Form 8-K
8-K — Algorhythm Holdings, Inc.
Accession: 0001493152-26-043599
Filed: 2026-09-21
Period: 2026-09-15
CIK: 0000923601
SIC: 7373 (SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN)
Item: Entry into a Material Definitive Agreement
Item: Completion of Acquisition or Disposition of Assets
Item: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
Item: Unregistered Sales of Equity Securities
Item: Material Modifications to Rights of Security Holders
Item: Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers
Item: Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
Item: Regulation FD Disclosure
Item: Financial Statements and Exhibits
Documents
8-K — form8-k.htm (Primary)
EX-3.1 (ex3-1.htm)
EX-10.1 (ex10-1.htm)
EX-10.2 (ex10-2.htm)
EX-10.3 (ex10-3.htm)
EX-10.4 (ex10-4.htm)
EX-10.5 (ex10-5.htm)
EX-10.6 (ex10-6.htm)
EX-10.7 (ex10-7.htm)
EX-10.8 (ex10-8.htm)
EX-10.9 (ex10-9.htm)
EX-10.10 (ex10-10.htm)
EX-99.1 (ex99-1.htm)
EX-99.2 (ex99-2.htm)
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported):
September
15, 2026
ALGORHYTHM
HOLDINGS, INC.
(Exact
Name of Registrant as Specified in Charter)
Delaware
001-41405
95-3795478
(State
or Other Jurisdiction
(Commission
(IRS
Employer
of
Incorporation)
File
Number)
Identification
No.)
6301
NW 5th Way, Suite 2900
Fort
Lauderdale, FL
33309
(Address
of Principal Executive Offices)
(Zip
Code)
Registrant’s
Telephone Number, Including Area Code:
(954)
800-0425
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions (see General Instruction A.2. below):
☐
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
Trading
Symbol(s)
Name
of each exchange on which registered
Common
Stock, par value $0.01 per share
RIME
The
Nasdaq Stock Market LLC
(The
Nasdaq Capital Market)
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item
1.01 Entry
into a Material Definitive Agreement.
Asset
Purchase Agreement
On
September 15, 2026 (the “Closing Date”), Algorhythm Holdings, Inc., a Delaware corporation (“Parent” or the “Company”),
through its wholly owned subsidiary Azure Holdings, LLC, a Nevada limited liability company (“Buyer”), entered into an Asset
Purchase Agreement (the “APA”) with Azure Energy, LLC, a Delaware limited liability company (“Seller”), Azure
Energy, S.R.L. (“Azure S.R.L.”), a Costa Rica company (solely with respect to Sections 2.09 and 3.02(c) thereof), and, as
to certain provisions, Tangen Family Trust, a Washington trust, and 1979, FLP, a North Carolina limited partnership (collectively, the
“Optionors”). Signing and closing of the acquisition (the “Closing”) occurred simultaneously on the Closing Date.
The board of directors of the Company (the “Board”) received a fairness opinion from Marshall & Stevens Inc. in connection
with the transactions contemplated by the APA and approved such transactions.
Pursuant
to the APA, Buyer acquired from Seller substantially all of the assets, and certain liabilities, of Seller. Seller operates a business
focused on developing firm-capacity renewable energy infrastructure built around converting waste and biomass into clean, dispatchable
power (the “Business”). The purchased assets (the “Purchased Assets”) include substantially all of the assets
used or held for use in the Business, including, without limitation, the following: (i) inventory; (ii) assigned contracts, including
intellectual property-related agreements; (iii) intellectual property assets; (iv) tangible personal properties including all furniture,
fixtures, equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones and other tangible personal property;
(v) owned and leased real property; (vi) permits, including, but not limited to, environmental permits, environmental attributes, renewable
energy credits and carbon credits, power purchase agreements, off-take contracts, interconnection agreements, and land rights; (vii)
rights to any actions relating to the Business; (viii) prepaid expenses; (ix) warranty rights; (x) insurance benefits; (xi) books and
records; and (xii) goodwill and going-concern value. The APA excludes the following from the Purchased Assets: (i) certain contracts
that are not assigned to either the Buyer or Parent; (ii) corporate seals and organizational documents of Seller; (iii) Seller’s
benefits plans; (iv) certain assets specifically scheduled by the parties; (v) all rights of Seller arising under or in connection with
the APA; (vi) cash and cash equivalents; and (vii) accounts receivable. In addition, Buyer and Parent assumed only the following liabilities
of Seller: (i) trade accounts payable of the Business that are not delinquent as of the Closing Date; (ii) liabilities and obligations
arising after the Closing Date; and (iii) such other liabilities as are specifically scheduled in the APA. All other liabilities of Seller
constitute excluded liabilities and were not assumed by Buyer or the Parent.
