Exhibit 10.4

 

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER is made as of July 18, 2018 by and among Seven
Stars Cloud Group Inc., a Nevada corporation (the “Buyer”), GLI Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of the Buyer (the
“Acquisition Company”) and Grapevine Logic, Inc., a Delaware corporation (the
“Company”) and the Holder Representative.

 

Recitals

 

The Boards of Directors of the Company, the Buyer and the Acquisition Company,
and stockholders representing at least a majority of the outstanding shares of
the Company’s outstanding capital stock (by written consent), have approved a
merger (the “Merger”) of the Acquisition Company with and into the Company in
accordance with the Delaware General Corporation Law (the “DGCL”), on the terms
and conditions set forth herein.

 

WITNESSETH:

 

In consideration of the mutual promises, representations and warranties,
covenants, payments and actions herein provided, the parties hereto, each
intending to be legally bound hereby, do agree as follows:

 

1.Definitions.

 

For convenience, certain terms used in this Agreement are listed in alphabetical
order and defined or referred to below (such terms as well as any other terms
defined elsewhere in this Agreement shall be equally applicable to both singular
and plural forms of the terms defined).

 

“Agreement” means this Agreement and Plan of Merger and the exhibits and
schedules hereto.

 

“Business” means the existing business and any business currently be planned by
the Company (without regard to this acquisition); and the operations, facilities
and other assets, financial condition, results of operations, finances, markets,
products, competitive positions, raw materials and other supplies, and customers
and customer relations of the Company or the Buyer, as the case may be,
including without limitation, the business of social influencer marketing (or
SIM).

 

“Business Condition” means the Business and assets of the Company or the Buyer,
as the case may be.

 

“Cash Balance Time” is defined in Section 2.12(a).

 

 

 

 

“Closing” and “Closing Date” are defined in Section 2.9.

 

“Closing Cash Statement” is defined in Section 2.12(c).

 

“Closing Net Cash” is defined in Section 2.12(c).

 

“Company Common Stock” is defined in Section 2.7(b).

 

“Company’s knowledge” means the actual or constructive knowledge of Grant Deken,
after due inquiry.

 

“Contract” means any written or oral contract, agreement, lease, note, bond,
mortgage, indenture, guarantee, other evidence of indebtedness, license, option,
contract, undertaking, understanding, covenant, instrument, other document or
other commitment that is binding on any person or its property under applicable
law.

 

“Court Order” means any judgment, decree, injunction, order or ruling of any
federal, state or local court, arbitral body or other dispute resolution body,
or Governmental Entity that is binding on any person or its property under
applicable law.

 

“DGCL” means the Delaware General Corporation Law as in effect upon the
Effective Time.

 

“Disputed Amounts” is defined in Section 2.12(d).

 

“Downpayment” is defined in Section 2.8(a).

 

“Downpayment Escrow Agent” is defined in Section 2.8(a).

 

“Downpayment Escrow Provisions” is defined in Section 2.8(a).

 

“Effective Time” is defined in Section 2.2.

 

“Eligible Option” is defined in Section 2.6.

 

“Indemnification Escrow Agreement” means the Escrow Agreement to be entered into
by Buyer, the Holder Representative and the Indemnification Escrow Agent at the
Closing, substantially in the form of Exhibit 1.

 

“Indemnification Escrow Agent” means Ruskin Moscou Faltischek P.C.

 

“Indemnification Escrow Amount” means Five Hundred Thirty Thousand Dollars
($530,000.00).

 

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“Indemnification Escrow Funds” is defined in Section 2.11.

 

“Estimated Closing Adjustment” is defined in Section 2.12(b).

 

“Estimated Net Cash” is defined in Section 2.12(b).

 

“Governmental Entity” is defined in Section 3.4(b).

 

“Holder” and “Holders” is defined as those holders of capital stock of the
Company and Optionees, as identified on Schedule 2.8.

 

“Holder Representative” is defined in Section 9.5.

 

“Independent Accountant” is defined in Section 2.12(d).

 

“Intellectual Property” means any and all rights in, arising out of, or
associated with any of the following in any jurisdiction throughout the world:
(a) issued patents and patent applications (whether provisional or
non-provisional), including divisionals, continuations, continuations-in-part,
substitutions, reissues, reexaminations, extensions, or restorations of any of
the foregoing, and other Governmental Authority-issued indicia of invention
ownership (including certificates of invention, petty patents, and patent
utility models) (“Patents”); (b) trademarks, service marks, brands,
certification marks, logos, trade dress, trade names, and other similar indicia
of source or origin, together with the goodwill connected with the use of and
symbolized by, and all registrations, applications for registration, and
renewals of, any of the foregoing (“Trademarks”); (c) copyrights and works of
authorship, whether or not copyrightable, and all registrations, applications
for registration, and renewals of any of the foregoing (“Copyrights”); (d)
internet domain names and social media account or user names (including
“handles”), whether or not Trademarks, all associated web addresses, URLs,
websites and web pages, social media accounts and pages, and all content and
data thereon or relating thereto, whether or not Copyrights; (e) mask works, and
all registrations, applications for registration, and renewals thereof;(f)
industrial designs, and all Patents, registrations, applications for
registration, and renewals thereof; (g) trade secrets, know-how, inventions
(whether or not patentable), discoveries, improvements, technology, business and
technical information, databases, data compilations and collections, tools,
methods, processes, techniques, and other confidential and proprietary
information and all rights therein (“Trade Secrets”); (h) computer programs,
operating systems, applications, firmware, and other code, including all source
code, object code, application programming interfaces, data files, databases,
protocols, specifications, and other documentation thereof; (i) rights of
publicity; and (j) all other intellectual or industrial property and proprietary
rights.

 

“Law” means any criminal, civil or common law, statute, ordinance, regulation,
Court Order, code, rule, regulation, Permit, policy, guidance document,
judgment, decree, injunction, or agreement of any Governmental Entity,
including, without limitation, those covering environmental, energy, safety,
health, transportation, bribery, record keeping, privacy, data protection,
zoning, anti-discrimination, antitrust, wage and hour, employment benefit plans
and price and wage control matters.

 

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“Liability” means any direct or indirect liability, indebtedness, obligation,
expense, claim, loss, damage, deficiency, guaranty or endorsement of or by any
person, absolute or contingent, accrued or unaccrued, due or to become due upon
the passage of time, liquidated or unliquidated.

 

“Loss” or “Losses” means losses, damages, liabilities, deficiencies,
Proceedings, 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 “Loss” or “Losses” shall not include punitive
damages, except to the extent actually awarded to a Governmental Entity or other
third party.

 

“Material” or “materially” means material or materially to the Business
Condition.

 

“Material Company Consents” and “Material Buyer Consents” are defined in Section
5.5.

 

“Merger” is defined in the recitals.

 

“Optionee” is defined in Section 2.7(b)(ii).

 

“Ownership Percentage” is defined in Section 2.8(b).

 

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

 

“Post-Closing Adjustment” is defined in Section 2.12(c).

 

“Purchase Price” is defined in Section 2.8(b).

 

“Resolution Period” is defined in Section 2.12(d).

 

“Review Period” is defined in Section 2.12(d).

 

“Rights Holder” is defined in Section 2.7(d).

 

“Shares” means Company Common Stock and Company Preferred Stock.

 

“Statement of Objections” is defined in Section 2.12(d).

 

“Stock Right” is defined in Section 2.7(d).

 

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“Surviving Corporation” is the Company upon the Effective Time.

 

“Tax” or Taxes” means all federal, state and local, territorial and foreign
taxes, levies, deficiencies or other assessments and other charges of whatever
nature (including income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, backup withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, real property gains, registration, value added,
alternative or add-on minimum, and estimated taxes and workers’ compensation
premiums and other governmental charges, and other obligations of the same
nature as or of a nature similar to any of the foregoing) imposed by any taxing
authority, as well as any obligation to contribute to the payment of Taxes
determined on a consolidated, combined or unitary basis with respect to the
Company or any Affiliate, including any interest, penalty (civil or criminal),
or addition thereto, whether disputed or not, as well as any expenses incurred
in connection with the determination, settlement or litigation of any liability.

 

“Tax Return” means any federal, state, local and foreign return, declaration,
report, claim for refund, amended return, declarations of estimated Tax or
information return or statement relating to Taxes, and any schedule or
attachment thereto, filed or maintained, or required to be filed or maintained
in connection with the calculation, determination, assessment or collection of
any Tax, and including any amendment thereof, as well as, where permitted or
required, affiliated, combined, consolidated, unitary or similar returns for any
group of entities that include the Company or any Affiliate; and reports with
respect to backup withholding and other payments to third parties.

 

“Target Cash” is defined in Section 2.12(a).

 

“Total Cash Consideration” means the Total Common Stock Cash Consideration,
Total Eligible Option Cash Consideration and Total Preferred Stock Cash
Consideration.

 

“Total Common Stock Cash Consideration” means that amount referenced in Schedule
2.8.

 

“Total Eligible Option Cash Consideration” means that amount referenced in
Schedule 2.8.

 

“Total Preferred Stock Cash Consideration” means that amount referenced in
Schedule 2.8.

 

“Transaction Documents” means this Agreement and the other agreements
contemplated by this Agreement.

 

“Transaction Expenses” means all fees and expenses incurred by the Company and
any affiliate at or prior to the Closing in connection with the preparation,
negotiation and execution of the Transaction Documents, and the performance and
consummation of the Merger and the other transactions contemplated hereby.

 

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“Transactions” means the transactions contemplated by the Transaction Documents.

 

“Uncleared Payment Date” is defined in Section 2.12(c).

 

“Uncleared Payments” is defined in Section 2.12(a).

 

“Undisputed Amounts” is defined in Section 2.12(d).

 

2.The Merger.

 

2.1        The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the relevant provisions of the DGCL, the Acquisition Company
shall be merged with and into the Company as soon as practicable following the
satisfaction or waiver of the conditions set forth in Section 6 and 7. Following
the Merger, the Company shall continue as the surviving corporation (the
“Surviving Corporation”) under the name “Grapevine Logic, Inc.” and shall
continue its existence under the laws of the State of Delaware, and the separate
corporate existence of the Acquisition Company shall cease.

 

2.2        Effective Time. The Merger shall be consummated by filing with the
Delaware Secretary of State a certificate of merger in the form attached hereto
as Exhibit A (the “Certificate of Merger”), as is required by, and executed in
accordance with, the relevant provisions of the DGCL (the time of such filing
being the “Effective Time”). The Merger shall become effective at the close of
business on the Closing Date.

 

2.3        Effects of the Merger. The Merger shall have the effects set forth in
Section 259 of the DGCL.

 

2.4        Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of the Acquisition Company, as in effect on the Closing Date,
shall be the Certificate of Incorporation of the Surviving Corporation, except
that the name of the Surviving Corporation shall be “Grapevine Logic Inc.”. The
Bylaws of the Acquisition Company shall be the Bylaws of the Surviving
Corporation.

 

2.5        Directors and Officers. Schedule 2.5 sets forth the names of the
persons who shall be the directors and officers of the Surviving Corporation at
the Effective Time.

 

2.6        Stock Options. As of the Closing, the Company shall cause (i) each
Company Common Stock option that have not expired or been exercised in full
prior to the Effective Time (an “Eligible Option”), whether vested or unvested,
to be cancelled as of the Effective Time without further liability or obligation
to the Company other than provided hereunder; whereby each such Eligible Option,
by virtue of the Closing and without further action on the part of the Optionee,
shall be cancelled and converted into the right solely to receive the amounts
referenced in Schedule 2.8.

 

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2.7        Conversion of Shares; Cash Consideration. The manner and basis of
converting the shares and Options of each of the Company and the Acquisition
Company shall be as follows:

 

(a)        Each share of Common Stock, $.001 par value per share, of the
Acquisition Company that is issued and outstanding at the Effective Time shall
be converted into and become one validly issued, fully paid and non-assessable
share of common stock, $.001 par value per share, of the Surviving Corporation.

 

(b)        Each share of capital stock of the Company shall by virtue of the
Merger and without any act on the part of the holder thereof, shall be converted
into a right to receive cash in the following amounts:

 

(i)for each Holder of Common Stock, $.001 par value per share, of the Company
outstanding at the Effective Time (“Company Common Stock”), the amount in cash
set forth next to such Holder’s name set forth on Schedule 2.8 (such amount
being equal to the Total Common Stock Cash Consideration multiplied by such
Holder’s Common Stock Ownership Percentage);

 

(ii)for each holder of an Eligible Option (an “Optionee”), the amounts described
in Section 2.6 above; and

 

(iii)for each share of Preferred Stock, $.001 par value per share, of the
Company outstanding at the Effective Time, including without limitation the Seed
1 Preferred Stock, par value $.001 par value per share and the Seed 2 Preferred
Stock, par value $.001 par value per share (collectively, the “Company Preferred
Stock”), the amount in cash set forth next to such Holder’s name on Schedule 2.8
(such amount being equal to the Total Preferred Stock Cash Consideration
multiplied by such Holder’s Preferred Stock Ownership Percentage).

 

(c)        Each share of Company Common Stock and Company Preferred Stock held
in the Company’s treasury immediately prior to the Merger shall, by virtue of
the Merger, be cancelled and retired and cease to exist, without any conversion
thereof.

 

(d)        Assuming the execution and delivery of the Redemption Agreement (the
“Redemption Agreement”) and Right to Acquire Common Stock (the “Stock Right”) by
Sun Seven Stars (the “Rights Holder”), the right to acquire Company Class A
Common Stock (a “Stock Right”) set forth in the Stock Right shall continue in
full force and effect in accordance with its terms at and following the
Effective Time; provided that the Buyer acknowledges and agrees that such Stock
Right shall only include the right to purchase Class A Common Stock in
connection with the Closing under this Agreement and, if this Agreement is
terminated without Closing, the Stock Right shall include only the right to
purchase the referenced shares of Class B Non-Voting Common Stock.

 

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2.8.       Payment of Cash.

 

(a)        Within four (4) days following the date of this Agreement, Buyer
shall deliver by wire transfer of immediately available funds, the amount of Two
Hundred and Forty Thousand Dollars $240,000, representing the downpayment
towards the Purchase Price (the “Downpayment”) to Company Counsel, LLC as escrow
agent (the “Downpayment Escrow Agent”). The Downpayment Escrow Agent shall hold
in, and deliver from, escrow, the Downpayment pursuant to the provisions of
Section 11 of this Agreement (the “Downpayment Escrow Provisions”). Within four
(4) days following the date of this Agreement, Buyer shall deliver by wire
transfer of immediately available funds, the amount of Two Million One Hundred
and Sixty Thousand Dollars $2,160,000, representing the remaining amounts due
towards the Purchase Price (the “Remaining Purchase Price”) to Ruskin Moscou
Faltischek P.C., to hold in escrow (the “Purchase Price Escrow Agent”). The
Purchase Price Escrow Agent shall hold in, and deliver from, escrow, the
Remaining Purchase Price per Section 2.8(b) upon the Closing. In the event that
Buyer fails to deliver the Downpayment to the Downpayment Escrow Agent or the
Remaining Purchase Price to the Purchase Price Escrow Agent within four (4) days
following the date of this Agreement, the Company may terminate this Agreement
upon written notice to Buyer..

 

(b)        Subject to any adjustments per Section 2.11, on the Closing Date, the
Buyer shall (x) pay, or cause the Acquisition Company to pay, or (y) cause the
Purchase Price Escrow Agent to pay from escrow, the Remaining Purchase Price,
and the Downpayment Escrow Agent shall pay the Downpayment escrowed funds, as
follows: (i) to the Escrow Agent, in an amount equal to the Escrow
Indemnification Amount per Section 2.11, (ii) to the parties listed under the
Transaction Expenses, and (iii) to each Holder, in an amount in proportion to
each Holder’s percentage ownership of the Common Stock, Eligible Options or
Company Preferred Stock shares (each percentage being referred to herein
respectively as a “Common Stock Ownership Percentage,” an “Eligible Option
Ownership Percentage,” or a “Preferred Stock Ownership Percentage” and
collectively, an “Ownership Percentage”), in all cases as set forth on Schedule
2.8 hereto (as updated by the Buyer at the Closing). The “Purchase Price” shall
mean the total amount payable to the Holders of the Common Stock, Eligible
Options or Company Preferred Stock as set forth on Schedule 2.8 hereto. The
parties shall work together to streamline the wire process relating to each of
the escrows distributing the funds.

 

(c)        The Purchase Price shall be paid by wire transfer in immediately
available funds at the Closing to each Holder in accordance with such written
instructions as shall be delivered to the Buyer by each Holder no less than two
business days prior to the Closing Date. The Seller shall deliver an updated
Schedule 2.8 two business days prior to the Closing Date to reflect the final
distribution amounts.

 

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2.9        Closing.

 

(a)        As soon as practicable after the satisfaction or waiver of the
conditions set forth in Sections 6 and 7, a closing (the “Closing”) will be held
at the offices of the Company (or such other place as the parties may agree).
The date on which the Closing occurs is hereinafter referred to as the “Closing
Date.” At the Closing, there shall be delivered (i) the documents referred to in
Sections 6 and 7, and (ii) the Certificate of Merger, executed and otherwise
prepared for filing.

