EXCHANGE AGREEMENT

 

Exhibit 10.1

  

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (the “Agreement”) is entered into February 26, 2018, by and among One Horizon Group, Inc., a Delaware corporation (“OHGI”), C-Rod, Inc., a Florida corporation (the “Company”), which includes any and all business conducted under the trade names Xxxx Media and/or Velveteen Entertainment, Xxxxxxxxxxx Xxxxx Xxxxxxxxx (hereinafter, “Xxxxxxxxx”) and Xxxxxxxx Xxxxx Xxxxxxxxx (hereinafter, “Xxxxx”), the stockholders of the Company (together, the “Stockholders”), upon the following premises:

 

Preliminary Statement

 

OHGI is a publicly traded corporation whose shares of common stock, par value $0.0001 per share (“OHGI Common Stock”), are listed on the NASDAQ Capital Market (“NASDAQ”) and registered under Section 12(b) of the Securities Exchange Act of 1934, as amended (“Exchange Act”).

 

The Stockholders own all of the outstanding shares of the capital stock of the Company (the “Company Shares”). OHGI desires to acquire the Company Shares from the Stockholders in exchange for $150,000 (the “Cash Exchange Consideration”) and 1,000,000 shares of OHGI Common Stock (the “Initial Shares”), plus an additional number of shares of OHGI Common Stock computed in accordance with the provisions of Section 5.02 of this Agreement (“Additional Shares,” and together with the Initial Shares, the “Exchange Shares”), and the Stockholders are willing to exchange their Company Shares for the Cash Exchange Consideration and the Exchange Shares, on the terms and subject to the conditions set forth herein (“Exchange”).

 

The board of directors of OHGI (“Board of OHGI”) and the Company (the “Company Board”) have determined that the transaction contemplated hereby is desirable and in the best interests of OHGI’s shareholders and the Stockholders. This Agreement is being entered into for the purpose of setting forth the terms and conditions of the proposed Exchange.

 

NOW THEREFORE, on the stated premises and for and in consideration of the mutual covenants and agreements hereinafter set forth and the mutual benefits to the parties to be derived here from, and intending to be legally bound hereby, it is hereby agreed as follows:

 

ARTICLE I 

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF THE COMPANY

 

As an inducement to the consummation of the Exchange, the Company and the Stockholders (collectively, the “Company Parties”), jointly and severally, represent and warrant that, except as set forth in the schedules of exceptions to the representations of the Company Parties annexed hereto (“Company Disclosure Schedules”), as of the date hereof and the Closing Date (as defined in Section 4.02 hereof):

 

1.01 Organization and Qualification.

 

(a) The Company is duly incorporated, validly existing, and in good standing under the laws of the State of Florida and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances and orders of public authorities, to carry on its business in all material respects as it is now being conducted. The Company has not qualified to do business in any State other than Florida. To the knowledge of the Company, no proceeding has been instituted in any jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail the power and authority or qualification of the Company within such jurisdiction.

 

(b) The Company has made available to OHGI complete and correct copies of its corporate documents as found at Xxxxxx.xxx (collectively, the “Company Charter Documents”). The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of the Company Charter Documents. The Company has taken all actions required by law and the Company Charter Documents, or otherwise, to authorize the execution and delivery of this Agreement.

 

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1.02 Power and Authority. The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby.

 

1.03 Authorization of Agreement; Due Execution and Delivery; Binding Agreement. The execution, delivery and performance of this Agreement by the Company, and the consummation of the transactions contemplated hereby, have been duly authorized by the Company Board and no further corporate action is required, and the Company Board has recommended that the Stockholders accept the Exchange. This Agreement has been duly executed and delivered on behalf of the Company. This Agreement constitutes a valid and binding obligation of the Company and the Stockholders, enforceable in accordance with its terms, except that such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors, rights generally, and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

1.04 No Conflict.  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement (i) will not violate any provision of the Company Charter Document; (ii) will not, with or without notice, lapse of time or both, result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of any indenture, mortgage, deed of trust, or other material agreement, or instrument to which the Company is a party or to which any of its assets, properties or operations are subject; (iii) violate any provision of law, statute, rule, regulation or executive order to which the Company is subject; or (iv) violate any judgment, order, writ or decree of any court applicable to the Company.

 

1.05 Company Capital Stock. As of the date hereof, all of the authorized capital stock of the Company issued and outstanding is owned by the Stockholders party hereto. All of the Company Shares have been duly authorized, are fully paid and non-assessable. None of the Company Shares were issued in violation of the preemptive or other rights of any Stockholders or other person or entity.

 

1.06 Derivative Securities.  There are no existing options, warrants, calls, or commitments of any character giving any person or entity the right to acquire shares of the Company’s capital stock.

 

1.07 Financial Statements.

 

(a) The Company has made available to OHGI a correct copy of the financial statements of the Company as of December 31, 2017 (the “Financial Statements”) as well as access to financial information for the fiscal years ended December 31, 2017 and December 31, 2016 (collectively, the “Company Financial Statements”).

 

(b) The Company Financial Statements are true and accurate and present fairly as of their respective dates the financial results of the Company. As of December 31, 2017, the Company had sufficient working capital to enable the Company to pay all liabilities as they fall due. The Company has no material liabilities, direct or indirect, matured or not yet matured, contingent or otherwise.

 

(c) The Company has or is duly and punctually paying all governmental fees and taxes that it has heretofore become liable to pay, which amounts up to and including the tax year ending December 31, 2016, do not currently exceed more than $6,000 in actual or potential liability. The Company has made any and all proper declarations and returns for taxation purposes and all information contained in such declarations and returns is true and complete and full provision or reserves have been made in its financial statements for all governmental fees and taxation.

 

(d) The books and records, financial and otherwise, of the Company are in all material aspects complete and correct and have been maintained consistently throughout the periods involved.

 

Section 1.08 Absence of Certain Changes or Events. Since December 31, 2017 (the “Cut-Off Date”):

 

(a) There has not been (i) any material adverse change in the business, operations, properties, assets or condition of the Company, or (ii) any damage, destruction or loss suffered by the Company (whether or not covered by insurance), materially and adversely affecting the business, operations, properties, assets or condition of the Company.

 

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(b) The Company has not (i) amended the Company Charter Documents; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock except in contemplation of this Agreement; (iii) waived any rights of value which in the aggregate are outside of the ordinary course of its business or material considering its business; (iv) made any material change in its method of management, operation, or accounting; (v) entered into any transactions or agreements other than in the ordinary course of business; (vi) made any accrual or arrangement for or payment of bonuses or special compensation of any kind or any severance or termination pay to any present or former officer or employee; (vii) increased the rate of compensation payable or to become payable by it to any of its officers or directors or any of its salaried employees whose monthly compensation exceed $1,000; or (viii) made any increase in any profit sharing, bonus, deferred compensation, insurance, pension, retirement, or other employee benefit plan, payment, or arrangement, made to, for or with its officers, directors, or employees.

 

(c) The Company has not (i) granted any options, warrants or rights to purchase, or issued any of its securities; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent), except liabilities incurred in the ordinary course of business; (iii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the Company Balance Sheets and current liabilities incurred since the Cut-Off Date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $1,000), or canceled, or agreed to cancel, any debts or claims (except debts or claims which in the aggregate are of a value less than $1,000); (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering its business; or (vi) issued, delivered or agreed to issue or deliver, any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock), except in connection or contemplation of this Agreement.

 

(d) The Company has not become subject to any law or regulation which materially and adversely affects, or in the future, may adversely affect, its business, operations, properties, assets or condition.

 

1.09 Liabilities. The Company represents and warrants that there are no lines of credit and other indebtedness that has been incurred by the Company of any kind.

 

1.10 Litigation and Proceedings.  There are no actions, suits, proceedings, or investigations pending or, to the knowledge of the Company after reasonable investigation, threatened by or against the Company or affecting the Company or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind.  The Company does not have any knowledge of any material default on its part with respect to any judgment, order, injunction, decree, award, rule, or regulation of any court, arbitrator, or governmental agency or instrumentality or of any circumstances which, after reasonable investigation, would result in the discovery of such a default.