The
aggregate purchase price for the Purchased Assets consists entirely of securities of Parent equal in value to $23,000,000 (the “Purchase
Price”), comprised of: (a) 4,076,312 shares of Common Stock of Parent, par value $0.01 per share (the “Common Stock”)
(representing 19.99% of the issued and outstanding shares of Common Stock as of September 14,
2026); and (b) 22,038 shares of Series B Preferred Stock of
Parent, par value $1.00 per share (the “Series B Preferred Stock; collectively with the shares of Common Stock purchased thereof,
the “Securities”). Under the APA, the Optionors also granted the Parent an option to purchase certain outstanding equity
interests of Azure S.R.L. pursuant to an Option Agreement as further described below.
The
representations and warranties of the parties generally survive for two (2) years following the Closing Date. Certain fundamental representations
survive for six (6) years, and representations relating to taxes and employee benefit matters of Seller survive until the expiration
of the applicable statute of limitations plus sixty (60) days. Seller’s indemnification obligations are subject to: (i) a de minimis
threshold of $25,000 per individual claim; (ii) an aggregate limit of $230,000; and (iii) a cap of $2,300,000 (equal to 10% of the Purchase
Price). Seller may satisfy indemnification obligations by surrendering Securities to Buyer and Parent, by exercising setoff rights, or
by making a cash payment.
Seller
agreed to customary restrictive covenants, including, but not limited to, the following: (i) a two (2)-year non-competition covenant
covering the Restricted Business (defined as the development, ownership, or operation of waste-to-power or biomass-to-power facilities)
within the State of North Carolina, subject to a 2.5% passive investment carve-out; (ii) a two (2)-year non-solicitation covenant with
respect to employees, contractors, and customers; (iii) customary confidentiality obligations; and (iv) a six (6)-month lock-up and short-sale
prohibition applicable to the Securities received by Seller (or until such Securities are registered under an effective registration
statement, whichever occurs first). The Buyer and Parent agreed to retain the Business’s books and records for a period of seven
(7) years following the Closing Date.
Option
Agreement
Concurrently
with the execution and closing of the APA, on September 15, 2026, Parent (as Optionee), Seller (as Target), Azure S.R.L., and the Optionors
entered into an Option Agreement (the “Option Agreement”). Pursuant to the Option Agreement, the Optionors granted to Parent
an exclusive, irrevocable option (the “Option”) exercisable for a period of thirty-six (36) months from the Closing Date
to purchase from the Optionors an aggregate of 79.0286% of the issued and outstanding equity interests of Azure S.R.L. for an aggregate
exercise price of $30,000,000. Upon exercise of the Option, Parent may elect, in its sole discretion, to pay up to fifty percent (50%)
of the exercise price in cash, with the remainder payable in shares of Series B Preferred Stock. No separate option payment or option
premium is payable by Parent in consideration for the grant of the Option.
The
Company may exercise the Option by delivering written notice of exercise to the Optionors. The Option Agreement terminates automatically
upon the earliest of: (i) the closing of the option transaction following exercise of the Option; (ii) the expiration of the thirty-six
(36)-month option term without exercise; or (iii) the mutual written agreement of the parties to terminate.
Employment
Matters Contemplated by the APA
As
further described in Item 5.02 below, pursuant to the APA, effective immediately after the Closing on September 15, 2026, the Company
terminated the employment of Gary Atkinson as Chief Executive Officer and Alex Andre as Chief Financial Officer and General Counsel,
in each case not for cause and in accordance with their respective employment agreements (as amended and restated) with the Company.
In addition, in connection with the Closing of the acquisition transaction contemplated by the APA, Gary Atkinson resigned as a member
of the Company’s Board, effective as of the Closing Date. Mr. Atkinson’s resignation was not the result of any disagreement
with the Company on any matter relating to the Company’s operations, policies or practices.
Furthermore,
pursuant to the APA, the Board appointed Andrew Thompson as Chief Executive Officer of the Company, effective as of the Closing on September
15, 2026. Pursuant to the terms of the APA, Seller nominated two directors to the Board, both of whom were appointed to the Board on
the Closing Date. The experience of Mr. Thompson and his employment agreement with the Company is further described in Item 5.02 below.
The
foregoing descriptions of the APA and the Option Agreement do not purport to be complete and are qualified in their entirety by reference
to the full text of the APA and the Option Agreement, copies of which are filed as Exhibits 10.1 and 10.2 to this Current Report on Form
8-K and are incorporated herein by reference.
