate in or conduct discussions with or engage in
negotiations with, any Person relating to any offer, indication of interest or
proposal, oral, written or otherwise, formal or informal (a “Competing Proposed
Transaction”), with respect to the Business or the Purchased Assets, (b) provide
information not customarily disclosed consistent with the Seller’s past
practices with respect to the Seller to any Person, other than Purchaser and its
designees (or Representatives), relating to (or which the Seller believes or
should reasonably know would be used for the purpose of formulating an offer,
indication of interest or proposal with respect to), or otherwise assist,
cooperate with, facilitate or encourage any effort or attempt by any such Person
with regard to the Business or the Purchased Assets, (c) agree to or enter into
a Contract with any Person, other than Purchaser, providing for or approving any
transaction or contract relating to the Business or the Purchased Assets,
(d) make or authorize any statement, recommendation, solicitation or endorsement
in support of any possible transaction involving the Business or the Purchased
Assets, other than by Purchaser, or (e) authorize or permit any of the Seller’s
Representatives to take any such action. The Seller shall immediately cease and
cause to be terminated any such contacts or negotiations with any Person
relating to any such transaction or contract. In addition to the foregoing, if
the Seller receives prior to the Closing or the termination of this Agreement
any offer, indication of interest or proposal (formal or informal, oral, written
or otherwise) relating to, or any inquiry or contact from any Person with
respect to, a Competing Proposed Transaction, the Seller shall promptly (and no
later than 24 hours after receipt) notify Purchaser thereof, such notice to
include a representation from the Seller to Purchaser that, to its knowledge,
the offer, indication of interest or proposal for the Competing Proposed
Transaction is a bona fide offer, indication of interest or proposal and the
terms thereof, and will keep Purchaser apprised on a current basis of the status
of any such offer, indication of interest or proposal and of any modifications
to the terms thereof; provided, however, that this provision shall not in any
way be deemed to limit the obligations of the Seller and its Representatives set
forth in the first sentence of this Section. Each of the Seller and Purchaser
acknowledge that this Section 6.3 was a significant inducement for Purchaser to
enter into this Agreement and the absence of such provision would have resulted
in either (i) a material reduction in the consideration to be paid to the Seller
and/or its designees or (ii) a failure to induce Purchaser to enter into this
Agreement.

 

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ARTICLE VII

INDEMNIFICATION AND RELATED MATTERS

7.1 Indemnification Holdback. At Closing, the Holdback Shares will be deemed
issued to the Seller and/or its designees and transferred to Holdback Share
Agent as security of the indemnification obligations of the Seller under this
Article VII. Any portion of the Holdback Shares not previously released to, or
permitted to be retained by, Purchaser as a result of an indemnification claim
by Purchaser shall be released to the Seller (and/or any Seller Person) on the
one-year anniversary of Closing; provided, however, that a portion of the
Holdback Shares, which, in the reasonable judgement of the Purchaser (with the
legal basis of such reasonable judgment of the Purchaser and the number of
Holdback Shares requested by the Purchaser to be retained by the Holdback Share
Agent pursuant to this Section 7.1 being set forth in a Claim Notice (as defined
in Section 7.2(a)) signed by an executive officer of Parent and delivered to the
Holdback Share Agent and the Seller), is necessary to satisfy any unsatisfied
claims specified in any Claim Notice (as defined in Section 7.2(a) below)
theretofore delivered to the Holdback Share Agent prior to the Holdback
Distribution Date with respect to facts and circumstances existing on or prior
to the Holdback Distribution Date (collectively, the “Disputed Holdback
Shares”), shall be retained by the Holdback Share Agent until such claims have
been resolved. Any Disputed Holdback Shares held by the Holdback Share Agent
with respect to any pending but unresolved indemnification claims (as described
in the immediately preceding sentence) shall be released to the Seller or
released to, or permitted to be retained by, Purchaser (as appropriate) promptly
upon resolution of each specific indemnification claim involved, as set forth in
a writing mutually agreeable to the Parties hereto. For purposes of this
Agreement, the value of a Holdback Share shall equal the Parent Stock Price.
Each date of release of the Holdback Shares, whether on the one-year anniversary
of Closing or once any indemnification claim(s) have been finally resolved
pursuant to the terms hereof, shall be known as a “Holdback Distribution Date”.
The Holdback Shares, when eligible for release, will be released as provided in
Section 2.3.

7.2 Survival.

(a) Survival of Representations, Warranties, Covenants and Agreements. Subject
to the limitations and other provisions of this Agreement, all representations,
warranties, covenants and agreements set forth in this Agreement, the Schedules
hereto and in any certificate delivered in connection with this Agreement, shall
survive the Closing Date as set forth herein. Notwithstanding the foregoing, no
Indemnified Party shall be entitled to recover for any Loss pursuant to
Section 7.3(a)(i) or Section 7.3(b)(i) unless written notice of a claim (“Claim
Notice”) thereof is delivered to the Indemnified Party prior to the Applicable
Limitation Date. For purposes of this Agreement, the term “Applicable Limitation
Date” means the twelve (12) month anniversary of the Closing Date; provided,
however, that the Applicable Limitation Date with respect to the following
Losses shall be as follows: (i) with respect to any Loss arising from or related
to a breach of the representations and warranties of Seller set forth in
Section 4.14 (Proprietary Rights), the Applicable Limitation Date shall be the
two-year anniversary of the Closing Date, (ii) with respect to any Loss arising
from or related to a breach of the representations and warranties of (A) Seller
set forth in Section 4.1 (Organization and Power), Section 4.2 (Subsidiaries),
Section 4.3 (Authorization of Transactions), the first sentence of
Section 4.8(c) (Title to Purchased Assets; Sufficiency of Assets), Section 4.12
(Taxes), and Section 4.16 (Brokerage) (collectively, the “Seller Fundamental
Representations”), and (B) Purchaser set forth in Section 5.1 (Organization and
Power), Section 5.2 (Authorization of Transaction) and Section 5.8 (Brokers)
(collectively, “Purchaser Fundamental Representations”), the Applicable
Limitation Date shall not apply and all Seller Fundamental Representations and
Purchaser Fundamental Representations shall survive for the full period of all
applicable statutes of limitations plus sixty (60) calendar days; and (iii) that
an Indemnified Party shall be entitled to seek recovery for fraud until the
expiration of the applicable statute of limitations for any claim which seeks
recovery of the Losses arising therefrom. All covenants and agreements of an
Indemnified Party contained in this Agreement, any of the Schedules hereto or in
any agreement, certificate or other document delivered pursuant hereto shall
survive

 

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the Closing for the applicable statute of limitations or for the period
explicitly specified therein, unless otherwise provided therein. Notwithstanding
the foregoing, any claims asserted in good faith with reasonable specificity (to
the extent known at such time) and in writing by a Claim Notice from an
Indemnified Party to the Indemnifying Party prior to the expiration date of the
applicable survival period shall not thereafter be barred by the Applicable
Limitation Date expiration of the relevant representation or warranty and such
claims shall survive until finally resolved.

(b) Sole and Exclusive Remedy. Notwithstanding anything else contained in this
Agreement to the contrary, except for (i) rights and remedies under other
Transaction Documents, (ii) equitable relief, and (iii) claims for fraud, from
and after the Closing, indemnification pursuant to the provisions of this
Article VII shall be an Indemnified Parties’ sole and exclusive remedy with
respect to inaccuracy, failure or breach of any representation or warranty,
covenant or other provision contained in this Agreement. Nothing in this
Section 7.2(b) shall be construed to limit or alter the provisions of
Section 7.2(a).

7.3 Indemnification.

(a) Seller Indemnification. Subject to the other terms and conditions of this
Article VII, Seller shall indemnify Purchaser and its officers, directors,
employees, agents, representatives, Affiliates, successors and permitted assigns
(each a “Purchaser Party” and collectively, the “Purchaser Parties” ) and hold
each of them harmless from and against and pay on behalf of or reimburse each of
them from any loss, Liability, Proceeding, cost, damage, deficiency, Tax,
penalty, fine or expense, whether or not arising out of third party claims
(including interest, penalties, reasonable attorneys’ fees and expenses, court
costs and all amounts paid in investigation, defense or settlement of any of the
foregoing) (collectively, “Losses” and individually, each a “Loss”) which any
such Purchaser Party may suffer, sustain or become subject to, as a result of,
in connection with or relating to:

(i) any inaccuracy in or breach of any representation or warranty made by Seller
contained in this Agreement, the Bill of Sale or any Schedule of Seller hereto
or any certificate delivered by Seller to Purchaser hereunder;

(ii) any non-fulfillment, violation, breach or non-performance of any covenant
or agreement made by Seller contained in this Agreement or the Bill of Sale;
and/or

(iii) any Excluded Liability.