 

(b)        Contemporaneously with the Closing, the Surviving Corporation shall
deliver to the Secretary of State of Delaware a duly executed and verified
Certificate of Merger, as required by the DGCL, and the parties shall take all
such other and further actions as may be required by law to make the Merger
effective upon the terms and subject to the conditions hereof.

 

2.10      No Further Transfer of Shares. After the Effective Time, the stock
ledger of the Company shall be closed and there shall be no further registration
of transfers on the records of the Company of shares of Common Stock or
Preferred Stock outstanding prior to the Effective Time.

 

2.11      Indemnification Escrow Funds. In accordance with the Indemnification
Escrow Agreement, at the Closing, Buyer shall deposit or cause to be deposited
with the Indemnification Escrow Agent the Indemnification Escrow Amount (such
amount, including any interest or other amounts earned thereon and less any
disbursements therefrom in accordance with the Escrow Agreement, the
“Indemnification Escrow Fund” or the “Indemnification Escrow Funds”), to be held
for the purpose of securing the indemnification obligations of the Company and
the Holders set forth in this Agreement and the obligations pursuant to Section
2.12.

 

2.12      Cash and Cash Adjustment.

 

(a)        Company’s Target Cash. The Company shall have a cash balance at the
close of business on the day before the Closing (the “Cash Balance Time”) in all
of the Company’s bank, depository and other accounts, net of all Company
payments that have been issued by the Company as of the Cash Balance Time but
have not yet been reflected in the applicable depository and other accounts of
the Company (the “Uncleared Payments”) as of the Cash Balance Time, of Three
Hundred Thousand Dollars ($300,000) (the “Target Cash”).

 

(b)        Closing Adjustment.

 

(i) On the day before the Closing, the Company shall prepare and deliver to
Buyer a statement setting forth the Company’s cash balance as of the Cash
Balance Time, net of all Uncleared Payments as of the Cash Balance Time in the
Company’s good faith estimate (the “Estimated Net Cash”).

 

(ii) The “Estimated Closing Adjustment” shall be an amount equal to the Target
Cash minus the Estimated Net Cash.

 

(iii) There shall only be an Estimated Closing Adjustment if the Estimated
Closing Adjustment is a positive number.

 

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(iii) The Total Cash Consideration shall be reduced by the Estimated Closing
Adjustment amount at the Closing.

 

(c)        Post-Closing Adjustment.

 

(i) Between the thirtieth (30th) day after the Closing Date (the “Uncleared
Payment Date”) and the sixtieth (60th) day after the Closing Date, Buyer shall
prepare and deliver to the Holder Representative a statement (the “Closing Cash
Statement”) setting forth its calculation of Company’s cash balance as of the
Cash Balance Time, net of all Uncleared Payments incurred prior to the Closing
Date and debited as of the Uncleared Payment Date (the “Closing Net Cash”),
which statement shall contain a schedule of such debited Uncleared Payments.

 

(ii) The “Post-Closing Adjustment” shall be an amount equal to the Estimated Net
Cash minus the Closing Net Cash.

 

(d)        Examination and Review.

 

(i) Examination. After receipt of the Closing Cash Statement, the Holder
Representative shall have ten (10) days (the “Review Period”) to review the
Closing Cash Statement. During the Review Period, the Holder Representative and
its accountants shall have full access to the books and records of the Surviving
Corporation with respect to the Uncleared Payments for the purpose of reviewing
the Closing Cash Statement and to prepare a Statement of Objections (defined
below), provided, that such access shall be in a manner that does not interfere
with the normal business operations of Buyer or the Surviving Corporation.

 

(ii) Objection. On or prior to the last day of the Review Period, the Holder
Representative may object to the Closing Cash Statement by delivering to Buyer a
written statement setting forth its objections in reasonable detail, indicating
each disputed item or amount and the basis for its disagreement therewith (the
“Statement of Objections”). If the Holder Representative fails to deliver the
Statement of Objections before the expiration of the Review Period, the Closing
Cash Statement and the Post-Closing Adjustment, as the case may be, reflected in
the Closing Cash Statement shall be deemed to have been accepted by the Holder
Representative. If the Holder Representative delivers the Statement of
Objections before the expiration of the Review Period, Buyer and the Holder
Representative shall negotiate in good faith to resolve such objections within
ten (10) days after the delivery of the Statement of Objections (the “Resolution
Period”), and, if the same are so resolved within the Resolution Period, the
Post-Closing Adjustment and the Closing Cash Statement with such changes as may
have been previously agreed in writing by Buyer and the Holder Representative,
shall be final and binding.

 

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(iii) Resolution of Disputes. If the Holder Representative and Buyer fail to
reach an agreement with respect to all of the matters set forth in the Statement
of Objections before expiration of the Resolution Period, then any amounts
remaining in dispute (“Disputed Amounts” and any amounts not so disputed, the
“Undisputed Amounts”) shall be submitted for resolution to the office of an
impartial nationally recognized firm of independent certified public accountants
(the “Independent Accountant”) appointed by mutual agreement of Buyer and the
Holder Representative, who, acting as experts and not arbitrators, shall resolve
the Disputed Amounts only and make any adjustments to the Post-Closing
Adjustment, as the case may be, and the Closing Cash Statement. The parties
hereto agree that all adjustments shall be made without regard to materiality.
The Independent Accountant shall only decide the specific items under dispute by
the parties and their decision for each Disputed Amount must be within the range
of values assigned to each such item in the Closing Cash Statement and the
Statement of Objections, respectively.

 

(iv) Fees of the Independent Accountant. The fees and expenses of the
Independent Accountant shall be paid by the Holder Representative (on behalf of
the Stockholders), on the one hand, and by Buyer, on the other hand, based upon
the percentage that the amount actually contested but not awarded to the Holder
Representative or Buyer, respectively, bears to the aggregate amount actually
contested by the Holder Representative and Buyer.

 

(v) Determination by Independent Accountant. The Independent Accountant shall
make a determination as soon as practicable within thirty (30) days (or such
other time as the parties hereto shall agree in writing) after their engagement,
and their resolution of the Disputed Amounts and their adjustments to the
Closing Cash Statement and/or the Post-Closing Adjustment shall be conclusive
and binding upon the parties hereto.

 

(e)        Payment of Post-Closing Adjustment. There shall only be a
Post-Closing Adjustment if the Post Closing Adjustment is a positive number. In
such case, the Holder Representative and Buyer shall, within five (5) days after
the final determination of the Post-Closing Adjustment, jointly instruct the
Indemnification Escrow Agent to disburse from the Indemnification Escrow Fund by
wire transfer of immediately available funds to Buyer, the Post-Closing
Adjustment.

 

(f)        Adjustments for Tax Purposes. Any payments made pursuant to this
Section 2.12 shall be treated as an adjustment to the Purchase Price by the
parties for Tax purposes, unless otherwise required by Law.

 

2.13      Dissenting Shares. Notwithstanding any provision of this Agreement to
the contrary, including Section 2.7, Shares issued and outstanding immediately
prior to the Effective Time (other than Shares cancelled in accordance with
Section 2.07(c)) and held by a Holder who has not voted in favor of adoption of
this Agreement or consented thereto in writing and who has properly exercised
appraisal rights of such Shares in accordance with Section 262 of the DGCL (such
Shares being referred to collectively as the “Dissenting Shares” until such time
as such holder fails to perfect or otherwise loses such holder’s appraisal
rights under the DGCL with respect to such Shares) shall not be converted into a
right to receive a portion of the Purchase Price, but instead shall be entitled
to only such rights as are granted by Section 262 of the DGCL; provided,
however, that if, after the Effective Time, such holder fails to perfect,
withdraws or loses such holder’s right to appraisal pursuant to Section 262 of
the DGCL or if a court of competent jurisdiction shall determine that such
holder is not entitled to the relief provided by Section 262 of the DGCL, such
Shares shall be treated as if they had been converted as of the Effective Time
into the right to receive the portion of the Purchase Price, if any, to which
such Holder is entitled pursuant to Section 2.7, without interest thereon. The
Company shall provide the Buyer with prompt written notice of any demands
received by the Company for appraisal of Shares, any withdrawal of any such
demand and any other demand, notice or instrument delivered to the Company prior
to the Effective Time pursuant to the DGCL that relates to such demand, and the
Buyer shall have the opportunity and right to direct all negotiations and
proceedings with respect to such demands. Except with the prior written consent
of the Buyer, the Company shall not make any payment with respect to, or settle
or offer to settle, any such demands.

 

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3.Representations and Warranties of the Company.

 

The Company represents and warrants to the Buyer, except as set forth in the
Disclosure Schedules corresponding in number to the applicable Section of this
Agreement (provided that the disclosure of an item in one Section of the
Disclosure Schedules shall be deemed to modify both (i) the representations and
warranties contained in the Section of this Agreement to which it corresponds in
number and (ii) any other representation and warranty of the Company in this
Agreement to the extent that it is reasonably apparent that such disclosure item
would also qualify or apply to such other representation and warranty), and all
such representations and warranties shall be true and correct at and as of the
Closing Date as though then made, as follows:

 

3.1        Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on the Business as it is now being conducted. The
Company is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of the business
conducted by it makes such qualification or licensing necessary. The Company has
delivered to the Buyer true, correct and complete copies of the Company’s
certificate of incorporation and bylaws, as currently in effect. The Company has
no wholly or partially owned subsidiaries.

 

3.2        Capitalization.

 

(a)         The authorized capital stock of the Company consists of:

 

(i) 42,965,030 shares of common stock, $.001 par value per share (the “Common
Stock”), of which 36,482,515 shares have been classified as Class A Common
Stock, 7,770,035 shares of which shall be issued and outstanding as of the
Closing Date, and 6,482,515 of which have been classified as Class B Non-Voting
Common Stock, none of which shall be issued and outstanding as of the Closing
Date; and

 

(ii) 10,000,000 share of preferred stock, $.001 par value per share (the
“Preferred Stock”), of which 3,461,240 shares have been classified as Series
Seed Preferred Stock, 1,005,143 shares of which shall be issued and outstanding
as of the Closing Date, and 1,863,837 shares have been classified as Series
Seed-2 Preferred Stock, 783,619 of which shall be issued and outstanding as of
the Closing Date.

 

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No other classes or series of securities shall be authorized or outstanding as
of the Closing Date. All of the issued and outstanding shares of the Company’s
common and preferred stock were duly authorized for issuance and are validly
issued, fully paid and non-assessable and held beneficially and of record as set
forth in Schedule 3.2(a) of the Disclosure Schedules. Except pursuant to the
Amended and Restated Investor Rights Agreement, the Amended and Restated Right
of First Refusal and Co-Sale Agreement and the Second Amended and Restated
Certificate of Incorporation, as amended, none of the shares of the Class A
Common Stock or Company Preferred Stock are subject to any pledges, commitments,
preemptive rights, rights to acquire or purchase, conversion rights or demands
of any character whatsoever.

 

(b)        The Company has reserved 3,000,000 shares of Common Stock for
issuance to officers, directors, employees and consultants of the Company
pursuant to its 2013 Stock Incentive Plan duly adopted by the Board of Directors
and approved by the Company stockholders (the “Stock Plan”). Of such reserved
shares of Common Stock options to purchase 2,819,253 shares have been granted
and are currently vested and shall be deemed outstanding as of Closing.
Additionally, assuming the execution and delivery of the Rights Holder of the
Redemption Agreement and the Stock Right, there shall be a Stock Right
outstanding as of the Closing which entitles the Rights Holder to acquire
6,482,515 shares of Class A Common Stock solely upon the Closing of this
Agreement (or Class B Non-Voting Common Stock if the Agreement is terminated).
Other than the forgoing in this Section 3.2(b), there is no existing option,
warrant, call, right or contract of any character to which the Company is a
party requiring, and there are no securities of the Company outstanding which
upon conversion or exchange would require, the issuance, sale or transfer of any
additional shares of capital stock or other equity securities of the Company or
other securities convertible into, exchangeable for or evidencing the right to
subscribe for or purchase shares of capital stock or other equity securities of
the Company. Neither the Company nor any Holder is a party to any voting trust
or other contract with respect to the voting, redemption, sale, transfer or
other disposition of the capital stock of the Company.

 

3.3        Authorization; Validity of Agreement. The Company has the requisite
power and authority to execute, deliver and perform this Agreement, the
Transaction Documents and each of the other agreements, instruments, documents
and certificates to be executed and delivered pursuant to this Agreement that is
to be signed by the Company to which the Company is a party and to perform the
Company’s obligations hereunder and thereunder, and to consummate the
Transactions. Each of this Agreement and the other Transaction Documents that
have been signed by the Company, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by the
Board of Directors and the stockholders of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby. This Agreement, and the other
Transaction Documents to which the Company is a party, have been duly executed
and delivered by the Company and they valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforceability may be subject to or limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors’ rights generally.

 

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3.4        No Violations; Consents and Approvals.

 

(a)        The execution, delivery and performance of this Agreement and the
other Transaction Documents does not, and the consummation by the Company and
the Holders of the transactions contemplated hereby and thereby will not, (i)
violate any provision of the certificate of incorporation or bylaws of the
Company, (ii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or, with the passage of time,
give rise to any right of termination, amendment, cancellation or acceleration)
under any of the terms, conditions or provisions of any Contract to which the
Company is a party or by which any of the properties or assets of the Company
may be bound or otherwise subject, which violation or breach could create
liability of any kind for the Buyer, or for the Company, or could in any way
result in any interference with the Transactions, or (iii) violate any order,
writ, judgment, injunction, decree, law, statute, rule or regulation applicable
to the Company or any of its properties or assets.

 

(b)        No filing or registration with, notification to, or authorization,
consent or approval of, any United States federal, state, county, municipal or
other local jurisdiction, political entity, body, organization, subdivision or
branch, legislative or executive agency or department or other regulatory
service, authority or agency (a “Governmental Entity”) or any other individual
or other entity (a “Person”) is required in connection with the execution,
delivery and performance of this Agreement or any of the other Transaction
Documents to which the Company is a party or the consummation by the Company of
the Transactions, except for such consents, approvals, orders, authorizations,
notifications, notices, estoppel certificates, registrations, ratifications,
declarations, filings or any waiver, exemption or variance with respect to any
license, permit or order as are set forth in Schedule 3.4(b) of the Disclosure
Schedules (“Consents”).

 

3.5        Financial Information.

 

(a)        The Company has heretofore delivered to the Buyer the Company’s
unaudited compiled financial statements, consisting of a balance sheet and the
related statements of income and retained earnings, stockholders’ equity and
cash flow, at and for the fiscal year ended December 31, 2017, and at for the
period ending May 31, 2018 (the “Financial Statements”). Except as set forth in
Schedule 3.5 of the Disclosure Schedules, (1) the Financial Statements are on an
accrual basis, are based on the books and records of the Company, and present
fairly in all material respects the financial condition of the Company as of
such dates and the results of operations of the Company for such periods, and
(2) the Company has no liability that would result in a material adverse impact
to the financial condition of the Company except for (a) liabilities reflected
in the Financial Statements, or (b) liabilities or obligations which have arisen
since May 31, 2018 (the “Balance Sheet Date”) (i) in the ordinary course of
business, or (ii) under existing contracts and agreements, in each case which
consistent with past practice and which are not, individually or in the
aggregate, material in amount, or (c) liabilities or obligations set forth in
Schedule 3.5 of the Disclosure Schedules.

 

 14 

 

 

(b)        The accounts receivable reflected on the May 31, 2018 Balance Sheet
and the accounts receivable arising after the date thereof (a) have arisen from
bona fide transactions entered into by the Company involving the sale of goods
or the rendering of services in the ordinary course of business consistent with
past practice; (b) constitute only valid, undisputed claims of the Company not
subject to claims of set-off or other defenses or counterclaims other than
normal cash discounts accrued in the ordinary course of business consistent with
past practice; and (c) subject to a reserve for bad debts shown on the May 31,
2018 Balance Sheet or, with respect to accounts receivable arising after the
Balance Sheet Date, on the accounting records of the Company, are collectible in
full within sixty (60) days after billing. The reserve for bad debts shown on
the May 31, 2018 Balance Sheet or, with respect to accounts receivable arising
after the May 31, 2018 Balance Sheet Date, on the accounting records of the
Company have been consistently applied, subject to normal year-end adjustments
and the absence of disclosures normally made in footnotes.

 

3.6        No Material Adverse Change. Except as set forth in Schedule 3.6 of
the Disclosure Schedules, since the Balance Sheet Date, no event, condition or
circumstance has occurred that has had, or to the Company’s knowledge could be
reasonably likely to have, a material adverse effect on the Business, or on the
results of operations or annualized revenue rate of the Company or the Business
(a “Material Adverse Effect”). As amplification and not in limitation of the
foregoing, except as set for in Schedule 3.6, since such date, the Company has
not (i) made any change in any method of accounting or accounting practice,
principle or policy used by the Company, (ii) incurred any Indebtedness,
obligation or liability or paid, satisfied or discharged any Indebtedness,
obligation or liability prior to the due date or maturity thereof; except for
current indebtedness, obligations and liabilities in the ordinary course of
business as set forth in Section 3.5, (iii) paid any bonus or made any
distribution or other payment to any of the Company’s employees not including
the base salary, monthly bonuses and commissions, and other standard bonuses due
to such employee paid in the ordinary course of business, or (iv) made any
change or modification in any manner to its (A) billing and collection policies,
procedures and practices with respect to accounts receivable or unbilled
charges, (B) policies, procedures and practices with respect to the provision of
discounts, rebates or allowances, or (C) payment policies, procedures and
practices with respect to accounts payable; and none of the foregoing has been
committed to, or is planned or contemplated, by the Company.

