Blueprint




Exhibit 10.1


 





 

AGREEMENT
AND PLAN OF MERGER

 

BY
AND AMONG

 

KEYSTONE
SOLUTIONS, INC.,

a
Delaware corporation,

 

NOVUME
SOLUTIONS, Inc.,

a
Delaware corporation,

 

KEYSTONE
MERGER SUB, INC.,

a
Delaware corporation,

 

BREKFORD
MERGER SUB, INC.,

a
Delaware corporation,

 

and

 

BREKFORD
CORP,

a
Delaware corporation

 

DATED AS OF FEBRUARY
10, 2017

 



 














TABLE
OF CONTENTS

 


	
ARTICLE
I

	
THE
MERGERS

	
2


	
Section
1.1.

	
The
Mergers

	
2


	
Section
1.2.

	
Effective
Time

	
2


	
Section
1.3.

	
Effects
of the Mergers

	
2


	
Section
1.4.

	
Subsequent
Actions

	
3


	
Section
1.5.

	
Certificate
of Incorporation; Bylaws; Directors and Officers of Surviving
Corporations

	
3


	
Section
1.6.

	
Company
Names

	
3


	
Section
1.7.

	
Company
Stockholders’ Agreement

	
3


	
ARTICLE
II

	
EFFECT
ON THE STOCK OF NOVUME, THE SURVIVING CORPORATIONS AND THE MERGED
CORPORATIONS

	
4


	
Section
2.1.

	
Conversion
of Securities

	
4


	
Section
2.2.

	
Conversion
of Shares

	
4


	
Section
2.3.

	
Cancellation
of Treasury Shares and of Outstanding Novume Common
Stock

	
5


	
Section
2.4.

	
Conversion
of Common Stock and Preferred Stock of the Merged Corporations into
Common Stock of the Surviving Corporations

	
5




	
Section
2.5.

	
Exchange
of Shares Other Than Treasury Shares

	
5




	
Section
2.6.

	
Transfer
Books

	
6




	
Section
2.7.

	
No
Fractional Shares

	
6




	
Section
2.8.

	
Options
to Purchase Common Stock

	
7




	
Section
2.9.

	
Certain
Adjustments

	
8




	
ARTICLE
III

	
CERTAIN
MATTERS WITH RESPECT TO NOVUME

	
8




	
Section
3.1.

	
Certificate
of Incorporation of Novume

	
8




	
Section
3.2.

	
Officers
and Directors of Novume

	
8




	
ARTICLE
IV

	
REPRESENTATIONS
AND WARRANTIES OF BREKFORD

	
 9


	
Section
4.1.

	
Organization
and Qualification; Subsidiaries

	
9




	
Section
4.2.

	
Certificate
of Incorporation and Bylaws

	
9




	
Section
4.3.

	
Capitalization

	
9




	
Section
4.4.

	
Authority
Relative to this Agreement

	
11








 



 

i






 





 


	
Section
4.5.

	
No
Conflict; Required Filings and Consents

	
11




	
Section
4.6.

	
SEC
Filings; Financial Statements

	
11


	
Section
4.7.

	
No
Undisclosed Liabilities; Absence of Certain Changes or
Events

	
12


	
Section
4.8.

	
Litigation

	
12


	
Section
4.9.

	
No
Violation of Law; Permits

	
13


	
Section
4.10.

	
Registration
Statement; Information Statement

	
14




	
Section
4.11.

	
Employee
Matters; ERISA

	
14


	
Section
4.12.

	
Labor
Matters

	
15


	
Section
4.13.

	
Environmental
Matters

	
16




	
Section
4.14.

	
Board
Action; Vote Required

	
18


	
Section
4.15.

	
Brokers

	
19


	
Section
4.16.

	
Tax
Matters

	
19




	
Section
4.17.

	
Intellectual
Property

	
20




	
Section
4.18.

	
Insurance

	
21


	
Section
4.19.

	
Ownership
of Securities

	
21


	
Section
4.20.

	
Certain
Contracts

	
21


	
Section
4.21.

	
Investment
Company

	
22


	
Section
4.22.

	
Certain
Plans

	
22


	
ARTICLE
V

	
REPRESENTATIONS
OF THE COMPANY AND THE MERGER SUBSIDIARIES

	
22


	
Section
5.1.

	
Organization
and Qualification; Subsidiaries

	
22


	
Section
5.2.

	
Certificate
of Incorporation, Certificate of Designations and
Bylaws

	
23


	
Section
5.3.

	
Capitalization

	
23


	
Section
5.4.

	
Authority
Relative to this Agreement

	
24


	
Section
5.5.

	
No
Conflict; Required Filings and Consents

	
24


	
Section
5.6.

	
SEC
Filings; Financial Statements

	
25


	
Section
5.7.

	
No
Undisclosed Liabilities; Absence of Certain Changes or
Events

	
26




	
Section
5.8.

	
No
Violation of Law; Permits

	
26




	
Section
5.9.

	
Registration
Statement; Information Statement

	
26




	
Section
5.10.

	
Board
Action; Vote Required

	
27




	
Section
5.11.

	
[Reserved]

	
27




	
Section
5.12.

	
Brokers

	
27








 



 

ii






 





 


	
Section
5.13.

	
Ownership
of Securities

	
27




	
Section
5.14.

	
Activities
of Merger Subsidiaries

	
27




	
Section
5.15.

	
Litigation

	
28




	
Section
5.16.

	
Employee
Matters; ERISA

	
28


	
Section
5.17.

	
Tax
Matters

	
29


	
Section
5.18.

	
Intellectual
Property

	
31


	
Section
5.19.

	
Certain
Contracts

	
31


	
Section
5.20.

	
Investment
Company

	
32


	
Section
5.21.

	
Certain
Plans

	
32


	
ARTICLE
VI

	
CONDUCT
OF BUSINESS PENDING THE MERGERS

	
32


	
Section
6.1.

	
Conduct
of Business of Brekford

	
32


	
Section
6.2.

	
Conduct
of Business of the Company

	
35


	
Section
6.3.

	
Exclusivity

	
38


	
Section
6.4.

	
Subsequent
Financial Statements

	
39


	
Section
6.5.

	
Control
of Operations

	
39


	
ARTICLE
VII

	
ADDITIONAL
AGREEMENTS

	
39


	
Section
7.1.

	
Registration
Statement; Information Statement

	
39


	
Section
7.2.

	
Stockholders’
Approval; Consummation of the Mergers

	
39


	
Section
7.3.

	
Additional
Agreements

	
40


	
Section
7.4.

	
Notification
of Certain Matters

	
40


	
Section
7.5.

	
Access
to Information

	
41


	
Section
7.6.

	
Public
Announcements

	
41


	
Section
7.7.

	
Indemnification;
Directors’ and Officers’ Insurance

	
42


	
Section
7.8.

	
Employee
Benefit Plans

	
42


	
Section
7.9.

	
Management
and Employment Arrangements

	
43


	
Section
7.10.

	
Stock
Exchange Listing

	
43


	
Section
7.11.

	
Sale
of Upfitting Business

	
43


	
Section
7.12.

	
Post-Merger
Novume Board of Directors

	
43


	
Section
7.13.

	
Registration
Rights

	
44


	
Section
7.14.

	
Affiliates

	
44


	
Section
7.15.

	
Blue
Sky

	
44


	
Section
7.16.

	
Compliance

	
44


	
Section
7.17.

	
Key
Stockholder Agreements

	
44






 



 

iii






 





 


	
Section
7.18.

	
Continuation
of Historic Business

	
44




	
ARTICLE
VIII

	
CONDITIONS
TO MERGERS

	
45


	
Section
8.1.

	
Conditions
to the Obligations of Each Party to Effect the Mergers

	
45


	
Section
8.2.

	
Additional
Conditions to Obligations of the Company

	
46


	
Section
8.3.

	
Additional
Conditions to Obligations of Brekford

	
47


	
ARTICLE
IX

	
TERMINATION,
AMENDMENT AND WAIVER

	
48


	
Section
9.1.

	
Termination

	
48


	
Section
9.2.

	
Effect
of Termination

	
49


	
Section
9.3.

	
Amendment

	
50


	
Section
9.4.

	
Waiver

	
50


	
ARTICLE
X

	
GENERAL
PROVISIONS

	
50


	
Section
10.1.

	
Non-Survival
of Representations, Warranties and Agreements

	
50


	
Section
10.2.

	
Notices

	
51


	
Section
10.3.

	
Expenses

	
81


	
Section
10.4.

	
Certain
Definitions

	
81


	
Section
10.5.

	
Headings

	
52


	
Section
10.6.

	
Severability

	
52


	
Section
10.7.

	
Entire
Agreement; No Third-Party Beneficiaries

	
53


	
Section
10.8.

	
Assignment

	
53


	
Section
10.9.

	
Governing
Law

	
53


	
Section
10.10.

	
Counterparts

	
53






 

 



 

iv















AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated
as of February 10, 2017 (the “Agreement”), is entered
into by and among KeyStone Solutions, Inc., a Delaware corporation
(the “Company”), Novume
Solutions, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company (“Novume”), KeyStone Merger
Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of
Novume (“Company
Merger Sub”), Brekford Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Novume
(“Brekford Merger
Sub”), and Brekford Corp., a Delaware corporation
(“Brekford” and, together
with the Company, Novume, Company Merger Sub and Brekford Merger
Sub, each a “Party” and collectively
the “Parties”).

WHEREAS, the Boards of Directors of the
Company and Brekford have each determined that it is in the best
interests of the stockholders of the Company and Brekford,
respectively, that each such corporation become a subsidiary of
Novume pursuant to the Mergers (as defined in Section 1.1 hereof) and desire
to make certain representations, warranties and agreements in
connection with the Mergers;

WHEREAS, the Company and Brekford are
unwilling to enter into this Agreement (and effect the transactions
contemplated hereby) unless, contemporaneously with the execution
and delivery hereof, certain record and beneficial holders of
shares of the common stock, par value $0.0001 per share, of the
Company (“Company
Common Stock”), and certain record and beneficial
holders of shares of the common stock, par value $0.0001 per share,
of Brekford (“Brekford Common Stock”),
as applicable, enter into agreements (the “Key Stockholder
Agreements”) providing for certain matters with
respect to their shares of Company Common Stock and Brekford Common
Stock, as applicable (including, without limitation, subject to the
express provisions and conditions of those agreements, to vote such
shares in favor of the Mergers (as defined in Section 1.1
hereof));

WHEREAS, for federal income tax
purposes, it is intended that the formation of Novume and the
Mergers shall constitute one or more integrated tax-free
transactions under Section 368 of the Internal Revenue Code of
1986, as amended (the “Code”);

WHEREAS, Brekford has delivered to the
Company and Novume a letter identifying all persons (each, a
“Brekford
Affiliate”) who are, at the date hereof,
“affiliates” of Brekford for purposes of Rule 145 under
the 1933 Act (as defined in Section 10.4 hereof), and each
Brekford Affiliate has delivered to the Company and Novume a letter
(each, a “Brekford
Affiliate Letter”) relating to (i) the transfer, prior
to the Effective Time (as defined in Section 1.2 hereof), of the
shares of Brekford Common Stock beneficially owned by such Brekford
Affiliate on the date hereof, (ii) the transfer of the shares of
Novume Common Stock to be received by such Brekford Affiliate in
the Brekford Merger and (iii) the obligations of each such Brekford
Affiliate to deliver to Sichenzia Ross Ference Kesner LLP
(“SRFK”), counsel to
Brekford, a certificate requested by such firm (if requested);
and

WHEREAS, the Company has delivered to
Brekford and Novume a letter identifying all persons (each, a
“Company
Affiliate”) who are, at the date hereof,
“affiliates” of the Company for purposes of Rule 145
under the 1933 Act, and each Company Affiliate has delivered to
Brekford and Novume a letter (each, a “Company Affiliate
Letter”) relating to (i) the transfer, prior to the
Effective Time, of the shares of Company Common Stock and Company
Preferred Stock beneficially owned by such Company Affiliate on the
date hereof, (ii) the transfer of the shares of Novume Common Stock
and Novume Preferred Stock to be received by such Company Affiliate
in the Company Merger and (iii) the obligations of each such
Company Affiliate to deliver to Crowell & Moring LLP, counsel
to the Company, a certificate requested by such firm (if
requested).



 

1






 





NOW, THEREFORE, in consideration of the
mutual agreements and covenants set forth herein, the Parties
hereby agree as follows:

ARTICLE
I

THE
MERGERS

Section
1.1.  The Mergers. At the Effective Time, and
subject to and upon the terms and conditions of this Agreement, (a)
the Company shall be merged with and into Company Merger Sub in
accordance with the Delaware General Corporation Law
(“Delaware
Law”), the separate corporate existence of the Company
shall cease, and Company Merger Sub shall continue as the surviving
corporation (the “Company Merger”), and (b)
Brekford Merger Sub shall be merged with and into Brekford in
accordance with Delaware Law, the separate corporate existence of
Brekford Merger Sub shall cease, and Brekford shall continue as the
surviving corporation (the “Brekford Merger”).The
Company Merger and the Brekford Merger are herein collectively
referred to as the “Mergers” and each
individually as a “Merger.” The Company
Merger Sub and Brekford as the surviving corporations after the
Mergers are herein sometimes collectively referred to as the
“Surviving
Corporations” and each individually as a
“Surviving
Corporation” and the Company and Brekford Merger Sub
as the non-surviving corporations after the Mergers are herein
sometimes collectively referred to as the “Merged Corporations” and
each individually as a “Merged
Corporation.”

Section
1.2. Effective Time. As promptly as
practicable after the satisfaction or waiver of the conditions set
forth in ARTICLE VIII hereof and the consummation of the Closing
referred to in Section
7.2(c) hereof, the Parties shall cause the Mergers to be
consummated concurrently by filing a Certificate of Merger with the
Secretary of State of the State of Delaware with respect to each of
the Mergers, in such form as required by, and executed in
accordance with, the relevant provisions of Delaware Law (the
effective time of such filings being the “Effective
Time”).

Section
1.3. Effects of the Mergers. At the Effective
Time, the effect of the Mergers shall be as provided in the
applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective
Time, (a) all of the property, rights, privileges, powers and
franchises of the Company and Company Merger Sub shall continue
with, or vest in, as the case may be, Company Merger Sub as the
Surviving Corporation, and all debts, liabilities and duties of the
Company and Company Merger Sub shall be, or become, as the case may
be, the debts, liabilities and duties of Company Merger Sub as the
Surviving Corporation, and (b) all of the property, rights,
privileges, powers and franchises of Brekford and Brekford Merger
Sub shall continue with, or vest in, as the case may be, Brekford
as the Surviving Corporation, and all debts, liabilities and duties
of Brekford and Brekford Merger Sub shall continue to be, or
become, as the case may be, the debts, liabilities and duties of
Brekford as the Surviving Corporation. As of the Effective Time,
each of the Surviving Corporations shall be a direct, wholly-owned
Subsidiary of Novume.



 

2






 





Section
1.4. Subsequent Actions. If, at any time
after the Effective Time, either of the Surviving Corporations
shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are
necessary or desirable to continue in, vest, perfect or confirm of
record or otherwise in such Surviving Corporation its right, title
or interest in, to or under any of the rights, properties,
privileges, franchises or assets of either of its constituent
corporations acquired or to be acquired by such Surviving
Corporation as a result of, or in connection with, one of the
Mergers or otherwise to carry out this Agreement, the officers and
directors of such Surviving Corporation shall be directed and
authorized to execute and deliver, in the name and on behalf of
either of such constituent corporations, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and
under such rights, properties, privileges, franchises or assets in
such Surviving Corporation or otherwise to carry out this
Agreement.

Section
1.5. Certificate of Incorporation; Bylaws; Directors
and Officers of Surviving Corporations. At the Effective
Time:

(a) the Certificate of
Incorporation of Company Merger Sub as a Surviving Corporation as
in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of Company Merger Sub, and the
Certificate of Incorporation of Brekford Merger Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of Brekford as a Surviving Corporation, in each case
until thereafter amended as provided by law and such Certificates
of Incorporation;

(b) the respective
Bylaws of each of Company Merger Sub and Brekford Merger Sub shall
be the Bylaws of the Company Merger Sub and the Brekford,
respectively, as Surviving Corporations, immediately prior to the
Effective Time, in each case until thereafter amended as provided
by law and the Certificates of Incorporation and such Bylaws of
such Surviving Corporation; and

(c) the officers of
each of Company Merger Sub and Brekford, respectively, as Surviving
Corporations shall be designated and appointed upon mutual
agreement of the Parties prior to the Effective Time. Such persons
shall serve as the officers of Company Merger Sub and Brekford,
respectively, as Surviving Corporations from and after the
Effective Time until their successors are elected or appointed and
qualified or until their resignation or removal.

Section
1.6. Company Names. At the Effective Time,
the name of KeyStone Merger Sub shall be changed to “KeyStone
Solutions, Inc.” and the name of Brekford shall be changed to
“Brekford Traffic Safety, Inc.”

Section
1.7. Company Stockholders’ Agreement.
As of the Effective Time, that certain stockholders’
agreement dated March 16, 2016, as amended (the “Stockholders’
Agreement”), by and among Robert Berman, Avon Road
Partners, L.P., James McCarthy, Richard Nathan, Gregory McCarthy
and Kevin Berrigan shall be terminated.



 

3






 





ARTICLE
II

EFFECT ON THE STOCK
OF NOVUME, THE SURVIVING

CORPORATIONS
AND THE MERGED CORPORATIONS

Section
2.1. Conversion of Securities. The manner and
basis of converting the shares of common stock of Novume, the
Surviving Corporations and of the Merged Corporations at the
Effective Time, by virtue of the Mergers and without any action on
the part of any of the Parties or the holder of any of such
securities, shall be as hereinafter set forth in this ARTICLE
II.

Section
2.2. Conversion of Shares.

(a) Each share of
Company Common Stock issued and outstanding immediately before the
Effective Time (other than those held in the treasury of the
Company) and all rights in respect thereof, shall at the Effective
Time, without any action on the part of any holder thereof,
forthwith cease to exist and be converted into and become
exchangeable for, 1.9975 shares of common stock, par value $0.0001
per share (“Novume
Common Stock”), of Novume, and each share of Series A
Cumulative Convertible Redeemable Preferred Stock
(“Company Preferred
Stock”) of the Company issued and outstanding
immediately before the Effective Time and all rights in respect
thereof, shall at the Effective Time, without any action on the
part of any holder thereof, forthwith cease to exists and be
converted into and become exchangeable for, 1. shares of Series A
Cumulative Convertible Redeemable Preferred Stock
(“Novume Preferred
Stock”), of Novume (collectively, the
“Company Merger
Consideration”, and such ratio of Company Common Stock
to Novume Common Stock and Company Preferred Stock to Novume
Preferred Stock being herein referred to as the “Company Exchange Ratio”).
Fractional shares of Novume Common Stock and Novume Preferred Stock
will not be issued in connection with the Company Merger. For a
discussion of the treatment of fractional shares that would
otherwise be issued, see Section 2.7.