Seller and Purchaser hereby acknowledge and agree that Parent shall be the only
Purchaser Party entitled to enforce the rights and remedies of any Purchaser
Party hereunder including, but not limited to, undertaking all actions and
making all decisions under this Article VII and each Purchaser Party shall be
irrevocably bound by the actions and/or decisions made by the Parent with regard
thereto. Seller shall have no responsibility and/or obligation in responding to
any correspondence and/or other communication including the filing of any legal
documents and/or Proceedings of any Purchaser Party other than those of the
Parent and Seller shall have no liability to any Purchaser Party relating to any
Parent’s actions and/or non-actions. Notwithstanding anything to the contrary
provided herein or elsewhere and for the avoidance of doubt, neither Seller nor
any other Person who was an employee, officer, director, consultant, independent
contractor and/or an Affiliate of the Seller shall be (nor shall be deemed to
be) a Purchaser Party hereunder.

(b) Purchaser Indemnification. Subject to the other terms and conditions of this
Article VII, Purchaser shall indemnify Seller and its officers, directors,
employees, agents, Representatives, Affiliates, successors, designees and
permitted assigns (each a “Seller Party” and collectively, the “Seller Parties”)
and hold each of them harmless from and against and pay on behalf of or
reimburse each Seller Party in respect of any Loss or Losses, which any such
Seller Party may suffer, sustain or become subject to, as a result of, in
connection with or relating to:

 

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(i) any inaccuracy in or breach of any representation or warranty made by
Purchaser contained in this Agreement, the Bill of Sale or any Schedule of
Purchaser hereto, the Assumption Agreement or any certificate delivered by
Purchaser to Seller hereunder;

(ii) any non-fulfillment, violation, breach or non-performance of any covenant,
agreement or obligation required to be performed by Purchaser contained in this
Agreement including, but not limited to, Section 2.7 hereof, the Assumption
Agreement and/or the Bill of Sale;

(iii) any obligation of Purchaser with respect to an Assumed Liability that
arises following the Closing; and

(iv) the Purchased Assets but solely to the extent of Losses related to actions
and/or inactions by Purchaser with respect thereto following the Closing.

(c) General Limitations on Indemnity for all Indemnifying Parties. Subject in
all respects to Section 9.13 hereof, an Indemnifying Party (as defined below)
will not be liable hereunder with respect to claims made by all Indemnified
Parties (as defined below) referred to in Section 7.3(a)(i) or Section 7.3(b)(i)
(as applicable) unless the applicable Indemnified Party gives written notice
thereof to the Indemnifying Party on or prior to the Applicable Limitation Date.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as an Indemnified Party delivers a written notice of claim no later than
the Applicable Limitation Date, an Indemnifying Party shall be required to
indemnify the claiming Indemnified Party hereunder for all Losses (subject to
the Deductible (as defined below) and Caps (as defined below), to the extent
applicable, and the other terms of this Agreement), which such Indemnified Party
may incur in respect of the matters which are the subject of such claim,
regardless of when incurred.

(d) Further Limitations on Indemnification by Seller. Notwithstanding anything
contained in this Agreement or elsewhere to the contrary, but subject in all
respects to Section 9.13, the indemnification obligations of the Seller under
Section 7.3(a), are subject to the following additional limitations and other
provisions:

(i) Seller shall not be required to indemnify any Purchaser Party in respect of
any Loss subject to indemnification under Section 7.3(a)(i) (x) unless and until
the aggregate of all Losses subject to indemnification under Section 7.3(a)(i)
(other than Losses thereunder to which the Deductible does not apply in
accordance with the last sentence of this Section 7.3(d)(i)) exceeds Fifty
Thousand Dollars ($50,000) (the “Deductible”), in which case Seller shall be
required to indemnify the Purchaser Parties for all Losses in excess of the
Deductible, and (y) from and after the time that Seller has made indemnification
payments under Section 7.3(a)(i) (other than payments thereunder to which the
Sellers Cap (as defined below), does not apply in accordance with the last
sentence of this Section 7.3(d)(i)) that in the aggregate are equal to or in
excess of One Million Dollars ($1,000,000), as adjusted pursuant to Section 2.4
(the “Sellers Cap”). Notwithstanding the foregoing, the Deductible and the
Sellers Cap shall not apply with respect to any claim for indemnification
(a) pursuant to any of Section 7.3(d)(ii) or Section 7.3(d)(iii); (b) for any
Loss resulting from any inaccuracy in or breach of any Seller Fundamental
Representation; or (c) for any claim of fraud. Notwithstanding anything to

 

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the contrary provided herein or elsewhere, Seller’s obligation to indemnify the
Purchaser Parties pursuant to Section 7.3(a)(i), including in respect of any
Loss resulting from any inaccuracy in or breach of any Seller Fundamental
Representation, shall not exceed the amount of Consideration actually received
by Seller hereunder; provided, however, that the foregoing limitation shall not
apply in the case of Seller’s fraud;

(ii) To the extent that Seller is Liable to a Purchaser Party hereunder,
Purchaser shall seek recourse for all indemnification claims by Purchaser
Parties against Seller hereunder as follows: (A) first, from the Holdback
Shares, to the extent that there are Holdback Shares then available to satisfy
indemnification claims by the Purchaser Parties, (B) second, by set-off against
the Earnout Consideration, and (C) third, directly against the Seller;

(iii) For clarity purposes, no director, officer, manager, member, employee,
stockholder, debt holder, agent, consultant, advisors and/or Representatives to
or of any Seller and/or the SPV shall have any indemnification obligation and/or
other responsibility for Losses and/or otherwise pursuant to Section 7.3(a).

(e) Further Limitations on Indemnification by Purchaser. Notwithstanding
anything contained in this Agreement to the contrary, but subject in all
respects to Section 9.13, the indemnification and other obligations of Purchaser
pursuant to Section 7.3(b) shall be subject to the following limitations:

(i) Purchaser shall not be required to indemnify any Seller Party in respect of
any Loss subject to indemnification under Section 7.3(b)(i) (x) unless and until
the aggregate of all Losses subject to indemnification under Section 7.3(b)(i)
(other than Losses thereunder to which the Deductible does not apply in
accordance with the last sentence of this Section 7.3(e)(i)) exceeds the Fifty
Thousand Dollars ($50,000) Deductible, in which case Purchaser shall be required
to indemnify the Purchaser Parties for all Losses in excess of the Deductible,
and (y) from and after the time that Purchaser has made indemnification payments
under Section 7.3(b)(i) (other than payments thereunder to which the Purchasers
Cap (as defined below), does not apply in accordance with the last sentence of
this Section 7.3(e)(i)) that in the aggregate are equal to or in excess of One
Million Dollars ($1,000,000), as adjusted pursuant to Section 2.4 (the
“Purchasers Cap” and together with the Sellers Cap, collectively, the “Caps”).
Notwithstanding the foregoing, the Deductible and the Purchasers Cap shall not
apply with respect to any claim for indemnification (a) pursuant to
Section 7.3(b)(ii), Section 7.3(b)(iii) and/or Section 7.3(b)(iv); (b) for any
Loss resulting from any inaccuracy in or breach of any Purchaser Fundamental
Representation; or (c) for any claim of fraud. Notwithstanding anything to the
contrary provided herein or elsewhere, Purchaser’s obligation to indemnify the
Seller Parties pursuant to Section 7.3(b), including in respect of any Loss
resulting from any inaccuracy in or breach of any Purchaser Fundamental
Representation, shall not exceed the amount of the sum of the Closing Cash
Consideration (which for clarification purposes for this Section 7.3(e)(i) means
$1,000,000, as adjusted pursuant to Section 2.4, the Closing Share
Consideration, the Holdback Shares and all Earnout Amounts earned by Seller
pursuant to the terms of this Agreement; provided, however, that the foregoing
limitation shall not apply in the case of Purchaser’s fraud.

 

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(f) Procedure.