 

3.7        Litigation; Compliance with Law; Licenses and Permits.

 

(a)        There is no claim, suit, action, audit, investigation or proceeding
(“Proceeding”) pending, nor, to the knowledge of the Company, is there any
Proceeding threatened, against the Company or the Business, by or before any
Governmental Entity, court, arbitration panel or any other Person.

 

(b)        There are no outstanding or unsatisfied Court Orders against or
affecting the Company or any of its properties or assets.

 

 15 

 

 

(c)        The Company has complied with all applicable Laws applicable to the
Business, except where the failure to comply would not have, or reasonably be
expected to have, a Material Adverse Effect. The Company has not received any
notice of any violation of any Law the failure comply with which would have, or
reasonably be expected to have, a Material Adverse Effect.

 

(d)        All Permits required for the Company to conduct the Business have
been obtained by it and are valid and in full force and effect. Section 3.7(d)
of the Disclosure Schedules lists all current Permits issued to the Company. No
event has occurred that, with or without notice or lapse of time or both, would
reasonably be expected to result in the revocation, suspension, lapse or
limitation of any such Permit.

 

3.8        Employee Benefit Plans; ERISA.

 

(a)        Schedule 3.8(a) of the Disclosure Schedules, lists each “employee
benefit plan” (as defined in Section 3(3) of ERISA), and all other material
employee benefit (including, without limitation, any non-qualified plans),
bonus, deferred compensation, incentive, stock option (or other equity-based),
severance, change-in-control, medical insurance and fringe benefit plans
maintained for the benefit of, or contributed to by the Company or any trade or
business of the Company, whether or not incorporated (an “ERISA Affiliate”),
that would be deemed a “single employer” within the meaning of Section 4001 of
the Employee Retirement Income Security Act of 1974 (“ERISA”) or Code Sections
414(b), (c), (m) or (o), for the benefit of any employee or former employee of
the Company (the “Plans”). None of the Plans is a multiemployer plan within the
meaning of Section 3(37) of ERISA. The Company has heretofore delivered to the
Buyer true, correct and complete copies of each of the Plans, including all
amendments to date.

 

(b)        Each of the Plans that is subject to ERISA complies with ERISA and
the applicable provisions of the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder (the “Code”) and any applicable
local Laws, and has been administered in accordance with ERISA and, where
applicable, the Code and any applicable local Laws. There are no pending, or to
the knowledge of the Company threatened, claims (other than routine claims for
benefits), actions, suits or proceedings by, on behalf of or against any of the
Plans or any trusts related thereto.

 

(c)        No Plan provides benefits including, without limitation, death or
medical benefits (whether or not insured), with respect to any employees or
former employees of the Company beyond their retirement or other termination of
service (other than (i) coverage mandated by applicable law, (ii) death benefits
or retirement benefits under any “employee pension plan,” as that term is
defined in Section 3(2) of ERISA, or (iii) benefits the full cost of which is
borne by the current or former employee (or his or her beneficiary)).

 

(d)        Neither the Company nor any of its ERISA Affiliates has (i) incurred
or reasonably expects to incur, either directly or indirectly, any material
Liability under Title I or Title IV of ERISA or related provisions of the Code
or applicable local Law relating to employee benefit plans; (ii) failed to
timely pay premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn
from any Plan; (iv) engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA; (v) incurred taxes
under Section 4971 of the Code with respect to any Single Employer Plan; or (vi)
participated in a multiple employer welfare arrangements (MEWA).

 

 16 

 

 

3.9        Real Property.

 

(a)        The Company owns no real property and has never owned any real
property.

 

(b)        Schedule 3.9(b) of the Disclosure Schedules sets forth a list and
description of all real property leases and subleases, written or oral, at will
or otherwise, under which the Company is a tenant or subtenant (each a “Lease”
and together the “Leases”), including the date of the Lease, the premises
demised thereunder, the name and address of each lessee and lessor, the
commencement date and expiration date of the Lease and the annual or other rent
payable by the lessee under the Lease. As used herein, the term “Leased Real
Property” shall mean the real property demised by the Leases.

 

(c)        The Company has heretofore delivered to the Buyer true, correct and
complete copies of any Leases. Each of the Leases is in full force and effect
and is enforceable in accordance with its terms. The Company is in possession of
and quietly enjoys the Leased Real Property applicable to it and the Company has
a valid and enforceable leasehold interest, subject to no liens, charges,
claims, pledges, security interests or other encumbrances (collectively, the
“Liens”) except immaterial easements and rights-of-way, none of which interferes
with the operation of the Business as currently conducted by it. No event has
occurred or failed to occur that, with the giving of notice or the passage of
time or both, would constitute a default under any Lease. No Person has entered
into any assignment of any Lease or sublease, subleased all or any portion of
any Leased Real Property and, to the knowledge of the Holders, no person has any
right to occupy the Leased Real Property other than the Company.

 

3.10      Intellectual Property; Computer Software.

 

(a)        Schedule 3.10(a) of the Disclosure Schedules, lists all Intellectual
Property that is owned by the Company or used by the Company in the operations
of the Business, and there are no pending or, to the knowledge of the Company,
threatened claims by any Person relating to the Company’s use of any such
Intellectual Property. Except as set forth in Schedule 3.10(a) of the Disclosure
Schedules, the Company has such rights of ownership (free and clear of all
Liens) of, or such rights by license, lease or other agreement to use (free and
clear of all Liens) the Intellectual Property that is material to the conduct of
the Business as currently conducted, and as is necessary to permit the Company
to conduct its business. Except as set forth in Schedule 3.10, the Company is
not obligated to pay any royalty or similar fee to any Person in connection with
the Company’s use or license of any of the Intellectual Property.

 

 17 

 

 

(b)        The Company has entered into binding, valid and enforceable, written
Contracts with each current and former employee and independent contractor who
is or was involved in or has contributed to the invention, creation, or
development of any Intellectual Property during the course of employment or
engagement with the Company whereby such employee or independent contractor (i)
acknowledges the Company’s exclusive ownership of all Intellectual Property
invented, created, or developed by such employee or independent contractor
within the scope of his or her employment or engagement with the Company; (ii)
grants to the Company a present, irrevocable assignment of any ownership
interest such employee or independent contractor may have in or to such
Intellectual Property; and (iii) irrevocably waives any right or interest,
including any moral rights, regarding such Intellectual Property, to the extent
permitted by applicable Law. The Company has provided Buyer with true and
complete copies of all such Contracts.

 

(c)        With respect to the Business, none of the Company’s ownership rights
or rights to use any of the Intellectual Property will be adversely affected by
any of the transactions contemplated hereby.

 

(d)        The conduct of the Company’s Business as currently and formerly
conducted (and as proposed to be conducted), and the products, processes and
services of the Company, have not infringed, misappropriated or otherwise
violated, and will not infringe, misappropriate or otherwise violate, the
Intellectual Property or other rights of any Person. To the Company’s knowledge,
no Person has infringed, misappropriated or otherwise violated any Company
Intellectual Property owned or licensed by the Company.

 

(e)        The computer hardware, servers, networks, platforms, peripherals,
data communication lines, and other information technology equipment and related
systems, including any outsourced systems and processes, that are owned or used
by the Company (“Company Systems”) are reasonably sufficient for the immediate
and anticipated needs of the Company’s Business if used as intended to be used
and in accordance with instructions. To the Company’s knowledge, in the past
eighteen (18) months, there has been no unauthorized access, use, intrusion, or
breach of security, or material failure, breakdown, performance reduction, or
other adverse event affecting any Company Systems, that has caused or could
reasonably be expected to cause any: (i) substantial disruption of or
interruption in or to the use of such Company Systems or the conduct of the
Company’s business; (ii) material loss, destruction, damage, or harm of or to
the Company or its operations, personnel, property, or other assets; or (iii)
material Liability of any kind to the Company. The Company has taken all
reasonable actions to protect the integrity and security of the Company Systems
and the data and other information stored or processed thereon. The Company (i)
maintains commercially reasonable backup and data recovery, disaster recovery,
and business continuity plans, procedures, and facilities; (ii) acts in
compliance therewith; and (iii) tests such plans and procedures on a regular
basis, and such plans and procedures have been proven effective in all material
respects upon such testing.

 

3.11      Title to Assets.

 

(a)        The Company has good and marketable title to all of its assets
material to the conduct of the Business, free and clear of all Liens, other than
Liens disclosed in Schedule 3.11(a) of the Disclosure Schedules.

 

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(b)        The Company owns or leases all material personal property and
intangible property or assets necessary for the conduct of the Business as it is
presently conducted.

 

3.12      Material Contracts.

 

(a)        Schedule 3.12 of the Disclosure Schedules sets forth, to the
knowledge of Company, a true, complete and correct list of every Contract with
respect to the Business that (i) provides for aggregate future payments by
Company or to the Company of more than $10,000; (ii) was entered into by the
Company with the Holders or any one of them, or an officer, director or
significant employee of the Company; (iii) is a collective bargaining or similar
agreement; (iv) involves an agreement with any bank, finance company or similar
organization; (v) restricts the Company or the Business from engaging in any
business or activity anywhere in the world; or (vi) any other Contract that is
material to the rights, properties, assets, business or operations of the
Company or the Business (the foregoing, collectively, “Material Contracts”).
Except as set forth in Schedule 3.12, the Company has heretofore provided true,
complete and correct copies of all Material Contracts to the Buyer.

 

(b)        Except as set forth in Schedule 3.12(b) of the Disclosure Schedules,
(i) there is not, and to the knowledge of the Company there has not been claimed
or alleged by any Person with respect to any Material Contract, any existing
default, or event that with notice or lapse of time or both would constitute a
default or event of default, on the part of the Company or, to the knowledge of
Company, on the part of any other party thereto and (ii) no consent, approval,
authorization or waiver from, or notice to, any Governmental Entity or other
Person is required in order to maintain in full force and effect any of the
Material Contracts, other than such consents and waivers that have been obtained
and are unconditional and in full force and effect and such notices that have
been duly given and copies of such consents, waivers and notices have been
delivered to the Buyer.

 

3.13      Taxes. As to the Company:

 

(a)        The Company has (i) except as set forth in Schedule 3.13(a) of the
Disclosure Schedules, duly and timely filed or caused to be filed with the
Internal Revenue Service or other applicable Governmental Entity (collectively,
“Taxing Authorities”) all Tax Returns (as defined below) that are required to be
filed by or on behalf of the Company or that include or relate to the Business
or any of its assets, which Tax Returns are true, correct and complete in all
material respects, and (ii), except as set forth in Schedule 3.13(a) of the
Disclosure Schedules, duly and timely paid in full or caused to be paid in full
all Taxes shown to be due on such Tax Returns. The Company has complied with all
applicable Laws relating to the payment and withholding of Taxes and has duly
and timely withheld and paid over to the appropriate Taxing Authority all
amounts required to be so withheld and paid under all applicable Laws. No audit,
examination, investigation, reassessment or other administrative or court
proceeding (collectively, a “Tax Proceeding”) is currently ongoing or, to the
knowledge of the Company, proposed, with regard to any Tax or Tax Return
referred to above, and, to the knowledge of the Company, no Taxing Authority is
contemplating such a Tax Proceeding and there is no basis for any such Tax
Proceeding that would have material adverse effect on the Tax basis of any
acquired asset. There is no Lien for any Tax upon the Business or any assets of
the Company, except for Taxes not yet due and payable.

 

 19 

 

 

(b)        No claim has been made by a Taxing Authority in a jurisdiction where
the Company does not file Tax Returns such that it is or may be subject to
taxation by that jurisdiction.

 

(c)        The Company has never been a member of any consolidated, combined,
affiliated or unitary group of corporations for any Tax purposes other than a
group in which the Company is the common parent.

 

(d)        The Company is not a party to any tax sharing, allocation, indemnity
or similar agreement or arrangement (whether or not written) pursuant to which
it will have any obligation to make any payments after the Closing Date.

 

(e)        There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by Buyer or the Company by reason of Code
Section 280G.

 

(f)        The Company is not a foreign person within the meaning of Code
Section 1445.

 

(g)        The Company has not been a United States real property holding
corporation within the meaning of Code Section 897(c)(1)(A)(ii).

 

(h)        As used herein, (i) “Tax Return” means any return, declaration,
report, information return or statement, and any amendment thereto, including
without limitation any consolidated, combined or unitary return or other
document (including any related or supporting information), filed or required to
be filed with any Taxing Authority in connection with the determination,
assessment, collection, payment, refund or credit of any federal, state, local
or foreign Tax or the administration of any Laws relating to any Tax, and (ii)
“Tax “ or “Taxes” means any and all taxes, charges, fees, levies, deficiencies
or other assessments of whatever kind or nature including, without limitation,
all net income, gross income, profits, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, excise, employment,
unemployment, minimum, estimated, severance, stamp, property, occupation,
environmental, windfall profits, use, service, net worth, payroll, franchise,
license, gains, customs, transfer, recording and other taxes, customs duty, fees
assessments or charges of any kind whatsoever, imposed by any Taxing Authority.

 

3.14      Affiliated Party Transactions. Except for obligations and benefits
arising under this Agreement, or as set forth in Schedule 3.14 of the Disclosure
Schedules, as of the Closing Date, to the knowledge of Company, neither of the
Company nor any employee (other than in return for their continued employment)
will have, directly or indirectly, any obligation to or claim against the
Business and none of the Company or any Persons presently or formerly controlled
by or are under common control with the Company (collectively, “Affiliates”)
will have, directly or indirectly, any obligation to, or cause of action or
claim against, the Company or the Business.

 

 20 

 

 

3.15      No Brokers. Except as described in Schedule 3.15 of the Disclosure
Schedules, the Company has not employed or otherwise engaged any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders’ fees or other similar fees in connection with the
transactions contemplated by this Agreement.

 

3.16      Insurance. Schedule 3.16 of the Disclosure Schedules contains a
complete and correct list of all policies of insurance of any kind or nature
covering the Company, including policies of life, fire, theft, casualty, product
liability, workmen’s compensation, business interruption, employee fidelity,
directors & officers, errors & omissions, and other casualty and liability
insurance. All such policies are valid, outstanding and enforceable policies.
All such insurance policies or comparable coverage shall be continued in full
force and effect through the Closing Date. The Company has paid all premiums on
such policies when due in accordance with the terms of such policies. At no time
during the last three years has any policy of insurance of the Company been
terminated or otherwise cancelled for non-payment, non-compliance or any other
reason whatsoever by any party other than such Company as permitted by and in
accordance with the express provisions of such policy or policies.

 

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

 

3.18      Relationships.

 

(a)        Schedule 3.18(a) of the Disclosure Schedules sets forth a true and
complete list of the suppliers of the Company to whom, during the fiscal year
ended December 31, 2017, the Company made payments aggregating $10,000 or more
showing, with respect to each, the name and dollar volume involved
(“Suppliers”). Since December 31, 2017, no Supplier of the Company has notified
the Company that it has cancelled, materially modified, or terminated its
relationship with the Company, or during said period has decreased materially
its services, supplies or materials furnished to the Company, nor does any
Supplier have, to the knowledge of the Company, any plan or intention to do any
of the foregoing, excepting for all of the aforementioned cases, circumstances
in which the Company has stopped using a Supplier, reduced the usage of a given
Supplier, or engaged other suppliers to perform similar services in place of any
Supplier in the ordinary course of business.

 

 21 

 

 

(b)        Schedule 3.18(b) of the Disclosure Schedules sets forth a true and
complete list of the customers of the Company to whom, during the fiscal year
ended December 31, 2017, the Company invoiced an aggregate of $10,000 or more
showing, with respect to each, the name and dollar volume involved
(“Customers”).

 

3.19      Labor Matters. There are no labor strikes, slow-downs or stoppages or
other labor troubles pending or, to the knowledge of the Company, threatened
with respect to the employees of the Company; there is no collective bargaining
agreement binding on the Company and there is no agreement which restricts the
Company from relocating or closing any or all of its businesses or operations;
there are no grievances asserted that could reasonably be expected to have an
Material Adverse Effect, nor is there pending any arbitration proceeding arising
out of or under any labor union agreement; the Company has not experienced any
work stoppage during the last five (5) years.

 

3.20      Certain Employees and Consultants.

 

(a)        Schedule 3.20 of the Disclosure Schedules sets forth a complete and
correct list for any parties receiving compensation of $50,000 or more in either
of the respective periods of the names, and annual compensation for calendar
year 2017 and estimated annual compensation for calendar year 2018 (which
amounts for each such employee and/or consultant and collectively have not
increased materially since such period, except as otherwise might have increased
relative to increased sales, development, or processing needs of the Company in
the ordinary course of business) and title, for each employee and consultant of
the Company who received or was entitled to receive compensation or fees of any
kind during such Company’s current fiscal year. Except as set forth in Schedule
3.20, neither the execution and delivery of this Agreement nor the consummation
of the transactions hereunder will: (i) result in any material payment
(including, without limitation, severance, “change of control” compensation or
golden parachute) becoming due to any employee, officer or director of the
Company, (ii) materially increase any benefits otherwise payable under any
benefit plan, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits to any material extent. The Company is not aware of
any employee who intends to terminate his or her relationship with the Company,
either as a result of the Transactions or otherwise. The Company is not a party
to or bound by any employment contracts or other contracts, agreements or
commitments to or with individual current or former employees, consultants or
agents that are still in effect, whether written or oral, except for offer
letters and other standard agreements that are terminable at will by the
Company.