Streeterville
Exchange Agreement
On
September 15, 2026,
the Company and Streeterville Capital, LLC (“Streeterville”) entered into an Exchange Agreement (the “Exchange Agreement”)
pursuant to which 3,500 shares of the Company’s Series A Preferred Stock held by Streeterville were surrendered and exchanged for
a new Secured Pre-Paid Purchase #5 in the original principal amount of $4,025,000 (“PPP #5”). PPP #5 bears interest at 9%
per annum, matures three years from September 15, 2026,
and may be prepaid at 110% of the outstanding balance. The shares of Series A Preferred Stock issued to Streeterville were cancelled
upon the exchange and returned to the status of authorized but unissued shares of preferred stock, and no shares of Series A Preferred
Stock remain outstanding. The exchange was effected in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities
Act”). In addition, Streeterville consented to the Company’s entry into and consummation of the transactions contemplated
by the Purchase Agreement, the Option Agreement, and the Certificate of Designation (as defined below).
The
foregoing descriptions of the Exchange Agreement and PPP #5 do not purport to be complete and are qualified in their entirety by reference
to the full text of the Exchange Agreement and PPP #5, copies of which are attached hereto as Exhibits 10.9 and 10.10, respectively,
and are incorporated herein by reference.
Item
2.01 Completion
of Acquisition or Disposition of Assets.
The
disclosure set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.01. The Company
will file the financial statements of Seller and the pro forma financial information required by Item 9.01 of Form 8-K no later than
71 calendar days after the date that this initial report on Form 8-K is required to be filed.
Item
2.03 Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The
Exchange Agreement and PPP #5 create a direct financial obligation of the Company in the amount of $4,025,000. The disclosure set forth
in Item 1.01 above regarding the Exchange Agreement and PPP #5 is incorporated by reference into this Item 2.03.
Item
3.02 Unregistered
Sales of Equity Securities.
The
disclosure set forth in Items 1.01, 2.01 and 5.03 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
The
issuance of Securities was made pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act. The shares
of Series B Preferred Stock issuable pursuant to the APA, and the shares of Common Stock issuable upon conversion of such Series B Preferred
Stock, have not been registered under the Securities Act and will be issued pursuant to applicable exemptions from registration under
the Securities Act.
PPP
#5 was issued under the terms of the Exchange Agreement in exchange for the surrender of the shares of Series A Preferred Stock pursuant
to Section 3(a)(9) of the Securities Act. The Company did not receive any cash proceeds from the issuance of PPP #5 and did not receive
any consideration for entering into the Exchange Agreement other than cancellation of the Series A Preferred Stock.
The
issuance of securities awards to Ms. Raele and the stock awards issued to Messrs. Thompson and Smith as further described in
Item 5.02 were made pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933. Such securities
awards have not been registered under the Securities Act and will be issued pursuant to applicable exemptions from registration under
the Securities Act.
Item
3.03 Material
Modification to Rights of Security Holders.
The
disclosures set forth in Items 1.01 and 5.03 of this Current Report on Form 8-K are incorporated by reference into this Item 3.03.
Item
5.02 Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
The
disclosure set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.02.
Appointment
of Chief Executive Officer.
Effective
as of September 15, 2026, in connection with the Closing of the transactions contemplated by the APA, the Board appointed Andrew Thompson
to serve as the Company’s Chief Executive Officer.
Mr.
Thompson, age 46, has served as a Managing Partner of Azure Energy, LLC since August 2025. From May 2022 to May 2023, Mr. Thompson served
as Co-Founder and Treasurer of Azure Renewables, S.A., located in San José, Costa Rica. From June 2015 to December 2024, he served
as a Managing Partner of an advisory firm, and earlier in his career, he served as Managing Director of Ocozzio Advisors, a risk management
agency, in 2017. Mr. Thompson has significant financial and executive leadership experience. He served as Co-Owner and Chief Financial
Officer of a company from January 2007 to August 2015 and as Chief Financial Officer of United Tissue, Inc. from January 2006 to December
2008. Through these roles, Mr. Thompson has developed extensive experience in corporate finance, treasury management, and corporate leadership.
Mr. Thompson received an undergraduate degree from Augusta State University and received his MBA from Augusta State University’s
College of Business Administration.
Other
than as described in this Current Report, (i) there are no family relationships between Mr. Thompson and any director or executive officer
of the Company that would require disclosure under Item 401(d) of Regulation S-K, and (ii) there are no transactions involving Mr. Thompson
that would require disclosure under Item 404(a) of Regulation S-K.
