Exhibit 10.1

 

 

 

 

STOCK PURCHASE AGREEMENT

 

 

Dated as of February 2, 2017

 

 

Among

 

FORM Holdings Corp.,

 

Excalibur Integrated Systems, Inc.,

 

The Sellers Party Hereto,

 

and

 

The Sellers’ Representative

  

 

 

 

Table of Contents

 

1. DEFINITIONS 1 2. PURCHASE AND SALE OF SHARES; ADDITIONAL CONSIDERATION 7  
2.1 Purchase and Sale of Shares 7   2.2 The Closing 7   2.3 Subsequent
Consideration 7   2.4 Assumption of Credit Line 7   2.5 Acceleration of
Consideration 7   2.6 Withholding Rights 8 3. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY 8   3.1 General 8   3.2 Organization; Predecessors 8   3.3 Power and
Authorization 8   3.4 Authorization of Governmental Authorities 8   3.5
Noncontravention . 9   3.6 Capitalization of the Company 9   3.7 Financial
Statements 10   3.8 Intentionally Omitted 10   3.9 Absence of Undisclosed
Liabilities 10   3.10 Absence of Certain Developments 10   3.11 Debt; Guarantees
11   3.12 Ownership of Assets; Sufficiency 11   3.13 Accounts Receivable;
Accounts Payable 12   3.14 Real Property 12   3.15 Intellectual Property 12  
3.16 Legal Compliance; Illegal Payments; Permits 14   3.17 Tax Matters 14   3.18
Environmental Matters 16   3.19 Contracts 16   3.20 Affiliate Transactions 18  
3.21 Customers and Suppliers 18   3.22 Employees 19   3.23 Litigation;
Governmental Orders 20   3.24 Product Warranties 20   3.25 Insurance 20   3.26
No Brokers 20   3.27 Inventory 20   3.28 Disclosure 20 4. INDIVIDUAL
REPRESENTATIONS AND WARRANTIES OF THE SELLERS 20  

4.1 Organization 

20   4.2 Power and Authorization 21   4.3 Noncontravention 21   4.4 Title 21  
4.5 No Brokers 21   4.6 Securities Law Matters 21   4.7 Restricted Securities;
Legend 22   4.8 Intentionally Omitted 22   4.9 Access to Information 22   4.10
Reliance Upon Representations 22   4.11 Exculpation; Representation by Counsel
22

 

 

 

 

5. REPRESENTATIONS AND WARRANTIES OF THE BUYER 23   5.1 Organization 23   5.2
Power And Authorization 23   5.3 Authorization of Governmental Authorities 23  
5.4 Noncontravention 23   5.5 No Brokers 23  

5.6 Investment Representation

23   5.7 SEC Filings; Financial Statements 24   5.8 Capitalization of the Buyer
24   5.9 Access to Information 25 6. COVENANTS 25   6.1 Closing 25   6.2
Operation of Business 25   6.3 Notices and Consents 25   6.4 Buyer’s Access to
Premises; Information 26   6.5 Notice of Developments 26   6.6 Exclusivity 26  
6.7 Transaction Expenses; Debt 26   6.8 Sellers’ Release 26   6.9
Confidentiality 26   6.10 Publicity 27   6.11 Further Assurances 27   6.12
Intentionally Omitted 27   6.13 Limitation on Personal Liability of Officers and
Directors of Company 27 7. CONDITIONS TO THE BUYER’S OBLIGATIONS AT THE CLOSING
27   7.1 Representations and Warranties 27   7.2 Performance 28   7.3 Stock
Certificates; Options and Warrants 28   7.4 Intentionally Omitted 28   7.5
Qualifications 28   7.6 Absence of Litigation 28   7.7 Consents, etc 28   7.8
FIRPTA Certificate 28   7.9 Proceedings and Documents 28   7.10 Ancillary
Agreements 28   7.11 Resignations 29   7.12 No Material Adverse Effect 29   7.13
Intentionally Omitted 29   7.14 Intentionally Omitted 29   7.15 Intentionally
Omitted 29   7.16 Tax Returns 29   7.17 Intentionally Omitted 29 8. CONDITIONS
TO THE SELLERS’ OBLIGATIONS AT THE CLOSING 29   8.1 Representations and
Warranties 29   8.2 Performance 29   8.3 Intentionally Omitted 29   8.4
Qualifications 29   8.5 Absence of Litigation 30   8.6 Consents, etc 30   8.7
Proceedings and Documents 30   8.8 FORM Securities 30   8.9 Ancillary Agreements
30

 

 

 

 

9. INTENTIONALLY OMITTED 30 10. INDEMNIFICATION 30   10.1 Indemnification by the
Sellers 30   10.2 Indemnity by the Buyer 31   10.3 Time for Claims 31   10.4
Third Party Claims 31   10.5 No Circular Recovery 33   10.6 Certain Limitations
33   10.7 Intentionally Omitted 33   10.8 Knowledge and Investigation 34   10.9
Remedies Cumulative 34 11. TAX MATTERS 34   11.1 Cooperation on Tax Matters 34  
11.2 Straddle Period 34   11.3 Transfer Taxes 34 12. MISCELLANEOUS 35   12.1
Notices 35   12.2 Succession and Assignment; No Third-Party Beneficiary 36  
12.3 Amendments and Waivers 36   12.4 Provisions Concerning Sellers’
Representative 36   12.5 Entire Agreement 37   12.6 Schedules; Listed Documents,
etc 37   12.7 Counterparts 37   12.8 Severability 37   12.9 Headings 37   12.10
Construction 37   12.11 Governing Law 39   12.12 Jurisdiction; Venue; Service of
Process 39   12.13 Specific Performance 39   12.14 Waiver of Jury Trial 40  
12.15 Representation by Counsel 40

 

 

 

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement dated as of February 2, 2017 (as amended or
otherwise modified, the “Agreement”) is among FORM Holdings Corp., a Delaware
corporation (the “Buyer”), and Excalibur Integrated Systems, Inc., a Tennessee
Corporation (the “Company”), each Person that has signed this Agreement as a
“Seller” (collectively, the “Sellers”), and Rodger Jenkins as the representative
of the Sellers (the “Sellers’ Representative”).

 

RECITALS

 

WHEREAS, the Sellers are the record and beneficial owners of all of the
outstanding shares of capital stock of the Company and all other equity
interests in the Company;

 

WHEREAS, the Buyer desires to purchase from the Sellers, and the Sellers desire
to sell to the Buyer, all of the shares of capital stock of the Company owned by
such Seller set forth opposite such Seller’s name on Exhibit A attached hereto,
which number of shares of capital stock is 100% of the shares of the Company’s
stock owned by each stockholder of the Company as set forth in the Company’s
records, and therefore, in the aggregate, is equal to 100% of the issued and
outstanding shares of capital stock of the Company on a fully-diluted basis
(collectively, such shares are referred to as the “Shares”) upon the terms and
subject to the conditions included in this Agreement; and

  

AGREEMENT

 

NOW THEREFORE, in consideration of the premises and mutual promises herein made,
and in consideration of the representations, warranties and covenants herein
contained, the Buyer, the Company and the Sellers hereby agree as follows:

 

1.DEFINITIONS; CERTAIN RULES OF CONSTRUCTION.

 

As used herein, the following terms will have the following meanings:

 

“1933 Act” means the Securities Act of 1933.

 

“Action” means any claim, action, cause of action, suit (whether in contract or
tort or otherwise) or audit, litigation (whether at law or in equity, whether
civil or criminal), controversy, assessment, arbitration, investigation,
opposition, interference, hearing, charge, complaint, demand, notice or
proceeding to, from, by or before any Governmental Authority.

  

“Affiliate” means, with respect to any specified Person at any time, (a) each
person directly or indirectly controlling, controlled by or under direct or
indirect common control with such specified Person at such time, (b) each Person
who is at such time an officer or director of, or direct or indirect beneficial
holder of at least 20% of any class of the equity interests of, such specified
Person, (c) each Person that is managed by a common group of executive officers
and/or directors as such specified Person, (d) the members of the immediate
family (i) of each officer, director or holder described in clause (b) and (ii)
if such specified Person is an individual, of such specified Person and (e) each
Person of which such specified Person or an Affiliate (as defined in clauses (a)
through (d)) thereof will, directly or indirectly, beneficially own at least 20%
of any class of equity interests at such time.

 

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“Agreement” is defined in the Preamble.

 

“Ancillary Agreements” means the employment agreements and lease agreement that
are attached as Exhibits C and D, respectively, hereto.

 

“Assets” means the Company’s properties, rights and assets, whether real or
personal and whether tangible or intangible, including all assets reflected in
the Most Recent Balance Sheet or acquired after the Most Recent Balance Sheet
Date (except for such assets which have been sold or otherwise disposed of since
the Most Recent Balance Sheet Date in the Ordinary Course of Business).

 

“Business” means the businesses conducted or actively being planned to be
conducted by the Company.

 

“Business Day” means any weekday other than a weekday on which banks in New
York, New York are authorized or required to be closed.

 

“Buyer” is defined in the Preamble.

 

“Change of Control” means the occurrence of any of the following events:

 

(i)Change of ownership of a company, whereby a Person acquires securities of
that company representing 50% or more of the total voting power represented by
that company’s then outstanding voting securities (excluding any such voting
securities held by that company or its affiliates or by any employee benefit
play of that company) pursuant to a transaction or a series of related
transactions; or

 

(ii)(a) A merger or consolidation of a company, other than a merger or
consolidation which would result in the voting securities of that company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or the parent of such company) more than 50% of the total
voting power represented by the voting securities of that company or such
surviving entity or parent of such company, as the case may be, outstanding
immediately after such merger or consolidation, or (b) the sale or disposition
by a company of all or substantially all of that company’s assets in a
transaction.

  

“Closing Effective Date” means February 2, 2017

 

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

 

“Common Stock” means the common stock, par value $.001 per share, of the
Company.

 

“Company” is defined in the Preamble.

 

“Company Due Diligence Material” is defined in Section 3.1.

 

“Company Intellectual Property Rights” means all Intellectual Property Rights
owned by the Company or used by the Company in connection with the Business,
including all Intellectual Property rights in and to Company Technology.

 

2

 

 

“Company Technology” means any and all Technology developed, or being developed,
by the Company.

 

“Company’s Knowledge” (or any similar reference to the Knowledge of the Company
or to the Knowledge of the Sellers) means the knowledge of the directors and
officers of the Company.

 

“Compensation” means, with respect to any Person, all salaries, commissions,
compensation, remuneration, bonuses or benefits of any kind or character
whatever (including issuances or grants of equity interests), required to be
made or that have been made directly or indirectly by the Company to such Person
or Affiliates of such Person.

 

“Consideration” means the consideration received by the Sellers in exchange for
the Shares under Section 2 herein.

 

“Contemplated Transactions” means, collectively, the transactions contemplated
by this Agreement, including (a) the sale and purchase of the Shares and (b) the
execution, delivery and performance of the Ancillary Agreements.

 

“Debt” means, with respect to any Person, all obligations (including all
obligations in respect of principal, accrued interest, penalties, fees and
premiums) of such Person (a) for borrowed money (including overdraft
facilities), (b) evidenced by notes, bonds, debentures or similar contractual
obligations, (c) for the deferred purchase price of property, goods or services
(other than trade payables or accruals incurred in the Ordinary Course of
Business, but including any deferred purchase price Liabilities, earnouts,
contingency payments, installment payments, seller notes, promissory notes, or
similar Liabilities, in each case, related to past acquisitions by the Company
and, for the avoidance of doubt, in each case, whether or not contingent), (d)
under capital leases (in accordance with GAAP), (e) in respect of letters of
credit and bankers’ acceptances (in each case whether or not drawn, contingent
or otherwise), (f) in respect of deferred compensation for services, (g) in
respect of severance, change of control payments, stay bonuses, retention
bonuses, success bonuses, and other bonuses and similar Liabilities payable in
connection with the Contemplated Transactions, (h) for contractual obligations
relating to interest rate protection, swap agreements and collar agreements and
(i) in the nature of guarantees of the obligations described in clauses (a)
through (h) above of any other Person.

  

“Encumbrance” means any charge, claim, community or other marital property
interest, condition, equitable interest, lien, license, option, pledge, security
interest, mortgage, deed of trust, right of way, easement, encroachment,
servitude, right of first offer or first refusal, buy/sell agreement and any
other restriction or covenant with respect to, or condition governing the use,
construction, voting (in the case of any security or equity interest), transfer,
receipt of income or exercise of any other attribute of ownership.

 

“Environmental Laws” means any Legal Requirement relating to (a) releases or
threatened releases of Hazardous Substances, (b) pollution or protection of
public health or the indoor or outdoor environment or worker safety or health or
(c) the generation, manufacture, handling, transport, use, treatment, storage,
or disposal of Hazardous Substances, including, without limitation, the
Comprehensive Environmental, Response, Compensation, and Liability Act of 1980,
42 U.S.C. §§ 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
§§ 6901 et seq., the Clean Water Act, 33 U.S.C. §§ 1251 et seq., the Clean Air
Act, 42 U.S.C. §§ 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. §§
2601 et seq. and all regulations promulgated thereto.

 

3

 

 

“ERISA” means the federal Employee Retirement Income Security Act of 1974.

 

“Facilities” means any buildings, plants, improvements or structures located on
the Real Property.

 

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

 

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

 

“Governmental Authority” means any United States federal, state or local or any
foreign government, or political subdivision thereof, or any multinational
organization or authority, or any authority, agency or commission, entitled to
exercise any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power, any court or tribunal (or any
department, bureau or division thereof), or any arbitrator or arbitral body.

 

“Gross Profit” means the gross profit, as calculated by GAAP, less any
commissions accrued under the employment agreement attached as Exhibit C hereto.

 

“Indemnity Claim” means a claim for indemnity under this Agreement.

 

“Indemnified Party” means, with respect to any Indemnity Claim, the party
asserting such claim.

 

“Indemnifying Party” means, with respect to any Indemnity Claims, the Buyer
Indemnified Person or the Seller Indemnified Person, as the case may be, against
whom such claim is asserted.

 

“Intellectual Property Rights” means the entire right, title, and interest in
and to all proprietary rights of every kind and nature however denominated,
throughout the world, including without limitation (a) patents, copyrights, mask
work rights, confidential information, trade secrets, database rights, and all
other proprietary rights in Technology; (b) trademarks, trade names, service
marks, service names, brands, trade dress and logos, and the goodwill and
activities associated therewith; (c) domain names, rights of privacy and
publicity, and moral rights; (d) any and all registrations, applications,
recordings, licenses, common-law rights, and contractual rights relating to any
of the foregoing; and (e) all Actions and rights to sue at law or in equity for
any past or future infringement or other impairment of any of the foregoing,
including the right to receive all proceeds and damages therefrom, and all
rights to obtain renewals, continuations, divisions, or other extensions of
legal protections pertaining thereto.