(b) Each share of
Brekford Common Stock issued and outstanding immediately before the
Effective Time (other than those held in the treasury of Brekford)
and all rights in respect thereof, shall at the Effective Time,
without any action on the part of any holder thereof, forthwith
cease to exist and be converted into and become exchangeable for
the right to receive 1/15th of one share (the
“Brekford Exchange
Ratio”) of Novume Common Stock (the
“Brekford Merger
Consideration”). Fractional shares of Novume Common
Stock will not be issued in connection with the Brekford Merger.
For a discussion of the treatment of fractional shares that would
otherwise be issued, see Section 2.7.

(c) Commencing
immediately after the Effective Time, each certificate which,
immediately prior to the Effective Time, represented issued and
outstanding shares of Company Common Stock or Company Preferred
Stock (together, “Company Shares”) or
Brekford Common Stock (“Brekford Shares” and,
together with the Company Shares, the “Shares”), shall evidence
the right to receive the Company Merger Consideration or the
Brekford Merger Consideration, as the case may be, on the basis
hereinbefore set forth, but subject to the limitations set forth in
Sections 2.3,
2.5, 2.7, 2.8 and 2.9 hereof.



 

4






 





Section
2.3. Cancellation of Treasury Shares and of
Outstanding Novume Common Stock.

(a) At the Effective
Time, each share of Company Common Stock and Company Preferred
Stock held in the treasury of the Company immediately prior to the
Effective Time, and each share of Brekford Common Stock held in the
treasury of Brekford immediately prior to the Effective Time, shall
be cancelled and retired and no shares of stock or other securities
of Novume or either of the Surviving Corporations shall be
issuable, and no payment or other consideration shall be made, with
respect thereto.

(b) At the Effective
Time, the shares of Novume Common Stock held by the Company shall
be cancelled and retired and no shares of stock or other securities
of Novume or any other corporation shall be issuable, and no
payment or other consideration shall be made, with respect
thereto.

Section
2.4. Conversion of Common Stock and Preferred Stock
of the Merged Corporations into Common Stock of the Surviving
Corporations.

(a)           At
the Effective Time, each share of common stock of Brekford Merger
Sub issued and outstanding immediately prior to the Effective Time,
and all rights in respect thereof, shall, without any action on the
part of Novume, forthwith cease to exist and be converted into
1,000 validly issued, fully paid and nonassessable shares of common
stock of Brekford, as one of the Surviving Corporations (or such
greater number as the Company shall determine prior to the
Effective Time). Immediately after the Effective Time and upon
surrender by Novume of the certificate representing the shares of
the common stock of Brekford Merger Sub, Brekford as one of the
Surviving Corporations shall deliver to Novume an appropriate
certificate or certificates representing the common stock of
Brekford created by conversion of the common stock of Brekford
Merger Sub owned by Novume as aforesaid.

Section
2.5. Exchange of Shares Other Than Treasury
Shares. Subject to the terms and conditions hereof, at or
prior to the Effective Time, Novume shall appoint an exchange agent
to effect the exchange of Shares for Novume Common Stock and Novume
Preferred Stock in accordance with the provisions of this ARTICLE
II (the “Exchange
Agent”). From time to time after the Effective Time,
Novume shall deposit, or cause to be deposited, (i) certificates
representing Novume Common Stock for conversion of Shares in
accordance with the provisions of Section 2.2 hereof and (ii)
certificates representing Novume Preferred Stock for conversion of
Shares in accordance with the provisions of Section 2.2 hereof (such
certificates, together with any dividends or distributions with
respect thereto, being herein referred to collectively as the
“Exchange
Fund”). Commencing immediately after the Effective
Time and until the appointment of the Exchange Agent shall be
terminated, each holder of a certificate or certificates
theretofore representing Shares may surrender the same to the
Exchange Agent, and, after the appointment of the Exchange Agent
shall be terminated, any such holder may surrender any such
certificate to Novume. Such holder shall be entitled upon such
surrender to receive in exchange therefor a certificate or
certificates representing the number of full shares of Novume
Common Stock or Novume Preferred Stock, as applicable, into which
the Shares theretofore represented by the certificate or
certificates so surrendered shall have been converted in accordance
with the provisions of Section 2.2 hereof. All such
shares of Novume Common Stock or Novume Preferred Stock, as
applicable, issued in accordance with the immediately preceding
sentence shall be deemed to have been issued at the Effective Time.
Until so surrendered and exchanged, each outstanding certificate
which, prior to the Effective Time, represented issued and
outstanding Shares shall be deemed for all corporate purposes of
the Parties, other than the payment of dividends and other
distributions, if any, to represent the right to receive the
Company Merger Consideration or the Brekford Merger Consideration,
as the case may be. Unless and until any such certificate
theretofore representing Shares is so surrendered, no dividend or
other distribution, if any, payable to the holders of record of
Novume Common Stock or Novume Preferred Stock as of any date
subsequent to the Effective Time shall be paid to the holder of
such certificate in respect thereof. Upon the surrender of any such
certificate theretofore representing Shares, however, the record
holder of the certificate or certificates representing shares of
Novume Common Stock or Novume Preferred Stock issued in exchange
therefor shall receive from the Exchange Agent or from Novume, as
the case may be, payment of the amount of dividends and other
distributions, if any, which as of any date subsequent to the
Effective Time and until such surrender shall have become payable
with respect to such number of shares of Novume Common Stock or
Novume Preferred Stock (“Pre-Surrender
Dividends”). No interest shall be payable with respect
to the payment of Pre-Surrender Dividends, upon the surrender of
certificates theretofore representing Shares. After the appointment
of the Exchange Agent shall have been terminated, such holders of
Novume Common Stock that have not received payment of Pre-
Surrender Dividends, shall look only to Novume for payment thereof.
Notwithstanding the foregoing provisions of this Section 2.5, neither the
Exchange Agent nor any Party shall be liable to a holder of Shares
for any Novume Common Stock or Novume Preferred Stock or dividends
or distributions thereon delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law or to a
transferee pursuant to Section 2.6
hereof.



 

5






 





Section
2.6. Transfer Books. The stock transfer books
of the Company with respect to the Company Shares and the stock
transfer books of Brekford with respect to the Brekford Shares
shall each be closed at the Effective Time and no transfer of any
Shares will thereafter be recorded on any of such stock transfer
books. In the event of a transfer of ownership of Shares that is
not registered in the stock transfer records of the Company or
Brekford, as the case may be, at the Effective Time, cash and/or a
certificate or certificates representing the number of full shares
of Novume Common Stock or Novume Preferred Stock, as applicable,
into which such Shares shall have been converted in accordance with
Section 2.2 hereof
shall be issued to the transferee in accordance with Section 2.7 hereof, and a cash
payment in the amount of Pre-Surrender Dividends, if any, in
accordance with Section
2.5 hereof, if the certificate or certificates representing
such Shares is or are surrendered as provided in Section 2.5 hereof, accompanied
by all documents required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer
tax.

Section
2.7. No Fractional Shares.

(a) No scrip or
fractional share certificate for Novume Common Stock or Novume
Preferred Stock will be issued upon the surrender for exchange of
certificates evidencing Shares. Any such fractional shares that
would have been issued shall be rounded up to the nearest whole
share and such whole share shall be issued.

(b) None of Novume, the
Company or Brekford shall be liable to any holder of Shares or
Novume Common Stock or Novume Preferred Stock, as the case may be,
for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.



 

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Section
2.8. Options and Warrants to Purchase Common
Stock.

(a) At the Effective
Time, each option granted by the Company to purchase shares of
Company Common Stock (each, a “Company Option”), or by
Brekford to purchase shares of Brekford Common Stock (each, a
“Brekford
Option” and, together with the Company Options,
“Options”), which is
outstanding and unexercised immediately prior to the Effective
Time, shall be assumed by Novume and converted into an option (a
“Novume
Option”) to purchase shares of Novume Common Stock in
such amount and at such exercise price as provided below and
otherwise having the same terms and conditions as are in effect
immediately prior to the Effective Time:

(i) the number of
shares of Novume Common Stock to be subject to the Novume Option
shall be equal to the product of (x) the number of shares of
Company Common Stock or Brekford Common Stock subject to the
original Option and (y) the Company Exchange Ratio or the Brekford
Exchange Ratio, as applicable;

(ii) the exercise price
per share of Novume Common Stock under the Novume Option shall be
equal to (x) the exercise price per share of the Company Common
Stock or Brekford Common Stock under the original Option divided by
(y) the Company Exchange Ratio or the Brekford Exchange Ratio, as
applicable; and

(iii) upon each exercise
of Novume Options by a holder thereof, the aggregate number of
shares of Novume Common Stock deliverable upon such exercise shall
be rounded down, if necessary, to the nearest whole share and the
aggregate exercise price shall be rounded up, if necessary, to the
nearest cent. The adjustments provided herein with respect to any
Options which are “incentive stock options” (as defined
in Section 422 of the Code) shall be effected in a manner
consistent with Section 424(a) of the Code.

(b) Novume shall take
all corporate action necessary to reserve for issuance a sufficient
number of shares of Novume Common Stock for delivery upon exercise
of Novume Options in accordance with this Section 2.8. As soon as
practicable (and in no event later than thirty (30) days) after the
Effective Time, Novume shall file a registration statement on Form
S-8 (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of Novume Common Stock
subject to the Novume Options and shall use its best efforts to
maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as the
Novume Options remain outstanding.

(c) At the Effective
Time, each outstanding warrant to purchase shares of Company Common
Stock (each, a “Company Warrant”), or to
purchase shares of Brekford Common Stock (each, a
“Brekford
Warrant” and, together with the Company Warrants, the
“Warrants”), which is
outstanding and unexercised immediately prior to the Effective
Time, shall be assumed by Novume and converted into a warrant to
purchase shares of Novume Common Stock (a “Novume Warrants”) in such
amount and at such exercise price as provided below and otherwise
having the same terms and conditions as are in effect immediately
prior to the Effective Time:



 

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(i) the number of
shares of Novume Common Stock issuable upon exercise of each Novume
Warrant shall be equal to the product of (x) the number of shares
of Company Common Stock or Brekford Common Stock issuable upon
exercise of the original Warrant and (y) the Company Exchange Ratio
or the Brekford Exchange Ratio, as applicable;

(ii) the exercise price
per share of Novume Common Stock under the Novume Warrants shall be
equal to (x) the exercise price per share of the Company Common
Stock or Brekford Common Stock under the original Warrant divided
by (y) the Company Exchange Ratio or the Brekford Exchange Ratio,
as applicable; and

(iii)     upon
each exercise of Novume Warrants by a holder thereof, the aggregate
number of shares of Novume Common Stock deliverable upon such
exercise shall be rounded down, if necessary, to the nearest whole
share and the aggregate exercise price shall be rounded up, if
necessary, to the nearest cent.

Section
2.9. Certain Adjustments. Without limiting
any other provision of this Agreement, if, between the date of this
Agreement and the Effective Time, the outstanding shares of Company
Common Stock or of Brekford Common Stock shall be changed into a
different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or
any dividend payable in stock or other securities shall be declared
thereon with a record date within such period, the exchange ratio
established pursuant to the provisions of Section 2.2 hereof shall be
adjusted accordingly to provide to the holders of Company Common
Stock and Brekford Common Stock the same economic effect as
contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or
dividend.

ARTICLE
III

CERTAIN MATTERS
WITH RESPECT TO NOVUME

Section
3.1. Certificate of Incorporation of Novume.
Prior to the Effective Time, the Company shall cause the
Certificate of Incorporation of Novume to be amended and restated
to read substantially as set forth in Appendix I hereto, and shall
cause Novume to file with the Secretary of State of the State of
Delaware a Certificate of Designations of the Novume Preferred
Stock containing terms substantially identical to the Certificate
of Designations of the Company Preferred Stock filed with the
Secretary of State of the State of Delaware as of the date hereof,
but in any event, which shall provide rights, preferences and
privileges to the holders of Novume Preferred Stock that are no
less favorable to such holders than those currently provided to the
holders of Company Preferred Stock.

Section
3.2. Officers and Directors of
Novume.

(a) At the Effective
Time, Robert A. Berman shall have been appointed the Chief
Executive Officer of Novume; such other persons shall have been
appointed officers of Novume as are designated by the Board of
Directors of the Company as it exists immediately prior to the
Effective Time.



 

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(b) At the Effective
Time, the Novume Board shall consist of seven (7) members, four (4)
of whom shall be independent within the meaning of the 1934 Act,
and the national stock exchange to which the Company has applied
for the listing of Novume Common Stock as described in Section 7.10. Six (6) members
of the Novume Board shall be designated by the Company, and one (1)
member of the Novume Board shall be designated by Brekford, subject
to the approval of KeyStone. The members designated by the Company
are James McCarthy, who shall serve as Chairman, Robert A. Berman,
Dr. Richard Nathan, Glenn Goord, Paul DeBary and one additional
independent director who shall be designated by the Company prior
to the Effective Time. The member to be designated by Brekford
shall be independent, as provided herein, and shall be subject to
the approval by the Company; such member shall be identified by
Brekford and approved by the Company prior to the Effective Time.
As of the date hereof, Glenn Goord and Paul DeBary are independent
as provided herein, and shall so remain, as and at the Effective
Time.

ARTICLE
IV

REPRESENTATIONS AND
WARRANTIES OF BREKFORD

Brekford hereby
represents and warrants to the Company and Novume as
follows:

Section
4.1. Organization and Qualification;
Subsidiaries. Each of Brekford and its Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization. Each of Brekford and its Subsidiaries has the
requisite corporate power and authority and any necessary
governmental authority, franchise, license or permit to own,
operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted,
and is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of
its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such
failure which, when taken together with all other such failures,
would not reasonably be expected to have a Material Adverse Effect
on Brekford. Brekford’s Subsidiaries are listed on
Schedule 4.1
hereto.

Section
4.2. Certificate of Incorporation and Bylaws.
Brekford has heretofore furnished, or otherwise made available, to
the Company a complete and correct copy of the Certificate, or
Articles, of Incorporation, as applicable, and the Bylaws (or
comparable governing documents), each as amended to the date
hereof, of Brekford and each of its Subsidiaries. Such Certificate
and Articles of Incorporation and Bylaws (or comparable governing
documents) are in full force and effect. Neither Brekford nor any
of its Subsidiaries is in violation of any of the provisions of its
respective Certificate or Articles Incorporation, as applicable, or
its Bylaws (or comparable governing documents).

Section
4.3. Capitalization.

(a) The authorized
capital stock of Brekford consists of (i) 20,000,000 shares of
preferred stock, par value $0.0001 per share, none of which are
outstanding and none of which are reserved for issuance and (ii)
150,000,000 shares of Brekford Common Stock, of which, as of
February 8, 2017, 49,311,265 shares were issued and outstanding and
1,390,000 shares were issuable upon the exercise of options
outstanding under the Brekford option plans listed on Schedule 4.3 hereto. Since
January 1, 2017, no shares of Brekford Common Stock have been
issued, except upon the exercise of options described in the
immediately preceding sentence. Except as set forth on Schedule 4.3, there are no
outstanding Brekford Equity Rights. For purposes of this Agreement,
“Brekford Equity
Rights” shall mean subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights
of any character (contingent or otherwise) to purchase or otherwise
acquire from Brekford or any of Brekford’s Subsidiaries at
any time, or upon the happening of any stated event, any shares of
the capital stock of Brekford. Schedule 4.3 sets forth a
complete and accurate list with respect to all outstanding Brekford
Equity Rights of the holder thereof, the date of grant, the number
of shares for which each such Brekford Equity Right is exercisable,
the respective dates upon which each such Brekford Equity Right
vests, becomes exercisable and expires, and the exercise price of
each such Brekford Equity Right.



 

9






 





(b) There are no
outstanding obligations of Brekford or any of Brekford’s
Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of Brekford or any such Subsidiary.

(c) All of the issued
and outstanding shares of Brekford Common Stock are validly issued,
fully paid and nonassessable.

(d) All of the
outstanding capital stock of each of Brekford’s Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable,
and, except as set forth on Schedule 4.3, is owned by
Brekford free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances. Except as set forth on
Schedule 4.3, there
are no existing subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise
acquire from Brekford or any of Brekford’s Subsidiaries at
any time, or upon the happening of any stated event, any shares of
the capital stock of any of Brekford’s Subsidiaries, or any
securities convertible into or exercisable for shares of the
capital stock of any of Brekford’s Subsidiaries, whether or
not presently issued or outstanding and there are no outstanding
obligations of Brekford or any of Brekford’s Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock
of any of Brekford’s Subsidiaries. Except for equity
interests disclosed on Schedule 4.3 hereto and
Subsidiaries listed on Schedule 4.1 hereto, Brekford
does not directly or indirectly own any equity interest in any
other person. Each of Brekford’s Subsidiaries is a
wholly-owned Subsidiary.

(e) Except as disclosed
on Schedule 4.3
hereto, there are no stockholder agreements, voting trusts or other
agreements or understandings to which Brekford is a party or to
which it is bound relating to the voting or registration of any
shares of capital stock of Brekford. Brekford has not taken any
action that would result in, nor is Brekford a party to any
agreement, arrangement or understanding not disclosed on
Schedule 4.3 hereto
that would result in, any Options to purchase Brekford Common Stock
that are unvested becoming vested in connection with or as a result
of the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.



 

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Section
4.4. Authority Relative to this Agreement.
Brekford has the necessary corporate power and authority to enter
into this Agreement. The execution and delivery of this Agreement
by Brekford and the consummation by Brekford of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Brekford, including the approval of
this Agreement by Brekford’s stockholders as required by the
Delaware Law. This Agreement has been duly executed and delivered
by Brekford and, assuming the due authorization, execution and
delivery thereof by the other Parties, constitutes a legal, valid
and binding obligation of Brekford, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles
of equity (the “Bankruptcy
Exception”).

Section
4.5. No Conflict; Required Filings and
Consents.

