Document:

Exhibit 10.1

 

CONFIDENTIAL

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

IDEANOMICS, INC.,

 

SOLECTRAC MERGER CORP.,

 

SOLECTRAC, INC.,

 

Steve
Heckeroth, Heather PaulsEn, NishiGANDHA Deokule, Willard MacDonald, Wilhelm Cashen, and Joseph
Nowicki, as the Primary Securityholders, and

 

SHAREHOLDER REPRESENTATIVE SERVICES LLC, as
the Securityholders’ Representative

 

Dated: June 11, 2021

 

     

     

    

 

TABLE OF CONTENTS 

 

	ARTICLE I Definitions and Rules of Construction	2
	1.1.   Definitions	2
	1.2.   Rules of Construction	20
	ARTICLE II The Merger	20
	2.1.   Closing	20
	2.2.   The Merger	20
	2.3.   Articles of Incorporation and Bylaws	21
	2.4.   Directors and Officers	21
	2.5.   Conversion of Shares	21
	2.6.   Closing Consideration	23
	2.7.   Mechanics of Exchange and Surrender	25
	2.8.   Purchase Price Adjustment	28
	2.9.   Dissenting Shares	31
	2.10.   Earnouts and Growth Capital	32
	2.11.   Substitution of Cash for Stock Consideration	36
	2.12.   Tax Treatment	36
	2.13.   Withholding	36
	ARTICLE III Representations and Warranties of the Company	37
	3.1.   Organization and Power	37
	3.2.   Authorization and Enforceability	37
	3.3.   Capitalization	38
	3.4.   No Violation	39
	3.5.   Governmental Authorizations and Consents	39
	3.6.   Financial Statements	39
	3.7.   Absence of Certain Changes	40
	3.8.   Relationships with Affiliates	42
	3.9.   Indebtedness to and from Officers and Directors of the Company	42
	3.10.   Assets	43
	3.11.   Real Property	43
	3.12.   Intellectual Property	44
	3.13.   Contracts	49
	3.14.   Compliance with Laws	51
	3.15.   Environmental Matters	52
	3.16.   Litigation	52
	3.17.   Personnel Matters	52
	3.18.   Labor Matters	53
	3.19.   Employee Benefits	54
	3.20.   Tax Matters	56
	3.21.   Insurance	60
	3.22.   Bank Accounts; Powers of Attorney	61
	3.23.   Customers and Suppliers	61
	3.24.   Accounts Receivable	61
	3.25.   Books and Records	62
	3.26.   Products Liability and Warranty Liability	62
	3.27.   Inventory	62

 

     

     

    

 

	3.28.   Export Control Laws	63
	3.29.   No Brokers	63
	3.30.   No Other Agreements to Purchase	64
	ARTICLE IV Representations and Warranties of Parent and Merger Sub	64
	4.1.   Organization and Power	64
	4.2.   Authorization and Enforceability	64
	4.3.   No Violation	65
	4.4.   Governmental Authorizations and Consents	65
	4.5.   No Brokers	65
	4.6.   Operations of Merger Sub	65
	4.7.   Financing	65
	ARTICLE V Covenants	66
	5.1.   Tax Matters	66
	5.2.   Public Announcements	67
	5.3.   Termination of Affiliated Loans	68
	5.4.   Notice of Developments	68
	5.5.   Retention Plan	69
	5.6.   No Other Representations; Non-Reliance	70
	ARTICLE VI Deliveries at Closing	70
	6.1.   Deliveries by the Company and/or the Securityholders’ Representative at Closing	70
	6.2.   Deliveries by Parent and Merger Sub at Closing	72
	ARTICLE VII Indemnification; Survival	73
	7.1.   Expiration of Representations and Warranties	73
	7.2.   Indemnification	74
	7.3.   Recourse; Escrow Release; Set-Off	80
	7.4.   Exclusive Remedy	80
	ARTICLE VIII Miscellaneous	81
	8.1.   Securityholders’ Representative	81
	8.2.   Expenses	83
	8.3.   Notices	83
	8.4.   Governing Law	84
	8.5.   Entire Agreement	84
	8.6.   Severability	84
	8.7.   Amendment	85
	8.8.   Effect of Waiver or Consent	85
	8.9.   Parties in Interest; Limitation on Rights of Others	85
	8.10.   Assignability	85
	8.11.   Dispute Resolution	85
	8.12.   No Other Duties	88
	8.13.   Reliance on Counsel and Other Advisors	88
	8.14.   Remedies	88
	8.15.   Specific Performance	88
	8.16.   Counterparts	89
	8.17.   Privileged Information; Counsel to Securityholder Representative	89
	8.18.   Further Assurances	90

 

    - ii - 

     

    

 

AGREEMENT
AND PLAN OF MERGER

 

This AGREEMENT
AND PLAN OF MERGER, dated as of June ______, 2021, by and among Ideanomics, Inc., a Nevada corporation (“Parent”),
Solectrac Merger Corp., a California corporation and wholly-owned subsidiary of Parent (“Merger Sub”), Solectrac, Inc.,
a California B-corporation (the “Company”), Steve Heckeroth, Heather Paulsen, Nishigandha Deokule, Willard MacDonald,
Wilhelm Cashen, and Joseph Nowicki, as the Primary Securityholders, and Shareholder Representative Services LLC, a Colorado limited liability
company, solely in its capacity as Securityholders’ Representative hereunder.

 

RECITALS

 

WHEREAS, Parent owns
21.4% percent of the Fully Diluted Share Number of the Company, consisting of 2,728,571 shares of Company common stock;

 

WHEREAS, Parent desires
to acquire all of the capital stock of the Company in a reverse triangular merger transaction pursuant to which the Merger Sub will merge
with and into the Company (the “Merger”), with the Company continuing as the surviving entity and a wholly-owned subsidiary
of Parent, upon the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, the respective
boards of directors of Parent, Merger Sub and the Company have, on the terms and subject to the conditions set forth in this Agreement,
(a) determined and declared that the Merger is advisable to, and in the best interest of, each corporation and its respective stockholders,
(b) authorized and approved this Agreement, the Merger and the consummation of the transactions contemplated hereby and (c) in the
case of the Company’s board of directors, has recommended the adoption and approval of this Agreement and the Merger by its stockholders,
in accordance with the California Corporations Code, as amended (the “CCC”);

 

WHEREAS, concurrently
with the execution and delivery of this Agreement, holders of the requisite number of shares of Capital Stock needed to approve and adopt
this Agreement are executing and delivering to the Company and Parent a written consent pursuant to which such holders adopt and approve
this Agreement, the Merger, and the consummation of the transactions contemplated hereby; and

 

WHEREAS, the parties
hereto desire to make certain representations, warranties, covenants and agreements in connection with the Merger.

 

NOW THEREFORE, in consideration
of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally
bound hereby, the parties hereto agree as follows:

 

     

     

    

 

ARTICLE I

Definitions and Rules of Construction

 

1.1.          Definitions.

 

As used in this Agreement, the
following terms shall have the meanings set forth below:

 

“2021 Addback”
has the meaning set forth in Section 2.10(d).

 

“2021 Earnout”
has the meaning set forth in Section 2.10(a).

 

“2021 Earnout Consideration”
has the meaning set forth in Section 2.10(a).

 

“2021 Earnout Trigger”
has the meaning set forth in Section 2.10(a).

 

“2022 Earnout”
has the meaning set forth in Section 2.10(b).

 

“2022 Earnout Consideration”
has the meaning set forth in Section 2.10(b).

 

“2022 Earnout Trigger”
has the meaning set forth in Section 2.10(b).

 

“2022 Revenue Threshold”
has the meaning set forth in Section 2.10(d).

 

“2023 Earnout”
has the meaning set forth in Section 2.10(c).

 

“2023 Earnout Consideration”
has the meaning set forth in Section 2.10(c).

 

“2023 Earnout Trigger”
has the meaning set forth in Section 2.10(c).

 

“Affiliate”
means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, “control” (including the correlative meanings of the terms “controlled
by” and “under common control with”) of a Person means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether by the ownership of voting securities or by contract or
otherwise. The Company shall be deemed for purposes of this Agreement an Affiliate of the Securityholders prior to the Closing and of
Parent from and after the Closing.

 

“Affiliated Loans”
means those items that are set forth on Section 3.9 of the Company Disclosure Schedule, together with those arrangements
entered into between the date hereof and the Closing that, if in place as of the date hereof, would have been required to have been included
on Section 3.9 of the Company Disclosure Schedule.

 

“Aggregate Optionholder
Closing Proceeds” means an amount equal to (a) the Closing Consideration multiplied by (b) the Optionholder Percentage.

 

“Aggregate Stockholder
Closing Proceeds” means an amount equal to (a) the Closing Consideration multiplied by (b) the Stockholder Percentage.

 

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“Agreement”
means this Agreement and Plan of Merger, as it may be amended from time to time in accordance with the terms hereof.

 

“Allocation Statement”
has the meaning set forth in Section 2.6(c).

 

“Ancillary Documents”
means the documents and agreements being executed and/or delivered in connection with this Agreement and the Contemplated Transactions.

 

“Auditor”
has the meaning set forth in Section 2.8(b).

 

“Balance Sheet Date”
has the meaning set forth in Section 3.6(a).

 

“Book Entry”
has the meaning in 2.5(b)(iv).

 

“Business Day”
means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York. If any period expires on a day which
is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is
not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding
Business Day.

 

“Cap” has
the meaning set forth in Section 7.2(c)(ii).

 

“Capital Stock”
means the Common Stock, including the Restricted Stock.

 

“CARES Act”
means the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended, and the rules and regulations promulgated thereunder.

 

“Cash” means
cash, cash equivalents, and marketable securities; provided that “Cash” shall not include restricted cash or cash subject
to limitations on use or distribution by Law.

 

“CCC” has
the meaning set forth in the Recitals.

 

“Certificate of Merger”
has the meaning set forth in Section 2.2(b).

 

“Closing”
has the meaning set forth in Section 2.1.

 

“Closing Cash”
means all Cash held by the Company as of 11:59 P.M. on the date immediately prior to the Closing Date, determined on a consolidated basis
in accordance with Company Accounting Principles; provided that “Closing Cash” shall be (a) increased by the amount
of deposits or other payments received by the Company but not yet credited to the bank accounts of the Company as of such time, to the
extent that such deposits or other payments have reduced Closing Net Working Capital, (b) reduced by the amount of any outstanding checks
or other payments issued by the Company but not yet deducted from the bank accounts of the Company as of such time, to the extent that
such checks or other payments have increased Closing Net Working Capital, and (c) calculated net of any amounts overdrawn from the bank
accounts of the Company as of such time.

 

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“Closing Consideration”
has the meaning set forth in Section 2.6(a).

 

“Closing Date”
has the meaning set forth in Section 2.1.

 

“Closing Date Statement”
has the meaning set forth in Section 2.6(b).

 

“Closing Indebtedness”
means all of the Indebtedness of the Company as of 11:59 P.M. on the date immediately prior to the Closing Date; provided that
 “Closing Indebtedness” shall exclude any Indebtedness repaid or otherwise terminated or released prior to Closing.

 

“Closing Net Working
Capital” means (a) the sum of the total consolidated current assets of the Company minus (b) the sum of the total consolidated
current liabilities of the Company, in each case, as of 11:59 P.M. on the date immediately prior to the Closing Date as calculated in
accordance with Company Accounting Principles applied on a basis consistent with prior periods since the Company converted from a limited
liability company to a corporation (“Since Conversion”); provided that “Closing Net Working Capital” shall
exclude Transaction Expenses of the Company and Closing Indebtedness. For the avoidance of doubt, the Closing Net Working Capital assets
include the Closing Cash.

 

“Closing Transaction
Expenses” means all Transaction Expenses as of 11:59 P.M. on the date immediately prior to the Closing Date; provided
that “Closing Transaction Expenses” shall exclude (i) costs and expenses paid by the Company or the Securityholders prior
to the Closing.

 

“Code” means
the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of subsequent superseding federal revenue
Laws.

 

“COGS” means,
with respect to a given period, the aggregate amount of all costs incurred by the Company during such period to produce, manufacture,
test, package, label, deliver, install, and/or provide the products and services of the Company, calculated in accordance with Company
Accounting Principles applied on a basis consistent with prior periods Since Conversion.

 

“Commercial Software”
means non-customized, off-the-shelf, commercially-available Software licensed pursuant to a standard form license agreement, used internally
(and not licensed or sublicensed to third parties) by the Company in connection with the business of the Company as currently conducted,
and with annual royalty, license, maintenance, support and other fees, costs, charges, and reimbursable expenses totaling $100,000 or
less in the aggregate.

 

“Commitment Letter”
means that certain side letter agreement delivered by Parent to the Company at Closing concerning, among other things, the contribution
and use of the Growth Capital described by Section 2.10(e).

 

“Common Stock”
means the common stock of the Company, par value $0. 0001 per share.

 

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

 

“Company Accounting
Principles” means GAAP accounting.

 

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“Company Data”
has the meaning set forth in Section 3.12(o).

 

“Company Disclosure
Schedule” means the disclosure schedule of even date herewith delivered by the Company to Parent in connection with the execution
and delivery of this Agreement.

 

“Company Employment
Contracts” has the meaning set forth in Section 3.17(d).

 

“Company Intellectual
Property” means all Intellectual Property that is owned or purported to be owned by the Company.

 

“Company IT Systems”
means all Software, computer hardware, servers, networks, platforms, peripherals, and similar or related items of automated, computerized,
or other information technology (IT) networks and systems (including telecommunications networks and systems for voice, data, and video)
owned, leased, licensed, or used (including through cloud-based or other third-party service providers) by or for the Company.

 

“Company Products”
means all material products and related services of the Company that are currently or at any time in the past have been offered, licensed,
sold, distributed, hosted, maintained or supported, or otherwise provided or made available by or on behalf of the Company, or are currently
under development by or for the Company.

 

“Company Sites”
has the meaning set forth in Section 3.12(n).

 

“Consultant”
means all Persons who are or have been engaged as consultants by the Company or who otherwise provide services to the Company under a
contractual arrangement.

 

“Contemplated Transactions”
means the transactions contemplated by this Agreement or any of the Ancillary Documents.

 

“Contract”
means any agreement, contract, arrangement, understanding, obligation or commitment to which a party is bound or to which its assets or
properties are subject, whether oral or written, and any amendments and supplements thereto.

 

“Copyrights”
means copyrights, works of authorship (registered or otherwise, and whether or not copyrightable), mask works, designs, and all registrations,
applications for registration, and renewals of any of the foregoing and all rights therein provided by multinational treaties or conventions,
including without limitation any rights of paternity, integrity, disclosure, withdrawal, or other so-called “moral rights”
that may be recognized in any jurisdiction (which to the extent they cannot be assigned or otherwise made subject to the transactions
contemplated herein, are hereby waived and confirmed by Company).

 

“Customer Data”
means all data, meta data, information or other content (a) transmitted to the Company by users or customers of the Company Products or
Company Sites or collected in the course of business of the Company or (b) otherwise stored, transmitted, used or hosted by or on behalf
of the Company or the Company Products.

 

“Deductible”
has the meaning set forth in Section 7.2(c)(i).

 

    - 5 - 

     

    

 

“Deferred Payroll Taxes”
means any Taxes payable by the Company that (i) relate to the portion of the “payroll tax deferral period” (as defined in
Section 2302(d) of the CARES Act) that occurs prior to the Closing and (ii) are payable following the Closing as permitted by Section
2302(a) of the CARES Act, similar law or executive order (together with all regulations and guidance related thereto issued by a Governmental
Authority).

 

“Deliverable Earnout
Consideration” has the meaning set forth in Section 2.10(g).

 

“Dispute”
has the meaning set forth in Section 8.11.

 

“Dispute Resolution
Submission” has the meaning set forth in Section 2.8(b).

 

“Disputed Line Item”
has the meaning set forth in Section 2.8(b).

 

“Dissenting Shares”
has the meaning set forth in Section 2.9(a).

 

“Earnout Auditor”
has the meaning set forth in Section 2.10(g).

 

“Earnout Consideration”
has the meaning set forth in Section 2.10(c).

 

“Earnout Dispute”
has the meaning set forth in Section 2.10(g).

 

“Earnout Dispute Notice”
has the meaning set forth in Section 2.10(g).

 

“Earnout Dispute Submission”
has the meaning set forth in Section 2.10(g).

 

“Earnout Statement”
has the meaning set forth in Section 2.10(g).

 

“Earnouts”
has the meaning set forth in Section 2.10(c).

 

“Effective Time”
has the meaning set forth in Section 2.2(b).

 

“Environmental Laws”
means any foreign, federal, state or local law, statute, ordinance, rule or regulation governing Environmental Matters, as the same have
been or may be amended from time to time, including any common law cause of action providing any right or remedy relating to Environmental
Matters, all indemnity agreements and other contractual obligations (including leases, asset purchase and merger agreements) relating
to Environmental Matters, and all applicable judicial and administrative decisions, orders and decrees relating to Environmental Matters.

 

“Environmental Matter”
means any matter arising out of, relating to, or resulting from pollution, contamination, protection of the environment, human health
or safety, health or safety of employees, sanitation, and any matters relating to emissions, discharges, disseminations, releases or threatened
releases, of Hazardous Materials into the air (indoor and outdoor), surface water, groundwater, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures or otherwise arising out of, relating to, or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling, release or threatened release of Hazardous Materials.

 

    - 6 - 

     

    

 

“Equity Securities”
of any Person means any and all shares of capital stock, rights to purchase shares of capital stock, warrants or options (whether or not
currently exercisable), participations or other equivalents of or interests in (however designated) the equity (including common stock,
preferred stock and limited liability company, partnership and joint venture interests) of such Person, and all securities exchangeable
for or convertible or exercisable into, any of the foregoing.

 

“ERISA” means
the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, as well as any rules and regulations
promulgated thereunder and any corresponding provisions of subsequent superseding federal Laws relating to retirement matters, as from
time to time in effect.

 

“ERISA Affiliate”
means a corporation which is or was at any time a member of a controlled group of corporations with the Company within the meaning of
Code Section 414(b), a trade or business which is or was under common control with the Company within the meaning of Code Section 414(c),
or a member of an affiliated service group with the Company within the meaning of Code Sections 414(m) or (o).

 

“Escrow Agent”
means American Stock Transfer & Trust Company, LLC, in its capacity as escrow agent.

 

“Escrow Agreement”
has the meaning set forth in Section 6.1(g).

 

“Estimated Closing
Indebtedness” has the meaning set forth in Section 2.6(b).

 

“Estimated Closing
Net Working Capital” has the meaning set forth in Section 2.6(b).

 

“Estimated Closing
Transaction Expenses” has the meaning set forth in Section 2.6(b).

 

“Event” means
any event, change, development, effect, condition, circumstance, matter, occurrence or state of facts.

 

“Excess Amount”
has the meaning set forth in Section 2.8(d).

 

“Excluded Shares”
has the meaning set forth in Section 2.5(b)(ii).

 

“Expense Fund”
has the meaning set forth in Section 8.1(e).

 

“Expiration Date”
has the meaning set forth in Section 7.1.

 

“FCPA” has
the meaning set forth in Section 3.14(c).

 

“Final Closing Consideration”
has the meaning set forth in Section 2.8(a).

 

“Final Closing Indebtedness”
means the amount of Closing Indebtedness as finally determined pursuant to Section 2.8.

 

    - 7 - 

     

    

 

“Final Closing Net
Working Capital” means the amount of Closing Net Working Capital as finally determined pursuant to Section 2.8.

 

“Final Closing Transaction
Expenses” means the amount of Closing Transaction Expenses as finally determined pursuant to Section 2.8.

 

“Final Determination
Date” means the date upon which the determinations of Closing Net Working Capital, Closing Indebtedness, and Closing Transaction
Expenses become final and binding on Parent and the Securityholders’ Representative pursuant to Section 2.8.

 

“Final Statement”
means the Preliminary Statement, as adjusted to reflect the final determination of Final Closing Indebtedness, Final Closing Net Working
Capital, and Final Closing Transaction Expenses in accordance with Section 2.8.

 

“Financial Statements”
has the meaning set forth in Section 3.6(a).

 

“Fiscal Year 2021”
means the fiscal year of the Company commencing on January 1, 2021 and ending on December 31, 2021.

 

“Fiscal Year 2022”
means the fiscal year of the Company commencing on January 1, 2022 and ending on December 31, 2022.

 

“Fiscal Year 2023”
means the fiscal year of the Company commencing on January 1, 2023 and ending on December 31, 2023.

 

“Fully Diluted Selling
Securityholder Share Number” means the aggregate number of shares of Capital Stock outstanding immediately prior to the Effective
Time and held by all Securityholders (other than Parent) after giving effect to the conversion of all then-outstanding In-the-Money Options.

 

“Fully Diluted Share
Number” means the aggregate number of shares of Capital Stock outstanding immediately prior to the Effective Time after giving
effect to the conversion of all then-outstanding In-the-Money Options.

 

“Fundamental Representations”
has the meaning set forth in Section 7.1.

 

“GAAP” means
generally accepted accounting principles in the United States.

 

“Governmental Authority”
means any nation or government, any foreign or domestic federal, state, county, municipal or other political instrumentality or subdivision
thereof and any foreign or domestic entity or body exercising executive, legislative, judicial, regulatory, administrative or taxing functions
of or pertaining to government, including any court.

 

“Governmental Consents”
has the meaning set forth in Section 3.5.

 

“Gross Profit Margin”
means, with respect to a given period of time, an amount, expressed as a percentage and calculated in accordance with Company Accounting
Principles applied on a basis consistent with prior periods Since Conversion, equal to (a) Gross Revenue for such period less COGS for
such period divided by (b) Gross Revenue for such period.

 

    - 8 - 

     

    

 

“Gross Revenue”
means, with respect to a given period of time, the aggregate dollar amount of revenue of the Company, calculated in accordance with Company
Accounting Principles applied on a basis consistent with prior periods Since Conversion, derived from all sales of products and services
by the Company during such period, net of a reasonable reserve for doubtful accounts established in the ordinary course of business consistent
with past practice.

 

“Growth Capital”
has the meaning set forth in Section 2.10(e).

 

“Hazardous Materials”
means any pollutants, contaminants, toxic or hazardous or extremely hazardous substances, materials, wastes, constituents, compounds,
chemicals, natural or man-made elements or forces (including petroleum or any by-products or fractions thereof, any form of natural gas,
lead, asbestos and asbestos-containing materials, building construction materials and debris, polychlorinated biphenyls (“PCBs”)
and PCB-containing equipment, radon and other radioactive elements, ionizing radiation, electromagnetic field radiation and other non-ionizing
radiation, sonic forces and other natural forces, infectious, carcinogenic, mutagenic or etiologic agents, pesticides, defoliants, explosives,
flammables, corrosives and urea formaldehyde foam insulation) that are regulated by, or may form the basis of liability under, any Environmental
Laws.

 

“In-the-Money Option”
means any Option other than an Out-of-Money Option.

 

“Income Tax Return”
means a Tax Return in connection with Income Taxes.

 

“Income Taxes”
means all federal, state, local and foreign (a) Taxes that are based on or measured by income (or that include as one of their alternative
bases a Tax based on or measured by income), and (b) franchise Taxes.

 

“Indebtedness”
means, without duplication, all obligations and indebtedness of the Company (a) for borrowed money (other than trade debt and other
similar liabilities incurred in the ordinary course of business), (b) evidenced by a note, bond, debenture or similar instrument
(including any interest rate swaps, collars, caps and similar hedging obligations), (c) created or arising under any capital lease,
conditional sale, earn out or other arrangement for the deferral of purchase price of any property, (d) under letters of credit,
banker’s acceptances, performance bonds, surety bonds or similar credit transactions, (e) for any other Person’s obligation
or indebtedness of the same type as any of the foregoing, whether as obligor, guarantor or otherwise, (f) any Deferred Payroll Taxes,
(g) for interest on any of the foregoing and/or (h) for any premiums, prepayment or termination fees, expenses or breakage costs
due upon prepayment of any of the foregoing; provided that “Indebtedness” shall exclude accounts payable to trade creditors,
accrued expenses, and deferred revenues (whether or not classified as a current or non-current liability in accordance with GAAP), in
each case to the extent arising in the ordinary course of business consistent with past practice and included in the calculation of Closing
Net Working Capital or Closing Transaction Expenses.

 

“Indemnification Percentages”
means, with respect to a Primary Securityholder, a fraction, expressed as a percentage, (a) the numerator of which is the aggregate number
of shares of Capital Stock outstanding immediately prior to the Effective Time and held by such Primary Securityholder, after giving effect
to the conversion of all then-outstanding In-the-Money Options, and (b) the denominator of which is the aggregate number of shares of
Capital Stock outstanding immediately prior to the Effective Time and held by all of the Primary Securityholders, after giving effect
to the conversion of all then-outstanding In-the-Money Options.

 

    - 9 - 

     

    

 

“Indemnitee”
has the meaning set forth in Section7.2(d)(i).

 

“Indemnitor”
has the meaning set forth in Section 7.2(d)(i).

 

“Indemnity Escrow Account”
has the meaning set forth in Section 2.6(d)(i).

 

“Indemnity Escrow Amount”
means $1,807,800.

 

“Individual Percentage”
means a fraction, expressed as a percentage, (i) the numerator of which is the individual Selling Securityholder’s Fully Diluted
Share Number and (ii) the denominator of which is the Fully Diluted Selling Securityholder Share Number.

 

“Insurance Policies”
has the meaning set forth in Section 3.21.

 

“Intellectual Property”
means any and all rights, title, and interest in, arising out of, or associated with any of the following in any jurisdiction throughout
the world: Copyrights; Patents; Trademarks; Trade Secrets; internet domain names and social media accounts or user names (including “handles”),
whether or not Trademarks, together with all associated web addresses, URLs, websites and web pages, social media sites and pages associated
with the foregoing, and all content, data, features, tools, or other materials thereon or relating thereto, whether or not Copyrights;
Software; rights of publicity, likeness, or voice or personal appearance; and all other intellectual or industrial property and proprietary
rights that are or may be recognized under applicable Law.

 

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

 

“International Trade
Laws and Regulations” means all applicable Laws concerning the importation of merchandise, the export or re-export of products,
services and/or technology, the terms and conduct of international transactions, the making or receiving international payments and/or
the authorization to hold an ownership interest in a business located in a country other than the United States, including the Tariff
Act of 1930 as amended and other Laws administered by the United States Customs Service, regulations issued or enforced by the United
States Customs Service, the Export Administration Act of 1979 as amended, the Export Administration Regulations, the International Emergency
Economic Powers Act, the Arms Export Control Act, the International Traffic in Arms Regulations, any other export controls administered
by an agency of the U.S. Government, Executive Orders of the President regarding embargoes and restrictions on trade with designated countries
and Persons, the embargoes and restrictions administered by the United States Office of Foreign Assets Control, the antiboycott regulations
administered by the United States Department of Commerce, the antiboycott regulations administered by the United States Department of
the Treasury, Laws of the United States and other countries implementing the United States Mexico Canada Agreement, antidumping and countervailing
duty Laws, Laws by other countries concerning the ability of U.S. Persons to own businesses and conduct business in those countries, Laws
by other countries implementing the OECD Convention on Combating Bribery of Foreign Officials, restrictions by other countries on holding
foreign currency and repatriating funds and other Laws adopted by the Governmental Authorities or agencies of other countries relating
to the same subject matter as the United States Laws described above.

 

    - 10 - 

     

    

 

“Inventory”
has the meaning set forth in Section 3.27.

 

“ITM Exercise Price”
means the aggregate amount of the exercise prices of all In-the-Money Options that are outstanding and unexercised immediately prior to
the Effective Time.

 

“Knowledge of the Company”
means the knowledge of any of the following individuals: Steve Heckeroth, Nishigandha Deokule, Heather Paulsen, and Willard MacDonald.
Any such individual shall be deemed to have knowledge of a particular fact or matter if: (i) such individual is actually aware of such
fact or matter, or (ii) such fact or matter would reasonably have been known by such individual in the reasonable and ordinary course
performance of his or her duties and responsibilities to the Company, as applicable. Notwithstanding the foregoing, “knowledge”
after reasonable inquiry will not be deemed to include knowledge of the results of any freedom to operate or patent or other intellectual
property clearance searches or an obligation to conduct the same.

 

“Laws” means
all laws, Orders, statutes, codes, regulations, ordinances, decrees, rules, or other requirements with similar effect of any Governmental
Authority.

 

“Leased Real Property”
has the meaning set forth in Section 3.11.

 

“Letter of Transmittal”
has the meaning set forth in Section 2.7(a).

 

“Liability”
means, with respect to any Person, any and all liabilities, claims, debts, obligations and commitments of whatever nature of such Person
of any kind, character or description, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable
or otherwise (including those arising out of any Law, Contract, breach, violation, infringement or tort, whether based on negligence,
strict liability or otherwise) and whether or not the same is required to be accrued on the financial statements of such Person.

 

“Licensed Intellectual
Property” means all Intellectual Property in which the Company holds any rights or interests granted by any other Person, whether
or not owned by such Person, and whether licensed by written or oral agreement.

 

“Lien” means,
with respect to any asset, any lien, security interest, mortgage, deed of trust, priority, pledge, charge, right of first refusal or other
encumbrance or similar right of others in respect of such asset, or any agreement to give any of the foregoing. Notwithstanding the foregoing,
however, the term “Lien” shall not include: (i) statutory liens for Taxes, which are not yet due and payable or are being
contested in good faith by appropriate proceedings and for which appropriate reserves have been established; (ii) statutory or common
law liens to secure landlords, lessors or renters under leases or agreements confined to the premises rented which are not violated by
the current use or occupancy of such real property or the operation or the respective business of the Company and with respect to leasehold
interests, mortgages and other Liens incurred, created, assumed or permitted to exist and arising by, through or under a landlord or owner
of the leased real property; (iii) deposits or pledges made in connection with, or to secure payment of, workers’ compensation,
unemployment insurance, old age pension or other social security programs mandated by Laws; (iv) statutory or common law liens in favor
of carriers, warehousemen, mechanics and materialmen to secure claims for labor, materials or supplies incurred in the ordinary course
of business; and (v) restrictions on transferability imposed by foreign, federal or state securities laws;.

 

    - 11 - 

     

    

 

“Litigation”
has the meaning set forth in Section 3.16.

 

“Loss” or
 “Losses” has the meaning set forth in Section 7.2(a).

 

“Malicious Code”
has the meaning set forth in Section 3.12(m).

 

“Material Adverse Effect”
means, with respect to a given Person, (a) a material adverse effect on the business, condition (financial or otherwise), assets, liabilities,
results of operation of the Person and its Subsidiaries taken as a whole; provided, that any effect resulting from any of the following
shall not be considered when determining whether a Material Adverse Effect shall have occurred: (i) conditions affecting generally the
United States economy, including the financial, credit, or securities markets, (ii) acts of terrorism, armed hostilities or war or any
other regional, national or international calamity (e.g., pandemic, chemical spill, industrial accident, or similar disastrous
event marked by great loss and lasting distress), (iii) any change in Law or GAAP, or the interpretation thereof, (iv) the public announcement
of this Agreement and the Contemplated Transactions, (v) any failure by such Person and its Subsidiaries to meet any internal or published
projections, forecasts, or revenue or earnings predictions (it being understood and agreed that the circumstances underlying any such
failure may, unless otherwise excluded by another clause in this definition, be taken into account in determining whether a Material Adverse
Effect has occurred or would be reasonably likely to occur), (vi) natural disasters or acts of God, (vii) actions by or on behalf of the
Company taken at the request of Parent or Merger Sub or an Affiliate thereof or (viii) fluctuations in the trading price of shares of
the capital stock of such Person (it being understood and agreed that the circumstances underlying any such fluctuations may, unless otherwise
excluded by another clause in this definition, be taken into account in determining whether a Material Adverse Effect has occurred or
would be reasonably likely to occur), except, in the case of clause (i), (ii), and (vi), to the extent (and only to the extent) that such
Person and its Subsidiaries are materially disproportionately impacted, or would reasonably be expected to be materially disproportionately
impacted, by such events in comparison to other businesses operating in the same locality or geographic area commercializing industrial
equipment, or (b) an Event that prevents or materially delays, or would reasonably be expected to prevent or materially delay, consummation
of the Contemplated Transactions or the performance by such Person, its Subsidiaries and their respective equity holders of any of their
material obligations under this Agreement or the Ancillary Documents.

 

“Material Contracts”
has the meaning set forth in Section 3.13(a).

 

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

 

    - 12 - 

     

    

 

“Merger Consideration”
means (a) the Closing Consideration, plus (b) the consideration that the Selling Securityholders become entitled to receive pursuant
to Section 2.8 in respect of the Shortfall Amount (if any), plus (c) that portion (if any) of the Working Capital Escrow Amount
that the Selling Securityholders become entitled to receive pursuant to Section 2.8, plus (d) that portion (if any) of the Indemnity
Escrow Amount that the Selling Securityholders become entitled to receive pursuant to Section 7.3 plus (e) the Earnout Consideration
that the Selling Securityholders become entitled to receive pursuant to Section 2.10.

 

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

 

“Merger Sub Common
Stock” has the meaning set forth in Section 2.5(a).

 

“Most Recent Financial
Statements” has the meaning set forth in Section 3.6(a).

 

“Most Recent Unaudited
Balance Sheet” has the meaning set forth in Section 3.24.

 

“Most Recent Unaudited
Financial Statements” has the meaning set forth in Section 3.6(a).

 

“NASDAQ”
means the National Market System of the National Association of Securities Dealers Automated Quotations System.

 

“Objections Statement”
has the meaning set forth in Section 2.8(b).

 

“Open Source Software”
means any Software that is distributed as “free software,” “open source software,” or pursuant to any license
identified as an “open source license” by the Open Source Initiative (www.opensource.org/licenses) or other license that substantially
conforms to the version of the Open Source Definition (opensource.org/osd) in effect on the Closing Date (including, without limitation,
the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), GNU Affero General Public License (AGPL), MIT License
(MIT), Apache License, Artistic License, and BSD Licenses).

 

“Option”
means an option to purchase shares of Common Stock.

 

“Option Cancellation
Agreement” has the meaning set forth in Section 2.7(c).

 

“Option Closing Consideration”
means, with respect to each share of Common Stock underlying each In-the-Money Option outstanding immediately prior to the Effective Time,
an amount, rounded to four decimal places, equal to (a) the Per Share Closing Consideration less (b) the exercise price per share of Common
Stock issuable upon exercise of such In-the-Money Option.

 

“Option Consideration”
means, with respect to each share of Common Stock underlying each In-the-Money Option outstanding immediately prior to the Effective Time,
an amount, rounded to four decimal places, equal to (a) the Option Closing Consideration, (b) the right to receive the Per Share Shortfall
Consideration (if any), as and when payable in accordance with the terms of this Agreement, (c) the right to receive the Per Share Working
Capital Escrow Consideration (if any), as and when payable in accordance with the terms of this Agreement and the Escrow Agreement, (d)
the right to receive the Per Share Indemnity Escrow Consideration (if any), as and when payable in accordance with the terms of this Agreement
and the Escrow Agreement, and (e) the right to receive the Per Share Earnout Consideration (if any), as and when payable in accordance
with the terms of this Agreement.

 

    - 13 - 

     

    

 

“Optionholder”
means any holder of any Options outstanding immediately prior to the Effective Time.

 

“Optionholder Percentage”
means a fraction, expressed as a percentage, (a) the numerator of which is equal to the aggregate amount of Option Closing Consideration
payable to the Optionholders pursuant to Section 2.5(c) and (b) the denominator of which is equal to the sum of (i) the aggregate amount
of Per Share Closing Consideration payable to the Stockholders pursuant to Section 2.5(b) plus (ii) the aggregate amount of Option Closing
Consideration payable to the Optionholders pursuant to Section 2.5(c).

 

“Orders”
means all judgments, orders, writs, injunctions, decisions, rulings, decrees and awards of any Governmental Authority.

 

“Out-of-Money Option”
means an Option having an exercise price per share of Common Stock issuable upon exercise of such Option in excess of the Per Share Closing
Consideration, calculated for this purpose as if all Options were included in the calculations of ITM Exercise Price and Fully Diluted
Selling Securityholder Share Number.

 

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

 

“Parent Common Stock”
means the common stock of Parent, par value $0.001 per share

 

“Parent Disclosure
Schedule” means the disclosure schedule of even date herewith delivered by Parent to the Company in connection with the execution
and delivery of this Agreement.

 

“Parent Indemnitees”
has the meaning set forth in Section 7.2(a).

 

“Patents”
means United States and foreign issued patents and patent applications (whether provisional or non-provisional), including divisionals,
continuations, continuations-in-part, substitutions, reissues, reexaminations or otherwise resulting from any post grant review, extensions,
or restorations of any of the foregoing, and other Governmental Authority-issued indicia of invention ownership (including certificates
of invention, petty patents, and patent utility models).

 

“Paying Agent”
means American Stock Transfer & Trust Company, LLC, in its capacity as paying agent.

 

“Paying Agent Agreement”
has the meaning set forth in Section 6.1(h).“PCBs” has the meaning set forth in the definition of “Hazardous
Materials.”

 

“Pending Claim”
has the meaning set forth in Section 7.3(b).

 

    - 14 - 

     

    

 

“Per Share Closing
Consideration” means the quotient obtained by dividing (i) the Closing Consideration by (ii) the Fully Diluted Selling Securityholder
Share Number.

 

“Per Share Earnout
Consideration” means, with respect to any Earnout Consideration that becomes payable to the Selling Securityholders pursuant
to Section 2.10, an amount, rounded to four decimal places, equal to (a) the amount of such Earnout Consideration divided by (b) the Fully
Diluted Selling Securityholder Share Number.

 

“Per Share Indemnity
Escrow Consideration” means, with respect to any amount released from time to time from the Indemnity Escrow Account for distribution
to the Selling Securityholders pursuant to Section 7.3, an amount, rounded to four decimal places, equal to (a) such amount so released
divided by (b) the Fully Diluted Selling Securityholder Share Number.

 

“Per Share Merger Consideration”
means an amount, rounded to four decimal places, equal to (a) the Per Share Closing Consideration, (b) the right to receive the Per Share
Shortfall Consideration (if any), as and when payable in accordance with the terms of this Agreement, (c) the right to receive the Per
Share Working Capital Escrow Consideration (if any), as and when payable in accordance with the terms of this Agreement and the Escrow
Agreement, (d) the right to receive the Per Share Indemnity Escrow Consideration (if any), as and when payable in accordance with the
terms of this Agreement and the Escrow Agreement, and (e) the right to receive the Per Share Earnout Consideration (if any), as and when
payable in accordance with the terms of this Agreement.

 

“Per Share Shortfall
Consideration” means an amount, rounded to four decimal places, equal to (a) the Shortfall Amount divided by (b) the Fully Diluted
Selling Securityholder Share Number.

 

“Per Share Working
Capital Escrow Consideration” means, with respect to any amount released from the Working Capital Escrow Account for distribution
to the Selling Securityholders pursuant to Section 2.8(c) or Section 2.8(d), an amount, rounded to four decimal places, equal to (a) such
amount so released divided by (b) the Fully Diluted Selling Securityholder Share Number.

 

“Permits”
has the meaning set forth in Section 3.14(b).

 

“Person”
means any individual, person, entity, general partnership, limited partnership, limited liability partnership, limited liability company,
corporation, joint venture, trust, business trust, cooperative, association, foreign trust or foreign business organization and the heirs,
executors, administrators, legal representatives, successors and assigns of the “Person” when the context so permits.

 

“Personally Identifiable
Information” means any information that alone or in combination with other information held by or on behalf of the Company can
be used to specifically identify a Person, including but not limited to a natural person’s name, street address, telephone number,
e-mail address, photograph, social security number, driver’s license number, passport number, credit or debit card number or customer
or financial account number or any similar information that is defined or otherwise treated as personally identifiable information under
applicable Laws.

 

    - 15 - 

     

    

 

“Personnel”
has the meaning set forth in Section 3.17(a).

 

“Plan” or
 “Plans” has the meaning set forth in Section 3.19(a).

 

“Pre-Closing Date Share”
means (a) with respect to any Income Tax liability for a Straddle Period, the amount that would be due for the portion of the tax
period beginning on the first day of the Straddle Period and ending on the Closing Date, based on an interim closing of the books as of
the close of business on the Closing Date, and (b) with respect to any other Tax liability for a Straddle Period, the total amount
due for the entire Straddle Period, multiplied by (x) the number of days in the Straddle Period on or before the Closing Date divided
by (y) the total number of days in the Straddle Period.

 

“Pre-Closing Taxes”
means (a) all Taxes of the Company with respect to taxable periods ending on or before the Closing Date, (b) the Pre-Closing Date Share
of all Taxes of the Company with respect to Straddle Periods, (c) all Transfer Taxes; (d) any Liabilities of the Company for Taxes of
another Person (1) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or non-U.S. Tax Law) as a result
of the Company (or any predecessor) having been a member of a consolidated, combined or similar Tax group at any time prior to Closing
or, (2) as a transferee or successor, where such status arose prior to Closing; (e) any and all Taxes arising in connection with the Contemplated
Transactions; (f) any Taxes, including employment, payroll or other Taxes with respect to compensatory payments paid in connection with
the Closing; (g) any Deferred Payroll Taxes; and (h) any payments required to be made after the Closing Date under any Tax Sharing Agreement
to the Company was obligated, or was a party, on or prior to the Closing Date provided, that Pre-Closing Taxes shall not include
any Taxes resulting from events or transactions occurring after the Closing or on the Closing Date at the request of Parent, other than
events or transactions in the ordinary course of business or the Contemplated Transactions.

 

“Preliminary Statement”
has the meaning set forth in Section 2.8(a).

 

“Primary Securityholders”
means Steve Heckeroth, Heather Paulsen, Nishigandha Deokule, Willard MacDonald, Wilhelm Cashen, and Joseph Nowicki.

 

“Privacy and Security
Requirements” has the meaning set forth in Section 3.12(n).

 

“Privacy Policy”
means any external or internal past or present published privacy policy of the Company, including any policy relating to (a) the privacy
of users of any Company Product or of any Company Site, (b) the collection, storage, disclosure, transmission, and transfer of any Customer
Data or Personally Identifiable Information, (c) any employee information, (d) Privacy and Security Requirements and any breach, failure,
or deficiency thereof (and Company’s subsequent remediation thereof or notification of affected Persons), and (e) any summary or
analysis of Company’s practices, statements, notices, communications, and disclosures regarding any of the foregoing.

 

“Real Property Leases”
has the meaning set forth in Section 3.11.

 

“Representatives”
means, with respect to any Person, such Person’s directors, officers, Affiliates, employees and agents.

 

    - 16 - 

     

    

 

“Restricted Stock”
means the shares of Common Stock that are subject to a repurchase option, risk of forfeiture or other condition under any applicable stock
restriction agreement or other Contract with the Company.

 

“Retention Plan”
has the meaning set forth in Section 5.5.

 

“Securities Act”
means the Securities Act of 1933, as amended.

 

“Securityholder”
means each Stockholder and each holder of In-the-Money Options.

 

“Securityholder Indemnitees”
has the meaning set forth in Section 7.2(b).

 

“Securityholders’
Representative” has the meaning set forth in Section 8.1(a).

 

“Selling Securityholder
Percentage” means a fraction, expressed as a percentage, (i) the numerator of which is the Fully Diluted Selling Securityholder
Share Number and (ii) the denominator of which is the Fully Diluted Share Number.

 

“Selling Securityholders”
means all of the Company’s Securityholders, except for Parent and any holder of Dissenting Shares (but only for so long as such
shares constitute Dissenting Shares in accordance with Section 2.9).

 

“Shortfall Amount”
has the meaning set forth in Section 2.8(c).

 

“Software”
means computer programs, operating systems, applications, firmware, and other code, including all source code, object code, application
programming interfaces, data files, databases, protocols, specifications, tools, designs, and other content, materials, features, and
documentation thereof, including without limitation any of the foregoing which is used, accessed, licensed, marketed, and/or distributed
as an externally-hosted, network-based, and/or remotely accessed “Software as a Solution” (SaaS), service bureau arrangement,
or similar service.

 

“StartEngine”
means StartEngine Crowdfunding, Inc.

 

“StartEngine Investors”
has the meaning set forth in Section 7.2(a).

 

“Stock Certificate”
means a certificate or certificates, or an instrument or instruments, which immediately prior to the Effective Time represented outstanding
shares of Capital Stock.

 

“Stock Option Plan”
means the Solectrac Inc. 2019 Equity Incentive Plan.

 

“Stockholder(s)”
means the holders of shares of Capital Stock.

 

“Stockholder Percentage”
means a fraction, expressed as a percentage, (a) the numerator of which is equal to the aggregate amount of Per Share Closing Consideration
payable to the Stockholders pursuant to Section 2.5(b) and (b) the denominator of which is equal to the sum of (i) the aggregate amount
of Per Share Closing Consideration payable to the Stockholders pursuant to Section 2.5(b) plus (ii) the aggregate amount of Option Closing
Consideration payable to the Optionholders pursuant to Section 2.5(c).