 

1.11 Compliance. The Company to its knowledge is not: (i) in default under or in violation of (and no event has occurred that has not been waived that, with notice, lapse of time or both, would result in a default by the Company under), nor has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived); (ii) in violation of any judgment, decree or order of any court, arbitrator or other governmental authority; or (iii) or has not been, in violation of any statute, rule, ordinance or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, registration as a charitable organization, and employment and labor matters, except in each case as could not have or reasonably be expected to result in a material adverse effect: (A) on the legality, validity or enforceability of this Agreement; (B) on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company; or (C) on the ability of the Company or the Stockholders to perform in any material respect on a timely basis, his, her or its obligations under this Agreement.

 

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1.12 Regulatory Permits. The Company possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its businesses as presently conducted as far as the Company is aware and the Company does not expect that the failure to possess any such permit might reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and the Company has not received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

1.13 Contracts.

 

(a)  Schedule 1.13(a) of the Company Disclosure Schedules contains a list of all contracts, agreements, franchises, license agreements, debt instruments or other commitments to which the Company is a party or by which it or any of its assets, products, technology, or properties are bound other than those incurred in the ordinary course of business (“Disclosure Documents”). In the case of oral agreements, Schedule 1.13(a) includes a description thereof. The Schedule 1.13(a) Disclosure Documents will be provided to OHGI by the Company not less than five (5) business days prior to the Closing Date as currently scheduled. Specifically, with respect to Xxxxxxxxx’ publishing agreement through Rosemine Publishing with Sony/ATV Discos Music Publishing LLC, Xxxxxxxxx has disclosed and OHGI acknowledges that such publishing agreement is personal to Xxxxxxxxx and any rights of Xxxxxxxxx thereunder shall continue to belong to Xxxxxxxxx and not the Company or OHGI notwithstanding any other provision of this Agreement. 

 

(b)  All contracts, agreements, franchises, license agreements, and other commitments to which the Company is a party or by which its properties are bound and which are material to the operations of the Company taken as a whole are valid and enforceable by the Company in all respects, except as limited by bankruptcy and insolvency laws and by other laws affecting the rights of creditors generally or by the terms and conditions set forth in such contracts or agreements;

 

(c) The Company owns, licenses or has rights to use any and all intellectual property and technology used in the Company’s business, and to its knowledge the Company’s use of such intellectual property or technology does not infringe upon the intellectual property rights of any third party; and

 

(d)  Except as included or described in Schedule 1.13(a) of the Company Disclosure Schedules, the Company is not a party to any oral or written (i) contract for the employment of any officer or employee; (ii) profit sharing, bonus, deferred compensation, stock option, severance pay, pension benefit or retirement plan; (iii) agreement, contract, or indenture relating to the borrowing of money; (iv) guaranty of any obligation; (vi) collective bargaining agreement; or (vii) agreement with any present or former officer or manager of the Company, which, in each case cannot be terminated by the Company on notice of no more than thirty (30) days at a cost of no more than $25,000.

 

1.14 Bank Accounts; Power of Attorney.   Schedule 1.15 of the Company Disclosure Schedules will be provided to OHGI by the Company not less than five (5) business days prior to the Closing Date as currently scheduled and will set forth a true and complete list of all accounts with banks, money market mutual funds or securities or other financial institutions maintained by the Company within the past twelve (12) months, the account numbers thereof, and all persons authorized to sign or act on behalf of the Company.

 

1.15 No Brokers. The Company has not retained any broker or finder in connection with any of the transactions contemplated by this Agreement, and has not incurred or agreed to pay, or taken any other action that would entitle any person to receive, any brokerage fee, finder’s fee or other similar fee or commission with respect to any of the transactions contemplated by this Agreement except as the Company has otherwise disclosed.

 

1.16 Disclosure.  All disclosure provided to OHGI regarding the Company, its business and the transactions contemplated hereby, including the Company Disclosure Schedules to this Agreement, furnished by or on behalf of the Company with respect to the representations and warranties made herein are true and correct with respect to such representations and warranties and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. In the event that the Company Disclosure Schedules are not delivered contemporaneously with the execution of this Agreement, they shall be delivered prior to the Closing Date.

  

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The Company Parties acknowledge and agree that OHGI has not made, nor is OHGI making, any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth herein.  

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

 

The Stockholders hereby represent and warrant, severally and solely, to OHGI as follows.

 

2.01 Good Title.  The Stockholder are the record and beneficial owners of the Company and have good title to the Company Shares and have the right and authority to sell and deliver such Company Shares, free and clear of all liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering OHGI or its designee as the new owner of such Company Shares in the records maintained by the Company listing the names of its stockholders and their respective ownership of Company Shares, OHGI or its designee will receive good title to such Company Shares, free and clear of all liens.

 

2.02 Power and Authority. The Stockholders have the legal power, capacity and authority to execute and deliver this Agreement, to consummate the transactions contemplated by this Agreement, and to perform such Stockholders’ obligations under this Agreement.  This Agreement constitutes a legal, valid and binding obligation of the Stockholders, enforceable against the Stockholders in accordance with the terms hereof.

 

2.03 No Conflicts.  The execution and delivery of this Agreement by the Stockholders and the performance by the Stockholders of their obligations hereunder in accordance with the terms hereof (i) will not require the consent of any third party or governmental entity under any applicable laws; (ii) will not violate any laws applicable to the Stockholders and (iii) will not violate or breach any contractual obligation to which the Stockholders are a party.

 

2.04 Stockholders are Acquiring Exchange Shares for Investment and are Accredited Investors.

 

(a) The Stockholders are acquiring the Exchange Shares for investment for such Stockholders’ own account and not as a nominee or agent, and not with a view to the resale or distribution.

 

(b) The Stockholders represent and warrant that such Stockholders (i) can bear the economic risk of such Stockholders’ investments, and (ii) possess such knowledge and experience in financial and business matters that such Stockholders are capable of evaluating the merits and risks of the investment in OHGI and OHGI Common Stock.

 

(c) The Stockholders represent that he and are “Accredited Person(s)” as that term is defined in Rule 501 of Regulation D (“Regulation D”) promulgated by the Securities and Exchange Commission (“SEC”) under Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”), and understand and acknowledge that OHGI is relying upon such representation to qualify for the exemption from the registration requirements of the Securities Act pursuant to Rule 506 of Regulation D, and that each certificate representing the Exchange Shares shall be endorsed with the following legends, in addition to any other legend required to be placed thereon by applicable federal or state securities laws:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.”

 

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(d) The Stockholders acknowledge that neither the SEC nor the securities regulatory body of any other jurisdiction, has received, considered or passed upon the accuracy or adequacy of the information and representations made in this Agreement. 

 

(e) The Stockholders acknowledge that they carefully reviewed such information as such Stockholders have deemed necessary to evaluate an investment in OHGI and the OHGI Common Stock. The Stockholders acknowledge that such Stockholders have been furnished all materials that he and she have requested relating to OHGI and the issuance of the Exchange Shares hereunder, and that such Stockholders have been afforded the opportunity to ask questions of OHGI’s representatives to obtain any information necessary to verify the accuracy of any representations or information made or given to the Stockholders. Notwithstanding the foregoing, nothing herein shall derogate from or otherwise modify the representations and warranties of OHGI set forth in this Agreement, on which each of the Stockholders have relied in making an exchange of his, her or its Company Shares for the Exchange Shares.

 

(f) Stockholders understand that the Exchange Shares may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Exchange Shares or any available exemption from registration under the Securities Act, the Exchange Shares may have to be held indefinitely. The Stockholders further acknowledges that the Exchange Shares may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of Rule 144 are satisfied (including, without limitation, OHGI’s compliance with the reporting requirements under the Exchange Act).

 

(g) Stockholders agree that, notwithstanding anything contained herein to the contrary, the warranties, representations, agreements and covenants of such Stockholders under this Section 3.04 shall survive the Closing for the period set forth in Section 11.01 hereof.

