Document:

Exhibit 10.25

 

Execution Copy

 

PES INVENTORY COMPANY, LLC

 

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

 

Effective as of October 7, 2014

 

 

TABLE OF CONTENTS

 

	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE 1   DEFINED TERMS
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
1.1
    	
Definitions
    	
1
    
	
 
    	
1.2
    	
Headings
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 2   CONTINUATION AND ORGANIZATION
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1
    	
Continuation and Name
    	
2
    
	
 
    	
2.2
    	
Principal Place of   Business; Other Places of Business
    	
2
    
	
 
    	
2.3
    	
Registered Office and   Registered Agent
    	
2
    
	
 
    	
2.4
    	
Term
    	
2
    
	
 
    	
2.5
    	
No State Law   Partnership
    	
2
    
	
 
    	
2.6
    	
Ownership of Company   Property
    	
2
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 3   PURPOSE AND POWERS OF THE COMPANY
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1
    	
Purpose
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 4   SHARES, CAPITAL CONTRIBUTIONS, NATURE OF INTERESTS AND ESTABLISHMENT OF   CAPITAL ACCOUNTS
    	
3
    
	
 
    	
 
    
	
 
    	
4.1
    	
Shares
    	
3
    
	
 
    	
4.2
    	
Capital Contributions
    	
4
    
	
 
    	
4.3
    	
Nature Of Interests
    	
4
    
	
 
    	
4.4
    	
Capital Accounts
    	
4
    
	
 
    	
4.5
    	
Negative Capital   Accounts
    	
5
    
	
 
    	
4.6
    	
No Withdrawal
    	
5
    
	
 
    	
4.7
    	
Redemption of Preferred   Shares
    	
5
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 5   ALLOCATIONS AND DISTRIBUTIONS
    	
6
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1
    	
Allocations of Profit   and Loss
    	
6
    
	
 
    	
5.2
    	
Tax Allocations
    	
8
    
	
 
    	
5.3
    	
Distributions
    	
9
    
	
 
    	
5.4
    	
Tax Distributions
    	
10
    
	
 
    	
5.5
    	
Withholding
    	
10
    
	
 
    	
5.6
    	
Tax Treatment
    	
11
    
	
 
    	
 
    	
 
    	
 
    
	
ARTICLE 6   MANAGEMENT OF COMPANY
    	
11
    
	
 
    	
 
    
	
 
    	
6.1
    	
Management
    	
11
    
	
 
    	
6.2
    	
Protective Provisions
    	
12
    
	
 
    	
6.3
    	
Limitations on the   Company’s Activities; Separateness Provisions
    	
12
    
	
 
    	
 
    
	
ARTICLE 7   RESTRICTIONS ON TRANSFER
    	
15
    
	
 
    	
 
    
	
 
    	
7.1
    	
Restrictions on   Transfer
    	
15
    
	
 
    	
 
    
	
ARTICLE 8   LIABILITY AND EXCULPATION; INDEMNIFICATION; CERTAIN COVENANTS
    	
15
    
	
 
    	
 
    
	
 
    	
8.1
    	
Liability
    	
15
    
	
 
    	
8.2
    	
Exculpation
    	
15
    

 

i

 

TABLE OF CONTENTS

(continued)

 

	
 
    	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.3
    	
Tax Matters Partner
    	
16
    
	
 
    	
8.4
    	
Nature of Rights
    	
16
    
	
 
    	
 
    
	
ARTICLE 9   DISSOLUTION, LIQUIDATION AND TERMINATION
    	
16
    
	
 
    	
 
    
	
 
    	
9.1
    	
No Dissolution
    	
16
    
	
 
    	
9.2
    	
Events Causing   Dissolution
    	
16
    
	
 
    	
9.3
    	
Liquidation
    	
16
    
	
 
    	
9.4
    	
Termination
    	
17
    
	
 
    	
9.5
    	
Claims of the Members
    	
17
    
	
 
    	
 
    
	
ARTICLE 10   MISCELLANEOUS
    	
17
    
	
 
    	
 
    
	
 
    	
10.1
    	
Governing Law
    	
17
    
	
 
    	
10.2
    	
Submission to Jurisdiction;   Waiver
    	
17
    
	
 
    	
10.3
    	
Waiver Of Jury Trial
    	
17
    
	
 
    	
10.4
    	
Equitable Remedies;   Failure to Pursue Remedies
    	
18
    
	
 
    	
10.5
    	
Cumulative Remedies
    	
18
    
	
 
    	
10.6
    	
Fees and Expenses
    	
18
    
	
 
    	
10.7
    	
Binding Effect
    	
18
    
	
 
    	
10.8
    	
Notices
    	
19
    
	
 
    	
10.9
    	
Severability
    	
20
    
	
 
    	
10.10
    	
Pronouns
    	
20
    
	
 
    	
10.11
    	
Counterparts; Facsimile   Signatures
    	
20
    
	
 
    	
10.12
    	
Article and   Section Headings and References
    	
20
    
	
 
    	
10.13
    	
Integration; Entire   Agreement
    	
20
    
	
 
    	
10.14
    	
Amendments
    	
20
    
	
 
    	
10.15
    	
Aggregation of Shares
    	
21
    

 

ii

 

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
 OF
 PES INVENTORY COMPANY, LLC

 

This Amended and Restated Limited Liability Company Agreement of PES Inventory Company, LLC, a Delaware limited liability company (the “Company”), is made as of October 7, 2014, by and among the Members listed on the signature pages hereto.  Unless defined elsewhere in this Agreement, capitalized terms used herein are defined in Section 1.1 hereof.

 

RECITALS

 

WHEREAS, a Certificate of Formation of the Company was executed and filed with the Delaware Secretary on September 5, 2014, thereby forming the Company as a limited liability company under and pursuant to the Act;

 

WHEREAS, PES Holdings, LLC, as the initial Common Member (the “Initial Common Member”), has entered into that certain Limited Liability Company Agreement of the Company, dated as of September 5, 2014 (the “Initial Agreement”);

 

WHEREAS, on the date hereof, prior to the consummation of the other transactions contemplated by the Transaction Documents, the Initial Common Member transferred to BTO Commodities L.P. (the “Successor Common Member”) all of the Membership Interests in the Company; and

 

WHEREAS, the Successor Common Member desires to amend and restate the Initial Agreement in its entirety as set forth in this Agreement to, among other things: (i) restate the capital structure of the Company and admit new Members in connection with the transactions contemplated by the Transaction Documents; (ii) provide for the management of the Company; (iii) set forth the rights and obligations of the Members; (iv) continue the Company as a limited liability company in accordance with the Act; and (v) continue the Company as a bankruptcy remote, single purpose entity.

 

NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINED TERMS

 

1.1          Definitions.  Unless the context otherwise requires, the terms defined in Exhibit A attached hereto shall, for the purposes of this Agreement, have the meanings therein specified.

 

1.2          Headings.  The headings and subheadings in this Agreement are included for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.

 

1

 

ARTICLE 2

 

CONTINUATION AND ORGANIZATION

 

2.1          Continuation and Name.  The Company shall continue as a limited liability company under the Act for the purposes hereinafter set forth.  The rights and obligations of the Members and the administration and termination of the Company shall be governed by this Agreement and the Act.  This Agreement shall be considered the “Limited Liability Company Agreement” of the Company within the meaning of Section 18-101(7) of the Act.  In the event of any inconsistency between any terms and conditions contained in this Agreement and any non-mandatory provisions of the Act, the terms and conditions contained in this Agreement shall govern. Each Person identified as a Member on Schedule A on the date hereof is admitted to the Company as a Member upon its execution of this Agreement.  The name of the Company is “PES Inventory Company, LLC”.  All Company business shall be conducted in the name of “PES Inventory Company, LLC”.

 

2.2          Principal Place of Business; Other Places of Business.  The principal office of the Company is 1735 Market Street, Philadelphia, PA 19103, and may be changed to such other place within or without the State of Delaware as may be determined from time to time by the Managing Member.  The Company may maintain offices and places of business at such other place or places within or without the State of Delaware as may be determined from time to time by the Managing Member.

 

2.3          Registered Office and Registered Agent.  The Company’s registered agent and office shall be The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.  The Company may change its registered agent or registered office to any other place or places in the State of Delaware as may be determined from time to time by the Managing Member.

 

2.4          Term.  The term of the Company commenced with the filing of the Certificate of Formation with the Delaware Secretary and shall continue until the Company is dissolved and all of its assets are liquidated in accordance with the provisions of this Agreement.  Notwithstanding the dissolution of the Company, the existence of the Company shall continue until its termination pursuant to this Agreement.

 

2.5          No State Law Partnership.  The Members intend that the Company (a) shall be taxed as a “disregarded entity” or a partnership for all applicable federal and, to the extent applicable, state and local income tax purposes, and (b) shall not be a partnership or joint venture for any other purpose, and that no Member shall, by virtue of this Agreement, be a partner or joint venturer of any other Member.

 

2.6          Ownership of Company Property.  All property acquired by the Company, real or personal, tangible or intangible, shall be owned by the Company as an entity and no Member, individually, shall have any ownership interest therein solely due to its capacity as a Member.

 

2

 

ARTICLE 3

 

PURPOSE AND POWERS OF THE COMPANY

 

3.1          Purpose.  The Company is formed for the object and purpose of (a) engaging in the Secured Prepay Transactions contemplated by the Transaction Documents and in activities related or incidental thereto or in anticipation thereof; (b) executing and delivering, and performing its obligations under the Transaction Documents; and (c) engaging in any lawful act or activity and exercising any powers permitted to limited liability companies organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above-mentioned purposes.

 

ARTICLE 4

 

SHARES, CAPITAL CONTRIBUTIONS, NATURE OF INTERESTS AND ESTABLISHMENT OF CAPITAL ACCOUNTS

 

4.1          Shares.

 

(a)         There are hereby established and authorized for issuance the following Membership Interests:

 

(i)            1,000 Common Shares, of which as of the date hereof all are issued and outstanding (the “Common Shares”);

 

(ii)           150,000 Preferred Shares, of which as of the date hereof all are issued and outstanding (the “Preferred Shares”);

 

(iii)          150,000 Class B Preferred Shares, of which as of the date hereof none are outstanding (the “Class B Preferred Shares”); and

 

(iv)          1 Class G Share, which as of the date hereof is issued and outstanding (the “Class G Share”).

 

All of the issued and outstanding Shares as of the date hereof are held by the Persons and in the amounts set forth on Schedule A. No Equity Interest shall be issued unless they have been authorized for issuance by the Company under the terms of this Agreement. The number of authorized Shares of any one or more classes of Shares set forth above available for issuance may be increased from time to time upon approval of the Managing Member and the approval of a majority of each other class of Shares outstanding, voting individually as a class; provided that at the sole direction and discretion of the holder of the Class G Share, and without the consent of any other Member or holders of Shares, the Managing Member will cause the Company to issue Class B Preferred Shares in connection with a Strategic Call or a Class G Share Call, such Class B Preferred Shares to have the ranking, liquidation preference and other rights, terms and conditions as set forth in Schedule B.

 

(b)         Certificates.  Unless otherwise determined by the Managing Member, the Shares shall not be certificated.

 

3

 

4.2          Capital Contributions.

 

(a)         The holders of Common Shares and the Class G Share have, as of the date hereof, made capital contributions to the Company in the amounts set forth on Schedule A.  The holders of Preferred Shares listed on Schedule A as of the date hereof have purchased the Preferred Shares from the Company for an aggregate purchase price of $150,000,000.00.

 

(b)         No Member shall be required to make any additional Capital Contribution to the Company, unless otherwise mutually agreed to by the Company and such Member.

 

(c)         Each Member, severally with respect to such Member, represents and warrants to the Company that the following statements are true and complete as of the date of this Agreement:

 

(i)            Such Member, if not a natural person, is duly incorporated, organized or formed, validly existing and in good standing under the laws of its state or country of incorporation, organization or formation (as the case may be).  Such Member has the requisite power and authority to own its property and to carry on its business as now conducted, to the extent material to its rights and obligations under this Agreement.

 

(ii)           The execution, delivery and performance by such Member of this Agreement, and the consummation by such Member of the transactions contemplated hereby, have been duly authorized by all necessary action on the part of such Member.  Such Member has the full right, power and authority to enter into, execute and deliver this Agreement, and to perform his, her or its obligations hereunder.  This Agreement has been duly executed and delivered by such Member and constitutes the valid and binding obligation of such Member, enforceable against him, her or it in accordance with its terms.

 

(iii)          Such Member is not party to, subject to or bound by any agreement or any judgment, order, writ, prohibition, injunction, decree, award or other requirement of any governmental entity that would prevent the execution or delivery of this Agreement.  The execution and delivery by such Member of this Agreement does not, and the performance of this Agreement will not, (a) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, or require any notice, consent or waiver under, any certificate or articles of incorporation or bylaws or other governing documents of such Member or any of its Affiliates or any material contract, instrument or other agreement to which such Member or any of its Affiliates is a party (either with the Company or with another Person) or to which such Member or any of its Affiliates may be bound or subject, (b) violate any fiduciary or confidential relationship or (c) conflict with or violate the provisions of any applicable laws or regulations or any order of any governmental entity.

 

4.3          Nature Of Interests.  The Shares shall for all purposes be personal property.  No Member has any interest in specific Company property.  Each Member hereby waives any and all rights such Person may have to initiate or maintain any suit or action for partition of the Company’s assets.

 

4.4          Capital Accounts.  An individual Capital Account shall be established and maintained for each Member in accordance with the rules of Treasury Regulations Section

 

4

 

1.704-1(b)(2)(iv).  Each Member’s Capital Account shall be increased by (i) the amount of money contributed by such Member to the Company, (ii) the Gross Asset Value of property contributed by such Member to the Company (net of liabilities secured by the contributed property that the Company is considered to assume or take subject to under Section 752 of the Code, and (iii) allocations to such Member of Profits (and any items in the nature of income or gain separately allocated to such Member).  Each Member’s Capital Account shall be decreased by (i) the amount of money distributed to such Member by the Company, (ii) the Gross Asset Value of property distributed to such Member by the Company (net of liabilities secured by the distributed property that the Member is considered to assume or take subject to under Section 752 of the Code), and (iii) allocations to such Member of Losses (and any items in the nature of losses or deductions separately allocated to such Member).  The Capital Accounts also shall be maintained and adjusted as permitted by the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4).  On the transfer of all or a portion of a Member’s Shares, the Capital Account of the transferor that is attributable to the transferred Shares shall carry over to the transferee Member in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(1).

 

4.5          Negative Capital Accounts.  No Member shall be required to pay to any other Member or the Company any deficit or negative balance that may exist from time to time in such Member’s Capital Account (including upon and after dissolution of the Company).

 

4.6          No Withdrawal.  No Member shall be entitled to resign from the Company or withdraw all or any portion of such Member’s Capital Contributions or the balance of such Member’s Capital Account, or to receive any distribution from the Company, except as contemplated by the Preferred Terms.

 

4.7          Redemption of Preferred Shares.  The Managing Member will, at the sole direction and discretion of the holder of the Class G Share, issue a notice of redemption of the Preferred Shares pursuant to a Strategic Call, a Class G Share Call or a Make-Whole Call, provided that the holder of the Class G Share shall not direct the Managing Member to issue any such notice unless the holder of the Class G Share has either (i) arranged for the subscription by a person that is not a Financial Sponsor of Class B Preferred Shares resulting in net proceeds (together with any amounts committed to be contributed by the holder of the Class G Share to the Company) sufficient to exercise such Strategic Call, Class G Share Call or Make-Whole Call, as applicable or (ii) committed, prior to or concurrently with the applicable redemption, to contribute amounts to the Company sufficient to exercise such Strategic Call, Class G Share Call or Make-Whole Call, as applicable.  For the avoidance of doubt, no redemption of Preferred Shares directed by the holder of the Class G Share shall be consummated unless the holders of the Preferred Shares to be redeemed pursuant thereto receive the full amount to which they are entitled pursuant to the Preferred Terms.

 

5

 

ARTICLE 5

 

ALLOCATIONS AND DISTRIBUTIONS

 

5.1          Allocations of Profit and Loss.  Except as otherwise provided in this Article 5, Profits and Losses for each Fiscal Year shall be allocated to the Members as set forth below in this Section:

 

(a)         Subject to Sections 5.1(b) and (c), Profits or Losses for each Fiscal Year shall be allocated to the Members in amounts that would result, to the greatest extent possible, in Capital Account balances for each Member being equal to the amount required to be distributed pursuant to Section 5.3(a) to such Member in accordance with the priority and manner provided therein on a hypothetical liquidation of the Company.  In determining the amounts distributable to the Members under Section 5.3(a) upon a hypothetical liquidation, it shall be presumed that (i) all of the Company’s remaining assets are sold at their respective values reflected on the books of account of the Company, determined in accordance with Section 704(b) of the Code and the Treasury Regulations thereunder (“Book Value”), without further adjustment, (ii) all Company liabilities are satisfied (limited with respect to each nonrecourse liability to the Gross Asset Value of the asset securing such liability), and (iii) the proceeds of such hypothetical sale are applied and distributed in accordance with Section 5.3(a) hereof.

 

(b)         The Losses allocated in accordance with Section 5.1(a) shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal Year.  All Losses in excess of such limitation shall be allocated to the Members who would not have an Adjusted Capital Account Deficit as a result of such allocation (pro rata in proportion to the excess of each such Member’s Capital Account balance over the amount of such allocations that would cause such Member to have an Adjusted Capital Account Deficit).  Any Losses allocated pursuant to this Section 5.1(b) shall be reversed with an allocation of Profits prior to any allocations pursuant to Section 5.1(a), in the reverse order as such Losses was allocated.

 

(c)         Special Allocations.

 

(i)            Qualified Income Offset.  In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (d)(5) or (d)(6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 5.1(c)(i) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Article 5 have been tentatively made as if this Section 5.1(c)(i) were not a term of this Agreement.  This Section 5.1(c)(i) is intended to constitute a “qualified income offset” provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

(ii)           Gross Income Allocation.  In the event any Member has a Capital Account Deficit at the end of any Fiscal Year, each such Member shall be specially allocated

 

6

 

items of Company income and gain in the amount of such Adjusted Capital Account Deficit as quickly as possible, provided that an allocation pursuant to this Section 5.1(c)(ii) shall be made if and only to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 5.1(c) have been tentatively made as if this Section 5.1(c)(ii) and Section 5.1(c)(i) hereof were not in the Agreement.

 

(iii)          Minimum Gain Chargeback.  If there is a net decrease in Company Minimum Gain during a Company taxable year, then each Member shall be allocated items of Company income and gain for such taxable year (and, if necessary, for subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g)(2).  This Section 5.1(c)(iii) is intended to comply with the minimum gain chargeback requirement of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(iv)          Member Minimum Gain Chargeback.  If there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Company taxable year, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such taxable year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in a manner consistent with the provisions of Regulations Section 1.704-2(g)(2).  This Section 5.1(c)(iv) is intended to comply with the partner nonrecourse debt minimum gain chargeback requirement of Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(v)           Certain Additional Adjustments.  To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

(vi)          Nonrecourse Deductions.  The Nonrecourse Deductions for each taxable year of the Company shall be allocated to the Common Members in proportion to their Common Shares.

 

(vii)         Member Nonrecourse Deductions.  The Member Nonrecourse Deductions shall be allocated each year to the Member that bears the economic risk of loss (within the meaning of Regulations Section 1.752-2) for the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations section 1.704-2(i)(1).

 

7

 

(viii)        Curative Allocations.  The allocations set forth in Sections 5.1(b) and 5.1(c)(i) through (vii) hereof (collectively, the “Regulatory Allocations”) are intended to comply with requirements of the Treasury Regulations. It is the intent of the parties hereto that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 5.1(c)(viii). Therefore, notwithstanding any other provision of Article 5 (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account such Member would have had if the Regulatory Allocations were not terms of this Agreement and all Company items were allocated pursuant to Section 5.1.

 

(ix)          Allocations of Withholding.  To the extent the Company receives (or is deemed to receive) an amount of income that is net of any withholding tax, (i) such income shall be allocated among the Members as if the Company received the gross amount of such income before giving effect to the payment of the withholding tax and (ii) any resulting tax credit shall be allocated among the Members in proportion to such Member’s allocated share of income or withholding amount (including income allocated pursuant to Section 704(c) of the Code) to which the credit or withholding amount relates.

 

5.2          Tax Allocations.

 

(a)         Generally.  Except as otherwise provided in this Section 5.2, taxable income and loss and all items thereof shall be allocated to the Members to the greatest extent practicable in a manner consistent with the manner set forth in Section 5.1 and Sections 704(b) and (c) of the Code.  Allocations pursuant to this Section 5.2 are solely for federal income tax purposes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Profits and Losses, other items or distributions pursuant to any provision of this Agreement.  For avoidance of doubt, no item of income or loss shall be allocated to Members holding Class G Shares.

 

(b)         Section 704(c) of the Code.  In accordance with Section 704(c) of the Code, income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for income tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value.

 

(c)         Adjustments under Section 704(c) of the Code.  In the event the Gross Asset Value of any Company asset is adjusted pursuant to paragraph (b) of the definition of “Gross Asset Value,” subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted tax basis of such asset and its Gross Asset Value in the same manner as, but not necessarily under the same convention(s) or method(s) specifically used by the Company for its allocations made or to be made, under Section 704(c) of the Code and Treasury Regulations thereunder.

 

8

 

(d)         Decisions Relating to Section 704(c) of the Code.  Any elections or other decisions relating to allocations under this Section 5.2, including the selection of any allocation method permitted under Treasury Regulation Section 1.704-3, shall be made by the Managing Member.  The Managing Member is hereby authorized to amend this Agreement as necessary to implement the method selected under Treasury Regulation Section 1.704-3.

 

(e)         Changes in Members’ Interests.  If during any Fiscal Year or other accounting period of the Company there is a change in any Member’s interest in the Company, the Managing Member shall allocate Profits or Losses to the Members in the Company in a manner that complies with the provisions of Section 706 of the Code.

 

(f)          Allocation of Non-recourse Liabilities.  Solely for purposes of determining a Member’s proportionate share of “excess non-recourse liabilities” of the Company within the meaning of Treasury Regulations Section 1.752-3(a)(3), the members’ interests in the Company profits are in proportion to their Common Shares.

 

5.3          Distributions.

 

(a)         The Company shall make distributions (including in respect of dividends, redemptions and associated premiums and Make-Whole Amounts, if any) as and when contemplated by the Preferred Terms.  Prior to the redemption of the Preferred Shares, the Company shall not make any distributions (including payments in-kind or other non-cash distributions) on any Equity Interests other than the Preferred Shares.  Following the redemption of the Preferred Shares, the Company may make distributions to the Common Shares at such times and in such amounts as the Managing Member in its sole discretion may determine.  The Class G Share shall not be entitled to any distributions from the Company, other than pursuant to Section 5.3(d) below.

 

(b)         Fees and Expenses. For the avoidance of doubt, if any fees are paid, or expenses are paid or reimbursed, to a holder of Shares or its Affiliates, such amounts shall not be considered distributions for any purpose under this Section 5.3 or otherwise hereunder.

 

(c)           Dissolution and Liquidation. Upon the occurrence of a Liquidation Event, the assets of the Company shall be disbursed in the following order of priority:

 

(i)            first, to make payment of all debts and liabilities owing to creditors and the expenses of dissolution or liquidation;

 

(ii)           second, to establish such reserves as reasonably deemed by the Managing Member necessary for any contingent or unforeseen liabilities or obligations of the Company;

 

(iii)          third, as contemplated by the Preferred Terms; and

 

(iv)          fourth, any remaining amounts to the holders of the Common Shares.

 

9

 

(d)         Notwithstanding Section 5.3(a) and (c) above, in the event any money is released from the Collateral Account not for use in connection with a redemption of Preferred Shares or Class B Preferred Shares, the holder of the Class G Share (or its designee) shall be entitled to receive from such released funds an amount equal to the least of (x) the amount of money so released from the Collateral Account, (y) the aggregate (unreimbursed pursuant to this Section 5.3(d)) amount of capital contributed to the Company by or on behalf of the holder of the Class G Share to fund any concurrent or prior redemptions of Preferred Shares and (z) the amount equal to $150,000,000 minus the Liquidation Preference of the Preferred Shares then outstanding, excluding from the amount then outstanding any Preferred Shares being redeemed concurrently with such release of funds from the Collateral Account.

 

5.4          Tax Distributions.  On or before April 15th of each Fiscal Year, the Company shall distribute to each Member with respect to each Fiscal Year of the Company an amount of cash equal to the product of (a) the excess (if any) of the total amount of taxable income and gain over the total amount of losses, deductions (and credits, properly adjusted to equal the equivalent of a deduction) allocated to the Member for such Fiscal Year for federal income tax purposes (as shown on such Members’ Schedule K-1 to the Company’s IRS Form 1065) and (b) the highest aggregate applicable federal and state individual or corporate marginal tax rate applicable to any Member with respect to the type of income being taxed (adjusted for the deductibility of state and local taxes) (i.e., the same rate shall be applied to each Member). Distributions pursuant to this Section 5.4 shall be made periodically during a Fiscal Year to correspond (i) with the timing of any estimated tax payments to the Internal Revenue Service (or other taxing authority) required of the Members based on the estimation of the Company’s net taxable income for the Fiscal Year and (ii) to the first due date of the income tax return of the Members (without regard to extensions) relating to such Fiscal Year. Notwithstanding the foregoing, (i) distributions payable to a Member for a Fiscal Year under this Section 5.4 shall be reduced by any distribution made to such Member under Section 5.3 with respect to such Fiscal Year, and (ii) no distribution shall be required under this Section 5.4 with respect to any Fiscal Year with respect to taxable income or gain allocated to a Member that is characterized as a “guaranteed payment” under Treasury Regulation Section 1.707-1(c). Distributions made under this Section 5.4 to a Member shall be treated for all purposes as if such Member had received such distributions in accordance with Section 5.3(a).