 

(b)        Each individual who is classified by the Company as an independent
contractor has been properly classified as such.

 

3.21      Business Metrics. Schedule 3.21 of the Disclosure Schedules, which
sets forth certain key metrics of the Company’s Business and product platform,
including the number of registered users, the total estimated reachable audience
through such registered users and the Company’s key verticles, is accurate and
complete in all material respects as of the date set forth on Schedule 3.21.

 

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3.22      Full Disclosure. No representation or warranty by the Company in this
Agreement and no statement contained in the Disclosure Schedules to this
Agreement or any certificate furnished or to be furnished to the Buyer pursuant
to this Agreement contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements contained therein, in
light of the circumstances in which they are made, not misleading.

 

4.Representations and Warranties of the Buyer.

 

The Buyer represents and warrants to the Company, except as set forth in the
Disclosure Schedules corresponding in number to the applicable Section of this
Agreement (provided that the disclosure of an item in one Section of the
Disclosure Schedules shall be deemed to modify both (i) the representations and
warranties contained in the Section of this Agreement to which it corresponds in
number and (ii) any other representation and warranty of the Company in this
Agreement to the extent that it is reasonably apparent that such disclosure item
would also qualify or apply to such other representation and warranty),and all
such representations and warranties shall be true and correct at and as of the
Closing Date as though then made as follows:

 

4.1        Organization.

 

(a)        The Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Nevada and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. The Buyer is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business conducted by it makes such qualification or
licensing necessary.

 

(b)        Acquisition Corp. is a corporation duly organized, validly existing
and in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Acquisition Corp. is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of the business conducted by it makes such
qualification or licensing necessary.

 

4.2        Authorization; Validity of Agreement.

 

(a)        The Buyer has the requisite power and authority to execute, deliver
and perform this Agreement and each other agreement executed or to be executed
by the Buyer pursuant to the terms of this Agreement (collectively, the “Buyer
Agreements”) and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Buyer of this Agreement and the
Buyer Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly and validly authorized by the Board of Directors of
the Buyer, and no other corporate proceedings on the part of the Buyer are
necessary to authorize the execution, delivery and performance of this Agreement
and the Buyer Agreements by the Buyer and the consummation of the transactions
contemplated hereby. This Agreement and each Buyer Agreement has been duly
executed and delivered by the Buyer and, assuming due authorization, execution
and delivery of this Agreement by the Company, is a valid and binding obligation
of the Buyer enforceable against the Buyer in accordance with its terms, except
as such enforceability may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors’ rights generally.

 

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(b)        Acquisition Corp. has the requisite power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Acquisition
Corp. of this Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by the Board of
Directors of Acquisition Corp. and by the Buyer, as sole stockholder of
Acquisition Corp., and no other corporate proceedings on the part of Acquisition
Corp. are necessary to authorize the execution, delivery and performance of this
Agreement by Acquisition Corp. and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Acquisition Corp. and, assuming due authorization, execution and delivery of
this Agreement by the Company, is a valid and binding obligation of Acquisition
Corp. enforceable against Acquisition Corp. in accordance with its terms, except
as such enforceability may be subject to or limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors’ rights generally.

 

4.3        No Violations; Consents and Approvals.

 

(a)        The execution, delivery and performance of this Agreement and the
Buyer Agreements by the Buyer or Acquisition Corp., as applicable, do not, and
the consummation by the Buyer and Acquisition Corp. of the transactions
contemplated hereby and thereby will not, (i) violate any provision of the
certificate of incorporation or bylaws of the Buyer or Acquisition Corp., (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any material note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, license, contract, agreement or other instrument to which the
Buyer or Acquisition Corp. is a party or by which the Buyer or Acquisition Corp.
or any of their respective properties or assets may be bound or otherwise
subject or (iii) violate any order, writ, judgment, injunction, decree, law,
statute, rule or regulation applicable to the Buyer or Acquisition Corp. or any
of their respective properties or assets.

 

(b)        No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity or Person is required in
connection with the execution, delivery and performance of this Agreement or the
Transaction Documents by the Buyer or Acquisition Corp. or the consummation by
the Buyer or Acquisition Corp. of the transactions contemplated hereby and
thereby.

 

4.4        Governmental Consents. Neither the Buyer nor Acquisition Corp. needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transaction contemplated by this Agreement.

 

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4.5        Legal Compliance. The Buyer and Acquisition Corp. has complied with
all applicable laws of federal state, local and foreign government (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, compliant, claim, demand, or notice has been filed or commenced by any
of them alleging any failure so to comply, except where the failure to comply
would not have a Material Adverse Effect on the Buyer.

 

4.6        Litigation. There is no legal, administrative, arbitral or other
proceeding by or before any Governmental Entity pending or, to the knowledge of
the Buyer, threatened against the Buyer or Acquisition Corp., nor to the
knowledge of the Buyer is there any pending investigation by any Governmental
Entity, which would give any third party the right to enjoin or rescind the
contemplated transaction or otherwise prevent the Buyer or Acquisition Corp.
from complying with the terms and provisions of this Agreement.

 

4.7        No Other Representations or Warranties. The Buyer hereby acknowledges
and agrees that, except for the representations and warranties set forth in
Section 3 (as qualified and limited by the Disclosure Schedule), none of the
Company or any of its Affiliates, directors, officers, employees, agents,
representatives or advisors, or any other person, has made or is making any
express or implied representation or warranty on behalf of the Company, and the
Buyer has not relied on any statement or information except for the express
representations and warranties set forth in Section 3 (as qualified and limited
by the Disclosure Schedule).

 

5.Company Covenants.

 

5.1        Conduct of the Company Business Pending the Merger. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time (the
“Pre-Closing Period”), the Company agrees, except to the extent that (i) Buyer
consents in writing, which will not be unreasonably withheld, conditioned or
delayed, to carry on its business in the ordinary course of business, or (ii)
the Company acts or refrains from acting at the request of the Buyer (it being
understood that the Company has no obligation to do so). In addition, without
limiting the foregoing, other than as expressly contemplated by this Agreement,
(x) without obtaining the written consent of the Buyer, which will not be
unreasonably withheld, conditioned or delayed, or (y) unless the Company acts or
refrains from acting at the request of the Buyer (it being understood that the
Company has no obligation to do so), the Company will not do any of the
following:

 

(a)        amend or otherwise change its certificate of incorporation or bylaws,
or otherwise alter its corporate structure through merger, liquidation,
reorganization or otherwise;

 

(b)        issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) (except
for the issuance of shares of common stock issuable pursuant to employee stock
options under currently existing employee stock option plans or pursuant to
currently outstanding warrants, as the case may be, which options, warrants or
rights, as the case may be, are outstanding on the date hereof);

 

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(c)        redeem, repurchase or otherwise acquire, directly or indirectly, any
shares of the Company Capital Stock (other than pursuant to a repurchase right
in favor of the Company with respect to unvested shares at no more than cost or
any such actions relating to the Redemption Agreement, Stock Right and/or the
Rights Holder);

 

(d)        incur any indebtedness or guarantee any indebtedness for borrowed
money or issue or sell any debt securities or guarantee any debt securities or
other obligations of others or sell, pledge, dispose of or create an Encumbrance
over any assets (except for (i) sales of assets in the ordinary course of
business and (ii) dispositions of obsolete or worthless assets);

 

(e)        accelerate, amend or change the period (or permit any acceleration,
amendment or change) of exercisability of options or warrants or authorize cash
payments in exchange for any options, except as may be required under this
Agreement;

 

(f)        declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(iii) amend the terms of, repurchase, redeem or otherwise acquire any of its
securities, or propose to do any of the foregoing;

 

(g)        acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or any other material property or assets;

 

(h)        take any action, other than as required by generally accepted
accounting policies (“GAAP”), to change accounting policies or procedures;

 

(i)         make or change any material tax election inconsistent with past
practices, adopt or change any Tax accounting method, or settle or compromise
any material federal, state, local or foreign tax liability or agree to an
extension of a statute of limitations for any assessment of any tax;

 

(j)         pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the financial statements of the
Company, or incurred in the ordinary course of business;

 

(k)         initiate any litigation, action, suit, proceeding, claim or
arbitration or settle or agree to settle any litigation, action, suit,
proceeding, claim or arbitration (in each case, except in connection with this
Agreement); and

 

(l)         take, or agree in writing or otherwise to take, any of the actions
described in Sections 5(a) through (k) above.

 

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The Parties acknowledge and agree that (i) nothing contained in this Agreement
shall give the Buyer, directly or indirectly, the right to control or direct the
Company’s operations prior to the Effective Time; (ii) prior to the Effective
Time, the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its operations; and (iii)
notwithstanding anything contrary set forth in this Agreement, no consent of the
Buyer will be required with respect to any matter set forth in the Agreement to
the extent the requirement of such consent would violate any applicable Law.

 

5.2     Company Financial Statements. The Company shall deliver to the Buyer the
Company Financial Statements presented in accordance with generally accepted
accounting principles, consistently applied, reviewed by an outside certified
public accountant, within sixty (60) days following the date of this Agreement.

 

6.Conditions Precedent to the Buyer’s and Acquisition Company’s Obligations.

 

All obligations of the Buyer and the Acquisition Company to be performed on the
Closing Date shall be subject to the satisfaction (or waiver by the Buyer or the
Acquisition Company) of the following conditions:

 

6.1        Representations True. The representations and warranties of the
Company set forth in Sections 3.1, 3.2, 3.3 and 3.4 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), at and as of the Closing Date.

 

6.2        Performance of Covenants. The Company shall not have failed to
perform, in a material respect, any of covenants and agreements that are to be
performed by it under Section 5.1 of this Agreement on or prior to the Closing
Date, provided, however, that, Buyer shall have first provided written notice of
the failure prior to the Closing Data and the Company shall have failed to cure
such failure within five (5) days of receipt of such notice.

 

6.3        Regulatory Compliance and Approvals. All approvals required under any
Laws by the Company to carry out the Merger shall have been obtained, and the
Company shall have complied in all material respects with all Laws applicable to
the Company with respect to the Transactions.

 

6.4        Consents. The Company shall have obtained and made available to the
Buyer copies of stockholder and board consents obtained in connection with the
Merger.

 

6.5        Corporate Documents. The Buyer shall have received a certificate of
the Secretary of the Company certifying the incumbency of officers and
genuineness of signatures of all officers executing any Transaction Documents
for it, copies of its bylaws, and copies of its director and stockholder
resolutions authorizing the Transactions; and

 

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(b)        Certificate of Incorporation, as amended, of the Company certified as
of a recent date prior to the Closing by the Secretary of State of the state in
which it is incorporated; and

 

(c)        Certificates of Corporate Good Standing and Legal Existence of the
Company as of a recent date prior to the Closing from the Secretary of State of
the state in which it is incorporated.

 

6.6        Company Financial Statements. The Buyer shall have received the
Company Financial Statements presented in accordance with United States
generally accepted accounting principles (i.e. U.S. GAAP), consistently applied,
reviewed by an outside certified public accountant (the “Reviewed Financials”).

 

6.7        Non-Voting Stock. The Company shall have executed and returned to the
Buyer the Redemption Agreement and Stock Right to the Buyer and, conditioned
upon the execution and delivery of such documents by the Buyer or Buyer
affiliates, taken such action as may be required to record on its record books
the redemption of all 6,482,515 shares of the Company’s Class B Non-Voting
Common Stock from the Rights Holder in consideration for the Stock Right
pursuant to which the Rights Holder shall have the right to acquire 6,482,515
shares of Class A Voting Common Stock from the Company solely upon the Closing
(or 6,482,515 shares of Class B Non-Voting Common Stock from the Company if the
Agreement is terminated without Closing) per the terms of such Stock Right.

 

7.Conditions Precedent to the Obligations of the Company.

 

All obligations of the Company to be performed on the Closing Date shall be
subject to the satisfaction (or waiver by the Company) of each of the following
conditions:

 

7.1        Representations True at the Date of this Agreement and at Closing.
The representations and warranties of the Buyer and the Acquisition Company set
forth in Sections 4.1, 4.2, and 4.3 in this Agreement shall be true and correct,
in all material respects, at and as of the Closing Date.

 

7.2        Regulatory Compliance and Approvals. All approvals required under any
Laws by the Buyer and the Acquisition Company to carry out the Merger shall have
been obtained, and the Buyer and the Acquisition Company shall have complied in
all material respects with all Laws applicable to them with respect to the
Transactions.

 

7.3        Corporate Documents. The Company shall have received:

 

(a)        Certificates of the Secretary of the Buyer and the Acquisition
Company, respectively, certifying the incumbency of officers and genuineness of
signatures of all officers executing any Transaction Documents for them, copies
of their bylaws, and copies of their director and stockholder resolutions
authorizing the Transactions; and

 

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(b)        Certificates of Incorporation, as amended, of the Buyer and the
Acquisition Company certified as of a recent date prior to the Closing by the
Secretaries of State of the respective states in which the Buyer and the
Acquisition Company are incorporated; and

 

(c)        Certificates of Corporate Good Standing and Legal Existence of the
Buyer and the Acquisition Company as of a recent date prior to the Closing from
the Secretaries of State of the respective states in which they are
incorporated.

 

8.Termination.

 

8.1        Termination. This Agreement may be terminated and the Merger may be
abandoned, at any time prior to the Effective Time, notwithstanding approval
thereof by the stockholders of the Company and Acquisition Company:

 

(a)        by mutual written consent of the Company and the Buyer duly
authorized by each of their respective boards of directors;

 

(b)        by either the Buyer (subject to Section 8.1(e)), or by the Company
(subject to Section 8.1(d)) if the Merger has not been consummated by the close
of business on earlier of (i) the thirtieth (30th) day after the delivery by the
Company of the Reviewed Financials, or (ii) one hundred twenty (120) days after
the date of this Agreement, (provided that the right to terminate this Agreement
under this Section 8.1(b) will not be available to any party whose material
breach of this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date, as evidenced by the prompt written
notice by the non-breaching party to the breaching party of the alleged breach
and, if such failure is curable, a failure by the breaching party to remedy with
five (5) days thereafter);

 

(c)        by either the Buyer or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
will have issued a non-appealable final order or ruling or taken any other
action, in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger or any of the other transactions contemplated
hereby;

 

(d)        by the Buyer upon the failure by the Company to satisfy the
conditions set forth in Section 6; provided if such failure is curable by the
Company, then this Agreement will not terminate pursuant to this Section 8.1(d)
as a result of such particular breach or inaccuracy unless the breach or
inaccuracy remains uncured as of the fifth (5th) day following the date of
written notice given by the Buyer to the Company of such failure and its
intention to terminate the agreement pursuant to this Section 8.1(d);

 

(e)        by the Company upon the failure by the Company to satisfy the
conditions set forth in Section 6; provided if such failure is curable by Parent
or Merger Sub, then this Agreement will not terminate pursuant to this Section
7.1(e) as a result of such particular breach or inaccuracy unless the breach or
inaccuracy remains uncured as of the fifth (5th) day following the date of
written notice given by the Company to the Buyer of such failure and its
intention to terminate the agreement pursuant to this Section 8.1(e).

 

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8.2        Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.1, this Agreement will forthwith become void,
except that this Section 8.2 and Section 12 shall survive such termination;
provided that nothing herein shall relieve the Buyer, the Acquisition Company or
the Company of any liability for any willful breach of this Agreement prior to
the effective date of termination. If this Agreement is terminated prior to
Closing due to the Buyer’s failure to satisfy the conditions set forth in
Section 7, or for any other reason except as provided in the next sentence, the
Company’s sole remedy shall be to receive and retain the Downpayment as
liquidated damages. If this Agreement is terminated prior to Closing due to the
Company’s failure to satisfy any of the conditions set forth in Section 6, or
for any other reason except as provided in the preceding sentence, the Buyer
shall be entitled to receive and retain the Downpayment.

 

9.Indemnification.

 

9.1        Indemnification by the Company and the Holders. Subject to the limits
set forth in this Section 9, the Company and each Holder agrees to indemnify,
defend and hold the Buyer and the Acquisition Company, their officers,
directors, agents and affiliates (each a “Buyer Indemnified Party”), harmless
from and against any and all Losses (including interest, penalties and
reasonable attorneys’ fees) that either may suffer, sustain, incur or become
subject to arising out of or due to (a) any inaccuracy of any representation or
the breach of any warranty of the Company contained in this Agreement, (b) any
breach or non-fulfillment of any covenant, agreement or obligation to be
performed by the Company pursuant to this Agreement, and (c) the enforcement or
settlement of a Buyer Indemnified Party’s rights under this Section 9. Subject
to the limits set forth in this Section 9, each Holder shall be severally liable
solely up to such Holder’s pro rata portion of the total claim amount relating
to any single claim.