(i) In the event that subsequent to the Closing any Person entitled to
indemnification under this Agreement (an “Indemnified Party”) receives notice of
the assertion of any claim or of the commencement of any action or other
Proceeding by any Person who is not a party to this Agreement or who is not
otherwise a Person entitled to indemnification under this Agreement or an
Affiliate of any such party or Person (including, without limitation, any Person
(a “Third Party Claim”) against such Indemnified Party, with respect to which
any Indemnifying Party is or may be required to provide indemnification under
this Agreement, the Indemnified Party shall give written notice to the
Indemnifying Party as promptly as practicable after learning of such claim (if
legally permissible), which notice shall describe the Third Party Claim in
reasonable detail and shall indicate the estimated amount, if reasonably
practicable, of the Losses that have been or may be sustained by the Indemnified
Party. The failure of the Indemnified Party to notify the Indemnifying Party of
such Third Party Claim in accordance with this Section 7.3(f)(i) will not
relieve the Indemnifying Party of any liability that it may have to the
Indemnified Party hereunder, except to the extent the Indemnifying Party or the
Indemnified Party is materially prejudiced by reason of such failure. Subject to
Section 7.3(f)(iv), the Indemnifying Party shall have the right, upon written
notice to the Indemnified Party (the “Defense Notice”) within thirty (30) days
after receipt from the Indemnified Party of notice of such Third Party Claim,
which notice by the Indemnifying Party shall specify the counsel it anticipates
that it will appoint to defend such claim (“Defense Counsel”), to conduct at its
expense the defense against such claim in its own name, or if necessary in the
name of the Indemnified Party; provided, that the Indemnifying Party
acknowledges in writing and without qualification (or reservation of rights) its
indemnification obligations under this Agreement (which such acknowledgement
shall include the Indemnifying Party’s agreement to be fully responsible for all
Losses relating to such Third Party Claim, subject to the applicable limitations
set forth in this Article VII); provided, further, that the Indemnified Party
shall have the right to approve the Defense Counsel, which approval shall not be
unreasonably withheld, and in the event the Indemnifying Party and the
Indemnified Party cannot agree upon such counsel within five (5) days after the
Defense Notice is provided, then the Indemnifying Party shall propose an
alternate Defense Counsel, which shall be subject again to the Indemnified
Party’s approval. The Indemnifying Party shall be liable for the fees and
expenses of counsel employed by the Indemnified Party for any period during
which the Indemnifying Party has not assumed the defense of any such Third Party
Claim in accordance with this Section 7.3(f)(i). For the purposes of this
Agreement, “Indemnifying Party” means Purchaser (in the case of a claim by a
Seller Party) or Seller (in the case of a claim by a Purchaser Party).

(ii) In the event that the Indemnifying Party shall fail to timely give the
Defense Notice, it shall be deemed to have elected not to conduct the defense of
the subject claim, and in such event the Indemnified Party shall have the right
to conduct such defense, but the Indemnified Party shall not compromise or
settle the claim without the prior consent of the Indemnifying Party (which
consent shall not be unreasonably withheld or delayed), and the Indemnifying
Party will be liable for all costs, expenses, settlement amounts or other Losses
paid or incurred in connection therewith, but only to the extent that such
Losses are indemnifiable Losses pursuant to Section 7.3(a) or Section 7.3(b) (as
applicable).

(iii) In the event that the Indemnifying Party does timely deliver a Defense
Notice and thereby elects to conduct the defense of the subject claim, the
Indemnifying Party shall have the right to conduct such defense and, except as
provided in Section 7.3(f)(iv) below, to settle the claim without the prior
consent of the Indemnified Party. The Indemnified Party will cooperate with and
make available to the Indemnifying Party such assistance and materials as it may
reasonably request, all at the expense of the Indemnifying Party, and the
Indemnified Party shall have the right at its expense to participate in the
defense assisted by counsel of its own choosing.

 

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(iv) No Indemnifying Party shall consent to the entry of any judgment or enter
into any settlement without the prior written consent of the Indemnified Party
(A) if such judgment or settlement does not include as an unconditional term
thereof the giving by each claimant or plaintiff to each Indemnified Party of a
release from all liability in respect to such claim, (B) if such judgment or
settlement would result in the finding or admission of any violation of Law, or
(C) if as a result of such consent or settlement, injunctive or other equitable
relief would be imposed against the Indemnified Party or such judgment or
settlement would materially interfere with or materially and adversely affect
the business, operations or assets of the Indemnified Party.

(v) The Indemnifying Party shall not be entitled to control, and the Indemnified
Party shall be entitled to have sole control over, the defense or settlement of
any claim (and, subject to the other provisions of this Article VII, the cost of
such defense and any Losses with respect to such claim shall constitute an
amount for which the Indemnified Party is entitled to indemnification hereunder)
if (i) the claim for indemnification is with respect to a criminal proceeding,
action, indictment, allegation or investigation, (ii) the Indemnified Party has
been advised by counsel that a reasonable likelihood exists of a conflict of
interest between the Indemnifying Party and the Indemnified Party, (iii) the
Indemnified Party reasonably believes the claim would be materially detrimental
to the Indemnified Party’s reputation, customer or supplier relations or future
business prospects, (iv) the Indemnifying Party has failed or is failing to
vigorously prosecute or defend such claim or (v) the claim seeks an injunction
or other equitable relief against the Indemnified Party or any of its
Affiliates.

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

(vii) Any judgment entered or settlement agreed upon in the manner provided
herein shall be binding upon the Indemnifying Party and the Indemnified Party.

 

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(g) Payments. Unless otherwise provided herein to the contrary, any
indemnification pursuant to this Article VII shall be effected, in the case of
an indemnification claim resolved in favor of an Indemnified Party, by wire
transfer of immediately available funds from the Indemnifying Party(ies) to an
account designated by the Indemnified Party within ten (10) days after the final
determination thereof.

(h) Insurance and Contribution. The amount of Losses otherwise recoverable under
this Article VII by an Indemnified Party shall be reduced by the amount of any
proceeds from third party insurance policies issued by insurers with respect to
such Losses actually recovered (after deducting therefrom the full amount of
out-of-pocket expenses incurred in procuring such recovery and the actual cost
of any subsequent premium increases directly related to such Losses) by the
Indemnified Party.

(i) Maximum Contribution. If and to the extent any provision of this Article VII
is unenforceable for any reason, the Indemnifying Party hereby agrees to make
the maximum contribution to the payment and satisfaction of any Loss for which
indemnification is provided for in this Section 7.3 which is permissible under
applicable legal requirements.

(j) Disclaimer of Punitive Damages. Notwithstanding anything contained herein to
the contrary, no Person shall be liable to any other Person for any punitive
damages (except to the extent paid to a third party) relating to the breach or
alleged breach of any representation, warranty, covenant or agreement in this
Agreement and the agreements and documents executed in connection herewith.

(k) Mitigation. To the extent required by the law governing this Agreement, each
Indemnified Party shall take, and cause its Affiliates to take, all reasonable
steps to mitigate any Losses upon becoming aware of any event or circumstance
that would be reasonably expected to, or does, give rise thereto, including
incurring costs only to the minimum extent necessary to remedy the beach that
gives rise to such Losses.

(l) Adjustments. Any payments made pursuant to any indemnification obligations
under this Article VII will be treated as adjustments to the consideration to be
received by Seller hereunder for Tax purposes and such treatment will govern for
purposes of this Agreement.

ARTICLE VIII

ADDITIONAL AGREEMENTS

8.1 Tax Matters.

(a) Transfer Taxes. Purchaser shall be responsible for paying any transfer,
documentary, sales, use, stamp and registration Taxes incurred in connection
with this Agreement, and Purchaser shall file all necessary Tax Returns and
other documentation (subject to Seller’s prior review and approval, such
approval not to be unreasonably withheld, conditioned, or delayed) with respect
to all such transfer, documentary, sales, use, stamp and registration Taxes, and
if required by applicable law, Seller shall, and shall cause its Affiliates to,
join in the execution of any such Tax Returns and other documentation.

(b) Cooperation on Tax Matters. Each of Purchaser and Seller shall cooperate, as
and to the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns for the Business and any audit, litigation or other
proceeding with respect to Taxes for the Business. Such cooperation shall
include the retention and (upon any Party’s request) the provision of records
and information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder. Seller agrees (i) to retain all books and records with respect to Tax
matters

 

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and pertinent to the Business relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Purchaser, any extensions thereof) for the respective taxable
periods, and to abide by all record retention agreements entered into with any
taxing authority, and (ii) to give Purchaser reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if
Purchaser so requests, Seller shall allow Purchaser to take possession of such
books and records.

(c) Tax Controversies. Purchaser shall give notice to Seller of the assertion of
any claim, or the commencement of any suit, action or proceeding with respect to
any Tax liability for which Seller is responsible under Section 2.2(b) or
Section 4.12 (by application of Section 7.3(a)(i) or Section 7.3(a)(iii)), and
shall give Seller such information with respect thereto as Seller may reasonably
request. Seller may, at its own expense, participate in the defense of any such
suit, action or proceeding, and whether or not Seller chooses to so participate,
all of the Parties shall cooperate in the defense or prosecution thereof.

(d) Bulk Transfers. Without admitting the applicability of the bulk transfer
Laws of any jurisdiction, the Parties agree that they will waive compliance with
any applicable bulk transfer or similar type law to the transactions
contemplated by this Agreement. Any and all Liabilities of Seller or Purchaser
which may be asserted by third parties, including any federal, state or local
taxing authority, as a result of such noncompliance shall be shared equally.

8.2 Press Releases and Announcements. After the Closing Date, no press releases
related to this Agreement or the transactions contemplated herein, or other
announcements to the employees, customers or suppliers of the Business, shall be
issued without Purchaser’s prior written consent, except for any public
disclosure which is required by Law or regulation (in which case such disclosure
shall be prepared jointly by Seller and Purchaser).

