Exhibit 10.01

 

Execution Version

 

Agreement and Plan of Merger

 

By and among

 

SRAX, INC., as the Parent

 

TOWNSGATE MERGER SUB 1, INC., as Merger Sub 1

 

LD MICRO, INC., as Merger Sub 2

 

LD MICRO, INC., as the Target

 

and

 

Christopher Lahiji, in the capacity as the sole stockholder of the target

 

dated as of

 

September 4, 2020

 

 

 

 

TABLE OF CONTENTS

 

Article I Definitions 2     Article II The Merger 10     Section 2.01 The
Merger. 10 Section 2.02 Closing. 10 Section 2.03 Closing Deliverables. 10
Section 2.04 Effective Time 12 Section 2.05 Effects of the Merger. 12 Section
2.06 Certificate of Incorporation; By-laws. 13 Section 2.07 Directors and
Officers. 13 Section 2.08 Effect of the Merger on Common Stock. 13 Section 2.09
Surrender and Payment. 14 Section 2.10 No Further Ownership Rights in Company
Common Shares. 14 Section 2.11 Adjustments. 14 Section 2.12 Section 2.12
Acceleration of Cash Payment. 15 Section 2.13 Withholding Rights. 15 Section
2.14 Lost Certificates. 15 Section 2.15 Post-Closing Affairs. 15 Section 2.18
Consideration Spreadsheet. 18     Article III Representations and warranties of
the Company and the Stockholder 18     Section 3.01 Organization and
Qualification of the Company. 18 Section 3.02 Authority; Board Approval. 18
Section 3.03 No Conflicts; Consents. 19 Section 3.04 Capitalization. 19 Section
3.05 No Subsidiaries. 20 Section 3.06 Financial Statements. 21 Section 3.07
Undisclosed Liabilities. 21 Section 3.08 Absence of Certain Changes, Events and
Conditions. 21

 

i

 

 

Section 3.09 Material Contracts. 23 Section 3.10 Title to Assets; Real Property.
25 Section 3.11 Condition And Sufficiency of Assets. 26 Section 3.12
Intellectual Property. 26 Section 3.13 Intentionally Omitted]. 27 Section 3.14
Accounts Receivable. 27 Section 3.15 Customers and Suppliers. 28 Section 3.16
Insurance. 28 Section 3.17 Legal Proceedings; Governmental Orders. 29 Section
3.18 Compliance With Laws; Permits. 29 Section 3.19 [Intentionally Omitted]. 29
Section 3.20 Employee Benefit Matters. 30 Section 3.21 Employment Matters. 33
Section 3.22 Taxes. 34 Section 3.23 Books and Records. 36 Section 3.24 Related
Party Transactions. 36 Section 3.25 Brokers. 37 Section 3.26 Full Disclosure. 37
    Article IV Representations and warranties of parent and merger sub 38    
Section 4.01 Organization and Authority of Parent and Merger Sub. 38 Section
4.02 No Conflicts; Consents. 39 Section 4.03 No Prior Merger Sub Operations. 39
Section 4.04 Brokers. 39 Section 4.05 Sufficiency of Funds; Solvency. 39 Section
4.06 Legal Proceedings. 40 Section 4.07 Independent Investigation. 40    
Article V Covenants 40     Section 5.01 Conduct of Business Prior to the
Closing. 40 Section 5.02 Access to Information. 41 Section 5.03 No Solicitation
of Other Bids. 41

 

ii

 

 

Section 5.04 Stockholder Consent. 42 Section 5.05 Notice of Certain Events. 42
Section 5.06 Resignations. 43 Section 5.07 Governmental Approvals and Consents
43 Section 5.08 Directors’ and Officers’ Indemnification and Insurance. 44
Section 5.09 Closing Conditions 44 Section 5.10 Public Announcements. 44 Section
5.11 Further Assurances. 44 Section 5.14 Rollover of 401(k) Plan Accounts. 45
Section 5.15 Trademark Assignments. 45 Section 5.16 Other Matters. 45    
Article VI Tax matters 46     Section 6.01 Tax Covenants. 46 Section 6.02
Termination of Existing Tax Sharing Agreements. 47 Section 6.03 Tax
Indemnification. 47 Section 6.04 Tax Returns 48 Section 6.06 Contests. 48
Section 6.07 Cooperation and Exchange of Information. 48 Section 6.08 Tax
Treatment of Indemnification Payments. 49 Section 6.09 Payments to Buyer 49
Section 6.10 Limitations on Tax Indemnification 49 Section 6.11 Survival. 49
Section 6.12 Overlap. 49     Article VII Conditions to closing 49     Section
7.01 Conditions to Obligations of All Parties. 49 Section 7.02 Conditions to
Obligations of Parent and Merger Sub. 50 Section 7.03 Conditions to Obligations
of the Company. 51     Article VIII Indemnification 52     Section 8.01
Survival. 52 Section 8.02 Indemnification By Stockholder. 52

 

iii

 

 

Section 8.03 Indemnification By Parent. 53 Section 8.04 Certain Limitations. 53
Section 8.05 Indemnification Procedures. 53 Section 8.06 Payments;
Indemnification Escrow Fund. 56 Section 8.07 Tax Treatment of Indemnification
Payments. 56 Section 8.08 Effect of Investigation. 56 Section 8.09 Exclusive
Remedies. 56     Article IX Termination 59     Section 9.01 Termination. 57
Section 9.02 Effect of Termination. 58     Article X Miscellaneous 58    
Section 10.01 Expenses. 58 Section 10.02 Notices. 58 Section 10.03
Interpretation. 59 Section 10.04 Headings. 59 Section 10.05 Severability. 60
Section 10.06 Entire Agreement. 60 Section 10.07 Successors and Assigns. 60
Section 10.08 No Third-party Beneficiaries. 60 Section 10.09 Amendment and
Modification; Waiver. 60 Section 10.10 Governing Law; Submission to
Jurisdiction; Waiver of Jury Trial. 61 Section 10.11 Specific Performance. 61
Section 10.12 Counterparts. 61

 

iv

 

 

AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this “Agreement”), dated as of September 4,
2020, is entered into by and among SRAX, Inc. a Delaware corporation (“Parent”),
Townsgate Merger Sub 1, Inc., a Delaware corporation and a direct wholly-owned
subsidiary of Parent (“Merger Sub 1”), LD Micro, Inc., a Delaware corporation
and a direct wholly-owned subsidiary of Parent (“Merger Sub 2”), LD Micro, Inc.,
a California corporation (the “Company”), and Christopher Lahiji, the sole
stockholder of the Company (the “Stockholder”). Merger Sub 1 and Merger Sub 2
are sometimes collectively referred to in this Agreement as “Merger Sub.”

 

RECITALS

 

WHEREAS, the parties intend that Merger Sub 1 will be merged with and into the
Company (the “First Merger”), with the Company surviving the First Merger, and
then the Company will be merged with and into Merger Sub 2 (the “Second Merger,”
and together with the First Merger, the “Merger”), with Merger Sub 2 surviving
the Second Merger, each on the terms and subject to the conditions set forth
herein;

 

WHEREAS, the board of directors of the Company (the “Company Board”) has, by
unanimous written consent (a) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are in the best
interests of the Company and its stockholders, (b) approved and declared
advisable this Agreement and the transactions contemplated hereby, including the
Merger, and (c) resolved to recommend adoption of this Agreement by the
Stockholder in accordance with the California Corporations Code, as amended (the
“CCC”);

 

WHEREAS, the Company has received the approval of the Stockholder by unanimous
written consent to enter into this Agreement in accordance with the CCC;

 

WHEREAS, the respective boards of directors of Parent and Merger Sub have
unanimously (a) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are in the best interests of Parent, Merger Sub
and their respective stockholders, (b) approved and declared advisable this
Agreement and the transactions contemplated hereby, including the Merger, and
(c) resolved to recommend adoption of this Agreement by their respective
stockholders in accordance with the Delaware General Corporation Law (“DGCL”).

 

WHEREAS, immediately following the execution of this Agreement by each of the
parties hereto, Parent, as the sole stockholder of Merger Sub 1, will adopt this
Agreement and the transactions contemplated hereby, including the First Merger,
by executing a written consent approving such adoption;

 

1

 

 

WHEREAS, immediately following the execution of this Agreement by each of the
parties hereto, Parent, as the sole member of Merger Sub 2, will adopt this
Agreement and the transactions contemplated hereby, including the Second Merger,
by executing a written consent approving such adoption; and

 

WHEREAS, for U.S. federal income Tax purposes, it is intended that the Mergers
qualify as a “reorganization” within the meaning of Section 368(a) of the Code,
and the Treasury Regulations promulgated thereunder, and this Agreement
constitute and be adopted as a “plan of reorganization” within the meaning of
Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

Article I

Definitions

 

The following terms have the meanings specified or referred to in this Article
I:

 

“Acquisition Proposal” has the meaning set forth in Section 5.03(a).

 

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.

 

“Affiliate” of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble.

 

“Annual Financial Statements” has the meaning set forth in Section 3.06.

 

“Balance Sheet” has the meaning set forth in Section 3.06.

 

“Balance Sheet Date” has the meaning set forth in Section 3.06.

 

“Benefit Plan” has the meaning set forth in Section 3.20(a).

 

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in New York, New York are authorized or required by Law
to be closed for business.

 

2

 

 

“Cash” means all cash and all cash equivalents, in each case determined in
accordance with GAAP. For the avoidance of doubt, Cash will be calculated net of
any expenses accrued and owed by the Company or Surviving Corporation, as
applicable, prior to the Measurement Date.

 

“Cash Payment” means $4,000,000 in cash payable as follows: (i) $1,000,000 at
the Closing, (ii) $1,000,000 on January 1, 2021, (iii) $1,000,000 on April 1,
2021, and (iv) $1,000,000 on July 1, 2021, and subject to adjustment or off-set
as provided for in this Agreement.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

 

“Certificate” has the meaning set forth in Section 2.09(a).

 

“Certificate of First Merger” has the meaning set forth in Section 2.04(a).

 

“Certificate of Second Merger” has the meaning set forth in Section 2.04(b).

 

“Closing” has the meaning set forth in Section 2.02.

 

“Closing Date” has the meaning set forth in Section 2.02.

 

“Closing Indebtedness Certificate” means a certificate executed by the Chief
Financial Officer of the Company certifying on behalf of the Company an itemized
list of all outstanding Indebtedness as of the close of business on the Closing
Date and the Person to whom such outstanding Indebtedness is owed and an
aggregate total of such outstanding Indebtedness.

 

“Closing Merger Consideration” means the portion of the Cash Payment payable at
the Closing minus the Transaction Expenses as set forth on the Closing
Transaction Expenses Certificate.

 

“Closing Per Share Merger Consideration” means (a) the Closing Merger
Consideration, divided by (b) the total number of Shares outstanding at the
Closing Date.

 

“Closing Transaction Expenses Certificate” means a certificate executed by the
Chief Financial Officer of the Company, certifying the amount of Transaction
Expenses remaining unpaid as of the close of business on the Business Day
immediately prior to the Effective Time (including an itemized list of each such
unpaid Transaction Expense with a description of the nature of such expense and
the Person to whom such expense is owed).

 

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

 

“Company” has the meaning set forth in the preamble.

 

“Company Board” has the meaning set forth in the recitals.

 

“Company Board Recommendation” has the meaning set forth in Section 3.02(b).

 

3

 

 

“Company Cash” means Cash held by the Company at the applicable time.

 

“Company Cash Statement” has the meaning set forth in Section 2.15(b).

 

“Company Charter Documents” has the meaning set forth in Section 3.03.

 

“Company Common Shares” means the common shares of the Company.

 

“Company Intellectual Property” means all Intellectual Property that is owned or
held for use by the Company.

 

“Company IP Agreements” means all licenses, sublicenses, consent to use
agreements, settlements, coexistence agreements, covenants not to sue,
permissions and other Contracts (including any right to receive or obligation to
pay royalties or any other consideration), whether written or oral, relating to
Intellectual Property to which the Company is a party, beneficiary or otherwise
bound.

 

“Company IP Registrations” means all Company Intellectual Property that is
subject to any issuance registration, application or other filing by, to or with
any Governmental Authority or authorized private registrar in any jurisdiction,
including registered trademarks, domain names and copyrights, issued and
reissued patents and pending applications for any of the foregoing.

 

“Consideration Spreadsheet” has the meaning set forth in Section 2.16(a).

 

“Contracts” means all contracts, leases, deeds, mortgages, licenses,
instruments, notes, commitments, undertakings, indentures, joint ventures and
all other agreements, commitments and legally binding arrangements, whether
written or oral.

 

“DGCL” has the meaning set forth in the recitals.

 

“Direct Claim” has the meaning set forth in Section 8.05(c).

 

“Disclosure Schedules” means the Disclosure Schedules delivered by the Company
and Parent concurrently with the execution and delivery of this Agreement.

 

“Disputed Amounts” has the meaning set forth in Section 2.15(c)(ii).

 

“Dollars or $” means the lawful currency of the United States.

 

“Effective Time” has the meaning set forth in Section 2.04(a).

 

“Encumbrance” means any charge, claim, community property interest, pledge,
condition, equitable interest, lien (statutory or other), option, security
interest, mortgage, easement, encroachment, right of way, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations promulgated thereunder.

 

4

 

 

“ERISA Affiliate” means all employers (whether or not incorporated) that would
be treated together with the Company or any of its Affiliates as a “single
employer” within the meaning of Section 414 of the Code.

 

“Financial Statements” has the meaning set forth in Section 3.06.

 

“First Merger” has the meaning set forth in the recitals.

 

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

 

“Government Contracts” has the meaning set forth in Section 3.09(a)(viii).

 

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

 

“Indebtedness” means, without duplication and with respect to the Company, all
(a) indebtedness for borrowed money; (b) obligations for the deferred purchase
price of property or services, (c) long or short-term obligations evidenced by
notes, bonds, debentures or other similar instruments; (d) obligations under any
interest rate, currency swap or other hedging agreement or arrangement; (e)
capital lease obligations; (f) reimbursement obligations under any letter of
credit, banker’s acceptance or similar credit transactions; (g) any other
accrued liabilities or expenses; (h) guarantees made by the Company on behalf of
any third party in respect of obligations of the kind referred to in the
foregoing clauses (a) through (g); and (i) any unpaid interest, prepayment
penalties, premiums, costs and fees that would arise or become due as a result
of the prepayment of any of the obligations referred to in the foregoing clauses
(a) through (h).

 

“Indemnified Party” has the meaning set forth in Section 8.05.

 

“Indemnifying Party” has the meaning set forth in Section 8.05.

 

“Independent Accountant” has the meaning set forth in Section 2.15(c)(ii).

 

“Insurance Policies” has the meaning set forth in Section 3.16.

 

5

 

 

“Intellectual Property” means all intellectual property and industrial property
rights and assets, and all rights, interests and protections that are associated
with, similar to, or required for the exercise of, any of the foregoing, however
arising, pursuant to the Laws of any jurisdiction throughout the world, whether
registered or unregistered, including any and all: (a) trademarks, service
marks, trade names, brand names, logos, trade dress, design rights and other
similar designations of source, sponsorship, association or origin, together
with the goodwill connected with the use of and symbolized by, and all
registrations, applications and renewals for, any of the foregoing; (b) internet
domain names, whether or not trademarks, registered in any top-level domain by
any authorized private registrar or Governmental Authority, web addresses, web
pages, websites and related content, accounts with Twitter, Facebook and other
social media companies and the content found thereon and related thereto, and
URLs; (c) works of authorship, expressions, designs and design registrations,
whether or not copyrightable, including copyrights, author, performer, moral and
neighboring rights, and all registrations, applications for registration and
renewals of such copyrights; (d) inventions, discoveries, trade secrets,
business and technical information and know-how, databases, data collections and
other confidential and proprietary information and all rights therein; (e)
patents (including all reissues, divisionals, provisionals, continuations and
continuations-in-part, re-examinations, renewals, substitutions and extensions
thereof), patent applications, and other patent rights and any other
Governmental Authority-issued indicia of invention ownership (including
inventor’s certificates, petty patents and patent utility models); and (f)
software and firmware, including data files, source code, object code,
application programming interfaces, architecture, files, records, schematics,
computerized databases and other related specifications and documentation.

 

“Intellectual Property Registrations” has the meaning set forth in Section
3.12(b).

 

“Intended Tax Treatment” has the meaning set forth in Section 6.01(a).

 

“Interim Balance Sheet” has the meaning set forth in Section 3.06.

 

“Interim Balance Sheet Date” has the meaning set forth in Section 3.06.

 

“Interim Financial Statements” has the meaning set forth in Section 3.06.

 

“Knowledge” means, when used with respect to any Person, the actual or
constructive knowledge of any director or officer of a Person, after due
inquiry.