 

9.2        Indemnification by the Buyer. Subject to the limits set forth in this
Section 9.2, the Buyer agrees to indemnify, defend and hold each Holder harmless
from and against any and all loss, liability, damage or deficiency (including
interest, penalties and reasonable attorneys’ fees) that such Holder may suffer,
sustain, incur or become subject to arising out of or due to (a) any inaccuracy
of any representation or the breach of any warranty of the Buyer or the
Acquisition Company contained in this Agreement, (b) any breach or
non-fulfillment of any covenant, agreement or obligation to be performed by the
Company pursuant to this Agreement, and (c) the enforcement or settlement of a
Buyer Indemnified Party’s rights under this Section 7. Any indemnity for which
the Buyer may be liable hereunder shall be funded in cash.

 

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9.3        Survival of Representations and Warranties; Limitations. Unless
otherwise indicated with specificity therein, the several warranties and
representations of the parties contained in this Agreement or in any instrument
delivered pursuant hereto will survive the Closing Date and will remain in full
force and effect thereafter for a period of twelve months subsequent to the
Closing Date; provided, that the representations and warranties in Section 3.1,
Section 3.2, Section 3.8, Section 3.15, Section 4.1 and Section 4.2 shall
survive for the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation, tolling or extension thereof). All covenants
and agreements of the parties contained herein shall survive the Closing the
earlier of indefinitely or for the period explicitly specified therein.
Notwithstanding the foregoing, any claims asserted in good faith with reasonable
specificity (to the extent known at such time) and in writing by notice from the
indemnified party to the indemnifying party(ies) prior to the expiration date of
the applicable survival period shall not thereafter be barred by the expiration
of the relevant representation or warranty and such claims shall survive until
finally resolved. Anything to the contrary contained herein notwithstanding,
neither the Holders, nor the Buyer Indemnified Parties (the Buyer Indemnified
Parties being considered as one party for purposes of this Section 9), shall be
entitled to recover from the other pursuant to this Section with respect to
indemnification under Section 9.1(a) or Section 9.2(a), as applicable, unless
and until the total of all claims from the other for indemnity pursuant to this
Section exceeds $20,000 and then only in the amount by which such claims for
indemnity exceed $20,000. Further, anything to the contrary contained herein
notwithstanding, but subject to the exceptions below, neither the Holders, nor
the Buyer and the Acquisition Company (the Buyer and the Acquisition Company
being considered as one party for purposes of this Section 9), shall be entitled
to recover from the other pursuant to this Section an aggregate amount in excess
of $240,000 (the “General Cap”), except that the Buyer and the Acquisition
Company (the Buyer and the Acquisition Company being considered as one party for
purposes of this Section 9) shall be entitled to recover from the Holders
pursuant to this Section an additional aggregate amount of up to $240,000 above
the General Cap with respect to Losses based upon, arising out of, with respect
to or by reason of any inaccuracy in or breach of any representation or warranty
in Section 3.10 or Section 3.21 (such additional amount plus the General Cap,
the “Special Cap”), and except further that the Holders, the Buyer and the
Acquisition Company (the Buyer and the Acquisition Company being considered as
one party for purposes of this Section 9) shall be entitled to recover from the
other an aggregate amount up to the Purchase Price with respect to Losses based
upon, arising out of, with respect to or by reason of any inaccuracy in or
breach of any representation or warranty in Section 3.1, Section 3.2, Section
3.11, Section 3.13(a), Section 3.15, Section 4.1 and Section 4.2, however the
indemnification amount for breaches of these Sections shall be limited to the
actual proceeds received by a Holder, with the Indemnification Escrow Amount
being the indemnification source of first resort. Notwithstanding the foregoing,
the basket limitations set forth in this Section 9.3 shall not apply to Losses
based upon, arising out of, with respect to or by reason of any inaccuracy in or
breach of any representation or warranty in Section 3.1, Section 3.2, Section
4.1 and Section 4.2. For purposes of this Section 9, any inaccuracy in or breach
of any representation or warranty shall be determined without regard to any
materiality, Material Adverse Effect or other similar qualification contained in
or otherwise applicable to such representation or warranty.

 

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9.4        Notice and Opportunity to Defend. If there occurs an event which
either party asserts is an indemnifiable event pursuant to Sections 9.1 or 9.2,
the party seeking indemnification shall notify the other party obligated to
provide indemnification (the “Indemnifying Party”) promptly. If such event
involves (i) any claim or (ii) the commencement of any action or proceeding by a
third person, the party seeking indemnification will give such Indemnifying
Party prompt written notice of such claim or the commencement of such action or
proceeding. Such notice shall be a condition precedent to any liability of the
Indemnifying Party hereunder; provided that the failure to provide prompt notice
as provided herein will relieve the Indemnifying Party of its obligations
hereunder only to the extent that such failure prejudices the Indemnifying Party
hereunder. In case any such action shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification and, after notice
from the Indemnifying Party to such party seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party seeking indemnification hereunder for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
party, in connection with the defense thereof other than reasonable costs of
investigation; provided, that if in the reasonable opinion of counsel to the
Indemnified Party, (A) there are legal defenses available to an indemnified
party that are different from or additional to those available to the
Indemnifying Party; or (B) there exists a conflict of interest between the
Indemnifying Party and the indemnified party that cannot be waived, the
Indemnifying Party shall be liable for the reasonable fees and expenses of
counsel to the indemnified party in each jurisdiction for which the indemnified
party determines counsel is required. The party seeking indemnification agrees
to cooperate fully with the Indemnifying Party and its counsel in the defense
against any such asserted liability. In any event, the party seeking
indemnification shall have the right to participate at its own expense in the
defense of such asserted liability. Any compromise of such asserted liability by
the Indemnifying Party shall require the prior written consent of the party
seeking indemnification. If, however, the party seeking indemnification refuses
its consent to a bona fide offer of settlement which the Indemnifying Party
wishes to accept (which must include the unconditional release of the parties
seeking indemnification from all liability with respect to the claim at issue),
the party seeking indemnification may continue to pursue such matter, free of
any participation by the Indemnifying Party, at the sole expense of the party
seeking indemnification. In such event, the obligation of the Indemnifying Party
to the party seeking indemnification shall be equal to the lesser of (i) the
amount of the offer or settlement which the party seeking indemnification
refused to accept plus the costs and expenses of such party prior to the date
the Indemnifying Party notifies the party seeking indemnification of the offer
of settlement and (ii) the actual out-of-pocket amount the party seeking
indemnification is obligated to pay as a result of such party’s continuing to
pursue such matter. The Parties hereto shall take all commercially reasonable
steps to mitigate all damages sustained or incurred upon and after becoming
aware of any event which could reasonably be expected to give rise to damages.
To the extent any damages of an Indemnified Party are reduced by receipt of
payment from third parties not affiliated with the Indemnified Party, such
payments (net of the costs or expenses incurred in connection with or as a
result of the recovery thereof) (“Proceeds”) shall be credited against any such
losses, and, if indemnification payments shall have been received by the
Indemnified Party prior to the collection of Proceeds, the indemnified party
shall remit to the Indemnifying Party the amount of such Proceeds to the extent
of indemnification payments received in respect of such damages.

 

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9.5        Holder Representative.

 

(a)        The Holder Representative. The Company hereby designates and appoints
Grant Deken (the “Holder Representative”) as representative for the Holders to
perform all such acts as are required, authorized or contemplated by this
Section 9 to be performed by any such person and hereby acknowledges that the
Holder Representative shall be the only person authorized to take any action so
required, authorized or contemplated by this Section 9 by such person. Each such
person further acknowledges that the foregoing appointment and designation shall
be deemed to be coupled with an interest and shall survive the death or
incapacity of such person. Such person hereby authorizes the other parties
hereto to disregard any notice or other action taken by such person pursuant to
this Section 9 except for the Holder Representative. The other parties hereto
are and will be entitled to rely on any action so taken or any notice given by
the Holder Representative and are and will be entitled and authorized to give
notices only to the Holder Representative for any notice contemplated by this
Section 9 to be given to any such person. Notwithstanding the foregoing, the
Holder Representative agrees that, before taking any action that would adversely
affect any Holder, the Holder Representative shall give notice to and obtain
consent from any such Holder. In the event the Holder Representative ceases to
own Shares or dies, a successor to the Holder Representative may be chosen by a
majority in interest of the Shares held by the Holders, provided that notice
thereof is given by the new Holder Representative to the Buyer.

 

(b)        Limitation of Liability. The Holder Representative shall not have any
liability arising out of or in connection with the exercise of his powers or the
discharge of his duties hereunder while acting as Holder Representative under
this Agreement, except that such Holder Representative shall be subject to
liability for his gross negligence or willful misconduct. The Holder
Representative shall not in any event be liable with respect to any action taken
or omitted to be taken by him in good faith or in accordance with and in
reliance upon the opinion of counsel or independent auditors or upon information
obtained by either of them from any governmental authority or other specialist.

 

9.6        Payments; Indemnification Escrow Fund.

 

(a)        Once a Loss is agreed to by the Indemnifying Party or finally
adjudicated to be payable pursuant to this Section 9, the Indemnifying Party
shall satisfy its obligations within thirty (30) days of such agreement or
final, non-appealable adjudication by wire transfer of immediately available
funds. The parties hereto agree that should an Indemnifying Party not make full
payment of any such obligations within such thirty (30) day period, any amount
payable shall accrue interest from and including the date of agreement of the
Indemnifying Party or final, non-appealable adjudication to but excluding the
date such payment has been made at a rate per annum equal to the then current
annual interest rate in the financial institution where the Indemnification
Escrow Agent deposits the Indemnification Escrow Fund. Such interest shall be
calculated daily on the basis of a 365 day year and the actual number of days
elapsed, without compounding.

 

(b)        Any Losses payable to a Buyer indemnified party pursuant to Section 9
shall be satisfied: (i) first, from the Indemnification Escrow Fund; and (ii) to
the extent the Losses arise under in Section 3.1, Section 3.2, Section 3.11,
Section 3.13(a), or Section 3.15 and the amount of Losses exceeds the amounts
available to the Buyer indemnified party in the Indemnification Escrow Fund,
from the Holders, severally and not jointly, up to each Holder’s pro rata
portion of the total claim amount, up to a maximum amount per Holder equal to
the amount set forth next to such Holder’s name on Schedule 2.8 hereto.

 

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(c)        Upon the termination of the Indemnification Escrow Fund pursuant to
the terms of the Escrow Agreement, the Indemnification Escrow Agent shall pay
any amounts remaining in the Indemnification Escrow Fund to the Holders as set
forth in the Escrow Agreement in proportion to their Ownership Percentages, as
set forth in the Escrow Agreement.

 

(d)        Notwithstanding anything to the contrary in this Section 9.6, upon
the final determination of the Post-Closing Adjustment (if any) and the Closing
Cash Statement, the Indemnification Escrow Agent shall pay Fifty Thousand
Dollars ($50,000) less the amount of any Post-Closing Adjustment out of the
Indemnification Escrow Fund the Holders as set forth in the Escrow Agreement in
proportion to their Ownership Percentages, and the Indemnification Escrow Fund
shall thus be reduced by such amount. For the avoidance of doubt, any or all of
the Indemnification Escrow Fund is available to fund the Post-Closing
Adjustment.

 

9.7        Sole and Exclusive Remedy. Except for loss, damage or expense based
upon common law fraud, intentional misrepresentation, criminal activity or
willful misconduct, or as set forth in Section 9.9, (a) the liability limits set
forth in Section 9.3 shall be the maximum liability of the Holders and the sole
and exclusive remedy of the Buyer subsequent to the Closing for any loss, damage
or expense sustained by the Buyer as a result of any breach of this Agreement,
and (b) each Holder’s pro rata portion of the Purchase Price shall be the
maximum liability of such Holder and the sole and exclusive remedy of the Buyer
subsequent to the Closing for any loss, damage or expense sustained by the Buyer
for Losses arising under Section 3.1, Section 3.2, Section 3.11, or Section
3.15. The indemnification provided under this Section 9 shall constitute the
sole and exclusive remedy of the Holders and the Buyer subsequent to the Closing
for any loss, damage or expense sustained by the Holders or the Buyer as a
result of any breach of this Agreement other than any loss, damage or expense
based upon common law fraud, intentional misrepresentation, criminal activity or
willful misconduct, or claims under Section 12.12.

 

9.8        Effect of Investigation. The representations, warranties and
covenants of the Indemnifying Party, and the indemnified party’s right to
indemnification with respect thereto, shall not be affected or deemed waived by
reason of any investigation made by or on behalf of the indemnified party
(including by any of its representatives) or by reason of the fact that the
indemnified party or any of its representatives knew or should have known that
any such representation or warranty is, was or might be inaccurate or by reason
of the indemnified party’s waiver of any condition set forth in Section 6 or
Section 7, as the case may be.

 

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9.9        Liability for Breach of Section 3.5(a).

 

(a)        If, based on the Reviewed Financials, the representations in Section
3.5(a) regarding the Company’s Financial Statements are untrue or incorrect in
any material respect (the “Material Financial Statement Variance”), an amount
equal to the damages, if any, determined per the terms of this Section 9.9 to
have been suffered by the Buyer or the Acquisition Company (the Buyer and the
Acquisition Company being considered as one party for purposes of this Section
9.9) as a direct result of the Material Financial Statement Variance (the
“Material Financial Statement Variance Damages”) shall be deducted from the from
the Purchase Price as the Buyer’s and the Acquisition Company’s sole remedy for
such Material Financial Statement Variance. For the purposes of this Section 9.9
only, “untrue or incorrect in any material respect” shall mean any discrepancy,
error, omission, inaccuracies, or misstatement of in the Financial Statements,
that, when taken together with other corresponding or related adjustments,
results in a downward correction or adjustment of the Company’s overall
financial performance in the Reviewed Financials in excess of $20,000. To be
clear, adjustments impacting solely the timing of revenue, expenses, etc. shall
not be deemed a Material Financial Statement Variance. Notwithstanding anything
to the contrary, the Material Financial Statement Variance Damages shall not
exceed Two Hundred Forty Thousand Dollars ($240,000). For the avoidance of
doubt, the Financial Statement Breach Damages that are deducted from the
Purchase Price prior to the Closing shall not be included in the General Cap.

 

(b)        Review and Procedure.

 

(i) Review. After receipt of the Reviewed Financials, the Buyer shall have ten
(10) days (the “Financials Review Period”) to review the Review Financials.
During the Financials Review Period, the Buyer and its accountants shall have
full access to the books and records of the Company for the purpose of reviewing
the Reviewed Financials and to determine if a Material Financial Statement
Variance has occurred and if so, what the Material Financial Statement Variance
Damages are, provided, that such access shall be in a manner that does not
interfere with the normal business operations of the Company.

 

(ii) Damages Assessment. On or prior to the last day of the Financial Review
Period, the Buyer may deliver to the Holder Representative a written statement
setting forth a description of the Material Financial Statement Variance in
reasonable detail, and indicating the Buyer’s determination of the Material
Financial Statement Variance Damages (the “Statement of Damages”). If the Buyer
fails to deliver the Statement of Damages before the expiration of the Review
Period, this Section 9.9 shall cease to apply and the Material Financial
Statement Variance Damages shall be deemed to be $0, the parties shall complete
the Closing without any adjustment to the Purchase Price and the Buyer’s or the
Acquisition Company’s (the Buyer and the Acquisition Company being considered as
one party) remedies for any breach of Section 3.5(a), if any, shall as set forth
in the other provisions of Section 9.

 

(iii) Objection. If the Buyer delivers the Statement of Damages before the
expiration of the Review Period, the Holder Representative may object to the
Statement of Damages by delivering to Buyer a written statement setting forth
its objections in reasonable detail (the “Objection to Damages”) within ten (10)
days following date that the Statement of Damages was delivered (the “Objection
Period”). If the Holder Representative fails to deliver the Objection to Damages
before the expiration of the Objection Period, the Statement of Damages shall be
deemed to have been accepted by the Holder Representative and the parties shall
make the adjustments per Section 9.9(c) and proceed to Closing.

 

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(iv)           Negotiation. If the Holder Representative delivers the Objection
to Damages before the expiration of the Objection Period, the Buyer and the
Holder Representative shall negotiate in good faith to resolve such objections
within ten (10) days after the delivery of the Objection to Damages (the “
Statement of Damages Resolution Period”), and, if the same are so resolved
within the Statement of Damages Resolution Period, the Statement of Damages with
such changes as may have been previously agreed in writing by Buyer and the
Holder Representative, shall be final and binding and the parties shall make the
adjustments per Section 9.9(c) and proceed to Closing.

 

(v)           Resolution of Disputes. If the Holder Representative and Buyer
fail to reach an agreement with respect to all of the matters set forth in the
Statement of Damages before expiration of the Statement of Damages Resolution
Period, then any dispute regarding a Material Financial Statement Variance or
the Material Financial Statement Variance Damages (“Disputed Positions”) shall
be submitted for resolution to the office of an impartial nationally recognized
Independent Accountant appointed by mutual agreement of Buyer and the Holder
Representative, who, acting as experts and not arbitrators, shall resolve the
Disputed Positions only and, if they determine that there was a Material
Financial Statement Variance (if that is in dispute), make a determination of
the Material Financial Statement Variance Damages. The Independent Accountant
shall only decide the specific items under dispute by the parties and their
decision for the Material Financial Statement Variance Damages must be within
the range of values assigned to each such item in the Statement of Damages and
the Objections to Damages, respectively.

 

(vi)           Fees of the Independent Accountant. The fees and expenses of the
Independent Accountant shall be paid by the Holder Representative (on behalf of
the Stockholders), on the one hand, and by Buyer, on the other hand, based upon
the percentage that the amount actually contested but not awarded to the Holder
Representative or Buyer, respectively, bears to the aggregate amount actually
contested by the Holder Representative and Buyer.

