Document:

EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE
AGREEMENT (this “Agreement”), dated as of December 30, 2017, is entered into by and among APPLIANCESMART
HOLDINGS LLC, a Nevada limited liability company (the “Buyer”), APPLIANCESMART, INC., a Minnesota corporation
(the “Company”), and APPLIANCE RECYCLING CENTERS OF AMERICA, INC., a Minnesota corporation (the “Seller”),
the sole stockholder of the Company.

 

R E C I T A L S

 

A. The Seller
owns all of the issued and outstanding capital stock of the Company; and

 

B. The Seller
desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, all of the issued and outstanding capital stock
of the Company, upon the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE,
in consideration of the foregoing and the premises and mutual covenants hereinafter contained, the parties hereto intending to
be legally bound, agree as follows:

 

Article
I

DEFINITIONS

 

Section 1.01.     Definitions.

 

Except as otherwise
expressly provided in this Agreement, the capitalized terms used in this Agreement shall have the meanings specified below and
shall be equally applicable to both the singular and plural forms:

 

“Affiliate”
as to a specified Person, means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled
by or is under common control with, the Person specified.

 

“Company
Business” means the sale of appliances at various retail locations.

 

“Contract”
shall mean any written or oral contract, note, bond, mortgage, indenture, lease, license, or other legally binding agreement, instrument,
commitment, guarantee, executory commitment, understanding or obligation.

 

“Encumbrances”
means any lien, security interest, mortgage, pledge, hypothecation, charge, preemptive right, voting trust, imposition, covenant,
condition, right of first refusal, easement or conditional sale or other title retention agreement or other restriction; provided,
however, that Encumbrances shall not include any Permitted Encumbrance or any Encumbrances arising under any of the Transaction
Documents.

 

“Equity
Securities” means: (a) in the case of a corporation, any and all shares of capital stock; (b) in the case of an association
or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital
stock; (c) in the case of a partnership or limited liability company, any and all partnership or membership interests (whether
general or limited); (d) in each case, any other interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person; and (e) in each case, any option or other right
to acquire, or securities or Indebtedness convertible into or exchangeable for, any of the foregoing.

 

 

 

 

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“GAAP”
means U.S. generally accepted accounting principles applied consistently by the Company throughout the periods covered thereby.

 

“Governmental
Authority” means any government, any governmental or quasi-governmental entity or municipality or political or other
subdivision thereof, department, commission, board, self-regulating authority, bureau, branch, authority, official, agency or instrumentality,
and any court, tribunal, arbitrator or judicial body, in each case, whether federal, state, city, county, local, provincial, foreign
or multi-national.

 

“Indebtedness”
means at a particular time, without duplication: (a) any indebtedness for borrowed money or issued in substitution for or exchange
of indebtedness for borrowed money; (b) any indebtedness evidenced by any note, bond, debenture or other debt security; (c) any
indebtedness for the deferred purchase price of property or services with respect to which a Person is liable, contingently or
otherwise, as obligor or otherwise (including trade payables and other current liabilities incurred in the ordinary course of business);
(d) any commitment by which a Person assures a creditor against loss (including contingent reimbursement obligations with respect
to letters of credit); (e) any indebtedness guaranteed in any manner by a Person (including guarantees in the form of an agreement
to repurchase or reimburse); (f) any obligations under capitalized leases with respect to which a Person is liable, contingently
or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations a Person assures a creditor against loss;
(g) any indebtedness secured by an Encumbrance on a Person’s assets; and (h) accrued interest to and including the Closing
Date in respect of any of the obligations described in the foregoing clauses (a) through (g) of this definition and
all premiums, penalties, charges, fees, expenses and other amounts due in connection with the payment and satisfaction in full
of such obligations.

 

“Inventory”
means the consumable inventory of the Company, wherever located, including, without limitation, all finished goods, work in process,
raw materials, spare parts and all other materials and supplies to be used or consumed by the Company in the Business.

 

“Liability”
means any direct or indirect indebtedness, liability, assessment, expense, claim, loss, damage, deficiency, obligation or responsibility,
known or unknown, disputed or undisputed, joint or several, vested or unvested, executory or not, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured, determinable or undeterminable, accrued or unaccrued, absolute or not, contingent
or not, whether or not required to be reflected in financial statements in accordance with GAAP, and whether due or to become due.

“

Material
Adverse Effect” means any change, event, development, circumstance or effect (each, an “Effect”)
that, individually or taken together with all other Effects is, or would be reasonably expected to be materially adverse to the
business, financial condition, properties or results of operations of the Company; provided, however, that,
in determining whether there has been a Material Adverse Effect or whether a Material Adverse Effect would occur, this definition
shall exclude any material adverse effect to the extent arising out of, attributable to, or resulting from: (a) actions or inactions
taken by the Company in compliance with the terms of this Agreement; (b) changes in conditions generally affecting the industry
in which the Company conducts its business (unless such changes affect the Company in a materially disproportionate manner compared
to other companies in the Company’s industry); (c) changes in general economic, political or financial market conditions
(unless such changes affect the Company in a materially disproportionate manner compared to other companies in the Company’s
industry); and (d) any outbreak or escalation of hostilities (including, without limitation, any declaration of war by the U.S.
Congress) or acts of terrorism.

 

 

 

 

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“Permits”
means any approval, consent, license, accreditation, certification, registration certificate, permit, waiver or other authorization
issued, granted, given or otherwise made available by or under the authority of any Governmental Authority.

 

“Person”
means any natural person, corporation, partnership, proprietorship, other business organization, trust, union, association or Governmental
Authority.

 

“Proceeding”
means any action, arbitration, mediation, audit, hearing, investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before or otherwise involving any Governmental Authority,
arbitrator or mediator.

 

“Representative”
as to a specified Person means any officer, director, principal, employee, attorney, accountant, consultant, lender, or other representative
of the Person specified.

 

“Subsidiary”
means each corporation, partnership or other entity, fifty percent (50%) or more of the outstanding voting shares of which or other
voting interests or equity interests in the case of a partnership or other entity are owned or controlled directly by the Company.

 

“Transaction
Documents” means this Agreement, the Transition Services Agreement and each of the documents to be delivered at the
Closing pursuant to the terms of this Agreement.

 

“Transition
Services Agreement” means the Transition Services Agreement substantially in the form of Exhibit B attached
hereto.

 

Article
II

CONSIDERATION

 

Section 2.01.     Sale
of Stock.

 

Upon the terms and
conditions hereinafter set forth, the Seller hereby agrees to sell, assign, transfer and deliver to the Buyer at the Closing, and
the Buyer hereby agrees to purchase and accept from the Seller at the Closing, upon the terms and subject to the conditions set
forth in this Agreement, 100% of the issued and outstanding capital stock of the Company (the “Stock”).
The Stock shall be conveyed free and clear of all Encumbrances (other than restrictions on transfer imposed by applicable federal
and state securities laws), including but not limited to those Encumbrances imposed by the MidCap Credit Agreement (as defined
below).

 

Section 2.02.     Purchase
Price.

 

The entire consideration
for the purchase and sale of the Stock pursuant to this Agreement shall be $6,500,000 (the “Purchase Price”).
In reliance upon the representations, warranties and covenants set forth herein and in consideration of the Seller’s sale,
assignment, transfer and delivery of the Stock to the Buyer, the Buyer shall pay to the Seller the Purchase Price upon Buyer’s
receipt of third-party financing in an amount sufficient to finance the Purchase Price, and the subsequent delivery of such funds
to certain third party lenders of the Seller and the Company, all of which the parties expect to occur prior to March 31, 2018.

 

Section 2.03.     Transfer
Taxes.

 

Notwithstanding anything
in this Agreement to the contrary, all transfer, documentary, stamp, registration and all other Taxes, fees and duties, if any,
incurred in connection with the sale and transfer of the Stock will be split equally by the Buyer, on the one hand, and the Seller,
on the other hand. The party required by Law to do so will file all necessary tax returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other taxes and fees, and, if required by applicable Law,
the other parties will join in the execution of any such tax returns and other documentation.

 

 

 

 

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Section 2.04.     Tax
Withholding.

 

The Buyer shall be
entitled to deduct or withhold or cause to be deducted or withheld from the consideration otherwise payable to, or on behalf of,
the Seller pursuant to this Agreement such taxes, if any, required to be deducted or withheld in accordance with applicable Laws,
which deducted or withheld taxes shall be remitted to the appropriate taxing authorities in accordance with applicable Laws.

 

Article
III

CLOSING

 

Section 3.01.     Closing.