In
connection with his appointment, the Company and Mr. Thompson entered into an Employment Agreement effective as of September 15, 2026
(the “Thompson Employment Agreement”), providing for an initial term ending on the third anniversary of the effective date.
The Thompson Employment Agreement will renew and extend automatically on the third anniversary of the effective date and each annual
anniversary thereafter, unless either party provides at least 90 days’ notice of non-renewal.
The
Thompson Employment Agreement provides for an annual base salary of $375,000 and an annual bonus opportunity of up to 50% of base salary.
Half of the bonus is earned based on continued employment, and half is subject to performance objectives. Of the performance-based portion,
two-thirds (2/3) will be earned upon the Company raising sufficient capital to ensure its viability for the applicable fiscal year, and
one-third (1/3) will be earned upon the Company generating at least $10,000,000 of revenue for the fiscal year ending December 31, 2026,
and such amount as the Board determines for subsequent years. Mr. Thompson is also entitled to a change-in-control bonus upon a change
in control transaction involving the Company during the employment term. As an inducement material to his acceptance of employment, the
Company granted Mr.
Thompson an inducement award of 2,119,542 restricted shares of Common Stock in reliance on Nasdaq Listing Rule 5635(c)(4). Of those shares,
1,059,771 were fully vested on
the grant date, and the remaining 1,059,771 are subject to a restricted stock award agreement and will vest in full on the first anniversary
of the effective date of the Thompson Employment Agreement. Mr. Thompson is also eligible to receive annual equity awards with a grant-date
value equal to the greater of four times his base salary or a value determined by an independent compensation consultant. Upon a termination
without cause or for good reason, Mr. Thompson is entitled to severance equal to two times the sum of his base salary and maximum annual
bonus, COBRA reimbursement for up to 18 months, and full accelerated vesting of his outstanding equity awards.
Appointment
of Chief Operating Officer.
The
Board also appointed Ryan J. Smith to serve as the Company’s Chief Operating Officer, effective as of September 15, 2026.
Mr.
Smith, age 39, has served as Vice President of Development at Azure Energy, LLC, a leading developer of firm-capacity renewable energy
infrastructure, since January 2026, where he led the origination and development of energy and infrastructure projects, overseeing the
full project lifecycle from site control to permitting. From July 2016 to May 2025, Mr. Smith held a series of operational risk roles
at Wells Fargo Bank, a multinational financial services company. He served as Vice President, Risk Officer in the Wealth Investment Management
business in the Charlotte, North Carolina office from October 2021 to May 2025 where he led a variety of risk management programs aimed
at documenting and mitigating the firm’s business risks. Prior to that, he served as Vice President, Operational Risk Officer in
Recovery & Resolution Planning, from June 2019 to September 2021, as Assistant Vice President, Operational Risk Consultant in Asset
Backed Finance, from May 2018 to June 2019, and as an Operational Risk Consultant within Wealth and Investment Management from July 2016
to May 2018. Earlier in his career, he served as an Operations Manager at Hexcel Corporation, a global leader in advanced composite materials,
and, prior to that, served as an Infantry Officer and Risk Assessment Officer in the United States Army. Mr. Smith received his Bachelor
of Arts degree from the University of California, Santa Barbara, and his MBA from the University of North Carolina at Chapel Hill’s
Kenan-Flagler Business School.
Other
than as described in this Current Report, (i) there are no family relationships between Mr. Smith and any director or executive officer
of the Company that would require disclosure under Item 401(d) of Regulation S-K, and (ii) there are no transactions involving Mr. Smith
that would require disclosure under Item 404(a) of Regulation S-K.
In
connection with his appointment, the Company and Mr. Smith entered into an Employment Agreement effective as of September 15, 2026 (the
“Smith Employment Agreement”), providing for an initial term ending on the third anniversary of the effective date. The Smith
Employment Agreement will renew and extend automatically on that third anniversary date and each annual anniversary thereafter, unless
either party provides at least 90 days’ notice of non-renewal.
The
Smith Employment Agreement provides for an annual base salary of $280,000 and an annual bonus opportunity of up to 50% of base salary.
Half of the bonus is earned based on continued employment, and half is subject to performance objectives. Of the performance-based portion,
two-thirds (2/3) will be earned upon achieving operational objectives established by the Chief Executive Officer and approved by the
Board for the applicable fiscal year, and one-third (1/3) will be earned upon the Company generating at least $10,000,000 of revenue
for the fiscal year ending December 31, 2026, and such amount as the Board determines for subsequent years. Mr. Smith is also entitled
to a change-in-control bonus upon a change in control transaction involving the Company during the employment term. As an inducement
material to his acceptance of employment, the Company granted Mr.