 

    - 17 - 

     

    

 

“Straddle Period”
means any taxable period beginning on or before the Closing Date and ending after the Closing Date.

 

“Subsidiary”
means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, (a) of which such
Person or any other Subsidiary of such Person is a general partner (excluding partnerships, the general partnership interests of which
held by such Person or any Subsidiary of such Person do not have a majority of the voting interests in such partnership), or (b) at
least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly
owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

 

“Surviving Corporation”
has the meaning set forth in Section 2.2(a).

 

“Target Net Working
Capital” means Two Million Five Hundred Thousand Dollars ($2,500,000), including for the avoidance of doubt, Cash.

 

“Tax” or
 “Taxes” means all federal, state, local and foreign income, profits, franchise, gross receipts, alternative minimum
add-on minimum, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use,
real property, personal property, unclaimed property, escheat, social security, unemployment, payroll, license, employee, withholding,
excise production, value added, occupancy, transfer, real property gains, value added, excise, occupation, customs, duties, documentary,
registration and other taxes, duties or assessments of any nature whatsoever imposed by a Governmental Authority, together with all interest,
penalties or additions to tax attributable to such taxes and any Liability for Taxes of another Person by Contract (including any Tax
Sharing Agreement), as a transferee or successor, or under § 1.1502-6 of the Treasury Regulations or analogous state, local
or foreign Law, or otherwise, whether disputed or not.

 

“Tax Contest”
shall mean any audit, hearing, examination, proposed adjustment, arbitration, deficiency, assessment, suit, dispute, claim, proceeding
or other Litigation commenced, filed or otherwise initiated or convened to investigate or resolve the existence and extent of a Liability
for Taxes.

 

“Tax Return”
means any report, return, statement, form or other written information (including elections, declarations, disclosures, schedules, estimates
and information returns) filed or required to be filed by the Company with a Taxing Authority in connection with any Taxes and any amendment
thereto.

 

“Tax Sharing Agreement”
means any Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar Contract or arrangement (including any such
agreement, contract or arrangement included in any purchase or sale agreement, merger agreement, joint venture agreement or other document).

 

    - 18 - 

     

    

 

“Taxing Authority”
shall mean any government or any subdivision, agency, commission or authority thereof, or any quasi-governmental or private body, having
jurisdiction over the assessment, determination, collection or other imposition of Taxes.

 

“Top Customers”
has the meaning set forth in Section 3.23(a).

 

“Top Suppliers”
has the meaning set forth in Section 3.23(b).

 

“Trade Secrets”
means trade secrets (whether defined and/or protectable by statute, common law, or any other source of applicable Law), know-how, inventions
(whether or not patentable), discoveries, improvements, technology, industrial designs, business and technical information, databases,
data compilations and collections, tools, methods, processes, formulae, techniques, plans, proposals, research, pricing, cost information,
and other confidential and proprietary information and all rights therein.

 

“Trademarks”
means trademarks, service marks, brands, certification marks, logos, trade dress, trade names, taglines, and other similar indicia of
source or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications for registration,
and renewals of, any of the foregoing.

 

“Transaction Expenses”
means all third-party fees, costs, expenses, and payments incurred, whether or not billed or accrued, by the Company in connection with,
arising from or relating to the Contemplated Transactions, including (a) fees and disbursements of counsel, financial advisors, Consultants
and accountants (including, for the avoidance of doubt, the fees and expenses of the Securityholders’ Representative), (b) filing
fees and expenses incurred by the Company in connection with any filing by the Company with a Governmental Authority, (c) any severance,
change-in-control, termination, retention, sale bonus, incentive or similar amounts or benefits payable or due to any current or former
employee, director or independent consultant of the Company as a result of or in connection with the Contemplated Transactions, together
with the employer portion of any applicable payroll Taxes owed with respect to the foregoing, (d) fifty percent (50%) of the fees and
expenses of the Paying Agent, and (e) fifty (50%) of the fees and expenses of the Escrow Agent; provided, that “Transaction Expenses”
shall not include: (i) any amounts payable pursuant to the Retention Plan; (ii) Taxes and all amounts otherwise included in the calculation
of Closing Net Working Capital; (iii) fifty percent (50%) of the fees and expenses of the Paying Agent; and (iv) fifty percent (50%) of
the fees and expenses of the Escrow Agent.

 

“Transfer Taxes”
means all transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest)
incurred in connection with the Contemplated Transactions.

 

“Treasury Regulations”
means the regulations promulgated under the Code, as amended from time to time (including any successor regulations).

 

“VWAP” means,
with respect to a given date, the volume weighted average price for a share of Parent Common Stock on the principal United States securities
exchange on which such security is traded (which is currently NASDAQ) during the thirty (30)-day period ending at 4:00 p.m. New York time
(or such other time as such exchange publicly announces is the official close of trading) on such date.

 

    - 19 - 

     

    

 

“Working Capital Escrow
Account” has the meaning set forth in Section 2.6(d)(i).

 

“Working Capital Escrow
Amount” means $200,000.

 

1.2.         
Rules of Construction.

 

Unless the context otherwise
requires (a) a capitalized term has the meaning assigned to it, (b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP, (c) references in the singular or to “him,” “her,” “it,” “itself,”
or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the
context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be, (d) references
to Articles, Sections and Exhibits shall refer to articles, sections and exhibits of this Agreement, unless otherwise specified, (e) the
headings in this Agreement are for convenience and identification only and are not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any provision thereof, (f) this Agreement shall be construed without regard to any presumption
or other rule requiring construction against the party that drafted and caused this Agreement to be drafted, (g) all monetary figures
shall be in United States dollars unless otherwise specified, (h) references to “including” in this Agreement shall mean “including,
without limitation,” whether or not so specified, and (i) the word “extent” in the phrase “to the extent”
shall mean the degree to which a subject or other theory extends and such phrase shall not mean “if.” The phrases “has
provided,” “made available,” “delivered” “furnished to” or similar phrases used in this Agreement
mean that, for any document, the subject document was delivered to Parent and its Representatives in connection with the Contemplated
Transactions prior to 5:00 p.m. Eastern Time at least two (2) Business Days prior to the date of this Agreement, and remained accessible
to the Parent and its Representatives through the Closing Date.

 

ARTICLE II

The Merger

 

2.1.         
Closing.

 

The closing of the Contemplated
Transactions (the “Closing”) will take place remotely via the electronic exchange of signature pages and closing deliverables
at 10:00 A.M. New York time on the date hereof or such other date, place or time as Parent and the Company may agree. The day on which
the Closing actually occurs is referred to herein as the “Closing Date”.

 

2.2.         
The Merger.

 

(a)               
Upon the terms and subject to the conditions hereof, and in accordance with the CCC, at the Effective Time, Merger Sub shall be
merged with and into the Company and the separate existence of Merger Sub shall thereupon cease, and the Company, as the corporation surviving
the Merger (the “Surviving Corporation”), shall by virtue of the Merger continue its corporate existence under the
laws of the State of California.

 

(b)              
The Merger shall become effective at the date and time (the “Effective Time”) when the certificate of merger
(the “Certificate of Merger”) shall have been duly executed and filed with the Secretary of State of the State of California
in accordance with the CCC, or at such other time as is specified in the Certificate of Merger in accordance with the CCC, which Certificate
of Merger shall be filed on the Closing Date as soon as practicable following the Closing.

 

    - 20 - 

     

    

 

(c)              
From and after the Effective Time, the Merger shall have the effects set forth in the CCC. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, and duties of the Company and Merger Sub shall become
debts, liabilities, obligations and duties of the Surviving Corporation. For the avoidance of doubt, all references herein to the Company
relating to the period following the Closing shall be deemed to refer to the Surviving Corporation.

 

2.3.         
Articles of Incorporation and Bylaws.

 

At the Effective Time, the articles
of incorporation and the bylaws of Merger Sub shall be the articles of incorporation and the bylaws, respectively, of the Surviving Corporation
(except that the name of the corporation shall be the name of the Company) until thereafter amended in accordance with the CCC.

 

2.4.         
Directors and Officers.

 

Unless otherwise determined
by Parent prior to the Effective Time, at the Effective Time, the directors of the Company serving in such capacity immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, until their respective successors are duly elected or appointed
and qualified. Unless otherwise determined by Parent prior to the Effective Time, at the Effective Time, the officers of the Company serving
in such capacity immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until their respective successors
are duly elected or appointed and qualified.

 

2.5.         
Conversion of Shares.

 

(a)              
Conversion of Merger Sub Common Stock. Subject to the terms and conditions of this Agreement, at the Effective Time, by
virtue of the Merger and without any action on the part of any party, each share of common stock, par value $0.0001 per share, of Merger
Sub (“Merger Sub Common Stock”), issued and outstanding immediately prior to the Effective Time, shall be converted
into one validly issued, fully paid and nonassessable share of common stock, par value $0.0001 per share, of the Surviving Corporation.
As of the Effective Time, the shares of Merger Sub Common Stock shall no longer be outstanding and shall automatically be cancelled and
shall cease to exist, and the holder or holders of such shares shall cease to have any rights with respect thereto, except the right to
receive shares of common stock in the Surviving Corporation to be issued in consideration therefore as provided herein, without interest.
After the Effective Time, Parent shall be the holder of all of the issued and outstanding shares of the Surviving Corporation’s
common stock.

 

(b)              
Subject to the terms and conditions of this Agreement, at the Effective Time, by virtue of the Merger and without any action on
the part of any party:

 

    - 21 - 

     

    

 

(i)               Conversion
of Company Common Stock. Each share of Common Stock issued and outstanding immediately prior to the Effective Time (other than shares
that are Dissenting Shares, Excluded Shares, or Parent Shares) shall be cancelled and extinguished and shall be converted automatically
into the right to receive the Per Share Merger Consideration;

 

(ii)             
Cancellation of Company-Owned Capital Stock. Each share of Capital Stock issued and outstanding immediately prior to the
Effective Time held by the Company (the “Excluded Shares”) shall be cancelled and extinguished as of the Effective
Time and no consideration will be delivered or deliverable in exchange therefor;

 

(iii)           
Cancellation of Parent-Owned Capital Stock. Each share of Capital Stock issued and outstanding immediately prior to the
Effective Time held by Parent (the “Parent Shares”) shall be cancelled and extinguished as of the Effective Time and
no consideration will be delivered or deliverable in exchange therefor; and

 

(iv)             Cancellation
of Authorized, Unissued Capital Stock. Each share of Capital Stock that is authorized but unissued immediately prior to the Effective
Time (including those held in the treasury of the Company) shall be cancelled and extinguished.

 

Each Stock Certificate outstanding
immediately prior to the Effective Time shall be cancelled and replaced with an electronic book entry (a “Book Entry”)
such that all shares of Capital Stock are solely reflected as Book Entries in the Company. Each share of Capital Stock to be converted
into the right to receive the Per Share Merger Consideration as provided in this Section 2.5(b) shall be automatically cancelled and shall
cease to exist, and the record holders of the shares represented by Book Entry immediately prior to the Effective Time shall cease to
have any rights with respect to such Capital Stock other than the right to receive, in accordance with Section 2.7, the Per Share Merger
Consideration.

 

(c)               
Company Options. Parent shall not assume any Option in connection with the Contemplated Transactions. Each Option shall
vest in full immediately prior to the Effective Time and, at the Effective Time, by virtue of the Merger and without any action on the
part of any party, each Option issued, outstanding and unexercised immediately prior to the Effective Time shall be cancelled and extinguished
and each Optionholder shall cease to have any rights with respect thereto other than the right to receive, solely with respect to In-the-Money
Options, consideration equal to (i) the Option Consideration multiplied by (ii) the number of shares of Common Stock underlying each In-the-Money
Option (such consideration to be paid as promptly as practicable following the Closing, subject to receipt of a letter of transmittal
as set forth in this Agreement from each respective holder of Company Options). For the avoidance of doubt, all Out-of-Money Options shall
be cancelled and shall not have any right to receive any consideration in respect thereof. The board of directors of the Company has adopted
all resolutions and taken all actions necessary to effectuate the provisions of this Section 2.5(c) and cause the Stock Option Plan to
terminate at or prior to the Effective Time.

 

(d)              
Company Restricted Stock. Each share of Restricted Stock issued and outstanding as of immediately prior to the Effective
Time shall vest in full immediately prior to the Effective Time and shall be entitled to receive the consideration set forth in Section
2.5(b)(i).

 

    - 22 - 

     

    

 

(e)               
Transfers. From and after the Effective Time, the stock transfer ledger of the Company shall be closed and there shall be
no further registration of transfers on the ledgers of the Surviving Corporation of any shares of Capital Stock.

 

2.6.         
Closing Consideration.

 

(a)              
The aggregate consideration to be received by the Selling Securityholders in exchange for the Capital Stock and In-the-Money Options
at the Closing (the “Closing Consideration”) shall be equal to (a) Eighteen Million Seventy Eight Thousand Dollars
($18,078,000) plus (b) the product of (i) (A) the ITM Exercise Price less (B) Estimated Closing Indebtedness plus
(C) the amount, if any, by which the Estimated Closing Net Working Capital exceeds the Target Net Working Capital less (D) the
amount, if any, by which the Estimated Closing Net Working Capital is less than the Target Net Working Capital less (E) Estimated
Closing Transaction Expenses, multiplied by (ii) the Selling Securityholder Percentage, less (c) the Indemnity Escrow Amount, less
(d) the Working Capital Escrow Amount, less (e) the Expense Fund.

 

(b)              
At least three (3) Business Days prior to the Closing, the Company shall deliver to Parent a statement, certified by the chief
executive officer of the Company, setting forth (i) the Company’s good faith estimate of Closing Indebtedness (the “Estimated
Closing Indebtedness”), Closing Net Working Capital (the “Estimated Closing Net Working Capital”), and Closing
Transaction Expenses (the “Estimated Closing Transaction Expenses”), together with reasonable supporting documentation,
and (ii) a calculation of the Closing Consideration based upon such estimates. Parent shall have the opportunity to review all materials
and information used by the Company and its respective Representatives in preparing such estimate, and the Company shall make available
such personnel as are reasonably necessary to assist Parent in its review of the Closing Date Statement. Such statement, as and to the
extent accepted by Parent in its good faith reasonable discretion, is referred to herein as the “Closing Date Statement.”

 

(c)              
On the date that is three (3) days prior to the Closing, the Company shall deliver to Parent a statement (the “Allocation
Statement”) that sets forth a detailed breakdown of all amounts payable at the Closing pursuant to this Article II (and in accordance
with the terms of this Agreement), including:

 

(i)               
the names and addresses of each Securityholder;

 

(ii)             
the number of shares of Capital Stock held by each Stockholder as of immediately prior to the Effective Time;

 

(iii)           
the number of Options held by each Optionholder as of immediately prior to the Effective Time, together with the exercise price
of each such Option, the number of shares of Common Stock subject to each such Option, and an indication of whether such Option is an
In-the-Money Option or an Out-of-Money Option;

 

(iv)            
the Fully Diluted Share Number and the Fully Diluted Selling Securityholder Share Number;

 

(v)              
the Selling Securityholder’s Individual Percentage;

 

    - 23 - 

     

    

 

(vi)            
the Per Share Closing Consideration and the Option Closing Consideration;

 

(vii)          
for each Selling Securityholder the portion (expressed in both percentage interest and dollar terms) of the Closing Consideration
to be paid to such Selling Securityholder;

 

(viii)       
the portion of the Option Closing Consideration to be paid by (A) the Paying Agent pursuant to Section 2.7(b)(i)(A) and (B) the
Paying Agent pursuant to Section 2.7(b)(i)(B);

 

(ix)            
the share of each Selling Securityholder, in percentage interest terms (i.e. the Selling Securityholder’s Individual Percentage),
of (A) the Indemnity Escrow Amount, (B) the Working Capital Escrow Amount, and (C) any Shortfall Amount; and

 

(x)              
the share of each Selling Securityholder, in percentage interest terms (i.e. the Selling Securityholder’s Individual Percentage),
of (A) the 2021 Earnout Consideration, (B) the 2022 Earnout Consideration, and (C) the 2023 Earnout Consideration.

 

The Allocation Statement shall
be subject to Parent’s review and approval and shall be certified by the chief executive officer of the Company on behalf of the
Company as the complete and accurate calculation of all amounts to be paid by Parent to payees pursuant to this Agreement.

 

(d)              
Upon the Effective Time, Parent shall:

 

(i)                
deliver, or cause to be delivered, to the Escrow Agent, by wire transfer of immediately available funds, (A) the Indemnity Escrow
Amount, which shall be held in a segregated account administered by the Escrow Agent in accordance with this Agreement and the Escrow
Agreement (the “Indemnity Escrow Account”) in order to secure the obligations of the Selling Securityholders pursuant
to Article VII and to be released in accordance with the provisions thereof and the Escrow Agreement, and (B) the Working Capital Escrow
Amount, which shall be held in a segregated account administered by the Escrow Agent in accordance with this Agreement and the Escrow
Agreement (the “Working Capital Escrow Account”) in order to secure the obligations of the Selling Securityholders
in respect of the post-Closing purchase price adjustment set forth in Section 2.8 and to be released in accordance with this Agreement
and the Escrow Agreement.

 

(ii)             
deliver, or cause to be delivered, to the Paying Agent, by wire transfer of immediately available funds to an account designated
by the Paying Agent, for further distribution to the Selling Securityholders in accordance with Section 2.7(a)(i) and the Allocation Statement,
an amount in cash equal to the Aggregate Stockholder Closing Proceeds; and

 

(iii)            
deliver, or cause to be delivered, to the Paying Agent, in accordance with the Allocation Statement, by wire transfer of immediately
available funds to an account designated by the Paying Agent, for further distribution to the holders of In-the-Money Options in accordance
with Section 2.7(c)(i) and the Allocation Statement, an amount in cash equal to the Aggregate Optionholder Closing Proceeds.

 

    - 24 - 

     

    

 

(e)              
The Merger Consideration delivered by or at the direction of Parent in exchange for the Capital Stock and the Options in accordance
with this Article II and the terms of this Agreement and the Ancillary Documents shall be deemed to be full payment and satisfaction of
all rights pertaining to all shares of Capital Stock and all Options. The parties hereto acknowledge and agree that (i) the delivery
to the Selling Securityholders of the Merger Consideration pursuant to this Agreement and the Ancillary Documents shall be administered
by, and shall be the sole responsibility of, the Paying Agent, upon delivery by or at the direction of Parent to the Paying Agent, of
the Merger Consideration in accordance with the terms of this Agreement, (ii) Parent shall be entitled to rely on the Allocation
Statement in delivering Merger Consideration under this Agreement and neither Parent nor the Surviving Corporation shall be responsible
for the calculations or the determinations regarding such calculations in the Allocation Statement, and (iii) after delivering, or causing
to be delivered, the Merger Consideration to the Paying Agent neither Parent, the Company, Merger Sub, the Surviving Corporation, nor
any of their respective Affiliates shall have any liability to any Person for the allocation or distribution of the Merger Consideration
among the Selling Securityholders.

 

2.7.         
Mechanics of Exchange and Surrender.

 

(a)              
Parent, and in reasonable consultation with the Securityholders’ Representative, shall engage the Paying Agent, and among
other things, cause the Paying Agent to mail, or send via electronic mail, to each record Stockholder, as soon as practicable after the
date of this Agreement, a letter of transmittal in the form attached hereto as Exhibit A (the “Letter of Transmittal”).
Upon surrender by a holder of Capital Stock of a duly completed and validly executed Letter of Transmittal, the holder of such Capital
Stock shall be entitled to receive in exchange therefor, the consideration to which such holder is entitled pursuant to Section 2.5(b)
for each share of Capital Stock formerly represented by a a Book Entry and the Book Entries in respect to the Capital Stock so surrendered
through the Letter(s) of Transmittal shall be deemed cancelled. Until so surrendered in accordance with this Section 2.7, each outstanding
Book Entry will be deemed for all corporate purposes to evidence only the right to receive the amount of consideration into which such
shares of Capital Stock shall be so exchanged. The Parent shall cause the Paying Agent to pay or deliver, as applicable, to the holder
of each Book Entry, in accordance with Section 2.7(b)):

 

(i)                
promptly after the Paying Agent’s receipt of a duly completed and validly executed Letter of Transmittal, the aggregate amount
of Per Share Closing Consideration to which such holder is entitled pursuant to Section 2.5(b) and as set forth in the Allocation Statement;

 

(ii)             
promptly after the later to occur of (x) the Paying Agent’s receipt of amounts in respect of the Shortfall Amount (if any)
pursuant to Section 2.8(c) and (y) the Paying Agent’s receipt of a duly completed and validly executed Letter of Transmittal, the
aggregate Per Share Shortfall Consideration to which such holder is entitled pursuant to Section 2.5(b) and as set forth in the Allocation
Statement;

 

(iii)           
promptly after the later to occur of (x) the Paying Agent’s receipt of any amounts released from the Working Capital Escrow
Account pursuant to Section 2.8(c) or Section 2.8(d) and (y) the Paying Agent’s receipt of a duly completed and validly executed
Letter of Transmittal, the aggregate Per Share Working Capital Escrow Consideration to which such holder is entitled pursuant to Section
2.5(b) and as set forth in the Allocation Statement;

 

    - 25 - 

     

    

 

(iv)            
promptly after the later to occur of (x) the Paying Agent’s receipt of any amounts released from the Indemnity Escrow Account
pursuant to Section 7.3 and (y) the Paying Agent’s receipt of a duly completed and validly executed Letter of Transmittal, the aggregate
Per Share Indemnity Escrow Consideration to which such holder is entitled pursuant to Section 2.5(b) and as set forth in the Allocation
Statement; and

 

(v)              
promptly after the later to occur of (x) the Paying Agent’s receipt of amounts in respect of Earnout Consideration and (y)
the Paying Agent’s receipt of a duly completed and validly executed Letter of Transmittal, the aggregate Per Share Earnout Consideration
to which such holder is entitled pursuant to Section 2.5(b) and as set forth in the Allocation Statement.

 

(b)              
As soon as practicable after the date of this Agreement, the Surviving Corporation shall distribute to each holder of outstanding
Options an option cancellation agreement, in substantially the form attached hereto as Exhibit B (an “Option Cancellation
Agreement”). The Merger Consideration payable to holders of In-the-Money Options shall be paid as follows:

 

(i)                
with respect to the Closing Consideration, (A) for In-the-Money Options held by Persons who are employees of the Company at the
time of payment, on the first payroll date to occur on or after the Surviving Corporation’s receipt of a duly completed and validly
executed Option Cancellation Agreement from such a holder, the Surviving Corporation shall cause Paying Agent to deliver to such holder
the aggregate amount of Option Closing Consideration to which such holder is entitled pursuant to Section 2.5(c) and as set forth in the
Allocation Statement, and (B) for In-the-Money Options held by Persons who are not employees of the Company at the time of payment, promptly
following the Surviving Corporation’s receipt of a duly completed and validly executed Option Cancellation Agreement from such a
holder, Parent shall cause the Paying Agent to deliver to such holder the aggregate amount of Option Closing Consideration to which such
holder is entitled pursuant to Section 2.5(c) and as set forth in the Allocation Statement;

 

(ii)             
with respect to the Shortfall Amount, (A) for In-the-Money Options held by Persons who are employees of the Company at the time
of payment, on the first payroll date to occur on or after the later to occur of amounts becoming payable to the Selling Securityholders
in respect of the Shortfall Amount (if any) pursuant to Section 2.8(c) and the Surviving Corporation’s receipt of a duly completed
and validly executed Option Cancellation Agreement from such a holder, the Surviving Corporation shall cause the Paying Agent to deliver
to such holder the aggregate amount of Per Share Shortfall Consideration to which such holder is entitled pursuant to Section 2.5(c) and
as set forth in the Allocation Statement, and (B) for In-the-Money Options held by Persons who are not employees of the Company at the
time of payment, upon the later to occur of amounts becoming payable to the Selling Securityholders in respect of the Shortfall Amount
(if any) pursuant to Section 2.8(c) and the Surviving Corporation’s receipt of a duly completed and validly executed Option Cancellation
Agreement from such a holder, Parent, in reasonable consultation with the Securityholders’ Representative, shall cause the Paying
Agent to deliver to such holder the aggregate amount of Option Closing Consideration to which such holder is entitled pursuant to Section
2.5(c) and as set forth in the Allocation Statement;

 

    - 26 - 

     

    

 

(iii)           
with respect to any amounts released from the Working Capital Escrow Account for distribution to the Selling Securityholders pursuant
to Section 2.8(c) or Section 2.8(d), (A) for In-the-Money Options held by Persons who are employees of the Company at the time of payment,
on the first payroll date to occur on or after the later to occur of such amounts being released from the Working Capital Escrow Account
and the Surviving Corporation’s receipt of a duly completed and validly executed Option Cancellation Agreement from such a holder,
the Surviving Corporation shall cause the Paying Agent to deliver to such holder the aggregate amount of Per Share Working Capital Escrow
Consideration to which such holder is entitled pursuant to Section 2.5(c) and as set forth in the Allocation Statement, and (B) for In-the-Money
Options held by Persons who are not employees of the Company at the time of payment, promptly following the later to occur of such amounts
being released from the Working Capital Escrow Account and the Surviving Corporation’s receipt of a duly completed and validly executed
Option Cancellation Agreement from such a holder, Parent, in reasonable consultation with the Securityholders’ Representative, shall
cause the Paying Agent to deliver to such holder the aggregate amount of Per Share Working Capital Escrow Consideration to which such
holder is entitled pursuant to Section 2.5(c) and as set forth in the Allocation Statement;

 

(iv)            
with respect to any amounts released from the Indemnity Escrow Account for distribution to the Selling Securityholders pursuant
to Section 7.3, (A) for In-the-Money Options held by Persons who are employees of the Company at the time of payment, on the first payroll
date to occur on or after the later to occur of such amounts being released from the Indemnity Escrow Account and the Surviving Corporation’s
receipt of a duly completed and validly executed Option Cancellation Agreement from such a holder, the Surviving Corporation shall cause
the Paying Agent to deliver to such holder the aggregate amount of Per Share Indemnity Escrow Consideration to which such holder is entitled
pursuant to Section 2.5(c) and as set forth in the Allocation Statement, and (B) for In-the-Money Options held by Persons who are not
employees of the Company at the time of payment, promptly following the later to occur of such amounts being released from the Indemnity
Escrow Account and the Surviving Corporation’s receipt of a duly completed and validly executed Option Cancellation Agreement from
such a holder, Parent, in reasonable consultation with the Securityholders’ Representative, shall cause the Paying Agent to deliver
to such holder the aggregate amount of Per Share Indemnity Escrow Consideration to which such holder is entitled pursuant to Section 2.5(c)
and as set forth in the Allocation Statement; and

 

(v)              
with respect to any Earnout Consideration that becomes payable to the Selling Securityholders pursuant to Section 2.10, (A) for
In-the-Money Options held by Persons who are employees of the Company at the time of payment, on the first payroll date to occur on or
after the later to occur of such Earnout Consideration becoming payable pursuant to Section 2.10 and the Surviving Corporation’s
receipt of a duly completed and validly executed Option Cancellation Agreement from such a holder, the Surviving Corporation shall cause
the Paying Agent to deliver to such holder the aggregate amount of Per Share Earnout Consideration to which such holder is entitled pursuant
to Section 2.5(c) and as set forth in the Allocation Statement, and (B) for In-the-Money Options held by Persons who are not employees
of the Company at the time of payment, promptly following the later to occur of such Earnout Consideration becoming payable pursuant to
Section 2.10 and the Surviving Corporation’s receipt of a duly completed and validly executed Option Cancellation Agreement from
such a holder, Parent, in reasonable consultation with the Securityholders’ Representative, shall cause the Paying Agent to deliver
to such holder the aggregate amount of the Per Share Earnout Consideration to which such holder is entitled pursuant to Section 2.5(c)
and as set forth in the Allocation Statement.

 

    - 27 - 

     

    

 

(c)              
Any portion of the Merger Consideration that remains unclaimed by the Securityholders six (6) months after such portion of the
Merger Consideration first becomes payable shall be promptly returned to Parent, and any such Selling Securityholder who has not exchanged
a Letter of Transmittal or delivered Option Cancellation Agreements, as applicable, for the Merger Consideration in accordance with this
Section 2.7 prior to that time shall thereafter look only to Parent for payment of the applicable portion of the Merger Consideration
as set forth in Section 2.5. Notwithstanding the foregoing, none of Parent, the Company, the Surviving Corporation or the Securityholder
Representative shall be liable to a holder of shares of Capital Stock or Options, for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar Law. Any portion of the Merger Consideration remaining unclaimed by Selling Securityholders
one (1) year after such Merger Consideration first becomes payable (or such earlier date, immediately prior to such time when the amounts
would otherwise escheat to or become property of any Governmental Authority) shall become, to the extent permitted by applicable Law,
(i) if the Indemnity Escrow Amount has not been fully released as of such time pursuant to the terms of this Agreement and the Escrow
Agreement, a deposit to the Indemnity Escrow Account to be treated (and subsequently released) the same way as the funds therein (and
if such amount remains unclaimed by the applicable Selling Securityholder upon the full release of the Indemnity Escrow Amount, such amount
shall become the property of Parent free and clear of any claims or interest of any Person previously entitled thereto) or (ii) if the
Indemnity Escrow has previously been fully released as of such time pursuant to the terms of this Agreement and the Escrow Agreement,
the property of Parent free and clear of any claims or interest of any Person previously entitled thereto.

 

(d)              
If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the Book Entry is registered,
it shall be a condition to such payment that (i) such Book Entry shall be properly endorsed, as applicable, or shall otherwise be in proper
form for transfer, and (ii) the Person requesting such payment shall pay to the Paying Agent any transfer or other Tax required as a result
of such payment to a Person other than the registered holder or establish to the reasonable satisfaction of the Paying Agent that such
Tax has been paid or is not payable.

 

(e)              
Unless otherwise provided herein, no interest shall be paid or shall accrue on any consideration payable or deliverable upon delivery
of a duly completed and validly executed Letter of Transmittal or an Option Cancellation Agreement.

 

2.8.         
Purchase Price Adjustment.

 

(a)              
As promptly as possible, but in any event within ninety (90) days after the Closing Date, Parent shall deliver to the Securityholders’
Representative a written statement (the “Preliminary Statement”) showing the calculation of (i) Closing Indebtedness,
Closing Net Working Capital, and Closing Transaction Expenses and (ii) the Closing Consideration substituting the Closing Indebtedness,
Closing Net Working Capital, and Closing Transaction Expenses as set forth in the Preliminary Statement for the Estimated Closing Indebtedness,
Estimated Closing Net Working Capital, and Estimated Closing Transaction Expenses as set forth in the Closing Date Statement, respectively
(the “Final Closing Consideration”). Each of Parent and the Securityholders’ Representative shall provide the
other party and its Representatives with reasonable access to the books and records of the Company and relevant personnel and properties
during the preparation of the Preliminary Statement and the resolution of any disputes that may arise under this Section 2.8.

 

    - 28 - 

     

    

 

(b)              
If the Securityholders’ Representative has any objections to the Preliminary Statement, the Securityholders’ Representative
shall deliver to Parent a statement setting forth his objections thereto and reasonable detail and with reasonable supporting documentation
(an “Objections Statement”). If an Objections Statement is not delivered to Parent within thirty (30) days after delivery
of the Preliminary Statement, the Preliminary Statement shall be final, binding and non-appealable by the parties hereto. Any item or
amount as to which no dispute is raised in the Objections Statement shall be final, binding and non-appealable on the parties thereto,
unless such item or amount is by its nature adjusted in connection with the matters raised in the Objections Statement. The Securityholders’
Representative and Parent shall negotiate in good faith to resolve any objections set forth in an Objections Statement, and any resolution
agreed to in writing by the Securityholders’ Representative and Parent shall be final and binding upon the parties. If the Securityholders’
Representative and Parent are unable to reach a resolution of all such objections within fifteen (15) days after the delivery of the Objections
Statement, the Securityholders’ Representative and Parent shall submit such dispute to a jointly selected arbiter from a nationally
recognized independent public accounting firm (the “Auditor”), who shall be appointed as an expert and not as an arbitrator.
If the Securityholders’ Representative and Parent are unable to agree upon an Auditor, each party shall select a nationally recognized
independent public accounting firm and such chosen firms shall mutually agree upon a nationally recognized independent public accounting
firm that shall serve as the Auditor; provided, that such firm shall not be the independent auditor of (or otherwise serve as a
Consultant to) Parent, the Company, or any of their respective Affiliates. Each of the Securityholders’ Representative and Parent
shall furnish to the Auditor a statement setting forth its position with respect to each item or amount set forth in the Objections Statement
that remains unresolved following such fifteen (15)-day period (each, a “Disputed Line Item”), together with such other
information and documents as it deems relevant (each such party’s “Dispute Resolution Submission”), with copies
of such submission and all such documents and information being concurrently given to the other party. The Auditor shall consider only
the Disputed Line Items identified in the Dispute Resolution Submission (and items related directly thereto). The Auditor’s determination
shall be based solely on (i) the definition of Closing Cash, Closing Indebtedness, Closing Net Working Capital, and Closing Transaction
Expenses contained herein and (ii) the Dispute Resolution Submissions provided by the Securityholders’ Representative and Parent
which are in accordance with the terms and procedures set forth in this Agreement (i.e., not on the basis of an independent review). The
Securityholders’ Representative and Parent shall use their commercially reasonable efforts to cause the Auditor to resolve all disagreements
as soon as practicable. The Auditor shall select as a resolution, for each item in dispute, either the position(s) of Parent or the position(s)
of the Securityholders’ Representative as set forth in their respective Dispute Resolution Submissions and in each case based upon
which party’s positions are closest to the determinations of the Auditor. The resolution of all Disputed Line Items by the Auditor
shall be final, binding and non-appealable on the parties hereto. The costs and expenses of the Auditor shall be borne by the Selling
Securityholders, on the one hand, and Parent, on the other hand, in the same proportion that the aggregate amount of the items unsuccessfully
disputed by each (as finally determined by the Auditor) bears to the aggregate amount of the disputed items submitted to the Independent
Auditor for review and resolution.

 

    - 29 - 

     

    

 

(c)              
If the Closing Consideration as set forth in the Closing Date Statement is less than the Closing Consideration as set forth in
the Final Statement (such shortfall, the “Shortfall Amount”), then within two (2) Business Days following the Final
Determination Date (i) Parent shall deliver or cause to be delivered to the Paying Agent, by wire transfer of immediately available funds,
for further distribution to the Selling Securityholders in accordance with Section 2.7(a)(ii) and Section 2.7(c)(ii), as applicable, an
aggregate amount equal to the Shortfall Amount, and (ii) Parent and the Securityholders’ Representative shall deliver joint written
instructions to the Escrow Agent to disburse from the Working Capital Escrow Account to the Paying Agent, for further distribution to
the Selling Securityholders in accordance with Section 2.7(a)(iii) and Section 2.7(c)(iii), as applicable, an amount equal to the aggregate
amount then remaining in the Working Capital Escrow Account.

 

(d)              
If the Closing Consideration as set forth in the Closing Date Statement is greater than the Closing Consideration as set forth
in the Final Statement (such excess, the “Excess Amount”), then Parent shall satisfy the Excess Amount (i) first, from
amounts then remaining in the Working Capital Escrow Account, (ii) second, to the extent that the Excess Amount exceeds the amounts then
remaining in the Working Capital Escrow Account, from amounts then remaining in the Indemnity Escrow Account, and (iii) thereafter, to
the extent that the Excess Amount exceeds the amounts then remaining in the Working Capital Escrow Account and the Indemnity Escrow Account,
directly from the Primary Securityholders on a several but not joint basis in accordance with their respective Indemnification Percentages;
provided that Parent shall first, before seeking such Excess Amount directly from the Primary Securityholders, if reasonably practicable,
offset any portion of the Excess Amount in excess of amounts remaining in the Working Capital Escrow Account and the Indemnity Escrow
Account against any portion of the Earnout Consideration that has become deliverable but has not yet been delivered to the Selling Securityholders
pursuant to Section 2.10. In the event that there is an Excess Amount, within two (2) Business Days following the Final Determination
Date (A) Parent and the Securityholders’ Representative shall deliver joint written instructions to the Escrow Agent to disburse
from the Working Capital Escrow Account (and the Indemnity Escrow Account, if applicable) to Parent an amount equal to the Excess Amount
(or such lesser amount as then remains in the Working Capital Escrow Account (and the Indemnity Escrow Account, if applicable)) and (B)
if, after disbursement to Parent of the Excess Amount in accordance with this Section 2.8(d), any amount remains in the Working Capital
Escrow Account, then Parent and the Securityholders’ Representative shall deliver joint written instructions to the Escrow Agent
to disburse from the Working Capital Escrow Account to the Paying Agent, for further distribution to the Selling Securityholders in accordance
with Section 2.7(a)(iii) and Section 2.7(c)(iii), as applicable, an amount equal to the aggregate amount that so remains in the Working
Capital Escrow Account.

 

(e)              
Notwithstanding anything herein to the contrary, the authority of the Auditor under this Section 2.8 shall be limited solely to
the resolution of the calculation of the Disputed Line Items as set forth herein, and all other disputes between the parties (including
with respect to the contractual interpretation of this Section 2.8) shall be resolved in accordance with Section 8.11.

 

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2.9.         
Dissenting Shares.

 

(a)              
Notwithstanding anything in this Agreement to the contrary, shares of Capital Stock (including, for avoidance of doubt, any shares
of Capital Stock issued or issuable upon the exercise, prior to the Closing, of any Options), if any, as to which the holder thereof shall
have (i) properly demanded that the Company purchase such shares of Common Stock for fair market value in accordance with, and otherwise
complied with and perfected such holder’s rights under, the provisions of Chapter 13 of the CCC (“Chapter 13”),
and (ii) not effectively withdrawn or lost such holder’s rights to demand purchase for such shares of Common Stock for fair
market value pursuant to Chapter 13 (shares satisfying the immediately preceding clauses (i) and (ii), “Dissenting
Shares”), shall not be converted into the right to receive the applicable Per Share Merger Consideration payable pursuant to Section 
2.5(b), but instead at the Effective Time shall become entitled only to payment from the Surviving Corporation of the fair market value
of such shares of Common Stock determined in accordance with Chapter 13, without interest (it being understood and acknowledged that
(A) at the Effective Time, (I) such Dissenting Shares shall no longer be outstanding, shall automatically be cancelled, and shall
cease to exist, and (II) such holder shall cease to have any rights with respect thereto other than the right to receive the fair market
value of such Dissenting Shares as determined in accordance with Chapter 13, and (B) Parent shall be entitled to retain or receive
all Merger Consideration to which such Dissenting Shares would have been entitled pursuant to Section  2.5(b) had such shares of
Common Stock not been Dissenting Shares); provided, however, that if any such holder fails to perfect or otherwise
waives, withdraws, or loses the right to payment of the fair market value of such Dissenting Shares under Chapter 13, then (I) the
right of such holder to be paid the fair market value of such holder’s Dissenting Shares pursuant to Chapter 13 shall cease,
(II) such shares of Common Stock shall cease to be Dissenting Shares, (III) such shares of Common Stock shall be deemed to have
been converted as of the Effective Time into, and to have become exchangeable solely for the right to receive, without interest or duplication,
the portion of the Per Share Merger Consideration, if any, to which such holder is entitled under Section  2.5(b), upon surrender
of the Book Entry, in each case pursuant to the exchange procedures set forth in Section 2.7. and (IV) Parent shall pay to the Paying
Agent (for remittance to such holder) any portion of the Per Share Merger Consideration retained, or received from the Payment Agent,
in respect of such previously Dissenting Shares.

 

(b)              
As soon as practicable after the approval of the Merger by the Company’s shareholders, to the extent required by the CCC,
and in any event not later than ten (10) days following such approval, the Company shall mail to each shareholder of the Company that
is entitled to such notice (pursuant to Chapter 13), a notice of such approval of the Merger, which notification shall include the
information and materials required by Section 1301(a) of the CCC (including the price determined by the Company, with written approval
of Parent, to represent the fair market value of any Dissenting Shares).  Parent shall make payment for Dissenting Shares that do
cease to be Dissenting Shares as provided in Section 2.9(a) and the applicable provisions of Sections 1303, 1304, 1305 and
1308 of the CCC.

 

    - 31 - 

     

    

 

(c)              
During the period from the date hereof to the Closing Date, the Company shall give Parent (i) prompt notice of any notice or written
threat to demand appraisal under the CCC or demand for appraisal or purchase under the CCC received by the Company, withdrawals of such
demands and (ii) the opportunity to participate in all negotiations and proceedings with respect to such demands under the CCC. During
such period, the Company shall not make any payment with respect to any such demands, offer to settle or settle any such demands, or use
in any offer of payment an estimate of fair value in an amount greater than the applicable Per Share Merger Consideration otherwise payable
to the holder demanding appraisal in accordance with this Agreement, in each case, without Parent’s prior written consent, which
may be granted or withheld in Parent’s sole discretion.

 

(d)              
Notwithstanding anything in this Article II to the contrary, (i) Parent shall not be obligated to pay or deliver, or cause to be
paid or delivered, to the Selling Securityholders any portion of the Merger Consideration in respect of any Dissenting Shares, and any
portion of the Merger Consideration paid or delivered to the Selling Securityholders in respect of any Dissenting Shares shall be promptly
returned to Parent, upon demand therefor, and (ii) the payment to holders of Capital Stock of consideration under this Agreement (other
than in respect of Dissenting Shares, which shall be treated as provided in this Section and under the CCC) shall not be affected by the
exercise or potential exercise of appraisal rights or dissenters’ rights under the CCC by any other Company Shareholder, except
pursuant to Section 7.2(a).

 

2.10.       
Earnouts and Growth Capital.

 

(a)              
2021 Earnout Consideration. Subject to Section 2.8(d) and Section 7.3(a), if the Company’s Gross Revenue for Fiscal
Year 2021 is at least $4,824,714 (equal to 80% of $6,030,927) and its Profit Margin for Fiscal Year 2021 is at least $964,948 (equal to
80% of 20% of $6,030,927) (both preconditions, collectively, referred to as the “2021 Earnout Trigger”), then the Selling
Securityholders shall be entitled to receive additional consideration (the “2021 Earnout”) in an aggregate amount equal
to the lesser of (i) the Gross Revenue of the Company for Fiscal Year 2021 multiplied by 0.3316 (a fraction equal to $2,000,000 divided
by $6,030,927), and (ii) its Profit Margin for Fiscal Year 2021 multiplied by 1.6581 (a fraction equal to $2,000,000 divided by 20%
of $6,030,927); provided that in no event shall the Selling Securityholders be entitled to receive consideration in excess of $2,000,000
in respect of the 2021 Earnout. The consideration the Selling Securityholders are entitled to receive in respect of the 2021 Earnout pursuant
to this Section 2.10(a) is referred to herein as the “2021 Earnout Consideration.” For purposes of this Section 2.10,
the term “Profit Margin” means, with respect to a given period of time, an amount calculated in accordance with Company
Accounting Principles applied on a basis consistent with prior periods Since Conversion, equal to Gross Revenue for such period less COGS
for such period.

 

(b)              
2022 Earnout Consideration. Subject to Section 2.8(d) and Section 7.3(a), if the Company’s Gross Revenue for Fiscal
Year 2022 is at least $12,980,272 (equal to 80% of $16,225,340) and its Profit Margin for Fiscal Year 2021 is at least $2,596,054 (equal
to 80% of 20% of $16,225,340) (collectively, the “2022 Earnout Trigger”), then the Selling Securityholders shall be
entitled to receive additional consideration (the “2022 Earnout”) in an aggregate amount equal to the lesser of (i) the
Gross Revenue of the Company for Fiscal Year 2022 multiplied by 0.1233 (a fraction equal to $2,000,000 divided by $16,225,340), and (ii) its
Profit Margin for Fiscal Year 2022 multiplied by 0.6163 (a fraction equal to $2,000,000 divided by 20% of $16,225,340); provided
that in no event shall the Selling Securityholders be entitled to receive consideration in excess of $2,000,000 in respect of the 2022
Earnout. The consideration the Selling Securityholders are entitled to receive in respect of the 2022 Earnout pursuant to this Section
2.10(b) is referred to herein as the “2022 Earnout Consideration.”

