ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) is made as of May 26, 2016 by
and among MGT Cybersecurity Inc., a Delaware corporation (the “Buyer”), MGT
Capital Investments, Inc., a Delaware corporation (“Parent”) and Demonsaw, LLC,
a Delaware limited liability company (“Demonsaw”), and the shareholders/members
of Demonsaw. identified on the signature page hereto (together with Demonsaw,
the “Sellers”).

 

RECITALS

 

WHEREAS, Demonsaw is in the business of developing and marketing certain secure
and anonymous information sharing applications (the “Business”), and owns
certain intellectual property and other assets related to the Business;

 

WHEREAS, Demonsaw desires to sell, and Buyer, a wholly owned subsidiary of
Parent, desires to purchase, on the terms and subject to the conditions of this
Agreement, certain assets of the Business;

 

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound, the Parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS

 

“Action” means any litigation, written claim threatening any third-party
adjudication of a dispute, suit, arbitration, mediation, inquiry, investigation,
government investigation, regulatory proceeding or other proceeding of any
nature (whether criminal, civil, legislative, administrative, regulatory,
prosecutorial or otherwise) by or before any arbitrator or Government Body or
similar Person or body.

 

“Affiliate” of any Person means any Person that controls, is controlled by, or
is under common control with such Person. As used herein, “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract or otherwise.

 

“Agreement” means this asset purchase agreement.

 

“Assets” shall have such meaning as set forth in Section 2.1.

 

“Assumed Liabilities” shall have such meaning as set forth in Section 2.3.

 

“Bill of Sale, Assignment and Assumption Agreement” shall have such meaning as
set forth in Section 3.2(i).

 

“Business” shall have the meaning as set forth in the recitals.

 

“Buyer” shall have the meaning as set forth in the recitals.

 

“Buyer’s Consents” shall have the meaning as set forth in Section 5.3(d).

 

“Bylaws” shall have such meaning as set forth in Section 5.2(c).

 

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“Certificate of Incorporation” shall have such meaning as set forth in Section
5.2(c).

 

“Closing” shall have such meaning as set forth in Section 3.1.

 

“Closing Date” shall have such meaning as set forth in Section 2.4.

 

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

 

“Collateral Agreements” means all such concurrent or subsequent agreements,
documents and instruments, as amended, supplemented, or otherwise modified in
accordance with the terms hereof or thereof, including without limitation the
Bill of Sale, the Escrow Agreement and the IP Assignment.

 

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

 

“Employment Agreements” shall have such meaning as set forth in Section 3.2(xi).

 

“Consulting Agreement” shall have such meaning as set forth in Section 3.2(xi).

 

“Contracts” means all contracts, agreements, leases, subleases, licenses,
sublicenses, commitments, indemnities, assignments, understandings and
arrangements, whether written or oral, that are legally enforceable.

 

“Contributing IP” shall have such meaning as set forth in Section 4.12(J).

 

“Demand Letters” shall have such meaning as set forth in Section 4.12(f).

 

“Demonsaw” shall have the meaning as set forth in the recitals.

 

“Demonsaw Consents” shall have such meaning as set forth in Section 4.3(d).

 

“Demonsaw Offerings” means any products or services developed, manufactured,
offered, provided, sold or otherwise distributed by or for Demonsaw related to
the Business.

 

“Encumbrance” means any mortgage, pledge, security interest, hypothecation,
assignment, or lien.

 

“Environmental Law” shall mean any Law which relates to or otherwise imposes
liability or standards of conduct concerning discharges, emissions, releases or
threatened releases of noises, pathogens, odors, pollutants, or contaminants or
hazardous or toxic wastes, substances or materials, whether as matter or energy,
into air (whether indoors or out), water (whether surface or underground) or
land (including any subsurface strata), or otherwise relating to their
manufacture, processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, the National Environmental Policy
Act of 1969, and any state provision analogous to any of the foregoing.

 

“Escrow Agent” shall mean an escrow agent to be mutually agreed by the Parties
prior to Closing.

 

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“Escrow Agreement” shall mean an escrow agreement dated of even date herewith by
and among the Parties and the Escrow Agent (the “Escrow Agreement”).

 

“Escrow Period” means a period of six (6) months, commencing on the Closing
Date.

 

“Escrow Shares” shall have such meaning as set forth in Section 2.4.

 

“Excluded Assets” shall have such meaning as set forth in Section 2.1.

 

“GAAP” shall have such meaning as set forth in Section 5.5.

 

“Governmental Body” means any nation or government, any state or other political
subdivision thereof, any legislative, executive or judicial unit or
instrumentality of any government entity (foreign, federal, state or local) or
any department, commission, board, agency, bureau, official or other regulatory,
administrative or judicial authority thereof or any entity (including a court or
self-regulatory organization) exercising executive, legislative or judicial,
Tax, regulatory or administrative functions of or pertaining to government.

 

“Hazardous Substance” means any material, substance, form of energy or pathogen
which (a) constitutes a “hazardous substance”, “toxic substance” or “pollutant”,
“contaminant”, “hazardous material”, “hazardous chemical”, “regulated
substance”, or “hazardous waste” (as such terms are defined by or pursuant to
any Environmental Law) or (b) is otherwise regulated or controlled by, or gives
rise to liability under, any environmental law.

 

“Indemnified Party” means any party entitled to receive indemnification
hereunder.

 

“Indemnifying Party” means any party obligated to provide indemnification
hereunder.

 

“Intellectual Property” means all domestic or foreign rights in, to and
concerning: (i) inventions and discoveries (whether patented, patentable or
unpatentable and whether or not reduced to practice), including ideas, research
and techniques, technical designs, and specifications (written or otherwise),
improvements, modifications, adaptations, and derivations thereto, and patents,
patent applications, inventor’s certificates, and patent disclosures, together
with divisions, continuations, continuations-in-part, revisions, reissuances and
reexaminations thereof; (ii) trademarks, service marks, brand names,
certification marks, collective marks, d/b/a’s, trade dress, logos, symbols,
trade names, assumed names, fictitious names, corporate names and other
indications or indicia of origin, including translations, adaptations,
derivations, modifications, combinations and renewals thereof; (iii) published
and unpublished works of authorship, whether copyrightable or not (including
databases and other compilations of data or information), copyrights therein and
thereto, moral rights, and rights equivalent thereto, including but not limited
to, the rights of attribution, assignation and integrity; (iv) trade secrets,
confidential and/or proprietary information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, schematics, designs, discoveries,
drawings, prototypes, specifications, hardware configurations, customer and
supplier lists, financial information, pricing and cost information, financial
projections, and business and marketing methods plans and proposals),
collectively “Trade Secrets”; (v) computer software, including programs,
applications, source and object code, data bases, data, models, algorithms,
flowcharts, tables and documentation related to the foregoing; (vi) other
similar tangible or intangible intellectual property or proprietary rights,
information and technology and copies and tangible embodiments thereof (in
whatever form or medium); (vii) all applications to register, registrations,
restorations, reversions and renewals or extensions of the foregoing; (viii)
internet domain names; and (ix) all the goodwill associated with each of the
foregoing and symbolized thereby; and (x) all other intellectual property or
proprietary rights and claims or causes of action arising out of or related to
any infringement, misappropriation or other violation of any of the foregoing,
including rights to recover for past, present and future violations thereof.

 

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“IP Assignment” shall have such meaning as set forth in Section 3.2(x).

 

“IP Claims” means any and all claims and causes of action, whether asserted or
unasserted, of Demonsaw against third parties related to the Intellectual
Property being sold, transferred and assigned hereunder to Buyer.

 

“Knowledge” or “knowledge” means, with respect to Sellers, the actual knowledge
of Sellers, and with respect to Buyer and Parent, the actual knowledge of Robert
B. Ladd.

 

“Law” or “Laws” means any law, statute, ordinance, rule, regulation, code,
order, judgment, Tax ruling, injunction, decision or decree of any Governmental
Body.

 

“Licenses” means any licenses, registrations or certificates granted to Demonsaw
by any Governmental Body as required by applicable Law.

 

“Material Adverse Effect” means, with respect to a Party any change, event or
occurrence that is, or is reasonably likely to be or become, materially adverse
to (a) the property, business, operations assets (tangible and intangible) or
financing condition of such Party, or (b) the ability of a Party to consummate
the transactions contemplated by this Agreement and the Collateral Agreements or
to perform its material obligations hereunder or thereunder, respectively;
provided, that none of the following shall be deemed, either alone or in
combination, to constitute a Material Adverse Effect: (i) conditions, changes or
effects that generally affect any of the industries or markets in which Demonsaw
or Buyer, as the context requires, operates, or the United States economy or
securities or financial markets in general, (ii) any change in any Law, (iii)
any formal change by a Governmental Body in the interpretation of any applicable
Law that takes effect after the date of this Agreement, or (iv) any change
resulting from compliance by such Party with the terms of, or the taking of any
action contemplated or permitted by, this Agreement.

 

“Parent” shall have the meaning as set forth in the recitals.

 

“Party” means Buyer, Parent or a Seller.

 

“Parties” means Buyer, Parent and Sellers, collectively.

 

“Permitted Encumbrances” means (a) liens for Taxes not yet due and payable or
being contested in good faith, (b) mechanics’, carriers’, workmen’s, repairmen’s
or other like liens arising or incurred in the ordinary course of business
consistent with past practice or amounts that are not delinquent and which are
not, individually or in the aggregate, material to the Business or the Assets,
or (c) liens arising under original purchase price conditional sales contracts
and equipment leases with Third Parties entered into in the ordinary course of
business consistent with past practice which are not, individually or in the
aggregate, material to the Business or the Assets.

 

“Permits” means all material permits, licenses, certificates, approvals,
qualifications, registrations, and similar authorizations issued to Demonsaw by
a Governmental Body related to the Assets or Purchased Contracts, including any
amendment, modification, limitation, condition or renewal thereof.

 

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“Person” means any individual, corporation, partnership, limited liability
company, limited liability firm, association, joint venture, joint stock
company, trust, unincorporated association or other entity, or any Governmental
Body.