 

“Law” means any statute, law, ordinance, regulation, rule, code, order,
constitution, treaty, common law, judgment, decree, other requirement or rule of
law of any Governmental Authority.

 

“Liabilities” has the meaning set forth in Section 3.07.

 

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

 

6

 

 

“Material Adverse Effect” means any event, occurrence, fact, condition or change
that is, or could reasonably be expected to become, individually or in the
aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise) or assets of the Company and/or Parent, or
(b) the ability of the Company and/or Parent to consummate the transactions
contemplated hereby on a timely basis; provided, however, that “Material Adverse
Effect” shall not include any event, occurrence, fact, condition or change,
directly or indirectly, arising out of or attributable to: (i) general economic
or political conditions; (ii) conditions generally affecting the industries in
which the Company and/or Parent operate; (iii) any changes in financial or
securities markets in general; (iv) acts of war (whether or not declared), armed
hostilities or terrorism, or the escalation or worsening thereof; (v) any action
required or permitted by this Agreement, except pursuant to Section 3.03 and
Section 5.07; (vi) any changes in applicable Laws or accounting rules, including
GAAP; or (vii) the public announcement, pendency or completion of the
transactions contemplated by this Agreement; provided further, however, that any
event, occurrence, fact, condition or change referred to in clauses (i) through
(iv) immediately above shall be taken into account in determining whether a
Material Adverse Effect has occurred or could reasonably be expected to occur to
the extent that such event, occurrence, fact, condition or change has a
disproportionate effect on the Company compared to other participants in the
industries in which the Company conducts its businesses.

 

“Material Contracts” has the meaning set forth in Section 3.09(a).

 

“Material Customers” has the meaning set forth in Section 3.15(a).

 

“Material Suppliers” has the meaning set forth in Section 3.15(b).

 

“Measurement Date” has the meaning set forth in Section 3.15(a).

 

“Merger” has the meaning set forth in the recitals.

 

“Merger Certificates” has the meaning set forth in Section 2.04(b).

 

“Merger Consideration” means the aggregate Purchase Price.

 

“Merger Sub” has the meaning set forth in the preamble.

 

“Merger Sub 1” has the meaning set forth in the preamble.

 

“Merger Sub 2” has the meaning set forth in the preamble.

 

“Multiemployer Plan” has the meaning set forth in Section 3.20(c).

 

“Non-U.S. Benefit Plan” has the meaning set forth in Section 3.20(a).

 

“Parent” has the meaning set forth in the preamble.

 

“Parent Indemnitees” has the meaning set forth in Section 8.02.

 

“Payment Shares” means 1,600,000 shares of Class A common stock of Parent.

 

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

 

7

 

 

“Permitted Encumbrances” has the meaning set forth in Section 3.10(a).

 

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association or other entity.

 

“Post-Closing Adjustment” has the meaning set forth in Section 2.15(d).

 

“Post-Closing Tax Period” means any taxable period beginning after the Closing
Date and, with respect to any taxable period beginning before and ending after
the Closing Date, the portion of such taxable period beginning after the Closing
Date.

 

“Post-Closing Taxes” means Taxes of the Company for any Post-Closing Tax Period.

 

“Post-Closing Tax Return” has the meaning set forth in Section 6.01(b).

 

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date and, with respect to any Straddle Period, the portion of such
Straddle Period ending on and including the Closing Date.

 

“Pre-Closing Taxes” means Taxes of the Company for any Pre-Closing Tax Period.

 

“Purchase Price” means the Payment Shares and the Cash Payment.

 

“Qualified Benefit Plan” has the meaning set forth in Section 3.20(c).

 

“Real Property” means the real property owned, leased or subleased by the
Company, together with all buildings, structures and facilities located thereon.

 

“Release” means any actual or threatened release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing or allowing to escape or migrate into or through
the environment (including, without limitation, ambient air (indoor or outdoor),
surface water, groundwater, land surface or subsurface strata or within any
building, structure, facility or fixture).

 

“Representative” means, with respect to any Person, any and all directors,
officers, employees, consultants, financial advisors, counsel, accountants and
other agents of such Person.

 

“Requisite Company Vote” has the meaning set forth in Section 3.02(a).

 

“Resolution Period” has the meaning set forth in Error! Reference source not
found..

 

“Review Period” has the meaning set forth in Section 2.15(c)(i).

 

“Second Merger” has the meaning set forth in the recitals.

 

“Second Merger Effective Time” has the meaning set forth in Section 2.04(b).

 

“Shares” has the meaning set forth in Section 2.08(a).

 

8

 

 

“Statement of Objections” has the meaning set forth in Section 2.15(c).

 

“Stockholder” has the meaning set forth in the preamble.

 

“Stockholder Indemnitees” has the meaning set forth in Section 8.03.

 

“Surviving Corporation” has the meaning set forth in Section 2.01.

 

“Straddle Period” means a Tax period that includes, but does not end on, the
Closing Date.

 

“Target Company Cash” has the meaning set forth in Section 2.15(c)(ii).

 

“Taxes” means all federal, state, local, foreign and other income, gross
receipts, sales, use, production, ad valorem, transfer, franchise, registration,
profits, license, lease, service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp, occupation,
premium, property (real or personal), real property gains, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.

 

“Tax Claim” has the meaning set forth in Section 6.06.

 

“Tax Return” means any return, declaration, report, claim for refund,
information return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.

 

“Third Party Claim” has the meaning set forth in Section 8.05(a).

 

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

 

“Treasury Regulations” means the federal income tax regulations promulgated
under the Code, as such regulations may be amended from time to time.

 

“Undisputed Amounts” has the meaning set forth in Section 2.15(c)(ii).

 

“Union” has the meaning set forth in Section 3.21(b).

 

“Written Consent” has the meaning set forth in Section 5.04.

 

9

 

 

Article II

The Merger

 

Section 2.01 The Merger.

 

(a) The First Merger. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL and the CCC (as applicable), at
the Effective Time, Merger Sub 1 will merge with and into the Company and the
separate corporate existence of Merger Sub 1 will cease and the Company will
continue its corporate existence under the CCC as the surviving corporation in
the First Merger.

 

(b) The Second Merger. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL and CCC (as applicable), at the
Second Merger Effective Time, the Company will merge with and into Merger Sub 2
and the separate corporate existence of the Company will cease and Merger Sub 2
will continue its corporate existence under the DGCL as the surviving
corporation in the Second Merger (sometimes referred to herein as the “Surviving
Corporation”).

 

Section 2.02 Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the “Closing”) shall take place as soon as practicable,
but no later than two (2) Business Days after the last of the conditions to
Closing set forth in Article VII have been satisfied or waived (other than
conditions which, 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
or on such other date or at such other place as the Company and Parent may
mutually agree upon in writing, which may be remotely, via the electronic
exchange of documents (the day on which the Closing actually takes place being
the “Closing Date”). All proceedings to be taken, all documents to be executed
and delivered by the parties, and all payments to be made and consideration to
be delivered at the Closing will be deemed to have been taken and executed
simultaneously, and, except as permitted hereunder, no proceedings will be
deemed taken nor any documents executed or delivered until all have been taken,
executed and delivered.

 

Section 2.03 Closing Deliverables.

 

(a) At or prior to the Closing, the Company shall deliver to Parent the
following:

 

(i) resignations of the directors and officers of the Company pursuant to
Section 5.06;

 

(ii) a certificate, dated the Closing Date and signed by a duly authorized
officer of the Company, that each of the conditions set forth in Section 7.02(a)
and Section 7.02(b) have been satisfied;

 

(iii) a certificate of the Secretary (or equivalent officer) of the Company
certifying that (A) attached thereto are true and complete copies of (1) all
resolutions adopted by the unanimous written consent of the Company Board
authorizing the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby and thereby and (2)
resolutions adopted by written consent of the Stockholder approving the Merger
and adopting this Agreement, and (B) all such resolutions are in full force and
effect and are all the resolutions adopted in connection with the transactions
contemplated hereby and thereby;

 

10

 

 

(iv) a certificate of the Secretary (or equivalent officer) of the Company
certifying as to the incumbency and genuineness of the signatures of the
officers of the Company authorized to sign this Agreement, and the other
documents to be delivered hereunder and thereunder;

 

(v) a good standing certificate (or its equivalent), dated within ten (10) days
of the Closing Date, from the secretary of state or similar Governmental
Authority of the jurisdiction in which the Company is organized;

 

(vi) the Closing Transaction Expenses Certificate;

 

(vii) the Closing Indebtedness Certificate;

 

(viii) the Consideration Spreadsheet contemplated in Section 2.16(a); and

 

(ix) such other documents or instruments as Parent reasonably requests and are
reasonably necessary to consummate the transactions contemplated by this
Agreement.

 

(b) At the Closing, Parent shall deliver to the Company (or such other Person as
may be specified herein), or as applicable, shall have performed, each of the
following:

 

(i) pay to the Stockholder, in accordance with the Consideration Spreadsheet,
the Closing Merger Consideration payable to the Stockholder;

 

(ii) issue to the Stockholder a certificate evidencing the Payment Shares
(which, for all purposes in this Agreement, may be book-entry security
entitlements representing such shares);

 

(iii) pay cash in an amount equal to the Transaction Expenses, by wire transfer
of immediately available funds, to each of the payees set forth on the Closing
Transaction Expenses Certificate;

 

(iv) a certificate, dated the Closing Date and signed by a duly authorized
officer of Parent, that each of the conditions set forth in Section 7.03(a) and
Section 7.03(b) have been satisfied;

 

(v) a certificate of the Secretary (or equivalent officer) of each of Parent and
Merger Sub certifying that (A) attached thereto are (1) true and complete copies
of all resolutions adopted by the board of directors of each of Parent and
Merger Sub authorizing the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and thereby and (2)
resolutions adopted by the sole stockholder of the Merger Sub approving the
Merger and adopting this Agreement and (B) that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby and thereby;

 

(vi) a certificate of the Secretary (or equivalent officer) of Parent and Merger
Sub certifying as to the incumbency and genuineness of the signatures of the
officers of Parent and Merger Sub authorized to sign this Agreement, and the
other documents to be delivered hereunder and thereunder;

 

11

 

 

(vii) a good standing certificate (or its equivalent), dated within ten (10)
days of the Closing Date, from the secretary of state or similar Governmental
Authority of the jurisdiction in which each of Parent and Merger Sub is
organized; and

 

(viii) such other documents or instruments as the Company reasonably requests
and are reasonably necessary to consummate the transactions contemplated by this
Agreement.

 

(c) At the Closing, the Company will deliver director / officer questionnaires
for the individuals requested by Parent.

 

Section 2.04 Effective Time

 

(a) Subject to the provisions of this Agreement, as soon as practicable on the
Closing Date, Parent shall cause to be filed with the Secretary of State of the
State of Delaware a certificate of merger, in the form agreed to by the parties
(the “Certificate of First Merger”), and executed in accordance with the
relevant provisions of the DGCL, and shall make all other filings or recordings
required under the DGCL and the CCC. The First Merger shall become effective at
such time as the Certificate of First Merger has been duly filed with the
Secretary of State of the State of Delaware or at such later date or time as may
be agreed by the Company and Parent in writing and specified in the Certificate
of Fist Merger in accordance with the DGCL (the effective time of the First
Merger being hereinafter referred to as the “Effective Time”). The Company will
issue no additional securities between the Closing Date and the Effective Time.

 

(b) Immediately following the Effective Time, the Company, as the surviving
corporation in the First Merger, Parent shall cause to be filed with the
Secretary of State of the State of Delaware a certificate of merger, in the form
agreed to by the parties (the “Certificate of Second Merger,” and together the
Certificate of First Merger, the “Merger Certificates”), and executed in
accordance with the relevant provisions of the DGCL, and shall make all other
filings or recordings required under the DGCL and the CCC. The Second Merger
shall become effective at such time as the Certificate of Second Merger has been
duly filed with the Secretary of State of the State of Delaware or at such later
date or time as may be agreed by the Company and Parent in writing and specified
in the Certificate of Second Merger in accordance with the DGCL (the effective
time of the Second Merger being hereinafter referred to as the “Second Merger
Effective Time”). The Company will issue no additional securities between the
Closing Date and the Second Merger Effective Time.

 

Section 2.05 Effects of the Merger. The Merger shall have the effects set forth
herein and in the applicable provisions of the DGCL and the CCC. Without
limiting the generality of the foregoing, and subject thereto, from and after
the Second Merger Effective Time, all property, rights, privileges, immunities,
powers, franchises, licenses and authority of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions and duties of each of the Company (as the surviving corporation in
the First Merger) and Merger Sub 2 shall become the debts, liabilities,
obligations, restrictions and duties of the Surviving Corporation.

 

12

 

 

Section 2.06 Certificate of Incorporation; By-laws.

 

(a) At the Effective Time, (i) the certificate of incorporation of the Company
as in effect immediately prior to the Effective Time shall be the certificate of
incorporation of the surviving corporation in the First Merger, until thereafter
amended in accordance with the terms thereof or as provided by applicable Law,
and (ii) the by-laws of the Company as in effect immediately prior to the
Effective Time shall be the by-laws of the surviving corporation in the First
Merger until thereafter amended in accordance with the terms thereof, the
certificate of incorporation of the Company or as provided by applicable Law.

 

(b) At the Second Merger Effective Time, (i) the certificate of incorporation of
Merger Sub 2 as in effect immediately prior to the Second Merger Effective Time
shall be the certificate of incorporation of the Surviving Corporation until
thereafter amended in accordance with the terms thereof or as provided by
applicable Law, and (b) the by-laws of Merger Sub2 as in effect immediately
prior to the Second Merger Effective Time shall be the by-laws of the Surviving
Corporation until thereafter amended in accordance with the terms thereof, the
certificate of incorporation of the Surviving Corporation or as provided by
applicable Law; provided, however, in each case, that the name of the
corporation set forth therein shall be changed to the name of the Company.

 

Section 2.07 Directors and Officers. The directors and officers of Merger Sub 1,
in each case, immediately prior to the Effective Time shall, from and after the
Effective Time, be the directors and officers, respectively, of the surviving
corporation in the First Merger. The directors and officers of Merger Sub 2, in
each case, immediately prior to the Second Merger Effective Time shall, from and
after the Second Merger Effective Time, be the directors and officers,
respectively, of the Surviving Corporation. Parent and the Surviving Corporation
will enter into employment agreements in substantially the forms as contained in
Exhibit A and Exhibit B hereto with the Stockholder and Mr. David Scher,
respectively (collectively, the “Employment Agreements”), whereby, as of the
Second Merger Effective Time, the Stockholder will serve as the President of the
Surviving Corporation and Mr. David Scher will serve as Senior Product Manager
of the Surviving Corporation. The Surviving Corporation shall also engage Mana
Moarefparvar as an at-will employee. Additionally, on or prior to the Closing
Date, Parent’s Board of Directors will appoint the Stockholder to Parent’s Board
of Directors, subject to the completion of an acceptable director / officer
questionnaire and a background check.

 

Section 2.08 Effect of the Merger on Common Stock. At the Effective Time and the
Second Merger Effective Time, as applicable, as a result of the Merger and
without any action on the part of Parent, Merger Sub, the Company or the
Stockholder:

 

(a) Cancellation of Certain Company Common Shares. Shares of the Company Common
Shares (the “Shares”) that are owned by Parent, Merger Sub or the Company (as
treasury stock or otherwise) or any of their respective direct or indirect
wholly-owned Subsidiaries shall automatically be cancelled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.

 

13

 

 

(b) Conversion of Company Common Shares. Each Share issued and outstanding
immediately prior to the Effective Time or the Second Effective Time, as
applicable) (other than (i) Shares to be cancelled and retired in accordance
with Section 2.08(a)), shall be converted into the right to receive the Closing
Per Share Merger Consideration, together with any amounts that may become
payable in the future as provided in this Agreement, such as the remaining
portion of the Purchase Price, at the respective times and subject to the
contingencies specified herein and therein.

 

(c) Conversion of Merger Sub Capital Stock. Each (i) share of common stock, par
value $0.0001 per share of Merger Sub 1 issued and outstanding immediately prior
to the Effective Time shall be converted into and become one newly issued, fully
paid and non-assessable share of common stock of the Company (as the surviving
corporation in the First Merger) and (ii) share of common stock, par value
$0.0001 per share of Merger Sub 2 issued and outstanding immediately prior to
the Second Merger Effective Time shall be converted into and become one newly
issued, fully paid and non-assessable share of common stock of the Surviving
Corporation.

 

Section 2.09 Surrender and Payment.

 

(a) At the Second Merger Effective Time, all Shares outstanding immediately
prior to the Second Merger Effective Time shall automatically be cancelled and
retired and shall cease to exist, and, each holder of a certificate formerly
representing any Shares, if any (each, a “Certificate”), shall cease to have any
rights as a stockholder of the Company.