 

ARTICLE III 

REPRESENTATIONS, COVENANTS, AND WARRANTIES OF OHGI

 

As an inducement to, and to obtain the reliance of the Company and its Stockholders, except as set forth in the schedules of exceptions to the representations of OHGI annexed hereto (“OHGI Disclosure Schedules”), OHGI represents and warrants, as of the date hereof and as of the Closing Date, as follows:

 

3.01 Organization. OHGI is a corporation duly incorporated, validly existing, and in good standing under the laws of Delaware and has the corporate power and is duly authorized under all applicable laws, regulations, ordinances, and orders of public authorities to carry on its business in all material respects as it is now being conducted.  OHGI has made available to the Company or there has been available on XXXXX complete and correct copies of the certificate of incorporation and bylaws of OHGI as in effect on the date hereof. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, violate any provision of OHGI’s certificate of incorporation or by-laws. OHGI has taken all action required by law, its certificate of incorporation and by-laws, or otherwise to authorize the execution and delivery of this Agreement, and OHGI has full power, authority, and legal right and has taken all action required by law, its certificate of incorporation and by-laws, or otherwise to consummate the transactions herein contemplated, except that the issuance of the OHGI Common Stock will require the consent of NASDAQ; and, if the number of such shares exceeds Nineteen and Nine-Tenths percent (19.9%) of the outstanding shares of OHGI outstanding on the Closing Date or the date of issuance, the consent of the shareholders of OHGI.

 

3.02 Capitalization.

 

 (a) OHGI’s authorized capitalization consists of 200,000,000 shares of OHGI Common Stock, of which not more than 35,000,000 shares are issued and outstanding, and 50,000,000 shares of preferred stock, par value $0.0001 per share, of which no shares are issued and outstanding. All issued and outstanding shares are legally issued, fully paid, and non-assessable and not issued in violation of the preemptive or other rights of any person. All outstanding shares OHGI Common Stock have been issued and granted in compliance with all applicable securities laws and (in all material respects) other applicable laws and regulations.

 

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(b) Except as contemplated by this Agreement, and as have or will be disclosed in the “SEC Reports” (as defined in Section 3.04) and except as set forth in Schedule 3.02 (c) of the OHGI Disclosure Schedules, there is no voting trust, proxy, rights plan, anti-takeover plan or other agreement or understanding to which OHGI is a party or by which it is bound with respect to any equity security of any class of OHGI, and there are no agreements to which OHGI is a party, or which OHGI has knowledge of, that conflict with this Agreement or the transactions contemplated herein or otherwise prohibit the consummation of the transactions contemplated hereunder.

 

(c) Except as contemplated by this Agreement, and as have or will be disclosed in the SEC Reports and except as set forth in Schedule 3.02 (c) of the OHGI Disclosure Schedules, there are no registration rights agreements to which OHGI is a party, or which OHGI has knowledge of, which conflict with this Agreement or the transactions contemplated herein or otherwise prohibit the consummation of the transactions contemplated hereunder.

 

3.03 Subsidiaries and Predecessor Corporations. Except as disclosed in the SEC Reports, OHGI does not have any predecessor corporation, no subsidiaries, and does not own, beneficially or of record, any shares of any other corporation.

 

3.04 SEC Filings; Financial Statements.

 

(a) OHGI has made available to the Company and the Members, or there has been available on XXXXX, correct and complete copies of each report, registration statement and definitive proxy statement filed by OHGI with the SEC since January 1, 2015 (“SEC Reports”). As of their respective dates, the SEC Reports: (i) were prepared in accordance and complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such SEC Reports; and (ii) did not at the time they were filed (and if amended or superseded by a filing prior to the date of this Agreement then on the date of such filing and as so amended or superseded) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(b) Included in the SEC Reports are the audited consolidated balance sheets of OHGI as of December 31, 2016, and 2015, and the related audited consolidated statements of operations, stockholders’ equity and cash flows for December 31, 2016, and 2015, together with the notes to such statements and the opinion of its independent certified public accountants, with respect thereto; and the unaudited consolidated balance sheets of OHGI as of September 30, 2017, and 2016, and the related unaudited consolidated statements of operations and cash flows for the three (3) months and nine (9) months ended September 30, 2017, and 2016, together with the notes to such statements.

 

(c) Each set of financial statements (including, in each case, any related notes thereto) contained in the SEC Reports comply as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with U.S generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and each fairly presents in all material respects the financial position of OHGI at the respective dates thereof and the results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal adjustments, which were not or are not expected to have a Material Adverse Effect upon the business, prospects, management, properties, operations, condition (financial or otherwise) or results of operations of OHGI, taken as a whole.

 

(d) The OHGI balance sheets are true and accurate and present fairly as of their respective dates the financial condition of OHGI. As of the date of such balance sheets, except as and to the extent reflected or reserved against therein, OHGI had no liabilities or obligations (absolute or contingent) that should be reflected in the balance sheets or the notes thereto prepared in accordance with GAAP, and all assets reflected therein are properly reported and present fairly the value of the assets of OHGI, in accordance with GAAP. The statements of operations, stockholders’ equity and cash flows reflect fairly the information required by GAAP to be set forth therein. All of OHGI’s assets are reflected on its financial statements, and, except as set forth in the OHGI Disclosure Schedules or the financial statements of OHGI or the notes thereto, OHGI has no material liabilities, direct or indirect, matured or un-matured, contingent or otherwise; and

 

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(e) The books and records, financial and otherwise, of OHGI are in all material aspects complete and correct and have been maintained in accordance with GAAP, consistently applied throughout the periods involved.

 

3.05 Options or Warrants.   Except as has or will be disclosed in the SEC Reports, there are no existing options, warrants, calls, or commitments of any character relating to the authorized and unissued stock of OHGI.

 

3.06 Absence of Certain Changes or Events. Since September 30, 2017 and except as disclosed in the SEC Reports or as set forth in Section 3.06 of the OHGI Disclosure Schedules hereto:

 

(a) there has not been (i) any material adverse change in the business, operations, properties, assets or condition of OHGI or (ii) any damage, destruction or loss to OHGI (whether or not covered by insurance) materially and adversely affecting the business, operations, properties, assets or condition of OHGI;

 

(b) OHGI has not (i) amended its certificate of incorporation or by-laws, except as required by this Agreement; (ii) declared or made, or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to stockholders or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock; (iii) waived any rights of value, which in the aggregate are outside of the ordinary course of business or material considering the business of OHGI; or (iv) made any material change in its method of management, operation, or accounting;

 

(c) OHGI has not except as has or will be disclosed in SEC Reports: (i) granted or agreed to grant any options, warrants, or other rights for its stock, bonds, or other corporate securities calling for the issuance thereof; (ii) borrowed or agreed to borrow any funds or incurred, or become subject to, any material obligation or liability (absolute or contingent) except liabilities incurred in the ordinary course of business; (iii) paid or agreed to pay any material obligations or liabilities (absolute or contingent) other than current liabilities reflected in or shown on the most recent OHGI balance sheet and current liabilities incurred since that date in the ordinary course of business and professional and other fees and expenses in connection with the preparation of this Agreement and the consummation of the transaction contemplated hereby; (iv) sold or transferred, or agreed to sell or transfer, any of its assets, properties, or rights (except assets, properties, or rights not used or useful in its business which, in the aggregate have a value of less than $1,000), or canceled, or agreed to cancel, any debts or claims (except debts or claims which in the aggregate are of a value less than $1,000); (v) made or permitted any amendment or termination of any contract, agreement, or license to which it is a party if such amendment or termination is material, considering the business of OHGI; or (vi) issued, delivered or agreed to issue or deliver, any stock, bonds or other corporate securities including debentures (whether authorized and unissued or held as treasury stock), except in connection with this Agreement; and

 

(d)  OHGI has not become subject to any law or regulation that materially and adversely affects, or in the future, may adversely affect, the business, operations, properties, assets or condition of OHGI.

 

3.07 Litigation and Proceedings.  There are no actions, suits, proceedings or investigations pending or, to the knowledge of OHGI, threatened against OHGI, or affecting OHGI or its properties, at law or in equity, before any court or other governmental agency or instrumentality, domestic or foreign, or before any arbitrator of any kind. OHGI is not in default with respect to any judgment, order, writ, injunction, decree, award, rule or regulation of any court, arbitrator, or governmental agency or instrumentality.  

