Document:

LODE-2015.6.30-EX10.1

Varilease Finance, Inc.
6340 South 3000 East, Suite 400
Salt Lake City, UT 84121
www.vfi.net
tel   801.733.8100
MASTER LEASE AGREEMENT

MASTER LEASE AGREEMENT (“Master Agreement”) made as of May 12, 2015, between VARILEASE FINANCE, INC., a Michigan corporation, having its chief executive offices at 6340 South 3000 East, Suite 400, Salt Lake City, UT 84121 (“Lessor”) and COMSTOCK MINING INC., a Nevada corporation, having its chief executive offices at 1200 American Flat Road, Virginia City, NV 89440 (“Lessee”).  

1.    LEASE
On the terms and conditions of this Master Agreement, Lessor shall lease to Lessee, and Lessee shall hire from Lessor, the items of personal property described in the Schedule(s) (collectively the "Equipment", and individually an "Item") which shall incorporate this Master Agreement. Subject to Section 16(a)(viii), each Schedule shall constitute a separate and independent lease and contractual obligation of Lessee.  The term "Lease" shall refer to an individual Schedule that incorporates this Master Agreement.  In the event of a conflict between this Master Agreement and any Schedule, the language of the Schedule shall prevail.  The Lease shall be effective upon execution by Lessor at its offices.

2.    TERM
(a) The term of the Lease may be comprised of a Progress Funding Term, Installation Term and Base Term.  The Progress Funding Term for each Item, if applicable, shall commence on the date the Authorization for Progress Payment (“Authorization”) is executed and shall end on the date specified on the Installation Certificate (the “Installation Date”).  The Installation Term shall commence on the Installation Date, and terminate on the first day of the calendar quarter following the Installation Date (the "Base Term Commencement Date").  The Base Term of the Lease shall begin on the Base Term Commencement Date, and shall, subject to Section 19(b), end on the last day of the last month of the Base Term.  The date of installation for any Item shall be the earlier of either (i) the Installation Date, or (ii) if Lessee does not, for any reason, sign an Installation Certificate the date shall be the date Lessee received the Equipment.

(b) In the event Lessee requests, for its benefit, that Lessor advance payments to supplier(s) or manufacturer(s) of the Equipment (collectively “Supplier(s)”) during the period prior to Lessee’s delivery of the Installation Certificate and make progress payments to such Supplier(s) or otherwise reimburse Lessee for deposits, if any, made to such Supplier(s) (all such Lessor payments and reimbursements collectively referred to as “Progress Payments”), Lessor may, in its sole discretion, accommodate such requests by Lessee, and make such Progress Payments pursuant to the terms provided for in this Section 2(b).  Lessee shall pay to Lessor  a daily pro rata rental fee (“Rental Fee”) from the date of execution of the Authorization for each Item of Equipment  through the Installation Date calculated by multiplying the Base Lease Rate Factor specified in the applicable Schedule times the amount of such Progress Payment divided by 30.  This Rental Fee will be billed monthly to Lessee.  If all of the Equipment to be included in the applicable Schedule is not accepted by Lessee within 90 days of the date of Lessor’s execution of the applicable  Schedule (the “Funding Cut-Off Date”), Lessor may, at its sole option, pursue any one of the following options:  (i) commence the term of any  Schedule (using the Funding Cut-Off Date as the Installation Date) based on the portion of the Equipment that has been delivered to Lessee and paid for by Lessor as of the Funding Cut-Off Date; (ii) extend the Progress Funding Term and establish a new Funding Cut-Off Date; or (iii) demand that the Lessee pay to Lessor a total amount equal to all Progress Payments paid to Supplier(s) on behalf of Lessee, plus all pro rata rentals, taxes, late fees and other payments 
which are due and owing under this Master Agreement.  Should such demand be made by Lessor, Lessee hereby unconditionally agrees to reimburse said amounts to Lessor in full within three (3) business days of said demand, and upon receipt of said payment in full, Lessor shall release Lessee from further payment obligations under the applicable Schedule.  Lessor hereby reserves the right to terminate the Progress Funding Term at any time if Lessor determines, at Lessor’s sole discretion, that there has been an adverse change in Lessee’s financial condition, at which time Lessor may elect either (i), (ii), or (iii) above.   Notwithstanding anything to the contrary in the Lease, for purposes of this Section 2(b)(iii), in the event such demand for reimbursement is made by Lessor and Lessee fails to reimburse Lessor in accordance with the terms herein, such failure shall automatically constitute an Event of Default, Lessee shall waive any right to cure or remedy the default as otherwise provided in Section 16(a), and Lessor shall be entitled to pursue all of its available remedies under the Lease.  Additionally, during the term of the Lease, in any jurisdiction where the Uniform Commercial Code is in effect, Lessee grants to Lessor a security interest in any and all goods, chattels, fixtures, equipment, assets, accounts receivable, contract rights, general intangibles and property of every kind wherever located in which Lessee has any interest and proceeds thereof, and agrees that any security 

interest created by this Master Agreement secures any and all obligations of Lessee and those of any affiliate of Lessee to Lessor whether now in existence and/or to come into existence.

3.    RENTAL
(a) The rental amount payable to Lessor by Lessee for the Equipment will be as set forth on the Schedule ("Base Monthly Rental").  As rent for Equipment, Lessee shall pay Lessor in immediately available funds and in advance on the Base Term Commencement Date and on the first day of each calendar month during the Base Term of the Lease the Base Monthly Rental, and upon receipt of an invoice, an amount equal to 1/30th of the Base Monthly Rental for each Item times the number of days which will elapse from the date such Item was installed to the Base Term Commencement Date of the Lease.  Each remittance from Lessee to Lessor shall contain information as to the Lease for which payment is made.  In the event of a partial installation of less than all the Equipment prior to the Base Term Commencement Date, Lessee shall pay pro rata rental for such Items of Equipment upon receipt of invoice for same.

(b) For any payment of rent or other amount due under a Lease which is past due, interest shall accrue at the rate of 2% per month, from the date such payment was due until payment is received by Lessor, or if such rate shall exceed the maximum rate of interest allowed by law, then at such maximum rate.  SUBJECT TO THE PROVISIONS OF SECTION 19(b), THIS IS A NON-CANCELABLE, NON-TERMINABLE LEASE OF EQUIPMENT FOR THE ENTIRE LEASE TERM AS PROVIDED IN EACH  SCHEDULE HERETO.

4.    TAXES
Lessee shall immediately reimburse Lessor for (or pay directly, but only if instructed by Lessor) all taxes, fees, and assessments that may be imposed by any taxing authority on the Equipment, on its purchase, ownership, delivery, possession, operation, rental, return to Lessor or its purchase by Lessee (collectively, Taxes); provided, however, that Lessee shall not be liable for any such Taxes (whether imposed by the United States of America or by any other domestic or foreign taxing authority) imposed on or measured by Lessor's net income or tax preference items.  Lessee's obligation includes, but is not limited to, the obligation to pay all license and registration fees, recycling fees, and all sales, use, personal property, recordation and other taxes and governmental charges, together with any penalties, fines and interest thereon, that may be imposed during the Base Term and any extension or renewal term of the applicable Schedule, including reasonable administrative costs incurred by Lessor in connection with the set-up, revisions, reporting, filing and payment of any taxes due hereunder or in connection with the Equipment.  Lessor shall report and file any and all Taxes and shall invoice Lessee for same.  Lessee shall promptly reimburse Lessor for all Taxes and hold Lessor harmless with respect to any non-payment thereof.

5.    NET LEASE
The Lease is a net lease, it being the intention of the parties that all costs, expenses and liabilities associated with the Equipment or its lease shall be borne by Lessee.  Lessee's agreement to pay all obligations under the Lease, including but not limited to Base Monthly Rental, is absolute and unconditional and such agreement is for the benefit of Lessor and its Assignee(s).  Lessee's obligations shall not be subject to any abatement, deferment, reduction, setoff, defense, counterclaim or recoupment for any reason whatsoever.  Except as may be otherwise expressly provided in the Lease, it shall not terminate, nor shall the obligations of Lessee be affected by reason of any defect in or damage to, or any loss or destruction of, or obsolescence of, the Equipment or any Item from any cause whatsoever, or the interference with its use by any private person, corporation or governmental authority, or as a result of any war, riot, insurrection or an Act of God.  It is the express intention of Lessor and Lessee that all rent and other sums payable by Lessee under the Lease shall be, and continue to be, payable in all events throughout the term of the Lease.  The Lease shall be binding upon the Lessee, its successors and permitted assigns and shall inure to the benefit of Lessor and its Assignee(s).

6.    INSTALLATION, RETURN AND USE OF EQUIPMENT
(a)  Upon delivery of the Equipment to Lessee, Lessee shall pay all transportation, installation, rigging, packing and insurance charges with respect to the Equipment.  In the case of a sale and leaseback transaction, Lessee shall, upon the request of Lessor, certify the date the Equipment was first put into use.  Lessee will provide the required electric current and a suitable place of installation for the Equipment with all appropriate facilities as specified by the manufacturer.  No cards, tapes, disks, data cells or other input/output and storage media may be used by Lessee to operate any Item unless it meets the specifications of the manufacturer.  Lessee agrees that it will not install, or permit the installation of, the Equipment without Lessor's consent.