(a) Except as listed on
Schedule 4.5
hereto, the execution and delivery of this Agreement by Brekford do
not, and the performance of this Agreement by Brekford will not,
(i) violate or conflict with the Certificate of Incorporation or
Bylaws of Brekford, (ii) conflict with or violate any Legal
Requirement, or conflict with or violate any Permit, applicable to
Brekford or any of its Subsidiaries or by which any of their
respective property is bound or affected, (iii) violate or conflict
with the Certificate of Incorporation or Bylaws (or comparable
governing documents) of any of Brekford’s Subsidiaries or
(iv) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination or cancellation
of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Brekford or any of its Subsidiaries
pursuant to, result in the loss of any material benefit under, or
require the consent of any other party to, any contract,
instrument, permit, license or franchise to which Brekford or any
of its Subsidiaries is a party or by which Brekford, each
Subsidiary or any of their respective property is bound or
affected, except, in the case of clauses (ii), (iii) or (iv) above,
for conflicts, violations, breaches, defaults, results or consents
which, individually or in the aggregate, would not have a Material
Adverse Effect on Brekford.

(b) Except as listed on
Schedule 4.5 and
except for applicable requirements, if any, of the Exchange Act (as
defined on Section
10.4 hereof), filing and recordation of appropriate merger
or other documents as required by Delaware Law and any filings
required pursuant to any state securities or “blue sky”
laws or the rules of any applicable stock exchanges, neither
Brekford nor its any of its Subsidiaries is required to submit any
notice, report or other filing with any governmental authority,
domestic or foreign, in connection with the execution, delivery or
performance of this Agreement. Except as set forth in the
immediately preceding sentence, no waiver, consent, approval or
authorization of any governmental or regulatory authority, domestic
or foreign, is required to be obtained by Brekford or any of its
Subsidiaries in connection with its execution, delivery or
performance of this Agreement.

Section
4.6. SEC Filings; Financial
Statements.

(a) Brekford has filed
all forms, reports and documents required to be filed with the
Securities and Exchange Commission (“SEC”) since January 1,
2016, and has heretofore delivered or made available to the
Company, in the form filed with the SEC, together with any
amendments thereto, its (i) Annual Report on Form 10-K for the
fiscal year ended December 31, 2015, (ii) all proxy statements
relating to Brekford’s meetings of stockholders (whether
annual or special) held since January 1, 2016, (iii) Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30,
2016, and (iv) all other reports or registration statements filed
by Brekford with the SEC since January 1, 2016 (collectively, the
“Brekford SEC
Reports”). The Brekford SEC Reports (i) were prepared
substantially in accordance with the requirements of the 1933 Act
(as defined in Section
10.4 hereof), or the Exchange Act as the case may be, and
the rules and regulations promulgated under each of such respective
acts, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.



 

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(b) The financial
statements, including all related notes and schedules, contained in
the Brekford SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of Brekford and
each of its Subsidiaries as at the respective dates thereof and the
consolidated results of operations and cash flows of Brekford and
each of its Subsidiaries for the periods indicated in accordance
with United States generally accepted accounting principles
(“GAAP”) applied on a
consistent basis throughout the periods involved (except for
changes in accounting principles disclosed in the notes thereto)
and subject, in the case of interim financial statements, to normal
year-end adjustments.

(c) Brekford has
heretofore made available to the Company a complete and correct
copy of any material amendments or modifications, which have not
yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by Brekford with the
SEC pursuant to the Exchange Act.

Section
4.7. No Undisclosed Liabilities; Absence of Certain
Changes or Events. Except as and to the extent publicly
disclosed by Brekford in the Brekford SEC Reports filed prior to the date of
this Agreement, as of January 1, 2016, neither Brekford nor any of its
Subsidiaries had any material liabilities or obligations of
any nature, whether or
not accrued, contingent or otherwise, and whether due or
to become due or
asserted or unasserted, which would be required by GAAP to
be reflected in,
reserved against or otherwise described in the
consolidated balance
sheet of Brekford (including the notes thereto) as of such date or
which could reasonably be expected to have a Material Adverse
Effect on Brekford. Except as disclosed on Schedule 4.7 hereto, since
September 30, 2016, neither Brekford nor any of its Subsidiaries
has incurred any material liability, except in the ordinary course
of their respective businesses consistent with their past
practices, and there has not been any change, or any event
involving a prospective change, in the business, financial
condition or results of operations of Brekford or any of its
Subsidiaries which has had, or is reasonably likely to have, a
Material Adverse Effect on Brekford, and Brekford and each of its
Subsidiaries has conducted their respective businesses in the
ordinary course consistent with their past practices.

Section
4.8. Litigation. Except as disclosed in
Schedule 4.8
hereto, there are no claims, actions, suits, proceedings or, to
Brekford’s knowledge, investigations pending or, to
Brekford’s knowledge, threatened against Brekford or any of
its Subsidiaries, or any properties or rights of Brekford or any of
its Subsidiaries, before any court, administrative, governmental,
arbitral, mediation or regulatory authority or body, domestic or
foreign, (a) as of the date hereof, as to which there is more than
a remote possibility of an adverse judgment or determination
against Brekford or any of its Subsidiaries or any properties or
rights of Brekford or any of its Subsidiaries in excess of $100,000
or which otherwise is reasonably likely to have a Material Adverse
Effect on Brekford, (b) as of the date hereof, which questions the
validity of this Agreement or any action to be taken by Brekford in
connection with the consummation of the transactions contemplated
by this Agreement or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement, or
(c) as to which there is reasonably likely to be an adverse
judgment or determination against Brekford or any of its
Subsidiaries or any properties or rights of Brekford or any of its
Subsidiaries in excess of $100,000 or which otherwise could
reasonably be expected to have a Material Adverse Effect on
Brekford.



 

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Section
4.9. No Violation of Law; Permits. The
business of Brekford and each of its Subsidiaries is not being
conducted in violation of any statute, law, ordinance, rule,
regulation, judgment, order or decree of any domestic or foreign
governmental, regulatory or judicial entity (including any stock
exchange or other self-regulatory body) (“Legal Requirements”), or
in violation of any permits, franchises, licenses, approvals,
tariffs and other authorizations or consents that are granted by
any domestic or foreign government or regulatory or judicial entity
(including any stock exchange or other self-regulatory body)
(“Permits”), except for
possible violations of any Legal Requirements, or violations of any
Permits, none of which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on
Brekford. Brekford and each of its Subsidiaries have all Permits
that are required in connection with the operation of their
businesses (collectively, “Required Permits”), and
no proceedings are pending or, to the knowledge of Brekford,
threatened to revoke or limit any Required Permit, except, in each
case, those the absence or violation of which do not and will not
have a Material Adverse Effect on Brekford. Except as set forth on
Schedule 4.9
hereto, (a) to Brekford’s knowledge, no investigation or
review by any domestic or foreign governmental or regulatory entity
(including any stock exchange or other self-regulatory body) with
respect to Brekford or any of its Subsidiaries in relation to any
alleged violation of law or regulation is pending or threatened,
and (b) no governmental or regulatory entity (including any stock
exchange or other self-regulatory body) has notified Brekford of
its intention to conduct the same, except for such investigations
which, if they resulted in adverse findings, would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect on Brekford. Except as set forth on Schedule 4.9 hereto, neither
Brekford nor any of its Subsidiaries is subject to any cease and
desist or other order, judgment, injunction or decree issued by, or
is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or
directive by, or has adopted any board resolutions at the request
of, any court, governmental entity or regulatory agency that
materially restricts the conduct of its business or which could
reasonably be expected to have a Material Adverse Effect on
Brekford, or would prevent or delay the consummation of the
transactions contemplated by this Agreement, nor has Brekford or
any of its Subsidiaries been advised that any court, governmental
entity or regulatory agency is considering issuing or requesting
any of the foregoing. Brekford and each of its Subsidiaries and
affiliates has complied with all material federal and state
regulatory reporting requirements necessary for the lawful
provision of services or products currently offered by Brekford or
such Subsidiaries or affiliate.



 

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Section
4.10. Registration Statement; Information
Statement. None of the information supplied or to be
supplied by or on behalf of Brekford for inclusion or incorporation
by reference in the Registration Statement on Form S-4 (the
“Registration
Statement”) to be filed with the SEC by Novume in
connection with the issuance of shares of Novume Common Stock and
Novume Preferred Stock in the Mergers will, at the time the
Registration Statement becomes effective under the 1933 Act,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information
supplied or to be supplied by or on behalf of Brekford for
inclusion or incorporation by reference in the information
statement, in definitive form, relating to the approval of the
Mergers by the required Brekford stockholders (the
“Information
Statement”) will, at any time prior to the Effective
Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any
time prior to the Effective Time any event with respect to
Brekford, its officers and directors or any of its Subsidiaries
should occur which is required to be described in an amendment of,
or a supplement to, the Registration Statement or the Information
Statement, Brekford shall promptly so advise the Company and such
event shall be so described, and such amendment or supplement
(which the Company shall have a reasonable opportunity to review)
shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of Brekford. The Registration
Statement and the Information Statement (except for information
relating to or provided by the Company) will each comply as to form
in all material respects with the provisions of the 1933 Act and
the Exchange Act, as applicable, and the rules and regulations
promulgated thereunder, as applicable.

Section
4.11. Employee Matters; ERISA.

(a) Set forth on
Schedule 4.11
hereto is a true and complete list of all employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), all deferred
compensation, bonus or other incentive compensation, stock options,
restricted stock, stock purchase or other equity-based, severance
or change in control, salary continuation, tuition assistance,
disability, leave of absence plans, policies or agreements, and all
employment, consulting, management or other individual compensation
agreements with respect to any current or former employee of
Brekford or any of its Brekford ERISA Affiliates, which in each
case Brekford or any of its Brekford ERISA Affiliates has any
obligation or liability, contingent or otherwise (collectively, the
“Brekford Benefit
Plans“).

(b) All contributions
and other payments required to be made by Brekford or any Brekford
ERISA Affiliate to or under any Brekford Benefit Plan (or to any
person pursuant to the terms thereof) have been timely made in
accordance with applicable law. No Brekford Benefit Plan is subject
to Section 412 of the Code or Section 302 of ERISA.

(c) Each of the
Brekford Benefit Plans intended to be “qualified”
within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the “IRS”) to be so qualified,
and, to the knowledge of Brekford or any Brekford ERISA Affiliate,
no circumstances exist that could reasonably be expected by
Brekford or any Brekford ERISA Affiliate to result in the
revocation of any such determination. Brekford is in compliance
with, and each of the Brekford Benefit Plans is and has been
operated in compliance with, all applicable Legal Requirements
governing such plan, including, without limitation, ERISA and the
Code.



 

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(d) Brekford has made
available to the Company with respect to each Brekford Benefit Plan
a true, correct and complete copy of each of the following
documents where applicable (i) such plan, summary plan description
and summary of material modifications, (ii) the most recent annual
report filed with the IRS, (iii) each related trust agreement, (iv)
the most recent determination of the IRS with respect to the
qualification under any provision of the Code and (v) the most
recent IRS Form 5500 and actuarial report or
valuation.

(e) Except as set forth
on Schedule 4.11
hereto, the consummation or announcement of any transaction
contemplated by this Agreement will not either alone or upon the
occurrence of any additional or further acts or events) result in
any (i) payment (whether of severance pay or otherwise) becoming
due from Brekford or any Brekford ERISA Affiliate to any current or
former officer, employee, former employee or director thereof, or
to any other person for the benefit of any such officer, employee
or director, or (ii) acceleration, vesting or establishment of any
benefit under any Brekford Benefit Plan, or (iii) disqualification
of any of the Brekford Benefit Plans intended to be qualified
under, result in a prohibited transaction or breach of fiduciary
duty under, or otherwise violate, ERISA or the Code.

(f) Neither Brekford
nor any of its Brekford ERISA Affiliates has incurred, and neither
of such entities reasonably expects to incur, any material
liability to the PBGC (other than premiums which are not overdue)
or pursuant to Title IV of ERISA with respect to any Brekford
Benefit Plan. Neither Brekford nor any Brekford ERISA Affiliate is
an employer with respect to, and neither has incurred or reasonably
expects to incur, any withdrawal liability with respect to, any
“multiemployer plan” (as defined in Section 3(37) of
ERISA).

(g) There are no
pending or, to the knowledge of Brekford or any Brekford ERISA
Affiliate, threatened actions, claims or proceedings against any
Brekford Benefit Plan or its assets, plan sponsor, plan
administrator or fiduciaries with respect to the operation of such
plan (other than routine benefit claims).

Section
4.12. Labor Matters. Except as disclosed on
Schedule 4.12
hereto, neither Brekford nor any of its Subsidiaries is party to
any collective bargaining agreement or other labor agreement with
any union or labor organization and no union or labor organization
has been recognized by Brekford or any of its Subsidiaries as an
exclusive bargaining representative for employees of Brekford or
any of its Subsidiaries. Except as disclosed on Schedule 4.12 hereto, there is
no current union representation question involving employees of
Brekford or any of Brekford’s Subsidiaries, nor does Brekford
have knowledge of any significant activity or proceeding of any
labor organization (or representative thereof) or employee group to
organize any such employees. Neither Brekford nor any of its
Subsidiaries has made any commitment not in collective bargaining
agreements listed on Schedule 4.12 hereto that would
require the application of the terms of any collective bargaining
agreements entered into by Brekford or any of its Subsidiaries to
the Company, Novume, or any Subsidiary or joint venture of either
the Company or Novume. Except as disclosed on Schedule 4.12 hereto, (i) there
is no material active arbitration under any collective bargaining
agreement involving Brekford or any of its Subsidiaries, (ii) there
is no material unfair labor practice, grievance, employment
discrimination or other labor or employment related charge,
complaint or claim against Brekford or any of its Subsidiaries
pending before any court, arbitrator, mediator or governmental
agency or tribunal, or threatened, (iii) there is no material
strike, picketing or work stoppage by, or any lockout of, employees
of Brekford or its Subsidiaries pending or, to Brekford’s
knowledge, threatened, against or involving Brekford or any of its
Subsidiaries, (iv) there is no significant active arbitration under
any collective bargaining agreement involving Brekford or any of
its Subsidiaries regarding the employer’s right to move work
from one location or entity to another, or to consolidate work
locations, or involving other similar restrictions on business
operations, and (v) there is no material proceeding, claim, suit,
action or, to Brekford’s knowledge, governmental
investigation pending or, to Brekford’s knowledge,
threatened, in respect of which any director, officer, employee or
agent of Brekford or any of its Subsidiaries is or may be entitled
to claim indemnification from Brekford or any Brekford Subsidiary
pursuant to their respective charters or bylaws or as provided in
the indemnification agreements, if any, listed on Schedule 4.12 hereto. For
purposes of this Section
4.12, “material” refers to any liability which
could reasonably be expected to exceed $100,000. A true, correct
and complete copy has been made available to the Company of each
current or last, in the case where there is no current, expired
collective bargaining agreement to which Brekford or any of its
Subsidiaries is a part or under which Brekford or any of its
Subsidiaries has obligations.



 

15






 





Section
4.13. Environmental Matters. Environmental
Matters. Except as set forth on Schedule 4.13
hereto:

(a) Brekford and each
of its Subsidiaries are and have been in compliance with all
applicable Environmental Laws (as defined below) and neither
Brekford nor any of its Subsidiaries has received any written or
oral communication from any person or governmental authority that
alleges that Brekford or any of its Subsidiaries is not in
compliance with applicable Environmental Laws, except for such
non-compliance which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on
Brekford.

(b) Brekford and each
of its Subsidiaries have obtained or have applied for all
environmental, health and safety permits, licenses, variances,
approvals and authorizations (collectively, the “Environmental Permits”)
necessary for the construction of their facilities or the conduct
of their operations, and all such Environmental Permits are
effective or, where applicable, a renewal application has been
timely filed and is pending agency approval, and Brekford and each
of its Subsidiaries are in compliance with all terms and conditions
of such Environmental Permits except for such non-compliance which,
individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect on Brekford. There are no past or
present events, conditions, circumstances, activities, practices,
incidents, actions or plans that may materially interfere with, or
prevent, future continued compliance on the part of Brekford or any
of its Subsidiaries with such Environmental Permits. Neither
Brekford nor any of its Subsidiaries has knowledge of matters or
conditions that would preclude reissuance or transfer of any such
Environmental Permit, including amendment of such instrument, to
Novume or one of its Subsidiaries, where such action is necessary
to maintain material compliance with Environmental
Laws.



 

16






 





(c) To Brekford’s
knowledge, there is no requirement to be imposed in the future by
any Environmental Law or Environmental Permit which could
reasonably be expected to result in the incurrence of a material
cost by Brekford or any of its Subsidiaries.

(d) There is no
Environmental Claim (as defined below) pending or, to
Brekford’s knowledge, threatened (i) against Brekford or any
of its Subsidiaries, (ii) against any person whose liability for
any Environmental Claim Brekford or any of its Subsidiaries has or
may have retained or assumed either contractually or by operation
of law, or (iii) against or associated with any real or personal
property or operations which Brekford or any of its Subsidiaries
currently or previously owned, leased or operated, in whole or in
part.

(e) There have been no
Releases (as defined below) of any Hazardous Material (as defined
below) that would be reasonably likely to form the basis of any
Environmental Claim against Brekford or any of its Subsidiaries, or
against any person whose liability for any Environmental Claim
Brekford or any of its Subsidiaries has or may have retained or
assumed either contractually or by operation of law.

(f) With respect to any
predecessor of Brekford or any of its Subsidiaries, there is no
Environmental Claim pending or, to Brekford’s knowledge,
threatened, or any Release of Hazardous Materials that would be
reasonably likely to form the basis of any Environmental Claim
against Brekford or any of its Subsidiaries.

(g) Brekford has
disclosed to the Company all material facts which Brekford
reasonably believes form the basis of a material current or future
cost relating to any environmental matter affecting Brekford and
each of its Subsidiaries.

(h) None of the
properties currently or formerly owned, leased or operated by
Brekford, any of its Subsidiaries or any predecessor thereof are
now, or were in the past, listed on the National Priorities List of
Superfund Sites (the “NPL”), the Comprehensive
Environmental Response, Compensation and Liability Information
System (“CERCLIS”), or any other
comparable state or local environmental database, including those
that are triggered by sales or transfers of businesses or real
property.