 

3.08 No Conflict with Other Instruments.  The execution of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in the breach of any term or provision of, constitute a default under, or terminate, accelerate or modify the terms of, any indenture, mortgage, deed of trust, or other material agreement or instrument to which OHGI is a party or to which any of their respective assets, properties or operations are subject.

 

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3.09 Compliance with Laws and Regulations.  OHGI has complied with all applicable statutes and regulations of any federal, state, or other applicable governmental entity or agency thereof.  

 

3.10 Approval of Agreement.  The Board of OHGI and to the extent required, its shareholders have authorized the execution and delivery of this Agreement by OHGI and have approved this Agreement and the transactions contemplated hereby, except that the shareholders of OHGI have not granted such requests as might be required for the issuance of shares hereunder as required by NASDAQ. 

 

3.11 Material Transactions or Affiliations.  Except as set forth in the SEC Reports, there exists no contract, agreement or arrangement between OHGI (or any predecessor) and any person who was at the time of such contract, agreement or arrangement an officer, director, or person owning of record or known by OHGI to own beneficially, five percent (5%) or more of the issued and outstanding common shares of OHGI; and, or, which is to be performed in whole or in part after the date hereof or was entered into since January 1, 2015. No officer, director, nor any five percent (5%) shareholder(s) of OHGI has, or has had since inception of OHGI, any known interest, direct or indirect, in any such transaction with OHGI, which was material to the business of OHGI. OHGI has no commitment, whether written or oral, to lend any funds to, borrow any money from, or enter into any other transaction with, any such affiliated person.

 

3.12 Valid Obligation.  This Agreement and all agreements and other documents executed by OHGI in connection herewith constitute the valid and binding obligation of OHGI, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and subject to the qualification that the availability of equitable remedies is subject to the discretion of the court before which any proceeding therefore may be brought.

 

3.13 Exchange Act Compliance.  OHGI is in compliance with, and current in, all of the reporting, filing and other requirements under the Exchange Act, except where a failure to so comply is not reasonably likely to have a Material Adverse Effect on OHGI.

 

3.14 No Brokers.  Except for the entity or entities that has or have been identified to the Company who has or have or will be paid by OHGI, OHGI has not retained any broker or finder in connection with any of the transactions contemplated by this Agreement, and OHGI has not incurred or agreed to pay, or taken any other action that would entitle any person to receive, any brokerage fee, finder’s fee or other similar fee or commission with respect to any of the transactions contemplated by this Agreement.  

 

3.15 Disclosure.  All disclosure provided to the Stockholders regarding OHGI, its business and the transactions contemplated hereby, including the OHGI Disclosure Schedules to this Agreement, furnished by or on behalf of OHGI with respect to the representations and warranties made herein are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. In the event that the OHGI Disclosure Schedules are not delivered contemporaneously with the execution of this Agreement, they shall be delivered as soon as practicable prior to the Closing Date.

 

OHGI acknowledges and agrees that the Company and its Stockholders have not made, nor is the Company and its Stockholders making, any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth herein.

 

ARTICLE IV 

PLAN OF EXCHANGE

 

4.01 The Exchange. On the terms and subject to the conditions set forth in this Agreement, on the Closing Date, the Stockholders shall assign, transfer and deliver to OHGI, free and clear of all security interests, liens, pledges, encumbrances, charges, restrictions or known claims of any kind, nature, or description, all of the Company Shares. In exchange for the transfer of the Company Shares, OHGI shall issue and deliver the Cash Exchange Consideration and the Initial Shares to the Stockholders. The Cash Exchange Consideration shall be delivered to the account designated by the Shareholders within two (2) business days of execution of this Agreement and the Initial Shares shall be delivered within two (2) weeks of the Closing Date.

 

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4.02 Closing.  The “Closing” or the “Closing Date” of the transactions contemplated by this Agreement shall occur on or before March 12, 2018, or such or such other date as the parties shall agree. Such Closing shall take place at a mutually agreeable time and place, and be conditioned upon all of the conditions of the Exchange being met.

 

4.03 Closing Events.  At the Closing, OHGI, the Company and its Stockholders shall execute, acknowledge, and deliver (or shall ensure to be executed, acknowledged, and delivered), any and all certificates, financial statements, Schedules, agreements, resolutions, rulings or other instruments required by this Agreement to be so delivered at or prior to the Closing, together with such other items as may be reasonably requested by the parties hereto and their respective legal counsel in order to effectuate or evidence the transactions contemplated hereby.

 

4.04 Termination.  This Agreement may be terminated by the Company or OHGI only in the event that the Company or OHGI, as the case may be, does not meet the conditions precedent set forth in Articles VI and VII. If this Agreement is terminated pursuant to this Section, this Agreement shall be of no further force or effect, and no obligation, right or liability shall arise hereunder.

 

ARTICLE V 

COVENANTS OF THE PARTIES

 

The parties hereby agree that:

 

5.01 Audited Financial Statements.  The Company shall deliver to OHGI no later than seventy (70) days following the consummation of the transaction contemplated hereby, audited financial statements of the Company for the year ended December 31, 2017, including balance sheets at December 31, 2017, and 2016, and statements of operations and cash flows for the year ended December 31, 2017, prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), consistently applied, together with a report of the auditors of the Company thereon, in such form that will to enable OHGI to file a Form 8-K with the SEC reporting the acquisition of the Company in accordance with the applicable requirements of the Exchange Act, all at OHGI’s sole cost and expense. The Company parties agree to exert reasonable best efforts and cooperate in the preparation of such financial statements, including executing such certificates as may reasonably be requested by the auditors. For further clarification, OHGI agrees to pay the reasonable fees and costs of the auditor in completing the audit of the Company.

 

5.02 Additional Shares.

 

(a) Promptly, and in no event more than forty-five (45) days after the end of the period commencing on the Closing Date and ending at the end of the calendar month which first ends twelve (12) months after the Closing Date, tentatively, on or about, March 31, 2019 (“First Adjustment Period”), OHGI shall deliver to the Stockholders, in proportion to their respective Stockholder Percentages, a number of Additional Shares equal to four (4) times the Company’s net after-tax earnings (“Net Profit”) for the First Adjustment Period, divided by the Market Value of the OHGI Common Stock, as determined below.

 

(b) Promptly and in no event more than forty-five (45) days after the end of the period commencing on the day following the First Adjustment Period and ending twelve (12) months thereafter (tentatively, on or about March 31, 2020) (“Second Adjustment Period”), OHGI shall deliver to the Stockholders, in proportion to their respective Stockholder Percentages, a number of Additional Shares equal to four (4) times the Company’s Net Profit for Second Adjustment Period, divided by the Market Value of the OHGI Common Stock, as determined below; provided that if the Company’s Net Profit for the eighteen (18) months following the Closing is in excess of $3,000,000, the number of Additional Shares to be delivered to the Stockholders in proportion to their respective Stockholder Percentages for the Second Adjustment Period shall be equal to five (5) times the Company’s Net Profit for the Second Adjustment Period, divided by the Market value of the OHGI Common stock, as determined below.

 

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For purposes of the above:

 

(i)         The Company’s Net Profit for each of the First Adjustment Period and the Second Adjustment Period shall be determined in accordance with GAAP. For the avoidance of doubt, Net Profits shall not include any revenues, or costs and expenses, related to OHGI or any other subsidiary or affiliate thereof other than the Company.

 

(ii)        The “Market Value” of the OHGI Common Stock used to determine the number of shares of Common Stock deliverable in respect of the First Adjustment Period or the Second Adjustment Period, as the case may be, shall be the average closing price of a share of OHGI Common Stock for the ten (10) consecutive trading days (“Determination Period”) ending on the last day of the First Adjustment Period or the Second Adjustment Period, as the case may be (each, a “Determination Date”).  