 

“Legal Requirement” means any United States federal, state or local or foreign
law, statute, standard, ordinance, code, rule, regulation, guidance, resolution
or promulgation, or any Governmental Order, or any license, franchise, permit or
similar right granted under any of the foregoing, or any similar provision
having the force or effect of law.

 

“Liability” means, with respect to any Person, any liability or obligation of
such Person whether known or unknown, whether asserted or unasserted, whether
determined, determinable or otherwise, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, whether incurred or
consequential, whether due or to become due and whether or not required under
GAAP to be accrued on the financial statements of such Person.

 

4

 

 

“Losses” is defined in Section 10.1.

 

“Material Adverse Effect” means any event, occurrence, change in facts,
condition or other change or effect on, the Business, operations, Assets or
condition (financial or otherwise) of the Company which is reasonably likely to
be materially adverse to the Business, operations, Assets or condition
(financial or otherwise) of the Company, taken as a whole, or to the ability to
operate the Business immediately after the Closing in the manner operated before
Closing. For purposes hereof, an event, occurrence, change in facts, condition
or other change or effect which has resulted or is reasonably likely to result
in Losses of at least $200,000 shall be deemed to constitute a Material Adverse
Effect.

 

“Most Recent Balance Sheet” is defined in Section 3.7.

 

“Most Recent Balance Sheet Date” is defined in Section 3.10(b).

 

“Ordinary Course of Business” means an action taken by any Person in the
ordinary course of such Person’s business which is consistent with the past
customs and practices of such Person (including past practice with respect to
quantity, amount, magnitude and frequency, standard employment and payroll
policies and past practice with respect to management of working capital) which
is taken in the ordinary course of the normal day-to-day operations of such
Person.

  

Permits” means, with respect to any Person, any license, franchise, permit,
consent, approval, right, privilege, certificate or other similar authorization
issued by, or otherwise granted by, any Governmental Authority or any other
Person to which or by which such Person is subject or bound or to which or by
which any property, business, operation or right of such Person is subject or
bound.

 

“Permitted Encumbrance” means (a) statutory liens for current Taxes, special
assessments or other governmental charges not yet due and payable or the amount
or validity of which is being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP, (b) mechanics’, materialmen’s, carriers’, workers’, repairers’ and similar
statutory liens arising or incurred in the Ordinary Course of Business which
liens have not had and are not reasonably likely to have a Material Adverse
Effect, (c) zoning, entitlement, building and other land use regulations imposed
by Governmental Authorities having jurisdiction over any Real Property which are
not violated in any material respect by the current use and operation of the
Real Property, (d) deposits or pledges made in connection with, or to secure
payment of, worker’s compensation, unemployment insurance, old age pension
programs mandated under applicable Legal Requirements or other social security,
(e) covenants, conditions, restrictions, easements, Encumbrances and other
similar matters of record affecting title to but not adversely affecting the
value of, or the current occupancy or use of, the Real Property in any material
respect, and (f) restrictions on the transfer of securities arising under
federal and state securities laws.

 

“Person” means any individual or corporation, association, partnership, limited
liability company, joint venture, joint stock or other company, business trust,
trust, organization, Governmental Authority or other entity of any kind.

 

“Real Property” is defined in Section 3.14.1 herein.

 

5

 

 

“Representative” means, with respect to any Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.

 

“Seller” and “Sellers” are defined in the Preamble.

 

“Sellers’ Representative” is defined in the Preamble.

 

“Seller Transaction Expenses” means the fees and expenses (including legal,
accounting, investment banking, advisory and other fees and expenses) of the
Company and the Sellers incurred in connection with the negotiation and the
consummation of the Contemplated Transactions.

 

“Shares” is defined in the recitals to this Agreement.

 

“Straddle Period” means any taxable period that includes, but does not end on,
the Closing Effective Date.

 

“Subsidiary” means, with respect to any specified person, any other Person of
which such specified Person will, at the time, directly or indirectly through
one or more Subsidiaries, (a) own at least 50% of the outstanding capital stock
(or other shares of beneficial interest) entitled to vote generally, (b) hold at
least 50% of the partnership, limited liability company, joint venture or
similar interests or (c) be a general partner, managing member or joint
venturer.

  

“Tax” or “Taxes” means (a) any and all federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar, including
FICA), unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind or any charge of any kind in the nature of (or similar
to) taxes whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not and (b) any liability for the payment of any amounts of
the type described in clause (a) of this definition as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period,
as a result of any tax sharing or tax allocation agreement, arrangement or
understanding, or as a result of being liable for another person’s taxes as a
transferee or successor, by contract or otherwise.

 

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

 

“Technology” means all inventions, works, discoveries, innovations, know-how,
information (including, without limitation, ideas, research and development,
formulas, algorithms, compositions, processes and techniques, data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, business and marketing plans and proposals, graphics,
illustrations, artwork, documentation, and manuals), databases, computer
software, firmware, computer hardware, integrated circuits and integrated
circuit masks, electronic, electrical, and mechanical equipment, and all other
forms of technology, including improvements, modifications, works in process,
derivatives, or changes, whether tangible or intangible, embodied in any form,
whether or not protectable or protected by patent, copyright, mask work right,
trade secret law, or otherwise, and all documents and other materials recording
any of the foregoing.

 

“Treasury Regulations” means the regulations promulgated under the Code.

 

6

 

 

Except as otherwise explicitly specified to the contrary, (a) references to a
Section, Article, Exhibit or Schedule means a Section or Article of, or Schedule
or Exhibit to this Agreement, unless another agreement is specified, (b) the
word “including” will be construed as “including without limitation,” (c)
references to a particular statute or regulation include all rules and
regulations thereunder and any predecessor or successor statute, rules or
regulation, in each case as amended or otherwise modified from time to time, (d)
words in the singular or plural form include the plural and singular form,
respectively and (e) references to a particular Person include such Person’s
successors and assigns to the extent not prohibited by this Agreement.

 

2.PURCHASE AND SALE OF SHARES; ADDITIONAL CONSIDERATION.

 

2.1              Purchase and Sale of Shares. At the Closing, subject to the
terms and conditions of this Agreement, the Sellers will sell, transfer and
deliver to the Buyer, and the Buyer will purchase from the Sellers, the Shares,
free and clear of all Encumbrances. In exchange for the Shares, at Closing, the
Buyer will issue 888,573 shares of its common stock, par value $0.01 per share
(the “FORM Securities”), to the Sellers, allocated as set forth on Exhibit A
hereto.

 

2.2              The Closing. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale of the Shares (the “Closing”)
will take place at the offices of the Buyer at 780 Third Avenue, 12th Floor, New
York, New York, concurrent with the execution of this Agreement.

  

2.3              Subsequent Consideration. After Closing, as additional
consideration for the purchase and sale of Shares as set forth in Section 2.1
herein, each year until the third anniversary of the Closing (the “Subsequent
Transfer Period”), the Buyer will, each April 1, pay $500,000, in either FORM
Securities or cash, in the sole discretion of the Buyer, to the Sellers,
allocated as set forth on Exhibit A hereto, for each $2,000,000 of cumulative
Gross Profit of sales generated by those accounts set forth on Exhibit B hereto
(the “Seller Accounts”), until the cumulative Gross Profit of sales generated by
the Seller Accounts in the Subsequent Transfer Period reaches $6,000,000, and an
additional $500,000, in either FORM Securities or cash, in the sole discretion
of the Buyer, to the Sellers, allocated as set forth on Exhibit A hereto, when
the cumulative Gross Profit of the Seller Accounts reaches $10,000,000. The
amount of FORM Securities to be issued, if applicable, will be based on the
10-day VWAP, as determined by Bloomberg. Notwithstanding the foregoing, the
transfer of FORM Securities to the Sellers, in the aggregate, will not
constitute a transfer of more than 20% of the outstanding common stock of the
Buyer as of the date hereof.

 

2.4              Assumption of Credit Line. At the Closing, Buyer shall assume
the entire outstanding balance of the credit line entered into by and between
the Company and FSG Bank and/or its successor, Atlantic Capital Bank, N.A.,
which amount is listed on Exhibit E hereto.

 

2.5              Acceleration of Consideration. Upon a Change of Control of the
Company’s subsidiary, Group Mobile International LLC (“Group Mobile”), if (a)
more than 25% of Group Mobile’s aggregate revenue is then derived from accounts
attributable to the efforts of the Company and/or the Sellers, and (b) if Rodger
Jenkins has met all applicable sales targets pursuant to his employment by Group
Mobile, as agreed to by Rodger Jenkins and Group Mobile in connection with the
employment agreement attached herein as Exhibit C, then (i) within sixty (60)
Business Days of such Change of Control, Buyer shall pay the Sellers 50% of the
subsequent consideration in either FORM Securities or cash, in the sole
discretion of the Buyer that would have been transferred from the Buyer to the
Sellers, in connection with Section 2.3 herein, as if the cumulative Gross
Profit of sales generated by the Seller Accounts, from Closing until the third
anniversary of the Closing, had reached $6,000,000, less the subsequent
consideration already transferred from the Buyer to the Sellers under Section
2.3 herein; and (ii) Buyer shall cause the purchaser of Group Mobile, as a
condition to such purchase, to assume the obligation to pay to the Sellers the
remaining amount of subsequent consideration due under Section 2.3, provided
that Sellers meet all conditions and requirements in connection therewith. The
amount of FORM Securities to be issued, if applicable, in connection with this
Section 2.5 will be based on the 10-day volume weighted average price (“VWAP”),
as determined by Bloomberg.

 

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2.6              Withholding Rights. Buyer shall deduct and withhold from any
amounts (including FORM Securities) otherwise payable to a Seller and shall pay
to the appropriate Governmental Authority such amounts that are required to be
deducted and withheld with respect to the making of such payment under any Tax
Law. To the extent amounts are so withheld and paid to a Governmental Authority,
the withheld amounts shall be treated for purposes of this Agreement as having
been paid to the Person in respect of which such deduction and withholding was
made.

 

3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

In order to induce the Buyer to enter into and perform this Agreement and to
consummate the Contemplated Transactions, the Company represents and warrants to
the Buyer, as of the date hereof, as follows:

 

3.1              General. From August 2, 2016 until September 16, 2016, Company
provided due diligence material (the “Company Due Diligence Material”) to Buyer,
and answered questions from Buyer with regard to that material. Company
represents and warrants that, other than as listed on Schedule 3.1, there have
been no material changes to the Company Due Diligence Material that have not
been previously disclosed to Buyer.

  

3.2              Organization; Predecessors. The Company is (a) duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and (b) is duly qualified to do business and in good standing in
each jurisdiction, except where the failure to so qualify has not had, and is
not reasonably likely to have, a Material Adverse Effect. The Company has, if so
requested, delivered to the Buyer true, accurate and complete copies of (x) the
organizational documents of the Company and (y) the minute books of the Company
which contain records of all meetings of, and other corporate actions taken by,
its stockholders, Boards of Directors and any committees appointed by its Boards
of Directors. The Company has delivered to the Buyer the latest certificate(s)
of good standing for all relevant jurisdictions.

 

3.3              Power and Authorization. The execution, delivery and
performance by the Company of this Agreement and each Ancillary Agreement to
which it is (or will be) a party and the consummation of the Contemplated
Transactions are within the power and authority of the Company and have been
duly authorized by all necessary action on the part of the Company. Rodger
Jenkins is the sole officer and director of the Company. This Agreement and each
Ancillary Agreement to which the Company is (or will be) a party (a) has been
(or, in the case of Ancillary Agreements to be entered into at or prior to the
Closing, will be) duly executed and delivered by the Company and (b) is (or, in
the case of Ancillary Agreements to be entered into at or prior to the Closing,
will be) a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by equitable principles or by bankruptcy, fraudulent conveyance or
insolvency laws affecting creditors’ rights generally. The Company has the full
power and authority necessary to own and use its Assets and carry on the
portions of the Business in which it is engaged.

 

3.4              Authorization of Governmental Authorities. No action by
(including any authorization, consent or approval), or in respect of, or filing
with, or notice to, any Governmental Authority is required for, or in connection
with, the valid and lawful (a) authorization, execution, delivery and
performance by the Company of this Agreement and each Ancillary Agreement to
which it is (or will be) a party or (b) the consummation of the Contemplated
Transactions by the Company.

 

8

 

 

3.5              Noncontravention. To the Company’s Knowledge, neither the
execution, delivery and performance by the Company of this Agreement or any
Ancillary Agreement to which it is (or will be) a party nor the consummation of
the Contemplated Transactions will: (a) assuming the taking of any action by
(including any authorization, consent or approval), or in respect of, or any
filing with, any Governmental Authority, in each case, violate any Legal
Requirement applicable to the Company; (b) result in a breach or violation of,
or default under, any contractual obligation of the Company; (c) require any
action by (including any authorization, consent or approval) or in respect of
(including notice to), any Person under any contractual obligation of the
Company; (d) result in the creation or imposition of an Encumbrance upon, or the
forfeiture of, any Asset; or (e) result in a breach or violation of, or default
under, the organizational documents of the Company.