 

(b) Payment for the Shares shall be made in accordance with Section 2.03(b) at
the Closing.

 

Section 2.10 No Further Ownership Rights in Company Common Shares. All Merger
Consideration paid in accordance with the terms hereof shall be deemed to have
been paid or payable in full satisfaction of all rights pertaining to the Shares
formerly represented by a Certificate, if any, and from and after the Second
Merger Effective Time, there shall be no further registration of transfers of
Shares on the stock transfer books of the Surviving Corporation. If, after the
Second Merger Effective Time, Certificates are presented to the Surviving
Corporation, they shall be cancelled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this Article
II and elsewhere in this Agreement.

 

Section 2.11 Adjustments. Without limiting the other provisions of this
Agreement, if at any time during the period between the date of this Agreement
and the Second Merger Effective Time, any change in the outstanding shares of
capital stock of the Company shall occur, including by reason of any
reclassification, recapitalization, stock split (including reverse stock split)
or combination, exchange or readjustment of shares, or any stock dividend or
distribution paid in stock, the Merger Consideration and any other amounts
payable pursuant to this Agreement shall be appropriately adjusted to reflect
such change.

 

14

 

 

Section 2.12 Acceleration of Cash Payment. If Parent fails to pay any portion of
the Cash Payment when due, then, subject to a forty-five (45) day interest free
cure period from such due date, the total amount of the remaining unpaid Cash
Payment shall accelerate and become due immediately, and such amount shall
accrue interest at a rate equal to the lesser of 1.5% per month (18% per annum)
and the maximum rate permitted by Law, accruing from the date following the end
of such cure period until the date the total amount of the accelerated Cash
Payment and all accrued interest is paid in full.

 

Section 2.13 Withholding Rights. Each of Parent, Merger Sub and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable to any Person pursuant to this Article II such amounts as may
be required to be deducted and withheld with respect to the making of such
payment under any provision of Tax Law. To the extent that amounts are so
deducted and withheld by Parent, Merger Sub or the Surviving Corporation, as the
case may be, such amounts shall be treated for all purposes of this Agreement as
having been paid to the Person in respect of which Parent, Merger Sub or the
Surviving Corporation, as the case may be, made such deduction and withholding.

 

Section 2.14 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such Person of a bond, in such reasonable amount as
Parent may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, Parent shall issue, in exchange for such lost,
stolen or destroyed Certificate, the Merger Consideration to be paid in respect
of the Shares formerly represented by such Certificate as contemplated under
this Article II less any amounts previously paid.

 

Section 2.15 Post-Closing Affairs.

 

(a) Parent hereby grants to the Stockholder, and the Stockholder shall have, the
right through September 30, 2020 (the “Measurement Date”), to manage the affairs
of the Surviving Corporation with respect to (i) the funds held by the Company
as of the Closing, (ii) any funds earned by the Company prior to, but received
after, the Closing, (iii) any Indebtedness of the Company as set forth in the
Closing Indebtedness Certificate, which amount shall be the full amount of the
Indebtedness of the Company as of the Measurement Date and (iv) up to $50,000 in
the aggregate in all other Indebtedness incurred in the ordinary course of
business by the Surviving Corporation after the Closing. For avoidance of doubt,
after the Measurement Date, all management of financial affairs will vest with
the board of directors of the Surviving Corporation.

 

15

 

 

(b) Post-Closing Adjustment.

 

(i) Within three (3) Business Days following the Measurement Date, the
Stockholder shall prepare and deliver to Parent (A) a written determination of
Company Cash as of the Measurement Date and the Post-Closing Adjustment (the
“Company Cash Statement”), (B) a Closing Indebtedness Certificate updated as of
the Measurement Date and (C) a written determination of the Company Cash, less
outstanding Indebtedness, as of the Measurement Date.

 

(c) Examination and Review.

 

(i) Examination and Objection. After receipt of the Company Cash Statement, the
Parent shall have ten (10) days (the “Review Period”) to review and object to
the Company Cash Statement by delivering to the Stockholder a written statement
setting forth its objections in reasonable detail, indicating each disputed item
or amount and the basis for its disagreement therewith (the “Statement of
Objections”). If Parent fails to deliver the Statement of Objections before the
expiration of the Review Period, the Company Cash Statement and the Post-Closing
Adjustment, as the case may be, reflected in the Closing Cash Statement shall be
deemed to have been accepted by Parent. If Parent delivers the Statement of
Objections before the expiration of the Review Period, Parent and the
Stockholder shall negotiate in good faith to resolve such objections within
fifteen (15) days after the delivery of the Statement of Objections (the
“Resolution Period”), and, if the same are so resolved within the Resolution
Period, the Post-Closing Adjustment and the Company Cash Statement with such
changes as may have been previously agreed in writing by Parent and the
Stockholder, shall be final and binding

 

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

 

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

 

16

 

 

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

 

(d) Payment of Post-Closing Adjustment. If the Company Cash Statement as finally
determined pursuant to Section 2.15(c) above (A) exceeds $50,000 (the “Target
Company Cash”), then Parent shall pay to the Stockholder an amount equal to such
excess, within five (5) Business Days, by wire transfer of immediately available
funds accordance with the Consideration Spreadsheet, or (B) is less than the
Target Company Cash, then Parent shall deduct an amount equal to such deficiency
from the next applicable Cash Payment (as necessary, the “Post-Closing
Adjustment”).

 

(e) Adjustments for Tax Purposes. Any payments made pursuant to Section 2.15
shall be treated as an adjustment to the Purchase Price by the parties for Tax
purposes, unless otherwise required by Law.

 

Section 2.16 Consideration Spreadsheet.

 

(a) Prior to the Closing, the Company shall prepare and deliver to Parent a
spreadsheet (the “Consideration Spreadsheet”), which shall set forth, as of the
Closing Date and which shall be effective as of the Second Merger Effective
Time:

 

(i) the allocation of the Merger Consideration payable to the Stockholder and
the Stockholder’s designees, as set forth in Exhibit E attached hereto; and

 

(ii) the names, addresses and wire transfer information of the Stockholder and
the Stockholder’s designees pursuant to clause (i) above; and

 

(iii) such other information as may reasonably requested by Parent to make
payments to the Stockholder under this Article II.

 

(b) The parties agree that Parent and Merger Sub shall be entitled to rely on
the Consideration Spreadsheet in making payments under this Article II and
Parent and Merger Sub shall not be responsible for the calculations or the
determinations regarding such calculations in such Consideration Spreadsheet.

 

(c) All payments of Merger Consideration allocated and made to the Stockholder’s
designees, as set forth in Exhibit E, shall be treated for Tax purposes as
bonuses paid by the Company to such designees.

 

Section 2.17 Payroll Protection Program Loan. The Company is party to a Payroll
Protection Program loan as contained in its Financial Statements. Stockholder
will be personally responsible for seeking any applicable debt forgiveness on
such loan and in the event that such forgiveness is not granted, Stockholder
will pay all amounts due under the loan within thirty (30) days of notice by
Parent.

 

17

 

 

Section 2.18 Automobile Insurance. The Company has certain vehicles driven by
its employees that are personally insured by such employees. To the extent those
automobiles are insured personally by employees, they agree to make every effort
to name Parent as an additionally insured party.

 

Article III

Representations and warranties of the Company and the Stockholder

 

Except as set forth in the correspondingly numbered Section of the Disclosure
Schedules, (i) the Company and (ii) the Stockholder, each jointly represent and
warrant to Parent that the statements contained in this Article III are true and
correct as of the date hereof. For purposes of clarity, where it states to the
Knowledge of Company it shall include the Knowledge of the Stockholder and vice
versa.

 

Section 3.01 Organization and Qualification of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of California and has full corporate power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on its business as it has been and is currently conducted. Section
3.01 of the Disclosure Schedules sets forth each jurisdiction in which the
Company is licensed or qualified to do business, and the Company is in good
standing in each jurisdiction in which it is duly licensed or qualified to do
business.

 

Section 3.02 Authority; Board Approval.

 

(a) The Company has full corporate power and authority to enter into and perform
its obligations under this Agreement to which it is a party and, subject to, in
the case of the consummation of the Merger, adoption of this Agreement by the
affirmative vote or consent of stockholders of the Company representing a
majority of the outstanding Shares (“Requisite Company Vote”), to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement or to consummate the Merger and the
other transactions contemplated hereby and thereby, subject only, in the case of
consummation of the Merger, to the receipt of the Requisite Company Vote. The
Requisite Company Vote is the only vote or consent of the holders of any class
or series of the Company’s capital stock required to approve and adopt this
Agreement, approve the Merger and consummate the Merger and the other
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Company, and (assuming due authorization,
execution and delivery by each other party hereto) this Agreement constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.

 

18

 

 

(b) The Company Board, by resolutions duly adopted by unanimous written consent
of the directors of the Company, not subsequently rescinded or modified in any
way, has, as of the date hereof (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are fair to, and in the
best interests of, the Stockholder, (ii) approved and declared advisable the
“agreement of merger” (as such term is used in Section 251 of the DGCL)
contained in this Agreement and the transactions contemplated by this Agreement,
including the Merger, in accordance with the DGCL, (iii) directed that the
“agreement of merger” contained in this Agreement be submitted to the
Stockholder for adoption, and (iv) resolved to recommend that the Stockholder
adopt the “agreement of merger” set forth in this Agreement (collectively, the
“Company Board Recommendation”) and directed that such matter be submitted for
consideration of the Stockholder.

 

Section 3.03 No Conflicts; Consents. The execution, delivery and performance by
the Company of this Agreement, and the consummation of the transactions
contemplated hereby and thereby, including the Merger, do not and will not: (i)
conflict with or result in a violation or breach of, or default under, any
provision of the certificate of incorporation, by-laws or other organizational
documents of the Company (“Company Charter Documents”); (ii) subject to, in the
case of the Merger, obtaining the Requisite Company Vote, conflict with or
result in a violation or breach of any provision of any Law or Governmental
Order applicable to the Company; (iii) except as set forth in Section 3.03 of
the Disclosure Schedules, require the consent, notice or other action by any
Person under, conflict with, result in a violation or breach of, constitute a
default or an event that, with or without notice or lapse of time or both, would
constitute a default under, result in the acceleration of or create in any party
the right to accelerate, terminate, modify or cancel any Contract to which the
Company is a party or by which the Company is bound or to which any of their
respective properties and assets are subject (including any Material Contract)
or any Permit affecting the properties, assets or business of the Company; or
(iv) result in the creation or imposition of any Encumbrance other than
Permitted Encumbrances on any properties or assets of the Company. No consent,
approval, Permit, Governmental Order, declaration or filing with, or notice to,
any Governmental Authority is required by or with respect to the Company in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby and thereby, except for
the filing of the Merger Certificates with the Secretary of State of Delaware
and/or California and such filings as may be required under the HSR Act.

 

Section 3.04 Capitalization.

 

(a) The authorized capital stock of the Company consists of 100,000 Shares, all
of which are issued and outstanding as of the close of business on the date of
this Agreement. The Shares owned by the Stockholder constitute 100% of the
issued and outstanding securities of any type of the Company. There are no other
stockholders of the Company except for the Stockholder.

 

19

 

 

(b) Section 3.04(b) of the Disclosure Schedules set forth, as of the date
hereof, the name of each Person that is the registered owner of any Shares and
the number of Shares owned by such Person.

 

(c) (i) no subscription, warrant, option, convertible or exchangeable security,
or other right (contingent or otherwise) to purchase or otherwise acquire equity
securities of the Company is authorized or outstanding, and (ii) there is no
commitment by the Company to issue shares, subscriptions, warrants, options,
convertible or exchangeable securities, or other such rights or to distribute to
holders of any of its equity securities any evidence of indebtedness or asset,
to repurchase or redeem any securities of the Company or to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend any warrant,
option, convertible or exchangeable security or other such right. There are no
declared or accrued unpaid dividends with respect to any shares of Company
Common Shares.

 

(d) All issued and outstanding shares of Company Common Shares are (i) duly
authorized, validly issued, fully paid and non-assessable; (ii) not subject to
any preemptive rights created by statute, the Company Charter Documents or any
agreement to which the Company is a party; and (iii) free of any Encumbrances
created by the Company in respect thereof. All issued and outstanding shares of
Company Common Shares were issued in compliance with applicable Law.

 

(e) No outstanding Company Common Shares is subject to vesting or forfeiture
rights or repurchase by the Company. There are no outstanding or authorized
stock appreciation, dividend equivalent, phantom stock, profit participation or
other similar rights with respect to the Company or any of its securities.

 

(f) All distributions, dividends, repurchases and redemptions of the capital
stock (or other equity interests) of the Company were undertaken in compliance
with the Company Charter Documents then in effect, any agreement to which the
Company then was a party and in compliance with applicable Law.

 

Section 3.05 No Subsidiaries. The Company does not own, or have any interest in
any shares or have an ownership interest in any other Person.

 

20

 

 

Section 3.06 Financial Statements. Complete copies of the Company’s unaudited
financial statements consisting of the balance sheet of the Company as at
December 31 in each of the years 2019 and 2018 and the related statements of
income and retained earnings, stockholders’ equity and cash flow for the years
then ended (the “Annual Financial Statements”), and unaudited financial
statements consisting of the balance sheet of the Company as at June 30, 2020
and the related statements of income and retained earnings, stockholders’ equity
and cash flow for the six-month period then ended (the “Interim Financial
Statements” and together with the Annual Financial Statements, the “Financial
Statements”) are included in the Disclosure Schedules. The Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved, subject, in the case of the Interim Financial
Statements, to normal and recurring year-end adjustments (the effect of which
will not be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those presented in the Annual Financial
Statements). The Financial Statements are based on the books and records of the
Company, and fairly present in all material respects the financial condition of
the Company as of the respective dates they were prepared and the results of the
operations of the Company for the periods indicated. The balance sheet of the
Company as of December 31, 2019 is referred to herein as the “Balance Sheet” and
the date thereof as the “Balance Sheet Date” and the balance sheet of the
Company as of June 30, 2020 is referred to herein as the “Interim Balance Sheet”
and the date thereof as the “Interim Balance Sheet Date”. The Company maintains
a standard system of accounting established and administered in accordance with
GAAP. The Company agrees to provide audited Annual Financial Statements and
reviewed Interim Financial Statement within seventy (70) days of the Closing
Date. The Company and the Stockholder represent and warrant that the Financial
Statements are accurate and correct to the best of their Knowledge.

 

Section 3.07 Undisclosed Liabilities. The Company has no liabilities,
obligations or commitments of any nature whatsoever, asserted or unasserted,
known or unknown, absolute or contingent, accrued or unaccrued, matured or
unmatured or otherwise (“Liabilities”), except (a) those which are adequately
reflected or reserved against in the Interim Balance Sheet as of the Interim
Balance Sheet Date, (b) those which have been incurred in the ordinary course of
business consistent with past practice since the Interim Balance Sheet Date, and
(c) those which are set forth on the Closing Indebtedness Certificate.