8.3 Further Transfers. Seller shall, for no additional consideration, execute
and deliver such further instruments of conveyance and transfer and take such
additional action as Purchaser may reasonably request to effect, consummate,
confirm or evidence the transfer to Purchaser of the Purchased Assets and any
other transactions contemplated hereby. Purchaser shall, for no additional
consideration execute and deliver such further instruments and take such
additional action as Seller may reasonably request to effect, consummate,
confirm or evidence the assumption by Purchaser of the Assumed Liabilities and
any other transaction contemplated herby.

8.4 Expenses. Except as otherwise provided herein, Seller and Purchaser shall
pay all of their own fees, costs and expenses (including fees, costs and
expenses of legal counsel, investment bankers, brokers, accountants and tax
advisors or other representatives and consultants and appraisal fees, costs and
expenses) incurred in connection with the negotiation of the Letter of Intent,
this Agreement, the other Transaction Documents, the performance of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby.

8.5 Post-Closing Covenants of Seller.

(a) During the period beginning on the Closing Date and ending on January 31,
2019, Seller shall cause the Purchaser and Transferred Employees to have the
right to occupy for business purposes the office leased by Seller at 4585
Tillicum Street, Burnaby, British Columbia V5J 5K9, Canada, and Purchaser shall
pay at or prior to Closing to Penguin Investments Ltd. (“Penguin”), $15,064.70,
representing the final lease payment for such premises, as set forth in the
Letter dated December 14, 2018 from Penguin to VCCS (the lease of such premises
and the $15,064.70 payable is an Assumed Liability as set forth in Schedule
2.2(a)). For avoidance of doubt and clarity purposes, at the Closing Purchaser
shall assume the lease as of February 28, 2018 by and between VCCS and B.U.K.
Investments, Ltd., as landlord, as amended and/or modified for the premises
located at 3711 North Fraser Way, Burnaby, British Columbia V5J 5J2, Canada,
dated February 28, 2018 (which lease is an Assumed Liability pursuant to
Schedule 2.2(a).

 

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(b) Seller shall cause all Transferred Employees to receive notification in
written form prior to the Closing Date as to cessation of membership,
participation, entitlement, benefit or accrual arising in respect of any Seller
Plan as of the Closing Date and, subject to the terms of the applicable Seller
Plan, continue to pay benefits in respect of outstanding claims Incurred or
accrued on or before the Closing Date for the period beginning on the Closing
Date and ending on the 90th day thereafter.

(c) During the period beginning on the Closing Date and ending on the 1st
anniversary of the Closing Date, Seller shall not cause any Seller Plan,
including any related contract or insurance policy, to be amended to change the
nature of claims that may be submitted for adjudication by Transferred Employees
or the period of time under such Seller Plan, or related contract or insurance
policy, in which such claim may be presented for adjudication.

8.6 Non-Competition, Non-Solicitation and Confidentiality Covenants of Seller.

(a) Non-Competition. In consideration of the mutual covenants provided for
herein to Seller at the Closing, during the period beginning on the Closing Date
and ending on the second anniversary of the Closing Date (the “Non-Compete
Period”), Seller shall not, and shall not allow any of its respective Affiliates
to, engage (whether as an owner, operator, manager, employee, officer, director,
consultant, advisor, representative or otherwise), directly or indirectly, in
competition with the Business; provided, that ownership of less than 5% of the
outstanding stock of any publicly-traded corporation shall not be deemed to be
engaging in competition with the Business. For the avoidance of doubt, nothing
in this Section 8.6(a) shall be deemed to prohibit Seller from (x) reselling or
otherwise distributing any product related to the Business, or (y) producing,
reselling, or distributing any product related to the Business in any other
sectors.

(b) Non-Solicitation. Without limiting the generality of Section 8.6(a), Seller
agrees that, during the Non-Compete Period, Seller shall not and shall not
permit any of its Affiliates to, directly or indirectly:

(i) contact, approach or solicit for the purpose of offering employment to or
hiring (whether as an employee, consultant, agent, independent contractor or
otherwise) or actually hire any Person employed by Purchaser during the
Non-Compete Period, without the prior written consent of Purchaser, unless such
person has not been employed by Seller or Purchaser, as the case may be, for at
least six months; or

(ii) solicit or attempt to induce any customer or other business relation of
Purchaser and/or the Business into ending or materially modifying its
association or relationship with Purchaser and/or the Business in a manner that
would reasonably be expected to materially harm the Business and/or Purchaser.

(c) Confidentiality. Seller shall treat and hold as confidential any information
concerning the Business that is not already generally available to the public
(the “Confidential Information”) and refrain from using any of the Confidential
Information except in connection with this Agreement. In the event that Seller
is requested or required (by oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information, Seller
shall notify Purchaser promptly of the request or requirement so that Purchaser
may seek an appropriate protective order or waive compliance with the

 

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provisions of this Section 8.6(c). If, in the absence of a protective order or
the receipt of a waiver hereunder, Seller is, on the advice of counsel, legally
compelled to disclose any Confidential Information, Seller may disclose the
Confidential Information as required; provided that such disclosing Person
shall, and Purchaser’s sole cost and expense, use commercially reasonable
efforts to obtain, at the request of Purchaser, an order or other assurance that
confidential treatment shall be accorded to such portion of the Confidential
Information required to be disclosed.

(d) Exceptions to Prior Employees of Seller Working for Purchaser and/or its
Affiliates. Notwithstanding anything to the contrary provided herein or
elsewhere, the restrictions and limitations set forth in Sections 8.6(a), (b)
and (c) shall not apply to any former officer, director, employee, consultant,
independent contractor or other Affiliate of Seller if any such Person is
employed or otherwise is paid for the performance of services for and/or on
behalf of the Purchaser or any of its Affiliates.

(e) Remedy for Breach. Seller acknowledges and agrees that in the event of a
breach by Seller of any of the provisions of this Section 8.6, monetary damages
shall not constitute a sufficient remedy. Consequently, in the event of any such
breach, Purchaser and/or its respective successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to the Court of
Chancery located in Wilmington, Delaware for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof by Seller, in each case without the requirement of posting a
bond or proving actual damages.

(f) Enforcement. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 8.6 is invalid or
unenforceable, Seller and Purchaser agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.

(g) Acknowledgment. Seller acknowledges and agrees that (i) the restrictions
contained in this Section 8.6 are reasonable in all respects (including, without
limitation, with respect to subject matter, time period and geographical area)
and are necessary to protect Purchaser’s interest in, and value of, the Business
and the Purchased Assets (including, without limitation, the goodwill inherent
therein), (ii) Seller is primarily responsible for the creation of such value,
(iii) Seller is deriving significant economic benefit from the transactions
contemplated hereby, and (iv) Purchaser would not have consummated the
transactions contemplated hereby without the restrictions contained in this
Section 8.6.

8.7 Access to Information. After Closing, upon reasonable notification from
Purchaser, Seller shall make available to Purchaser and its representatives
reasonable access to all books and records of Seller with respect to the
Business. Seller understands and acknowledges that, contemporaneously with or
after Closing, Purchaser and its Affiliates may do one or more financings for
which financial information with respect to the Business will be reported for
periods on and prior to the Closing Date.

8.8 Discharge of Liabilities. Seller shall pay and discharge the Excluded
Liabilities (including, without limitation, all accounts and accruals payable
which constitute Excluded Liabilities) as and when due, subject to Seller’s
right to negotiate amounts and time of payment thereof.

8.9 Trademarks. Following the Closing, Seller shall not, and shall cause its
Affiliates not to, use, license or permit any third party to use any name,
slogan, logo or trademark that contains the name “Enterphone” or is set forth on
Schedule 4.14, or any name, slogan, logo or trademark that is confusingly

 

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similar thereto (collectively, the “Business Marks”), including as a trademark,
service mark, trade name, corporate name, or Internet domain name. Within ten
(10) days following the Closing Date, Seller shall, and shall cause its
Affiliates to, file such documentation as is necessary to change its and their
respective names so as to comply with the requirements of this Section 8.9 and
shall, and shall cause its Affiliates to, remove from their respective assets,
properties, stationery, literature and Internet website any and all Business
Marks. Seller shall not, and shall cause their Affiliates not to, use any
Business Mark in connection with the sale of any products or services or
otherwise in the conduct of their business.

8.10 Registration and Certain Other Rights.

(a) Definitions. The following definitions will apply to this Section 8.10.

(i) “Form S-3” means such form under the Securities Act as in effect on the date
hereof or any Registration Statement under the Securities Act subsequently
adopted by the SEC that permits incorporation of substantial information by
reference to other documents filed by the Parent with the SEC.

(ii) “Register,” “registered,” and “registration” shall refer to a registration
effected by preparing and (i) filing a Registration Statement in compliance with
the Securities Act and applicable rules and regulations thereunder, and the
declaration or ordering of effectiveness of such Registration Statement or
(ii) filing a prospectus and/or prospectus supplement in respect of an
appropriate effective Registration Statement on Form S-3.