 

(a)             
The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place
by the remote exchange of documents and signatures by facsimile or electronic mail (.PDF) on the first business day following the
satisfaction (or, to the extent permitted by applicable Law, waiver) of the conditions set forth in Article IV, commencing at 10:00
a.m. local time. The date and time of the Closing are herein referred to as the “Closing Date,” and the
Closing shall be deemed effective at 5:01 p.m. (Central Time) on the Closing Date.

 

(b)            
The Seller shall deliver, or cause to be delivered, to a mutually agreed upon third-party escrow agent (“Escrow
Agent”), each of the following:

 

(i)              
a certificate or certificates representing the Stock duly endorsed for transfer or with duly executed stock powers assigning
the Stock to the Buyer;

 

(ii)            
documents and instruments reasonably acceptable to the Buyer demonstrating the release of all Encumbrances imposed by the
MidCap Credit Agreement and the instruments, documents and agreements contemplated by the MidCap Credit Agreement, including but
not limited to the Security Documents (as defined in the MidCap Credit Agreement);

 

(iii)          
the Transition Services Agreement;

 

(iv)           
evidence reasonably acceptable to the Buyer that all of the outstanding Indebtedness has been repaid in full;

 

(v)            
all book and records relating to the organization, ownership and maintenance of the Company in possession or control of
the Seller, if not already located on the premises of the Company;

 

(vi)           
a fairness opinion or valuation of the fair market value of the Inventory by an independent third party;

 

(vii)         
a certificate, signed by an officer of the Company, certifying the truth and correctness of attached copies of the Company’s
organizational documents (including amendments thereto);

 

 

 

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(viii)       
a certificate duly issued by the applicable Governmental Authority in the State of Minnesota and all other jurisdictions
in which the Company is qualified to conduct business, showing that the Company is validly existing or qualified to do business
in such jurisdiction; and

 

(ix)           
such other documents and instruments as may be reasonably required by the Buyer to consummate the transactions contemplated
hereby.

 

All of the foregoing
shall be held in escrow by the Escrow Agent until such time as Buyer pays the Purchase Price in accordance with Section 2.02 hereof.
Upon payment of the Purchase Price by Buyer in accordance with Section 2.02 hereof, all the foregoing shall be automatically released
by the Escrow Agent without any further action by any of the parties hereto.

 

Article
IV

REPRESENTATIONS AND
WARRANTIES OF THE SELLER

 

The Seller hereby represents
and warrants to the Buyer that the following statements contained in this Article IV are true and correct as of the date
hereof (except, as to any representations and warranties that specifically relate to an earlier date, such representations and
warranties are true and correct as of such earlier date):

 

Section 4.01.     Execution
and Effect of Agreement.

 

The Seller has the
power and authority to execute and deliver this Agreement and the other Transaction Documents to which the Seller is a party and
to perform its obligations under each of the Transaction Documents to which the Seller is a party and to consummate the transactions
contemplated by the Transaction Documents to which the Seller is a party. The execution and delivery by the Seller of this Agreement
and the other Transaction Documents to which the Seller is a party and the consummation by the Seller of the transactions contemplated
by the Transaction Documents to which the Seller is a party have been duly authorized by all necessary action on the part of the
Seller and no other proceeding, approval or authorization on the part of the Seller is necessary to authorize the execution, delivery
and performance of this Agreement or any other Transaction Document to which the Seller is a party or the transactions contemplated
by the Transaction Documents to which the Seller is a party. This Agreement and each of the other Transaction Documents to which
the Seller is a party have been duly executed and delivered by the Seller and constitute the legal, valid and binding obligation
of the Seller, enforceable against the Seller in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject as
to enforceability, to general principles of equity, regardless of whether enforcement is sought in a proceeding at law or in equity
(the “Bankruptcy and Equity Exceptions”).

 

Section 4.02.     No
Violation.

 

Neither the execution
or delivery by the Seller of this Agreement or any other Transaction Document to which the Seller is a party, nor the consummation
of the transactions contemplated by the Transaction Documents to which the Seller is a party does or will: (a) violate any statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or restriction of any Governmental Authority to which the
Seller is a party or by which or to which it is bound or subject; (b) require notice to, conflict with or result in a breach of,
or give rise to a right of termination of, or accelerate the performance required by, any terms of any Contract to which the Seller
is a party, or constitute a default thereunder; or (c) result in the creation of any Encumbrance upon any of the Seller’s
assets (except Encumbrances that individually and in the aggregate are not material).

 

 

 

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Section 4.03.     Title;
Agreements.

 

The Seller holds of
record and beneficially all of the Stock, free and clear of any and all Encumbrances or other restrictions on transfer (other than
restrictions on transfer imposed by applicable federal and state securities laws). The Seller is not a party to any voting trust,
proxy or other agreement or understanding with respect to any equity interest of the Company.

 

Section 4.04.     Litigation;
Consents.

 

There are no Proceedings
(including any arbitration proceedings), orders, or claims pending or, to the Seller’s knowledge, threatened against the
Seller with respect to the execution, delivery or performance of this Agreement or the transactions contemplated hereby or the
Stock owned by the Seller; (ii) there are no investigations, inquiries or other Proceedings involving the Seller pending or to
the Seller’s knowledge, threatened; and (iii) there are no Proceedings (including any arbitration proceedings), orders, or
claims pending or threatened by the Seller against any third party, at law or in equity, or before or by any Governmental Authority
relating to the Company or the Stock (including any actions, suits, proceedings or investigations with respect to the transactions
contemplated by this Agreement or any Transaction Document).

 

Section 4.05.     Brokers.

 

Neither the Seller
nor any Person acting on behalf of the Seller has agreed to pay a commission, finder’s fee, investment banking fee or similar
payment in connection with this Agreement or any matter related hereto.

 

Article
V

REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY

 

The Company and the
Seller each represent and warrant to the Buyer that the following statements contained in this Article V are true and correct
as of the date hereof (except, as to any representations and warranties that specifically relate to an earlier date, such representations
and warranties are true and correct as of such earlier date):

 

Section 5.01.     Organization
and Good Standing.

 

The Company is a corporation
duly incorporated and validly existing under the laws of the State of Minnesota and the Company has full power and authority to
carry on its business in the places and in the manner as now conducted and to own or hold under lease the properties and assets
it now owns or holds under lease. The Company is duly qualified in all jurisdictions in which the conduct of its business or activities
or its ownership of assets requires qualification under applicable Laws, except whereby the failure to be so qualified would not
have a Material Adverse Effect. True, complete and correct copies of the articles of incorporation of the Company and the bylaws
of the Company, each as amended to date, of the Company (the “Organizational Documents”) have been made
available to the Buyer and are in full force and effect. The Company has no Subsidiaries. The Company does not control directly
or indirectly or have any direct or indirect equity participation in any corporation, partnership, trust, or other business association.

 

 

 

 

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Section 5.02.     Capitalization.

 

The Seller is the record
and beneficial owner of all of the Stock. The Stock comprises the entire capitalization of the Company on a fully diluted basis.
For purposes of this Agreement, “fully diluted basis” shall mean, at the time of determination, the Stock and any warrants,
options, rights to subscribe for or to purchase, or other securities convertible into, or exercisable or exchangeable for Equity
Securities, assuming, without duplication, the conversion, exchange or exercise of all outstanding warrants, options, rights to
subscribe for or to purchase, or other securities convertible into, or exercisable or exchangeable for Equity Securities, that
are not already issued and that are then currently convertible, exchangeable or exercisable. Other than the Stock, there are no
outstanding options (whether under an option plan or otherwise), rights (preemptive or otherwise), warrants, calls, convertible
securities, commitments or any other arrangements to which the Company is a party requiring or restricting the issuance, sale or
transfer by the Company of any Equity Securities of or in the Company or any securities convertible directly or indirectly into
Equity Securities of or in the Company or evidencing the right to subscribe for any Equity Securities, or giving any Person any
rights with respect to the Equity Securities of or in the Company. There are no voting agreements, voting trusts, equity appreciation
rights, phantom equity plans or other agreements (including cumulative voting rights), commitments or understandings to which the
Company is a party with respect to the Equity Securities of the Company. The Company is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any of its Equity Securities. All of the Stock has been duly authorized
and is validly issued, fully paid and nonassessable and was not issued in violation of any statutory or contractual preemptive
rights or similar restrictions. There are no statutory or contractual preemptive rights, rights of first refusal or similar rights
or restrictions with respect to the sale of the Stock hereunder arising under any written or verbal agreement to which the Company
is a party or to which the Seller is a party.

 

Section 5.03.     Indebtedness;
No Undisclosed Liabilities.