 

“Personal Information” means information from or about an individual that is
sufficient to identify such individual, including, but not limited to, an
individual’s: first and last name, home or other physical address; telephone
number, including home telephone number and mobile telephone number, email
address or other contact information; financial account number,
government-issued identifier, or persistent identifier, such as IP address or
other unique identifier with another piece of information that would permit the
identification of a Person; list of contacts, provided that the list permitted
specific identification of those on such list; sufficiently precise physical
location; or any other information from or about an individual consumer that is
combined with information from or about an individual that is sufficient to
identify such individual.

 

“Purchase Price” shall have such meaning as set forth in Section 2.5.

 

“Purchased Contracts” shall have such meaning as set forth in Section 2.2.

 

“Registered IP” means all Intellectual Property rights that are registered or
filed with or issued by any Governmental Body, including all patents, registered
copyrights, registered mask works, and registered trademarks and all
applications for any of the foregoing.

 

“Registered IP Fees” shall have such meaning as set forth in Section 4.12(c).

 

“SEC Documents” shall have such meaning as set forth in Section 5.5.

 

“Sellers” shall have the meaning as set forth in the recitals.

 

“Software” means all (i) computer programs and other software, including
software implementations of algorithms, models, and methodologies, whether in
source code, object code or other form, including libraries, subroutines and
other components thereof, (ii) computerized databases and other computerized
compilations and collections of data or information, including all data and
information included in such databases, compilations or collections, (iii)
screens, user interfaces, command structures, report formats, templates, menus,
buttons and icons, (iv) descriptions, flow-charts, architectures, development
tools, and other materials used to design, plan, organize and develop any of the
foregoing and (v) all documentation, including development, diagnostic, support,
user and training documentation related to any of the foregoing.

 

“Tax Returns” means all returns, information returns, reports, declarations, or
other filings required to be made with any Governmental Body with respect to
Taxes.

 

“Taxes” mean all taxes of any kind, charges, fees, customs, levies, duties,
imposts, required deposits or other assessments, including all net income,
capital gains, gross income, gross receipt, property, franchise, sales, use,
excise, ad valorem, value added, transfer, gains, profits, license, net worth,
asset, transaction, and other taxes, imposed upon any Person by any Law or
Governmental Body, together with any interest and any penalties, or additions to
tax, with respect to such taxes.

 

“Third Party” means any Person other than, and not an Affiliate of, a Party.

 

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ARTICLE II

PURCHASE AND SALE OF ASSETS

 

2.1. Purchase and Sale of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Demonsaw agrees to sell, convey and assign to Buyer,
and Buyer agrees to purchase from Demonsaw, free and clear from all Encumbrances
(other than Permitted Encumbrances), all of Demonsaw’s right, title and interest
in, to and under the assets of Demonsaw used or held for use in the Business at
Closing, including those assets specified below (which are hereinafter
collectively referred to as the “Assets”), but specifically excluding the
Excluded Assets (defined below):

 

(a) customer contracts, databases, sales pipeline, proposals of the Business,
and project files associated with the Business;

 

(b) all Licenses and Permits of the Business, to the extent transferable to
Buyer;

 

(c) the assets to be transferred pursuant to the IP Assignment;

 

(d) all social media accounts used by Demonsaw in the conduct of the Business,
including all user names and passwords associated with such social media
accounts.

 

(e) all Purchased Contracts, including but not limited to the accounts with any
Third Party provider enabling the Business’ website and/or application, to the
extent the contracts associated with those accounts are assignable; and

 

(f) all rights, IP Claims and causes of action against third parties resulting
from or relating to the operation of the Business and the Assets prior to the
Closing Date, including without limitation, any rights, claims and causes of
actions arising under warranties from vendors and other third parties and the
proceeds of insurance.

 

“Excluded Assets” shall mean the following assets of Sellers that will be
retained by Sellers and are not being sold or assigned to Buyer hereunder: (i)
all taxpayer and other identification numbers and minute books, stock transfer
books and other documents relating to the organization, maintenance, and
existence of Demonsaw as a legal entity; (ii) Sellers’ rights under this
Agreement and the agreements to be executed by Sellers in connection herewith;
and (iii) such other assets of Demonsaw as are specifically listed on Schedule
2.1.

 

2.2. Assignment of Contracts. Upon the terms and subject to the conditions of
this Agreement, at the Closing, Demonsaw shall assign and transfer to Buyer, and
Buyer shall assume and take assignment of, the Contracts listed on Schedule 2.2
hereto (collectively, the “Purchased Contracts”) subject to Third Party
consents, which may be later obtained in accordance with the Escrow Agreement.
Sellers shall take or cause to be taken all actions reasonably necessary to
receive all required consents from Third Parties to the assignment of the
Purchased Contracts. Buyer shall not be obligated to assume any Purchased
Contracts which require consent to assignment unless such consent has been
obtained.

 

2.3. Liabilities. Except as provided for herein, Buyer will not assume any
liabilities of Sellers. Excluded liabilities (the “Excluded Liabilities”) shall
include, without limitation, the following:

 

(a) liabilities arising from Sellers’ breaches, defaults or failures of
performance (i) under the Purchased Contracts; (ii) under contracts not included
in the Purchased Contracts, including but not limited to any leases for the
rental of any real property; or (iii) the operation of the Business, arising out
of events occurring on or before the Closing;

 

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(b) any liabilities for Taxes incurred or accrued by Sellers, including but not
limited to payroll, sales, income, and any Taxes that become due as a result of
the transactions contemplated by this Agreement;

 

(c) any debt, payables or other liabilities, including without limitation any
equipment or other leases (operating, capitalized or otherwise), any 401(k),
profit sharing or pension plan, any deferred compensation payables, accrued
bonus, payroll or vacation payables, or COBRA-related obligations;

 

(d) any litigation, dispute or Action pending or threatened against Sellers (or
its shareholders or management as applicable); and any warranty liability to
customers arising out of events occurring on or before the Closing Date;

 

(e) accrued interest on any debt obligations of the Sellers; and

 

(f) any liabilities not related to the Business.

 

Notwithstanding the foregoing, as part of the consideration for the Assets,
Buyer shall assume on the Closing Date only those obligations of Sellers to be
performed after the Closing under those Purchased Contracts, Licenses and
Permits constituting Assets, but excluding any obligations or liabilities
arising from any performance, omissions, activities or events related to any
such Purchased Contract, License or Permit occurring on or prior to the Closing
(the “Assumed Liabilities”).

 

2.4. Purchase Price. Subject to the terms and conditions set forth in Section
2.5, in consideration for the sale, transfer, assignment, conveyance and
delivery by Demonsaw to Buyer of the Assets and Sellers’ agreement to retain and
satisfy the Excluded Liabilities, Parent shall (i) issue to Sellers of Seller’s
designees(s), and deliver to Escrow Agent four million (4,000,000) unregistered
shares of Common Stock (the “Escrow Shares”) to be held in escrow in accordance
with the Escrow Agreement and subject to adjustment, in accordance with the
Escrow Agreement; and (iii) issue and delivery to Sellers or Sellers’
designees(s) sixteen million (16,000,000) unregistered shares of Common Stock
(the “Closing Shares” together with Escrow Shares as “Purchase Price Shares”)
The Purchase Price Shares shall be allocated to Sellers according to Annex A.

 

2.5. Escrow; Lockup.

 

(a) The Escrow Shares shall represent shares otherwise transferable by Demonsaw
to certain shareholders or creditors of Demonsaw and be available to cover any
claims that may arise with respect to the representations, warranties, covenants
or indemnification obligations of Sellers pursuant to this Agreement during the
Escrow Period. Furthermore, the Escrow Shares shall be surrendered for
cancellation to the Parent upon the failure to obtain certain milestones set
forth in the Escrow Agreement.

 

(b) All of the Purchase Price Shares shall be subject to the obligation by
Demonsaw or Demonsaw’s designees, for a period of twelve (12) months following
the Closing Date, not to offer, sell, offer to sell, contract to sell, hedge,
pledge, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or sell, or otherwise
transfer or dispose of any securities of the Parent pursuant to the Lockup
Agreement in the form attached hereto as Exhibit B (the “Lockup Agreement”),
which Lockup Agreement Demonsaw agrees to require any of the Demonsaw’s
designees to assume prior to becoming the registered holder of such Purchase
Price Shares.

 

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ARTICLE III

CLOSING

 

3.1. Closing. Unless this Agreement is earlier terminated in accordance with
Section 3.4, the closing of the transactions contemplated by this Agreement (the
“Closing”) shall take place such date when each of the conditions set forth in
this Article III have been satisfied or waived (other than those conditions that
by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions), or at such other time as the Parties
may agree (the “Closing Date”). The Closing shall take place remotely by the
electronic exchange of documents and signatures, or at such location as the
Parties hereto agree.

 

3.2. Conditions to Closing.

 

(a) Conditions to Obligations Common to Both Parties. The respective obligations
of each Party hereto to consummate the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions:

 

(i) No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Asset Purchase shall
be in effect, nor shall any action have been taken by any Governmental Authority
seeking any of the foregoing, and no statute, rule, regulation or order shall
have been enacted, entered, enforced or deemed applicable to the Asset Purchase,
which makes the consummation of the Asset Purchase illegal; and

 

(ii) Buyer and Seller shall have timely obtained from each Governmental
Authority, including NYSE MKT, all approvals, waivers and consents, if any,
necessary for consummation of, or in connection with, the Asset Purchase and the
other transactions contemplated hereby.

 

(iii) Buyer shall have received an appraisal from an independent investment bank
or other qualified institution.

 

(iv) Buyer shall have closed the transaction contemplated in the Asset Purchase
Agreement (“D-Vasive APA”) by and among the Buyer, the Parent, D-Vasive, Inc.
and shareholders of D-Vasive, Inc. dated May 9, 2016.

 

(b) Additional Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions (it
being understood that each such condition is solely for the benefit of Seller
and may be waived by Seller in writing in its sole discretion without notice,
liability or obligation to any Person):

 

(i) The representations and warranties of Buyer in this Agreement shall be true
and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true and correct
in all respects) on and as of the Agreement Date and on and as of the Closing
Date as though such representations and warranties were made on and as of such
date (except for representations and warranties which address matters only as to
a specified date, which representations and warranties shall be true and correct
with respect to such specified date). Buyer shall have performed and complied in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it at or prior to the
Closing.