 

Section 3.08 Absence of Certain Changes, Events and Conditions. Since the
Interim Balance Sheet Date, and other than in the ordinary course of business
consistent with past practice, there has not been, with respect to the Company,
any:

 

(a) event, occurrence or development that has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(b) amendment of the charter, by-laws or other organizational documents of the
Company;

 

(c) split, combination or reclassification of any shares of its capital stock;

 

(d) issuance, sale or other disposition of any of its capital or grant of any
options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;

 

(e) declaration or payment of any dividends or distributions on or in respect of
any of its capital stock or redemption, purchase or acquisition of its capital
stock;

 

21

 

 

(f) material change in any method of accounting or accounting practice of the
Company, except as required by GAAP or as disclosed in the notes to the
Financial Statements;

 

(g) material change in the Company’s cash management practices and its policies,
practices and procedures with respect to collection of accounts receivable,
establishment of reserves for uncollectible accounts, accrual of accounts
receivable, inventory control, prepayment of expenses, payment of trade accounts
payable, accrual of other expenses, deferral of revenue and acceptance of
customer deposits;

 

(h) entry into any Contract that would constitute a Material Contract;

 

(i) incurrence, assumption or guarantee of any indebtedness for borrowed money
except unsecured current obligations and Liabilities incurred in the ordinary
course of business consistent with past practice and those which are set forth
on the Closing Indebtedness Certificate;

 

(j) transfer, assignment, sale or other disposition of any of the assets shown
or reflected in the Balance Sheet or cancellation of any debts or entitlements;

 

(k) transfer, assignment or grant of any license or sublicense of any material
rights under or with respect to any Company Intellectual Property or Company IP
Agreements;

 

(l) material damage, destruction or loss (whether or not covered by insurance)
to its property;

 

(m) any capital investment in, or any loan to, any other Person;

 

(n) acceleration, termination, material modification to or cancellation of any
material Contract (including, but not limited to, any Material Contract) to
which the Company is a party or by which it is bound;

 

(o) any material capital expenditures;

 

(p) imposition of any Encumbrance upon any of the Company properties, capital
stock or assets, tangible or intangible;

 

(q) (i) grant of any bonuses, whether monetary or otherwise, or increase in any
wages, salary, severance, pension or other compensation or benefits in respect
of its current or former employees, officers, directors, independent contractors
or consultants, other than as provided for in any written agreements or required
by applicable Law, (ii) change in the terms of employment for any employee or
any termination of any employees for which the aggregate costs and expenses
exceed $500.00, or (iii) action to accelerate the vesting or payment of any
compensation or benefit for any current or former employee, officer, director,
independent contractor or consultant;

 

(r) hiring or promoting any person as or to (as the case may be) an officer or
hiring or promoting any employee below officer except to fill a vacancy in the
ordinary course of business;

 

22

 

 

(s) adoption, modification or termination of any: (i) employment, severance,
retention or other agreement with any current or former employee, officer,
director, independent contractor or consultant, (ii) Benefit Plan or (iii)
collective bargaining or other agreement with a Union, in each case whether
written or oral;

 

(t) any loan to (or forgiveness of any loan to), or entry into any other
transaction with, any of its stockholders or current or former directors,
officers and employees;

 

(u) entry into a new line of business or abandonment or discontinuance of
existing lines of business;

 

(v) except for the Merger, adoption of any plan of merger, consolidation,
reorganization, liquidation or dissolution or filing of a petition in bankruptcy
under any provisions of federal or state bankruptcy Law or consent to the filing
of any bankruptcy petition against it under any similar Law;

 

(w) purchase, lease or other acquisition of the right to own, use or lease any
property or assets for an amount in excess of $1,000, individually (in the case
of a lease, per annum) or $5,000 in the aggregate (in the case of a lease, for
the entire term of the lease, not including any option term), except for
purchases of inventory or supplies in the ordinary course of business consistent
with past practice;

 

(x) acquisition by merger or consolidation with, or by purchase of a substantial
portion of the assets or stock of, or by any other manner, any business or any
Person or any division thereof;

 

(y) action by the Company to make, change or rescind any Tax election, amend any
Tax Return or take any position on any Tax Return, take any action, omit to take
any action or enter into any other transaction that would have the effect of
increasing the Tax liability or reducing any Tax asset of Parent in respect of
any Post-Closing Tax Period; or

 

(z) any Contract to do any of the foregoing, or any action or omission that
would result in any of the foregoing.

 

Section 3.09 Material Contracts.

 

(a) Section 3.09(a) of the Disclosure Schedules lists each of the following
Contracts of the Company (such Contracts, together with all Contracts concerning
the occupancy, management or operation of any Real Property (including without
limitation, brokerage contracts) listed or otherwise disclosed in Section
3.10(b) of the Disclosure Schedules and all Company IP Agreements set forth in
Section 3.12(b) of the Disclosure Schedules, being “Material Contracts”):

 

(i) each Contract of the Company involving aggregate consideration in excess of
$100,000 and which, in each case, cannot be cancelled by the Company without
penalty or without more than ninety (90) days’ notice;

 

23

 

 

(ii) all Contracts that require the Company to purchase its total requirements
of any product or service from a third party or that contain “take or pay”
provisions;

 

(iii) all Contracts that provide for the indemnification by the Company of any
Person or the assumption of any Tax, environmental or other Liability of any
Person;

 

(iv) all Contracts that relate to the acquisition or disposition of any
business, a material amount of stock or assets of any other Person or any real
property (whether by merger, sale of stock, sale of assets or otherwise);

 

(v) all broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing consulting and advertising
Contracts to which the Company is a party;

 

(vi) all employment agreements and Contracts with independent contractors or
consultants (or similar arrangements) to which the Company is a party and which
are not cancellable without material penalty or without more than sixty (60)
days’ notice;

 

(vii) except for Contracts relating to trade receivables, all Contracts relating
to indebtedness (including, without limitation, guarantees) of the Company;

 

(viii) all Contracts with any Governmental Authority to which the Company is a
party (“Government Contracts”);

 

(ix) all Contracts that limit or purport to limit the ability of the Company to
compete in any line of business or with any Person or in any geographic area or
during any period of time;

 

(x) any Contracts to which the Company is a party that provide for any joint
venture, partnership or similar arrangement by the Company;

 

(xi) all collective bargaining agreements or Contracts with any Union to which
the Company is a party; and

 

(xii) any other Contract that is material to the conduct of the business of the
Company and not previously disclosed pursuant to this Section 3.09.

 

(b) Each Material Contract is valid and binding on the Company in accordance
with its terms and is in full force and effect. None of the Company or, to the
Company’s Knowledge, any other party thereto is in breach of or default under.
No event or circumstance has occurred that, with notice or lapse of time or
both, would constitute an event of default under any Material Contract or result
in a termination thereof or would cause or permit the acceleration or other
changes of any right or obligation or the loss of any benefit thereunder.
Complete and correct copies of each Material Contract (including all
modifications, amendments and supplements thereto and waivers thereunder) have
been made available to Parent.

 

24

 

 

Section 3.10 Title to Assets; Real Property.

 

(a) The Company has good and valid (and, in the case of owned Real Property,
good and marketable fee simple) title to, or a valid leasehold interest in, all
Real Property and assets reflected in the Interim Balance Sheet or acquired
thereafter prior to the execution of this Agreement, other than properties and
assets sold or otherwise disposed of in the ordinary course of business
consistent with past practice since the Interim Balance Sheet Date and assets
that are not, individually or in the aggregate, material to the conduct of the
business of the Company. All such properties and assets (including leasehold
interests) are free and clear of Encumbrances except for the following
(collectively referred to as “Permitted Encumbrances”):

 

(i) liens for Taxes not yet due and payable;

 

(ii) 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 of the Company;

 

(iii) easements, rights of way, zoning ordinances and other similar encumbrances
affecting Real Property, which do not materially impair the occupation or the
use of the Real Property for the purposes which it is currently used; or

 

(iv) other than with respect to owned Real Property, 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 of the Company.

 

(b) Section 3.10(b) of the Disclosure Schedules lists each parcel of Real
Property describes the current use of such property. With respect to owned Real
Property, the Company has delivered or made available to Parent true, complete
and correct copies of the deeds and other instruments (as recorded) by which the
Company acquired such Real Property, and copies of all title insurance policies,
opinions, abstracts and surveys in the possession of the Company and relating to
the Real Property. With respect to leased Real Property, the Company has
delivered or made available to Parent true, complete and correct copies of any
leases affecting the Real Property. The Company is not a sublessor or grantor
under any sublease or other instrument granting to any other Person any right to
the possession, lease, occupancy or enjoyment of any leased Real Property. There
are no Actions pending nor, to the Company’s Knowledge, threatened against or
affecting the Real Property or any portion thereof or interest therein in the
nature or in lieu of condemnation or eminent domain proceedings.

 

25

 

 

Section 3.11 Condition And Sufficiency of Assets. Except as set forth in Section
3.11 of the Disclosure Schedules, the buildings, plants, structures, furniture,
fixtures, machinery, equipment, vehicles and other items of tangible personal
property of the Company are structurally sound, are in good operating condition
and repair, and are adequate for the uses to which they are being put, and, to
the Company’s Knowledge, none of such buildings, plants, structures, furniture,
fixtures, machinery, equipment, vehicles and other items of tangible personal
property is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The buildings,
plants, structures, furniture, fixtures, machinery, equipment, vehicles and
other items of tangible personal property currently owned or leased by the
Company, together with all other properties and assets of the Company, are
sufficient for the continued conduct of the Company’s business after the Closing
in substantially the same manner as conducted prior to the Closing and
constitute all of the rights, property and assets necessary to conduct the
business of the Company as currently conducted.

 

Section 3.12 Intellectual Property.

 

(a) Section 3.12(a) of the Disclosure Schedules lists all (i) Company IP
Registrations and (ii) Company Intellectual Property, including software, that
are not registered but that are material to the Company’s business or
operations. All required filings and fees related to the Company IP
Registrations have been timely filed with and paid to the relevant Governmental
Authorities and authorized registrars, and all Company IP Registrations are
otherwise in good standing. The Company has provided Parent with true and
complete copies of file histories, documents, certificates, office actions,
correspondence and other materials related to all Company IP Registrations.

 

(b) Section 3.12(b) of the Disclosure Schedules list all Company IP Agreements.
The Company has provided Parent with true and complete copies of all such
Company IP Agreements, including all modifications, amendments and supplements
thereto and waivers thereunder. Each Company IP Agreement is valid and binding
on the Company in accordance with its terms and is in full force and effect.
Neither the Company nor any other party thereto is in breach of or default under
(or is alleged to be in breach of or default under), or has provided or received
any notice of breach or default of or any intention to terminate, any Company IP
Agreement.

 

(c) Except as set forth in Section 3.12(c) of the Disclosure Schedules, the
Company is the sole and exclusive legal and beneficial, and with respect to the
Company IP Registrations, record, owner of all right, title and interest in and
to the Company Intellectual Property, and has the valid right to use all other
Intellectual Property used in or necessary for the conduct of the Company’s
current business or operations, in each case, free and clear of Encumbrances
other than Permitted Encumbrances. Without limiting the generality of the
foregoing, the Company has entered into binding, written agreements with every
current and former employee, and with every current and former independent
contractor, whereby such employees and independent contractors (i) assign to the
Company any ownership interest and right they may have in the Company
Intellectual Property; and (ii) acknowledge the Company’s exclusive ownership of
all Company Intellectual Property. The Company has provided Parent with true and
complete copies of all such agreements.

 

26

 

 

(d) The consummation of the transactions contemplated hereunder will not result
in the loss or impairment of or payment of any additional amounts with respect
to, nor require the consent of any other Person in respect of, the Company’s
right to own, use or hold for use any Intellectual Property as owned, used or
held for use in the conduct of the Company’s business or operations as currently
conducted.

 

(e) The Company’s rights in the Company Intellectual Property are valid,
subsisting and enforceable. The Company has taken all reasonable steps to
maintain the Company Intellectual Property and to protect and preserve the
confidentiality of all trade secrets included in the Company Intellectual
Property, including requiring all Persons having access thereto to execute
written non-disclosure agreements.

 

(f) The conduct of the Company’s business as currently and formerly conducted,
and the products, processes and services of the Company, have not infringed,
misappropriated, diluted or otherwise violated, and do not and will not
infringe, dilute, misappropriate or otherwise violate the Intellectual Property
or other rights of any Person. No Person has infringed, misappropriated, diluted
or otherwise violated, or is currently infringing, misappropriating, diluting or
otherwise violating, any Company Intellectual Property.

 

(g) There are no Actions (including any oppositions, interferences or
re-examinations) settled, pending or threatened (including in the form of offers
to obtain a license): (i) alleging any infringement, misappropriation, dilution
or violation of the Intellectual Property of any Person by the Company; (ii)
challenging the validity, enforceability, registrability or ownership of any
Company Intellectual Property or the Company’s rights with respect to any
Company Intellectual Property; or (iii) by the Company or any other Person
alleging any infringement, misappropriation, dilution or violation by any Person
of the Company Intellectual Property. The Company is not subject to any
outstanding or prospective Governmental Order (including any motion or petition
therefor) that does or would restrict or impair the use of any Company
Intellectual Property.

 

Section 3.13 [Intentionally Omitted].

 

Section 3.14 Accounts Receivable. The accounts receivable reflected on the
Interim Balance Sheet and the accounts receivable arising after the date thereof
(a) have arisen from bona fide transactions entered into by the Company
involving the sale of goods or the rendering of services in the ordinary course
of business consistent with past practice; (b) constitute valid, undisputed
claims of the Company not subject to any known rights of set-off or other
defenses or counterclaims other than normal cash discounts accrued in the
ordinary course of business consistent with past practice; and (c) subject to a
reserve for bad debts shown on the Interim Balance Sheet or, with respect to
accounts receivable arising after the Interim Balance Sheet Date, on the
accounting records of the Company, are collectible in full . The reserve for bad
debts shown on the Interim Balance Sheet or, with respect to accounts receivable
arising after the Interim Balance Sheet Date, on the accounting records of the
Company have been determined in accordance with GAAP, consistently applied,
subject to normal year-end adjustments and the absence of disclosures normally
made in footnotes.

 

27

 

 

Section 3.15 Customers and Suppliers.

 

(a) Section 3.15(a) of the Disclosure Schedules sets forth (i) each customer who
has paid aggregate consideration to the Company for goods or services rendered
in an amount greater than or equal to $50,000 during each of the two (2) most
recent fiscal years (collectively, the “Material Customers”); and (ii) the
amount of consideration paid by each Material Customer during such periods.
Except as set forth in Section 3.15(a) of the Disclosure Schedules, the Company
has not received any notice, and, to the Company’s Knowledge, has no reason to
believe, that any of its Material Customers has ceased, or intends to cease
after the Closing, to use its goods or services or to otherwise terminate or
materially reduce its relationship with the Company.

 

(b) Section 3.15(b) of the Disclosure Schedules sets forth (i) each supplier to
whom the Company has paid consideration for goods or services rendered in an
amount greater than or equal to $50,000 during each of the two (2) most recent
fiscal years (collectively, the “Material Suppliers”); and (ii) the amount of
purchases from each Material Supplier during such periods. Except as set forth
in Section 3.15(b) of the Disclosure Schedules, the Company has not received any
notice, and, to the Company’s Knowledge, has no reason to believe, that any of
its Material Suppliers has ceased, or intends to cease, to supply goods or
services to the Company or to otherwise terminate or materially reduce its
relationship with the Company.

 

Section 3.16 Insurance. Section 3.16 of the Disclosure Schedules sets forth a
true and complete list of all current policies or binders of fire, liability,
product liability, umbrella liability, real and personal property, workers’
compensation, vehicular, directors’ and officers’ liability, fiduciary liability
and other casualty and property insurance maintained by Company and relating to
the assets, business, operations, employees, officers and directors of the
Company (collectively, the “Insurance Policies”) and true and complete copies of
such Insurance Policies have been made available to Parent. Such Insurance
Policies are in full force and effect and shall remain in full force and effect
following the consummation of the transactions contemplated by this Agreement.
The Company has not received any written notice of cancellation of, premium
increase with respect to, or alteration of coverage under, any of such Insurance
Policies. All premiums due on such Insurance Policies have either been paid or,
if due and payable prior to Closing, will be paid prior to Closing in accordance
with the payment terms of each Insurance Policy. The Insurance Policies do not
provide for any retrospective premium adjustment or other experience-based
liability on the part of the Company. All such Insurance Policies (a) are valid
and binding in accordance with their terms and (b) have not been subject to any
lapse in coverage. Except as set forth on Section 3.16 of the Disclosure
Schedules, there are no claims related to the business of the Company pending
under any such Insurance Policies as to which coverage has been questioned,
denied or disputed or in respect of which there is an outstanding reservation of
rights. The Company is not in default under, and has not otherwise failed to
comply with, in any material respect, any provision contained in any such
Insurance Policy.

 

28

 

 

Section 3.17 Legal Proceedings; Governmental Orders.

 

(a) Except as set forth in Section 3.17(a) of the Disclosure Schedules, there
are no Actions pending or, to the Company’s Knowledge, threatened (a) against or
by the Company affecting any of its properties or assets; or (b) against or by
the Company that challenges or seeks to prevent, enjoin or otherwise delay the
transactions contemplated by this Agreement. To the Company’s Knowledge, no
event has occurred or circumstances exist that may give rise to, or serve as a
basis for, any such Action.

 

(b) Except as set forth in Section 3.17(b) of the Disclosure Schedules, there
are no outstanding Governmental Orders and no unsatisfied judgments, penalties
or awards against or affecting the Company or any of its properties or assets.
The Company is in compliance with the terms of each Governmental Order set forth
in Section 3.17(b) of the Disclosure Schedules. No event has occurred or
circumstances exist that may constitute or result in (with or without notice or
lapse of time) a violation of any such Governmental Order.

 

Section 3.18 Compliance With Laws; Permits.

 

(a) Except as set forth in Section 3.18(a) of the Disclosure Schedules, the
Company is in compliance, in all material respects, with all Laws applicable to
its business.

 

(b) All Permits required for the Company to conduct its business have been
obtained by it and are valid and in full force and effect. All fees and charges
with respect to such Permits as of the date hereof have been paid in full.
Section 3.18(b) of the Disclosure Schedules lists all current Permits issued to
the Company, including the names of the Permits and their respective dates of
issuance and expiration. To the Company’s Knowledge, no event has occurred that,
with or without notice or lapse of time or both, would reasonably be expected to
result in the revocation, suspension, lapse or limitation of any Permit set
forth in Section 3.18(b) of the Disclosure Schedules.