 

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(c)              
2023 Earnout Consideration. Subject to Section 2.8(d) and Section 7.3(a), if the Company’s Gross Revenue for Fiscal
Year 2023 is at least $22,177,514 (equal to 80% of $27,721,892) and its Profit Margin for Fiscal Year 2023 is at least $4,435,503 (equal
to 80% of 20% of $27,721,892) (collectively, the “2023 Earnout Trigger”), then the Selling Securityholders shall be
entitled to receive additional consideration (the “2023 Earnout”) in an aggregate amount equal to the lesser of (i) the
Gross Revenue of the Company for Fiscal Year 2023 multiplied by 0.07215 (a fraction equal to $2,000,000 divided by $27,721,892), and (ii) its
Profit Margin for Fiscal Year 2023 multiplied by 0.3607 (a fraction equal to $2,000,000 divided by 20% of $27,721,892); provided
that in no event shall the Selling Securityholders be entitled to receive consideration in excess of $2,000,000 in respect of the 2023
Earnout. The consideration the Selling Securityholders are entitled to receive in respect of the 2023 Earnout pursuant to this Section 2.10(c)
is referred to herein as the “2023 Earnout Consideration,” and the 2023 Earnout Consideration together with the 2021
Earnout Consideration and the 2022 Earnout Consideration, as the “Earnout Consideration.”

 

(d)              
2021 Addback. Solely for purposes of calculating the 2021 Earnout, if and only if the Gross Revenue for Fiscal Year 2021
was less than $6,030,927 and the Gross Revenue for Fiscal Year 2022 exceeds $16,225,340 (the “2022 Revenue Threshold”)
(i) the excess of Gross Revenue for Fiscal Year 2022 over the 2022 Revenue Threshold shall be added to the Gross Revenue for Fiscal
Year 2021 (the “2021 Addback”), (ii) the calculation of the 2021 Earnout Consideration shall be rerun taking into account
the 2021 Addback and (iii) the Selling Securityholders shall be entitled to receive an amount equal to the excess (if any) of (A) the
2021 Earnout Consideration calculated pursuant to clause (ii) over (B) the amount (if any) of 2021 Earnout Consideration that the Selling
Securityholders were previously entitled to receive pursuant to this Section 2.10. Any additional amount that the Selling Securityholders
are entitled to receive in respect of the 2021 Earnout Consideration pursuant to Section 2.10(d) shall be payable to the Selling Securityholders
concurrently with the 2022 Earnout Consideration.

 

(e)              
Growth Capital. In accordance with the terms and conditions of the Commitment Letter, Parent shall make available to the
Surviving Corporation up to an aggregate amount of $12,000,000 (the “Growth Capital”) during the three (3)-year period
following the Closing Date to be used by the Surviving Corporation for working capital purposes, to support sales and marketing functions,
to accelerate product and partnership development, and for such other purposes as may be mutually agreed between Parent, on the one hand,
and the executive management team of the Company, on the other hand.

 

(f)               
No Circumvention. During the period from and after the Closing Date through the end of Fiscal Year 2023, Parent shall not,
and shall cause its Affiliates not to, take any action, or omit to take any action, the substantial purpose of which, whether direct or
indirect, is to circumvent the achievement of any performance threshold on which the Earnouts are based. Additionally, during the same
such period, Parent shall not, and shall cause its Affiliates not to, acquire, merge with or otherwise consummate a business combination
transaction with a direct competitor of the Company in a manner that is reasonably likely to result in a Material Adverse Effect on the
Company during such period(s).

 

    - 33 - 

     

    

 

(g)              
Earnout Statement. As soon as reasonably practicable following the end of each of Fiscal Year 2021, Fiscal Year 2022 and
Fiscal Year 2023, and in any event within ninety (90) days thereafter, Parent shall prepare and deliver to the Securityholders’
Representative a statement (each, an “Earnout Statement”) setting forth (x) calculations of the Gross Revenue and Gross
Profit Margin for Fiscal Year 2021, Fiscal Year 2022 (together with a recalculation for Fiscal Year 2021, if applicable), and Fiscal Year
2023, as applicable, and (y) a calculation of the applicable Earnout Consideration (if any) that the Selling Securityholders are entitled
to receive based upon the calculations set forth in clause (x) (“Deliverable Earnout Consideration”), together with
such additional documentation and data as may be appropriate to support such calculations. In order to allow the Securityholders’
Representative to verify each proposed determination with respect to Deliverable Earnout Consideration, Parent shall provide copies of
any books and records of accounting reasonably requested by the Securityholders’ Representative that were used by Parent in reaching
such determination and shall afford Representatives of the Securityholders’ Representative reasonable access, upon reasonable advance
notice and during normal business hours, to appropriate personnel of Parent and its Affiliates to discuss such books and records. On or
before the thirtieth (30th) day after receipt of an Earnout Statement from Parent, the Securityholders’ Representative
shall either (i) if the Securityholders’ Representative believes that the calculation of Deliverable Earnout Consideration set forth
in such Earnout Statement is inaccurate, deliver to Parent a written notice (an “Earnout Dispute Notice”) setting forth
its assertion of such inaccuracy and, in reasonable detail, the Securityholders’ Representative’s basis therefor (an “Earnout
Dispute”), or (ii) deliver to Parent a written notice that the Securityholders’ Representative accepts such Earnout Statement
and the Deliverable Earnout Consideration set forth therein, or (iii) if the Securityholders’ Representative has a good faith basis
that there exists a bona fide dispute between the parties concerning the Earnout Statement that does not solely relate to, or which
is not solely based on, calculations therein the Securityholders’ Representative shall deliver a Notice of Dispute for resolution
of the Dispute pursuant to Section 8.11. If the Securityholders’ Representative does not deliver an Earnout Dispute Notice or a
Notice of Dispute, as applicable, to Parent on or before the thirtieth (30th) day after receipt of an Earnout Statement from
Parent, then the Securityholders’ Representative shall be deemed to have conclusively accepted such Earnout Statement and the Deliverable
Earnout Consideration set forth therein. In the event that the Securityholders’ Representative delivers to Parent a Notice of Dispute
timely, as set forth above regarding disputes that are not related to the calculations set forth in the Earnout Statement, the provisions
of Section 8.11 shall apply. In the event that the Securityholders’ Representative does deliver to Parent an Earnout Dispute Notice
prior to the expiration of such thirty (30)-day period, Parent and the Securityholders’ Representative shall endeavor in good faith
to resolve any Earnout Dispute by mutual agreement. If, within thirty (30) days after the Securityholders’ Representative delivers
an Earnout Dispute Notice to Parent: (i) Parent and the Securityholders’ Representative are able to reach a mutually satisfactory
resolution of such Earnout Dispute, then such Earnout Statement shall be revised to reflect such resolution, and such Earnout Statement
will be final, binding and conclusive (provided, however, Section 8.11 shall apply in the event the Securityholders’ Representative
has delivered a Notice of Dispute in accordance with the terms herein); or (ii) Parent and the Securityholders’ Representative are
unable to reach a mutually satisfactory resolution of such Earnout Dispute, then: (A) Parent and the Securityholders’ Representative
shall promptly submit such Earnout Dispute to a nationally recognized independent public accounting firm mutually selected by Parent and
the Securityholders’ Representative (the “Earnout Auditor”); (B) if Parent and the Securityholders’ Representative
are unable to agree upon an Earnout Auditor, each party shall select a nationally recognized independent public accounting firm and such
chosen firms shall mutually agree upon a nationally recognized independent public accounting firm that shall serve as the Earnout Auditor;
provided, that such firm shall not be the independent auditor of (or otherwise serve as a Consultant to) Parent, the Company, or any of
their respective Affiliates; (C) each of Parent and the Securityholders’ Representative shall furnish to the Earnout Auditor a statement
setting forth its position with respect to such Earnout Dispute together with such other information and documents as it deems relevant
(each such party’s “Earnout Dispute Submission”), with copies of such submission and all such documents and information
being concurrently given to the other party; (D) the Earnout Auditor shall consider only the disputed matters identified in the Earnout
Dispute Submission (the “Disputed Line Items”); (E) the Earnout Auditor’s determination shall be based solely
on the Earnout Dispute Submissions provided by Parent and the Securityholders’ Representative which are in accordance with the terms
and procedures set forth in this Agreement (i.e., not on the basis of an independent review); (F) the Securityholders’ Representative
and Parent shall use their commercially reasonable efforts to cause the Earnout Auditor to resolve all disagreements as soon as practicable,
and in no event later than forty-five (45) days following delivery of the earlier of the Earnout Dispute Submissions; (G) the Earnout
Auditor shall select as a resolution of the Disputed Line Items, either Parent’s calculation or the Securityholders’ Representative’s
calculation with respect to each Disputed Line Item as set forth in their respective Earnout Dispute Submissions based upon which calculations
are the most accurate in the reasonable determination of the Earnout Auditor; and (H) the resolution of the Earnout Dispute by the Earnout
Auditor shall be final, binding and non-appealable on all parties to this Agreement provided no Notice of Dispute has been delivered by
the Securityholders’ Representative. The costs and expenses of the Earnout Auditor shall be borne by the parties in the same proportion
that the aggregate amount of the items unsuccessfully dispute by each (as finally determined by the Earnout Auditor) bears to the aggregate
amount of the disputed items submitted to the Earnout Auditor for review and resolution. Notwithstanding anything herein to the contrary,
the authority of the Earnout Auditor under this Section 2.10(f) shall be limited solely to the resolution of the calculation of the Disputed
Line Items in an Earnout Dispute, and all other disputes between the parties (including with respect to the contractual interpretation
of this Section 2.10) shall be resolved in accordance with Section 8.11.

 

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(h)              
Earnout Determination Action. Within three (3) Business Days following a final determination that the Selling Securityholders
are entitled to receive Earnout Consideration, Parent shall deliver or cause to be delivered to the Paying Agent, by wire transfer of
immediately available funds, for further distribution to the Selling Securityholders in accordance with Section 2.7(a)(v) and Section
2.7(c)(v), as applicable, an aggregate amount equal to such Earnout Consideration.

 

(i)                
Books and Records Regarding Earnout. Parent shall keep, and shall cause its Affiliates to keep, adequate books and records
of accounting for the purpose of confirming the calculations of the 2021 Earnout Consideration, 2022 Earnout Consideration, and 2023 Earnout
Consideration for a period of at least one (1) year following the end of Fiscal Year 2023.

 

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(j)                
Nature of Earnout Consideration (As Cash or Parent Common Stock). With respect to each Earnout Consideration that becomes
payable or deliverable to the Selling Securityholders pursuant to this Section 2.10, each Selling Securityholder shall have the option
to receive all (but not less than all) of such Earnout Consideration in the form of shares of Parent Common Stock rather than in cash;
provided that (w) such Securityholder is an “accredited investor” as defined in Rule 501(a) under the Securities Act,
(x) the issuance by Parent of such shares to such Securityholder would not result in Parent failing to comply with the Securities Act
or the rules, regulations and requirements of NASDAQ, (y) such Securityholder delivers to Parent, prior to the expiration of the fiscal
year to which such Earnout Consideration relates, a written notice indicating such Securityholder’s desire to receive such Earnout
Consideration in the form of shares of Parent Common Stock and (z) such Securityholder thereafter cooperates with Parent and provides
Parent with such other information and documentation as Parent may request in order to effect such issuance of shares to such Securityholder.
In the event that any portion of any Earnout Consideration is to be paid in the form of shares of Parent Common Stock pursuant to this
Section 2.10(i), (1) the number of shares to be issued in respect of such Earnout Consideration shall be equal to (I) the amount of such
Earnout Consideration payable to such Securityholder which is being paid in shares of Parent Common Stock divided by (II) the VWAP as
of December 31, 2021 (with respect to the 2021 Earnout Consideration), December 31, 2022 (with respect to the 2022 Earnout Consideration),
or December 31, 2023 (with respect to the 2023 Earnout Consideration), as applicable, and (2) Parent shall deliver, or cause to be delivered,
to the applicable Securityholder(s) the shares that such Securityholder(s) are entitled to receive pursuant to this Section 2.10 in accordance
with the procedures set forth Section 2.7(a)(v) and Section 2.7(c)(v), as applicable.

 

2.11.       
Substitution of Cash for Stock Consideration. Notwithstanding anything herein to the contrary, in the event that the issuance
of any shares of Parent Common Stock pursuant to this Agreement would result in Parent failing to comply with the Securities Act or the
rules, regulations and requirements of NASDAQ, Parent shall have the option, exercisable in its sole discretion, to make payment of the
subject Merger Consideration in the form of cash in lieu of such shares of Parent Common Stock.

 

2.12.       
Tax Treatment. The parties hereto intend that for U.S. federal income Tax purposes (and for purposes of any comparable state
or foreign Tax Law) the Merger is treated as a sale and purchase of 100% the issued and outstanding shares of stock of the Company and
no party hereto shall take any position that is inconsistent with such Tax treatment on any Tax Return or before any Governmental Authority,
unless required to pursuant to a “determination” as defined in Section 1313 of the Code. The Company acknowledges and the
Securityholders’ Representative acknowledges on behalf of the Selling Securityholders that the Company and the Selling Securityholders
are relying on their own Tax advisors in connection with this Agreement, the Merger, and the Contemplated Transactions.

 

2.13.       
Withholding. Notwithstanding anything to the contrary herein, the Parent, its Affiliates and any other applicable withholding
agent will be entitled to deduct and withhold from any amounts otherwise payable by it pursuant to this Agreement to any Person such amounts
as it reasonably determines must be deducted and withheld from such Person with respect to the making of such payment under any provision
of any Law. To the extent that amounts are so deducted, withheld and remitted, such deducted, withheld and remitted amounts shall be treated
for all purposes of this Agreement as having been paid to such Person in respect of which such deduction, withholding and remittance was
made.

 

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ARTICLE III

Representations and Warranties of the Company

 

Except as set forth in the
Company Disclosure Schedule (it being agreed that any matter disclosed in the Company Disclosure Schedule
with respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other section to which such matter
relates so long as the relation of such matter to such other section is reasonably apparent from the description of such matter), the
Company represents and warrants to Parent and Merger Sub, as of the date hereof and on and as of the Closing Date, as follows (and for
the avoidance of doubt, the following Representations and Warranties are made solely by the Company and not by the Primary Securityholders):

 

3.1.         
Organization and Power.

 

The Company is a corporation
duly incorporated, validly existing and in good standing under the Laws of its jurisdiction of incorporation. The Company has full
corporate power and authority to execute, deliver and perform this Agreement (as applicable) and the Ancillary Documents to which it is
a party and to consummate the Contemplated Transactions subject to the terms and conditions set forth in the Transaction Documents. The
Company has all power (corporate or otherwise) and authority, and possesses all governmental licenses, permits, authorizations and approvals,
necessary to enable it to own or lease and to operate its properties and assets and carry on its business as currently and historically
conducted, except where the failure to possess such power, authority, licenses, permits, authorizations and approvals would not reasonably
be expected to result in material Liability or otherwise materially interfere with the conduct of the business of the Company in the manner
currently conducted.. The Company is qualified or licensed to conduct its business in the jurisdiction(s) listed on Section 3.1
of the Company Disclosure Schedule.

 

3.2.         
Authorization and Enforceability.

 

The execution and delivery
of this Agreement (as applicable) and the Ancillary Documents to which the Company is a party and the performance by the Company of the
Contemplated Transactions has been duly authorized by the board of directors or other governing body (if applicable) of the Company in
accordance with applicable Law and the articles of incorporation and bylaws or other similar organizational documents, as applicable,
of the Company, and no other organizational proceedings, as applicable, on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement (in accordance with its terms and conditions) (as applicable) and the Ancillary Documents (in
accordance with their respective terms and conditions) to which the Company is a party or the consummation of the Contemplated Transactions.
This Agreement (as applicable) and each of the Ancillary Documents to be executed and delivered at or prior to the Closing by the Company
will be, at the Closing, duly authorized, executed and delivered by the Company and constitutes, or as of the Closing Date will constitute,
valid and legally binding agreements of the Company enforceable against the Company in accordance with their terms, subject to bankruptcy,
insolvency, reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to rules of law
governing specific performance, injunctive relief and other general equity principles.

 

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3.3.         
Capitalization.

 

(a)              
The authorized capital stock of the Company consists solely of (i) 20,000,000 shares of Common Stock, of which 11,244,361
are issued and outstanding (including 600,000 restricted shares). The record owners of all of the issued and outstanding shares of Capital
Stock are as set forth on Section 3.3(a) of the Company Disclosure Schedule. All issued and outstanding shares of Capital
Stock are duly authorized, have been validly issued and are fully paid and non-assessable, are owned beneficially and of record by the
Stockholders, free and clear of any Lien (other than those arising from applicable securities Laws) and free of any restriction on the
right to vote, sell or otherwise dispose of such shares of Capital Stock, and were not issued in violation of any preemptive or similar
rights. Except as set forth on Section 3.3(b) of the Company Disclosure Schedule, there are no (x) outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in
writing, to purchase or acquire from the Company any shares of Capital Stock, or any securities convertible into or exchangeable for shares
of Capital Stock or (y) agreements providing for any calls against, commitments by, or claims against the Company relating to any shares
of Capital Stock. Except as set forth on Section 3.3(a)(ii) of the Company Disclosure Schedule, the Company is not a party
to and there is not, and immediately after the Closing there will not be, any Contract, right of first refusal, right of first offer,
proxy, voting agreement, voting trust, registration rights agreement or stockholders agreement, whether or not the Company is a party
thereto, with respect to the purchase, sale or voting of any shares of Capital Stock or any other Equity Securities of the Company. All
of the shares of Capital Stock have been issued in compliance with all applicable Laws and the organizational documents of the Company.

 

(b)              
Except for the Stock Option Plan, the Company does not maintain any equity incentive plan or other plan providing for equity compensation
of any Person. The Company has reserved 7,500,000 shares of Common Stock for issuance to officers, directors, employees and consultants
of the Company pursuant to the Stock Option Plan. Of such reserved shares of Common Stock, (i) Options to purchase 1,510,000 shares have
been granted, 20,000 of which were cancelled, and therefore 1,490,000 Options are currently outstanding and (ii) 650,000 shares of restricted
stock were issued, 50,000 of which were cancelled, and therefore, 600,000 shares of restricted stock are currently outstanding and 5,410,000
shares of Common Stock remain available for issuance pursuant to the Stock Option Plan. The Company has furnished to Parent complete and
accurate copies of the Stock Option Plan and forms of agreements used thereunder. Section 3.3(b) of the Company Disclosure Schedule
sets forth (i) the name of each Optionholder, (ii) the number of Options held by such Optionholder, (iii) the exercise price of each such
Option, (iv) and the vesting schedule of each such Option. All of the Options have been issued in compliance with all applicable Laws,
the Stock Option Plan, and the organizational documents of the Company.

 

(c)              
The Company does not have any Subsidiaries.

 

    - 38 - 

     

    

 

3.4.         
No Violation.

 

The execution and delivery by
the Company of this Agreement (as applicable) and the Ancillary Documents to which the Company is a party, consummation of the Contemplated
Transactions, and compliance with the terms of this Agreement (as applicable) and the Ancillary Documents to which the Company is a party
will not (a) conflict with or violate any provision of the articles of incorporation, bylaws or similar organizational documents
of the Company, (b) result in any violation of or default, give rise to a right of termination, cause the forfeiture of any right,
or require any notice or consent, under (with or without notice or lapse of time or both) any provision of any Contract to which the Company
is a party or by which the Company or its properties are bound or affected, (c) assuming that all consents, approvals and authorizations
contemplated by Section 3.5 have been obtained and all filings described therein have been made, conflict with or violate any Law applicable
to the Company or by which any of its properties are bound or affected, or (d) result in the creation of, or require the creation
of, any Lien upon any shares of capital stock or any property of the Company, except, with respect to clauses (b)-(d), as would not reasonably
be expected to result in material Liability or otherwise materially interfere with the conduct of the business of the Company in the manner
currently conducted.

 

3.5.         
Governmental Authorizations and Consents.

 

Except for (i) the filing of
the Certificate of Merger as provided in this Agreement, and (ii) as set forth on Section 3.5 of the Company Disclosure Schedule,
no consents, licenses, approvals or authorizations of, or registrations, declarations or filings with, any Governmental Authority (“Governmental
Consents”) are required to be obtained or made by the Company in connection with the execution, delivery, performance, validity
and enforceability of this Agreement or any Ancillary Documents to which the Company is a party or the consummation by the Company of
the Contemplated Transactions.

 

3.6.         
Financial Statements.

 

(a)              
Section 3.6(a) of the Company Disclosure Schedule sets forth the following financial statements (the “Financial
Statements”): (i) the unaudited balance sheet of the Company as of December 31, 2020, and the related statements of income,
Securityholders’ equity and cash flows for the year ending December 31, 2020, and (ii) the reviewed balance sheet of the Company
as of December 31, 2019, and the related statements of income, Securityholders’ equity and cash flows for the year ending December
31, 2019, and (iii) the unaudited balance sheet of the Company as of March 31, 2021 (the “Balance Sheet Date”) and
the related unaudited statements of income, Securityholders’ equity and cash flows, respectively, for the 3-month period ended on
such date (the “Most Recent Financial Statements”). Each of the Financial Statements has been prepared in accordance
with Company Accounting Principles consistently applied throughout the periods indicated and consistent with each other (except (i) as
may be otherwise indicated in such Financial Statements or the notes thereto and (ii)  to the extent they may exclude footnotes,
or, in the case of the unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements
and subject to year-end accruals) and fairly presents in all material respects the consolidated financial condition of the Company as
of its respective date and the consolidated results of operations and Securityholders’ equity, or cash flows, as the case may be,
of the Company for the period covered thereby.

 

    - 39 - 

     

    

 

(b)              
The financial books and records of the Company have been maintained in accordance with customary business practices and fairly
and accurately reflect, in all material respects, on a basis consistent with past periods and throughout the periods involved, (i) the
consolidated financial position of the Company and (ii) all transactions of the Company. The Company has never received any advice or
notification from its independent accountants that it has used any improper accounting practice that would have the effect of not reflecting
or incorrectly reflecting in the books and records of the Company any properties, assets, liabilities, revenues, expenses, equity accounts
or other accounts.

 

(c)              
The Company does not have any Liabilities (whether or not the subject of any other representation or warranty hereunder), except
for Liabilities (i) reflected in the Most Recent Unaudited Financial Statements, (ii) set forth in Section 3.6(c) of the Company
Disclosure Schedule, (iii) incurred in the ordinary course of business consistent with past practice since the date of the Most
Recent Unaudited Financial Statements, (iv) incurred under this Agreement and the Ancillary Documents or in connection with the Contemplated
Transactions, or (v) which otherwise would not be likely to result in a Material Adverse Effect on the Company.

 

3.7.         
Absence of Certain Changes.

 

(a)              
Since the Balance Sheet Date, the Company has conducted its businesses in the ordinary course and in a manner consistent with past
practice, and there has not been any Event, individually or together with any other Event, that has had, or would be reasonably expected
to have, either individually or in the aggregate, a Material Adverse Effect on the Company. Without limiting the generality of the foregoing,
since the Balance Sheet Date, the Company has not:

 

(i)                
acquired, sold, leased, abandoned, allowed to lapse, licensed, transferred, mortgaged or assigned any material assets, tangible
or intangible, other than sales of goods or services in the ordinary course of business consistent with past practice;

 

(ii)             
written down the value of any personal property or other assets owned or used by the Company, including inventory and capital lease
assets, except on account of depreciation and amortization in the ordinary course of business;

 

(iii)           
incurred, assumed, guaranteed or discharged any Liability, including any Indebtedness or mortgages, or otherwise created or permitted
to exist any Lien on any of its assets, other than (except in the case of Indebtedness) in the ordinary course of business consistent
with past practice;

 

(iv)            
cancelled any material debts or claims owed to the Company or amended, terminated, compromised, released, or waived any material
rights or claims of the Company;

 

(v)             
acquired or sold, assigned, transferred, terminated, disposed of, or licensed from or to any Person, any Intellectual Property
other than in the ordinary course of business;

 

(vi)            
changed or modified any of the credit, collection or payment policies, procedures or practices of the Company, including accelerating
collections of receivables, failing to collect or delaying collection of receivables, accelerating payment of payables or other Liabilities
or failing to pay or delaying payment of payables or other Liabilities;

 

    - 40 - 

     

    

 

(vii)         
committed to make any capital expenditure (or series of related capital expenditures) involving amounts that exceed $50,000 in
the aggregate, other than in connection with the transactions contemplated hereunder;

 

(viii)         
suffered any damages to or destruction or other casualty loss of any tangible assets (whether or not covered by insurance), involving
amounts that exceed $25,000 in the aggregate;

 

(ix)            
modified any of its respective articles of incorporation, bylaws or similar organizational documents;

 

(x)              
issued, sold or otherwise permitted to become outstanding any shares of their respective capital stock, bonds, options or other
securities of any type whatsoever of the Company, or split, combined, reclassified, repurchased or redeemed any such shares;

 

(xi)            
declared, set aside or paid any cash or non-cash dividend or made any cash or non-cash distribution in respect of any Equity Securities
of the Company;

 

(xii)            
made any capital investment in, any loan to, or any acquisition of the securities or assets of any other Person other than acquisitions
of inventory and supplies in the ordinary course of business consistent with past practice;

 

(xiii)           
failed to maintain in full force and effect insurance policies on their respective properties providing coverage and amounts of
coverage comparable to the coverage and amounts of coverage provided under their policies of insurance in effect on the Balance Sheet
Date;

 

(xiv)          
made any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, or agreed to pay,
conditionally or otherwise, any bonus, incentive, retention or other compensation, any change in control payment, retirement, welfare,
fringe or severance benefit or vacation pay, to or in respect of any employee, other than increases and payments in the ordinary course
of business and in a manner consistent with past practice in the compensation payable to employees (none of whom is a director or officer
of the Company) and other than in connection with the Retention Plan hereunder;

 

(xv)           
materially modified or changed any of their respective business organizations or materially and adversely modified or changed their
respective relationships with its suppliers, customers and others having business relations with them;

 

(xvi)           
except as otherwise required by Law, entered into, established amended, modified, varied, altered or otherwise changed any Plan;

 

(xvii)         
entered into, modified, terminated, waived, amended or otherwise altered the terms or provisions of any Material Contract outside
the ordinary course of business;

 

    - 41 - 

     

    

 

(xviii)        
settled or compromised any action, suit or proceeding by or against the Company;

 

(xix)           
abandoned, permitted to lapse or failed to maintain in full force and effect any Company Intellectual Property, or failed to take
or maintain reasonable measures to protect the confidentiality of any Intellectual Property used by or for the Company in conducting its
business;

 

(xx)            
made, revoked or changed any Tax election, changed any annual Tax accounting period, changed any method of Tax accounting, entered
into any closing agreement with respect to any Tax, settlement, concession, compromise or abandonment of any Tax claim or assessment or
surrendered any right to claim a Tax refund, filed any amended Tax Return, or consented to any extension or waiver of the limitation period
applicable to any Tax claim or assessment;

 

(xxi)          
adopted a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization,
or other material reorganization, other than as contemplated herein; or

 

(xxii)          
authorized, agreed, resolved or committed to any of the foregoing.

 

3.8.         
Relationships with Affiliates.

 

Except as set forth in Section
3.8 of the Company Disclosure Schedule, no officer, director, Selling Securityholder or any Affiliate of any of the foregoing
(a) has any interest in any property (real, personal, or mixed and whether tangible or intangible), used in or necessary to the business
of the Company as currently conducted, (b) except for the ownership of less than two percent (2%) of the outstanding common stock
of a publicly-held corporation, owns of record or as a beneficial owner, has any equity interest or any other financial or profit interest
in a Person that has material business dealings or a material financial interest in any transaction with the Company or (c) is a
party to any Contract (except for employment agreements, shareholder agreements, offer letters, confidentiality or invention assignment
agreements and director and key officer indemnification agreements or like ordinary course such agreements) with the Company, including
with respect to compensation or remuneration to be paid to such officer, director, Selling Securityholder, or Affiliate in connection
with this Agreement or the Contemplated Transactions.

 

3.9.         
Indebtedness to and from Officers and Directors of the Company.

 

Except as set forth in Section
3.9 of the Company Disclosure Schedule, the Company is not indebted, directly or indirectly, to any Person who is a Selling Securityholder,
officer or director of the Company, or any Affiliate thereof in any amount whatsoever, other than for salaries for services rendered or
reimbursable business expenses. No Selling Securityholder, officer, director, or Affiliate is indebted to the Company, except for advances
made to employees of the Company in the ordinary course of business consistent with past practice to meet reimbursable business expenses
reasonably anticipated to be incurred by such obligor.

 

    - 42 - 

     

    

 

3.10.       
Assets.

 

(a)              
The assets and rights of the Company include all of the assets and rights of the Company which were used in the conduct of its
business as conducted as of the Balance Sheet Date, subject to such changes as have occurred in the ordinary course of business consistent
with past practice or that are otherwise permitted by (or not explicitly prohibited by) this Agreement since such date. All of such assets
necessary for the conduct of the business of the Company are in normal operating condition and repair, ordinary wear and tear excepted.

 

(b)              
The Company collectively has good and marketable title to, or valid leasehold interests in, all of the tangible and intangible
assets and personal property shown to be owned or leased by it on the Most Recent Unaudited Financial Statements or acquired thereafter,
free and clear of any Lien, except for (i) assets disposed of since such date in the ordinary course of business consistent with
past practice or otherwise permitted by this Agreement, (ii) Liens reflected in the Financial Statements or the notes thereto, and
(iii) assets validly leased from third parties. Following the Closing, such assets and personal property will constitute all of the
assets and properties necessary to conduct the business of the Company in substantially the manner conducted prior to Closing and consistent
with past practice.

 

3.11.       
Real Property.

 

Section 3.11 of the Company
Disclosure Schedule includes a true and complete list of all real property leases, subleases, or other occupancies used by the
Company or to which the Company is a party as a lessee or lesser and currently bound (the “Real Property Leases,” and
the properties leased thereunder, the “Leased Real Property”). To the Company’s Knowledge, no Person other than
the Company has any right to use, occupy or lease any of the Leased Real Property. No Leased Real Property is occupied by a Person other
than the Company. The leasehold interests relating to the Real Property Leases are free and clear of all Liens. No waiver, indulgence
or postponement of any of the Company’s obligations, as lessee, has been granted by any owner or lessor of the Leased Real Property.
The Company has not received any written notice from the other party to any Real Property Lease of the termination or proposed termination
thereof. The Company is not, and, to the Knowledge of the Company, no other Person is, in violation of a condition or agreement contained
in any easement, restrictive covenant or any similar instrument or agreement affecting the Leased Real Property in any material respect.
Other than the Real Property Leases, there are no agreements or arrangements whatsoever relating to the Company’s use or occupancy
of any of the Leased Real Property. The Company has not transferred, mortgaged or assigned any interest in any of the Leased Real Property
or the Real Property Leases. There is no pending nor, to the Knowledge of the Company, threatened condemnation or similar proceeding affecting
any Leased Real Property or any portion thereof. All Leased Real Property is supplied with utilities and other services sufficient to
operate the business of the Company as presently conducted and neither the operations of the Company on the Leased Real Property nor,
to the Knowledge of the Company, the Leased Real Property itself, violate any applicable building code, zoning requirement, or classification
or statute relating to the particular property or such operations in a manner reasonably likely to have a Material Adverse Effect on the
Company. The Leased Real Property is in good operating condition and repair and is suitable for the conduct of business as presently conducted
therein. The Company does not own any real property.

 

    - 43 - 

     

    

 

3.12.       
Intellectual Property.

 

(a)              
Section 3.12(a) of the Company Disclosure Schedule includes a true and complete list of: (i) all Company Intellectual
Property that is subject to any issuance, registration, or application by or with any Governmental Authority or authorized private registrar
in any jurisdiction (collectively, “Intellectual Property Registrations”), including issued Patents, registered Trademarks,
domain names, and Copyrights, and pending applications for any of the foregoing, and specifying as to each, as applicable, the title,
mark, design; the record owner and inventor(s), if any; the jurisdiction and Governmental Authority or authorized private registrar by
or in which it has been issued, registered, or filed; the patent, registration, or application serial number (or equivalent alphanumeric
identifier registered with the applicable Government Authority and/or authorized private registrar); the issue, registration, renewal,
continuation, and/or filing date; and the current status thereof; (ii) all unregistered Trademarks included in the Company Intellectual
Property; and (iii) all Company Software and other Company Products made available by Company for use, access, license, or purchase, including
any Company Product currently under development and scheduled for commercial release within 90 days following the Closing Date, and any
other Software owned by the Company (whether or not offered for use, access, license, or purchase).

 

(b)              
Status of Intellectual Property. No Company Intellectual Property has been opposed, cancelled, held unenforceable or, to
the Knowledge of the Company, otherwise challenged, and Company has not been receipt of any notice of Litigation regarding, and no Litigation
is pending or, to the Knowledge of the Company, threatened in relation to any Company Intellectual Property or otherwise challenging the
validity, enforceability, registrability, patentability, ownership, licensing, use, distribution, or other exploitation of any Company
Intellectual Property or the Company’s right, title, or interest in or to any Company Intellectual Property. To the Knowledge of
the Company, all Company Intellectual Property is valid (or in the case of applications, applied for), subsisting and enforceable and
in full force and effect. Each of the Intellectual Property Registrations is duly registered or filed in the name of the Company. To the
Knowledge of the Company, all assignments and other instruments necessary to establish, record, perfect, and otherwise memorialize or
evince the Company’s ownership interest in the Intellectual Property Registrations have been validly executed, delivered, and filed
with the relevant Governmental Authorities and authorized registrars. All required filings and fees related to the Intellectual Property
Registrations have been timely submitted with and paid to the relevant Governmental Authorities and authorized registrars, and Company
has engaged in all other administrative tasks necessary to maintain the current status of its Intellectual Property Registrations. The
Company has made available to Parent true and complete copies of all file histories, documents, certificates, correspondence, assignments,
and other instruments relating to the Intellectual Property Registrations. To the Knowledge of the Company, the Company is the sole and
exclusive legal and beneficial, and with respect to the Intellectual Property Registrations, record, owner of all right, title, and interest
in and to the Company Intellectual Property, and has the valid and enforceable right (including without limitation, as applicable, all
necessary rights by license) to use all other Intellectual Property used in or necessary for the conduct of the business of the Company
as currently conducted, in each case, free and clear of all Liens. The Company is not subject to any outstanding or, to the Knowledge
of the Company, prospective Order (including any motion or petition therefor) that does or would reasonably be expected to restrict or
impair the ownership or use of any Company Intellectual Property or Licensed Intellectual Property, and the Company has no Knowledge of
any facts or circumstances that could reasonably be expected to give rise to any such Litigation.

 

    - 44 - 

     

    

 

(c)              
Inbound Licenses; Agreements. Section 3.12(c) of the Company Disclosure Schedule is a true and complete list
of all licenses, sublicenses and other agreements as to which the Company is a party in connection with Licensed Intellectual Property
(other than those comprising or reflected in Commercial Software). The Company is not obligated to make any payment or grant any rights
to any third party in respect of Intellectual Property used by the Company or in connection with the business of the Company as currently
conducted (other than those comprising or reflected in Commercial Software and other than in connection with Licensed Intellectual Property,
as applicable).

 

(d)              
Outbound Licenses. Except as set forth in Section 3.12(d) of the Company Disclosure Schedule, no Person has
an interest in or any right to use any of the Company Intellectual Property.

 

(e)              
No Violation; Non-Infringement by Third Parties. Except as set forth in Section 3.12(e) of the Company Disclosure
Schedule, to the Knowledge of the Company, there has not been, and there is not now, any unauthorized use, infringement, misappropriation,
dilution, or other violation by any third party, including by any employee or former employee of the Company, of any of the Company Intellectual
Property. No stockholder, director, officer or employee of, or Consultant to, the Company has any right to use, other than, pursuant to
applicable Law or as drafted in the form of confidential information and invention assignment agreements made available to Parent, or
in connection with the business activities of the Company as conducted in the ordinary course of business and in the due course of such
individual’s employment or other professional responsibilities for Company, any of the Company Intellectual Property.

 

(f)               
Non-Infringement of Third Parties. To the Knowledge of the Company, the operation of the business of the Company as currently
and formerly conducted, including the use of the Company Intellectual Property and Licensed Intellectual Property in connection therewith,
does not misappropriate, infringe, dilute or otherwise violate in any respect the Intellectual Property or other rights of any Person.
There is no Litigation (including any opposition, cancellation, revocation, review, post grant review or other proceeding) pending or,
to the Knowledge of the Company, threatened alleging any misappropriation, infringement, dilution or other violation by the Company of
the Intellectual Property of any Person, and the Company is not in receipt of any notice of or otherwise aware of any facts or circumstances
that could reasonably be expected to give rise to any such Litigation.

 

(g)              
Trade Secrets. The Company has taken reasonable precautions to protect the secrecy, confidentiality and value of all Trade
Secrets included in the Company Intellectual Property and Licensed Intellectual Property, including by requiring all Persons having access
thereto to execute binding, written non-disclosure agreements which expressly acknowledge the confidential, proprietary nature of such
Trade Secrets and expressly obligate such Persons to safeguard the confidentiality thereof in such a manner, to such an extent, and for
such time period as required for such Trade Secrets to remain fully protectable as Trade Secret assets under applicable Law. To the Company’s
Knowledge, such Trade Secrets are not part of the public domain, public knowledge or literature. Such Trade Secrets have not been used,
divulged or appropriated by the Company, and to the Knowledge of the Company have not been used, divulged, or appropriated by any other
Person, either for the benefit of any Person (other than the Company) or to the detriment of the Company, and have not been disclosed
to or used or accessed by any Person in any manner which would threaten, compromise, abridge, or alter their current status as fully protected
Trade Secret assets under applicable Law.

 

    - 45 - 

     

    

 

(h)              
Invention Assignment Agreements. The Company has entered into binding, valid and enforceable, written Contracts with each
current and former Personnel and independent contractor who is or was involved in or has contributed to the invention, creation, authorship,
design, or development of any Intellectual Property during the course of employment or engagement with the Company, in each case, effectively,
finally, and irrevocably assigning, transferring, and conveying all Intellectual Property intended to be owned by the Company (which,
in the case of Personnel, consists of all Intellectual Property conceived or developed in the scope of such Personnel’s employment
with Company) to the Company, in a form of an agreement executed by Company and the applicable Personnel or independent contractor(s)
made available to Parent.

 

(i)                
Non-Contravention. Neither the execution, delivery, or performance of this Agreement, nor the consummation of the Contemplated
Transactions, will, under any Contracts to which the Company is a party or by which any of its assets is bound, result in the loss or
impairment of, or require the consent of any other Person in respect of, the Company’s right to own, use, or enforce any rights
to Company Intellectual Property or Licensed Intellectual Property, which shall continue unchanged in full force and effect (in the case
of Licensed Intellectual Property, consistent with all provisions of any applicable license, sublicense, or other contract or agreement
regarding such rights).

 

(j)                
IT Systems. To the Knowledge of the Company, all Company IT Systems are in good working condition and function substantially
in accordance with all applicable documentation and specifications regarding such systems, and are otherwise performing in all material
respects as reasonably required for the operation of the Company’s business as currently conducted. To the Knowledge of the Company,
there have been no unauthorized intrusions or material breaches of security, malfunctions, failures, breakdowns, continued substandard
performance, denials-of-service, or other similar such cyber incidents, including any cyberattacks, or other similar material adverse
events affecting the Company IT Systems. The Company uses industry standard (as relates to like industries as that of the Company at a
like stage of the Company) efforts to (and to its Knowledge, its third-party contractors use industry standard efforts to) protect the
confidentiality, availability, integrity and security of Company IT Systems, including with respect to unauthorized use, access, interruption
or modification by third parties. The Company has implemented and maintained appropriate backup, disaster recovery, and Software and hardware
support arrangements for the Company IT systems, except as otherwise would not have a Material Adverse Effect on the Company.

 

(k)              
Company Source Code. The Company does not have source code for the Company’s Products and uses Commercial Software.
The Company has not disclosed, delivered, licensed, or otherwise made available, and does not have a duty or obligation (whether present,
contingent, or otherwise) to disclose, deliver, license, or otherwise make available, any source code for any Company Product to any escrow
agent or any other Person, other than a Personnel, independent contractor, or consultant of the Company bound by a valid and enforceable
written confidentiality agreement containing obligations sufficient to safeguard the confidential, proprietary, and/or Trade Secret status
thereof, which forms of confidentiality agreement have been made available to Parent. Without limiting the foregoing, neither the execution
of this Agreement nor the consummation of any of the Contemplated Transactions will, or would reasonably be expected to, result in the
release from escrow or other delivery to or access by any Person of any source code for any Company Product. To the Knowledge of the Company,
there has been no unauthorized theft, reverse engineering, decompiling, disassembling, or other unauthorized disclosure of or access to
any source code for any Company Product.

 

    - 46 - 

     

    

 

(l)                
Open Source Software. Section 3.12(k) of the Company Disclosure Schedule identifies all Open Source Software
distributed to third parties by the Company and describes the manner in which such Open Source Software was or is used by the Company
and whether (and if so, how) the Open Source Materials were modified by the Company and for each such item of Open Source Software, (i)
the applicable Company Product and (ii) the name and version number of the applicable license agreement governing the use of such Open
Source Software; Company Software does not incorporate, integrate, reference, or include any Open Source Software except as expressly
identified therein. The Company has materially complied with all notice, attribution, and other requirements of each license applicable
to the Open Source Software disclosed in Section 3.12(k) of the Company Disclosure Schedule. The Company has not used any
Open Source Software in a manner that does, will, or would reasonably be expected to require the (x) disclosure or distribution of any
Company Product other than as currently conducted in Company’s ordinary course of business; (y) license or other provision of any
Company Product on a royalty-free basis or other terms equivalent or substantially similar to an Open Source License; or (z) grant of
any Patent license, non-assertion covenant, or other rights under any Company Product or rights to modify, make derivative works based
on, decompile, disassemble, or reverse engineer any Company Product.

 

(m)            
Malicious Code. All Company Products (i) materially comply with all applicable Laws and industry standards, including with
respect to information security and consumer protection; and (ii) materially conform to all applicable contractual commitments, express
and implied warranties (to the extent not subject to legally effective express exclusions thereof), representations and claims made with
respect to such Company Products, including without limitation those in packaging, labeling, advertising, and marketing materials, and
applicable specifications, user manuals, training materials, and other documentation. No Company Product contains any bug, defect, or
error that materially adversely affects, or could reasonably be expected to materially adversely affect, the value, functionality, or
performance of such Company Product, or contain any “time bomb,” “Trojan horse,” “back door,” “worm,”
virus, malware, spyware, or other hardware components or software routines, scripts, code, or tools (collectively, “Malicious
Code”) that, (x) disrupt, disable, harm, or otherwise materially impair the normal and authorized operation of, or provide unauthorized
access to, unauthorized disablement or erasure of any Company Product and the technology used to deliver the Company Products, (y) damage,
destroy, or prevent the access to or use of any data or file without the user’s consent, except, for the avoidance of doubt, license
keys and other code intended to limit access to or use of such Company Product to an authorized user, or (z) otherwise engage in unlawful,
deceptive, fraudulent, tortious, harmful, or malicious behavior or functionality. The Company has exercised commercially reasonable industry
standard efforts to prevent the introduction of Malicious Code into the Company Products.

 

    - 47 - 

     

    

 

(n)              
Privacy and Personal Data. Section 3.12(m) of the Company Disclosure Schedule describes, in a summary manner, the
type of Personally Identifiable Information and Customer Data collected (and the process by which such information is collected) by the
Company through internet websites, mobile applications and online services owned, maintained or operated by the Company (collectively,
the “Company Sites”), and through any Company Products. The Company has at all times complied in all material respects
with all applicable Laws, contractual obligations, requirements of self-regulatory organizations binding upon the Company, consumer-facing
statements of the Company in any marketing or promotional materials and each Privacy Policy relating to (i) the privacy of users of Company
Sites or Company Products, (ii) the past and present collection, use, storage, transfer, retention, dissemination, disposal and any other
processing of any Personally Identifiable Information and Customer Data collected or used by the Company, or (iii) the transmission of
consensual and/or unsolicited communications (collectively, the “Privacy and Security Requirements”). The Company has
not received any written notice from any Governmental Authority that it is under investigation by any Governmental Authority for a violation
of any Privacy and Security Requirements or applicable Laws. The Company has made available to Parent complete and accurate copies of
all written complaints or notices delivered to the Company during the past twelve (12) months alleging or providing notice of a violation
of any Privacy and Security Requirement. Prior to the installation of any Company Software (including without limitation computer programs
that have been caused to be installed by the Company) on a third party’s computer system or device, and prior to any electronic
message being sent from such computer system or device, requisite consent to the installation of such Software and all transmissions of
electronic messages has been obtained from the owner or authorized user of such computer system or device.