 

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(ii) Seller shall have received each of the deliverables required to be made by
Buyer to Seller pursuant to Section 3.3.

 

(c) Additional Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions (it
being understood that each such condition is solely for the benefit of the Buyer
and may be waived by the Buyer in writing in its sole discretion without notice,
liability or obligation to any Person):

 

(i) The representations and warranties of Seller in this Agreement shall be true
and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true and correct
in all respects) on and as of the Agreement Date and on and as of the Closing
Date as though such representations and warranties were made on and as of such
date (except for representations and warranties which address matters only as to
a specified date, which representations and warranties shall be true and correct
with respect to such specified date). Seller shall have performed and complied
in all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it at or prior to the
Closing.

 

(ii) Buyer shall have received each of the deliverables required to be made by
Seller to Buyer pursuant to Section 3.3.

 

(iii) There shall not have occurred a Material Adverse Effect with respect to
the Purchased Assets since the Agreement Date.

 

(iv) Seller shall have delivered financial statements of the Business (either
auditable or audited by a PCAOB qualified auditing firm).

 

3.3. Closing Deliverables.

 

(a) At the Closing, Seller shall deliver to Buyer

 

i. a bill of sale, assignment and assumption for the Assets in the form attached
as Exhibit C hereto (the “Bill of Sale”) duly executed by Demonsaw;

 

ii. assignments in the form of Exhibit D hereto transferring all Demonsaw
Intellectual Property to Buyer duly executed by Demonsaw, Eric J. Anderson or
any other Person who has rights in the Demonsaw Intellectual Property (the “IP
Assignment”);

 

iii. duly executed Escrow Agreement;

 

iv. such other instruments of assignment, transfer and conveyance as Buyer shall
reasonably request to transfer to and vest in Buyer all of Demonsaw’s right,
title and interest in, to and under the Assets;

 

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v. evidence of the receipt of Demonsaw Consents or, if applicable, evidence of
communications requesting a Third Party to provide consent required to be
obtained by Demonsaw pursuant to this Agreement and subject to the Escrow
Agreement;

 

vi. any Uniform Commercial Code termination statements, releases and other
documents necessary to evidence that each of the Assets is being sold, conveyed,
transferred, assigned and delivered to Buyer free and clear of any Encumbrances
(except for Permitted Encumbrances), as set forth on Schedule 3.3(iv);

 

vii. Seller shall deliver, cause to be delivered, or make available in a manner
satisfactory to the Buyer, the source code underpinning the Demonsaw application
and other Software developed by Seller in connection with the Business;

 

viii. the book and records solely related to the Assets;

 

ix. copies of the following, in each case certified as of the Closing Date by
the Secretary of Demonsaw: (1) resolutions of Demonsaw’s board and shareholders
authorizing the execution, delivery and performance of this Agreement and the
other agreements that Demonsaw is required to execute and deliver pursuant to
the terms of this Agreement; and (2) the signature and incumbency of the Persons
authorized to execute and deliver this Agreement and the other agreements and
certificates that Demonsaw is required to execute and deliver pursuant to the
terms of this Agreement; and

 

x. a certificate dated as of the Closing Date, executed on behalf of Seller by
its executive officer, to the effect that (i) the condition set forth in Section
3.2(c)(i) has been satisfied, and (ii) there shall not have occurred a Material
Adverse Effect with respect to the Assets since the Agreement Date;

 

xi. employment agreement, in the form of Exhibit E hereto (the “Employment
Agreement”) whereby Eric J. Anderson will be appointed as the Chief Technology
Officer of the Parent, duly executed by Eric J. Anderson,

 

xii. duly executed Lockup Agreement; and

 

xiii. Seller’s counsel’s opinion in a form satisfactory to Buyer’s counsel.

 

Simultaneous with the deliveries referred to in this Section 3.2, Sellers shall
take or cause to be taken all such actions as may reasonably be required to put
Buyer in actual possession and operating control of the Assets. To the extent
deliveries required under Section 3.2 are not made, Buyer (in its sole
discretion) may waive such requirement; but if such requirement is not waived,
Sellers shall cooperate in any reasonable arrangement proposed by Buyer designed
to obtain for Buyer the material benefits and privileges of such deliveries not
made.

 

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(b) At the Closing, Buyer shall deliver to Seller:

 

i. a certificate dated as of the Closing Date, executed on behalf of Buyer by
its President, to the effect that the condition set forth in Section 3.2(b)(i)
has been satisfied;

 

ii. evidence that the approval from NYSE MKT has been obtained;

 

iii. certificate(s) of Common Stock representing the Closing Shares;

 

iv. certificate(s) of Common Stock representing the Escrow Shares to the Escrow
Agent;

 

v. Employment Agreement duly executed by Parent;

 

vi. the Bill of Sale duly executed by Buyer;

 

vii. the Escrow Agreement duly executed by Buyer and Parent; and

 

viii. Buyer shall deliver copies of the following, in each case certified as of
the Closing Date by the Secretary or Assistant Secretary of Buyer or the Parent,
as may be the case: (1) resolutions of Buyer’s and Parent’s board of directors
authorizing the execution, delivery and performance of this Agreement and the
other agreements that Buyer is required to execute and deliver pursuant to the
terms of this Agreement; and (2) the signature and incumbency of the Persons
authorized to execute and deliver this Agreement, the other agreements and
certificates Buyer is required to deliver pursuant to this Agreement.

 

3.4. Termination. At any time prior to the Closing, this Agreement may be
terminated and the transactions contemplated hereby abandoned by authorized
action taken by the terminating Party:

 

(a) by mutual written consent duly authorized by Buyer and Seller;

 

(b) by either Buyer or Seller, if the Closing shall not have occurred on or
before September 24, 2016 or such other date that Buyer and Seller may agree
upon in writing (the “Termination Date”); provided, however, that the right to
terminate this Agreement under this Section 3.4(b) shall not be available to any
Party whose breach of this Agreement has resulted in the failure of the Closing
to occur on or before the Termination Date;

 

(c) by either Buyer or Seller, if any permanent injunction or other order of a
Governmental Authority preventing the consummation of the transactions
contemplated hereby shall have become final and nonappealable;

 

(d) by Buyer, if Seller shall have breached any representation, warranty,
covenant or agreement contained herein and such breach shall not have been cured
within five business days after receipt by Seller of written notice of such
breach (provided, however, that no such cure period shall be available or
applicable to any such breach which by its nature cannot be cured) and if not
cured within the timeframe above and at or prior to the Closing, such breach
would result in the failure of any of the conditions set forth in Section 3.2(c)
to be satisfied; or

 

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(e) by Seller, if Buyer shall have breached any representation, warranty,
covenant or agreement contained herein and such breach shall not have been cured
within five business days after receipt by Buyer of written notice of such
breach (provided, however, that no such cure period shall be available or
applicable to any such breach which by its nature cannot be cured) and if not
cured within the timeframe above and at or prior to the Closing, such breach
would result in the failure of any of the conditions set forth in Section 3.2(b)
to be satisfied.

 

3.5. Effect of Termination. In the event of termination of this Agreement as
provided in Section 3.4, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of the Buyer, Parent, Seller, or
their respective officers, directors, stockholders or affiliates; provided,
however, that the provisions of this Section 3.5 and Article VIII
(Miscellaneous) shall remain in full force and effect and survive any
termination of this Agreement.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Except as set forth in the Schedules attached hereto, Sellers represent and
warrant to Buyer and Parent that the statements contained in this Article IV are
true and correct as of the date hereof.

 

4.1. Organization and Qualification. Demonsaw is a company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Demonsaw has all requisite power and authority to own, lease and license the
Assets as such Assets are currently owned, operated, leased or licensed, and to
operate the Business as such Business is currently operated.

 

4.2. Authorization; Binding Effect.

 

(a) Subject to obtaining board and/or shareholder approval of this Agreement
prior to Closing, each Seller has all requisite power and authority to execute
and deliver this Agreement and each Collateral Agreement to which it is or will
be a party and to effect the transactions contemplated hereby and thereby. The
execution, delivery and performance by Demonsaw of this Agreement and each
Collateral Agreement to which it is or will be a party and the consummation by
Demonsaw of the transactions contemplated hereby and thereby have been duly and
validly approved by Demonsaw’s shareholders and board of directors, and no other
company actions or proceedings on the part of Demonsaw or any Affiliate of
Demonsaw are necessary to authorize the execution, delivery and performance by
Demonsaw of this Agreement or the Collateral Agreements to which it is or will
be a party or the transactions contemplated hereby and thereby save and except
shareholder approval.

 

(b) Sellers have duly and validly executed and delivered this Agreement. When
this Agreement and each of the Collateral Agreements to which Sellers are or
will be a Party have been duly executed and delivered by Sellers (assuming due
execution by Buyer, Parent and any party to such agreements other than Sellers),
this Agreement and each such Collateral Agreement will constitute valid and
legally binding obligations of Sellers, enforceable against Sellers in
accordance with their respective terms, except as such agreements may be subject
to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws and equitable principles relating to or affecting or
qualifying the rights of creditors generally and general principles of equity.

 

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4.3. Non-Contravention; Demonsaw Consents. The execution, delivery and
performance of this Agreement and the applicable Collateral Agreements by
Sellers, and the consummation of the transactions contemplated hereby and
thereby do not and will not:

 

(a) conflict with or result in a breach or violation of any provision of any
organizational documents of Demonsaw, it being expressly understood that
Demonsaw is required to obtain a consent from its shareholders authorizing the
transactions contemplated hereunder, which consent shall be obtained prior to
the Closing Date;

 

(b) violate, or result in a breach of, or constitute an occurrence of default
under any provision of, result in the acceleration or cancellation of, any
obligation under, or give rise to a right by any Third Party to terminate or
amend its obligations under, any Purchased Contract, or result in the creation
of any Encumbrance (other than Permitted Encumbrances) upon any of the Assets,
which violation, breach, default or Encumbrance would have a Material Adverse
Effect. For the avoidance of doubt, there are no Purchased Contracts which
provide any party thereto with the right to cancel or terminate their Purchased
Contract in the event of (i) an assignment of the Purchased Contract to the
Buyer, or (ii) the sale of substantially all of the Demonsaw’s assets to the
Buyer;

 

(c) to Sellers’ Knowledge, violate any applicable Law of any Governmental Body
having jurisdiction over Sellers or the Assets, which would have a Material
Adverse Effect; or

 

(d) except as set forth on Schedule 4.3(d) hereto, require the consent,
authorization, order or approval of, filing or registration with, or waiver of
any right of first refusal or first offer from, any Governmental Body or any
Third Party, that has not been obtained, except as would not individually or in
the aggregate be materially adverse to Sellers (any such consents, approvals,
orders, authorizations, registrations, declarations and filings listed on
Schedule 4.3(d) being referred to herein collectively as the “Demonsaw
Consents”).