 

Other than outstanding
accounts payable incurred in the ordinary course of business, certain personal property leases that are immaterial in amount, and
that indebtedness under that certain Credit and Security Agreement dated as of May 10, 2017 (the “Midcap Credit Agreement”)
(such Indebtedness is collectively referred to as the “Outstanding Indebtedness”), by and among the lenders
referenced in the Midcap Credit Agreement, MidCap Funding X Trust, as Agent, and the Company and other borrowers thereto, there
is no indebtedness of the Company. The Company has no liability that would be required under GAAP to be reserved against or reflected
in a balance sheet other than: (i) Liabilities set forth or reserved against and disclosed on the Balance Sheet; (ii) Liabilities
which have arisen after the Balance Sheet Date in the ordinary course of business consistent with past practice; or (iii) Liabilities
incurred in connection with this Agreement or any of the other Transaction Documents and the transactions contemplated hereby or
thereby.

 

Section 5.04.     No
Change in the Business.

 

Since September 30,
2017, there has been no change in the business, financial condition, properties or results of operations of the Company that has
had or could be reasonably expected to have a Material Adverse Effect. Since September 30, 2017, the Company has conducted its
business in the ordinary course consistent with past custom and practice.

 

Section 5.05.     Permits;
Compliance with Law.

 

(a)                
The Company is in compliance in all material respects with all applicable federal, state and local laws, rules and regulations
of any Governmental Authority regarding the operation of the Company Business (“Laws”). The Company has
not received any written notices from any Governmental Authority that it is in material violation or breach of any Laws, which
violation or breach has not been cured to the satisfaction any such Governmental Authority.

 

 

 

 

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(b)                
The Company holds all Permits necessary for the conduct of its business as currently conducted. The Permits are valid and
in full force and effect, and the Company has not received any notice that any Governmental Authority intends to cancel, suspend,
terminate or not renew any of such Permits. The transactions contemplated by this Agreement and the other Transaction Documents
will not result in a default under, or a breach or violation of, any of the Permits listed on Schedule 5.05(b).

 

Section 5.06.     Real
Property; Leases of Real Property.

 

The Company does not
own any real property. Schedule 5.06 contains a true, complete and correct list of all leases, subleases, license agreements
or other rights of possession or occupancy of real property to which the Company is a party (each, a “Lease”).
All of the Leases are in full force and effect, and the Company is not in default in any material respect beyond any applicable
notice or grace period, and has not received written notice of any such default still outstanding on the date hereof under any
such Lease. To the Company’s knowledge, on the date hereof, there exists no uncured material default under any Lease by any
third party. True, complete and correct copies of each Lease have been made available to the Buyer. Except as described on Schedule 5.06,
no consent is required of any landlord or any other party to any Lease to consummate the transactions contemplated hereby, and
upon consummation of the transactions contemplated hereby, each Lease will continue to entitle the Company to the use and possession
of the real property specified in such Leases for the purposes for which such real property is now being used by the Company. The
Company has not agreed, nor is it otherwise committed, to lease any real property except for the real property described in the
Leases.

 

Section 5.07.     Litigation;
Consents.

 

(a)                
Other than potential claims with respect to the damage caused by the fire at 6080 E. Main Street, Columbus, Ohio 43212:
(i) there are no Proceedings, orders, or claims pending or, to the Company’s knowledge, threatened against or affecting the
Company or any assets of the Company or with respect to any service provided by the Company; (ii) there are no investigations,
inquiries or other Proceedings involving the Company pending or to the Company’s knowledge, threatened; and (iii) there are
no Proceedings, orders, or claims pending or threatened by the Company against any third party, at law or in equity, or before
or by any Governmental Authority (including any actions, suits, proceedings or investigations with respect to the transactions
contemplated by this Agreement or any Transaction Document). The Company is not subject to any arbitration proceedings under collective
bargaining agreements or otherwise or any investigations or inquiries by any Governmental Authority. The Company is not subject
to any judgment, order or decree of any court or other Governmental Authority and the Company has not received any opinion or memorandum
or legal advice from legal counsel to the effect that the Company is exposed, from a legal standpoint, to any liability which would
reasonably be expected to result in a Material Adverse Effect.

 

(b)                
No notice to, consent, approval, permit, authorization of, declaration to or filing with any Governmental Authority or any
other third party to be obtained or made by the Company (collectively, “Consents”) is required in connection
with: (i) the execution and delivery of this Agreement or any other Transaction Document or the consummation of the transactions
contemplated hereby or thereby, except for those listed on Schedule 5.08(b); or (ii) a change in control of the Company,
except for those listed on Schedule 5.07(b).

 

 

 

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Section 5.08.     Certain
Payments.

 

Neither the Company
nor any of its directors, officers, nor to the Seller’s knowledge or Company’s knowledge, any of its employees or agents
has directly or indirectly made any contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment in
violation of any federal, state, local, municipal, foreign or other law, ordinance, regulation, statute or treaty to any person
or entity, private or public, regardless of form, whether in money, property, or services: (a) to obtain favorable treatment in
securing business; (b) to pay for favorable treatment for business secured; or (c) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or any Affiliate thereof.

 

Article
VI

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer hereby represents
and warrants to the Seller that the following statements contained in this Article VI are true and correct as of the date
hereof (except, as to any representations and warranties that specifically relate to an earlier date, such representations and
warranties are true and correct as of such earlier date):

 

Section 6.01.     Organization
and Good Standing. The Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Nevada. The Buyer has full power and authority to own its
properties and carry on its business as it is now being conducted. 

 

Section 6.02.     Execution
and Effect of Agreement.

 

The Buyer has the power
and authority to enter into this Agreement and each of the other Transaction Documents to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the
Buyer of this Agreement and each of the other Transaction Documents to which it is a party and the consummation by the Buyer of
the transactions contemplated hereby and the Transaction Documents have been duly authorized by all necessary action on the part
of the Buyer, and no other proceeding, approval or authorization on the part of the Buyer is necessary to authorize the execution,
delivery and performance of this Agreement or any other Transaction Document and the transactions contemplated hereunder and under
the Transaction Documents. This Agreement and each Transaction Document to which the Buyer is a party have been duly executed and
delivered by the Buyer and constitute the legal, valid and binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms, except as limited by the Bankruptcy and Equity Exceptions.

 

Section 6.03.     No
Violation.

 

Neither the execution
or delivery by the Buyer of this Agreement and each of the other Transaction Documents to which it is a party nor the consummation
of the transactions contemplated under this Agreement and each of the Transaction Documents to which the Buyer is a party, will:
(i) violate any statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or restriction of any Governmental
Authority to which the Buyer is a party or by which or to which the Buyer or any of its assets or properties is bound or subject,
or the provisions of the organizational documents of the Buyer; or (ii) conflict in any material respect with or result in a material
breach of, or give rise to a right of termination of, or accelerate the performance required by, the terms of any material agreement
to which the Buyer is a party or to which it or any of its assets or properties is bound or subject.

 

Section 6.04.     Litigation;
Consents.

 

(a)       There
is no Proceeding, order or claim pending, or to the Buyer’s knowledge, threatened, against the Buyer which seeks to restrain,
prohibit or otherwise challenges the consummation, legality or validity of the transactions contemplated hereby.

 

 

 

 

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(b)       No
consent, approval, permit, authorization of, declaration to or filing with any Governmental Authority or any other third party
on the part of the Buyer is required in connection with the execution and delivery of this Agreement or any other Transaction Documents
to which the Buyer is a party, or the consummation of the transactions contemplated hereunder or under any of the Transaction Documents
to which the Buyer is a party.

 

Section 6.05.     Brokers.

 

Neither the Buyer nor
any Person acting on behalf of the Buyer has agreed to pay a commission, finder’s fee, investment banking fee or similar
payment in connection with this Agreement or any matter related hereto.

 

Article
VII

COVENANTS

 

Section
7.01.     Cooperation.

 

If, at any time after
the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Buyer with
full right, title and possession to the Stock, the Seller agrees to take, and will take, all such lawful and necessary action required
to so do or that the Buyer otherwise reasonably requests to carry out and give effect to the Seller’s agreements and undertakings
pursuant to this Agreement. In furtherance thereof, the Seller agrees to execute and deliver, or cause to be executed and delivered,
such further instruments or documents or take such other action as may be necessary or convenient, in the opinion of the Buyer
or the Buyer’s legal counsel, to carry out the transactions contemplated hereby.

 

Section 7.02.     Press
Releases.