(b)  Provided that no Event of Default shall have occurred, Lessee shall, at all times during the term of the Lease, be entitled to unlimited use of the Equipment.  Lessee will at all times keep the Equipment in its sole possession and control.  The Equipment shall not be moved from the location stated in the Schedule without the prior written consent of Lessor and in no event shall the Equipment be moved outside the continental, contiguous United States.    Lessee will comply with all laws, regulations, and ordinances, and all applicable requirements of the manufacturer of the Equipment that apply to the physical possession, use, operation, condition, and maintenance of the Equipment.  Lessee agrees to obtain all permits and licenses necessary for the operation of the Equipment.
(c)  Lessee shall not without the prior written consent of Lessor, affix or install any accessory, feature, equipment or device to the Equipment or make any improvement, upgrade, modification, alteration or addition to the Equipment (any such accessory, feature, equipment, device or improvement, upgrade, modification, alteration or addition affixed or installed is an "Improvement").  Title to all Improvements shall, without further act, upon the making, affixing or installation of such Improvement, vest solely in Lessor, except such Improvements as may be readily removed without causing material damage to the Equipment and without in any way affecting or impairing the originally intended function, value or use of the Equipment.  Removal of the Improvement shall be performed by the manufacturer, at the sole expense of Lessee.  Provided the Equipment is returned to Lessor in the condition required by the Lease, including, but not limited to coverage under the manufacturer's standard maintenance contract, title to the Improvement shall vest in the Lessee upon removal.  Any Improvement not removed from the Equipment prior to return shall at Lessor's option remain the property of Lessor and shall be certified for maintenance by the manufacturer, at Lessee's expense. 

Lessee shall notify Lessor in writing no less than thirty (30) days prior to the desired installation date of the type of Improvement Lessee desires to obtain.  Lessor may, at any time within ten (10) days after receipt of the notice offer to provide the Improvement to Lessee upon terms and conditions 

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to be mutually agreed upon.  Lessee shall notify Lessor of any third party offers and shall lease the Improvement from Lessor if Lessor meets the terms of the third party offer. 

If Lessee leases an Improvement from Lessor, such lease shall be under a separate Schedule, the Improvement shall not be placed in service by Lessee prior to acquisition by Lessor, and Lessee shall execute and deliver any document necessary to vest title to such Improvement in Lessor.

During the term of the Lease and any renewal term, Lessee shall cause all Improvements to be maintained, at Lessee's expense, in accordance with the requirements of Section 7.  Unless otherwise agreed to by Lessor, upon the expiration or earlier termination of the term of the Lease, any Improvement shall be de-installed and removed from the Equipment by the manufacturer, at Lessee's expense.  If the Improvement is removed, the Equipment shall be restored to its unmodified condition and shall be certified for maintenance by the manufacturer, at Lessee's expense.

In the event an Improvement is provided to Lessee by a party other than Lessor, Lessee shall cause such party to execute and deliver to Lessor such documents as shall be required by Lessor to protect the interests of Lessor and any Assignee in the Equipment, this Master Agreement and any Schedule.

(d) Subject to Section 19(b), Lessee shall, at the termination of the Lease, at its expense, cause the Equipment to be decontaminated and remove all proprietary data from any and all memory storage devices from the Equipment, by the manufacturer or other entity approved by Lessor, in accordance with manufacturer specifications and all applicable laws, rules and regulations, if any (and provide to Lessor documentation verifying such decontamination and proprietary data removal), de-install, pack and return the Equipment to Lessor at such location within the continental United States as shall be designated by Lessor in the same operating order, repair, condition and appearance as of the date the Equipment was installed, reasonable wear and tear excepted, with all current engineering changes prescribed by the manufacturer of the Equipment or a maintenance contractor approved by Lessor (the "Maintenance Organization") incorporated in the Equipment.  Until the return of the Equipment to Lessor, Lessee shall be obligated to pay the Base Monthly Rental and all other sums due under the Lease.  Upon redelivery to Lessor, Lessee shall arrange and pay for such repairs (if any) as are necessary for the manufacturer of the Equipment to accept the Equipment under a maintenance contract at its then standard rates.  

(e) Lessee shall comply in all material respects with all present and future federal, state, regional and municipal laws, statutes, ordinances, regulations, rules, judicial and similar requirements of all federal, state, regional and municipal governmental agencies, bodies or officials or other governmental entities with legal authority pertaining to the protection of human or wildlife health and safety or the environment, including, without limitation, any such laws, statutes, ordinances, regulations, rules, judicial and administrative orders and decrees, permits, licenses, approvals, authorizations and similar requirements regulating or relating  to Hazardous Materials (defined below) or to the generation, use, storage, release, presence, disposal, transport, or handling of any other substance, oil, oil byproducts, gas element, or material which has the potential to pollute, contaminate or harm any land, subsurface area, water source or watercourse, air or other natural resource, hereinafter referred to as “Environmental Laws”.

“Hazardous Materials” is defined as any hazardous or toxic substance, material or waste that is or becomes regulated under any applicable local, state or federal law, including, but not limited to, those substances, materials, and waste listed in the United States Department of Transportation Hazardous Materials Table (49 CFR 172.101) or defined by the Environmental Protection Agency (“EPA”) as “any material that poses a threat to human health and/or the environment.   Typical Hazardous substances are toxic, corrosive, ignitable, explosive, or chemically reactive”.

7.    MAINTENANCE AND REPAIRS
Lessee shall, during the term of the Lease, maintain in full force and effect a contract with the manufacturer of the Equipment or Maintenance Organization covering at least prime shift maintenance of the Equipment.  Lessee upon request shall furnish Lessor with a copy of such maintenance contract as amended or supplemented.  During the term of the Lease, Lessee shall, at its expense, keep the Equipment in good working order, repair, appearance and condition and make all necessary adjustments, repairs and replacements, all of which shall become the property of Lessor.  Lessee shall not use or permit the use of the Equipment for any purpose for which, the Equipment is not designed or intended.

8.    OWNERSHIP, LIENS AND INSPECTIONS
(a) Lessee shall keep the Equipment free from any marking or labeling which might be interpreted as a claim of ownership by Lessee or any party other than Lessor and its Assignee(s), and shall affix and maintain tags, decals or plates furnished by Lessor on the Equipment indicating ownership and title to the Equipment in Lessor or its Assignee(s).  Upon reasonable notice to Lessee, Lessor or its agents shall have access to the Equipment and Lessee's books and records with respect to the Lease and the Equipment at reasonable times for the purpose of inspection and for any other purposes contemplated by the Lease, subject to the reasonable security requirements of Lessee.

(b) Lessee shall execute and deliver such instruments, including Uniform Commercial Code financing statements, as are required to be filed to evidence the interest of Lessor and its Assignee(s) in the Equipment or the Lease.  Lessee has no interest in the Equipment except as expressly set forth in the Lease, and that interest is a lease-hold interest.  Lessor and Lessee agree, and Lessee represents for the benefit of Lessor and its Assignee(s) that the Lease is intended to be a "finance lease" and not a "lease intended as security " as those terms are used in the Uniform Commercial Code; and that the Lease is intended to be a "true lease" as the term is commonly used under the Internal Revenue Code of 1986, as amended.

(c) LESSEE SHALL KEEP THE LEASE, THE EQUIPMENT AND ANY IMPROVEMENTS FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES OF WHATSOEVER KIND (EXCEPT THOSE CREATED BY LESSOR) AND LESSEE SHALL NOT ASSIGN THE LEASE OR ANY OF ITS RIGHTS UNDER THE LEASE OR SUBLEASE ANY OF THE EQUIPMENT OR GRANT ANY RIGHTS TO THE EQUIPMENT 

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WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.  No permitted assignment or sublease shall relieve Lessee of any of its obligations under the Lease and Lessee agrees to pay all costs and expenses Lessor may incur in connection with such sublease or assignment.  Lessee grants to Lessor the right of first refusal on any sublease or other grant of Lessee's rights to the Equipment.

9.    DISCLAIMER OF WARRANTIES
(a) LESSOR LEASES THE EQUIPMENT "AS IS," AND BEING NEITHER THE MANUFACTURER OF THE EQUIPMENT NOR THE AGENT OF EITHER THE MANUFACTURER OR SELLER, LESSOR DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE CONDITION OR PERFORMANCE OF THE EQUIPMENT, ITS MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WITH RESPECT TO PATENT INFRINGEMENTS OR THE LIKE.  LESSOR SHALL HAVE NO LIABILITY TO LESSEE OR ANY OTHER PERSON FOR ANY CLAIM, LOSS OR DAMAGE OF ANY KIND OR NATURE WHATSOEVER, NOR SHALL THERE BE ANY ABATEMENT OF RENTAL FOR ANY REASON INCLUDING CLAIMS ARISING OUT OF OR IN CONNECTION WITH (i) THE DEFICIENCY OR INADEQUACY OF THE EQUIPMENT FOR ANY PURPOSE, WHETHER OR NOT KNOWN OR DISCLOSED TO LESSOR, (ii) ANY DEFICIENCY OR DEFECT IN THE EQUIPMENT, (iii) THE USE OR PERFORMANCE OF THE EQUIPMENT, OR (iv) ANY LOSS OF BUSINESS OR OTHER CONSEQUENTIAL LOSS OR DAMAGE, WHETHER OR NOT RESULTING FROM ANY OF THE FOREGOING.

(b) For the term of the Lease, Lessor assigns to Lessee (to the extent possible), and Lessee may have the benefit of, any and all manufacturer's warranties, service agreements and patent indemnities, if any, with respect to the Equipment; provided, however, that Lessee's sole remedy for the breach of any such warranty, indemnification or service agreement shall be against the manufacturer of the Equipment and not against Lessor, nor shall any such breach have any effect whatsoever on the rights and obligations of Lessor or Lessee with respect to the Lease.

(c) NO REPRESENTATIONS OR WARRANTIES OF THE MANUFACTURER OR DISTRIBUTOR OF THE EQUIPMENT, OR ANY OTHER THIRD PARTY, CAN BIND LESSOR, AND LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR SHALL HAVE NO OBLIGATIONS WITH RESPECT TO THE EQUIPMENT EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR OTHER DOCUMENT EXECUTED BY LESSOR.