 

(iii)       Closing price of a share of OHGI Common Stock as of any date during the Determination Period shall mean (A) if the OHGI Common Stock is then listed on NASDAQ or another securities exchange (each, an “Exchange”), the closing price of the OHGI Common Stock on the Exchange on which OHGI Common Stock is then listed on such date as reported by Bloomberg L.P. (based on a trading day from 9:30 a.m. (New York City-time) to 4:02 p.m. (New York City-time); (B) if OHGI Common Stock is quoted on OTCQB, OTCQX or a similar recognized quotation service (each, a “Quotation Service”), the closing price of a share OHGI Common Stock on such date as quoted on such Quotation Service ; or (C) if the OHGI Common Stock is not then listed on an Exchange or quoted for trading on a Quotation Service and if prices for the OHGI Common Stock are then reported by OTC Pink, the price published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), as the last bid price per share of the OHGI Common Stock so reported for such date; or (D) in all other cases, the fair market value of a share of OHGI Common Stock as determined by an independent appraiser selected in good faith by the Board of Directors of OHGI, the fees and expenses of which shall be paid by OHGI.

 

For example, (i) if the Company’s Net Profit for the First Adjustment Period was $1,000,000 and the Market Value of the OHGI Common Stock was $1.00, the aggregate number of shares of OHGI Common Stock to be issued to the Stockholders would be 4,000,000 shares, (ii) if the Company’s Net Profit for the Second Adjustment Period was $4,000,000 and the Market Value of the OHGI Common Stock was $4.00, the aggregate number of shares of OHGI Common Stock to be issued to the Stockholders would be 4,000,000 shares, and (iii) if the Company’s Net Profit for the first eighteen (18) months after the Closing was $3,050,000 and the Company’s Net Profit for the Second Adjustment Period was $4,000,000 and the Market Value of the OHGI Common Stock was $4.00, the aggregate number of shares of OHGI Common Stock to be issued to the Stockholders would be 5,000,000 shares.

 

OHGI shall cause its Transfer Agent to issue and deliver certificates evidencing the number of additional shares of OHGI Common Stock, if any, registered in the names of the Stockholders, to the Stockholders, in proportion to their respective Stockholder Percentages within five (5) days after the Determination Date (“Issuance Date”).

 

(c) Notwithstanding anything herein to the contrary, regardless of whether OHGI has a class of securities listed on NASDAQ at the time Additional Shares are to be issued in respect of the First Adjustment Period and the Second Adjustment Period, the aggregate number of shares of OHGI Common Stock to be delivered pursuant to this Agreement, including the Initial Shares and the Additional Shares, cannot exceed 19.9% of the total number of shares of the OHGI Common Stock outstanding as of the Closing Date and on the dates of issuance of Additional Shares unless approved by NASDAQ, which will require a vote of the shareholders of OHGI other than the Stockholders. If it is necessary under the circumstances for OHGI to obtain approval from its stockholders to permit any issuance of OHGI Common Stock pursuant to the terms hereof, OHGI agrees to exercise reasonable best efforts to obtain the requisite stockholder approval and NASDAQ’s approval.

 

If OHGI shall not obtain such approvals prior to the end of the First Adjustment Period or the Second Adjustment Period and the number of shares of OHGI Common Stock deliverable pursuant hereto exceeds 19.9% of the total number of shares of OHGI Common Stock outstanding on the date hereof or on the Issuance Date, OHGI shall pay cash in lieu of delivering any shares of OHGI Common Stock otherwise deliverable.

 

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(d)   The Stockholders understand and acknowledge that the issuance of shares of OHGI Common Stock pursuant hereto is contingent upon OHGI obtaining NASDAQ approval. The Stockholders further acknowledge that NASDAQ approval is dependent upon OHGI’s satisfaction of certain qualifications and requirements imposed by the NASDAQ Capital Market, which may include the approval of the issuance of OHGI common stock by OHGI’s stockholders.

 

5.03 Reservation of OHGI Common Stock. OHGI agrees to reserve with its Transfer Agent from time-to-time a sufficient number of shares of OHGI Common Stock for issuance to the Stockholders pursuant to Section 5.02.

 

5.04 Public Status.  OHGI shall make any and all required filings under the Exchange Act so that it remains a reporting company under the Exchange Act and so that the OHGI Common Stock continues to be a publicly-traded security for a period of at least five (5) years from the Closing Date. OHGI shall exercise commercially reasonable efforts to maintain the listing of the OHGI Common Stock on NASDAQ during the five (5) years following the Closing Date.        

 

5.05 Public Announcements.  Except as required by applicable law, OHGI and the Company shall consult with each other before issuing any press release or making any public statement with respect to this Agreement or the transactions contemplated hereby. The Stockholders shall be afforded the opportunity for meaningful consultation prior to OHGI issuing any press release or making any public statement should the contemplated press release or public statement be in reference to such Stockholder in any way.

 

5.06 Notices of Certain Events.  In addition to any other notice required to be given by the terms of this Agreement, each of the parties shall promptly notify the other party hereto of:

 

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

 

(b) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Agreement; and

 

(c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge threatened against, relating to or involving or otherwise affecting such party that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant hereto or that relates to the consummation of the transactions contemplated by this Agreement.  

 

5.07 Access to Information.  Following the date hereof, until consummation of all transactions contemplated hereby:

 

(a) The Company shall give to OHGI and its authorized representatives full and complete access to its books and records, contracts, facilities and personnel as OHGI and its authorized representatives may request so that OHGI may complete its due diligence investigation of the Company. The officers of the Company agree to provide OHGI and its authorized representatives with access to any information in his or her or the Company’s possession or within his or her or the Company’s control that contains information generated by him or her or the Company regarding the Company relative to its financial, operational, and/or regulatory condition (present, past, or prospective). 

 

(b) OHGI shall give to the officers and the authorized representatives of the Company full and complete access to the books and records, contracts, facilities and personnel of OHGI as the officers and the authorized representatives of the Company may request so that the Company may complete its due diligence investigation of OHGI. OHGI agrees to provide the officers and authorized representatives of the Company with access to any information in its possession or within its control which contains information generated by it or on its behalf relative to the financial, operational, and/or regulatory condition (present, past, or prospective) of OHGI.

 

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5.08 Limitation of Business Activities of the Company Prior to Closing.  Except for transactions contemplated by this Agreement, the Company will not, without the prior written consent of OHGI, (i) make any material change in the type or nature of its business, or in the nature of its operations, (ii) create or suffer to exist any debt, other than that currently in existence or undertaken to complete projects ongoing or to meet short term working capital needs, (iii) issue any securities or membership interests or (iv) enter into any new agreements of any kind or undertake any new obligations or liabilities likely to have a material impact on its business.

 

5.09 Consents of Third Parties.  Each of the parties will give any notices to third parties, and will use its reasonable best efforts to obtain any third-party consents, that the other parties reasonably may request in connection with this Agreement. Each of the parties will give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters in this Agreement.

 

5.10 No Solicitations.  From and after the date of this Agreement until the later of the Closing, sixty (60) days after the date hereof or termination of this Agreement pursuant to Section 9.01, the Company will not, and will not permit any of its directors, officers, stockholders, or agents acting on its behalf to: (i) take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than OHGI, and other person(s) or entities for purposes of soliciting their participation as investors or co-investors with the Company, relating to the acquisition, sale or transfer of any of the Company Shares or any material part of the assets of the Company; (ii) offer to issue, sell or transfer any Company Shares or any material part of the assets of the Company to any person other than OHGI; or (iii) disclose financial or other information relating to the Company other than in the ordinary course of business to any person or entity other than OHGI or its agents and representatives, except with the written consent of OHGI. The Company acknowledges and agrees that the legal remedies available to OHGI in the event it violates any of the foregoing covenants would be inadequate and that OHGI shall be entitled to specific performance, injunctive relief and other equitable remedies in the event of any such violation. The Company agrees that it will immediately notify OHGI regarding any contact between the Company, any of its directors, officers, stockholders, employees, agents or representatives and any other person regarding any offer, proposal or inquiry during this exclusivity period.  

 

5.11 No Investment without Consent. Prior to the second (2nd) anniversary of the Closing Date, the Company shall not accept any investment from a third party without the consent of OHGI.