  

3.6              Capitalization of the Company. As of the date hereof and as of
the Closing Effective Date, the entire issued and outstanding shares of capital
stock of the Company consists of 125 shares of Common Stock. All of the
outstanding shares of capital stock of the Company have been duly authorized,
validly issued, and are fully paid and non-assessable. The Company has not
violated any preemptive or other similar rights of any Person in connection with
the issuance or redemption of any of its equity interests. The Company holds no
shares of its respective capital stock in its treasuries. The Shares represent
all of the issued and outstanding shares of capital stock of the Company. The
Company has delivered to the Buyer true, accurate and complete copies of the
stock ledger of the Company which reflects all issuances, transfers, repurchases
and cancellations of shares of its capital stock. All of the outstanding equity
interests in each of the Company’s Subsidiaries are validly issued, fully paid
and non-assessable. The Company is the beneficial owner and the record owner of
all of the equity interests in the Company’s Subsidiaries and holds such equity
interests free and clear of all Encumbrances except as are imposed by applicable
securities laws. The Company does not own, directly or indirectly, any
membership interests, partnership interests or voting securities of, or other
equity interests in, or any interest convertible into or exchangeable or
exercisable for, any membership interests, partnership interests or voting
securities of, or other equity interests in, any firm, corporation, partnership,
company, limited liability company, trust, joint venture, association or other
entity. There are no preemptive rights or other similar rights in respect of any
equity interests in the Company. To the Company’s Knowledge, except as imposed
by applicable securities laws, there are no Encumbrances on, or other
contractual obligations relating to, the ownership, transfer or voting of any
equity interests in the Company, or otherwise affecting the rights of any holder
of the equity interests in the Company. Except for the Contemplated
Transactions, there is no contractual obligation, or provision in the
organizational documents of the Company which obligates it to purchase, redeem
or otherwise acquire, or make any payment (including any dividend or
distribution) in respect of, any equity interests in the Company and (d) there
are no existing rights with respect to registration under the 1933 Act of any
equity interests in the Company. As of the date of this Agreement, there are no
outstanding or authorized options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character that have been
issued or agreed, or are otherwise known, by the Company relating to any equity
ownership interests in the Company. As of the date of this Agreement, there are
no outstanding or authorized options, warrants, convertible securities or other
rights, agreements, arrangements or commitments of any character obligating the
Sellers to issue or sell any interest in the Company. As of the Closing
Effective Date, there will not be any outstanding or authorized options,
warrants, convertible securities, or other rights, agreements, arrangements or
commitments of any character relating to any equity ownership interests of the
Company or obligating the Sellers or the Company to issue or sell any interest
in the Company. The Company does not have any outstanding, or authorized any,
equity appreciation, phantom equity, profit participation or similar rights. To
the Company’s Knowledge there are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with respect to the
voting or transfer of any of the Shares.

 

9

 

 

3.7              Financial Statements. Attached, as Schedule 3.7, is the opening
balance sheet of the Company (the “Most Recent Balance Sheet”) as of the date of
the execution of this Agreement. The Most Recent Balance Sheet (a) is complete
and correct and was prepared in accordance with the books and records of the
Company, and (b) fairly presents the consolidated financial position of the
Company and the consolidated results of the operations of the Company.

 

3.8              Intentionally Omitted.

 

3.9              Absence of Undisclosed Liabilities. The Company has no
Liabilities except for (a) those Liabilities previously disclosed to the Buyer
in the Company Due Diligence Material, and (b) Liabilities incurred in the
Ordinary Course of Business, including in connection with the Contemplated
Transactions (none of which results from, arises out of, or relates to any
breach or violation of, or default under, a contractual obligation or Legal
Requirement).

 

3.10          Absence of Certain Developments. Since the delivery of the Company
Due Diligence Material, the Business has been conducted in the Ordinary Course
of Business, including matters related to the Contemplated Transactions, and,
other than as disclosed on Schedule 3.1 hereto:

 

(a)                the Company has not (i) amended its organizational documents,
(ii) amended any term of its outstanding equity interests or other securities or
(iii) issued, sold, granted, or otherwise disposed of, its equity interests or
other securities;

 

(b)               the Company has not become liable in respect of any guarantee
or has incurred, assumed or otherwise become liable in respect of any Debt,
except for borrowings in the Ordinary Course of Business under credit facilities
in existence as of the date of the Most Recent Balance Sheet (“Most Recent
Balance Sheet Date”);

 

(c)                the Company has not permitted any of its Assets to become
subject to an Encumbrance other than a Permitted Encumbrance;

 

(d)               the Company has not (i) made any declaration, setting aside or
payment of any dividend or other distribution with respect to, or any
repurchase, redemption or other acquisition of, any of its capital stock or
other equity interests or (ii) entered into, or performed, any transaction with,
or for the benefit of, any Seller or any Affiliate of any Seller (other than
payments made to officers, directors and employees in the Ordinary Course of
Business);

 

(e)                there has been no material loss, destruction, damage or
eminent domain taking (in each case, whether or not insured) affecting the
Business or any material Asset;

 

(f)                the Company has not increased the Compensation payable or
paid, whether conditionally or otherwise, to (i) any employee, consultant or
agent other than in the Ordinary Course of Business, (ii) any director or
officer or (iii) any Seller or any Affiliate of any Seller;

 

10

 

 

(g)               the Company has not entered into any contractual obligation
providing for the employment or consultancy of any Person on a full-time,
part-time, consulting or other basis or otherwise providing Compensation or
other benefits to any officer, director, employee or consultant;

 

(h)               the Company has not made any change in its methods of
accounting or accounting practices (including with respect to reserves);

 

(i)                 the Company has not made, changed or revoked any material
Tax election, elected or changed any method of accounting for Tax purposes,
settled any Action in respect of Taxes or entered into any contractual
obligation in respect of Taxes with any Governmental Authority;

 

(j)                 the Company has not terminated or closed any Facility,
business, or operation;

 

(k)               the Company has not adopted or amended any employee plan or,
except in accordance with terms thereof as in effect on the Most Recent Balance
Sheet Date, increased any benefits under any employee plan;

 

(l)                 the Company has not written up or written down any of its
material Assets or revalued its inventory;

 

(m)             the Company has not entered into any contractual obligation to
do any of the things referred to elsewhere in this Section 3.10;

 

(n)               no event or circumstance has occurred which has had, or is
reasonably likely to have, a Material Adverse Effect;

 

(o)               the Company has not (i) collected accounts receivable at a
discount, (ii) collected accounts receivable earlier than in the ordinary course
of business consistent with past practice or prior to their original due date or
(iii) accepted cash for more than the first year of a multi-year support or
services contract;

 

(p)               the Company has not paid or extended accounts payable later
than in the ordinary course of business consistent with past practice or later
than the due date; and

 

(q)               the Company has not failed to pay any creditor any amount owed
to such creditor when due.

 

3.11          Debt; Guarantees. The Company has no Liabilities in respect of
Debt except as set forth on Schedule 3.11. For each item of Debt, Schedule 3.11
correctly sets forth the debtor, the principal amount of the Debt as the date of
this Agreement, the creditor, the maturity date, and the collateral, if any,
securing the Debt. The Company has no Liability in respect of a guarantee of any
Liability of any other Person.

 

3.12          Ownership of Assets; Sufficiency. The Company has sole and
exclusive, good and marketable title to, or, in the case of property held under
a lease or other contractual obligation, a sole and exclusive, enforceable
leasehold interest in, or right to use, all of its Assets (other than Real
Property). None of the Assets (other than Real Property) is subject to any
Encumbrance other than Permitted Encumbrances. The Assets comprise all of the
assets, properties and rights of every type and description, whether real or
personal, tangible or intangible, used or necessary to the conduct of the
Business and are adequate for the continued conduct of the Business after the
Closing in substantially the same manner as conducted prior to the Closing. The
Company does not control, directly or indirectly, or own any direct or indirect
equity interest any Person which is not a Subsidiary of the Company.

 

11

 

 

3.13Accounts Receivable; Accounts Payable.

 

(a)            All accounts and notes receivable as of or prior to the Closing
Effective Date, have arisen or will arise in the ordinary course of business,
consistent with past practice, and (i) there are no material disputes, contests,
claims, counterclaims, or setoffs with respect to such accounts receivable that
have not been reserved for in the Company’s financial statements and (ii) all
such accounts and notes receivable have been, or will be, collected or are, or
will be, collectible in the aggregate recorded amounts thereof, without resort
to litigation or extraordinary collection activity thereof, in accordance with
their terms and no later than ninety (90) days after invoice thereof.

 

(b)            The accounts payable and accrued expenses reflected on the Most
Recent Balance Sheet and the accounts payable and accrued expenses arising after
the dates thereof have arisen from bona fide transactions entered into in the
ordinary course of business consistent with past practice, including in
connection with the Contemplated Transactions.

 

3.14Real Property.

 

3.14.1           The Company or one of its Subsidiaries has good and clear,
record and marketable fee simple title in and to its owned real property (the
“Real Property”), free and clear of all Encumbrances other than Permitted
Encumbrances. There are no written or oral subleases, licenses, concessions,
occupancy agreements or other contractual obligations granting to any other
Person the right of use or occupancy of the Real Property and there is no Person
(other than any Company) in possession of the Real Property.

 

3.14.2        The current use of the Real Property is, in all material respects,
in accordance with the certificates of occupancy relating thereto and the terms
of any Permits relating thereto. The Real Property and its current use,
occupancy and operation by the Companies and the Facilities located thereon do
not (a) constitute a nonconforming use or structure under any applicable
building, zoning, subdivision or other land use or similar Legal Requirements,
or (b) otherwise violate or conflict with any covenants, conditions,
restrictions or other contractual obligations, including the requirements of any
applicable Encumbrances thereto. No condemnation Action is pending or, to the
Company’s Knowledge, threatened, that would preclude or materially impair the
use of any Real Property.

 

3.14.3        Each Facility is supplied with utilities and other services
necessary for the operation of such Facility as the same is currently operated
or currently proposed to be operated, all of which utilities and other services
are provided via public roads or via permanent, irrevocable appurtenant
easements benefiting the Real Property. Each parcel of Real Property abuts on,
and has direct vehicular access to, a public road, or has access to a public
road via a permanent, irrevocable appurtenant easement benefiting the parcel of
Real Property, in each case, to the extent necessary for the conduct of the
Business.

 

3.15Intellectual Property.

 

3.15.1           Company IP. Except for any Technology and Intellectual Property
Rights licensed to the Company under any agreements pursuant to which the
Company uses or licenses an item of Company Technology or Company Intellectual
Property Rights that any Person besides the Company owns (the “Inbound IP
Contracts”) and to the extent provided in such Inbound IP Contracts, none of the
Company Technology or Company Intellectual Property Rights is in the possession,
custody, or control of any third Person other than the Company.

 

12

 

 

3.15.2           Infringement. The Company (a) has not, to the Company’s
Knowledge, interfered with, infringed upon, diluted, misappropriated, or
violated any Intellectual Property Rights of any Person, (b), has not received
any charge, complaint, claim, demand, or notice alleging interference,
infringement, dilution, misappropriation, or violation of the Intellectual
Property Rights of any Person (including any invitation to license or request or
demand to refrain from using any Intellectual Property Rights of any Person in
connection with the conduct of the Business or the use of the Company
Technology), or (c) has not agreed to or has a contractual obligation to
indemnify any Person for or against any interference, infringement, dilution,
misappropriation, or violation with respect to any Intellectual Property Rights.
To the Company’s Knowledge, no Person has interfered with, infringed upon,
diluted, misappropriated, or violated any Company Intellectual Property Rights.

 

3.15.3           IP Contracts. Except as provided in the Inbound IP Contracts,
the Company does not owe any royalties to any Person for the use of any
Intellectual Property Rights or Technology.

 

3.15.4           Confidentiality and Invention Assignments. The Company has
maintained commercially reasonable practices to protect the confidentiality of
the Company’s confidential information and trade secrets and has required any
employee or third party with access to the Company’s confidential information to
execute enforceable contracts requiring them to maintain the confidentiality of
such information and use such information only for the benefit of the Company.
All current and former employees of the Company who contributed to the Company
Technology that is incorporated in any product or service of the Company have
executed contracts that assign to the Company all of such Person’s respective
rights, including Intellectual Property Rights relating to such product or
service.

 

3.15.5           Open Source Software. To the best of the Company’s Knowledge,
none of the Company Technology or any product or service of the Company
constitutes, contains, or is dependent on any open source computer code, and
none of the Company Technology or any product or service of the Company is
subject to any contractual obligation that would require the Company to divulge
to any Person any source code or trade secret that is part of the Company
Technology.

  

3.15.6           Privacy and Data Security. The Company’s use and dissemination
of any personally-identifiable information concerning individuals is in
compliance with all applicable privacy policies, terms of use, Legal
Requirements, and contractual obligations. The Company maintains policies and
procedures regarding data security and privacy and maintain administrative,
technical, and physical safeguards that are commercially reasonable and, in any
event, in compliance with all applicable Legal Requirements and contractual
obligations. To the Company’s Knowledge, there have been no security breaches
relating to, or violations of any security policy regarding, or any unauthorized
access of, any data or information used by the Company.

 

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3.16           Legal Compliance; Illegal Payments; Permits. The Company has
complied and is in compliance in all material respects with all Legal
Requirements applicable to it or any of its Assets. The Company is not in breach
or violation of, it or default under, and has not at any time during the
previous five (5) years been in breach or violation of, or default under: (a)
its organizational documents nor, to the Company’s Knowledge, is there a basis
which could constitute such a breach, violation or default; (b) any Legal
Requirement nor, to the Company’s Knowledge, is there a basis which could
constitute such a breach, violation or default, except for breaches, violation
or defaults which have not had, and are not reasonably likely to have, a
Material Adverse Effect. In the conduct of the Business, to the Company’s
Knowledge, neither the Company nor any of its directors, officers, employees or
agents, has (a) directly or indirectly, given, or agreed to give, any illegal
gift, contribution, payment or similar benefit to any supplier, customer,
governmental official or employee or other Person who was, is or may be in a
position to help or hinder the Company (or assist in connection with any actual
or proposed transaction) or made, or agreed to make, any illegal contribution,
or reimbursed any illegal political gift or contribution made by any other
Person, to any candidate for federal, state, local or foreign public office or
(b) established or maintained any unrecorded fund or asset or made any false
entries on any books or records for any purpose. The Company has been duly
granted all Permits under all Legal Requirements necessary for either (a) the
conduct of the Business, or (b) the lawful occupancy of the Real Property and
the present use and operation thereof. Schedule 3.16 describes each Permit
affecting, or relating to, the Assets or the Business together with the
Governmental Authority or other Person responsible for issuing such Permit. All
Permits are valid and in full force and effect, and the Company is not in breach
or violation of, or default under, any such Permit, and, to the Company’s
Knowledge, no basis exists which, with notice or lapse of time or both, would
constitute any such breach, violation nor default and (c) the Permits will
continue to be valid and in full force and effect, on identical terms following
the consummation of the Contemplated Transactions.

 

3.17Tax Matters.

 

3.17.1           Schedule 3.17 sets forth a complete list of the Company’s tax
liabilities, tax investigations or audits, and unfiled tax returns.

 

3.17.2           Other than as disclosed on Schedule 3.17 hereto, the Company
has timely filed, or has caused to be timely filed on its behalf, all Tax
Returns required to be filed by it in accordance with all Legal Requirements.
All such Tax Returns were true, correct and complete in all respects. All Taxes
owed by the Company (whether or not shown on any Tax Return) have been timely
paid in full. No claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that the Company is or may be
subject to taxation by that jurisdiction, and, to the Company’s Knowledge, there
is no basis for any such claim to be made. There are no Encumbrances with
respect to Taxes upon any Asset other than Permitted Encumbrances for current
Taxes not yet due and payable.