 

(o)              
Company Data. The Company has at all times taken commercially reasonable steps (including implementing and monitoring compliance
with reasonable measures with respect to technical and physical security) consistent in all material respects with requirements of applicable
Laws or contractual obligations to protect the confidentiality, availability, security and integrity of the Company’s data, information
technology assets and all Personally Identifiable Information and Customer Data within the possession or control of the Company (collectively,
the “Company Data”). Such steps and procedures comply in all material respects all applicable Laws relating to the
security of the Company Data, and to the Knowledge of the Company such steps and procedures comply in all material respects with all Privacy
and Security Requirements. This includes, but is not limited to, the Company having implemented, maintained, and monitored reasonable
measures with respect to technical, administrative, and physical security designed to preserve and protect the confidentiality, availability,
security, and integrity of all Company Data (including such measures designed to protect the foregoing from infection by Malicious Code,
access by unauthorized Persons or access by authorized Persons that exceeds the Person’s authorization). There is no, nor has there
ever been, any complaint to, any audit, proceeding or investigation (formal or information), or any claim against, the Company, initiated
by a private Person or any Governmental Authority with respect to the security, confidentiality, transmission, availability, or integrity
of any Company Data. To the Knowledge of the Company after due reasonable inquiry, there has been no material unauthorized access to or
acquisition of the Company Data or Company Intellectual Property.

 

    - 48 - 

     

    

 

3.13.       
Contracts.

 

(a)              
Section 3.13(a) of the Company Disclosure Schedule is a true and complete list, as of the date hereof, of all of
the following Contracts to which the Company is a party or by which it or its assets or properties are bound (the “Material Contracts”):

 

(i)                
Contracts evidencing Indebtedness;

 

(ii)             
Contracts evidencing any obligations of the Company with respect to the issuance, sale, repurchase or redemption of any Equity
Securities of the Company;

 

(iii)            
Contracts with any customers of, or suppliers to, the Company which involved aggregate payments to or from the Company in the most
recent twelve (12)-month period of in excess of $100,000;

 

(iv)            
all Real Property Leases;

 

(v)              
all Company Employment Contracts;

 

(vi)            
Contracts providing for the indemnification of any current or former director, officer, manager or employee of the Company;

 

(vii)           
collective bargaining agreements or other Contracts with any labor unions or associations representing employees;

 

(viii)          
Contracts evidencing partnerships, or joint ventures, limited liability companies, limited liability partnerships or similar entities
in which the Company has an interest;

 

(ix)            
Contracts that obligate the Company with respect to contingent payments of any type exceeding $50,000 per annum;

 

(x)              
Contracts relating to Intellectual Property listed in Sections 3.12(c) and 3.12(d) of the Company Disclosure
Schedule;

 

(xi)            
Contracts by and between the Company, on the one hand, and any Affiliate of the Company, other Persons with whom the Company is
not dealing at arm’s-length, an employee, officer or director of the Company, or entity controlled by any employees, officers or
directors of the Company, on the other hand;

 

(xii)            
leases of personal property under which the Company is the lessee and is obligated to make payments more than $50,000 per annum;

 

(xiii)         
Contracts relating to any Litigation involving the Company and pursuant to which the Company has any ongoing obligations related
to such Litigation, including settlement agreements;

 

    - 49 - 

     

    

 

(xiv)          
Contracts evidencing the acquisition or disposition of any capital stock, business or product line of any other Person entered
into at any time during the last three (3) years;

 

(xv)          
Contracts limiting the freedom of the Company or any Affiliate to engage in any line of business, acquire any entity or compete
with any Person or in any market or geographical area, or to solicit any individual or class of individuals for employment or transact
business or deal in any manner with any other person;

 

(xvi)          
any Contract pursuant to which the Company is subject to (A) continuing indemnification obligations, other than indemnification
obligations contained in commercial Contracts entered into in the ordinary course of business that would not reasonably be likely to result
in material payments by the Company or (B) continuing “earn-out” obligations;

 

(xvii)         
any Contract that contains a “most-favored nation” or “most-favored-customer” clause; and

 

(xviii)        
any Contract not otherwise listed above that is, individually or in the aggregate, material to the Company (e.g., involving
payments to or from the Company in excess of $100,000).

 

(b)              
A true and complete copy of each written Material Contract has been made available to Parent. All Material Contracts are valid,
binding and in full force and effect and enforceable by the Company in accordance with their respective terms with respect to the Company,
and to the Knowledge of the Company, with respect to the other Persons party thereto, in each case subject to bankruptcy, insolvency,
reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
The Company has complied in all material respects with the terms and conditions of the Material Contracts. As to each Material Contract,
there does not exist thereunder any material breach, violation or default on the part of the Company or, to the Knowledge of the Company,
any other party to such Material Contract, and, to the Knowledge of the Company, there does not exist any event, occurrence or condition,
including the consummation of the Contemplated Transactions, which (with or without notice, passage of time, or both) would constitute
a material breach, violation or default thereunder on the part of the Company. No material waiver has been granted by the Company or any
of the other parties thereto under any of the Material Contracts. There exists no suspension, stop work order, cure notice or show cause
notice in effect for any Material Contract or any other complaint relating to the Company’s performance thereunder, nor, to the
Knowledge of the Company, has any counterparty with respect to any Material Contract made any threats with respect thereto. To the Knowledge
of the Company, no party other than Company to any Material Contract has repudiated any provision thereof, terminated any Material Contract
or given notice of any such termination, nor to the Knowledge of the Company, is any party intending to do so. The Company has not repudiated
any provision of any Material Contract, terminated any Material Contract or given notice of any such termination.

 

    - 50 - 

     

    

 

3.14.       
Compliance with Laws.

 

(a)              
The Company is not, and during the past three (3) years the Company has not been, in violation of in any material respect, and,
to the Knowledge of the Company, no event has occurred or circumstance exists that (with or without notice or lapse of time) would constitute
or result in a violation in any material respect by the Company of, or failure on the part of the Company to, comply with, in any material
respect, any Law that is or was applicable to it or the conduct or operation of its business or the ownership or use of any of its assets.

 

(b)              
The Company has in effect all material approvals, authorizations, certificates, filings, franchises, licenses, consents, exemptions,
variances, notices and permits of or with all Governmental Authorities (collectively, “Permits”) necessary for it to
own, lease or operate its properties and other assets and to carry on its business and operations as presently conducted. All such Permits
are set forth in Section 3.14(b) of the Company Disclosure Schedule. There has occurred no default under, or violation of,
any such Permit, and each such Permit is in full force and effect. Except as set forth on Section 3.14(b) of the Company Disclosure
Schedule, the execution, delivery and performance of this Agreement, and the consummation of the Contemplated Transactions, does
not and will not result in a violation of or default under and will not cause the suspension, modification, nonrenewal, termination, revocation
or cancellation of any such Permit. Neither the Company nor any Subsidiary has received any communication and, to the Knowledge of the
Company, there exists no facts or circumstances which would reasonably be expected to result in any of the Permits failing to be in good
standing.

 

(c)              
The Company has kept all required records and has filed with Governmental Authorities all required notices, supplemental applications
and annual or other reports required by applicable Laws for the operation of the business of the Company. Without limiting the generality
of the foregoing, the Company has not, (i) directly or indirectly taken any action which would cause it to be in violation of the Foreign
Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1 et seq., as amended, or any rules or regulations thereunder (the “FCPA”),
or any similar anti-corruption or anti-bribery Laws applicable to the Company in any jurisdiction other than the United States, or (ii)
provided, offered, gifted, authorized or promised, directly or indirectly, anything of value to any official of a Governmental Authority,
political party or candidate for government office, nor provided or promised anything of value to any other person, in each case, while
knowing that all or a portion of that thing of value would or will be offered, given or promised, directly or indirectly, to any such
official, party or candidate for the purpose of (1) influencing any action or decision of such official, party or candidate in his or
her official capacity, inducing such official, party or candidate to do or omit to do any act in violation or their lawful duty or securing
any improper advantage for the benefit of the Company, or (2) inducing such official, party or candidate to use his or her influence with
his or her government or instrumentality to affect or influence any act or decision of such government or instrumentality, in order to
assist the Company in obtaining or retaining business for or with, or directing business to, any Person.  The operations of the Company
are, and during the preceding five (5) years have been, conducted at all times in compliance in all material respects with all applicable
anti-money laundering Laws and all applicable financial recordkeeping and reporting requirements, rules, regulations and guidelines.

 

    - 51 - 

     

    

 

3.15.       
Environmental Matters.

 

The Company (i) is, and at all
times has been, in compliance in all material respects with all applicable Environmental Laws, and (ii) has obtained, and is in compliance
in all material respects with, all permits, licenses, authorizations, registrations and other governmental consents required by applicable
Environmental Laws, and has made all appropriate filings for issuance or renewal of such permits, licenses, authorizations, registrations
and consents, except as would otherwise not have either alone or in the aggregate a Material Adverse Effect on the Company. There is no
contamination of and, to the Knowledge of the Company, there have been no releases or threatened releases of Hazardous Materials at the
Leased Real Property or any real property formerly owned, leased or operated by the Company (or any predecessor of the Company), in each
case, that would require notification to governmental entities, investigation and/or remediation pursuant to any Environmental Laws. To
the Knowledge of the Company, there are no past or present conditions, events, circumstances, facts, activities, practices, incidents,
actions, omissions or plans that would reasonably be expected to give rise to any material liability or other material obligation under
any Environmental Laws. There are no claims, notices, civil, criminal or administrative actions, suits, hearings, investigations, inquiries
or proceedings pending or, to the Knowledge of the Company, threatened that are based on or related to any Environmental Matters relating
to the business of the Company.

 

3.16.       
Litigation.

 

Except as set forth in Section
3.16 of the Company Disclosure Schedule, there are no claims, actions, suits, audits, inquiries, proceedings or governmental investigations
(“Litigation”) pending or, to the Knowledge of the Company, threatened involving the Company or its properties or business,
at Law or in equity or before any Governmental Authority, or that have been settled, dismissed or resolved in the preceding three (3)
years. The Company is not subject to any Order arising from any Litigation and, to the Knowledge of the Company, no such Order is threatened
to be imposed by any Governmental Authority.

 

3.17.       
Personnel Matters.

 

(a)              
True, accurate, and complete lists of all of the directors, officers, and employees of the Company (individually and collectively,
 “Personnel”) as of the date hereof and their positions are included in Section  3.17(a) of the Company Disclosure
Schedule together with the following as to each: (i) name, (ii) job title or description, (iii) principal place of employment,
(iv) base salary or wage level (including any bonus opportunities, incentive compensation, commissions, or deferred compensation arrangements)
and also showing any bonus or other material remuneration other than salary paid during the Company’s fiscal year ending December
31, 2020, (v) date of hire, (vi) leave of absence status (including expected return to work date if known) and dates of any leaves of
absence taken during employment, along with the type of leave taken, (vii) whether exempt or non-exempt under the Fair Labor Standards
Act and any applicable state or local laws (viii) current accrued, unused vacation balance; and (ix) visa status (if any). True and complete
information concerning the respective salaries, wages, bonuses, commissions, and other compensation paid or payable by the Company during
2020 and 2019, as well as dates of employment and date and amount of last salary increase, of such Personnel has been made available to
Parent.

 

    - 52 - 

     

    

 

(b)              
There are no legal complaints, lawsuits, claims (other than ordinary claims under Plans), disputes, actions, grievances or disciplinary
actions pending or, to the Knowledge of the Company, threatened, by or between the Company and any Personnel, former employee, job applicants
or other current or former service providers.

 

(c)              
The most recent written personnel policies and manuals of the Company are listed in Section 3.17(c) of the Company Disclosure
Schedule, and true, accurate, and complete copies of all such written personnel policies and manuals have been made available
to Parent.

 

(d)              
The employment of all Personnel is terminable at-will, and the Company has not made any written or oral commitment to any employee
with respect to such employee’s compensation, promotion, retention, termination, severance or related matters, whether in connection
with the Contemplated Transactions or otherwise, other than to the extent such persons are aware of the Retention Plan hereunder in connection
with the negotiation of this Agreement or the Contemplated Transactions. To the Knowledge of the Company, no executive officer or management
level employees have any plans to terminate his, her or their employment with the Company. Section 3.17(d) of the Company Disclosure
Schedule is a true and complete list of all employment and independent contractor Contracts to which the Company is a party (the
 “Company Employment Contracts”), and except as otherwise disclosed in Section 3.17(d) of the Company Disclosure
Schedule, the Company is not a party to any (i) management, employment, consulting or other agreements with any Personnel or other
Person providing for employment over a period of time or for termination or severance benefits, whether written or unwritten, and whether
or not conditioned upon a change in control of the Company, (ii) bonus pay, incentive compensation, deferred compensation, profit-sharing,
stock purchase other than in the ordinary course equity agreements, stock option or similar plans, other than in the ordinary course in
connection with the Stock Option Plan, agreements or arrangements, whether written or unwritten, or (iii) collective bargaining agreements
or other agreements with any labor organization or union or other Personnel organization (and no such agreement is currently being requested
by, or is under discussion by management with, any Personnel or others). During the last three years there has not been and there is not
presently pending, existing, or threatened, any organized strike, slowdown, picketing, or work stoppage by any Personnel.

 

3.18.       
Labor Matters.

 

The Company is not obligated
by, or subject to, any order of the National Labor Relations Board or other labor board or administration, or any unfair labor practice
decision. The Company is not a party or subject to any pending or, to the Knowledge of the Company, threatened labor or civil rights dispute,
controversy or grievance or any unfair labor practice proceeding with respect to claims of, or obligations of, any employee or group of
employees. The Company has not received any notice that any labor representation request is pending or is threatened with respect to any
employees of the Company. For the last four years, the Company has been in compliance in all material respects with all applicable Laws
respecting employment and employment practices, hiring, termination of employment, terms and conditions of employment, wages and hours,
employment standards, human rights, discrimination, harassment, occupational safety, workers’ compensation, classification of employees
as exempt versus non-exempt, and plant closings and mass layoffs. To the Knowledge of the Company, the Company is not liable for the payment
of any compensation, damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any employment
related laws. The Company has paid in full to all Personnel all wages, salaries, vacation, commission, bonuses and other compensation
due and payable to such Personnel, including overtime compensation and severance payments, but excluding arrearages in accordance with
the Company’s customary payroll practices, and there are no severance payments due or that could become due in the future pursuant
to applicable Law, Contract or policy other than payment in lieu of an advance notice of termination of services. All Personnel classified
by the Company as independent contractors at any time during the past four (4) years have, to the Company’s Knowledge, satisfied
the requirements of applicable Law to be so classified. The Company has fully and accurately reported the compensation of each Person
classified by the Company as independent contractors on IRS Forms 1099 during such period if and when required to do so. All Personnel
classified as exempt from overtime pay requirements at any time during the past four (4) years have satisfied the requirements of the
federal Fair Labor Standards Act and all analogous and applicable state and local laws to be so classified.

 

    - 53 - 

     

    

 

3.19.       
Employee Benefits.

 

(a)              
Section 3.19(a) of the Company Disclosure Schedule lists all employee benefit plans (as defined in Section 3(3) of
ERISA) and all bonus, stock option, stock purchase, phantom stock, stock appreciation rights, other equity-based profit sharing, savings,
disability, incentive, deferred compensation, retirement, simplified employee pension, severance, retention, change in control or other
employee benefit plans or programs and all employment or compensation agreements, for the benefit of, or relating to, current employees
and former employees or service providers of the Company or any ERISA Affiliate, or with respect to which the Company could have any Liability,
contingent or otherwise (individually, a “Plan,” collectively, the “Plans”).

 

(b)              
With respect to each Plan, the Company has made available to Parent true and complete copies of: (i) all current Plan documents,
(ii) all current funding and administrative arrangement documents, including, but not limited to, trust agreements, insurance contracts,
custodial agreements, investment manager agreements and service agreements, (iii) the latest favorable determination letter (or as to
a prototype or volume submitter plan, opinion letter) received from the Internal Revenue Service regarding the qualification of each Plan
covered by Section 401(a) of the Code, (iv) the three most recently filed Forms 5500 for each Plan that is an employee pension benefit
plan (as defined in Section 3(2) of ERISA) and for each Plan that is an employee welfare benefit plan (as defined in Section 3(1) of ERISA),
subject to such filing requirement, (v) each current summary plan description and each summary of material modification regarding the
terms and provisions thereof, (vi) the most recent actuarial report, if applicable, (vii) results of any required nondiscrimination or
other testing under each Plan for the last three years, (viii) the three most recent Forms 1094-C, with attachments, filed for any group
health plan and (ix) any material communication with any Governmental Authority, including without limitation correspondence to or from
the government in connection with any audit or investigation of or correction filing for any Plan.

 

(c)              
Each Plan (i) is in compliance in all material respects with all applicable governmental Laws, Orders, statutes, regulations, and
rules issued by a Governmental Authority and with any agreement entered into with a union or labor organization and (ii) has been operated
in compliance in all materials respects with all applicable Laws and its terms. With respect to each Plan, the Company has timely submitted
all required filings, including but not limited to Forms 5500 and 1094-C, as applicable, and it has timely furnished all required notices
to participants and beneficiaries.

 

    - 54 - 

     

    

 

(d)              
No current or former employees of the Company or an ERISA Affiliate currently participate or ever have participated (i) in any
multiemployer plan, as defined in Section 3(37) of ERISA, (ii) any plan subject to Title IV of ERISA or the funding requirements set out
in Section 302 of ERISA or Sections 412, 430, or 431 of the Code, (iii) any voluntary employees beneficiary association, as defined in
Section 501(c)(9) of the Code, (iv) any multiple employer welfare arrangement, as defined in Section 3(40) of ERISA, or (v) any multiple
employer plan, as described in Section 413(c) of the Code.

 

(e)              
No Plan provides retiree medical or retiree life insurance benefits. Any Plan designed to satisfy the requirements of Section 125,
401(k), and/or 4980B of the Code satisfies such section in all material respects. The Company has not received any Letter 226J or other
penalty notice arising under the provisions of the Patient Protection and Affordable Care Act, as amended by the Health Care and Reconciliation
Act of 2010 (“PPACA”), and no event has occurred that could cause the Company to be subject to penalties under PPACA.

 

(f)               
Each Plan intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal
Revenue Service or may rely on an opinion or advisory letter issued to a pre-approved plan, and no event has occurred that could adversely
affect the qualified status of such Plan or its ability to rely on such opinion or advisory letter. No Plan or related trust, or any administrator
or trustee thereof, or party-in-interest or disqualified person thereto has engaged in a transaction that could cause any of them or the
Company, whether directly or through an indemnification requirement, to be liable for a civil penalty under Section 409 or 502(i) or any
other section of ERISA or result in a tax under Section 4975 or 4976 or any other section of Chapter 43 of Subtitle D of the Code. Within
the last six years, no partial termination of any Plan intended to qualify under Section 401(a) of the Code has occurred.

 

(g)              
Each Plan that is required to be registered or approved by a Governmental Authority has been registered with, or approved by, and
has been maintained in good standing with such Governmental Authority.

 

(h)              
All contributions required to be made with respect to any Plan by applicable Law, any Order or any Plan document or other contractual
undertaking, and all premiums due or payable with respect to any insurance policy funding any Plan have been timely paid in full or, to
the extent not required to be made or paid on or before the date hereof, have been accrued in accordance with GAAP and are fully reflected
on the Most Recent Unaudited Financial Statements.

 

(i)                
All amounts required to be reserved under each unfunded Plan have been so reserved in accordance with reasonable accounting practices
prevailing in the country where such Plan is maintained.

 

(j)                
The fair market value of the assets of each Plan that is funded, and the amount of book reserves for each Plan that is unfunded
or underfunded, are, to the Knowledge of the Company, sufficient to satisfy the liability for accrued benefits with respect to current
and former employees of the Company participating in each such Plan, based on reasonable actuarial or other applicable assumptions and
valuations. Each insurance contract relating to any Plan is valid and enforceable and, to the Knowledge of the Company, there is no ground
on which the insurer might avoid liability thereunder.

 

    - 55 - 

     

    

 

(k)              
The execution of this Agreement or any of the Ancillary Documents, and performance of the Contemplated Transactions, will not (either
alone or upon the occurrence of any additional or subsequent events) (i) constitute an event under any Plan or related agreement, trust
or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect to any current or former Personnel, (ii) result in the
triggering or imposition or any restrictions or limitations on the right of the Company to amend or terminate any Plan (or result in any
adverse consequence for so doing) or (iii) except as set forth in Section 3.19(k) of the Company Disclosure Schedule, result
in any payment or benefit that will or may be made by the Company that may be characterized as “excess parachute payment,”
within the meaning of Section 280G(b)(1) of the Code. The Company does not have any obligation or requirement to indemnify or make any
Person whole with respect to taxes under Section 4999 of the Code.

 

(l)                
There are no pending or, to the Knowledge of the Company, threatened claims, actions, proceedings or litigations by or on behalf
of any Plan, any employee or beneficiary covered under any Plan, any Governmental Authority, or otherwise involving any Plan (other than
routine claims for benefits). There are no pending or, to the Knowledge of the Company, threatened claims, actions, proceedings or litigation
by any current or former employee or applicant for employment against the Company. No Plan is under audit or investigation by any Governmental
Authority and, to the Knowledge of the Company, no such audit or investigation is threatened.

 

(m)            
Each Plan that is a nonqualified deferred compensation plan, as defined in Section 409A(d)(1) of the Code has been maintained and
operated in documentary and operational compliance with the requirements under Section 409A of the Code and the Treasury Regulations and
guidance issued thereunder. The Company does not have any obligation or requirement to indemnify or make any Person whole with respect
to taxes under Section 409A of the Code.

 

3.20.       
Tax Matters.

 

(a)              
The Company has duly and timely filed all Tax Returns required to be filed by them, and all such Tax Returns are true, complete
and correct in all material respects. The Company has timely paid all Taxes due and owing (whether or not shown due on any Tax Return).
The Company is not currently the beneficiary of any extension of time within which to file any Tax Return, other than automatic extensions
of time not requiring the consent of any Governmental Authority.

 

(b)              
The Company has complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes and
has, within the time and in the manner prescribed by applicable Laws, withheld and paid over to the proper Governmental Authority all
amounts required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor,
member, stockholder or other third party.

 

    - 56 - 

     

    

 

(c)              
The Company is not, nor has ever been, a party to or bound by any Tax Sharing Agreement. There are no Liens on any of the assets
of the Company with respect to Taxes.

 

(d)              
No Governmental Authority is conducting or, to the Knowledge of the Company, proposing or has threatened to conduct an audit or
administrative or judicial proceeding with respect to Taxes or any Tax Returns of the Company. No extension or waiver of the statute of
limitations with respect to Taxes or any Tax Return has been granted by the Company which remains in effect. All Tax deficiencies which
have been proposed, asserted or assessed against the Company have been fully paid or finally settled. The Company has not received a notice
of a claim by any Governmental Authority in any jurisdiction where the Company does not file Tax Returns that the Company is or may be
subject to taxation by that jurisdiction.

 

(e)              
The Company has not received or requested any ruling, closing agreement, transfer pricing agreement or similar agreement from any
Governmental Authority with respect to any Tax which will have any effect after the Closing.

 

(f)               
The Company has never been included in an affiliated group (as defined in Section 1504 of the Code or any similar group defined
under a similar provision of state, local, or foreign Law).

 

(g)              
The Company has no liability for the Taxes of any Person under Treasury Regulations Section 1.1502-6 (or any similar provision
of state, local or foreign Law), as a transferee, successor or as a result of similar liability, operation of Law, by Contract (including
any Tax Sharing Agreement) or otherwise.

 

(h)              
The Company has not participated in a listed transaction or a reportable transaction within the meaning of Treasury Regulation
Section 1.6011-4 or Treasury Regulation Section 1.6011-4T.

 

(i)                
No Person has been treated as an independent contractor of the Company for Tax purposes who should have been treated as an employee
for such purposes.

 

(j)                
The Capital Stock is not subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code.

 

(k)              
The Company is not a party to any “gain recognition agreements” as such term is used in the Treasury Regulations promulgated
under Code Section 367.

 

(l)                
There are no joint ventures, partnerships, limited liability companies, or other arrangements or contracts to which the Company
is a party and that could be treated as a partnership for federal income tax purposes.

 

(m)            
The Company has not agreed, nor is it required, to make any adjustment to taxable income in any period (or portion thereof) ending
after the Closing Date by reason of (i) a change in method of accounting for any period (or portion thereof) ending on or before the Closing
Date, (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state,
local or foreign income Tax Law) executed on or prior to the Closing Date, (iii) installment sale or open transaction disposition made
on or prior to the Closing Date, (iv) prepaid amount or deferred revenue received or accrued on or prior to the Closing Date, (v) use
of an improper method of accounting for a taxable period ending on or prior to the Closing Date; (vi) intercompany transaction or excess
loss account described in the regulations promulgated under Section 1502 of the Code (or any corresponding or similar provision of state,
local or foreign income Tax law); or (vii) election under Section 108(i) of the Code. The Company will not be required to include any
item of income in taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of Section 965
of the Code.

 

    - 57 - 

     

    

 

(n)              
The Company has delivered or otherwise made available to Parent true, correct and complete copies of all Tax Returns of the Company
for all Tax periods beginning on or after January 1, 2015. The Company has delivered or otherwise made available to Parent true, correct
and complete copies of any examination reports received by the Company, and statements of deficiencies assessed against or agreed to by
the Company.

 

(o)              
The Company has not in the past five years, been a “distributing corporation” or a “controlled corporation”
in a transaction that qualifies under Section 355 of the Code.

 

(p)              
The Company does not own an interest in (i) a “specified foreign corporation” within the meaning of Section 965 of
the Code, or (ii) a “passive foreign investment corporation” within the meaning of Section 1297 of the Code.

 

(q)              
The Company does not engage in (or has not engaged in) a trade or business in a country other than the country in which the Company
is incorporated or otherwise organized and is not subject to Tax or has a permanent establishment (within the meaning of an applicable
Tax treaty or convention between the United States and such foreign country) or otherwise has an office or fixed place of business, in
a country other than the country in which it is incorporated or otherwise organized.

 

(r)               
The Company does not have any obligation to make a payment for which a deduction would be disallowed in whole or part under Section
162(m) of the Code or that is under a plan or agreement.

 

(s)               
The Company has not, nor has at any time been, subject to (i) the dual consolidated loss provisions of Section 1503(d) of the Code,
(ii) the overall foreign loss provisions of Section 904(f) of the Code or (iii) the recharacterization provisions of Section 952(c)(2)
of the Code.

 

(t)                
All transactions (including but not limited to sales of goods, loans, and provision of services) between the Company, on the one
hand, and any other Person, on the other hand, that is controlled directly or indirectly by the Company or any shareholder thereof (within
the meaning of Section 482 of the Code) were effected on arms’-length terms and for fair market value consideration. The Company
has delivered to the Parent true, correct and complete copies of any transfer pricing studies or materials prepared by, or in respect
of the Company.

 

    - 58 - 

     

    

 

(u)              
The Company has duly and timely collected all amounts on account of any sales or transfer taxes, including goods and services,
harmonized sales and state, provincial or territorial sales Taxes, required by applicable Laws to be collected by it and has duly and
timely remitted to the appropriate taxing authority any such amounts required by Law to be remitted by it.

 

(v)              
The existence, amount or usability of the Tax attributes of the Company (such as net operating losses, capital loss carry forwards,
foreign tax credit carry forwards, asset bases, research and development credit, and depreciation periods) for Tax periods (or portions
thereof) are not currently subject to limitation under any Section of the Code or the Treasury Regulations thereunder, or any applicable
provision of state, local or non-U.S. Law.

 

(w)              
The Company has not claimed any foreign Tax credits, neither has it obtained official receipts from any non-U.S. taxing authorities.

 

(x)              
The Company has never taken advantage of any Tax holiday or other similar incentive.

 

(y)              
The Company does not nor has ever had signatory authority over, or with respect to, any foreign bank accounts and has no FBAR filing
requirements.

 

(z)               
None of the assets of the Company are “section 197(f)(9) intangibles” (as defined in Treasury Regulation Section 1.197-2(h)(1)(i)
and assuming for this purpose that the transition period ends on August 10, 1993).

 

(aa)           
The Company is not nor has ever been a “United States Real Property Holding Corporation” within the meaning of Section
897(c)(2) of the Code or owns an interest in “United States real property” within the meaning of Section 897 of the Code or
 “United States property” within the meaning of Section 956 of the Code.

 

(bb)            
The Company has not deferred any obligation to pay Taxes pursuant to Section 2302 of the CARES Act or any other similar Law, executive
order or Presidential Memorandum (including the Presidential Memorandum described in IRS Notice 2020-65) enacted in connection with COVID-19.

 

(cc)            
The Company (i) has not received or requested any ruling, administrative relief, technical advice, change of a method of accounting,
closing agreement pursuant to Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign Law) or similar
agreement from any taxing authority with respect to any Tax or (ii) has not granted a power of attorney with respect to Taxes that is
currently in force.

 

(dd)            
At all times since the Company’s conversion from a California limited liability company to a California corporation, the
Company has been classified as a corporation under Subchapter C of the Code for federal and, where applicable, state and local income
Tax purposes.

 

(ee)             
The unpaid Taxes of the Company (A) did not, as of the Most Recent Unaudited Balance Sheet Date, materially exceed the reserve
for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the Most Recent Unaudited Balance Sheet (rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing their
Tax Returns.

 

    - 59 - 

     

    

 

(ff)              
The Company is a “United States person” (within the meaning of Section 7701(a)(30) of the Code).

 

(gg)            
The Company does not have any obligation to make a payment that is not fully deductible under Section 162(m).

 

(hh)            
None of the Company’s losses or other Tax attributes are subject to an existing limitation under Code Section 382 (or any
other similar provision of state, local or foreign law).

 

(ii)              
The Company has never received or accrued income that will be required to be included in the income of a “United States Shareholder”
(as defined under Section 951(b) of the Code or similar provision of state or local Law) that is related or attributable to: (i) “subpart
F income” (within the meaning of Section 952 of the Code or similar provision of state or local Law); or (ii) the holding of “United
States property” (within the meaning of Section 956 of the Code or similar provision of state or local Law) on or prior to the Closing
Date.

 

3.21.       
Insurance.

 

The Company maintains general
liability, workers’ compensation, and other types of insurance shown in Section 3.21 of the Company Disclosure Schedule
(the “Insurance Policies”), which insurance is in full force and effect and, to the Knowledge of the Company, comprised
of the types and in the amounts of insurance customarily carried by businesses of similar size and type in the same industry. The Company
does not maintain professional liability, product liability, fire, casualty or motor vehicle insurance. All premiums with respect to the
Insurance Policies covering all periods for periods due and owing up to and as of the date of the Closing have been paid. The Company
has not received any written notice of increase in premiums with respect to, or cancellation, termination or non-renewal of, any of the
Insurance Policies, except for general increases in rates to which similarly situated companies are subject. The Company has timely filed
all claims for which they are seeking payment or other coverage under any of the Insurance Policies. The Company has not made any claim
against an Insurance Policy as to which the insurer is denying coverage or defending the claim under a reservation of rights. The Company
is not in default in any material respect under any Insurance Policy. The Company has performed in all material respects all of its obligations
under the Insurance Policies. The Insurance Policies (i) are sufficient for compliance with all material requirements of applicable Law
and all Material Contracts relating to the Company, (ii) are valid, outstanding and enforceable policies, (iii) will remain in full force
and effect through the respective dates set forth in Section 3.21 of the Company Disclosure Schedule without the payment
of additional premiums, (iv) will not in any way be affected by, in any material respect, or terminate or lapse by reason of, the Contemplated
Transactions and (v) do not provide for any retrospective premium adjustment or other experienced-based liability on the part of the Company.
The Company has not been refused any insurance by any insurance carrier to which the Company has applied for any such insurance or with
which the Company has carried insurance during the last three (3) years.

 

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3.22.       
Bank Accounts; Powers of Attorney.

 

Section 3.22 of the Company
Disclosure Schedule sets forth a true and complete list of (a) all bank accounts or safe deposit boxes under the control or for
the benefit of the Company, (b) the names of all persons authorized to draw on or have access to such accounts and safe deposit boxes,
and (c) all outstanding powers of attorney or similar authorizations granted by the Company.

 

3.23.       
Customers and Suppliers.

 

(a)              
Section 3.23(a) of the Company Disclosure Schedule sets forth a true and complete list of the ten (10) largest customers
of the Company, determined on a consolidated basis by dollar volume of sales, for the fiscal year ended December 31, 2020 and the fiscal
year ended December 31, 2019 (collectively, the “Top Customers”) and the applicable dollar amounts with respect to
each Top Customer. Except as set forth in Section 3.23(a) of the Company Disclosure Schedule, the Company has no Knowledge
of any termination, cancellation or threatened termination or cancellation of or material limitation of, or any material modification
or change in, or material dissatisfaction with, the business relationship between the Company and any of the Top Customers. The Company
has no Knowledge that any Top Customer intends to, as a result of the Contemplated Transactions, cease to contract with the Company or
substantially reduce its business with the Company.

 

(b)              
Section 3.23(b) of the Company Disclosure Schedule sets forth a true and complete list of the ten (10) largest suppliers
of the Company, determined on a consolidated basis by dollar volume of expenditures, for the fiscal year ended December 31, 2020 and the
fiscal year ended December 31, 2019 (collectively, the “Top Suppliers”) and the applicable dollar amounts with respect
to each Top Supplier. Except as set forth in Section 3.23(b) of the Company Disclosure Schedule, the Company has no Knowledge
of any termination, cancellation or threatened termination or cancellation of or material limitation of, or any material modification
or change in, or material dissatisfaction with the business relationship between the Company and any of the Top Suppliers. The Company
has no Knowledge that any Top Supplier intends to, as a result of the Contemplated Transactions, cease to contract with or supply to the
Company or substantially reduce its business with the Company.

 

3.24.       
Accounts Receivable.

 

All accounts and notes receivable
and other receivables reflected on the balance sheet set forth in the Most Recent Unaudited Financial Statements (“Most Recent
Unaudited Balance Sheet”) represent, and the accounts and notes receivable and other receivables arising from the date hereof
through the Closing Date will represent, bona fide, current and valid obligations arising from sales actually made or services actually
performed in the ordinary course of business. The reserve for doubtful accounts reflected on the Most Recent Unaudited Balance Sheet was
established in the ordinary course of business consistent with past practice. The Company has not received written notice from any obligor
of any accounts receivable that such obligor is refusing to pay or contesting payment of amounts, other than with respect to returns in
the ordinary course of business.

 

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3.25.       
Books and Records.

 

The books and records of the
Company have been maintained in accordance with good business practices and, in all material respects, all applicable Laws. The minute
books of director (including committees thereof) and stockholder meetings of the Company, as previously made available to Parent, contain
accurate records of all such meetings and accurately reflect all other material corporate action of the stockholders and directors of
the Company in all material respects.

 

3.26.       
Products Liability and Warranty Liability.

 

The Company (a) has no material
Liability arising out of any product designed, manufactured, assembled, repairs, maintained, delivered, sold, or installed, or any services
rendered, by or on behalf of the Company, other than those that have been reserved against on the Most Recent Reviewed Financial Statements,
(b) has not committed any act or failed to commit any act which would reasonably be expected to result in any product liability claim
or Liability for breach of warranty (whether or not covered by insurance) on the part of the Company with respect to any product designed,
manufactured, assembled, repairs, maintained, delivered, sold, or installed, or services rendered, by or on behalf of the Company, (c)
has extended any warranty period on any products beyond those customarily given by the Company for such products or beyond those provided
by the manufacturer, as applicable, or (d) is aware of any facts or circumstances which, given the passage of time, would reasonably be
expected to result in a claim against the Company for product liability or breach of warranty. The Company has made available to Parent
copies of all guarantees, warranties, and indemnities given by the Company in connection with the Company Products. Each product designed,
manufactured, sold, or delivered by the Company has been in material conformity with all product specifications, applicable express and
implied warranties, and all applicable Laws in all material respects. To the Knowledge of the Company, there are no latent or overt design,
manufacturing, or other defects in any products designed, manufactured, assembled, repairs, maintained, delivered, sold, or installed,
or services rendered, by or on behalf of the Company. None of the products or services covered by the prior sentence have been the subject
of any recall. The warranty reserves on the Most Recent Reviewed Financial Statements are reasonable based on past experience and have
been accrued in accordance with Company Accounting Principles. Complete and correct copies of all documentation related to all warranty
claims made against the Company since January 1, 2018 have been made available to Parent.

 

3.27.       
Inventory.

 

All inventory, finished goods,
raw materials, work in progress, packaging, supplies, parts, and other inventories of the Company (“Inventory”), whether
or not reflected in the Most Recent Unaudited Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course
of business consistent with past practice, except for obsolete, damaged, defective, or slow-moving items that have been written off or
written down to fair market value or for which adequate reserves have been established in a manner consistent with past practice. All
Inventory is owned by the Company free and clear of all Liens, and no Inventory is held on a consignment basis. The quantities of each
item of Inventory (whether raw materials, work-in-process or finished goods) are not excessive, but are reasonable in the present conduct
of the business of the Company or consistent with past practice.

 

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3.28.       
Export Control Laws.

 

(a)              
The Company is and has at all times since its inception been in compliance in all material respects with all applicable International
Trade Laws and Regulations and there are no claims, complaints, charges, investigations, voluntary disclosures or proceedings pending
or, to the Knowledge of the Company, threatened between the Company, on the one hand, and any Governmental Authority under any International
Trade Laws and Regulations, on the other hand.

 

(b)              
The Company has prepared and timely applied for all import and export licenses required in accordance with International Trade
Laws and Regulations, for the business of the Company as presently conducted or conducted consistent with past practice.

 

(c)              
The Company has made available to Parent true and complete copies of all issued and pending import and export licenses, and all
documentation required by, and necessary to evidence compliance with, all International Trade Laws and Regulations in connection with
the business of the Company.

 

(d)              
The Company has not maintained employees or assets of any kind in Cuba, Iran, North Korea, Sudan, Syria, or any other country against
which the United States maintains, or has maintained since the Company’s inception, economic sanctions and the Company has not maintained
employees or assets of any kind in any country against which the United States maintains, or has maintained during the last five (5) years,
an arms embargo.

 

(e)              
The Company has at all times been in compliance in all material respects with all International Trade Laws and Regulations relating
to export control and trade embargoes, and has not provided, sold to, or otherwise transferred, without explicit approval from the U.S.
Government, products, software, technology, or services, directly or indirectly, to (i) Cuba, Iran, North Korea, Sudan, Syria or any other
country against which the United States maintains, or has maintained during the last five (5) years, economic sanctions or embargoes,
(ii) any instrumentality, agent, entity, or individual that is acting on behalf of, or directly or indirectly owned or controlled by,
any Governmental Authority of such countries, (iii) any nationals of such countries, or (iv) any organization, entity, or individual appearing
on a United States Government list of parties with whom companies are prohibited from transacting including the Specially Designated Nationals
List maintained by the United States Treasury Department’s Office of Foreign Assets Control.

 

3.29.       
No Brokers.

 

Neither the Company nor any
of its respective directors, officers, employees or agents has employed or incurred any Liability to any broker, finder or agent for any
brokerage fees, finder’s fees, commissions or other amounts with respect to this Agreement, the Ancillary Documents or the Contemplated
Transactions.

 

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3.30.       
No Other Agreements to Purchase.

 

Except for the rights of Parent
and Merger Sub under this Agreement, no Person has any written or oral agreement, option, understanding or commitment, or any right or
privilege (whether by law, contractual or otherwise) capable of becoming such, for (a) the purchase or acquisition of Equity Securities
or substantially all of the assets of the Company or (b) the purchase, subscription, allotment or issuance of any of the unissued Equity
Securities of the Company.

 

ARTICLE IV

Representations and Warranties of Parent and Merger Sub

 

Except as set forth in the
Parent Disclosure Schedule (it being agreed that any matter disclosed in the Parent Disclosure Schedule with
respect to any section of this Agreement shall be deemed to have been disclosed with respect to any other section to which such matter
relates so long as the relation of such matter to such other section is readily apparent from the description of such matter), Parent
and Merger Sub jointly and severally represent and warrant to the Company as of the date hereof and on and as of the Closing Date as follows:

 

4.1.          Organization
and Power.

 

Parent is duly incorporated,
validly existing and in good standing under the Laws of the State of Nevada and has full power and authority to execute and deliver this
Agreement and the Ancillary Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the
Contemplated Transactions. Merger Sub is a corporation, duly incorporated, validly existing and in good standing under the Laws of the
State of California and has full power and authority to execute and deliver this Agreement and the Ancillary Documents to which it is
a party, to perform its obligations hereunder and thereunder and to consummate the Contemplated Transactions. All of the issued and outstanding
capital stock of Merger Sub is owned directly by Parent.

 

4.2.          Authorization
and Enforceability.

 

The execution and delivery of
this Agreement and the Ancillary Documents to which Parent and Merger Sub are a party and the performance by Parent and Merger Sub of
the Contemplated Transactions that are required to be performed by Parent and Merger Sub have been duly authorized by the board of directors
of both Parent and Merger Sub in accordance with applicable Law and their respective certificates of incorporation and bylaws or other
similar organizational documents of Parent and Merger Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize the execution, delivery and performance of this Agreement and the Ancillary Documents to which Parent and Merger
Sub are a party or the consummation of the Contemplated Transactions that are required to be performed by Parent and Merger Sub. This
Agreement and each of the Ancillary Documents to be executed and delivered at the Closing by Parent and Merger Sub will be, at the Closing,
duly authorized, executed and delivered by Parent and Merger Sub and constitutes, or as of the Closing Date will constitute, valid and
legally binding agreements of Parent and Merger Sub enforceable against each in accordance with their terms, subject to bankruptcy, insolvency,
reorganization and other Laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

 

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4.3.         
No Violation.

 

The execution and delivery by
Parent and Merger Sub of this Agreement and the Ancillary Documents to which each is a party, consummation of the Contemplated Transactions
that are required to be performed by each and compliance with the terms of this Agreement and the Ancillary Documents to which each is
a party will not (i) conflict with or violate any provision of the certificate of incorporation, bylaws or similar organizational
documents of Parent or Merger Sub, or (ii) assuming that all consents, approvals and authorizations contemplated by Section 4.4 have
been obtained and all filings described therein have been made, conflict with or violate any Law applicable to Parent or Merger Sub or
by which any properties of Parent or Merger Sub are bound or affected, except as would not reasonably be expected to prevent or materially
delay consummation of the Contemplated Transactions or the performance by Parent or Merger Sub of any of their material obligations under
this Agreement or the Ancillary Documents.

 

4.4.         
Governmental Authorizations and Consents.

 

Except as set forth in Section
4.4 of the Parent Disclosure Schedules, no Governmental Consents or consents of a listing exchange are required to be obtained
or made by Parent or Merger Sub in connection with the execution, delivery, performance, validity and enforceability of this Agreement
or any Ancillary Documents to which Parent or Merger Sub is a party or the consummation of the merger and all other transactions contemplated
hereby.

 

4.5.         
No Brokers.

 

No agent, broker, Person or
firm acting on behalf of Parent or Merger Sub or their Affiliates is, or will be, entitled to any commission or broker’s or finder’s
fees from any of the parties hereto, or from any Affiliate of any of the parties hereto, in connection with any of the Contemplated Transactions.

 

4.6.         
Operations of Merger Sub.

 

Merger Sub was formed by Parent
solely for the purpose of engaging in the Contemplated Transactions. Since the date of its incorporation, Merger Sub has not engaged in
any activities other than in connection with or as contemplated by this Agreement. Merger Sub has no liabilities except in connection
with the Contemplated Transactions and, except for an agreement pursuant to which all of its authorized capital stock was issued to Parent
and any other agreement in connection with the Contemplated Transactions, is not a party to any agreement other than this Agreement.

 

4.7.         
Financing.

 

Parent has sufficient funds
available as and when needed to consummate the transactions contemplated by this Agreement and to perform its obligations hereunder.

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ARTICLE V

Covenants

 

5.1.        
Tax Matters.

 

(a)              
The Surviving Corporation shall prepare, or cause to be prepared, and file, or cause to be filed, on a timely basis all Tax Returns
of the Surviving Corporation and the Company that are due (taking into account permitted extensions that have been granted) after the
Closing Date and that reflect any liability for Pre-Closing Taxes. All such Tax Returns shall be prepared in a manner consistent with
prior practice, unless such prior practice is not in accordance with applicable Law. The Surviving Corporation shall provide the Securityholders’
Representative with a draft copy of each such Tax Return which is a Tax Return that reflects any liability for Pre-Closing Taxes at least
twenty (20) Business Days prior to the filing of such Tax Return (taking into account permitted extensions that have been granted) for
its review and comment and, with respect to each such Tax Return that is an Income Tax Return, shall consider in good faith any reasonable
changes requested by the Securityholders’ Representative; provided that such changes (i) are determined, by a jointly selected
arbiter from a nationally recognized independent public accounting firm, to constitute a position that is at least “more likely
than not” to be sustained, (ii) impact the amount of Pre-Closing Taxes payable by the Securityholders, and (iii) will not have any
adverse effect on the Surviving Corporation or the Company after the Closing Date. All costs and expenses of the nationally recognized
independent public accounting firm incurred in making the ”more likely than not” determination shall be borne by the Parent.
Subject to Article VII, the Securityholders are jointly and severally responsible for any liability for Pre-Closing Taxes shown as due
on any Tax Returns filed pursuant to this Section 5.2(a) and, to the extent paid by the Surviving Corporation or the Company, the Surviving
Corporation shall be entitled to be reimbursed from the Indemnity Escrow Amount for the amount of any Tax liabilities with respect to
such returns that are Pre-Closing Taxes that were unpaid as of the Closing Date.