(i) Brekford has
delivered, or caused to be delivered, to the Company copies of all
written environmental audit reports, written site assessments
performed by environmental professionals, asbestos surveys, written
claims and complaints, and consent decrees and other similar
documents with respect to Brekford or any of its Subsidiaries,
which are in the possession or control of Brekford or any of its
Subsidiaries, related to compliance with Environmental Laws,
Environmental Claims, or Releases of Hazardous
Materials.

For purposes of
this Section
4.13:

(i) “Environmental
Claim” means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person
(including any federal, state, local or foreign governmental
authority) alleging potential liability (including, without
limitation, potential responsibility for or liability for
enforcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural resources
damages, property damages, personal injuries or penalties) arising
out of, based on or resulting from (A) the presence, or Release or
threatened Release into the environment, of any Hazardous Materials
at any location, whether or not owned, operated, leased or managed
by Brekford or any of its Subsidiaries (including but not limited
to obligations to clean up contamination resulting from leaking
underground storage tanks); or (B) circumstances forming the basis
of any violation or alleged violation of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of any
Hazardous Materials.



 

17






 





(ii) “Environmental
Laws” means all applicable foreign, federal, state and local
laws (including the common law), rules, requirements and
regulations relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata) or protection of human health as it
relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials or relating to management of asbestos in
buildings.

(iii) “Hazardous
Materials” means (A) any petroleum or any by-products or
fractions thereof, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, any form of natural
gas, explosives, and polychlorinated biphenyls
(“PCBs”); (B) any chemicals, materials or substances,
whether waste materials, raw materials or finished products, which
are now defined as or included in the definition of
“hazardous substances,” “hazardous wastes,”
“hazardous materials,” “extremely hazardous
substances,” “restricted hazardous wastes,”
“toxic substances,” “toxic pollutants,”
“pollutants,” “contaminants,” or words of
similar import under any Environmental Law; and (C) any other
chemical, material or substance, whether waste materials, raw
materials or finished products, regulated or forming the basis of
liability under any Environmental Law.

(iv) “Release”
means any release, spill, emission, leaking, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the
environment (including without limitation ambient air, atmosphere,
soil, surface water, groundwater or property).

Section
4.14. Board
Action; Vote Required

(a) The Board of
Directors of Brekford has determined that the transactions
contemplated by this Agreement are in the best interests of
Brekford and its stockholders and has resolved to recommend to such
stockholders that they vote in favor thereof.

(b) The approval of the
Merger of Brekford Merger Sub into Brekford by a majority of the
votes entitled to be cast by all holders of Brekford Common Stock
(the “Brekford
Stockholders’ Approval”) is the only vote of the
holders of any class or series of the capital stock of Brekford
required to approve this Agreement, the Mergers and the other
transactions contemplated hereby, in accordance with the provisions
of Delaware Law, any applicable United States federal and state
securities laws, and the Certificate of Incorporation and Bylaws of
Brekford, each as amended and as currently in effect.

(c) The Brekford Key
Stockholders, together, hold the requisite voting power to obtain
the Brekford Stockholders’ Approval.



 

18






 





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

Section
4.16. Tax Matters. Except as set forth on
Schedule 4.16
hereto:

(a) Brekford and each
of its Subsidiaries, and each affiliated group (within the meaning
of Section 1504 of the Code) of which Brekford or any of its
Subsidiaries is or has been a member, has timely filed all federal
state, local, foreign, income and franchise Tax Returns (as defined
below), and all other material Tax Returns required to be filed by
them. All such Tax Returns are true and correct in all material
respects. Except to the extent adequately reserved for in
accordance with GAAP, all material Taxes due and payable by
Brekford and each of its Subsidiaries have been timely paid in
full. The most recent consolidated financial statements contained
in the Brekford SEC Reports reflect an adequate reserve (other than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in accordance with GAAP
for all Taxes payable by Brekford and each of its Subsidiaries for
all taxable periods and portions thereof through the date of such
financial statements.

(b) No material
deficiencies for any Taxes have been proposed, asserted or assessed
in writing against Brekford or any of its Subsidiaries that have
not been fully paid or adequately provided for in the appropriate
financial statements of Brekford and its Subsidiaries, no requests
for waivers of the time to assess any Taxes are pending, and no
power of attorney with respect to any Taxes has been executed or
filed with any taxing authority. No material issues relating to
Taxes have been raised in writing by any governmental authority
during any presently pending audit or examination. For any open
taxable period, neither Brekford nor any of its Subsidiaries has
waived or extended the statute of limitations applicable to any Tax
or Tax Return or consented to any extension of time with respect to
any material tax assessment or deficiency.

(c) There are no
material liens or encumbrances for Taxes on any of the assets of
Brekford or any of its Subsidiaries (other than for current Taxes
not yet due and payable).

(d) Brekford and each
of its Subsidiaries have complied in all material respects with all
applicable Legal Requirements relating to the payment and
withholding of Taxes.

(e) Neither of Brekford
nor any of its Subsidiaries has made any payments, nor are any of
them obligated to make any payments, and none of them is a party to
any agreement that could obligate it to make any payments that
would not be deductible by reason of Sections 280G or 162(m) of the
Code as a result of the transactions contemplated by this
Agreement.

(f) Neither Brekford
nor any of its Subsidiaries is a party to any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or
similar agreement, arrangement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or
other agreement relating to Taxes with any taxing authority but
excluding in each case any contract entered into in the ordinary
course of business and the primary subject of which is not Taxes).
Neither Brekford nor any of its Subsidiaries (i) has been a member
of an affiliated group for federal income tax purposes other than a
group of which Brekford is the common parent or (ii) has any
liability for the Taxes of any person other than itself under
Treasury Regulations Section 1.1502-6 (or any similar provision of
U.S. state or local or non-U.S. Tax Law), or as a transferee or
successor.



 

19






 





(g) No federal, state,
local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or
Tax Returns of Brekford or any of its Subsidiaries and neither
Brekford nor any of its Subsidiaries has received a written notice
of any pending audit or proceeding.

(h) Neither Brekford
nor any of its Subsidiaries has agreed to or is required to make
any adjustment under Section 481(a) of the Code as a result of a
“closing agreement” as described in Section 7121 of the
Code (or any similar or corresponding provision of U.S. state or
local or non-U.S. Tax Law) that, in either case, would result in
the inclusion of a material amount of income in, or the exclusion
of a material amount of deductions from, taxable income for any
taxable period (or portion thereof) ending after the Closing
Date.

(i) No property owned
by Brekford or any of its Subsidiaries (i) constitutes “tax
exempt use property” within the meaning of Section 168(h)(1)
of the Code; or (ii) is tax exempt bond financed property within
the meaning of Section 168(g) of the Code.

(j) Neither Brekford
nor any of its Subsidiaries has (i) in the two (2) years prior to
the date of this Agreement, distributed stock of another person, or
has had its stock distributed by another person, in a transaction
that was purported or intended to be governed in whole or in part
by Sections 355 or 361 of the Code or (ii) engaged in any
“reportable transaction” within the meaning of Treasury
Regulation Section 1.6011-4(b) (or any similar provision of U.S.
state or local or non-U.S. Tax Law).

(k) For purpose of this
Agreement, (A) the terms “Tax” or “Taxes”
shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever,
together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic
or foreign) and shall include any transferee liability in respect
of Taxes, any liability in respect of Taxes imposed by contract,
tax sharing agreement, tax indemnity agreement or any similar
agreement and (B) the term “Tax Return” shall mean any
report, return, document, declaration or any other information or
filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any document
with respect to or accompanying payments or estimated Taxes, or
with respect to or accompanying requests for the extension of time
in which to file any such report, return document, declaration or
other information.

 

Section
4.17. Intellectual Property. Brekford and each
of its Subsidiaries owns or possess all necessary licenses or other
valid rights to use all material computer software and firmware,
patents, trademarks, trade names, brand names, copyrights, trade
secrets, applications for trademarks and for patents, domain names,
know-how and other proprietary rights and information used or held
for use in connection with the business of Brekford and each of its
Subsidiaries as currently conducted or as contemplated to be
conducted, and, to the knowledge of Brekford, except as described
on Schedule 4.17
hereto, as of the date hereof, there has been no assertion or claim
challenging the ownership or validity of any of the foregoing.
Except as disclosed on Schedule 4.17 hereto, the
conduct of the business of Brekford and each of its Subsidiaries as
currently conducted does not to the knowledge of Brekford, in any
material respect, conflict with or infringe any patent, license,
trademark, trade name, service mark, copyright, domain name or any
other intellectual property right of any third party. To the
knowledge of Brekford, except as described on Schedule 4.17 hereto, there are
no infringements of any proprietary rights owned by or licensed by
or to Brekford or any of its Subsidiaries.



 

20






 





Section
4.18. Insurance. Except as set forth on
Schedule 4.18
hereto, each of Brekford and each of its Subsidiaries is, and has
been continuously since January 1, 2016 (or such later date as each
such Subsidiary was organized or acquired by Brekford), insured
with financially responsible insurers in such amounts and against
such risks and losses as are customary for companies conducting the
business as conducted by Brekford and each of its Subsidiaries
during such time period. Except as set forth on such Schedule 4.18, since January 1,
2016 neither Brekford nor any of its Subsidiaries has received
notice of cancellation or termination with respect to any material
insurance policy of Brekford or any of its Subsidiaries. The
insurance policies of Brekford and each of its Subsidiaries are
valid and enforceable policies.

Section
4.19. Ownership of Securities. As of the date
hereof, neither of Brekford nor any of its Subsidiaries nor any of
their affiliates or associates (as such terms are defined under the
Exchange Act), (a)(i) beneficially owns, directly or indirectly, or
(ii) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each
case, shares of capital stock of the Company, which in the
aggregate represent 10% or more of the outstanding shares of
Company Common Stock, or (b) is an “interested
stockholder” of the Company within the meaning of Section 203
of the Delaware Law. Except as set forth on Schedule 4.19 hereto, neither
Brekford nor any of its Subsidiaries owns any shares of Company
Common Stock.

Section
4.20. Certain Contracts.

(a) Brekford has
delivered or otherwise made available to the Company true, correct
and complete copies of all contracts and agreements (and all
amendments, modifications and supplements thereto and all side
letters to which Brekford is a party affecting the obligations of
any party thereunder) to which Brekford or any of its Subsidiaries
is a party or by which any of its properties or assets are bound
that are material to the business, properties or assets of Brekford
and each of its Subsidiaries taken as a whole, including, without
limitation, all: (i) employment, consulting, non-competition,
severance, golden parachute or indemnification contracts
(including, without limitation, any contract to which Brekford is a
party involving employees of Brekford); (ii) contracts granting a
right of first refusal or first negotiation; (iii) partnership or
joint venture agreements; (iv) agreements for the acquisition, sale
or lease of material properties or assets of Brekford (by merger,
purchase or sale of assets or stock or otherwise); (v) contracts or
agreements with any governmental entity; (vi) contracts or
arrangements limiting or restraining Novume, Brekford, any of
Brekford’s Subsidiaries or any successor thereto from
engaging or competing in any business; and (vii) all commitments
and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with
Section 6.1 hereof,
the “Brekford
Contracts”).



 

21






 





(b) Except as set forth
on Schedule 4.20(b):

(i) There is no default
under any Brekford Contract either by Brekford or any of its
Subsidiaries or, to the knowledge of Brekford, by any other party
thereto, and no event has occurred that with the lapse of time or
the giving of notice or both would constitute a default thereunder
by Brekford or any of its Subsidiaries or, to the knowledge of
Brekford, any other party, in any such case in which such default
or event could reasonably be expected to have a Material Adverse
Effect on Brekford.

(ii) No party to any
such Brekford Contract has given notice to Brekford of or made a
claim against Brekford with respect to any breach or default
thereunder, in any such case in which such breach or default could
reasonably be expected to have a Material Adverse Effect on
Brekford.

(c) Set forth on
Schedule 4.20(c)
hereto is a list of each material contract, agreement or
arrangement to which Brekford or any of its Subsidiaries is a party
or may be bound and under the terms of which any of the rights or
obligations of a party thereto will be modified or altered
(including, without limitation, any acceleration of rights or
obligations thereunder pursuant to the terms of any such contract,
agreement or arrangement) as a result of the transactions
contemplated hereby.

Section
4.21. Investment Company. Brekford is not and
will be not an “investment company” within the meaning
of Code Section 368(a)(2)(F)(ii) immediately before the Effective
Time.


Section 4.22. Certain Plans. Immediately following the
Effective Time, Brekford, as the Surviving Corporation in the
Brekford Merger, will own substantially all of the assets of
Brekford immediately prior to the Brekford Merger.  There is
no plan or intention for Brekford Merger Sub, as the Surviving
Corporation of the Brekford Merger, to transfer any material assets
or businesses or to cease any existing business of the Brekford
after the Effective Time. There is no plan or intention for the
Novume stock issued in the Brekford Merger to be
redeemed.

ARTICLE
V

REPRESENTATIONS OF
THE COMPANY AND THE MERGER SUBSIDIARIES

The Company and
each Merger Subsidiary (as defined below) hereby represent and
warrant to Brekford as follows:

Section
5.1. Organization and Qualification;
Subsidiaries. Each of the Company and each of Novume,
Company Merger Sub and Brekford Merger Sub (collectively, the
“Merger
Subsidiaries” and each individually a
“Merger
Subsidiary”) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization. Each of the Company and each of the
Merger Subsidiaries has the requisite corporate power and authority
and any necessary governmental authority, franchise, license or
permit to own, operate or lease the properties that it purports to
own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction where
the character of its properties owned, operated or leased or the
nature of its activities makes such qualification necessary, except
for such failure which, when taken together with all other such
failures, would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company’s Subsidiaries are
listed on Schedule
5.1 hereto.



 

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Section
5.2. Certificate of Incorporation, Certificate of
Designations and Bylaws. The Company has heretofore
furnished, or otherwise made available, to Brekford a complete and
correct copy of the Certificates of Incorporation and the Bylaws
(or comparable governing documents), each as amended to the date
hereof, of the Company and each of the Merger Subsidiaries, and a
complete and correct copy of the Certificates of Designations, each
as amended to the date hereof, for each class of the Company
Preferred Stock and Novume Preferred Stock. Such Certificates of
Incorporation, Bylaws (or comparable governing documents) and
Certificates of Designation are in full force and effect. Neither
the Company nor any of the Merger Subsidiaries is in violation of
any of the provisions of its respective Certificate of
Incorporation or its Bylaws (or comparable governing
documents).

Section
5.3. Capitalization.

(a) The authorized
capital stock of the Company consists of (i) 7,500,000 shares of
Preferred Stock, par value $0.0001 per share, 500,000 shares of
which have been designated Series A Cumulative Convertible
Redeemable Preferred Stock, 421,357 shares of which are issued and
outstanding and none of which are reserved for issuance, and (ii)
25,000,000 shares of Company Common Stock, of which, as of February
7, 2017, 5,488,094 shares were issued and outstanding, no shares
were held in the treasury of the Company, 280,882 shares were
issuable upon the conversion of Company Preferred Stock, 493,230
shares were issuable upon the exercise of warrants, 506,400 shares
were issuable upon the exercise of options outstanding under the
Company option plans listed on Schedule 5.3(a) hereto. Except as
set forth on Schedule
5.3 hereto, (i) from February 9, 2017 through the date
hereof, no shares of Company Common Stock have been issued, except
upon the exercise of options described in the immediately preceding
sentence, and (ii) as of the date hereof, there are no outstanding
“Company Equity
Rights”. For purposes of this Agreement, Company
Equity Rights shall mean subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise
acquire from the Company or any of the Company’s Subsidiaries
at any time, or upon the happening of any stated event, any shares
of the capital stock of the Company). Schedule 5.3 hereto sets forth
a complete and accurate list with respect to all outstanding
Company Equity Rights as of February 9, 2017 of the holder thereof,
the date of grant, the number of shares for which each such Company
Equity Right is exercisable, the respective dates upon which each
such Company Equity Right vests, becomes exercisable and expires,
and the exercise price of each such Company Equity
Right.

(b) Except as set forth
on Schedule 5.3(b),
there are no outstanding obligations of the Company or any of the
Company’s Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company.



 

23






 





(c) All of the issued
and outstanding shares of Company Common Stock and Company
Preferred Stock are validly issued, fully paid and
nonassessable.

(d) The authorized
capital stock of Novume consists of 30,000,000 shares of Novume
Common Stock, par value $0.0001 per share, of which 1,000 shares
are validly issued and outstanding, and 20,000,000 shares of Novume
Preferred Stock, none of which are issued and outstanding. All of
the issued and outstanding capital stock of Novume is, and at the
Effective Time will be, owned by the Company free and clear of any
liens, security interests, pledges, agreements, claims, charges or
encumbrances, and there are (i) no other shares of capital stock or
other voting securities of Novume, (ii) no securities of Novume
convertible into or exchangeable for shares of capital stock or
other voting securities of Novume and (iii) no options or other
rights to acquire from Novume, and no obligations of Novume to
issue, any capital stock, other voting securities or securities
convertible into or exchangeable for capital stock or other voting
securities of Novume. All of the issued and outstanding capital
stock of each of Company Merger Sub and Brekford Merger Sub is duly
authorized, validly issued, fully paid and nonassessable, and is
owned by Novume free and clear of any liens, security interests,
pledges, agreements, claims, charges or encumbrances.

(e) Except as disclosed
on Schedule 5.3
hereto, there are no stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or to
which it is bound relating to the voting or registration of any
shares of capital stock of the Company. The Company has not taken
any action that would result in, nor is the Company a party to any
agreement, arrangement or understanding not disclosed on
Schedule 5.3
hereto, that would result in any Options to purchase Company Common
Stock that are unvested becoming vested in connection with or as a
result of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.

Section
5.4. Authority Relative to this Agreement.
Each of the Company and each Merger Subsidiary has the necessary
corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of
this Agreement by the Company and each Merger Subsidiary and the
consummation by each such Party of the transactions contemplated
hereby have been duly authorized by all necessary corporate action
on the part of each such Party. This Agreement has been duly
executed and delivered by each of the Company and each Merger
Subsidiary and, assuming the due authorization, execution and
delivery thereof by the other Parties, constitutes a legal, valid
and binding obligation of each such Party, enforceable against it
in accordance with its terms, subject to the Bankruptcy
Exception.

Section
5.5. No Conflict; Required Filings and
Consents.