  

3.17.3        The Company has deducted, withheld and timely paid to the
appropriate Governmental Authority all Taxes required to be deducted, withheld
or paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party, and the Company has
complied with all Tax-related reporting and recordkeeping requirements.

 

3.17.4        To the Company’s Knowledge, there is no dispute, audit,
investigation, proceeding or claim concerning any Tax Liability of the Company
pending, being conducted, claimed, raised by a Governmental Authority in
writing. The Company has provided or made available to the Buyer true, correct
and complete copies of all Tax Returns, examination reports, and statements of
deficiencies filed, assessed against, or agreed to by the Company since December
31, 2015.

 

14

 

 

3.17.5        The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency. The Company has not executed any power of attorney with respect to
any Tax, other than powers of attorney that are no longer in force. No closing
agreements, private letter rulings, technical advice memoranda or similar
agreements or rulings relating to Taxes have been entered into or issued by any
Governmental Authority with or in respect of the Company.

 

3.17.6        The unpaid Taxes of the Company did not as of the Most Recent
Balance Sheet Date exceed the reserve for Taxes (excluding any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Balance Sheet (rather than in
any notes thereto).

 

3.17.7        The Company has not made any payments, or has been or is a party
to any agreement, contract, arrangement or plan that could result in it making
payments, that have resulted or would result, separately or in the aggregate, in
the payment of any “excess parachute payment” within the meaning of Code Section
280G or in the imposition of an excise Tax under Code Section 4999 (or any
corresponding provisions of state, local or foreign Tax law) or that were or
would not be deductible under Code Sections 162 or 404.

 

3.17.8        The Company has not filed a consent under Code Section 341(f).

 

3.17.9        The Company has never been a member of an “affiliated group”
within the meaning of Code Section 1504(a) filing a consolidated federal income
Tax Return (other than the “affiliated group” the common parent of which is the
Company). The Company is not a party to any contractual obligation relating to
Tax sharing or Tax allocation. The Company has no Liability for the Taxes of any
Person under Treasury Regulation 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.

  

3.17.10    The Company is not or has not been required to make any adjustment
pursuant to Code Section 481(a) (or any predecessor provision) or any similar
provision of state, local or foreign tax law by reason of any change in any
accounting methods, or will be required to make such an adjustment as a result
of the Contemplated Transactions, and there is no application pending with any
Governmental Authority requesting permission for any changes in any of its
accounting methods for Tax purposes. To the Company’s Knowledge, no Governmental
Authority has proposed any such adjustment or change in accounting method.

 

3.17.11    To the Company’s Knowledge, the Company will not be required to
include any amount in taxable income or exclude any item of deduction or loss
from taxable income for any taxable period (or portion thereof) ending after the
Closing Effective Date as a result of (a) any “closing agreement” as described
in Code Section 7121 (or any corresponding or similar provision of state, local
or foreign Income Tax law) executed on or prior to the Closing Effective Date,
(b) any deferred intercompany gain or excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding or similar provision
or administrative rule of federal, state, local or foreign Income Tax law), (c)
installment sale or open transaction disposition made on or prior to the Closing
Effective Date, (d) any prepaid amount received on or prior to the Closing
Effective Date or (e) any change in Legal Requirements.

 

3.17.12    To the Company’s Knowledge, the Company owns no property of a
character, the indirect transfer of which, pursuant to this Agreement, would
give rise to any documentary, stamp, or other transfer Tax.

 

15

 

 

3.17.13    The Company has never been either a “distributing corporation” or a
“controlled corporation” in a distribution in which the parties to such
distribution treated the distribution as one to which Section 355 of the Code is
applicable.

 

3.17.14    The Company is not a passive foreign investment company as defined
under Sections 1291 and 1298 of the Code. The Company has not recognized a
material amount of Subpart F income as defined in Section 952 of the Code during
a taxable year of such company that includes but does not end on the Closing
Effective Date.

 

3.18           Environmental Matters. To the Company’s Knowledge, (a) the
Company and its predecessors are, and have been, in compliance with all
Environmental Laws, (b) the Company has obtained and currently maintains in full
force and effect all permits, licenses, authorizations and registrations
required by any Environmental Law for its operations, (c) there is no Action
relating to or arising under any Environmental Law pending, or, to the Knowledge
of the Company, threatened, against the Company or a predecessor, and there are
no facts, circumstances or conditions that could reasonably be expected to form
the basis of any such Action, (c) there has been no release or threatened
release of any pollutant, asbestos, lead or lead-based paint, polychlorinated
biphenyls (PCBs), petroleum or any fraction thereof, contaminant or toxic or
hazardous material or substance (including toxic mold), substance or waste (each
a “Hazardous Substance”) at, on, upon, into or from any site currently or
heretofore owned, leased or otherwise used by the Company, (d) there have been
no Hazardous Substances generated, manufactured, handled, transported, used,
treated or stored by the Company that have been disposed of or come to rest at
any site that has been included in any published U.S. federal, state or local
“superfund” site list or any other similar list of hazardous or toxic waste
sites published by any Governmental Authority in the United States, (e) there
are no underground storage tanks located on, no PCBs or PCB-containing equipment
used or stored on, and no Hazardous Substances generated, manufactured, handled,
transported, used, treated or stored on, any site currently or heretofore owned,
leased or otherwise used by the Company and (f) the Company has made available
to the Buyer true, accurate and complete copies of all environmental records,
reports, notifications, certificates of need, permits, licenses, authorizations,
registrations, pending permit applications, correspondence, engineering studies,
and environmental studies or assessments, in each case as amended and in effect.

  

3.19Contracts.

 

3.19.1           Contracts. Except as previously disclosed to the Buyer in the
Company Due Diligence Material, the Company is not bound by or a party to:

 

3.19.1.1             any contractual obligation (or group of related contractual
obligations) for the purchase or sale of inventory, raw materials, commodities,
supplies, goods, products, equipment or other personal property, or any Asset
other than in the Ordinary Course of Business, or for the furnishing or receipt
of services, in each case, the performance of which will extend over a period of
more than one year or which provides for aggregate payments to or by the Company
in excess of $30,000;

 

3.19.1.2             (i) any capital lease or (ii) any other lease or other
contractual obligation relating to the Equipment providing for aggregate rental
payments in excess of $5,000 under which any Equipment is held or used by the
Company;

 

16

 

 

3.19.1.3             any contractual obligation, other than Real Property Leases
or leases relating to the Equipment, relating to the lease or license of any
Asset, including Technology and Intellectual Property Rights (and including all
customer license and maintenance agreements);

 

3.19.1.4             any contractual obligation relating to the acquisition or
disposition of any business of the Company (whether by merger, consolidation or
other business combination, sale of securities, sale of assets or otherwise;

 

3.19.1.5             any contractual obligation under which the Company is, or
may become, obligated to pay any amount in respect of indemnification
obligations, purchase price adjustment or otherwise in connection with any (i)
acquisition or disposition of assets or securities (other than the sale of
inventory in the Ordinary Course of Business), (ii) merger, consolidation or
other business combination or (iii) series or group of related transactions or
events of the type specified in clauses (i) and (ii) above;

 

3.19.1.6             any contractual obligation concerning or consisting of a
partnership, limited liability company or joint venture agreement;

  

3.19.1.7             any contractual obligation (or group of related contractual
obligations) (i) under which the Company has created, incurred, assumed or
guaranteed any Debt or (ii) under which the Company has permitted any Asset to
become Encumbered;

 

3.19.1.8             any contractual obligation under which any other Person has
guaranteed any Debt of the Company;

 

3.19.1.9             any contractual obligation relating to confidentiality or
non- competition (whether the Company is subject to or the beneficiary of such
obligations);

 

3.19.1.10         any contractual obligation under which the Company is, or may
become, obligated to incur any severance pay or special Compensation obligations
which would become payable, directly or indirectly, by reason of, this Agreement
or the Contemplated Transactions;

 

3.19.1.11         any contractual obligation under which the Company is, or may,
have any Liability to any investment bank, broker, financial advisor, finder’s
agreement or other similar Person (including an obligation to pay any legal,
accounting, brokerage, finder’s, or similar fees or expenses in connection with
this agreement or the Contemplated Transactions);

 

3.19.1.12         any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of the Company’s current or former directors, officers, and
employees;

 

3.19.1.13         any contractual obligation providing for the employment or
consultancy with an individual on a full-time, part-time, consulting or other
basis or otherwise providing Compensation or other benefits, including but not
limited to severance or change of control benefits, to any officer, director,
employee or consultant (other than an employee plan);

 

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3.19.1.14         any agency, dealer, distributor, sales representative,
marketing or other similar agreement;

 

3.19.1.15         any contractual obligation under which the Company has
advanced or loaned an amount to any of its Affiliates or employees other than in
the Ordinary Course of Business;

 

3.19.1.16         any contractual obligation with any Governmental Authority
(including a notation as to any such contractual obligation under which the
Company has a “small business” or similar designation); and

 

3.19.1.17         any other contractual obligation (or group of related
contractual obligations) the performance of which involves consideration in
excess of $25,000 over the life of such contractual obligation.

  

3.19.2           Enforceability; Breach. To the Company’s Knowledge, each
contractual obligation to which the Company is a party (each, a “Contract”) is
enforceable against each counterparty to such contractual obligation, and is in
full force and effect, and, subject to obtaining any necessary consents, each of
which the Company has disclosed to the Buyer in the Company Due Diligence
Material, and subject to limitations to enforceability resulting from equitable
principles or from bankruptcy, fraudulent conveyance or insolvency laws
affecting creditors’ rights generally, will continue to be so enforceable and in
full force and effect on identical terms following the consummation of the
Contemplated Transactions. The Company or, to the Company’s Knowledge, any other
party to any contract therewith has not been or is not currently in breach or
violation of, or default under, or has repudiated any provision of, any
Contract. The Company has delivered to the Buyer true, accurate and complete
copies of each written Contract, in each case, as amended or otherwise modified
and in effect.

 

3.20           Affiliate Transactions. Except as disclosed otherwise to the
Buyer in the Company Due Diligence Material, no Seller or any Affiliate of any
Seller is an officer, director, employee, consultant, competitor, creditor,
debtor, customer, distributor, supplier or vendor of, or is a party to any
contractual obligation with, the Company. Except as disclosed otherwise to the
Buyer in the Company Due Diligence Material, no Seller or any Affiliate of any
Seller owns any Asset used in, or necessary to, the Business. At Closing, there
will be no amounts owed to any Seller by the Company for (i) previously deferred
compensation or (ii) any Liability for any Debt or loans made by them to the
Company.

 

3.21           Customers and Suppliers. Schedule 3.21 sets forth a complete and
accurate list of the Company's top 10 customers and top 10 suppliers for the
fiscal year ended December 31, 2016 (determined on a consolidated basis based
on, in the case of customers, the amount of revenues recognized by the Company
and, in the case of suppliers, the dollar amount of payments made by the
Company). Except as described on Schedule 3.21, the Company has not received any
written notice that (and the Company has no Knowledge of) any customers or
customers plans or has threatened to stop or materially decrease the rate of
business done with the Company. In addition, except as described on Schedule
3.21, the Company has not received any written notice that (and the Company has
no Knowledge of) any supplier or suppliers plans or has threatened to stop or
materially decrease the rate of business done with, or materially increase the
prices charged to, the Company.

 

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3.22           Employees. There are no labor troubles (including any
arbitrations, grievances, work slowdown, lockout, stoppage, picketing or strike)
pending, or to the Company’s Knowledge, threatened between the Company, on the
one hand, and its employees, on the other hand, and there have been no such
troubles at any time during the past five years. No employee of the Company is
represented by a labor union. The Company is not a party to, or otherwise
subject to, any collective bargaining agreement or other labor union contract.
No petition has been filed or proceedings instituted by or on behalf of an
employee or group of employees of the Company with any labor relations board
seeking recognition of a bargaining representative and there are no pending or
threatened charges or complaints before the National Labor Relations Board or
analogous state or foreign Governmental Entities. The Company has not, or is not
currently engaged in any unfair labor practice, and (e) there is no
organizational effort currently being made or threatened by, or on behalf of,
any labor union to organize employees of the Company and no demand for
recognition of employees of the Company has been made by, or on behalf of, any
labor union. No executive officer’s or other key employee’s employment with the
Company has been terminated for any reason nor has any such officer or employee
notified the Company of his or her intention to resign or retire since at any
time during the past five years. The Company has not implemented any plant
closings or layoff of employees that would constitute a “plant closing” or a
“mass layoff” within the meaning of the WARN Act or any State of local analogy
thereto. Neither the execution and delivery of this Agreement nor the
consummation of any Contemplated Transaction will (either alone or upon the
occurrence of any additional or subsequent event or events) (i) result in any
payment (whether of severance pay or otherwise) becoming due to any employee,
officer, consultant, independent contractor, agent or director of the Company
(ii) increase any benefit under any employee plan or (iii) result in the
acceleration before its due date or maturity date of the time of payment or
vesting of any such payment or benefits.

  

3.22.1           Schedule 3.22.1 lists all current employees and independent
contractors of the Company and each such individual’s (a) classification as an
employee or independent contractor; (b) classification as exempt or non-exempt
from any Legal Requirement relating to the payment of minimum wage or overtime
wages, (c) the date the individual commenced providing services to the Company,
(d) full compensation, including but not limited to current annual base salary
or hourly rate of pay, (e) participation in any Company benefits plan, (f) leave
status and expected date of return if he or she is on leave, and (g) title. As
of the date hereof and as of the Closing Effective Date, the Company, (i) has
paid in full or accrued in full on the Most Recent Balance Sheet all
compensation, including wages, commissions, bonuses and accrued vacation or
other paid time off, payable to such employees and independent contractors of
the Company for services performed on or prior to the applicable date; and (ii)
has paid or withheld or collected from their employees the amount of all Taxes
required to be withheld or collected therefrom and have paid the same when due
to the proper Governmental Authority. The employment or services of all persons
employed by or providing services to the Company is terminable at will without
any penalty or severance obligation on the part of the Company. There are no
employment, severance pay, continuation pay, termination or indemnification
agreements or arrangements between the Company and any current or former
officer, director, manager, employee, consultant or independent contractor of
the Company, and no representation, promise, or guarantee of any kind has been
made to its employees regarding the employee’s continued employment with the
Company or the terms of any employee’s compensation.