 

5.12 Short Sale. Prior to the second (2nd) anniversary of the Closing Date, no Stockholder shall, directly or indirectly, enter into a short sale of OHGI Common Stock or enter into any hedging transaction including any borrowing which establishes a net short position.

 

5.13 Additional Acquisitions. Prior to completing an acquisition of another business, OHGI shall advise the Stockholders serving on the Board of the Company of its intent to do so and, if consummation of such acquisition requires consent of the stockholders of OHGI, such Stockholders shall have the right to vote any shares of OHGI they may hold on the applicable record date.

 

5.14 Survival. The obligations of OHGI under this Article V shall survive any termination of this Agreement.

  

ARTICLE VI 

CONDITIONS PRECEDENT TO OBLIGATIONS OF OHGI

 

The obligations of OHGI under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

6.01 Accuracy of Representations and Performance of Covenants. Each of the representations and warranties made by the Company Parties and the Stockholders shall be true and correct in all material respects as of the Closing Date as if made on such date.  The Company and the Stockholders shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing. OHGI shall be furnished with a certificate, signed by the Stockholders of the Company and a duly authorized executive officer of the Company dated as of the Closing Date, confirming (i) the statements made in the two (2) preceding sentences; and (ii) that there has been no material adverse change in the business, affairs, prospects, operations, properties, assets or conditions of the Company since the date of this Agreement.

 

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6.02 No Governmental Prohibition. No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality that prohibits the consummation of the transactions contemplated hereby.

 

6.03 Consents.  All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of the Company after the Closing Date on the basis as presently operated shall have been obtained.

 

6.04 Absence of Litigation. There shall be no actions, suits, proceedings or governmental investigations or inquiries pending or, to Company’s knowledge, threatened against the Company and/or its Stockholders, which would prevent the consummation of the transaction contemplated hereby.

 

6.05 Other Items. OHGI shall have received further documents, certificates, or instruments relating to the transactions contemplated hereby as it may reasonably request, including such financial statements for the Company and such information regarding the Company and its operations as OHGI shall deem reasonably necessary for inclusion in the reports to be filed by OHGI with the SEC.

 

6.06 Schedules and Other Information.  The Company shall have delivered to OHGI the books and records reasonably requested in connection with OHGI’s due diligence investigation of the Company, and there shall have been no disclosure provided in connection with such due diligence investigation, which in the reasonable opinion of OHGI differs materially from the information it has received as of the date hereof and which does or may have a materially adverse effect on the value of the business of the Company or on its assets, properties or goodwill.

 

ARTICLE VII 

CONDITIONS PRECEDENT TO OBLIGATIONS OF 

THE COMPANYAND ITS STOCKHOLDERS

 

The obligations of the Company and its Stockholders under this Agreement are subject to the satisfaction, at or before the Closing Date, of the following conditions:

 

7.01   Accuracy of Representations and Performance of Covenants. Each of the representations and warranties made by OHGI shall be true and correct in all material respects as of the Closing Date as if made on such date. OHGI shall have performed or complied with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing. The Company shall be furnished with a certificate, signed by a duly authorized executive officer of OHGI, dated the Closing Date, confirming (i) the statements made in the two preceding sentences; and (ii) that there has been no material adverse change in the business, affairs, prospects, operations, properties, assets or conditions of the OHGI since the date of this Agreement.

 

7.02 No Governmental Prohibition.  No order, statute, rule, regulation, executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any court or governmental or regulatory authority or instrumentality, which prohibits the consummation of the transactions contemplated hereby.

 

7.03 Consents.  All consents, approvals, waivers or amendments pursuant to all contracts, licenses, permits, trademarks and other intangibles in connection with the transactions contemplated herein, or for the continued operation of OHGI after the Closing Date shall have been obtained, except that the consent of NASDAQ to the issuance of the Additional Shares, the consent of the shareholders of OHGI to the issuance of the Additional Shares and the issuance of the Additional Shares may be obtained or effectuated as otherwise set forth in Section 5.02.

 

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7.04 Absence of Litigation. There shall be no actions, suits, proceedings or governmental investigations or inquiries pending or, to OHGI’s knowledge, threatened against OHGI which would prevent the consummation of the transactions contemplated hereby.

 

7.05 Employment Agreement. OHGI shall within three (3) business days of the Closing Date, enter into Employment Agreements with Xxxxxxxxx, Xxxxx and Xxxxxxxxxx Xxxxxxxx Xxxxxxx (“Xxxxxxx”) in the forms to be annexed hereto as Exhibits 7.05A, 7.05B and 7.05C, respectively, and which Employment Agreements (i) shall be for a minimum period of two (2) years; (ii) shall specify that the annual salaries for Xxxxxxxxx and Xxxxx respectively will be at a minimum rate of $125,000 annually and that the annual salary for Xxxxxxx will be at a minimum rate of $50,000 annually; (iii) Xxxxxxxxx’ Employment Agreement will include an issuance from OHGI to Xxxxxxxxx and/or his designee(s) of 400,000 shares of OHGI common stock within five (5) business days of the ‘Effective Date’ of such Employment Agreement, which may be issued on an S-8 basis to the extent available subject to any applicable affiliate rules; and (iv) which such Employment Agreements shall not include any non-compete beyond the minimum two (2) year period of such Employment Agreements.

 

7.06 Other Items.  The Company and its Stockholders shall have received further documents, certificates, or instruments relating to the transactions contemplated hereby as they may reasonably request.

 

7.07 Schedules and Other Information. OHGI shall have delivered to the Company the OHGI Disclosure Schedules required hereunder, and there shall have been no disclosure in any Schedule delivered after the date of execution and delivery of this Agreement, or the documents described therein, which in the reasonable opinion of the Company does or may have a materially adverse effect on the value of the business of OHGI or on its assets, properties or goodwill.

 

ARTICLE VIII 

POST CLOSING COVENANTS

 

8.01       Cooperation with Financial Statements. The Company shall, at the expense of OHGI, assist OHGI to complete such audit of the Company’s financial statements as are required by the Exchange Act.

 

8.02       Information Statement. As promptly as practicable following the Closing Date, OHGI shall prepare and caused to be mailed to its stockholders such Information Statement as may be required by the Rules and Regulations of the Exchange Act and the Rules of NASDAQ to permit the Exchange Shares to be issued to the Stockholders. 

 

8.03       Board Representation. OHGI shall cause Xxxxxxxxx and Xxxxx to be elected as directors of the Board of the Company; it being understood that under all circumstances, OHGI will have the right to designate a majority of the members of the Board of the Company. Xxxxxxxxx and Xxxxx and any other directors or officers of the Company and the Company shall be covered under OHGI’s Directors and Officers Liability Insurance Policy so long as the Company remains a wholly owned subsidiary of OHGI at OHGI’s sole cost and expense including any applicable retention amount(s).

 

  

 

8.04       Restriction on Investment in Company by Third Parties. For a period of three (3) years after the Closing Date, the Company will not accept investment funds from any third party, or issue any of its securities, or permit the transfer or assignment of any of its securities without the express written approval of a designated member of the Board of OHGI.

 

8.05       Trading Restrictions. No stockholder of the Company, whether in such stockholder’s own capacity or through a representative, agent or affiliate, shall enter into or effect any “short sales” (as that term is defined in Rule 10a-1 of the Exchange Act) of OHGI Common Stock or any hedging transaction, including obtaining a borrowing, which establishes a net short position with respect to OHGI Common Stock.

 

8.06       Non-interference. Subject to the fiduciary obligations of the Board of XXXX, Xxxxxxxxxxx Xxxxx Xxxxxxxxx and Xxxxxxxx Xxxxx-Xxxxxxxxx shall serve as the co-Chief Executive Officers of the Company, with sole responsibility and authority for the Company’s obligations for the term of their Employment Agreements. Further, subject to the fiduciary obligations of the Board of OHGI, neither OHGI nor any of its affiliated entities shall interfere with the operations of the Company.