10.    ASSIGNMENT
(a) Lessee acknowledges and understands that Lessor may assign to a successor, financing lender and/or purchaser (the "Assignee"), all or any part of the Lessor's right, title and interest in and to the Lease and the Equipment and Lessee hereby consents to such assignment(s).  In the event Lessor transfers or assigns, or retransfers or reassigns, to an Assignee all or part of Lessor's interest in the Lease, the Equipment or any sums payable under the Lease (including any extension rentals, purchase sums or new schedule rentals which may become due at the end of the Base Term), whether as collateral security for loans or advances made or to be made to Lessor by such Assignee or otherwise, Lessee covenants that, upon receipt of notice of any such transfer or assignment and instructions from Lessor,

(i) Lessee shall, if so instructed, pay and perform its obligations under the Lease to the Assignee (or to any other party designated by Assignee), and shall not assign the Lease or any of its rights under the Lease or permit the Lease to be amended, modified, or terminated without the prior written consent of Assignee; and

(ii) Lessee's obligations under the Lease with respect to Assignee shall be absolute and unconditional and not be subject to any abatement, reduction, recoupment, defense, offset or counterclaim for any reason, alleged or proven, including, but not limited to, defect in the Equipment, the condition, design, operation or fitness for use of the Equipment or any loss or destruction or obsolescence of the Equipment or any part, the prohibition of or other restrictions against Lessee's use of the Equipment, the interference with such use by any person or entity, any failure by Lessor to perform any of its obligations contained in the Lease, any insolvency or bankruptcy of Lessor, or for any other cause; and

(iii) Lessee shall, upon request of Lessor, submit documents and certificates as may be reasonably required by Assignee to secure and complete such transfer or assignment, including but not limited to the documents set forth in Section 15(c) of this Master Agreement.

(iv) Lessee shall deliver to Assignee copies of any notices which are required under the Lease to be sent to Lessor; and

(v) Lessee shall, if requested, restate to Assignee the representations, warranties and covenants contained in the Lease (upon which Lessee acknowledges Assignee may rely) and shall make such other representations, warranties and covenants to Assignee as may be reasonably required to give effect to the assignment.

(b) Lessor shall not make an assignment or transfer to any Assignee who shall not agree that, so long as Lessee is not in default under the Lease, such Assignee shall take no action to interfere with Lessee's quiet enjoyment and use of the Equipment in accordance with the terms of the Lease.  No such assignment or conveyance shall relieve Lessor of its obligations under the Lease and Lessee agrees it shall not look to any Assignee to perform any of Lessor's obligations under the Lease.  No such assignment shall increase Lessee's obligations nor decrease Lessee's rights hereunder.

11.    QUIET ENJOYMENT
Lessor covenants that so long as Lessee is not in default under a Lease, Lessor shall take no action to interfere with Lessee's possession and use of the Equipment subject to and in accordance with the provisions of the Lease.

12.    INDEMNIFICATION
Except for the sole and gross negligence or willful misconduct of Lessor or Assignee, Lessee shall and does agree to indemnify, protect, defend, save and keep harmless Lessor and its Assignee(s) from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, or expenses of any kind and nature whatsoever, including but not limited to attorneys fees (including without limitation attorneys fees in connection with the enforcement of this indemnification) which may be imposed upon, incurred by or asserted against Lessor or its Assignee(s) in any way relating to or arising out of the Lease, the manufacture, ownership, lease, possession, use, condition, operation, accident in connection with the Equipment 

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(including, without limitation, those claims based on latent and other defects, whether or not discoverable, or claims based on strict liability, or any claim for patent, trademark or copyright infringement, or claims for any damages to any person or property, any costs associated with, or any fines caused by violation of any Environmental Laws) or Lessee’s failure to protect or remove proprietary data from memory storage devices. Lessor's and its Assignee’s rights arising from this Section shall survive the expiration or other termination of the Lease.  Nothing in this Section shall limit or waive any right of Lessee to proceed against the manufacturer of the Equipment.

13.    RISK OF LOSS
(a) Lessee assumes and shall bear the entire risk of loss and damage, whether or not insured against, of the Equipment from any and every cause whatsoever, and damage caused by the Equipment to the environment, any person or property, as of the date the Equipment is delivered to Lessee.

(b) In the event of loss or damage of any kind to any Item, Lessee shall use all reasonable efforts to place the Item in good repair, condition and working order to the reasonable satisfaction of Lessor within sixty (60) days of such loss or damage, unless the Lessor, in its sole discretion,  determines in writing within twenty (20) days of receiving notice from the Lessee of such damage that such Item has been irreparably damaged, in which case Lessee shall, within ten (10) days of the Lessor's determination of irreparable loss, make its election to either pay Lessor the Stipulated Loss Value  for the irreparably damaged Item or replace the irreparably damaged Item, all as provided in this Section.  The Stipulated Loss Value will start at 110% of Lessor’s original equipment cost and decline by 1.25% per month during the Base Term and will not decline any further after the expiration of the Base Term. To the extent that the Item is damaged but not irreparably damaged and if Lessee is entitled, pursuant to the insurance coverage, to obtain proceeds from such insurance for the repair of the Item, Lessee (provided no Event of Default has occurred under the Lease) may arrange for the disbursement of such proceeds to the manufacturer or other entity approved by Lessor to perform the repairs to pay the cost of repair.  However, Lessee's obligation to timely repair the damaged Item is not contingent upon receipt of such insurance proceeds.

(c) In the event that Lessee elects to pay Lessor the Stipulated Loss Value for the irreparably damaged Item, Lessee shall (i) pay such amount (computed as of the first day of the month following the determination of the irreparable damage by the Lessor) to Lessor on the first day of the month following the election by Lessee as provided in (b) above, (ii) pay all Base Monthly Rental for the Item up to the date that the Stipulated Loss Value is paid to Lessor; and (iii) arrange with the applicable insurance company (with the consent of Lessor) for the disposition of the irreparably damaged Item.  If not all the Equipment is irreparably damaged, the Value for Calculation of Stipulated Loss Value ("Value") as set forth on the Schedule for the irreparably damaged Item shall be multiplied by the applicable Stipulated Loss Value percentage to compute the Stipulated Loss Value for such irreparably damaged Item, and the Base Monthly Rental for the undamaged Equipment remaining due (after payment of the Stipulated Loss Value for the irreparably damaged Item) shall be that amount resulting from multiplying the original Base Monthly Rental by the ratio of the Value of the undamaged Equipment divided by the Value for all the Equipment prior to the damage.

(d) If Lessee elects to replace the irreparably damaged Item, Lessee shall continue all payments under the Lease without interruption, as if no such damage, loss or destruction had occurred, and shall replace such irreparably damaged Item, paying all such costs, associated with the replacement, and Lessee shall be entitled to insurance proceeds up to the amount expended by Lessee in effecting the replacement.  Lessee shall within twenty (20) days following the date of determination of irreparable damage by the Lessor, effect the replacement by replacing the irreparably damaged Item with a "Replacement Item" so that Lessor has good, marketable and unencumbered title to such Replacement Item.  The Replacement Item shall have a fair market value equal to or greater than the Item replaced, and anticipated to have a fair market value at the expiration of the Base Term equal to the fair market value that the replaced Item would have had at the end of the Base Term, and be the same manufacture, model and type and of at least equal capacity to the Item for which the replacement is being made.  Upon delivery, such Replacement Item shall become subject to all of the terms and conditions of the Lease and, for the avoidance of doubt, ownership of such Replacement Item shall immediately vest in Lessor free and clear of all claims, liens and encumbrances.  Lessee shall execute all instruments or documents necessary to effect the foregoing.

(e) For purposes of this Section 13, the term "fair market value" shall mean the price of the Equipment delivered and installed at Lessee's location that would be obtained in an arm's-length transaction between an informed and willing buyer-lessee under no compulsion to buy or lease and an informed and willing seller-lessor under no compulsion to sell or lease.  If Lessor and Lessee are unable to agree upon fair market value, such value shall be determined, at Lessee's expense, in accordance with the foregoing definition, by three independent appraisers, one to be appointed by Lessee, one to be appointed by Lessor and the third to be appointed by the first two.

14.    INSURANCE
During the term of the Lease, Lessee, at its own expense, shall maintain in regard to the Equipment all risk insurance (in an amount not less than the Stipulated Loss Value) and comprehensive public liability insurance, including any claims caused from the breach of any Environmental Laws involving the Equipment, in amounts and with carriers reasonably satisfactory to Lessor.  Any such insurance shall name Lessor and the Assignee(s) as additional insured and, as for the all risk insurance, loss payees as their interests may appear.  All such insurance shall provide that it may not be terminated, canceled or altered without at least thirty (30) days' prior written notice to Lessor and its Assignee(s).  Coverage afforded to Lessor shall not be rescinded, impaired, or invalidated by any act or neglect of Lessee.  Lessee agrees to supply to Lessor, upon request, evidence of such insurance.