 

5.5          Withholding.  Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement.  The amount of any such taxes paid by or withheld from direct or indirect receipts of the Company will be allocated among the Members as determined in good faith by the Managing Member, in accordance with applicable law.  All amounts withheld pursuant to the Code or any provision of tax laws with respect to any payment or distribution to the Members from the Company shall, at the option of the Managing Member (a) be treated as amounts distributed to the Member or Members subject to such withholding obligation in accordance with this Agreement and, accordingly, shall be credited to each Member as if such Member had received such distribution in accordance with Section 5.3(a), or (b) constitute a loan by the Company to such Member, which loan shall be repaid by such Member within 15 days after notice from the Company that such payment must be made unless: (i) the Company withholds such payment from a distribution that would otherwise be made to the

 

10

 

Member or (ii) the Managing Member determines in its sole discretion that such payment may be satisfied out of amounts determined by the Managing Member to be available therefor which would, but for such payment, be distributed to the Member.  Each Member shall provide the Company with such information as the Company reasonably requests in order to determine the amount of taxes required to be withheld with respect to such Member.

 

5.6          Tax Treatment.  Notwithstanding anything to the contrary, so long as (i) all of the Common Shares and the Preferred Shares are beneficially owned by a single owner for U.S. federal income tax purposes, (ii) there are no outstanding Class B Preferred Shares and (iii) Capital Account of members holding Class G Shares remains zero, the Members agree that the Company shall be treated as a “disregarded entity” for U.S. federal income tax purposes and provisions in this Agreement relating to or relevant to an entity treated as a partnership for U.S. federal income tax purposes shall not apply.

 

ARTICLE 6

 

MANAGEMENT OF COMPANY

 

6.1          Management.  Other than as set forth in Section 6.2 below or the Preferred Terms, the management of the Company shall be exclusively vested in the Common Member (in such capacity, the “Managing Member”), and the Company shall not have “managers” as that term is used in the Act. Other than with respect to actions set forth in Section 6.3, the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Managing Member, which shall make all decisions and take all actions for the Company. The Managing Member may, from time to time, designate one or more persons to be officers or authorized representatives of the Company (each, an “Authorized Officer”) on such terms and conditions as the Managing Member may determine.  Any authorized person so designated shall have such title and authority and perform such duties as the Managing Member may, from time to time, designate or as are normally associated with such office.  Notwithstanding the foregoing, provided that the Consulting Agreement has not been terminated and the SOA is in effect, the Managing Member designates and appoints PESRM, including such individuals from time to time designated by PESRM, to be its authorized representative under this Section 6.1 and as otherwise required under this Agreement, to carry out all of the activities required of the Managing Member under this Agreement and each of the Transaction Documents consistent with the terms hereof and of the Consulting Agreement.  The designation and appointment set forth above is coupled with an interest and is revocable only following the occurrence and continuance of an event of default by PESRM under the Consulting Agreement.  For the avoidance of doubt, notwithstanding anything in this Agreement, the Consulting Agreement or the other Transaction Documents to the contrary, (1) PESRM is, and at all times shall be, the sole owner and operator of the Refinery (as defined in Intermediation Agreement) and all other Basic Infrastructure (as defined in the Intermediation Agreement), and (2) the Company does not, and at no time shall it, have (a) any responsibility or obligation of any nature with respect to the operation of the Refinery or any other Basic Infrastructure; or (b) any power or authority to (i) direct the activities of PESRM with respect to the Refinery or any other Basic Infrastructure or (ii) exert any control over the operation of the Refinery or any other Basic Infrastructure and (3) as the Company is not engaged in any storage, transportation, treatment or disposal of any Crude Oil or Refined Products, but only the flash title

 

11

 

receipt and delivery of Crude Oil and Refined Products at designated delivery points, PESRM is not acting as agent for the Company with respect to any storage, transportation, treatment or disposal activities (without limiting Consultant’s obligations hereunder to arrange for all receipts and deliveries of Crude Oil and Refined Products by the Company under the relevant Transactions) (as each of the foregoing undefined terms are defined as provided in the Consulting Agreement).

 

6.2          Protective Provisions.  Until the earliest to occur of (x) termination of the SOA and payment in full of all obligations owed by the Company to MLC under the Transaction Documents, (y) a Specified Default and (z) a Bankruptcy Action with respect to PESRM, the Managing Member and the Company shall not directly or indirectly take any of the actions prohibited by Section 6.3 (other than clause (xvii) thereof) without Class G Approval.  For so long as the Preferred Shares are outstanding, the Managing Member and the Company shall not directly or indirectly take any of the actions prohibited by the Preferred Protective Provisions without Preferred Approval.  Notwithstanding anything in this Agreement or the Consulting Agreement to the contrary, the approval or consent of any other Member shall not be required for the Managing Member to take any action in connection with (i) the payment or transfer of assets from the Collection Account, (ii) the pursuit or defense of any claims by or against the Company, including in respect of insurance and indemnification and (iii) the exercise of any rights of the Company under Part 10 of the Schedule to the MLC-PESIC ISDA Master Agreement or the Standby LC(1) (as defined in the Framework Agreement).

 

6.3          Limitations on the Company’s Activities; Separateness Provisions.  This Section 6.3 is being adopted in order to comply with certain provisions required in order to qualify the Company as a “special purpose” entity.  Since its formation, the Company has not and from and after the date hereof the Company will not:

 

(i)            engage in any business or activity other than to (i) to engage in the Secured Prepay Transactions contemplated by the Transaction Documents and to engage in any other activities related or incidental thereto or in anticipation thereof, (ii) to execute and deliver, and perform its obligations under the Transaction Documents, (iii) to engage in any lawful act or activity and to exercise any powers permitted to limited liability companies organized under the laws of the State of Delaware that are related or incidental to and necessary, convenient or advisable for the accomplishment of the above-mentioned purposes and (iv) to take such action as may be necessary or advisable to comply with applicable law;

 

(ii)           acquire or own any assets other than as permitted under and pursuant to the Transaction Documents;

 

(iii)          to the fullest extent permitted by law, engage in any dissolution, liquidation, consolidation, merger, sale or transfer of substantially all of its assets other than such activities as are expressly permitted pursuant to the Transaction Documents;

 

(iv)          fail to observe all organizational formalities, or fail to maintain its separate existence as an entity duly organized, validly existing and in good standing (if

 

(1)  The current draft of the Framework Agreement does not have a definition of Standby LC

 

12

 

applicable) under the applicable legal requirements of Delaware, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

 

(v)           own any subsidiary, or make any investment in or own or acquire any stock or securities of, any Person, except investments permitted under the Transaction Documents;

 

(vi)          commingle its assets with the assets of any other Person;

 

(vii)         other than expressly provided in this Agreement, incur, create or assume any debt or liabilities, secured or unsecured, direct or contingent, other than indebtedness and liabilities incurred in the ordinary course of its business pursuant to the Transaction Documents;

 

(viii)        buy or hold evidence of indebtedness issued by any other Person (other than cash or investment-grade securities);

 

(ix)          fail to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person;

 

(x)           enter into any contract or agreement with any general partner, member, shareholder, principal, guarantor of the obligations of the Company, or any affiliate of the foregoing, except upon terms and conditions that are intrinsically fair, commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with unaffiliated third parties, provided that the Transaction Documents and the transactions contemplated thereby are expressly permitted;

 

(xi)          maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(xii)         except as contemplated by the Transaction Documents, assume or guaranty any obligation of any other Person, including any affiliate, or hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

 

(xiii)        to the extent the Company is required by applicable laws to file a tax return, fail to file its own tax returns (provided, however, that so long as the Company is treated as a disregarded entity for United States federal and/or other relevant income tax purposes, the taxable income, gains, deductions and losses of the Company shall be reflected on Common Member’s tax returns for such purposes, consistent with applicable laws);

 

(xiv)        fail either to hold itself out to the public as a legal entity separate and distinct from any other Person or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

 

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(xv)         fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

 

(xvi)        take, or permit to be taken, any action prohibited by this Section 6.3 without prior Class G Approval;

 

(xvii)       take or permit to be taken any action in violation of the Preferred Protective Provisions without Preferred Approval;

 

(xviii)      fail to fairly and reasonably allocate shared expenses (including, without limitation, shared office space and services performed by an employee of an affiliate) among the Persons sharing such expenses and to use separate stationery, invoices and checks;

 

(xix)        fail to remain solvent or pay its own liabilities (including, without limitation, salaries of its own employees, if any) only from its own funds;

 

(xx)         acquire obligations or securities of its partners, members, shareholders or other affiliates, as applicable;

 

(xxi)        fail to maintain a sufficient number of employees (if any) in light of its contemplated business operations;

 

(xxii)       take any actions that involve the making of any investment or the consummation of any acquisition or divestiture of assets other than as expressly contemplated by the Transaction Documents;

 

(xxiii)      take any actions that involve any transaction, agreement, arrangement or understanding between the Company, on the one hand, and MLC, PESRM or any of their Affiliates, on the other hand, except as expressly contemplated by the Transaction Documents;

 

(xxiv)     enter into any third party contracts, other than (a) the PESIC Secured Prepay Transaction Documents (as defined in the Framework Agreement) and (b) contracts contemplated under the Consulting Agreement as of the date hereof, with the consent of the Class G Member;

 

(xxv)      take any actions that involve any amendment, waiver or termination of any Transaction Document;

 

(xxvi)     take any actions that create (by reclassification or otherwise) or issue any Equity Interests having rights, preferences or privileges senior to or on a parity with the Preferred Shares other than the Class B Preferred Shares;

 

(xxvii)    take any actions that result in the repurchase, redemption or other acquisition of any Equity Interests of the Company other than as contemplated or permitted by the Preferred Terms; or

 

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(xxviii)   create any lien over the Company’s assets except as expressly contemplated by the Transaction Documents.

 

ARTICLE 7

 

RESTRICTIONS ON TRANSFER

 

7.1          Restrictions on Transfer(i).  (a) Except as otherwise provided elsewhere in this Agreement (including the Preferred Terms), no Member may Transfer all or any part of the Shares held by it to any Person without the consent of the other Members; provided that (i) without such approval, a holder of Preferred Shares or Common Shares may Transfer all or any part of its Preferred Shares or Common Shares (x) to an Affiliate of such holder and (y) to any Person following the occurrence of a Specified Default or a Bankruptcy Action with respect to PESRM, and (ii) without such approval, the holder of the Class G Share may Transfer its Class G Share to an Affiliate of such holder.

 

(b)         Notwithstanding any provision of this Agreement to the contrary, at any time that no Preferred Shares are owned by BTO Commodities L.P. or an Affiliate thereof, if a Bankruptcy Action has not occurred with respect to PESRM, the holder of the Class G Share shall purchase, and the Common Member shall sell, all of the Common Shares for an amount equal to the greater of (x) the aggregate equity contributed by the Common Member and (y) $1.00.

 

ARTICLE 8

 

LIABILITY AND EXCULPATION; INDEMNIFICATION; CERTAIN COVENANTS

 

8.1          Liability.  Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person.

 

8.2          Exculpation.

 

(a)         To the fullest extent permitted by applicable law, no Covered Person shall be liable to the Company, any Members, or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, unless such Covered Person shall have been found guilty of gross negligence, willful misconduct or fraud, or have been found to be in material breach of this Agreement, in each case with respect to such acts or omissions by a court of competent jurisdiction.  This Section 8.2(a) shall not reduce or limit the contractual liability of a Covered Person for breach of any other agreement with the Company or any affiliate of the Company to which the Covered Person is a party.

 

(b)         A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such

 

15

 

other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, Profits, Losses or income or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid.  Without limiting the foregoing, neither the Company nor any Covered Person shall have any liability with respect to any valuations performed pursuant to this Agreement, and shall be fully protected in relying in good faith upon the records of the Company and upon information, opinions, reports or statements presented to the Company by any person as to matters which the Company or such Covered Person reasonably believes are within such other Person’s professional or expert competence.

 

8.3          Tax Matters Partner.  The Managing Member shall appoint a “Tax Matters Partner” of the Company for purposes of Section 6231(a)(7) of the Code, who shall have the power and authority, subject to the review and control of the Managing Member, to manage and control, on behalf of the Company, any administrative proceeding involving the Company with the Internal Revenue Service relating to the determination of any item of Company income, gain, loss, deduction or credit for federal income tax purposes.  Any Person serving as the Tax Matters Partner may be removed by the Managing Member and the Managing Member may appoint another Person permitted to serve in such position under the Treasury Regulations to serve as Tax Matters Partner at any time.

 

8.4          Nature of Rights.  The rights set forth in this Article 8 are contractual in nature and may not be revised as applied to prior actions of a Covered Person by a subsequent amendment of this Agreement without such Covered Person’s prior written approval.

 

ARTICLE 9

 

DISSOLUTION, LIQUIDATION AND TERMINATION

 

9.1          No Dissolution.  Only the events set forth in Section 9.2 hereof shall cause the dissolution of the Company.  The Company shall not be dissolved by the admission of additional or substitute Members in accordance with the terms of this Agreement.

 

9.2          Events Causing Dissolution.  Subject to Section 6.2, the Company shall be dissolved and its affairs shall be wound up upon:

 

(a)         approval by the Managing Member, Preferred Approval and Class G Approval; or

 

(b)         upon the entry of a decree of judicial dissolution under the Act.

 

Any other provision of this Agreement to the contrary notwithstanding, no withdrawal, assignment, removal, bankruptcy except as required by applicable law, insolvency except as required by applicable law, death, incompetency, termination, dissolution or distribution with respect to any Member or any Share will effect a dissolution of the Company.

 

9.3          Liquidation.  Upon dissolution of the Company, the Managing Member may appoint one or more Persons to carry out the winding up of the Company (such Person(s) if

 

16

 

appointed, or the Managing Member if no such Person(s) are so appointed, being referred to as the “Liquidating Trustee(s)”), which Liquidating Trustee(s) shall immediately commence to wind up the Company’s affairs in an orderly fashion.  The proceeds of liquidation shall be disbursed in accordance with this Agreement.

 

9.4          Termination.  The Company shall terminate when all of the assets of the Company, after payment of or due provision for all debts, liabilities and obligations of the Company, have been distributed as provided in Section 5.3(c).

 

9.5          Claims of the Members.  The Members and former Members shall look solely to the Company’s assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Members and former Members shall have no recourse against the Company or any other Member with respect to such Capital Contributions.

 

ARTICLE 10

 

MISCELLANEOUS

 

10.1        Governing Law.  This Agreement (including any claim or controversy arising out of or relating to this Agreement) shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the laws of the State of Delaware.

 

10.2        Submission to Jurisdiction; Waiver.  Each party irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement or for recognition and enforcement of any judgment in respect hereof brought by another party hereto or its successors or assigns shall be brought and determined in the courts of the State of Delaware and the United States District Court for the District of Delaware, as well as to the jurisdiction of all courts to which an appeal may be taken from such courts, and each party hereby irrevocably submits with regard to any action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts.  Each party hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (c) to the fullest extent permitted by applicable law, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper and (iii) this Agreement or the subject matter hereof, may not be enforced in or by such courts.

 

10.3        Waiver Of Jury Trial.  EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY

 

17

 

ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.3.

 

10.4        Equitable Remedies; Failure to Pursue Remedies.  The parties hereto agree that irreparable harm may occur in the event that any of the agreements and provisions in this Agreement, specifically including, but without limitation, Article 7 hereof, were not performed fully by the parties hereto in accordance with their specific terms or were otherwise breached, and that money damages may be an inadequate remedy for breach hereof because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or is otherwise breached.  It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the Company and the other parties hereto and to enforce specifically such terms and provisions of this Agreement against the Company and other parties hereto, as applicable, in any court of the United States or any state having jurisdiction, such remedy being in addition to and not in lieu of, any other rights and remedies to which the parties are entitled to hereunder and at law or in equity.

 

10.5        Cumulative Remedies.  The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.  Except where a time period is otherwise specified, no delay on the part of any party in the exercise of any right, power, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any exercise or partial exercise of any such right, power, privilege or remedy preclude any further exercise thereof or the exercise of any right, power, privilege or remedy.

 

10.6        Fees and Expenses.  If any legal action, including, without limitation, an action for injunctive relief, is brought by a Member to enforce its rights under this Agreement and such Member prevails in such legal action, such Member shall be entitled to receive from the Company all attorneys’ fees and disbursements, and all other costs and expenses paid or incurred by or on behalf of such Member in connection with such action or proceeding and in connection with enforcing any judgment or order with respect to such matter; provided, that this provision shall not apply to claims brought by the holder of the Class G Shares in respect of actions or omissions of the Consultant under the Consulting Agreement.

 

10.7        Binding Effect.  This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, legal representatives and assigns.

 

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10.8        Notices.

 

(a)         All demands, notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by electronic mail or facsimile machine (with a confirmation copy sent by one of the other methods authorized in this Section), generally recognized receipted overnight courier (including FedEx) or U.S. Postal Service overnight delivery service, or, deposited with the U.S. Postal Service mailed first class, registered or certified mail, postage prepaid, as set forth below:

 

If to the Company, addressed to:

 

PESIC Inventory Company, LLC
 1735 Market Street
 Philadelphia PA 19103
 Attention: Treasury Department
 Fax: 877-846-3802
 Email: treasury@pes-companies.com

 

With copies to:

 

The Blackstone Group LP

345 Park Avenue

New York NY 10154

Attention: Daniel Lee, SVP, Senior Vice President

Email:  daniel.lee@blackstone.com

Fax:  212 284 7406

 

and

Morrison & Foerster LLP 
 250 West 55th Street
 New York, New York 10019

Attn.:  David H. Kaufman
 Phone:  (212) 468-8237

Fax:  (212) 468-7900
 E-mail: dkaufman@mofo.com

 

(b)         If to any Member, at its address set forth on Schedule A hereto.

 

(c)         Notices shall be deemed given upon the earlier to occur of (i) receipt by the party to whom such notice is directed; (ii) if sent by electronic mail or facsimile machine, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) such notice is sent if sent (as evidenced by the facsimile confirmed receipt) prior to 5:00 p.m. U.S. Eastern Time and, if sent after 5:00 p.m. U.S. Eastern Time, on the day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) after which such notice is sent; (iii) on the first day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following the day the same is deposited with the courier if sent by generally recognized receipted overnight courier; or (iv) the fifth day (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such notice is directed) following

 

19

 

deposit thereof with the U.S. Postal Service as aforesaid.  Each party, by notice duly given in accordance therewith, may specify a different address for the giving of any notice hereunder.

 

10.9        Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

10.10      Pronouns.  Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

 

10.11      Counterparts; Facsimile Signatures.  This Agreement may be executed in any number of counterparts each of which shall be deemed to be an original, and all of which shall constitute one and the same document.  This Agreement may be executed and delivered by Electronic Transmission.

 

10.12      Article and Section Headings and References.  The Article and Section headings are for the convenience of the parties and in no way alter, modify, amend, limit or restrict the contractual obligations of the parties.  Any reference in this agreement to a particular Article, Section or Subsection shall refer to an Article, Section or Subsection of this Agreement, unless specified otherwise.

 

10.13      Integration; Entire Agreement.  This Agreement constitutes the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, written or oral, relating to such subject matter.

 

10.14      Amendments.  Except as otherwise specified herein, this Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by Members holding a majority of each class of Shares then outstanding, each voting separately as a single class (except for amendments in connection with the issuance of Class B Preferred Shares).  Notwithstanding the foregoing:

 

(a)         this Agreement may not be amended or terminated and the observance of any term of this Agreement may not be waived with respect to any Preferred Member or Common Member without the written consent of such Preferred Member or Common Member unless such amendment, termination or waiver applies to all Preferred Members or Common Members, as the case may be, in the same fashion, provided that, the rights set forth in Article 10 are contractual in nature and may not be revised as applied to prior actions of a Covered Person by a subsequent amendment of this Agreement without such Covered Person’s prior written approval; provided, further, that increasing or decreasing the number of authorized Common Shares or issuing additional Common Shares shall not require the separate approval or consent of Common Members;

 

(b)         any provision hereof may be waived by the waiving party on such party’s own behalf, without the consent of any other party; and

 

20

 

(c)                            Schedule A hereto may be amended by the Company from time to time in order to update and reflect (i) information regarding additional Members admitted to the Company, (ii) the issuance of Shares effected in compliance with the terms of this Agreement, and (iii) the Transfer of Shares effected in compliance with the terms of this Agreement and any other agreement referenced herein containing restrictions on Member Transfers, in each case where such admittance, Transfer or issuance has been made in accordance with the terms hereof, including the Preferred Terms and the Class G Terms.

 

The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto.  Any amendment, termination or waiver effected in accordance with this Section 10.14 shall be binding on each Member and all of such Member’s successors and permitted assigns, whether or not any such Member, successor or assignee entered into or approved such amendment, termination or waiver.

 

10.15                 Aggregation of Shares.  All Shares held or acquired by Affiliated Persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

 

[Remainder of page intentionally left blank.]

 

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

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
PES   INVENTORY COMPANY, LLC
    
	
 
    	
 
    
	
 
    	
By:   BTO COMMODITIES L.P., as Managing Member
    
	
 
    	
 
    
	
 
    	
By:   BTO Commodities Manager L.L.C., as general partner of BTO Commodities L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christopher J. James
    
	
 
    	
Name:
    	
Christopher   J. James
    
	
 
    	
Title:
    	
Senior   Managing Member
    

 

 

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

 

	
 
    	
MEMBERS:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PES HOLDINGS, LLC
    
	
 
    	
as holder of Class G Share
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   John B. McShane
    
	
 
    	
Name:
    	
John   B. McShane
    
	
 
    	
Title:
    	
General   Counsel and Secretary
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BTO COMMODITIES L.P.
    
	
 
    	
as Common Member
    
	
 
    	
 
    
	
 
    	
By: BTO Commodities Manager   L.L.C.,
    
	
 
    	
as general partner of BTO   Commodities L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christopher J. James
    
	
 
    	
Name:
    	
Christopher   J. James
    
	
 
    	
Title:
    	
Senior   Managing Director
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
BTO COMMODITIES L.P.
    
	
 
    	
as Preferred Member
    
	
 
    	
 
    
	
 
    	
By: BTO Commodities Manager   L.L.C.,
    
	
 
    	
as general partner of BTO   Commodities L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Christopher J. James
    
	
 
    	
Name:
    	
Christopher   J. James
    
	
 
    	
Title:
    	
Senior   Managing Director
    

 

 

Schedule A

 

Company Capitalization Table

 

	
Member
    	
 
    	
Class and No. of Shares
    	
 
    	
Capital Contribution
    	
 
    	
Address
    
	
Common Member
    	
 
    	
1,000 Common Shares
    	
 
    	
$
    	
1,000
    	
 
    	
(1)
    
	
Class G Member
    	
 
    	
1 Class G Share
    	
 
    	
$
    	
0
    	
 
    	
To the address set forth for the Consultant in the   Consulting Agreement
    
	
Preferred Member
    	
 
    	
150,000 Preferred Shares
    	
 
    	
$
    	
150,000,000
    	
 
    	
(1)
    

 

(1)  The address of the Common Member and the Preferred Member is:

 

c/o The Blackstone Group LP

345 Park Avenue

New York NY 10154

Attention: Daniel Lee, , Senior Vice President

Email:  daniel.lee@blackstone.com

Fax:  212 284 7406

 

 

Schedule B

 

Preferred Shares Terms and Conditions

 

1.                                      Ranking.  The Preferred Shares shall rank, with respect to payment of dividends, distributions, redemption payments and rights (including as to the distribution of assets) upon a Liquidation Event, (i) subordinated and junior to all contractual obligations of the Company (including all obligations under the Secured Prepay Transactions and (ii) senior to all other Equity Interests in the Company.

 

2.                                      Reissuance.  Any Preferred Shares which may be redeemed, purchased or acquired by the Company shall be retired and may not be reissued.

 

3.                                      Dividends.  Each outstanding Preferred Share shall accrue, on a daily basis, dividends on the amount of the Liquidation Preference of such Preferred Share at the Applicable Rate.  The Company shall pay, on a monthly basis in advance, cash dividends on each outstanding Preferred Share in an amount equal to the dividends to be accrued during such month.  Unless otherwise notified in writing by the holder of the Preferred Shares, the Company shall pay such dividends by wire transfer to the Collection Account on the first business day of each calendar month (other than the month in which this Agreement is executed, for which such dividends shall be paid on the date hereof).  For the avoidance of doubt in no event shall dividends or other distributions in respect of the Preferred Shares be paid from funds on deposit in, or credited to, the Collateral Account.

 

4.                                      Liquidation Preference.  Upon the occurrence of a Liquidation Event, the holder of each Preferred Share shall be entitled to be paid, before any payment is made to the holder of any other Equity Interests in the Company, an amount in cash equal to the Liquidation Preference of such Preferred Share; provided, that if the assets available to make such payment are insufficient to pay such holders the full amount to which they are entitled, such payment shall be made ratably among the holders in proportion to the number of Preferred Shares owned by each such holder.

 

5.                                      Voting.  Except as otherwise provided in this Agreement or required by law, the Preferred Shares shall not have voting rights.

 

6.                                      Redemption.

 

(a)                                 Strategic Call. At any time prior to the first anniversary of the date of this Agreement, the Company shall have the right, at the direction and discretion of the holder of the Class G Share, upon at least 10 business days’ written notice delivered to the holders of Preferred Shares, to redeem all, but not less than all, of the Preferred Shares for an aggregate purchase price of (x) 1.15 times the Liquidation Preference of the Preferred Shares minus (y) the amount of dividends actually paid in respect of the Preferred Shares prior to such redemption, provided that such Strategic Call cannot be financed by a Financial Sponsor.

 

 

(b)                                 Class G Share Call.

 

i.      At any time prior the first anniversary of the date of this Agreement, concurrently with the Company’s issuance of Class B Preferred Shares, the Company shall have the right, at the sole direction and discretion of the holder of the Class G Share, to redeem up to $100,000,000 in Liquidation Preference of Preferred Shares for an aggregate purchase price equal to the net amount received by the Company from the proceeds of the issuance of such Class B Preferred Shares (and in such case the Preferred Shares so redeemed shall immediately be deemed cancelled and of no further force and effect) in exchange for the payment of a purchase price per Preferred Share redeemed equal to (x) 1.120 times the Liquidation Preference of each Preferred Share minus (y) the amount of dividends actually paid in respect of each Preferred Shares prior to such redemption, provided that such Class G Share Call cannot be financed by a Financial Sponsor.