 

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ARTICLE IX 

TERMINATION

 

9.01 Termination.  This Agreement may be terminated at any time prior to the Closing:

 

(a) by mutual written consent of OHGI and the Company;

 

(b) by OHGI or the Company if the Closing shall not have occurred on or before March 12, 2018 (unless the failure to consummate the transactions by such date shall be due to the action or failure to act of the party seeking to terminate this Agreement which, in the case of the Company would include the failure of any Stockholder);

 

(c) by OHGI if: (i) the Company or any of its Stockholders shall have failed to timely comply in any material respect with any of the other covenants, conditions, terms or agreements contained in this Agreement to be complied with or performed by it, which breach is not cured within ten (10) days if capable of cure; or (ii) any representations and warranties of the Company Parties or its Stockholders contained in this Agreement shall have been materially false when made or on and as of the Closing Date; or

 

(d) by the Company if: (i) OHGI shall have failed to timely comply in any material respect with any of the covenants, conditions, terms or agreements contained in this Agreement to be complied with or performed by it, which breach is not cured within ten (10) days if capable of cure; or (ii) any representations and warranties of OHGI contained in this Agreement shall have been materially false when made or on and as of the Closing Date.  

 

9.02 Effect of Termination.  In the event of the termination of this Agreement pursuant to this Article IX, all further obligations of the parties under this Agreement shall forthwith be terminated without any further liability of any party to the other parties; provided, however, that nothing contained in this Section 9.02 shall relieve any party from liability for any breach of this Agreement. Upon termination of this Agreement for any reason, each of the parties shall promptly cause to be returned to the other all documents and information obtained in connection with this Agreement and the transactions contemplated by this Agreement and all documents and information obtained in connection with the investigation of the other party’s business, operations and legal affairs, including any copies made of any such documents or information.

 

ARTICLE X 

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

 

10.01. Survival. The representations and warranties, set forth in this Agreement, in any Exhibit or Schedule hereto and in any certificate or instrument delivered in connection herewith shall survive for a period of eighteen (18) months after the Closing Date (“Warranty Period”) and shall thereupon terminate and expire and shall be of no force or effect thereafter, except that (i) the representation and warranty of the Stockholders in Section 3.01 as to the ownership of the Company Shares shall survive for the period equal to the applicable statute of limitations relating to said matter; (ii) with respect to any claim, written notice of which shall have been delivered to OHGI or the Stockholders, as the case may be, in accordance with the indemnification provisions of this Article X and prior to the end of the Warranty Period, such claim shall survive the termination of such Warranty Period for as long as such claim is unsettled, and (ii) with respect to any litigation which shall have been commenced to resolve such claim on or prior to such date.

 

10.02. Indemnification by Members. Subject to the provisions of Section 10.05 below, each Stockholder hereby covenants and agrees with OHGI that such Stockholder shall indemnify OHGI and its directors, officers, employees and Affiliates (as that term is defined in Rule 405 of the Securities Act), and each of their successors and assigns (individually, an “OHGI Indemnified Party”), and hold them harmless from, against and in respect of any and all costs, losses, claims, liabilities, fines, penalties, damages and expenses (including interest, if any, imposed in connection therewith, court costs and reasonable fees and disbursements of counsel) (collectively, “Damages”) incurred by any of them resulting from any misrepresentation, breach of any representation or warranty in this Agreement or the non-fulfillment in any material respect of any agreement, covenant or obligation by the Stockholders or Members, as the case may be, made in this Agreement (including without limitation any Exhibit or Schedule hereto and any certificate or instrument delivered in connection herewith).

 

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10.03. Indemnification by OHGI. Subject to the provisions of Section 10.05 below, OHGI hereby covenants and agrees with the Stockholders that OHGI shall indemnify the Stockholders (each a “Stockholder Indemnified Party” and collectively, the “Stockholder Indemnified Parties”) and hold them harmless from, against and in respect of any and all Damages incurred by the Stockholder Indemnified Party resulting from any misrepresentation, breach of any representation or warranty in this Agreement or the non-fulfillment in any material respect of any agreement, covenant or obligation by OHGI made in this Agreement (including without limitation any Exhibit or Schedule hereto and any certificate or instrument delivered in connection herewith).

 

10.04. Right to Defend. If the facts giving rise to any such indemnification shall involve any actual claim or demand by any third party against an OHGI Indemnified Party or Stockholder Indemnified Party (referred to herein as an “Indemnified Party”), then the Indemnified Party will give prompt written notice of any such claim to the indemnifying party, which notice shall set forth in reasonable detail the nature, basis and amount of such claim (the “Notice of Third Party Claim”). It is a condition precedent to the applicable indemnifying party’s obligation to indemnify the applicable Indemnified Party for such claim that such Indemnified Party timely provide to such indemnifying party the applicable Notice of Third Party Claim, provided that the failure to provide such Notice of Third Party Claim shall only relieve such indemnifying party of its or his obligation to indemnify for such claim only to the extent that such indemnifying party has been prejudiced by such Indemnified Party’s failure to give the Notice of Third Party Claim as required. The indemnifying party receiving such Notice of Third Party Claim may (without prejudice to the right of any Indemnified Party to participate at its own expense through counsel of its own choosing) undertake the defense of such claims or actions at its expense with counsel chosen and paid by its giving written notice (the “Election to Defend”) to the Indemnified Party within thirty (30) days after the date the Notice of Third Party Claim is deemed received; provided, however, that the indemnifying party receiving the Notice of Third Party Claim may not settle such claims or actions without the consent of the Indemnified Party, which consent will not be unreasonably withheld or delayed, except if the sole relief provided is monetary damages to be borne solely by the indemnifying party; and, provided further, if the defendants in any action include both the indemnifying party and the Indemnified Party, and the Indemnified Party shall have reasonably concluded that counsel selected by the indemnifying party has a conflict of interest because of the availability of different or additional defenses to the parties, the Indemnified Party shall cooperate in the defense of such claim and shall make available to the indemnifying party pertinent information under its control relating thereto, but the Indemnified Party shall have the right to retain its own counsel and to control its defense and shall be entitled to be reimbursed for all reasonable costs and expenses incurred in such separate defense. In no event will the provisions of this Article reduce or lessen the obligations of the parties under this Article, if prior to the expiration of the foregoing thirty (30) day notice period, the Indemnified Party furnishing the Notice of Third Party Claim responds to a third-party claim if such action is reasonably required to minimize damages or avoid a forfeiture or penalty or because of any requirements imposed by law. If the indemnifying party receiving the Notice of Third Party Claim does not duly give the Election to Defend as provided above, then it will be deemed to have irrevocably waived its right to defend or settle such claims, but it will have the right, at its expense, to attend, but not otherwise to participate in, proceedings with such third parties; and if the indemnifying party does duly give the Election to Defend, then the Indemnified Party giving the Notice of Third Party Claim will have the right at its expense, to attend, but not otherwise to participate in, such proceedings. The parties to this Agreement will not be entitled to dispute the amount of any Damages (including reasonable attorney’s fees and expenses) related to such third-party claim resolved as provided above.

 

10.05 Limitation on Rights of Indemnification.

 

(a) No OHGI Indemnified Party shall have the right to indemnification under this Agreement unless and until the aggregate amount of any and all such indemnification claims made by an OHGI Indemnified Party under this Agreement exceeds $100,000 (the “Basket”). If claims asserted by the OHGI Indemnified Parties exceed the Basket, OHGI Indemnified Parties shall be entitled to receive $1.50 USD in respect of each one dollar ($1.00 USD) of indemnified claims in excess of the Basket until the OHGI Indemnified Parties shall have received an amount equal to the sum of the reimbursed indemnified claims plus the Basket in respect of indemnified claims If OHGI Indemnified Parties are entitled to any further payments in respect of indemnifications claims, they shall be made on a dollar-for-dollar basis subject to any limitations contained herein. The Basket shall not apply to claims relating to the representation and warranty of the Stockholders in Section 2.01 as to the ownership of the Company Shares.

 

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Stockholders may satisfy any indemnification claims hereunder by delivery of shares of OHGI Common Stock. Such shares shall be valued at the greater of (i) $1.50 USD per share and (ii) the value used to determine the number of shares issued in respect of the Additional Shares, and, in such latter case, shares shall be valued first at the highest price, up to the number of shares issued at such price, next at the second highest price, up to the number of shares issued at such price, and then at the lowest price.