(a) Except as listed on
Schedule 5.5
hereto, the execution and delivery of this Agreement by each of the
Company and each Merger Subsidiary does not, and the performance of
this Agreement by each of the Company and each Merger Subsidiary
will not, (i) violate or conflict with the Certificate of
Incorporation or Bylaws of the Company, (ii) conflict with or
violate any law, regulation, court order, judgment or decree
applicable to the Company or any of its Subsidiaries or by which
any of their respective property is bound or affected, (iii)
violate or conflict with the Articles or Certificate of
Incorporation or Bylaws (or comparable governing documents) of any
of the Company’s Subsidiaries, or (iv) result in any breach
of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others
any rights of termination or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or
assets of the Company or any of its Subsidiaries pursuant to,
result in the loss of any material benefit under, or require the
consent of any other party to, any contract, instrument, permit,
license or franchise to which the Company or any of its
Subsidiaries is a party or by which the Company, any of such
Subsidiaries or any of their respective property is bound or
affected except, in the case of clauses (ii), (iii) or (iv) above,
for conflicts, violations, breaches, defaults, results or consents
which, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.



 

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(b) Except as listed on
Schedule 5.5 and
except for applicable requirements, if any, of the Exchange Act,
filing and recordation of appropriate merger or other documents as
required by Delaware Law and any filings required pursuant to any
state securities or “blue sky” laws or the rules of any
applicable stock exchanges, neither the Company nor any of its
Subsidiaries is required to submit any notice, report or other
filing with any governmental authority, domestic or foreign, in
connection with the execution, delivery or performance of this
Agreement. Except as set forth in the immediately preceding
sentence, no waiver, consent, approval or authorization of any
governmental or regulatory authority, domestic or foreign, is
required to be obtained by the Company or any of its Subsidiaries
in connection with its execution, delivery or performance of this
Agreement.

Section
5.6. SEC Filings; Financial
Statements.

(a) The Company has
filed all forms, reports and documents required to be filed with
the SEC since March 15, 2016, and has heretofore delivered or made
available to Brekford, in the form filed with the SEC, together
with any amendments thereto (collectively, the “Company SEC Reports”).
The Company SEC Reports (i) were prepared substantially in
accordance with the requirements of the 1933 Act or the Exchange
Act, as the case may be, and the rules and regulations promulgated
under each of such respective acts, and (ii) did not at the time
they were filed contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading.

(b) The financial
statements, including all related notes and schedules, contained in
the Company SEC Reports (or incorporated by reference therein)
fairly present the consolidated financial position of the Company
and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations and cash flows of the Company
and its Subsidiaries for the periods indicated in accordance with
GAAP applied on a consistent basis throughout the periods involved
(except for changes in accounting principles disclosed in the notes
thereto) and subject in the case of interim financial statements to
normal year-end adjustments.

(c) The Company has
heretofore made available to Brekford a complete and correct copy
of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by the Company with the
SEC pursuant to the Exchange Act.



 

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Section
5.7. No Undisclosed Liabilities; Absence of Certain
Changes or Events. Except as and to the extent publicly
disclosed by the Company in the Company SEC Reports filed prior to the date of
this Agreement, as of March 15, 2016, none of the Company or its Subsidiaries
had any material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and whether due or to become due or asserted or
unasserted, which would be required by GAAP to be reflected in, reserved against or
otherwise described in the consolidated balance sheet of the Company
(including the notes thereto) as of such date or which could reasonably be expected to
have a Material Adverse Effect on the Company. Except as disclosed on Schedule 5.7 hereto, since
March 15, 2016, there has not been any change, or any event involving
a prospective change, in the business, financial condition or results of
operations of the Company or any of its Subsidiaries which has had, or is reasonably
likely to have, a Material Adverse Effect on the Company and the Company and
each of its Subsidiaries has conducted its and their business in
the ordinary course consistent with past practices.

Section
5.8. No Violation of Law; Permits. The
business of the Company and each of its Subsidiaries is not being
conducted in violation of any Legal Requirements, or in violation
of any Permits, except for possible violations none of which,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on the Company. The Company and each
of its Subsidiaries have all Permits that are required in
connection with the operation of their businesses (collectively,
“Company Required
Permits”), and no proceedings are pending or, to the
knowledge of the Company, threatened to revoke or limit any Company
Required Permit, except, in each case, those the absence or
violation of which do not and will not have a Material Adverse
Effect on the Company. Except as set forth on Schedule 5.8 hereto, (a) to the
Company’s knowledge, no investigation or review by any
domestic or foreign governmental or regulatory entity (including
any stock exchange or other self-regulatory body) with respect to
the Company or its Subsidiaries in relation to any alleged
violation of law or regulation is pending or threatened, and (b) no
governmental or regulatory entity (including any stock exchange or
other self-regulatory body) has notified the Company of its
intention to conduct the same, except for such investigations
which, if they resulted in adverse findings, would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company. Except as set forth on Schedule 5.8 hereto, neither
the Company nor any of its Subsidiaries is subject to any cease and
desist or other order, judgment, injunction or decree issued by, or
is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or
directive by, or has adopted any board resolutions at the request
of, any court, governmental entity or regulatory agency that
materially restricts the conduct of its business or which could
reasonably be expected to have a Material Adverse Effect on the
Company, or would prevent or delay the consummation of the
transactions contemplated by this Agreement, nor has the Company or
any of its Subsidiaries been advised that any court, governmental
entity or regulatory agency is considering issuing or requesting
any of the foregoing.

Section
5.9. Registration Statement . None of the
information supplied or to be supplied by or on behalf of the
Company for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement
becomes effective under the 1933 Act, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event
with respect to the Company, its officers and directors or any of
its Subsidiaries should occur which is required to be described in
an amendment of, or a supplement to, the Registration Statement,
the Company shall promptly so advise Brekford and such event shall
be so described, and such amendment or supplement (which the
Company shall have a reasonable opportunity to review) shall be
promptly filed with the SEC and, as required by law, disseminated
to the shareholders of Brekford. The Registration Statement (except
for information relating to or provided by Brekford) will each
comply as to form in all material respects with the provisions of
the 1933 Act and the Exchange Act, as applicable, and the rules and
regulations promulgated thereunder, as applicable.



 

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Section
5.10. Board Action; Vote
Required.

(a) The Board of
Directors of the Company has unanimously determined that the
transactions contemplated by this Agreement are in the best
interests of the Company and its stockholders and has resolved to
recommend to such stockholders that they vote in favor
thereof.

(b) The approval of the
Merger of Company into the Company Merger Sub by a majority of the
votes entitled to be cast by all holders of Company Common Stock
(the “Company
Stockholders’ Approval”) is the only vote of the
holders of any class or series of the capital stock of the Company
required to approve this Agreement, the Mergers and the other
transactions contemplated hereby, in accordance with the provisions
of Delaware Law, any applicable United States federal and state
securities laws and the Certificate of Incorporation and Bylaws of
the Company, each as amended and as currently in
effect.

(c) The Company Key
Stockholders, together, hold the requisite voting power to obtain
the Company Stockholders’ Approval.

Section
5.11. [Reserved]

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

Section
5.13. Ownership of Securities. As of the date
hereof, neither the Company nor, to the Company’s knowledge,
any of its affiliates or associates (as such terms are defined
under the Exchange Act), (a) (i) beneficially owns, directly or
indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of capital stock of Brekford,
which in the aggregate represent 10% or more of the outstanding
shares of Brekford Common Stock. The Company owns no shares of
Brekford Common Stock.

Section
5.14. Activities of Merger Subsidiaries. None
of the Merger Subsidiaries have conducted any activities other than
in connection with the organization thereof, the negotiation and
execution of this Agreement and the consummation of the
transactions contemplated hereby.



 

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Section
5.15. Litigation. Except as disclosed in
Schedule 5.16
hereto, there are no claims, actions, suits, proceedings or, to the
Company’s knowledge, investigations pending or, to the
Company’s knowledge, threatened against the Company or any of
its Subsidiaries, or any properties or rights of the Company or any
of its Subsidiaries, before any court, administrative,
governmental, arbitral, mediation or regulatory authority or body,
domestic or foreign, (a) as of the date hereof, as to which there
is more than a remote possibility of an adverse judgment or
determination against the Company or any of its Subsidiaries or any
properties or rights of the Company or any of its Subsidiaries in
excess of $100,000 or which otherwise could have a Material Adverse
Effect on the Company, (b) as of the date hereof, which questions
the validity of this Agreement or any action to be taken by the
Company in connection with the consummation of the transactions
contemplated by this Agreement or could otherwise prevent or delay
the consummation of the transactions contemplated by this
Agreement, or (c) as to which there is reasonably likely to be an
adverse judgment or determination against the Company or any of its
Subsidiaries which could reasonably be expected to have a Material
Adverse Effect on the Company.

Section
5.16. Employee Matters; ERISA.

(a) Set forth on
Schedule 5.16
hereto is a true and complete list of all employee benefit plans
within the meaning of Section 3(3) of ERISA, all deferred
compensation, bonus or other incentive compensation, stock options,
restricted stock, stock purchase or other equity-based, severance
or change in control, salary, continuation, tuition assistance,
disability, leave of absence plans, policies or agreements, and all
employment, consulting, management or other individual compensation
agreements with respect to any current or former employee of the
Company or any of its Company ERISA Affiliates, which, in each
case, the Company or any of its Company ERISA Affiliates has any
obligation or liability, contingent or otherwise (collectively, the
“Company Benefit
Plans”).

(b) All contributions
and other payments required to be made by the Company or any
Company ERISA Affiliate to or under any Company Benefit Plan
maintained (or to any person pursuant to the terms thereof) have
been timely made. No Company Benefit Plan is subject to Section 412
of the Code or Section 302 of ERISA.

(c) Each of the Company
Benefit Plans intended to be “qualified” within the
meaning of Section 401(a) of the Code has been determined by the
IRS to be so qualified, and, to the knowledge of the Company or any
Company ERISA Affiliate, no circumstances exist that could
reasonably be expected by the Company or any Company ERISA
Affiliate to result in the revocation of any such determination.
The Company is in compliance with, and each of the Company Benefit
Plans is and has been operated in compliance with, all applicable
Legal Requirements governing such plan, including, without
limitation, ERISA and the Code.

(d) Except as set forth
on Schedule 5.16
hereto, the consummation or announcement of any transaction
contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or further acts or events) result in
any (i) payment (whether of severance pay or otherwise) becoming
due from the Company or any Company ERISA Affiliate to any current
or former officer, employee, former employee or director thereof,
or to any other person for the benefit of any such officer,
employee or director, or (ii) acceleration, vesting or
establishment of any benefit under any Company Benefit Plan, or
(iii) disqualification of any of the Company Benefit Plans intended
to be qualified under, result in a prohibited transaction or breach
of fiduciary duty under, or otherwise violate, ERISA or the
Code.



 

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(e) Neither the Company
nor any Company ERISA Affiliate has incurred, and none of such
entities reasonably expects to incur, any material liability to the
PBGC (other than premiums which are not overdue) or pursuant to
Title IV of ERISA with respect to any Company Benefit Plan. Neither
the Company nor any Company ERISA Affiliate is an employer with
respect to, and neither has incurred or reasonably expects to
incur, any withdrawal liability with respect to any
“multiemployer plan” (as defined in Section 3(37) of
ERISA).

(f) There are no
pending or, to the Company’s knowledge, threatened actions,
claims or proceedings against any Company Benefit Plan or its
assets, plan sponsor, plan administrator or fiduciaries with
respect to the operation of such plan (other than routine benefit
claims).

(g) Each Company
Benefit Plan that constitutes in any part a nonqualified deferred
compensation plan within the meaning of Section 409A of the Code
has been operated and maintained in operational and documentary
compliance with Section 409A of the Code and applicable guidance
thereunder. No payment to be made under any Company Benefit Plan
is, or to the knowledge of the Company, will be, subject to the
penalties of Section 409A(a)(1) of the Code.

Section
5.17. Tax Matters. Except as set forth on
Schedule 5.17
hereto:

(a) The Company and
each of its Subsidiaries, and each affiliated group (within the
meaning of Section 1504 of the Code) of which the Company or any
Subsidiary is or has been a member, has timely filed all federal
state, local, foreign, income and franchise Tax Returns (as defined
below), and all other material Tax Returns required to be filed by
them. All such Tax Returns are true and correct in all material
respects. Except to the extent adequately reserved for in
accordance with GAAP, all material Taxes due and payable by the
Company and each of its Subsidiaries have been timely paid in full.
The most recent consolidated financial statements contained in the
Company SEC Reports reflect an adequate reserve (other than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in accordance with GAAP
for all Taxes payable by the Company and its Subsidiaries for all
taxable periods and portions thereof through the date of such
financial statements.

(b) No material
deficiencies for any Taxes have been proposed, asserted or assessed
in writing against the Company or any of its Subsidiaries that have
not been fully paid or adequately provided for in the appropriate
financial statements of the Company and each of its Subsidiaries,
no requests for waivers of the time to assess any Taxes are
pending, and no power of attorney with respect to any Taxes has
been executed or filed with any taxing authority. No material
issues relating to Taxes have been raised in writing by any
governmental authority during any presently pending audit or
examination. For any open taxable period, the Company and each of
its Subsidiaries have not waived or extended the statute of
limitations applicable to any Tax or Tax Return or consented to any
extension of time with respect to any material tax assessment or
deficiency.



 

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(c) There are no
material liens or encumbrances for Taxes on any of the assets of
the Company or any of its Subsidiaries (other than for current
Taxes not yet due and payable).

(d) The Company and
each of its Subsidiaries have complied in all material respects
with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes.

(e) Neither the Company
nor any of its Subsidiaries has made any payments, nor are any of
them obligated to make any payments, and none of them is a party to
any agreement that could obligate it to make any payments that
would not be deductible by reason of Sections 280G or 162(m) of the
Code as a result of the transactions contemplated by this
Agreement.

(f) Neither the Company
nor any of its Subsidiaries is a party to any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or
similar agreement, arrangement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or
other agreement relating to Taxes with any taxing authority but
excluding in each case any contract entered into in the ordinary
course of business and the primary subject of which is not Taxes).
Neither the Company nor any of its Subsidiaries (i) has been a
member of an affiliated group for federal income tax purposes other
than a group of which the Company is the common parent or (ii) has
any liability for the Taxes of any person other than itself under
Treasury Regulations Section 1.1502-6 (or any similar provision of
U.S. state or local or non-U.S. Tax Law), or as a transferee or
successor.

(g) No federal, state,
local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or
Tax Returns of the Company or its Subsidiaries and neither the
Company nor any of its Subsidiaries has received a written notice
of any pending audit or proceeding, in any such case involving a
material issue with respect to Taxes.

(h) Neither the Company
nor any of its Subsidiaries has agreed to or is required to make
any material adjustment under Section 481(a) of the Code as a
result of a “closing agreement” as described in Section
7121 of the Code (or any similar or corresponding provision of U.S.
state or local or non-U.S. Tax Law) that, in either case, would
result in the inclusion of a material amount of income in, or the
exclusion of a material amount of deductions from, taxable income
for any taxable period (or portion thereof) ending after the
Closing Date.

(i) No property owned
by the Company or any of its Subsidiaries (i) constitutes
“tax exempt use property” within the meaning of Section
168(h)(1) of the Code; or (ii) is tax exempt bond financed property
within the meaning of Section 168(g) of the Code.

(j) Neither the Company
nor any of its Subsidiaries has (i) in the two (2) years prior to
the date of this Agreement, distributed stock of another person, or
has had its stock distributed by another person, in a transaction
that was purported or intended to be governed in whole or in part
by Sections 355 or 361 of the Code or (ii) engaged in any
“reportable transaction” within the meaning of Treasury
Regulation Section 1.6011-4(b) (or any similar provision of U.S.
state or local or non-U.S. Tax Law).



 

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Section
5.18. Intellectual Property. The Company and
each of its Subsidiaries owns or possesses all necessary licenses
or other valid rights to use all material computer software and
firmware, patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, brand names, copyrights, service
marks, trade secrets, applications for trademarks and for service
marks, know-how and other proprietary rights and information used
or held for use in connection with the business of the Company and
each of its Subsidiaries as currently conducted or as contemplated
to be conducted, and, to the knowledge of the Company, except as
described on Schedule
5.18 hereto, as of the date hereof, there has been no
assertion or claim challenging the ownership or validity of any of
the foregoing. To the knowledge of the Company, except as disclosed
on Schedule 5.18
hereto, the conduct of the business of the Company and each of its
Subsidiaries as currently conducted does not, in any material
respect, conflict with or infringe any patent, patent right,
license, trademark, trademark right, trade name, trade name right,
service mark, copyright or any other intellectual property right of
any third party. To the knowledge of the Company, except as
described on Schedule
5.18 hereto, there are no infringements of any proprietary
rights owned by or licensed by or to the Company or any of its
Subsidiaries.

Section
5.19. Certain Contracts.

(a) Except for such
contracts as are filed publicly in the Company SEC Reports, the
Company has delivered or otherwise made available to Brekford true,
correct and complete copies of all contracts and agreements (and
all amendments, modifications and supplements thereto and all side
letters to which the Company is a party affecting the obligations
of any party thereunder) to which the Company or any of its
Subsidiaries is a party or by which any of its properties or assets
are bound that are material to the business, properties or assets
of the Company and its Subsidiaries taken as a whole, including,
without limitation, all: (i) employment, consulting,
non-competition, severance, golden parachute or indemnification
contracts (including, without limitation, any contract to which the
Company is a party involving employees of the Company); (ii)
contracts granting a right of first refusal or first negotiation;
(iii) partnership or joint venture agreements; (iv) agreements for
the acquisition, sale or lease of material properties or assets of
the Company (by merger, purchase or sale of assets or stock or
otherwise); (v) contracts or agreements with any governmental
entity; (vi) contracts or arrangements limiting or restraining
Novume, the Company, any of the Company’s Subsidiaries or any
successor thereto from engaging or competing in any business; and
(vii) all commitments and agreements to enter into any of the
foregoing (collectively, together with any such contracts entered
into in accordance with Section 6.2 hereof, the
“Company
Contracts”).

(b) Except as set forth
on Schedule
5.19(b):

(i) There is no default
under any Company Contract either by the Company or any of its
Subsidiaries or, to the knowledge of the Company, by any other
party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default
thereunder by the Company or any of its Subsidiaries or, to the
knowledge of the Company, any other party, in any such case in
which such default or event could reasonably be expected to have a
Material Adverse Effect on the Company.

(ii) No party to any
such Company Contract has given notice to the Company of or made a
claim against the Company with respect to any breach or default
thereunder, in any such case in which such breach or default could
reasonably be expected to have a Material Adverse Effect on the
Company.