 

None of the Buyer,
the Seller, the Company or any of their respective Affiliates, directors, officers, Representatives, or agents, shall make any
press release or public announcement disclosing the existence of this Agreement or make known publicly any facts related to the
transactions contemplated hereby without the prior written consent of the Buyer, on the one hand, or the Seller, on the other hand,
except where such disclosure is required by Law or a national securities exchange, in which event only after prior consultation
with such other party.

 

Section
7.03.      Transaction Expenses.

 

Each party shall bear
all out-of-pocket costs and expenses incurred by such party to third parties in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the Transaction Documents to which such Person is a party, and in connection with
the consummation of the transactions contemplated hereby and thereby including, without limitation, legal, accounting and investment
banker’s or broker’s fees (the “Transaction Expenses”). Without limiting the generality of
the foregoing, all Transaction Expenses of the Company (prior to the Closing) and the Seller shall be borne, paid, satisfied, and
discharged solely and exclusively by the Seller and shall have been paid in full by the Seller or the Company prior to the Closing,
and neither the Buyer nor the Company shall have any liability or responsibility therefor.

 

 

 

 

    	 	10	 

     

    

 

 

 

Section
7.04.     Non-Competition and Non-Solicitation.

 

The Seller agrees and
confirms that in connection with the agreements and covenants herein, including, without limitation, the Purchase Price, and as
a material inducement to the Buyer to enter into this Agreement, it agrees with, and will hereafter fully comply with, abide by,
and perform as follows:

 

(a)       Non-Solicitation.
The Seller, for itself and on behalf of its Affiliates, hereby covenants and agrees that it will not (whether directly or indirectly):
(i) for a period of five years after the Closing Date, recruit, solicit or induce, or attempt to induce, for employment by the
Seller or any Affiliate of the Seller, any Person who is an employee of the Company whose employment by the Company continues after
the Closing; or (ii) for a period of five years after the Closing Date, solicit, induce or attempt to induce any customer or potential
customer of the Buyer, any of the Buyer’s Affiliates or the Company, or any customer, client, consultant, independent contractor,
vendor, supplier, or partner of the Buyer, any of the Buyer’s Affiliates or the Company, to terminate, diminish, or materially
alter in a manner harmful to the Buyer, any of the Buyer’s Affiliates or the Company, its relationship or their relationships
with the Buyer, any of the Buyer’s Affiliates, or the Company. For purposes of clarity under this Section 8.09 and
not by way of limitation, the Company shall be deemed to include its successors and assigns.

 

(b)       Noncompetition.
The Seller, for itself and on behalf of its Affiliates, covenants and agrees that for a period of five years after the Closing
Date, it will not (whether directly or indirectly): engage in the Company Business anywhere in the United States, directly or indirectly,
as a shareholder, member, partner, owner, joint venture, investor, lender or in any other capacity whatsoever.

 

(c)       The
Seller hereby acknowledges and confirms that the provisions of this Section 7.04 are reasonable and necessary to protect
the interests of the Buyer and the Company, that any violation of this Section 7.04 will result in an immediate, irreparable
injury to the Buyer and the Company and that damages at law would not be reasonable or adequate compensation to the Buyer and the
Company for violation of this Section 7.04 and that, in addition to any other available remedies, the Buyer and the Company
shall be entitled to have the provisions of this Section 7.04 specifically enforced by preliminary and permanent injunctive
relief without the necessity of proving actual damages or posting a bond or other security to an equitable accounting of all earnings,
profits and other benefits arising out of any violation of this Section 7.04. In the event that the provisions of this Section
7.04 shall ever be deemed to exceed the time, geographic scope or other limitations permitted by applicable Law, then the provisions
shall be deemed reformed to the maximum extent permitted by applicable Law.

 

Section
7.05.     Tax Matters.

 

Following
Seller’s request in writing, Buyer shall make an election under Section 338(h)(10) of the Internal Revenue Code
of 1986, as amended (and any corresponding election under state, local, and foreign tax law) (collectively, a “Section 338(h)(10) Election”)
with respect to the Stock to be acquired by Buyer under this Agreement.  If a request for a Section 338(h)(10) Election is
made (i) Buyer shall prepare and timely file with the appropriate taxing authorities any forms used to make the Section 338(h)(10) Election
and (ii) Seller and Buyer each acknowledge and agree to execute and deliver before or after Closing all federal and state forms
used to make a Section 338(h)(10) Election requiring their signature.  The Company shall include any income, gain,
loss, deduction, or other tax item resulting from the Section 338(h)(10) Election on its tax returns to the extent required
by applicable law.  Seller shall pay (or reimburse Buyer within 15 days after payment by Buyer or the Company) any tax imposed
on the Company attributable to the making of the Section 338(h)(10) Election (including, but not limited to, any tax
imposed under Treasury Regulation § 1.338(h)(10)-1(d)(4), and any state, local or foreign tax imposed on the Company’s
gain), and Seller shall indemnify, defend, and hold harmless Buyer, the Company, and each of their respective successors, assigns,
and Affiliates from and against any liability arising out of any failure to pay any such tax.

 

 

 

    	 	11	 

     

    

 

 

 

Article
VIII

INDEMNIFICATION

 

Section 8.01.     Obligations
of the Seller.

 

(a)       As
consideration for the commitment of the Buyer hereunder, subject to the conditions and limitations set forth in this Article
VIII, the Seller hereby agrees to indemnify and hold harmless the Buyer, the Company and each of their Affiliates, directors,
officers, agents and employees and each other Person, if any, controlling the Buyer (each a “Buyer Indemnified Person”)
from and against any direct loss, damage, Liability, demand, settlement, judgment, award, fine, penalty, charge, cost or expense
of any nature (including, without limitation, the reasonable fees of counsel) (each, a “Loss”), to which
such Buyer Indemnified Person becomes subject as a result of, or based upon or arising out of, directly or indirectly: (i) any
inaccuracy in or breach of any representation or warranty made by the Seller in Article IV or the Seller and the Company
in Article V of this Agreement; or (ii) any breach or nonperformance of any covenant or agreement made or to be performed
by the Seller or the Company pursuant to this Agreement.

 

(b)       For
purposes of this Article VIII, the amount of any Loss incurred by any Buyer Indemnified Person shall be reduced by: (x)
any insurance proceeds received by the Buyer or the Company as a result of such Loss (net of any deductible or retention amount),
which proceeds the Buyer would diligently seek to claim and obtain; and (y) any third-party recovery received by the Buyer or the
Company as a result of such claims (net of any out of pocket costs of collection. For the avoidance of doubt, any such offset or
setoff shall reduce dollar-for-dollar any amount due from the Seller. With respect to any Loss suffered by a Buyer Indemnified
Person, the Buyer shall diligently seek to mitigate any Losses.

 

Section 8.02.     Obligations
of the Buyer.

 

As consideration for
the commitment of the Seller hereunder, subject to the conditions and limitations set forth in this Article VIII, the Buyer
agrees to indemnify and hold harmless the Seller and each of their Affiliates (each a “Seller Indemnified Person”)
from and against any Loss to which a Seller Indemnified Person becomes subject as a result of, or based upon or arising out of,
directly or indirectly: (a) any inaccuracy in or breach of any representation or warranty made by the Buyer pursuant to Article
VI of this Agreement; or (b) any breach or nonperformance of any covenant made or to be performed by the Buyer or, after the
Closing, the Company, pursuant to this Agreement.

 

Section 8.03.     Remedies.

 

Each party hereto acknowledges
that irreparable damage would result if this Agreement is not specifically enforced. Therefore, the rights and obligations of the
parties under this Agreement, including, without limitation, their respective rights and obligations to sell and purchase the Stock
and the rights and obligations of the parties hereunder shall be enforceable by a decree of specific performance issued by any
court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith. Each
party hereto agrees that monetary damages would not be adequate compensation for any Loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive the defense that a remedy at law may be adequate in any action for
specific performance hereunder.

 

 

 

    	 	12	 

     

    

 

 

 

Article
IX.

GENERAL PROVISIONS

 

Section 9.01.     Amendments
and Waivers.

 

Any term of this Agreement
may be amended, supplemented or modified only with the written consent of each of the Buyer and the Seller. The observance of any
term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively),
only with the written consent of: (a) the Buyer if such waiver is sought to be enforced against the Buyer or the Company; or (b)
the Seller if the waiver is sought to be enforced against the Seller. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided.

 

Section 9.02.     Successors
and Assigns.

 

This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, successors, heirs,
executors and assigns. Neither this Agreement nor any rights or obligations hereunder may be assigned or transferred without the
prior written consent of the other parties hereto, except that the Buyer may: (a) assign its rights under this Agreement to any
lender of the Buyer or the Company for collateral security purposes; or (b) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for, and shall guarantee,
the performance of all of its obligations hereunder).