(iii) “Registrable Securities” means (A) the Closing Share Consideration,
(B) the Holdback Shares, (C) shares of Parent Stock that may be issued as
Earnout Consideration, and (D) any equity securities issued or issuable directly
or indirectly with respect to the securities referred to in the foregoing
clauses (A), (B) and (C) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, reclassification,
merger, amalgamation, arrangement, consolidation or other reorganization;
provided that, once issued, such securities will cease to constitute Registrable
Securities upon the earliest to occur of (1) when they are sold pursuant to an
effective Registration Statement under the Securities Act, or (2) when they
shall have ceased to be outstanding.

(iv) “Registration Expenses” means all expenses incurred by the Purchaser in
effecting any registration pursuant to this Agreement (whether or not any
registration or prospectus becomes effective or final) or otherwise complying
with its obligations under this Section 8.10, including all registration, filing
and listing fees, printing expenses, fees and disbursements of counsel for
Parent, blue sky fees and expenses, and expenses of the Parent’s independent
accountants in connection with any regular or special reviews or audits incident
to or required by any such registration, but shall not include Selling Expenses.

(v) “Registration Statement” means each prospectus and other documents filed
with the SEC to effect a registration under the Securities Act of the
Registrable Securities, which such Registration Statement will be on Form S-3.

(vi) “Selling Expenses” means all discounts, selling commissions and stock
transfer taxes applicable to the sale of Registrable Securities and fees and
disbursements of counsel and other advisors for the Seller Persons and all
similar commissions relating to the Seller Persons disposition of Registrable
Securities.

 

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(vii) “Seller Person” means, the Seller, the SPV (as defined in the Payment
Instructions) and any of their respective designees, assignees and/or
transferees who are reasonably acceptable to the Parent.

(b) Registration Rights. Parent covenants and agrees as follows: Subject to the
terms and conditions of this Agreement and the Parent’s receipt of information
from the Seller Persons that is required to be included in a Form S-3 regarding
the Seller Persons, within thirty (30) days after the Closing Date, Seller shall
prepare and file with the SEC a Form S-3 covering the Registrable Securities and
shall use its commercially reasonable efforts to have such Registration
Statement declared effective as soon as reasonably practicable after filing.
Parent hereby covenants, represents and warrants that it meets the eligibility
requirements for use of Form S-3 and it has sufficient capacity under the
applicable rules and regulations of the Federal Securities Laws including the
instruction to S-3 to include all Registrable Securities therein. Parent shall
use commercially reasonable efforts to keep any such Form S-3 continuously
effective and in compliance with the Securities Act and usable for resale of all
Registrable Securities until the date all Registrable Securities have been sold
by the Seller.

(c) Expenses of Registration. All Registration Expenses incurred in connection
with any registration, qualification or compliance hereunder shall be borne by
the Parent. All Selling Expenses incurred in connection with any registrations
hereunder shall be borne by the Seller Persons.

(d) Obligations of the Parent. Whenever required to effect the registration of
any Registrable Securities or facilitate the distribution of Registrable
Securities pursuant to an effective Form S-3, the Parent shall, as expeditiously
as possible:

(i) Prepare and file with the SEC a Registration Statement covering the resale
of all Registrable Securities (or a prospectus supplement pursuant to an
effective Registration Statement) and keep such Registration Statement effective
or such prospectus supplement current for the period set forth in
Section 8.10(b).

(ii) Prepare and file with the SEC such amendments and supplements to the
applicable Registration Statement and the prospectus or prospectus supplement
used in connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement.

(iii) Use its commercially reasonable efforts to register and qualify the
securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by each
Seller Person, to keep such registration or qualification in effect for so long
as such Registration Statement is required to remain current and effective
pursuant to Section 8.10(b), and to take any other action which may be
reasonably necessary to enable Seller Persons to consummate the disposition in
such jurisdictions of the Registrable Securities owned by Seller
Persons; provided that, the Parent shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

(iv) Use its commercially reasonable efforts to procure the cooperation of the
Parent’s transfer agent in settling any sale or transfer of Registrable
Securities.

(v) If requested by a Seller Person, promptly include in a prospectus supplement
or amendment such information as the Seller Person may reasonably request in
order to permit the intended method of distribution of such securities and make
all required filings of such prospectus supplement or such amendment as soon as
practicable after the Parent has received such request.

 

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(e) Suspension of Sales. Upon receipt of written notice from the Parent that a
Registration Statement, prospectus or prospectus supplement contains or may
contain an untrue statement of a material fact or omits or may omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or that the Parent’s board of directors has determined in
good faith that circumstances exist that make inadvisable use of such
Registration Statement, prospectus or prospectus supplement, the Seller Persons
shall forthwith discontinue disposition of Registrable Securities until Seller
Person has received copies of a supplemented or amended prospectus or prospectus
supplement, or until Seller Persons is advised in writing by the Parent that the
use of the prospectus and, if applicable, prospectus supplement may be resumed,
and, if so directed by the Parent, Seller Person shall deliver to the Parent all
copies, other than permanent file copies then in such Holder’s possession, of
the prospectus and, if applicable, prospectus supplement covering such
Registrable Securities in use at the time of receipt of such notice. The total
number of days that any such suspension described in this paragraph may be in
effect in any 180-day period shall not exceed twenty (20) Business Days.

(f) Obligations of the Seller Persons.

(i) Discontinuance of Distribution. The Seller Persons agrees that, upon receipt
of any notice from the Parent of the occurrence of any event of the kind
described in Section 8.10(e) hereof, the Seller Persons shall immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement covering such Registrable Securities until the Seller Person’s receipt
of the copies of the supplemented or amended prospectus contemplated
by Section 8.10(e) hereof or receipt of notice that no supplement or amendment
is required and that the Seller Person’s disposition of the Registrable
Securities may be resumed. Parent may provide appropriate stop orders to enforce
the provisions of this Section 8.10(f).

(ii) Compliance with Prospectus Delivery Requirements. Seller Persons covenants
and agrees that he shall comply with the prospectus delivery requirements of the
Securities Act as applicable to him or an exemption therefrom in connection with
sales of Registrable Securities pursuant to any Registration Statement filed by
Parent pursuant to this Agreement.

(iii) Notification of Sale of Registrable Securities. Seller Persons covenants
and agrees that he shall notify Parent following the sale of Registrable
Securities to a third party as promptly as reasonably practicable, and in any
event within thirty (30) days, following the sale of such Registrable
Securities.

(iv) Confidentiality. In the event the filing of any Registration Statement,
prospectus or prospectus supplement is deferred pursuant to Section 8.10(e), or
a Holder’s ability to trade is suspended pursuant to Section 8.10(e), Seller
Persons agrees to treat such information confidentially and to not make public
such information.

(g) Termination of Registration Rights. The provisions of this Section 8.10
shall survive and shall terminate on the date all such Registrable Securities
are sold (other than Section 8.10(i)(i-iv), which provisions shall survive such
termination).

 

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(h) Furnishing Information.

(i) Seller Persons shall not shall use any free writing prospectus (as defined
in Rule 405) in connection with the sale of Registrable Securities without the
prior written consent of the Parent.

(ii) It shall be a condition precedent to the obligations of the Parent to take
any action pursuant to Section 8.10 that the Seller Persons shall furnish to the
Parent such information regarding themselves, the Registrable Securities held by
them and the intended method of disposition of such securities as shall be
reasonably required to effect the registered offering of its Registrable
Securities.

(i) Registration Statement Indemnification.

(i) The Purchaser shall indemnify and hold harmless each Seller Person and each
such Seller Person’s officers, directors, managers, members, partners,
shareholders and Affiliates and each other controlling Person, if any, who
controls any of the foregoing Persons, against all claims, losses, damages and
liabilities (or actions in respect thereof) to which he may become subject under
the Securities Act or otherwise, insofar as such claims, losses, damages and
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, prospectus, preliminary prospectus, free writing
prospectus (as defined in Rule 405 under the Securities Act or any successor
rule thereto) or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of a prospectus, preliminary
prospectus or free writing prospectus, in light of the circumstances under which
they were made) not misleading; and shall reimburse Seller Persons for any
reasonable legal or other expenses reasonably incurred by him in connection with
investigating or defending any such claims, losses, damages and liabilities (or
actions in respect thereof); provided, however, that the Purchaser shall not be
required to provide indemnification pursuant to this Section 8.10(i); (i) where
the claims, losses, damages and liabilities (or actions in respect thereof) are
caused by or contained in any information furnished in writing to the Parent by
Seller Persons expressly for use therein, (ii) where the claims, losses, damages
and liabilities (or actions in respect thereof) are caused by such Selling
Person’s failure to deliver a copy of the Registration Statement, prospectus,
preliminary prospectus, free writing prospectus (as defined in Rule 405 under
the Securities Act or any successor rule thereto) or any amendments or
supplements thereto (if the same was required by applicable law to be so
delivered) after the Parent has furnished Seller Persons with the same prior to
any written confirmation of the sale of Registrable Securities or (iii) offers
or sales effected by or on behalf of Seller Persons “by means of” (as defined in
Rule 159A) a “free writing prospectus” (as such term is defined in Rule 405)
that was not authorized in writing by the Parent. This indemnity shall be in
addition to any liability the Parent may otherwise have.