 

(b)              
The Surviving Corporation, the Securityholders’ Representative and Parent shall cooperate fully, as and to the extent reasonably
requested by any party hereto, in connection with (i) the filing of Tax Returns pursuant to this Article V, (ii) any other Tax Returns
required to be filed in connection with the Contemplated Transactions (including, without limitation, required filings under Section 6043
or Section 6043A of the Code or the Treasury Regulations thereunder), and (iii) any Tax Contest. Such cooperation shall include the retention
and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such Tax Return
or Tax Contest and making employees available on a mutually convenient basis to provide additional information and explanation of any
material provided hereunder. Parent, the Surviving Corporation and the Securityholders’ Representative (to the extent in its possession)
agree (x) to retain all books and records with respect to Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by Parent, the Surviving Corporation
or the Securityholders’ Representative, any extensions thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any Taxing Authority, and (y) to give each other reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other so requests, the Surviving Corporation or the Securityholders’ Representative,
as the case may be, shall allow the other to take possession of such books and records.

 

(c)              
All Transfer Taxes shall be borne by the Securityholders. The Person(s) required to do so by applicable Law shall timely prepare
and file all necessary Tax Returns with respect to all such Transfer Taxes and shall provide a draft copy of such Tax Returns and other
documentation to the non-filing Person at least ten (10) Business Days prior to the due date for such Tax Returns for its review and comment
and shall incorporate all reasonable comments made by the non-filing Person. The filing Person shall timely file or cause to be filed
all such Tax Returns, and Parent, the Securityholders’ Representative, and the Surviving Corporation shall reasonably cooperate
with the filing Person(s) as may be necessary to effectuate such filings.

 

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(d)              
All Tax Sharing Agreements with respect to or involving the Company shall have been terminated no later than the Closing Date and,
after the Closing Date, the Surviving Corporation shall not be bound thereby or have any liability thereunder.

 

(e)              
Notwithstanding anything herein to the contrary, Parent (and, after the Closing, the Surviving Corporation), shall be entitled
to, (i) initiate, participate in and control any “voluntary disclosure” process or procedure sponsored by a particular Governmental
Authority with respect to Taxes of the Company for any Pre-Closing Tax Period or Straddle Period (and any related process with respect
to other Taxes that is required under applicable Law in order to participate in such voluntary disclosure process), (ii) approach on an
anonymous basis and seek a resolution in a manner similar to the “voluntary disclosure” process or procedure for any jurisdiction
that does not have a formal “voluntary disclosure” process or procedure with respect to Taxes of the Company for any Pre-Closing
Tax Period or Straddle Period (and any related process with respect to other Taxes that is required under applicable Law in order to participate
in such process or procedure), and (iii) make any remedial Tax filings with respect to any Pre-Closing Tax Period or Straddle Period,
including, for the avoidance of doubt, any remedial Tax filings relating to sales and use Taxes or in any non-U.S. jurisdiction, that
Parent reasonably determines to be appropriate (each, a “Specified Proceeding”). For each Specified Proceeding, Parent (i)
shall diligently prosecute such Specified Proceeding in good faith, (ii) shall keep the Securityholders’ Representative reasonably
informed of the status of developments with respect to such Specified Proceeding, (iii) provide the Securityholders’ Representative
with copies of all written materials related to such Specified Proceeding and provide the Securityholders’ Representative with a
draft of any filings or submissions with respect to such Specified Proceeding (and Parent shall incorporate any reasonable comments requested
by the Securityholders’ Representative thereon), and (iv) allow the Securityholders’ Representative to participate in all
discussions and meetings with a Governmental Authority in connection with such Specified Proceeding. Subject to Article VII, any (i) out-of-pocket
expenses incurred by Parent or the Company and (ii) Taxes payable by Parent or the Company, in each case, pursuant to the settlement or
other resolution of a Specified Proceeding (together, the “Specified Proceeding Recovery Amounts”) shall be paid by the Securityholders
to Parent (or its designee) within five (5) Business Days after a written demand from Parent as indemnifiable losses pursuant to Article
VII hereof.

 

5.2.         
Public Announcements.

 

The timing and content of all
press releases or public announcements regarding any aspect of this Agreement, any Ancillary Document, or the Contemplated Transactions
to the financial community, government agencies or the general public shall be mutually agreed upon in advance by Parent and the Company,
prior to Closing, and in consultation with the Securityholders’ Representative after Closing. Notwithstanding the foregoing, each
such party may make any such announcement which it in good faith believes, based on advice of counsel, is required by Law or any listing
agreement with any national securities exchange to which such party is subject; provided, that such party shall consult with the
other party prior to any such announcement to the extent practicable, and shall in any event promptly provide the other party with copies
of any such announcement. Notwithstanding the foregoing, following Closing and the public announcement (if any) of the Merger, the Securityholders’
Representative may, after receiving written consent (e-mail being sufficient) from Parent, publicly announce that it has been engaged
to serve as the Securityholders’ Representative in connection herewith as long as such announcement does not disclose or reference
any terms hereof or any Ancillary Document or any negotiations among the parties or any confidential information of any party hereto or
any Ancillary Document, provided, that Parent has reviewed any such announcement prior to its release and the Securityholders’ Representative
shall incorporate comments from Parent regarding such proposed public announcement.

 

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5.3.         
Termination of Affiliated Loans.

 

The Company shall cause all
Affiliated Loans to be repaid, satisfied, discharged, and terminated at or prior to the Closing (including, as necessary, offsetting amounts
owed to the Company against amounts to be paid to a Securityholder pursuant to this Agreement).

 

5.4.         
Notice of Developments.

 

From and after the Closing Date,
the Securityholders’ Representative shall promptly notify Parent if the Securityholders’ Representative becomes aware of or
has knowledge of (a) any notice or other communication from any Person challenging the Contemplated Transactions, (b) any notice or other
oral or written communication from any Governmental Authority in connection with or directly relating to the Contemplated Transactions,
and (c) any Event that constitutes, or would reasonably be expected to constitute as of the Closing Date, a breach or violation of any
representation, warranty, covenant or agreement of the Company under this Agreement; provided that no disclosure by the Securityholders’
Representative pursuant to this Section 5.4, or any other communication from the Securityholders’ Representative after the date
hereof, shall be deemed (i) to amend or supplement the Company Disclosure Schedule or exhibits attached hereto or the representations
and warranties contained in this Agreement, (ii) to prevent or cure any misrepresentation or breach of warranty, (iii) to affect in any
way the indemnification provided under Section 7.2(a), or (iv) to otherwise prejudice any right or remedies of the Parent Indemnitees.
Notwithstanding the foregoing, the Selling Securityholders shall promptly notify the Securityholders’ Representative if any such
Selling Securityholder becomes aware of or has knowledge of any of the items listed in clauses (a) through (c).

 

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5.5.         
Retention Plan.

 

Concurrently with the Closing,
Parent and the Company shall establish a performance and retention plan that will be implemented by the Surviving Corporation following
the Closing (the “Retention Plan”). The Retention Plan shall provide for the retention of the following employees,
in each case subject to continued performance in the ordinary course of business of the Company by such employees and standard labor and
employment laws regarding at-will employment, subject to the provisions herein: Steve Heckeroth; Nishigandha Deokule; Wilhelm Cashen;
Norm Fluhrer; and Jason Fluhrer. The Retention Plan shall (a) provide for payment to such employees of (i) an aggregate of $1,000,000
if the 2021 Earnout Trigger is met (including taking into consideration the 2021 Addback); (ii) an aggregate of $1,000,000 if the 2022
Earnout Trigger is met; and (iii) an aggregate of $1,000,000 if the 2023 Earnout Trigger is met, (b) condition such payments to each such
employee to such employee remaining employed by the Surviving Corporation from the Closing Date through the date such payment is made
(unless such employee is terminated without Cause or resigns for Good Reason, as such terms are defined in the Retention Plan, by or from
the Surviving Corporation after the respective qualifications for earning the Retention Plan payment were substantially met but before
the related such payments were made), (c) provide that the foregoing retention payments shall be allocated substantially as follows to
the following persons: Steve Heckeroth (50%); Nishigandha Deokule (20%); Wilhelm Cashen (20%); Norm Fluhrer (5%); Jason Fluhrer (5%);
and (d) contain such other terms and conditions as may be mutually agreed between Parent and the Company. With respect to any payment
to be made under the Retention Plan, each recipient shall have the option to receive all (but not less than all) of the amount to which
such recipient is entitled to receive in the form of shares of Parent Common Stock rather than in cash; provided that (w) such
recipient is an “accredited investor” as defined in Rule 501(a) under the Securities Act, (x) the issuance by Parent of such
shares to such Securityholder would not result in Parent failing to comply with the Securities Act or the rules, regulations and requirements
of NASDAQ, (y) such recipient delivers to Parent, prior to the expiration of the fiscal year to which such payment relates, a written
notice indicating such recipient’s desire to receive such payment in the form of registered shares of Parent Common Stock and (z)
such recipient thereafter cooperates with Parent and provides Parent with such other information and documentation as Parent may request
in order to effect such issuance of shares to such recipient. In the event that any portion of any such payment is to be paid in the form
of shares of Parent Common Stock pursuant to this Section 5.5, the number of shares to be issued in respect of such payment shall be equal
to (I) the amount of such payment payable to such recipient which is being paid in shares of Parent Common Stock divided by (II) the VWAP
as of December 31, 2021 (with respect to the payments to be made in respect of Fiscal Year 2021), December 31, 2022 (with respect to the
payments to be made in respect of Fiscal Year 2022), or December 31, 2023 (with respect to the payments to be made in respect of Fiscal
Year 2023), as applicable.

 

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5.6.         
No Other Representations; Non-Reliance.

 

Notwithstanding
anything contained in this Agreement to the contrary, Parent (a sophisticated party capable of evaluating the transaction contemplated
hereby) and Merger Sub on behalf of themselves and on behalf of each of their respective Affiliates, and Company on its behalf and on
behalf of each of its Affiliates, each acknowledge and agree that: (a) the representations and warranties of the Company set forth in
Article III (as qualified by the Company Disclosure Schedule), and the representations and warranties of Parent and Merger Sub set forth
in Article IV (as qualified by the Parent Disclosure Schedule), constitute, respectively, the sole and exclusive representations and warranties
of the Company of any kind to Parent and the sole and exclusive representations and warranties of Parent and Merger Sub to the Company,
in connection with the transactions contemplated hereby, and Parent, Merger Sub and the Company each understand, acknowledge and
agree that all other representations, warranties and statements of any kind or nature expressed or implied are specifically disclaimed
by the Company, Parent and Merger Sub, respectively; (b) the representations
and warranties set forth in Article III (as qualified by the Company Disclosure Schedule) and Article IV (as qualified by the Parent Disclosure
Schedules) are the only representations and warranties that Parent, Merger Sub, and the Company, respectively, required in connection
with each of its decision to enter into this Agreement and consummate the Contemplated Transactions; and (c)
in connection with Parent’s investigation of the Company and the Company’s investigation of Parent, Parent and the Company,
respectively, has received or may receive certain projections, including projected statements of operating revenues and income from operations
of the Company or Parent, as applicable, and certain plan information. Parent, Merger Sub and the Company each acknowledge that there
are uncertainties inherent in attempting to make such estimates, projections, plans and other forecasts, that Parent Merger Sub, and the
Company, respectively, is each familiar with such uncertainties and is taking full responsibility for making its own evaluation of the
adequacy and accuracy of such estimates, and other forecasts and plans so furnished to it, including the reasonableness of the underlying
assumptions thereof and that neither Parent, Merger Sub, nor the Company shall have any claim against anyone with respect thereto.
In making the decision to enter into this Agreement and to consummate the transactions contemplated hereby, other than reliance on the
representations, warranties, covenants and obligations of the Company set forth in this Agreement and the other Ancillary Documents, Parent
and Merger Sub have relied solely on their own independent investigation, analysis and evaluation of the Company and its Capital Stock
(including Parent’s own estimate and appraisal of the value of the business, financial condition, assets, operations and prospects
of the Company).

 

ARTICLE VI

Deliveries at Closing

 

6.1.         
Deliveries by the Company and/or the Securityholders’ Representative at Closing.

 

On the Closing Date, the Company
and/or the Securityholders’ Representative, as applicable, shall deliver or cause to be delivered to Parent:

 

(a)              
Resignations. Written resignations, dated as of the Closing Date, of each of the following officers and directors of the
Company: Heather Paulsen as Secretary and director (but not in her other employee capacity); Nishigandha Deokule (as director, but not
in his other employee capacity); Willard MacDonald (as director) in form and substance reasonably satisfactory to Parent.

 

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(b)              
Evidence of Indebtedness Payoff. Documentation evidencing the repayment or satisfaction in full, and discharge and termination,
of all Indebtedness, including payoff letters, UCC termination statements and documentation evidencing the release of Liens relating thereto,
as applicable, in form and substance reasonably satisfactory to Parent except with respect to the Grant Lien (as defined in the Company
Disclosure Schedule).

 

(c)              
Heckeroth Employment Agreement. An Employment Agreement in form and substance satisfactory to Parent for Steve Heckeroth.

 

(d)              
FIRPTA Certificate. An affidavit issued pursuant to and in compliance with Section 1445 of the Code (and the Treasury Regulations
thereunder) and dated as of the Closing Date, in a form reasonably satisfactory to Parent, certifying that the Company is not, and has
not been, a “United States real property holding corporation” as defined in Section 897(c)(2) of the Code during the applicable
period described in Section 897(c)(1)(A)(ii) of the Code, in compliance with Treasury Regulations Sections 1.897-2(h) and 1.1445-2(c)(3).

 

(e)              
Secretary Certificate. A certificate, signed by the secretary of the Company and dated as of the Closing Date, certifying
that (a) attached thereto is a true, correct and complete copy of the certificate of incorporation and bylaws of the Company as in effect
on the date of such certification, and (b) attached thereto is a true, correct and complete copy of the resolutions adopted by the board
of directors of the Company authorizing the execution, delivery and performance of this Agreement and the Ancillary Documents, and that
such resolutions are in full force and effect, and (c) attached thereto is a true, correct and complete copy of resolutions of the Stockholders
duly authorizing and adopting the execution, delivery and performance of this Agreement and the Ancillary Documents to which the Company
is a party, and that such resolutions are in full force and effect.

 

(f)               
Certificate of Good Standing. Certificates of the Secretary of State of the applicable states of incorporation, which certificates
shall be of a reasonably recent date, as to the due incorporation and good standing (or equivalent) of the Company.

 

(g)              
Escrow Agreement. An escrow agreement, in form and substance satisfactory to Parent and the Securityholders’ Representative
(the “Escrow Agreement”), duly executed by each of the Securityholders’ Representative and the Escrow Agent.

 

(h)              
Paying Agent Agreement. A paying agent agreement, in form and substance satisfactory to Parent and the Securityholders’
Representative (the “Paying Agent Agreement”), duly executed by each of the Securityholders’ Representative and
the Paying Agent.

 

(i)                
Restrictive Covenant Agreements. Restrictive covenant agreement, in form and substance satisfactory to Parent (the “Restrictive
Covenant Agreements”), duly executed by each of the Primary Securityholders.

 

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(j)    
             Stock Option Plan Termination. Evidence of the termination of the Stock Option Plan, in form and substance acceptable to
Parent.

 

(k)              
 Consents. Executed copies of the consents from the Persons set forth on Schedule 6.1(i).

 

(l)    
            Letter of Transmittal. A Letter of Transmittal, duly completed and validly executed by each Primary Securityholder.

 

(m)            
Option Cancellation Agreements. An option cancellation agreement, duly completed and validly executed by each Optionholder.

 

(n)              
Retention Plan. An executed copy of the Retention Plan.

 

(o)              
Spreadsheets/Statements. The Closing Date Statement and Allocation Statement contemplated under this Agreement in connection
with the consummation of the Contemplated Transactions shall have been delivered.

 

(p)              
Lease Consent. A consent, in form and substance satisfactory to
Parent, from Jerry F. Smyth Trust and Barbara R. Smyth Trust in respect of the Standard Industrial/Commercial Multi-Tenant Leases, dated
December 22, 2020 and April 27, 2021. 

 

(q)              
Other. Such documents of further assurance reasonably necessary and typical for transactions similar to the Contemplated
Transactions in order to complete the Contemplated Transactions.

 

6.2.         
Deliveries by Parent and Merger Sub at Closing.

 

On the Closing Date, in addition
to the deliverables of Parent set forth in Section 2.6(d), Parent shall deliver or cause to be delivered to the Company:

 

(a)              
Officer’s Certificate. A certificate, signed by an officer of Parent and dated as of the Closing Date, certifying
that (a) attached thereto is a true, correct and complete copy of the certificate of incorporation and bylaws of Parent and Merger Sub
as in effect on the date of such certification, and (b) attached thereto is a true, correct and complete copy of the resolutions adopted
by the board of directors of Parent and the applicable governing body of Merger Sub authorizing the execution, delivery and performance
of this Agreement and the Ancillary Documents to which Parent and Merger Sub is a party, and that such resolutions are in full force and
effect.

 

(b)              
Good Standing Certificate of Parent. Certificate of the Secretary of State of Nevada, which such certificate shall be of
a recent date, as to the due incorporation and good standing of Parent.

 

(c)              
Good Standing Certificate of Merger Sub. Certificate of the Secretary of State of California, which such certification shall
be of a recent date, as to the incorporation and good standing of Merger Sub.

 

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(d)              
Escrow Agreement. The Escrow Agreement, duly executed by Parent and the Escrow Agent.

 

(e)              
Paying Agent Agreement. The Paying Agent Agreement, duly executed by Parent and the Paying Agent.

 

(f)               
Retention Plan. An executed copy of the Retention Plan.

 

(g)              
Commitment Letter. The Commitment Letter, duly executed by Parent and the Company, on behalf of itself and the Selling Securityholders.

 

(h)              
Lease Amendment. An amendment to the Lease to be executed by Parent, to remove or replace Steve Heckeroth as the guarantor
with respect to such Lease with Parent as guarantor or to otherwise remove the guarantee.

 

(i)                
Other. Such documents of further assurance reasonably necessary and typical for transactions similar to the Contemplated
Transactions in order to complete the Contemplated Transactions.

 

(j)                
Indemnification Agreements. Parent shall have delivered an indemnification agreement executed by Surviving Corporation and
Steve Heckeroth, in a form reasonably acceptable to Parent and Steve Heckeroth to remain in effect with the Surviving Corporation and
any other current Company executive officers and directors that will remain as executive officers and/or directors in some capacity with
the Surviving Corporation.

 

ARTICLE VII

Indemnification; Survival

 

7.1.           
Expiration of Representations and Warranties.

 

All of the representations and
warranties of the parties set forth in this Agreement shall terminate and expire, and shall cease to be of any force or effect, at 5:00
P.M. (Eastern time) on the date that is the eighteen (18)-month anniversary of the Closing Date (the “Expiration Date”),
and all liability with respect to such representations and warranties shall thereupon be extinguished; provided, that (a) the representations
and warranties of the Company set forth in Section 3.19 (Employee Benefits) and Section 3.20 (Tax Matters) shall continue in full force
and effect until thirty (30) days after all applicable statutes of limitations, including waivers and extensions, have expired with respect
to the matters addressed therein, (b) the representations and warranties of the Company set forth in Section 3.1 (Organization and Power),
Section 3.2 (Authorization and Enforceability), Section 3.3 (Capitalization), and Section 3.29 (No Brokers) shall survive until the later
of (i) the applicable statute of limitations with respect to the underlying matter for which recovery of indemnifiable damages is being
sought, including waivers and extensions, or (ii) four years following the Closing Date, and (c) the representations and warranties of
Parent and Merger Sub set forth in Section 4.1 (Organization and Power), Section 4.2 (Authorization and Enforceability), and Section 4.5
(No Brokers) shall survive until the later of (i) the applicable statute of limitations with respect to the underlying matter for which
recovery of indemnifiable damages is being sought, including waivers and extensions, or (ii) four years following the Closing Date (the
representations and warranties referred to in clauses (a)-(c) are collectively referred to as the “Fundamental Representations”).
All of the covenants contained in this Agreement that by their nature are required to be performed after the Closing shall survive the
Closing until fully performed or fulfilled. Notwithstanding the foregoing, in the event a valid claim for indemnification has been asserted
in good faith in accordance with Section 7.2(d) and such claim remains unresolved as of the expiration of the applicable survival period
as set forth in this Section 7.1, then the covenant, agreement, representation or warranty (as applicable) that is the subject of such
claim shall survive solely with respect to such claim until such claim is finally resolved.

 

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7.2.         
Indemnification.

 

(a)              
By the Primary Securityholders. Subject to the provisions of Section 7.1 relating to the survival of representations and
warranties, and the other limitations set forth herein, from and after the Closing, the Primary Securityholders shall, severally but not
jointly in accordance with their respective Indemnification Percentages, indemnify, defend and hold harmless Parent, its Affiliates, and
its and their respective officers, directors, employees, stockholders, members, partners, agents, representatives, successors, and assigns
(collectively, “Parent Indemnitees”) from and against all claims, losses, Liabilities, Taxes, damages, deficiencies,
interest and penalties, costs and expenses, including, without limitation, losses resulting from the defense, settlement and/or compromise
of a claim and/or demand and/or assessment, reasonable attorneys’, accountants’ and expert witnesses’ fees, costs and
expenses of investigation, and the costs and expenses of enforcing the indemnification provided hereunder, but
excluding, in all cases, consequential, incidental, punitive, and exemplary damages (unless consequential damages are reasonably
foreseeable or punitive damages are actually awarded or paid in connection with a third party claim and excluding any such damages or
losses based on a multiplier), whether or not involving a third party claim (hereafter individually
a “Loss” and collectively “Losses”) actually incurred by any Parent Indemnitees to the extent arising
out of or relating to: (i) any breach of any representation or warranty made by the Company or a Selling Securityholder in Article III
of this Agreement or any Ancillary Document (without regard, for purposes of this clause (i), to any qualifications as to materiality
or Material Adverse Effect (or any correlative terms), other than with respect to the first sentence of Section 3.7 and where “material”
is used for the purpose of listing and referring to Material Contracts); (ii) any breach of any covenant or agreement of the Selling
Securityholders, or of the Company to the extent required to be performed or complied with by the Company prior to the Closing, contained
in this Agreement or any Ancillary Document or in respect of the Contemplated Transactions; (iii) any Transaction Expenses for which the
Selling Securityholders shall cover pursuant to Section 2.6(a) or Indebtedness of the Company to the extent not paid, satisfied, and discharged
prior to the Closing; (iv) any Pre-Closing Taxes to the extent not taken into account in calculating the Closing Net Working Capital;
(v) any breach of fiduciary duty prior to Closing by any then-current or former holder or alleged then-current or former holder of Capital
Stock of the Company; (vi) (x) any amount payable to a holder of Dissenting Shares (other than Selling Securityholders who hold Common
Stock by virtue of his, her or its investment through StartEngine (collectively, the “StartEngine Investors”) under
applicable Law and (y) half of any amount payable to StartEngine Investors as a result of such investors availing himself, herself or
itself of its dissenting rights under applicable law); (vii) any amount payable in connection with any claim of any holder (or alleged
holder) of Capital Stock or Options involving or related to his, her or its rights or status (or alleged rights or status) as a holder
of any Capital Stock, Options or other ownership rights in the Company during the period prior to the Closing, in each case, in excess
of the Merger Consideration to which such holder is entitled to receive pursuant to Section 2.5; (viii) all Losses that arise from the
equity compensation arrangements between the Company and employees, including Losses that arise as a result of any employee failing to
receive cash in connection with his or her employment; (ix) all Tax penalties that arise from the Company’s failure to withhold
Tax and pay the employer share of FICA on restricted stock grants; (x) the classification of employees as exempt versus non-exempt and
individuals as employees versus independent contractors; or (xi) any claim resulting from any inaccuracies in the Allocation Statement
or otherwise alleging that a Person was due amounts other than as set forth in the Allocation Statement. Notwithstanding anything to the
contrary herein or in the Ancillary Documents, the Primary Securityholders shall not, under any circumstances, be liable for any Taxes
relating to the Company that are attributable to any taxable period or portion thereof beginning after the Closing Date.

 

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(b)              
By Parent. Subject to the provisions of Section 7.1 relating to the survival of representations and warranties, from and
after the Closing, Parent shall indemnify, defend and hold harmless the Selling Securityholders and their respective Affiliates, trustees,
beneficiaries, estates, heirs, spouses, other family members, officers, directors, employees, stockholders, members, partners, agents,
representatives, successors, and assigns (collectively, “Securityholder Indemnitees”) from and against all Losses incurred
by any Securityholder Indemnitees arising out of or relating to: (i) any breach of any representation or warranty made by Parent in Article
IV or any Ancillary Document (without regard, for purposes of this clause (i), to any qualifications as to materiality or Material Adverse
Effect (or any correlative terms)), and (ii) any breach of any covenant or agreement of Parent or Merger Sub, or of the Company to the
extent required to be performed or complied with by the Surviving Corporation after the Closing, contained in this Agreement or any Ancillary
Document or in respect of the Contemplated Transactions.

 

(c)              
Limitations on Rights of Indemnitees. Notwithstanding anything herein or in any Ancillary Document to the contrary:

 

(i)                
Basket/Deductible. (A) The Primary Securityholders shall not be required to indemnify the Parent Indemnitees with respect
to any claim for indemnification arising out of, or relating to matters described in, Section 7.2(a)(i) unless and until the aggregate
amount of all such claims for such matters exceeds an amount equal to Two Hundred Fifty Thousand Dollars ($250,000) (the “Deductible”),
in which event the Parent Indemnitees shall be entitled to recover Losses only in excess thereof; provided, that the foregoing
limitation shall not apply to a claim for indemnification to the extent such claim is based upon fraud or a breach of any of the Fundamental
Representations of the Company and (B) Parent shall not be required to indemnify the Securityholder Indemnitees with respect to any claim
for indemnification arising out of or relating to matters described in Section 7.2(b)(i) unless and until the aggregate amount of
all such claims for such matters exceeds the Deductible, in which event the Securityholder Indemnitees shall be entitled to recover Losses
only in excess thereof; provided, that the foregoing limitation shall not apply to a claim for indemnification to the extent such
claim is based upon fraud or a breach of any of the Fundamental Representations of Parent or Merger Sub;

 

(ii)             
Liability Cap. (A) In no event shall the aggregate Liability of the Primary Securityholders (x) arising out of or relating
to Section 7.2(a)(i) exceed an amount equal to the Indemnity Escrow Amount (the “Cap”); provided, however,
that the limitation set forth in this clause (x) shall not apply to indemnification for Losses arising out of or resulting from a claim
for indemnification to the extent such claim is based upon fraud or a breach of any of the Fundamental Representations of the Company,
and (y) arising out of or relating to this Agreement, any of the Ancillary Documents and/or the Contemplated Transactions exceed the Merger
Consideration received by the Primary Securityholders (provided that the limitation in clause (y) shall not apply to claims based upon
fraud, which shall be uncapped) and (B) in no event shall the aggregate Liability of Parent (x) arising out of or relating to Section
7.2(b)(i) exceed the Cap; provided, however, that the limitation set forth in this clause (x) shall not apply to indemnification
for Losses arising out of or resulting from a claim for indemnification to the extent such claim is based upon fraud or a breach of any
of the Fundamental Representations of Parent or Merger Sub, and (y) arising out of or relating to this Agreement, the Ancillary Documents
and/or the Contemplated Transactions exceed the Merger Consideration received by the Primary Securityholders; provided that the
limitation set forth in this clause (y) shall not apply to claims based upon fraud, which shall be uncapped. Notwithstanding the foregoing
or anything to the contrary herein, no Primary Securityholder shall be liable for the breach of any covenant of another Primary Securityholder
or any fraud, intentional misrepresentation or willful misconduct solely by another Primary Securityholder; provided, however, that nothing
herein shall limit the liability of a Primary Securityholder for his or her own fraud, intentional misrepresentation or willful misconduct;

 

(iii)           
to the extent required by applicable Law, each Indemnitee shall use commercially reasonable efforts to mitigate any Losses arising
out of or relating to this Agreement or the Contemplated Transactions upon becoming aware of any event that would be reasonably expected
to give rise to a Loss or Losses;

 

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(iv)            
in the event that the Surviving Corporation is the Parent Indemnitee in respect of Losses, the amount of such Losses for which
the Surviving Corporation is entitled to be indemnified shall be calculated in a manner proportionate to the relative ownership of the
Securityholders (other than Parent) in the Company as of immediately prior to the Closing (e.g., if the Surviving Corporation is entitled
to indemnification for Losses in an amount equal to $100,000, and the aggregated ownership interest in the Company of the Securityholders
(other than Parent) is 80% as of immediately prior to the Closing, then the Primary Securityholders’ indemnification obligation
pursuant to Section 7.2(a) would be equal to $80,000);

 

(v)              
the amount of any Losses for which an Indemnitee claims indemnification under this Agreement shall be reduced by the amount of
any insurance proceeds and any indemnification, contribution, offset or reimbursement payments actually received from a third party with
respect to such Losses (net of (x) documented out-of-pocket expenses incurred in connection with such recovery, (y) deductibles, premiums
and retentions paid pursuant to the insurance policies under which such recovery is made to the extent attributable to or in connection
with such claims and (z) the net present value of any increase in premiums paid and retentions for such policies to the extent attributable
to or in connection with such claim); provided that if an Indemnitee actually receives insurance proceeds or indemnification, contribution,
offset or reimbursement payments from third party insurers with respect to such Losses, in each case, at any time subsequent to any indemnification
payment pursuant to this Article VII, then such Indemnitee shall promptly reimburse the applicable Indemnitor for the lesser of (A) the
amount of such proceeds and/or payments actually received by such Indemnitee in respect of such Losses (net of (x) documented out-of-pocket
expenses incurred in connection with such recovery, (y) deductibles, premiums and retentions paid pursuant to the insurance policies under
which such recovery is made to the extent attributable to or in connection with such claims, and (z) the net present value of any increase
in premiums paid and retentions for such policies to the extent attributable to or in connection with such claim) and (B) the aggregate
amount of the payment made by such Indemnitor in respect of such Losses; and

 

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(vi)            
any indemnification provided hereunder shall be so applied as to avoid any double counting and no Indemnitee shall be entitled
to obtain indemnification (x) to the extent that such Losses are taken into account in the determination of the Closing Consideration
set forth in the Final Statement; or (y) more than once for the same matter Loss or Losses.

 

(vii)         
For the avoidance of doubt, in no event shall the Selling Securityholders, Parent, or the Surviving Corporation be liable for any
consequential, incidental or punitive damages, unless consequential damages are reasonably foreseeable or punitive damages are actually
awarded and paid in connection with a third-party claim (and excluding any such damages or losses based on a multiplier).

 

(d)              
Procedure.

 

(i)                
Direct Claims. If either a Parent Indemnitee, on the one hand, or a Securityholder Indemnitee, on the other hand, shall
have a claim for indemnification hereunder (the “Indemnitee”) for any claim other than a claim asserted by a third
party, the Indemnitee shall, as promptly as is practicable, give written notice to the party from whom indemnification is sought (the
 “Indemnitor”) of the nature and, to the extent practicable, a good faith estimate of the amount, of the claim. The
failure to make timely delivery of such written notice by the Indemnitee to the Indemnitor shall not relieve the Indemnitor from any liability
under this Article VII with respect to such matter, except to the extent the Indemnitor is actually materially prejudiced by the failure
to give such notice. If the Indemnitor does not notify the Indemnitee within thirty (30) days that the Indemnitor disputes such claim,
the amount of such claim shall be conclusively deemed a Liability of the Indemnitor hereunder. In case an objection is made in writing
by the Indemnitor prior to the expiration of such thirty (30) day period, the Indemnitor and the Indemnitee shall attempt in good faith
for a period of thirty (30) days to agree upon the rights of the respective parties with respect to such claim. If the Indemnitee and
Indemnitor so agree, a written memorandum setting forth such agreement and the agreed upon dollar amount of liability for such claim of
the Indemnitor shall be prepared and signed by the Indemnitee and the Indemnitor. If the Indemnitee and Indemnitor are unable to so agree,
either party shall be permitted to pursue resolution of such dispute in accordance with Section 8.11 hereof (stepped ADR).

 

(ii)             
Third-Party Actions (Other than Tax Contests).

 

(A)       If
an Indemnitee receives notice or otherwise obtains knowledge of any matter or any threatened matter that may reasonably be expected to
give rise to an indemnification claim against the Indemnitor with respect to a claim asserted by a third party, then the Indemnitee shall
promptly deliver to the Indemnitor a written notice describing, to the extent practicable, such matter in reasonable detail. The failure
to make timely delivery of such written notice by the Indemnitee to the Indemnitor shall not relieve the Indemnitor from any liability
under this Section 7.2 with respect to such matter, except to the extent the Indemnitor is actually materially prejudiced by the
failure to give such notice. The Indemnitor shall have the right, at its option, exercisable within fifteen (15) Business Days after the
date of such notice to assume the defense of any such matter with its own counsel and at its sole cost and expense; provided that
(x) such counsel shall be reasonably satisfactory to the Indemnitee, (y) the Indemnitor shall have such right to assume the defense of
any such matter only if the Indemnitor irrevocably relinquishes its right to contest whether such claim is indemnifiable hereunder and
(z) the Indemnitor shall not have any right to assume the defense of any such matter if (1) where the Indemnitee is a Parent Indemnitee,
and the applicable third party claimant is a then-current customer of the Indemnitee or its Affiliates, (2) where the Indemnitee is a
Parent Indemnitee, and such Indemnitee reasonably believes an adverse determination with respect to such matter would be materially detrimental
to or materially injure the reputation and future business prospects of the Indemnitee or its Affiliates, (3) such matter is criminal
in nature, (4) such matter seeks injunctive relief or other equitable remedies against the Indemnitee, (5) such matter seeks damages in
excess of the amount for which the Indemnitee could obtain indemnification from the Indemnitor pursuant to this Article VII, (6) the
Indemnitor fails to provide the Indemnitee with evidence reasonably acceptable to the Indemnitee that the Indemnitor will have the financial
resources to defend such matter and fulfill its indemnification obligations under this Article VII, (7) the Indemnitee reasonably
shall have concluded (upon advice of its counsel) that there may be one or more legal defenses available to such Indemnitee or other Indemnitees
that are not available to the Indemnitor, or (8) the Indemnitee reasonably shall have concluded (upon advice of its counsel) that,
with respect to such claims, the Indemnitee and the Indemnitor may have conflicting or adverse legal positions or interests.

 

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(B)       If
the Indemnitor elects to assume the defense of and indemnification for any such matter in accordance with this Section 7.2(d), then:

 

(1)       notwithstanding
anything to the contrary contained in this Agreement, the Indemnitor shall not be required to pay or otherwise indemnify the Indemnitee
against any attorneys’ fees or other expenses incurred on behalf of the Indemnitee in connection with such matter following the
Indemnitor’s election to assume the defense of such matter, unless the Indemnitor fails to defend diligently the action or proceeding;
provided, the Indemnitee delivered written notice of such failure and provided Indemnitor a reasonable opportunity to cure the defect
in the defense;

 

(2)       except
in connection with any Litigation where any Indemnitee is adverse to any Indemnitor, the Indemnitee shall, at his, her or its own expense,
make available to the Indemnitor all books, records and other documentation and materials that are under the direct or indirect control
of such Indemnitee or any of the Indemnitee’s agents and that the Indemnitor considers necessary or desirable for the defense of
such matter, and shall reasonably cooperate with, and make his, her or its employees and advisors available or otherwise render reasonable
assistance to, the Indemnitor and his, her or its agents; and

 

(3)       the
Indemnitor shall not settle or compromise any pending or threatened Litigation in respect of which indemnification may be sought hereunder
(whether or not the Indemnitee is an actual or potential party to such Litigation) or consent to the entry of any judgment, in each case
without the prior written consent of the Indemnitee, which shall not be unreasonably withheld, preconditioned or delayed.

 

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(C)       If
the Indemnitor (x) elects not to assume the defense of and indemnification for such matter (or fails to notify the Indemnitee of such
election within the period set forth in Section 7.2(d)(ii)(A)), (y) elects to assume the defense of and indemnification for such matter
but then fails to diligently conduct such defense, or (z) is not entitled to assume the defense of such matter pursuant to Section 7.2(d)(ii)(A),
then the Indemnitee shall proceed diligently to defend such matter with the assistance of counsel reasonably satisfactory to the Indemnitor;
provided, that the Indemnitee shall not settle, adjust or compromise such matter, or admit any liability with respect to such matter,
without the prior written consent of the Indemnitor, such consent not to be unreasonably withheld, preconditioned or delayed.

 

(D)       The
procedures in this Section 7.2(d)(ii) shall not apply to matters subject to Section 7.2(d)(iii) (Tax Contests) or to direct claims of
an Indemnitee which are addressed in Section 7.2(d)(i).

 

(iii)           
Tax Contests.

 

(A)       If,
following the Closing Date, Parent or the Surviving Corporation receives from any Taxing Authority written notice of any Tax Contest with
respect to which Parent or the Surviving Corporation may reasonably have any liability for Pre-Closing Taxes, Parent shall promptly provide
a copy of such notice to the Securityholders’ Representative; provided, that Parent’s failure to promptly provide a
copy of such notice to the Securityholders’ Representative shall not affect the Parent Indemnitee’s right to receive indemnification
under Section 7.2(a) unless the Securityholders’ Representative or any Primary Securityholder is materially prejudiced thereby.

 

(B)       The
Securityholders’ Representative shall have the right, at his expense, payable from the Expense Fund, to control, manage and be responsible
for any Tax Contest to the extent that such Tax Contest relates to Pre-Closing Taxes, other than Tax Contests with respect to a Straddle
Period. Parent and the Surviving Corporation may participate in such Tax Contest and the Securityholders’ Representative shall not
settle, compromise or otherwise resolve such Tax Contest without the consent of the Surviving Corporation and Parent, which consent will
not be unreasonably withheld or delayed. The Securityholders’ Representative shall keep the Surviving Corporation and Parent informed
of the progress of all such Tax Contests and shall provide copies of all written communications with any Taxing Authority related to such
Tax Contests.

 

(iv)            
Securityholders’ Representative. All notices to be provided to the Primary Securityholders as an Indemnitee or Indemnitor
pursuant to this Section 7.2(d) shall be provided to the Securityholders’ Representative and the Securityholders’ Representative
shall act on behalf of the Securityholder Indemnitees and any Primary Securityholders that are Indemnitors under this Section 7.2(d) and
in connection with and subject to Section 8.1.

 

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(e)              
Tax Treatment. The parties hereto agree to treat any indemnity payment made pursuant to this Article VII as an adjustment
to the purchase price for federal, state, local and foreign income Tax purposes.

 

7.3.         
Recourse; Escrow Release; Set-Off.

 

(a)              
In the event that any Parent Indemnitee is entitled to indemnification for Losses pursuant to this Article VII, then, subject to
the applicable limitations set forth in this Article VII, such Parent Indemnitee shall satisfy the amount of such Losses (i) first, from
amounts then remaining in the Indemnity Escrow Account, and (ii) thereafter, directly from the Primary Securityholders on a several but
not joint basis in accordance with their respective Indemnification Percentages; provided that the Parent Indemnitees may (but
shall not be obligated to) offset any such Losses in excess of amounts remaining in the Indemnity Escrow Account against any portion of
the Earnout Consideration that becomes deliverable to the Selling Securityholders pursuant to Section 2.10. Notwithstanding anything else
in this Agreement, to give effect to clause (ii) of this Section 7.3(a), Parent may offset against shares of Parent Common Stock issued
to any Selling Securityholder pursuant to this Agreement and still held by such Selling Securityholder or its Affiliates at such time
(it being agreed that such shares shall be valued for purposes of such offset at the VWAP as of the date that the Parent Indemnitees became
entitled to indemnification for the applicable Losses pursuant to this Article VII. Upon a Parent Indemnitee becoming entitled to receive
any sums from the Indemnity Escrow Account pursuant to this Article VII or Section 5.1(a)(tax matters), Parent and the Securityholders’
Representative shall deliver joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse to such Parent Indemnitee
from the Indemnity Escrow Account the amount to which such Parent Indemnitee is so entitled (or the entire then-remaining balance of the
Indemnity Escrow Account, if less than such amount).

 

(b)              
Upon the Expiration Date, Parent and the Securityholders’ Representative shall deliver joint written instructions to the
Escrow Agent to disburse from the Indemnity Escrow Account to the Paying Agent, for further distribution to the Selling Securityholders
in accordance herewith, an amount equal to (i) the balance then remaining in the Indemnity Escrow Account less (ii) the aggregate amount
of any claims of the Parent Indemnitees for indemnification properly notified in accordance with this Article VII and that remain unresolved
as of the Expiration Date (each, a “Pending Claim”).

 

(c)              
Upon the full and final resolution of a Pending Claim, if the amount retained in the Indemnity Escrow Account with respect to such
Pending Claim pursuant to Section 7.3(b) exceeds the amount that the Parent Indemnitees are entitled to receive from the Indemnity Escrow
Account pursuant to this Article VII in respect of such Pending Claim, then Parent and the Securityholders’ Representative shall
deliver joint written instructions to the Escrow Agent to disburse from the Indemnity Escrow Account to the Paying Agent, for further
distribution to the Selling Securityholders in accordance herewith, the amount of such excess.

 

7.4.         
Exclusive Remedy.

 

Each party hereto acknowledges
and agrees that, from and after the Closing, the indemnification provisions of this Article VII shall be the sole and exclusive remedy
for breaches of representations and warranties contained in this Agreement, the failure or non-performance of any covenants or agreements
contained in this Agreement, and any other claim in connection with the Contemplated Transactions, except for (a) the remedies arising
from claims based on fraud or intentional misrepresentation in connection with the Contemplated Transactions, (b) the equitable and other
remedies available to the parties pursuant to Section 8.15, (c) the dispute resolution mechanisms set forth in Section 2.8 with respect
to the final determination of the Closing Consideration and Section 2.10 with respect to the final determination of Earnout Consideration,
(d) any express dispute resolution provisions found within any of the Ancillary Documents for the resolution of claims arising out
of, or relating, thereto and (e) the Securityholders’ Representative’s rights under Section 8.1.

 

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ARTICLE VIII

Miscellaneous

 

8.1.           
Securityholders’ Representative.

 

(a)              
Appointment of Securityholders’ Representative. Shareholder Representative Services LLC shall as of the Closing be
the representative, agent and attorney-in-fact for each of the Selling Securityholders to act as Securityholders’ Representative
under this Agreement and the Ancillary Documents in accordance with the terms of this Section 8.1 and the Ancillary Documents (the “Securityholders’
Representative”). In the event of the resignation, death or incapacity of the Securityholders’ Representative, a successor
Securityholders’ Representative reasonably satisfactory to Parent shall thereafter be appointed by an instrument in writing signed
by Parent, the Selling Securityholders holding not less than 50% of the outstanding Company shares at the time of Closing, and such successor
Securityholders’ Representative.

 

(b)              
Authority. The Securityholders’ Representative is hereby authorized and empowered to act for, and on behalf of, any
or all of the Selling Securityholders (with full power of substitution in the premises) in connection with (i) the indemnity provisions
of Article VII as they relate to the Selling Securityholders generally and (ii) such other matters as are reasonably necessary for the
consummation of the Contemplated Transactions including, without limitation, (A) to terminate, amend, waive any provision of, or abandon,
this Agreement or any of the Ancillary Documents, (B) to act as the representative of the Selling Securityholders to review and authorize
all claims and disputes or question the accuracy thereof, (C) to negotiate and compromise on their behalf with Parent any claims asserted
thereunder and to authorize payments to be made with respect thereto, (D) to take such further actions as are authorized in this Agreement
or the Ancillary Documents, and (E) in general, to do all things and perform all acts, including, without limitation, executing and delivering
all agreements (including the Ancillary Documents), certificates, receipts, consents, elections, instructions and other documents contemplated
by or deemed by the Securityholders’ Representative to be necessary or desirable in connection with this Agreement, the Ancillary
Documents and the Contemplated Transactions. Parent and Merger Sub shall be entitled to rely on such appointment and to treat the Securityholders’
Representative as the duly appointed attorney-in-fact of each Selling Securityholder. After the Closing, notices given to the Securityholders’
Representative in accordance with the provisions of this Agreement shall constitute notice to the Securityholders for all purposes under
this Agreement.