 

Section 9.03.     No
Third Party Beneficiaries.

 

The rights created
by this Agreement are solely for the benefit of the parties hereto and their respective successors or permitted assigns, and no
other Person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue
of this Agreement or any provision herein contained; provided, however, that the provisions of Article VIII
above concerning indemnification and the provisions of Section 9.13 concerning the release of the Released Claims by the
Releasors are intended for the benefit and burden of the parties specified therein, and their respective legal representatives,
successors, heirs, executors and assigns.

 

Section 9.04.     Choice
of Law; Consent to Jurisdiction.

 

(a)       This
Agreement shall be governed by and construed under and the rights of the parties determined in accordance with the internal, substantive
laws of the State of Nevada (without reference to the choice of law provisions of the State of Nevada or of any other jurisdiction
that would result in the application of the laws of any other jurisdiction).

 

(b)       Without
limiting the other provisions of this Section 9.04(b), the parties hereto agree that any legal proceeding by or against
any party hereto or with respect to or arising out of this Agreement shall be brought exclusively in Clark County, Nevada. By execution
and delivery of this Agreement, each party hereto irrevocably and unconditionally submits to the exclusive jurisdiction of such
courts and to the appellate courts therefrom solely for the purposes of disputes arising under this Agreement and not as a general
submission to such jurisdiction or with respect to any other dispute, matter or claim whatsoever. The parties hereto irrevocably
consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the delivery of copies
thereof by overnight courier to the address for such party to which notices are deliverable hereunder. Any such service of process
shall be effective upon delivery. Nothing herein shall affect the right to serve process in any other manner permitted by applicable
Law. The parties hereto hereby waive any right to stay or dismiss any action or proceeding under or in connection with this Agreement
brought before the foregoing courts on the basis of: (i) any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason, or that it or any of its property is immune from the above-described legal process; (ii) that
such action or proceeding is brought in an inconvenient forum, that venue for the action or proceeding is improper or that this
Agreement may not be enforced in or by such courts; or (iii) any other defense that would hinder or delay the levy, execution or
collection of any amount to which any party hereto is entitled pursuant to any final judgment of any court having jurisdiction.

 

 

 

    	 	13	 

     

    

 

 

 

Section 9.05.     WAIVER
OF JURY TRIAL.

 

EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

Section 9.06.     Specific
Performance.

 

The Seller agrees and
acknowledges that irreparable damage would occur to the Buyer in the event that any provision of this Agreement was not performed
in accordance with the terms hereof or in the event of any breach or threatened breach of any provision of this Agreement by the
Seller and that, therefore, the Buyer shall be entitled to expedited and immediate: (a) specific performance of the terms hereof;
(b) injunctive relief to enjoin any breach or threatened breach of any of the terms hereof; or (c) other appropriate equitable
relief, in each case in addition to any other remedy at law, in equity, by contract, or otherwise and that in connection therewith
the Buyer shall not be required or compelled to post any bond or security in connection with any application or petition for any
such equitable remedy or relief it or they may seek.

 

Section 9.07.     Notices.

 

Unless otherwise specifically
provided in this Agreement, any notice required or permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon the earlier of: (a) personal delivery to the party to be notified; (b) actual receipt after deposit with
the United States Post Office, by certified mail, postage prepaid return receipt requested; (c) the actual receipt after dispatch
via nationally recognized overnight courier; or (d) confirmation of transmission by electronic mail (provided such transmission
is also contemporaneously sent via one of the methods specified in clauses (a), (b) or (c)), all addressed
to the party to be notified at the address indicated for such party below, or at such other address as such party may designate
by five business days’ advance written notice to the other parties. Notices should be provided in accordance with this Section
9.07 at the following addresses:

 

 

 

    	 	14	 

     

    

 

 

 

If to the Seller, to: 

 

Appliance Recycling Centers of America, Inc.

175 Jackson Ave. North, Suite 102

Minneapolis, MN 55343

E-mail: t.isaac@isaa.com

Attn: Tony Isaac, CEO

 

If to the Buyer or the Company, to:

 

ApplianceSmart Holdings LLC

c/o Live Ventures Incorporated

325 E. Warm Springs Road, Suite 102

Las Vegas, NV 89119

E-mail: j.isaac@isaac.com

Attn: Jon Isaac, President and
CEO

 

Section 9.08.     Severability.

 

If one or more provisions
of this Agreement shall be held invalid, illegal or unenforceable, such provision shall, to the extent possible, be modified in
such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement. In either case, the balance of this Agreement shall be interpreted
as if such provision were so modified or excluded, as the case may be, and shall be enforceable in accordance with its terms.

 

Section 9.09.     Entire
Agreement.

 

This Agreement, together
with the Company Disclosure Schedules hereto, constitutes the entire agreement among the parties with respect to the subject matter
hereof and supersedes all prior understandings and agreements, whether written or oral, and no party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein.

 

Section 9.10.     Construction.

 

The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises,
this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of such party’s (or its Representative’s) actual authorship of any provision of
this Agreement and the parties have agreed that no provision or provisions of this Agreement can, may, or should be attributed
to any particular party. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used
in this Agreement, they shall be deemed to be followed by the words “without limitation” whether or not actually followed
by such words. References to “or” shall be read, interpreted and construed if the context permits as “and/or”.
For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders;
and the neuter gender shall include the masculine and feminine genders.

 

 

 

 

    	 	15	 

     

    

 

 

 

Section 9.11.     Titles
and Subtitles.

 

The titles and subtitles
used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

Section 9.12.     Counterparts;
Copies Sent by Facsimile or .PDF

 

This Agreement may
be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Delivery of facsimile or .pdf, or other electronic copies of signature pages for this Agreement, other
documents required by the Agreement, and all certificates and other documents required to be delivered for Closing shall be valid
and treated for all purposes as delivery of the originals.

 

Section 9.13.     Release.

 

The consideration described
in this Agreement represents the only payments and consideration to be received by the Seller in exchange for the Stock owned by
the Seller and to be sold to the Buyer hereunder. In exchange for such consideration, the Seller, for itself and its successors
and assigns (collectively, the “Releasors”), hereby forever fully and irrevocably releases and discharges
the Buyer, the Company and each of their respective predecessors, successors, subsidiaries and Affiliates, managers, Representatives
and agents (collectively, the “Released Parties”) from any and all actions, suits, claims, demands, debts,
sums of money, accounts, reckonings, bonds, bills, covenants, Contracts, controversies, promises, judgments, Liabilities or obligations
of any kind whatsoever in law or equity, or otherwise (including claims for damages, costs, expenses, and attorneys’, brokers’
and accountants’ fees and expenses) for additional payment or consideration in connection with the transactions contemplated
by this Agreement, as well as all other events, facts, conditions or circumstances existing or arising prior to the Closing Date,
which the Releasors can, shall or may have against the Released Parties, and that now exist or may hereafter accrue (collectively,
the “Released Claims”); provided, that the Released Claims shall not include claims arising under
or otherwise specifically available to the Releasors under this Agreement, any of the other Transactional Documents or any of the
transactions contemplated hereby, indemnification or advancement of expenses arising under applicable Law or the Organizational
Documents, or rights, claims and actions arising out of or under any insurance policies. The Releasors shall refrain from asserting
any claim or demand or commencing (or causing to be commenced) any Proceeding, in any court or before any tribunal, against any
Released Party based upon any Released Claim.

 

(Remainder of this
page intentionally left blank; signatures begin on the next page.)

 

 

 

    	 	16	 

     

    

 

 

 

IN WITNESS WHEREOF,
the parties have executed this Stock Purchase Agreement as of the date first above written.

 

 

 

	 	
        SELLER:

         

        APPLIANCE RECYCLING
        CENTERS OF AMERICA, INC.

         

         

        By: _/s/ Tony Isaac______________

        Name: Tony Isaac

        Title: Chief Executive Officer

	 	 
	 	 
	 	
        COMPANY:

         

        APPLIANCESMART, INC.

         

         

        By: _/s/ Tony Isaac______________

        Name: Tony Isaac

        Title: Chief Executive Officer

	 	 
	 	 
	 	
        buyer:

         

        APPLIANCESMART HOLDINGS
        LLC

         

         

        By: _/s/ Jon Isaac______________

        Name: Jon Isaac

        Title: President and Chief Executive Officer

 

 

 

    	 	17odt-ex101_1520.htm

Exhibit 10.1

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

ODONATE HOLDINGS, LLC

 

This Amended and Restated Limited Liability Company Agreement (this “Operating Agreement”) of Odonate Holdings, LLC (“Odonate Holdings”) is made effective as of December 6, 2017 (the “Effective Date”), with respect to the holders of Units (each a “Member,” and collectively, the “Members”). This Operating Agreement amends and restates that certain Limited Liability Company Agreement, dated as of November 27, 2017 (the “Prior Agreement”).