(ii) To the extent permitted by applicable Law, each Seller Person (for such
Seller Person only and not any other Seller Person), shall, indemnify and hold
harmless the Parent, each of its directors, each officer of the Parent who shall
sign such Registration Statement, each legal counsel and each underwriter,
broker or other Person acting on behalf of the holders of Registrable Securities
and each Affiliate who controls (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act) any of the foregoing Persons
against all claims, losses, damages and liabilities (or actions in respect
thereof) resulting from any untrue or alleged untrue statement of material fact
contained in the Registration Statement, prospectus, preliminary prospectus,
free writing prospectus (as

 

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defined in Rule 405 under the Securities Act or any successor rule thereto) or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, preliminary prospectus or free
writing prospectus, in light of the circumstances under which they were made)
not misleading, but only to the extent that such untrue statement or omission is
in writing and is provided by such Seller Person (or its representative) to the
Parent expressly to be used in the Registration Statement; and shall reimburse
such Persons for any legal or other expenses reasonably incurred by any of them
in connection with investigating or defending any such claims, losses, damages
and liabilities (or actions in respect thereof); provided, that the obligation
of such Seller Person to indemnify pursuant to this subsection (i) of
Section 8.10(i) shall not exceed an amount equal to the net proceeds (after
underwriting fees, commissions or discounts) actually received by such Seller
Person from the sale of Registrable Securities pursuant to such Registration
Statement. This indemnity shall be in addition to any liability the Seller
Person may otherwise have.

(iii) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in
this Section 8.10(i), such indemnified party shall, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. The failure of any indemnified party to
notify an indemnifying party of any such action shall not (unless such failure
shall have a material adverse effect on the indemnifying party) relieve the
indemnifying party from any liability in respect of such action that it may have
to such indemnified party hereunder. In case any such action is brought against
an indemnified party, the indemnifying party shall be entitled to participate in
and to assume the defense of the claims in any such action that are subject or
potentially subject to indemnification hereunder, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after written
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be responsible
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof; provided, that, if (i) any indemnified
party shall have reasonably concluded upon advice of counsel that there may be
one or more legal or equitable defenses available to such indemnified party
which are additional to or conflict with those available to the indemnifying
party, or that such claim or litigation involves or could have an effect upon
matters beyond the scope of the indemnity provided hereunder, or (ii) such
action seeks an injunction or equitable relief against any indemnified party or
involves actual or alleged criminal activity, the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
indemnified party without such indemnified party’s prior written consent (but,
without such consent, shall have the right to participate therein with counsel
of its choice) and such indemnifying party shall reimburse such indemnified
party and any Affiliate of such indemnified party for that portion of the fees
and expenses of any counsel retained by the indemnified party which is
reasonably related to the matters covered by the indemnity provided hereunder.
If the indemnifying party is not entitled to, or elects not to, assume the
defense of a claim, it shall not be obligated to pay the fees and expenses of
more than one firm of legal counsel for all parties indemnified by such
indemnifying party with respect to such claim.

 

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(iv) If the indemnification provided for in this Section 8.10(i) is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any claims, losses, damages and liabilities (or actions in respect
thereof) referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amounts
paid or payable by such indemnified party as a result of such claims, losses,
damages and liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such claims, losses, damages and liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations; provided, that the maximum amount of liability in respect of
such contribution shall be limited, in the case of each holder of Registrable
Securities, to an amount equal to the net proceeds (after underwriting fees,
commissions or discounts) actually received by such seller from the sale of
Registrable Securities effected pursuant to such registration. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the Parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Parties agree that it would not be just and equitable if contribution
pursuant hereto were determined by pro rata allocation or by any other method or
allocation which does not take account of the equitable considerations referred
to herein. No Person guilty or liable of “fraudulent misrepresentation” within
the meaning of Section 11(f) of the Securities Act shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

8.11 Lock-Up.

(a) Each Seller Person (each a “Holder” and together, the “Holders”) agrees not
to sell, pursuant to this Section 8.11, Rule 144 or otherwise, any of the
Closing Share Consideration received by such Holder during the six-month period
beginning on the Closing Date through the six-month anniversary of the Closing
Date. Beginning on the day following the six-month anniversary of the Closing
Date, there shall be no further sale restriction pursuant to this
Section 8.11(a).

(b) Notwithstanding anything to the contrary in the foregoing, the restrictions
set forth in this Section 8.11 shall not apply to (i) any transfer by the Holder
to any of its Affiliates or any limited partner, member, shareholder or
stockholder of the Holder, provided that such Affiliate(s) or other
transferee(s) agree in writing, in form and substance reasonably satisfactory to
Purchaser to be bound by the terms and conditions of this Agreement, (ii) a
transfer to any party or parties not affiliated with the Holder who are
acquiring majority control of Purchaser in a merger, tender offer or other
transaction approved or recommended by the Parent’s board of directors, (iii) as
a bona fide gift or gifts, provided that the donee or donees thereof agree in
writing, in form and substance reasonably satisfactory to Purchaser, to be bound
by the terms and conditions of this Agreement, (iv) to any trust, partnership,
limited liability company or other entity for the direct or indirect benefit of
the Holder or an immediate family member of the Holder; provided that the
trustee of the trust or such other transferee agrees in writing, in form and
substance reasonably satisfactory to Purchaser, to be bound by the terms and
conditions of this Agreement; provided, further that any such transfer shall not
involve a disposition for value; or (v) transfers to Purchaser to effect
withholding or surrender of any of the Holder’s Closing Share Consideration to
satisfy tax withholding obligations.

(c) Any Transfer or attempted Transfer of Purchaser Shares in violation of this
Section 8.11 shall, to the fullest extent permitted by applicable law, be null
and void ab initio, and Purchaser shall not, and shall instruct its transfer
agent and other third parties not to, record or recognize any such purported
transaction on the share register of Purchaser.

 

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8.12 Rule 144 Compliance. With a view to making available to each Holder the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit a holder to sell shares of Parent Stock received in connection with
this Agreement to the public without registration, the Purchaser shall:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144, at all times after the Registration Date;

(b) use commercially reasonable efforts to file with the SEC in a timely manner
all reports and other documents required of Parent under the Securities Act and
the Exchange Act, at all times after the Closing; and

(c) furnish to each Holder so long as any Holder, following the Closing Date,
owns any shares of Parent Stock, including the Holdback Shares (and/or has been
designated by Seller or VS225, LLC as a person to receive Earnout Consideration
if Earnout Amounts are achieved pursuant to Section 2.7), promptly upon written
request, a copy of the most recent annual or quarterly report of the Parent, and
such other reports and documents so filed or furnished by the Parent as Holder
may reasonably request in connection with the sale of Registrable Securities
without registration.

8.13 Legends; Securities Act Compliance.

(a) The Parties hereto acknowledge and agree that the Closing Share
Consideration to be received by each Seller Person will not be registered under
the Securities Act or any state securities laws at the time of Closing, and
agrees that such shares may not be sold, transferred, offered for sale, pledged,
hypothecated or otherwise disposed of without registration under the Securities
Act, except pursuant to an exemption from such registration available under the
Securities Act, and without compliance with foreign securities laws, in each
case, to the extent applicable. The Holder agrees that all certificates,
book-entry shares or other instruments representing the Closing Share
Consideration to be received by such Seller Person will bear a legend
substantially to the following effect:

The securities evidenced by this certificate have been issued and sold without
registration under the United States Securities Act of 1933, as amended (the
“Securities Act”), or the securities laws of any state of the United States (a
“State Act”) in reliance upon certain exemptions from registration under said
acts. The securities evidenced by this certificate are subject to a six
(6) month restriction on resale pursuant to Section 8.11(a) of the Asset
Purchase Agreement and cannot be sold, assigned or otherwise transferred within
the United States unless such sale, assignment or other transfer is (i) made
pursuant to Section 8.11(b) thereof, (ii) made pursuant to an effective
registration statement under the Securities Act and in accordance with each
applicable State Act, or (iii) exempt from, or not subject to, the Securities
Act and each applicable State law.

(b) Notwithstanding Section 8.13(a), at the request of a Seller Person, (i) at
such time as the restrictions described in the second sentence of the foregoing
legend are no longer applicable to such Seller Person, and (ii) with respect to
restrictions that refer to the Securities Act or other Legal Requirements, upon
receipt by the Parent of an opinion of counsel to the effect that the first
sentence of the foregoing legend is no longer required under the Securities Act
or other Legal Requirements, as the case may be (and for which Parent will use
reasonable efforts to have corporate counsel to Parent provide such an opinion
of counsel to Parent upon request by such Seller Person), Parent will promptly
cause such legend to be removed from any certificate or book-entry share for any
shares of Parent Stock held by such requesting Seller Person.