15.    REPRESENTATIONS AND WARRANTIES OF LESSEE; FINANCIAL STATEMENTS
(a) Lessee represents and warrants to Lessor and its Assignee(s) (i) that the execution, delivery and performance of this Master Agreement and the Lease was duly authorized and that upon execution of this Master Agreement and the Lease by Lessee and Lessor, this Master Agreement and the Lease will be in full force and effect and constitute a valid legal and binding obligation of Lessee, and enforceable against Lessee in accordance with their respective terms; (ii) the Equipment is accurately described in the Lease and all documents of Lessee relating to the Lease; (iii) that Lessee is in good standing in the jurisdiction of its incorporation and/or organization and in any jurisdiction in which any of the Equipment is located; (iv) that no consent or approval of, giving of notice to, registration with, or taking of any other action in respect of, any state, federal or other government authority or agency is required 

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with respect to the execution, delivery and performance by the Lessee of this Master Agreement or the Lease or, if any such approval, notice, registration or action is required, it has been obtained; (v) that the entering into and performance of this Master Agreement and the Lease will not violate any judgment, order, law or regulation applicable to Lessee or any provision of Lessee's Articles of Incorporation, Bylaws, Articles of Organization and/or Operating Agreements or result in any breach of, or constitute a default under, or result in the creation of any lien, charge, security interest or other encumbrance upon any assets of Lessee or upon the Equipment pursuant to any instrument to which Lessee is a party or by which it or its property may be bound, which has not been either  waived or consented to in writing; (vi) there are no actions, suits or proceedings pending, or to the knowledge of Lessee, threatened, before any court or administrative agency, arbitrator or governmental body which will, if determined adversely to Lessee, materially adversely affect its ability to perform its obligations under the Lease or any related agreement to which it is a party; (vii) that aside from this Master Agreement and the Lease there are no additional agreements between Lessee and Lessor relating to the Equipment, and (viii) that any and all financial statements and other information with respect to Lessee supplied to Lessor at the time of execution of the Lease and any amendment, are true and complete.  The foregoing representations and warranties shall survive the execution and delivery of the Lease and any amendments hereto and shall upon the written request of Lessor, be made to Lessor's Assignee(s).

(b) Prior to and during the term of the Lease, Lessee will furnish Lessor with Lessee's annual audited financial statements no later than ninety (90) days after its fiscal year end, and a copy of its quarterly unaudited financial statements within forty-five (45) days after the end of each fiscal quarter.  In the event Lessee is a public company, its financial statements shall be available based upon the requirements of the Securities and Exchange Commission and Lessor shall obtain such financial statements through public domain. If Lessee is a subsidiary of another company, Lessee shall supply such company's financial statements and guarantees as are reasonably acceptable to Lessor.  Lessor's obligations to perform under any Lease is subject to the condition that the financial statements furnished to Lessor by Lessee present the financial condition and results of operations of Lessee and its affiliated corporations and/or companies, if any, and any guarantor of Lessee's obligations under any Lease, as of the date of such financial statements, and that since the date of such statements there have been no material adverse changes in the assets or liabilities, the financial condition or other condition which in Lessor's or Assignee(s) sole discretion are deemed to be materially adverse.  Lessee shall also provide Lessor with such other statements concerning the Lease and the condition of the Equipment as Lessor may from time to time request. 

(c) Upon Lessor's request, Lessee shall, with respect to each Lease, deliver to Lessor (i) a certificate of a secretarial officer of Lessee certifying the bylaw, resolution (specific or general) or corporate action authorizing the transactions contemplated in the Lease; (ii) an incumbency certificate certifying that the person signing this Master Agreement and the Lease holds the office the person purports to hold and has authority to sign on behalf of Lessee; (iii) an opinion of Lessee's counsel with respect to the representations in Section 15(a) (other than 15(a)(ii), 15(a)(vi), 15(a)(vii) or 15(a)(viii)); (iv) an agreement with Lessor's Assignee with regard to any assignment as referred to in Section 10; (v) the purchase documents if Lessee has sold or assigned its interest in the Equipment to Lessor; (vi) an insurance certificate evidencing the insurance provided by Lessee pursuant to Section 14; and (vii) an Installation Certificate duly executed by Lessee.  Failure by Lessee to deliver any of these documents when due shall operate, at Lessor's option, to continue the Installation Term for the Lease thus delaying the Base Term Commencement Date, or to increase the Base Monthly Rental to recover costs incurred by Lessor consequent to the delay or the termination of the Lease as provided in Section 16. 

16.    DEFAULT, REMEDIES
(a) The following shall be deemed "Events of Default" under the Lease:

(i) Lessee fails to pay any installment of rent or other charge or amount due under the Lease when the same becomes due and payable and such failure continues for fifteen (15) days after its due date; or

 (ii) Except as expressly permitted in the Lease, Lessee attempts to remove, sell, encumber, assign or sublease or fails to insure any of the Equipment, or fails to deliver any documents required of Lessee under the Lease without the prior written consent of Lessor; or

 (iii) Any representation or warranty made by Lessee or Lessee's guarantor in the Lease or any document supplied in connection with the Lease or any financial statement is misleading or materially inaccurate; or

 (iv) Lessee fails to observe or perform any of the other obligations required to be observed by Lessee under the Lease and such failure continues uncured for twenty (20) days after its occurrence thereof; or

(v) Lessee or Lessee's guarantor ceases doing business as a going concern; makes an assignment for the benefit of creditors; admits in writing its inability to pay its debts as they become due; files a voluntary petition in bankruptcy; is adjudicated a bankrupt or an insolvent; files a petition seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar arrangement under any present or future statute, law or regulation or files an answer admitting or fails to deny the material allegations of a petition filed against it in any such proceeding; consents to or acquiesces in the appointment of a trustee, receiver, or liquidator for it or of all or any substantial part of its assets or properties, or if it or its trustee, receiver, liquidator or shareholders shall take any action to effect its dissolution or liquidation;

(vi) If within thirty (30) days after the commencement of any proceedings against Lessee or Lessee’s guarantor seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such proceedings shall not have been dismissed, or if within thirty (30) days after the appointment (with or without Lessee’s or Lessee’s guarantor’s consent) of any trustee, receiver or liquidator of it or all of or any substantial part of its respective assets and properties, such appointment shall not be vacated;

(vii) Lessee or any guarantor of Lessee shall suffer an adverse change in its financial condition after the date hereof as determined by Lessor in its sole discretion, or there shall occur a substantial change in ownership of the outstanding stock of the Lessee, any subsidiary of Lessee or a substantial change in its board of directors, members or partners;

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(viii) Lessee shall be in default of any other Schedule or agreement executed with Lessor or under any agreement with any other party that in Lessor's sole opinion is a material agreement; or shall fail to sign and deliver to Lessor any document requested by Lessor in connection with this Master Agreement or shall fail to do anything determined by Lessor to be necessary or desirable to effectuate the transaction contemplated by this Master Agreement or to protect Lessor’s rights and interest in this Master Agreement and Equipment; or shall fail to provide financial statements to Lessor as provided for in Section 15 (b) hereof.

(ix) Lessee breaches any license or other agreement for software.

(x) Failure of Lessee to promptly execute and deliver to Lessor any document required under Section 10 of this Master Agreement.

(b) Lessee shall immediately notify Lessor of the occurrence of an Event of Default or any event that would become an Event of Default.  Upon the happening of any Event of Default, Lessor may declare the Lessee to be in default. Upon a declaration of default, Lessor may immediately apply the Security Deposits (as defined and set forth in Section 18) to any one or more of the obligations of Lessee to Lessor, including unpaid rent, fees, costs, charges, expenses and/or the Stipulated Loss Value or as otherwise provided for in any Schedule to this Master Agreement.  The application of the Security Deposits shall not be in lieu of, but shall be in addition to all other remedies available to Lessor under the Master Agreement and applicable law. Lessee authorizes Lessor at any time thereafter that such default is continuing, with or without terminating the Lease, to enter any premises where the Equipment may be and take possession of the Equipment.  Lessee shall, upon such declaration of default, without further demand, immediately pay Lessor an amount which is equal to (i) any unpaid amount due on or before Lessor declared the Lease to be in default, plus (ii) as liquidated damages for loss of a bargain and not as a penalty, an amount equal to the Stipulated Loss Value for the Equipment computed as of the date the last Base Monthly Rental payment was due prior to the date Lessor declared the Lease to be in default, together with interest, as provided herein, plus (iii) all attorney and court costs incurred by Lessor relating to the enforcement of its rights under the Lease.  After an Event of Default, at the request of Lessor and to the extent requested by Lessor, Lessee shall immediately comply with the provisions of Section 6(d) and Lessor may sell the Equipment at private or public sale, in bulk or in parcels, with or without notice, without having the Equipment present at the place of sale; or Lessor may lease, otherwise dispose of or keep idle all or part of the Equipment, subject, however, to its obligation to mitigate damages.  The proceeds of sale, lease or other disposition, if any, of the Equipment shall be applied: (1) to all Lessor's costs, charges and expenses incurred in taking, removing, holding, repairing and selling, leasing or otherwise disposing of the Equipment including actual attorney fees; then (2) to the extent not previously paid by Lessee, to pay Lessor the Stipulated Loss Value for the Equipment and all other sums owed by Lessee under the Lease, including any unpaid rent which accrued to the date Lessor declared the Lease to be in default and indemnities then remaining unpaid under the Lease; then (3) to reimburse to Lessee Stipulated Loss Value previously paid by Lessee as liquidated damages; and (4) any surplus shall be retained by Lessor.  Lessee shall pay any deficiency in (1) and (2) immediately.  If Lessee breaches Section 19(l) of this Master Agreement with regard to Software (as hereinafter defined), Lessee shall be liable to Lessor for additional damages in an amount equal to the original purchase price paid by Lessor for the Software, and in addition, at Lessor’s option, Lessor shall be entitled to injunctive and other equitable relief.   The exercise of any of the foregoing remedies by Lessor shall not constitute a termination of the Lease unless Lessor so notifies Lessee in writing.  Lessor may also proceed by appropriate court action, either at law or in equity to enforce performance by Lessee of the applicable covenants of the Lease or to recover damages for the breach of the Lease. Upon the happening of an Event of Default by Lessee with regard to Software under Section 19(l) of this Lease, Lessor may elect any of the following remedies: (i) by notice to Lessee, declare any License agreement with respect to Software terminated, in which event the right and License of Lessee to use the Software shall immediately terminate and Lessee shall thereupon cease all use of the Software and return all copies thereof to Lessor or original Licensor;  (ii) have access to and disable the Software by any means deemed necessary by Lessor, for which purposes Lessee hereby expressly consents to such access and disablement, promises to take no action that would prevent or interfere with Lessor’s ability to perform such access and disablement, and waives and releases any and all claims that it has or might otherwise have for any and all losses, damages, expenses, or other detriment that it might suffer as a result of such access and disablement.  Lessee agrees that the detriment that Lessor will suffer as a result of a breach by Lessee of the obligations contained in this Master Agreement cannot be adequately compensated by monetary damages, and therefore Lessor shall be entitled to injunctive and other equitable relief to enforce the provisions of this paragraph.  LESSEE AGREES THAT LESSOR SHALL HAVE NO DUTY TO MITIGATE LESSOR’S DAMAGES UNDER ANY SCHEDULE BY TAKING LEGAL ACTION TO RECOVER THE SOFTWARE FROM LESSEE OR ANY THIRD PARTY, OR TO DISPOSE OF THE SOFTWARE BY SALE, RE-LEASE OR OTHERWISE. 