 

Section 3.19 [Intentionally Omitted].

 

29

 

 

Section 3.20 Employee Benefit Matters.

 

(a) Section 3.20(a) of the Disclosure Schedules contains a true and complete
list of each pension, benefit, retirement, compensation, employment, consulting,
profit-sharing, deferred compensation, incentive, bonus, performance award,
phantom equity, stock or stock-based, change in control, retention, severance,
vacation, paid time off, welfare, fringe-benefit and other similar agreement,
plan, policy, program or arrangement (and any amendments thereto), in each case
whether or not reduced to writing and whether funded or unfunded, including each
“employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or
not tax-qualified and whether or not subject to ERISA, which is or has been
maintained, sponsored, contributed to, or required to be contributed to by the
Company for the benefit of any current or former employee, officer, director,
retiree, independent contractor or consultant of the Company or any spouse or
dependent of such individual, or under which the Company or any of its ERISA
Affiliates has or may have any Liability, or with respect to which Parent or any
of its Affiliates would reasonably be expected to have any Liability, contingent
or otherwise (as listed on Section 3.20(a) of the Disclosure Schedules, each, a
“Benefit Plan”). The Company has separately identified in Section 3.20(a) of the
Disclosure Schedules (i) each Benefit Plan that contains a change in control
provision and (ii) each Benefit Plan that is maintained, sponsored, contributed
to, or required to be contributed to by the Company primarily for the benefit of
employees outside of the United States (a “Non-U.S. Benefit Plan”)].

 

(b) With respect to each Benefit Plan, the Company has made available to Parent
accurate, current and complete copies of each of the following: (i) where the
Benefit Plan has been reduced to writing, the plan document together with all
amendments; (ii) where the Benefit Plan has not been reduced to writing, a
written summary of all material plan terms; (iii) where applicable, copies of
any trust agreements or other funding arrangements, custodial agreements,
insurance policies and contracts, administration agreements and similar
agreements, and investment management or investment advisory agreements, now in
effect or required in the future as a result of the transactions contemplated by
this Agreement or otherwise; (iv) copies of any summary plan descriptions,
summaries of material modifications, employee handbooks and any other written
communications (or a description of any oral communications) relating to any
Benefit Plan; (v) in the case of any Benefit Plan that is intended to be
qualified under Section 401(a) of the Code, a copy of the most recent
determination, opinion or advisory letter from the Internal Revenue Service;
(vi) in the case of any Benefit Plan for which a Form 5500 is required to be
filed, a copy of the two most recently filed Form 5500, with schedules and
financial statements attached; (vii) actuarial valuations and reports related to
any Benefit Plans with respect to the two most recently completed plan years;
(viii) the most recent nondiscrimination tests performed under the Code; and
(ix) copies of material notices, letters or other correspondence from the
Internal Revenue Service, Department of Labor, Pension Benefit Guaranty
Corporation or other Governmental Authority relating to the Benefit Plan.

 

30

 

 

(c) Except as set forth in Section 3.20(c) of the Disclosure Schedules, each
Benefit Plan and any related trust (other than any multiemployer plan within the
meaning of Section 3(37) of ERISA (each a “Multiemployer Plan”)) has been
established, administered and maintained in accordance with its terms and in
compliance with all applicable Laws (including ERISA, and the Code, and any
applicable local Laws). Each Benefit Plan that is intended to be qualified
within the meaning of Section 401(a) of the Code (a “Qualified Benefit Plan”) is
so qualified and has received a favorable and current determination letter from
the Internal Revenue Service, or with respect to a prototype plan, can rely on
an opinion letter from the Internal Revenue Service to the prototype plan
sponsor, to the effect that such Qualified Benefit Plan is so qualified and that
the plan and the trust related thereto are exempt from federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, and nothing has
occurred that could reasonably be expected to adversely affect the qualified
status of any Qualified Benefit Plan. Nothing has occurred with respect to any
Benefit Plan that has subjected or could reasonably be expected to subject the
Company or any of its ERISA Affiliates or, with respect to any period on or
after the Closing Date, Parent or any of its Affiliates, to a penalty under
Section 502 of ERISA or to tax or penalty under Section 4975 of the Code. Except
as set forth in Section 3.20(c) of the Disclosure Schedules, all benefits,
contributions and premiums relating to each Benefit Plan have been timely paid
in accordance with the terms of such Benefit Plan and all applicable Laws and
accounting principles, and all benefits accrued under any unfunded Benefit Plan
have been paid, accrued or otherwise adequately reserved to the extent required
by, and in accordance with, GAAP. All Non-U.S. Benefit Plans that are intended
to be funded and/or book-reserved are funded and/or book-reserved, as
appropriate, based upon reasonable actuarial assumptions.

 

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

 

(e) With respect to each Benefit Plan (i) no such plan is a Multiemployer
Plan/except as set forth in Section 3.20(e) of the Disclosure Schedules, no such
plan is a Multiemployer Plan, and (A) all contributions required to be paid by
the Company or its ERISA Affiliates have been timely paid to the applicable
Multiemployer Plan, (B) neither the Company nor any ERISA Affiliate has incurred
any withdrawal liability under Title IV of ERISA which remains unsatisfied, and
(C) a complete withdrawal from all such Multiemployer Plans at the Effective
Time would not result in any material liability to the Company; (ii) no such
plan is a “multiple employer plan” within the meaning of Section 413(c) of the
Code or a “multiple employer welfare arrangement” (as defined in Section 3(40)
of ERISA); (iii) no Action has been initiated by the Pension Benefit Guaranty
Corporation to terminate any such plan or to appoint a trustee for any such
plan; (iv) no such plan is subject to the minimum funding standards of Section
412 of the Code or Title IV of ERISA, and none of the assets of the Company or
any ERISA Affiliate is, or may reasonably be expected to become, the subject of
any lien arising under Section 302 of ERISA or Section 412(a) of the Code/
except as set forth in Section 3.20(e) of the Disclosure Schedules, no such plan
is subject to the minimum funding standards of Section 412 of the Code or Title
IV of ERISA, and no plan listed in Section 3.20(e) of the Disclosure Schedules
has failed to satisfy the minimum funding standards of Section 302 of ERISA or
Section 412 of the Code; and (v) no “reportable event,” as defined in Section
4043 of ERISA, has occurred with respect to any such plan.

 

31

 

 

(f) Each Benefit Plan can be amended, terminated or otherwise discontinued after
the Closing in accordance with its terms, without material liabilities to
Parent, the Company or any of their Affiliates other than ordinary
administrative expenses typically incurred in a termination event. The Company
has no commitment or obligation and has not made any representations to any
employee, officer, director, independent contractor or consultant, whether or
not legally binding, to adopt, amend, modify or terminate any Benefit Plan or
any collective bargaining agreement, in connection with the consummation of the
transactions contemplated by this Agreement or otherwise.

 

(g) Except as set forth in Section 3.20(g) of the Disclosure Schedules and other
than as required under Section 601 et. seq. of ERISA or other applicable Law, no
Benefit Plan provides post-termination or retiree welfare benefits to any
individual for any reason, and neither the Company nor any of its ERISA
Affiliates has any Liability to provide post-termination or retiree welfare
benefits to any individual or ever represented, promised or contracted to any
individual that such individual would be provided with post-termination or
retiree welfare benefits.

 

(h) Except as set forth in Section 3.20(h) of the Disclosure Schedules, there is
no pending or, to the Company’s Knowledge, threatened Action relating to a
Benefit Plan (other than routine claims for benefits), and no Benefit Plan has
within the three (3) years prior to the date hereof been the subject of an
examination or audit by a Governmental Authority or the subject of an
application or filing under or is a participant in, an amnesty, voluntary
compliance, self-correction or similar program sponsored by any Governmental
Authority.

 

(i) There has been no amendment to, announcement by the Company or any of its
Affiliates relating to, or change in employee participation or coverage under,
any Benefit Plan or collective bargaining agreement that would increase the
annual expense of maintaining such plan above the level of the expense incurred
for the most recently completed fiscal year with respect to any director,
officer, employee, independent contractor or consultant, as applicable. Neither
the Company nor any of its Affiliates has any commitment or obligation or has
made any representations to any director, officer, employee, independent
contractor or consultant, whether or not legally binding, to adopt, amend,
modify or terminate any Benefit Plan or any collective bargaining agreement.

 

(j) Each Benefit Plan that is subject to Section 409A of the Code has been
administered in compliance with its terms and the operational and documentary
requirements of Section 409A of the Code and all applicable regulatory guidance
(including notices, rulings and proposed and final regulations) thereunder. The
Company does not have any obligation to gross up, indemnify or otherwise
reimburse any individual for any excise taxes, interest or penalties incurred
pursuant to Section 409A of the Code.

 

(k) Each individual who is classified by the Company as an independent
contractor has been properly classified for purposes of participation and
benefit accrual under each Benefit Plan.

 

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(l) Except as set forth in Section 3.20(l) of the Disclosure Schedules, neither
the execution of this Agreement nor any of the transactions contemplated by this
Agreement will (either alone or upon the occurrence of any additional or
subsequent events): (i) entitle any current or former director, officer,
employee, independent contractor or consultant of the Company to severance pay
or any other payment; (ii) accelerate the time of payment, funding or vesting,
or increase the amount of compensation due to any such individual; (iii) limit
or restrict the right of the Company to merge, amend or terminate any Benefit
Plan; (iv) increase the amount payable under or result in any other material
obligation pursuant to any Benefit Plan; (v) result in “excess parachute
payments” within the meaning of Section 280G(b) of the Code; or (vi) require a
“gross-up” or other payment to any “disqualified individual” within the meaning
of Section 280G(c) of the Code.

 

Section 3.21 Employment Matters.

 

(a) Section 3.21(a) of the Disclosure Schedules contains a list of all persons
who are employees, independent contractors or consultants of the Company as of
the Closing, including any employee who is on a leave of absence of any nature,
paid or unpaid, authorized or unauthorized, and sets forth for each such
individual the following: (i) name; (ii) title or position (including whether
full or part time); (iii) hire date; (iv) current annual base compensation rate;
(v) commission, bonus or other incentive-based compensation; and (vi) a
description of the fringe benefits provided to each such individual as of the
date hereof. Except as set forth in Section 3.21(a) of the Disclosure Schedules,
as of the date hereof, all compensation, including wages, commissions and
bonuses, payable to all employees, independent contractors or consultants of the
Company for services performed on or prior to the date hereof have been paid in
full and there are no outstanding agreements, understandings or commitments of
the Company with respect to any compensation, commissions or bonuses. Further,
the Company and Stockholder represent and warrant that all employees and
consultants have been properly characterized and all taxes related thereto have
been fully paid.

 

(b) Except as set forth in Section 3.21(b) of the Disclosure Schedules, the
Company is not, and has not been for the past three (3) years, a party to, bound
by, or negotiating any collective bargaining agreement or other Material
Contract with a union, works council or labor organization (collectively,
“Union”), and there is not, and has not been for the past three (3) years, any
Union representing or purporting to represent any employee of the Company, and,
to the Company’s Knowledge, no Union or group of employees is seeking or has
sought to organize employees for the purpose of collective bargaining. Except as
set forth in Section 3.21(b) of the Disclosure Schedules, there has never been,
nor has there been any threat of, any strike, slowdown, work stoppage, lockout,
concerted refusal to work overtime or other similar labor disruption or dispute
affecting the Company or any of its employees.

 

33

 

 

(c) The Company is in compliance with the terms of the collective bargaining
agreements and other Material Contracts listed on Section 3.21(b) of the
Disclosure Schedules and in material compliance with all applicable Laws
pertaining to employment and employment practices to the extent they relate to
employees of the Company, including all Laws relating to labor relations, equal
employment opportunities, fair employment practices, employment discrimination,
harassment, retaliation, reasonable accommodation, disability rights or
benefits, immigration, wages, hours, overtime compensation, child labor, hiring,
promotion and termination of employees, working conditions, meal and break
periods, privacy, health and safety, workers’ compensation, leaves of absence
and unemployment insurance. All individuals characterized and treated by the
Company as independent contractors or consultants are properly treated as
independent contractors under all applicable Laws. All employees of the Company
classified as exempt under the Fair Labor Standards Act and state and local wage
and hour laws are properly classified. Except as set forth in Section 3.21(c),
there are no Actions against the Company pending, or to the Company’s Knowledge,
threatened to be brought or filed, by or with any Governmental Authority or
arbitrator in connection with the employment of any current or former applicant,
employee, consultant, volunteer, intern or independent contractor of the
Company, including, without limitation, any claim relating to unfair labor
practices, employment discrimination, harassment, retaliation, equal pay, wage
and hours or any other employment-related matter arising under applicable Laws.

 

Section 3.22 Taxes. Except as set forth in Section 3.22 of the Disclosure
Schedules:

 

(a) All Tax Returns required to be filed on or before the Closing Date by the
Company have been, or will be, timely filed. Such Tax Returns are, or will be,
true, complete and correct in all respects. All Taxes due and owing by the
Company (whether or not shown on any Tax Return) have been, or will be, timely
paid.

 

(b) The Company has withheld and paid each Tax required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, customer, shareholder or other party, and complied with
all information reporting and backup withholding provisions of applicable Law.

 

(c) No claim has been made by any taxing authority in any jurisdiction where the
Company does not file Tax Returns that it is, or may be, subject to Tax by that
jurisdiction.

 

(d) No extensions or waivers of statutes of limitations have been given or
requested with respect to any Taxes of the Company.

 

(e) The amount of the Company’s Liability for unpaid Taxes for all periods
ending on or before December 31, 2019 does not, in the aggregate, exceed the
amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected
on the Financial Statements. The amount of the Company’s Liability for unpaid
Taxes for all periods following the end of the recent period covered by the
Financial Statements shall not, in the aggregate, exceed the amount of accruals
for Taxes (excluding reserves for deferred Taxes) as adjusted for the passage of
time in accordance with the past custom and practice of the Company (and which
accruals shall not exceed comparable amounts incurred in similar periods in
prior years).

 

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(f) Section 3.22(f) of the Disclosure Schedules sets forth:

 

(i) the taxable years of the Company as to which the applicable statutes of
limitations on the assessment and collection of Taxes have not expired;

 

(ii) those years for which examinations by the taxing authorities have been
completed; and

 

(iii) those taxable years for which examinations by taxing authorities are
presently being conducted.

 

(g) All deficiencies asserted, or assessments made, against the Company as a
result of any examinations by any taxing authority have been fully paid.

 

(h) The Company is not a party to any Action by any taxing authority. There are
no pending or threatened Actions by any taxing authority.

 

(i) The Company has delivered to Parent copies of all federal, state, local and
foreign income, franchise and similar Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by, the Company for
all Tax periods ending after 2017.

 

(j) There are no Encumbrances for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company.

 

(k) The Company is not a party to, or bound by, any Tax indemnity, Tax sharing
or Tax allocation agreement.

 

(l) No private letter rulings, technical advice memoranda or similar agreement
or rulings have been requested, entered into or issued by any taxing authority
with respect to the Company.

 

(m) The Company has not been a member of an affiliated, combined, consolidated
or unitary Tax group for Tax purposes. The Company has no Liability for Taxes of
any Person (other than the Company) under Treasury Regulations Section 1.1502-6
(or any corresponding provision of state, local or foreign Law), as transferee
or successor, by contract or otherwise.

 

(n) The Company will not be required to include any item of income in, or
exclude any item or deduction from, taxable income for taxable period or portion
thereof ending after the Closing Date as a result of:

 

(i) any change in a method of accounting under Section 481 of the Code (or any
comparable provision of state, local or foreign Tax Laws), or use of an improper
method of accounting, for a taxable period ending on or prior to the Closing
Date;

 

(ii) an installment sale or open transaction occurring on or prior to the
Closing Date;

 

35

 

 

(iii) a prepaid amount received on or before the Closing Date;

 

(iv) any closing agreement under Section 7121 of the Code, or similar provision
of state, local or foreign Law; or

 

(v) any election under Section 108(i) of the Code.

 

(o) The Company is not, nor has it been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(a) of the Code.

 

(p) The Company has not been a “distributing corporation” or a “controlled
corporation” in connection with a distribution described in Section 355 of the
Code.

 

(q) The Company is not, and has not been, a party to, or a promoter of, a
“reportable transaction” within the meaning of Section 6707A(c)(1) of the Code
and Treasury Regulations Section 1.6011 4(b).

 

(r) There is currently no limitation on the utilization of net operating losses,
capital losses, built-in losses, tax credits or similar items of the Company
under Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury
Regulations thereunder (and comparable provisions of state, local or foreign
Law).