 

4.4. Assets – Sufficiency and Title.

 

(a) The Assets constitute all of the assets, tangible and intangible, of any
nature whatsoever, necessary to operate the Business in the manner presently
operated by Sellers.

 

(b) Demonsaw has good and valid title to, or a valid leasehold interest or
license in, all of the Assets, free and clear of any Encumbrances except for
Permitted Encumbrances, and has the full right to sell, convey, transfer, assign
and deliver all of the Assets to Buyer at the Closing, free and clear of all
Encumbrances except for Permitted Encumbrances.

 

(c) Except as set forth on Schedule 4.4(c) hereto and subject to normal wear and
tear, all the tangible Assets are in good working condition and repair,
consistent with their current use in the Business.

 

(d) There are no material defects in, or conditions with, the Assets that will
negatively impact Buyer’s ability to use the Assets as they are currently used.
Demonsaw is not a party to any Contract with any Third Party to sell, transfer,
assign, convey or otherwise dispose of any portion of the Assets or any portion
of Demonsaw’s interest in the Assets.

 

4.5. Licenses and Permits. Except as set forth on Schedule 4.5, to Sellers’
Knowledge, Demonsaw is in compliance with the Licenses and Permits, if any,
required for it to own, operate, lease or license the Assets as such Assets are
currently owned, operated, leased or licensed, and to operate the Business as
such Business is currently operated, and to Sellers’ Knowledge, no Action is
pending or threatened which could revoke or limit any License or Permit.

 

4.6. Compliance with Laws; Litigation. To Sellers’ Knowledge, Demonsaw is in
compliance with all Laws of or from Governmental Bodies applicable to the
Business and the Assets.

 

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(a) Except as set forth on Schedule 4.6, there are no Actions pending or, to
Sellers’ Knowledge, threatened, against Demonsaw or any of its officers,
managers, employees or members in their capacity as such, with respect to the
Business, the Assets or the Purchased Contracts. Demonsaw is not subject to any
order (consent or other), judgment, decree, injunction or stipulation of or with
any court or other Governmental Body that names Demonsaw and imposes a material
ongoing obligation with respect to the operation of the Business and the Assets,
which would have a Material Adverse Effect.

 

(b) There are no Actions pending or, to Sellers’ Knowledge, threatened by or
against Sellers with respect to this Agreement or any of the Collateral
Agreements, or in connection with the transactions contemplated hereby or
thereby, that would reasonably be expected to prevent or materially delay the
consummation by Sellers of the transactions contemplated hereby or thereby or
would reasonably be expected individually or in the aggregate to have a Material
Adverse Effect.

 

4.7. Purchased Contracts. All amounts due and payable with respect to the
Purchased Contracts prior to the date hereof have been paid through the date
hereof and all such amounts due and payable immediately prior to the Closing
Date will have been paid through the Closing Date and, to Sellers’ Knowledge,
there are no material breaches, violations or defaults under any provision of
any Purchased Contracts, which would have a Material Adverse Effect. To Sellers’
Knowledge, Demonsaw has complied with all terms of use, terms of service and
other obligations of the Purchased Contracts and all associated policies and
guidelines relating to its use of any social media platforms, sites or services
in the conduct of the Business.

 

4.8. Taxes. Except as set forth on Schedule 4.8:

 

(a) To the Sellers’ knowledge, there are no liens for Taxes upon any of the
Assets, except for liens for Taxes not yet due and payable.

 

(b) Demonsaw has paid, or made provision for the payment of, all material Taxes
required to be paid by it with respect to the Business and the Assets.

 

4.9. Brokers. No broker, finder, financial advisor or other Person is entitled
to any broker’s, finder’s, financial advisor’s or other similar fee or
commission from any Party in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Sellers or any of
its Affiliates.

 

4.10. Environmental Matters.

 

(a) To Sellers’ Knowledge, Sellers are operating the Business and Assets in
material compliance with all applicable Environmental Laws;

 

(b) Demonsaw has not, and, to Sellers’ Knowledge, no other Person has, used,
stored, disposed of, released or managed (whether by act or omission) any
Hazardous Substances in a manner that could reasonably be expected to result in
the owner or operator of the Business or Assets incurring any material liability
or expense;

 

(c) Demonsaw has not received any written notice from any Governmental Body that
Demonsaw is in violation of any Environmental Law in connection with its
operation of the Business and Assets; and

 

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(d) Demonsaw is not subject to any pending or, to Sellers’ Knowledge, threatened
Action in connection with the Business or Assets involving a demand for damages,
injunctive relief, penalties or other potential liability with respect to a
violation of any Environmental Law or release of any Hazardous Substance.

 

4.11. Investment Representations.

 

(a) Demonsaw (or its designees) are acquiring the shares of Common Stock
comprising the Purchase Price Shares for its own account and not with a view to
the distribution thereof in contravention of the Securities Act of 1933, as
amended (the “Securities Act”).

 

(b) In proceeding with the transactions contemplated hereby, Demonsaw (and its
designees) are not relying upon any representation or warranty of Buyer or
Parent, or any of its officers, directors, employees, agents or representatives
thereof, except the representations and warranties set forth herein and the
statements contained in Parent’s filings with the Securities and Exchange
Commission.

 

(c) Demonsaw and its designees have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of
acquiring the Purchase Price Shares and understand the risks of, and other
considerations relating to, its acquisition of the shares of Common Stock.

 

4.12 Proprietary Rights.

 

(a) Registered IP. Schedule 4.12(a) contains a complete and accurate list of all
Registered IP owned or purported to be owned by or filed in the name of
Demonsaw, which list identifies (i) the jurisdiction in which each item of
Registered IP has been registered or filed, and (ii) any item of Registered IP
that is jointly owned with any other Person.

 

(b) All Registered IP are active and have not been abandoned for any reason.

 

(c) All required filings and fees (“Registered IP Fees”) related to the
Registered IP have been timely filed with and paid to the relevant Governmental
Bodies and authorized registrars, and all Registered IP are in good standing.
Demonsaw has provided Buyer with true and complete copies of all file histories,
documents, certificates, Government Body actions, correspondence and other
materials related to all Registered IP.

 

(d) Third Party IP and Inbound Licenses. Schedule 4.12(d) contains a complete
and accurate list of all Intellectual Property licensed to Demonsaw (other than
non-customized, executable code, internal use software licenses for software
that is not incorporated into, or used directly in the development,
manufacturing, or distribution of, Demonsaw’s products or services and that is
generally available on standard terms for less than $2,000), and the
corresponding Contracts in which such Intellectual Property is licensed to
Demonsaw.

 

(e) Outbound Licenses. Schedule 4.12(e) contains a complete and accurate list of
all Contracts currently in effect in which any Person has been granted any
license under, or otherwise transferred or conveyed any right or interest in,
Demonsaw Intellectual Property; provided, however, that all consumers who have
downloaded any apps created and/or distributed by Demonsaw are not listed in
such Schedule (it being recognized that such consumers have a license to use
such apps). Demonsaw is not bound by, or subject to, any Contract containing any
covenant or other provision that in any way limits or restricts the ability of
Demonsaw to use, exploit, assert, or enforce the Demonsaw Intellectual Property
anywhere in the world which limitations or restrictions would reasonably be
expected to have a Material Adverse Effect (it being understood that Demonsaw’s
apps may be distributed through third party apps markets and that such
distributors may impose various restrictions on distribution under the
applicable agreements for distributing apps through such channels).

 

 15 

  

 

(f) Demand Letters. Schedule 4.12(f) contains a complete and accurate list (and
Demonsaw has provided true, complete and accurate copies to Buyer) of all
letters and other written or electronic communications or correspondence,
between Demonsaw and any other Person regarding any actual, alleged, claimed, or
suspected infringement or misappropriation of Demonsaw Intellectual Property,
along with a brief description of the current status of each such matter
(“Demand Letters”).

 

(g) Ownership Free and Clear. Demonsaw exclusively owns all right, title, and
interest to and in the Demonsaw Intellectual Property (other than Intellectual
Property licensed from Third Parties) free and clear of any Encumbrances other
than Encumbrances in favor of Buyer.

 

(h) Valid and Enforceable. All Demonsaw Intellectual Property is valid,
subsisting, and enforceable (although Demonsaw makes no representations with
regard to Intellectual Property licensed from Third Parties). Without limiting
the generality of the foregoing, if applicable,:

 

(i) Each U.S. patent application and U.S. patent owned by Demonsaw was filed
within one year of a printed publication, public use, or offer for sale of each
invention described in the U.S. patent application or U.S. patent. Each foreign
patent application and foreign patent owned by Demonsaw was filed or claims
priority to a patent application filed prior to each invention described in the
foreign patent application or foreign patent being made available to the public.
No trademark or trade name owned, used, or applied for by Demonsaw conflicts or
interferes with any trademark or trade name owned, used, or applied for by any
other Person. Demonsaw has no Knowledge with respect to and is not aware of any
other basis for a claim that any of the Demonsaw Intellectual Property is
invalid or unenforceable.

 

(ii) All Demonsaw Intellectual Property (other than in-licensed Intellectual
Property) that is Registered IP is in compliance with all formal legal
requirements and all filings, payments, and other actions required to be made or
taken to maintain such Registered IP in full force and effect have been made by
the applicable deadline. Schedule 4.12(h)(ii) contains a complete and accurate
list of all actions, filings, and payments that must be taken or made through
December 31, 2015, in order to maintain such Registered IP in full force and
effect.

 

(iii) No legal proceeding (including any interference, opposition, reissue, or
reexamination proceeding) is pending or, to Sellers’ Knowledge, threatened, in
which the scope, validity, or enforceability of any Demonsaw Intellectual
Property is being, has been, or could reasonably be expected to be contested or
challenged, and there has been no such legal proceeding.