(c) The waiver by Lessor of any breach of any obligation of Lessee shall not be deemed a waiver of any future breach of the same or any other obligation.  The subsequent acceptance of rental payments under the Lease by Lessor shall not be deemed a waiver of any such prior existing breach at the time of acceptance of such rental payments.  The rights afforded Lessor under Section 16 shall be cumulative and concurrent and shall be in addition to every other right or remedy provided for the Lease or now or later existing in law (including as appropriate all the rights of a secured party or lessor under the Uniform Commercial Code) or in equity and Lessor's exercise or attempted exercise of such rights or remedies shall not preclude the simultaneous or later exercise of any or all other rights or remedies.

(d) In the event Lessee shall fail to perform any of its obligations under the Lease, then Lessor may perform the same, but shall not be obligated to do so, at the cost and expense of Lessee.  In any such event, Lessee shall promptly reimburse Lessor for any such costs and expenses incurred by Lessor.

(e) In the event Lessor believes in good faith that the Equipment is in danger of misuse, abuse or confiscation or to be in any other way threatened; or believes in good faith that the Equipment is no longer sufficient; or believes in good faith for any other reason that the prospect for payment or performance has become impaired, Lessor shall have the right, in its sole discretion, to either require additional collateral or declare the entire indebtedness under any  Schedule immediately due and payable. 

17.    LESSOR'S TAX BENEFITS 
Lessee acknowledges that Lessor shall be entitled to claim all tax benefits, credits and deductions related to the Equipment for federal income tax purposes including, without limitation: (i) deductions on Lessor's cost of the Equipment for each of its tax years during the term of the Lease under any method of depreciation or other cost recovery formula permitted by the Internal Revenue Code of 1986, as amended (hereinafter called the "Code"), and (ii) interest deductions as permitted by the Code on the aggregate interest paid to any Assignee (hereinafter collectively "Lessor's Tax Benefits").  

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Lessee agrees to take no action inconsistent (including the voluntary substitution of Equipment) with the foregoing or which would result in the loss, disallowance, recapture or unavailability to Lessor of Lessor's Tax Benefits.  Lessee hereby indemnifies Lessor and its Assignee(s) from and against (a) any loss, disallowance, unavailability or recapture of Lessor's Tax Benefits resulting from any action or failure to act of Lessee, including replacement of the Equipment, plus (b) all interest, penalties, costs, (including actual attorney fees), or additions to tax resulting from such loss, disallowance, unavailability or recapture.

18.    SECURITY DEPOSIT
Lessor acknowledges receipt of the security deposit(s) identified on each of the Schedules to this Master Agreement or otherwise provided to Lessor (the “Security Deposits”).  Lessee hereby grants to Lessor a security interest in each of the Security Deposits, to secure all obligations of Lessee under this Master Agreement and all Schedules hereto, including but not limited to, all payment obligations and all other obligations of Lessee to Lessor for which Lessee is now or may in the future become liable.  Lessee authorizes Lessor to file all financing statements, amendments to financing statements and other documents as may be required, if any, with any public filing agency in any jurisdiction, to advise of Lessor’s interest in the Security Deposits.  Lessee agrees to execute such additional documents or instruments as may be deemed advisable or necessary by Lessor in order to maintain and continue such security interest.

19.    GENERAL
(a) The Lease shall be deemed to have been made and delivered in the State of Michigan and shall be governed in all respects by the laws of such State. LESSEE AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND/OR FEDERAL COURTS IN THE STATE OF MICHIGAN IN ALL MATTERS RELATING TO THE LEASE, THE EQUIPMENT, AND THE CONDUCT OF THE RELATIONSHIP BETWEEN LESSOR AND LESSEE. THE PARTIES HERETO AGREE THAT IN THE EVENT OF AN ALLEGED BREACH OF THIS MASTER AGREEMENT OR ANY DOCUMENTS RELATING THERETO BY EITHER PARTY, OR ANY CONTROVERSIES ARISE BETWEEN THE PARTIES RELATING TO THIS MASTER AGREEMENT OR ANY DOCUMENTS RELATING THERETO, SUCH CONTROVERSIES SHALL BE TRIED BY A JUDGE ALONE BEFORE THE FEDERAL OR STATE COURTS IN OAKLAND COUNTY, MICHIGAN.  THE PARTIES, HAVING HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOOSING, HEREBY KNOWINGLY AND VOLUNTARILY CONSENT TO MICHIGAN JURISDICTION AS SET FORTH HEREIN AND WAIVE THEIR RIGHTS TO A TRIAL BY JURY IN ANY MATTER RELATING TO THIS MASTER AGREEMENT OR ANY DOCUMENTS RELATED THERETO.

(b) Provided no Event of Default has occurred and is continuing, and provided no Event of Default or event which with the giving of notice or lapse of time, or both, would constitute an Event of Default has occurred and is continuing, upon the completion of the Base Term of any Schedule, Lessee shall, upon giving ninety (90) days prior written notice to Lessor by certified mail, elect one of the following options:  (i) purchase all, but not less than all, of the Items of Equipment on the applicable Schedule for a price to be agreed upon by both Lessor and any applicable Assignee and Lessee, (ii) extend the Schedule for all, but not less than all, of the Items of Equipment on the applicable Schedule for an additional twelve (12) months at the Base Monthly Rental then in effect  or (iii) return all, but not less than all of the Items of Equipment on the applicable Schedule to Lessor at Lessee’s expense to a destination within the Continental United States as directed by Lessor, provided that for option (iii) to apply, Lessee  shall have paid all late charges, interest, taxes, penalties due under the Lease, Lessee agrees to pay to Lessor an additional  per diem rent (“Hold Over Rent”) in an amount equal to one hundred twenty five percent (125%) of the Base Monthly Rental then in effect  divided by thirty (30) until all Items of Equipment are received by Lessor, Lessee shall have complied with Sections 6 (a), (b), (c) and Section 7 hereof, and Lessee shall immediately pay to Lessor a Terminal Rental Adjustment Cost (“TRAC”) in an amount equal to subsection (ii) above.  Provided that Lessee selects option (iii), Lessor shall use its best efforts to remarket the Equipment and remit to Lessee any amount collected by Lessor less its reasonable remarketing costs which shall include, without limitation, costs of repossession, reconfiguration, de-installation and installation, refurbishment, storage, and freight charges and legal fees, whether in house or to third parties.  With respect to option (i) and option (iii), both Lessor and Lessee shall have absolute and sole discretion regarding the terms and conditions of the agreement to the purchase price of the Equipment.  In the event that Lessor and Lessee have not agreed to either option (i) or option (iii) by the conclusion of the Base Term, or if Lessee fails to provide notice of its election via certified mail at least one hundred eighty (180) days prior to the termination of the Base Term, then option (ii) shall automatically apply at the end of the Base Term.  At the conclusion of option (ii) above, the Lease shall continue for successive six (6) month renewals at the payment specified on the respective Schedule until either Lessee or Lessor provide the other party with at least ninety (90) days written notice of their desire to terminate the agreement.

(c) This Master Agreement and the Lease constitute the entire and only agreement between Lessee and Lessor with respect to the lease of the Equipment, and the parties have only those rights and have incurred only those obligations as specifically set forth herein.  The covenants, conditions, terms and provisions may not be waived or modified orally and shall supersede all previous proposals, both oral and written, negotiations, representations, commitments or agreements between the parties.  The Lease may not be amended or discharged except by a subsequent written agreement entered into by duly authorized representatives of Lessor and Lessee.  A photocopy or facsimile or scanned reproduction of an original signature of a party to this Agreement shall bind that party to the terms, conditions and covenants of the Agreement as if it were the original.     

______________________                    LESSEE INITIALS

(d) All notices, consents or requests desired or required to be given under the Lease shall be in writing and shall be delivered in person or sent by certified mail, return, receipt requested, or by courier service to the address of the other party set forth in the introduction of this Master Agreement or to such other address as such party shall have designated by proper notice.

(e) Each Schedule shall be executed with one original.  To the extent, if any, that a Schedule constitutes chattel paper (as such term is defined in the Uniform Commercial Code) a security interest in the Schedule may only be created through the transfer or possession of the Schedule marked “Original”.  This Master Agreement, in the form of a photocopy, is Exhibit A to the Schedule and is not chattel paper by itself.

(f) Section headings are for convenience only and shall not be construed as part of the Lease.

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(g) It is expressly understood that all of the Equipment shall be and remain personal property, notwithstanding the manner in which the same may be attached or affixed to realty, and, upon Lessor's request, Lessee shall secure from its mortgagee, landlord or owner of the premises a waiver in form and substance reasonably satisfactory to Lessor.
(h) Lessor may upon written notice to Lessee advise Lessee that certain Items supplied to Lessee are leased to Lessor and supplied to Lessee under the Lease as a sublease.  Lessee agrees to execute and deliver such acknowledgements and assignments in connection with such a Lease as are reasonably required.  If, at any time during the term of the Lease, Lessor's right to lease such Equipment expires, Lessor may remove such Equipment from Lessee's premises and shall promptly provide identical substitute Equipment.  All expenses of such substitution, including de-installation, installation and transportation expenses, shall be borne by Lessor.