 

ii.   The Class B Preferred Shares issued pursuant to clause (i) above shall rank, with respect to payment of dividends, distributions, redemption payments and rights (including as to the distribution of assets) upon a Liquidation Event, (i) subordinated and junior to all contractual obligations of the Company (including all obligations under the Secured Prepay Transactions) and (ii) senior to all other Equity Interests in the Company, including the Preferred Shares. The Class B Preferred Shares will have otherwise the same terms and conditions as the Preferred Shares, other than with respect to the dividend rate, provided that in no event such dividend rate shall be higher or payable more frequently than the dividend rate of the Preferred Shares.

 

(c)                                  Mandatory Redemption.  Other than in the event that the Company has exercised the Strategic Call, on the 5th day following (1)(i) the termination of the SOA (other than as contemplated by clause (2) below), (ii) the occurrence of a Specified Default or (iii) the occurrence of an MLC Default, _the Preferred Shares shall be mandatorily redeemed by the Company for an aggregate purchase price equal to the Liquidation Preference of the Preferred Shares or (2) the voluntary termination of the SOA by PESRM and MLC, the Preferred Shares shall be mandatorily redeemed by the Company for an aggregate purchase price equal to the Liquidation Preference of the Preferred Shares plus the Make-Whole Amount.

 

(d)                                 Make-Whole Call.  Following the earlier to occur of (x) a Class G Share Call pursuant to Section 6(b)(i) above and (y) the first anniversary of the date of this Agreement, the Company shall have the right, at the sole direction and discretion of the holder of the Class G Share, upon at least 10 business days’ written notice delivered to the holders of Preferred Shares, to redeem all, but not less than all, of the Preferred Shares then outstanding for an aggregate purchase price equal to the Liquidation Preference of the Preferred Shares plus the Make-Whole Amount.

 

 

(e)                                  Preferred Put.  No later than 2 Business Days after the occurrence of a Change of Control of PESRM or an Incurrence Default , the Class G Shareholder shall notify the holders of the Preferred Shares of the occurrence of such Change of Control.  Each holder of Preferred Shares shall have the right, upon written notice delivered to the Company no later than 10 days after the earlier of (i) the holder of the Class G Share has notified the holders of the Preferred Shares of the occurrence of a Change of Control or an Incurrence Default or (ii) in the absence of such notification, 10 days after the holders of the Preferred Shares have otherwise received knowledge of such Change of Control or an Incurrence Default, to deliver notice to the Company indicating in such notice that such holder is requiring the Company to redeem the Preferred Shares held by such holder, such redemption to occur no later than 60 days after the notification from the holders of the Preferred Shares to the Company, at an aggregate purchase price equal to the Liquidation Preference of the Preferred Shares so redeemed.

 

(f)                                   Maturity Redemption.  On the Maturity Date, the Company shall redeem the Preferred Shares for an aggregate purchase price equal to the Liquidation Preference of the Preferred Shares.

 

7.                                      Protective Provisions.  For so long as the Preferred Shares remain outstanding, the Managing Member and the Company shall not, without Preferred Approval, take any of the following actions, it being agreed for the avoidance of doubt that such protective provisions shall not prohibit the Company from consummating any of the redemptions contemplated by the foregoing paragraph 6 without Preferred Approval:

 

(i)                                     actions that result in the incurrence by the Company of any indebtedness or the creation of any lien over the Company’s assets except as expressly contemplated by the Transaction Documents;

 

(ii)                                  actions that involve the making of any investment or the consummation of any acquisition or divestiture of assets other than as expressly contemplated by the Transaction Documents;

 

(iii)                               actions that involve any transaction, agreement, arrangement or understanding between the Company, on the one hand, and MLC, PESRM or any of their Affiliates, on the other hand, except as expressly contemplated by the Transaction Documents;

 

(iv)                              actions that involve any amendment, waiver or termination of any Transaction Documents or entering into any other contract by or on behalf of the Company;

 

(v)                                 actions that alter or change in any respect the rights, preferences or privileges of the Preferred Shares, or increase or decrease the authorized number of Preferred Shares;

 

 

(vi)                              actions that alter, amend or waive any provision of the Company’s certificate of formation or limited liability company agreement, or any other organizational document of the Company or admit any additional Member to the Company;

 

(vii)                           actions that create (by reclassification or otherwise) or issue any Equity Interests having rights, preferences or privileges senior to or on a parity with the Preferred Shares other than the Class B Preferred Shares; provided, that no issuance of Class B Preferred Shares shall be permitted to the extent the aggregate liquidation preference of the Class B Preferred Shares would exceed $100 million;

 

(viii)                        actions that result in the repurchase, redemption or other acquisition of any Equity Interests of the Company, other than membership interests held by the Preferred Member except as expressly permitted by the foregoing paragraph 6;

 

(ix)                              actions that result in the declaration or making of any dividend or other distribution other than dividends or other distributions on the Preferred Shares and distributions contemplated by Section 5.4;

 

(x)                                 actions that result in the merger, consolidation, recapitalization reclassification, restructuring, reorganization of the Company or the filing or acquiescence in the filing of a Bankruptcy Action; or

 

(xi)                              actions that change the nature of the Company’s business.

 

 

Schedule C

 

Class G Share Terms and Conditions

 

1.                                      Ranking.  The Class G Share shall rank, with respect to payment of dividends, distributions, redemption payments and rights (including as to the distribution of assets) upon a Liquidation Event, on parity to the Common Shares.

 

2.                                      Reissuance.  Any Class G Share which may be redeemed, purchased or acquired by the Company shall be retired and may not be reissued.

 

3.                                      Dividends.  No dividends shall be payable in respect of the Class G Share.

 

4.                                      Liquidation.  The Class G Share shall not be entitled to any distribution upon the occurrence of a Liquidation Event.

 

5.                                      Voting.  The Class G Shares shall be entitled to the voting rights set forth in this Agreement.

 

6.                                      Redemption.  Upon the termination of the SOA and Consulting Agreement, the Company shall have the right to redeem the Class G Share.

 

7.                                      Protective Provisions.  Until the earliest to occur of (x) termination of the SOA and payment in full of all obligations owed by the Company to MLC under the Transaction Documents, (y) a Specified Default and (z) a Bankruptcy Action with respect to PESRM, the Managing Member and the Company shall not, without Class G Approval, directly or indirectly take any of the following actions:

 

(i)                                     actions that alter or change in any respect the rights, preferences or privileges of the Class G Share;

 

(ii)                                  actions that alter, amend or waive any provision of the Company’s certificate of formation or limited liability company agreement, or any other organizational document of the Company;

 

(iii)                               any Bankruptcy Action; or

 

(iv)                              actions that change the nature of the Company’s business.

 

 

Exhibit A

 

Definitions

 

“Act” means the Delaware Limited Liability Company Act, 6 Del. C. §18-101, et seq., as it may be amended or succeeded from time to time.

 

“Adjusted Capital Account Deficit” means, with respect to the Capital Account of any Member as of the end of any Fiscal Period, the amount by which the balance in such Capital Account is less than $0.00, after giving effect to the following adjustments:

 

(a)                                 Each Member’s Capital Account shall be increased by the amount, if any, such Member is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c) or Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

(b)                                 Each Member’s Capital Account shall be decreased by the amount of any of the items described in Treasury Regulation Sections 1.704-1 (b)(2)(ii)(d)(4), (5) and (6).

 

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

“Affiliate” means with respect to any specified Person, any other Person that directly or indirectly controls, is under common control with, or is controlled by, such specified Person and shall include without limitation (regardless of control) any current or former limited partner, general partner, managing member, manager, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management with, such Person.  As used in this definition, “control”, including, its correlative meanings, “controlled by” and “under common control with”, shall mean possession of power to direct or cause the direction of management or policies (whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise).

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement, as the same may be amended, modified, supplemented and/or restated from time to time in accordance with the terms hereof.

 

“Applicable Rate” means (x) except as contemplated by the following clause (y), (i) through the first anniversary of the date hereof, 9.00% per annum, (ii) following the first anniversary of the date hereof through the second anniversary of the date hereof, 10.50% per annum, and (iii) following the second anniversary of the date hereof, 11.00% per annum, and (y) following the incurrence of a Class G Share Call pursuant to clause 6(b)(i) of Schedule B, 15.00% per annum.

 

“Authorized Officer” has the meaning specified in Section 6.1.

 

“Bankruptcy Action” means:

 

 

(i)                                     commencing any case, proceeding or other action on behalf of the Company under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors;

 

(ii)                                  instituting proceedings to have the Company adjudicated as bankrupt or insolvent;

 

(iii)                        consenting to the institution of bankruptcy or insolvency proceedings against the Company;

 

(iv)                       filing a petition or consent to a petition seeking reorganization, arrangement, adjustment, winding-up, dissolution, composition, liquidation or other relief on behalf of the Company of its debts under any federal or state law relating to bankruptcy;

 

(v)                          seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the Company or a material portion of the Company’s properties; or

 

(vi)                       making any assignment for the benefit of the Company’s creditors.

 

“Board of Directors” means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing.

 

“Book Value” has the meaning specified in Section 5.1(a).

 

“Business Day” means any day other than a Saturday, Sunday or a legal holiday in the State of Delaware or any other day on which commercial banks in such state are authorized by law or government decree to close.

 

“Capital Account” means, with respect to any Member, the account maintained for such Member in accordance with the provisions of Section 4.4.

 

“Capital Contribution” means, with respect to any Member, the aggregate amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company pursuant to Section 4.2.

 

“Certificate of Formation” means the Certificate of Formation of the Company as originally filed with the Delaware Secretary on September 5, 2014, and as amended from time to time.”Change of Control” means, (i) prior to an IPO, with respect to a person, the occurrence, directly or indirectly, in one or more transactions, of any of the following: (a) any consolidation, merger, share issuance, transfer, exchange or similar transaction unless (x) the direct and indirect beneficial owners of such person’s capital stock or other equity interests on the date hereof hold more than 50% of the outstanding voting power of the surviving entity or more than 50% of the voting power of any general partner of such entity (or, if applicable, the ultimate parent entity

 

 

that directly or indirectly has beneficial ownership of 100% of the voting securities of the surviving entity) following such transaction (excluding from the number of voting securities held by such holders, but not from the total amount of voting securities, any voting securities of the other constituent entity in such transaction beneficially owned by them prior to such transaction) and such voting power among the holders thereof is in substantially the same proportion as in existence immediately prior to such transaction, and (y) no person or group (other than a person or group who, on the date hereof, was the direct or indirect beneficial owner of 20% or more of the outstanding voting power of such person) directly or indirectly beneficially owns 20% or more of the combined voting power of the surviving entity (or, if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of 100% of the voting securities of the surviving entity); (b) any sale, transfer, lease, exchange or other disposition of all, or substantially all, of the consolidated assets of such person; (c) any reorganization, reclassification, restructuring, recapitalization, liquidation, dissolution or similar transaction with respect to such person; or (d) the occurrence of a “change of control” as such term is defined under any note, indenture, loan, credit agreement or other financing document, of such person, and (ii) upon and following an IPO, any “person” or “group” (within the meaning of Rule 13d-5 of the Exchange Act), other than the Permitted Holders, shall “beneficially own” (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the IPO Issuer, unless (i) the Permitted Holders have, at such time, the right or the ability, directly or indirectly, by voting power, contract or otherwise to elect or designate for election at least a majority of the Board of Directors of the IPO Issuer (or the general partner of the IPO Issuer in the event of a master limited partnership as the IPO Issuer) or (ii) during any period of twelve (12) consecutive months after the Permitted Holders no longer beneficially own more than 50% of the Equity Interests in the IPO Issuer, a majority of the seats (other than vacant seats) on the Board of Directors of the IPO Issuer (or the general partner of the IPO Issuer in the event of a master limited partnership as the IPO Issuer) shall be occupied by persons who were (x) members of the Board of Directors of the IPO Issuer (or the general partner of the IPO Issuer in the event of a master limited partnership as the IPO Issuer) on the Effective Date or nominated by the Board of Directors of the IPO Issuer (or the general partner of the IPO Issuer in the event of a master limited partnership as the IPO Issuer) or by one or more Permitted Holders or persons nominated by one or more Permitted Holders or (y) appointed by directors so nominated.

 

“Class B Preferred Shares” means Membership Interests in the Company having the economic rights set forth herein with respect to the “Preferred Shares”, with the modifications specified in Section 6(b) of Schedule B.

 

“Class G Approval” means the written consent or approval of the holder of the Class G Share.

 

“Class G Protective Provisions” means the protective provisions set forth in Schedule C.

 

“Class G Share” has the meaning set forth in Section 4.1(a)(iv).

 

“Class G Terms” means the terms and conditions governing the Class G Share as set forth in Schedule C.

 

 

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

 

“Collateral Account” means the account No. 5514058400 established and maintained by the Bank of New York Mellon in the name of the Company (as the same may be redesignated, renumbered or otherwise modified), and any successor or replacement account.

 

“Collection Account” means the account No. 4481988400 established and maintained by the Bank of New York Mellon in the name of the Company (as the same may be redesignated, renumbered or otherwise modified), and any successor or replacement account.

 

“Common Member” means a Member holding Common Shares.

 

“Common Shares” means Membership Interests in the Company having the economic rights set forth herein with respect to “Common Shares,” which shall be issued as capital interests.

 

“Company” means PES Inventory Company, LLC, the Delaware limited liability company that is the subject of this Agreement.

 

“Company Minimum Gain” has the meaning set forth in Regulations Sections 1.704-2(b)(2) and 1.704-2(d)(1) for the phrase “partnership minimum gain.

 

“Consulting Agreement” means the Consulting Agreement, dated as of October 7, 2014, between the Company and PESRM.

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

 

“Controlled Investment Affiliate” means, as to any person, any other person which directly or indirectly is in Control of, is Controlled by, or is under common Control with, such person and is organized by such person (or any person Controlling such person) primarily for making equity or debt investments in PES Holdings, or, in each case other portfolio companies.

 

“Covered Person” means each Member, the current or former Tax Matters Partner (as defined in Section 6231(a)(7) of the Code), and any officer of the Company in accordance with the terms of this Agreement in each case when acting in connection with matters pertaining to the Company.

 

“Delaware Secretary” means the Secretary of State of the State of Delaware.

 

“Depreciation” means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such fiscal year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such fiscal year or other period, Depreciation shall be an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation,

 

 

amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.

 

“Discounted Value” means, with respect to Remaining Scheduled Payments, the amount obtained by discounting such Remaining Scheduled Payments from their respective scheduled due dates to the Settlement Date, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which the Remaining Scheduled Payments are payable) equal to the Reinvestment Yield.

 

“Electronic Transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.

 

“Equity Interest” means any equity capital, voting securities, proxies, profit interests or derivative rights, or any options, warrants or other securities convertible into or exchangeable or exercisable for any of the foregoing.

 

“Exchange Act” means the Securities Exchange Act of 1934.

 

“Financial Sponsor” means any Person, including any Subsidiary of such Person, whose principal business activity is acquiring, holding, and selling investments (including controlling interests) in otherwise unrelated companies that each are distinct legal entities with separate management, books and records and bank accounts, whose operations are not integrated with one another and whose financial condition and creditworthiness are independent of the other companies so owned by such Person.  For avoidance of doubt, the term Financial Sponsor shall exclude insurance companies (other than insurance companies that are portfolio companies of a Financial Sponsor) and holding companies thereof (to the extent such holding company would not otherwise be a Financial Sponsor), and shall include hedge funds.

 

“Fiscal Period” means a calendar year or any portion thereof for which the Company is required to make allocations or distributions pursuant to Article 5.

 

“Fiscal Year” means a calendar year.

 

“Framework Agreement” means the Framework and Collateral Agency Agreement, dated as of October 7, 2014, entered into between the Company and MLC.

 

“Gross Asset Value” means, with respect to any asset, such asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a)                                 the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as agreed to by the contributing Member and the Managing Member;

 

 

(b)                                 the Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member, as of the following times: (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of Company assets as consideration for an interest in the Company; and (iii) the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-l(b)(2)(ii)(g) other than a constructive termination of the Company pursuant to Code Section 708(b)(1)(B); provided, however, that adjustments pursuant to clauses (i) and(ii) of this sentence shall be made only if the Managing Member reasonably determines such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

 

(c)                                  the Gross Asset Value of any Company asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution, as determined by the Member receiving such distribution and the Managing Member; and

 

(d)                                 the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to the extent that an adjustment pursuant to subparagraph (b) above is made in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph d.

 

“Incurrence Default” means the incurrence by any Loan Party of Indebtedness for borrowed money in excess of the Term Loan Permitted Indebtedness Limit in effect on the date hereof (as each such term is defined in the Senior Secured Credit Facility).

 

“Initial Agreement” has the meaning specified in the recitals.

 

“Initial Member” has the meaning specified in the recitals.

 

“IPO” means an underwritten public offering by PESRM or any Affiliate (other than PES Logistics Partners, L.P.) in the form of a master limited partnership, limited liability company or corporation that makes a quarterly cash distribution or dividend to its equity holders, and raises net cash proceeds of at least $50,000,000.

 

“IPO Issuer” means PESRM or its Affiliate that directly or indirectly owns all or substantially all of the Refinery and that is the issuer of the IPO.

 

“Liquidating Trustee” has the meaning specified in Section 9.3.

 

“Liquidation Event” means any liquidation, dissolution or winding up of the Company.

 

“Liquidation Preference” means, with respect to a Preferred Share, (i)(x) $1,000, plus (y) the amount of any unpaid dividends due and payable with respect thereto, compounded

 

 

monthly, minus (ii) the amount of any dividends paid with respect thereto which have not been accrued by the date of determination.

 

“Make-Whole Amount” means, with respect to any Preferred Share, an amount equal to the Discounted Value of the Remaining Scheduled Payments with respect to such Preferred Share.

 

“Managing Member” has the meaning specified in Section 6.1.

 

“Maturity Date” means the third anniversary of the date of this Agreement.

 

“Member” means each of the Persons listed on Schedule A hereto, and includes any Person admitted as an additional Member or a substitute Member pursuant to the provisions of this Agreement, in such Person’s capacity as a member of the Company.

 

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i) with respect to “partner minimum gain.”

 

“Member Nonrecourse Debt” has the meaning set forth in Regulations Section 1.704-2(b)(4) for the phrase “partner nonrecourse debt.”

 

“Member Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-2(i) for the phrase “partner nonrecourse deductions.”

 

“Membership Certificates” has the meaning specified in Section 4.1(b).

 

“Membership Interests” means all legal and beneficial ownership interests in, and rights and duties as a Member of, the Company, including, without limitation, the right to share in Profits and Losses, the right to receive distributions of cash and other property from the Company, and the right to receive allocations of items of income, gain, loss, deduction and credit and similar items from the Company.

 

“MLC” means Merrill Lynch Commodities, Inc.

 

“MLC-PESIC ISDA Master Agreement” means the 2002 Master Agreement, dated as of October 7, 2014 (including the Schedule thereto and the Confirmation Swap Transaction related thereto dated as of the date hereof, between the Company and MLC.

 

“MLC Default” means (i) a breach by MLC of its obligations under Section 16 of the Framework Agreement (or the occurrence of a Letter of Credit Default thereunder), (ii) the failure of the PESIC Collateral Account Control Agreement to be executed and delivered in accordance with section 15 of the Framework Agreement within 30 days after the date hereof or (iii) an MLC Specified Termination Event (as defined in the Schedule to the MLC-PESIC ISDA Master Agreement).

 

 

“Nonrecourse Deductions” has the meaning set forth in Regulations Sections 1.704-2(b)(1) and 1.704-2(c).

 

“Nonrecourse Liability” has the meaning set forth in Regulations Sections 1.704-2(b)(3) and 1.752-1(a)(2).

 

“Person” includes any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, governmental body or agency or other legal entity or organization.

 

“Personal Representative” means the successor or legal representative (including without limitation, a guardian, executor, administrator or conservator) of a deceased or incompetent Covered Person.

 

“Permitted Holders” means (a) the Sponsor, (b) its Controlled Investment Affiliates, (c)  such person’s Related Parties and (d) Affiliates of Energy Transfer Partners, L.P.

 

“PES Holdings” means PES Holdings, LLC, a Delaware limited liability company.

 

“PESIC-PESRM ISDA Master Agreement” means the 2002 Master Agreement, dated as of October 7, 2014 (including the Schedule thereto and the Confirmation Swap Transaction related thereto dated as of the date hereof, between the Company and PESRM.

 

“PESRM” means Philadelphia Energy Solutions Refining and Marketing LLC.

 

“Preferred Approval” means the written consent or approval of Preferred Members holding a majority of Preferred Shares then outstanding, voting together as a single class.

 

“Preferred Member” means a Member holding Preferred Shares.

 

“Preferred Protective Provisions” means the protective provisions set forth in Schedule B.

 

“Preferred Shares” means Membership Interests in the Company having the economic rights set forth herein with respect to “Preferred Shares”, which shall be issued as capital interests.

 

“Preferred Terms” means the terms and conditions governing the Preferred Shares as set forth in Schedule B.

 

“Profits” and “Losses” means, for each fiscal period, an amount equal to the Company’s taxable income or loss for such fiscal period, determined in accordance with Section 703(a) of the Code (but including in taxable income or loss, for this purpose, all items of income, gain, loss, deduction or credit required to be stated separately pursuant to Section 703(a)(1) of the Code), with the following adjustments:

 

(i)                                     any income of the Company exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be added to such taxable income or loss;

 

 

(ii)                                  any expenditures of the Company described in Section 705(a)(2)(B) of the Code (or treated as expenditures described in Section 705(a)(2)(B) of the Code pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be subtracted from such taxable income or loss;

 

(iii)                               in the event the Gross Asset Value of any Company asset is adjusted in accordance with paragraph (b) or paragraph (c) of the definition of “Gross Asset Value” above, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

 

(iv)                              in lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing the Company’s taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period;

 

(v)                                 gain or loss resulting from any disposition of any asset of the Company with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; and

 

(vi)                              any items which are specially allocated pursuant to the provisions relating to Regulatory Allocations herein shall not be taken into account in computing Profits and Losses. The amounts of the items of Company income, gain, loss or deduction available to be specially allocated as Regulatory Allocations shall be determined by applying rules analogous to those set forth in this definition of Profits and Losses.

 

“Refinery” means the refinery located in Philadelphia, Pennsylvania (consisting of two formerly separate refining operations commonly known as “Point Breeze” and “Girard Point”) and owned by PESRM.

 

“Regulatory Allocations” has the meaning specified in Section 5.1(c)(viii).

 

“Reinvestment Yield” means the yield to maturity implied by (i) the yields reported as of 10:00 a.m. (New York City time) on the second business day preceding the Settlement Date, on the display designated as “Page PX1” (or such other display as may replace Page PX1) on Bloomberg Financial Markets for the most recently issued actively traded on the run U.S. Treasury securities having a maturity comparable to the Maturity Date (“Comparable Securities”), or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by way of interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second business day preceding the Settlement Date, in Federal Reserve Statistical Release H.15 (or any comparable successor publication) for the Comparable Securities.

 

 

“Related Parties” means, with respect to any person, such person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such person and of such person’s Affiliates.

 

“Remaining Scheduled Payments” means, with respect to a Preferred Share, all dividends that would be payable after the Settlement Date through the Maturity Date with respect to the Liquidation Preference of such Preferred Share if no redemption of such Preferred Share were made prior to the Maturity Date, provided that if such Settlement Date is not a date on which a dividend payment is due to be made under the terms of the Preferred Shares, then the amount of the next succeeding scheduled dividend payment will be reduced by the amount of dividends accrued to such Settlement Date and required to be paid on such Settlement Date.

 

“Secured Prepay Transactions” means the transactions contemplated by the PESIC-PESRM ISDA Master Agreement and the MLC-PESIC ISDA Master Agreement.

 

“Senior Secured Credit Facility” means that certain Amended and Restated Revolving Credit and Guaranty Agreement dated as of the date hereof, among PESRM, the guarantors party thereto, the lenders party thereto from time to time and Bank of America, as administrative agent and as collateral agent.

 

“Settlement Date” means, with respect to Preferred Share, the date on which such Preferred Share is redeemed.

 

“Shares” means, collectively, the Preferred Shares, the Class B Preferred Shares (if any), the Common Shares and the Class G Share.

 

“SOA” means the Amended and Restated Supply and Offtake Agreement, dated as of October 7, 2014, among PESRM, the guarantors party thereto and MLC.

 

“Specified Default” means any of (i) the failure of the Company to make any distribution (including in respect of dividends, redemptions and associated premiums and make-whole payments) as and when contemplated by the Preferred Terms, unless, with respect to the payment of dividends only, such failure is cured within five (5) business days, (ii) the occurrence of an Event of Default or Termination Event under the PESIC-PESRM ISDA Master Agreement where PESRM is the defaulting party or (ii) an Event of Default by PESRM under the Consulting Agreement.

 

“Sponsor” means Carlyle U.S. Equity Opportunity Fund, L.P., Carlyle Energy Mezzanine Opportunities Fund, L.P., and each of their respective Controlled Investment Affiliates but not including, however, any portfolio companies of the foregoing.

 

“Subsidiary” means, with respect to any Person (the “parent”) at any date, (i) any Person the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, (ii) any corporation, limited liability company, association or other business entity of which securities or other ownership interests representing more than 50% of the voting power of all Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the board of directors thereof are, as of such date, owned, controlled or held by the

 

 

parent and/or one or more subsidiaries of the parent, (iii) any partnership (a) the sole general partner or the managing general partner of which is the parent and/or one or more subsidiaries of the parent or (b) the only general partners of which are the parent and/or one or more subsidiaries of the parent and (iv) any other Person that is otherwise Controlled by the parent and/or one or more subsidiaries of the parent.

 

“Successor Common Member” has the meaning specified in the recitals.