 

(i) Trade Secrets. Demonsaw has taken all reasonable steps to maintain the
confidentiality of and otherwise protect and enforce its respective rights in
its respective Trade Secrets.

 

(j) Employees and Contractors. All employees and contractors of Demonsaw who
were involved in the creation or development of Demonsaw Intellectual Property
will sign agreements assigning such Demonsaw Intellectual Property to Demonsaw
and binding them to confidentiality provisions regarding to Demonsaw
Intellectual Property. No past or present member, officer, manager, or employee
of Demonsaw have any claim, right, or interest to or in any Demonsaw
Intellectual Property. Notwithstanding the foregoing, employees and contractors
who contributed to development of the Demonsaw Intellectual Property using their
own, pre-existing Intellectual Property (listed on Schedule 4.12(j), the
“Contributing IP”), shall maintain full rights and ownership to such
Contributing IP; provided, however, that the owners of the Contributing IP agree
to enter into license agreements with Buyer with respect to Buyer’s license of
the Contributing IP.

 

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(k) Chain of Title. Demonsaw has properly recorded assignments from all named
inventors for all patents and patent applications included in the Registered IP
owned or purported to be owned by Demonsaw.

 

(l) Impairment of Goodwill. The goodwill associated with or inherent in
Demonsaw’s trademarks (both registered and unregistered) has not been impaired.

 

(m) Infringement of Sellers Intellectual Property by Third Parties. To Sellers’
Knowledge, no Person has infringed, misappropriated, or otherwise violated, and
no Person is currently infringing, misappropriating, or otherwise violating, any
Demonsaw Intellectual Property, provided Demonsaw makes no representation with
regard to in-licensed Intellectual Property.

 

(n) Government Rights. No government funding or personnel were used, directly or
indirectly, by Sellers to develop or create, in whole or in part, any of
Demonsaw Intellectual Property.

 

(o) Effects of This Transaction. Neither the execution or delivery of this
Agreement nor the performance of this Agreement and the consummation of the
transactions contemplated hereby will, with or without notice or lapse of time,
result in, or give any other Person the right or option to cause or declare, (i)
a loss of, or Encumbrance or restriction on, any Demonsaw Intellectual Property
or any license to Intellectual Property held by Demonsaw; (ii) a breach of any
license agreement listed or required to be listed in Schedule 4.12(d); (iii) the
release or delivery of any Demonsaw Intellectual Property to any other Person;
or (iv) the grant, assignment, or transfer to any other Person of any license or
other right or interest under, to, or in any of the Demonsaw Intellectual
Property.

 

(p) No Infringement of Third Party IP Rights. To Sellers’ Knowledge, Demonsaw
has never infringed, misappropriated, or otherwise violated the Intellectual
Property Rights of any other Person, which infringement or misappropriation
would reasonably be expected to have a Material Adverse Effect. Without limiting
the generality of the foregoing, to Sellers’ Knowledge no product, information,
or service ever manufactured, produced, distributed, published, used, provided,
or sold by or on behalf of Demonsaw, and no Intellectual Property ever owned,
used, or developed by Demonsaw, has infringed, misappropriated, or otherwise
violated the Intellectual Property Rights of any other Person, which
infringement or misappropriation would reasonably be expected to have a Material
Adverse Effect.

 

(q) Pending, Threatened, or Possible IP Infringement Claims. There are no
pending or to Sellers’ Knowledge threatened infringement, misappropriation, or
similar claims or legal proceedings against Demonsaw or to Sellers’ knowledge
against any other Person who would be entitled to indemnification by Demonsaw
for such claim or legal proceeding. Demonsaw has never received any written
notice of any actual, alleged, possible, potential, or suspected infringement or
misappropriation of any other Person’s Intellectual Property Rights by Demonsaw
or by any product or service developed, manufactured, distributed, provided, or
sold by or on behalf of Demonsaw.

 

(r) Sufficiency. To Sellers’ Knowledge, Demonsaw owns or otherwise has all
Intellectual Property rights needed to conduct its business as currently
conducted.

 

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4.13 Privacy; Data Security.

 

(a) Demonsaw has not collected Personal Information, including data collected
from an IP address, web beacon, pixel tag, ad tag, cookie, JavaScript, local
storage, Software, or by any other means, or from a particular computer, Web
browser, mobile telephone, or other device or application, where such data is or
may be used to identify or contact an individual, device, or application
(including, without limitation, by means of an advertisement or content), or to
predict or infer the preferences, interests, or other characteristics of the
device or of a user of such device or application or is otherwise used to target
advertisements or other content to a device or application or to a user of such
device or application (“Non-Personal Information”). Demonsaw does not, and the
Assets purchase do not provide for collection or utilization of, Personal
Information or Non-Personal Information, nor perform in any manner when utilized
by users as intended, any function that would collect Personal Information or
Non-Personal Information from users of its Assets. Demonsaw has complied in all
material respects with all Laws (which for such purposes shall include the
policy of such third party apps markets that distribute Demonsaw’s apps)
relating to: (i) the privacy of users of (including Internet or mobile users who
view or interact with) the Demonsaw Offerings and all of the websites of
Demonsaw, and (ii) the collection, use, storage, retention, disclosure, and
disposal of any Personal Information or Non-Personal Information collected by
Demonsaw, or by Third Parties acting on the Demonsaw’s behalf or having
authorized access to the Demonsaw’s records. The privacy practices of Demonsaw
concerning the collection, use, retention, disclosure, and disposal, of Personal
Information or Non-Personal Information conform, and at all times have
materially conformed, to all of the contractual commitments of Demonsaw
including to viewers of the websites of the Demonsaw and users of (including
Internet users who view or interact with) the Demonsaw Offerings and the
contractual commitments of Demonsaw through which Demonsaw Offerings are
offered. Demonsaw Offerings conform, and at all times have materially conformed
to applicable Law and, to the extent subject thereto, to the Network Advertising
Initiative’s Self-Regulatory Code of Conduct (2008), the Digital Advertising
Alliance’s Self-Regulatory Principles for Online Behavioral Advertising, and the
Federal Trade Commission’s Principles for the Self Regulation of Online
Behavioral Advertising (2010). Except as required to process a transaction or
provide the Demonsaw Offerings, Demonsaw has not disclosed, and does not have
any obligation to disclose, any Personal Information or Non-Personal Information
to any Third Party. Demonsaw and its websites and the Demonsaw Offerings, have
made all disclosures to users or customers and obtained all necessary consents
from users or customers required by applicable Law, and none of such disclosures
made or contained in any of Demonsaw’s websites or in any such materials have
been inaccurate, misleading or deceptive or in violation of any applicable Law.
No Actions have been asserted or, to the knowledge of the Sellers, are
threatened against Demonsaw by any Person alleging a violation of any Person’s
privacy, personal or confidentiality rights under the Privacy Policies or any
applicable Law. Neither this Agreement nor the transactions contemplated by this
Agreement, including any disclosures of data, will violate the Privacy Policies
as they currently exist or as they existed at any time during which any of the
Personal Information or Non-Personal Information was collected or obtained.

 

(b) To the knowledge of the Sellers, at all times since inception, Demonsaw has
complied in all material respects with any Law applicable to Demonsaw relating
to the security of Personal Information to which Demonsaw or Third Parties
acting on Demonsaw’s behalf or otherwise having authorized access to the
Demonsaw’s records, have access or otherwise collect or handle. To the knowledge
of the Sellers, Demonsaw’s information security practices conform, and at all
times have conformed, in all material respects with (i) any information security
statements made by Demonsaw and (ii) all of the contractual commitments of
Demonsaw, including, but not limited to, any contractual commitments to
analytics providers, data providers, publishers, advertisers and advertising
networks, exchanges and advertising networks, through which Demonsaw Offerings
are offered. Demonsaw has made no statements to the general public regarding the
information security practices of Demonsaw. No Actions have been asserted or, to
the knowledge of the Sellers, are threatened against Demonsaw by any Person with
respect to the security of Personal Information. To the knowledge of the
Sellers, there has been no unauthorized access to or unauthorized disclosure or
use of Personal Information owned or licensed by Demonsaw or in Demonsaw’s
possession or control by or to any Third Party, including any Governmental
Entity.

 

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4.14 Financial Statements Seller shall produce audited financial statements
within such number days requested by the Buyer within such a number of days
mutually agreed by the Parties after execution of this Agreement. All expenses
resulting from the preparation and auditing of the financial statement related
to the Business shall be paid by the Buyer. Sellers will use their best efforts
to assist with the preparation and audit of financial statement related to the
Business as required by applicable securities laws.

 

4.15 Cash at Closing. There shall be $250,000 cash on hand on the Seller’s
balance sheet at the Closing.

 

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT

 

Except as set forth in Schedules attached hereto, Buyer and Parent, jointly and
severally, represent and warrant to Sellers that the statements contained in
this Article V are true and correct as of the date hereof.

 

5.1. Organization. Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. Buyer and Parent have all requisite corporate power and
authority to own, lease or license and operate their business and assets as
currently operated.

 

5.2. Authorization; Binding Effect.

 

(a) Buyer and Parent have all requisite corporate power and authority to execute
and deliver this Agreement and each Collateral Agreement to which they are or
will be parties and to effect the transactions contemplated hereby and thereby.
The execution, delivery and performance by Buyer and Parent of this Agreement
and each Collateral Agreement to which they are or will be parties and the
consummation by Buyer and Parent of the transactions contemplated hereby and
thereby have been duly and validly approved by Buyer’s and Parent’s boards of
directors, and no other corporate actions or proceedings on the part of Buyer or
Parent are necessary to authorize the execution, delivery and performance by
Buyer of this Agreement or the Collateral Agreements to which they are or will
be parties or the transactions contemplated hereby and thereby.

 

(b) Buyer and Parent have duly and validly executed and delivered this
Agreement. When this Agreement and each of the Collateral Agreements to which
Buyer and Parent are or will be a party have been duly executed and delivered by
Buyer and Parent and (assuming due execution by Sellers), this Agreement and
each such Collateral Agreement to which they are parties will constitute valid
and legally binding obligations of Buyer and Parent, enforceable against them in
accordance with their respective terms, except as such agreements may be subject
to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws and equitable principles relating to or affecting or
qualifying the rights of creditors generally and general principles of equity.