 

3.23           Litigation; Governmental Orders. Except as disclosed otherwise to
the Buyer in the Company Due Diligence Material, during the past five (5) years,
there have been no Actions pending, or, to the Knowledge of the Company,
threatened against the Company and to the Knowledge of the Company, there are no
facts making the commencement of any such Action reasonably likely. The Company
(i) is not the subject of any judgment, decree, injunction or Governmental Order
or (ii) does not plan to initiate any Action.

 

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3.24           Product Warranties. There are no claims outstanding, pending or,
to the Sellers’ Knowledge, threatened for breach of any express written warranty
relating to any products manufactured, sold or delivered by the Company. To the
Company’s Knowledge there is no material design defect with respect to the
Company’s products.

 

3.25           Insurance. All insurance policies in force with respect to the
Company (collectively “Liability Policies”) are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing will have been paid, the Company is not in default thereunder, and no
notice of cancellation or termination has been received by the Company with
respect to any such policy. No insurer has (a) questioned, denied or disputed
(or otherwise reserved its rights with respect to) the coverage of any claim
pending under any insurance policy or (b) to the Knowledge of the Company, has
threatened to cancel any insurance policy. To the Knowledge of the Company, no
insurer plans to raise the premiums for, or materially alter the coverage under,
any such insurance policy.

 

3.26           No Brokers. The Company has no Liability of any kind to, or is
subject to any claim of, any broker, finder or agent in connection with the
Contemplated Transactions other than those, if any, which have been incurred by
the Sellers.

 

3.27           Inventory. Schedule 3.27 sets forth a list of all inventory of
the Company as of the date of the execution of this Agreement. All inventory of
the Company consists of a quality and quantity that is materially usable and
salable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been or will be, as applicable,
written off or written down to net realizable value, or otherwise not included,
in the Most Recent Balance Sheet. All inventories not written off have been
priced at the lower of cost or market on a first in, first out basis. The
quantities of each item of inventory (whether raw materials, work-in-process, or
finished goods) are not excessive, but are reasonable in the present
circumstances of the Company.

 

3.28           Disclosure. The representations and warranties of the Company and
the Company contained in this Section 3 and in the Ancillary Agreements, as well
as the certificates furnished by the Company, the Sellers’ Representative and
the Sellers to the Buyer, both with respect to this Agreement and the Ancillary
Agreements, do not contain and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained therein not misleading.

 

4.INDIVIDUAL REPRESENTATIONS AND WARRANTIES OF THE SELLERS.

 

Each Seller, hereby represents and warrants to the Buyer, solely as to such
Seller, and, except as otherwise provided herein, with no joint or other
responsibility for the representations, warranties or other liabilities or
obligations of any other Seller or of, or for, any of the Company, as of the
date hereof and as of the Closing Effective Date, that:

 

4.1              Organization. In the case of each Seller which is not an
individual, such Seller is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.

 

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4.2              Power and Authorization. The execution, delivery and
performance by such Seller of this Agreement and each Ancillary Agreement to
which it is (or will be) a party and the consummation of the Contemplated
Transactions are within the power and authority of such Seller and, if
applicable, have been duly authorized by all necessary action on the part of
such Seller. This Agreement and each Ancillary Agreement to which such Seller is
(or will be) a party (a) has been (or, in the case of Ancillary Agreements to be
entered into at or prior to the Closing, will be) duly executed and delivered by
such Seller and (b) is (or in the case of Ancillary Agreements to be entered
into at or prior to the Closing, will be) a legal, valid and binding obligation
of such Seller, enforceable against such Seller in accordance with its terms,
except as enforceability may be limited by equitable principles or by
bankruptcy, fraudulent conveyance or insolvency laws affecting creditors’ rights
generally. No action by, or in respect of, or filing with, any Governmental
Authority is required for, or in connection with, the valid and lawful (a)
authorization, execution, delivery and performance by such Seller of this
Agreement or (b) the consummation of the Contemplated Transactions by such
Seller.

  

4.3              Noncontravention. Neither the execution, delivery and
performance by such Seller of this Agreement or any Ancillary Agreement to which
such Seller is (or will be) a party nor the consummation of the Contemplated
Transactions will: (a) assuming the taking of any action by (including any
authorization, consent or approval) or in respect of, or any filing with, any
Governmental Authority, in each case, violate any provision of any Legal
Requirement applicable to such Seller; (b) result in a breach or violation of,
or default under, any contractual obligation of such Seller; (c) require any
action by (including any authorization, consent or approval) or in respect of
(including notice to), any Person under any contractual obligation; or (d) if
such Seller is not an individual, result in a breach or violation of, or default
under, such Seller’s organizational documents.

 

4.4              Title. Such Seller is the record and beneficial owner of the
outstanding Shares set forth opposite such Seller’s name on Exhibit A hereto,
and has good and marketable title to such Shares, free and clear of all
Encumbrances. Such Seller has full right, power and authority to transfer and
deliver to the Buyer valid title to the Shares held by such Seller, free and
clear of all Encumbrances. Immediately following the Closing, the Buyer will be
the record and beneficial owner of such Shares, and have good and marketable
title to such Shares, free and clear of all Encumbrances. Except pursuant to
this Agreement, there is no contractual obligation pursuant to which such Seller
has, directly or indirectly, granted any option, warrant or other right to any
Person to acquire any Shares or other equity interests in the Company.

 

4.5              No Brokers. Such Seller has no Liability of any kind to any
broker, finder or agent with respect to the Contemplated Transactions for which
the Buyer could be liable, and such Seller agrees to satisfy in full any such
Liability to any broker, finder, agent or other person.

 

4.6              Securities Law Matters. Each Seller hereby acknowledges that
the shares of FORM Securities being issued to such Seller hereunder have not
been registered under the 1933 Act, or registered or qualified for sale under
any state securities laws, and cannot be resold without registration thereunder
or exemption therefrom. Each Seller represents that such Seller is an
“accredited investor,” as such term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D of the 1933 Act, and will acquire the shares of FORM
Securities for his, her or its own account and not with a view to a sale or
distribution thereof. Each Seller represents that such Seller has sufficient
knowledge and experience in financial and business matters to enable him, her or
it to evaluate the risks of investment in the FORM Securities, is acquiring the
FORM Securities with a full understanding of all of the terms, conditions and
risks thereof, and at the Closing will bear and have the ability to bear the
economic risk of this investment for an indefinite period of time. Each Seller
represents that such Seller understands and agrees to the terms and conditions
under which the shares of FORM Securities are being offered.

 

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4.7              Restricted Securities; Legend. Each Seller acknowledges that
the FORM Securities (including the Conversion Shares) being offered hereunder
are “restricted securities” (as such term is defined in Rule 144 under the 1933
Act) and must be held indefinitely unless subsequently registered under the 1933
Act or an exemption from such registration is available. Each Seller
acknowledges that, to the extent applicable, each certificate evidencing the
shares of FORM Securities being issued hereunder shall be endorsed with a legend
substantially in the form set forth below, as well as any additional legend
imposed or required by applicable securities laws:

 

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY U.S.
STATE, NOR IS ANY SUCH REGISTRATION CONTEMPLATED. THIS SECURITY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM.”

 

4.8              Intentionally Omitted.

 

4.9              Access to Information. Each Seller acknowledges that he has
been afforded an opportunity to request and to review all information considered
by that Seller to be necessary to make an investment decision with respect to
the FORM Securities being issued hereunder. Each Seller also acknowledges that
he has received and reviewed information about Buyer and has had an opportunity
to discuss Buyer’s business, management and financial affairs with Buyer’s
management.

 

4.10          Reliance Upon Representations. Each Seller understands and
acknowledges that: 

(a)  the FORM Securities being issued hereunder have not been registered under
the 1933 Act; (b) the representations and warranties contained in Sections 4.7
through 4.11 are being relied upon by Buyer as a basis for exemption of the
issuance of the FORM Securities under the 1933 Act; (c) the offering of the FORM
Securities pursuant to this Agreement will not be registered under the 1933 Act
based on a determination that the issuance of securities hereunder is exempt
from the registration requirements of the 1933 Act; and (d) no state or federal
agency has made any finding or determination as to the fairness of the terms of
the sale of the FORM Securities or any recommendation or endorsement thereof. If
any of the representations made by any Seller in connection with the purchase of
FORM Securities is no longer accurate prior to the Closing Effective Date, such
Seller will promptly notify Buyer.

 

4.11          Exculpation; Representation by Counsel. Each Seller acknowledges
that he, she or it is not relying upon any Person, including, without
limitation, the Buyer, in making its decision to acquire the FORM Securities,
other than the representations and warranties of the Buyer contained in this
Agreement. Each Seller represents that he, she or it is aware that it has not
been represented in this transaction by the Company’s legal counsel or by any
legal counsel provided by the Company, that the Company has advised the Seller
that it should retain the Seller’s own legal counsel to advise it with respect
to the transaction, and that the Seller has had the opportunity to consult with
its own personal counsel concerning the advisability of entering into and
executing and delivering this Agreement. Each Seller further represents that the
Seller understands that the Company’s legal counsel has reviewed the Agreement
and other documents only as counsel to the Company and not on behalf of the
Seller.

 

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5.REPRESENTATIONS AND WARRANTIES OF THE BUYER.

 

The Buyer represents and warrants to the Sellers, as of the date hereof and as
of the Closing Effective Date, that:

 

5.1              Organization. The Buyer is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization.

 

5.2              Power and Authorization. The execution, delivery and
performance by the Buyer of this Agreement and each Ancillary Agreement to which
it is (or will be) a party and the consummation of the Contemplated Transactions
are within the power and authority of the Buyer and have been duly authorized by
all necessary action on the part of the Buyer. This Agreement and each Ancillary
Agreement to which the Buyer is (or will be) a party (a) has been (or, in the
case of Ancillary Agreements to be entered into at or prior to the Closing, will
be) duly executed and delivered by the Buyer and (b) is (or in the case of
Ancillary Agreements to be entered into at or prior to the Closing, will be) a
legal, valid and binding obligation of the Buyer, enforceable against the Buyer
in accordance with its terms, except as enforceability may be limited by
equitable principles or by bankruptcy, fraudulent conveyance or insolvency laws
affecting creditors’ rights generally

 

5.3              Authorization of Governmental Authorities. Except for any
filings required by the SEC or NASDAQ, no action by (including any
authorization, consent or approval), or in respect of, or filing with, any
Governmental Authority is required for, or in connection with, the valid and
lawful (a) authorization, execution, delivery and performance by the Buyer of
this Agreement and each Ancillary Agreement to which it is (or will be) a party
or (b) the consummation of the Contemplated Transactions by the Buyer.

 

5.4              Noncontravention. Neither the execution, delivery and
performance by the Buyer of this Agreement or any Ancillary Agreement to which
it is (or will be) a party nor the consummation of the Contemplated Transactions
will: (a) assuming the taking of any action by (including any authorization,
consent or approval) or in respect of, or any filing with, any Governmental
Authority, in each case, violate any provision of any Legal Requirement
applicable to the Buyer; (b) result in a breach or violation of, or default
under, any contractual obligation of the Buyer; (c) require any action by
(including any authorization, consent or approval) or in respect of (including
notice to), any Person under any contractual obligation; or (d) result in a
breach or violation of, or default under, the Buyer’s organizational documents.

 

5.5              No Brokers. The Buyer has no Liability of any kind to any
broker, finder or agent with respect to the Contemplated Transactions for which
the Sellers could be Liable, and Buyer agrees to satisfy in full any such
Liability incurred by Buyer to any broker, finder, agent or other Person.

 

5.6              Investment Representation. Buyer is purchasing the Shares for
its own account with the present intention of holding such securities for
investment purposes and not with a view to or for sale in connection with any
public distribution of such securities in violation of any federal or state
securities laws. Buyer acknowledges that it is informed as to the risks of the
Contemplated Transactions and of ownership of the Sharers. Buyer acknowledges
that the Shares have not been registered under the 1933 Act or registered or
qualified under any state or foreign securities laws and that the Shares may not
be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of unless such transfer, sale, assignment, pledge, hypothecation or
other disposition is pursuant to the terms of an effective registration
statement under the 1933 Act and are registered under any applicable state or
foreign securities laws or pursuant to an exemption from registration under the
1933 Act and any applicable state or foreign securities laws.

 

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5.7SEC Filings; Financial Statements.

 

(a)                Since January 1, 2014, Buyer has timely filed (including any
extension permitted under the SEC’s rules) or otherwise furnished (as
applicable) all registration statements, prospectuses, forms, reports,
definitive proxy statements, schedules, statements and documents required to be
filed or furnished by it under the 1933 Act or the Securities Exchange Act of
1934 (the “Exchange Act”), as the case may be, together with all certifications
required pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes Oxley Act”)
such documents and any other documents filed by Buyer with the SEC, as have been
supplemented, modified or amended since the time of filing, collectively, the
“Buyer SEC Documents”). As of their respective filing dates, the Buyer SEC
Documents (i) did not (or with respect to Buyer SEC Documents filed after the
date hereof, will not) contain any untrue statement of any material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading and (ii) complied (or will comply) in all material
respects with the applicable requirements of the Exchange Act or the 1933 Act,
as the case may be, the Sarbanes-Oxley Act and the applicable rules and
regulations of the SEC under each of those statutes, rules, and regulations.

 

(b)               All of the audited financial statements and unaudited interim
financial statements of Buyer included in the Buyer SEC Documents (i) have been
or will be, as the case may be, prepared from, are in accordance with, and
accurately reflect the books and records of Buyer in all material respects, (ii)
have been or will be, as the case may be, prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of interim financial statements,
for normal and recurring year-end adjustments that are not material in amount or
nature and as may be permitted by the SEC on Form 10-Q, Form 8-K or any
successor or like form under the Exchange Act) and (iii) fairly and accurately
present in all material respects the consolidated financial position and the
consolidated results of operations, cash flows and changes in stockholders’
equity of the Buyer as of the dates and for the periods referred to therein.
Without limiting the generality of the foregoing, (i) no independent public
accountant of Buyer has resigned or been dismissed as independent public
accountant of Buyer as a result of or in connection with any disagreement with
Buyer on a matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, (ii) no executive officer of Buyer
has failed in any respect to make, without qualification, the certifications
required of him or her under Section 302 or 906 of the Sarbanes-Oxley Act with
respect to any form, report or schedule filed by Buyer with the SEC since the
enactment of the Sarbanes-Oxley Act and (iii) no enforcement action has been
initiated or, to the knowledge of Buyer, threatened against Buyer by the SEC
relating to disclosures contained in any Buyer SEC Document.