 

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(c) Set forth on
Schedule 5.19(c)
hereto is a list of each material contract, agreement or
arrangement to which the Company or any of its Subsidiaries is a
party or may be bound and under the terms of which any of the
rights or obligations of a party thereto will be modified or
altered (including, without limitation, any acceleration of rights
or obligations thereunder pursuant to the terms of any such
contract, agreement or arrangement) as a result of the transactions
contemplated hereby.

Section
5.20. Investment Company. None of Novume, the
Merger Subsidiaries or the Company, is or will be an
“investment company” within the meaning of Code Section
368(a)(2)(F)(ii) immediately before the Effective
Time.

Section
5.21. Certain Plans. Immediately following the
Effective Time, Company Merger Sub, as the Surviving Corporation in
the Company Merger, will own substantially all of the assets of the
Company immediately prior to the Company Merger.  There is no
plan or intention for Company Merger Sub, as the Surviving
Corporation of the Company Merger, to transfer any material assets
or businesses or to cease any existing business of the Company
after the Effective Time. There is no plan or intention for the
Novume stock issued in the Company Merger to be
redeemed.

ARTICLE
VI

CONDUCT OF BUSINESS
PENDING THE MERGERS

Section
6.1. Conduct of Business of Brekford.
Brekford covenants and agrees that, between the date of this
Agreement and the Effective Time, unless the Company shall
otherwise consent in writing, and except as described on
Schedule 6.1 hereto
or as otherwise expressly contemplated hereby, the business of
Brekford and each of its Subsidiaries shall be conducted only in,
and such entities shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice;
and Brekford and each of its Subsidiaries will use their
commercially reasonable efforts to preserve substantially intact
their business organizations, to keep available the services of
those of their present officers, employees and consultants who are
integral to the operation of their businesses as presently
conducted and to preserve their present relationships with
significant customers, significant suppliers and with other persons
with whom they have significant business relations. By way of
amplification and not limitation, except as set forth on
Schedule 6.1 hereto
or as otherwise expressly contemplated by this Agreement, Brekford
agrees on behalf of itself and each of its Subsidiaries that they
will not, between the date of this Agreement and the Effective
Time, directly or indirectly, do any of the following without the
prior written consent of the Company:

(a) (i) except for (A)
the issuance of Brekford Common Stock in order to satisfy
obligations under employee benefit plans disclosed in Schedule 4.11; (B) grants of
Brekford Options as set forth in Schedule 6.1; (C) the issuance
of securities by any of Brekford’s Subsidiaries to any person
which is directly or indirectly wholly-owned by Brekford; and (D)
the issuance of Brekford Common Stock to satisfy the exercise of
outstanding Brekford Warrants or outstanding Brekford Options,
issue, sell, pledge, dispose of, encumber, authorize, or propose
the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock of, or any other
ownership interest in, Brekford or any of its Subsidiaries; (ii)
amend or propose to amend the Certificate of Incorporation or
Bylaws of Brekford or any of its Subsidiaries or adopt any
shareholder rights plan or related rights agreement; (iii) split,
combine or reclassify any outstanding shares of Brekford Common
Stock, or declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise with respect to such
shares; (iv) redeem, purchase or otherwise acquire or offer to
redeem, purchase or otherwise acquire any shares of its capital
stock; or (v) authorize or propose or enter into any contract,
agreement, commitment or arrangement with respect to any of the
matters prohibited by this Section 6.1(a);



 

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(b) (i) acquire (by
merger, consolidation, or acquisition of stock or assets) any
corporation, partnership or other business organization or division
thereof or make any investment in another entity other than an
entity which is a wholly-owned subsidiary of Brekford as of the
date hereof, except for investments which do not exceed $50,000 for
any single investment or series of related investments, or $100,000
in the aggregate for all such investments in any twelve (12)-month
period; (ii) except in the ordinary course of business and in a
manner consistent with past practice, sell, pledge, dispose of, or
encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any assets of Brekford or any of its Subsidiaries;
(iii) authorize or make capital expenditures which are in excess of
the amounts shown in Schedule 6.1 hereto; (iv) enter
into any agreement, contract or commitment which involves payments
by Brekford or any of its Subsidiaries in an amount in excess of
$50,000 individually or as part of a series of related
transactions, except for agreements, contracts and commitments of a
type referred to in another clause of this subsection (b) and not
prohibited thereby because of the amount of such contract; or (v)
authorize, enter into or amend any contract, agreement, commitment
or arrangement with respect to any of the matters prohibited by
this Section
6.1(b);

(c) (i) incur any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person
or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Brekford or any of its Subsidiaries
or guarantee any debt securities of others (other than Brekford or
any of its wholly-owned Subsidiaries) or enter into or amend any
contract, agreement, commitment or arrangement with respect to any
of the foregoing, other than (A) in replacement for existing or
maturing debt, (B) borrowings by Brekford under its lines of credit
existing on the date hereof up to the maximum amount permitted
thereunder (as such maximum amount may be reduced from time to time
in accordance with the terms thereof) or (C) capital leases or
other vendor financing for capital assets the acquisition of which
is otherwise permitted under this Agreement; (ii) make any loans,
advances or capital contributions to, or investments in, any other
person (other than to the wholly-owned subsidiaries of Brekford or
customary loans or advances to employees in the ordinary course of
business consistent with past practice and in amounts not material
to the maker of such loan or advance); or (iii) mortgage or pledge
any of its material assets, tangible or intangible, or create or
suffer to exist any material lien thereupon;

(d) enter into (i)
leveraged derivative contracts (defined as contracts that use a
factor to multiply the underlying index exposure), or (ii) other
derivative contracts except for the purpose of hedging known
interest rate and foreign exchange exposures or otherwise reducing
such Party’s cost of financing;



 

33






 





(e) adopt a plan of
complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization of Brekford or any of its Subsidiaries (other than
the Brekford Merger);

(f) alter through
merger, liquidation, reorganization, restructuring or in any other
fashion the corporate structure or ownership of any of
Brekford’s Subsidiaries;

(g) except as may be
required by law or as contemplated by this Agreement, enter into,
adopt or amend or terminate any Brekford Benefit Plan, or (except
for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to Brekford,
and as required under existing agreements or in the ordinary course
of business generally consistent with past practice) increase in
any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Brekford
Benefit Plan] as in effect as of the date hereof;

(h) make any payments
(except in the ordinary course of business and in amounts and in a
manner consistent with past practice or as otherwise required by
Legal Requirements or the provisions of any Brekford Benefit Plan)
under any Brekford Benefit Plan to any director or employee of, or
independent contractor or consultant to, Brekford or its
Subsidiaries;

(i) change in any
material respect its tax or accounting policies, methods or
procedures except as required by GAAP;

(j) do any act or omit
to do any act which would cause a material breach of any material
contract, commitment or obligation;

(k) take any action
which could reasonably be expected to adversely affect or delay the
ability of any of the Parties to obtain any approval of any
governmental or regulatory body required to consummate the
transactions contemplated hereby;

(l) other than pursuant
to this Agreement, take any action to cause the Brekford Common
Stock to cease to be quoted on the OTCQX;

(m) (i) issue SARs, new
performance shares, restricted stock, or similar equity based
rights; (ii) materially modify (with materiality to be determined
with respect to the Brekford Benefit Plan in question) any
actuarial cost method, assumption or practice used in determining
benefit obligations, annual expense and funding for any Brekford
Benefit Plan, except to the extent required by GAAP; (iii)
materially modify (with materiality to be determined with respect
to the Brekford Benefit Plan trust in question) the investment
philosophy of the Brekford Benefit Plan trusts or maintain an asset
allocation which is not consistent with such philosophy, subject to
any ERISA fiduciary obligation; (iv) subject to any ERISA fiduciary
obligation, enter into any outsourcing agreement, or any other
material contract relating to the Brekford Benefit Plans or
management of the Brekford Benefit Plan trusts; (v) offer any new
or extend any existing retirement incentive, “window”
or similar benefit program; (vi) grant any ad hoc pension increase;
(vii) establish any new or fund any existing “rabbi” or
similar trust (except in accordance with the current terms of such
trust), or enter into any other arrangement for the purpose of
securing non-qualified benefits or deferred compensation; (viii)
adopt or implement any corporate owned life insurance; or (ix)
adopt, implement or maintain any “split dollar” life
insurance program;



 

34






 





(n) take any action
which would cause its representations and warranties contained
herein to become inaccurate in any material respect;

(o) revalue in any
material respect any of its assets, including, without limitation,
writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business
or as required by GAAP;

(p) make or revoke any
tax election or settle or compromise any tax liability material to
Brekford and/or any of its Subsidiaries taken as a whole or change
(or make a request to any taxing authority to change) any material
aspect of its method of accounting for tax purposes, other than as
required by applicable Legal Requirements;

(q) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the
notes thereto) of Brekford and its Subsidiaries or incurred in the
ordinary course of business consistent with past
practice;

(r) settle or
compromise any pending or threatened suit, action or claim relating
to the transactions contemplated hereby; or

(s) make any
significant distribution or redemption of its
securities.

Section
6.2. Conduct of Business of the Company. The
Company covenants and agrees that, between the date of this
Agreement and the Effective Time, unless Brekford shall otherwise
consent in writing, and except as described on Schedule 6.2 hereto or as
otherwise expressly contemplated hereby, the Company and each of
its Subsidiaries will use their commercially reasonable efforts to
preserve substantially intact their business organizations, to keep
available the services of those of their present officers,
employees and consultants who are integral to the operation of
their businesses as presently conducted and to preserve their
present relationships with significant clients and with other
persons with whom they have significant business relations. By way
of amplification and not limitation, except as set forth on
Schedule 6.2 hereto
or as otherwise expressly contemplated by this Agreement, the
Company agrees on behalf of itself and each of its Subsidiaries
that they will not, between the date of this Agreement and the
Effective Time, directly or indirectly, do any of the following
without the prior written consent of Brekford:



 

35






 





(a) (i) except for (A)
the issuance of Company Common Stock in order to satisfy
obligations under employee benefit plans disclosed in Schedule 5.16; (B) grants of
Company Options as set forth in Schedule 6.2; (C) the issuance
of securities by any of the Company’s Subsidiaries to any
person which is directly or indirectly wholly-owned by the Company;
and (D) the issuance of Company Common Stock to satisfy the
exercise of outstanding Company Warrants or outstanding Company
Options, issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any
kind to acquire any shares of capital stock of, or any other
ownership interest in, the Company or any of its Subsidiaries; (ii)
amend or propose to amend the Certificate of Incorporation or
Bylaws of the Company or any of its Subsidiaries or adopt any
shareholder rights plan or related rights agreement; (iii) split,
combine or reclassify any outstanding shares of Company Common
Stock, or declare, set aside or pay any dividend or distribution
payable in cash, stock, property or otherwise with respect to such
shares; (iv) redeem, purchase or otherwise acquire or offer to
redeem, purchase or otherwise acquire any shares of its capital
stock; or (v) authorize or propose or enter into any contract,
agreement, commitment or arrangement with respect to any of the
matters prohibited by this Section 6.2(a);

(b) (i) other than as
set forth on Schedule
2(b)(i)(B) hereto, acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof or make any
investment in another entity other than an entity which is a
wholly-owned Subsidiary of the Company as of the date hereof,
except for investments which do not exceed $50,000 for any single
investment or series of related investments, or $100,000 in the
aggregate for all such investments in any twelve (12)-month period;
(ii) except in the ordinary course of business and in a manner
consistent with past practice, sell, pledge, dispose of, or
encumber or authorize or propose the sale, pledge, disposition or
encumbrance of any assets of the Company or any of its
Subsidiaries; (iii) authorize or make capital expenditures which
are in excess of the amounts shown in Schedule 6.2 hereto; (iv) enter
into any agreement, contract or commitment which involves payments
by the Company or any of its Subsidiaries in an amount in excess of
$50,000 individually or as part of a series of related
transactions, except for agreements, contracts and commitments of a
type referred to in another clause of this subsection (b) and not
prohibited thereby because of the amount of such contract; or (v)
authorize, enter into or amend any contract, agreement, commitment
or arrangement with respect to any of the matters prohibited by
this Section 6.2(b); or

(c) (i) incur any
indebtedness for borrowed money or assume, guarantee, endorse or
otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person
or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any debt securities of others (other than
the Company or any of its wholly-owned Subsidiaries) or enter into
or amend any contract, agreement, commitment or arrangement with
respect to any of the foregoing, other than (A) in replacement for
existing or maturing debt, (B) borrowings by the Company under its
lines of credit existing on the date hereof up to the maximum
amount permitted thereunder (as such maximum amount may be reduced
from time to time in accordance with the terms thereof) or (C)
capital leases or other vendor financing for capital assets the
acquisition of which is otherwise permitted under this Agreement;
(ii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to the wholly-owned
subsidiaries of the Company or customary loans or advances to
employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or
advance); or (iii) mortgage or pledge any of its material assets,
tangible or intangible, or create or suffer to exist any material
lien thereupon;



 

36






 





(d) enter into (i)
leveraged derivative contracts (defined as contracts that use a
factor to multiply the underlying index exposure), or (ii) other
derivative contracts except for the purpose of hedging known
interest rate and foreign exchange exposures or otherwise reducing
such Party’s cost of financing;

(e) adopt a plan of
complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization of the Company or any of
its Subsidiaries (other than the Company Merger);

(f) alter through
merger, liquidation, reorganization, restructuring or in any other
fashion the corporate structure or ownership of any of the
Company’s Subsidiaries;

(g) except as may be
required by law or as contemplated by this Agreement, enter into,
adopt or amend or terminate any Company Benefit Plan, or (except
for normal increases in the ordinary course of business consistent
with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the
Company, and as required under existing agreements or in the
ordinary course of business generally consistent with past
practice) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit
not required by any Company Benefit Plan as in effect as of the
date hereof;

(h) make any payments
(except in the ordinary course of business and in amounts and in a
manner consistent with past practice or as otherwise required by
Legal Requirements or the provisions of any Company Benefit Plan)
under any Company Benefit Plan to any director or employee of, or
independent contractor or consultant to, the Company or its
Subsidiaries;

(i) change in any
material respect its tax or accounting policies, methods or
procedures except as required by GAAP;

(j) change in any
material respect its tax or accounting policies, methods or
procedures except as required by GAAP;

(k) do any act or omit
to do any act which would cause a material breach of any material
contract, commitment or obligation;

(l) take any action
which could reasonably be expected to adversely affect or delay the
ability of any of the Parties to obtain any approval of any
governmental or regulatory body required to consummate the
transactions contemplated hereby;

(m) (i) issue SARs, new
performance shares, restricted stock, or similar equity based
rights; (ii) materially modify (with materiality to be determined
with respect to the Company Benefit Plan in question) any actuarial
cost method, assumption or practice used in determining benefit
obligations, annual expense and funding for any Company Benefit
Plan, except to the extent required by GAAP; (iii) materially
modify (with materiality to be determined with respect to the
Company Benefit Plan trust in question) the investment philosophy
of the Company Benefit Plan trusts or maintain an asset allocation
which is not consistent with such philosophy, subject to any ERISA
fiduciary obligation; (iv) subject to any ERISA fiduciary
obligation, enter into any outsourcing agreement, or any other
material contract relating to the Company Benefit Plans or
management of the Company Benefit Plan trusts; (v) offer any new or
extend any existing retirement incentive, “window” or
similar benefit program; (vi) grant any ad hoc pension increase;
(vii) establish any new or fund any existing “rabbi” or
similar trust (except in accordance with the current terms of such
trust), or enter into any other arrangement for the purpose of
securing non-qualified benefits or deferred compensation; (viii)
adopt or implement any corporate owned life insurance; or (ix)
adopt, implement or maintain any “split dollar” life
insurance program;



 

37






 





(n) take any action
which would cause its representations and warranties contained
herein to become inaccurate in any material respect;

(o) revalue in any
material respect any of its assets, including, without limitation,
writing down the value of inventory or writing-off notes or
accounts receivable other than in the ordinary course of business
or as required by GAAP;

(p) make or revoke any
tax election or settle or compromise any tax liability material to
the Company and/or any of its Subsidiaries taken as a whole or
change (or make a request to any taxing authority to change) any
material aspect of its method of accounting for tax purposes, other
than as required by applicable Legal Requirements;

(q) pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or
contemplated by, the consolidated financial statements (or the
notes thereto) of the Company and its Subsidiaries or incurred in
the ordinary course of business consistent with past
practice;

(r) settle or
compromise any pending or threatened suit, action or claim relating
to the transactions contemplated hereby; or

(s) make any
significant distribution or redemption of its
securities.

Section
6.3. Exclusivity. During the period
commencing on the date hereof, Brekford, without the prior written
consent of the Company, will not, and will not authorize or permit
any of its Party Representatives (as defined in Section 7.5(b) hereof) to,
directly or indirectly, solicit, initiate, entertain or encourage
or support (including by way of furnishing information) or take any
other action to facilitate any inquiries or the making of any
proposal or offer which constitutes or may reasonably be expected
to lead to an Acquisition Proposal (as defined below) from any
person, or engage in any discussion or negotiations relating
thereto or accept any Acquisition Proposal, unless the Board of
Directors of Brekford shall conclude in good faith, after
considering applicable law, on the basis of oral or written advice
of outside counsel, that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties.
Consistent with the foregoing provisions of this Section 6.3, Brekford shall
immediately cease and terminate any currently existing
solicitation, initiation, encouragement, activity, discussion or
negotiation with any persons conducted heretofore by Brekford or
its Representatives with respect to the foregoing. Brekford agrees
not to release any third party from, or waive any provision of, any
standstill agreement to which it is a party or any confidentiality
agreement between it and another person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal,
unless the Board of Directors of Brekford shall conclude in good
faith, after considering applicable law, on the basis of oral or
written advice of outside counsel, that such action is necessary
for the Board of Directors to act in a manner consistent with its
fiduciary duties. As used herein, “Acquisition Proposal”
shall mean a proposal or offer for a tender or exchange offer,
merger, consolidation or other business combination involving
Brekford or any proposal to acquire in any manner a substantial
equity interest in, or all or substantially all of the assets of,
Brekford.