 

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(c) As of the date hereof, the authorized capital stock of Parent is 75,000,000
shares of Common Stock, par value $0.001 per share, of which 23,800,00
(exclusive of the Purchase Price Shares) are issued and outstanding, and
1,500,000 shares of preferred stock, par value $0.001 per share, of which zero
are issued and outstanding. Except as otherwise disclosed herein or as disclosed
in the SEC Documents, (i) no shares of Parent’s capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by Parent, (ii) there are no outstanding debt securities,
(iii) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, any shares of capital stock of
Parent or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which Parent or any of its subsidiaries is or may become bound
to issue additional shares of capital stock of Parent or any of its subsidiaries
or options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of Parent or any of its subsidiaries, (iv) other than as
disclosed in the SEC Documents, there are no agreements or arrangements under
which Parent or any of its subsidiaries is obligated to register the sale of any
of their securities under the Securities Act, (v) there are no outstanding
securities or instruments of Parent or any of its subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which Parent or any of its subsidiaries is or
may become bound to redeem a security of Parent or any of its subsidiaries, (vi)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Purchase Price Shares
as described in this Agreement, as applicable, and (vii) Parent does not have
any restricted stock units, stock appreciation rights or “phantom stock” plans
or agreements or any similar plan or agreement. Parent has furnished to the
Sellers (and its designees) true and correct copies of Parent’s Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”), and Parent’s Bylaws, as amended and as in effect on the date
hereof (the “Bylaws”), and the SEC Documents disclose summaries of the terms of
all securities convertible into or exercisable for Common Stock, if any, and
copies of any documents containing the material rights of the holders thereof in
respect thereto. The foregoing is subject to the following issuances
contemplated prior to or contemporaneously at Closing: (i) 900,000 shares of
Common Stock issued with respect to the cash exercise of the Company’s warrants
at an exercise price of $0.25 per share; (ii) 2,500,000 shares of Common Stock
to be issued to directors, officers and employees of Parent; and (iii)
23,800,000 restricted shares of Common Stock to be issued pursuant to the
D-Vasive APA.

 

5.3. Non-Contravention; Buyer’s Consents. The execution, delivery and
performance of this Agreement and the Collateral Agreements by Buyer and Parent,
and the consummation of the transactions contemplated hereby and thereby do not
and will not:

 

(a) conflict with or result in a breach or violation of any provision of any
organizational documents of Buyer or Parent,

 

(b) violate, or result in a breach of, or constitute an occurrence of default
under any provision of, result in the acceleration or cancellation of any
obligation under, or give rise to a right by any Third Party to terminate or
amend its obligations under, any Contract to which Buyer or Parent is a party or
by which it or its assets or properties are bound, or result in the creation of
any Encumbrance upon any of its assets or properties, which violation, breach,
default or Encumbrance would individually or in the aggregate be material to
Buyer or Parent or materially impair or delay or prevent the consummation of the
transactions contemplated hereby,

 

(c) to Knowledge of Buyer and Parent, violate any applicable Law of any
Governmental Body having jurisdiction over Buyer, Parent or any of their
properties, which violation would individually or in the aggregate be materially
adverse to Buyer or Parent, or

 

(d) except as set forth on Schedule 5.3(d) hereto, require the consent,
authorization, order or approval of, filing or registration with, or waiver of
any right of first refusal or first offer from, any Governmental Body or any
Third Party, that has not been obtained, except as would not individually or in
the aggregate be materially adverse to Buyer or Parent (any such consents,
approvals, orders, authorizations, registrations, declarations and filings
listed on Schedule 5.3(d) being referred to herein collectively as the “Buyer’s
Consents”).

 

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5.4. Compliance with Laws; Litigation.

 

(a) To Knowledge, Buyer and Parent are in material compliance with all Laws of
or from Governmental Bodies applicable to their business and assets; and

 

(b) There are no Actions pending against Buyer or Parent or, to the Knowledge of
Buyer or Parent, threatened by or against Buyer or Parent with respect to this
Agreement or any of the Collateral Agreements, or in connection with the
transactions contemplated hereby or thereby.

 

5.5. SEC Documents; Financial Statements. Parent has filed all reports,
schedules, forms, statements and other documents required to be filed by Parent
under the Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the twelve (12) months preceding the date hereof (or
such shorter period as Parent was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Documents”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the expiration of
any such extension. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable. None of the SEC Documents, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the SEC Documents
comply in all material respects with applicable accounting requirements and the
rules and regulations of the SEC with respect thereto as in effect at the time
of filing. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of Parent and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments. All
non-GAAP financial information included in the SEC Documents complies with the
requirements of Regulation G and Item 10 of Regulation S-K regarding the use of
non-GAAP financial information. Except as set forth in the SEC Documents, Parent
has received no notices or correspondence from the SEC for the one year
preceding the date hereof. The SEC has not commenced any enforcement proceedings
against Parent or any of its subsidiaries.

 

5.6. Brokers. No broker, finder, financial advisor or other Person is entitled
to any broker’s, finder’s, financial advisor’s or other similar fee or
commission from any Party in connection with the transactions contemplated by
this Agreement based on arrangements made by or on behalf of Buyer, Parent or
any Affiliate thereof.

 

5.7. Absence of Certain Changes. Except as disclosed in the SEC Documents, since
March 31, 2014, there has been no Material Adverse Effect. Parent has not taken
any steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy Law nor does Parent or any of its subsidiaries have
any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy or insolvency proceedings.

 

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5.8. Issuance of Shares. Except for the restrictions set forth in the Lockup
Agreement, all shares of Common Stock to be issued to Demonsaw or its designees
pursuant to this Agreement will, when issued pursuant to the terms of this
Agreement, be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights, and free and clear of all liens and encumbrances and
free of any restriction on transfer, other than restrictions on transfer under
applicable federal and state securities laws.

 

5.9. Absence of Litigation. Except as disclosed in the SEC Documents, there is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of Parent or any of its subsidiaries, threatened against or
affecting Parent, the Common Stock or any of Parent’s or its subsidiaries’
officers or directors in their capacities as such, which could reasonably be
expected to have a Material Adverse Effect.

 

5.10. Tax Status. Parent and each of its subsidiaries has made or filed all
federal and state income and all other material tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that Parent and each of its subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Parent know of no basis for any such claim.

 

ARTICLE VI
COVENANTS

 

6.1. Access to Information.

 

(a) For a period of three (3) years after the Closing Date, upon reasonable
prior written notice, the Parties shall furnish or cause to be furnished to each
other and their employees, agents, auditors and representatives access, during
normal business hours, to such information, books and records relating to the
Business and the Assets as is reasonably necessary for financial reporting and
accounting matters, the preparation and filing of Tax Returns, reports or forms
for the defense of any Tax claims, assessments, audits or disputes, or the
prosecution or defense of any Action and shall cooperate with each other to the
extent reasonably requested for the preparation of such financial reporting,
accounting and Tax matters, provided, that with respect to any Tax Returns or
other records relating to Tax matters or any other Action, a Party shall have
reasonable access to such information until the applicable statute of
limitations, if any, shall have expired, and provided, further, that in either
case such access shall be subject to reasonable and customary restrictions with
respect to confidentiality. Each Party shall have the right to copy any of such
records at its own expense. No Party shall be required by this Section 6.1(a) to
take any action that would unreasonably interfere with the conduct of its
business or unreasonably disrupt its normal operations. Further, the Parties
understand that it is the intention of Demonsaw to terminate all operations
following closing and to liquidate its assets to its shareholders and as
required, to creditors, prior to the three (3) year term reflected above.

 

(b) Sellers and Buyer each agree to preserve, for at least three (3) years after
the Closing Date, all material books, ledgers and other records that are (i)
reasonably related to the Business or Assets and (ii) in their possession;
provided, that each Party will preserve all such material books, ledgers and
other records relating to Tax matters until expiration of the applicable statute
of limitations. Notwithstanding the foregoing, Buyer and Parent understand that
it is the intention of Sellers to terminate all operations following closing and
to liquidate its assets to its members and as required, to creditors, prior to
the three (3) year term reflected above.

 

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(c) On and after the Closing Date, Sellers and Buyer will take all appropriate
action and execute all documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out the intent and purposes of
this Agreement and the Collateral Agreements, including putting Buyer in
possession and operating control of the Business and the Assets.

 

6.2. Confidentiality.

 

(a) After the Closing Date, Sellers will not, and Sellers will use reasonable
commercial efforts to cause its Affiliates not to, use for its or their own
benefit or divulge or convey to any Third Party, any Buyer or Parent
Confidential Information relating to the Business or the Assets.

 

(b) After the Closing Date, Buyer and Parent will not, and Buyer and Parent will
use reasonably commercial efforts to cause its Affiliates not to, use for its or
their own benefit or divulge or convey to any Third Party, any Sellers
Confidential Information.

 

(c) Notwithstanding the foregoing, neither Sellers nor Buyer or Parent shall be
deemed to have violated this Section 6.3 if it or any of its Affiliates receives
a request to disclose all or any part of the Buyer or Parent Confidential
Information or Sellers Confidential Information, as applicable, in a legal
proceeding or under the terms of a subpoena, civil investigative demand or order
issued by a Governmental Body, and it or such Affiliate, to the extent not
inconsistent with such request and to the extent time reasonably allows: (i)
notifies the other party of the existence, terms and circumstances surrounding
such request; and (ii) furnishes only such portion of the Buyer or Parent
Confidential Information or Sellers Confidential Information, as applicable,
which it is advised by its counsel is legally obligated to be disclosed and
exercises reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to the disclosed Buyer Confidential
Information or Sellers Confidential Information, as applicable.

 

(d) For purposes of this Agreement, “Sellers Confidential Information” consists
of all information, knowledge or data that is not related solely to the
Business, Assets or the Purchased Contracts and that is not in the public domain
or otherwise publicly available which are treated as confidential by Sellers as
of the date hereof, provided, that Sellers Confidential Information shall not
include information that: (i) enters the public domain or becomes publicly
available, so long as neither Buyer nor any of its Affiliates, directly or
indirectly, improperly causes such information to enter the public domain, (ii)
after the date of this Agreement becomes known to Buyer or any of its Affiliates
on a non-confidential basis from a source that is not prohibited from disclosing
such information to Buyer or such Affiliate by a contractual or other legal duty
owed to Sellers, or (iii) after the date of this Agreement is developed
independently by Buyer or any Affiliate of Buyer without violation of this
Agreement.