 

5.8              Capitalization of the Buyer. As of the Closing Effective Date,
the entire authorized capital stock of the Buyer is as set forth in the Buyer
SEC Documents. All of the outstanding shares of capital stock of the Buyer have
been duly authorized, validly issued, and are fully paid and non- assessable.
Subject to the truth and accuracy of the representations and warranties of
Sellers set forth in Section 4. The Buyer has not violated and in entering into
and effecting the Contemplated Transactions will not violate, the 1933 Act, the
Exchange Act, any state “blue sky” or securities laws, any other similar Legal
Requirement or any preemptive or other similar rights of any Person in
connection with the issuance of the FORM Securities. Except as disclosed in the
Buyer SEC Documents or as otherwise contemplated by this Agreement: (a) there
are no preemptive rights or other similar rights in respect of any equity
interests in the Buyer, (b) there is no contractual obligation, or provision in
the organizational documents of the Buyer which obligates the Buyer to purchase,
redeem or otherwise acquire, or make any payment (including any dividend or
distribution) in respect of any equity interests in the Buyer, and (c) there are
no existing rights with respect to registration under the 1933 Act of any equity
interests in the Buyer. Except as set forth in the Buyer SEC Documents or as
otherwise contemplated by this Agreement, as of the date of this Agreement,
there are no outstanding or authorized options, warrants, convertible securities
or other rights, agreements, arrangements or commitments of any character
relating to any equity interests in the Buyer or obligating the Buyer to issue
or sell any interest in the Buyer.

 

24

 

 

5.9              Access to Information. Buyer acknowledges that it has been
afforded an opportunity to request and to review all information considered by
Buyer to be necessary to make an investment decision with respect to the Shares.
Buyer has received and reviewed information about the Company and about each
Seller’s Shares, and has had an opportunity to discuss these matters, including
the business, management and financial affairs of the Company with management of
the Company, and to discuss information concerning the ownership of the Shares
with the individual owners to the extent deemed necessary by Buyer.

 

6.COVENANTS.

 

6.1              Closing. The Sellers’ Representative will, and will cause the
Company to and each Seller, with respect to itself only, cooperate with the
Buyer to take all of the actions and deliver all the various certificates,
documents and instruments described in Section 7 as being performed or delivered
by the Sellers, the Company, or the Sellers’ Representative, as applicable.

 

6.2              Operation of Business. From the date of this Agreement until
the earlier of the Closing or the termination of this Agreement pursuant to
Section 9, the Company will: (a) conduct the Business only in the Ordinary
Course of Business; (b) maintain the value of the Business as a going concern;
(c) preserve intact its business organization and relationships with third
parties (including lessors, licensors, suppliers, distributors and customers)
and employees; and (d) consult with the Buyer prior to taking any action or
entering into any transaction that may be of strategic importance to the
Company. Without limiting the generality of Section 6.2, without the written
consent of the Buyer, the Company will not: (a) take any action, other than in
the Ordinary Course of Business, that would cause the representations and
warranties in Section 3 or any of the information set forth on the Sellers’
disclosure schedules to be untrue at, or as of any time prior to, the Closing
Effective Date; and (b) take any action, other than in the Ordinary Course of
Business or as disclosed on Schedule 3.8, which, if taken or omitted to be taken
between the Most Recent Balance Sheet Date and the date of this Agreement would
have been required to be disclosed on Schedule 3.8. Without limiting the
generality of the foregoing, the Company will not, without the prior written
consent of Buyer, other than in the Ordinary Couse of Business (i) sell any
assets, other than sales of inventory in the Ordinary Course of Business, (ii)
incur any new Debt, (iii) prepay or discharge any existing Debt or liabilities
(including accounts payable) before normal due dates, (iv) alter or change any
terms or alter or amend its respective organizational documents, (v) make or
change any Tax election, adopt or change any accounting method with respect to
Taxes, file any amended Tax Return, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment relating to the
Company, or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax. (vi) issue or sell equity or rights to acquire
equity of the Company, (vii) declare dividends on, make distributions with
respect to, or redeem any portion of, the equity of the Company, (viii)
materially increase the level of compensation or employee benefits of any
employee, except in amounts in keeping with past practices by formulas or
otherwise, or (ix) agree to do any of the foregoing.

 

6.3              Notices and Consents. The Company shall and the Sellers’
Representative shall cause the Company to give all notices to, make all filings
with and use their commercially reasonable efforts to obtain all necessary
authorizations, consents or approvals from, any Governmental Authority or other
Person or as otherwise reasonably requested by the Buyer. The Buyer will give
all notices to, make all filings with and use its commercially reasonable
efforts to obtain all necessary authorizations, consents or approvals from, any
Governmental Authority or other Person or as otherwise reasonably requested by
the Company.

 

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6.4              Buyer’s Access to Premises; Information. From the date of this
Agreement until the Closing, the Company will permit the Buyer and its
Representatives to have full access (at reasonable times and upon reasonable
notice) to all officers of the Company and to all premises, properties, books,
records (including Tax records), contracts, financial and operating data and
information and documents pertaining to the Company and make copies of such
books, records, contracts, data, information and documents as the Buyer or its
Representatives may reasonably request. The Company will prepare and furnish to
the Buyer, promptly after becoming available and in any event within 15 days of
the end of each calendar month, Monthly Financials for each month following the
Most Recent Balance Sheet Date through the Closing Effective Date.

 

6.5              Notice of Developments. From the date of this Agreement until
the Closing, the Company will give the Buyer prompt written notice upon becoming
aware of any material development affecting the Assets, Liabilities, Business,
financial condition, operations or prospects of the Company, or any event or
circumstance that could reasonably be expected to result in a breach of, or
inaccuracy in, any of the Company’s or the Sellers’ representations and
warranties. Nothing contained herein shall affect the Buyer’s rights or remedies
with respect to, or the Company’s or any Seller’s obligations or Liabilities
resulting from, any such development, breach or inaccuracy.

 

6.6              Exclusivity. From the date of this Agreement until the Closing,
the Company will not and the Company will not permit its Affiliates or any of
their or their Affiliates’ Representatives to directly or indirectly: (a)
solicit, initiate, or encourage the submission of any proposal or offer from any
Person relating to, or enter into or consummate any transaction relating to, the
acquisition of any equity interests in the Company or any merger,
recapitalization, share exchange, sale of substantial Assets (other than sales
of inventory in the Ordinary Course of Business) or any similar transaction or
alternative to the Contemplated Transactions or (b) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. None of the Sellers
will vote their Shares in favor of any such acquisition structured as a merger,
consolidation, share exchange or otherwise. The Company and the Sellers’
Representative will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry or contact with respect to any of the foregoing
(whether solicited or unsolicited). Each Seller and the Company acknowledges and
agrees that any breach or threatened breach of this Section 6.6 shall cause
irreparable injury to Buyer and money damages would be difficult to ascertain
and, therefore, the Company agrees to pay liquidated damages to Buyer in an
amount equal to $200,000 for any such breach or threatened breach, plus any
costs and expenses, including reasonable legal fees and expenses, incurred by
Buyer in seeking to enforce the provisions of this Section 6.6.

  

6.7              Transaction Expenses; Debt. At or prior to Closing, Sellers
shall cause to be paid and satisfied in full any and all Seller Transaction
Expenses. In addition, at or prior to Closing, each Seller will, and will cause
each of its Affiliates to satisfy all Liabilities it has to the Company in
respect of Debt.

 

6.8              Sellers’ Release. Effective as of the Closing, each Seller
hereby releases, remises and forever discharges any and all rights and claims
that it has had, now has or might now have against the Company except for (a)
rights and claims arising from or in connection with this Agreement and the
Ancillary Agreements, and (b) rights and claims arising from or in connection
with claims asserted against such Seller by third parties for which the Buyer
Indemnified Persons are not entitled to indemnification by such Seller pursuant
to Section 10.

 

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6.9              Confidentiality. The Buyer acknowledges that the information
provided to it in connection with this Agreement and the Contemplated
Transactions is subject to the terms of the Mutual non-Disclosure Agreement
between the Buyer and the Company dated May 12, 2016 (the “Confidentiality
Agreement”), the terms of which are incorporated herein by reference. Effective
upon, and only upon, the date of the Closing, the Confidentiality Agreement
shall terminate with respect to information relating solely to the Business.
Sellers hereby agree with Buyer that Sellers will not, and that Sellers will
cause their Affiliates not to, at any time on or after the date of the Closing,
directly or indirectly, without the prior written consent of the Buyer, disclose
or use, any confidential or proprietary information involving or relating to the
Business.

 

6.10          Publicity. No public announcement or disclosure will be made by
any party with respect to the subject matter of this Agreement or the
Contemplated Transactions without the prior written consent of the Buyer and the
Sellers’ Representative; provided, however, notwithstanding anything to the
contrary herein or in the Confidentiality Agreement, the provisions of Section
6.9 and this Section 6.10 will not prohibit (a) a press release and Form 8-K
filed with the SEC by Buyer disclosing the entry into of this Agreement and the
Contemplated Transactions, (b) any disclosure required by any applicable Legal
Requirements after the full execution of this Agreement, (c) any disclosure made
in connection with the enforcement of any right or remedy relating to this
Agreement or the Contemplated Transactions; (d) any disclosure by the Sellers
and the Buyer to report and disclose the status of this Agreement and the
Contemplated Transactions in the Ordinary Course of Business to their board of
directors, owners and Affiliates; provided, further, however, that after the
Closing, all parties are freely permitted to make any such public announcements
or disclosures of matters that previously have been publicly disclosed.

 

6.11          Further Assurances. From and after the Closing Effective Date,
upon the request of either the Sellers’ Representative or the Buyer, each of the
parties hereto will do, execute, acknowledge and deliver all such further acts,
assurances, deeds, assignments, transfers, conveyances and other instruments and
papers as may be reasonably required or appropriate to carry out the
Contemplated Transactions in a manner that is in accordance, and consistent,
with this Agreement. No Seller will take any action that is designed or intended
to have the effect of discouraging any lessor, licensor, supplier, distributor
or customer of the Company or other Person with whom the Company has a
relationship from maintaining the same relationship with the Company after the
Closing as it maintained prior to the Closing. Each Seller will refer all
customer inquiries relating to the Business to the Buyer, or the Company, as
appropriate, from and after the Closing.

  

6.12          Intentionally Omitted.

 

6.13          Limitation on Personal Liability of Officers and Directors of
Company. The directors and officers of the Company will not have any personal
liability for any matters in this Agreement, including representations and
warranties, for which they are acting in their respective capacities as officers
or directors of the Company, except to the extent that they are making a
representation, warranty or covenant as a Seller or to the extent that they have
made false statements that they knew were false at the time of making the
statement, or they otherwise intentionally violated their duties to the Company.

 

7.CONDITIONS TO THE BUYER’S OBLIGATIONS AT THE CLOSING.

 

The obligation of the Buyer to consummate the Closing is subject to the
fulfillment of each of the following conditions (unless waived by the Buyer in
accordance with Section 12.3):

 

7.1              Representations and Warranties. The representations and
warranties of the Company and the Sellers contained in this Agreement and in any
document, instrument or certificate delivered hereunder (a) that are not
qualified by materiality or Material Adverse Effect will be true and correct in
all material respects at and as of the Closing with the same force and effect as
if made as of the Closing and (b) that are qualified by materiality or Material
Adverse Effect will be true and correct in all respects at and as of the Closing
with the same force and effect as if made as of the Closing, in each case, other
than representations and warranties that expressly speak only as of a specific
date or time, which will be true and correct as of such specified date or time.

 

27

 

 

7.2              Performance. The Company and each Seller will have performed
and complied in all material respects with all agreements, obligations and
covenants contained in this Agreement that are required to be performed or
complied with by each of them, respectively, at or prior to the Closing.

 

7.3              Stock Certificates; Options and Warrants. The Sellers will have
delivered to the Buyer certificates, duly endorsed (or accompanied by duly
executed stock transfer powers) evidencing all of the Shares. Any options or
warrants to acquire any capital stock of the Company shall have been exercised
or otherwise terminated.

 

7.4              Intentionally Omitted.

 

7.5              Qualifications. No provision of any applicable Legal
Requirement and no Governmental Order will prohibit the consummation of any of
the Contemplated Transactions.

  

7.6              Absence of Litigation. No Action will be pending or threatened
in writing which may result in a Governmental Order (nor will there be any
Governmental Order in effect) (a) which would prevent consummation of any of the
Contemplated Transactions, (b) which would result in any of the Contemplated
Transactions being rescinded following consummation, (c) which would limit or
otherwise adversely affect the right of the Buyer to own the Shares (including
the right to vote the Shares), to control the Company, or to operate all or any
material portion of either the Business or Assets or the business or assets of
the Buyer or any of its Affiliates or (d) would compel the Buyer or any of its
Affiliates to dispose of all or any material portion of either the Business or
Assets or the business or assets of the Buyer or any of its Affiliates.

 

7.7              Consents, etc. All actions by (including any authorization,
consent or approval) or in respect of (including notice to), or filings with,
any Governmental Authority or other Person that are required to consummate the
Contemplated Transactions, as disclosed in Schedule 3.11 , or as otherwise
reasonably requested by the Buyer, will have been obtained or made, in a manner
reasonably satisfactory in form and substance to the Buyer (including any
authorizations, consents or approvals required by any lenders or suppliers), and
no such authorization, consent or approval will have been revoked.

 

7.8              FIRPTA Certificate. If requested by Buyer, the Company will
have delivered to the Buyer a duly executed certificate conforming to the
requirements of Treasury Regulation Section 1.1445- 2(b)(2).

 

7.9              Proceedings and Documents. All corporate and other proceedings
on the part of the Company and the Sellers in connection with the Contemplated
Transactions and all documents incident thereto will be reasonably satisfactory
in form and substance to the Buyer and its counsel, and they will have received
all such counterpart original and certified or other copies of such documents as
they may reasonably request.

 

7.10          Ancillary Agreements. Each of the Ancillary Agreements required to
be delivered to the Buyer will have been executed and delivered to the Buyer by
each of the other parties thereto.

 

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7.11          Resignations. The Buyer will have received the resignation of
Rodger Jenkins as sole officer and director of, and from any other position with
the Company.