 

(vii)          Determination by Independent Accountant. The Independent
Accountant shall make a determination as soon as practicable within thirty (30)
days (or such other time as the parties hereto shall agree in writing) after
their engagement, and their resolution of the Disputed Positions and their
adjustments to the Material Financial Statement Variance Damages shall be
conclusive and binding upon the parties hereto.

 

(c)           Payment of the Material Financial Statement Variance Damages. If
the Material Financial Statement Variance Damages are finally determined as
aforesaid prior to the Closing, the amount of the Material Financial Statement
Variance Damages shall be deducted from the Purchase Price and retained by the
Buyer as set forth in Section 9.9(a). If the Material Financial Statement
Variance Damages are not finally determined as aforesaid prior to the Closing,
the Buyer shall deliver to the Indemnification Escrow Agent the amount of the
Purchase Price equal to the Financial Statement Breach Damages set forth in the
Statement of Damages and the Indemnification Escrow Agent shall hold such amount
in escrow as part of the Indemnification Escrow Fund in accordance with the
Indemnification Escrow Agreement. In such case, the Holder Representative and
Buyer shall, within five (5) days after the final determination of the
resolution of the Disputed Positions, jointly instruct the Indemnification
Escrow Agent to disburse from the Indemnification Escrow Fund by wire transfer
of immediately available funds, the amount of the Financial Statement Breach
Damages finally determined to Buyer, and the remainder of the amount of the
escrowed Financial Statement Breach Damages as directed by the Holder
Representative.

 

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(d)           Adjustments for Tax Purposes. Any payments made pursuant to this
Section 9.9 shall be treated as an adjustment to the Purchase Price by the
parties for Tax purposes, unless otherwise required by Law.

 

10.         Tax Matters.

 

10.1        Tax Periods Ending on or before the Closing Date. The Company shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The Company shall permit Buyer to review and
consent to each such Tax Return described in the preceding sentence at least
thirty (30) days prior to filing.

 

10.2        Cooperation on Tax Matters.

 

(a)           Buyer, the Company and the Holders shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section 10.2 and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other 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. The Company and the Holders agree (A) to retain all books and records
with respect to Tax matters pertinent to the Company relating to any Tax period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or the Holders, any extensions
thereof) of the respective Tax periods, and to abide by all record retention
agreements entered into with any Taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company or
the Holders, as the case may be, shall allow the other party to take possession
of such books and records.

 

(b)           Buyer and the Holders further agree, upon request, to use their
best efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).

 

10.3         Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any
corporate-level gains Tax triggered by the sale of the Company stock and any
transfer or similar Tax imposed in other states or subdivisions) shall be paid
by the Holders when due, and the Holders shall, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Buyer will, and will cause its affiliates to, join
in the execution of any such Tax Returns and other documentation.

 

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11.         Downpayment Escrow Provisions.

 

11.1         The parties hereto do hereby appoint the Downpayment Escrow Agent
as escrow agent to act in accordance with and subject to the terms of this
Section 11 of this Agreement and the Downpayment Escrow Agent hereby accepts
such appointment and agrees to act in accordance with and subject to the terms
hereof.

 

11.2         Within four (4) days following the date of this Agreement, Buyer
shall deliver into escrow with the Downpayment Escrow Agent the Downpayment
referred to in Section 2.8(a) hereof pursuant to the terms hereof.

 

11.3         At Closing, the Downpayment Escrow Agent shall deliver the
Downpayment as directed in accordance with Section 2.8, via wire transfer of
immediately available funds.

 

11.4         In the event the Agreement is terminated pursuant to Section 8.1(e)
and it does not close pursuant to its terms, the Downpayment Escrow Agent shall
deliver the Downpayment to the Company, subject to Section 11.6, following
notice duly given by the Company pursuant to Section 11.6.

 

11.5         In the event the Agreement is terminated pursuant to Sections 8.1
(a), (b), (c) or (d) and it does not close pursuant to its terms, the
Downpayment Escrow Agent shall return the Downpayment to Buyer subject to
Section 11.6 following notice duly given by Buyer pursuant to Section 11.6.

 

11.6         Following the giving of notice by the Company pursuant to Section
11.4 or Buyer pursuant to Section 11.5, as the case may be, the Downpayment
Escrow Agent shall thereupon notify the non-notice giving party in writing of
its intent to deliver to the notice-giving party the Downpayment ten (10) days
from the date of its notice. In the event the Downpayment Escrow Agent shall
have not received written notice from the non-notice giving party by the end of
such ten (10) day period that the Downpayment should not be distributed to the
notice-giving party, the Downpayment Escrow Agent shall promptly deliver to the
notice-giving party the Downpayment. If the non-notice giving party timely
notifies the Downpayment Escrow Agent not to distribute the Downpayment to the
notice-giving party, the Downpayment Escrow Agent shall not thereafter deliver
any of the Downpayment to the notice-giving party and may exercise any of its
rights under Section 11.8.4 hereof. The notice-giving party shall send a copy of
its notice to the non-notice giving party concurrently with its delivery to the
Downpayment Escrow Agent.

 

11.7         The Downpayment Escrow Provisions pursuant to this Section 11 shall
terminate once the Downpayment has been delivered to the Company, the
Representative Holder, or the Buyer as the case may be. Upon delivery of the
Downpayment as provided for herein, the Downpayment Escrow Agent shall be
relieved of any and all further obligations and liabilities hereunder, other
than liabilities resulting from the negligence or willful misconduct of the
Downpayment Escrow Agent.

 

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11.8         Except in the case of the willful misconduct or gross negligence of
the Downpayment Escrow agent, the following provisions shall apply:

 

11.8.1           The Downpayment Escrow Agent shall not be liable for any action
taken or omitted by it, or any action suffered by it or to be taken or omitted,
in good faith and in the exercise of its own best judgment, and may rely
conclusively and shall be protected in acting upon any order, notice, demand,
certificate, opinion or advice of counsel (including counsel chosen by the
Downpayment Escrow Agent), statement, instrument, report or other paper or
document (not only as to its due execution and the validity and effectiveness of
its provisions, but also as to the truth and acceptability of any information
therein contained) which is believed by the Downpayment Escrow Agent to be
genuine and to be signed or presented by the proper person or persons. The
Downpayment Escrow Agent shall not be bound by any notice or demand, or any
waiver, modification, termination or rescission of this Agreement unless
evidenced by a writing delivered to the Downpayment Escrow Agent signed by the
proper party or parties and, if the duties or rights of the Downpayment Escrow
Agent are affected, unless it shall have given its prior written consent
thereto.

 

11.8.2           The Downpayment Escrow Agent shall not be responsible for the
sufficiency, accuracy, form, execution, validity, value or genuineness of any
document or property received, held or delivered by it hereunder, or of any
signature or endorsement thereon, or for any lack of endorsement thereon, or for
any description therein, nor shall the Downpayment Escrow Agent be responsible
or liable in any respect on account of the identity, authority or rights of the
persons executing or delivering or purporting to execute or deliver any document
or property pursuant to the provisions hereof. Pending the disbursement of any
monies held by the Downpayment Escrow Agent hereunder, the Downpayment Escrow
Agent is expressly authorized, empowered and directed to deposit such funds in a
segregated non-interest-bearing escrow account with the banking institution with
which the Downpayment Escrow Agent normally maintains such accounts (provided
that such bank is FDIC insured). In no event shall the Downpayment Escrow Agent
be liable to any party hereto with regard to the financial stability of any
banking institution with which it deposits such funds. Any deliveries of funds
held in escrow shall be accompanied by a delivery of all accrued interest
thereon. The Downpayment Escrow Agent shall not be liable for any loss which may
be incurred by reason of any investment of any monies or properties which it
holds hereunder.

 

11.8.3           The Downpayment Escrow Agent shall have the right to assume, in
the absence of written notice to the contrary from the proper person or persons,
that a fact or an event by reason of which an action would or might be taken by
the Downpayment Escrow Agent does not exist or has not occurred, without
incurring liability for any action taken or omitted, in good faith and in the
exercise of its own best judgment, in reliance upon such assumption.

 

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11.8.4           Following the receipt by the Downpayment Escrow Agent of notice
of any demand or claim or the commencement of any action, suit or proceeding,
including, without limitation, notice from the non-notice giving party pursuant
to Section 11.6 hereof, the Downpayment Escrow Agent shall, if such notice shall
relate to the other parties hereto, notify such parties thereof in writing; but
the failure by the Downpayment Escrow Agent to give such notice shall not
relieve any party from any liability which such party may have to the
Downpayment Escrow Agent hereunder. In the event of the receipt of such notice,
the Downpayment Escrow Agent, in its sole discretion, may (a) commence an action
in the nature of interpleader in an appropriate court to determine ownership or
disposition of the Downpayment (b) deposit the Downpayment with the clerk of any
appropriate court; or (c) retain the Downpayment pending receipt of (X) written
instructions from both Buyer and the Company, or its permitted assignees, as to
the disposition thereof or (Y) a final, non-appealable order of a court having
jurisdiction over all of the parties hereto directing to whom and under what
circumstances the Downpayment are to be delivered.

 

11.8.5           The Downpayment Escrow Agent shall be entitled to reimbursement
from Buyer and the Company, jointly and severally for all expenses paid or
incurred by it in the administration of its duties hereunder, and the Buyer and
the Company shall be equally responsible therefor.

 

11.8.6           The Downpayment Escrow Agent shall be indemnified and held
harmless, jointly and severally, by Buyer and the Company from and against any
and all liabilities, losses, costs and expenses, including, without limitation,
(a) reasonable attorneys’ fees and disbursements and (b) usual and customary
expenses involved in discovery proceedings and testimony, in connection with any
claim, action, suit or other proceeding which in any way, directly or
indirectly, arises out of or relates to this Section 11, the services of the
Downpayment Escrow Agent hereunder, or the Downpayment. In addition, the
Downpayment Escrow Agent shall be entitled to receive from Buyer and the
Company, jointly and severally fees (in amounts calculated at the Downpayment
Escrow Agent’s customary rates) for time devoted to matters arising out of or
related to its services hereunder, including, without limitation, in connection
with any such claim, action, suit or other proceeding.

 

11.8.7           From time to time on and after the date hereof, the parties
other than the Downpayment Escrow Agent shall deliver or cause to be delivered
to the Downpayment Escrow Agent such further documents and instruments and shall
do or cause to be done such further acts as the Downpayment Escrow Agent shall
reasonably request (it being understood that the Downpayment Escrow Agent shall
have no obligation to make any such request) to carry out more effectively the
provisions and purposes of this Section 11, to evidence compliance herewith or
to assure itself that it is protected in acting hereunder.

 

11.8.8           The Downpayment Escrow Agent may resign at any time and be
discharged from its duties as the escrow agent hereunder by its giving the other
parties hereto at least thirty (30) days prior written notice thereof in
accordance with the terms hereof. As soon as practicable after its resignation,
the Downpayment Escrow Agent shall turn over to a successor escrow agent
appointed by the other parties hereto, jointly, the Downpayment held hereunder
upon presentation of the document appointing the new escrow agent and its
acceptance thereof. If no new agent is so appointed within the sixty (60) day
period following the giving of such notice of resignation, the Downpayment
Escrow Agent may deposit the Downpayment with the New York County Supreme Court.

 

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11.8.9           The Downpayment Escrow Agent shall resign and be discharged
from its duties as the escrow agent hereunder if so requested in writing at any
time by the other parties hereto, jointly; provided, however, that such
resignation shall become effective only upon acceptance of appointment by a
successor escrow agent as provided in Section 11.8.8 hereof.

 

11.8.10         Following resignation and/or discharge of the Downpayment Escrow
Agent, the provisions of this Section 11 shall nonetheless continue to be
applicable with respect to the Downpayment Escrow Agent.

 

11.8.11         Notwithstanding any obligation to make deliveries to Buyer, the
Company or the Holder Representative hereunder, the Downpayment Escrow Agent may
retain and hold for such time as it deems necessary such property payable to
Buyer, the Company or the Holder Representative, as the case may be, as it shall
from time to time in its reasonable sole discretion deem sufficient to indemnify
itself for any expense or loss or for any amounts due it. The Downpayment Escrow
Agent may not retain or hold any property payable to the Company or the Holder
Representative to indemnify itself for any expense or loss. For the purposes
hereof, the term “expense or loss” shall include all amounts paid, payable or
incurred by the Downpayment Escrow Agent to satisfy any claim, demand or
liability, or in investigating, defending, or settling any claim, demand,
action, suit or proceeding made or brought against it (any such settlement to be
with the express written consent of the Downpayment Escrow Agent) including, but
not limited to, reasonable counsel fees and disbursements.

 

11.8.12         Any notice, delivery or other communication required or
permitted hereunder to the Downpayment Escrow Agent shall be deemed to have been
duly made or given for all purposes when in writing and delivered pursuant to
Section 13.8 hereof addressed to the Downpayment Escrow Agent as set forth in
Section 12.7 hereof or at such other address as shall be furnished in writing by
the Downpayment Escrow Agent in the manner provided in Section 12.7, and any
notice or communication given pursuant to the provisions hereof shall be deemed
to have been given as of the date delivered.

 

11.8.13         The parties agree to take all further actions and to execute and
deliver such additional documents and instruments as may be necessary to give
full effect to this Section 11.

 

12.         General.

 

12.1         Governing Law. This Agreement shall be construed and enforced in
accordance with the internal, substantive laws of the State of Delaware. Each of
the parties hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of the courts of the State of Delaware in connection with any
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby, waives any objection to venue in the Delaware, and agrees
that service of any summons, complaint, notice or other process relating to such
proceeding may be effected in the manner provided by Section 9.7.

 

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12.2         Further Assurances. The parties hereto agree to execute and deliver
any and all papers and documents necessary to complete the transactions
contemplated hereby.

 

12.3         Binding Effect. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement and all rights hereunder may not be assigned by any party hereto
without the written consent of the other parties.

 

12.4         Waiver of Conditions. Any party hereto may waive any condition
provided in this Agreement for its benefit.

 

12.5         Exhibits and Schedules. All of the Exhibits and Schedules attached
to this Agreement are hereby incorporated herein and made a part hereof.

 

12.6         Entire Agreement. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof and there are
no agreements, representations or warranties with respect to the subject matter
hereof which are not set forth herein. All prior negotiations, agreements and
understandings with respect to the subject matter hereof are superseded hereby.
This Agreement may not be amended or revised except by a writing signed by all
parties hereto.

 

12.7         Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be deemed given when delivered in person or sent
by confirmed facsimile or electronic mail, or when received if given by Federal
Express or other nationally recognized overnight courier service, or two (2)
business days after being deposited in the United States mail, postage prepaid,
registered or certified mail, addressed to the applicable party as follows:

 

To the Buyer:

 

Seven Stars Cloud Group, Inc.

55 Broadway, 19th Floor

New York, NY 10006

Attention: President

Email: bob.benya@sevenstarscloud.com

 

 42 

 

 

with a copy to:

 

Ruskin Moscou Faltischek P.C.

1425 RXR Plaza

Uniondale, NY 11556

Attention: Gavin C. Grusd, Esq.

Email: ggrusd@rmfpc.com

 

To the Company at:

 

Grapevine Logic, Inc.

10 Ware Street

Cambridge, MA 02138

Attention: Attn: Grant Deken

Email: grant@grapevinelogic.com

 

with a copy to:

 

Company Counsel, LLC

28 Stone Avenue

Winchester, MA 01890

Attention: Steven J. Cagnetta

Email: steve@companycounsel.biz

 

To Holder Representative at:

 

Grant Deken

10 Ware Street

Cambridge, MA 02138

Email: grant@grapevinelogic.com

 

To the Downpayment Escrow Agent at:

 

Company Counsel, LLC

28 Stone Avenue

Winchester, MA 01890

Email: steve@companycounsel.biz

 

and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 12.7.

 

12.8         Counterparts; Signatures. This Agreement may be executed in two or
more counterparts, each of which shall be binding as of the date first written
above. Each such copy shall be deemed an original, and it shall not be necessary
in making proof of this Agreement to produce or account for more than one such
counterpart. Signatures hereon which are transmitted via facsimile or email or
in electronic, .pdf or functional equivalent format shall be deemed original
signatures.

 

 43 

 

 

12.9         Amendment. This Agreement may be amended by a written instrument
signed by the parties hereto; provided, however, that this Agreement may only be
amended without approval of the stockholders of the Company and the Acquisition
Company to the extent permitted by applicable law.

 

12.10         Publicity. Press releases, public disclosure or other public
statement concerning this transaction shall be made only with the prior written
agreement of the Company, the Holder Representative and the Buyer, except if
such disclosure is required by applicable Law or stock exchange rules.
Additionally, no such press releases, public disclosure or other public
statement shall state the amount of the Purchase Price unless such disclosure is
required by applicable Law or stock exchange rules.

 

12.11         Fees and Expenses. Whether or not the Transactions are
consummated, each of the parties hereto shall bear his or its own expenses for
legal, accounting, brokers’ or other professional fees or expenses incurred in
connection therewith.