 

(e) For purposes of this Agreement, “Buyer Confidential Information” consists of
all information, knowledge or data related to the Buyer and/or Parent or its
business not in the public domain or otherwise publicly available which are
treated as confidential by Buyer or Parent as of the date hereof, provided that
Buyer Confidential Information shall not include information that: (i) enters
the public domain or becomes publicly available, so long as neither Sellers nor
any of its Affiliates, directly or indirectly, improperly causes such
information to enter the public domain, (ii) after the date of this Agreement
becomes known to Sellers or any of its Affiliates on a non-confidential basis
from a source that is not prohibited from disclosing such information to Sellers
or such Affiliate by a contractual or other legal duty owed to Buyer, or (iii)
after the date of this Agreement is developed independently by Sellers or any
Affiliate of Sellers without violation of this Agreement.

 

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(f) The Buyer or Parent and the Sellers shall not issue any press release nor
otherwise make any public statement regarding the transactions contemplated
hereby without the prior written consent of the other party, except as required
by law or regulation or as otherwise determined by a Party and its counsel.
Notwithstanding the foregoing, Buyer and Parent shall have the right to issue
press releases and publicly reference the acquisition of Sellers upon Closing.

 

6.3. Payment of Liabilities. Buyer and Parent agree and acknowledge that the
Purchase Price Shares to be issued pursuant to the Escrow Agreement is intended
to compensate Demonsaw for the satisfaction of various liabilities and
obligations of Demonsaw, whether existing at Closing or arising thereafter. To
that end, Demonsaw agrees and acknowledges that the Escrow Shares shall be
available to secure any claims that may arise with respect to the Sellers’
representations, warranties, indemnification obligations or covenants, including
the covenants set forth in this Section 6.3, pursuant to this Agreement.

 

6.4. Noncompetition. For a period of eighteen months (18) after the Closing
Date, Eric J. Anderson and Demonsaw shall not, directly or indirectly, invest
in, own, manage, operate, finance, control, advise, render services to or
guarantee the obligations of any Person engaged in or planning to become engaged
in the commercial use or commercial development of the Assets, or any
enhancements thereon, as intended to be used by the Buyer, Parent or any of
Parent’s subsidiaries. For the avoidance of doubt, the restrictions set forth in
the Section 6.4 shall not apply to the commercial use or commercial development
of Contributing IP.

 

6.5. Cooperation. After the Closing, and continuing for one (1) year from the
Closing Date, to the extent it remains in existence, Sellers will cooperate with
Buyer in its efforts to continue and maintain for the benefit of Buyer those
business relationships of Sellers existing prior to the Closing and relating to
the Business to be operated by Buyer after the Closing, including relationships
with lessors, employees, regulatory authorities, licensors, customers, suppliers
and others, which reasonably requested cooperation shall include, without
limitation, assisting the Buyer from time to time with technical and engineering
matter associated with updating and maintaining the applications forming the
core part of the Business. Sellers will refer to Buyer all inquiries relating to
such Business. Neither the Sellers nor the members of the Sellers shall take any
action that would tend to diminish the value of the Assets after the Closing or
that would interfere with the Business of Buyer to be engaged in after the
Closing.

 

ARTICLE VII
SURVIVAL AND INDEMNIFICATION

 

7.1. Survival of Representations and Warranties. The representations and
warranties of Buyer, Parent and Sellers contained in this Agreement or in any
other certificate, writing or agreement delivered pursuant hereto or in
connection herewith shall the survive the Closing Date for one (1) year, except
(i) as to any matter as to which a good faith claim has been submitted in
writing to the other Party describing the claim in reasonable detail before such
date and identified as a claim for indemnification pursuant to this Article VII,
(ii) as to any matter which is based successfully upon fraud with respect to
which the cause of action shall expire only upon expiration of the applicable
statute of limitations, and (iii) those representations and warranties set forth
in Section 4.4(b) (title to the Assets), which shall survive for the applicable
statute of limitations period, and Sections 4.8 (Taxes), and 4.10 (Environmental
Matters), and 4.15 (Proprietary Rights), which shall survive until the
expiration of the applicable statute of limitations.

 

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7.2. Obligations of Sellers. Subject to the other terms and conditions of this
Article VII, Sellers shall indemnify, defend and hold harmless Buyer and Parent
and its shareholders, directors, officers, employees, Affiliates, agents,
representatives and permitted assigns, from and against any and all liabilities,
losses, damages, costs and expenses (including reasonable attorney’s fees and
costs) (collectively, “Losses”), directly or indirectly, as a result of, in
connection with, or based upon or arising from any of the following: (i) any
inaccuracy in or breach or non performance of any of the representations,
warranties, covenants or agreements made by Sellers in this Agreement or any
Collateral Agreement; (ii) the failure of Sellers to perform fully any covenant,
provision or agreement to be performed or observed by it pursuant to this
Agreement or any Collateral Agreement; (iii) any other matter as to which
Sellers in other provisions of this Agreement or any Collateral Agreement has
agreed to indemnify Buyer; (iv) any product, information, or service ever
manufactured, produced, distributed, published, used, provided, or sold by or on
behalf of Demonsaw; (v) any Intellectual Property ever owned, used, or developed
by Demonsaw that infringed, misappropriated, or otherwise violated the
intellectual property rights of any other Person; or (vi) any Excluded
Liability.

 

7.3. Obligations of Buyer/Parent. Subject to the other terms and conditions of
this Article VII, Buyer and Parent shall indemnify, defend and hold harmless
Sellers and its members, managers, officers, employees, Affiliates, agents,
representatives and permitted assigns from and against any and all Losses,
directly or indirectly, as a result of, in connection with, or based upon or
arising from any of the following: (i) any inaccuracy in or breach or non
performance of any of the representations, warranties, covenants or agreements
made by Buyer or Parent in or pursuant to this Agreement or any Collateral
Agreement; (ii) the failure of Buyer or Parent to perform fully any covenant,
provision or agreement to be performed or observed by it pursuant to this
Agreement or any Collateral Agreement; (iii) any other matter as to which Buyer
in other provisions of this Agreement has agreed to indemnify Sellers; or (iv)
any Assumed Liability.

 

7.4. Notice of Loss. The Indemnified Party with respect to any Loss shall give
prompt notice thereof to the Indemnifying Party.

 

7.5. Defense. In the event any Third Party shall make a demand or claim or file
or threaten to file or continue any lawsuit, which demand, claim or lawsuit may
result in liability to an Indemnified Party in respect of matters covered by the
indemnity under this Agreement, or in the event that a potential Loss, damage or
expense comes to the attention of any Party in respect of matters embraced by
the indemnity under this Agreement, then the Party receiving notice or becoming
aware of such event shall promptly notify the other Party in writing of the
demand, claim or lawsuit. Within thirty (30) days after written notice by the
Indemnified Party (the “Notice”) to an Indemnifying Party of such demand, claim
or lawsuit, except as provided in the next sentence, the Indemnifying Party
shall have the option, at its sole cost and expense, to retain counsel to defend
any such demand, claim or lawsuit; provided that counsel who will conduct the
defense of such demand, claim or lawsuit will be approved by the Indemnified
Party whose approval will not unreasonably be withheld. The Indemnified Party
shall have the right, at its own expense, to participate in the defense of any
suit, action or proceeding brought against it with respect to which
indemnification may be sought hereunder; provided, if (i) the named parties to
any such proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them, and the Indemnifying Party has not retained separate
counsel for the Indemnified Party, (ii) the employment of counsel by such
Indemnified Party has been authorized in writing by the Indemnifying Party, or
(iii) the Indemnifying Party has not in fact employed counsel to assume the
defense of such action within a reasonable time; then, the Indemnified Party
shall have the right to retain its own counsel at the sole cost and expense of
the Indemnifying Party, which costs and expenses shall be paid by the
Indemnifying Party on a current basis. No Indemnifying Party, in the defense of
any such demand, claim or lawsuit, will consent to entry of any judgment or
enter into any settlement without the prior written consent of the Indemnified
Party. If any Indemnified Party will have been advised by counsel chosen by it
that there may be one or more legal defenses available to such Indemnified Party
which are different from or in addition to those which have been asserted by the
Indemnifying Party and counsel retained by the Indemnifying Party declines to
assert those defenses, then, at the election of the Indemnified Party, the
Indemnifying Party will not have the right to continue the defense of such
demand, claim or lawsuit on behalf of such Indemnified Party and will reimburse
such Indemnified Party and any Person controlling such Indemnified Party on a
current basis for the reasonable fees and expenses of any counsel retained by
the Indemnified Party to undertake the defense. In the event that the
Indemnifying Party shall fail to respond within thirty (30) days after receipt
of the Notice, the Indemnified Party may retain counsel and conduct the defense
of such demand, claim or lawsuit, as it may in its sole discretion deem proper,
at the sole cost and expense of the Indemnifying Party, which costs and expenses
shall be paid by the Indemnifying Party on a current basis. Failure to provide
Notice shall not limit the rights of such party to indemnification, except to
the extent the Indemnifying Party’s defense of the action is actually prejudiced
by such failure. The assumption of the defense, or the non-assumption of the
defense, by the purported Indemnifying Party will not affect such party’s right
to dispute its obligation to provide indemnification hereunder.

 

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7.6. Notice by the Parties. Each Party agrees to promptly notify the other of
any liabilities, claims or misrepresentations, breaches or other matters covered
by this Article VII upon discovery or receipt of notice thereof.

 

7.7. Limitations. Except in the case of Losses arising from a Seller’s fraud or
willful and intentional breach, the indemnification provided hereunder by the
Sellers shall be limited to the Purchase Price. Furthermore, each Indemnified
Party entitled to indemnification hereunder shall take all reasonable steps to
mitigate all losses, costs, expenses and damages after becoming aware of any
event which could reasonably be expected to give rise to any Losses that are
indemnifiable or recoverable hereunder.