 

7.12          No Material Adverse Effect. Since the Most Recent Balance Sheet
Date, there will have occurred no events nor will there exist circumstances
which singly or in the aggregate have resulted in a Material Adverse Effect.

 

7.13          Intentionally Omitted.

 

7.14          Intentionally Omitted.

 

7.15          Intentionally Omitted.

 

7.16          Tax Returns. The Company shall have provided evidence to Buyer
that the Company has filed, or caused to be filed on its behalf, all Tax Returns
required to be filed by the Company for the year ending December 31, 2015 and
all Taxes owed by the Company (whether or not shown on any Tax Return) shall
have been paid in full.

  

7.17          Intentionally Omitted.

 

8.CONDITIONS TO THE SELLERS’ OBLIGATIONS AT THE CLOSING.

 

The obligation of the Sellers to consummate the Closing is subject to the
fulfillment of each of the following conditions (unless waived by the Sellers’
Representative in accordance with Section 12.3):

 

8.1             Representations and Warranties. The representations and
warranties of the Buyer contained in this Agreement and in any document,
instrument or certificate delivered hereunder (a) that are not qualified by
materiality or Material Adverse Effect will be true and correct in all material
respects at and as of the Closing with the same force and effect as if made as
of the Closing and (b) that are qualified by materiality or Material Adverse
Effect will be true and correct in all respects at and as of the Closing with
the same force and effect as if made as of the Closing, in each case, other than
representations and warranties that expressly speak only as of a specific date
or time, which will be true and correct as of such specified date or time.

 

8.2             Performance. The Buyer will have performed and complied with, in
all material respects, all agreements, obligations and covenants contained in
this Agreement that are required to be performed or complied with by the Buyer
at or prior to the Closing.

 

8.3              Intentionally Omitted.

 

8.4              Qualifications. No provision of any applicable Legal
Requirement and no Governmental Order will prohibit the consummation of any of
the Contemplated Transactions.

 

29

 

 

8.5              Absence of Litigation. No Action will be pending or threatened
in writing which may result in Governmental Order, nor will there be any
Governmental Order in effect, (a) which would prevent consummation of any of the
Contemplated Transactions or (b) which would result in any of the Contemplated
Transactions being rescinded following consummation (and no such Governmental
Order will be in effect).

 

8.6              Consents, etc. All actions by (including any authorization,
consent or approval) or in respect of (including notice to), or filings with,
any Governmental Authority or other Person that are required to consummate the
Contemplated Transactions will have been obtained or made, in a manner
reasonably satisfactory in form and substance to the Sellers’ Representative,
and no such authorization, consent or approval will have been revoked.

 

8.7              Proceedings and Documents. All corporate and other proceedings
on the part of the Buyer in connection with the Contemplated Transactions and
all documents incident thereto will be reasonably satisfactory in form and
substance to the Sellers’ Representative and to its counsel, and the Sellers’
Representative will have received all such counterpart original and certified or
other copies of such documents as it may reasonably request.

 

8.8              FORM Securities. The Buyer will have delivered to the Sellers’
Representative separate certificates for each respective Seller evidencing all
of the securities as set forth on Exhibit A to which that Seller is entitled.

  

8.9              Ancillary Agreements. Each of the Ancillary Agreements required
to be delivered to the Sellers will have been executed and delivered to the
Sellers’ Representative by each of the other parties thereto.

 

9.INTENTIONALLY OMITTED.

 

10.INDEMNIFICATION.

 

10.1       Indemnification by the Sellers. Each Seller will severally indemnify
and hold harmless the Buyer and each of its directors, officers, shareholders,
partners, employees, agents and Affiliates (including, following the Closing,
the Company), and the Representatives and Affiliates of each of the foregoing
Persons (each, a “Buyer Indemnified Person”), from, against and in respect of
any and all Actions, Liabilities, Governmental Orders, Encumbrances, losses,
damages, bonds, dues, assessments, fines, penalties, Taxes, fees, costs
(including costs of investigation, defense and enforcement of this Agreement),
expenses or amounts paid in settlement (in each case, including reasonable
attorneys’ and experts fees and expenses), whether or not involving a Third
Party Claim (each, a “Loss”, and collectively, the “Losses”), incurred or
suffered by the Buyer Indemnified Persons or any of them as a result of, arising
out of or directly or indirectly relating to: (a) any breach of, or inaccuracy
in, any representation or warranty made by the Company or the Sellers or any of
them in this Agreement (other than in Section 4), any Ancillary Agreement or in
any document, Schedule, instrument or certificate delivered pursuant to this
Agreement (in each case, as such representation or warranty would read if all
qualifications as to materiality, including each reference to the defined term
“Material Adverse Effect,” were deleted therefrom); (b) any fraud of the Company
or any breach or violation of any covenant or agreement of the Company in or
pursuant to this Agreement or any Ancillary Agreement to the extent required to
be performed or complied with by the Company at or prior to the Closing; (c) any
breach of, or inaccuracy in, any representation or warranty made by such Seller
in Section 4, any Ancillary Agreement or in any document, Schedule, instrument
or certificate delivered pursuant to this Agreement (in each case, as such
representation or warranty would read if all qualifications as to materiality,
including each reference to the defined term “Material Adverse Effect,” were
deleted therefrom); or (d) any fraud of any of the Sellers or any breach or
violation of any covenant or agreement of such Sellers or any of them (including
under this Section 10) in or pursuant to this Agreement or any Ancillary
Agreement.

 

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10.2          Indemnity by the Buyer. The Buyer will indemnify and hold harmless
each Seller and each Seller’s respective Affiliates (including, prior to the
Closing, the Company), and the Representatives and Affiliates of each of the
foregoing Persons (each, a “Seller Indemnified Person”), from, against and in
respect of any and all Losses incurred or suffered by the Seller Indemnified
Persons or any of them as a result of, arising out of or relating to, directly
or indirectly: (a) any breach of, or inaccuracy in, any representation or
warranty made by the Buyer in this Agreement any Ancillary Agreement or in any
document, Schedule, instrument or certificate delivered pursuant to this
Agreement (in each case, as such representation or warranty would read if all
qualifications as to materiality, including each reference to the defined term
“Material Adverse Effect,” were deleted therefrom); or (b) any breach or
violation of any covenant or agreement of the Buyer (including under this
Section 10) or any covenant or agreement of the Company to the extent required
to be performed or complied with by the Company after the Closing, in either
case in or pursuant to this Agreement or any Ancillary Agreement.

 

10.3          Time for Claims. No claim may be made or suit instituted seeking
indemnification pursuant to Section 10.1 or 10.2 for any breach of, or
inaccuracy in, any representation or warranty unless a written notice describing
such breach or inaccuracy in reasonable detail in light of the circumstances
then known to the Indemnified Party, is provided to the Indemnifying Party: (a)
at any time, in the case of any breach of, or inaccuracy in, the representations
and warranties set forth in Sections 3.2 (Organization; Predecessors), 3.3
(Power and Authorization), 3.6 (Capitalization), 3.11 (Debt; Guarantees), 3.26
(No Brokers), 4.1 (Organization), 4.2 (Power and Authorization), 4.4 (Title),
4.5 (No Brokers), 5.1 (Organization), 5.2 (Power and Authorization), 5.5 (No
Brokers) or 5.8 (Capitalization) (or as such representations and warranties are
repeated or confirmed in any document, Schedule, instrument or certificate
delivered pursuant to this Agreement), or in the case of any claim or suit based
upon fraud or intentional misrepresentation; (b) at any time prior to the
thirtieth day after the expiration of the applicable statute of limitations
(taking into account any tolling periods and other extensions) in the case of
any breach of, or inaccuracy in, the representations and warranties set forth in
Sections 3.17 (Tax Matters) or 3.18 (Environmental Matters) (or as such
representations and warranties are repeated or confirmed in any document,
Schedule, instrument or certificate delivered pursuant to this Agreement); (c)
at any time prior to the thirty-six month anniversary of the Closing, in the
case of any breach of covenant required to be performed or complied with at or
prior to the Closing or breach of, or inaccuracy in, any other representation
and warranty in this Agreement (or as such representations and warranties are
repeated or confirmed in any document, Schedule, instrument or certificate
delivered pursuant to this Agreement) and (d) in the case of breaches of
covenants hereunder that are required to be performed after the Closing, at any
time prior to the expiration of the time period within which such covenant is to
be performed or observed under the express terms of this Agreement.

 

Claims for indemnification pursuant to any other provision of Sections 10.1 and
10.2 are not subject to the limitations set forth in this Section 10.3.

 

10.4          Third Party Claims.

 

10.4.1       Notice of Claim. If any third party will notify an Indemnified
Party with respect to any matter (a “Third Party Claim”) which may give rise to
an Indemnified Claim against an Indemnifying Party under this Section 10, then
the Indemnified Party will promptly give written notice to the Indemnifying
Party; provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party will relieve the Indemnifying Party from any
obligation under this Section 10, except to the extent such delay actually and
materially prejudices the Indemnifying Party.

 

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10.4.2       Assumption of Defense, etc. The Indemnifying Party will be entitled
to participate in the defense of any Third Party Claim and will have the right
to defend the Indemnified Party against the Third Party Claim so long as (a) the
Indemnifying Party gives written notice to the Indemnified Party within fifteen
(15) days after receipt of written notice of the claim pursuant to Section
10.4.1 that it will indemnify the Indemnified Party from and against the
entirety of any and all Losses the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, (b) the Third Party Claim involves only money damages and does not seek
an injunction or other equitable relief against the Indemnified Party, (c) the
Indemnified Party has not been advised by counsel that a conflict exists between
the Indemnified Party and the Indemnifying Party in connection with the defense
of the Third Party Claim, (d) the Third Party Claim does not relate to or
otherwise arise in connection with Taxes or any criminal or regulatory
enforcement action, (e) settlement of an adverse judgment with respect to, or
the Indemnifying Party’s conduct of, the defense of the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to be adverse
to the Indemnified Party’s reputation or continuing business interests
(including its relationships with current or potential customers, suppliers or
other parties material to the conduct of its business) and (f) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently. The
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim; provided, however, that
the Indemnifying Party will pay the fees and expenses of separate co-counsel
retained by the Indemnified Party if the Indemnifying Party does not assume
control of the defense of the Third Party Claim within the 15-day period
described above in this Section 10.4.2.

  

10.4.3       Limitations on Indemnifying Party. The Indemnifying Party will not
consent to the entry of any judgment or enter into any compromise or settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party unless such judgment, compromise or settlement (a) provides
for the payment by the Indemnifying Party of money as sole relief for the
claimant, (b) results in the full and general release of the Buyer Indemnified
Persons or Seller Indemnified Persons, as applicable, from all liabilities
arising or relating to, or in connection with, the Third Party Claim and (c)
involves no finding or admission of any violation of Legal Requirements or the
rights of any Person and no effect on any other claims that may be made against
the Indemnified Party.

 

10.4.4       Indemnified Party’s Control. If the Indemnifying Party does not
deliver the notice contemplated by clause (a) of Section 10.4.2 within 15 days
after the Indemnified Party has given notice of the Third Party Claim, or
otherwise at any time fails to conduct the defense of the Third Party Claim
actively and diligently, the Indemnified Party may defend, and may consent to
the entry of any judgment or enter into any compromise or settlement with
respect to, the Third Party Claim in any manner it may deem appropriate. If such
notice is given on a timely basis and the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently, but any of the other
conditions in Section 10.4.2 is or becomes unsatisfied, the Indemnified Party
may defend, and may consent to the entry of any judgment or enter into any
compromise or settlement with respect to, the Third Party Claim. In the event
that the Indemnified Party conducts the defense of the Third Party Claim
pursuant to this Section 10.4.4, the Indemnifying Party will (a) advance the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including reasonable attorneys’ and experts’ fees and
expenses) and (b) remain responsible for any and all other Losses that the
Indemnified Party may incur or suffer resulting from, arising out of, relating
to, in the nature of or caused by the Third Party Claim to the fullest extent
provided in this Section 10.

 

32

 

 

10.5          No Circular Recovery. Notwithstanding anything to the contrary in
this Agreement, each Seller hereby agrees that it will not make any claim for
indemnification against the Buyer, any Buyer Indemnified Person or the Company
for any matter with respect to which such Seller (i) was an executive officer or
director of the Company, and (ii) was either negligent or was acting outside of
his authorized authority, or otherwise did not intend to act in the best
interests of the Company, and (iii) in such director or officer position was
responsible for and in control of the facts or circumstances (with the ability
to modify such facts and circumstances at that time) that form the basis for an
indemnification claim by a Buyer Indemnified Person hereunder.

  

10.6          Certain Limitations. The indemnification provided for in Section
10.1 and Section 10.2 shall be subject to the following limitations:

 

(a)                The amount of each Loss for which either Sellers or Buyer
shall be liable pursuant to Section 10.1 or 10.2 shall not exceed the total
amount of Consideration paid from Buyer to Sellers under this Agreement as of
the time of that Loss.

 

(b)               The aggregate amount of all Losses for which either Sellers or
Buyer shall be liable pursuant to Section 10.1 or 10.2 shall not exceed the
total amount of Consideration paid from Buyer to Sellers under this Agreement.

 

(c)                Notwithstanding the foregoing, the limitations set forth in
Section 10.6(a) and 10.6(b) shall not apply to Losses for fraud or willful
misrepresentation or breach of any covenant or agreement, or for any breaches of
Sections 3.2 (Organization; Predecessors), 3.3 (Power and Authorization), 3.6
(Capitalization), 3.11 (Debt; Guarantees), 3.26 (No Brokers), 4.1
(Organization), 4.2 (Power and Authorization), 4.4 (Title), 4.5 (No Brokers),
5.1 (Organization), 5.2 (Power and Authorization), 5.5 (No Brokers) or 5.8
(Capitalization) (or as such representations and warranties are repeated or
confirmed in any document, Schedule, instrument or certificate delivered
pursuant to this Agreement).

 

(d)               Notwithstanding anything to the contrary set forth herein, all
indemnification obligations pursuant to this Section 10 will exclude punitive
Losses (except to the extent punitive Losses constitute Losses payable to a
third party as a result of a claim by a third party) and damages (other than
direct or incidental damages) that are not the probable and reasonably
foreseeable result of the underlying breach, misrepresentation, inaccuracy,
default or event.