 

    - 81 - 

     

    

 

(c)              
Extent and Survival of Authority. The appointment of the Securityholders’ Representative is an agency coupled with
an interest and is irrevocable and any action taken by the Securityholders’ Representative pursuant to the authority granted in
this Section 8.1 shall be effective and absolutely binding on each Securityholder notwithstanding any contrary action of, or direction
from, such Securityholder, except for actions or omissions of the Securityholders’ Representative constituting willful misconduct
or gross negligence. The death or incapacity, or dissolution or other termination of existence, of any Securityholder shall not terminate
the authority and agency of the Securityholders’ Representative. Parent, Merger Sub and any other party to an Ancillary Document
in dealing with the Securityholders’ Representative may conclusively and absolutely rely, without inquiry, upon any act of the Securityholders’
Representative as the act of all the Securityholders.

 

(d)              
Release from Liability; Indemnification. The Securityholders’ Representative will incur no liability of any kind with
respect to any action or omission by the Securityholders’ Representative in connection with its services pursuant to this Agreement
and any Ancillary Document, except in the event of liability directly resulting from the Securityholders’ Representative’s
fraud, gross negligence or willful misconduct. The Securityholders’ Representative shall not be liable for any action or omission
pursuant to the advice of counsel. The Securityholders shall indemnify, defend and hold harmless the Securityholders’ Representative
from and against any and all losses, liabilities, damages, claims, penalties, fines, forfeitures, actions, fees, costs and expenses (including
the reasonable fees and expenses of counsel and experts and their staffs and all expense of document location, duplication and shipment)
(collectively, “Representative Losses”) arising out of or in connection with the Securityholders’ Representative’s
execution and performance of this Agreement and any Ancillary Document, in each case as such Representative Loss is suffered or incurred;
provided, that in the event that any such Representative Loss is finally adjudicated to have been directly caused by the fraud, gross
negligence or willful misconduct of the Securityholders’ Representative, the Securityholders’ Representative will reimburse
the Securityholders the amount of such indemnified Representative Loss to the extent attributable to such fraud, gross negligence or willful
misconduct. If not paid directly to the Securityholders’ Representative by the Securityholders, any such Representative Losses may
be recovered by the Securityholders’ Representative from (i) the funds in the Expense Fund and (ii) any other funds that become
payable to the Selling Securityholders under this Agreement at such time as such amounts would otherwise be distributable to the Selling
Securityholders; provided, that while this section allows the Securityholders’ Representative to be paid from the aforementioned
sources of funds, this does not relieve the Securityholders from their obligation to promptly pay such Representative Losses as they are
suffered or incurred, nor does it prevent the Securityholders’ Representative from seeking any remedies available to it at law or
otherwise. In no event will the Securityholders’ Representative be required to advance its own funds on behalf of the Securityholders
or otherwise. Notwithstanding anything in this Agreement to the contrary, any restrictions or limitations on liability or indemnification
obligations of, or provisions limiting the recourse against non-parties otherwise applicable to, the Securityholders set forth elsewhere
in this Agreement are not intended to be applicable to the indemnities provided to the Securityholders’ Representative under this
section. The foregoing indemnities will survive the Closing, the resignation or removal of the Securityholders’ Representative or
the termination of this Agreement.

 

    - 82 - 

     

    

 

(e)              
Expense Fund. Upon the Closing, the Company, or Parent on behalf of the Company, will wire an amount of $200,000 (the “Expense
Fund”) to the Securityholders’ Representative, which will be used for the purposes of paying directly, or reimbursing the
Securityholders’ Representative for, any third-party expenses pursuant to this Agreement and the Ancillary Documents. The Securityholders
will not receive any interest or earnings on the Expense Fund and irrevocably transfer and assign to the Securityholders’ Representative
any ownership right that they may otherwise have had in any such interest or earnings. The Securityholders’ Representative will
not be liable for any loss of principal of the Expense Fund other than as a result of its fraud, gross negligence or willful misconduct.
The Securityholders’ Representative will hold these funds separate from its corporate funds, will not use these funds for its operating
expenses or any other corporate purposes and will not voluntarily make these funds available to its creditors in the event of bankruptcy.
As soon as practicable following the completion of the Securityholders’ Representative’s responsibilities, the Securityholders’
Representative will deliver any remaining balance of the Expense Fund to the Paying Agent for further distribution to the Securityholders.
For tax purposes, the Expense Fund will be treated as having been received and voluntarily set aside by the Securityholders at the time
of Closing.

 

8.2.           
Expenses.

 

All fees and expenses incurred
in connection with the Contemplated Transactions shall be paid by the party incurring such expenses, whether or not the Contemplated Transactions
are consummated.

 

8.3.           
Notices.

 

All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made (a) as of the date delivered,
if delivered personally, (b) on the date the delivering party receives confirmation, if delivered by email, (c) three (3) Business
Days after being mailed by registered or certified mail (postage prepaid, return receipt requested) or (d) one (1) Business Day after
being sent by overnight courier (providing proof of delivery), to the parties at the following addresses (or at such other address for
a party as shall be specified in a notice given in accordance with this Section 8.3):

 

If to the Selling Securityholders
or the Securityholders’ Representative:

 

Shareholder Representative
Services LLC

950 17th Street,
Suite 1400

Denver, CO 80202

Attention: Managing
Director

Email: deals@srsacquiom.com

Facsimile: (303)
623-0294

Telephone: (303)
648-4085

 

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

 

Rogoway Law Group PC

115 4th Street, Suite B

Santa Rosa, CA 95401

Telephone: (707) 526-0420

Email: hilarystjean@rogowaylaw.com

 

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

 

Ideanomics, Inc.

1441 Broadway, Suite
5116

New York, NY 10018

Attn: Alf Poor, Chief Executive
Officer

Email: apoor@ideanomics.com

 

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

 

Venable LLP

1270 Avenue of the Americas

24th Floor

New York, NY 10020

Attn: William N. Haddad

Email: WNHaddad@Venable.com

 

8.4.         
Governing Law.

 

This Agreement, and all claims
or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement, or the negotiation,
execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation
or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by the internal
laws of Nevada (excluding conflict of laws rules and principles).

 

8.5.         
Entire Agreement.

 

This Agreement, together with
the Exhibits hereto, the Company Disclosure Schedule, the Parent Disclosure Schedule and the Ancillary Documents, contains the entire
agreement of the parties respecting the Contemplated Transactions and supersedes all prior agreements among the parties respecting the
Contemplated Transactions. The parties hereto have voluntarily agreed to define their rights, liabilities and obligations respecting the
Contemplated Transactions exclusively in contract pursuant to the express terms and provisions of this Agreement; and the parties hereto
expressly disclaim that they are owed any duties or are entitled to any remedies not expressly set forth in this Agreement.

 

8.6.         
Severability.

 

Should any provision of this
Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision
shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest
extent permitted by Law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable
such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability
or prohibition shall not affect or invalidate any other provision of this Agreement.

 

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8.7.         
Amendment.

 

Neither this Agreement nor any
of the terms hereof may be terminated, amended, supplemented or modified orally, but only by an instrument in writing signed by the parties
hereto; provided, that the observance of any provision of this Agreement may be waived in writing by the party that will lose the
benefit of such provision as a result of such waiver.

 

8.8.         
Effect of Waiver or Consent.

 

No waiver or consent, express
or implied, by any party to or of any breach or default by any party in the performance by such party of its obligations hereunder shall
be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such party of the same or
any other obligations of such party hereunder. No single or partial exercise of any right or power, or any abandonment or discontinuance
of steps to enforce any right or power, shall preclude any other or further exercise thereof or the exercise of any other right or power.
Failure on the part of a party to complain of any act of any party or to declare any party in default, irrespective of how long such failure
continues, shall not constitute a waiver by such party of its rights hereunder until the applicable statute of limitation period has run.

 

8.9.         
Parties in Interest; Limitation on Rights of Others.

 

The terms of this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and their respective legal representatives, successors and assigns.
Nothing in this Agreement, whether express or implied, shall be construed to give any Person (other than the parties hereto and their
respective legal representatives, successors and assigns and as expressly provided herein) any legal or equitable right, remedy or claim
under or in respect of this Agreement or any covenants, conditions or provisions contained herein, as a third party beneficiary or otherwise;
provided that Parent Indemnitees or Securityholder Indemnitees who are not otherwise a party to this Agreement shall be third party
beneficiaries of this Agreement.

 

8.10.       
Assignability.

 

This Agreement shall not be
assigned by any party hereto without the written consent of the other parties.

 

8.11.       
Dispute Resolution.

 

Except as provided below, any
dispute, claim or controversy arising out of, or relating to, this Agreement, or to the breach, termination, enforcement, interpretation,
legality, issues of public policy or validity hereof, or relating to any of the Contemplated Transactions, including the determination
of the scope or applicability of this agreement to arbitrate (each and every such dispute, brought at any time, hereinafter a “Dispute”),
shall be resolved through the use of the following stepped dispute resolution procedures:

 

    - 85 - 

     

    

 

(a)  
Negotiation. Any Dispute, shall be submitted first for resolution to authorized representatives of the parties who have
decision-making authority.  The party that believes that a Dispute exists (the “Disputing Party”) shall put such
Dispute in writing to the other party(s) (the “Receiving Party”).  Such writing (a “Notice of Dispute”)
shall clearly and in reasonable detail state the substance and scope of the Dispute, the Disputing Party’s relative position thereto
and shall include any legal or factual justifications of which the Disputing Party is aware, and the remedy or remedies being sought. 
The Receiving Party shall respond to the Notice of Dispute within fifteen (15) days of its receipt thereof and set forth its positions
with respect to each item included in the Disputing Party’s writing.  Within fifteen (15) days of the Receiving Party’s
response, authorized representatives of the parties who have decision-making authority shall meet at a mutually agreeable place and time
to seek, in good faith, an amicable settlement to the Dispute.  All reasonable requests for information from one party shall be honored
by the other party(s), subject to obligations of confidentiality.  All offers, promises, conduct and statements, whether oral or
written, made in the process of the procedures in this Section 8.11(a) by any of the parties or their representatives are
confidential, privileged and inadmissible for any purpose, including impeachment, in any arbitration or litigation or other proceeding
involving the parties; provided, that evidence that is otherwise admissible or discoverable shall not be rendered inadmissible
or non-discoverable as a result of its use in the foregoing procedures.  Following the procedures set forth above in this Section
8.11(a) by a party is a condition precedent to such party’s resorting to the resolution processes specified below in this Section
8.11.  Notwithstanding the immediately preceding sentence, if either the Disputing Party or the Receiving Party fails to comply
with the provisions of this Section 8.11(a), the other party may commence an arbitration proceeding under this Section 8.11 without
itself further complying with this Section 8.11(a).

 

(b)  
If, within fifteen (15) days after the meeting held pursuant to Section 8.11(a), the parties fail to resolve the Dispute
or if such meeting is not held within thirty (30) days following delivery of a Dispute Notice, the parties to the Dispute shall move directly
to binding arbitration. If the parties to the Dispute cannot mutually agree upon an arbitration provider, the parties to the Dispute shall
submit their dispute to JAMS for arbitration, and the arbitration shall be conducted according to that tribunal’s rules in effect
as of the date hereof, which rules are incorporated herein by this reference ; however, in furtherance of an economical resolution to
any dispute, the parties hereto agree that in any arbitration, even one brought before a tribunal other than JAMS, each party to the Dispute
will be limited to five (5) depositions, thirty (30) special interrogatories, and ten (10) requests for admission. Additionally, unless
otherwise agreed, the arbitration (i) shall be held in San Francisco, California, if the Securityholders’ Representative is the
Disputing Party, and in New York, New York, in all other cases, (ii) shall be adjudicated by a panel of three arbitrators (or a single
arbitrator if the aggregate amount in Dispute is less than $2 million), which arbitrator(s) shall be retired judge(s) who have either
at least ten (10) years’ experience in commercial disputes involving equipment manufacturers, or significant experience litigating
or arbitrating commercial disputes involving equipment manufacturers.

 

(c)  
The arbitrator(s) shall apply the Law of the State of Delaware and shall not have the authority to add to, detract from, or
modify any provision hereof and shall not award lost profits, loss of future revenue or income, diminution in value, or exemplary, treble,
punitive, special, speculative, personal injury, incidental or indirect damages in excess of contract damages or other similar damages
to any injured party.

 

    - 86 - 

     

    

 

(d)  
The costs and expenses of the arbitrators shall be borne by the non-prevailing party. Notwithstanding the foregoing, the arbitrator
shall have the authority to award to the prevailing party in any Dispute attorneys’ fees and disbursements, expert witness fees
and other costs and expenses of the arbitration.

 

(e)  
The arbitrator(s) shall have the power to decide any motions brought by any party, including motions for summary judgment and/or
adjudication, and motions to dismiss and demurrers, applying the standards set forth under Delaware law. The parties agree that the arbitrator(s)
shall have the authority to interpret all provisions of this Agreement, including the parties’ agreement to arbitrate and whether
the arbitrator or arbitrators have the authority to resolve the dispute between the parties. The award of the arbitrator(s) shall be final
and binding on the parties.

 

(f)   
The arbitrator shall specify the basis for his/her/their decision, the basis for the Losses award and a breakdown of the Losses
awarded, and the basis of any other remedy.  The arbitrator’s decision shall be considered as a final and binding resolution
of the disagreement, shall not be subject to appeal and may be entered as an order in any court of competent jurisdiction in the United
States.  Each party agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such order and
to service of process by certified mail, return receipt requested to the address listed above for each party.  No party shall be
permitted to sue the other except for enforcement of the arbitrator’s decision if the other party is not performing in accordance
with the arbitrator’s decision.  The provisions of this Agreement shall be binding upon the arbitrator.

 

(g)  
Any arbitration proceeding shall be conducted on a confidential basis.

 

(h)  
The arbitrator’s discretion to fashion remedies hereunder shall be no broader or narrower than the legal and equitable remedies
available to a court.

 

(i)    
The arbitration shall be resolved as expeditiously as possible, but in any event, within one-hundred twenty (120) days after the
commencement of such arbitration.

 

(j)    
The arbitration shall be governed by the JAMS Rules, and, with respect to the confirmation, modification, enforcement, or vacation
of any award, the Federal Arbitration Act (9 U.S.C. § 1, et seq.)

 

(k)  
The parties hereby exclude any right of appeal to any court on the merits of the Dispute other than as permitted by applicable
Law.  The provisions of this Section 8.11 may be enforced in any court having jurisdiction over the award or any of
the parties or any of their respective assets, and judgment on the award (including without limitation equitable remedies) granted in
any arbitration hereunder may be entered in any such court.  Notwithstanding the foregoing provisions of this Section 8.11,
nothing contained in this Section 8.11 shall preclude or prevent any party from seeking specific performance or injunctive
or other equitable relief from any court of competent jurisdiction, without the need to resort to arbitration.  Each Party agrees
and consents that any dispute, claim or controversy brought by such party against any other party to enforce an arbitration award or to
seek specific performance or injunctive or other equitable relief in connection with or arising from this Agreement shall be brought in
the courts of the state of California, county of Sonoma, or if it has or can acquire jurisdiction, the United States District Court for
the Northern District of California, as the party bringing the dispute, claim or controversy may elect, and each of the parties hereby
submits to and accepts with regard to any such dispute, claim or controversy the exclusive jurisdiction of the aforesaid courts and waives
any right to challenge such jurisdiction or venue.

 

    - 87 - 

     

    

 

(l)    
NO PARTY TO THIS AGREEMENT OR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF SUCH PARTY SHALL SEEK A JURY TRIAL IN
ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE TRANSACTIONS, OR ANY OF THE OTHER TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  NO SUCH PARTY
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR
HAS NOT BEEN WAIVED.  THE PROVISIONS OF THIS SECTION 8.11 HAVE BEEN FULLY DISCUSSED BY SUCH PARTIES, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS.  NO SUCH PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS SECTION 8.11 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.

 

8.12.       
No Other Duties.

 

The only duties and obligations
of the parties under this Agreement are as specifically set forth in this Agreement, and no other duties or obligations shall be implied
in fact, Law or equity, or under any principle of fiduciary obligation.

 

8.13.       
Reliance on Counsel and Other Advisors.

 

Each party has consulted such
legal, financial, technical or other expert as it deems necessary or desirable before entering into this Agreement. Each party represents
and warrants that it has read, knows, understands and agrees with the terms and conditions of this Agreement.

 

8.14.       
Remedies.

 

All remedies, either under this
Agreement or by Law or otherwise afforded to the parties hereunder, shall be cumulative and not alternative, and any Person having any
rights under any provision of this Agreement will be entitled to enforce such rights specifically, to recover damages by reason of any
breach of this Agreement and to exercise all other rights granted by Law, equity or otherwise.

 

8.15.       
Specific Performance.

 

The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms
or were otherwise breached. Accordingly, the parties agree that, in addition to any other remedies, each party shall be entitled to enforce
the terms of this Agreement by a decree of specific performance without the necessity of proving the inadequacy of money damages as a
remedy. Each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy. Each party further
agrees that the only permitted objection that it may raise in response to any action for equitable relief is that it contests the existence
of a breach or threatened breach of this Agreement.

 

    - 88 - 

     

    

 

8.16.       
Counterparts.

 

This Agreement may be executed
in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same
the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying
with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be
deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

8.17.       
Privileged Information; Counsel to Securityholder Representative.

 

(a) Parent, for itself, Merger
Sub, the Company, and its and each of their respective successors and assigns, hereby irrevocably acknowledges and agrees that all attorney-client
privileged communications between the shareholders of the Company, the Company (with respect to the Company, to the extent such communications
were made prior to the Closing), and their respective counsel, including, without limitation, Rogoway Law Group (“RLG”), made
in connection with the negotiation, preparation, execution, delivery and closing under, or any dispute or proceeding arising under or
in connection with this Agreement shall continue after the Closing to be privileged communications with such counsel. Other than as explicitly
set forth in this Section 8.17, the parties acknowledge that any attorney-client privilege attaching as a result of legal counsel representing
the Company prior to the Closing shall survive the Closing and continue to be a privilege of the Company (as the case may be), and not
the Securityholders, after the Closing.

 

(b) If the Securityholders
Representative so desires, and without the need for any consent or waiver by the Company or Parent, RLG shall be permitted to represent
the Securityholders Representative after the Closing in connection with any matter, including without limitation anything related to the
Contemplated Transactions or any disagreement or dispute relating thereto. Without limiting the generality of the foregoing, after the
Closing, RLG shall be permitted to represent the Securityholders Representative, any of its agents and affiliates, or any one or more
of them, in connection with any negotiation, transaction or dispute (“dispute” includes litigation, arbitration or other adversary
proceeding) with Parent, the Company or any of their agents or affiliates under or relating to this Agreement, any transaction contemplated
by this Agreement, and any related matter, such as claims for indemnification and disputes involving employment or noncompetition or other
agreements entered into in connection with this Agreement, whether or not such matter is substantially related to any prior representation
by RLG of the Company (“Company Engagements”).

 

(c) Upon and after the Closing,
the Company shall cease to have any attorney-client relationship with RLG, including with respect to any Company Engagements, unless RLG
is subsequently specifically engaged in writing by the Company to represent the Company after Closing, and either such engagement involves
no conflict of interest with respect to the Securityholders Representative, or the Securityholders Representative consents in writing
at the time to such engagement. Any such representation of the Company by RLG after Closing shall not affect the foregoing provisions
hereof.

 

    - 89 - 

     

    

 

(d) The Securityholders Representative,
the Company, Parent and Merger Sub (on behalf of the Surviving Corporation) consent to the foregoing arrangements and waive any actual
or potential conflict of interest that may be involved in connection with any representation by RLG permitted hereunder.

 

8.18.       
Further Assurances.

 

If at any time after the Closing
any further action is necessary or desirable to fully effect the Contemplated Transactions or any other of the Ancillary Documents, each
of the parties shall take such further action (including the execution and delivery of such further instruments and documents) as any
other party reasonably may request, including obtaining any consents from third party Persons or Governmental Authorities not obtained
prior to the Closing. Furthermore, the parties agree to comply with all applicable Laws in connection with this Agreement, the Ancillary
Documents, and the consummation of the Contemplated Transactions.

 

(signature pages follow)

 

    - 90 - 

     

    

 

IN WITNESS WHEREOF,
each of the parties hereto has caused this Agreement to be duly executed and delivered in its name and on its behalf, all as of the day
and year first above written.

 

	 	IDEANOMICS, INC.
	 	 
	 	By:	                        
	 	Name:
	 	Title:
	 	 
	 	SOLECTRAC MERGER CORP.
	 	 
	 	By:	 
	 	Name:
	 	Title:
	 	 
	 	SOLECTRAC, INC.
	 	 
	 	By:	 
	 	Name:
	 	Title:
	 	 
	 	SHAREHOLDER REPRESENTATIVE SERVICES LLC
	 	 
	 	By:	 
	 	Name: Sam Riffe
	 	Title: Managing Director
	 	 
	 	PRIMARY SECURITYHOLDERS
	 	 
	 	By:	 
	 	Name: Steve Heckeroth
	 	 
	 	By:	 
	 	Name: Heather Paulsen

 

[Signature Page to Agreement and Plan of Merger]

 

     

     

    

 

	 	By:	           
	 	Name: Nishigandha Deokule
	 	 
	 	By:	 
	 	Name: Willard MacDonald
	 	 
	 	By:	 
	 	Name: Wilhelm Cashen
	 	 
	 	By:	 
	 	Name: Joseph Nowicki

 

[Signature Page to Agreement and Plan of Merger]banf-ex101_79.htm

Exhibit 10.1

50755.0003 136129v2 

 
SUBORDINATED NOTE PURCHASE AGREEMENT
This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of June 17, 2021, and is made by and among BancFirst Corporation, an Oklahoma corporation (the “Company”), and the several purchasers of the Subordinated Notes (as defined herein) identified on the signature pages hereto (each a “Purchaser” and collectively, the “Purchasers”).

RECITALS

WHEREAS, the Company has requested that the Purchasers purchase from the Company up to $60,000,000 in aggregate principal amount of Subordinated Notes, which aggregate amount is intended to qualify as Tier 2 Capital (as defined herein).

WHEREAS, the Company has engaged D.A. Davidson & Co., as its exclusive placement agent (“Placement Agent”) for the offering of the Subordinated Notes.

WHEREAS, each of the Purchasers is an institutional “accredited investor” as such term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or a QIB (as defined below).

WHEREAS, the offer and sale of the Subordinated Notes by the Company is being made in reliance upon the exemptions from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated under the Securities Act.

WHEREAS, each Purchaser is willing to purchase from the Company a Subordinated Note in the principal amount set forth on such Purchaser’s respective signature page hereto (the “Subordinated Note Amount”) in accordance with the terms, subject to the conditions and in reliance on, the recitals, representations, warranties, covenants and agreements set forth herein and in the Subordinated Notes.

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

AGREEMENT

1.DEFINITIONS.

1.1Defined Terms.  The following capitalized terms used in this Agreement and the Subordinated Notes have the meanings defined or referenced below.  Certain other capitalized terms used only in specific sections of this Agreement may be defined in such sections.

“Affiliate(s)” means, with respect to any Person, such Person’s immediate family members, partners, members or parent and Subsidiaries, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person. For purposes of this definition, “control,” when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

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

 

“Bank” means BancFirst, an Oklahoma state-charted banking corporation and wholly-owned subsidiary of the Company.

“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the State of Oklahoma are permitted or required by any applicable law or executive order to close.

“Bylaws” means the Bylaws of the Company, as amended and as in effect on the Closing Date.

“Charter” means the Certificate of Incorporation of the Company, as amended and as in effect on the Closing Date. 

“Closing” has the meaning set forth in Section 2.2.

“Closing Date” means June 17, 2021.

“Company” has the meaning set forth in the preamble hereto and shall include any successors to the Company.

“Company Covered Person” has the meaning set forth in Section 4.2.4.

“Company’s Reports” means (i) audited financial statements of the Company for the year ended December 31, 2020; (ii) the unaudited financial statements of the Company for the period ended March 31, 2021; and (iii) the Company’s reports (FR Y-9C) for the year ended December 31, 2020 and the period ended March 31, 2021 as filed with the FRB as required by regulations of the FRB.

“Disbursement” has the meaning set forth in Section 3.1.

“Disqualification Event” has the meaning set forth in Section 4.2.4.

“Equity Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person which is not a corporation, and any and all warrants, options or other rights to purchase any of the foregoing.

“Event of Default” has the meaning set forth in the Subordinated Notes.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“FDIC” means the Federal Deposit Insurance Corporation.

“FRB” means the Board of Governors of the Federal Reserve System.

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

“Governmental Agency(ies)” means, individually or collectively, any arbitrator, court, federal, state, county or local governmental department, commission, board, regulatory authority or administrative agency (including each applicable Regulatory Agency) with jurisdiction over the Company or a Subsidiary or any of their respective properties, assets or operations.

“Governmental Licenses” has the meaning set forth in Section 4.3.

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“Hazardous Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic substances” under the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or regulations.

“Hazardous Materials Laws” mean any laws, regulations, permits, licenses or requirements pertaining to the protection, preservation, conservation or regulation of the environment which relates to real property, including:  the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.

“Indebtedness” means:  (i) all items arising from the borrowing of money that, according to GAAP, would be included in determining total liabilities as shown on the consolidated balance sheet of the Company; and (ii) all obligations secured by any lien in property owned by the Company or any Subsidiary whether or not such obligations shall have been assumed; provided, however, Indebtedness shall not include deposits or other Indebtedness created, incurred or maintained in the ordinary course of the Company’s or the Bank’s business (including, without limitation, federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by the Company or the Bank or any other Subsidiary and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.

“Leases” means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all amendments, extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate agreements relating thereto.

“Material Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably likely to be material and adverse to the financial condition, results of operations or business of such Person and its Subsidiaries taken as a whole, or (ii) would materially impair the ability of such Person to perform its respective obligations under any of the Transaction Documents, or otherwise materially impede the consummation of the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Agencies which do not disproportionally affect the operations or business of the Company or the Bank in comparison to other banking institutions with similar operations, (2) changes in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally, (3) changes after the date of this Agreement in general economic or capital market conditions affecting financial institutions or their market prices generally, including changes in prevailing interest rates, credit availability and liquidity, general changes in the credit markets or general downgrades in the credit markets, currency exchange rates, and price levels or trading volumes in the United States or foreign securities markets affecting other companies in the financial services industry, and not specifically related to the Company, the Bank or the Purchasers, (4) direct effects of compliance with this Agreement on the operating performance of the Company, the Bank or the Purchasers, including expenses incurred by the Company, the Bank or the Purchasers in consummating the transactions contemplated by this Agreement, (5) effects 

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of any action or omission taken by the Company with the prior written consent of the Purchasers, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Notes, (6) natural or man-made disaster or acts of God, (7) outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism, (8) failure to meet any internal or published projections, forecasts or revenue or earnings predictions, or (9) outbreak or worsening of pandemics, epidemics, disease, and other public health emergencies, including the Coronavirus disease (COVID-19) and including government responses thereto.

“Maturity Date” means June 30, 2036.

“Person” means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an association, a trust, an unincorporated organization, a government or any department or agency thereof (including a Governmental Agency) or any other entity or organization.

“Placement Agent” has the meaning set forth in the Recitals.

“Property” means any real property owned or leased by, and used in the conduct of the business of, the Company or any Affiliate or Subsidiary of the Company.

“Purchaser” or “Purchasers” has the meaning set forth in the preamble hereto.

“QIB” means a “qualified institutional buyer,” as defined in Rule 144A promulgated under the Securities Act.

“Regulation D” has the meaning set forth in the Recitals.

“Regulatory Agency” means any federal or state agency charged with the supervision or regulation of depository institutions or holding companies of depository institutions, or engaged in the insurance of depository institution deposits, or any court, administrative agency or commission or other authority, body or agency having supervisory or regulatory authority with respect to the Company, the Bank or any of their Subsidiaries.

“SEC” means the Securities and Exchange Commission.

“Securities Act” has the meaning set forth in the Recitals.

“Subordinated Note” means the Subordinated Note (or collectively, the “Subordinated Notes”) in the form attached as Exhibit A hereto, as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered in substitution or exchange for such Subordinated Note.

“Subordinated Note Amount” has the meaning set forth in the Recitals.

“Subsidiary” means with respect to any Person, any corporation or entity in which a majority of the outstanding Equity Interest is directly or indirectly owned by such Person.

“Tier 2 Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 217, as amended, modified and supplemented and in effect from time to time or any replacement thereof.

“Transaction Documents” has the meaning set forth in Section 3.2.1.1.

1.2Interpretations.  The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined.  The words “hereof”, “herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision 

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of this Agreement.  The word “including” when used in this Agreement without the phrase “without limitation,” shall mean “including, without limitation.” All references to time of day herein are references to Central Time unless otherwise specifically provided.  All references to this Agreement and the Subordinated Notes shall be deemed to be to such documents as amended, modified or restated from time to time.  With respect to any reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all heirs, legal representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document, instrument or agreement, then it shall also include any amendment, replacement, extension or other modification thereof.

1.3Exhibits Incorporated.  All Exhibits attached hereto are hereby incorporated into this Agreement.

2.SUBORDINATED DEBT.

2.1Certain Terms.  Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Purchasers, severally and not jointly, Subordinated Notes in an aggregate principal amount equal to the aggregate of the Subordinated Note Amounts.  The Purchasers, severally and not jointly, each agree to purchase the Subordinated Notes in an amount equal to such Purchaser’s Subordinated Note Amount from the Company on the Closing Date in accordance with the terms of, and subject to the conditions and provisions set forth in, this Agreement and the Subordinated Notes.  Each Purchaser’s respective Subordinated Note Amounts shall be disbursed in accordance with Section 3.1.

2.2The Closing.  The closing of the sale and purchase of the Subordinated Notes (the ”Closing”) shall occur remotely via the electronic or other exchange of documents and signature pages at 10:00 a.m. on the Closing Date, or at such other place or time or on such other date as the parties hereto may agree.

2.3No Right of Offset.  Each Purchaser hereby expressly waives any right of offset it may have against the Company or any of its Subsidiaries.

2.4Use of Proceeds.  The Company shall use the net proceeds from the sale of Subordinated Notes for general corporate purposes.

3.DISBURSEMENT.

3.1Disbursement.  On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by the Company and the Company has executed and delivered to each of the Purchasers this Agreement and such Purchaser’s Subordinated Note and any other related documents in form and substance reasonably satisfactory to the Purchasers, each Purchaser shall disburse in immediately available funds the Subordinated Note Amount set forth on each Purchaser’s respective signature page hereto to the Company in exchange for a Subordinated Note with a principal amount equal to such Subordinated Note Amount (the “Disbursement”).  The Company will deliver to the respective Purchasers the Subordinated Notes in definitive form (or provide evidence of the same with the original to be delivered by the Company by overnight delivery on the next Business Day in accordance with the delivery instructions of the Purchaser), registered in such name as such Purchaser may request.

3.2Conditions Precedent to Disbursement.  

3.2.1Conditions to the Purchasers’ Obligation. The obligation of each Purchaser to consummate the purchase of the Subordinated Notes to be purchased by them at Closing and to effect the 

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Disbursement is subject to delivery by or at the direction of the Company to such Purchaser each of the following (or written waiver by such Purchaser prior to the Closing of such delivery):

3.2.1.1Transaction Documents.  This Agreement and such Purchaser’s Subordinated Note (collectively, the “Transaction Documents”), each duly authorized and executed by the Company.

3.2.1.2Authority Documents.

(a)A copy, certified by the Executive Chairman, President, Chief Financial Officer, or Secretary of the Company, of the Charter of the Company;

(b)A certificate of good standing of the Company issued by the Secretary of State of the State of Oklahoma;

(c)A certificate regarding the certificate of authority of the Bank issued by the Oklahoma State Banking Department;

(d)A copy, certified by the Executive Chairman, President, Chief Financial Officer, or Secretary of the Company, of the Bylaws of the Company;

(e)A copy, certified by the Executive Chairman, President, Chief Financial Officer, or Secretary of the Company, of the resolutions of the board of directors of the Company authorizing the issuance of the Subordinated Notes and the execution, delivery and performance of the Transaction Documents;

(f)An incumbency certificate of the Executive Chairman, President, Chief Financial Officer, or Secretary of the Company, certifying the names of the officer or officers of the Company authorized to sign the Transaction Documents and the other documents provided for in this Agreement; and

(g)The opinion of McAfee & Taft A Professional Corporation, counsel to the Company, dated as of the Closing Date, substantially in the form set forth at Exhibit B attached hereto addressed to the Purchasers and Placement Agent.

3.2.1.3Other Documents.  Such other certificates, affidavits, schedules, resolutions, notes and/or other documents which are provided for hereunder or as a Purchaser may reasonably request.

3.2.2Conditions to the Company’s Obligation.  With respect to a given Purchaser, the obligation of the Company to consummate the sale of the Subordinated Notes and to effect the Closing is subject to delivery of this Agreement to the Company by or at the direction of such Purchaser, duly authorized and executed by such Purchaser, and the delivery of the Subordinated Note Amount set forth in such Purchaser’s signature page of this Agreement.

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4.REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company hereby represents and warrants to each Purchaser as follows:

 

4.1Organization and Authority.

4.1.1Organization Matters of the Company and Its Subsidiaries.

4.1.1.1The Company is a duly organized corporation, is validly existing and in good standing under the laws of the State of Oklahoma and has all requisite corporate power and authority to conduct its business and activities as presently conducted, to own its properties, and to perform its obligations under the Transaction Documents.  The Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect on the Company.  The Company is duly registered as a financial holding company under the Bank Holding Company Act of 1956, as amended.

4.1.1.2Each Subsidiary of the Company other than the Bank and Pegasus Bank either has been duly organized and is validly existing as a corporation or limited liability company, or, in the case of the Bank, has been duly chartered and is validly existing as an Oklahoma state-chartered banking corporation, or, in the case of Pegasus Bank, has been duly chartered and is validly existing as a Texas state-chartered banking corporation, in each case in good standing under the laws of the jurisdiction of its incorporation or organization, has corporate or limited liability company power and authority, as applicable, to own, lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation or limited liability company to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not reasonably be expected to result in a Material Adverse Effect.  All of the issued and outstanding shares of capital stock or other Equity Interest in each Subsidiary of the Company have been duly authorized and validly issued, are fully paid and, except as provided by 6 Okla. Stat. § 220 with respect to the common stock of the Bank, non-assessable and are owned by the Company, directly or through Subsidiaries of the Company, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim; none of the outstanding shares of capital stock of, or other Equity Interests in, any Subsidiary of the Company were issued in violation of the preemptive or similar rights of any security holder of such Subsidiary of the Company or any other entity.

4.1.1.3The deposit accounts of the Bank are insured by the FDIC up to applicable limits.  The Bank has not received any notice or other information indicating that the Bank is not an “insured depository institution” as defined in 12 U.S.C. Section 1813, nor has any event occurred which could reasonably be expected to adversely affect the status of the Bank as an FDIC-insured institution.  

4.1.2Capital Stock and Related Matters.  The Charter of the Company authorizes the Company to issue 40,000,000 shares of common stock, 900,000 shares of 10% Cumulative Preferred Stock and 10,000,000 shares of Senior Preferred Stock.  As of March 31, 2021, there were 32,771,013 shares of the Company’s common stock issued and outstanding, and no shares of the Company’s 10% Cumulative Preferred Stock or Senior Preferred Stock issued and outstanding.  All of the outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable.  There are, as of the date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such 

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agreement or commitment to any Person other than the Company except pursuant to the Company’s equity incentive plans duly adopted by the Company’s board of directors.

4.2No Impediment to Transactions.

4.2.1Transaction is Legal and Authorized.  The issuance of the Subordinated Notes, the borrowing of the aggregate of the Subordinated Note Amounts, the execution of the Transaction Documents and compliance by the Company with all of the provisions of the Transaction Documents are within the corporate and other powers of the Company.  

4.2.2Agreement.  This Agreement has been duly authorized, executed and delivered by the Company, and, assuming due authorization, execution and delivery by the other parties hereto, constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

4.2.3Subordinated Notes.  The Subordinated Notes have been duly authorized by the Company and when executed by the Company and issued, delivered to and paid for by the Purchasers in accordance with the terms of the Agreement, will have been duly executed, issued and delivered, and will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

4.2.4Exemption from Registration.  Neither the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Subordinated Notes.  Assuming the accuracy of the representations and warranties of each Purchaser set forth in this Agreement and the accuracy of the representations and warranties of the Placement Agent in the Placement Agent Agreement, the Subordinated Notes will be issued in a transaction exempt from the registration requirements of the Securities Act.  No “bad actor” disqualifying event described in Rule 506(d)(1)(i)-(viii) of Regulation D (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any Person described in Rule 506(d)(1) (each, a “Company Covered Person”).  The Company has exercised reasonable care to determine whether any Company Covered Person is subject to a Disqualification Event.  The Company has complied, to the extent applicable, with its disclosure obligations under Rule 506(e).

4.2.5No Defaults or Restrictions.  Neither the execution and delivery of the Transaction Documents by the Company nor compliance by the Company with their respective terms and conditions will (whether with or without the giving of notice or lapse of time or both) (i) violate, conflict with or result in a breach of, or constitute a default under:  (1) the Charter or Bylaws of the Company; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any contract, agreement, indenture, note, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreement or instrument to which the Company or the Bank, as applicable, is now a party or by which it or any of its properties may be bound or affected; (3) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency applicable to the Company, the Bank or any of their Subsidiaries; or (4) any statute, rule or regulation applicable to the Company, except, in the case of items (2), (3) or (4), for such violations, conflicts, breaches and default that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on the Company and its Subsidiaries taken as a whole, or (ii) result in the creation or imposition of any lien, charge or encumbrance 

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of any nature whatsoever upon any property or asset of the Company.  Neither the Company nor the Bank is in default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture, note or other agreement or instrument creating, evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued, or any other agreement or instrument to which the Company or the Bank, as applicable, is a party or by which the Company or the Bank, as applicable, or any of its properties may be bound or affected, except, in each case, only such defaults that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on the Company taken as a whole.

4.2.6Governmental Consent.  No governmental orders, permissions, consents, approvals or authorizations are required to be obtained by the Company that have not been obtained, and no registrations or declarations are required to be filed by the Company that have not been filed in connection with, or, in contemplation of, the execution and delivery of, and performance under, the Transaction Documents, except for applicable requirements, if any, of the Securities Act, the Exchange Act or state securities laws or “blue sky” laws of the various states and any applicable federal or state banking laws and regulations.

4.3Possession of Licenses and Permits.  The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary to conduct the business now operated by them except where the failure to possess such Governmental Licenses would not, singularly or in the aggregate, have a Material Adverse Effect on the Company or such applicable Subsidiary; the Company and each Subsidiary of the Company is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, individually or in the aggregate, have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect on the Company or such applicable Subsidiary of the Company; and neither the Company nor any Subsidiary of the Company has received any notice of any unresolved proceedings relating to the revocation or modification of any such Governmental Licenses.

4.4Financial Condition.

4.4.1Company Financial Statements.  The financial statements of the Company included in the Company’s Reports (including the related notes, where applicable), which have been made available to the Purchasers (i) have been prepared from, and are in accordance with, the books and records of the Company; (ii) fairly present in all material respects the results of operations, cash flows, changes in stockholders’ equity and financial position of the Company and its consolidated Subsidiaries, for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), as applicable; (iii) complied as to form, as of their respective dates of filing, in all material respects with applicable accounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, (x) as indicated in such statements or in the notes thereto, (y) for any statement therein or omission therefrom that was corrected, amended, or supplemented or otherwise disclosed or updated in a subsequent Company’s Report, and (z) to the extent that any unaudited interim financial statements do not contain the footnotes required by GAAP, and were or are subject to normal and recurring year-end adjustments, which were not or are not expected to be material in amount, either individually or in the aggregate.  The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements.  The Company does not have any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or 

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to become due) that is required by GAAP to be reflected or reserved against on the consolidated balance sheet of the Company contained in the Company’s Reports, except for those liabilities that are so reflected or reserved against and for those liabilities incurred since the date of such consolidated balance sheet in the ordinary course of business consistent with past practice or in connection with this Agreement and the transactions contemplated hereby.

4.4.2Absence of Default.  Since the end of the Company’s last fiscal year ended December 31, 2020, no event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of the Company the right to accelerate the maturity of any material Indebtedness of the Company.  The Company is not in default under any Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, except where such default could not reasonably be expected to result in a Material Adverse Effect on the Company.

4.4.3Solvency.  After giving effect to the consummation of the transactions contemplated by this Agreement, the Company has capital sufficient to carry on its business and transactions and is solvent and able to pay its debts as they mature.  No transfer of property is being made and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Company or any Subsidiary of the Company.

4.4.4Ownership of Property.  The Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and used in the conduct of its business and good title to all assets and properties owned by the Company and such Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet contained in the Company’s Reports or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public deposits or statutory obligations or any discount with, borrowing from or other obligations to the Federal Home Loan Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by the Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith and (iii) such as do not, individually or in the aggregate, materially and adversely affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries.  The Company and each of its Subsidiaries, as lessee, has the right under valid and existing Leases of real and personal properties that are material to the Company or such Subsidiary, as applicable, in the conduct of its business to occupy or use all such properties as presently occupied and used by it.  Such existing Leases and commitments to Lease constitute or will constitute operating Leases for both tax and financial accounting purposes except as otherwise disclosed in the Company’s Reports and the Lease expense and minimum rental commitments with respect to such Leases and Lease commitments are as disclosed in all material respects in the Company’s Reports.

4.5No Material Adverse Change Since the end of the Company’s last fiscal year ended December 31, 2020, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect on the Company taken as a whole.

4.6Legal Matters.

4.6.1Compliance with Law.  The Company and each of its Subsidiaries (i) has complied with and (ii) is not under investigation with respect to, and, to the Company’s knowledge, has not been threatened to be charged with or given any notice of any material violation of any applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality or 

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agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, except where any such failure to comply or violation would not reasonably be expected to have a Material Adverse Effect on the Company and its Subsidiaries taken as a whole. The Company and each of its Subsidiaries is in compliance with, and at all times prior to the date hereof has been in compliance with, (x) all statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any Governmental Agency, applicable to it, and (y) its own privacy policies and written commitments to customers, consumers and employees concerning data protection, the privacy and security of personal data, and the nonpublic personal information of its customers, consumers and employees, in each case except where any such failure to comply, would not result, individually or in the aggregate, in a Material Adverse Effect on the Company taken as a while.  At no time during the two years prior to the date hereof has the Company or any of its Subsidiaries received any written notice from a Regulatory Agency asserting any material violations of any of the foregoing.

4.6.2Regulatory Enforcement Actions.  The Company, the Bank and its other Subsidiaries are in compliance in all material respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them, the failure to comply with which would have a Material Adverse Effect on the Company taken as a whole.  None of the Company or its Subsidiaries nor any of their officers or directors is now operating under any restrictions, agreements, memoranda, commitment letter, supervisory letter or similar regulatory correspondence, or other commitments (other than restrictions of general application) imposed by any Governmental Agency, nor are, to the Company’s knowledge, (i) any such restrictions threatened, (ii) any agreements, memoranda or commitments being sought by any Governmental Agency, or (iii) any legal or regulatory violations previously identified by, or penalties or other remedial action previously imposed by, any Governmental Agency remains unresolved.

4.6.3Pending Litigation.  There are no actions, suits, proceedings or written agreements pending, or, to the Company’s knowledge, threatened or proposed, against the Company or any of its Subsidiaries at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, or other administrative agency, domestic or foreign, that, either separately or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole, or materially and adversely affect issuance or payment of the Subordinated Notes; and neither the Company nor any of its Subsidiaries is a party to or named as subject to the provisions of any order, writ, injunction, or decree of, or any written agreement with, any Governmental Agency, that, either separately or in the aggregate, will have a Material Adverse Effect on the Company and any of its Subsidiaries, taken as a whole.

4.6.4Environmental.  Except as would not, singly or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company, (i) no Property is or, to the Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any Hazardous Materials and neither the Company nor any of its Subsidiaries has engaged in such activities, and (ii) there are no claims or actions pending or, to the Company’s knowledge, threatened against the Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials or pursuant to any Hazardous Materials Law. 

4.6.5Brokerage Commissions.  Except for commissions paid to the Placement Agent, neither the Company nor any Affiliate of the Company is obligated to pay any brokerage commission or finder’s fee to any Person in connection with the transactions contemplated by this Agreement.

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4.6.6Investment Company Act.  Neither the Company nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

4.7No Misstatement.  No information, exhibit, report, schedule or document, when viewed together as a whole, furnished by the Company to the Purchasers in connection with the negotiation, execution or performance of this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances when made or furnished to Purchasers and as of the date of this Agreement.