 

EXCEPT FOR LOSSES ARISING FROM A PARTY’S FRAUD OR WILLFUL AND INTENTIONAL
BREACH, IN NO EVENT SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE UNDER ANY THEORY
OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY
CONSEQUENTIAL, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL OR INDIRECT DAMAGES
CLAIMED BY ONE OR MORE PARTIES HERETO AGAINST ANOTHER PARTY HERETO, EACH OF
WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH
DAMAGES WERE FORESEEABLE OR SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.

 

7.8. Insurance Benefits; Tax Proceeds. The amount of Losses recoverable by any
Indemnified Party under this Agreement with respect to an indemnity claim shall
be reduced by (a) the amount of any payment actually received by or on behalf of
any Indemnified Party from any insurance policy net of any deductibles or other
reasonable amounts payable with respect thereto, and (b) the amount of any net
Tax benefits available to any Indemnified Party from the incurrence or payment
of such Losses.

 

7.9. Exclusive Remedy. The indemnification rights provided in this Article VII
shall be the sole and exclusive remedy available to the Parties (including
Indemnified Parties other than Buyer or Sellers) for any Losses related to an
inaccuracy in or breach or nonperformance of any of the terms, conditions,
covenants, agreements, representations or warranties contained herein or in any
of the other Collateral Agreements or any right, claim or action arising from
the transactions contemplated hereunder or thereunder, and each Party hereby
waives, to the fullest extent permitted by applicable Laws, any other rights or
remedies that may arise under any applicable Laws.

 

7.10. Survival. This Article VII shall survive the Closing. The obligations set
forth in Sections 7.2 and 7.3 shall remain in effect until the later of the one
(1) year anniversary of the Closing or any applicable statute of limitations.
Any matter as to which a good faith claim has been asserted by notice to the
other Party that is pending or unresolved at the end of any applicable
limitation period set forth in Section 7.1 shall continue to be covered by this
Article VII until such matter is finally terminated or otherwise resolved by the
Parties or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.

 

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ARTICLE VIII
MISCELLANEOUS PROVISIONS

 

8.1. Notices. Except as otherwise provided herein or in a Collateral Agreement,
all notices and other communications hereunder and under the Collateral
Agreements shall be in writing and shall be deemed to have been duly given upon
receipt if (i) mailed by certified or registered mail, return receipt requested,
(ii) sent by a nationally recognized overnight delivery service (receipt
requested), fee prepaid, (iii) sent via facsimile with receipt confirmed, or
(iv) delivered personally, addressed as follows or to such other address or
addresses of which the respective party shall have notified the other.

 

  (a) If to Sellers, to:           Demonsaw, Inc.     5 Robin Hood Road    
Windham New Hampshire 03087     eijah@demonsaw.com           With a copy (which
shall not constitute notice) to:           Laxague Law, Inc.     1 East Liberty,
Suite 600     Reno, NV 89501     Fax: (775) 996-3283     Attention: Joe Laxague,
Esq,         (b) If to Buyer or Parent, to:           MGT Capital Investments,
Inc.     500 Mamaroneck Avenue – Suite 320     Harrison, NY 10528     Attention:
Robert B. Ladd, President and CEO     Fax: (914) 630-7532           With a copy
(which shall not constitute notice) to:           Sichenzia Ross Friedman
Ference LLP     61 Broadway, 32nd Floor     New York, New York 10006     Fax:
(212) 930-9725     Attention: Jay M. Kaplowitz, Esq.

 

8.2. Expenses. Except as otherwise provided in this Agreement or the Collateral
Agreements, each Party will pay its own costs and expenses, including legal and
accounting expenses, related to the transactions contemplated by this Agreement
and the Collateral Agreements, irrespective of when incurred.

 

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8.3. Entire Agreement. The agreements of the Parties, which is comprised of this
Agreement, the Schedules and Exhibits hereto and the documents referred to
herein, including the Collateral Agreements, sets forth the entire agreement and
understanding between the Parties and supersedes any prior agreement or
understanding, written or oral, relating to the subject matter of this Agreement
and the Collateral Agreements.

 

8.4. Waiver of Jury Trial. The Parties irrevocably waives the right to a jury
trial in connection with any legal proceeding relating to this Agreement or any
of the Collateral Agreements or the enforcement of any provision hereof or
thereof.

 

8.5. Governing Law; Arbitration; Prevailing Party. This Agreement and the
Collateral Agreements, and all claims or causes of action that may be based
upon, arise out of or relate to this Agreement or the Collateral Agreements will
be construed in accordance with and governed by the internal laws of the State
of New York applicable to agreements made and to be performed entirely within
such State without regard to conflicts of laws principles thereof. Any dispute
arising under or in connection with any matter of any nature (whether sounding
in contract or tort) relating to or arising out of this Agreement, shall be
resolved exclusively by arbitration. The arbitration shall be in conformity with
and subject to the applicable rules and procedures of JAMS. The arbitration
shall be conducted before a panel of three (3) arbitrators, with one arbitrator
to be selected by each of Sellers and Buyer and the third arbitrator to be
selected by the arbitrators selected by the Parties. The Parties agree to be (a)
subject to the exclusive jurisdiction and venue of the arbitration in New York,
New York (b) bound by the decision of the arbitrator as the final decision with
respect to the dispute, and (c) subject to the jurisdiction of both of the
federal courts of the United States of America or the courts of the State, City
and County of New York for the purpose of confirmation and enforcement of any
award. The prevailing party in any arbitration shall be entitled to recover its
costs and expenses (including attorney’s fees and expenses) from the
non-prevailing party.

 

8.6. Waiver. The rights and remedies of the Parties to this Agreement and the
Collateral Agreements are cumulative and not alternative. Neither the failure
nor any delay by any party in exercising any right, power or privilege under
this Agreement or the documents referred to in this Agreement will operate as a
waiver of such right, power or privilege, and no single or partial exercise of
any such right, power or privilege will preclude any other or further exercise
of such right, power or privilege or the exercise of any other right, power or
privilege. To the maximum extent permitted by Law, (a) no claim or right arising
out of this Agreement or the Collateral Agreements can be discharged by one
party, in whole or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver that may be given by
a party will be applicable except in the specific instance for which it is given
and will not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure or noncompliance; and (c) no notice to or demand on one party
will be deemed to be a waiver of any obligation of such party or of the right of
the party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the Collateral Agreements.

 

8.7. No Oral Modification. Neither this Agreement nor any Collateral Agreement
may be amended except by a written agreement executed by the Parties. Any
attempted amendment in violation of this Section 9.7 will be void ab initio.

 

8.8. Assignments; Successors. No party may assign any of its rights under this
Agreement or any Collateral Agreements without the prior written consent of the
other parties hereto or thereto. Subject to the preceding sentence, this
Agreement and the Collateral Agreements will apply to, be binding in all
respects upon, and inure to the benefit of the successors and permitted assigns
of the Parties.

 

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8.9. Severability. If any provision of this Agreement or the Collateral
Agreements is held invalid or unenforceable by any court of competent
jurisdiction, the other provisions of this Agreement and the Collateral
Agreements will remain in full force and effect; provided, that the court making
such determination shall have the power to and shall, subject to the discretion
of such court, reduce the scope, duration, area or applicability of such
provision, to delete specific words or phrases, or to replace any invalid, void
or unenforceable provision with a provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision.

 

8.10. Limitations on Public Disclosure. No Party may issue any press release, or
make any public announcement or filing with a Governmental Body, with respect to
this Agreement or any Collateral Agreement without obtaining prior written
consent of the other Party to the issuance of such press release, or the making
of such public announcement or filing, and to the contents thereof, which shall
not be unreasonably withheld or delayed; provided, that such Party may, without
the prior consent of the other Party, issue such press release, or make such
public statement or filing, as may upon the advice of counsel be required by Law
if it has provided notice to and used reasonable efforts to consult with the
other Party.

 

8.11. No Third Party Beneficiaries. Nothing in this Agreement or the Collateral
Agreements, express or implied, is intended to or shall constitute the Parties
as partners or as participants in a joint venture. This Agreement and the
Collateral Agreements are solely for the benefit of the Parties and, only to the
extent provided in Article VII hereof, their respective Affiliates and
employees, representatives, agents, directors, officers, partners or principals,
as applicable, or their respective assigns, for whom the parties shall be
entitled to enforce this Agreement, and no provision of this Agreement shall be
deemed to confer upon any other Third Parties any remedy, claim, liability,
reimbursement, cause of action or other right; provided however, Parent and
Buyer understand and agree that Demonsaw’s designees shall have a right to
receive the Common Shares constituting the Purchase Price. Within 90 days of
closing, Demonsaw shall provide Buyer and Parent with written notice of the
intended recipients of the shares of Common Stock and Parent shall use its best
commercial efforts to honor such transfer request, including, without
limitation, notice and any opinions of counsel to Parent’s transfer agent for
its Common Stock and Sellers shall have the right to enforce such transfer
request.

 

8.12. Incorporation of Exhibit and Schedules. The Exhibits and Schedules
identified and/or attached to this Agreement are incorporated herein by
reference and made a part hereof.

 

8.13. Counterparts. This Agreement and the Collateral Agreements each may be
executed simultaneously in two or more counterparts, each of which will be
deemed to be an original copy hereof or thereof and all of which together will
be deemed, respectively, to constitute one and the same agreement. Counterparts
delivered by facsimile, e-mail or other electronic transmission shall be deemed
to have the same legal effect as delivery of an original signed copy of this
Agreement.

 

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

 

PARENT       MGT Capital Investments, Inc.         By: /s/ Robert B. Ladd  
Name: Robert B. Ladd   Title: Chief Executive Officer and President        
BUYER       MGT Cybersecurity, Inc.         By: /s/ Robert B. Ladd   Name:
Robert B. Ladd   Title: Sole Director         SELLERS:       DEMONSAW LLC.      
  By: /s/ Eric J. Anderson   Name: Eric J. Anderson   Title: Manager        
Members of Demonsaw LLC.         /s/ Eric J. Anderson   Name: Eric J. Anderson  
      Future Tense Secure Systems Inc.         By: /s/ Tom Guscinski   Name: Tom
Guscinski   Title: President         Round House, LLC         By: /s/ Kyle
Sandler   Name: Kyle Sandler   Title: Managing Member  

 

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