(i) Prior to the delivery of any Item, the obligations of Lessor hereunder shall be suspended to the extent that it is hindered or prevented from complying therewith because of: labor disturbances, including strikes and lockouts; acts of God; fires; storms; accidents; failure to deliver any Item; governmental regulations or interferences or any cause whatsoever not within the sole control of Lessor.

(j) Lessee hereby acknowledges and agrees that it has had a full and fair opportunity to read each of the terms and conditions of this Master Agreement, specifically Sections 2, 16 and 19, and that Lessee fully understands the terms and conditions herein, having had the opportunity to consult with an attorney of its own choosing prior to executing this Master Agreement and any related documents.    

______________________                    LESSEE INITIALS

(k) Any provision of this Master Agreement or any Schedule prohibited by or unlawful or unenforceable under any applicable law of any jurisdiction shall be ineffective as to such jurisdiction without invalidating the remaining provisions of this Master Agreement and such Schedule.

(l) In the event the Equipment includes software (which Lessee agrees shall include all documentation, later versions, updates, upgrades, and modifications) (herein  “Software”), the following shall apply:  (i) Lessee shall possess and use the Software in accordance with the terms and conditions of any  license  agreement  (“License”)  entered  into  with  the owner/vendor of such Software and shall not breach the License (at Lessor’s request, Lessee shall provide a complete copy of the License to Lessor); (ii) Lessee agrees that Lessor shall have an interest in the License and Software arising out of  its payment of  the price  thereof and 

is an assignee or third party beneficiary of the License; (iii) as due consideration of Lessor’s payment of the License and Software and for providing the Software to Lessee at a lease rate (as opposed to a debt rate), Lessee agrees that Lessor is leasing (and not financing) the Software to Lessee; (iv) except for the original price paid by Lessor, Lessee shall, at its own expense, pay promptly when due all servicing fees, maintenance fees update and upgrade costs, modification cost, and all other costs and expenses relating to the Software and maintain the License in effect during the term of the Lease; and (v) the Software shall be deemed Equipment for all purposes under the Lease.

(m)  The parties agree that this is a "Finance Lease" as defined by section 2A-103(g) of the Uniform Commercial Code ("UCC").  Lessee acknowledges either (a) that Lessee has reviewed and approved any written Supply Contract (as defined by UCC 2-A-103(y)) covering the Equipment purchased from the Supplier (as defined by UCC 2A-103(x)) thereof for lease to Lessee or (b) that Lessor has informed or advised Lessee, in writing, either previously or by this Lease of the following: (i) the identity of the Supplier, (ii) that the Lessee may have rights under the Supply Contract; and (iii) that the Lessee may contact the Supplier for a description of any such rights Lessee may have under the Supply Contract. 

Lessee hereby waives any and all rights and remedies granted to Lessee by Sections 303 and 508 through 522 of Articles 2A of the Uniform Commercial Code (although no such waiver shall constitute a waiver of any of Lessee’s rights or remedies against the manufacturer of the Equipment).

(n) The parties acknowledge that serial numbers and/or other identifiable information for one or more Items may be unavailable prior to execution of the applicable Schedule.  In the event a Schedule fails to indicate serial numbers or other identifiable information or incorrectly identifies serial numbers or other identifiable information, for one or more Items after execution of the applicable Schedule, Lessee expressly consents to Lessor’s unilateral amendment of the applicable Schedule to insert or correct serial numbers or other identifiable information therein.

(o) Lessee hereby authorizes and appoints Lessor and Lessor's agents and assigns as Lessee's attorney-in-fact to execute acknowledgement letters and other documents required to be executed by Lessee to effect any underwriting or perfect any security interest with regard to a Schedule.

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The parties have executed this Master Lease Agreement as of the date first written above.

	
							
	LESSOR:
	 
	LESSEE:

	VARILEASE FINANCE, INC.
	 
	COMSTOCK MINING INC.

	By:
	 
	/s/ Kristy Phillips
	 
	By:
	 
	/s/ Corrado De Gasperis

	Name:
	 
	Kristy Phillips
	 
	Name:
	 
	Corrado De Gasperis

	Title:
	 
	Vice President
	 
	Title:
	 
	President and CEO

	 
	 
	 
	 
	 
	 
	 

10Exhibit 10.1

 

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT
(the “Agreement”) is made as of July 20, 2015 by and between Drone AFS Corp., a Nevada corporation (the “Buyer”),
Drone Aviation Holding Corp., a Nevada corporation (“Parent”) and Adaptive Flight, Inc., a Georgia corporation
(“AFI”), and the shareholders of Adaptive Flight, Inc. identified on the signature page hereto (together with
AFI, the “Sellers”).

 

RECITALS

 

WHEREAS, AFI is
in the business of designing and developing flight control systems for unmanned aerial vehicles (the “Business”),
and owns certain intellectual property and other assets related to the Business;

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

“Agreement”
means this asset purchase agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	1

    	 

    

 

 

“Closing”
means the closing of the transactions contemplated by this Agreement.

 

“Closing Date”
means the date on which Closing occurs.

 

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

 

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

 

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

 

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

 

“Contingency Sub
License” shall have such meaning as set forth in Annex A of the Escrow Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Escrow Agent”
shall mean a mutual agreed to Third Party that is in the business of providing the escrow services similar to the services required
herein.

 

“Escrow Agreement”
shall have such meaning as set forth in Section 2.6.

 

“Escrow Period”
means a period of twelve (12) months, commencing on the Closing Date.

 

“Escrow Cash”
shall have such meaning as set forth in Section 2.5(a).

 

“Escrow Shares”
shall have such meaning as set forth in Section 2.5(a).

 

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

 

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

 

“Georgia Tech”
shall have such meaning as set forth in Annex A of the Escrow Agreement.

 

“Governmental
Body” means any nation or government, any state or other political subdivision thereof, any legislative, executive or
judicial unit or instrumentality of any government entity (foreign, federal, state or local) or any department, commission, board,
agency, bureau, official or other regulatory, administrative or judicial authority thereof or any entity (including a court or
self-regulatory organization) exercising executive, legislative or judicial, Tax, regulatory or administrative functions of or
pertaining to government. “Hazardous Substance” means any material, substance, form of energy or pathogen which
(a) constitutes a “hazardous substance”, “toxic substance” or “pollutant”, “contaminant”,
“hazardous material”, “hazardous chemical”, “regulated substance”, or “hazardous waste”
(as such terms are defined by or pursuant to any Environmental Law) or (b) is otherwise regulated or controlled by, or gives rise
to liability under, any environmental law.

 

    	2

    	 

    

 

 

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

 

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

 

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

 

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

 

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

 

“Knowledge”
or “knowledge” means, with respect to Sellers, the actual knowledge of Sellers, and with respect to Buyer and
Parent, the actual knowledge of Felicia Hess, Daniyel Erdberg and Kevin Hess.

 

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

 

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

 

“License Agreements”
shall have such meaning as set forth in Annex A of the Escrow Agreement.

 

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

 

    	3

    	 

    

 

 

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

 

“Party”
means Buyer, Parent or a Seller.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

    	4

    	 

    

 

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

 

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

 

“Technology Integration
Plan” shall have the meaning as set forth in the Escrow Agreement.

 

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

 

ARTICLE II 

PURCHASE AND SALE
OF ASSETS

 

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

 

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

 

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

 

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

 

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

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

 

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

 

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

 

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

 

    	5

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

(f)                 
any liabilities not related to the Business.

 

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

 

2.4.             
Purchase Price. Subject to the terms and conditions
set forth in Section 2.5, in consideration for the sale, transfer, assignment, conveyance and delivery by AFI to Buyer of the Assets
and Sellers’ agreement to retain and satisfy the Excluded Liabilities, Parent shall (i) pay to Escrow Agent One Hundred Thousand
U.S. Dollars ($100,000), less Registered IP Fees due and unpaid by AFI at Closing unless otherwise agreed upon by the Parties (the
“Closing Cash”), to be held in escrow in accordance with the Escrow Agreement dated of even date herewith by
and among the Parties (“the “Escrow Agreement”), which Closing Cash shall be immediately available for
disbursement by the Escrow Agent upon AFI’s delivery to the Escrow Agent of written notice in form and substance satisfactory
to the Escrow Agent and the Buyer instructing the Escrow Agent to make payment to be applied towards effectuating the Technology
Integration Plan and towards AFI’s liabilities, including but not limited to all amounts owed by AFI to the property owner
of the facilities rented by AFI; (ii) pay to Escrow Agent One Hundred Thousand U.S. Dollars ($100,000) (the “Escrow Cash”)
to be held in escrow in accordance with the Escrow Agreement; and (iii) issue to AFI, or AFI’s designees(s), and deliver
to Escrow Agent Six Million (6,000,000) unregistered shares of Common Stock (the “Purchase Price Shares” and
together with the Closing Cash and the Escrow Cash, the “Purchase Price”), with such Purchase Price Shares to
be held in escrow, and subject to adjustment, in accordance with the Escrow Agreement. 

	 

2.5.             
Escrow; Lockup.

 

(a)                
The Escrow Cash shall represent funds intended to be used by AFI to satisfy any retained liabilities
and to implement the Technology Integration Plan set forth in the Escrow Agreement. The Escrow Shares shall represent shares otherwise
transferable by AFI to certain shareholders or creditors of AFI and be available to secure any claims that may arise with respect
to the representations, warranties, covenants or indemnification obligations of Sellers pursuant to this Agreement during the Escrow
Period. Furthermore, the Escrow Shares shall be surrendered for cancellation to the Parent upon the failure to obtain certain milestones
set forth in the Escrow Agreement. The Parent and Buyer agree to look to the Escrow Cash first and the Escrow Shares second with
respect the fulfillment of any indemnification obligations of Sellers under this Agreement.