 

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8.14 Purchaser Confidentiality. Purchaser shall, (a) prior to the Closing, treat
and hold as confidential information concerning the Seller, the SPV, the
Business, the Purchased Assets and related information, and (b) post Closing,
treat and hold as confidential information concerning the Seller and the SPV,
that is not already generally available to the public (the “Confidential
Information”). In the event that Purchaser is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, Purchaser shall notify Seller promptly of
the request or requirement so that Seller may seek an appropriate protective
order or waive compliance with the provisions of this Section 8.14. If, in the
absence of a protective order or the receipt of a waiver hereunder, Purchaser
is, on the advice of counsel, legally compelled to disclose any Confidential
Information, Purchaser may disclose the Confidential Information as required;
provided that such disclosing Person shall, and at Seller’s sole cost and
expense, use reasonable efforts to obtain, at the request of Seller, an order or
other assurance that confidential treatment shall be accorded to such portion of
the Confidential Information required to be disclosed.

ARTICLE IX

TERMINATION, AMENDMENTS, WAIVERS AND MISCELLANEOUS

9.1 Termination.

(a) Except as provided in Section 9.1(b), this Agreement may be terminated and
the transactions contemplated hereby abandoned at any time prior to the Closing
(except as provided in Section 9.1(a)(vi)):

(i) by mutual agreement of the Seller and Purchaser;

(ii) by Purchaser or the Seller if: the Closing has not occurred before 5:00p.m.
(Pacific Time) on January 30, 2019 (provided, however, that the right to
terminate this Agreement under this Section 9.1(a) shall not be available to a
party whose willful failure to fulfill any obligation hereunder has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date);

(iii) by either Seller or Purchaser in the event that any Governmental Entity
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and nonappealable;

(iv) by Purchaser if it is not in material breach of its representations,
warranties, covenants and agreements under this Agreement which are capable of
being cured and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of Seller and
(i) Seller is not using its commercially reasonable efforts to cure such breach,
or has not cured such breach within twenty (20) calendar days, after notice of
such breach to Seller by Purchaser (provided, however, that no cure period shall
be required for a breach which by its nature cannot be cured) and (ii) as a
result of such breach the conditions set forth in Article III, as the case may
be, would not be satisfied prior to the Closing Date;

(v) by Seller if it is not in material breach of its representations,
warranties, covenants and agreements under this Agreement which are capable of
being cured and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of Purchaser and
(i) Purchaser is not using its reasonable

 

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efforts to cure such breach, or has not cured such breach within twenty
(20) calendar days, after notice of such breach to Purchaser by Seller
(provided, however, that no cure period shall be required for a breach which by
its nature cannot be cured), and (ii) as a result of such breach the conditions
set forth in Article III, as the case may be, would not be satisfied as of the
Closing Date; or

(vi) by Purchaser, if the required VSI stockholder approval has not been
obtained as of immediately prior to the actual time of Closing in accordance
with applicable Law at (A) any meeting (or any adjournment thereof) convened for
the purpose of taking a vote with respect to the transactions contemplated by
this Agreement, or (B) by written consent of stockholders of VSI with respect to
the transactions contemplated hereby.

(b) Effect of Termination. In the event of a valid termination of this Agreement
as provided in Section 9.1(a) above, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of the Purchaser or
Seller, or their respective officers, directors, stockholders or stockholder or
Affiliates; provided, however, that each of Seller and Purchaser shall remain
liable for any breaches of this Agreement prior to its termination; and provided
further that, the provisions of Sections 8.2, 8.4, 8.5(c), 9.1(b), 9.2 through
and including 9.20 and the applicable definitions set forth in this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.

9.2 Amendment and Waiver. This Agreement may be amended and any provision of
this Agreement may be waived, provided that any such amendment or waiver shall
be binding upon a party hereto only if such amendment or waiver is set forth in
a writing executed by such party. No course of dealing between or among any
persons having any interest in this Agreement shall be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any party hereto under or by reason of this Agreement.

9.3 Notices. All notices, demands and other communications given or delivered
under this Agreement shall be in writing and shall be deemed to have been given
when personally delivered, mailed by first class mail, return receipt requested,
or delivered by express courier service or telecopied (with hard copy to
follow). Notices, demands and communications to Seller and Purchaser shall,
unless another address is specified in writing, be sent to the address or
telecopy number indicated below. All notices, demands and other communications
hereunder may be given by any other means (including electronic mail), but shall
not be deemed to have been duly given unless and until it is actually received
by the intended recipient.

 

Notices to Seller:    with a copy to (which shall not constitute notice): 1.  

Wade Greaton

225 NE Mizner Boulevard, Suite 720

Boca Raton, FL 33432

Email: VS225llc@gmail.com

 

and

  

Gusrae Kaplan Nusbaum PLLC

120 Wall Street, 25th Floor

New York, NY 10005

Attention: Lawrence G. Nusbaum

Facsimile: 212-809-4147

Email: lnusbaum@gusraekaplan.com

2.  

Geoffrey Arens

747 Third Avenue, 26th Floor

New York, NY 10017

Email: vysyold225.1@gmail.com

  

 

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Notices to Purchaser:

 

Identiv, Inc.

2201 Walnut Avenue, Suite 100
Fremont, CA 94538

Attention: Steve Humphreys

Email: shumphreys@identiv.com

  

with a copy to (which shall not constitute notice):

 

Pillsbury Winthrop Shaw Pittman LLP

2550 Hanover Street, Palo Alto, CA

Attention: Stanley Pierson

Facsimile: 650-233-4545

Email: spierson@pillsburylaw.com

9.4 Binding Agreement; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns; provided that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by Seller without the prior written consent of Purchaser or by
Purchaser without the prior written consent of Seller. Notwithstanding the
foregoing, without the prior written consent of Seller, each of Purchaser and
its permitted assigns may at any time following the Closing, subject to
Section 2.7(f), in its sole discretion, assign, in whole or in part, (a) its
rights under this Agreement and the other Transaction Documents for collateral
security purposes to any lender providing financing to Purchaser, such permitted
assign or any of their Affiliates and any such lender may exercise all of the
rights and remedies of Purchaser or such permitted assign hereunder and
thereunder; (b) its rights (but not its obligations) under this Agreement and
the other Transaction Documents to an affiliate of Purchaser and (c) its rights
and obligations under this Agreement and the other Transaction Documents
pursuant to a Purchaser Change of Control.

9.5 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.

9.6 Construction.

(a) The language used in this Agreement shall be deemed to be the language
chosen by the Parties to express their mutual intent, and no rule of strict
construction shall be applied against any Person. The Disclosure Schedules
attached to this Agreement have been arranged in separately titled sections
corresponding to sections of this Agreement; provided, however, each section of
the Disclosure Schedules will be deemed to incorporate by reference all
information disclosed in any other section of the Disclosure Schedules to the
extent that the relevance of such information to such other schedules is readily
apparent on its face. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. In addition, each
of the Parties acknowledges and agrees that any purchase price adjustments as a
result of the application of any provision of this Agreement or any other of the
Transaction Documents do not prejudice or limit in any respect whatsoever any
Party’s rights to indemnification under any other provision of this Agreement or
any other Transaction Document or pursuant to any other applicable requirement
of Law. Notwithstanding anything to the contrary contained herein, for the
purpose of determining the amount of any Losses for which an Indemnified Party
is entitled to indemnification pursuant to Article VII, each representation,
warranty, covenant or agreement contained in this Agreement and each certificate
delivered pursuant hereto shall be read without regard and without giving effect
to any materiality or Material Adverse Effect standard or qualification
contained in such representation, warranty, covenant or agreement (as if such
standard or qualification were deleted from such representation, warranty,
covenant or agreement).

 

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(b) In this Agreement, unless the context otherwise requires: (i) references to
“the date hereof” means as of the date of this Agreement; (ii) the words
“hereof”, “herein”, “hereto” and “hereunder”, and words of similar import shall
refer to this Agreement as a whole and not to any provision of this Agreement;
(iii) this “Agreement” shall be construed as a reference to this Agreement as
may have been, or may from time to time be, amended, varied, novated or
supplemented; (iv) “include”, “includes”, and “including” are deemed to be
followed by “without limitation” whether or not they are in fact followed by
such words or words of similar import; (v) references to dollars or “$” are to
United States of America dollars, unless otherwise specified on the Disclosure
Schedule; and (vi) the execution, in and of itself, of this Agreement, and the
negotiation of this Agreement by the Parties hereto (including the transmission
of any drafts of this Agreement between the Parties hereto prior to the date
hereof) shall not give rise to any right or claim of any kind by any third
party, under any Contract or otherwise. All references to materials being “made
available” by Seller means documents posted and accessible to Purchaser and its
advisors in the Seller’s electronic data room no less than three (3) Business
Day prior to the date of this Agreement and remained so posted and accessible
continuously through the Closing and ten (10) Business Days thereafter.