 

(s) Section 3.22(s) of the Disclosure Schedules sets forth all foreign
jurisdictions in which the Company is subject to Tax, is engaged in business or
has a permanent establishment. The Company has not entered into a gain
recognition agreement pursuant to Treasury Regulations Section 1.367(a)-8. The
Company has not transferred an intangible the transfer of which would be subject
to the rules of Section 367(d) of the Code.

 

(t) No property owned by the Company is (i) required to be treated as being
owned by another person pursuant to the so-called “safe harbor lease” provisions
of former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended,
(ii) subject to Section 168(g)(1)(A) of the Code, or (iii) subject to a
disqualified leaseback or long-term agreement as defined in Section 467 of the
Code.

 

Section 3.23 Books and Records. The minute books and stock record books of the
Company, all of which have been made available to Parent, are complete and
correct and have been maintained in accordance with sound business practices. At
the Closing, all of those books and records will be in the possession of the
Company. To the extent required by Law, approval of all material actions or
contracts undertaken by the Company since January 2, 2018 have been accurately
described and documented in the minute books.

 

Section 3.24 Related Party Transactions. No executive officer or director of the
Company or any person owning 5% of the Shares (or any of such person’s immediate
family members or Affiliates or associates) is a party to any Contract with or
binding upon the Company or any of its assets, rights or properties or has any
interest in any property owned by the Company or has engaged in any transaction
with any of the foregoing within the last twelve (12) months.

 

36

 

 

Section 3.25 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.

 

Section 3.26 No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement (including the
related portions of the Disclosure Schedules), neither the Company nor any other
Person has made or makes any other express or implied representation or
warranty, either written or oral, on behalf of the Company.

 

Section 3.27 Accredited Status. At the time the Stockholder is offered the
Payment Shares, the Stockholder is an “accredited investor” as defined in Rule
501(a) under the Securities Act of 1933, as amended.

 

Section 3.28 Experience of Stockholder. The Stockholder, either alone or
together with his representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in and ownership of the
Payment Shares, and has so evaluated the merits and risks of such investment and
ownership of such securities. The Stockholder is able to bear the economic risk
of an investment in the Payment Shares and, at the present time, is able to
afford a complete loss of the value of such Payment Shares.

 

Section 3.29 General Solicitation. The Stockholder is not, to his Knowledge,
purchasing / receiving the Payment Shares as a result of any advertisement,
article, notice or other communication regarding the Payment Shares published in
any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or, to the Knowledge of the Stockholder, any other
general solicitation or general advertisement.

 

Section 3.30 Access to Information. The Stockholder acknowledges that he has had
the opportunity to review this Agreement (including all exhibits and schedules
thereto) and has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of Parent
concerning the terms and conditions of the offering of the Payment Shares and
the merits and risks of investing / receiving the Payment Shares; (ii) access to
information about Parent and its financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information that Parent possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to the investment. The Stockholder acknowledges and agrees that neither Parent,
nor any Affiliate of Parent has provided such the Stockholder with any
information or advice with respect to the Payment Shares nor is such information
or advice necessary or desired. In connection with the issuance of the Payment
Shares to the Stockholder, neither Parent nor any of its Affiliates has acted as
a financial advisor or fiduciary to the Stockholder.

 

37

 

 

Section 3.31 Legend on Payment Shares. The Stockholder understands that there
are substantial restrictions on the transferability of the Payment Shares and
that the certificates or book-entry security entitlements representing the
Payment Shares shall bear a restrictive legend in substantially the following
form:

 

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

The Parent shall be obligated to promptly reissue unlegended certificates upon
the request of the Stockholder (x) at such time as the holding period under Rule
144 or another applicable exemption from the registration requirements of the
Securities Act of 1933, as amended, has been satisfied or (y) at such time as a
registration statement is available for the transfer of the Payment Shares.

 

Article IV

Representations and warranties of parent and merger sub

 

Except as set forth in the correspondingly numbered Section of the Disclosure
Schedules, Parent and Merger Sub represent and warrant to the Company that the
statements contained in this Article IV are true and correct as of the date
hereof.

 

Section 4.01 Organization and Authority of Parent and Merger Sub. Each of Parent
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation. Each of Parent
and Merger Sub has full corporate power and authority to enter into and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the consummation by Parent and
Merger Sub of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of Parent and Merger
Sub and no other corporate proceedings on the part of Parent and Merger Sub are
necessary to authorize the execution, delivery and performance of this Agreement
or to consummate the Merger and the other transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by Parent and
Merger Sub, and (assuming due authorization, execution and delivery by each
other party hereto) this Agreement constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against Parent and Merger Sub in
accordance with its terms.

 

38

 

 

Section 4.02 No Conflicts; Consents. The execution, delivery and performance by
Parent and Merger Sub of this Agreement, and the consummation of the
transactions contemplated hereby and thereby, do not and will not: (a) conflict
with or result in a violation or breach of, or default under, any provision of
the certificate of incorporation, by-laws or other organizational documents of
Parent or Merger Sub; (b) conflict with or result in a violation or breach of
any provision of any Law or Governmental Order applicable to Parent or Merger
Sub; or (c) require the consent, notice or other action by any Person under any
Contract to which Parent or Merger Sub is a party. No consent, approval, Permit,
Governmental Order, declaration or filing with, or notice to, any Governmental
Authority is required by or with respect to Parent or Merger Sub in connection
with the execution, delivery and performance of this Agreement, except for the
filing of the Merger Certificates with the Secretary of State of Delaware and/or
California and such filings as may be required under the HSR Act.

 

Section 4.03 No Prior Merger Sub Operations. Merger Sub was formed solely for
the purpose of effecting the Merger and has not engaged in any business
activities or conducted any operations other than in connection with the
transactions contemplated hereby.

 

Section 4.04 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Merger Sub.

 

Section 4.05 Sufficiency of Funds; Solvency. Parent has sufficient cash on hand
or other sources of immediately available funds to enable it to make payment of
the Purchase Price and consummate the transactions contemplated by this
Agreement. As of the date of this Agreement and immediately prior to the
Closing, Parent is able to pay its current debts and obligations in the ordinary
course of business as they become due. Immediately after giving effect to
transactions contemplated hereby, Parent and the Surviving Corporation shall be
able to pay their debts and obligations in the ordinary course of business as
they become due. In consummating the transactions contemplated hereby, Parent
does not intend to hinder, delay or defraud any present or future creditors of
Parent, Merger Sub, the Company, or the Surviving Corporation.

 

39

 

 

Section 4.06 Legal Proceedings. Except with respect to any Actions which could
not result in a Materially Adverse Effect, there are no Actions pending or, to
Parent’s or Merger Sub’s knowledge, threatened against or by Parent, Merger Sub
or any of their respective Affiliates (a) affecting any of its properties or
assets or (b) that challenge or seek to prevent, enjoin or otherwise delay the
transactions contemplated by this Agreement. No event has occurred or
circumstances exist that may give rise or serve as a basis for any such Action.

 

Section 4.07 Independent Investigation. Parent and Merger Sub have conducted
their own independent investigation, review and analysis of the business,
results of operations, prospects, condition (financial or otherwise) or assets
of the Company, and acknowledges that they have been provided adequate access to
the personnel, properties, assets, premises, books and records and other
documents and data of the Company for such purpose. Parent and Merger Sub
acknowledge and agree that (a) in making their decision to enter into this
Agreement and any ancillary documents and to consummate the transactions
contemplated hereby and thereby, Parent and Merger Sub have relied solely upon
their own investigation and the representations and warranties of the Company
set forth in this Agreement (including the related portions of the Disclosure
Schedules), and (b) neither the Company nor any other Person has made any
representation or warranty as to the Company or this Agreement, except as
expressly set forth in this Agreement (including the related portions of the
Disclosure Schedules).

 

Article V

Covenants

 

Section 5.01 Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as otherwise provided in this Agreement or consented
to in writing by Parent (which consent shall not be unreasonably withheld or
delayed), the Company shall (x) conduct the business of the Company in the
ordinary course of business consistent with past practice; and (y) use
reasonable best efforts to maintain and preserve intact the current
organization, business and franchise of the Company and to preserve the rights,
franchises, goodwill and relationships of its employees, customers, lenders,
suppliers, regulators and others having business relationships with the Company.
Without limiting the foregoing, from the date hereof until the Closing Date, the
Company shall:

 

(a) preserve and maintain all of its Permits;

 

(b) pay its debts, Taxes and other obligations when due;

 

(c) maintain the properties and assets owned, operated or used by it in the same
condition as they were on the date of this Agreement, subject to reasonable wear
and tear;

 

40

 

 

(d) continue in full force and effect without modification all Insurance
Policies, except as required by applicable Law;

 

(e) defend and protect its properties and assets from infringement or
usurpation;

 

(f) perform all of its obligations under all Contracts relating to or affecting
its properties, assets or business;

 

(g) maintain its books and records in accordance with past practice;

 

(h) comply in all material respects with all applicable Laws; and

 

(i) not take or permit any action that would cause any of the changes, events or
conditions described in Section 3.08 to occur except to convert the Company from
a subchapter S corporation to a C corporation in conjunction with the Merger.

 

Section 5.02 Access to Information.

 

(a) From the date hereof until the Closing, the Company shall (a) afford Parent
and its Representatives full and free access to and the right to inspect all of
the Real Property, properties, assets, premises, books and records, Contracts
and other documents and data related to the Company; (b) furnish Parent and its
Representatives with such financial, operating and other data and information
related to the Company as Parent or any of its Representatives may reasonably
request; and (c) instruct the Representatives of the Company to cooperate with
Parent in its investigation of the Company. Any investigation pursuant to this
Section 5.02 shall be conducted in such manner as not to interfere unreasonably
with the conduct of the business of the Company. No investigation by Parent or
other information received by Parent shall operate as a waiver or otherwise
affect any representation, warranty or agreement given or made by the Company in
this Agreement.

 

(b) Each of Parent, Merger Sub and the Company covenants that until such time as
the transactions contemplated by this Agreement are publicly disclosed by
Parent, such party will maintain the confidentiality of the existence and terms
of this transaction and the confidential information learned during the course
of the negotiation of the transactions contemplated hereby.

 

Section 5.03 No Solicitation of Other Bids.

 

(a) The Company shall not, and shall not authorize or permit any of its
Affiliates or any of its or their Representatives to, directly or indirectly,
(i) encourage, solicit, initiate, facilitate or continue inquiries regarding an
Acquisition Proposal; (ii) enter into discussions or negotiations with, or
provide any information to, any Person concerning a possible Acquisition
Proposal; or (iii) enter into any agreements or other instruments (whether or
not binding) regarding an Acquisition Proposal. The Company shall immediately
cease and cause to be terminated, and shall cause its Affiliates and all of its
and their Representatives to immediately cease and cause to be terminated, all
existing discussions or negotiations with any Persons conducted heretofore with
respect to, or that could lead to, an Acquisition Proposal. For purposes hereof,
“Acquisition Proposal” shall mean any inquiry, proposal or offer from any Person
(other than Parent or any of its Affiliates) concerning (i) a merger,
consolidation, liquidation, recapitalization, share exchange or other business
combination transaction involving the Company; (ii) the issuance or acquisition
of shares of capital stock or other equity securities of the Company; or (iii)
the sale, lease, exchange or other disposition of any significant portion of the
Company’s properties or assets.

 

41

 

 

(b) In addition to the other obligations under this Section 5.03, the Company
shall promptly (and in any event within one (1) Business Day after receipt
thereof by the Company or its Representatives) advise Parent orally and in
writing of any Acquisition Proposal, any request for information with respect to
any Acquisition Proposal, or any inquiry with respect to or which could
reasonably be expected to result in an Acquisition Proposal, the material terms
and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the Person making the same.

 

(c) The Company agrees that the rights and remedies for noncompliance with this
Section 5.03 shall include having such provision specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to Parent and that
money damages would not provide an adequate remedy to Parent.

 

Section 5.04 Stockholder Consent. The Company will complete and have executed,
the Requisite Company Vote pursuant to a written consent of the Stockholder (the
“Written Consent”).

 

Section 5.05 Notice of Certain Events.

 

(a) From the date hereof until the Closing, the Company shall promptly notify
Parent in writing of:

 

(i) any fact, circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (B) has resulted in, or could
reasonably be expected to result in, any representation or warranty made by the
Company hereunder not being true and correct or (C) has resulted in, or could
reasonably be expected to result in, the failure of any of the conditions set
forth in Section 7.02 to be satisfied;

 

(ii) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

 

(iii) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; and

 

(iv) any Actions commenced or, to the Company’s Knowledge, threatened against,
relating to or involving or otherwise affecting the Company that, if pending on
the date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.17 or that relates to the consummation of the transactions
contemplated by this Agreement.

 

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(b) Parent’s receipt of information pursuant to this Section 5.05 shall not
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by the Company in this Agreement (including Section 8.02
and Section 9.01(b)) and shall not be deemed to amend or supplement the
Disclosure Schedules.

 

Section 5.06 Resignations. The Company shall deliver to Parent written
resignations, effective as of the Closing Date, of the officers and directors of
the Company set forth on Section 5.06 of the Disclosure Schedules on the Closing
Date other than the Stockholder’s continued service as the Company’s President
subsequent to the Closing Date.1

 

Section 5.07 Governmental Approvals and Consents

 

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be
made, all filings and submissions (including those under the HSR Act) required
under any Law applicable to such party or any of its Affiliates; and (ii) use
reasonable best efforts to obtain, or cause to be obtained, all consents,
authorizations, orders and approvals from all Governmental Authorities that may
be or become necessary for its execution and delivery of this Agreement and the
performance of its obligations pursuant to this Agreement. Each party shall
cooperate fully with the other party and its Affiliates in promptly seeking to
obtain all such consents, authorizations, orders and approvals. The parties
hereto shall not willfully take any action that will have the effect of
delaying, impairing or impeding the receipt of any required consents,
authorizations, orders and approvals.

 

(b) The Company and Parent shall use reasonable best efforts to give all notices
to, and obtain all consents from, all third parties that are described in
Section 3.02 and of the Disclosure Schedules.

 

(c) Without limiting the generality of the parties’ undertakings pursuant to
subsections (a) and (b) above, each of the parties hereto shall use all
reasonable best efforts to:

 

(i) respond to any inquiries by any Governmental Authority regarding antitrust
or other matters with respect to the transactions contemplated by this
Agreement;

 

(ii) avoid the imposition of any order or the taking of any action that would
restrain, alter or enjoin the transactions contemplated by this; and

 

(iii) in the event any Governmental Order adversely affecting the ability of the
parties to consummate the transactions contemplated by this Agreement has been
issued, to have such Governmental Order vacated or lifted.

 

1 NTD: To be confirmed.

 

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(d) All analyses, appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of either party
before any Governmental Authority or the staff or regulators of any Governmental
Authority, in connection with the transactions contemplated hereunder (but, for
the avoidance of doubt, not including any interactions between the Company and
Governmental Authorities in the ordinary course of business, any disclosure
which is not permitted by Law or any disclosure containing confidential
information) shall be disclosed to the other party hereunder in advance of any
filing, submission or attendance, it being the intent that the parties will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any such analyses, appearances, meetings,
discussions, presentations, memoranda, briefs, filings, arguments, and
proposals. Each party shall give notice to the other party with respect to any
meeting, discussion, appearance or contact with any Governmental Authority or
the staff or regulators of any Governmental Authority, with such notice being
sufficient to provide the other party with the opportunity to attend and
participate in such meeting, discussion, appearance or contact.

 

(e) Notwithstanding the foregoing, nothing in this Section 5.07 shall require,
or be construed to require, Parent or any of its Affiliates to agree to (i)
sell, hold, divest, discontinue or limit, before or after the Closing Date, any
assets, businesses or interests of Parent, the Company or any of their
respective Affiliates; (ii) any conditions relating to, or changes or
restrictions in, the operations of any such assets, businesses or interests
which, in either case, could reasonably be expected to result in a Material
Adverse Effect or materially and adversely impact the economic or business
benefits to Parent of the transactions contemplated by this Agreement; or (iii)
any material modification or waiver of the terms and conditions of this
Agreement.

 

Section 5.08 Reserved.

 

Section 5.09 Closing Conditions From the date hereof until the Closing, each
party hereto shall use reasonable best efforts to take such actions as are
necessary to expeditiously satisfy the closing conditions set forth in Article
VII hereof.

 

Section 5.10 Public Announcements. Unless otherwise required by applicable Law
or stock exchange requirements (based upon the reasonable advice of counsel), no
party to this Agreement shall make any public announcements in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written consent of the other party (which
consent shall not be unreasonably withheld or delayed), and the parties shall
cooperate as to the timing and contents of any such announcement.