 

“Transaction Documents” means the Framework Agreement, the Consulting Agreement, the PESIC-PESRM ISDA Master Agreement and the MLC-PESIC ISDA Master Agreement.

 

“Transfer” shall refer to any sale, exchange, issuance, redemption, assignment, distribution or other transfer, disposition or alienation in any way (whether voluntarily, involuntarily or by operation of law) as to any interest as a Member.

 

“Treasury Regulation” means and refers to a provision of the temporary or final regulations promulgated by the United States Department of the Treasury pursuant to the Code.Exhibit 10.1

 

ASSET PURCHASE AGREEMENT

 

BY AND AMONG

 

XCEL BRANDS, INC.

 

C WONDER LICENSING, LLC,

 

BURCH ACQUISITION,
LLC

 

AND

 

J. CHRISTOPHER BURCH

 

DATED AS OF JULY 16, 2015

 

    	 

    	 

    

  

Table
of Contents

 

	 	Page 

	 	 
	ARTICLE I  Definitions and Usage	1
	 	 	 	 	 
	 	1.1	 	Definitions	1
	 	1.2	 	Usage	11
	 	 	 	 	 
	ARTICLE II  Purchase and Sale of Assets	12
	 	 	 	 	 
	 	2.1	 	Purchase and Sale of Assets	12
	 	2.2	 	No Other Assets Acquired	12
	 	2.3	 	No Liabilities Assumed	12
	 	 	 	 	 
	ARTICLE III  Purchase Price; Payment	12
	 	 	 	 	 
	 	3.1	 	The Closing	12
	 	3.2	 	Purchase Price	13
	 	3.3	 	Payment of Purchase Price; Escrow	13
	 	3.4	 	Earn-Out	13
	 	3.5	 	Allocation	14
	 	3.6	 	Tax Treatment of Earn-Out Payments	15
	 	 	 	 	 
	ARTICLE IV  Representations and Warranties of the Seller	15
	 	 	 	 	 
	 	4.1	 	Organization and Good Standing	15
	 	4.2	 	Enforceability; Authority	16
	 	4.3	 	Consents; Approvals	16
	 	4.4	 	Title to and Sufficiency of Assets	16
	 	4.5	 	Sufficiency of Assets	16
	 	4.6	 	Solvency and No Creditors	17
	 	4.7	 	Taxes	17
	 	4.8	 	Litigation; Decrees	18
	 	4.9	 	Compliance With Laws; Permits	18
	 	4.10	 	Operations of the Seller	18
	 	4.11	 	Material Contracts	19
	 	4.12	 	Intellectual Property	20
	 	4.13	 	Affiliate Transactions	22
	 	4.14	 	Brokers or Finders	22
	 	4.15	 	Powers of Attorney	22
	 	4.16	 	Disclaimer of Other Representations and Warranties	22
	 	 	 	 	 
	ARTICLE V  Representations and Warranties of the Buyers	22
	 	 	 	 	 
	 	5.1	 	Existence and Good Standing; Authorization	22
	 	5.2	 	Consents and Approvals; No Violations	23
	 	5.3	 	Compliance with Laws	23
	 	5.4	 	Litigation	24
	 	5.5	 	Taxes	24
	 	5.6	 	Brokers’ or Finders’ Fees	24

 

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Table
of Contents

(continued)

 

	 	 	 	 	Page
	 	 	 	 	 
	 	5.7	 	Disclaimer of Other Representations and Warranties	24
	 	 	 	 	 
	ARTICLE VI  Pre-Closing Covenants	25
	 	 	 	 	 
	 	6.1	 	Efforts to Closing	25
	 	6.2	 	Conduct of the Business	25
	 	6.3	 	Access and Investigation	26
	 	6.4	 	Exclusivity	26
	 	6.5	 	Notice of Developments	27
	 	6.6	 	Press Releases and Public Announcements	27
	 	6.7	 	Confidentiality	27
	 	6.8	 	Third Party Registered IP	28
	 	6.9	 	Further Action	28
	 	 	 	 	 
	ARTICLE VII  Post-Closing Covenants 	28
	 	 	 	 	 
	 	7.1	 	Cooperation	28
	 	7.2	 	Quarterly Meetings	29
	 	7.3	 	Taxes Related to Purchase of Assets; Tax Cooperation	29
	 	7.4	 	Acquired Assets; Excluded Samples	30
	 	7.5	 	Additional Financial Statements	30
	 	7.6	 	Lock-Up Agreements; Registration	30
	 	7.7	 	Agreement to Vote	32
	 	7.8	 	Access to Records	32
	 	7.9	 	Noncompetition and Nonsolicitation	32
	 	7.10	 	Non-Disparagement	33
	 	7.11	 	Recording of Intellectual Property Assignments	34
	 	7.12	 	Foreign Intellectual Property	34
	 	7.13	 	Buyer QVC Agreement	34
	 	7.14	 	Successors and Assigns	34
	 	7.15	 	Further Assurances	34
	 	 	 	 	 
	ARTICLE VIII  Conditions Precedent to Buyers’ Obligation to Close 	35
	 	 	 	 	 
	 	8.1	 	Truth of Representations and Warranties	35
	 	8.2	 	Performance of Agreements	35
	 	8.3	 	Certificate	35
	 	8.4	 	No Injunction	35
	 	8.5	 	Governmental and Other Approvals	35
	 	8.6	 	Lien Release	35
	 	8.7	 	Assignments	35
	 	8.8	 	Completion of Due Diligence	35
	 	8.9	 	No Seller Material Adverse Effect	35
	 	8.10	 	Financing	36
	 	8.11	 	Third Party Registered IP	36
	 	8.12	 	Board of Directors Consent	36

 

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Table
of Contents

(continued)

 

	 	 	 	 	Page
	 	 	 	 	 
	 	8.13	 	No Decree or Proceeding	36
	 	8.14	 	Closing Deliverables	36
	 	 	 	 	 
	ARTICLE IX  Conditions Precedent to the Seller’S Obligation to Close 	37
	 	 	 	 	 
	 	9.1	 	Truth of Representations and Warranties	37
	 	9.2	 	Performance of Agreements	37
	 	9.3	 	Certificate	37
	 	9.4	 	No Injunction	37
	 	9.5	 	Governmental and Other Approvals	37
	 	9.6	 	Closing Deliverables	37
	 	 	 	 	 
	ARTICLE X  Termination 	38
	 	 	 	 	 
	 	10.1	 	Right to Terminate	38
	 	10.2	 	Post-Termination License Agreement with Seller or its Affiliate	38
	 	10.3	 	Effect of Termination	39
	 	 	 	 	 
	ARTICLE XI  Indemnification; Remedies 	39
	 	 	 	 	 
	 	11.1	 	Survival	39
	 	11.2	 	Indemnification by the Seller	40
	 	11.3	 	Indemnification by Buyers	40
	 	11.4	 	Right to Offset	41
	 	11.5	 	Limitation on Liability	41
	 	11.6	 	Other Indemnification Provisions	42
	 	11.7	 	Procedure for Indemnification	42
	 	11.8	 	Non-Third Party Claims	44
	 	11.9	 	Tax Treatment	45
	 	 	 	 	 
	ARTICLE XII  Miscellaneous	45
	 	 	 	 	 
	 	12.1	 	Public Disclosure or Communications	45
	 	12.2	 	Notices	45
	 	12.3	 	Entire Agreement; Nonassignability; Parties in Interest; No Third-Party Beneficiaries	46
	 	12.4	 	Bulk Sales Law	46
	 	12.5	 	Expenses	47
	 	12.6	 	Waiver and Amendment	47
	 	12.7	 	Severability	47
	 	12.8	 	Remedies Cumulative	47
	 	12.9	 	Counterparts	47
	 	12.10	 	Governing Law	47
	 	12.11	 	Dispute Resolution	48

 

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Table
of Contents

(continued)

 

	 	Page
	 	 
	Annexes, Exhibits and Schedules	
	 	 
	Exhibits:	 
	 	 
	Form of Escrow Agreement	Exhibit A
	Form of Lock-Up Agreement	Exhibit B
	Form of Voting Agreement	Exhibit C
	Form of Intellectual Property Assignments	Exhibit D
	 	 
	Schedules:	 
	 	 
	Assumed Contracts	A-1
	Trademarks	A-2
	C Wonder Logo	A-3
	Consents and Approvals	4.3
	Title to Assets	4.4
	Sufficiency of Assets	4.5
	Insolvency Proceedings and Creditors	4.6
	Operation of Seller	4.10
	Material Contracts	4.11(a)
	Intellectual Property Rights	4.12(a)
	Seller Intellectual Property Agreements and Arrangements	4.12(b)
	Seller Intellectual Property Rights	4.12(c)
	Seller Intellectual Property Infringements	4.12(d)
	Validity of Intellectual Property Rights	4.12(e)
	Third Party Intellectual Property Infringements	4.12(f)
	Intellectual Property Development and Acquisition	4.12(g)
	Intellectual Property Restrictions	4.12(h)
	Intellectual Property Rights Jurisdictions	4.12(j)
	Affiliate Transactions	4.13
	Seller’s Brokers	4.14
	Buyers’ Brokers	5.6
	Third Party Registered IP	6.8
	Seller Governmental and Other Approvals	8.5
	Buyer Governmental and Other Approvals	9.5

 

    	-iv-

    	 

    

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE
AGREEMENT (this “Agreement”) is entered into as of July 16, 2015, by and among Xcel Brands, Inc., a Delaware
corporation (“Xcel”), C Wonder Licensing, LLC, a Delaware limited liability company and wholly owned subsidiary
of Xcel (“CWL” and together with Xcel, the “Buyers”), Burch Acquisition, LLC, a Delaware
limited liability company (the “Seller”), and, solely for the purposes of Sections 6.6, 7.9 and
12.1, J. Christopher Burch (“JC Burch”). The Seller and Buyers are referred to herein each individually
as a “Party,” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, the Seller
owns the Acquired Assets (as defined below); and

 

WHEREAS, the Seller
desires to sell, and Buyers desire to purchase from the Seller, the Acquired Assets, including certain Intellectual Property Rights
(as defined below) and certain other assets, on the terms and subject to the conditions set forth in this Agreement; and

 

NOW, THEREFORE, in
consideration of the representations, warranties, covenants and agreements set forth in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows:

 

ARTICLE
I

Definitions and Usage

 

1.1           Definitions.
For purposes of this Agreement, the following terms and variations thereof have the meanings specified or referred to in this Section
1.1:

 

“Accounting
Referee” is defined in Section 3.4(b).

 

“Acquired Assets”
means all of the Seller’s rights, title and interest in and to all of the following assets: (a) the Acquired Trademarks;
(b) the Acquired Intellectual Property; (c) the Assumed Contracts; (d) all press books, promotional and advertising materials,
and design archives exclusively related to the Acquired Intellectual Property, including the C Wonder Design Archives; and (e)
all Intellectual Property Rights owned or developed by Seller that are related to the Acquired Trademarks, the Acquired Intellectual
Property, the Assumed Contracts or the C Wonder Brand.

 

“Acquired Intellectual
Property” means all Intellectual Property Rights exclusively related to the Acquired Trademarks and the C Wonder Brand.

 

“Acquired Trademarks”
means the C Wonder trademarks and brands (including the C Wonder Brand).

 

“Acquisition
Proposal” is defined in Section 6.4.

 

“Adjustment”
is defined in Section 7.6(b).

 

    	 

    	 

    

  

“Adjustment
Shares” is defined in Section 7.6(b).

 

“Affiliate”
of any Person means any Person which directly or indirectly controls or is controlled by that Person, or is under common control
with that Person. For the purposes of this definition, “control” (including, with correlative meaning, the terms “controlled
by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly
or indirectly of the power to direct or cause the direction of the management and policies of such Person, whether through ownership
of voting securities or by contract or otherwise.

 

“Agreement”
is defined in the preamble.

 

“Allocation
Schedule” is defined in Section 3.5.

 

“Assumed Contracts”
means those contracts set forth on Schedule A-1.

 

“Award”
is defined in Section 12.11(b).

 

“Board of Directors”
means, as to any Person, the board of directors (or comparable managers) of such Person, or any committee thereof duly authorized
to act on behalf of the board of directors (or comparable managers).

 

“Books and Records”
means all books and records of the Seller and the Predecessors (to the extent such books and records are in the possession or control
of the Seller or an Affiliate thereof) relating to the Acquired Assets or necessary for the operation of the Business, including
the CW Design Archives, files, documents, correspondence, cost and pricing information, accounting records, licensee lists and
records, research and development files, brand and marketing research, sales, marketing, advertising and promotional materials,
product designs and samples, maintenance and inspection reports, archives, factory lists, advertiser and supplier lists, and photographs
and other photography items and collections.

 

“Branded Product
Royalty” shall mean an imputed royalty equal to (i) 3% of any retail sales by Xcel of products exclusively relating to
the Acquired Assets, plus (ii) 8% of any wholesale sales by Xcel of products exclusively relating to the Acquired Assets;
provided, however, that any retail sale products included in the calculation set forth in clause (i) shall be excluded
from the calculation set forth in clause (ii); provided further that in the event that Xcel determines to operate
the Business using the Acquired Assets in a manner whereby its primary business model is not a licensing model, the Parties shall
negotiate in good faith on a mutually agreeable royalty calculation.

 

“Business”
means the business of designing, manufacturing, marketing, distributing and selling of apparel and accessories under the C.
Wonder brand name, both owned and under license, through retail, department and specialty stores and directly to consumers
through retail stores, catalogs and e-commerce websites.

 

“Business Day”
means any day other than (a) Saturday or Sunday or (b) any other day on which banks in New York, New York are permitted or required
to be closed.

 

    	2

    	 

    

  

“Buyers”
is defined in the preamble.

 

“Buyer Disclosure
Schedule” is defined in the first paragraph of Article V.

 

“Buyer Indemnified
Parties” is defined in Section 11.2.

 

“Buyer Material
Adverse Effect” means any change, effect, event, occurrence, state of facts or development that is, or would reasonably
be expected to be, materially adverse to the assets, business, liabilities, prospects, results of operations or condition (financial
or otherwise) of the Buyers taken as a whole or that prevents or materially impedes, or would reasonably be expected to prevent
or materially impede, the consummation by any of the Buyers of the transactions contemplated by this Agreement; provided,
however, that none of the following shall constitute, or shall be considered in determining whether there has occurred,
a Buyer Material Adverse Effect: (a) changes that are solely the result of economic or political factors affecting the national,
regional or world economy or the Buyers’ industry, acts of war or terrorism or other force majeure events, in each case except
where such condition has a disproportionate effect on the Buyers; (b) changes that are solely the result of factors generally affecting
the industries or markets in which any of the Buyers operate, in each case except where such condition has a disproportionate effect
on the Buyers; (c) changes in Legal Requirements or the interpretation thereof; (d) any decrease in stock price of the Xcel Shares
on the applicable Trading Market at any time; or (e) any action required to be taken pursuant to this Agreement.

 

“Buyer QVC Agreement”
means the agreement to be entered into by and between CWL, on the one hand, and QVC, on the other hand, relating to the C Wonder
Brand.

 

“C Wonder Brand”
means the trademark “C Wonder” whether in typed form, stylized, or otherwise and all Intellectual Property Rights
associated therewith as used, historically or currently, by the Seller or any Predecessor on goods and services in commerce or
as registered or applied for registration in the United States or elsewhere in the world, including all trademarks (and registrations)
set forth on Schedule A-2.

 

“C Wonder Logo”
means the logo attached as Schedule A-3, or such other logo as Buyers develop for the C Wonder Brand.

 

“Cap”
is defined in Section 11.5(b).

 

“Claim”
is defined in Section 12.11(a).

 

“Claim Notice”
is defined in Section 11.8.

 

“Closing”
is defined in Section 3.1.

 

“Closing Date”
is defined in Section 3.1.

 

“COBRA”
means Section 4980B of the Code, Sections 601 through 608, inclusive, of ERISA and any applicable similar state laws.

 

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

 

    	3

    	 

    

  

“Competes with
the Business” means to participate in any business or enterprise (including any division, group or franchise of a larger
organization) that engages or proposes to engage in a business that creates, registers, uses or otherwise exploits, or plans to
create, register, use or otherwise exploit, Intellectual Property Rights (including trademarks, designs and color schemes) confusingly
similar or substantially similar to the Intellectual Property Rights comprising the Acquired Assets. For purposes of this definition,
the term “participate in” shall include having any direct or indirect interest in any Person, whether as an owner,
stockholder, partner, member, joint venturer, creditor, sole proprietor or otherwise, or rendering any direct or indirect service
or assistance to any Person (whether as a director, officer, supervisor, employee, agent, consultant or otherwise).

 

“Comprehensive
Rules” is defined in Section 12.11(b).

 

“Confidentiality
Agreement” is defined in Section 6.8(a).

 

“Confidential
Information” means confidential data and confidential information, without regard to form (including designs, advertising
promotions, technical or nontechnical data, algorithms, formulas, compilations, programs, methods, techniques, drawings, processes,
financial data, financial and marketing plans, product or service plans or lists of customers or suppliers) which is not known
or available to the public. Notwithstanding anything to the contrary contained herein, Confidential Information shall not include
any data or information that (v) has been voluntarily disclosed to the public by the protected Party, (w) has been independently
developed and disclosed to the public by others, (x) otherwise enters the public domain through lawful means, (y) was lawfully
and rightfully disclosed to recipient by another Person, or (z) that is required to be disclosed by Legal Requirement or Decree
or requested to be disclosed by a Governmental Authority without the availability of applicable protective orders or treatment.
Following the Closing, all Seller Information shall be deemed to be Confidential Information of Buyers.

 

“Contract”
means any agreement, contract, license, sublicense, lease, sublease, indenture, mortgage, instrument, guaranty, loan or credit
agreement, note, bond, customer order, purchase order, franchise, dealer and distributorship agreement, supply agreement, development
agreement, joint venture agreement, promotion agreement, partnership agreement or other arrangement, understanding or commitment,
whether written or oral and including any right or obligation under any of the foregoing.

 

“Core Representations”
is defined in Section 11.1.

 

“CW Design Archives”
means all computer-aided designs, designs, drawings, paintings, illustrations, patterns, fabric direction, artwork, advertising,
press books and other books, prints, video and audio, photographs, and other images and media related to the C Wonder Brand, all
original sketches of any kind, and all other such materials that primarily relate to the C Wonder Brand, but excluding the Excluded
Samples. For the avoidance of doubt, CW Design Archives shall include catalogued images of all archived items and all original
sketches and drawings.

 

“CWL”
is defined in the preamble.

 

    	4

    	 

    

  

“Damages”
is defined in Section 11.2.

 

“Decree”
means any final, non-appealable judgment, decree, ruling, injunction, assessment, attachment, undertaking, award, charge, writ,
executive order, administrative order or any other order of any Government Authority.

 

“Earn-Out Payment
Period” is defined in Section 3.4(a).

 

“Earn-Out Reconciliation”
is defined in Section 3.4(b).

 

“Earn-Out Shares”
is defined in Section 3.4(a).

 

“Earn-Out Value”
is defined in Section 3.4(a).

 

“Employee Benefit
Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA and any other material employee
benefit or fringe benefit plan, program or arrangement of any kind (whether written or oral).

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate”
means, with respect to any entity, any trades or business (whether or not incorporated) that are treated as a single employer with
such entity under Sections 414(b), (c), (m) or (o) of the Code.

 

“Escrow”
is defined in Section 3.3.

 

“Escrow Agent”
shall be the agent responsible for the Escrow. 

 

“Escrow Agreement”
is defined in Section 3.3(b).

 

“Escrow Amount”
is defined in Section 3.3(a)(iii).

 

“Escrow Claim”
is defined in Section 11.7(e).

 

“Escrow Survival
Period” is defined in Section 3.3(b).

 

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

 

“Excluded Assets”
is defined in Section 2.2.

 

“Excluded Liabilities”
is defined in Section 2.3.

 

“Excluded Samples”
means any physical samples owned by Seller as of the date hereof related to the C Wonder Brand.

 

“Exclusivity
Termination Fee” is defined in Section 10.3(b).

 

    	5

    	 

    

  

“Financial Statements”
is defined in Section 4.4(a).

 

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

 

“Government
Authority” means any domestic or foreign national, state, multi-state or municipal or other local government, any subdivision,
agency, commission or authority thereof, including any quasi-governmental or private body exercising any regulatory or taxing authority
thereunder or any judicial authority (or any department, bureau or division thereof).

 

“Government
Authorization” means any approval, consent, license, permit, waiver, or other authorization issued, granted, given or
otherwise made available by or under the authority of any Government Authority or pursuant to any Legal Requirement.

 

“Indemnification
Objection” is defined in Section 11.8.

 

“Indemnified
Party” is defined in Section 11.3.

 

“Indemnifying
Party” is defined in Section 11.7(a).

 

“Indebtedness”
means (a) indebtedness of Seller for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of
Seller evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of Seller upon which interest charges
are paid, (d) all obligations of Seller in respect of capitalized leases that, individually, involve an aggregate future liability
in excess of $15,000 and obligations of Seller for the deferred purchase price of goods or services (other than trade payables
or accruals incurred in the Ordinary Course of Business), (e) all obligations in respect of banker’s acceptances or letters
of credit issued or created for the account of Seller, (f) all indebtedness or obligations of the types referred to in the preceding
clauses (a) through (e) of any other Person secured by any Lien on any assets of Seller, even if such Seller has not assumed or
otherwise become liable for the payment thereof, (g) all guarantees by Seller of obligations of the type described in clauses (a)
through (f) above of any other Person, and (h) payment obligations in respect of interest under any interest rate swap or other
hedge agreement or arrangement entered into by Seller with respect to any Indebtedness described in clauses (a) through (g) above.

 

“Initial Period”
is defined in Section 7.6(b).

 

“Intellectual
Property Assignments” means one or more Intellectual Property Assignment Agreements, in the form attached hereto as Exhibit
D, transferring to the Buyers (as directed by the Buyers) all Intellectual Property Rights included in the Acquired Assets.

 

    	6

    	 

    

 

“Intellectual
Property Rights” means all intellectually property and proprietary rights of any kind, in any jurisdiction throughout
the world, whether used now or in the future, including the following: (i) patents, patent applications and patent disclosures;
(ii) trademarks, service marks, proprietary designs and design processes, rights in design, brand names, trade dress, trade names,
product configuration, corporate names, logos (including the C Wonder Logo), insignias and slogans and internet domain names, internet
websites, uniform resource identifiers, social network site handles, metatags, URLs, internet and phone applications and systems;
(iii) copyrights and copyrightable works; (iv) registrations and applications for any of the foregoing; (v) trade secrets
and confidential or proprietary information (including inventions, ideas, formulae, algorithms, models, methodologies, compositions,
know-how, proprietary processes, manufacturing and production processes and techniques, manufacturing or raw material sources,
research and development information, technology, sketches and drawings (including preliminary and technical sketches and drawings),
specifications, designs, plans, proposals, technical data, financial, business and marketing data, pricing and cost information,
business and marketing plans, and customer and supplier lists and related information); (vi) product designs, configurations, and
material and color specifications and combinations; (vii) manufacturing molds, techniques, and processes; (viii) all other intellectual
property and brand materials; (ix) computer software, computer programs and databases (whether in source code, object code or other
form); (x) any goodwill, registrations or applications associated with each of the foregoing; (xi) all rights under any agreements
relating to the foregoing; and (x) all rights to sue for past, present and future infringement, misappropriation, dilution or other
violation of any of the foregoing and all remedies at law or equity associated therewith.

 

“Inventory”
means inventories of raw materials and supplies, manufactured and purchased parts, goods in process and finished goods.

 

“IRS”
means the United States Internal Revenue Service.

 

“JC Burch”
is defined in the preamble.

 

“Knowledge”
means, with respect to the Seller, the actual knowledge, after reasonable due inquiry of JC Burch, Brian Carden and Buck Marshall.
With respect to the Buyers, the actual knowledge, after reasonable due inquiry, of Robert D’Loren, Seth Burroughs and James
Haran.

 

“Legal Requirement”
means any federal, state, local, municipal, foreign, international, multinational or other administrative order, constitution,
law, ordinance, principle of common law, regulation, rule, statute or treaty.

 

“Letter Agreement”
means the letter agreement dated as of even date herewith between Xcel and the Seller.

 

“Liability”
means any liability or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated and whether due or to become due), including
any liability for Taxes.

 

“License Agreement”
means any Contract between a Party (or an Affiliate thereof) and any Person pursuant to which such Party (or an Affiliate thereof)
has granted such Person the right to design, manufacture, sell or distribute goods under or using the C Wonder Brand.

 

    	7

    	 

    

  

“Licensee”
means a Person who has entered into and as of the Closing Date is a party to a License Agreement.

 

“Liens”
means any liens, pledges, claims, encumbrances, hypothecations, mortgages, charges, options, preemptive rights, rights of first
refusal or similar rights, title retention agreements, easements, encroachments, leases, subleases, covenants, security interests
and restrictions and encumbrances of any kind or nature whatsoever.

 

“Lock-Up Agreement”
is defined in Section 7.6(a).

 

“Lock-Up Shares”
is defined in Section 7.6(b).

 

“Material Contracts”
is defined in Section 4.11(a).

 

“Net Royalties”
means any gross royalty revenues from any License Agreements directly related to the Acquired Assets, less third-party commissions
payable by Xcel on such royalty revenues.

 

"Notice of Escrow
Claim" is defined in Section 11.7(e)(i).

 

“Ordinary Course
of Business” means the ordinary course of business consistent with past custom and practice.

 

“Organizational
Documents” means with respect to any entity, the certificate of incorporation, bylaws, certificate of formation, operating
agreement or other governing documents of such entity.

 

“Party”
or “Parties” have the meaning set forth in the preamble.

 

“Permitted Lien”
means (i) any Lien for Taxes not yet due or delinquent or being contested in good faith by appropriate proceedings or that may
thereafter be paid without penalty, and (ii) any carrier’s, warehousemen’s, mechanic’s, materialmen’s or
repairmen’s Lien incurred in the Ordinary Course of Business and not yet delinquent and that does not result from the violation
or breach of, or default under, any Legal Requirement or Contract.