 

(b) The aggregate liability of the Stockholders pursuant to this Article X shall not exceed the sum of the Cash Exchange Consideration and the value of the Exchange Shares received by them; provided, however, that the provisions of this Section 10.05(b) shall not apply to: (i) breaches of Stockholders’ representations and warranties relating to ownership of Company Shares, and (ii) claims arising out of fraud.

 

(c) Except in the event of fraud, the remedies provided in Sections 10.02 and 10.03 hereof shall be the sole and exclusive remedies of OHGI Indemnified Parties and Stockholder Indemnified Parties from and after the Closing in connection with any breach of representation or warranty or non-performance, partial or total, of any covenant or agreement contained in this Agreement; provided, that, nothing contained herein shall prevent any party from seeking equitable remedies (including specific performance or injunctive relief) in connection therewith.

 

ARTICLE XI 

MISCELLANEOUS

 

11.01 Governing Law.  This Agreement shall be governed by, enforced, and construed under and in accordance with the laws of New York, without giving effect to principles of conflicts of law thereunder. Venue for all matters shall be in New York, New York. Each of the parties irrevocably consents and agrees that any legal or equitable action or proceedings arising under or in connection with this Agreement shall be brought exclusively in the Southern District Court of the United States located in New York County. By execution and delivery of this Agreement, each party hereto irrevocably submits to and accepts, with respect to any such action or proceeding, generally and unconditionally, the jurisdiction of the aforesaid court, and irrevocably waives any and all rights such party may now or hereafter have to object to such jurisdiction.

 

11.02 Notices.  Any notice or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered to it or sent by overnight courier or registered mail or certified mail, postage prepaid, or electronic mail with a follow up copy by overnight courier, addressed as follows:

 

If to the Company or the Stockholders:

 

C-Rod, Inc. 

000 XX 00xx Xxxxxx 

Xxxxx, Xxxxxxx 00000 

Attn: Xxxxxxxxxxx Xxxxx Xxxxxxxxx, President 

E-mail: xxxxxxxxxxxxxxxxx@xxxxx.xxx

 

with a copy (which shall not constitute notice) by electronic mail to:

 

If to OHGI:

 

One Horizon Group, Inc. 

Xxxx 0000, 00/X Xxxxxxxxx Xxxxx, 00 Xxxxxxxx Xxxx, Xxxxxxx 

Xxxx Xxxx 

Attn: Xxxx X. Xxxxx, Chief Executive Officer 

E-mail: xxxx@xxxxxxxxxxxxx.xxx

 

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with a copy (which shall not constitute notice) by electronic mail to:

 

One Horizon Group, Inc.
00 Xxxxx Xxxxxx Xxxxxx
Xxxxxx X0X 0XX, Xxxxxx Xxxxxxx

Attn: Xxxxxx Xxxx, Chief Financial Officer 

E-mail: xxxxxx.xxxx@xxxxxxxxxxxxx.xxx

 

Xxxxxxxxxx Xxxxxxxx P.C. 

0000 Xxxxxx xx xxx Xxxxxxxx, Xxxxx 0000 

Xxx Xxxx, XX 00000 

Attention: Xxxxxxx X. XxXxxx, Esq. 

E-mail: xxxxxxx@xxxxxxx.xx

 

or such other addresses as shall be furnished in writing by any party in the manner for giving notices hereunder, and any such notice or communication shall be deemed to have been given (i) upon receipt, if personally delivered or sent by electronic mail, (ii) on the day after dispatch, if sent by overnight courier, and (iii) three (3) days after mailing, if sent by registered or certified mail.

 

11.03 Attorney’s Fees.  In the event that either party institutes any action or suit to enforce this Agreement or to secure relief from any default hereunder or breach hereof, the prevailing party shall be reimbursed by the losing party for all costs, including reasonable attorney’s fees, incurred in connection therewith and in enforcing or collecting any judgment rendered therein.

 

11.04 Confidentiality. OHGI, on the one hand, the Company and its Stockholders, on the other hand, each agree with the other that the documentation and other information disclosed to them by the other party hereunder to evaluate various the business and affairs of the Company or OHGI, as the case may be, and various aspects of the Exchange and the other transactions contemplated hereby may contain proprietary confidential information and trade secrets, and that the disclosure and unauthorized use of such information could cause irreparable injury. The parties agree that all such information and materials shall be used and disclosed only to the limited extent necessary for the parties hereto (and their professional advisors) to evaluate the Exchange and the other transactions contemplated hereby. All extracts, digests and copies of such documentation and information shall be maintained under strict control by the recipients. Upon termination of the negotiations by the parties, no party (or advisor to such party) shall make any further use of such documentation and information, and all documentation previously obtained (together with all copies, abstracts, digests and analyses thereof) shall be returned to the party providing such information. The Company and its Stockholders recognize that OHGI is a publicly traded company in the United States and agree not to buy OHGI Common Stock or recommend to any other party that it or he or she do so, from the Closing Date until such information has been disclosed to the public.

 

11.05 Public Announcements and Filings.  Unless required by applicable law or regulatory authority, none of the parties will issue any report, statement or press release to the general public, trade or trade press, or to any third party (other than its advisors and representatives in connection with the transactions contemplated hereby) or file any document, relating to this Agreement and the transactions contemplated hereby, except as may be mutually agreed by the parties. Copies of any such filings, public announcements or disclosures, including any announcements or disclosures mandated by law or regulatory authorities, shall be delivered to each party prior to the release thereof. 

 

11.06 Schedules; Knowledge.  Each party is presumed to have full knowledge of all information set forth in the other party’s schedules delivered pursuant to this Agreement.

 

11.07 Third Party Beneficiaries.  This contract is strictly between OHGI, the Company and its Stockholders, and, except as specifically provided, no director, officer, stockholder, employee, agent, independent contractor or any other person or entity shall be deemed to be a third-party beneficiary of this Agreement.

 

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11.08 Expenses.  Whether or not the Exchange is consummated, each of OHGI, on the one hand, and the Company, on the other hand, will bear their own respective expenses, including without limitation the fees and expenses of its legal, accounting and financial advisors, incurred in connection with the Exchange or any of the other transactions contemplated hereby.

 

11.09 Entire Agreement.  This Agreement represents the entire agreement between the parties relating to the subject matter thereof and supersedes all prior agreements, understandings and negotiations, written or oral, with respect to such subject matter.

 

11.10 Amendment or Waiver.  Every right and remedy provided herein shall be cumulative with every other right and remedy, whether conferred herein, at law, or in equity, and may be enforced concurrently herewith, and no waiver by any party of the performance of any obligation by the other shall be construed as a waiver of the same or any other default then, theretofore, or thereafter occurring or existing. This Agreement may by amended only by a writing signed by all parties hereto.

 

11.11. Best Efforts.  Subject to the terms and conditions herein provided, each party shall use its best efforts to perform or fulfill all conditions and obligations to be performed or fulfilled by it under this Agreement so that the transactions contemplated hereby shall be consummated as soon as practicable. Each party also agrees that it shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective this Agreement and the transactions contemplated herein.

 

11.12 Counterparts.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall be but a single instrument.

 

Signature Page 21 Follows

 

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

 

  One Horizon Group, Inc.
     
  By:  /s/ Xxxx Xxxxx
    Name: Xxxx Xxxxx
    Title: Chief Executive Officer

 

  C-Rod, Inc.
     
  By:  /s/ Xxxxxxxxxxx Xxxxx Xxxxxxxxx
    Name: Xxxxxxxxxxx Xxxxx Xxxxxxxxx
    Title: Co-Chief Executive Officer

 

  Stockholders:
     
  /s/ Xxxxxxxxxxx Xxxxx Xxxxxxxxx
  Xxxxxxxxxxx Xxxxx Xxxxxxxxx
     
  /s/ Xxxxxxxx Xxxxx Xxxxxxxxx
  Xxxxxxxx Xxxxx Xxxxxxxxx

 

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Company Disclosure Schedules

 

22 

 

 

OHGI Disclosure Schedules

 

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Filed: February 28th, 2018
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