 

Odonate Holdings and the Members agree as follows:

1.Purpose. Odonate Holdings may engage in any lawful act or activity in furtherance thereof, as permitted under the Act. Except as may be directed by the Board of Directors, the principal purpose of Odonate Holdings shall be to hold the shares of Common Stock (the “Shares”) of Odonate Therapeutics, Inc. (“Odonate”) underlying the Incentive Units.

2.Powers; Limitations on Disposition of Shares. 

(a)In furtherance of its purposes, but subject to all of the provisions of this Operating Agreement, Odonate Holdings shall have the power and is hereby authorized to do all things and engage in all such activities as may be necessary, convenient or incidental to the conduct of the business of Odonate Holdings, and have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act.

(b)Notwithstanding the foregoing, Odonate Holdings shall have no power or authority to sell, pledge, assign, transfer or otherwise dispose of any of the Shares, other than through a distribution in kind to one or more Members, when and as directed by the Board of Directors. To the extent that Odonate Holdings holds a number of Shares exceeding the aggregate number of shares of Odonate Common Stock underlying all outstanding profits interest awards granted by Odonate Management Holdings, LLC (“Management Holdings”) (e.g., by virtue of the forfeiture of profits interests granted by Management Holdings), the excess Shares shall be returned to Odonate for cancellation (“Cancelled Shares”). Cancelled Shares (if any) shall be returned to Odonate on a quarterly basis as of the last day of the last month of each calendar quarter.

3.Principal Business Office. The principal business office of Odonate Holdings shall be located at such location as may be determined by the Board of Directors.

1

 

4.Registered Office. The name and address of the registered agent of Odonate Holdings for service of process on Odonate Holdings in the State of Delaware, and the address of the registered office of Odonate Holdings in the State of Delaware, is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, New Castle County, Delaware, 19808.

5.Members. The names and mailing addresses of the Members shall be maintained in the records of Odonate Holdings at the principal business office of Odonate Holdings. The number of Units owned by each Member shall be maintained in the records of Odonate Holdings at the principal business office of Odonate Holdings, which shall be updated from time to time to reflect changes in the amount or ownership of the Units.

6.Limited Liability. Except as otherwise provided by the Act, the debts, obligations and liabilities of Odonate Holdings, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of Odonate Holdings, and the Members shall not be obligated personally for any such debt, obligation or liability of Odonate Holdings solely by reason of being a Member of Odonate Holdings.

7.Board of Directors.

 

(a)Except as set forth below, the business and affairs of Odonate Holdings shall be managed by or under the direction of a board of directors (the “Board of Directors”), which may from time to time by resolution delegate authority to officers, employees or other agents to act on behalf of Odonate Holdings, and with such authority to be delegated as of the Effective Date to a committee consisting of: (i) the Chief Executive Officer of Odonate, (ii) the Chief Financial Officer of Odonate, and (iii) the Chairman of the Compensation Committee of Odonate (the “Management Committee”); references herein to actions taken by the Board of Directors shall be deemed to include actions taken by the Management Committee pursuant to the foregoing delegation of authority. The Board of Directors, acting with due authorization pursuant to this Section 7(a), shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes of Odonate Holdings described herein, including all powers, statutory or otherwise, possessed by managers of a limited liability company under the laws of the State of Delaware. Each member of the Board of Directors (each, a “Director”) is hereby designated a “manager” of Odonate Holdings within the meaning of the Act (a “Manager”). Except as otherwise required by law, approval of any action by the Board of Directors (or approval by an agent delegated such approval authority by the Board of Directors) in accordance with the Operating Agreement shall constitute approval of such action by Odonate Holdings. Except as otherwise provided in this Operating Agreement, no Member or Director (acting alone and not collectively with the authority of the Board of Directors) shall have the authority to bind Odonate Holdings.

 

(b)The size of the Board of Directors may be fixed by a vote of the Directors or by the Members, acting by Unit Approval. As of the Effective Date, the size of the Board of Directors has been fixed at six Directors, and the composition of the Board of Directors shall be the same as the composition of the Odonate board of directors. The Members may appoint or remove any Director in conjunction with a change in the Odonate board of directors by vote or consent of Members holding a majority of the Common Units of Odonate Holdings (“Unit Approval”). Any vacancy created with the removal of a Director shall be filled solely by a vote 

2

 

 

of the Members acting with Unit Approval. Vacancies created by the expansion of the number of Directors or by the resignation or retirement of a Director may be filled either by a vote of the Members acting with Unit Approval, or by a vote of the Board of Directors.

 

(c)A majority of the Directors then serving shall constitute a quorum, and a quorum shall be required to be present for the Board of Directors to take action at any meeting. At any meeting where a quorum is present, an action approved by the majority of the Directors present at such meeting (whether in person or via remote means of communication, such as telephone or video conferencing) shall constitute the approval of such action by the Board of Directors. The Board of Directors may also take action by written consent, executed or otherwise unanimously approved in writing (including via email) by all Directors then serving in office. Meetings of the Board of Directors may be called by any Director or by the Chief Executive Officer upon providing at least 24 hours’ prior notice of such meeting to all Directors, with such notice to be provided in person, by telephone or via email.

 

(d)Notwithstanding the foregoing, the Board of Directors shall be required to obtain Unit Approval prior to taking any of the following actions: (i) effecting any merger or consolidation in which the holders of the Units immediately prior to such transaction do not hold at least a majority of the voting interests of the surviving entity immediately after such transaction; (ii) the sale of all or substantially all of the assets of Odonate Holdings; or (iii) the liquidation or dissolution of Odonate Holdings.

 

(e)The Board of Directors shall have a fiduciary relationship with the Members and shall act at all times in accordance with such fiduciary duties. In defining the scope of such fiduciary duties, the Board of Directors’ duties to the Members shall be substantially similar to the duties owed by directors of a corporation to its stockholders under the Delaware General Corporation Law (including decisions by Delaware courts interpreting such law). Notwithstanding the foregoing, in no event shall the Board of Directors owe any fiduciary duties to creditors of the Company.

8.Capitalization.

 

(a)Authorized Units. The capital of Odonate Holdings shall be represented by two classes of units: common units (the “Common Units”) and incentive units (the “Incentive Units” and, together with the Common Units, the “Units”).

 

(b)Common Units. Common Units shall be issued in consideration for cash or non-cash contributions at such prices and on such other terms as the Board of Directors shall determine from time to time. Units may be issued in fractions going out to two decimal places. The amount of cash or other property or rights contributed by each Member to Odonate Holdings pursuant to this Section 8(b) (collectively, the “Capital Contributions”) will be recorded on the books of Odonate Holdings.

 

3

 

 

(c)Incentive Units. The Incentive Units are intended to be issued, in such amounts and with such terms as determined by the Board of Directors in its sole discretion, to selected employees, Directors, consultants and other service providers and agents of Odonate Holdings or its affiliates, including to Management Holdings.

(i)Any Incentive Units awarded shall have set forth in a written agreement with the recipient (an “Award Agreement”) a base price (the “Base Price”) that shall be on a per Incentive Unit basis and shall not be less than the amount, on a per Unit basis, that would be received per Common Unit outstanding at the time of such grant, if, immediately after the issuance of such Incentive Units, all the assets of Odonate Holdings were sold for their respective fair values (as determined in good faith by the Board of Directors), the liabilities of Odonate Holdings were paid in full and the remaining proceeds were distributed in accordance with Section 15.

(ii)Notwithstanding anything contained herein or in the Act to the contrary, the Incentive Units shall have no voting, approval, information or consent rights.

(iii)Odonate Holdings and each Member shall: (A) treat each Incentive Unit as a “profits interest” within the meaning of Rev. Proc. 93-27, 1993-2C.B. 343, as clarified by Rev. Proc. 2001-43, 2001-2 C.B. 191; (B) treat each holder of an Incentive Unit as the owner of such interests from the date such interests are granted until such interests are forfeited or otherwise disposed of; (C) agree that each holder of an Incentive Unit will take into account such distributive share of Odonate Holdings’ income, gain, deduction and loss in computing its United States federal income tax liability for the entire period during which it holds such interests; and (D) agree that Odonate Holdings will not claim a deduction (as wages, compensation or otherwise) for the fair value of any Incentive Unit either upon grant or vesting of the Incentive Unit.