 

10.7          Intentionally Omitted.

 

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10.8          Knowledge and Investigation. The right of any party to
indemnification pursuant to this Section 10 will not be affected by any
investigation conducted or knowledge acquired (or capable of being acquired) at
any time, whether before or after the execution and delivery of this Agreement
or the Closing, with respect to the accuracy of any representation or warranty,
or performance of or compliance with any covenant or agreement. The waiver of
any condition contained in this Agreement or in any Ancillary Agreement based on
the breach of any such representation or warranty, or on the performance of or
compliance with any such covenant or agreement, will not affect the right of any
person to indemnification pursuant to this Section 10 based on such
representation, warranty, covenant or agreement. Such representations and
warranties and covenants and agreements shall not be affected or deemed waived
by reason of the fact that the indemnified party knew or should have known that
any representation or warranty might be inaccurate or that the indemnifying
party failed to comply with any agreement or covenant. Any investigation by such
party shall be for its own protection only and shall not affect or impair any
right or remedy hereunder.

  

10.9          Remedies Cumulative. The rights of each Buyer Indemnified Person
and Seller Indemnified Person under this Section 10 are cumulative and each
Buyer Indemnified Person and Seller Indemnified Person, as the case may be, will
have the right in any particular circumstance, in its sole discretion, to
enforce any provision of this Section 10 without regard to the availability of a
remedy under any other provision of this Section 10.

 

11.TAX MATTERS

 

11.1          Cooperation on Tax Matters. Buyer and the Company will cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with any Tax matters relating to the Company (including by the
provision of reasonably relevant records or information). The party requesting
such cooperation will pay the reasonable out-of-pocket expenses of the other
party.

 

11.2          Straddle Period. In the case of any Straddle Period, the amount of
Taxes allocable to the portion of the Straddle Period ending on the Closing
Effective Date shall be deemed to be: (1) In the case of Taxes imposed on a
periodic basis (such as real or personal property Taxes), the amount of such
Taxes for the entire period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period)
multiplied by a fraction, the numerator of which is the number of calendar days
in the Straddle Period ending on and including the Closing Effective Date and
the denominator of which is the number of calendar days in the entire relevant
Straddle Period; and (2) In the case of Taxes not described in (1) above (such
as franchise Taxes, Taxes that are based upon or related to income or receipts,
based upon occupancy or imposed in connection with any sale or other transfer or
assignment of property (real or personal, tangible or intangible)), the amount
of any such Taxes shall be determined as if such taxable period ended as of the
close of business on the Closing Effective Date.

 

11.3          Transfer Taxes. Sellers shall be responsible for the timely
payment of, and to such extent shall indemnify and hold harmless the Buyer
against, all sales (including without limitation, bulk sales), use, value added,
documentary, stamp, gross receipts, registration, transfer, conveyance, excise,
recording, license, stock transfer stamps and other similar Taxes (in no event
including Taxes computed on the basis of income) and fees (“Transfer Taxes”)
arising out of or in connection with or attributable to the transactions
effected pursuant to this Agreement. Sellers shall prepare and timely file all
Tax Returns required to be filed in respect of Transfer Taxes (including,
without limitation, all notices required to be given with respect to bulk sales
taxes), provided that Buyer shall prepare any such Tax Returns that are the
primary responsibility of Buyer under applicable laws. Buyer’s preparation of
any such Tax Returns shall be subject to Seller’s approval, which approval shall
not be unreasonably withheld.

  

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12.MISCELLANEOUS

 

12.1          Notices. All notices, requests, demands, claims and other
communications required or permitted to be delivered, given or otherwise
provided under this Agreement must be in writing and must be delivered, given or
otherwise provided: (a) by hand (in which case, it will be effective upon
delivery); (b) by facsimile (in which case, it will be effective upon receipt of
confirmation of good transmission by the intended recipient; provided, that such
communication is also sent by some other means permitted by this Section 12.1);
(c) by overnight delivery by a nationally recognized courier service (in which
case, it will be effective on the Business Day after being deposited with such
courier service); or (d) by e-mail (in which case it will be effective on the
date sent if sent during normal business hours of the recipient, and on the next
Business Day if sent after normal business hours of the recipient, and followed
by a transmission pursuant to another method of delivery permitted by this
Section 12.1) in each case, to the address (or facsimile number) listed below:

 

If to the Company, to it at:

 

Excalibur Integrated Systems, Inc.

6031 Century Oaks Dr.

Chattanooga, TN 37416

Telephone number: (800) 899-8451

Facsimile number: (423) 899-7524

Attention: President

Email: info@ExcaliburIS.com

 

If to Buyer, to:

 

FORM Holdings Corp.

780 Third Avenue, 12th Floor New York, NY 10017

Telephone number: (212) 309-7549

Facsimile number: (646) 532-6775 Attention: Chief Executive Officer

Email: Notices@FORMHoldings.com

If to Sellers’ Representative, to:

Rodger Jenkins

6401 Beacon Pointe Cir.

Hixson, TN 37343

Telephone number: (423) 505-8451

Email: []

 

Each of the parties to this Agreement may specify different address or facsimile
number by giving notice in accordance with this Section 12.1 to each of the
other parties hereto.

  

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12.2          Succession and Assignment; No Third-Party Beneficiary. Subject to
the immediately following sentence, this Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, each of which such successors and permitted assigns will be
deemed to be a party hereto for all purposes hereof. No party may assign,
delegate or otherwise transfer either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other parties; provided, however, that the Buyer may (a) assign any or all of
its rights and interests hereunder to one or more of its Affiliates and (b)
designate one or more of its Affiliates to perform its obligations hereunder, in
each case, so long as Buyer is not relieved of any Liability hereunder. Except
as expressly provided herein, this Agreement is for the sole benefit of the
parties and their permitted successors and assignees and nothing herein
expressed or implied will give or be construed to give any Person, other than
the parties and such successors and assignees, any legal or equitable rights
hereunder. Notwithstanding the foregoing, the Buyer Indemnified Persons and the
Seller Indemnified Persons shall be considered third party beneficiaries of this
Agreement with respect to Section 10 hereof.

  

12.3          Amendments and Waivers. No amendment or waiver of any provision of
this Agreement will be valid and binding unless it is in writing and signed, in
the case of an amendment, by Buyer, the Company and the Sellers’ Representative,
or in the case of a waiver, by the party (in the case of the Sellers, by the
Sellers’ Representative) against whom the waiver is to be effective. No waiver
by any party of any breach or violation or, default under or inaccuracy in any
representation, warranty or covenant hereunder, whether intentional or not, will
be deemed to extend to any prior or subsequent breach, violation, default of, or
inaccuracy in, any such representation, warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence. No delay or omission on the part of any party in exercising any
right, power or remedy under this Agreement will operate as a waiver thereof.

 

12.4Provisions Concerning Sellers’ Representative.

 

12.4.1       Appointment. Each Seller hereby appoints Rodger Jenkins as the
Sellers’ Representative, to serve, in the manner and to the extent described
herein, as agent and proxy for such Seller for all purposes under this
Agreement. Without limiting the generality of the foregoing, the Sellers’
Representative will be authorized to: (a) in connection with the Closing,
execute and receive all documents, instruments, certificates, statements and
agreements on behalf of and in the name of the Sellers necessary to effectuate
the Closing and consummate the Contemplated Transactions; (b) take all actions
on behalf of the Sellers with respect to the matters set forth in Section 10;
(c) take all actions on behalf of the Sellers in connection with any claims made
under Section 10 to defend or settle such claims, and to make payments in
respect of such claims; (d) execute and deliver, should it elect to do so in its
sole discretion, on behalf of the Sellers, any amendment to this Agreement so
long as such amendment will apply equally to all Sellers and (e) take all other
actions to be taken by or on behalf of the Sellers and exercise any and all
rights which the Sellers are permitted or required to do or exercise under this
Agreement. All decisions of the Sellers' Representative shall be final and
binding on all of the Sellers, and no Seller shall have the right to object,
dissent, protest or otherwise contest the same. The Buyer shall be entitled to
rely upon, without independent investigation, any act, notice, instruction or
communication from the Sellers' Representative and any document executed by the
Sellers' Representative on behalf of any such Sellers and shall be fully
protected in connection with any action or inaction taken or omitted to be taken
in reliance thereon absent willful misconduct.

 

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12.4.2          Liability. The Sellers’ Representative will not be liable to any
Seller for any action taken by it in good faith pursuant to this Agreement. The
Sellers’ Representative is serving as Sellers’ Representative solely for
purposes of administrative convenience, and is not personally liable in such
capacity for any of the obligations of the Sellers or for any other obligations
hereunder, and the Buyer agrees that it will not look to the personal assets of
the Sellers’ Representative, acting in such capacity, for the satisfaction of
any obligations to be performed by the Sellers hereunder.

  

12.5          Entire Agreement. This Agreement, together with the other
Ancillary Agreements and any documents, instruments and certificates explicitly
incorporated by reference herein, constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes any and
all prior discussions, negotiations, proposals, undertakings, understandings and
agreements, whether written or oral, with respect thereto.

 

12.6          Schedules; Listed Documents, etc. Neither the listing nor
description of any item, matter or document in any Schedule hereto nor the
furnishing or availability for review of any document will be construed to
modify, qualify or disclose an exception to any representation or warranty of
any party made herein or in connection herewith, except to the extent that the
applicability of such disclosure to such representation or warranty is
reasonably apparent on the face of such disclosure.

 

12.7          Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute but one and the same instrument. This Agreement will
become effective when duly executed by each party hereto.

 

12.8          Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. In the event that any provision hereof
would, under applicable law, be invalid or unenforceable in any respect, each
party hereto intends that such provision will be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law.

 

12.9          Headings. The headings contained in this Agreement are for
convenience purposes only and will not in any way affect the meaning or
interpretation hereof.

 

12.10      Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The parties intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party has breached or violated, or if there is an inaccuracy in, any
representation, warranty or covenant contained herein in any respect, the fact
that there exists another representation, warranty or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
party has not breached or violated, or in respect of which there is not an
inaccuracy, will not detract from or mitigate the fact that the party has
breached or violated, or there is an inaccuracy in, the first representation,
warranty or covenant.

 

37

 

 

12.11      Governing Law. This Agreement, the negotiation, terms and performance
of this Agreement, the rights of the parties under this Agreement, and all
Actions arising in whole or in part under or in connection with this Agreement
shall be governed by and construed in accordance with the domestic substantive
laws of the State of New York, without giving effect to any choice or conflict
of law provision or rule that would cause the application of the laws of any
other jurisdiction.

  

12.12Jurisdiction; Venue; Service of Process.

 

12.12.1   Jurisdiction. Except as otherwise expressly provided in this
Agreement, each party to this Agreement, by its, his or her execution hereof,
(a) hereby irrevocably submits to the exclusive jurisdiction and venue of the
state courts of the State of New York or the United States District Court
located in the Southern District of New York for the purpose of any Action
between any of the parties hereto arising in whole or in part under or in
connection with this Agreement, any Ancillary Agreement, the Contemplated
Transactions or the negotiation, terms or performance hereof or thereof, (b)
hereby waives to the extent not prohibited by applicable Legal Requirements, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
Action, any claim that it, he or she is not subject personally to the
jurisdiction of the above-named courts, that venue in any such court is
improper, that its, his or her property is exempt or immune from attachment or
execution, that any such Action brought in one of the above-named courts should
be dismissed on grounds of forum non conveniens or improper venue, that such
Action should be transferred or removed to any court other than one of the
above-named courts, that such Action should be stayed by reason of the pendency
of some other Action in any other court other than one of the above-named courts
or that this Agreement or the subject matter hereof may not be enforced in or by
such court and (c) hereby agrees not to commence or prosecute any such Action
other than before one of the above-named courts. Notwithstanding the previous
sentence, a party hereto may commence any Action in a court other than the
above-named courts solely for the purpose of enforcing an order or judgment
issued by one of the above-named courts.

 

12.12.2   Service of Process. Each party hereto hereby (a) consents to service
of process in any Action between any of the parties hereto arising in whole or
in part under or in connection with this Agreement, any Ancillary Agreement, the
Contemplated Transactions or the negotiation, terms or performance hereof or
thereof, in any manner permitted by Delaware law, (b) agrees that service of
process made in accordance with clause (a) or made by overnight delivery by a
nationally recognized courier service at its, his or her address specified
pursuant to Section 12.1 will constitute good and valid service of process in
any such Action and (c) waives and agrees not to assert (by way of motion, as a
defense or otherwise) in any such Action any claim that service of process made
in accordance with clause (a) or (b) does not constitute good and valid service
of process.

 

12.13      Specific Performance. Each of the parties hereto acknowledges and
agrees that the other parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached or violated. Accordingly, each of
the parties hereto agrees that, without posting bond or other undertaking, the
other parties hereto shall be entitled to an injunction or injunctions to
prevent breaches or violations of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
Action instituted in any court specified in Section 12.12.1 in addition to any
other remedy to which it, he or she may be entitled, at law or in equity. Each
party hereto further agrees that, in the event of any action for an injunction
or specific performance in respect of any such threatened or actual breach or
violation, it, he or she shall not assert that a remedy at law would be
adequate.

 

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12.14      Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, THE PARTIES HERETO HEREBY WAIVE, AND COVENANT THAT THEY
SHALL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION
WITH THIS AGREEMENT, ANY ANCILLARY AGREEMENT, THE CONTEMPLATED TRANSACTIONS OR
THE NEGOTIATION, TERMS OR PERFORMANCE HEREOF OR THEREOF, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE
PARTIES HERETO AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY
COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT
AMONG THE PARTIES HERETO IRREVOCABLY TO WAIVE THEIR RIGHT TO TRIAL BY JURY IN
ANY PROCEEDING SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE SITTING WITHOUT A JURY.

 

12.15      Representation by Counsel. Each party hereto acknowledges that it has
been advised by legal and any other counsel retained by such party in its sole
discretion. Each party acknowledges that such party has had a full opportunity
to review this Agreement and all related exhibits, schedules and ancillary
agreements and to negotiate any and all such documents in its sole discretion,
without any undue influence by any other party hereto or any third party.

 

 

[Signature Page follows]

 

39

 

 

[Signature Page to Stock Purchase Agreement]

 

IN WITNESS WHEREOF, each of the undersigned has executed this Agreement as of
the date first above written.

 

 

THE BUYER: FORM HOLDINGS CORP.         By:       Name: Andrew D. Perlman    
Title: Chief Executive Officer             THE COMPANY: EXCALIBUR INTEGRATED
SYSTEMS, INC.         By:         Name: Rodger Jenkins     Title: President    
        THE SELLERS ' REPRESENTATIVE: By:       Name:  Rodger Jenkins    
Title:   Sellers' Representative             THE SELLERS:                 Rodger
Jenkins        

 

  Gregory Jones