4.8Internal Accounting Controls.  The Company, the Bank and each other Subsidiary has established and maintains a system of internal control over financial reporting that pertains to the maintenance of records that accurately and fairly reflect the transactions and dispositions of the Company’s assets (on a consolidated basis), provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s and the Bank’s receipts and expenditures are being made only in accordance with authorizations of the Company’s or the Bank’s management, and provides reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company on a consolidated basis that could have a Material Adverse Effect on the Company.  Such internal control over financial reporting is effective to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with GAAP.  Since the conclusion of the Company’s last completed fiscal year there has not been and there currently is not (i) any significant deficiency or material weakness in the design or operation of its internal control over financial reporting which is reasonably likely to adversely affect its ability to record, process, summarize and report financial information, or (ii) to the Company’s knowledge, any fraud, whether or not material, that involves management or other employees who have a role in the Company’s or the Bank’s internal control over financial reporting.  The Company (A) has implemented and maintains disclosure controls and procedures reasonably designed and maintained to ensure that material information relating to the Company is made known to the chief executive officer and the chief financial officer of the Company by others within the Company and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s outside auditors and the audit committee of the Company’s board of directors any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company’s internal controls over financial reporting.  Such disclosure controls and procedures are effective for the purposes for which they were established.

4.9Tax Matters.  The Company, the Bank and each Subsidiary of the Company have (i) filed all material foreign, U.S. federal, state and local tax returns, information returns and similar reports that are required to be filed, and all such tax returns are true, correct and complete in all material respects, and (ii) paid all material taxes required to be paid by it and any other material assessment, fine or penalty levied against it other than taxes (x) currently payable without penalty or interest, (y) being contested in good faith by appropriate proceedings, or (z) would not reasonably be believed to have a Material Adverse Effect on the Company taken as a whole.

4.10Exempt Offering.  Assuming the accuracy of the Purchasers’ representations and warranties set forth in this Agreement and the accuracy of the Placement Agent’s representations and warranties in the Placement Agreement, no registration under the Securities Act is required for the offer and sale of the Subordinated Notes by the Company to the Purchasers.

4.11Representations and Warranties Generally The representations and warranties of the Company set forth in this Agreement and in the Subordinated Notes that do not contain a “Material Adverse Effect” qualification or other express materiality or similar qualification shall be true and correct in all 

12

material respects as of the date hereof and as of the Closing Date (except for any such representation or warranty that is made only as of a specific date, in which case as of such specific date).  The representations and warranties of the Company set forth in this Agreement and in the Subordinated Note that contain a “Material Adverse Effect” qualification or any other express materiality or similar qualification shall be true and correct as of the date hereof and as of the Closing Date (except for any such representation or warranty that is made only as of a specific date, in which case as of such specific date). The Company does not make any representation or warranty to Purchaser that is not set forth in this Agreement, the Subordinated Notes or the documents and certificates contemplated hereby and thereby.  

5.GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.

The Company hereby further covenants and agrees with each Purchaser as follows:

5.1Compliance with Transaction Documents.  The Company shall comply with, observe and timely perform each and every one of the covenants, agreements and obligations under the Transaction Documents.

5.2Affiliate Transactions.  The Company shall not itself, nor shall it cause, permit or allow any of its Subsidiaries to enter into any material transaction, including the purchase, sale or exchange of property or the rendering of any service, with any Affiliate of the Company except in the ordinary course of business and pursuant to the reasonable requirements of the Company’s or such Affiliate’s business and upon terms consistent with applicable laws and regulations and reasonably found by the appropriate board(s) of directors to be fair and reasonable and no less favorable to the Company or such Affiliate than would be obtained in a comparable arm’s length transaction with a Person not an Affiliate.

5.3Compliance with Laws; Other Agreements.

5.3.1Generally.  The Company shall comply and cause the Bank and each of its other Subsidiaries to comply in all material respects with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties, except, in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on the Company taken as a whole.

5.3.2Regulated Activities.  The Company shall not itself, nor shall it cause, permit or allow the Bank or any other of its Subsidiaries to (i) engage in any business or activity not permitted by all applicable laws and regulations, except where such business or activity would not reasonably be expected to have a Material Adverse Effect on the Company taken as a whole or (ii) make any loan or advance secured by the capital stock of another bank or depository institution, or acquire the capital stock, assets or obligations of or any interest in another bank or depository institution, in each case other than in accordance with applicable laws and regulations and safe and sound banking practices.

5.3.3Taxes.  The Company shall and shall cause the Bank and any other of its Subsidiaries to promptly pay and discharge all taxes, assessments and other governmental charges imposed upon the Company, the Bank or any other of its Subsidiaries or upon the income, profits, or property of the Company or any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the property of the Company, the Bank or any other of its Subsidiaries.  Notwithstanding the foregoing, none of the Company, the Bank or any other of its Subsidiaries shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof shall be contested in good faith by appropriate proceedings, and appropriate reserves therefor shall be maintained on the books of the Company, the Bank and such other Subsidiary.

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5.3.4Corporate Existence.  The Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and the corporate or limited liability company existence of the Bank and the other Subsidiaries and its and their rights and franchises, and comply in all material respects with all related laws applicable to the Company, the Bank or the other Subsidiaries; provided, however, that the Company may consummate the transactions described in Section 9 of the Subordinated Notes in accordance with the provisions of that section; and further provided that the Company will not be required to preserve the existence (corporate or otherwise) of any of its Subsidiaries or any such right or franchise of the Company or any of its Subsidiaries if the Board of Directors of the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof will not impair the Company’s ability to repay the Subordinated Notes.

	
5.3.5
	
Dividends, Payments, and Guarantees During Event of Default.  Upon the occurrence of an Event of Default (as defined under the Subordinated Notes), until such Event of Default is cured by the Company or waived by the Holders (as defined under the Subordinated Notes) in accordance with Section 14 of the Subordinated Notes and except as required by any federal or state Governmental Agency, the Company shall not (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock; (b) make any payment of principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of the Company’s Indebtedness that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s or its Affiliate’s directors, officers or employees or any of the Company’s dividend reinvestment plans or employee stock purchase plans; or (vi) the grant or award of, the lapse of restrictions with respect to, or the issuance, acquisition or withholding of shares of any class of the Company’s common stock upon the exercise or settlement of (including the satisfaction of tax withholding obligations associated with) options, warrants, grants, awards or rights under any Company stock option or equity incentive plan.

5.3.5Tier 2 Capital.  Whether or not the Company is subject to consolidated capital requirements under applicable regulations of the FRB, if all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Maturity Date of the Subordinated Notes, the Company will immediately notify the Holder (as defined in the Subordinated Note), and thereafter the Company and the Holder (as defined in the Subordinated Note) will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event as described in the Subordinated Notes.

5.4Absence of Control.  It is the intent of the parties to this Agreement that in no event shall the Purchasers, by reason of any of the Transaction Documents, be deemed to control, directly or indirectly, the Company, and the Purchasers shall not exercise, or be deemed to exercise, directly or indirectly, a controlling influence over the management or policies of the Company.

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6.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

Each Purchaser hereby represents and warrants to the Company, and covenants with the Company, severally and not jointly, as follows:

6.1Legal Power and Authority.  It has all necessary power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.  It is an entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

6.2Authorization and Execution.  The execution, delivery and performance of this Agreement has been duly authorized by all necessary action on the part of such Purchaser, this Agreement has been duly executed and delivered on the part of such Purchaser, and, assuming due authorization, execution and delivery by the other parties hereto, this Agreement is a legal, valid and binding obligation of such Purchaser, enforceable against such Purchaser in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

6.3No Conflicts.  Neither the execution, delivery or performance of the Transaction Documents nor the consummation of any of the transactions contemplated thereby will conflict with, violate, constitute a breach of or a default (whether with or without the giving of notice or lapse of time or both) under (i) its organizational documents, (ii) any agreement to which it is party, (iii) any law applicable to it or (iv) any order, writ, judgment, injunction, decree, determination or award binding upon or affecting it.

6.4Purchase for Investment.  It is purchasing the Subordinated Note for its own account and not with a view to distribution and with no present intention of reselling, distributing or otherwise disposing of the same.  It has no present or contemplated agreement, undertaking, arrangement, obligation, Indebtedness or commitment providing for, or which is likely to compel, a disposition of the Subordinated Notes in any manner.

6.5Institutional Accredited Investor.  It is and will be on the Closing Date (i) an institutional “accredited investor” as such term is defined in Rule 501(a) of Regulation D and as contemplated by subsections (1), (2), (3) and (7) of Rule 501(a) of Regulation D, and has no less than $5,000,000 in total assets, or (ii) a QIB.

6.6Financial and Business Sophistication.  It has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the prospective investment in the Subordinated Notes, including those risks set forth in Exhibit C attached hereto.  It has relied solely upon its own knowledge of, and/or the advice of its own legal, financial or other advisors with regard to, the legal, financial, tax and other considerations involved in deciding to invest in the Subordinated Notes.

6.7Ability to Bear Economic Risk of Investment.  It recognizes that an investment in the Subordinated Notes involves substantial risk.  It has the ability to bear the economic risk and other risks of the prospective investment in the Subordinated Notes, including the ability to hold the Subordinated Notes indefinitely, and further including the ability to bear a complete loss of all of its investment in the Company.

6.8Information.  It acknowledges that  (i) it is not being provided with the disclosures that would be required if the offer and sale of the Subordinated Notes were registered under the Securities Act, nor is it being provided with any offering circular or prospectus prepared in connection with the offer and 

15

sale of the Subordinated Notes; (ii) it has conducted its own examination of the Company and the terms of the Subordinated Notes to the extent it deems necessary to make its decision to invest in the Subordinated Notes; (iii) it has availed itself of publicly available financial and other information concerning the Company to the extent it deems necessary to make its decision to purchase the Subordinated Notes; and (iv) it has not received or relied on any form of general solicitation or general advertising (within the meaning of Regulation D) from the Company, the Placement Agent or any other party acting on the Company’s behalf in connection with the offer and purchase of the Subordinated Note.  It has reviewed the information set forth in the Company’s Reports, the exhibits hereto (including those risks set forth in Exhibit C attached hereto) and the information provided to Purchaser by or on behalf of the Company in connection with the transactions contemplated by this Agreement, including the Company’s investor presentation dated March 31, 2021.

6.9Access to Information.  It acknowledges that it and its advisors have been (i) given the opportunity to review the information, documents and materials contained in the virtual data room prepared for purposes of the offering of the Subordinated Notes, (ii) furnished with all materials relating to the business, finances and operations of the Company that have been requested by it or its advisors and (iii) have been given the opportunity to ask questions of, and to receive answers from, persons acting on behalf of the Company concerning terms and conditions of the transactions contemplated by this Agreement in order to make an informed and voluntary decision to enter into this Agreement.

6.10Investment Decision.  It has made its own investment decision based upon its own judgment, due diligence and advice from such advisors as it has deemed necessary and not upon any view expressed by any other Person or entity, including the Company or the Placement Agent.  Neither such inquiries nor any other due diligence investigations conducted by it or its advisors or representatives, if any, shall modify, amend or affect its right to rely on the Company’s representations and warranties contained herein.  It is not relying upon, and has not relied upon, any advice, statement, representation or warranty made by any Person by or on behalf of the Company, including, without limitation, the Placement Agent, except for the express statements, representations and warranties of the Company made or contained in this Agreement or the Subordinated Note.  Furthermore, it acknowledges that (i) the Placement Agent has not performed any due diligence review on behalf of it and (ii) nothing in this Agreement or any other materials presented by or on behalf of the Company to it in connection with the purchase of the Subordinated Notes constitutes legal, tax or investment advice.

6.11Private Placement; No Registration; Restricted Legends.  It understands and acknowledges that the Subordinated Notes are “restricted securities” under Rule 144 of the Securities Act and are being sold by the Company without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively, Rule 506(b) of Regulation D promulgated under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any state securities laws, and accordingly, may be resold, pledged or otherwise transferred only in compliance with the registration requirements of federal and state securities laws or if exemptions from the Securities Act and applicable state securities laws are available to it.  It further understands and acknowledges that the Company will not be obligated in the future to register the Subordinated Notes under the Securities Act or the Exchange Act or under any state securities laws.  Neither the Placement Agent nor the Company has made or is making any representation, warranty or covenant, express or implied, as to the availability of any exemption from registration under the Securities Act or any applicable state securities laws for the resale, pledge or other transfer of the Subordinated Notes. It is not subscribing for the Subordinated Notes as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting.  It further acknowledges and agrees that all certificates or other instruments representing the Subordinated Notes will bear the restrictive legend set forth in the form of Subordinated Note.  It further acknowledges its primary responsibilities under the Securities Act and, accordingly, will not sell or 

16

otherwise transfer the Subordinated Notes or any interest therein without complying with the requirements of the Securities Act and the rules and regulations promulgated thereunder and the requirements set forth in this Agreement. 

6.12Placement Agent.  It will purchase the Subordinated Note(s) directly from the Company and not from the Placement Agent and understands that neither the Placement Agent nor any other broker or dealer has any obligation to make a market in the Subordinated Notes.

6.13Tier 2 Capital.  If the Company provides notice as contemplated in Section 5.3.5 hereof of the occurrence of the event contemplated in such section, thereafter the Company and Purchaser will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Agreement shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event in accordance with the Subordinated Note. 

6.14Accuracy of Representations.  It understands that each of the Placement Agent and the Company are relying upon the truth and accuracy of the foregoing representations, acknowledgements and agreements in connection with the transactions contemplated by this Agreement.

6.15Representations and Warranties Generally.  The representations and warranties of the Purchaser set forth in this Agreement are true and correct as of the date hereof and will be true and correct as of the Closing Date and except as otherwise specifically provided herein.  Any certificate signed by a duly authorized representative of the Purchaser and delivered to the Company or to counsel for the Company shall be deemed to be a representation and warranty by the Purchaser to the Company as to the matters set forth therein.

7.MISCELLANEOUS.

7.1Prohibition on Assignment by the Company.  Except as described in Section 9 (Merger or Sale of Assets) of the Subordinated Notes, the Company may not assign, transfer or delegate any of its rights or obligations under this Agreement or the Subordinated Notes without the prior written consent of all the Holders (as defined in the Subordinated Note).  In addition, in accordance with the terms of the Subordinated Notes, any transfer of such Subordinated Notes by the Holders (as defined in the Subordinated Note) must be made in accordance with the Assignment Form attached thereto and the requirements and restrictions thereof.

7.2Time of the Essence.  Time is of the essence for this Agreement.

7.3Waiver or Amendment.  No waiver or amendment of any term, provision, condition, covenant or agreement herein or in the Subordinated Notes (including, in each case, past defaults) shall be effective against a Purchaser or any Holder (as defined in the Subordinated Notes) unless in writing and signed by the Holders of Subordinated Notes representing a majority of the aggregate outstanding principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent of each Holder of an affected Subordinated Notes, no such amendment or waiver may:  (i) reduce the principal amount of the Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note, (iv) change the currency in which payment of the obligations of the Company under this Agreement and the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of this Agreement or the Subordinated Notes, (vi) make any changes to Section 6 (Events of 

17

Default; Acceleration) or Section 14 (Amendments; Waivers) of the Subordinated Notes that adversely affects the rights of any Holder of a Subordinated Note; or (vii) disproportionately affect the rights of any of the Holders of the then outstanding Subordinated Notes.  Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent of the Holders of the Subordinated Notes to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any Holder of any of the Subordinated Notes. No waiver or amendment of any term, provision, condition or agreement herein or in the Subordinated Notes (including, in each case, past defaults) shall be effective against the Company unless in writing and signed by the Company.  No failure to exercise or delay in exercising, by a Purchaser or any Holder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law. The rights and remedies provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity.

7.4Severability.  Any provision of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though any such invalid portion had never been included herein.  Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement or the application thereof are held invalid or unenforceable only as to particular persons or situations, the remainder of this Agreement, and the application of such provision to persons or situations other than those to which it shall have been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest extent permitted by law.

7.5Notices.  Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing and if delivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested, or if delivered by a responsible overnight commercial courier promising next business day delivery, addressed:

		
	
if to the Company:
	
BancFirst Corporation

Attn:  David R. Harlow, President and CEO

P.O. Box 26788 (73126-0788)

100 N. Broadway, 2nd Floor (73102)

Oklahoma City, Oklahoma 

	
 
	
	
with a copy to:
	
McAfee & Taft A Professional Corporation

Attn:  Matthew K. Brown

Two Leadership Square, 8th Floor

211 N. Robinson

Oklahoma City, Oklahoma  73102

 

	
if to the Purchasers:
	
To the address indicated on such Purchaser’s signature page.

 

or to such other address or addresses as the party to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for the giving of notice; provided that no change in address shall be effective until five (5) Business Days after being given to the other party in the manner provided for above.  Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, three (3) Business Days after it shall have been deposited in the United 

18

States mails as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier (provided next business day delivery was requested).

7.6Successors and Assigns.  This Agreement shall inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns; except that, unless a Purchaser consents in writing, no assignment made by the Company in violation of this Agreement shall be effective or confer any rights on any purported assignee of the Company.  The term “successors and assigns” will not include a purchaser of any of the Subordinated Notes or a beneficial interest therein from any Purchaser merely because of such purchase.

7.7No Joint Venture.  Nothing contained herein or in any document executed pursuant hereto and no action or inaction whatsoever on the part of a Purchaser, shall be deemed to make a Purchaser a partner or joint venturer with the Company.

7.8Documentation.  All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to a Purchaser shall be in form and substance reasonably satisfactory to such Purchaser.

7.9Entire Agreement.  This Agreement and the Subordinated Notes, along with any exhibits thereto, constitute the entire agreement between the parties hereto with respect to the subject matter hereof and may not be modified or amended in any manner other than by supplemental written agreement executed by the parties hereto.  No party, in entering into this Agreement, has relied upon any representation, warranty, covenant, condition or other term that is not set forth in this Agreement or in the Subordinated Notes.

7.10Choice of Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma without giving effect to its laws or principles of conflict of laws.  Each of the parties to this Agreement irrevocably and unconditionally submits itself and its property to the exclusive jurisdiction of any federal or state court located in Oklahoma County, Oklahoma in any action or proceeding arising out of or relating to this Agreement, and each Purchaser agrees to such jurisdiction and waives any defense of inconvenient forum.

7.11No Third Party Beneficiary.  This Agreement is made for the sole benefit of the Company and the Purchasers, and no other Person shall be deemed to have any privity of contract hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any other Person have any right of action of any kind hereon or be deemed to be a third party beneficiary hereunder; provided, that the Placement Agent may rely on the representations and warranties contained herein to the same extent as if it were a party to this Agreement.

7.12Legal Tender of United States.  All payments hereunder shall be made in coin or currency which at the time of payment is legal tender in the United States of America for public and private debts.

7.13Captions; Counterparts.  Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.  In the event that any signature on this Agreement in favor of the Purchasers and all other documents delivered hereunder (other than the Subordinated Notes) are delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

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7.14Knowledge; Discretion.  All references herein to the Company’s knowledge shall be deemed to mean the actual knowledge of the Company’s executive chairman, president, chief executive officer and chief financial officer or such other persons holding equivalent offices.  All references herein to a Purchaser’s knowledge shall be deemed to mean the knowledge of such Purchaser based on the actual knowledge of such Purchaser’s chief executive officer and chief financial officer or such other persons holding equivalent offices.  Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by a Purchaser to the making of a determination or designation by a Purchaser, to the application of a Purchaser’s discretion or opinion, to the granting or withholding of a Purchaser’s consent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to a Purchaser, or otherwise involving the decision making of a Purchaser, shall be deemed to mean that such Purchaser shall decide using the reasonable discretion or judgment of a prudent lender.

7.15Waiver Of Right To Jury Trial.  TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF THE COMPANY OR THE PURCHASERS.  THE PARTIES ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL.  THE PARTIES FURTHER ACKNOWLEDGE THAT (I) THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (II) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (III) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

7.16Expenses.  Except as otherwise provided in this Agreement, each of the parties will bear and pay all other costs and expenses incurred by it or on its behalf in connection with the transactions contemplated pursuant to this Agreement.

7.17Survival.  Each of the representations and warranties set forth in this Agreement shall survive the consummation of the transactions contemplated hereby for a period of one year after the date hereof.  Except as otherwise provided herein, all covenants and agreements contained herein shall survive until, by their respective terms, they are no longer operative.

[Signature Pages Follow]

 

 

 

20

 

 

IN WITNESS WHEREOF, the Company has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the date first above written.

COMPANY:

 

BancFirst Corporation

 

 

By:

Name:David R. Harlow

Title:President and Chief Executive Officer

 

 

[Company Signature Page to Subordinated Note Purchase Agreement]

 

 

IN WITNESS WHEREOF, the Purchaser has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the date first above written.

PURCHASER:

 

[INSERT PURCHASER’S NAME]

 

 

By:

Name: [●]

Title:[●] 

 

Domicile/Headquarter Address of Purchaser:

 

[●]

 

Address of Purchaser for Notices (if different):

 

[●]

 

 

 

Subordinated Note Amount: 

 

$[●]

 

 

 

 

[Purchaser Signature Page to Subordinated Note Purchase Agreement]

 

 

EXHIBIT A

FORM OF SUBORDINATED NOTE

BANCFIRST CORPORATION

[●]% FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE 2036

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND WITHOUT A VIEW TO DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ”SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT (A) PURSUANT TO, AND IN ACCORDANCE WITH, A REGISTRATION STATEMENT THAT IS EFFECTIVE UNDER THE SECURITIES ACT AT THE TIME OF SUCH TRANSFER; (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT OR TO A PERSON THAT YOU REASONABLY BELIEVE TO BE AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT; OR (C) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (INCLUDING, IF AVAILABLE, THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT), AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS, AS EVIDENCED BY AN OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED. 

THIS SECURITY AND THE OBLIGATIONS OF THE COMPANY (AS DEFINED HEREIN) AS EVIDENCED HEREBY (1) ARE NOT DEPOSITS WITH OR HELD BY THE COMPANY AND ARE NOT INSURED OR GUARANTEED BY ANY FEDERAL AGENCY OR INSTRUMENTALITY, INCLUDING, WITHOUT LIMITATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION AND (2) ARE SUBORDINATE IN THE RIGHT OF PAYMENT TO ALL SENIOR INDEBTEDNESS (AS DEFINED HEREIN).

THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF.  ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.  ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED NOTE.

CERTAIN ERISA CONSIDERATIONS:

THE HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE ”CODE”) (EACH A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S 

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INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLANS, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE OR (ii) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.

 

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No. 2036-[●]ACCREDITED INVESTOR CUSIP[●] / ISIN: [●]

QIB CUSIP[●] / ISIN: [●]

BANCFIRST CORPORATION

[●]% FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE 2036

1.Note Purchase Agreement; Holders.  This Subordinated Note is one of a duly authorized issue of notes of BancFirst Corporation, an Oklahoma corporation (the ”Company”), designated as the “[●]% Fixed-to-Floating Rate Subordinated Notes due 2036” (the “Subordinated Notes”) initially issued on June [●], 2021. The Company has issued this Subordinated Note under that certain Subordinated Note Purchase Agreement dated as of June [●], 2021, as the same may be amended or supplemented from time to time (“Note Purchase Agreement”), between the Company and the several purchasers of the Subordinated Notes identified in the signature pages thereto.  The holder of this Subordinated Note (the “Holder”), by the acceptance of this Subordinated Note, agrees to and will be bound by all provisions of the Note Purchase Agreement that are applicable to the Purchasers (as defined therein) or holders of Subordinated Notes from time. All capitalized terms not otherwise defined in this Subordinated Note will have the meanings assigned to them in the Note Purchase Agreement.  A copy of the Note Purchase Agreement is on file at the Company and will be provided to any holder of this Subordinated Note upon request.

2.Payment.  The Company, for value received, promises to pay to [●], the principal sum of [●] DOLLARS (U.S.) ($[●]), plus accrued but unpaid interest on June 30, 2036 (“Stated Maturity Date”), unless redeemed prior to such date, and to pay interest thereon (i) from and including the date of issuance of this Subordinated Note to, but excluding, June 30, 2031 or earlier date of redemption contemplated by Section 5 (the “Redemption Date”), at a rate of [●]% per annum, semi-annually in arrears on June 30 and December 31 of each year, commencing December 31, 2021 (each such date, a “Fixed Rate Interest Payment Date,” with the period from, and including, the date of issuance of this Subordinated Note to, but excluding, the first Fixed Rate Interest Payment Date and each successive period from, and including, a Fixed Rate Interest Payment Date to, but excluding, the next Fixed Rate Interest Payment Date being a “Fixed Rate Period”) and (ii) from, and including, June 30, 2031 to, but excluding, the Stated Maturity Date, unless redeemed prior to the Stated Maturity Date, at a rate equal to the Benchmark, reset quarterly, plus a spread of [●] basis points, or such other rate as determined pursuant to this Subordinated Note, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year through the Stated Maturity Date or earlier Redemption Date (each such date, including the Maturity Date, a “Floating Rate Interest Payment Date” and, together with the Fixed Rate Interest Payment Dates, the “Interest Payment Dates,” with the period from, and including, June 30, 2031 to, but excluding, the first Floating Rate Interest Payment Date and each successive period from, and including, a Floating Rate Interest Payment Date to, but excluding, the next Floating Rate Interest Payment Date being a “Floating Rate Period”). For the avoidance of doubt, the payment of interest on December 31, 2021 shall include interest from and including the date of issuance of this Subordinated Note to, but excluding, December 31, 2021.  The amount of interest payable on any Fixed Rate Interest Payment Date during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months up to, but excluding June 30, 2031, and, the amount of interest payable on any Floating Rate Interest Payment Date during the Floating Rate Period will be computed on the basis of a 360-day year and the number of days actually elapsed. In the event that any scheduled Interest Payment Date for this Subordinated Note falls on a day that is not a Business Day, then payment of interest payable on such Interest Payment Date will be paid on the next succeeding day which is a Business Day (any payment made on such date will be treated as being made on the date that the payment was first due and no interest on such payment will accrue for 

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the period from and after such scheduled Interest Payment Date); provided, that in the event that any scheduled Floating Rate Interest Payment Date falls on a day that is not a Business Day and the next succeeding Business Day falls in the next succeeding calendar month, such Floating Rate Interest Payment Date will be the immediately preceding Business Day, and, in each such case, the amounts payable on such Business Day will include interest accrued to, but excluding, such Business Day. All percentages used in or resulting from any calculation of the Benchmark shall be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%.  Notwithstanding anything to the contrary, in the event the Benchmark is less than zero, the Benchmark shall be deemed to be zero.  

Effect of Benchmark Transition Event.

(i)If the Calculation Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any determination of the Benchmark on any date, the Benchmark Replacement will replace the then-current Benchmark for all purposes relating to the Subordinated Notes during the relevant Floating Rate Period in respect of such determination on such date and all determinations on all subsequent dates.

(ii)In connection with the implementation of a Benchmark Replacement, the Calculation Agent will have the right to make Benchmark Replacement Conforming Changes from time to time.

(iii)Any determination, decision or election that may be made by the Calculation Agent pursuant to the benchmark transition provisions set forth herein, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date, and any decision to take or refrain from taking any action or any selection:

(1)will be conclusive and binding absent manifest error;

(2)if made by the Company as the Calculation Agent, will be made in the Company’s sole discretion; 

(3)if made by the Calculation Agent other than the Company, will be made after consultation with the Company, and the Calculation Agent will not make any such determination, decision or election to which the Company reasonably objects; and

(4)notwithstanding anything to the contrary in this Subordinated Note, shall become effective without consent from the Holder or any other party.

(iv)For the avoidance of doubt, after a Benchmark Transition Event and its related Benchmark Replacement Date have occurred, interest payable on this Subordinated Note for the Floating Rate Period will be an annual rate equal to the sum of the applicable Benchmark Replacement and the spread specified on the face hereof.

As used in this Subordinated Note:

	
 
	
(a)
	
“Benchmark” means:

(i)initially Three-Month Term SOFR.

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(ii)Notwithstanding the foregoing clause (i) of this Section 2(a):

(1)If the Calculation Agent determines prior to the relevant Floating Interest Determination Date that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, then the Company shall promptly provide notice of such determination to the Holder and Section 2(b) will thereafter apply to all determinations, calculations and quotations made or obtained for the purposes of calculating the Benchmark payable on the Subordinated Notes during a relevant Floating Rate Period.

(2)However, if the Calculation Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, but for any reason the Benchmark Replacement has not been determined as of the relevant Floating Interest Determination Date, the Benchmark for the applicable Floating Rate Period will be equal to the Benchmark on the last Floating Interest Determination Date for the Subordinated Notes, as determined by the Calculation Agent.

(iii)If the then-current Benchmark is Three-Month Term SOFR and any of the foregoing provisions concerning the calculation of the interest rate and the payment of interest during the Floating Rate Period are inconsistent with any of the Three-Month Term SOFR Conventions determined by the Calculation Agent, then the relevant Three-Month Term SOFR Conventions will apply.

(b)“Benchmark Replacement” means the Interpolated Benchmark; provided that if (i) the Calculation Agent cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date or (ii) the then-current Benchmark is Three-Month Term SOFR and a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR (in which event no Interpolated Benchmark with respect to Three-Month Term SOFR shall be determined), then “Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Calculation Agent, as of the Benchmark Replacement Date:

(i)Compounded SOFR;

(ii)the sum of:  (1) the alternate rate that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (2) the Benchmark Replacement Adjustment;

(iii)the sum of: (1) the ISDA Fallback Rate and (ii) the Benchmark Replacement Adjustment; or

(iv)the sum of: (1) the alternate rate that has been selected by the Calculation Agent as the replacement for the then-current Benchmark for the applicable Corresponding Tenor, giving due consideration to any industry-accepted rate as a replacement for the then-current Benchmark for U.S. Dollar denominated floating rate notes at such time and (2) the Benchmark Replacement Adjustment.

(c)“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Calculation Agent, as of the Benchmark Replacement Date:

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(i)the spread adjustment, or method for calculating or determining such spread adjustment (which may be a positive or negative value or zero), that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;

(ii)if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment; or

(iii)the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Calculation Agent giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. Dollar denominated floating rate notes at such time.

(d)“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Floating Rate Period,” timing and frequency of determining rates with respect to each Floating Rate Period and making payments of interest, rounding of amounts or tenors and other administrative matters) that the Calculation Agent decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Calculation Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Calculation Agent determines is reasonably necessary).

(e)“Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:

(i)in the case of clause (i) of the definition of “Benchmark Transition Event,” the relevant Reference Time in respect of any determination;

(ii)in the case of clause (ii) or (iii) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or

(iii)in the case of clause (iv) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

For the avoidance of doubt, for purposes of the definitions of Benchmark Replacement Date and Benchmark Transition Event, references to the Benchmark also include any reference rate underlying the Benchmark (for example, if the Benchmark becomes Compounded SOFR, references to the Benchmark would include SOFR).

For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination.

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(f)“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:

(i)if the Benchmark is Three-Month Term SOFR, (1) the Relevant Governmental Body has not selected or recommended a forward-looking term rate for a tenor of three months based on SOFR, (2) the development of a forward-looking term rate for a tenor of three months based on SOFR that has been recommended or selected by the Relevant Governmental Body is not complete or (3) the Calculation Agent determines that the use of a forward-looking rate for a tenor of three months based on SOFR is not administratively feasible;

(ii)a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;

(iii)a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or

(iv)a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.

(g)“Business Day” means any day that is not a Saturday or Sunday and that is not a day on which banks in the State of Oklahoma are generally authorized ore required by law or executive order to be closed.

(h)“Calculation Agent” means the agent appointed by the Company prior to the commencement of the Floating Rate Period (which may include the Company or any of its Affiliates) to act in accordance with the terms of this Subordinated Note during the Floating Rate Period.

(i)“Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate being established by the Calculation Agent in accordance with:

(i)the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining Compounded SOFR; provided that:

(ii)if, and to the extent that, the Calculation Agent determines that Compounded SOFR cannot be determined in accordance with clause (i) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by 

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the Calculation Agent giving due consideration to any industry-accepted market practice for U.S. Dollar denominated floating rate notes at such time.

For the avoidance of doubt, the calculation of Compounded SOFR shall exclude the Benchmark Replacement Adjustment (if applicable) and the spread of [●] basis points per annum.

(j)“Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding Business Day adjustment) as the applicable tenor for the then-current Benchmark.

(k)“Federal Reserve” means the Board of Governors of the Federal Reserve System.

(l)“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.

(m)An “Interest Payment Date” is either a Fixed Interest Payment Date or a Floating Interest Payment Date, as applicable. 

(n)“Interpolated Benchmark” with respect to the Benchmark means the rate determined for the Corresponding Tenor by interpolating on a linear basis between: (i) the Benchmark for the longest period (for which the Benchmark is available) that is shorter than the Corresponding Tenor and (ii) the Benchmark for the shortest period (for which the Benchmark is available) that is longer than the Corresponding Tenor.

(o)“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.

(p)“ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.

(q)“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.

(r)“Reference Time” with respect to any determination of a Benchmark means (i) if the Benchmark is Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions, and (ii) if the Benchmark is not Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Benchmark Replacement Conforming Changes.

(s)“Relevant Governmental Body” means the Federal Reserve and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve and/or the Federal Reserve Bank of New York or any successor thereto.

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(t)“SOFR” means the daily secured overnight financing rate published by the Federal Reserve Bank of New York, as the administrator of the Benchmark (or a successor administrator), on the Federal Reserve Bank of New York’s Website (or such successor’s website).

(u)“Term SOFR” means the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.

(v)“Term SOFR Administrator” means any entity designated by the Relevant Governmental Body as the administrator of Term SOFR (or a successor administrator).

(w)“Three-Month Term SOFR” means the rate for Term SOFR for a tenor of three months that is published by the Term SOFR Administrator at the Reference Time for any Floating Rate Period, as determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions.

(x)“Three-Month Term SOFR Conventions” means any determination, decision or election with respect to any technical, administrative or operational matter (including with respect to the manner and timing of the publication of Three-Month Term SOFR, or changes to the definition of “Floating Rate Period”, timing and frequency of determining Three-Month Term SOFR with respect to each interest period and making payments of interest, rounding of amounts or tenors, and other administrative matters) that the Calculation Agent decides may be appropriate to reflect the use of Three-Month Term SOFR as the Benchmark in a manner substantially consistent with market practice (or, if the Calculation Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice for the use of Three-Month Term SOFR exists, in such other manner as the Calculation Agent determines is reasonably necessary).

(y)“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding any Benchmark Replacement Adjustment.

3.Paying Agent and Registrar.  The Company or any of its Subsidiaries may act as Paying Agent and/or Registrar, and the Company will act as the initial Paying Agent and Registrar.  The Company may change any Paying Agent or Registrar from time to time without notice to any Holder.  The Company will maintain an office or agency where Subordinated Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Subordinated Notes may be presented for payment (“Paying Agent”).  The Registrar will keep a register of the Subordinated Notes (“Subordinated Note Register”) and of their transfer and exchange.  The Holder of a Subordinated Note as set forth in the Subordinated Note Register will be treated as the owner of the Subordinated Note for all purposes. The Company may appoint one or more co-registrars and one or more additional paying agents.  The term “Registrar” includes any co-registrar and the term “Paying Agent” includes any additional paying agent. The Company may change any Paying Agent or Registrar without prior notice to any Holder; provided that no such removal or replacement will be effective until a successor Paying Agent or Registrar will have been appointed by the Company and will have accepted such appointment.  The Company or any of its Subsidiaries may act as Paying Agent or Registrar, and the Company shall be the initial Paying Agent and Registrar for the Subordinated Notes.  There will be only one Subordinated Note Register.

4.Subordination. 

(a)The indebtedness of the Company evidenced by this Subordinated Note, including the principal thereof and interest thereon, shall be subordinate and junior in right of payment to obligations of the Company constituting Senior Indebtedness, and will rank pari passu in right of 

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payment with all other Subordinated Notes. For purposes of this Subordinated Note, “Senior Indebtedness” means any obligation of the Company to its creditors, whether now outstanding or subsequently created, assumed, guaranteed or incurred, other than any obligation where, in the instrument creating or evidencing the obligation or pursuant to which the obligation is outstanding, it is provided that the obligation is not Senior Indebtedness. Senior Indebtedness includes, without limitation: (i) the principal (and premium, if any) of and interest in respect of indebtedness and obligations of, or guaranteed or assumed by, the Company for borrowed money, whether or not evidenced by securities, notes, debentures, bonds or other similar instruments issued by the Company, including obligations incurred in connection with the acquisition of property, assets or businesses; (ii) all lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any conditional sale or title retention agreement, but excluding trade accounts payable in the ordinary course of business; (iv) all obligations of the Company arising from off-balance sheet guarantees and direct credit substitutes, including obligations in respect of any letters of credit, bankers’ acceptance, security purchase facilities and similar credit transactions; (v) all obligations of the Company associated with derivative products, including obligations in respect of interest rate swap, cap or other agreements, interest rate future or options contracts, currency swap agreements, currency future or option contracts and other similar agreements; (vi) all obligations of the type referred to in clauses (i) through (v) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; (vii) all obligations of the type referred to in clauses (i) through (vi) of other persons secured by any lien on any property or asset of the Company whether or not such obligation is assumed by the Company; and (viii) any deferrals, renewals or extensions of any obligations of the type referred to in clauses (i) through (vii) above.  Notwithstanding the foregoing, Senior Indebtedness does not include: (A) the Subordinated Notes; (B) trade accounts payable arising in the ordinary course of business; (C) any indebtedness that by its terms is expressly junior and subordinated to, or ranks on an equal basis with, the Subordinated Notes (including, without limitation, the 7.20% Junior Subordinated Debentures of the Company); or (D) without limiting the generality of the foregoing, any subordinated debentures or junior subordinated debentures, of the Company (including as successor-in-interest of other issuers by way of merger) underlying trust preferred securities issued by subsidiary trusts of the Company (including subsidiary trusts of the Company acquired prior to, on or after the date hereof) that are outstanding as of the date hereof or that are issued or assumed after the date hereof by the Company or any such subsidiary trust of the Company, which subordinated debentures or junior subordinated debentures shall in all cases be junior to the Subordinated Notes.

(b)In the event of liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on this Subordinated Note.  Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes, including this Subordinated Note.  In the event of any such proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the registered Holders of the Subordinated Notes at that time, together with the holders of any obligations of the Company ranking on parity with the Subordinated Notes, shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation that by its terms expressly is junior to in the right of payment to the Subordinated Notes, (ii) with respect to any junior subordinated debentures of the Company (underlying the outstanding trust preferred securities) described in 

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Section 4(a)(D) above to which this Subordinated Note shall be senior, or (iii) on account of any shares of capital stock of the Company.

(c)If there shall have occurred and be continuing (i) a default in any payment with respect to any Senior Indebtedness or (ii) an event of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until such payment default or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made by the Company with respect to the Subordinated Notes.  The provisions of this paragraph shall not apply to any payment with respect to which the immediately preceding paragraph of this Section 4 (Subordination) would be applicable.

(d)Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes. Each Holder, by its acceptance hereof, further acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration for each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Subordinated Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold or in continuing to hold such Senior Indebtedness.

5.Redemption.

(a)The Company may, at its option, on any Interest Payment Date on or after June 30, 2031, redeem this Subordinated Note, in whole or in part, without premium or penalty, but in all cases in a principal amount with integral multiples of $1,000. In addition, the Company may redeem all, but not a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event. Any redemption of this Subordinated Note shall be subject to the prior approval of the Federal Reserve (or its designee) or any successor agency, and any other bank regulatory agency, to the extent such approval shall then be required by law, regulation or policy. This Subordinated Note is not subject to redemption at the option of the Holder. The Redemption Price with respect to any redemption permitted under this Subordinated Note will be equal to 100% of the principal amount of this Subordinated Note, or portion thereof, to be redeemed, plus accrued but unpaid interest, if any, thereon to, but excluding, the Redemption Date. “Tier 2 Capital Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Subordinated Note no longer qualifies as “Tier 2” Capital (as defined by the Federal Reserve) (or its then equivalent) as a result of a change in interpretation or application of law or regulation by any judicial, legislative or regulatory authority that becomes effective after the date of issuance of this Subordinated Note.  “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there is a material risk that interest payable by the Company on the Subordinated Notes is not, or within 120 calendar days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for U.S. federal income tax purposes.  “Investment Company Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Company is or, within 120 calendar days after the receipt of such opinion will be, required to register as an investment company pursuant to the Investment Company Act of 1940, as amended.

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(b)If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new note shall be issued representing the unredeemed portion without charge to the Holder thereof and (ii) such redemption shall be effected on a pro rata basis as to the Holders. For purposes of clarity, upon a partial redemption, a like percentage of the principal amount of every Subordinated Note held by every Holder shall be redeemed.

(c)In the case of any redemption of this Subordinated Note pursuant to this Section 5 (Redemption), the Company will give the Holder hereof notice of redemption, which notice shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than 30 nor more than 45 calendar days prior to the redemption date. If notice of redemption has been duly given and notwithstanding that any Subordinated Notes so called for redemption have not been surrendered for cancellation, on and after the Redemption Date interest shall cease to accrue on all Subordinated Notes (or portion thereof) so called for redemption, all Subordinated Notes (or portion thereof) so called for redemption shall no longer be deemed outstanding and all rights with respect to such Subordinated Notes shall forthwith on such Redemption Date cease and terminate (unless the Company shall default in the payment of the redemption price), except only the right of the Holder thereof to receive the amount payable on such redemption, without interest.

(d)This Subordinated Note is not subject to redemption at the option of the Holder of this Subordinated Note.

(e)The Company shall have the right to purchase any of the Subordinated Notes at any time in the open market, private transactions or otherwise as mutually agreed to by the Company and the Holder.  If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased Subordinated Notes.

6.Events of Default; Acceleration. If an Event of Default under subsection (a), (b) or (c) of this Section 6 occurs, then the principal amount of all of the then outstanding Subordinated Notes, and accrued and unpaid interest, if any, on all outstanding Subordinated Notes will become and be immediately due and payable without any declaration or other act on the part of the Holder, and the Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices.  Except as set forth in the preceding sentence, the Holder shall not have any right to accelerate the Stated Maturity Date of the Subordinated Notes or to otherwise make the principal of, and any accrued and unpaid interest on, the Subordinated Notes, immediately due and payable.  An “Event of Default” means any one of the following events (whatever the reason for such Event of Default and whether it will be voluntary or involuntary or be effected by operation of law or in accordance with any judgment, decree, or order of any court or any order, rule, or regulation of any administrative or governmental body):

(a)the entry by a court having jurisdiction in the premises of (i) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (ii) a decree or order adjudging the Company bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 90 consecutive days;

(b)the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any 

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other case or proceeding to be adjudicated as bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property or the taking of corporate action by the Company in furtherance of any such action;

(c)(i) the appointment by a competent government agency having primary regulatory authority over any Subsidiary that is organized as a banking organization under federal or state law and that represents 50% or more of the consolidated assets of the Company determined as of the date of the most recent audited financial statements of the Company (a “Major Constituent Bank”) under any applicable federal or state banking, insolvency or similar law now or hereafter in effect of a receiver of any such Major Constituent Bank, or (ii) the entry of a decree or order in any case or proceeding under any applicable federal or state banking, insolvency or other similar law now or hereafter in effect appointing any receiver of any Major Constituent Bank; or

(d)the failure of the Company to perform any other covenant or agreement on the part of the Company contained in this Subordinated Note, and the continuation of such failure for a period of thirty (30) consecutive calendar days after the date on which notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given, in the manner set forth in Section 20, to the Company by a Holder.

7.Failure to Make Payments. If the Company fails to make any payment of interest on this Subordinated Note when such interest becomes due and payable and such default continues for a period of 30 days, or if the Company fails to make any payment of the principal of this Subordinated Note when such principal becomes due and payable, the Holders may (if such principal or interest remains unpaid following delivery by such Holders of notice to the Company) institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law.  Any such failure by the Company to pay interest or principal as provided above shall constitute a “Payment Default.”

Upon the occurrence of an Event of Default or a Payment Default, until such Event of Default or Payment Default is cured by the Company or waived by the Holders in accordance with Section 14 and except as required by any federal or state Governmental Agency, the Company shall not (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock; (b) make any payment of principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of the Company’s indebtedness that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than (i) any dividends or distributions payable solely in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange 

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or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s or its Affiliate’s directors, officers or employees or any of the Company’s dividend reinvestment plans or employee stock purchase plans; or (vi) the grant or award of, the lapse of restrictions with respect to, or the issuance, acquisition or withholding of shares of any class of the Company’s common stock upon the exercise or settlement of (including the satisfaction of tax withholding obligations associated with) options, warrants, grants, awards or rights under any of the Company’s or its Affiliate’s stock option or equity incentive plans.

8.Affirmative Covenants of the Company.