 

    	6

    	 

    

 

 

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

 

2.6.             
Integration Cost. Subject to the receiving consent
from all parties to the Purchased Contracts from whom consent to assign the Purchased Contracts to the Buyer is required, Parent
shall make payments in aggregate of up to Twenty Five Thousand U.S. Dollars ($25,000), on behalf of AFI, to any consultants that
AFI and Buyer mutually agree are necessary to implement the Technology Integration Plan. 

	 

ARTICLE III 

CLOSING

 

3.1.             
Closing Date. The Closing shall take place at the
offices of Buyer commencing at noon local time, on the date of this Agreement. 

 

3.2.             
Closing Deliveries of Sellers. At the Closing, Sellers
shall deliver, or cause to be delivered to Buyer, the following unless waived by Buyer: 

 

(i)                  
a bill of sale for the Assets in the form attached as Exhibit C hereto (the
“Bill of Sale, Assignment and Assumption”) duly executed by AFI; 

 

(ii)                
such other instruments of assignment, transfer and conveyance as Buyer shall reasonably request
to transfer to and vest in Buyer all of AFI’s right, title and interest in, to and under the Assets;

 

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

 

(iv)              
any Uniform Commercial Code termination statements, releases and other documents necessary
to evidence that each of the Assets is being sold, conveyed, transferred, assigned and delivered to Buyer free and clear of any
Encumbrances (except for Permitted Encumbrances), as set forth on Schedule 3.2(iv);

 

(v)                
an opinion from Sellers’ corporate counsel affirming the enforceability of this Agreement
or other writing delivered by Sellers pursuant hereto; 

 

(vi)              
the Escrow Agreement duly executed by Sellers;

 

(vii)             
the Lockup Agreement duly executed by AFI and/or AFI’s designees;

 

(viii)           
assignments in the form of Exhibit D hereto transferring all of AFI’s
right, title and interest in and to AFI Intellectual Property to be transferred to Buyer pursuant to this Agreement to Buyer duly
executed by AFI (the “IP Assignment”); 

 

(ix)              
consulting agreements, in the form of Exhibit E hereto (the “Consulting

Agreements”), duly executed by each of Wayne Pickell, Henrik Christophersen and Eric
Johnson; 

(x)                
this Agreement duly executed by Sellers;

 

    	7

    	 

    

 

(xi)              
 all of the Schedules set forth herein; and

 

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

 

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

3.3.             
Closing Deliveries of Buyer and Parent. At the Closing,
Buyer and Parent shall deliver, or cause to be delivered to Sellers, the following unless waived by Sellers:

 

(i)                  
the certificates representing the Escrow Shares comprising part of the Purchase Price as set
forth in Section 2.5;

 

(ii)                
the Closing Cash in immediately available funds or confirmation of the federal funds transfer
of such funds comprising part of the Purchase Price as set forth in Section 2.5;

 

(iii)               
the Escrow Cash in immediately available funds or confirmation of the federal funds transfer
of such funds comprising part of the Purchase Price as set forth in Section 2.5;

 

(iv)              
Consulting Agreements duly executed by Parent; 

 

(v)                
the Bill of Sale duly executed by Buyer; 

 

(vi)              
the Escrow Agreement duly executed by Buyer, Parent and Escrow Agent; and

 

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

  

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

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

 

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

 

    	8

    	 

    

 

 

4.2.             
Authorization; Binding Effect.

 

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

 

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

 

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

 

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

 

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

 

    	9

    	 

    

 

 

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

 

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

 

4.4.             
Assets – Sufficiency and Title.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	10

    	 

    

 

 

4.10.          
Environmental Matters.

 

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

 

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

 

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

 

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

 

4.11.          
Investment Representations.

 

(a)                
AFI (or its designees) are acquiring the shares of Common Stock comprising the Purchase Price
for its own account and not with a view to the distribution thereof in contravention of the Securities Act of 1933, as amended
(the “Securities Act”); provided, however, Parent and Buyer understand and acknowledge that AFI shall be distributing
shares of Common Stock comprising the Purchase Price, a portion of which AFI agreed to distribute
to pay creditors, settle creditor claims of AFI and as consideration for the consulting services contemplated by the Technology
Integration Plan, to its designees, who must be able to provide the same representations contained in this Section 4.11.

 

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

 

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

 

4.12 Proprietary
Rights.

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

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

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

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

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

    	11

    	 

    

 

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

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

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

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

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

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

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

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

    	12

    	 

    

 

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

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

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

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

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

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

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

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

4.13Privacy;
Data Security.

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

 

    	13

    	 

    

 

 

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

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT

 

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

 

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

 

5.2.             
Authorization; Binding Effect.

 

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

 

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

 

    	14

    	 

    

 

 

(c)                
As of the date hereof, the authorized capital stock of Parent is 300,000,000 shares of common
stock, par value $0.0001 per share, of which 72,631,021 (inclusive of the Purchase Price Shares) are issued and outstanding, and
100,000,000 shares of preferred stock, par value $0.0001 per share, of which 40,800,022 are issued and outstanding. Except as otherwise
disclosed herein or as disclosed in the SEC Documents, (i) no shares of Parent's capital stock are subject to preemptive rights
or any other similar rights or any liens or encumbrances suffered or permitted by Parent, (ii) there are no outstanding debt securities,
(iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, any shares of capital stock of Parent or any of its
subisidiaries, or contracts, commitments, understandings or arrangements by which Parent or any of its subisidiaries is or may
become bound to issue additional shares of capital stock of Parent or any of its subisidiaries or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares
of capital stock of Parent or any of its subisidiaries, (iv) other than as disclosed in the SEC Documents, there are no agreements
or arrangements under which Parent or any of its subisidiaries is obligated to register the sale of any of their securities under
the Securities Act, (v) there are no outstanding securities or instruments of Parent or any of its subisidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which Parent or
any of its subisidiaries is or may become bound to redeem a security of Parent or any of its subisidiaries, (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Purchase Price as described
in this Agreement, as applicable, and (vii) Parent does not have any restricted stock units, stock appreciation rights or "phantom
stock" plans or agreements or any similar plan or agreement. Parent has furnished to the Sellers (and its designees) true
and correct copies of Parent's Certificate of Incorporation, as amended and as in effect on the date hereof (the "Certificate
of Incorporation"), and Parent's Bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and the SEC Documents disclose summaries of the terms of all securities convertible into or exercisable for Common Stock, if any,
and copies of any documents containing the material rights of the holders thereof in respect thereto.

 

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

 

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

 

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

 

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

 

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

 

    	15

    	 

    

 

 

5.4.             
Compliance with Laws; Litigation.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	16

    	 

    

 

 

ARTICLE VI

COVENANTS

 

6.1.             
Access to Information.

 

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

 

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

 

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

 

6.2.             
Confidentiality.

 

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

 

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

 

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

 

    	17

    	 

    

 

 

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

 

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

 

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

 

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

 

6.4.             
Noncompetition. Except for any work done for and
on behalf of Georgia Tech, or any customers or affiliates of Georgia Tech, for a period of eighteen months (18) after the Closing
Date, AFI and Professor Eric N. Johnson shall not, and for a period of six months (6) after the Closing Date, Henrik B. Christophersen,
R. Wayne Pickell and AFI shall not, directly or indirectly, invest in, own, manage, operate, finance, control, advise, render services
to or guarantee the obligations of any Person engaged in or planning to become engaged in the commercial use or commercial development
of the Assets, or any enhancements thereon, as intended to be used by the Buyer, Parent or any of Parent’s subsidiaries for
tethered UAVs.  For the avoidance of doubt, the restrictions set forth in the Section 6.4 shall not apply to the commercial
use or commercial development of Contributing IP.

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

 

    	18

    	 

    

 

 

6.6.             
Contingency Sub License. After the Closing, in the
event AFI fails to obtain Georgia Tech’s consent to the assignment and assumption to and by the Buyer of the License Agreements,
AFI agrees to grant the Contingency Sub License, subject to final approval from Georgia Tech Research Corporation, and AFI agrees
to be responsible for all costs and fees required to grant such Contingency Sub License to the Buyer. For the avoidance of doubt,
the Closing Cash shall not be returned to the Parent in the event of such failure to obtain Georgia Tech’s consent, however,
all Escrow Cash and Escrow Shares shall be returned to Parent.

 

6.7.             
Continuation of Business by Sellers. After the Closing,
the Sellers may continue the portion of the Business that is not in competition with the Buyer’s intended use of the Assets.
In the event the Sellers require any use of the Assets, including intellectual property or rights under the License Agreements,
the Sellers and Buyer shall enter into a mutually acceptable license and revenue sharing agreement.

	 

ARTICLE VII

SURVIVAL AND INDEMNIFICATION

 

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

 

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

 

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

 

    	19

    	 

    

 

 

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

 

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

 

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

 

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

 

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

 

    	20

    	 

    

 

 

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

 

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

 

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

 

ARTICLE VIIII

INTENTIONALLY OMITTED

 

ARTICLE IX

MISCELLANEOUS PROVISIONS

 

9.1.             
Notices. Except as otherwise provided herein or in
a Collateral Agreement, all notices and other communications hereunder and under the Collateral Agreements shall be in writing
and shall be deemed to have been duly given upon receipt if (i) mailed by certified or registered mail, return receipt requested,
(ii) sent by a nationally recognized overnight delivery service (receipt requested), fee prepaid, (iii) sent via facsimile with
receipt confirmed, or (iv) delivered personally, addressed as follows or to such other address or addresses of which the respective
party shall have notified the other.