 

12.12         Attorneys’ Fees. In the event that any action is brought to
enforce any of the provisions of this Agreement, or to obtain money damages for
the breach thereof, and such action results in the award of a judgment for money
damages or in the granting of any injunction in favor of one of the parties to
this Agreement, all expenses, including reasonable attorneys’ fees, shall be
paid by the nonprevailing party.

 

[Remainder of Page Left Intentionally Blank]

 

 44 

 

 

AGREEMENT AND PLAN OF MERGER

Counterpart Signature Page

 

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

 

  Company:       GRAPEVINE LOGIC, INC.

 

  By: /s/ Grant Deken     Name: Grant Deken     Title: CEO

 

  Buyer:       SEVEN STARS CLOUD GROUP INC.

 

  By: /s/ Bruno Wu     Name: Bruno Wu     Title: Chairman/CEO

 

  Holder Representative:

 

  /s/ Grant Deken   Grant Deken

 

 45 

 

 

DISCLOSURE SCHEDULES

 

See attached.

 

 

 

 

AGREEMENT AND PLAN OF MERGER

GRAPEVINE LOGIC, INC.

 

COMPANY DISCLOSURE SCHEDULE

 

This Disclosure Schedule is being delivered by the Company (as defined below)
pursuant to that certain Agreement and Plan of Merger, dated as of July 18, 2018
(the “Purchase Agreement”), by and among Seven Stars Cloud Group Inc., a Nevada
corporation (“Buyer”), GLI Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Buyer, Grapevine Logic, Inc., a Delaware limited
liability company (the “Company”) and Grant Deken, solely in his capacity as the
Holder Representative (the “Holder Representative”).

 

This Disclosure Schedule is an integral part of the Purchase Agreement, is
incorporated therein by reference and is not intended to be an independent
document. Any matter disclosed in one section or subsection of this Disclosure
Schedule shall be deemed disclosed with respect to any other section or
subsection of this Disclosure Schedule only to the extent that the Purchase
Agreement requires such disclosure and it is reasonably apparent on the face of
such disclosure that such disclosure is applicable to such other section or
subsection.

 

Unless the context otherwise requires, all capitalized terms used herein shall
have the meanings given to such terms in the Purchase Agreement. All headings
and subheadings included herein are inserted for ease of reference only and
shall not in any way expand or create a different standard for disclosure than
the language set forth in the Purchase Agreement or be used in the construction
or interpretation of the information contained in this Disclosure Schedule.

 

 

 

 

Schedule 2.8

 

Company Stockholder Conversion Amounts

 

See attached, which shall be updated as of the Closing:

 

                           Payments     Common   Nonvoting       Seed 1   Seed
2   Total Fully   Due (TBD  Stockholder  Stock   Common   Options   Shares  
Shares   Diluted   at Close)  Grant Deken   805,000         1,912,152       
      2,717,152       Marco Buchbinder   216,000                      
 216,000       Jesse Wrenn   744,000                        744,000       Chris
Beaman   1,080,000                        1,080,000       Tech Stars   992,856  
                     992,856                                            Option
Pool                                    Alex Riina             318,374       
      318,374       TJ Mahony             55,662              55,662      
Kimberley Bond             283,048              283,048       Edward Breed      
      202,675              202,675       Jennifer Monaco             12,667  
           12,667       ReadyCart Inc.             30,000              30,000  
    Mateo Alampi             7,881              7,881                        
                   Investors                                    Angel List 
 470,320              237,657         707,977       Apex Merits Global Limited 
 79,392                   40,118    119,510       Bantam Group   24,327       
      12,292         36,619       Boston Seed Capital   1,611,607            
 573,654    240,704    2,425,965       Christian Noske (Trans Atlantic
Ventures)   46,405                        46,405       Commonwealth Fund III,
LLC   285,810                   169,289    455,099       David Williams 
 86,101                   20,059    106,160       Derrick L. Horner   7,939  
                4,012    11,951       Diane Hessan   7,939                 
 4,012    11,951       Gary Tiffany   298,007              103,688       
 401,695       Harold Simansky   46,405                        46,405       Jim
Alvarez   40,545              20,487         61,032       Martin Issac 
 32,436              16,390         48,826       Massachusetts Technology
Development Corp   190,541                   112,860    303,401       Michael P.
Murray   92,810                        92,810       Oyster Angel Fund   81,089  
           40,975         122,064       Scott M. Johnson   39,696            
      20,059    59,755      

 

 

 

 

                           Payments     Common   Nonvoting       Seed 1   Seed
2   Total Fully   Due (TBD  Stockholder  Stock   Common   Options   Shares  
Shares   Diluted   at Close)  TJ Mahony   55,686                        55,686  
    Walter Winshall   238,176                   120,353    358,529       Warren
Katz   39,696                   20,059    59,755       Timothy Lieto   46,868  
                     46,868       Michael Welts   46,868                      
 46,868       William Herman   63,514                   32,094    95,608      
                                     SSS Venture Entity        6,482,515       
           6,482,515                                            Total 
 7,770,033    6,482,515    2,822,459    1,005,143    783,619    18,863,769      

 

Rights Holders   Seven Stars Sun Right to acquire shares of the Company’s Class
A Common Stock (pursuant to a rights agreement to be entered into after the date
of this Agreement)

 

 

 

 

Schedule 3.2(a)

 

Capitalization

 

See Schedule 2.8.

 

 

 

 

Schedule 3.4(b)

 

None.

 

 

 

 

Schedule 3.5

 

Financial Information

 

None.

 

In 2017, the Company recognized breakage revenue in an amount of approximately
$44,000 that had accrued in previous years in the form of legacy credits that
were not redeemed or used. Since January 1, 2017, the Company has changed its
revenue recognition model such that it generally only recognizes revenues upon
completion of a project and receipt of payment.

 

In addition, the Company has recently identified an error in its financial
accounting, pursuant to which there is potentially up to a 1% margin of error in
recognized revenue stemming from a new discounted product line launched in
January 2018 for self-serve client. The Company is taking necessary measures to
implement more comprehensive financial controls and procedures such that going
forward these discrepancies will not occur and the existing inaccuracies will be
retroactively corrected.

 

 

 

 

Schedule 3.6

 

Materially Adverse Change

 

Strategic Bonus Letter between the Company and Grant Deken dated June 19, 2018.

 

In addition, the Company has recently identified an error in its financial
accounting, pursuant to which there is potentially up to a 1% margin of error in
recognized revenue stemming from a new discounted product line launched in
January 2018 for self-serve client.

 

As part of the Merger and as a condition to Closing, the Buyer plans to enter in
employment offer letter with certain key employees that may result in salary
increases.

 

Otherwise, none.

 

 

 

 

Schedule 3.7(d)

 

Permits

 

Certificate of good standing from the Secretary of State of Delaware.

 

 

 

 

Schedule 3.8

 

Employee Benefits Plans

 

As of November 2016, all benefits are handled through Trinet. These include
without limitation full health insurance up to $300 per employee per month for
single individuals, as well as dental, vision, access to disability insurance
and to life insurance policies. The Company currently maintains an unlimited
vacation policy. The Company offers discretionary fringe benefits such as a
commuter pass on an as-needed basis.

 

The Company maintained a 401(k) Plan (“Plan”) with Nationwide Insurance until
November 2016, at which point the trustee of the Plan, former CEO Brendan
Lattrell, left the Company and the Plan became dormant. The Company has not
contributed to or done anything to maintain the Plan since that point.

 

2013 Stock Incentive Plan.

 

Strategic Bonus Letter between the Company and Grant Deken dated June 19, 2018.

 

In connection with the termination of and redemption of 100% of the Company
stock held by former CEO Brendan Lattrell on or around November 2016, the
Company executed a Mutual Release and Non-Disparagement Agreement with Mr.
Lattrell.

 

 

 

 

Schedule 3.9

 

Real Property

 

Alley Membership Agreement between the Company and Alley NYC, LLC for
month-to-month “membership” to use certain office space located at 10 Ware
Street, Cambridge, MA 02138, starting as of March 5, 2018, for a monthly fee of
$3,900.

 

 

 

 

Schedule 3.10

 

Intellectual Property

 

(a)

 

Trademarks                 Name   Regi.Serial #   Reg. Date   Status   Reference
URL #GetSponsored   5234826   7/4/17   Live  
 http://tmsearch.uspto.gov/bin/gate.exe?f=doc&state=4801:16vrwp.8.1 GRAPEVINE  
86525337   2/5/15   Dead  
 http://tmsearch.uspto.gov/bin/gate.exe?f=doc&state=4801:16vrwp.10.2

 

Patents

 

None

 

Copyrights

Grapevine brand

All Marketing Materials

Original blog content on blog.grapevinelogic.com and
grapevinelogic.com/resources

 

Domain Names

grapevinelogic.net

hellologic.co

readycart.com

grapevine.me

grapevinelogic.com

 

Trade Secrets and other Proprietary Rights

Proprietary influencer flywheel framework and all other proprietary rights in
the Business.

SocMetrics Platform

 

Asset Purchase Agreement, dated as of May 31, 2017, between the Company and
SocMetrics, Inc. (“SocMetrics”), pursuant to which the Company purchased
substantially all of the assets of SocMetrics in exchange for a payment of
$35,000 (which has been made) and additional amounts to be determined during a
revenue-share period, which amounts have not yet been finalized but which the
Company expects to be roughly $25,000.

 

(b) None.

 

 

 

 

Schedule 3.11(a)

 

Liens

 

None.

 

 

 

 

Schedule 3.12

 

Material Contracts

 

Material Service Agreements with the following brands:

 

Services Agreement between the Company and MAESA LLC, dated as of December 1,
2016.

Services Agreement between the Company and White with Style, dated as of June
11, 2015.

Services Agreement between the Company and Sue and Daughters, dated as of
December 8, 2016.

Services Agreement between the Company and Credit Sesame, dated as of July 28,
2017.

Services Agreement between the Company and Society6, dated as of September 1,
2015.

Services Agreement between the Company and Unboxed Inc. Foreo, dated as of
November 21, 2017.

Services Agreement between the Company and Coke - The Coca-Cola Company, dated
as of October 14, 2017.

Services Agreement between the Company and ZenLen, Inc. (Native), dated as of
August 16, 2017.

Services Agreement between the Company and Scentbird, dated as of March 27,
2015.

Services Agreement between the Company and Deep Sentinel, Inc., dated as of
April 23, 2017.

Services Agreement between the Company and Fleishman-Hillard Inc., dated as of
May 29, 2018.

Services Agreement between the Company and Relish Labs LLC d/b/a HomeChef, dated
as of February 12, 2018.

Services Agreement between the Company and Universal Beauty Products Inc., dated
as of October 9, 2017.

Services Agreement between the Company and Organifi Shop, dated as of May 22,
2018.

Services Agreement between the Company and Pixability, Inc. dated June 29, 2018.

 

Agreements with the following Vendors:

 

●Amazon Web Services (cloud hosting services)

●eSquared Partners (controller services)

●Company Counsel, LLC (legal services)

 

Asset Purchase Agreement, dated as of May 31, 2017, between the Company and
SocMetrics, Inc. (“SocMetrics”), pursuant to which the Company purchased
substantially all of the assets of SocMetrics in exchange for a payment of
$35,000 (which has been made) and additional amounts to be determined during a
revenue-share period, which amounts have not yet been finalized but which the
Company expects to be roughly $25,000.

 

 

 

 

The Company pays Creators on a per-project basis and cannot predict with
certainty how much it will pay per Creator until the applicable project is
complete. See Schedule 2.18 for a list of Creators paid amounts greater than
$10,000 in 2017.

 

Mutual Release and Non-Disparagement Agreement between the Company and Brendan
Latrell dated as of November 2016.

 

Strategic Bonus Letter between the Company and Grant Deken dated June 19, 2018.

 

 

 

 

Schedule 3.13

 

Taxes

 

The Company was found by the Massachusetts Department of Revenue (“DOR”) and the
Internal Revenue Service (“IRS”) to be delinquent in payroll tax withholding for
2016 and parts of 2015. The Company entered into a Case Resolution with the IRS
on March 10, 2017 and a Notice of Abatement Determination with the Massachusetts
Department of Revenue on February 26, 2018, and has since satisfied all
outstanding obligations with both the DOR and the IRS.

 

 

 

 

Schedule 3.14

 

Affiliated Party Transaction

 

Other than the Strategic Bonus Letter between the Company and Grant Deken dated
June 19, 2018, there are none.

 

 

 

 

Schedule 3.15

 

No Brokers.

 

None.

 

 

 

 

Schedule 3.16

 

Insurance

 

Business & Management (D&O) Indemnity Policy, provided by National Casualty
Company, valid through 3/22/19.

 

Commercial General Liability Coverage and Businessowners Property Coverage,
provided by Travelers Casualty Insurance Company of America, valid through
6/17/19.

 

Workers Compensation Insurance is provided through Trinet.

 

 

 

 

Schedule 3.18

 

Relationships

 

(a) Suppliers

 

The Company paid the following creators the following amounts in 2017.
Otherwise, none.

 

Shanna Perplies  $47,700.00  Lizzy Ashley  $39,440.00  Ashley Mitchell 
$36,680.00  Ashley Mitchell  $36,680.00  Samantha      Robinson  $30,645.00 
Travis Bryant  $30,154.00  Nastazsa Barrett  $24,615.00  Dani Meza  $22,689.40 
aspyn ovard  $21,600.00  Raven Scott  $19,400.00  Edward ZO  $18,912.00  Jose
Zuniga  $17,550.00  Alena Maze  $16,301.00  Macy Kate  $15,660.00  Stephanie
Stipes  $15,480.00  Yasmin Maya  $15,000.30  Jackie Perdue  $14,940.00  Kelly
Strack  $14,916.00  Kassie Thatcher  $14,105.00  Drew Scott  $13,455.00  Kenzie
Elizabeth  $13,185.00  kyra sivertson  $13,050.00  Ruby Franke  $13,001.00 
Leesha  $10,920.00  Jordan Cheyenne  $10,737.00 

 

 

 

 

(b) Customers

 

The Company received the following amounts from the following Customers in 2017:

 

Name  2017 Payments Received  MAESA LLC  $397,960.00  White with Style 
$179,312.20  Sue and Daughters  $126,500.00  Trello, Inc. (Atlassian Inc.) 
$125,000.00  Hong Kong Live.me Corporation Limited  $99,966.00  Credit Sesame 
$93,880.05  Match.com, L.L.C.  $76,477.55  Shoptagr  $62,378.40  Society6 
$60,000.00  Unboxed Inc. Foreo  $50,000.00  Coke - The Coca-Cola Company 
$50,000.00  Boohoo.com UK Limited  $50,000.00  Care.com  $50,000.00  Native 
$37,763.00  Force Factor, LLC Nutraclick, HFM Marketing  $25,000.00  LinkedIn
(Customer)  $25,000.00  Lomeway E-Commerce (HongKong) Limited  $25,000.00  Girl
Starter, LLC  $24,970.00  Juvalips  $22,726.00  Patchology  $21,229.60 
Scentbird  $21,051.84  American Telecast  $20,000.00  Lovepop, Inc.  $20,000.00 
Zenlen, Inc.  $20,000.00  LumaBella  $16,621.80  La Roshe Posay  $15,000.00 
LumaRX  $13,269.85  Kind LLC  $12,500.00  MVF Global  $11,063.00  Agency Within 
$11,010.60  Lexington International  $10,570.00  Curology, Inc.  $10,000.00 
Dermablend  $10,000.00  Mainline Menswear  $10,000.00  SSI  $10,000.00  PMD Age
Science, Inc  $10,000.00 

 

 

 

 

Schedule 3.20

 

Certain Employees and Consultants

 

Employees:

●Casey Nulph, Account Manager

○2017 salary: N/A

○estimated 2018 salary: $50,000

●Jed Breed, Senior Director, Strategy

○2017 salary: $90,000

○estimated 2018 salary: $100,000 (plus discretionary bonus and commissions)*

●Jen Monaco, Associate Director, Accounts

○2017 salary: $52,000

○estimated 2018 salary: $60,000 (plus discretionary bonus and commissions)

●Jibran Malek, Senior Marketing Manager

○2017 salary: $55,000

○estimated 2018 salary: $55,000

●Laura Picard, Account Manager

○2017 salary: $50,000

○estimated 2018 salary: $50,000

●Kimberly Bond, Director, Talent

○2017 salary: $72,000

○estimated 2018 salary: $78,000

●Grant Deken, CEO

○2017 salary: $120,000

○estimated 2018 salary: $175,000

●Daniel Shields, Account Executive (SaaS)

○2017 salary: $50,000

○estimated 2018 salary: $55,000 plus commission

●Alex Riina, Director of Engineering

○2017 salary: $105,000

○estimated 2018 salary: $105,000

 

*Jed Breed’s last day of employment with the Company is July 3, 2018.

 

 

 

 

Schedule 3.21

 

Business Metrics

 

● Total aggregate number of registered users on the Company’s platform:

○ 2018-02-01 — 158,596

○ 2018-03-01 — 162,019

○ 2018-04-01 — 165,706

○ 2018-05-01 — 168,428

○ 2018-06-01 — 171,122

 

● Total estimated reachable audience as calculated based on connections of
registered users drawing from data from the following sources:

○ Total Instagram Followers 686,798,344

○ Total Youtube Subscribers: 1,285,048,309

○ Total Facebook Page Likes 188,872,372

○ Total Twitter Followers 66,262,236

○ TOTAL 2,226,981,261

 

● Key Verticals for the Company:

○ Beauty, Fashion, Women’s Lifestyle

○ Gaming

○ Consumer Electronics

○ Cooking and Nutrition

○ Men’s Lifestyle, sports, and exercise

○ Secondary Verticals

 

 

 

 

EXHIBIT A

 

CERTIFICATE OF MERGER

 

OF

 

GLI ACQUISITION CORP.