 

“Person”
means an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint
stock company, trust, unincorporated association, joint venture or other entity or a Government Authority.

 

“Predecessor”
means any predecessor owner of the Acquired Assets, including C Wonder, LLC and its direct and indirect Subsidiaries.

 

“Proceeding”
means any action, claim, cause of action, arbitration, audit, hearing, investigation, litigation or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal, whether public or private, whether at law or in equity)
commenced, brought, conducted or heard by or before, or otherwise involving, and whether before any Government Authority or arbitrator.

 

    	8

    	 

    

  

“Purchase Price”
is defined in Section 3.2.

 

“QVC”
means QVC, Inc., a Delaware corporation.

 

“Registration
Statement” is defined in Section 7.6(c).

 

“Related Agreements”
means, collectively, the Voting Agreement, the Lock-Up Agreement, the Escrow Agreement, the Intellectual Property Assignments,
the Letter Agreement, the Supplemental Indemnity Agreement, any bills of sale, any assignment and assumption agreements and all
of the agreements, instruments, certificates and other documents contemplated by this Agreement.

 

“Related Mark”
means (a) derivatives of the C Wonder Brand, or (b) any other mark, service mark, tradename, fictitious name, dba or trademark,
or portion of mark confusingly similar to the C Wonder Brand or its derivatives.

 

“Representative”
means, with respect to a particular Person, any director, officer, manager, employee, agent, consultant, advisor, accountant, financial
advisor, investment banker, legal counsel or other representative of that Person.

 

“Restricted
Period” is defined in Section 7.9(a).

 

“Royalty Target
Period” means the four (4) year period commencing on July 1, 2015 and ending on June 30, 2019.

 

“Royalty Target
Year” means each twelve (12) month period commencing on July 1 and ending on June 30 during the Royalty Target Period.

 

“SEC”
means the United States Securities and Exchange Commission.

 

“Securities”
is defined in Section 7.6(b).

 

“Securities
Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

 

“Seller”
is defined in the preamble.

 

“Seller Disclosure
Schedule” is defined in the first paragraph of Article IV.

 

“Seller Indemnified
Parties” is defined in Section 11.3.

 

“Seller Information”
means any data and information relating to the Acquired Assets, including all Books and Records, customers, suppliers, financial
statements, conditions or operations of the Business, including with respect to the Acquired Assets, in each case which is confidential
in nature and not generally known to the public.

 

“Seller Intellectual
Property Rights” is defined in Section 4.12(c).

 

    	9

    	 

    

  

“Seller Material
Adverse Effect” means any change, effect, event, occurrence, state of facts or development that is, or would reasonably
be expected to be, materially adverse to the assets, business, liabilities, prospects, results of operations or condition (financial
or otherwise) of the Seller taken as a whole or that prevents or materially impedes, or would reasonably be expected to prevent
or materially impede, the consummation by the Seller of the transactions contemplated by this Agreement; provided, however,
that none of the following shall constitute, or shall be considered in determining whether there has occurred, a Seller Material
Adverse Effect: (a) changes that are solely the result of economic or political factors affecting the national, regional or world
economy or Seller’s industry, acts of war or terrorism or other force majeure events, in each case except where such condition
has a disproportionate effect on Seller; (b) changes that are solely the result of factors generally affecting the industries or
markets in which the Seller operates, in each case except where such condition has a disproportionate effect on the Seller; (c)
changes in Legal Requirements or the interpretation thereof; or (d) any action required to be taken pursuant to this Agreement.

 

“Seller”
is defined in the preamble.

 

“Straddle Period”
is defined in Section 7.3(b).

 

“Subsidiary”
means, with respect to any Person, any other Person of which securities or other interests having the power to elect a majority
of that corporation’s or other Person’s board of directors or similar governing body, or otherwise having the power
to direct the business and policies of that other Person (other than securities or other interests having such power only upon
the happening of a contingency that has not occurred), are held by such Person or one or more of its Subsidiaries.

 

“Supplemental
Indemnity Agreement” means the indemnification agreement dated as of even date herewith between the Buyers and the Seller.

 

“Survival Date”
is defined in Section 11.1.

 

“Tail Fee”
is defined in Section 10.2.

 

“Tax”
means (i) any tax assessment, duty or similar charge of any kind whatsoever (including any income tax, franchise tax, margin tax,
branch profits tax, capital gains tax, alternative or add-on minimum tax, estimated tax, value-added tax, sales tax, use tax, property
tax, transfer tax, payroll tax, social security tax or withholding tax, escheat or abandoned property liability), and any related
fine, penalty, interest or addition to tax with respect thereto, imposed, assessed or collected by or under the authority of any
Government Authority or payable pursuant to any tax-sharing agreement relating to the sharing or payment of any such tax and (ii)
any transferee, successor or other liability in respect of the taxes of another Person (whether by contract or otherwise).

 

“Tax Return”
means any return (including any information return), report, statement, schedule, notice, form or other document or information
filed with or submitted to, or required to be filed with or submitted to, any Government Authority in connection with the determination,
assessment, collection or payment of any Tax.

 

    	10

    	 

    

  

“Termination
Date” is defined in Section 10.1.

 

“Third Party”
means a Person that is not a party to this Agreement.

 

“Third Party
Claim” is defined in Section 11.7(b).

 

“Threshold”
is defined in Section 11.5(a).

 

“Trading Day”
means a day on which the New York Stock Exchange is open for trading.

 

“Trading Market”
means the following markets or exchanges on which the Xcel Shares are listed or quoted for trading on the date in question: the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, NYSE Amex Equities
or the OTC Bulletin Board (or any successor to any of the foregoing).

 

“Transfer”
is defined in Section 7.6(b).

 

“Transfer Taxes”
is defined in Section 7.3(a).

 

“Voting Agreement”
is defined in Section 7.7.

 

“Xcel”
is defined in the preamble.

 

“Xcel Shares”
means the shares of common stock of Xcel.

 

1.2           Usage.

 

(a)          Interpretation.
In this Agreement, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa;
(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and
assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other
capacity or individually; (iii) reference to any gender includes each other gender; (iv) reference to any agreement, document or
instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with
the terms thereof; (v) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced
or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and
reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to
time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section
or other provision; (vi) “hereunder,” “hereof,” “hereto,” and words of similar import shall
be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof; (vii) “including”
(and with correlative meaning “include”) means including without limiting the generality of any description preceding
such term; (viii) “or” is used in the inclusive sense of “and/or”; (ix) with respect to the determination
of any period of time, “from” means “from and including” and “to” means “to but excluding”;
and (x) references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules
or amendments thereto.

 

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(b)          Legal
Representation of the Parties. This Agreement was negotiated by the Parties with the benefit of legal representation, and any
rule of construction or interpretation otherwise requiring this Agreement to be construed or interpreted against any party shall
not apply to any construction or interpretation hereof.

 

ARTICLE
II

Purchase and Sale of Assets

 

2.1           Purchase
and Sale of Assets. On the terms and subject to the conditions of this Agreement, the Seller agrees to sell, assign, convey,
transfer and deliver to the Buyers (as directed by the Buyers) as of the Closing Date, and each Buyer agrees to purchase and take
assignment and delivery from the Seller as of the Closing Date, all of Seller’s right, title and interest in and to the Acquired
Assets, free and clear of all Liens and Liabilities.

 

2.2           No
Other Assets Acquired. Pursuant to this Agreement, no Buyer is acquiring, and the Seller shall retain, any assets, rights and
properties other than those related to the Acquired Assets, including any corporate office leases, retail store leases or shop-in-shop
leases (collectively, the “Excluded Assets”).

 

2.3           No
Liabilities Assumed. The Buyers are not agreeing to, and shall not, assume any Liability, margin guarantee contract, undertaking,
expense or other Contract (other than the Assumed Contracts) of Seller or related to any of the Acquired Assets of any kind, character
or description, whether absolute, contingent, known, unknown, accrued, liquidated, unliquidated, executory or otherwise, and whether
arising prior to or following the Closing, and the execution and performance of this Agreement shall not render the Buyers liable
for any such Liability, obligation, undertaking, expense or Contract (other than the Assumed Contracts) (all of such liabilities
and obligations shall be referred to herein as the “Excluded Liabilities”). Excluded Liabilities shall include
any Liability related to any Excluded Asset and shall include any shop in shop obligations, mark down obligations, employee obligations
and any other Liabilities or obligations relating to the operation of the Business at any time prior to the Closing Date.

 

ARTICLE
III

Purchase Price; Payment

 

3.1           The
Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place
at the offices of Blank Rome, LLP (or such other location as shall be mutually agreed upon by the Seller and Buyers) commencing
at 10:00 a.m. New York time on a date (the “Closing Date”) that is the second Business Day after all conditions
to the obligations of the Seller and Buyers to consummate the transactions contemplated hereby set forth in Article VIII
and Article IX (other than conditions with respect to actions the Seller and/or Buyers will take at the Closing itself,
but subject to the satisfaction or waiver of those conditions) have been satisfied or waived, or on such other date as shall be
mutually agreed upon by the Seller and Buyers prior thereto. The effective time of the Closing shall be deemed to be 12:01 a.m.
on the Closing Date.

 

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3.2           Purchase
Price. Subject to the terms and conditions of this Agreement, in reliance on the representations, warranties, covenants and
agreements of the Seller contained herein, and in payment and consideration for the sale, conveyance, assignment, transfer and
delivery of the Acquired Assets by the Seller to the Buyers, (i) the Buyers shall pay to the Seller at the Closing an aggregate
amount in cash and Xcel Shares pursuant to Section 3.3 (the “Purchase Price”), payable as hereinafter provided,
and (ii) the Buyers shall pay the Earn-Out Value, if any, to the Seller pursuant to Section 3.4.

 

3.3           Payment
of Purchase Price; Escrow. At Closing, the Buyers shall pay the Purchase Price as follows: 

 

(i)          Buyers
shall pay to the Seller Two Million Five Hundred Thousand Dollars ($2,500,000) in cash, by wire transfer of immediately available
funds pursuant to wire instructions provided by Seller at least two (2) Business Days prior to the Closing Date;

 

(ii)         Buyers
shall cause to be issued to Seller 500,000 Xcel Shares; and

 

(iii)        Five
Hundred Thousand Dollars ($500,000) in cash and 500,000 Xcel Shares shall be deposited into escrow (the “Escrow”)
for the purposes described in Section 11.7 (such cash and Xcel Shares, collectively, the “Escrow Amount”).

 

(iv)        Subject
to all other remedies available to the Buyers hereunder, the Escrow shall secure the Seller’s indemnification obligations
pursuant to Section 11.2 of this Agreement and pursuant to the Supplemental Indemnity Agreement. The Escrow Agent shall
hold the Escrow Amount in escrow until the later of (i) the expiration or earlier termination of the initial term of the Buyer
QVC Agreement, and (ii) the five (5) year anniversary of the Closing Date (the “Escrow Survival Period”) (subject
to Section 11.7(e)), and, at such time, shall release the balance of the Escrow Amount, if any, to the Seller in accordance
with the terms of an escrow agreement dated as of the Closing Date by and among the Buyers, the Seller and the Escrow Agent, in
form and substance attached hereto as Exhibit A (the “Escrow Agreement”).

 

3.4           Earn-Out.

 

(a)          Within
the later of (i) thirty (30) days following the delivery of the Earn-Out Reconciliation (as defined below) to the Seller and (ii)
one hundred and twenty (120) days after June 30, 2019 (the “Earn-Out Payment Period”), and as additional consideration
for the sale and purchase of the Acquired Assets as contemplated by the terms and conditions of this Agreement, Seller shall be
entitled to receive from the Buyers (subject to the terms and conditions set forth in this Section 3.4) additional compensation,
payable as contemplated in this Section 3.4, and with a value (the “Earn-Out Value”) based on the royalties
related directly to the Acquired Assets. The Earn-Out Value shall be calculated as the positive amount, if any, of (i) two (2)
times the amount equal to (A) the maximum Net Royalties as calculated for any single Royalty Target Year less (B) Four Million
Dollars ($4,000,000), plus (ii) two (2) times the maximum Branded Product Royalty as calculated for any single Royalty Target
Year. The Earn-Out Value shall be payable in either cash or Xcel Shares (the “Earn-Out Shares”), as calculated
pursuant to this Section 3.4, at the sole and unfettered discretion of the Buyers.

 

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(b)          Procedure
for Earn-Out. Within ninety (90) days of June 30, 2019, Buyers shall deliver to the Seller: (i) a statement prepared by Xcel
of the calculation of the Earn-Out Value, Xcel’s election to pay the Earn-Out Value in cash or Earn-Out Shares and Branded
Product Royalties, and, if Xcel elects to pay in Earn-Out Shares, the number of Earn-Out Shares to be issued to the Seller pursuant
to this Section 3.4; and (ii) if reasonably requested by the Seller, supporting documentation of the determination of Net
Royalties and Branded Product Royalties during each Royalty Target Year within the Target Royalty Period (collectively, (i) and
(ii), the “Earn-Out Reconciliation”). Within thirty (30) days after receiving the Earn-Out Reconciliation, Seller
shall notify Buyers that they agree with the Earn-Out Reconciliation or have a dispute regarding the Earn-Out Reconciliation. Any
dispute regarding the Earn-Out Reconciliation shall be decided by an independent certified public accountant mutually agreed upon
by Seller and Buyers (an “Accounting Referee”). The fees, costs and expenses of the Accounting Referee shall
be borne by Seller and Buyers (or its successor), as the case may be, in inverse proportion relative to how they prevail in such
dispute. Following either the notification by the Seller of its agreement with the Earn-Out Reconciliation or the resolution of
any dispute regarding the Earn-Out Reconciliation by the Accounting Referee, the Earn-Out Reconciliation shall be binding and conclusive
on all of the Parties. Within five (5) days of the Earn-Out Reconciliation becoming final, the Buyers shall deliver the Earn-Out
Value, either in cash or in Earn-Out Shares, to the Seller. In the event that the Earn-Out Value is paid in Earn-Out Shares, the
price per Earn-Out Share shall be based on the market value of the Earn-Out Shares as determined at the average closing price on
the Trading Market for each of the ten (10) Trading Days preceding the end of the Earn-Out Payment Period, subject to a minimum
share price of $9.00 per share, which shall be equitably adjusted to reflect the effect of any stock split, stock dividend (including
any dividend or distribution of securities made to holders of Xcel  Shares which are convertible into shares of Xcel Shares),
reorganization, recapitalization, reclassification, combination or other like change with respect to Xcel Shares occurring on or
after the Closing Date.

 

(c)          The
Seller acknowledges and agrees that (i) there is no guarantee that the Buyers shall achieve royalties at sufficient levels for
the Seller to receive any Earn-Out Value, (ii) Seller shall not hold any Buyer responsible for failing to achieve royalties required
to receive Earn-Out Value and (iii) Seller is not relying on any information from any Buyer in determining the requirements to
achieve any Earn-Out Value. Except in the case of fraud, the Seller hereby waives and indemnifies each Buyer from any claims as
a result of the failure of any Buyer to achieve royalties at sufficient levels for the Seller to receive Earn-Out Value.

 

3.5           Allocation.
The Seller and the Buyers agree that the Purchase Price and any other consideration paid by Buyers pursuant to this Agreement,
in each case to the extent treated as purchase price for U.S. federal income tax purposes, shall be allocated among the Acquired
Assets for tax purposes in a mutually agreed upon manner, consistent with Code Section 1060 and the regulations promulgated thereunder,
based upon the fair market values of such assets consistent with an allocation schedule to be determined in the reasonable good
faith judgment of Xcel, within 90 calendar days after the Closing Date, subject to the approval of Seller, which approval shall
not be unreasonably withheld or delayed (the “Allocation Schedule”). Each of the Parties hereto agrees that:
(i) none of the Parties shall take a position on any Tax Return (including IRS Form 8594, if applicable) that is in any way inconsistent
with the Allocation Schedule without the written consent of the other Parties or unless specifically required by an applicable
Government Authority; and (ii) each party shall promptly notify each other regarding the existence of any Tax audit, controversy
or litigation related to the Allocation Schedule. Notwithstanding the foregoing, nothing contained herein shall prevent the Buyers
or the Seller from settling any proposed deficiency or adjustment assessed against it by any Government Authority based upon or
arising out of the Allocation Schedule, and neither the Buyers nor the Seller shall be required to litigate before any court any
such proposed deficiency or adjustment by any Government Authority challenging the Allocation Schedule.

 

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3.6           Tax
Treatment of Earn-Out Payments. Except as otherwise required under applicable Legal Requirements, any payments of Earn-Out
Value under Section 3.4 hereof shall be treated by the Parties for United States federal income tax purposes as additional
consideration for the Acquired Assets (other than any portion required to be treated as imputed interest under the Code).

 

ARTICLE
IV

Representations and Warranties of the Seller

 

The Seller hereby
represents and warrants to each of the Buyers that the statements contained in this Article IV are true, correct and complete
as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this Article IV, except to the extent any representation
or warranty expressly speaks only as of a different date), except as set forth in the disclosure schedule attached hereto (the
“Seller Disclosure Schedule”). The disclosures in any section or subsection of the Seller Disclosure Schedule
shall qualify the corresponding section or subsection in this Article IV and any other section or subsection in which such
disclosure is required to be included to the extent the relevance of such disclosure is reasonably apparent on its face.

 

4.1           Organization
and Good Standing.

 

(a)          The
Seller is an entity, duly formed, validly existing and in good standing under the laws of the state of its formation. The Seller
has all requisite power and authority to own, lease and operate its assets and properties and to carry on its business as currently
conducted. The Seller is duly qualified and, to the extent applicable, is in good standing, in each jurisdiction in which the character
or location of the property owned, leased or operated by the Seller or the nature of the business conducted by the Seller. The
Seller has no Subsidiaries.

  

    	15

    	 

    

 

4.2           Enforceability;
Authority.

 

(a)          Seller
has all requisite power and authority to execute and deliver this Agreement and each other Related Agreement to which Seller is
a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by Seller of this Agreement and each Related Agreement to which it is a party, and the
consummation by it of the transactions contemplated hereby and thereby, have been duly authorized and approved, and no other action
on the part of Seller is necessary to authorize the execution, delivery and performance of this Agreement or any Related Agreement
to which Seller is a party or the consummation of the transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Seller and constitutes, and, with respect to each other Related Agreement to which Seller is a party,
upon its execution and delivery by Seller, will constitute, assuming the due execution of this Agreement and such other Related
Agreement by the Buyers and/or the other parties thereto, a valid and binding obligation of Seller enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, receivership and similar laws affecting
the enforcement of creditors’ rights generally, and general equitable principles.

 

4.3           Consents;
Approvals. Except as set forth in Schedule 4.3, the execution and delivery of this Agreement by the Seller and the consummation
of the transactions contemplated hereby do not and will not:

 

(a)          violate
or conflict with the provisions of the Organizational Documents of the Seller;

 

(b)          violate
any Legal Requirement or Decree to which the Seller is subject or by which any of their material properties or assets are bound;

 

(c)          require
any permit, consent or approval of, or the giving of any notice to, or filing with any Government Authority; or

 

(d)          result
in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien (other than
a Permitted Lien) upon any of the Acquired Assets under any of the terms, conditions or provisions of any Contract or any other
instrument or obligation to which the Seller is a party, or by which it or any of its respective properties or assets may be bound;
excluding from the foregoing clauses (b), (c) and (d) permits, consents, approvals, notices and filings the absence of which, and
violations, breaches, defaults and Liens the existence of which, have not had, and would not reasonably be expected, individually
or in the aggregate, to have, a Seller Material Adverse Effect.

 

4.4           Title
to and Sufficiency of Assets. Except as set forth on Schedule 4.4, the Seller have good and marketable title to, or
a valid leasehold interest in, all properties and assets owned or used by the Seller, free and clear of all Liens other than Permitted
Liens.

 

4.5           Sufficiency
of Assets. Except as set forth on Schedule 4.5, the Acquired Assets include all of Intellectual Property Rights sufficient
for Buyers to conduct the Business. The Acquired Assets do not include any design, product, intellect property or other asset that
breaches or violates or, if used in the conduct of the Business, would breach or violate the covenants, restrictions, prohibitions
or other obligations contained in the Settlement Agreement (as defined in the Supplemental Indemnity Agreement).

 

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4.6           Solvency
and No Creditors.

 

(a)          Except
as set forth on Schedule 4.6, the Seller is not currently subject to any insolvency proceedings of any kind, including bankruptcy,
receivership, reorganization, composition or arrangement with creditors, voluntary or involuntary, affecting the Acquired Assets
and, to the Seller’s Knowledge, no such proceedings are threatened. The Seller has not made an assignment for the benefit
of creditors or taken any action with a view to, or that would constitute a valid basis for, the institution of any such insolvency
proceedings. The Seller is not now insolvent or will be rendered insolvent by any of the transactions contemplated by this Agreement
or any Related Agreement. As used in this Section 4.6, “insolvent” means that the sum of the debts and other
probable Liabilities of the Seller exceeds the present fair saleable value of the Seller’s assets. Immediately after giving
effect to the consummation of the transactions contemplated by this Agreement and the Related Agreements, (a) the Seller will be
able to pay its Liabilities as they become due in the Ordinary Course of Business, (b) the Seller will not have unreasonably small
capital with which to conduct its present or proposed business, (c) the Seller will have assets (calculated at fair market value)
that exceed its Liabilities, and (d) taking into account all pending and threatened litigation, final judgments against the Seller
in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, the Seller
will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable
amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as well
as all other obligations of the Seller.

 

(b)          No
claim has been made by any creditor against any of the Acquired Assets and the Seller has no Knowledge of any facts that could
form a basis for any such claim.

 

4.7           Taxes.

 

(a)          All
Tax Returns required to be filed by or on behalf of the Seller with respect to the Acquired Assets have been timely filed and all
Taxes shown as due thereon have been paid. The Seller are not a beneficiary of any extension of time within which to file any Income
Tax Return. The Seller has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder, or other Third Party, and all Forms W-2 and 1099
required with respect thereto have been properly completed and timely filed. The Seller have paid all sales Tax amounts owed or
owing. There are no Liens (other than Permitted Liens) on any of the assets of the Seller that arose in connection with the failure
(or alleged failure) to pay any Tax.

 

(b)          There
is no dispute or claim concerning any Tax liability of the Seller either (A) claimed or raised by any authority in writing or (B)
as to which any of the officers or managers of the Seller has knowledge based upon personal contact with any agent of such authority.

 

(c)          The
Seller, with respect to the Acquired Assets, does not have any liability for the Taxes of any other Person as a transferee or successor,
by contract, or otherwise.

 

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(d)          There
is no dispute or claim concerning any Tax liability of the Seller either (i) claimed or raised by any authority in writing or (ii)
as to which any of the officers or managers of the Seller has knowledge based upon personal contact with any agent of such authority.

 

(e)          The
Seller, with respect to the Acquired Assets, has no Liability for the Taxes of any other Person as a transferee or successor, by
contract, or otherwise.

 

(f)          Seller
has disclosed to the Internal Revenue Service on the appropriate Tax Returns any Reportable Transaction in which Seller has participated
and have retained all documents and other records pertaining to any Reportable Transaction in which Seller has participated, including
documents and other records listed in Treasury Regulation Section 1.6011-4(g) and any other documents or other records which are
related to any Reportable Transaction in which Seller has participated but which are not listed in Treasury Regulation Section
1.6011-4(g). A “Reportable Transaction” means any transaction listed in Treasury Regulation Section 1.6011-4(b).

 

4.8           Litigation;
Decrees.

 

(a)          There
is no Proceeding pending or, to Seller’s Knowledge, threatened, against Seller or relating to any of the Acquired Assets
or the Business.

 

(b)          There
is no Decree to which Seller or any of the Acquired Assets or the Business is subject.

 

4.9           Compliance
With Laws; Permits.

 

(a)          Seller
is and has been in full compliance with each Legal Requirement that is applicable to it or to the conduct or operation of the Business
or the ownership, use, license or exploitation of the Acquired Assets. Seller has received no written notice or other communication
(whether oral or written) from any Government Authority or any other Person regarding any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement applicable to Seller, the Acquired Assets or the Business.

 

(b)          Seller
possesses all Government Authorizations necessary for the ownership of its properties and the conduct of the Business, except for
such exceptions as, individually or in the aggregate, have not had and would not reasonably be expected to have a Seller Material
Adverse Effect. Further, (i) all such Government Authorizations are in full force and effect and (ii) Seller has received no written
notice of any event, inquiry, investigation or proceeding threatening the validity of such Government Authorizations.

 

4.10         Operations
of the Seller. Except as set forth on Schedule 4.10, since February 5, 2015, through the date of this Agreement, there
has not been any change, event or condition of any character that has had or would reasonably be expected to have a Seller Material
Adverse Effect. Without limiting the generality of the foregoing, except as set forth on Schedule 4.10, since February 5,
2015, the Seller has taken no action (nor committed to take any action) that would be prohibited (nor failed to take any action
that would be required) by Section 6.2 hereof if such action (or commitment) were taken (or failed to be taken) after the
date of this Agreement and prior to Closing.

 

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4.11         Material
Contracts.

 

(a)          Schedule
4.11(a) contains a complete and correct list identified by the Seller, as of the date of this Agreement, of the following Contracts
to which Seller is a party, or, to Seller’ Knowledge, a Third Party is a party, or by which Seller is bound, or, to Seller’s
Knowledge, to which a Third Party is bound, in any case relating to the Acquired Assets or the Related Marks (collectively, the
“Material Contracts”), including:

 

(i)          any
agreement (or group of related agreements) for the lease of personal property to or from a Person providing for lease payment in
excess of $15,000 per annum, which is not terminable by Seller on less than ninety (90) days’ notice;

 

(ii)         any
License Agreement currently in effect;

 

(iii)        any
License Agreement submitted to a Person for execution but not yet executed and delivered to the Seller by such Person;

 

(iv)        any
agreements relating to Intellectual Property Rights;

 

(v)         any
agreement imposing continuing confidentiality obligations on Seller with respect to the Acquired Assets;

 

(vi)        any
contracts containing covenants that in any way purport to limit the freedom to engage in any line of business or to compete with
any Person or in any geographical area;

 

(vii)       any
design agreements; and

 

(viii)      any
other agreement related to the Acquired Assets the performance of which involves consideration in excess of $15,000.