 

Section 5.11 Further Assurances. At and after the Second Merger Effective Time,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Corporation any
and all right, title and interest in, to and under any of the rights, properties
or assets of the Company acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger.

 

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Section 5.12 [Intentionally Omitted].

 

Section 5.13 Non-Compete Agreements. Except for providing services to the
Surviving Corporation or Parent, for a period of five (5) years from the
Closing, the Stockholder agrees not to (i) be employed by, or render services
to, any person, firm or entity of any type engaged directly or indirectly in the
business of in-person or virtual investor conferences (a “Competitive
Business”), (ii) own, manage, operate, control, assist, consult, advise or
participate in the ownership, management, operation or control of any
Competitive Business, or otherwise engage in any Competitive Business for the
Stockholder’s own account as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, trustee, consultant, advisor or
in any other relationship or capacity. Notwithstanding the foregoing, this
Section 5.13 shall not preclude the Stockholder from investing his personal
assets in the securities of any corporation or other business entity which is
engaged in a Competitive Business if such securities are traded on a national
stock exchange, through an automated inter-dealer quotation system or in the
over-the-counter-market and if such investment does not result in the Executive
beneficially owning, at any time, more than 2% of the class of publicly-traded
equity securities of such Competitive Business. Notwithstanding the foregoing,
in the event Parent fails to make a Cash Payment when due and such failure
remains uncured pursuant to Section 2.12 for a period of one hundred eighty
(180) days following such due date, the Stockholder shall be released from any
and all restrictions imposed under this Section 5.13 and the provisions of this
Section 5.13 shall be null and void.

 

Section 5.14 Rollover of 401(k) Plan Accounts. Parent shall allow the rollover
of the Stockholder’s and Mana Moarefparvar’s accounts under the Company’s 401(k)
plan into Parent’s individual retirement account plan or to any third party
administrator selected by the Stockholder and Mana Moarefparvar.

 

Section 5.15 Other Matters. Following the Closing, Parent and the Surviving
Corporation shall cooperate with the Stockholder as reasonably necessary to
effectuate the assignment from the Company to the Stockholder of the rights in
and to the trademarks set forth in Section 5.15 of the Disclosure Schedules (the
“Excluded Trademarks”).

 

Section 5.16 Other Matters. Following the Closing, Parent shall pay, or cause to
be paid, to the Stockholder, any and all funds received by the Surviving
Corporation in connection with The Fortune Film Fund II, LLC.

 

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Article VI
Tax matters

 

Section 6.01 Tax Covenants.

 

(a) Parent, the Company, its Representatives and the Stockholder agree that, for
federal income tax purposes, the First Merger and the Second Merger should be
treated together as one integrated transaction that is a “reorganization” within
the meaning of Code Section 368(a)(2)(D) (the “Intended Tax Treatment”). Parent
or its affiliates (including the Merger Sub) shall not make or permit to be made
any election under Section 388 or Section 336 of the Code or any similar
provision of state, local, or non-U.S. Tax law with respect to any transactions
contemplated herein. Notwithstanding anything to the contrary contained in this
Agreement, the covenant contained in this Section shall survive the Closing
indefinitely. None of Parent, the Company, the Merger Sub or the Stockholder
shall take any actions, including taking any position on any Tax Return or other
similar document, or take any other Tax reporting position for federal, state
and local income Tax purposes, inconsistent with the Intended Tax Treatment;
provided, however, that after reasonable written notice and consultation with
the other parties, a party may settle any audit or other claim initiated by a
Taxing authority concerning the Intended Tax Treatment that does not result in a
taxable exchange by the Stockholder otherwise intended to be tax-free pursuant
to Section 354 of the Code. In the event of an audit or claim that any exchange
by the Stockholder does not qualify as a tax-free exchange pursuant to Section
354 of the Code, the Stockholder shall have the right to assume the defense of
such claim, at the Stockholder’s expense.

 

(b) The parties agree that the Company shall cease to exist and thus its final
taxable year shall end on the date of the First Merger. The Stockholder shall
timely prepare and file (or cause to be timely prepared and filed) the final S
Corporation Tax Returns for the Company required to be filed after the Closing
Date (each, a “Post-Closing Tax Return”). All Post-Closing Tax Returns shall be
prepared in accordance with past practice of the Company except as otherwise
required by applicable Law. The Stockholder shall timely pay (or cause to be
paid) all Taxes shown to be due and payable on all Post-Closing Tax Returns. The
Stockholder shall provide Parent with copies of all such Post-Closing Tax
Returns at least twenty (20) days prior to the due date thereof (giving effect
to any extensions thereto) and shall consider in good faith any written comments
provided by Parent with respect to such Post-Closing Tax Return.

 

(c) For purposes of allocating Taxes payable for a Straddle Period, the portion
of such Taxes relating to the Pre-Closing Tax Period portion thereof shall: (i)
in the case of all Taxes not based upon or related to income or receipts, be
equal to the amount of such Tax for the entire Straddle Period, multiplied by a
fraction, the numerator of which is the number of days in the portion of the
Straddle Period ending on and including the Closing Date, and the denominator of
which is the number of days in the entire Straddle Period, and (ii) in the case
of any Tax based upon or related to income or receipts be equal to the amount
payable if the relevant Straddle Period ended on and including the Closing Date.

 

46

 

 

(d) Without the prior written consent of Parent, prior to the Closing, the
Company, its Representatives and the Stockholder shall not make, change or
rescind any Tax election, amend any Tax Return or take any position on any Tax
Return, take any action, omit to take any action or enter into any other
transaction that would have the effect of increasing the Tax liability or
reducing any Tax asset of Parent or the Surviving Corporation in respect of any
Post-Closing Tax Period. The Company agrees that Parent is to have no liability
for any Tax resulting from any action of the Company, any of its Representatives
or the Stockholder. The Stockholder shall indemnify and hold harmless Parent
against any such Tax or reduction of any Tax asset.

 

(e) All transfer, documentary, sales, use, stamp, registration, value added and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any real property transfer Tax and any
other similar Tax) shall be borne and paid by the Stockholder when due. The
Stockholder shall timely file any Tax Return or other document with respect to
such Taxes or fees (and Parent shall cooperate with respect thereto as
necessary).

 

Section 6.02 Termination of Existing Tax Sharing Agreements. Any and all
existing Tax sharing agreements (whether written or not) binding upon the
Company shall be terminated as of the Closing Date. After such date neither the
Company nor any of its Representatives shall have any further rights or
liabilities thereunder.

 

Section 6.03 Tax Indemnification. Subject to the applicable conditions and
limitations set forth herein, the Stockholder shall indemnify the Company,
Parent, and each Parent Indemnitee and hold them harmless from and against (a)
any Loss attributable to any breach of or inaccuracy in any representation or
warranty made in Section 3.22; (b) any Loss attributable to any breach or
violation of, or failure to fully perform, any covenant, agreement, undertaking
or obligation in Article VI; (c) all Taxes of the Company or relating to the
business of the Company for all Pre-Closing Tax Periods; (d) all Taxes of any
member of an affiliated, consolidated, combined or unitary group of which the
Company (or any predecessor of the Company) is or was a member on or prior to
the Closing Date by reason of a liability under Treasury Regulation Section
1.1502-6 or any comparable provisions of foreign, state or local Law; and (e)
any and all Taxes of any person imposed on the Company arising under the
principles of transferee or successor liability or by contract, relating to an
event or transaction occurring before the Closing Date. In each of the above
cases, together with any out-of-pocket fees and expenses (including attorneys’
and accountants’ fees) incurred in connection therewith, the Stockholder shall
reimburse Parent for any Taxes of the Company that are the responsibility of the
Stockholder pursuant to this Section 6.03 within ten Business Days after payment
of such Taxes by Parent or the Company.

 

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Section 6.04 Tax Returns

 

(a) The Company shall prepare and timely file, or cause to be prepared and
timely filed, all Tax Returns required to be filed by it that relate to the
Pre-Closing Tax Period and are due after the Closing Date (taking into account
any extensions), and shall timely pay all Taxes that are due and payable on or
before the Closing Date (taking into account any extensions), and shall timely
pay all Taxes that are due and payable on or before the Closing Date. Any such
Tax Return shall be prepared in a manner consistent with past practice (unless
otherwise required by Law).

 

Section 6.05 [Intentionally Omitted].

 

Section 6.06 Contests. Parent agrees to give written notice to the Stockholder
of the receipt of any written notice by the Company, Parent or any of Parent’s
Affiliates which involves the assertion of any claim, or the commencement of any
Action, in respect of which an indemnity may be sought by Parent pursuant to
this Article VI (a “Tax Claim”); provided, that failure to comply with this
provision shall not affect Parent’s right to indemnification hereunder. Parent
shall control the contest or resolution of any Tax Claim; provided, however,
that Parent shall obtain the prior written consent of the Stockholder (which
consent shall not be unreasonably withheld or delayed) before entering into any
settlement of a claim or ceasing to defend such claim; and, provided further,
that the Stockholder shall be entitled to participate in the defense of such
claim and to employ counsel of its choice for such purpose, the fees and
expenses of which separate counsel shall be borne solely by the Stockholder.

 

Section 6.07 Cooperation and Exchange of Information. The Stockholder, the
Company and Parent shall provide each other with such cooperation and
information as either of them reasonably may request of the others in filing any
Tax Return pursuant to this Article VI or in connection with any audit or other
proceeding in respect of Taxes of the Company. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules, related work papers and documents relating
to rulings or other determinations by tax authorities. Each of the Stockholder,
the Company and Parent shall retain all Tax Returns, schedules and work papers,
records and other documents in its possession relating to Tax matters of the
Company for any taxable period beginning before the Closing Date until the
expiration of the statute of limitations of the taxable periods to which such
Tax Returns and other documents relate, without regard to extensions except to
the extent notified by any of the other parties in writing of such extensions
for the respective Tax periods. Prior to transferring, destroying or discarding
any Tax Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of the Company for any taxable period
beginning before the Closing Date, the Stockholder, the Company or Parent (as
the case may be) shall provide the other parties with reasonable written notice
and offer the other parties the opportunity to take custody of such materials.

 

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Section 6.08 Tax Treatment of Indemnification Payments. Any indemnification
payments pursuant to this Article VI shall be treated as an adjustment to the
Purchase Price by the parties for Tax purposes, unless otherwise required by
Law.

 

Section 6.09 Payments to Parent. Any amounts payable to Parent pursuant to this
Article VI shall be satisfied: (i) from a reduction in the final Cash Payment.

 

Section 6.10 Limitations on Tax Indemnification The indemnification provided for
in Section 6.03 shall be subject to the following limitation:

 

(a) The Stockholder shall not be required to indemnify any Persons in respect of
any Losses for which indemnification is claimed under Section 6.03 unless and
until the aggregate amount of all Losses in respect of indemnification under
Section 6.03 and Article VIII exceeds $100,000, in which event the Stockholder
shall be required to indemnify such Persons for all such Losses from the first
dollar. The aggregate amount of all Losses for which the Stockholder shall be
liable pursuant to Section 6.03 and Article VIII shall not exceed $1,000,000.

 

Section 6.11 Survival. Notwithstanding anything in this Agreement to the
contrary, the provisions of Section 3.22 and this Article VI shall survive for
the full period of all applicable statutes of limitations (giving effect to any
waiver, mitigation or extension thereof) plus 60 days.

 

Section 6.12 Overlap. To the extent that any obligation or responsibility
pursuant to Article VIII may overlap with an obligation or responsibility
pursuant to this Article VI, the provisions of this Article VI shall govern.

 

Article VII

Conditions to closing

 

Section 7.01 Conditions to Obligations of All Parties. The obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:

 

(a) This Agreement shall have been duly adopted by the Requisite Company Vote.

 

(b) The filings of Parent and the Company pursuant to the HSR Act, if any, shall
have been made and the applicable waiting period and any extensions thereof
shall have expired or been terminated.

 

(c) No Governmental Authority shall have enacted, issued, promulgated, enforced
or entered any Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal, otherwise
restraining or prohibiting consummation of such transactions or causing any of
the transactions contemplated hereunder to be rescinded following completion
thereof.

 

49

 

 

(d) The Company shall have received all consents, authorizations, orders and
approvals from the Governmental Authorities referred to in Section 3.02 and
Parent shall have received all consents, authorizations, orders and approvals
from the Governmental Authorities referred to in Section 4.02, in each case, in
form and substance reasonably satisfactory to Parent and the Company, and no
such consent, authorization, order and approval shall have been revoked.

 

Section 7.02 Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or Parent’s waiver, at or prior to
the Closing, of each of the following conditions:

 

(a) Other than the representations and warranties of the Company contained in
Section 3.01, Section 3.02(a), Section 3.04, Section 3.06 and Section 3.25, the
representations and warranties of the Company contained in this Agreement, and
any certificate or other writing delivered pursuant hereto shall be true and
correct in all respects (in the case of any representation or warranty qualified
by materiality or Material Adverse Effect) or in all material respects (in the
case of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date,
the accuracy of which shall be determined as of that specified date in all
respects). The representations and warranties of the Company contained in
Section 3.01, Section 3.02(a), Section 3.04, Section 3.06 and Section 3.25 shall
be true and correct in all respects on and as of the date hereof and on and as
of the Closing Date with the same effect as though made at and as of such date
(except those representations and warranties that address matters only as of a
specified date, the accuracy of which shall be determined as of that specified
date in all respects).

 

(b) The Company shall have duly performed and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date;.

 

(c) No Action shall have been commenced against Parent, Merger Sub or the
Company, which would prevent the Closing. No injunction or restraining order
shall have been issued by any Governmental Authority, and be in effect, which
restrains or prohibits any transaction contemplated hereby.

 

(d) All approvals, consents and waivers that are listed on Section 3.02 of the
Disclosure Schedules shall have been received, and executed counterparts thereof
shall have been delivered to Parent at or prior to the Closing.

 

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(e) From the date of this Agreement, there shall not have occurred any Material
Adverse Effect, nor shall any event or events have occurred that, individually
or in the aggregate, with or without the lapse of time, could reasonably be
expected to result in a Material Adverse Effect.

 

(f) The Company shall have delivered each of the closing deliverables set forth
in Section 2.03(a).

 

(g) The Stockholder, Mr. David Scher and Mr. Wade Hickok shall have executed and
delivered to Parent the lock-up agreement in the form of Exhibit C, attached
hereto.

 

(h) The Stockholder shall have executed and delivered to Parent the voting
agreement in the form of Exhibit D, attached hereto.

 

Section 7.03 Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or the Company’s waiver, at or prior to the Closing,
of each of the following conditions:

 

(a) Other than the representations and warranties of Parent and Merger Sub
contained in Section 4.01 and Section 4.04, the representations and warranties
of Parent and Merger Sub contained in this Agreement, and any certificate or
other writing delivered pursuant hereto shall be true and correct in all
respects (in the case of any representation or warranty qualified by materiality
or Material Adverse Effect) or in all material respects (in the case of any
representation or warranty not qualified by materiality or Material Adverse
Effect) on and as of the date hereof and on and as of the Closing Date with the
same effect as though made at and as of such date (except those representations
and warranties that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all respects). The
representations and warranties of Parent and Merger Sub contained in Section
4.01 and Section 4.04 shall be true and correct in all respects on and as of the
date hereof and on and as of the Closing Date with the same effect as though
made at and as of such date.

 

(b) Parent and Merger Sub shall have duly performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date.

 

(c) No injunction or restraining order shall have been issued by any
Governmental Authority, and be in effect, which restrains or prohibits any
material transaction contemplated hereby.

 

(d) All approvals, consents and waivers that are listed on Section 4.02 of the
Disclosure Schedules shall have been received, and executed counterparts thereof
shall have been delivered to the Company at or prior to the Closing.

 

(e) Parent shall have delivered each of the closing deliverables set forth in
Section 2.03(b).

 

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Article VIII
Indemnification

 

Section 8.01 Survival. Subject to the limitations and other provisions of this
Agreement, the representations and warranties contained herein (other than any
representations or warranties contained in Section 3.22 which are subject to
Article VI) shall survive the Closing and shall remain in full force and effect
until the date that is eighteen (18) months from the Closing Date; provided,
that the representations and warranties in (a) Section 3.01, Section 3.02(a),
Section 3.04, Section 3.20, Section 3.25 and Section 4.01 through Section 4.04
shall survive for the full period of all applicable statutes of limitations
(giving effect to any waiver, mitigation or extension thereof). All covenants
and agreements of the parties contained herein (other than any covenants or
agreements contained in Article VI which are subject to Article VI) shall
survive the Closing until they are fully performed in accordance with their own
terms or for the period explicitly specified therein. Notwithstanding the
foregoing, any claims asserted in good faith with reasonable specificity (to the
extent known at such time) and in writing by notice from the Indemnified Party
to the Indemnifying Party prior to the expiration date of the applicable
survival period shall not thereafter be barred by the expiration of the relevant
representation or warranty and such claims shall survive until finally resolved.