 

9.Capital Accounts; Allocation of Profits and Losses.

(a)Capital Accounts. A capital account for each Member shall be established and maintained in accordance with Section 704(b) of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations promulgated thereunder. Odonate Holdings’ net profit, net loss and items thereof shall be allocated to the capital accounts of the eligible Members on an annual basis, at the end of each calendar year, unless otherwise required by law or deemed advisable by the Board of Directors (and a period for which such allocations are made is referred to herein as an “accounting period”).

(b)Allocation of Profits and Losses. Subject to Section 9(c), after all capital contributions and distributions for each accounting period have been reflected in the Members’ capital accounts, the net profit or net loss, if any, for each accounting period shall be credited to such Members’ capital accounts in such manner that as of the end of such accounting period, each Member’s capital account shall be equal to the respective net amounts, positive or negative, which would be distributed to them or for which they would be liable to Odonate Holdings under this Operating Agreement, determined as if Odonate Holdings were to liquidate all of the assets of Odonate Holdings for an amount equal to their fair value and distribute the proceeds of such liquidation in the manner described in Section 15. For purposes of calculating a Member’s capital 

4

 

 

account under this Section 9(b), any amounts such Member is obligated to restore (or deemed obligated to restore pursuant to the Treasury Regulations under Section 704(b) of the Code) shall be deemed to increase such Member’s capital account balance. For purposes of this Section 9(b), all unvested Incentive Units shall be treated as if they were vested.

(c)Regulatory and Special Allocations. Notwithstanding the allocations set forth in Section 9(b), Odonate Holdings’ net profit, net loss and items thereof shall be allocated to the Members in the manner and to the extent required by the Treasury Regulations under Section 704 of the Code, the provisions thereof dealing with minimum gain chargebacks, partner minimum gain chargebacks, qualified income offsets, partnership nonrecourse deductions, partner nonrecourse deductions, and the provisions dealing with deficit capital accounts in Sections 1.704-2(g)(1), 1.704-2(i)(5), and 1.704-1(b)(2)(ii)(d).

(d)Tax Allocations. The income, gains, losses, deductions and expenses of Odonate Holdings shall be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses, deductions and expenses among the Members for computing their capital accounts, except that if any such allocation is not permitted by the Code or other applicable law, Odonate Holdings’ subsequent income, gains, losses, deductions and expenses shall be allocated among the Members for tax purposes to the extent permitted by the Code and other applicable law, so as to reflect as nearly as possible the allocation set forth herein in computing their capital accounts. Notwithstanding the previous sentence, such tax items shall be allocated among the Members in a different manner to the extent required by Code Section 704(c) and the Treasury Regulations thereunder (dealing with contributed property), Treasury Regulations Sections 1.704-1(b)(2)(1) (dealing with property having a book value different than its tax basis), and 1.704-1(b)(4)(ii) (dealing with tax credit items). Allocations pursuant to this Section 9(d) are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s capital account or share of profits, losses, other items or distributions pursuant to any provisions of this Operating Agreement.

(e)Pass-Through Taxation. Prior to allocating any taxable income to the Members, Odonate Holdings shall take such actions to either: (a) change to a non-pass through entity (e.g., a corporation) in order to prevent any Members from incurring, or otherwise recognizing, any unrelated business taxable income; or (b) as requested by a Member, insert a blocker entity for tax purposes.

 

(f)Tax Matters Partner. Tang Capital Partners, LP shall be the “tax matters partner” for purposes of Code Section 6231. The tax matters partner may be removed and replaced by the Members, subject to obtaining Unit Approval. As tax matters partner, Tang Capital Partners, LP covenants and agrees with the Members that, without obtaining Unit Approval: (i) after the receipt of a final partnership administrative adjustment for a taxable year, Tang Capital Partners, LP will not file a “petition for readjustment of the partnership items,” within the meaning of Section 6226 of the Code, in any court other than the United States Tax Court; and (ii) Tang Capital Partners, LP will not agree, pursuant to Section 6229(b)(1)(B) of the Code, to extend the period for assessing any tax imposed by subtitle A of the Code with respect to any Member that any item (or affected items) of Odonate Holdings is attributable to.

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10.Distributions.

(a)General. Distributions may be made to the Members at the times and in the amounts determined by the Board of Directors. Such distributions shall be made to the Members in proportion to their ratable holdings of Units as compared to the number of total Units outstanding (subject to Section 10(b)); provided that no distribution shall be made to a Member to the extent it would cause such Member to have a deficit capital account.

(b)Incentive Units Adjustment. For the purposes of any distributions made under this Section 10(a) or 15, an Incentive Unit shall not be considered outstanding until the aggregate distributions made to the Common Unit holders, on a per-Common Unit basis, since the grant of such Incentive Unit equal the Base Price for such Incentive Unit.

(c)Unvested Incentive Units. Notwithstanding the foregoing, for the purposes of making any distributions pursuant to this Section 10, no Incentive Unit shall be entitled to receive a distribution while it is unvested pursuant to the terms of the Award Agreements thereunder. Instead, the distributions that would otherwise be made on such unvested Incentive Units will be credited to a memorandum account and, subject to such Incentive Units becoming vested, distributed at the time of the next distribution to the Common Units pursuant to Section 10(a).

(d)Property Distributions. At the sole discretion of the Board of Directors, Odonate Holdings may make in-kind distributions of its property, including any publicly traded stock.

(e)Redemptions on Full Distributions. To the extent that a Member receives a distribution equal to such Member’s full capital account, the membership interest of that Member shall be deemed redeemed. 

11.Other Business. The Members, Manager, and any person or entity affiliated with the Members or Manager may engage in or possess an interest in other business ventures (unconnected with Odonate Holdings) of every kind and description, independently or with others. Odonate Holdings shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Operating Agreement.

12.Exculpation and Indemnification.

 

(a)Member Exculpation and Indemnification.

(i)No Member, its affiliates or any of their current or former officers, directors, trustees, members, employees, representatives, attorneys or agents (collectively, “Member Indemnified Parties”, and each individually, a “Member Indemnified Party”) shall, by virtue of such Member’s status as a Member, have any liability to any other person under the Certificate of Formation, this Operating Agreement or any applicable law, except liability to Odonate Holdings, the other Members and the tax matters partner in respect of obligations expressly arising hereunder or required by law.

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(ii)No Member shall in any event have any liability whatsoever (except as expressly required by the Act) in excess of the following (without duplication): (A) the amount of any Capital Contribution previously made by such Member; (B) its share of any assets and undistributed profits of Odonate Holdings; and (C) the amount of any wrongful distribution to such Member, if, and only to the extent, such Member had actual knowledge (at the time of the distribution) that such distribution was made in violation of the Act or this Operating Agreement.

(iii)To the fullest extent permitted by law, in any threatened, pending or completed action, suit or proceeding brought by a person other than a Member, an affiliate of a Member or Odonate Holdings, each Member Indemnified Party shall be fully protected and indemnified and held harmless by Odonate Holdings against all Damages actually incurred by such Member Indemnified Party in connection with such action, suit or proceeding by virtue of the relevant Member’s status as a Member or with respect to any action or omission taken or suffered in good faith by it in connection with the relevant Member’s status as a Member. The preceding sentence shall not apply to Damages resulting from the bad faith, fraud or willful misconduct of such Member Indemnified Party. “Damages” means any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, proceedings, costs, expenses and disbursements of any kind or nature whatsoever (including reasonable attorneys’ fees, costs of investigation, fines, judgments and amounts paid in settlement).

(iv)The indemnification provided by this Section 12(a) shall be recoverable only out of the assets of Odonate Holdings, and no Member shall have any personal liability (or obligation to contribute capital to Odonate Holdings or make any other financial accommodation available) on account thereof. No amendment to this Section 12(a) will impair the rights of any person arising at any time with respect to events occurring prior to such amendment.

(b)Director Exculpation and Indemnification.

(i)No Director, officer or employee of Odonate Holdings (collectively, the “D&O Indemnified Parties”, and each individually, a “D&O Indemnified Party”) shall, in such person’s capacity as such a Director, officer or employee, have any liability to any other person (other than Odonate Holdings and its Members) under the Certificate of Formation, this Operating Agreement or any applicable law, except as otherwise expressly provided for herein or required by such law.