Smith an inducement award of 2,119,542 restricted shares of Common Stock in reliance on Nasdaq Listing Rule 5635(c)(4). Of those shares,
1,059,771 were fully vested in
full on the grant date, and the remaining 1,059,771 are subject to a restricted stock award agreement and will vest in full on the first
anniversary of the effective date of the Smith Employment Agreement. Mr. Smith is also eligible to receive annual equity awards with
a grant-date value equal to the greater of four times his base salary or a value determined by an independent compensation consultant.
Upon a termination without cause or for good reason, Mr. Smith is entitled to severance equal to two times the sum of his base salary
and maximum annual bonus, COBRA reimbursement for up to 18 months, and full accelerated vesting of his outstanding equity awards.
Appointment
of Chief Accounting Officer and Interim Chief Financial Officer
In
connection with Mr. Andre’s termination as the Company’s Chief Financial Officer, the Board appointed and promoted Leticia
Raele from her position as Controller of the Company to serve as the Company’s Chief Accounting Officer and Interim Chief Financial
Officer, effective as of the Closing Date. In connection with Ms. Raele’s appointment, the Company and Raele entered into an Employment
Agreement effective as of September 15, 2026.
(the “Raele Employment Agreement”), providing for an initial term ending on the second anniversary of the effective date.
The Raele Employment Agreement will renew and extend automatically on that third anniversary date and each annual anniversary thereafter,
unless either party provides at least 90 days’ notice of non-renewal.
Pursuant
to the Raele Employment Agreement, Ms. Raele is entitled to an annual base salary of $270,000, subject to annual review by the Board
(but not subject to decrease without consent), and is eligible for an annual bonus of up to 20% of her base salary based on performance
objectives determined by the Chief Executive Officer. In addition, Ms. Raele received a one-time signing bonus of $25,000 on the effective
date and is entitled to an additional one-time bonus of $25,000 if she remains employed through December 31, 2026. As an inducement to
Ms. Raele’s continued service, the Company granted Ms. Raele a stock option (the “Raele Stock Option”) exercisable
into 1,144,552 shares of Common Stock at an exercise price of $0.2359 per share, vesting 25% on the date of grant and the remaining 75%
in equal quarterly installments over the following two years. The Raele Stock Option was granted outside the Company’s 2022 Equity
Incentive Plan and expires on September 15, 2036.
Upon a termination without cause or for good reason, Ms. Raele is entitled to severance equal to the sum of her base salary and maximum
annual bonus, COBRA reimbursement for up to 18 months, and full accelerated vesting of her outstanding equity awards including the Raele
Stock Option.
Ms.
Raele, age 48, has served as the Company’s Controller since September 2025. From March 2017 to July 2025, Ms. Raele held a series
of accounting leadership roles at FlexShopper, LLC, the principal operating subsidiary of FlexShopper, Inc., a publicly traded financing
solutions business, most recently as Chief Accounting Officer from May 2023 to August 2025, and previously as Controller and Assistant
Controller. Earlier in her career, from August 1999 to January 2011, Ms. Raele served as an accountant for Price Waterhouse & Co.
S.R.L., the PwC member firm in Argentina, most recently as an Audit Manager, where she led audits of public and private companies. Ms. Raele received her degree in Public Accounting
from the Universidad de Buenos Aires and holds the Diploma in International Financial Reporting from the Association of Chartered Certified
Accountants.
There
are no family relationships between Ms. Raele and any director or executive officer of the Company that would require disclosure under
Item 401(d) of Regulation S-K. There are no transactions involving Ms. Raele that would require disclosure under Item 404(a) of Regulation
S-K.
Appointment
of New Directors
Pursuant
to the APA, the Company agreed to appoint two directors nominated by Seller to the Board. Effective as of September 15, 2026, Mr. Thompson
and Gregory D. Smith were appointed to serve as members of the Board. Mr. Thompson was appointed Chairman of the Board. Mr. Gregory Smith’s
committee assignment will be determined at a later date.
There
are no arrangements or understandings with any other person pursuant to which Messrs. Thompson and Gregory Smith were selected as directors.
Neither Mr. Thompson nor Mr. Gregory Smith has any family relationship with any director or executive officer of the Company that would
require disclosure under Item 401(d) of Regulation S-K. Other than the transactions contemplated by the APA and described in Items 1.01
and 2.01 above, there are no transactions involving Mr. Thompson or Mr. Gregory Smith that would require disclosure under Item 404(a)
of Regulation S-K.