 

(b)          All
Material Contracts are in full force and effect and in written form and true, correct and complete copies of all Material Contracts,
including any amendments, waivers, supplements or other modifications thereto, have been made available to the Buyers. Seller is
not in violation or breach of or in default under any Material Contract. No Proceeding or event or condition has occurred or exists
or, to Seller’s Knowledge, is alleged by any party to have occurred or exist which, with notice or lapse of time or both,
would constitute a default by any of the parties thereto of their respective obligations under a Material Contract (or would give
rise to any right of termination or cancellation). To Seller’s Knowledge, no party to a Material Contract is in breach of
a Material Contract. No party to a Material Contract has expressed in writing, orally, or through any other means of communication,
such party’s plans to breach, terminate, re-negotiate, or fail to renew a Material Contract. The Closing of the transactions
contemplated in this Agreement will not trigger any payments or termination rights under a Material Contract outside of the Ordinary
Course of Business, and will not cause Seller to be in breach of any Material Contract.

 

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4.12         Intellectual
Property.

 

(a)          Schedule
4.12(a) attached hereto sets forth a complete and correct list of (i) all registered trademarks or service marks related to
the Acquired Assets owned by Seller (ii) all pending applications for registration of any trademarks or service marks related to
the Acquired Assets and owned by Seller (iii) all trade names, common law trademarks and unregistered marks related to the Acquired
Assets and owned and used by Seller; (iv) all internet domain names, social network site handles, and URLs used, registered or
applied for by Seller and related to the Acquired Assets; (v) all Intellectual Property Rights related to the C Wonder Brand or
Related Marks that are owned by any Person other than the Seller; and (vi) all Intellectual Property Rights otherwise held by Seller
that relate, either directly or indirectly, to the Acquired Assets.

 

(b)          Schedule
4.12(b) attached hereto sets forth a complete and correct list of: (i) all licenses or similar agreements or arrangements in
which Seller or its Affiliates are a licensor of Intellectual Property Rights that are related to or used in connection with the
Acquired Assets, including any License Agreements or any similar arrangements or agreements, (ii) all licenses and similar agreements
or arrangements in which Seller or its Affiliates are a licensor of Intellectual Property Rights that are not otherwise listed
under (i), and (iii) all other agreements or similar arrangements, in effect as of the date hereof, relating
to the use of Intellectual Property Rights related to the C Wonder Brand as used by Seller,
including settlement agreements, consent-to-use or standstill agreements and standalone indemnification agreements.

 

(c)          Except
as set forth on Schedule 4.12(c), (i) the Seller own and possess all right, title and interest in and to, or has the enforceable
right to use, the Intellectual Property Rights related to the C Wonder Brand, which are set forth in Schedule 4.12(a), have
a valid and enforceable right to use pursuant to the agreements set forth in Schedule 4.12(b), or otherwise own and possess
all right, title and interest in and to all other Intellectual Property Rights related to the C Wonder Brand free and clear of
all Liens (collectively, the “Seller Intellectual Property Rights”), and (ii) Seller has not licensed any of
the Seller Intellectual Property Rights to any Third Party.

 

(d)          Except
as set forth on Schedule 4.12(d), (i) neither the Seller nor, to the Knowledge of the Seller, any Predecessor has infringed,
diluted, misappropriated or otherwise conflicted with any Intellectual Property Rights of any Person, including rights under patents,
trademarks, service marks, copyrights, publicity or personality rights, or otherwise; (ii) Seller has no Knowledge of any facts
which indicate a likelihood of any of the foregoing; (iii) Seller has received no written notices regarding any of the foregoing
(including any demands that Seller or, to the Knowledge of the Seller, any Predecessor is required to license any Intellectual
Property Rights, including Intellectual Property Rights related to the C Wonder Brand, from any Person or any requests for indemnification
from customers) and (iv) Seller has received no written opinions of counsel related to the foregoing.

 

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(e)          Except
as set forth on Schedule 4.12(e), (i) no loss or expiration of any of the Seller Intellectual Property Rights is threatened,
pending or reasonably foreseeable, except for those rights expiring at the end of their current registration terms without renewal
by Seller (and not as a result of any act or omission by Seller, including a failure by Seller to pay any required maintenance
or renewal fees); (ii) all of the Seller Intellectual Property Rights are valid and enforceable; (iii) no claim by any Third Party
contesting the validity, enforceability, use or ownership of any of the Seller Intellectual Property Rights has been made, is currently
outstanding or threatened; (iv) to the extent the Seller Intellectual Property Rights are protected by applications or registrations,
Seller will continue to maintain and protect such applications and registrations prior to the Closing so as not to adversely affect
the validity or enforceability thereof; and (v) Seller has not disclosed or allowed to be disclosed any of its trade secrets or
confidential information to any Third Party other than pursuant to a written confidentiality agreement.

 

(f)          Except
as set forth on Schedule 4.12(f), no Person has infringed, diluted, misappropriated or otherwise conflicted with any of
the Seller Intellectual Property Rights and no Seller knows of no facts that indicate a likelihood of any of the same.

 

(g)          Except
as set forth on Schedule 4.12(g), all Intellectual Property Rights related to the C Wonder Brand and owned by the Seller
were: (i) developed by employees of the Seller or a Predecessor working within the scope of their employment; (ii) developed by
officers, directors, agents, consultants, contractors, subcontractors or others who have executed appropriate instruments of assignment
in favor of the Seller as assignee that have conveyed to the Seller ownership of all of such Person’s rights in such Intellectual
Property Rights relating to such developments; or (iii) acquired in connection with acquisitions in which the Seller obtained appropriate
representations, warranties and indemnities from the transferring party relating to the title to such Intellectual Property Rights.

 

(h)          Except
as set forth in Schedule 4.12(h), none of the Seller Intellectual Property Rights is subject to any proceeding or
outstanding decree, order, judgment, agreement or stipulation restricting in any manner the use, transfer or licensing thereof
by Seller, or which may affect the validity, use or enforceability of the Seller Intellectual Property Rights.

 

(i)          Seller
has collected, used, imported, exported and protected all personally identifiable information, and other information relating to
individuals protected by law, in accordance with the privacy policies of Seller and in accordance with applicable law, including
by entering into agreements, where applicable, governing the flow of such information across national borders.

 

(j)          Each
item of the Seller Intellectual Property Rights is valid, enforceable and subsisting in the United States and the jurisdictions
set forth on Schedule 4.12(j). Prior to the Closing, the Seller will deliver to the Buyers all files, documents, or instruments
necessary to the preservation and maintenance of the Seller Intellectual Property Rights.

 

(k)          Neither
Seller nor any other Person owns, or has pending, any patent applications or patents related to the Acquired Assets.

 

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4.13         Affiliate
Transactions. Except as set forth on Schedule 4.13, and with respect to the Acquired Assets (a) there are no Contracts
between Seller, on the one hand, and any member, interest or right holder or any family member of any such member, interest or
right holder, or any Affiliate of any of the foregoing, on the other hand; (b) there are no Contracts between Seller, on the one
hand, and any employee or director or any family member or Affiliate of any such person, on the other hand, other than employment
agreements entered into in the Ordinary Course of Business; and (c) there are no loans or other indebtedness owing by any employee
of Seller or any family member or Affiliate of any such person to Seller.

 

4.14         Brokers
or Finders. Except as set forth on Schedule 4.14, no agent, broker, firm or other Person acting on behalf of Seller
(or Affiliate thereof) is, or will be, entitled to any investment banking, commission, broker’s or finder’s fees from
any of the parties hereto for which any Buyer (or Affiliate thereof) would be responsible to pay in connection with any of the
transactions contemplated by this Agreement.

 

4.15         Powers
of Attorney. There are no outstanding powers of attorney executed by or on behalf of Seller with respect to any of the Acquired
Assets.

 

4.16         Disclaimer
of Other Representations and Warranties. Except for the representations and warranties contained in this Article IV
or expressly contained in any other Related Agreement, Seller makes no other representation or warranty, express or implied.

 

ARTICLE
V

Representations and Warranties of the Buyers

 

The Buyers hereby jointly
and severally represent and warrant to the Seller that the statements contained in this Article V are correct and complete
as of the date of this Agreement and will be true, correct and complete as of the Closing Date, except in each case as set forth
in the disclosure schedule attached hereto (the “Buyer Disclosure Schedule”). The disclosures in any section
or subsection of the Buyer Disclosure Schedule shall qualify the corresponding section or subsection in this Article V and
any other section or subsection in which such disclosure is required to be included to the extent the relevance of such disclosure
is reasonably apparent on its face.

 

5.1           Existence
and Good Standing; Authorization. Each Buyer is an entity duly formed, validly existing and in good standing under the laws
of the state of its formation. Each Buyer has all requisite power and authority to own, lease and operate its assets and properties
and to carry on its business as currently conducted. Each Buyer is duly qualified and, to the extent applicable, is in good standing,
in such jurisdiction in which the character and location of the property owned, leased or operated by each Buyer or the nature
of the business conducted by such Buyer makes such qualification necessary, except where the failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a Buyer Material Adverse Effect. Each Buyer has all requisite
power and authority to execute and deliver this Agreement and each other Related Agreement to which such Buyer is a party, to perform
its obligations hereunder and thereunder and to consummate the sale and the other transactions contemplated hereby and thereby.
The execution, delivery and performance by each Buyer of this Agreement and each other Related Agreement to which it is a party,
and the consummation by it of the transactions contemplated hereby and thereby, have been duly authorized and approved, and no
other action on the part of any Buyer is necessary to authorize the execution, delivery and performance by any Buyer of this Agreement
or any other Related Agreement to which a Buyer is a party or the consummation thereby of the transactions contemplated hereby
and thereby. This Agreement has been duly executed and delivered by each Buyer and constitutes, and, with respect to each other
Related Agreement, upon its execution and delivery by each Buyer party thereto, will constitute, assuming the due execution of
this Agreement and such other Related Agreement by the Seller and/or the other parties thereto, a valid and binding obligation
of that Buyer enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, receivership and similar laws affecting the enforcement of creditors’ rights generally, and general equitable
principles.

 

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5.2           Consents
and Approvals; No Violations. The execution and delivery of this Agreement by each Buyer, and the execution and delivery of
each Related Agreement to which each Buyer is a party, and the consummation of the transactions contemplated hereby and thereby
do not and will not:

 

(a)   violate
or conflict with any provisions of the Organizational Documents of any Buyer;

 

(b)  violate
any Legal Requirement or Decree to which any Buyer is subject or by which any of their respective material properties or assets
are bound;

 

(c)  require
any permit, consent or approval of, or the giving of any notice to, or filing with any Government Authority on or prior to the
Closing Date; or

 

(d)  result
in a material violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any Lien
upon any of the material properties or assets of any Buyer under any of the material terms, conditions or provisions of any Material
Contract or any other instrument or obligation to which any Buyer is a party, or by which it or any of their respective material
properties or assets may be bound; excluding from the foregoing clauses (b), (c) and (d) permits, consents, approvals, notices
and filings the absence of which, and violations, breaches, defaults and Liens the existence of which, would not, individually
or in the aggregate, reasonably be expected to prevent such Buyer from performing its obligations under this Agreement or constitute
a Buyer Material Adverse Effect.

 

5.3           Compliance
with Laws. 

 

(a)  Each
of the Buyers is in full compliance with each Legal Requirement that is applicable to it or to the conduct or operation of its
business or the ownership of its assets, except for such non-compliance, individually or in the aggregate, as would not reasonably
be expected to have a Buyer Material Adverse Effect. None of the Buyers has received any written notice or other communication
(whether oral or written) from any Government Authority or any other Person regarding any actual, alleged, possible or potential
violation of, or failure to comply with, any material Legal Requirement.

 

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(b)  Each
Buyer possesses all Government Authorizations necessary for the ownership of its properties and the conduct of its business as
currently conducted, except for such exceptions as, individually or in the aggregate, have not had and would not reasonably be
expected to have a Buyer Material Adverse Effect. Further, (i) to the Buyers’ Knowledge, all such Government Authorizations
are in full force and effect and (ii) no Buyer has received any written notice of any event, inquiry, investigation or proceeding
threatening the validity of such Government Authorizations.

 

(c)  All
of the Xcel Shares to be issued pursuant to this Agreement, including the shares to be issued at the Closing and the Earn-Out Shares,
if any, have been, or will have been at the time of issuance, duly authorized by all necessary corporate action and, will be, when
issued in accordance with this Agreement duly authorized, validly issued, fully paid and nonassessable and will be issued in compliance
with all applicable federal and state securities laws.

5.4           Litigation.

(a)  There
is no Proceeding pending or, to the Buyers’ Knowledge, threatened, against any of the Buyers.

(b)  There
is no Decree to which any of the Buyers is subject, and each of the Buyers is in compliance with each Decree to which it or its
properties or assets are subject.

5.5           Taxes.
There are no material Taxes due and payable by any Buyer which have not been timely paid. The reserves for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) as reflected on the
most recent financial statements of Xcel in accordance with GAAP are adequate in amount for the payment of all material Taxes (whether
or not disputed) of the Buyers through the date of such financial statements. There have been no examinations or audits of any
Tax Returns of Buyers by any Government Authority. Each Buyer has duly and timely filed all material Tax Returns required to have
been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to Taxes for any year.

5.6           Brokers’
or Finders’ Fees. Except as set forth on Schedule 5.6, no agent, broker, firm or other Person acting on behalf
of any Buyer (or Affiliate thereof) is, or will be, entitled to any investment banking, commission, broker’s or finder’s
fees from any of the parties hereto for which Seller (or Affiliate thereof) would be responsible to pay in connection with any
of the transactions contemplated by this Agreement.

5.7           Disclaimer of Other Representations and Warranties. Except for the representations and warranties contained in this Article
V or expressly contained in any other Related Agreement, no Buyer makes any other representation or warranty, express or implied.

 

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ARTICLE
VI

Pre-Closing Covenants

6.1           Efforts
to Closing. On the terms and subject to the conditions in this Agreement, and provided that neither Buyer is in default hereunder,
the Seller agrees to use commercially reasonable efforts to take, or cause to be taken, all actions as may reasonably be necessary
to consummate the transactions contemplated hereby and to cause the conditions set forth in Article VIII to be satisfied,
and, provided that Seller is not in default hereunder, the Buyers agree to use their commercially reasonable efforts to take, or
cause to be taken, all actions as may reasonably be necessary to consummate the transactions contemplated hereby and to cause the
conditions set forth in Article IX to be satisfied as soon as practicable after the date hereof but not later than July
31, 2015. Without limiting the generality of the foregoing, the Seller shall give or cause to be given any notices to Third Parties
required to be given pursuant to any Contract to which they are a party as a result of this Agreement or any of the transactions
contemplated hereby. The Seller shall use commercially reasonable efforts to obtain prior to the Closing, and deliver to the Buyers
at or prior to the Closing, all consents, waivers and approvals required to be obtained under each Contract to which it is a party
or by which it is bound in form and substance reasonably acceptable to the Buyers. The Buyers shall use commercially reasonable
efforts to cooperate with the Seller in the Seller’s efforts to obtain the aforementioned consents, including by providing
such information as the other contracting parties may reasonably request.

6.2           Conduct
of the Business. From the date of this Agreement until the Closing Date, Seller shall not:

(a)  Sell
or dispose of any of the Acquired Assets;

(b)   Create,
or suffer or permit the creation of, any Lien including any royalty advances or other advances from Third Parties (other than Permitted
Liens) on any of the Acquired Assets or with respect thereto or otherwise impair the Acquired Assets;

(c)  Take
any action that would reasonably be likely to prevent Seller from consummating the transactions contemplated in this Agreement;

(d)  Fail
to maintain the Seller Intellectual Property Rights, including all trademark, domain name, and other registrations;

(e)  Knowingly
violate any applicable Legal Requirement;

(f)  Take,
or fail to take, any other action which would reasonably be expected to result in a breach or inaccuracy in any of the representations
or warranties of the Seller contained in this Agreement;

(g)  Enter
into any Contract that would constitute a Material Contract hereunder other than in the Ordinary Course of Business;

(h)  Take
any action that would harm the goodwill of the Business;

 

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(i)  Accelerate,
terminate, make material modifications to, or cancel any Contract related to the Acquired Assets;

(j)  Transfer,
assign or grant any license or sublicense of any Intellectual Property Rights;

(k)  Incur
any Indebtedness or incur or become subject to any material Liability;

(l)  Suffer
any extraordinary losses or waive any rights of material value;

(m)  Abandon,
permit to lapse or fail to renew any of the Acquired Trademarks or Acquired Intellectual Property

(n)  Settle
or compromise any Proceeding related to the Acquired Assets in which the Seller (or an Affiliate thereof) is a defendant (whether
or not commenced prior to the date hereof) or settle, pay or compromise any claims not required to be paid, in any such case if
doing so would reasonably be expected to materially and adversely impact the ability of the Seller to consummate the transactions
contemplated by this Agreement;

(o)  Take
any action that would reasonably be likely to have a Seller Material Adverse Effect; or

(p)  Agree
or commit, whether in writing or otherwise, to take any of the actions specified in the foregoing clauses.

6.3           Access
and Investigation. The Seller shall permit the Buyers and their respective Representatives to have reasonable access, prior
to the Closing Date, to the properties and to the Books and Records during normal working hours and upon reasonable advance notice,
for Buyers to familiarize themselves with the Seller’ properties, businesses and operating and financial conditions of the
Seller.

6.4           Exclusivity.
Until the termination of this Agreement pursuant to Section 10.1, provided that neither Buyer is in breach of this Agreement,
the Seller jointly and severally agree that neither Seller nor any of its members or officers shall, and that they shall cause
their Affiliates, employees, agents and Representatives not to (and shall not authorize any of them to) directly or indirectly:
(i) solicit, initiate, encourage or facilitate any inquiries with respect to, or the making, submission or announcement of, any
offer or proposal from any Person (other than the Buyers) concerning any proposal for a merger, sale of substantial assets (including
the license of any assets), sale of shares of stock or securities of Seller, business combination involving Seller, or other takeover
or business combination transaction involving Seller or any sale of the Acquired Assets other than in accordance with this Agreement
(each an “Acquisition Proposal”); (ii) participate in any discussions or negotiations regarding, or furnish
to any Person any nonpublic information with respect to, or otherwise cooperate in any respect with, any Acquisition Proposal;
(iii) engage in discussions with any Person with respect to any Acquisition Proposal (except to inform such Person that these restrictions
exist); (iv) approve, endorse or recommend any Acquisition Proposal; or (v) enter into any letter of intent or similar document
or any contract, agreement, arrangement, understanding or commitment, whether binding or non-binding, contemplating any Acquisition
Proposal or transaction contemplated thereby or requiring opposition to or seeking to prevent or undermine the transactions contemplated
by this Agreement. The Seller shall immediately cease any and all existing activities, discussions or negotiations with any Third
Parties conducted heretofore with respect to any Acquisition Proposal.

 

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6.5           Notice
of Developments. Seller shall promptly advise the Buyers, and each Buyer, as the case may be, shall promptly advise the Seller,
in writing of any (a) event, circumstance or development that results (or would reasonably be expected to result on the Closing
Date) in a breach of any representation, warranty or covenant made by it in this Agreement or (b) any material failure of the Seller
or a Buyer, as the case may be, to comply with or satisfy any condition or agreement to be complied with or satisfied by it hereunder;
provided that no disclosure pursuant to this Section 6.5 shall be deemed to amend or supplement any provision of this Agreement
or any disclosure schedule hereto, or to prevent or cure any misrepresentation, breach of warranty or breach of covenant.

6.6           Press
Releases and Public Announcements. No Party shall issue any press release or make any public announcement relating to the existence
or subject matter of this Agreement without the prior written approval of the other Party; provided, however, that any Party may
make any public disclosure it believes in good faith is required by applicable law or any listing requirement (including the listing
requirements of the Trading Market and securities laws applicable to Buyers) or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party shall use commercially reasonable efforts to advise the other Party a reasonable
period of time prior to making the disclosure and to provide such other Party the opportunity to comment thereon). The Seller acknowledge
and agree that Xcel may be required to file a Current Report on Form 8-K disclosing the transactions contemplated by this Agreement
and attaching as an exhibit thereto a copy of this Agreement, in which event no written approval for such filing shall be required
from Seller hereunder.

6.7           Confidentiality.

(a)  The
Parties acknowledge that Xcel and the Seller have previously executed a confidentiality and non-disclosure agreement dated April
9, 2015 (the “Confidentiality Agreement”) which Confidentiality Agreement shall continue in full force and effect
in accordance with its terms.

 

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(b)  From
and after the date hereof, Seller and each Buyer shall, and shall cause each of its respective Affiliates and Representatives to,
treat as confidential and use commercially reasonable efforts to safeguard and not to disclose, except as expressly agreed in writing,
all Confidential Information of the other Parties, and the Seller agrees to, and to cause its respective Affiliates and Representatives,
not to use any and all Seller Information included within the Acquired Assets, including the Seller Intellectual Property Rights.
Each Party shall exercise the same care used by such Party to prevent the unauthorized use or dissemination of its own proprietary
and confidential information in connection with the protection of Confidential Information pursuant to this Section 6.7.
Notwithstanding the foregoing, a Party may disclose Confidential Information (i) to its Representatives who agree to or are otherwise
bound to maintain the confidentiality thereof, (ii) to a Third Party, as required by a valid Decree, (iii) to a Governmental Authority,
as required by applicable Legal Requirement, legal process or request for information from a Governmental Authority, (iv) as required
to be disclosed on any Tax Returns or securities filings, or (v) in connection with any Proceedings relating to this Agreement
or any Related Agreement or the transactions contemplated hereby or thereby or the enforcement of any rights hereunder or thereunder.
Notwithstanding the provisions of clauses (ii) and (iii) above, in the event that a Party is requested or required (by oral question
or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose the Confidential Information of any other Party, to the extent permitted, such Party will notify the disclosing
Party promptly of the request or requirement so that the disclosing Party may seek an appropriate protective order or waive compliance
with the provisions of this Section 6.7. If, in the absence of a protective order or the receipt of a waiver hereunder,
a Party is, on advice of counsel, nonetheless requested or required to disclose any Confidential Information of another Party,
it may do so to the extent so requested or required; provided, however, that such Party shall use its commercially
reasonable efforts to obtain, at the reasonable request of the disclosing Party and at the sole expense of the disclosing Party,
an order or other assurance that confidential treatment will be accorded to such portion of such information as the disclosing
Party shall designate. In addition, to the extent any of the Seller Disclosure Schedules or any Confidential Information of the
Seller is required to be disclosed by either Buyer in connection with any securities filings, Buyers shall use commercially reasonable
efforts to obtain confidential treatment of such information. Notwithstanding the generality of the foregoing, nothing in this
Section 6.7 shall prohibit any Party from making public disclosures required by applicable Legal Requirements, according
to Section 12.1.

6.8           Third
Party Registered IP. From and after the date of this Agreement, with respect to Intellectual Property Rights comprising the
Acquired Assets registered, applied for or otherwise recorded in the name of a Person other than the Seller as of the date hereof
set forth on Schedule 6.8 (“Third Party Registered IP”), the Seller shall apply to record such Third
Party Registered IP in the name of the Seller or the Buyer designated by the Buyers in each applicable jurisdiction.

6.9           Further
Action. Prior to the Closing, each of the Parties shall use commercially reasonable efforts to take, or cause to be taken,
all appropriate action, do or cause to be done all things necessary, proper or advisable under applicable Legal Requirements, and
execute and deliver such documents and other papers, as may be required to consummate the transactions contemplated herein.

ARTICLE
VII

Post-Closing Covenants

7.1           Cooperation.
Following the Closing, the Parties shall cooperate with each other, and shall use their commercially reasonable efforts to cause
their respective Representatives to cooperate with each other, to provide an orderly transition of the Acquired Assets from the
Seller to Buyers.         

 

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7.2           Quarterly
Meetings. Subject to the execution of a confidentiality agreement in form and substance satisfactory to the Buyers, following
Closing, Buyers shall use commercially reasonable efforts to cause its representatives to meet on a quarterly basis with representatives
of the Seller, including Marisa Gardini and/or JC Burch, to review current and future product designs, branding and other strategic
matters relating to the Acquired Assets. Such meetings (including any related reports or other materials) shall be advisory only,
and shall not give Seller (or a representative thereof) the right to consent to or approve any such designs or other materials,
or the Buyers’ use of the Acquired Assets.

7.3           Taxes
Related to Purchase of Assets; Tax Cooperation.

(a)  The
Buyers, on the one hand, and the Seller, on the other hand, shall each be responsible for one-half of any and all stamp, transfer,
documentary, sales and use, registration and other similar taxes and fees (including any penalties and interest) incurred in connection
with this Agreement and the transactions contemplated hereby (collectively, the “Transfer Taxes”) regardless
of the Person liable for such Transfer Taxes under applicable Legal Requirements. Except to the extent required to be filed by
the Seller, the Buyers shall properly file on a timely basis all necessary Tax Returns and other documentation with respect to
all Transfer Taxes, provided that the Buyers shall provide copies of all such Transfer Tax Returns to the Seller at least twenty
(20) days prior to the due date thereof for Seller’s review and approval. The non-filing Party shall promptly reimburse the
filing Party for 50% of the amount of such Transfer Tax within ten (10) Business Days of receipt by the non-filing Party of evidence
of the timely filing and payment thereof. The provisions of this Section 7.2 and no other provision, shall govern the economic
burden of Transfer Taxes. Each of Buyers and Seller shall (and shall cause their respective Affiliates to) timely sign and deliver
such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax
Returns or reports with respect to, Transfer Taxes.