 

(a)                
If to Sellers, to:

 

Adaptive Flight, Inc.

3041 Hallman Circle

Marietta, GA
30064

Fax:

Attention: Henrik
Christophersen

 

With a copy (which
shall not constitute notice) to:

 

Siavage Law Group,
LLC

1360 Peachtree
Street, Suite 150

Atlanta, Georgia
30318

Fax: 404-351-5280

Attention: Michael
Siavage

 

    	21

    	 

    

 

 

(b)                
If to Buyer or Parent, to:

 

Drone Aviation
Corp

11651 Central Parkway,
#118

Jacksonville, FL
32224

PH: (904) 834-4400

Fax: (904)
834-4360

Attention: Chief
Executive Officer

 

With a copy (which
shall not constitute notice) to:

 

Sichenzia Ross
Friedman Ference LLP

61 Broadway, 32nd
Floor

New York, New York
10006

Fax: (212) 930-9725

Attention: Harvey
Kesner, Esq.

 

9.2.             
Expenses. Except as otherwise provided in this Agreement
or the Collateral Agreements, each Party will pay its own costs and expenses, including legal and accounting expenses, related
to the transactions contemplated by this Agreement and the Collateral Agreements, irrespective of when incurred.

 

9.3.             
Entire Agreement. The agreements of the Parties,
which is comprised of this Agreement, the Schedules and Exhibits hereto and the documents referred to herein, including the Collateral
Agreements, sets forth the entire agreement and understanding between the Parties and supersedes any prior agreement or understanding,
written or oral, relating to the subject matter of this Agreement and the Collateral Agreements. 

 

9.4.             
Waiver of Jury Trial. The Parties irrevocably waives
the right to a jury trial in connection with any legal proceeding relating to this Agreement or any of the Collateral Agreements
or the enforcement of any provision hereof or thereof. 

 

9.5.             
Governing Law; Arbitration; Prevailing Party. This
Agreement and the Collateral Agreements, and all claims or causes of action that may be based upon, arise out of or relate to this
Agreement or the Collateral Agreements will be construed in accordance with and governed by the internal laws of the State of New
York applicable to agreements made and to be performed entirely within such State without regard to conflicts of laws principles
thereof. Any dispute arising under or in connection with any matter of any nature (whether sounding in contract or tort) relating
to or arising out of this Agreement, shall be resolved exclusively by arbitration. The arbitration shall be in conformity with
and subject to the applicable rules and procedures of JAMS. The arbitration shall be conducted before a panel of three (3) arbitrators,
with one arbitrator to be selected by each of Sellers and Buyer and the third arbitrator to be selected by the arbitrators selected
by the Parties. The Parties agree to be (a) subject to the exclusive jurisdiction and venue of the arbitration in New York, New
York (b) bound by the decision of the arbitrator as the final decision with respect to the dispute, and (c) subject to the jurisdiction
of both of the federal courts of the United States of America or the courts of the State, City and County of New York for the purpose
of confirmation and enforcement of any award. The prevailing party in any arbitration shall be entitled to recover its costs and
expenses (including attorney’s fees and expenses) from the non-prevailing party.

 

    	22

    	 

    

 

 

9.6.             
Waiver. The rights and remedies of the Parties to
this Agreement and the Collateral Agreements are cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power or privilege under this Agreement or the documents referred to in this Agreement will operate as
a waiver of such right, power or privilege, and no single or partial exercise of any such right, power or privilege will preclude
any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the
maximum extent permitted by Law, (a) no claim or right arising out of this Agreement or the Collateral Agreements can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party;
(b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given and will not
operate as a waiver of, or estoppel with respect to, any subsequent or other failure or noncompliance; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this Agreement or the Collateral Agreements.

 

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

 

9.8.             
Assignments; Successors. No party may assign any
of its rights under this Agreement or any Collateral Agreements without the prior written consent of the other parties hereto or
thereto. Subject to the preceding sentence, this Agreement and the Collateral Agreements will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the Parties.

 

9.9.             
Severability. If any provision of this Agreement
or the Collateral Agreements is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this
Agreement and the Collateral Agreements will remain in full force and effect; provided, that the court making such determination
shall have the power to and shall, subject to the discretion of such court, reduce the scope, duration, area or applicability of
such provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable provision with a provision
that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

 

9.10.          
Limitations on Public Disclosure. No Party may issue
any press release, or make any public announcement or filing with a Governmental Body, with respect to this Agreement or any Collateral
Agreement without obtaining prior written consent of the other Party to the issuance of such press release, or the making of such
public announcement or filing, and to the contents thereof, which shall not be unreasonably withheld or delayed; provided,
that such Party may, without the prior consent of the other Party, issue such press release, or make such public statement or filing,
as may upon the advice of counsel be required by Law if it has provided notice to and used reasonable efforts to consult with the
other Party.

 

9.11.          
No Third Party Beneficiaries. Nothing in this Agreement
or the Collateral Agreements, express or implied, is intended to or shall constitute the Parties as partners or as participants
in a joint venture. This Agreement and the Collateral Agreements are solely for the benefit of the Parties and, only to the extent
provided in Article VII hereof, their respective Affiliates and employees, representatives, agents, directors, officers, partners
or principals, as applicable, or their respective assigns, for whom the parties shall be entitled to enforce this Agreement, and
no provision of this Agreement shall be deemed to confer upon any other Third Parties any remedy, claim, liability, reimbursement,
cause of action or other right; provided however, Parent and Buyer understand and agree that AFI’s designees shall have a
right to receive the Common Shares constituting the Purchase Price. Within 90 days of closing, AFI shall provide Buyer and Parent
with written notice of the intended recipients of the shares of Common Stock and Parent shall use its best commercial efforts to
honor such transfer request, including, without limitation, notice and any opinions of counsel to Parent’s transfer agent
for its Common Stock and Sellers shall have the right to enforce such transfer request.

 

9.12.          
Incorporation of Exhibit and Schedules. The Exhibits
and Schedules identified and/or attached to this Agreement are incorporated herein by reference and made a part hereof.

 

9.13.          
Counterparts. This Agreement and the Collateral Agreements
each may be executed simultaneously in two or more counterparts, each of which will be deemed to be an original copy hereof or
thereof and all of which together will be deemed, respectively, to constitute one and the same agreement. Counterparts delivered
by facsimile, e-mail or other electronic transmission shall be deemed to have the same legal effect as delivery of an original
signed copy of this Agreement.

 

    	23

    	 

    

 

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

 

	BUYER	 	PARENT

	Drone AFS Corp.	 	DRONE AVIATION HOLDING CORP.

	 	 	 
	 	 	 
	By: /s/ Felicia Hess	 	By: /s/ Felicia Hess
	Name: Felicia Hess	 	Name: Felicia Hess

	Title: Chief Executive Officer and Director	 	Title: Chief Executive Officer and Director

	 	 	 
	 	 	 
	SELLERS:

	 	 
	ADAPTIVE FLIGHT, INC.

	 	 
	 	 	 
	/s/ Henrik B. Christophersen	 	 
	By: Henrik B. Christophersen	 	 
	Title: Chief Executive Officer	 	 
	 	 	 
	 	 	 
	/s/ Henrik B. Christophersen	 	 
	Name: Henrik B. Christophersen	 	 
	 	 	 
	 	 	 
	/s/ Eric N. Johnson	 	 
	Name: Eric N. Johnson	 	 
	 	 	 
	/s/ Robert Wayne Pickell	 	 
	Name: Robert Wayne Pickell

	 	 
	 	 	 

 

 

    	24

    	 

    

 

 

EXHIBIT A

 

ESCROW AGREEMENT

 

    	EX A-1

    	 

    

 

EXHIBIT B

 

 

LOCKUP AGREEMENT

 

    	EX B-1

    	 

    

 

EXHIBIT C

 

 

 

BILL OF SALE

 

    	EX D-1

    	 

    

 

EXHIBIT D

 

 

IP ASSIGNMENT

 

    	EX D-2

    	 

    

 

EXHIBIT E

 

FORM OF CONSULTING AGREEMENTS

 

    	EX E-1

    	 

    

 

Disclosure
Schedules

 

Schedule
2.1 (Excluded Assets):

 

 

All of AFi’s assets are available
for transfer to Buyer, except:

2 each FCS20 autopilots to be delivered
to USTI complete with software

1 each FCS20 autopilot to be delivered
to Scion UAS with software.

 

(Note: These three autopilots have already
been committed to USTI and Scion as part of ongoing contracts.)

 

 

Schedule
2.2 (Purchased Contracts):

 

 

USTI: SOW13-040-01 w/ amendments and
additions (Value of contract: ~$25K)

 

Upcoming (expected) contracts:

Scion UAS: Two FCS20s with software for
helicopter (Est. Contract Value: $50K)

GTRI: Four FCS20s without software (Est.
Contract Value: $24K)

 

Schedule 3.2(iv)
(Liens):

 

None

 

Schedule
4.3(d) (AFI Consents):

 

None required

 

Schedule 4.4(c)
(Condition of Assets) – 

 

Assets are
in normal working condition.

 

 

schedule
4.5 – AFI currently owes $3,400 in taxes to the City of Marietta and does not have a valid business license.

 

 

Schedule
4.6:

 

2014/2015:
State Court of Cobb County: Plaintiff: LIT Industrial Ltd., Judgement against AFI in the amount of ~$19,500 for unpaid rent.

23
April, 2015: State Court of Cobb County: Plaintiff: LIT Industrial Ltd., Complaint Served against AFI for unpaid rent and expenses
(~$63,000)

 

 

Schedule
4.8 – AFI currently owes $3,400 in taxes to the City of Marietta and does not have a valid business license.

 

Schedule
4.12 (Proprietary Rights):

 

 

See Attachment “Summary of Contributing
IP”

 

 

 

 

EX E-2

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