9.7 Captions/Headings. The captions/headings used in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.

9.8 Entire Agreement. The schedules and exhibits identified in this Agreement
are incorporated herein by reference. This Agreement and the documents referred
to herein (including the schedules and exhibits hereto) contain the entire
agreement between the Parties and supersede any prior understandings, agreements
or representations by or between the Parties, written or oral, which may have
related to the subject matter hereof in any way, including the Letter of Intent.

9.9 Counterparts. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which taken together shall
constitute one and the same instrument.

9.10 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the internal laws of California applicable to
parties residing in California, without regard applicable principles of
conflicts of law. Any dispute, claim or controversy arising out of or relating
to this Agreement or the breach, termination, enforcement, interpretation or
validity hereof, including the determination of the scope or applicability of
this agreement to arbitrate shall be determined by arbitration in Santa Clara
County, California before one arbitrator (the “Arbitration”). The Arbitration
shall be final and binding. The Arbitration shall be submitted to JAMS or its
successor (collectively, “JAMS”) and administered by JAMS pursuant to its
Comprehensive Arbitration Rules and Procedures and the Parties will use
reasonable efforts to expedite the resolution of the Arbitration as promptly as
practicable (and within sixty (60) days of the initial submission of the
Arbitration to JAMS by a party hereto). Either party may initiate Arbitration by
filing a written demand for arbitration with JAMS. Seller and Purchaser shall
each advance one half of the arbitrator’s fees and administrative costs of the
Arbitration. The arbitrator shall award to the prevailing party or parties, if
any, the costs (including advanced JAMS payments) (but excluding any attorneys’
fees) reasonably incurred by the prevailing party or parties in connection with
the Arbitration taking into account the extent of the prevailing party’s or
parties’ victory. Judgment on the award rendered by the arbitrator may be
entered in any court of appropriate jurisdiction. This clause shall not preclude
any party from seeking provisional remedies in aid of arbitration from a court
of appropriate jurisdiction. Notwithstanding the foregoing, any dispute, claim
or controversy arising out of or relating to the Closing Net Working Capital
Statement (a “Working Capital Disagreement”) shall instead be referred to an
Independent Accounting Firm for resolution. Purchaser and the Seller shall
instruct the Independent Accounting Firm that the determinations of such firm
with respect to any Working Capital Disagreement shall be rendered within
fifteen (15) days after referral of the Working Capital Disagreement to such
firm

 

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or as soon thereafter as reasonably possible. Such determinations shall only be
made with respect to the items that remain the subject of the Working Capital
Disagreement on the basis of written position papers submitted by Purchaser and
the Seller (i.e., not on the basis of independent review), shall with respect to
each item be made within the range of the disputed amounts claimed by Purchaser
and the Seller in the position papers submitted, and shall be final and binding
upon the Parties. Each of Purchaser and the Seller shall use its commercially
reasonable efforts to cause the Independent Accounting Firm to render its
determination within the 15-day period described above, and each shall cooperate
with such firm and provide such firm with reasonable access to the books,
records, personnel and representatives of it and such other information as such
firm may reasonably require in order to render its determination. All of the
fees and expenses of any Independent Accounting Firm retained pursuant to this
Section 9.10 shall be allocated between the Seller, on the one hand, and
Purchaser, on the other hand, in the same proportion that the aggregate amount
of the items unsuccessfully disputed or defended, as the case may be, by each
(as finally determined by the Independent Accounting Firm) bears to the total
amount of the disputed items.

9.11 Parties in Interest. Nothing in this Agreement, express or implied, is
intended to confer on any Person other than the Parties and their respective
successors, designees and assignees any rights or remedies under or by virtue of
this Agreement (other than in respect of the Purchaser Parties and the Seller
Parties pursuant to Article VII).

9.12 Delivery by Facsimile or Electronic Transmission. This Agreement and any
Transaction Document, and any amendments hereto or thereto, to the extent signed
and delivered by means of a facsimile machine or other electronic transmission
(including electronic transmission of a document in portable document format),
shall be treated in all manner and respects as an original Contract and shall be
considered to have the same binding legal effects as if it were the original
signed version thereof delivered in person. At the request of any party hereto
or to any such Contract, each other party hereto or thereto shall re-execute
original forms thereof and deliver them to all other parties. No party hereto or
to any such Contract shall raise the use of a facsimile machine or electronic
transmission to deliver a signature or the fact that any signature or Contract
was transmitted or communicated through the use of facsimile machine or
electronic transmission as a defense to the formation of a Contract and each
such party forever waives any such defense.

9.13 Successor Liability. It is the intent of the Parties that, except where
expressly prohibited under applicable Law, upon the Closing, Purchaser shall not
be deemed to: (i) be the successor of Seller; (ii) have, de facto, or otherwise,
merged with or into Seller; (iii) be a mere continuation or substantial
continuation of Seller; or (iv) be liable for any acts or omissions of Seller in
the conduct of the Business or arising under or related to the Purchased Assets
other than as set forth in this Agreement including, but not limited to, with
respect to the Assumed Liabilities. Without limiting the generality of the
foregoing, and except as otherwise provided in this Agreement, It is the intent
of the Parties that, Purchaser shall not be liable for any claims against Seller
or any of its predecessors or Affiliates, and Purchaser shall have no successor
or vicarious liability of any kind or character whether known or unknown as of
the Closing of the transactions contemplated by this Agreement, whether now
existing or hereafter arising, or whether fixed or contingent, with respect to
the Business or any obligations of Seller arising prior to the Closing, except
as provided in this Agreement, including Liabilities on account of any Taxes
arising, accruing, or payable under, out of, in connection with, or in any way
relating to the operation of the Business prior to the Closing.

9.14 Special Rule for Fraud. Notwithstanding anything herein to the contrary, in
no event shall any limit or restriction on any rights or remedies set forth in
this Agreement limit or restrict the rights or remedies of any Party for fraud
by any other Party.

 

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9.15 Specific Performance. Seller and Purchaser agree and affirmed that in the
event of a breach of this Agreement, each party shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce its
rights and the obligations of the other Party hereunder not only by an action or
actions for damages but also by an action or actions for specific performance,
injunctive and/or other equitable relief. In any such action brought by
Purchaser or Seller to enforce this Agreement, the other Party hereby waives the
defense that there is an adequate remedy at law.

9.16 Prompt Transfer of shares of Parent Stock. Purchaser agrees that in
connection with all shares of Parent Stock issued to Seller (or its designees)
in the transaction contemplated hereby, upon request by Seller and/or any of its
designees, assignees or subsequent holders of such shares, to transfer any such
shares, Purchaser shall effectuate such requests promptly and take all actions
reasonably necessary and/or reasonably requested by a transferor to effectuate
any such requested transfer, subject to and in compliance with all applicable
securities laws.

9.17 Cooperation Post-Closing by Yvonne. For a period of six (6) months
following the Closing, Yvonne Zheng, a former employee of the Seller and who
will become an employee of the Purchaser immediately following the Closing, to
assist the Seller and/or any of its Affiliates in obtaining such information and
other items relating to the Seller as reasonably requested by the Seller and/or
any of its Affiliates following the Closing.

9.18 Further Assurances; Post-Closing Cooperation. At any time or from time to
time after the Closing, the parties shall execute and deliver to the other party
such other documents and instruments, provide such materials and information and
take such other actions as the other party may reasonably request to consummate
the transactions contemplated by this Agreement and otherwise to cause the other
party to fulfill its obligations under this Agreement and the transactions
contemplated hereby. Each party agrees to use commercially reasonable efforts to
cause the conditions to its obligations to consummate the transactions
contemplated by this Agreement to be satisfied.

9.19 Remedies. All remedies, either under this Agreement or by Legal Requirement
or otherwise afforded, will be cumulative and not alternative.

9.20 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the undersigned have executed this Asset Purchase Agreement
as of the date first written above.

 

SELLER:              PURCHASER: VISCOUNT SYSTEMS, INC.     IDENTIV, INC. By:  

/s/ Scott Sieracki

    By:   

/s/ Steve Humphreys

 

Name: Scott Sieracki

Title: Chief Executive Officer

      

Name: Steve Humphreys

Title: Chief Executive Officer

VISCOUNT COMMUNICATIONS AND CONTROL SYSTEMS INC.     VISCOUNT ACQUISITION ULC
By:  

/s/ Scott Sieracki

    By:   

/s/ Steve Humphreys

 

Name: Scott Sieracki

Title: Chief Executive Officer

      

Name: Steve Humphreys

Title: Chief Executive Officer

FREEDOM AI LLC        By:  

/s/ Scott Sieracki

        

Name: Scott Sieracki

Title: Chief Executive Officer

       VS225 LLC        (solely for the purpose of Article VII)        By:  

/s/ James Cacioppo

        

Name: James Cacioppo

Title: Manager

      

 

Signature Page to Asset Purchase Agreement