 

Section 8.02 Indemnification By Stockholder. From and after the Closing, and
subject to the applicable conditions and limitations set forth herein, the
Stockholder shall indemnify and defend each of Parent and its Affiliates
(including the Surviving Corporation) and their respective Representatives
(collectively, the “Parent Indemnitees”) against, and shall hold each of them
harmless from and against, and shall pay and reimburse each of them for, any and
all Losses incurred or sustained by, or imposed upon, the Parent Indemnitees
based upon, arising out of, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
the Company contained in this Agreement (other than in respect of Section 3.22,
it being understood that the sole remedy for any such inaccuracy in or breach
thereof shall be pursuant to Article VI);

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by the Company pursuant to this Agreement (other than any breach or
violation of, or failure to fully perform, any covenant, agreement, undertaking
or obligation in Article VI, it being understood that the sole remedy for any
such breach, violation or failure shall be pursuant to Article VI);

 

(c) any claim made by a Person relating to such Person’s rights with respect to
the Merger Consideration, or the calculations and determinations set forth on
the Consideration Spreadsheet; or

 

(d) any Transaction Expenses or Indebtedness of the Company outstanding as of
the Closing to the extent not paid or satisfied by the Company at or prior to
the Closing, or if paid by Parent or Merger Sub at or prior to the Closing, to
the extent not deducted in the determination of Closing Merger Consideration.

 

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Section 8.03 Indemnification By Parent. From and after the Closing, and subject
to the applicable conditions and limitations set forth herein, Parent shall
indemnify and defend the Stockholder and his Affiliates and their respective
Representatives (collectively, the “Stockholder Indemnitees”) against, and shall
hold each of them harmless from and against, and shall pay and reimburse each of
them for, any and all Losses incurred or sustained by, or imposed upon, the
Stockholder Indemnitees based upon, arising out of, with respect to or by reason
of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Parent and Merger Sub contained in this Agreement; or

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Parent or Merger Sub pursuant to this Agreement (other than Article
VI, it being understood that the sole remedy for any such breach thereof shall
be pursuant to Article VI).

 

Section 8.04 Certain Limitations. The indemnification provided for in Section
8.02, Section 8.03 or Section 6.03 shall be subject to the following limitation:

 

(a) None of the parties to this Agreement shall be required to indemnify any
other party with respect of any Losses for which indemnification is claimed
under Section 8.02, Section 8.03 or Section 6.03 unless and until the aggregate
amount of all Losses incurred by the party seeking indemnification under Section
8.02, Section 8.03 or Section 6.03 exceeds either (i) $100,000, or (ii) $25,000
prior to the one (1) year anniversary date of the Closing with respect to any
indemnification claim as a result of breaches of Sections 3.21 and 3.22(b), in
which event the indemnifying party shall be required to indemnify the party
seeking indemnification for all such Losses from the first dollar. The aggregate
amount of all Losses for which the Stockholder or the Parent (including Merger
Sub) shall be liable pursuant to Section 8.02, Section 8.03 or Section 6.03, as
the case may be, shall not exceed $400,000.

 

Section 8.05 Indemnification Procedures. The party making a claim under this
Article VIII is referred to as the “Indemnified Party”, and the party against
whom such claims are asserted under this Article VIII is referred to as the
“Indemnifying Party”. For purposes of this Article VIII, (i) if Parent (or any
other Parent Indemnitee) comprises the Indemnified Party, any references to
Indemnifying Party (except provisions relating to an obligation to make
payments) shall be deemed to refer to the Stockholder, and (ii) if Parent
comprises the Indemnifying Party, any references to the Indemnified Party shall
be deemed to refer to the Stockholder.

 

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(a) Third Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement or a
Representative of the foregoing (a “Third Party Claim”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall give the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than thirty (30) calendar days after receipt of such notice of such
Third Party Claim. The failure to give such prompt written notice shall not,
however, relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party forfeits rights or
defenses by reason of such failure. Such notice by the Indemnified Party shall
describe the Third Party Claim in reasonable detail, shall include copies of all
material written evidence thereof and shall indicate the estimated amount, if
reasonably practicable, of the Loss that has been or may be sustained by the
Indemnified Party. The Indemnifying Party shall have the right to participate
in, or by giving written notice to the Indemnified Party, to assume the defense
of any Third Party Claim at the Indemnifying Party’s expense and by the
Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in
good faith in such defense; provided, that if the Indemnifying Party is the
Stockholder, such Indemnifying Party shall not have the right to defend or
direct the defense of any such Third Party Claim that (x) is asserted directly
by or on behalf of a Person that is a supplier or customer of the Company, or
(y) seeks an injunction or other equitable relief against the Indemnified
Parties. In the event that the Indemnifying Party assumes the defense of any
Third Party Claim, subject to Section 8.05(b), it shall have the right to take
such action as it deems necessary to avoid, dispute, defend, appeal or make
counterclaims pertaining to any such Third Party Claim in the name and on behalf
of the Indemnified Party. The Indemnified Party shall have the right to
participate in the defense of any Third Party Claim with counsel selected by it
subject to the Indemnifying Party’s right to control the defense thereof. The
fees and disbursements of such counsel shall be at the expense of the
Indemnified Party, provided, that if in the reasonable opinion of counsel to the
Indemnified Party, (A) there are legal defenses available to an Indemnified
Party that are different from or additional to those available to the
Indemnifying Party; or (B) there exists a conflict of interest between the
Indemnifying Party and the Indemnified Party that cannot be waived, the
Indemnifying Party shall be liable for the reasonable fees and expenses of
counsel to the Indemnified Party in each jurisdiction for which the Indemnified
Party determines counsel is required. If the Indemnifying Party elects not to
compromise or defend such Third Party Claim, fails to promptly notify the
Indemnified Party in writing of its election to defend as provided in this
Agreement, or fails to diligently prosecute the defense of such Third Party
Claim, the Indemnified Party may, subject to Section 8.05(b), pay, compromise,
defend such Third Party Claim and seek indemnification for any and all Losses
based upon, arising from or relating to such Third Party Claim. The Stockholder
and Parent shall cooperate with each other in all reasonable respects in
connection with the defense of any Third Party Claim, including making available
records relating to such Third Party Claim and furnishing, without expense
(other than reimbursement of actual out-of-pocket expenses) to the defending
party, management employees of the non-defending party as may be reasonably
necessary for the preparation of the defense of such Third Party Claim.

 

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(b) Settlement of Third Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third Party Claim without the prior written consent of the Indemnified Party,
except as provided in this Section 8.05(b). If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnified Party and provides, in customary
form, for the unconditional release of each Indemnified Party from all
liabilities and obligations in connection with such Third Party Claim and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to that effect to the Indemnified Party. If the
Indemnified Party fails to consent to such firm offer within ten (10) days after
its receipt of such notice, the Indemnified Party may continue to contest or
defend such Third Party Claim and in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim shall not exceed the amount of
such settlement offer. If the Indemnified Party fails to consent to such firm
offer and also fails to assume defense of such Third Party Claim, the
Indemnifying Party may settle the Third Party Claim upon the terms set forth in
such firm offer to settle such Third Party Claim. If the Indemnified Party has
assumed the defense pursuant to Section 8.05(a), it shall not agree to any
settlement without the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed).

 

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

 

55

 

 

(d) Tax Claims. Notwithstanding any other provision of this Agreement, the
control of any claim, assertion, event or proceeding in respect of Taxes of the
Company (including, but not limited to, any such claim in respect of a breach of
the representations and warranties in Section 3.22 hereof or any breach or
violation of or failure to fully perform any covenant, agreement, undertaking or
obligation in Article VI) shall be governed exclusively by Article VI hereof.

 

Section 8.06 Payments.

 

(a) Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to
be payable pursuant to this Article VIII, the Indemnifying Party shall satisfy
its obligations within fifteen (15) Business Days of such final, non-appealable
adjudication by wire transfer of immediately available funds. The parties hereto
agree that should an Indemnifying Party not make full payment of any such
obligations within such fifteen (15) Business Day period, any amount payable
shall accrue interest from and including the date of agreement of the
Indemnifying Party or final, non-appealable adjudication to but excluding the
date such payment has been made at a rate per annum equal to 10%. Such interest
shall be calculated daily on the basis of a 365 day year and the actual number
of days elapsed, without compounding.

 

(b) Any Losses payable to a Parent Indemnitee pursuant to Article VIII or
Section 6.03 shall be satisfied from a reduction in the final payment of the
Cash Payment.

 

Section 8.07 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by
Law.

 

Section 8.08 Effect of Investigation. No party shall not be liable under this
Article VIII or Section 6.03 with respect to any Losses arising out of matters
known, or that should have been known to the party seeking indemnification, at
the Closing Date.

 

Section 8.09 Exclusive Remedies. Subject to Section 10.11, the parties
acknowledge and agree that their sole and exclusive remedy with respect to any
and all claims (other than claims arising from fraud, criminal activity or
willful misconduct on the part of a party hereto in connection with the
transactions contemplated by this Agreement) for any breach of any
representation, warranty, covenant, agreement or obligation set forth herein or
otherwise relating to the subject matter of this Agreement, shall be pursuant to
the indemnification provisions set forth in Article VI and this Article VIII. In
furtherance of the foregoing, each party hereby waives, to the fullest extent
permitted under Law, any and all rights, claims and causes of action for any
breach of any representation, warranty, covenant, agreement or obligation set
forth herein or otherwise relating to the subject matter of this Agreement it
may have against the other parties hereto and their Affiliates and each of their
respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in Article VI and this Article VIII.
Nothing in this Section 8.09 shall limit any Person’s right to seek and obtain
any equitable relief to which any Person shall be entitled or to seek any remedy
on account of any party’s fraudulent, criminal or intentional misconduct.

 

56

 

 

Article IX
Termination

 

Section 9.01 Termination. This Agreement may be terminated at any time prior to
the Closing:

 

(a) by the mutual written consent of the Company and Parent;

 

(b) by Parent by written notice to the Company if:

 

(i) neither Parent nor Merger Sub is then in material breach of any provision of
this Agreement and there has been a breach, inaccuracy in or failure to perform
any representation, warranty, covenant or agreement made by the Company pursuant
to this Agreement that would give rise to the failure of any of the conditions
specified in Article VII and such breach, inaccuracy or failure has not been
cured by the Company within ten (10) days of the Company’s receipt of written
notice of such breach from Parent; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.02 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled within two (2) days after the execution of this Agreement, unless such
failure shall be due to the failure of Parent to perform or comply with any of
the covenants, agreements or conditions hereof to be performed or complied with
by it prior to the Closing;

 

(c) by the Company by written notice to Parent if:

 

(i) the Company is not then in material breach of any provision of this
Agreement and there has been a breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by Parent or Merger Sub
pursuant to this Agreement that would give rise to the failure of any of the
conditions specified in Article VII and such breach, inaccuracy or failure has
not been cured by Parent or Merger Sub within ten (10) days of Parent’s or
Merger Sub’s receipt of written notice of such breach from the Company; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.03 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled within two (2) days after the execution of this Agreement, unless such
failure shall be due to the failure of the Company to perform or comply with any
of the covenants, agreements or conditions hereof to be performed or complied
with by it prior to the Closing; or

 

(d) by Parent or the Company if there shall be any Law that makes consummation
of the transactions contemplated by this Agreement illegal or otherwise
prohibited or any Governmental Authority shall have issued a Governmental Order
restraining or enjoining the transactions contemplated by this Agreement, and
such Governmental Order shall have become final and non-appealable.

 

57

 

 

Section 9.02 Effect of Termination. In the event of the termination of this
Agreement in accordance with this Article, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except:

 

(a) as set forth in this Article IX, Section 5.02(b) and Article X hereof; and

 

(b) that nothing herein shall relieve any party hereto from liability for any
willful breach of any provision hereof.

 

Article X
Miscellaneous

 

Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.

 

Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF or WORD document (with confirmation of transmission) if sent
during normal business hours of the recipient, and on the next Business Day if
sent after normal business hours of the recipient or (d) on the third (3rd) day
after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications must be sent to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):

 

If to the Company prior to the Closing:  

LD Micro, Inc.

11040 Bollinger Canyon Rd., Suite E-405

San Ramon, California 94582

Facsimile:N/A

E-mail:

Attention: Christopher Lahiji, President

      with a copy to:  

Mitchell Silberberg & Knupp LLP

Facsimile: (310) 231-8302

E-mail:

Attention: .

 

58

 

 

If to Parent or Merger Sub (or the Surviving Corporation after the Closing):  

SRAX, Inc.

456 Seaton Street

Los Angeles CA 90013

Facsimile: N/A

E-mail:

Attention:

      with a copy to:  

Silvestre Law Group, P.C.

2629 Townsgate Rd. #215

Westlake Village, CA 91361

Facsimile: (805) 553-9783

E-mail:

Attention:

      If to the Stockholder:  

Christopher Lahiji

LD Micro, Inc.

11040 Bollinger Canyon Rd., Suite E-405

San Ramon, California 94582

Facsimile:N/A

E-mail:

      with a copy to:  

Mitchell Silberberg & Knupp LLP

Facsimile:(310) 231-8302

E-mail:

Attention: .

 

Section 10.03 Interpretation. For purposes of this Agreement, (a) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation”; (b) the word “or” is not exclusive; and (c) the
words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles
and Sections of, and Disclosure Schedules and Exhibits attached to, this
Agreement; (y) to an agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and (z) to a
statute means such statute as amended from time to time and includes any
successor legislation thereto and any regulations promulgated thereunder. This
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting an instrument or
causing any instrument to be drafted. The Disclosure Schedules and Exhibits
referred to herein shall be construed with, and as an integral part of, this
Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

 

59

 

 

Section 10.05 Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

Section 10.06 Entire Agreement. This Agreement con the sole and entire agreement
of the parties to this Agreement with respect to the subject matter contained
herein and therein, and supersede all prior and contemporaneous understandings
and agreements, both written and oral, with respect to such subject matter. In
the event of any inconsistency between the statements in the body of this
Agreement, the Exhibits and Disclosure Schedules (other than an exception
expressly set forth as such in the Disclosure Schedules), the statements in the
body of this Agreement will control.

 

Section 10.07 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither party may assign its rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed. No assignment shall relieve the
assigning party of any of its obligations hereunder.

 

Section 10.08 No Third-party Beneficiaries. Except as provided in Section 6.03
and Article VIII, this Agreement is for the sole benefit of the parties hereto
and their respective successors and permitted assigns and nothing herein,
express or implied, is intended to or shall confer upon any other Person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.

 

Section 10.09 Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an agreement in writing signed by Parent,
Merger Sub and the Company at any time prior to the Effective Time; provided,
however, that after the Requisite Company Vote is obtained, there shall be no
amendment or waiver that, pursuant to applicable Law, requires further approval
of the Stockholder, without the receipt of such further approvals. Any failure
of Parent or Merger Sub, on the one hand, or the Company, on the other hand, to
comply with any obligation, covenant, agreement or condition herein may be
waived by the Company (with respect to any failure by Parent or Merger Sub) or
by Parent or Merger Sub (with respect to any failure by the Company),
respectively, only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.

 

60

 

 

Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction).

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED
IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE STATE
OF CALIFORNIA IN EACH CASE LOCATED IN THE CITY OF LOS ANGELES AND COUNTY OF LOS
ANGELES, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS,
NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL
BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH
COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

 

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF
A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 10.10(c).

 

Section 10.11 Specific Performance. The parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy to which they
are entitled at law or in equity.

 

Section 10.12 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

61

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

  The Company:       LD MICRO, INC.         By /S/ Christopher Lahiji   Name:
Christopher Lahiji   Title: President

 

  Parent:       SRAX, INC.         By /S/ Christopher Miglino   Name:
Christopher Miglino   Title: CEO

 

  Merger Sub 1:       TOWNSGATE MERGER SUB 1, INC.         By /S/ Christopher
Miglino   Name: Christopher Miglino   Title: CEO

 

  Merger Sub 2:       LD MICRO, INC.         By /S/ Christopher Miglino   Name:
Christopher Miglino   Title: CEO

 

  The Stockholder:       /s/ Christopher Lahiji   Christopher Lahiji, as the
sole stockholder of the Company

 

 

 

 

Exhibit A

 

Form of the Stockholder’s Employment Agreement

 

 

 

 

Exhibit B

 

Form of David Scher’s Employment Agreement

 

 

 

 

Exhibit C

 

Form of Lock-Up Agreement

 

 

 

 

Exhibit D

 

Form of Voting Agreement

 

 

 

 

Exhibit E

 

Merger Consideration Allocation Schedule

 

[REDACTED]