 

INTO

 

GRAPEVINE LOGIC, INC.

 

Pursuant to Title 8, Section 251 of the Delaware General Corporation Law, the
undersigned corporation executed the following Certificate of Merger:

 

FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:

 

Name   State of Incorporation       GLI ACQUISITION CORP.   Delaware      
GRAPEVINE LOGIC, INC.   Delaware

 

SECOND: The Agreement of Merger has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with
Section 251 of the Delaware General Corporation Law.

 

THIRD: The name of the surviving corporation is GRAPEVINE LOGIC, INC., a
Delaware corporation.

 

FOURTH: The Certificate of Incorporation of the surviving corporation shall be
its Certificate of Incorporation.

 

FIFTH: The merger is to become effective on the date of filing of this
Certificate of Merger.

 

SIXTH: The Agreement and Plan of Merger is on file at 10 Ware Street, Cambridge,
MA 02138, the place of business of the surviving corporation.

 

SEVENTH: A copy of the Agreement and Plan of Merger will be furnished by the
surviving corporation on request and without cost, to any stockholder of the
constituent corporations.

 

[Signature page follows]

 

 

 

 

IN WITNESS WHEREOF, said surviving corporation has caused this certificate to be
signed by an authorized officer on the ___ day of _____, 2018.

 

  By:     Name:     Title:  

 

 

 

 

EXHIBIT 1

 

ESCROW AGREEMENT

 

ESCROW AGREEMENT (“Agreement”) dated _____ ___, 2018, by and among Seven Stars
Cloud Group, Inc., a Nevada corporation with offices located at 55 Broadway, New
York, New York 10006 (“Buyer”), GLI Acquisition Corp., a Delaware corporation
with offices located at 55 Broadway, New York, New York 10006 (“GLI”), Grapevine
Logic, Inc., a Delaware corporation with offices located at 10 Ware Street,
Cambridge, Massachusetts, 02138 (“Grapevine”), Ruskin Moscou Faltischek, P.C.,
with offices at 1425 RXR Plaza, East Tower, 15th Floor, Uniondale, New York
11556, as escrow agent (the “Escrow Agent”) and Grant Deken acting as Holder
Representative (“Holder Representative”). Capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Agreement and Plan of
Merger (as defined below).

 

WITNESSETH:

 

WHEREAS, Buyer, GLI and the Grapevine have entered into an Agreement and Plan of
Merger (the “Merger Agreement”) dated the date hereof, pursuant to which GLI
shall be merged with and into Grapevine as fully set forth in the Merger
Agreement, with Grapevine continuing as the surviving corporation and a
subsidiary of the Buyer.

 

WHEREAS, pursuant to the terms and conditions of the Merger Agreement, Buyer has
agreed to deposit the aggregate sum of Five Hundred Thirty Thousand ($530,000)
Dollars with the Escrow Agent, which monies shall be released upon the terms and
conditions set forth herein.

 

NOW, THEREFORE, IT IS AGREED,

 

1.           Appointment of and Acceptance by Escrow Agent. The parties hereby
appoint Escrow Agent to serve as escrow agent hereunder. Escrow Agent hereby
accepts such appointment and, upon receipt of the Escrowed Funds in accordance
with Section 2 below, agrees to hold, invest and disburse the Escrowed Funds in
accordance with this Escrow Agreement.

 

2.           The Escrowed Funds.

 

(a) Upon the Closing Date as set forth in the Merger Agreement, Buyer shall
deposit the aggregate principal sum of Five Hundred Thirty Thousand ($530,000)
Dollars (the “Escrowed Funds”), by wire transfer of immediately available funds,
in an account designated by the Escrow Agent, which Escrowed Funds are a part of
the Purchase Price.

 

(b) Upon the Closing Date as set forth in the Merger Agreement, Buyer may
deposit the amount referred to in the Merger Agreement as the Material Financial
Statement Variance Damages, by wire transfer of immediately available funds, in
an account designated by the Escrow Agent, which funds are part of the Purchase
Price.

 

 

 

 

(c) The Escrow Agent will receive the Escrowed Funds and, if applicable, the
Material Financial Statement Variance Damages amount, and will issue appropriate
written acknowledgments (which may be provided via electronic mail) of all
deposits into the Escrow Fund.

 

3.           Terms of Escrow. The Escrow Agent agrees to hold the Escrowed Funds
in an interest bearing trust account under the terms and conditions of this
Agreement and to perform the acts and duties imposed upon it hereby.

 

4.           Disbursement of Escrowed Funds. The Escrow Agent shall release the
Escrowed Funds only in accordance with the following:

 

(a) Distribution of Escrowed Funds Pursuant to Joint Written Instructions.
Subject to the terms of this Agreement, the Escrow Agent shall disburse Escrowed
Funds at any time and from time to time, upon receipt of, and in accordance with
a written direction executed by Buyer and Holder Representative and directing
Escrow Agent to disburse all or a portion of the Escrowed Funds or to take or
refrain from taking any other action pursuant to this Escrow Agreement (a “Joint
Written Direction”). Such Joint Written Direction shall contain complete payment
instructions, including wiring instructions or an address to which a check shall
be sent.

 

(b) Distribution of Cash Adjustment Amount Pursuant to Joint Written
Instructions. Upon the Escrow Agent’s receipt of a Joint Written Direction
signed by Buyer and Holder Representative that there has been a final
determination of the Post-Closing Adjustment pursuant to Section 2.12(e) of the
Merger Agreement, the Escrow Agent shall disburse up to a maximum amount of
Fifty Thousand Dollars ($50,000) (the “Cash Adjustment Amount”). Such Joint
Written Direction shall contain complete payment instructions, including wiring
instructions or an address to which a check shall be sent.

 

(c) Distribution of Cash Adjustment Amount upon Passage of Time. Upon receipt by
the Escrow Agent at any time following the date which is ninety (90) days after
the Closing Date of the Merger Agreement of a written notice signed by Holder
Representative, with a copy to the Buyer, requesting (i) release of all or a
portion of the Cash Adjustment Amount pursuant to this Section 4(c); and (ii)
stating that no unresolved claims are pending with respect to the Closing
Adjustment pursuant to Section 2.12 of the Merger Agreement, then the Escrow
Agent will, subject to the provisions of Section 4(g) below, as promptly as
practicable, distribute to, or at the written direction of, the Holder
Representative an amount equal to the remaining portion of the Cash Adjustment
Amount.

 

(d) Distribution Upon Indemnification Claim. Upon receipt by the Escrow Agent of
a written notice signed by a Buyer Indemnified Party, with a copy to the Holder
Representative (i) requesting release of the Escrowed Funds or any portion
thereof (the “Indemnification Escrow Funds”) to the Buyer Indemnified Party
pursuant to this Section 4(d); and (ii) stating that a Holder or the Company is
liable to the Buyer Indemnified Party pursuant to Article 9 of the Merger
Agreement, for a Loss which has been agreed to by the Indemnifying Party or
finally adjudicated to be payable pursuant to Article 9 of the Merger Agreement,
in an amount up to the Indemnification Escrow Funds applicable to such Loss then
remaining in Escrow, then the Escrow Agent will, subject to the provisions of
Section 4(g) below, as promptly as practicable, distribute to the Buyer
Indemnified Party, by wire transfer to an account or accounts designated by the
Buyer Indemnified Party, such amount of the Indemnification Escrow Funds
applicable to the Loss.

 

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(e) Distribution of Material Financial Statement Variance Damages Pursuant to
Joint Written Instructions. Upon the Escrow Agent’s receipt of a Joint Written
Direction signed by Buyer and Holder Representative that there has been a final
determination of the Material Financial Statement Variance Damages pursuant to
Section 9.9 of the Merger Agreement, the Escrow Agent shall distribute to the
Buyer, an amount equal to the amount of the Material Financial Statement
Variance Damages finally determined to Buyer, and the remainder of the Material
Financial Statement Variance Damages at the written direction of the Holder
Representative.

 

(f) Release of Remaining Escrow Funds. Upon receipt by the Escrow Agent at any
time following the date which is more than twelve (12) months after the Closing
Date of the Merger Agreement (the “Escrow Release Date”), of a written notice
signed by Holder Representative, with a copy to the Buyer (i) requesting release
of the remaining Escrow Funds pursuant to this Section 4(f); and (ii) stating
that no unresolved claims are pending pursuant to the Merger Agreement, then the
Escrow Agent will, subject to the provisions of Section 4(g) below, as promptly
as practicable, distribute to the Holder Representative, by wire transfer to an
account or accounts designated by Holder Representative, the remaining balance
of the Escrowed Funds less the amount of all Unresolved Claims. For purposes of
this Agreement, the term “Unresolved Claims” shall mean, as of the Escrow
Release Date, the aggregate amount of all claims for Losses and all claims that
are the subject of a Claim Notice that have not previously been resolved or
satisfied in accordance herewith or that were otherwise properly and timely
asserted under this Agreement but otherwise unsatisfied as of the Escrow Release
Date, including any claims for which a Claim Notice (as defined herein) has been
delivered but for which the seven-day objection period has not expired as of the
Escrow Release Date.

 

(g) (i) In the event that Buyer or Representative Holder (as the case may be,
the “Non-Requesting Party”) has not provided the other party and the Escrow
Agent, within seven (7) days of receipt of notice from a Requesting Party
(defined below), with written notice (a “Claim Notice”) specifying with
reasonable particularity the reasons it believes the Escrowed Funds or some
portion of the Escrowed Funds should not be released to the party requesting
release (the “Requesting Party”), then, upon expiration of such seven-day
period, Escrow Agent shall release the Escrowed Funds to the Requesting Party
together with interest earned on such monies through the date of payment. If
Buyer and Representative Holder do not agree that monies are due to a party, or
cannot agree on the sum due, such claim only to the extent of the disputed
amount shall be referred to herein as a “Disputed Claim.”

 

(ii)         In the event of a Disputed Claim, Buyer and Representative Holder
shall in good faith negotiate to settle such Disputed Claim. If resolution of
the Disputed Claim is reached, then the parties shall promptly, and in no event
later than thirty (30) days following the Escrow Agent’s receipt of a Claim
Notice, deliver to the Escrow Agent written instructions in connection with the
disbursement of such agreed portion of the Escrowed Funds together with interest
earned on such monies through the date of payment.

 

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(iii)        If the Escrow Agent does not receive a notice of resolution within
thirty (30) days after the Escrow Agent’s receipt of the Claim Notice, then the
parties shall commence an arbitration within sixty (60) days after the date of
the Escrow Agent’s receipt of the Claim Notice. Any such arbitration shall be
before a single arbitrator (the “Arbitrator”) (i) who is a member of the
American Arbitration Association selected in accordance with the procedures of
the Commercial Rules of the American Arbitration Association in any venue
mutually agreed to by the parties. In the event the parties cannot agree on a
venue, the arbitration shall take place in Nassau County, New York. Each party
shall bear its own costs and attorneys’ fees in the arbitration hearing and
share equally in the cost and expenses of the arbitrator. The Arbitrator’s award
or order shall be final and binding on the parties.

 

(iv)        If a Disputed Claim has subsequently been settled or determined by
Buyer and Representative Holder or has been resolved by arbitration or by a
final judgment, order or decree of a court of competent jurisdiction, and a copy
of such settlement, judgment, award order or decree is received by the Escrow
Agent, then the Escrow Agent shall pay the appropriate party, as the case may
be, from the Escrowed Funds, the amount set forth in such settlement,
arbitration award or judgment, as the case may be, together with any accrued
interest on that portion of the Escrowed Funds as of the date of payment.

 

(h) All disbursements of Escrowed Funds shall be made together with any accrued
interest thereon.

 

5.           Responsibilities of the Escrow Agent.

 

(a) It is agreed that the duties and obligations of the Escrow Agent are only
such as are herein specifically provided and no other. The Escrow Agent’s duties
are as a depositary only, is acting purely in custodial fashion for the
convenience of both parties, and shall incur no liability whatsoever, except for
its bad faith, willful misconduct or gross negligence. The Escrow Agent may
consult with counsel of its choice, and shall not be liable for any action
taken, suffered or omitted by it in accordance with the advice of such counsel.
The Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Escrow Agreement unless the
same shall be in writing and signed by or on behalf of each of the parties and
agreed to by the Escrow Agent. In the event that the Escrow Agent shall be
uncertain as to its duties or rights hereunder or shall receive instructions,
claims or demands which, in its opinion, are in conflict with any of the
provisions of this Escrow Agreement, it shall be entitled to refrain from taking
any action other than to keep safely, all property held in escrow until it shall
jointly be directed otherwise in writing by the parties or by a final judgment
of a court of competent jurisdiction.

 

(b) The Escrow Agent shall be fully protected in relying upon any written
notice, demand, certificate or document which it, in good faith, believes to be
genuine.

 

(c) The Escrow Agent shall not be required to institute legal proceedings of any
kind and shall not be required to defend any legal proceedings which may be
instituted against it.

 

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(d) If the Escrow Agent at any time, in its sole discretion, deems it necessary
or advisable to relinquish custody of the Escrowed Funds, it may do so by
delivering the same to any other escrow agent mutually agreeable to the parties,
and if no such Escrow Agent shall be selected, then the Escrow Agent may do so
by delivering the Escrowed Funds (a) to any bank or trust company located in the
State of New York, which is willing to act as escrow agent hereunder in place
and instead of the Escrow Agent or (b) to the clerk or other proper officer of a
court of competent jurisdiction as may be permitted under the terms and
conditions of this Agreement and by law within the State of New York. The fee of
any such bank or trust company or court officer shall be jointly paid in equal
amounts by Buyer and Representative Holder. Upon such delivery, the Escrow Agent
shall be discharged from any and all responsibility or liability with respect to
the Escrowed Funds except as herein provided.

 

6.           Expenses of Escrow Agent. The Escrow Agent will not charge a fee
for its services as Escrow Agent unless a dispute arises pursuant to Section 4
hereof. All fees, costs and expenses, including, but not limited to, all
reasonable outside counsel and advisors’ and agents’ fees and all taxes or other
governmental charges, if any, and all reasonable out-of-pocket expenses incurred
or paid by the Escrow Agent in connection with a dispute of the Escrowed Funds
or this Escrow Agreement, shall be jointly paid by Buyer and Representative
Holder.

 

7.           Indemnification of Escrow Agent. The parties hereto jointly and
severally agree to indemnify the Escrow Agent and to hold the Escrow Agent
harmless from any loss, liability and expenses incurred without willful
misconduct or gross negligence on the part of the Escrow Agent arising out of or
in connection with the acceptance or administration by the Escrow Agent of its
duties hereunder including the legal fees, costs and expenses of defending
itself against any claims of liability hereunder.

 

8.           Escrow Agent as Counsel to Buyer and GLI. The parties acknowledge
that Ruskin Moscou Faltischek, P.C. has acted as counsel for Buyer and GLI in
connection with the Merger Agreement and otherwise. The parties further
acknowledge and consent that no action taken by Ruskin Moscou Faltischek, P.C.
as Escrow Agent hereunder shall preclude it from acting as counsel for Buyer or
GLI or any shareholder, affiliate, or related party of Buyer or GLI or its
shareholders in any matter related hereto or otherwise.

 

9.           Non-waiver. No delay or failure by any party to exercise a right
hereunder, and no partial or single exercise of any such right, will constitute
a waiver or operate as a waiver of that right or any other right. A waiver on
any one occasion will not be construed as a bar to or a waiver of any right on
any future occasion.

 

10.         Notices. Any and all notices or other communications required or
permitted to be given under any of the provisions of this Agreement shall be in
writing and shall be deemed to have been duly given when personally delivered,
one (1) day after having been sent by nationally recognized overnight courier
service, or three (3) days after having been mailed by certified or registered
mail, return receipt requested, addressed to the parties at the addresses set
forth in the Merger Agreement (or at such other address as any such person may
specify by notice to all other such persons given as aforesaid). Copies of all
such notices sent to either party hereunder shall also be sent in the manner
prescribed herein to Ruskin Moscou Faltischek, P.C., 1425 RXR Plaza, East Tower,
15th Floor, Uniondale, New York 11556, Attention, Gavin Grusd, Esq.

 

11.         Governing Law. This Escrow Agreement shall be construed and enforced
in accordance with the law of the State of New York without regard to any
principles of conflicts of laws.

 

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12.         Counterparts. This Agreement may be executed in any number of
counterparts, including via facsimile or other electronic means, each of which
shall be deemed an original, but all of which when taken together shall
constitute one and the same instrument.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
signed the day and year first above written.

 

  SEVEN STARS CLOUD GROUP, INC.

 

  By:     Name:     Title:  

 

  GLI ACQUISITION CORP.

 

  By:     Name:     Title:  

 

  GRAPEVINE LOGIC, INC.

 

  By:     Name:     Title:  

 

  RUSKIN MOSCOU FALTISCHEK, P.C.   as Escrow Agent

 

  By:     Name:     Title:  

 

      GRANT DEKEN   as Holder Representative

 

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