 

38






 





Section
6.4. Subsequent Financial Statements. Prior
to the Effective Time, Brekford shall (a) prior to making publicly
available its financial results for any period, provide a copy of
such financial results to the Company and (b) timely file with the
SEC each Annual Report on Form 10-K, Quarterly Report on Form 10-Q
and Current Report on Form 8-K required to be filed by it under the
Exchange Act and the rules and regulations promulgated thereunder,
and, prior to the filing thereof, provide a copy to the Company,
and will promptly deliver to the Company copies of each such report
filed with the SEC. As of their respective dates, none of such
reports shall contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
respective audited financial statements and unaudited interim
financial statements of Brekford included in such reports will
fairly present the financial position of Brekford and each of its
Subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods then ended in accordance
with GAAP applied on a consistent basis and, subject, in the case
of unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described
therein.

Section
6.5. Control of Operations. Nothing contained
in this Agreement shall give the Company or Brekford, directly or
indirectly, the right to control or direct the operations of the
other prior to the Effective Time. Prior to the Effective Time,
each of the Company and Brekford shall exercise, consistent with
the terms and conditions of this Agreement, complete control and
supervision over its respective operations.

ARTICLE
VII

ADDITIONAL
AGREEMENTS

Section
7.1. Registration Statement; Information
Statement. As promptly as practicable after the execution
and delivery of this Agreement, the Parties shall prepare and file
with the SEC, and shall use all reasonable efforts to have cleared
by the SEC, the Registration Statement on Form S-4 under the
Securities Act of 1933, and the Information Statement, and Brekford
shall promptly thereafter mail to the holders of record of Brekford
Common Stock the Information Statement in accordance with the
requirements of the applicable rules and regulations of the
Exchange Act.

Section
7.2. Stockholders’ Approval; Consummation of
the Mergers.

(a) At the earliest
reasonably practicable time following the execution and delivery of
this Agreement, each of the Company and Brekford shall promptly
take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and Bylaws, each as amended and as
currently in effect, to obtain the Company Stockholders’
Approval and the Brekford Stockholders’ Approval, as
applicable. The stockholder vote or consent required for approval
of each of the Mergers will be no greater than that contemplated by
Sections 4.14(b)
and 5.10(b) hereof.
Each of the Parties shall take all other action necessary or, in
the opinion of the other Parties, reasonably advisable to promptly
and expeditiously secure any vote or consent of stockholders
required by Delaware Law, as the case may be, and such
Party’s Certificate of Incorporation and Bylaws, each as
amended and as currently in effect, to adopt this Agreement, and
effect the Mergers and any other transactions contemplated
hereby.



 

39






 





(b) Upon receipt of the
Brekford Stockholders’ Approval, Brekford take all action as
may be necessary and appropriate to distribute the Information
Statement to the holders of record of Brekford Common Stock in
accordance with the applicable rules and regulations of the
Exchange Act.

(c) Upon the terms and
subject to the conditions hereof and as soon as practicable after
the conditions set forth in ARTICLE VIII hereof have been fulfilled
or waived, each of the Parties shall execute in the manner required
by Delaware Law and deliver to and file with the Secretary of State
of the State of Delaware such instruments and agreements as may be
required by Delaware Law, and the Parties shall take all such other
and further actions as may be required by law to make the Mergers
effective. Prior to the filings referred to in this Section 7.2(c), a closing (the
“Closing”) will be held at
the offices of Crowell & Moring LLP, 1001 Pennsylvania Ave NW,
Washington, D.C. 20004 (or such other place as the Company and
Brekford may mutually agree upon), for the purpose of confirming
all the foregoing. The Closing will take place upon the fulfillment
or waiver of all of the conditions to closing set forth in ARTICLE
VIII of this Agreement, or as soon thereafter as practicable (the
date of the Closing being herein referred to as the
“Closing
Date”).

Section
7.3. Additional Agreements. Each of the
Parties will comply in all material respects with all applicable
Legal Requirements of any governmental authority in connection with
its execution, delivery and performance of this Agreement and the
transactions contemplated hereby. Each of the Parties agrees to use
all commercially reasonable efforts to obtain in a timely manner
all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to use all commercially
reasonable efforts to take, or cause to be taken, all other actions
and to do, or cause to be done, all other things necessary, proper
or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement. The
Parties shall cooperate in responding to inquiries from, and making
presentations to, regulatory authorities.

Section
7.4. Notification of Certain Matters. Each of
the Company and Brekford shall give prompt notice to the other of
the following:

(a) the occurrence or
nonoccurrence of any event whose occurrence or nonoccurrence would
be likely to cause either:

(i) any representation
or warranty of such Party contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date
hereof to the Effective Time, or (ii) directly or indirectly, any
Material Adverse Effect with respect to such Party;



 

40






 





(b) any material
failure of such Party, or any officer, director, employee or agent
of any thereof, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it
hereunder;

(c) any facts relating
to such Party which would make it necessary or advisable to amend
the Registration Statement or the Information Statement in order to
make the statements therein not misleading or to comply with
applicable law;

(d) any notice of, or
other communication relating to, a default or event which, with
notice or lapse of time or both, would become a default, received
by it or any of its Subsidiaries subsequent to the date of this
Agreement and prior to the Effective Time, under any contract or
agreement material to the financial condition, properties,
businesses or results of operations of it and its Subsidiaries
taken as a whole to which it or any of its Subsidiaries is a party
or is subject; and

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

provided, however,
that the delivery of any notice pursuant to this Section 7.4 shall not limit or
otherwise affect the remedies available hereunder to the Party
receiving such notice.

Section
7.5. Access to Information.

(a) From the date
hereof to the Effective Time, each of the Company and Brekford
shall, and shall cause its respective Subsidiaries, and its and
their officers, directors, employees, auditors, counsel and agents
to afford the officers, employees, auditors, counsel and agents of
the other Party complete access at all reasonable times to such
Party’s and its Subsidiaries’ officers, employees,
auditors, counsel agents, properties, offices and other facilities
and to all of their respective books and records, and shall furnish
the other with all financial, operating and other data and
information as such other Party may reasonably
request.

(b) Each of the Company
and Brekford agrees that all information so received from the other
Party shall be deemed received pursuant to the Mutual
Non-Disclosure Agreement between the Company and Brekford dated as
of October 10, 2016, heretofore executed and delivered by the
Company and Brekford (the “Confidentiality
Agreement”) and such Party shall, and shall cause its
Subsidiaries and each of its and their respective officers,
directors, employees, financial advisors and agents
(“Party
Representatives”), to comply with the provisions of
the Confidentiality Agreement with respect to such information and
the provisions of the Confidentiality Agreement are hereby
incorporated herein by reference with the same effect as if fully
set forth herein; provided,
that, the Company, on one hand, and Brekford, on the other
hand, shall be permitted to disclose the contents of this Agreement
and the Mergers in appropriate filings with the SEC, upon
consultation with and agreement by Brekford, on the one hand, and
the Company, on the other hand.

Section
7.6. Public Announcements. Except as required
by applicable law or stock exchange requirements, the Company and
Brekford shall provide the other Party with a reasonable
opportunity to review and comment on all press releases and other
public statements with respect to the transactions contemplated
hereby.



 

41






 





Section
7.7. Indemnification; Directors’ and
Officers’ Insurance.

(a) For a period of six
(6) years after the Effective Time, Novume and the Company jointly
and severally shall indemnify the directors and officers of the
Company who hold such positions at any time during the period from
the date hereof through the Effective Time to the fullest extent to
which the Company is permitted to indemnify such officers and
directors under its Certificate of Incorporation and Bylaws, each
as amended and as currently in effect, and applicable
law.

(b) Prior to the
Effective Time, Brekford will purchase a “tail” on its
directors’ and officers’ liability insurance policy
(“Brekford Insurance
Policies”), which shall be at no less broad coverage
and limits than Brekford’s currently existing Brekford
Insurance Policies and which shall cover the period from the
Closing Date until such date as is six (6) years following the
Closing Date, provided that, nothing shall prevent Novume, from and
after the Closing Date, from purchasing, at its sole option and at
its expense, an additional limit on the “tail”
policy.

Section
7.8. Employee Benefit Plans.

(a) Except as otherwise
set forth in Section
2.8 and Section
2.9 hereof, in the case of the Company Benefit Plans listed
on Schedule
7.8(a)(i) hereto (“Company Stock Plans”) and
the Brekford Benefit Plans listed on Schedule 7.8(b)(i) hereto
(“Brekford Stock
Plans”), to the extent the employees’ interests
are based upon Company Common Stock or Brekford Common Stock, as
applicable, or the market prices thereof (but which interests do
not constitute Options), as applicable, each of the Company and
Brekford agrees that such interests shall, from and after the
Effective Time, be based on Novume Common Stock in accordance with
the Company Exchange Ratio (with respect to Company Stock Plans)
and the Brekford Exchange Ratio (with respect to Brekford Benefit
Plans).

(b) With respect to any
Company Stock Plans or Brekford Stock Plans maintained or
contributed to persons outside the United States for the benefit of
non-United States citizens or residents, the principles set forth
in this Section
7.8, and on Schedule 6.1 or Schedule 6.2, as applicable,
shall apply to the extent the application of such principles does
not violate applicable foreign law.

(c) Without limiting
the applicability of Sections 2.8 and 2.9 hereof, each of the Parties
shall take all actions as are necessary to ensure that the Company
and Brekford will not be at the Effective Time bound by any stock
options, warrants, stock appreciation rights (“SARs”), or other awards,
rights or agreements which would entitle any person, other than
Novume, to own any capital stock of the Surviving Corporations or
to receive any payment in respect thereof, and all Company Stock
Plans and Brekford Benefit Plans conferring any rights with respect
to Company Common Stock, Company Preferred Stock or other capital
stock of the Company, or Brekford Common Stock or other capital
stock of Brekford, as the case may be, shall be deemed hereby to be
amended to be in conformity with this Section 7.8.

Section
7.9. Management and Employment
Arrangements.



 

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(a) Robert A. Berman
shall, as of or prior to the Effective Time, have been appointed
the Chief Executive Officer of Novume, and an executive team of
Novume shall have been appointed, consisting of such individuals as
shall be designated by the Board of Directors of the
Company.

(b) Each of Scott
Rutherford and Rodney Hillman (together, the "Brekford Officers") shall, as
of or prior to the Effective Time, enter into separate five
(5)-year employment agreements (the "Employment Agreements") in the
form attached as Exhibit
A hereto, and proprietary rights agreements
(“Proprietary Rights
Agreements”) in the form attached as Exhibit B hereto, with
Brekford, pursuant to which they shall be engaged to serve as the
Chief Technology Officer and President/Chief Operating Officer,
respectively. None of the Brekford Officers shall have any right,
remedy or cause of action under this Section 7.9, nor shall they be
third party beneficiaries of this Section 7.9. In addition to the
forgoing, the Parties intend that key executives of the Company and
of Brekford, as shall be mutually agreed by the Parties, will enter
into employment agreements with Novume or one or more of its
subsidiaries.

Section
7.10. Stock Exchange Listing. The Company
shall use its best efforts to obtain, prior to the Effective Time,
or as soon as reasonably practicable thereafter, the approval for
listing on a national stock exchange of the shares of Novume Common
Stock into which the Shares will be converted pursuant to ARTICLE
II hereof and which will be issuable upon exercise of options
pursuant to Section
2.8 hereof; provided,
that, if such listing is not obtained within ninety (90)
days of the Effective Time, the Board of Directors of Novume will
use its best efforts to take further actions as appropriate to
achieve such listing as soon as is reasonably
practicable.

Section
7.11. Sale of Upfitting Business. The
obligations of the Company to consummate the transactions
contemplated by this Agreement are conditioned upon the prior or
concurrent closing of the sale by Brekford of not more than 81% of
the ownership of its Rugged Information Technology Solutions and
360° Vehicle Solution Upfitting Business (collectively, the
“Upfitting
Business”); provided, that, (a) Novume shall retain
not less than a 19% ownership interest in the Upfitting Business
and (b) Brekford will use all proceeds from such disposition to
repay in full any and all indebtedness of Brekford such that, as of
the Closing, Brekford shall have no indebtedness other than as
permitted by the Company.

Section
7.12. Post-Merger Novume Board of Directors.
At the Effective Time, the Novume Board shall consist of seven (7)
members, four (4) of whom shall be independent within the meaning
of the 1934 Act, and the national stock exchange to which the
Company has applied for the listing of Novume Common Stock as
described in Section
7.10. Six (6) members of the Novume Board shall be
designated by the Company, and one (1) member of the Novume Board
shall be designated by Brekford, subject to the approval of
KeyStone. The members designated by the Company are James McCarthy,
who shall serve as Chairman, Robert A. Berman, Dr. Richard Nathan,
Glenn Goord, Paul DeBary and one additional independent director
who shall be designated by the Company prior to the Effective Time.
The member to be designated by Brekford shall be independent, as
provided herein, and shall be subject to the approval by the
Company; such member shall be identified by Brekford and approved
by the Company prior to the Effective Time. As of the date hereof,
Glenn Goord and Paul DeBary are independent as provided herein, and
shall so remain, as and at the Effective Time.



 

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Section
7.13. Registration Rights. Novume shall not be
required to amend or maintain the effectiveness of the Registration
Statement for the purpose of permitting resale of the shares of
Novume Common Stock received pursuant hereto by the persons who may
be deemed to be “affiliates” of the Company or Brekford
within the meaning of Rule 145 promulgated under the 1933 Act, as
amended.

Section
7.14. Affiliates. Each of the Company and
Brekford (i) has disclosed to the other all persons who are, or may
be, at the time this Agreement is executed its
“affiliates” for purposes of Rule 145 under the 1933
Act, and (ii) has delivered, or caused each person who is so
identified as an “affiliate” of it to deliver, to the
other as promptly as practicable but in no event later than the
Closing Date, a Company Affiliate Letter or a Brekford Affiliate
Letter, as the case may be. The Company and Brekford shall notify
each other from time to time of any other persons who then are, or
may be, such an “affiliate” and use all reasonable
efforts to cause each additional person who is identified as an
“affiliate” to execute a Company Affiliate Letter or a
Brekford Affiliate Letter, as the case may be.

Section
7.15. Blue Sky. The Company and Brekford will
use their best efforts to obtain prior to the Effective Time all
necessary blue sky permits and approvals required to permit the
distribution of the shares of Novume Common Stock to be issued in
accordance with the provisions of this Agreement.

Section
7.16. Compliance.

(a) In consummating the
Brekford Merger and the transactions contemplated hereby, Brekford
shall comply in all material respects with the provisions of the
Exchange Act and the 1933 Act, and shall comply, and/or cause its
subsidiaries to comply or to be in compliance, in all material
respects, with all other applicable Legal
Requirements.

(b) In consummating the
Company Merger and the transactions contemplated hereby, the
Company shall comply in all material respects with the provisions
of the Exchange Act and the 1933 Act, and shall comply, and/or
cause its subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Legal
Requirements.

Section
7.17. Key Stockholder Agreements. Each of C.B.
Brechin, Scott Rutherford and Robert West (the “Brekford Key
Stockholders”) shall have entered into a Key
Stockholder Agreement with Brekford, and each of Robert A. Berman,
James McCarthy and Dr. Richard Nathan (the “Company Key Stockholders”
and collectively with the Brekford Key Stockholders, the
“Key
Stockholders”), shall have entered into a Key
Stockholder Agreement with the Company, pursuant to which the Key
Stockholder shall agree to vote all of their voting securities in
the Company or Brekford, as applicable, in favor of this Agreement
and the Mergers.

Section
7.18. Continuation of Historic Business. After
the Effective Time Brekford, as the Surviving Corporation of the
Brekford Merger, will continue Brekford’s historic business
or use a significant portion of Brekford’s historic assets in
a business.  Company Merger Sub, as the Surviving Corporation
of the Company Merger, will continue the Company’s historic
business or use a significant portion of the Company’s
historic assets in a business.



 

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ARTICLE
VIII

CONDITIONS TO
MERGERS

Section
8.1. Conditions to the Obligations of Each Party to
Effect the Mergers. The respective obligations of each Party
to effect the Mergers shall be subject to the following
conditions:

(a) Stockholder Approval. The Mergers, this
Agreement and all transactions contemplated hereby shall have been
approved and adopted by the requisite vote of the stockholders of
each of the Company and Brekford, in accordance with Section 7.2(a), and each of the
Merger Subsidiaries in accordance with Delaware Law, applicable
United States state and federal securities laws, and the
Certificate of Incorporation and Bylaws, each as amended and as
currently in effect, of each such entity;

(b) Legality. No federal, state or foreign
statute, rule, regulation, executive order, decree or injunction
shall have been enacted, entered, promulgated or enforced by any
court or governmental authority which is in effect and has the
effect of making the Mergers illegal or otherwise prohibiting the
consummation of the Mergers;

(c) Required Consents. All authorizations,
licenses, Permits, consents, orders or approvals of, or
declarations, filings with or notices to, any governmental body,
agency or official, or any non-governmental third party (all of the
foregoing, “Required
Consents”), which are necessary for the consummation
of the transactions contemplated hereby, other than immaterial
Required Consents the failure to obtain which would have no
material adverse effect on the consummation of the transactions
contemplated hereby and no Material Adverse Effect on Novume or
either of the Surviving Corporations, shall have been, as
applicable, made, filed, shall have occurred or shall have been
obtained and all such Required Consents shall be in full force and
effect, provided, however, that a Required Consent shall not be
deemed to have been obtained if in connection with the grant
thereof there shall have been an imposition by any state or federal
governmental body, agency or official of any condition,
requirement, restriction or change of regulation, or any other
action directly or indirectly related to such grant taken by such
governmental body, which would reasonably be expected to either (i)
have a Material Adverse Effect on any of Novume or either of the
Surviving Corporations, or (ii) prevent the Parties from realizing
in all material respects the economic benefits of the transactions
contemplated by this Agreement that such Parties currently
anticipate receiving therefrom;

(d) Registration Statement Effective. The
Registration Statement shall have become effective, no stop order
suspending the effectiveness of the Registration Statement shall
then be in effect, and no proceedings for that purpose shall then
be threatened by the SEC or shall have been initiated by the SEC
and not concluded or withdrawn;

(e) Blue Sky. All state securities or blue
sky permits or approvals required to carry out the transactions
contemplated hereby shall have been received; and

(f) Key Stockholder Agreements. Each of the
Key Stockholders shall have entered into a Key Stockholder
Agreement with the Company or Brekford, as applicable, and Brekford
shall have received copies of each such agreement with the Company
Key Stockholders duly executed by Brekford and the applicable Key
Stockholder, and the Company shall have received copies of each
such agreement with the Brekford Key Stockholders duly executed by
Brekford and the applicable Key Stockholder.