(ii)No D&O Indemnified Party will be liable, responsible or accountable for Damages or otherwise to: (A) Odonate Holdings or to any Member or its affiliates; (B) any direct or indirect equity holder of Odonate Holdings or any Member or its affiliates; or (C) any direct or indirect holder of a claim against Odonate Holdings or any Member or its affiliates, for: (i) any action or omission taken or suffered within the scope of the authority conferred on such person by this Operating Agreement or any other agreement between the applicable Director, officer or employee and Odonate Holdings, except for the fraud or intentional misconduct of such person in carrying out such person’s obligations hereunder; (ii) such person’s performance of, or failure to perform, any act in reasonable reliance on the advice of legal counsel to Odonate Holdings; or (iii) the negligence, dishonesty or bad faith of any agent, consultant, professional or broker of Odonate Holdings selected, engaged or retained in good faith by Odonate Holdings.

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(iii)To the fullest extent permitted by law, in any threatened, pending or completed action, suit or proceeding, each D&O Indemnified Party shall be fully protected and indemnified and held harmless by Odonate Holdings against all Damages actually incurred by such D&O Indemnified Party in connection with such action, suit or proceeding by virtue of its status as a D&O Indemnified Party or with respect to any action or omission taken or suffered by such D&O Indemnified Party as such; provided, that the relevant D&O Indemnified Party: (A) acted in a manner such person reasonably believed to be in, or not opposed to, the best interests of Odonate Holdings; (B) did not believe to be in violation of the terms of this Operating Agreement; and (C) with respect to any criminal proceeding, had no reasonable cause to believe that his or her conduct was unlawful.

(iv)The indemnification provided by this Section 12(b) shall be recoverable only out of the assets of Odonate Holdings, and no Member shall have any personal liability (or obligation to contribute capital to Odonate Holdings or make any other financial accommodation available) on account thereof. In addition, a majority of the Board of Directors, acting in its sole discretion, may from time to time extend the indemnification and advancement of expenses provided by this Section 12(b) to one or more agents of Odonate Holdings; in each case on the basis set forth herein applicable to D&O Indemnified Parties.

(c)Any indemnification under Section 12(a) and 12(b) will be made by Odonate Holdings unless there has been a final and unappealable determination by a court of competent jurisdiction in the specific case that indemnification of the person requesting indemnification is not proper in the circumstances because the relevant person has not met the applicable standard of conduct set forth in this Operating Agreement.

(d)Damages suffered by a person entitled to indemnification pursuant to Sections 12(a) or 12(b) may be paid (and, in the case of an agent, may be paid if so determined by the Board of Directors) by Odonate Holdings from time to time as incurred and in advance of the final disposition of such matter upon receipt of a written undertaking by or on behalf of such person to repay amounts paid if it is ultimately determined that such person is not entitled to be indemnified by Odonate Holdings as authorized in Sections 12(a) and 12(b) or, where indemnification is authorized, to the extent amounts paid exceed the amount to which such person is entitled.

(e)The rights provided to any person by Sections 12(a) and 12(b) will be enforceable against Odonate Holdings by such person and each such person being presumed to have relied upon such rights in serving or continuing to serve Odonate Holdings. No amendment to this Section 12(e) will impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of Sections 12(a) and 12(b), the term “Odonate Holdings” includes any constituent person (including any constituent of a constituent) absorbed by Odonate Holdings in a consolidation or merger.

(f)Nothing in this Section 12 will limit or affect any other right of any person indemnified hereunder to indemnification or reimbursement of damages under any other provision of this Operating Agreement or any provision of any other agreement (including any insurance policy), any organizational document, any statute, rule or regulation or otherwise.

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(g)The provisions of this Section 12 shall survive the dissolution of Odonate Holdings, the withdrawal of a Member from Odonate Holdings and the resignation or removal of any Director, officer or employee of Odonate Holdings.

(h)If this Section 12 or any portion hereof shall be invalidated on any ground by any court or other governmental authority of competent jurisdiction, then Odonate Holdings shall nevertheless indemnify and hold harmless each person indemnified pursuant to this Section 12 as to costs, charges and expenses (including reasonable attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any such proceeding, appeal, inquiry or investigation to the full extent permitted by any applicable portion of this Section 12 that shall not have been invalidated and to the fullest extent permitted by applicable law.

13.Assignments.

(a)A Member may not assign in whole or in part his, her or its interest in Odonate Holdings without receiving prior written consent from the Board of Directors, which consent shall not be unreasonably withheld.

(b)Notwithstanding anything in the above Section 13(a), a member may transfer any Units owned by such Member to its affiliates or investment funds managed by such Member or its affiliates without consent from the Board of Directors.

(c)Any transfer or assignment permitted by this Section 13 shall be subject in all respects to the transferee executing a joinder to this Operating Agreement and furnishing notice of such transfer or assignment to the Board of Directors.

14.Admission of Additional Members. One or more additional Members of Odonate Holdings may be admitted to Odonate Holdings by approval of the Board of Directors.

15.Dissolution. Odonate Holdings shall dissolve, and its affairs shall be wound up upon: (i) approval of the Board of Directors, acting with Unit Approval; or (ii) the entry of a decree of judicial dissolution under the Act. In the event of dissolution, Odonate Holdings shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of Odonate Holdings in an orderly manner), and, after giving effect to allocations, if any, pursuant to Section 10, the assets of Odonate Holdings shall be distributed to the Members in accordance with their respective capital account balances.

16.Certificate. The Board of Directors has been designated as Odonate Holdings’ “authorized person” within the meaning of the Act. The Board of Directors shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for Odonate Holdings to qualify to do business in any jurisdiction in which the Board of Directors deems necessary or advisable.

17.Reparability of Provisions. Each provision of this Operating Agreement shall be considered separable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Operating Agreement which are valid, enforceable and legal.

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18.Counterparts. This Operating Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Operating Agreement.

19.Entire Agreement. This Operating Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supersedes all prior understandings or agreements between the parties.

20.No Third-party Beneficiaries. Except as set forth in Section 12, this Operating Agreement is not intended and shall not be construed as granting any rights, benefits or privileges to any person not a party to this Operating Agreement. Without limiting the generality of the foregoing, no creditor of Odonate Holdings or of any Member shall have any right whatsoever to require any Member to contribute capital, perform services for or on behalf of, or make a financial accommodation for or on behalf of Odonate Holdings.

21.Governing Law. This Operating Agreement shall be governed by, and construed under, the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws.

22.Market Stand-off. In the event that Odonate Holdings (or any successor or parent entity thereto) distributes any of the Shares to a Member, then no such Member will, without the prior written consent of the managing underwriter of the Initial Public Offering of Odonate (the “IPO”), during the period commencing on the date of the final prospectus relating to the IPO, and ending on the date specified by the Board of Directors and the managing underwriter (such period not to exceed one hundred eighty (180) days (or longer, up to an additional 35 days, if mutually agreed to by the managing underwriter and the Board of Directors)): (i) sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; lend; offer; pledge; or otherwise transfer or dispose of, directly or indirectly, any Units or shares of Odonate (or any successor or parent entity thereto) common stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for such securities (the “Covered Securities”); or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Covered Securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Covered Securities or other securities, in cash, or otherwise. The foregoing provisions of this Section 22 shall not apply to: (i) Common Units purchased by a Member on the open market following the IPO or Common Units acquired by a Member in the IPO; or (ii) the transfer of any shares to any trust for the direct or indirect benefit of the Member or the immediate family of the Member, provided that, in the case of clause (ii), the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, and shall be applicable to the Members only if all officers and directors are subject to the same restrictions. The foregoing provisions of this Section 22 shall not apply to bona-fide gifts made to private and/or public charities and foundations. The underwriters in connection with such registration are intended third-party beneficiaries of this Section 22 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Member further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 22 or that are necessary to give further effect thereto.

23.Amendments. This Operating Agreement may not be modified, altered, supplemented or amended except by receiving Unit Approval.

 

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Operating Agreement, and such execution shall represent the consent and approval required to amend and restate this Operating Agreement, effective as of the Effective Date.

 

	
TANG CAPITAL PARTNERS, LP

	
 

	
By: Tang Capital Management, LLC, its general partner

	
 
	
 
	
 

	
By:
	
 
	
/s/ Kevin C. Tang

	
Name:  
	
 
	
Kevin C. Tang

	
Title:
	
 
	
Manager

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Operating Agreement, and such execution shall represent the consent and approval required to amend and restate this Operating Agreement, effective as of the Effective Date.

 

	
ODONATE MANAGEMENT HOLDINGS, LLC

	
 
	
 
	
 

	
By: 
	
 
	
/s/ Kevin C. Tang

	
Name:
	
 
	
Kevin C. Tang

	
Title:
	
 
	
Manager

 

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