(b)  All
Taxes and assessments on the Acquired Assets for any taxable period commencing on or prior to the Closing Date and ending after
the Closing Date (a “Straddle Period”) shall be prorated between the Buyers and the Seller as of the close of
business on the Closing Date based on the best information then available, with (a) the Seller liable for such Taxes attributable
to any portion of a Straddle Period ending on or prior to the Closing Date and (b) the Buyers being liable for such Taxes attributable
to any portion of a Straddle Period beginning after the Closing Date. Information available after the Closing Date that alters
the amount of Taxes due with respect to the Straddle Period shall be taken into account and any change in the amount of such Taxes
shall be prorated between the Buyers and the Seller as set forth in the next sentence. All pro-rations of Straddle Period Taxes
on the Acquired Assets shall be allocated so that items relating to the portion of a Straddle Period ending on or prior to the
Closing Date shall be allocated to the Seller based upon the number of days in the Straddle Period on or prior to the Closing Date
and items related to the portion of a Straddle Period beginning after the Closing Date shall be allocated to the Buyers based upon
the number of days in the Straddle Period after the Closing Date. The amount of all such prorations that must be paid in order
to convey the Acquired Assets to the Buyers free and clear of all Liens other than Permitted Liens have been calculated and shall
be paid on the Closing Date; all other prorations shall be calculated and paid as soon as practicable thereafter.

 

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(c)  The
Seller and the Buyers shall (and shall cause their respective Affiliates to) cooperate fully with each other and make available
or cause to be made available to each other for consultation, inspection and copying (at such other party’s expense) in a
timely fashion such personnel, Tax data, relevant Tax Returns or portions thereof and filings, files, books, records, documents,
financial, technical and operating data, computer records and other information as may be reasonably requested, including (a) for
the preparation by such other party of any Tax Returns or (b) in connection with any Tax audit or proceeding including one party
(or an Affiliate thereof) to the extent such Tax audit or proceeding relates to or arises from the transactions contemplated by
this Agreement.

7.4           Acquired
Assets; Excluded Samples.

(a)  Seller
agrees to execute on or before the Closing Date all necessary documents with respect to the assignment of the Acquired Assets owned
by such Seller to the applicable Buyer (including registrations thereof). Upon the written request of a Buyer, its successors,
legal representatives or assigns, the Seller agrees that at any time from and after the Closing Date, the Seller shall use commercially
reasonable efforts to communicate with the Buyers, their respective successors, legal representatives and assigns regarding all
information known to the Seller relating to the Acquired Assets in the United States and worldwide, and the Seller shall execute
and deliver any papers, make rightful oaths, testify in any legal proceedings, and perform all other lawful acts reasonably deemed
necessary or desirable by Buyers, their successors, legal representatives and assigns, to convey or perfect the Buyers’ rights
to the Acquired Assets and to enforce or defend Buyers’ and their assigns’ rights in and to the Acquired Assets.

(b)  Following
the Closing Date, the Seller agrees to make available to Buyers any Excluded Samples free of charge for Buyers’ use for marketing
and product and business development purposes. Notwithstanding the foregoing, the Buyers hereby acknowledge that, within ninety
(90) days of the Closing Date, the Seller shall have the right to sell or otherwise dispose of any Excluded Samples not requested
by a Buyer to be made available for use by such Buyer in accordance with the preceding sentence.

7.5           Additional
Financial Statements. The Seller shall use commercially reasonable efforts to assist the Buyers in the preparation of any financial
statements required by the SEC in connection with the transactions contemplated by this Agreement, if any, at the Buyer’s
cost and expense, including providing the Buyers with full access during normal business hours, in a manner so as not to interfere
with the normal business operations of the Seller and on reasonable advance notice, but in any event not less than two (2) Business
Days, to all relevant books, records, work papers, information and employees and auditors of the Seller, to the extent necessary
in connection with the preparation of any such financial statements.

7.6           Lock-Up
Agreements; Registration.

(a)  The
Seller agrees to execute an agreement (a “Lock-Up Agreement”) not to sell, transfer, pledge, hypothecate or
otherwise dispose of any securities of Xcel, whenever acquired, consistent with the provisions of Section 7.6(b), in form
and substance attached hereto as Exhibit B.

 

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(b)  Subject
to Section 7.6(a), the Seller agrees to execute a Lock-Up Agreement with respect to any Xcel Shares issued to a Seller (collectively,
the “Lock-Up Shares”), consistent with the following terms: (i) during the twelve (12) month period from the
date that such Xcel Shares are issued as a result of the payment of a portion of the Purchase Price in the form of Xcel Shares
pursuant to Section 3.3(ii) or the payment of the Earn-Out Value in the form of Earn-Out Shares pursuant to Section 3.4
(each such period herein referred to as an “Initial Period”), the Seller shall not, directly or indirectly,
through an “affiliate” or “associate” (as such terms are defined in the General Rules and Regulations under
the Securities Act), or otherwise, offer, sell, pledge, hypothecate, grant an option for sale, or otherwise dispose of, or transfer
or grant any rights with respect to any Lock-Up Shares in any manner (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition, whether by actual disposition, effective economic disposition due to cash
settlement, transfer of any entity holding the Lockup Shares or otherwise) either privately or publicly (each, a “Transfer”)
any of such Lock-Up Shares acquired by Seller pursuant to a stock split, stock dividend, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of Xcel (each an “Adjustment” and such shares “Adjustment
Shares”) affecting Xcel Shares (the Adjustment Shares, together with the Xcel Shares, the “Securities”),
or enter into any agreement or any transaction that has the effect of transferring, in whole or in part, directly or indirectly,
the economic consequence of ownership of the Securities, whether any such agreement or transaction is to be settled by delivery
of the Securities; (ii) upon the expiration of any such Initial Period, such foregoing restrictions on Transfer shall lapse with
respect to 25% of the number of corresponding Securities as to which such Initial Period relates (in each case taking into account
and proportionally adjusting for any Adjustments occurring during such period), and the Seller may Transfer such Securities in
open market transactions without restriction, subject to applicable securities laws; and (iii) on the first day of each of the
first three (3) consecutive three (3) month periods following the end of the applicable Initial Period, the restrictions on Transfer
provided for in this Section 7.6(b) shall lapse with respect to an additional 25% of the number of corresponding Securities
received by the Seller as to which such Initial Period relates (in each case taking into account and proportionally adjusting for
any Adjustments occurring during such period), and the Seller may Transfer such Xcel Shares, in open market transactions without
restriction, subject to applicable securities laws.

 

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(c)  Upon
expiration of an Initial Period, Xcel agrees to file with the SEC a registration statement under the Securities Act (a “Registration
Statement”), and make any filings with state securities agencies reasonably requested of it, with respect to the Xcel
Shares issued as a result of the payment of a portion of the Purchase Price in the form of Xcel Shares pursuant to Section 3.3(ii)
or the payment of the Earn-Out Value in the form of Earn-Out Shares pursuant to Section 3.4, as applicable. Xcel shall use
commercially reasonable efforts to cause such Registration Statement to become effective within sixty (60) days from the expiration
of such Initial Period or such later date as may be requested by the Seller. All expenses in connection with the preparation of
such Registration Statement (other than the expenses of counsel for the Seller) shall be borne by Xcel. Xcel shall indemnify and
hold harmless the Seller in connection with any such registration from and against any and all Damages caused by (a) any untrue
statement or alleged untrue statement of a material fact contained in the Registration Statement, prospectus, offering circular
or other document relating to the Xcel Shares issued to the Seller hereunder, or any omission or alleged omission to state a material
fact required to be stated in order to make the statements therein not misleading, or (b) any violation (or alleged violation)
by Xcel of the Securities Act, the Exchange Act, or any Legal Requirement in connection with the Registration Statement. The Seller
shall indemnify and hold Xcel harmless from and against any and all Damages caused by any untrue statement or alleged untrue statement
of a material fact contained in any information provided by the Seller (or its Affiliates or Representatives) for inclusion in
such Registration Statement, prospectus, offering circular or other document relating to the Xcel Shares issued to the Seller hereunder,
or any omission or alleged omission to state a material fact required to be stated by the Seller in order to make the information
so provided not misleading; provided, that the Seller shall not be liable in any such case to the extent that it has furnished
in writing to Xcel prior to the date of the Registration Statement, prospectus, offering circular or other document information
which corrected or made not misleading the information previously furnished by the Seller, and Xcel failed to update such information.
Notwithstanding the foregoing, (i) the Seller shall have no “piggyback” registration or similar rights as to any Xcel
Shares and (ii) Xcel shall not be obligated to register any Xcel Shares that may be sold pursuant to Rule 144 of the Securities
Act.

7.7           Agreement
to Vote. The Seller agrees to enter into a voting agreement at the Closing, in substantially the form attached hereto as Exhibit
C (the “Voting Agreement”). Each of the Seller and Xcel agree to comply with the terms of the Voting Agreement.

7.8           Access
to Records. At all times after the Closing, each Party shall permit the other Parties and their Affiliates reasonable access
upon not less than five (5) Business Days prior written notice, during normal business hours, at the sole cost and expense of the
requesting Party and in a manner that will not unreasonably interfere with the normal operations of the providing Party, to and
the right to make copies of the Books and Records and such other books and records of such Party relating to the Seller and/or
the Acquired Assets existing prior to Closing and in such providing Party’s possession or control; provided, however, that
the requesting Party shall only use such information (a) to protect or enforce its rights or perform its obligations under this
Agreement and any agreements entered into among the Parties in connection herewith or (b) in connection with tax or other regulatory
filings, litigation, financial reporting or to satisfy retention obligations under any applicable bankruptcy order. In addition,
the providing Party shall make available to the requesting Party or its Affiliate, upon reasonable request and to the extent still
employed by the providing Party, personnel who are familiar with any such matter requested. The Buyers agree that, within ninety
(90) days of the Closing Date, they shall return any unwanted Books and Records that are transferred from the Seller to the Buyers
at Closing and shall permit the Seller to keep copies of all other Books and Records for the sole purpose of satisfying its retention
obligations under any applicable bankruptcy order. Buyers agree that they shall maintain any books and records that they do not
transfer to Seller for the period provided in an applicable bankruptcy order.

7.9           Noncompetition
and Nonsolicitation.

(a)  For
a period of five (5) years from the Closing Date (the “Restricted Period”), each of the Seller
and JC Burch will not, directly or indirectly, on its or his own behalf, as an agent of, on behalf of or in conjunction with, or
as a member, partner or shareholder of, any other Person:

 

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(i)  engage
in any business that (x) Competes with the Business, or (y) operates under, registers or otherwise uses, or proposes to operate
under, register or otherwise use, any trademark or name containing the letter ‘C’ or containing the letter ‘C’
standing alone or set apart (whether or not separated by spaces, hyphens or otherwise) or the word ‘Wonder’
(or any confusingly similar word), in each case, in any form whatsoever.

 

(ii)  induce
any employee, licensee, independent contractor, manufacturer, supplier or customer of the Buyers or their Affiliates with respect
to the Acquired Assets or the Business, to terminate his or her employment or relationship, as applicable, with the Buyers or their
Affiliates, other than as a result of general solicitations for employment that are not specifically targeted at employees of the
Business.

(b)  Notwithstanding
anything to the contrary contained herein, the Seller shall have the right to sell or otherwise dispose of any Excluded Samples
in accordance with Section 7.4(b). In addition, nothing herein will prohibit the Seller or JC Burch from mere passive ownership
of not more than three percent (3%) of the outstanding stock of any class of a publicly held corporation whose stock is traded
on a national securities exchange or in the over-the-counter market. As used herein, the phrase “mere passive ownership”
shall include voting or otherwise granting any consents or approvals required to be obtained from such Person as an owner of stock
or other ownership interests in any entity pursuant to the charter or other organizational documents of such entity, but shall
not include any involvement in the day-to-day operations of such Person.

(c)  The
Buyers are entitled (without limitation of any other remedy) to specific performance and/or injunctive relief with respect to any
breach or threatened breach of the covenants in this Section 7.9. If any court of competent jurisdiction at any time deems
the time periods for the foregoing covenants too lengthy or the scope of the covenants too broad, the restrictive time periods
will be deemed to be the longest period permissible by law, and the scope will be deemed to comprise the broadest scope permissible
by law under the circumstances. It is the intent of the Parties to protect and preserve the Business and the Acquired Assets and
therefore the Parties agree and direct that the time period and scope of the foregoing covenants will be the maximum permissible
duration and size.

7.10         Non-Disparagement.

(a)  Neither
Seller nor any of its respective Affiliates or Representatives shall make any false or disparaging statements, in public or private,
which is reasonably likely to materially impair the reputation, goodwill or commercial interest of the Buyers.

(b)  No
Buyer shall, and each Buyer shall cause its Affiliates not to, make any false or disparaging statements, in public or private,
which is reasonably likely to materially impair the reputation, goodwill or commercial interest of Seller or its respective Affiliates
or Representatives.

(c)  Each
Party shall be entitled (without limitation of any other remedy) to seek specific performance and/or injunctive relief with respect
to any breach or threatened breach of the covenants in this Section 7.10.

 

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7.11         Recording
of Intellectual Property Assignments. The Seller and Buyers shall cooperate to timely record and file the Intellectual Property
Assignments with the appropriate Government Authorities as promptly as practicable following the Closing.

7.12         Foreign
Intellectual Property. The Seller agree to use commercially reasonably efforts to take, or cause to be taken, all actions,
as any of the Buyers may reasonably request or as may be otherwise necessary to assist with the registration and transfer of all
foreign Acquired Intellectual Property. In furtherance of this obligation, the Seller shall reimburse Buyers for 30% of the costs
of the registration and transfer of all foreign Acquired Intellectual Property, subject to a cap of $20,000.

7.13         Buyer
QVC Agreement. The Seller shall comply with the Buyer QVC Agreement at all times following the Closing. The Seller acknowledge
and agree that the Buyers shall have sole operating authority over the Buyer QVC Agreement, and Seller shall not interfere in any
way with the Buyers’ business with QVC unless requested by a Buyer.

7.14         Successors
and Assigns. Subject to the immediately following sentence, this Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and permitted assigns, including beneficiaries of an estate or trust, each of
which such successors and permitted assigns shall be deemed to be a party hereto for all purposes hereof. No Party may assign this
Agreement in whole or in part without prior written consent of the other Parties, which shall not be unreasonably withheld, and
any attempt to do so shall be null and void ab initio; provided, however, that in the event of any merger,
sale, sale of substantially all assets or any similar transaction is effected by Xcel, such written consent of the Seller shall
not be required and Xcel shall use commercially reasonable efforts to cause the successor, transferee or assign thereof to be bound
by the Buyers’ obligations hereunder (including the obligation to pay the Earn-Out Value); provided, however,
that, in the even such successor, transferee or assign does not assume such obligations, the Buyers shall not be relieved of its
obligations hereunder.

7.15         Further
Assurances. From time to time following the Closing, each Party shall execute and deliver, or cause to be executed and delivered,
such instruments and documents as a Party may reasonably request or as may be otherwise necessary to more effectively consummate
the transactions contemplated hereby. Following the Closing, the Seller agree to promptly forward to the Buyers any correspondence
or other communications addressed to the Seller received by them that relates to the Acquired Assets. Following the Closing, the
Seller and the Buyers shall promptly take all action reasonably requested and provide the Seller or the Buyers, respectively, or
their respective successors, assigns and Representatives, reasonable cooperation and assistance, at the requesting Party’s
expense, relating to (i) the preparation, prosecution, enforcement or defense of any Acquired Asset that constitutes Intellectual
Property Rights, or (ii) the procurement of any additional protection, extensions, or renewals for any Intellectual Property Rights
that the Buyers may deem appropriate which may be secured under any Legal Requirement. The Seller’s cooperation shall include
the execution and delivery of any and all affidavits, declarations, oaths, exhibits, assignments, powers of attorney or other documentation
as may be reasonably requested by the Buyers, including in connection with the registration or recordal of any Third Party Registered
IP not completed prior to Closing and expressly waived by the Buyers in writing as a condition to Closing.

 

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ARTICLE
VIII

Conditions Precedent to Buyers’ Obligation to Close

All obligations
of the Buyers under this Agreement are subject to the satisfaction of each of the following conditions (any of which may be waived
by the Buyers, in whole or in part, in their sole discretion):

8.1           Truth
of Representations and Warranties. The representations and warranties of the Seller contained in this Agreement that are qualified
as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as
of the date of this Agreement and on and as of the Closing Date, except to the extent that any such representation or warranty
expressly relates to an earlier date, in which case such representation and warranty qualified as to materiality shall be true
and correct, and such representation and warranty not so qualified shall be true and correct in all material respects, as of such
earlier date.

8.2           Performance
of Agreements. Each of the covenants and agreements of the Seller to be performed or complied with by it at or prior to the
Closing Date pursuant to the terms hereof, shall have been performed or complied with in all material respects.

8.3           Certificate.
The Seller shall have delivered (or caused to be delivered) to the Buyers a certificate, dated the Closing Date and executed by
or on behalf of the Seller, certifying as to the satisfaction of the conditions set forth in Sections 8.1 and 8.2
of this Agreement.

8.4           No
Injunction. No court or other Government Authority shall have issued a Decree, which shall then be in effect, restraining or
prohibiting the completion of the transactions contemplated hereby.

8.5           Governmental
and Other Approvals. All of the Government Authorizations and third-party consents and approvals set forth on Schedule 8.5
shall have been received and shall be in full force and effect.

8.6           Lien
Release. The Buyers shall have received copies of releases of all Liens (other than Permitted Liens) against any asset, property
or right comprising the Acquired Assets.

8.7           Assignments.
The Buyers shall have received the duly executed Intellectual Property Assignments.

8.8           Completion
of Due Diligence. Buyers shall have completed, to its reasonable satisfaction, a due diligence investigation of the Seller,
the Business and the Acquired Assets.

8.9           No
Seller Material Adverse Effect. From the date hereof to the Closing Date, there shall not have occurred any event, circumstance
or effect that has had or would reasonably be expected to have a Seller Material Adverse Effect.

 

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8.10         Financing.
The Buyers shall have completed a debt, equity or other financing pursuant to which Buyers received gross proceeds of at least
Four Million Dollars ($4,000,000), on terms and conditions satisfactory to the Buyers in their sole discretion.

8.11         Third
Party Registered IP. The Seller shall have recorded all Third Party Registered IP in the name of the Seller or the Buyer designated
by the Buyers in each applicable jurisdiction.

8.12         Board
of Directors Consent. The Board of Directors of Xcel shall have authorized Xcel’s execution, delivery, and performance
of this Agreement and the Related Agreements to which it is a party and authorized specific officers of Xcel to execute the same.

8.13         No
Decree or Proceeding. No Decree or Proceeding shall be pending against Seller which would be reasonably expected to (i) prevent
consummation of any of the transactions contemplated by this Agreement, or (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation thereof.

8.14         Closing
Deliverables. In addition to any other documents to be delivered or actions to be taken under other provisions of this Agreement,
at the Closing, the Seller shall deliver to the Buyers:

(a)  One
or more executed bills of sale in form and substance reasonably satisfactory to the Buyers transferring to the Buyers all tangible
assets included in the Acquired Assets;

(b)  In
respect of the Acquired Assets, such documents as Buyers may reasonably require to effect the transfer to the Buyers of the Seller’s
interests therein free and clear of all Liens;

(c)  Counterparts
of all Related Agreements executed by the Seller, as applicable;

(d)  Certified
copies of the resolutions of the Seller authorizing the execution, delivery, and performance of this Agreement and any Related
Agreements by the Seller and the consummation of the transactions provided for herein;

(e)  An
executed assignment and assumption of the Assumed Contracts, in form and substance reasonably acceptable to the Buyers;

(f)  The
Books and Records;

(g)  A
non-foreign affidavit dated as of the Closing Date, sworn under penalty of perjury and in the form required under treasury regulations
issued pursuant to Code §1445 stating that Seller is not a foreign person as defined in Code §1445; and

(h)  Certificates
of the Secretaries of State (or other applicable office) in each jurisdiction in which Seller is organized, dated as of the Closing
Date (or as close thereto as reasonably practicable), certifying as to the good standing (to the extent such concept is recognized
in such jurisdiction) and non-delinquent status of such entity.

 

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ARTICLE
IX

Conditions Precedent to the Seller’S Obligation to Close

All obligations of
the Seller under this Agreement are subject to the satisfaction of each of the following conditions, (any of which may be waived
in whole or in part by the Seller, in its sole discretion):

9.1           Truth
of Representations and Warranties. The representations and warranties of the Buyers contained in this Agreement that are qualified
as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as
of the date of this Agreement and on and as of the Closing Date, except to the extent that any such representation or warranty
expressly relates to an earlier date, in which case such representation or warranty that is qualified as to materiality shall be
true and correct, and such representation and warranty not so qualified shall be true and correct in all material respects, as
of such earlier date.

9.2           Performance
of Agreements. Each of the covenants and agreements of the Buyers to be performed or complied with by the Buyers at or prior
to the Closing Date pursuant to the terms hereof shall have been duly performed or complied with by each of the Buyers in all material
respects.

9.3           Certificate.
Buyers have delivered to the Seller a certificate, dated the Closing Date and executed by a duly authorized officer on behalf of
the Buyers, certifying as to the satisfaction of the conditions set forth in Sections 9.1 and 9.2 of this Agreement.

9.4           No
Injunction. No court or other Government Authority shall have issued a Decree, which shall then be in effect, restraining or
prohibiting the completion of the transactions contemplated hereby.

9.5           Governmental
and Other Approvals. All Government Authorizations and third-party consents and approvals set forth on Schedule 9.5
shall have been received and shall be in full force and effect.

9.6           Closing
Deliverables. In addition to any other documents to be delivered or actions to be taken under other provisions of this Agreement,
at Closing, the Buyers, as applicable, shall deliver to the Seller the following:

(a)  The
Purchase Price as provided in Sections 3.2 and 3.3;

(b)  Counterparts
of all Related Agreements, executed by the Buyers, as applicable;

 

(c)  An
executed assignment and assumption of the Assumed Contracts, in form and substance reasonably acceptable to the Buyers; and

 

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(d)  A
certified copy of the resolutions of the Buyers authorizing the execution, delivery and performance of this Agreement and the consummation
of the transactions provided for herein.

ARTICLE
X

Termination

10.1         Right
to Terminate. This Agreement and the transactions contemplated hereby may be terminated at any time prior to the Closing on
the earlier of (the “Termination Date”):

(a)  the mutual written consent of the Buyers and the Seller;

(b)  by
the Buyers or the Seller if the Closing shall not have occurred by July 31, 2015;

(c)  final
decree by a court of competent jurisdiction or other Government Authority s having the effect of permanently restraining, enjoining
or otherwise prohibiting any of the transactions contemplated hereby, except if the party relying on such order, decree or ruling
or other action has not complied with its obligations under this Agreement;

(d)  by
the Seller, if there has been a breach of any representation, warranty, covenant or agreement on the part of the Buyers set forth
in this Agreement that causes the conditions set forth in Article IX to become incapable of fulfillment by the Termination
Date, unless waived by the Seller;

(e)  by
the Buyers, if there has been a breach of any representation, warranty, covenant or agreement on the part of the Seller set forth
in this Agreement that causes the conditions set forth in Article VIII to become incapable of fulfillment by the Termination
Date, unless waived by the Buyers;

provided, however,
that the Party exercising its right to so terminate this Agreement pursuant to Section 10.1(b), 10.1(d) or 10.1(e)
shall not have a right to terminate if, at the time of such termination, there exists a breach of any of the exercising Party’s
representations, warranties, covenants or agreements contained in this Agreement that causes the closing conditions set forth in
Article VIII or IX, as applicable, to become incapable of being fulfilled by the Termination Date.

10.2         Post-Termination
License Agreement with Seller or its Affiliate. If (i) the Closing is not consummated by the Parties hereto for any reason
other than pursuant to Sections 10.1(a), (c), or (d), and (ii) within twelve (12) months of the date of termination
of this Agreement, Seller or Affiliate thereof, directly or indirectly, enters into a license or other agreement(s) with QVC or
any other Person (A) to whom Xcel introduced Seller (or Affiliate thereof), or (B) with whom Xcel facilitated licensing discussions,
then Seller shall pay to Xcel a commission on such license agreement or other agreement(s) equal to fifteen percent (15%) of all
net royalty revenues received by such Seller thereof during the first twenty-four (24) months of such agreement(s) (the “Tail
Fee”).

 

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10.3         Effect
of Termination.

(a)  Except
as otherwise set forth in Section 10.2 and this Section 10.3, in the event of a termination of this Agreement by
either Seller or Buyers as provided in Section 10.1, this Agreement (other than Section 6.8, Section 10.2,
this Section 10.3 and Article XIII) shall forthwith become void; provided, however, that such termination
shall not relieve any Party of any liability for Damages actually incurred or suffered by the other Parties as a result of any
breach of this Agreement.

(b)  If
this Agreement is terminated solely as a result of Seller’s breach of Section 6.4 prior to the Termination Date, then
the Seller shall pay to Xcel, or a party designated by Xcel, (i) One Million Two Hundred Thousand Dollars ($1,200,000) (the “Exclusivity
Termination Fee”) not later than the day of such termination, and (ii) all of Buyers’ reasonable fees and expenses
related to the transaction contemplated herein (including reasonable legal fees and expenses of the Buyers) upon its receipt of
an invoice for such fees and expenses from the Buyers. The Exclusivity Termination Fee shall be paid by wire transfer of immediately
available funds to an account designated in writing to the Seller by Xcel.

(c)  In
the event that the Tail Fee or the Exclusivity Termination Fee is payable to Xcel hereunder but the Seller does not have the liquidity
to make such payments, the Seller shall not sell, dispose of or otherwise transfer any of its assets to any Person before satisfying
all payment obligations owed to Xcel. In the event of the foregoing, the Seller shall (i) grant Xcel a first priority security
interest in all of Seller’s assets and (ii) authorize Xcel to file a financing statement to that effect naming the Seller
as debtor and Xcel as secured party (in form and substance satisfactory to Xcel), which shall remain in place until such time as
the Seller satisfies all payment obligations owed to Xcel.