 

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Section
8.2. Additional Conditions to Obligations of the
Company. The obligations of the Company to effect the
Mergers are also subject to the fulfillment of the following
conditions:

(a) Representations and Warranties. The
representations and warranties of Brekford contained in this
Agreement shall be true and correct on the date hereof and (except
to the extent such representations and warranties speak as of an
earlier date) shall also be true and correct on and as of the
Closing Date, except for changes expressly contemplated by this
Agreement, with the same force and effect as if made on and as of
the Closing Date;

(b) Agreements, Conditions and Covenants.
Brekford shall have performed or complied in all material respects
with all agreements, conditions and covenants required by this
Agreement to be performed or complied with by Brekford on or before
the Effective Time;

(c) Certificates.

(i) The Company shall
have received a certificate of an executive officer of Brekford to
the effect set forth in paragraphs (a) and (b) above;
and

(ii)           The
Company shall have received a certificate of the Secretary of
Brekford with respect to certain corporate matters, including a
true, correct and complete copy of Brekford’s certificate of
incorporation, as currently in effect, a true, correct and complete
copy of Brekford’s bylaws, as currently in effect,
certificate(s) as to Brekford’s formation and good standing
in its jurisdiction of formation and each other jurisdiction in
which it is qualified to do business, and attaching thereto a true,
correct and complete copy of resolutions and consents, as
applicable, of the stockholder(s) and board of Brekford
authorizing, in each case, the execution, delivery and performance
of this Agreement, the filing and distribution of the Information
Statement, and the consummation of the transactions contemplated
hereby.

(d) Opinions.

(i) The Company shall
have received an opinion of Crowell & Moring LLP, counsel to
the Company, dated as of the Closing Date, in form and substance
reasonably satisfactory to the Company, substantially to the effect
that, on the basis of the facts, representations and assumptions
set forth in such opinion: (A) no gain or loss will be recognized
for federal income tax purposes by Novume, the Company or Company
Merger Sub as a result of the formation of Novume and Company
Merger Sub and the Merger of the Company with and into the Company
Merger Sub; and (B) no gain or loss will be recognized for federal
income tax purposes by the stockholders of the Company upon their
exchange of Company Common Stock or Company Preferred Stock, as
applicable, solely for Novume Common Stock or Novume Preferred
Stock, as applicable, pursuant to such Merger. In rendering such
opinion, Crowell & Moring LLP may require and rely upon
representations and covenants including those contained in
certificates of officers of Novume, the Company, Brekford and
others, as may be requested by Crowell & Moring LLP and shall
be provided by Novume, the Company, Brekford; and

(ii) To the extent
required by the SEC in connection with the filing of the
Registration Statement and the Information Statement, Brekford
shall have received the opinion described in Section 8.3(d)(i) hereof, in
form and substance reasonably satisfactory to the
Company.



 

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(e) Affiliate Letters. The Company shall
have received the Brekford Affiliate Letters required by
Section 7.14, duly
executed by each “affiliate” of Brekford;

(f) No Material Adverse Change. Since
September 30, 2016, there shall not have occurred any event that
has had or could reasonably be expected to have a Material Adverse
Effect on Brekford or Novume;

(g) Consents Under Brekford Agreements.
Brekford shall have obtained the consents listed on Schedule 8.2(g) hereto, as well
as the consent or approval of each other person whose consent or
approval shall be required under any agreement or instrument in
order to permit the consummation of the transactions contemplated
hereby except those which the failure to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on
Novume or either of the Surviving Corporations; and

(h) Employment Agreements; Proprietary Rights
Agreements. The Employment Agreements and Proprietary Rights
Agreements shall be in full force and effect.

(i) Sale of Upfitting Business. The sale of
the Upfitting Business as described, and on the terms and
conditions set forth, in Section 7.11 shall have been
consummated in accordance with the requirements of Delaware Law and
Brekford’s Certificate of Incorporation and Bylaws, each as
amended and as currently in effect.

Section
8.3. Additional Conditions to Obligations of
Brekford. The obligations of Brekford to effect the Mergers
are also subject to the fulfillment of the following
conditions:

(a) Representations and Warranties. The
representations and warranties of the Company contained in this
Agreement shall be true and correct on the date hereof and (except
to the extent such representations and warranties speak as of an
earlier date) shall also be true and correct on and as of the
Closing Date, except for changes expressly contemplated by this
Agreement, with the same force and effect as if made on and as of
the Closing Date;

(b) Agreements, Conditions and Covenants.
The Company shall have performed or complied in all material
respects with all agreements, conditions and covenants required by
this Agreement to be performed or complied with by the Company on
or before the Effective Time;

(c) Certificates.

(i) Brekford shall have
received a certificate of an executive officer of the Company to
the effect set forth in paragraphs (a) and (b) above;
and

(ii) Brekford shall have
received a certificate of the Secretary of the Company with respect
to certain corporate matters, including a true, correct and
complete copy of the Company’s certificate of incorporation,
as currently in effect, a true, correct and complete copy of the
Company’s bylaws, as currently in effect, certificate(s) as
to the Company’s formation and good standing in its
jurisdiction of formation and each other jurisdiction in which it
is qualified to do business, and attaching thereto a true, correct
and complete copy of resolutions and consents, as applicable, of
the stockholder(s) and board of the Company authorizing, in each
case, the execution, delivery and performance of this Agreement,
the filing and distribution of the Information Statement, and the
consummation of the transactions contemplated hereby.



 

47






 





(d) Tax Opinion.

(i) To the extent
required by the SEC in connection with the filing of the
Registration Statement and the Information Statement, Brekford
shall have received an opinion of counsel, such counsel to be
determined, dated as of the Closing Date, in form and substance
reasonably satisfactory to Brekford, substantially to the effect
that, on the basis of the facts, representations and assumptions
set forth in such opinion: (A) no gain or loss will be recognized
for federal income tax purposes by Novume, Brekford or Brekford
Merger Sub as a result of the formation of Novume and Brekford
Merger Sub and the Merger of Brekford Merger Sub with and into
Brekford; and (B) no gain or loss will be recognized for federal
income tax purposes by the stockholders of Brekford upon their
exchange of Brekford Common Stock for the Brekford Merger
Consideration pursuant to such Merger; and

(ii) the Company shall
have received the opinion described in Section 8.2(d)(i) hereof, in
form and substance reasonably satisfactory to
Brekford;

(e) Affiliate Letters. Brekford shall have
received the Company Affiliate Letters required by Section 7.14 hereof, duly
executed by each “affiliate” of the
Company;

(f) No Material Adverse Change. Since
September 30, 2016, there shall not have occurred any event that
has had or could reasonably be expected to have a Material Adverse
Effect on the Company or Novume; and

(g) Consents Under the Company Agreements.
The Company shall have obtained the consent or approval of each
person whose consent or approval shall be required under any
agreement or instrument in order to permit the consummation of the
transactions contemplated hereby except those which the failure to
obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Novume or either of the Surviving
Corporations.

ARTICLE
IX


TERMINATION,
AMENDMENT AND WAIVER

Section
9.1. Termination. This Agreement may be
terminated at any time before the Effective Time in each case as
authorized by the respective Board of Directors of the Company or
Brekford:

(a) By mutual written
consent of each of the Company and Brekford;



 

48






 





(b) By either the
Company or Brekford if the Mergers shall not have been consummated
on or before June 1, 2017 (the “Termination Date”);
provided, however, that the right to terminate this Agreement under
this Section 9.1(b)
shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before the
Termination Date; and provided, further, that if on the Termination
Date the conditions to the Closing set forth in Section 8.1(d) shall not have
been fulfilled, but all other conditions to the Closing shall be
fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be extended to a date mutually agreed upon
by the parties hereto;

(c) By either the
Company or Brekford if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other
action (which order, decree or ruling the Parties shall use their
commercially reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or
other action shall have become final and
nonappealable;

(d) By either the
Company or Brekford if the other shall have breached, or failed to
comply with, in any material respect any of its obligations under
this Agreement or any representation or warranty made by such other
Party shall have been incorrect in any material respect when made
or shall have since ceased to be true and correct in any material
respect, and such breach, failure or misrepresentation is not cured
within thirty (30) days after notice thereof and such breaches,
failures or misrepresentations, individually or in the aggregate
and without regard to materiality qualifiers contained therein,
results or would reasonably be expected to result in a Material
Adverse Effect on Novume, the Company or Brekford;

(e) By either the
Company or Brekford upon the occurrence of a Material Adverse
Effect on the other or on Novume or an event which could reasonably
be expected to result in a Material Adverse Effect on the other or
on Novume;

(f) By either the
Company or Brekford if the Board of Directors of the other or any
committee of the Board of Directors of the other (i) shall withdraw
or modify in any adverse manner its approval or recommendation of
this Agreement, the Mergers or any other transaction contemplated
hereby, (ii) shall fail to reaffirm such approval or recommendation
upon such Party’s request, (iii) approve or recommend any
acquisition of the other or a material portion of its assets or any
tender offer for shares of its capital stock, in each case, other
than by a Party or an affiliate thereof, or (iv) shall resolve to
take any of the actions specified in clause (i) above;
or

(g) By either the
Company or Brekford if the Company Stockholders’ Approval or
the Brekford Stockholders’ Approval, as applicable, shall
fail to have been obtained in accordance with Section 7.2(a); provided, however, that no termination
by Brekford shall be effective pursuant to Sections 9.1(f) or (g) under circumstances in
which a Termination Fee is payable by Brekford under Section 9.2(b) unless
concurrently with such termination, such Termination Fee is paid in
full by Brekford in accordance with the provisions of Section 9.2(b).

Section
9.2. Effect of Termination.

(a) In the event of
termination of this Agreement as provided in Section 9.1 hereof, and subject
to the provisions of Section 10.1 hereof, this
Agreement shall forthwith become void and there shall be no
liability on the part of any of the Parties, except (i) as set
forth in this Section
9.2 and in Sections
4.10, 4.16, 5.9, 5.12 and 10.3 hereof, and (ii) nothing
herein shall relieve any Party from liability for any willful
breach hereof.



 

49






 





(b) If (i) this
Agreement (A) is terminated by the Company pursuant to Section 9.1(f) hereof, or the
Company or Brekford pursuant to Section 9.1(g) hereof because
of the failure to obtain the Brekford Stockholders’ Approval,
or (B) is terminated as a result of Brekford’s material
breach of Section
7.2 hereof which is not cured within thirty (30) days after
notice thereof to Brekford, and (ii) at the time of such
termination there shall have been an Acquisition Proposal involving
Brekford or any of its subsidiaries (whether or not such offer
shall have been rejected or shall have been withdrawn prior to the
time of such termination), Brekford shall pay to the Company a
termination fee of $250,000 (the “Termination Fee”). The
Termination Fee payable under this Section 9.2(b) shall be payable
in cash at the date of termination.

(c) Brekford agrees
that the agreements contained in Section 9.2(b) above are an
integral part of the transactions contemplated by this Agreement
and constitute liquidated damages and not a penalty. If Brekford
fails to promptly pay to the Company any fee due under such
Section 9.2(b),
Brekford shall pay the costs and expenses (including reasonable
legal fees and expenses) in connection with any action, including
the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at
the publicly announced prime rate as
reported by The Wall Street Journal's bank
survey

from the date such
fee was required to be paid.

Section
9.3. Amendment. This Agreement may be amended
by the Parties pursuant to a writing adopted by action taken by all
of the Parties at any time before the Effective Time; provided,
however, that, after approval of the Mergers by the stockholders of
the Company or Brekford, whichever shall occur first, no amendment
may be made which would (a) alter or change the amount or kinds of
consideration to be received by the holders of Shares upon
consummation of the Mergers, (b) alter or change any term of the
Certificate of Incorporation of either of the Surviving
Corporations or Novume, or (c) alter or change any of the terms and
conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of securities
of the Company or Brekford. This Agreement may not be amended
except by an instrument in writing signed by the
Parties.

Section
9.4. Waiver. At any time before the Effective
Time, any Party may (a) extend the time for the performance of any
of the obligations or other acts of the other Parties, (b) waive
any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a Party to any such extension
or waiver shall be valid only as against such Party and only if set
forth in an instrument in writing signed by such
Party.

ARTICLE
X

GENERAL
PROVISIONS

Section
10.1. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements
in this Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 9.1 hereof, as the case
may be, except that (a) the agreements set forth in ARTICLE I and
Sections 2.4, 2.5, 2.6,
2.7, 2.8, 7.7, 7.8 and 7.11 hereof and this
Section 10.1 shall
survive the Effective Time indefinitely, (b) the agreements and
representations set forth in Sections 4.10, 4.16, 5.9, 5.12,
7.5(b), 9.2 and 10.3 hereof and this
Section 10.1 shall
survive termination indefinitely and (c) nothing contained herein
shall limit any covenant or agreement of the Parties which by its
terms contemplates performance after the Effective
Time.



 

50






 





Section
10.2. Notices. All notices and other
communications given or made pursuant hereto shall be in writing
and shall be deemed to have been duly given or made as of the date
of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt
requested), sent by overnight courier or sent by telecopy, to the
Parties at the following addresses or telecopy numbers (or at such
other address or telecopy number for a Party as shall be specified
by like notice):

(a) if to the Company
or any Merger Subsidiary:

KeyStone Solutions,
Inc.

14420 Albemarle
Point Place, Suite 200

Chantilly,
VA 20151

Attn: Robert
Berman

Email :
rberman@keystonewins.com

with a copy
to:

Crowell &
Moring LLP

1001 Pennsylvania
Ave NW

Washington, D.C.
20004

Attention: Morris
DeFeo, Esq.

Email: mdefeo@crowell.com

Telephone.: (202)
624-2925

 

(b) if to
Brekford:

Brekford
Corp.

7020 Dorsey
Road

Hanover, Maryland
21076

Attn: Rodney
Hillman

Email: rhillman@brekford.com

with a copy
to:

Sichenzia Ross
Ference Kesner LLP

61
Broadway

New York, NY
10006

Attention: Thomas
A. Rose, Esq.

Email: trose@srfkllp.com

Telephone: (212)
930-9700

 



 

51






 





Section
10.3. Expenses. Except as otherwise provided
herein, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by
the Party incurring such costs and expenses, whether or not the
transactions contemplated by this Agreement are consummated, and
any actions taken by either party in furtherance thereof shall be
at such Party’s sole risk and expense.

Section
10.4. Certain Definitions. For purposes of
this Agreement, the following terms shall have the following
meanings:

(a) “1933
Act” means the U.S. Securities Act of 1933, as the same may
be amended from time to time, and “Exchange Act” means
the U.S. Securities Exchange Act of 1934, as the same may be
amended from time to time.

(b) “affiliate”
of a person means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.

(c) “Brekford
ERISA Affiliate” means any entity that would have ever been
considered a single employer with Brekford under Section 4001(b) of
ERISA or part of the same “controlled group” as
Brekford for purposes of Section 302(d)(3) of ERISA.

(d) “Company
ERISA Affiliate” means any entity that would have ever been
considered a single employer with the Company under Section 4001(b)
of ERISA or part of the same “controlled group” as the
Company for purposes of Section 302(d)(3) of ERISA.

(e) “control”
(including the terms “controlled by” and “under
common control with”) means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement
or otherwise.

(f) “knowledge”
of any Party shall mean the actual knowledge of the executive
officers of such Party.

(g) “Material
Adverse Effect” means any change in or effect on the business
of the referenced corporation or any of its Subsidiaries that is or
will be materially adverse to the business, operations (including
the income statement), properties (including intangible
properties), condition (financial or otherwise), assets,
liabilities or regulatory status of such referenced corporation and
its Subsidiaries taken as a whole, but shall not include the
effects of changes that are generally applicable in (A) the United
States economy or (B) the United States securities markets if, in
any of (A) or (B), the effect on the Company or Brekford (as the
case may be) and its respective Subsidiaries, taken as a whole, is
not disproportionate relative to the effect on the other and its
Subsidiaries, taken as a whole.

(h) “person”
means an individual, corporation, partnership, association, trust,
unincorporated organization, entity or group (as defined in the
Exchange Act).

(i) “Subsidiary”
means any corporation or other legal entity of which the Company or
Brekford, as the case may be (either alone or through or together
with any other Subsidiary or Subsidiaries), owns, directly or
indirectly, more than 50% of the stock or other equity interests
the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.



 

52






 





Section
10.5. Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this
Agreement.

Section
10.6. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any Party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties
as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum
extent possible.

Section
10.7. Entire Agreement; No Third-Party
Beneficiaries. This Agreement constitutes the entire
agreement and, except as expressly set forth herein, supersedes any
and all other prior agreements and undertakings, both written and
oral, among the Parties, or any of them, with respect to the
subject matter hereof and, except for Section 7.7 (Indemnification; Directors’ and
Officers’ Insurance), is not intended to confer upon
any person other than the Company, Brekford, Novume, Company Merger
Sub and Brekford Merger Sub and, after the Effective Time, their
respective stockholders, any rights or remedies
hereunder.

Section
10.8. Assignment. This Agreement shall not be
assigned by operation of law or otherwise.

Section
10.9. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Delaware applicable to contracts executed in and to be
performed entirely within that State, without regard to the
conflicts of laws provisions thereof.

Section
10.10. Counterparts. This Agreement may be
executed in one or more counterparts, and by the different Parties
in separate counterparts, each of which when executed shall be
deemed to be an original, but all of which shall constitute one and
the same agreement.


[Signature Page to Follow]



 

53






 





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


	
 

	
KeyStone
Solutions, Inc.,

a Delaware
corporation

 


/s/ Robert A
Berman                 



 

Name:
Robert A. Berman      
  

 

Title:

Chief Executive Officer  

 

 

 

Brekford
Corp.,

a Delaware corporation


/s/ Rodney
Hillman                   



 

 

 


Name: Rodney Hillman         
  


 


Title: President & COO           
 


 


 

Novume
Solutions, Inc.,

a Delaware
corporation

 


/s/ Robert A.
Berman                 



Name:

Robert A. Berman        
 

 

Title:

Chief Executive Officer   

 

KeyStone
Merger Sub, Inc.,

a Delaware
corporation

 


/s/ Robert A.
Berman                 

 

Name:

Robert A. Berman        
 

 

Title:

President                
          

 

Brekford
Merger Sub, Inc.,

a Delaware
corporation

 


/s/ Robert A.
Berman                 

 

Name:

Robert A. Berman        
 

 

Title:
President  
                
       






 

 

 




[Signature page to the Agreement and Plan of Merger]















APPENDIX I

Certificate
of Incorporation of Novume