In
connection with the appointments of Messrs. Thompson and Gregory Smith to the Board, the Board’s size increased from six (6) to
seven (7) directors, and seven (7) directors currently serve on the Board.
Departure
of Officers and Director
In
connection with, and effective upon, the Closing of the transactions contemplated by the APA, as described in Items 1.01 and 2.01 above,
the Company terminated, on September 15, 2026, the employment of Gary Atkinson, its former Chief Executive Officer, and Alex Andre, its
former Chief Financial Officer and General Counsel (each a “Departing Executive” and collectively, the “Departing Executives”,
each without “cause” and pursuant to their respective employment agreements with the Company. In connection with their departures,
the Company entered into separate Separation and Release Agreements dated September 15, 2026 (each, a “Separation Agreement”),
with each of Mr. Atkinson and Mr. Andre. Pursuant to the Separation Agreement with Mr. Atkinson, the Company agreed to pay Mr. Atkinson
a one-time separation payment of $1,080,000 on the effective date, in addition to any other compensation and benefits owed to him, in
exchange for a general release of claims in favor of the Company and its affiliates. Pursuant to the Separation Agreement with Mr. Andre,
the Company agreed to pay Mr. Andre a one-time separation payment of $1,170,000 on the effective date, in addition to any other compensation
and benefits owed to him, in exchange for a general release of claims in favor of the Company and its affiliates.
Also
on September 15, 2026, Gary Atkinson resigned as a member of the Board, effective as of the Closing. Mr. Atkinson’s resignation
was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
Consulting
Agreements with Former Officers
In
connection with the departures of Messrs. Atkinson and Andre as officers of the Company, the Company entered into consulting arrangements
with each of them, in each case dated September 15, 2026 (each a “Consulting Agreement”). Pursuant to the Consulting Agreement
with Mr. Atkinson, the Company engaged G2M Consulting, LLC, an entity owned by Mr. Atkinson, to provide general corporate consulting
and advisory services up to 20 hours per month for an 18-month term. The consideration for the engagement consists of (i) a one-time
payment of $270,000 (subject to repayment if the consultant terminates the arrangement within six months), (ii) a monthly retainer of
$25,000, (iii) a restricted stock award of 2,000,000 shares of Common Stock granted under the Company’s 2022 Equity Incentive Plan,
which is registered on Form S-8 (File No. 333-268106), and (iv) the immediate vesting of an outstanding stock option exercisable into
740,597 shares of Common Stock. Of the 2,000,000 shares of Common Stock underlying the restricted stock award granted to Mr. Atkinson,
1,000,000 will vest on the 91st day following the effective date, and 1,000,000 will vest on January 1, 2027, subject to a 4.99% beneficial
ownership limitation. Pursuant to the Consulting Agreement with Mr. Andre, the Company engaged Mr. Andre to provide general corporate
consulting and advisory services up to 20 hours per month for an 18-month term. The consideration for Mr. Andre’s engagement consists
of (i) a one-time payment of $222,000 (subject to repayment if Mr. Andre terminates the arrangement within six months), (ii) a monthly
retainer of $21,000, (iii) a restricted stock award of 1,000,000 shares of Common Stock granted under the Company’s 2022 Equity
Incentive Plan, which is registered on Form S-8 (File No. 333-268106), and (iv) the immediate vesting of certain outstanding stock options
exercisable into an aggregate of 281,427 shares of Common Stock. Of the 1,000,000 shares of Common Stock underlying the restricted stock
award granted to Mr. Andre, 500,000 vest on the 91st day following the effective date, and 500,000 vest on January 1, 2027, subject to
a 4.99% beneficial ownership limitation.
The
foregoing descriptions of the Thompson Employment Agreement, the Smith Employment Agreement, the Raele Employment Agreement, the Separation
Agreements with each of Messrs. Atkinson and Andre and the Consulting Agreements with each of Messrs. Atkinson and Andre do not purport
to be complete and are qualified in their entirety by reference to the full text of each such agreement. Copies of the form of employment
agreement with Messrs. Thompson and Smith, the Raele Employment Agreement and the form of consulting agreement are filed as Exhibits
10.3, 10.4, 10.5 and 10.6 to this Current Report on Form 8-K and are incorporated herein by reference.