(a)Notice of Certain Events.  To the extent permitted by applicable statute, rule or regulation, the Company shall provide written notice to the Holders of the occurrence of any of the following events promptly, but in no event later than 15 Business Days following the Company becoming aware of the occurrence of such event:

	
 
	
(i)
	
The Company or the Bank become less than “well-capitalized” as defined under the then applicable regulatory capital standards;

	
 
	
(ii)
	
The Company, or any of the Company’s Subsidiaries or any officer of the Company (in such capacity), becomes subject to any formal, written regulatory enforcement action (as defined by the applicable federal and state regulatory agency); or 

	
 
	
(iii)
	
There is a change in ownership of 25% or more of the outstanding securities of the Company entitled to vote for the election of directors.

(b)Payment of Principal and Interest.  The Company covenants and agrees for the benefit of the Holder that it will duly and punctually pay the principal of, and interest on, this Subordinated Note, in accordance with the terms hereof. 

(c)Maintenance of Office.  The Company will maintain an office or agency in Oklahoma City, Oklahoma where Subordinated Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated Notes may be served.

The Company may also from time to time designate one or more other offices or agencies where the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the State of Oklahoma.  The Company will give prompt written notice to the Holders of any such designation or rescission and of any change in the location of any such other office or agency.

(d)Corporate Existence.  The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i) the corporate existence of the Company; (ii) the existence (corporate or other) of each Subsidiary; and (iii) the rights (constituent governing documents and statutory), licenses and franchises of the Company and each of its Subsidiaries; provided, however, that the Company will not be required to preserve the existence (corporate or other) of any of its Subsidiaries or any such right, license or franchise of the Company or any of its Subsidiaries if the Board of Directors of the Company determines that the preservation thereof is 

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no longer desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole and that the loss thereof will not be disadvantageous in any material respect to the Holders.

(e)Maintenance of Properties. The Company will, and will cause each Subsidiary to, cause all its material properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order, ordinary wear and tear excepted, and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 8(e) will prevent the Company or any subsidiary from discontinuing the operation and maintenance of any of their respective material properties if such discontinuance is, in the reasonable judgment of the Board of Directors of the Company or of any Subsidiary, as the case may be, desirable in the conduct of its business.

(f)Tier 2 Capital.  Whether or not the Company is subject to consolidated capital requirements under applicable regulations of the Federal Reserve, if all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five years immediately preceding the Stated Maturity Date, the Company will promptly, but in no event later than 15 Business Days following the Company becoming aware of the occurrence of such event, notify the Holder, and thereafter the Company and the Holder will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing in this Section 8(f) shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event or other rights to redeem the Subordinated Notes as provided in Section 5.

(g)Compliance with Laws. The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or its properties, except for such noncompliance that would not reasonably be expected to result in a Material Adverse Effect on the Company taken as a whole.

(h)Taxes and Assessments. The Company shall punctually pay and discharge all material taxes, assessments, and other governmental charges or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental charges need be paid if they are being contested in good faith by the Company.

(i)Limitation on Dividends. The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company if the Company is not “well capitalized” for regulatory purposes immediately prior to the declaration of such dividend or distribution, except for dividends payable solely in shares of common stock of the Company.

(j)Company Statement as to Compliance.  The Company will deliver to the Holders, upon request, which request shall not be made before the date that is 120 days after the end of each fiscal year, an Officers’ Certificate covering the preceding calendar year, stating whether or not, to the best of his or her knowledge, the Company is in default in the performance and observance of any of the terms, provisions and conditions of the Note Purchase Agreement and this Subordinated Note (without regard to notice requirements or periods of grace) and if the Company will be in 

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default, specifying all such defaults and the nature and status thereof of which he or she may have knowledge.

(k)Financial Statements.

	
 
	
(i)
	
Upon request, which request shall not be made before the date that is 45 days after the end of each quarterly period, as applicable, for which the Company has not submitted a Consolidated Financial Statements for Holding Companies Reporting Form FR Y-9C to the Federal Reserve (or equivalent applicable Federal Reserve form) or otherwise made publicly available its consolidated financial statements for such period, the Company shall provide the Holders with a copy of the Company’s unaudited parent company only balance sheet and statement of income (loss) for and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice. Quarterly financial statements, if required herein, shall be unaudited and need not comply with GAAP.

	
 
	
(ii)
	
Upon request, which request shall not be made before the date that is 120 days after the end of each fiscal year, the Company shall provide the Holders with copies of the Company’s audited financial statements consisting of the consolidated balance sheet of the Company as of the fiscal year end and the related statements of income (loss) and retained earnings, stockholders’ equity, prepared in accordance with GAAP applied on a consistent basis throughout the period involved.

9.Merger or Sale of Assets.  The Company shall not merge into another entity, effect a Change in Bank Control or convey, transfer or lease substantially all of its properties and assets to any person, unless:

(a)the continuing entity into which the Company is merged or the person which acquires by conveyance or transfer or which leases all or substantially all of the properties and assets of the Company shall be a corporation, association or other legal entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; provided, however, that no express assumption shall be required by any successor by merger to the Company to the extent such legal successor assumes the Company’s obligations hereunder by operation of law; and 

(b)immediately after giving effect to such transaction, no Event of Default or Payment Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing.

“Change in Bank Control” means the sale, transfer, lease or conveyance by the Company, or an issuance of equity securities by the Company’s wholly-owned subsidiary, BancFirst (the “Bank”), other than to the Company, in either case resulting in ownership by the Company of less than 80% of the Bank.

10.Denominations, Transfer, Exchange.  The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof. The transfer of this Subordinated Note may be registered and this Subordinated Note may be exchanged as provided in the Note Purchase Agreement. No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this 

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Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Holder requesting such transfer or exchange.  Upon surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $100,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested by the Holder.  Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein (and such other documents reasonably requested by the Company), duly executed by the Holder or its attorney duly authorized in writing, with such tax identification number (including, without limitation, an appropriate and properly executed Internal Revenue Service Form W-9 or appropriate type of Form W-8) or other information for each Person in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as the Company may reasonably request to comply with applicable law.  No exchange or registration of transfer of this Subordinated Note shall be made on or after (a) the 15th day immediately preceding the Stated Maturity Date, or (b) the due delivery of notice of redemption.

11.Charges and Transfer Taxes.  No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Holder requesting such transfer or exchange.

12.Payment Procedures.  The Company will act as the initial Paying Agent and Registrar.  The Company may appoint a new or change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity.  Payment of the principal and interest payable on the Stated Maturity Date will be made by check, or by Automated Clearing House (ACH) transfer or by wire transfer in immediately available funds to a bank account in the U.S. designated by the Holder if such Holder shall have previously provided wire instructions to the Company (or provided that the Paying Agent will have received written notice of such account designation at least five Business Days prior to the date of such payment), upon presentation and surrender of this Subordinated Note to the Paying Agent, or at such other place or places as the Company or the Paying Agent shall designate by notice to the Holders, provided that this Subordinated Note is presented to the Paying Agent in time for the Paying Agent to make such payments in such funds in accordance with its normal procedures.  Payments of interest (other than interest payable on the Stated Maturity Date) shall be made on each Interest Payment Date by wire transfer in immediately available funds (provided that the Paying Agent will have received written notice of such account designation at least five Business Days prior to the date of such payment) or check mailed to the registered Holder, as such person’s address appears on the Subordinated Note Register.  Interest payable on any Interest Payment Date shall be payable to the Holder in whose name this Subordinated Note is registered at the close of business on the 15th calendar day prior to the applicable Interest Payment Date, without regard to whether such date is a Business Day (such date being referred to herein as the “Regular Record Date”), except that interest not paid on the Interest Payment Date, if any, will be paid to the Holder in whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a “Special Record Date”), notice of which shall be given to the Holder not less than 10 calendar days prior to such Special Record Date.  (The Regular Record Date and Special Record Date are referred to herein collectively as the “Record Dates”). To the extent permitted by applicable law, interest 

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shall accrue, at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this Subordinated Note not paid when due.  All payments on this Subordinated Note shall be applied first against interest due hereunder; and then against principal due hereunder.  The Holder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes.  In the event that the Holder receives payments in excess of its pro rata share of the Company’s payments to the Holders of all of the Subordinated Notes, then the Holder shall hold in trust all such excess payments for the benefit of the Holders of the other Subordinated Notes and shall pay such amounts held in trust to such other Holders upon demand by such Holders.

13.Persons Deemed Owners.  The Company, Paying Agent and Registrar, and any other agent of the Company, may treat the Person in whose name this Subordinated Note is registered as the owner hereof as set forth in the Subordinated Note Register for all purposes, whether or not this Subordinated Note is overdue, and neither the Company, Paying Agent nor Registrar, nor any such other agent, will be affected by notice to the contrary.

14.Amendments; Waivers.

(a)The Note Purchase Agreement permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Subordinated Notes at any time by the Company and the Holders of a majority in principal amount of the then outstanding Subordinated Notes. The Note Purchase Agreement also contains provisions permitting the Holders of specified percentages in principal amount of the then outstanding Subordinated Notes, on behalf of the holders of all Subordinated Notes, to waive past defaults under the Note Purchase Agreement and their consequences. Any such consent or waiver by the Holder of this Subordinated Note will be conclusive and binding upon such Holder and upon all future holders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note. Any insured depository institution which shall be a Holder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.

(b)No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except with the consent of the Holders holding not less than more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent of each Holder of an affected Subordinated Note, no such amendment or waiver may:  (i) reduce the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note; (iv) change the currency in which payment of the obligations of the Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of the Subordinated Notes, (vi) make any changes to Section 6 (Events of Default; Acceleration) or Section 14 (Amendments; Waivers) of the Subordinated Notes that adversely affects the rights of any Holder; or (vii) disproportionately affect any of the Holders of the then outstanding Subordinated Notes.  Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent of the Holders to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely 

A-18

affect the rights of any Holder.  No failure to exercise or delay in exercising, by any Holder, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law, except as restricted hereby.  The rights and remedies provided in this Subordinated Note are cumulative and not exclusive of any right or remedy provided by law or equity.  No notice or demand on the Company in any case shall, in itself, entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Holders to any other or further action in any circumstances without notice or demand.  No consent or waiver, expressed or implied, by the Holders to or of any breach or default by the Company in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of the Company hereunder.  Failure on the part of the Holders to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Holders of their rights hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.

15.Impairment.  No reference herein to the Note Purchase Agreement and no provision of this Subordinated Note or of the Note Purchase Agreement will alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest of this Subordinated Note at the Stated Maturity Date.

16.No Sinking Fund; No Convertibility.  This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any Subsidiary.

17.No Recourse Against Others.  No recourse under or upon any obligation, covenant or agreement contained in the Note Purchase Agreement or in this Subordinated Note, or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee, officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company or any predecessor or successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Subordinated Note by the Holder and as part of the consideration for the issuance of this Subordinated Note.

18.Further Issuances.  The Company may, without the consent of the Holders, create and issue additional notes having the same terms and conditions of the Subordinated Notes (except for the date of issuance and issue price) so that such further notes shall be consolidated and form a single series with the Subordinated Notes.

19.Abbreviations.  Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gifts to Minors Act). Additional abbreviations may also be used though not in the above list.

20.Notices.  All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at P.O. Box 26788 (73126-0788), 100 N. Broadway, 2nd Floor (73102), Oklahoma City, Oklahoma, Attention: David R. Harlow, President and Chief Executive Officer, or to such other address as the Company may notify to the Holders provided that no change in address of the Company shall be effective until five Business Days after being given to the Holders. All notices to the Holders under this Subordinated Note shall be in writing and addressed to the Holders as set forth on their respective signature pages to the Note Purchase Agreement, or to such other address as a Holder may notify to the 

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Company provided that no change in address of a Holder shall be effective until five Business Days after being given to the Company. Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, three Business Days after it shall have been deposited in the United States mails as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier (provided next business day delivery was requested).

21.Successors and Assigns.  This Subordinated Note shall be binding upon the Company and inure to the benefit of the Company and the Holder and their respective successors and permitted assigns.  The Holder may assign all, or any part of, or any interest in, the Holder’s rights and benefits hereunder only to the extent and in the manner permitted by the terms of this Note, the Purchase Agreement, and under applicable securities laws and regulations.  To the extent of any such assignment, such assignee shall have the same rights and benefits against the Company and shall agree to be bound by and to comply with the terms and conditions of the Purchase Agreement as it would have had if it were the Holder hereunder.

22.Governing Law; Jurisdiction; Interpretation.  THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF OKLAHOMA AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OKLAHOMA WITHOUT GIVING EFFECT TO ANY LAWS OR PRINCIPLES OF CONFLICT OF LAWS THAT WOULD APPLY THE LAWS OF A DIFFERENT JURISDICTION.  THE COMPANY AND HOLDERS OF THE SUBORDINATED NOTES IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN OKLAHOMA COUNTY, OKLAHOMA IN ANY ACTION ARISING OUT OF OR RELATING TO THE SUBORDINATED NOTES. THIS SUBORDINATED NOTE IS INTENDED TO MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.

[Signature page follows]

 

 

A-20

 

IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly executed.

 

	
 
	
BancFirst Corporation

 

 

	
 
	
 
	
 
	
 

	
 
	
By: 

Name:David R. Harlow

Title:President and Chief Executive Officer 

	
 

 

 

A-21

 

 

ASSIGNMENT FORM

 

To assign this Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:

 

 

 

(Print or type assignee’s name, address and zip code)

 

 

 

(Insert assignee’s social security or tax I.D. No.)

 

and irrevocably appoint _______________________ agent to transfer this Subordinated Note on the books of the Company.  The agent may substitute another to act for him.

 

	
Date:
	
 
	
 
	
Your signature:
	
 

	
 
	
 
	
 
	
(Sign exactly as your name appears on the face of this Subordinated Note)

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
Tax Identification No:
	
 

 

	
Signature Guarantee:
	
 

(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).

The undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is / is not] an Affiliate of the Company. “Affiliate” means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates. “Person” means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an association, a trust, an unincorporated organization, a government or any department or agency thereof or any other entity or organization.

In connection with any transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later of the date of original issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned by the Company or any Affiliate of the Company, the undersigned confirms that this Subordinated Note is being:

CHECK ONE BOX BELOW:

☐(1)acquired for the undersigned’s own account, without transfer;

☐(2)transferred to the Company;

	
☐
	
(3)transferred in accordance and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”);

☐(4)transferred under an effective registration statement under the Securities Act;

	
☐
	
(5)transferred in accordance with and in compliance with Regulation S under the Securities Act;

A-22

 

	
☐
	
(6)transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) or an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), that has furnished a signed letter containing certain representations and agreements; or

	
☐
	
(7)transferred in accordance with another available exemption from the registration requirements of the Securities Act.

Unless one of the boxes is checked, the Paying Agent will refuse to register this Subordinated Note in the name of any person other than the registered Holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Paying Agent may require, prior to registering any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information as the Paying Agent may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.

	
 
	
Signature:
	
 

 

	
Signature Guarantee:
	
 

(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-15).

 

TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.

 

The undersigned represents and warrants that it is purchasing this Subordinated Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

	
Date:
	
 
	
 
	
Signature:
	
 

 

 

 

A-23

 

 

 

EXHIBIT B

OPINION OF COUNSEL

1.The Company (a) is a corporation existing in good standing under the laws of Oklahoma, and (b) has the corporate power and authority to carry on its business as such business is currently conducted and to own, lease and operate its properties and assets.

2.Each of BancFirst and Pegasus Bank (a) is a state-chartered banking corporation existing in good standing under the laws of Oklahoma and Texas, respectively, and (b) has the corporate and banking power and authority to carry on its business as such business is currently conducted and to own, lease and operate its respective properties and assets.

3.The Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended.

4.The Bank is an insured depository institution under the Federal Deposit Insurance Act, 12 U.S.C. 1811-1831y.

5.The Company has the corporate power and authority to execute, deliver and perform its obligations under the Transaction Documents to which it is a party and to consummate the transactions contemplated by the Transaction Documents.  

6.The Subordinated Notes have been duly authorized for issuance and executed by the Company.  When the Subordinated Notes are issued and delivered to the Purchasers against payment therefor as contemplated by the Subordinated Note Purchase Agreements, (i) none of the Subordinated Notes will be issued in violation of any preemptive or other similar rights of any securityholder of the Company or the Bank, and (ii) the Subordinated Notes will constitute legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with their terms.

7.The Subordinated Note Purchase Agreements have been duly and validly authorized, executed and delivered by the Company.  The Subordinated Note Purchase Agreements constitute legal, valid, and binding obligations of the Company, enforceable against the Company in accordance with their terms.

8.The execution and delivery by the Company of, and the performance by the Company of its agreements and obligations under, the Transaction Documents do not (i) to such counsel’s knowledge, violate any applicable provisions of the Oklahoma General Corporation Act or the Oklahoma Banking Code, (ii) to such counsel’s knowledge, violate any court order or judgment of any agency or court of the State of Oklahoma having jurisdiction over the Company that names the Company and is specifically directed to it and that is known to such counsel or (iii) violate the Charter or Bylaws.

9.Assuming the accuracy of the representations, warranties and covenants set forth in the Subordinated Note Purchase Agreements, the offer and sale of the Subordinated Notes in accordance with the terms of the Transaction Documents does not require registration under the Securities Act of 1933, as amended.

*  The opinion will be subject to customary limitations, qualifications, and carve-outs.

 

B-1

 

 

 

EXHIBIT C

RISK FACTORS

In these Risk Factors, the word “notes” refers to the Fixed-to-Floating Rate Subordinated Notes which are the subject of this offering, the word “the Company” refers to BancFirst Corporation (exclusive of its subsidiaries unless otherwise expressly stated or the context otherwise requires), and the word “the Banks” refers to BancFirst and Pegasus Bank, unless otherwise expressly stated or the context otherwise requires.  When these Risk Factors use the words “we,” “us,” and “our,” they refer to the Company and its subsidiaries (including the Banks) unless otherwise expressly stated or the context otherwise requires.  Terms capitalized but not otherwise defined in these Risk Factors have the meanings given to them in the notes.

An investment in the notes involves a number of risks. You should carefully consider the risks described in these Risk Factors, as well as the risks, uncertainties and assumptions discussed in our Annual Report on Form 10-K for the year ended December 31, 2020, and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which are incorporated herein by reference, and which may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. You should also note, however, that our business, financial condition, results of operations and prospects may have changed since the respective dates of those reports.  These Risk Factors and those incorporated herein by reference do not describe all of those risks. Our business, financial condition, and results of operations could be materially adversely affected by any of these risks. The value of the notes could decline due to any of these risks, and you may lose all or part of your investment.  The order of these Risk Factors does not reflect their relative importance or likelihood of occurrence.

Risks Related to an Investment in the Notes

The amount of interest payable on the notes will be fixed from and including June 17, 2021 to but excluding June 30, 2031.

During the fixed rate period, the notes will bear interest at an initial rate of 3.50% per annum.  The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, and increases in prevailing interest rates could have an adverse effect on the value of the notes.

The amount of interest payable on the notes will vary from and including June 30, 2031.

During the floating rate period, the notes will bear interest at a floating rate per annum equal to Three-Month Term SOFR plus a spread of 229 basis points, or such other rate as determined pursuant to the terms of the note, subject to certain provisions of the notes.  The per annum interest rate that is determined at the reference time for each interest period will apply to the entire quarterly interest period following such determination date even if the Benchmark rate increases during that period.

Floating rate notes bear additional significant risks not associated with fixed rate debt securities.  These risks include fluctuation of the interest rates and the possibility that you will receive an amount of interest that is lower than expected.  We have no control over a number of matters, including economic, financial, and political events, that are important in determining the existence, magnitude, and longevity of market volatility and other risks and their impact on the value of, or payments made on, the notes.  In recent years, interest rates have been volatile, and that volatility may be expected in the future.

You should not rely on indicative or historical data concerning SOFR.

The interest rate during the floating rate period will be determined using Three-Month Term SOFR (unless a Benchmark Transition Event and its related Benchmark Replacement Date occur with respect to Three-Month Term SOFR, in which case the rate of interest will be based on the next-available Benchmark Replacement).  In the following discussion of SOFR, when we refer to the notes, we mean the notes at any time during the floating rate period when the interest rate on the notes is or will be determined based on SOFR, including Three-Month Term SOFR.

C-1

 

SOFR is published by the FRBNY and is intended to be a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities.  FRBNY reports that SOFR includes all trades in the Broad General Collateral Rate, plus bilateral U.S. Treasury repurchase agreement (“repo”) transactions cleared through the delivery‐versus-payment service offered by the Fixed Income Clearing Corporation (the “FICC”), a subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). SOFR is filtered by FRBNY to remove a portion of the foregoing transactions considered to be “specials.” According to FRBNY, “specials” are repos for specific-issue collateral which take place at cash-lending rates below those for general collateral repos because cash providers are willing to accept a lesser return on their cash in order to obtain a particular security.

FRBNY reports that SOFR is calculated as a volume-weighted median of transaction‐level tri-party repo data collected from The Bank of New York Mellon, which currently acts as the clearing bank for the tri-party repo market, as well as General Collateral Finance Repo transaction data and data on bilateral U.S. Treasury repo transactions cleared through the FICC’s delivery‐versus-payment service. FRBNY states that it obtains information from DTCC Solutions LLC, an affiliate of DTCC.

FRBNY publishes SOFR daily on its website at https://apps.newyorkfed.org/markets/autorates/sofr. FRBNY states on its publication page for SOFR that use of SOFR is subject to important disclaimers, limitations and indemnification obligations, including that FRBNY may alter the methods of calculation, publication schedule, rate revision practices or availability of SOFR at any time without notice.

FRBNY started publishing SOFR in April 2018.  FRBNY has also started publishing historical indicative SOFRs dating back to 2014, although such historical indicative data inherently involves assumptions, estimates and approximations.  Investors should not rely on such historical indicative data or on any historical changes or trends in SOFR as an indicator of the future performance of SOFR.  Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no relation to the historical actual or historical indicative data.  In addition, the return on and value of the notes may fluctuate more than floating rate securities that are linked to less volatile rates.

Changes in SOFR could adversely affect holders of the notes.

Because SOFR is published by FRBNY based on data received from other sources, we have no control over its determination, calculation or publication.  There is no assurance that SOFR will not be discontinued or fundamentally altered in a manner that is materially adverse to the interests of investors in the notes.  If the manner in which SOFR is calculated is changed, that change may result in a reduction in the amount of interest that accrues on the notes during the floating rate period, which may adversely affect the value of the notes.  Further, if the Benchmark rate on the notes during the floating rate period on any determination date declines to zero or becomes negative, interest will only accrue on the notes at a rate equal to 229 basis points with respect to that interest period.  In addition, once the Benchmark rate for the notes for each interest period during the floating rate period is determined by the calculation agent on the determination date, interest on the notes shall accrue at such Benchmark rate for the applicable interest period and will not be subject to change during such interest period. There is no assurance that changes in SOFR could not have a material adverse effect on the yield on, value of and market for the notes.

SOFR differs fundamentally from, and may not be a comparable substitute for, U.S. dollar LIBOR.

In June 2017, the ARRC convened by the Federal Reserve and FRBNY announced SOFR as its recommended alternative to LIBOR for U.S. dollar obligations.  However, because SOFR is a broad U.S. Treasury repo financing rate that represents overnight secured funding transactions, it differs fundamentally from LIBOR.  For example, SOFR is a secured overnight rate, while LIBOR is an unsecured rate that represents interbank funding over different maturities. In addition, because SOFR is a transaction-based rate, it is backward-looking, whereas LIBOR is forward-looking.  Because of these and other differences, there is no assurance that SOFR will perform in the same way as LIBOR would have performed at any time, and there is no guarantee that it is a comparable substitute for LIBOR.

C-2

 

Any failure of SOFR to gain market acceptance could adversely affect holders of the notes.

SOFR may fail to gain market acceptance. SOFR was developed for use in certain U.S. dollar derivatives and other financial contracts as an alternative to LIBOR in part because it is considered to be a good representation of general funding conditions in the overnight U.S. Treasury repo market.  However, as a rate based on transactions secured by U.S. Treasury securities, it does not measure bank-specific credit risk and, as a result, is less likely to correlate with the unsecured short-term funding costs of banks.  This may mean that market participants would not consider SOFR to be a comparable substitute or successor for all of the purposes for which LIBOR historically has been used (including, without limitation, as a representation of the unsecured short-term funding costs of banks), which may, in turn, lessen its market acceptance.  Any failure of SOFR to gain market acceptance could adversely affect the yield on, value of and market for the notes.

The interest rate for the notes during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR.

Under the terms of the notes, the interest rate on the notes for each interest period during the applicable floating rate period will be based on Three-Month Term SOFR, a forward-looking term rate for a tenor of three months that will be based on SOFR.  Three-Month Term SOFR does not currently exist and is currently being developed under the sponsorship of the ARRC.  There is no assurance that the development of Three-Month Term SOFR, or any other forward-looking term rate based on SOFR, will be completed.  Uncertainty surrounding the development of forward‐looking term rates based on SOFR could have a material adverse effect on the return on, value of and market for the notes.  If, at the commencement of the applicable floating rate period for the notes, the relevant governmental body has not selected or recommended a forward-looking term rate for a tenor of three months based on SOFR, the development of a forward-looking term rate for a tenor of three months based on SOFR that has been recommended or selected by the relevant governmental body is not complete or we determine that the use of a forward-looking rate for a tenor of three months based on SOFR is not administratively feasible, then the next-available Benchmark Replacement under the benchmark transition provisions will be used to determine the interest rate on the notes during the applicable floating rate period (unless a Benchmark Transition Event and its related Benchmark Replacement Date occur with respect to that next-available Benchmark Replacement).

Under the terms of the notes, we are expressly authorized to make determinations, decisions or elections with respect to technical, administrative or operational matters that we decide are appropriate to reflect the use of Three-Month Term SOFR as the interest rate basis for the notes in a manner substantially consistent with market practice, which are defined in the terms of the notes as “Three-Month Term SOFR Conventions.”  For example, assuming that a form of Three-Month Term SOFR is developed, it is not currently known how or by whom rates for Three-Month Term SOFR will be published.  Accordingly, we will need to determine and to instruct the calculation agent concerning the manner and timing for its determination of the applicable Three-Month Term SOFR during the applicable floating rate period.  Our determination and implementation of any Three-Month Term SOFR Conventions could result in adverse consequences to the amount of interest that accrues on the notes during the applicable floating rate period, which could adversely affect the return on, value of and market for the notes.

Any Benchmark Replacement may not be the economic equivalent of Three-Month Term SOFR. 

Under the benchmark transition provisions of the notes, if the calculation agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, then the floating interest rate on the notes for each interest period during the floating rate period will be determined using the next-available Benchmark Replacement (which may include a related Benchmark Replacement Adjustment).  However, the Benchmark Replacement may not be the economic equivalent of Three-Month Term SOFR.  For example, Compounded SOFR, the first-available Benchmark Replacement, is the compounded average of the daily SOFR calculated in arrears, while Three-Month Term SOFR is intended to be a forward-looking rate with a tenor of three months.  In addition, very limited market precedent exists for securities that use Compounded SOFR as the rate basis, and the method for calculating Compounded SOFR in those precedents varies.  Further, the ISDA Fallback Rate, which is another Benchmark Replacement, has not yet been established and may change over time.

C-3

 

The implementation of Benchmark Replacement Conforming Changes could adversely affect holders of the notes.

Under the benchmark transition provisions of the notes, if Three-Month Term SOFR has been discontinued or if a particular Benchmark Replacement or Benchmark Replacement Adjustment cannot be determined, then the next-available Benchmark Replacement or Benchmark Replacement Adjustment will apply.  These replacement rates and adjustments may be selected or formulated by: (i) the relevant governmental body (such as the ARRC); (ii) ISDA; or (iii) in certain circumstances, us.  In addition, the benchmark transition provisions expressly authorize us to make certain changes, which are defined in the terms of the notes as “Benchmark Replacement Conforming Changes,” with respect to, among other things, the determination of interest periods, and the timing and frequency of determining rates and making payments of interest.  The application of a Benchmark Replacement and Benchmark Replacement Adjustment, and any implementation of Benchmark Replacement Conforming Changes, could result in adverse consequences to the amount of interest that accrues on the notes during any interest period during the floating rate period, which could adversely affect the yield on, value of and market for the notes.  Further, there is no assurance that the characteristics of any Benchmark Replacement will be similar to the then-current Benchmark rate that it is replacing, or that any Benchmark Replacement will produce the economic equivalent of the then-current Benchmark rate that it is replacing.

Any market for the SOFR-linked notes may be illiquid or unpredictable.

Since SOFR is a relatively new market index, SOFR-linked debt securities likely will have no established trading market when issued, and an established trading market may never develop or may not be very liquid.  Market terms for debt securities indexed to SOFR, such as the spread over the index reflected in interest rate provisions, may evolve over time, and trading prices of the notes may be lower than those of later-issued SOFR-linked debt securities as a result.  Similarly, if SOFR does not prove to be widely used in securities similar to the notes, the trading price of the notes may be lower than those of debt securities linked to such rates that are more widely used.  Debt securities indexed to SOFR (as the notes will be) may not be able to be sold at all or may not be able to be sold at prices that will provide a yield comparable to similar investments that have a developed secondary market, and may consequently suffer from increased pricing volatility and market risk.  The manner of adoption or application of reference rates based on SOFR in the bond and equity markets may differ materially compared with the application and adoption of SOFR in other markets, such as the derivatives and loan markets.  You should carefully consider how any potential inconsistencies between the adoption of reference rates based on SOFR across these markets may impact any hedging or other financial arrangements which you may put in place in connection with any acquisition, holding or disposal of the notes.

We will act as the initial calculation agent and may have economic interests adverse to the interests of the holders of the notes.

The calculation agent will determine the interest rate during the floating rate period. We will act as the initial calculation agent for the notes.  Any exercise of discretion by us under the terms of the notes, including, without limitation, any discretion exercised by us acting as calculation agent, could present a conflict of interest.  In making the required determinations, decisions and elections, we may have economic interests that are adverse to the interests of the holders of the notes, and those determinations, decisions or elections could have a material adverse effect on the yield on, value of and market for the notes.  Any determination by us, as the calculation agent or otherwise, will be conclusive and binding absent manifest error.

The Company’s obligations under the notes will be unsecured and will be subordinated in right of payment to certain obligations of the Company.

The notes will be expressly subordinated in right of payment to all of the Company’s creditors, including both secured and unsecured or general creditors, except those specifically designated as ranking on a parity with, or subordinated to, the notes and existing and future Senior Indebtedness.  As a result, in the event of the liquidation of the Company, if holders of the notes receive any payments, they may receive less, ratably, than other creditors of the Company.

C-4

 

The notes will be obligations of the Company and not obligations of either Bank and will be structurally subordinated to the debt of the Banks (which will not guarantee the notes).

The right of the Company to participate in any distribution of assets of the Company’s subsidiaries, including the Banks, upon their liquidation or otherwise, and thus your ability as a holder of notes to benefit indirectly from such distribution, will be subject to the prior claims of depositors and creditors of such subsidiaries, except to the extent that any of the claims of the Company as a creditor of a subsidiary may be recognized.  The notes will not be guaranteed by any subsidiary of the Company, including the Banks.  As a result, the notes will be structurally subordinated to all existing and future liabilities and obligations of those subsidiaries, including without limitation the Banks’ depositors, obligations to general creditors and liabilities arising during the ordinary course of business or otherwise.  Subsidiaries of the Company may incur additional debt and liabilities in the future, all of which would rank structurally senior to the notes.

If the Company is in default on its obligations to pay its Senior Indebtedness, it will not be able to make payments on the notes.

The Company’s obligations under the notes are unsecured and rank junior to the following:

	
 
	
•
	
all indebtedness and obligations of, or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by securities, notes, debentures, bonds or similar instruments issued by the Company, including all obligations to the Company’s general and secured creditors and obligations incurred in connection with the acquisition of property, assets or businesses;

	
 
	
•
	
all lease obligations of the Company;

	
 
	
•
	
all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any conditional sale or title retention agreement (but excluding trade accounts payable in the ordinary course of business);

	
 
	
•
	
all obligations of the Company arising from off‐balance sheet guarantees and direct credit substitutes, including obligations in respect of letters of credit, bankers’ acceptances, security purchase facilities and similar credit transactions;

	
 
	
•
	
all obligations of the Company associated with derivative products, including obligations in respect of interest rate swap, cap or other agreements, interest rate future or options contracts, currency swap agreements, currency future or option contracts and other similar agreements;

	
 
	
•
	
all obligations that are similar to those described above of other persons for a payment of which the Company is responsible or liable as an obligor, guarantor, or otherwise;

	
 
	
•
	
all obligations of the types described above of other persons secured by a lien on any property or asset of the Company; and

	
 
	
•
	
any deferrals, renewals or extensions of any obligation of the type described above;

unless, in any case in the instrument creating or evidencing any such indebtedness or obligation, or pursuant to which the same is outstanding, it is expressly provided that such indebtedness or obligation is not superior in right of payment to the notes or to other debt that is pari passu with or subordinate to the notes.

If the Company defaults on payments under any of these obligations that are senior to the notes, or if any of these senior obligations are accelerated or any judicial proceeding with respect to a default is pending, the Company will not be able to make payments on the notes, unless the Company cures the default.  If the Company liquidates, goes bankrupt or dissolves, the Company would be able to pay under the notes only after it has paid in full all of its liabilities that are senior to the notes.

As of March 31, 2021, on a consolidated basis, the Company’s outstanding indebtedness and other liabilities totaled approximately $9.45 billion, which included approximately $9.37 billion of deposits, approximately $3.75 million of short-term borrowing, and approximately $52.14 million accrued interest payable 

C-5

 

and other liabilities, all of which will rank structurally senior to the notes, and approximately $26.80 million of outstanding trust preferred subordinated indebtedness, which will rank junior to the notes.

Government regulation may affect the priority of the notes in the case of a bankruptcy or liquidation.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) created a new resolution regime known as the “orderly liquidation authority,” which may apply to the Company as a bank holding company.  Under the orderly liquidation authority, the FDIC may be appointed as receiver for an entity for purposes of liquidating the entity if the Secretary of the Treasury determines that the entity is in severe financial distress.

If the FDIC is appointed as receiver under the orderly liquidation authority, then the Dodd-Frank Act, rather than applicable insolvency laws, would determine the powers of the receiver, and the rights and obligations of creditors and other parties who have dealt with the institution.  There are substantial differences in the rights of creditors under the orderly liquidation authority compared to those under the U.S. Bankruptcy Code, including the right of the FDIC to disregard the strict priority of creditor claims in some circumstances, the use of an administrative claims procedure to determine creditors’ claims (as opposed to the judicial procedure utilized in bankruptcy proceedings) and the right of the FDIC to transfer claims to a “bridge” entity.  As a consequence of the rights of the FDIC under the orderly liquidation authority, the holders of the notes may be fully subordinated to interests held by the U.S. government if we enter into a receivership, insolvency, liquidation or similar proceeding.  While the FDIC has issued regulations to implement the orderly liquidation authority, not all aspects of how the FDIC might exercise this authority are known and additional rulemakings are likely.  Further, it is uncertain how the FDIC might exercise its discretion under the orderly liquidation authority in a particular case.

The notes have early redemption features.

The Company may, at its option, beginning with the interest payment date of June 30, 2031 and on any interest payment date thereafter, redeem the notes, in whole or in part, upon not fewer than 30 nor greater than 45 days’ notice to holders, at a redemption price equal to 100% of the principal amount of the notes to be redeemed plus accrued and unpaid interest to, but not including, the date of redemption. This option of redemption is subject to the approval of the Federal Reserve, or any successor governmental agency or authority having jurisdiction over bank holding companies or financial holding companies, to the extent then required under applicable laws or regulations, including regulations regarding capital adequacy.

In addition, at any time any notes remain outstanding, the Company may, upon not fewer than 30 nor greater than 45 days’ notice to holders, redeem all (but not less than all) of the notes at a redemption price equal to 100% of the principal amount of the notes being redeemed (plus accrued and unpaid interest to, but not including, the early redemption date) if (i) the Company receives an opinion of counsel to the effect that there is a material risk that the notes no longer qualify as “Tier 2” capital (as defined by the Federal Reserve) (or its then equivalent) as a result of a change in interpretation or application of law or regulation, (ii) the Company receives an opinion of counsel to the effect that as a result of any amendment to, or change in, the tax laws that there is a material risk that interest payable on the notes is not deductible for tax purposes or (iii) the Company receives an opinion of counsel to the effect that there is a material risk that the Company is required to register as an investment company, subject, in each case, to the prior approval of the Federal Reserve, to the extent then required under the rules of the Federal Reserve. There is no sinking fund for the notes.

If the notes are redeemed, you may be required to reinvest your principal at a time when you may not be able to earn a return that is as high as you were earning on the notes.

The notes will not restrict the Company’s or any of its subsidiaries’ ability to incur additional debt, grant or incur security interests on its assets, sell or otherwise dispose of assets, pay dividends or repurchase shares of its securities.

The notes do not limit the amount of additional indebtedness the Company or its subsidiaries may incur or the amount of other obligations ranking senior or equal to the indebtedness evidenced by the notes that the Company may incur.  If the Company incurs additional debt or liabilities, its ability to pay its obligations on the notes could be 

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adversely affected.  The Company and its subsidiaries may incur, from time to time, additional debt and other liabilities that may negatively impact those subsidiaries’ ability to make distributions or other payments to the Company.  In addition, the Company is not restricted under the notes from granting security interests over its assets, paying dividends or issuing or repurchasing its securities.

Holders of the notes will have limited rights if there is an event of default.

An event of default under the notes will occur, and the payment of principal of the notes may be accelerated, only in the case of certain bankruptcy, insolvency, reorganization or receivership events involving the Company or the Banks. Failure by the Company to pay any principal or interest on the notes, when due, will constitute an event of default and will trigger the right of the holders to institute judicial proceedings for the collection of any amounts due and unpaid if such failure continues beyond 15 days; however, such failure to pay will not result in acceleration of the notes.  In addition, the Federal Reserve may require that any prepayment (including prepayment as a result of acceleration as described above) of outstanding subordinated debt be made only with its prior approval. 

The notes will not be insured or guaranteed by the FDIC.

The notes will not be savings accounts, deposits or other obligations of the Company or its subsidiaries, including the Banks, and, accordingly, will not be insured or guaranteed by the FDIC, or any other governmental agency or instrumentality.

The Company’s access to funds from the Banks and other entities in which it has an investment may become limited, thereby restricting the Company’s ability to make payments on its obligations.

The Company is a separate and distinct legal entity from the Banks. The Company depends on dividends, distributions and other payments from the Banks and other entities in which it has an investment to fund payments on its obligations, including debt obligations such as the notes. The Banks are subject to laws that authorize regulatory bodies to block or reduce the flow of funds from the Banks to the Company. Under the Federal Deposit Insurance Act, insured depository institutions such as the Banks are prohibited from making capital distributions, including the payment of dividends, if the insured depository institutions are, or after making such distribution would become, “undercapitalized.” Payment of dividends by the Banks also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe or unsound banking practice. In addition, contractual or other restrictions may also limit the abilities of the Company’s subsidiaries to pay dividends or make distributions, loans or advances to the Company.

Because the Company has multiple bank subsidiaries, the Company may become subject to regulatory restrictions on its ability to accept dividends or service our debt if any one bank subsidiary becomes financially distressed.  The other bank subsidiary would also be liable to the FDIC for its losses should any one of our bank subsidiaries fail, causing a loss to the FDIC.  Moreover, pursuant to federal law and regulations promulgated by the Federal Reserve, a bank holding company is required to act as a source of financial and managerial strength to each of its banking subsidiaries and commit resources to their support, including the guarantee of capital plans of an undercapitalized bank subsidiary.  Such support may be required at times when a holding company may not otherwise be inclined to provide it.  As a result of the foregoing, the Company may be unable to pay the principal of, and accrued but unpaid interest on, the notes as those obligations become due. 

The Company may not be able to generate sufficient cash to service all of its debt, including the notes.

The Company’s ability to make scheduled payments of principal and interest, or to satisfy its obligations in respect of its debt or to refinance its debt, will depend on its future operating performance.  Prevailing economic conditions (including interest rates), regulatory constraints, including, among other things, limiting distributions to the Company from the Banks and required capital levels with respect to the Banks, and financial, business and other factors, many of which are beyond the Company’s control, will also affect the Company’s ability to meet these needs.  The Company may not be able to generate sufficient cash flows from operations or obtain future borrowings in an amount sufficient to enable the Company to pay its debt, or to fund its other liquidity needs.  The Company 

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may need to refinance all or a portion of its debt on or before maturity.  The Company may not be able to refinance any of its debt when needed on commercially reasonable terms or at all.

There is no established trading market for the notes which could make it more difficult for you to sell your notes and could adversely affect their price.

The notes constitute a new issue of securities for which no established trading market exists or is expected to develop. Further, there are limitations as to what persons or to which entities the notes may be sold or transferred that may limit their marketability.  Consequently, it may be difficult for you to sell your notes.  If the notes are traded after their initial issuance, they may trade at a discount to their original purchase price, depending upon:

	
 
	
•
	
the financial condition, results of operations and prospects of the Company;

	
 
	
•
	
prevailing interest rates;

	
 
	
•
	
the time remaining until the maturity of the notes;

	
 
	
•
	
the Company’s and its subsidiaries’ other existing and future liabilities, including Senior Indebtedness, deposits and other obligations;
	
 

	
 
	
•
	
the outstanding principal amount of the notes;

	
 
	
•
	
credit ratings assigned by rating agencies to the notes or the Company, if any; 

	
 
	
•
	
the market for similar securities; and

	
 
	
•
	
other factors beyond the control of the Company, including economic, financial, geopolitical, regulatory or judicial events that affect the Company or the financial markets generally (including the occurrence of market disruption events).
	
 

The notes will not be listed on any securities exchange.  We cannot assure you of the development or liquidity of any trading market for the notes following the offering.

Increased leverage as a result of this offering, or as a result of future debt incurred by the Company or its subsidiaries, may harm the financial condition and results of operations of the Company.

The level of indebtedness of the Company could have important consequences to you, because:

	
 
	
•
	
it could affect the Company’s ability to satisfy its financial obligations, including those relating to the notes;
	
 

	
 
	
•
	
a portion of cash flows from operations of the Company will be dedicated to interest and principal payments and may not be available for operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;
	
 

	
 
	
•
	
it may impair the ability of the Company to obtain additional financing in the future;
	
 

	
 
	
•
	
it may limit the flexibility of the Company in planning for, or reacting to, changes in business and industry; and
	
 

	
 
	
•
	
it may make the Company more vulnerable to downturns in business, industry or the economy in general.
	
 

The notes will not be issued pursuant to an indenture.

The Company has not entered into or qualified any trust indenture in connection with the notes.  The notes will be issued pursuant to one or more subordinated note purchase agreements and a paying agency and registrar agreement.  The paying agent under that agreement is not a fiduciary for the holders of the notes and is not required to enforce the rights of the holders of the notes, including the rights to receive principal and interest.

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The notes have not been registered under the Securities Act of 1933 (the “Securities Act”).

The notes have not been registered with the U.S. Securities and Exchange Commission (“SEC”) under the Securities Act.  The notes are being offered and sold in reliance upon an exemption from registration provided in Section 4(a)(2) of the Securities Act and Rule 506(b) issued thereunder.  Accordingly, the notes may not be offered or sold absent registration with the SEC or a valid exemption under the Securities Act, and are subject to certain transfer restrictions set forth in the notes. 

The Company may need to raise additional capital, and these funds may not be available on a timely basis or on acceptable terms.

The Company may need to raise additional capital and cannot be certain that it will be able to do so on acceptable terms, if at all.  Any debt financing, if available, may restrict its operations and any debt securities it may issue may have rights that are senior to holders of the notes.  There can be no guarantee that the Company will be able to raise additional capital when required or at all, or that such transactions will be on acceptable terms.  If the Company is unable to secure additional capital, it would need to significantly curtail or reorient its business activities and may be unable to sustain operations.

Neither the Company nor the notes are expected to be rated by any credit ratings agency.

If any credit rating is assigned in the future, such a rating would be an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in any such credit rating would generally affect the value of the notes. Agency ratings are not a recommendation to buy, sell or hold any security, and there can be no assurance that such ratings will be assigned or, if assigned, that such ratings would remain in effect for any given period of time or that such ratings would not be lowered, suspended or withdrawn entirely by the rating agencies, if, in each rating agency’s judgment, circumstances so warrant. Actual or anticipated changes or downgrades in credit ratings, including any announcement that ratings are under further review for a downgrade, could affect the value and liquidity of the notes and possibly increase our corporate borrowing costs.

Risks Related to Our Business

We operate in a rapidly changing economic, financial and regulatory environment that presents numerous risks, many of which are driven by factors that we cannot control or predict. The risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which are incorporated by reference into these Risk Factors, highlight some of these risks. You should read our Annual Report on Form 10-K and Quarterly Report on Form 10-Q, including the sections entitled “Risk Factors”.

 

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