ARTICLE
XI

Indemnification; Remedies

11.1         Survival.
All representations and warranties made by the Seller, or the Buyers, herein, or in any certificate, schedule or exhibit delivered
pursuant hereto, shall survive the Closing and continue in full force and effect until the eighteen (18) month anniversary of
the Closing Date (the “Survival Date”), other than in the case of fraud and except as to any matters with respect
to which a bona fide written claim shall have been made or action at law or in equity shall have been commenced before such date,
in which event survival shall continue (but only with respect to, and to the extent of, such claim or action); provided, however,
that the representations and warranties) in Sections 4.1 (Organization and Good Standing), 4.2 (Enforceability; Authority),
4.4 (Title to Assets), Section 4.7 (Taxes) Section 4.12 (Intellectual Property), 4.14 (Brokers’
or Finders’ Fees), 5.1 (Existence and Good Standing; Authorization) and 5.8 (Brokers’ or Finders’
Fees) (collectively, the “Core Representations”) shall survive and remain in full force and effect until the
expiration of the Escrow Survival Period (subject to Section 11.7(e)). Each covenant and agreement of any of the Parties
contained in this Agreement, which by its terms is required to be performed after the Closing Date, shall survive the Closing and
remain in full force and effect until such covenant or agreement is performed.

 

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11.2         Indemnification
by the Seller. Subject to the limitations set forth in this Article XI, the Seller shall indemnify, defend and hold
harmless the Buyers and their stockholders, managers, members, officers, directors, agents, attorneys and employees, (hereinafter
“Buyer Indemnified Parties”) from and against any and all actual losses, claims, liabilities, debts, damages,
fines, penalties, costs (in each case including reasonable out-of-pocket expenses (including reasonable fees and expenses of counsel))
that any Buyer incurs or sustains (collectively, “Damages”) as a result of:

(a)  the
breach of any representation or warranty of Seller contained in this Agreement, any Related Agreement or in any certificate or
other instrument furnished to the Buyers by Seller pursuant to this Agreement;

(b)  the
breach of, default under or nonfulfillment of any covenant, obligation or agreement of the Seller under this Agreement, any Related
Agreement or the agreements and instruments contemplated herein or therein, which is not cured within thirty (30) days from the
Seller’s receipt of notice thereof;

(c)  the
Excluded Assets;

(d)  the
Excluded Liabilities;

(e)  the
breach of, default under or non-fulfillment of any of the Seller’s obligations;

(f)  any
Proceeding brought or claim made by a Licensee against Seller, Affiliate thereof or Predecessor involving a breach of, default
under or nonfullfilment of any obligations of such Party under an international License Agreement in effect prior to the Closing
Date to which such Licensee is a Party; or

(g)  any
and all Proceedings incident to any of the foregoing.

11.3         Indemnification
by Buyers. Subject to the limitations set forth in this Article XI, the Buyers shall each indemnify, defend and hold
harmless the Seller and its respective stockholders, managers, officers, directors, agents, attorneys and employees (hereinafter
“Seller Indemnified Parties” and, together with the Buyer Indemnified Parties, each an “Indemnified
Party”) from and against any and all Damages incurred or sustained by the Seller Indemnified Parties as a result of:

(a)  the
breach of any representation or warranty of the Buyers contained under this Agreement, any Related Agreement or any certificate
or other instrument furnished by the Buyers to Seller pursuant to this Agreement; and

(b)  the
breach of, default under of nonfulfillment of any covenant, obligation or agreement by the Buyers under this Agreement, any Related
Agreement or in the agreements and instruments contemplated herein or therein, which is not cured within thirty (30) days of Buyers’
receipt of notice thereof.

 

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11.4         Right
to Offset. Without limiting any other rights or remedies available to them, the Buyers shall be entitled to offset any claim
for indemnity made pursuant to Section 11.2 and in accordance with Section 11.7, against any payment of the Earn-Out
Value then or in the future payable by the Buyers to the Seller; provided, however, the Buyers may only exercise such right of
offset in respect of claims relating to Damages actually incurred by a Buyer Indemnified Party (in which case the amount of such
offset shall be the amount of such actual Damages) or bona fide claims actually asserted by a Third Party (in which case the amount
of the offset shall not exceed the Buyers’ good faith estimate of the amount of indemnifiable Damages that will ultimately
be payable to a Buyer Indemnified Party in respect of such claims). If any such claims for indemnity are resolved in favor of any
of the Buyer Indemnified Parties by mutual agreement or otherwise, or if the amount withheld exceeds the amount ultimately payable
to a Buyer Indemnified Party in respect of such claim, the Buyers shall pay to the Seller the excess amount withheld with respect
to such claim.

11.5         Limitation
on Liability.

(a)  Neither
the Seller nor the Buyers shall have any liability for Damages under Section 11.3(a) or Section 11.2(a), respectively,
and neither the Seller Indemnified Parties nor the Buyer Indemnified Parties shall have the right to seek indemnification under
Section 11.2 or Section 11.3, respectively, until the amount of all such Damages exceeds, in the aggregate, One Hundred
and Ten Thousand Dollars ($110,000) (the "Threshold"), in which event the Indemnifying Party shall, subject to
Section 11.5(b) pay or be liable for all such Damages from the first dollar. Notwithstanding the foregoing, Damages that
arise out of or result from, in whole or in part, any claim (whether direct or indirect) based on fraud or in connection with any
failure by the Buyers to make any payment of the Purchase Price when due are excluded from the application of the Threshold.

(b)  The
aggregate liability of the Seller, on the one hand, and the Buyers, on the other, for all Damages under Section 11.2(a)
or Section 11.3(a), as applicable, shall not exceed the amount that remains in the Escrow, (the “Cap”);
provided, however, that the Cap shall not apply to any breach of Section 4.4 (Title to Assets), in the case
of fraud or in connection with any failure by the Buyers to make any payment of the Purchase Price when due; provided further
that the aggregate liability of the Seller for Damages for a breach of Section 4.4 (Title to Assets) shall not exceed
the Purchase Price actually received by the Seller at the Closing regardless of the value of the Xcel Shares at the time an indemnity
claim is made.

(c)  In
determining the amount of Damages in respect of a claim under this Article XI, there shall be deducted an amount equal to
the amount of any third-party insurance proceeds actually received by the Indemnified Party making such claim with respect to such
Damages less the cost of any increase in insurance premiums over the projected period of such increase
as a result of making a claim for such Damages, provided that there shall be no obligation to make a claim, and no offset
against Damages shall be made, if a party reasonably believes that making a claim for such Damages is reasonably likely to result
in a non-renewal of the insurance policy.

(d)  Except
for liability resulting from fraud, and notwithstanding anything contained herein to the contrary, no Party shall be liable under
this Agreement for any consequential, special, indirect, incidental, or punitive damages of any kind or nature, regardless of the
form of action through which such damages are sought.

 

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(e)          The
limitations of liability contained in this Section 11.5 shall not be exceeded or modified in any way by the Supplemental
Indemnity Agreement.

 

11.6         Other
Indemnification Provisions.

(a)  To
the extent that any representations and warranties of the Seller or the Buyers, as applicable, have been breached, thereby entitling
the non-breaching party to indemnification pursuant to Section 11.2 or Section 11.3 hereof, it is expressly agreed
and acknowledged by the Parties that, solely for purposes of calculation of Damages in connection with any right to indemnification,
the representations and warranties of the Seller or Buyers, as applicable, that have been breached shall be deemed not qualified
by any references therein to materiality generally, Knowledge or to whether or not any breach or inaccuracy results in a Seller
Material Adverse Effect or Buyer Material Adverse Effect.

(b)  An
Indemnified Party’s right to indemnification pursuant to this Article XI shall, except for equitable relief and specific
performance of covenants that survive Closing, be the sole and exclusive remedy available to such Indemnified Party with respect
to any matter arising under or in connection with this Agreement or the transactions contemplated hereby, other than for claims
of fraud.

11.7         Procedure
for Indemnification. The procedure to be followed in connection with any claim for indemnification by Buyer Indemnified Parties
under Section 11.2 or Seller Indemnified Parties under Section 11.3 or any claims by one party against the other
is set forth below:

(a)  Notice.
Whenever any Indemnified Party shall have received notice that a claim has been asserted or threatened against such Indemnified
Party, which, if valid, would subject the indemnifying party (the “Indemnifying Party”) to an indemnity obligation
under this Agreement, the Indemnified Party shall promptly notify the Indemnifying Party of such claim; provided, however,
that failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its indemnification obligations hereunder,
except to the extent the Indemnifying Party is actually prejudiced thereby. Any such notice must be made to the Indemnifying Party
not later than the expiration of the applicable survival period specified in Section 11.1 above.

(b)  Defense
of a Third Party Claim. If any Third Party shall notify any Party with respect to any matter (a “Third Party Claim”)
that may give rise to a claim for indemnification against any other Party under this Article XI, the Indemnifying Party
shall have the right, but not the obligation, to assume the defense of the Third Party Claim so long as (i) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have
the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (ii) uses
counsel reasonably satisfactory to the Indemnified Party, (iii) the Indemnifying Party acknowledges its obligation to indemnify
the Indemnified Party hereafter in respect of such matters and (iv) the relief sought is monetary damages.

 

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(c)  After
notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of the Third Party Claim, the
Indemnifying Party shall not, as long as the Indemnifying Party diligently conducts such defense, be liable to the Indemnified
Party for any legal or other expense subsequently incurred by the Indemnified Party in connection with the defense thereof, other
than reasonable costs of investigation; provided, however, that if counsel defending such Third Party Claim
shall advise the parties of a potential conflict of interest arising from the existence of one or more legal defenses available
to the Indemnified Party which are different from or additional to those available to the Indemnifying Party or its Affiliates,
then the Indemnified Party may retain separate counsel to defend it and in that event the reasonable fees and expenses of such
separate counsel shall be paid by the Indemnifying Party if applicable under this Article XI. Subject to the proviso to
the foregoing sentence, if the Indemnifying Party assumes such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party.
The Indemnifying Parties shall be liable for the reasonable fees and expenses of counsel employed by the Indemnified Party for
any period during which the Indemnifying Party has not assumed the defense thereof if the Indemnifying Party is ultimately found
to be liable to indemnify the Indemnified Party. If the Indemnifying Party chooses to defend or prosecute any Third Party Claim,
all of the Parties hereto shall cooperate in the defense or prosecution thereof.

 

(d)  If
an Indemnifying Party assumes the defense of an action or proceeding, then, without the Indemnified Party’s written consent,
the Indemnifying Party shall not settle or compromise any Third Party Claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the delivery by the claimant or other plaintiff to the Indemnified Party of a written
release from all liability in respect of such Third Party Claim or if such settlement shall include injunctive or other relief
that affects or relates to the right or obligations of such Indemnified Party, other than the obligation to pay monetary damages
where such damages have been satisfied in full by the Indemnifying Party or their respective Affiliates.

(e)  In
the event the Buyers desire to make a claim against the Escrow on account of, or with respect to, the obligations of the Seller
under this Agreement (an "Escrow Claim"), the Parties shall comply with the following procedures:

(i)  The
Buyers shall notify the Seller and Escrow Agent in writing (a "Notice of Escrow Claim"), which notice shall set
forth a description of the Escrow Claim and the amount owed with respect to such Escrow Claim (if known). In the event that the
Seller disputes that a Buyer Indemnified Party is entitled to be paid the amounts set forth in such Escrow Claim, the Seller shall
notify the Buyers and the Escrow Agent of such dispute in writing within thirty (30) days following the Seller's receipt of the
Notice of Escrow Claim. If no notice of dispute is received by the Buyers within thirty (30) days after the Seller has been provided
a Notice of Escrow Claim, such amount specified therein shall be paid from the Escow to the Buyers (or a designee thereof) and
the Escrow Amount shall be reduced by such amount.

 

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(ii)  In
the event that the Seller disputes the Escrow Claim and provides the Buyers written notice of such dispute within thirty (30) days
following receipt by the Seller of the Notice of Escrow Claim, the amount set forth in such Escrow Claim shall be retained by in
the Escrow unless and until, and in the amount, (x) agreed by the Parties in writing, or (y) directed or permitted by
a final decision of a court of competent jurisdiction, which decision has not been appealed within any applicable time periods
for such appeal or with respect to which no appeal is available.

 

(iii)  On
each of (x) the twelve (12) month anniversary of the Closing Date, and (y) the twenty-four (24) month anniversary of the Closing
Date, the Buyers shall cause the Escrow Agent to release from the Escrow to the Seller 111,111 Xcel Shares minus the amounts
set forth in any Notices of Escrow Claim pending as of such date. To the extent the amounts set forth in any Notice of Escrow Claim
exceed the amount of cash that remains in the Escrow, the Escrow Agent shall retain additional Xcel Shares at $9.00 per share to
account for the full amount set forth in any Notice of Escrow Claim.

(iv)  In
the event that, on the expiration of the Escrow Survival Period, no Notices of Escrow Claim are pending, the Buyers shall cause
the Escrow Agent to release from the Escrow to the Seller the remaining balance of the Escrow Amount, if any. If, on such date,
one or more Notices of Escrow Claim are pending, the Buyers shall cause the Escrow Agent to release from the Escrow to the Seller
the remaining balance of the Escrow Amount, minus the amounts set forth in the Notices of Escrow Claim. To the extent the
amounts set forth in any Notice of Escrow Claim exceed the amount of cash that remains in the Escrow, the Escrow Agent shall retain
additional Xcel Shares at $9.00 per share to account for the full amount set forth in any Notice of Escrow Claim. Upon final resolution
of all claims set forth in all Notices of Escrow Claim that have been disputed as set forth herein (which shall be evidenced by
the written agreement of the Buyers in writing, or the direction by a final decision of a court of competent jurisdiction, which
decision has not been appealed within any applicable time periods for such appeal or with respect to which no appeal is available),
the Buyers shall cause the Escrow Agent to release from the Escrow to the Seller the remaining balance of the Escrow Amount.

(v)  The
Seller shall be entitled to any interest earned on any cash portion of the Escrow Amount disbursed to the Seller pursuant to this
Section 11.7.

11.8         Non-Third
Party Claims. Within thirty (30) Business Days after a Party obtains knowledge that it has sustained any Damages not involving
a Third Party Claim or action which such Party reasonably believes may give rise to a claim for indemnification from another party
hereunder, such Indemnified Party shall deliver notice of such claim to the Indemnifying Party, together with a brief description
of the facts and data which support the claim for indemnification (a “Claim Notice”); provided, however,
that failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its indemnification obligations hereunder,
except to the extent that the Indemnifying Party is actually prejudiced thereby. Any Claim Notice must be made to the Indemnifying
Party not later than the expiration of the applicable survival period specified in Section 11.1 above. If the Indemnifying
Party does not deliver notice to the Indemnified Party within thirty (30) Business Days following its receipt of a Claim Notice
that the Indemnifying Party disputes its liability to the Indemnified Party under this Article XI (an “Indemnification
Objection”) the Indemnifying Party shall be deemed to have accepted liability for such claim, in which event the other
party shall be free to pursue such remedies as may be available to them.

 

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11.9         Tax
Treatment. All indemnity payments made under this Article XI shall be treated as adjustments to the Purchase Price for
all tax purposes.

ARTICLE
XII

Miscellaneous

12.1         Public
Disclosure or Communications. Except to the extent required by applicable Legal Requirements (including securities laws applicable
to the Parties), none of the Buyers nor the Seller nor any of their respective Affiliates shall issue any press release or public
announcement of any kind concerning the transactions contemplated by this Agreement without the prior written consent of the other
Parties; and, in the event that any such public announcement, release or disclosure is required by applicable Legal Requirements
(including the rules of the stock market and/or securities laws), the disclosing Party shall provide the other Parties, to the
extent practicable and permissible under the circumstances, reasonable opportunity to comment on any such announcement, release
or disclosure prior to the making thereof. Each of the Parties hereto acknowledges that Xcel may be required to file a Current
Report on Form 8-K disclosing the transactions contemplated by this Agreement and attaching as an exhibit thereto a copy of this
Agreement, in which case no approval for such filing shall be required from Seller.

12.2         Notices.
All notices, consents, waivers, and other communications under this Agreement must be in writing and shall be deemed to have been
duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation
of receipt); provided that a copy is mailed by registered mail, return receipt requested, or (c) one (1) Business Day after its
delivery, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to
the other parties):

	 	If to the Seller:
	 	 
	 	Burch Acquisition LLC
	 	840 First Avenue, Suite 200
	 	King of Prussia, Pennsylvania 19406
	 	Facsimile:  (610) 688-2429
	 	Attn:  Brian Carden
	 	 
	 	With a copy to (which shall not constitute notice):
	 	 
	 	DLA Piper (US), LLP
	 	203 N. LaSalle Street, Suite 1900
	 	Chicago, Illinois 60601
	 	Facsimile:  (312) 630-5330
	 	Attn:  Richard A. Chesley, Esq.

 

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	 	If to the Buyers:
	 	 
	 	Xcel Brands, Inc.
	 	475 Tenth Avenue, 4th Floor
	 	New York, NY  10018
	 	Attention:  Robert D’Loren, CEO
	 	Facsimile: 347-572-0456
	 	 
	 	With a copy to (which shall not constitute notice):
	 	 
	 	Blank Rome, LLP
	 	405 Lexington Avenue
	 	New York, NY  10174
	 	Attention:  Robert Mittman
	 	Facsimile: 212-885-5001

 

12.3         Entire
Agreement; Nonassignability; Parties in Interest; No Third-Party Beneficiaries. This Agreement, the Related Agreements and
the certificates, exhibits, schedules, documents, instruments and other agreements specifically referred to herein or therein or
delivered pursuant hereto or thereto: (a) constitute the entire agreement among the Parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject
matter hereof, (b) are not intended to confer upon any other Person, either explicitly or implicitly, any equitable or legal rights
or remedies of any nature whatsoever hereunder, and (c) except as set forth in Section 7.14 hereof, shall not be assigned
by operation of law or otherwise without the written consent of the other party; provided, however, that the
Buyers may, without the consent of the Seller but upon written notice to the Seller thereof, (i) assign any or all of their rights
and interests hereunder to one or more of their Affiliates or successors, (ii) designate one or more of their Affiliates to perform
their obligations hereunder, (iii) direct the Seller, at the Closing and on behalf of the Buyers, to transfer title to all or some
of the Acquired Assets directly to either Buyer or one of more of their Affiliates, and (iv) assign their rights and obligations
under this Agreement to a purchaser of all or substantially all of the assets of the Buyers; provided, however,
that in each of (i)-(iv) the Buyers shall remain obligated to perform all their obligations under this Agreement. Except as expressly
provided herein, this Agreement is for the sole benefit of the Parties hereto and their successors and permitted assignees and
nothing herein expressed or implied shall give or be construed to give any Person, other than the parties hereto and such successors
and permitted assignees, any other right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. For
the avoidance of doubt, it is hereby acknowledged and agreed by the Parties hereto that an Indemnified Party that is not party
hereto is intended to be an express third party beneficiary of this Agreement.

 

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12.4         Bulk
Sales Law. The Buyers hereby waive compliance by the Seller with the provisions of any so-called bulk transfer laws of any
jurisdiction in connection with the sale of the Acquired Assets, and the Seller shall indemnify and hold harmless the Buyers and
any of their Affiliates from and against any claims arising out of or due to failure to comply with such bulk transfer laws.

12.5         Expenses.
Except as otherwise specifically provided in this Agreement, including the Tail Fee as provided in Section 10.3(b), whether
or not the transactions contemplated by this Agreement are consummated, each party hereto shall bear its own costs, expenses and
fees incurred in connection with this Agreement and the other transactions contemplated by this Agreement.

12.6         Waiver
and Amendment. Any representation, warranty, covenant, term or condition of this Agreement which may legally be waived, may
be waived, or the time of performance thereof extended, at any time by the party hereto entitled to the benefit thereof and any
term, condition or covenant hereof may be amended by the Parties hereto at any time. Any such waiver, extension or amendment shall
be evidenced by an instrument in writing executed on behalf of the appropriate party by a person who has been authorized by such
party to execute waivers, extensions or amendments on its behalf. No waiver by any party hereto, whether express or implied, of
its rights under any provision of this Agreement shall constitute a waiver of such party’s rights under such provisions at
any other time or a waiver of such party’s rights under any other provision of this Agreement. No failure by any party hereto
to take any action against any breach of this Agreement or default by another party shall constitute a waiver of the former party’s
right to enforce any provision of this Agreement or to take action against such breach or default or any subsequent breach or default
by such other party.

12.7         Severability.
Any term or provision of this Agreement which is invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining rights of the person intended to be benefited by such
provision or any other provisions of this Agreement.

12.8         Remedies
Cumulative. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by
a party of any one remedy shall not preclude the exercise of any other remedy.

12.9         Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall constitute an original, and all of which taken
together shall constitute one instrument. Any signature page delivered by a facsimile machine, or in portable document format file
format shall be binding to the same extent as an original signature page with regard to any agreement subject to the terms hereof
or any amendment thereto.

12.10         Governing
Law. The interpretation and construction of this Agreement, and all matters relating hereto, shall be governed by the laws
of the State of New York, including Sections 5-1401 and 5-1402 of the New York General Obligations Law.

 

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12.11         Dispute
Resolution. The parties agree to submit to binding arbitration (as set forth below) any and all disputes, claims or controversies
arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including
the determination of the scope or applicability of the Agreement to arbitrate. It is expressly acknowledged and agreed that the
Parties have chosen the mediation and arbitration process set forth herein in an effort to lower the cost and increase the efficiency
of dispute resolution beyond that encountered in traditional litigation, and the JAMS mediator/arbitrator shall keep that objective
in mind.

 

(a)  Mediation.
Before any dispute, controversy or claim arising out of or relating to this Agreement (independently or collectively, the “Claim”)
may be submitted to arbitration (as set forth immediately below), the parties hereto shall first attempt to resolve any such Claim
in a non-binding half-day mediation to be held in New York, New York before a mutually acceptable JAMS mediator. The mediation
process shall proceed as follows: (a) the complaining Party shall submit its Claim in writing to the other Party; (b) the other
Party shall respond in writing within three (3) Business Days; (c) the complaining Party shall reply in writing within three (3)
Business Days; (d) the Parties shall negotiate in good faith using commercially reasonable efforts to settle the Claim without
delay; (e) if the Claim is not settled within ten (10) Business Days of the complaining Party’s provision, by facsimile and/or
email, of its written reply to the other Party, the Claim shall promptly be submitted to mediation as set forth above; and (f)
the mediation shall occur no later than twenty-five (25) Business Days after the complaining Party’s provision, by facsimile
and/or email, of its written reply to the other Party.

(b)  Arbitration.
In the event that any Claim is not resolved through the mediation procedure outlined immediately above, the Parties agree that
such Claim shall be determined by arbitration as set forth in this section. Any arbitration pursuant to this section shall be held
exclusively in New York, New York before a single JAMS arbitrator, and shall be exclusively and finally settled, adjudicated and
determined in accordance with the JAMS Comprehensive Arbitration Rules and Procedures (“Comprehensive Rules”).
At the commencement of any arbitration, the parties shall in good faith discuss and determine whether such arbitration should be
conducted pursuant to the Expedited Procedures of the Comprehensive Rules, i.e. Rules 16.1 and 16.2. The arbitrator shall not authorize
more than: (1) five (5) depositions per Party; (2) the issuance of more than ten (10) interrogatories per Party; (3) the issuance
of more than seven (7) document subpoenas per Party; or (4) the issuance of more than ten (10) requests for admission per party.
Any such Claim shall be governed by the laws of the State of New York, including its statutes of limitations, but without regard
to its choice or conflicts of laws rules. All fact and expert discovery shall be completed within 120 days of the Preliminary Conference,
and any hearing shall commence and be completed within 150 days of the Preliminary Conference. Judgment upon the written Award
(as defined below) rendered by the arbitrator may be enforced, confirmed, rendered and entered in any court of competent jurisdiction
having jurisdiction thereof. All proceedings in connection with any arbitration, and any submissions relating to the arbitration,
except for the final written Award of the arbitrator, shall be kept confidential and may not be discussed or disclosed publicly
without the prior written consent of all Parties to the arbitration unless required by applicable law or the rules of any securities
exchange on which any Party’s or its affiliate’s securities are traded. The arbitrator’s written award (the “Award”)
shall include specific findings of fact and conclusions of law with citations to applicable authority, and shall be issued as soon
as practicable following the conclusion of the record or hearing, and in no event more than sixty (60) days after the conclusion
of the record or hearing.

 

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(c)  Fees
and Expenses. Any fees or expenses incurred by a Party in connection with a mediation (as outlined above) shall be borne that
Party, except that any fees, expenses and/or costs charged by the mediator shall be borne equally by the Parties. The arbitrator
shall award to the prevailing Party in any arbitration (as outlined above) all reasonable fees, expenses and costs including attorneys’
fees and expert witness fees and/or consultant fees.

 

(d)  Interim
Relief. Notwithstanding any provision of this Agreement including the foregoing sections outlining mediation and arbitration
procedures, any Party may seek interim judicial relief pending mediation and/or arbitration, including injunctive or other equitable
relief, to prevent irreparable harm or to preserve the status quo without waiving, and without prejudice to, the right or obligation
to mediate and/or arbitrate. The Parties agree that any such request for equitable or injunctive relief may be pursued only in
the state or federal courts located in New York, New York, and hereby submit to the jurisdiction of these courts for any such
purpose.

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IN WITNESS WHEREOF,
the parties hereto have each executed and delivered this Asset Purchase Agreement as of the day and year first above written.

	 	XCEL BRANDS, INC.
	 	 	 
	 	By:	/s/ Robert D’Loren
	 	Name:	Robert D’Loren
	 	Title:	CEO
	 	 	 
	 	C WONDER LICENSING, LLC
	 	 
	 	By:	/s/Seth Burroughs
	 	Name:	Seth Burroughs
	 	Title:	EVP
	 	 	 
	 	BURCH ACQUISITION, LLC
	 	 	 
	 	By:	/s/ J. Brian Carden
	 	Name:	J. Brian Carden
	 	Title:	Manager
	 	 	 
	 	/s/ J. Christopher Burch
	 	J. Christopher Burch

 

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