Rabbi
Trust and Funding Agreement
Pursuant
to the Separation Agreements, on the Closing Date, the Company entered into a Funding Agreement (the “Funding Agreement”)
with each of the Departing Executive addressing the Company’s obligation to fund certain deferred compensation owed to the Departing
Executives under Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”). On September 11, 2026, the
Company entered a Trust Agreement (the “Rabbi Trust Agreement”) with The Bryn Mawr Trust Company of Delaware (the “Trustee”)
establishing a nonqualified irrevocable grantor trust, commonly known as a rabbi trust (the “Trust”), the assets of which
will be used to hold and distribute deferred compensation owed to the Departing Executives under Section 409A. Pursuant to the Trust
Agreement, the Company is required to fund the Trust within six months of September 11, 2026 with cash sufficient to satisfy the deferred
compensation obligations. With respect to any amounts payable from the Trust, the Departing Executives and their beneficiaries shall
have the status of general unsecured creditors of the Company, and the Trust assets shall be subject to the claims of the Company’s
general creditors in the event of insolvency.
Pursuant
to the Funding Agreement, the Company acknowledged that it currently has insufficient capital to fully fund the Trust on the Closing
Date and agreed to a structured funding arrangement pursuant to which specified percentages of capital received by the Company from various
sources will be deposited into the Trust until the deferred compensation obligations have been satisfied in full. Interest accrues on
the outstanding deferred compensation at the short-term annual applicable federal rate. In the event the deferred compensation has not
been fully paid by the date that is six months after the termination of the Departing Executives’ employment, the Funding Agreement
provides for the automatic increase of 80% of the overdue amounts and the issuance of additional shares of Common Stock under the Company’s
2022 Equity Incentive Plan to the Departing Executives as liquidated damages.
The
foregoing description of the Funding Agreement and the Rabbi Trust Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the Funding Agreement and the Rabbi Trust Agreement, copies of which are attached hereto as
Exhibits 10.7 and 10.8 and are incorporated herein by reference.
Item
5.03 Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The
disclosure set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.03.
On
September 18, 2026, the Company filed a Certificate of Designation of Preferences and Rights of Series B Preferred Stock (the
“Certificate of Designation”) with the Secretary of State of the State of Delaware, thereby amending its Certificate of Incorporation
to establish a new series of the Company’s preferred stock designated as Series B Preferred Stock. The Certificate of Designation
authorizes 100,000 shares of Series B Preferred Stock, each having a stated value of $1,000 per share (the “Stated Value”).
Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to them in the Certificate of Designation.
The
Series B Preferred Stock ranks senior to the Company’s Common Stock and every other class or series of the Company’s preferred
stock, whether now existing or hereafter created, other than the Company’s Series A Preferred Stock (the “Series A Preferred
Stock”), and ranks junior to the Series A Preferred Stock with respect to dividends, distributions, and payments upon the liquidation,
dissolution, or winding up of the Company.
The
holders of Series B Preferred Stock are not entitled to participate in any dividends, distributions, or payments made to the holders
of Common Stock unless and until the shares of Series B Preferred Stock are converted into shares of Common Stock in accordance with
the terms of the Certificate of Designation.
The
Series B Preferred Stock is not redeemable by the Company. In addition, the Series B Preferred Stock is not redeemable at the option
of any holder, and no holder has any right, under any circumstance or upon the occurrence of any event, to require, demand, or compel
the Company to redeem, repurchase, or otherwise acquire any shares of Series B Preferred Stock or to require the Company to transfer
cash or other assets in respect of the Series B Preferred Stock.
Subject
to the receipt of Stockholder Approval described below, each holder of Series B Preferred Stock has the right, at any time and from time
to time, to convert all or any portion of its shares of Series B Preferred Stock into shares of Common Stock at a conversion rate (the
“Conversion Rate”) equal to the number of shares of Common Stock determined by dividing the Stated Value by the conversion
price of $0.2359 per share of Common Stock (the “Conversion Price”). To convert, a holder must deliver to the Company a written
notice of conversion specifying the number of shares to be converted. Following receipt of Stockholder Approval, the Company must issue
and deliver the applicable shares of Common Stock as promptly as practicable and, in any event, within three (3) Trading Days. The Company
is required at all times to reserve and keep available out of its authorized but unissued Common Stock a sufficient number of shares
to effect the conversion of all outstanding shares of Series B Preferred Stock. No fractional shares of Common Stock will be issued upon
conversion. In lieu of any fractional share, the Company will, at its election, either pay a cash adjustment equal to the fraction multiplied
by the Conversion Price or round up to the next whole share.
The
right to exercise the conversion rights of the Series B Preferred Stock is conditioned upon the Company’s receipt of Stockholder
Approval. Until Stockholder Approval has been obtained, the holders of the Series B Preferred Stock are not entitled to convert any shares
of Series B Preferred Stock into shares of Common Stock. “Stockholder Approval” as used in the Certificate of Designation
means all approvals as may be required by the applicable rules of The Nasdaq Stock Market (or other exchange or trading system on which
the Common Stock is then listed) or under applicable law from the Company’s stockholders with respect to the transactions to which
the obligation to issue the Series B Preferred Stock relates, the issuance of the Series B Preferred Stock, and the right of the holders
to convert the Series B Preferred Stock into Common Stock. No shares of Series B Preferred Stock are convertible into Common Stock, and
no holder has the right to convert shares of Series B Preferred Stock into shares of Common Stock, unless and until Stockholder Approval
has been obtained. Any attempted conversion prior to Stockholder Approval is null and void ab initio.
The
right to exercise the voting rights of the Series B Preferred Stock is conditioned upon the Company’s receipt of Stockholder Approval.
Until Stockholder Approval has been obtained, the holders of the Series B Preferred Stock are not entitled to vote on any matter submitted
to the holders of Common Stock, except as otherwise required by the Delaware General Corporation Law, other applicable law, or the Certificate
of Designation. Immediately after receipt of Stockholder Approval, the Series B Preferred Stock has voting rights with respect to any
amendment or repeal of the Certificate of Designation. In that event, each holder is entitled to one vote per share held of record, voting
separately as a single class, whether by written consent or at a meeting. Any amendment or repeal effected without the required vote
or consent is null and void ab initio.
In
addition, no amendment to the Certificate of Designation may provide the holders of Series B Preferred Stock with rights or preferences
as to dividends, distributions, and payments upon liquidation, dissolution, or winding up that are senior to, or on parity with, those
of the Series A Preferred Stock.
The
foregoing description of the Series B Preferred Stock and the Certificate of Designation does not purport to be complete and is qualified
in its entirety by reference to the full text of the Certificate of Designation, a copy of which is filed as Exhibit 3.1 to this Current
Report on Form 8-K and is incorporated herein by reference.
Item
7.01 Regulation
FD Disclosure.
On
September 15, 2026, the Company issued a press release announcing the leadership transition in connection with the acquisition contemplated
by the APA, including the dismissal of Gary Atkinson as Chief Executive Officer and Mr. Atkinson’s resignation from the Board of
Directors. A copy of this press release is filed as Exhibit 99.1 hereto and is incorporated herein by reference.
Also
on September 15, 2026, the Company issued a press release announcing the Closing of the acquisition described in Item 1.01. A copy of
this press release is filed as Exhibit 99.2 hereto and is incorporated herein by reference.
The
information furnished pursuant to Item 7.01, including Exhibits 99.1 and 99.2, shall not be deemed to be “filed” for the
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the
liabilities of that section, and shall not be deemed to be incorporated by reference into any filing made by the Company under the Exchange
Act or Securities Act, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by
specific reference in such filing.
Forward
Looking Statements
This
Current Report on Form 8-K and other reports filed by Algorhythm Holdings, Inc. (the “Company”) from time to time with the
Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward-looking statements and information
that is based upon beliefs of, and information currently available to, the Company’s management, as well as estimates and assumptions
made by the Company’s management. When used in the Filings, the words “anticipate,” “believe,” “estimate,”
“expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions
as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current
view of the Company with respect to future events and are subject to risks, uncertainties, assumptions and other factors relating to
the Company’s industry and the Company’s operations and results of operations. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed,
estimated, expected, intended or planned.
Risks
and uncertainties related to the transactions described herein include, among others: the risk that the Company may not realize the anticipated
benefits of the acquisition; the risk that the integration of the acquired business may be more difficult, time-consuming, or costly
than expected; the risk that the Company may not be able to obtain the stockholder approval required for conversion of the Series B Preferred
Stock; uncertainties as to the financial performance of the acquired business; potential adverse reactions or changes to business or
employee relationships resulting from the announcement or completion of the transaction; the inability to retain key personnel; the Company’s
ability to fund its deferred compensation obligations; and any changes in general economic and/or industry specific conditions. Consequently,
all of the forward-looking statements made by the Company in this and in other documents or statements are qualified by factors, risks
and uncertainties, including, but not limited to, those set forth under the headings titled “Cautionary Statement Regarding Forward-Looking
Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2025, and other reports filed by the Company with the SEC, which are available at the SEC’s website http://www.sec.gov.
You
should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Current Report on
Form 8-K. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after
the date of this Current Report on Form 8-K to conform our statements to actual results or changed expectations, or the results of any
revision to these forward-looking statements.
Item
9.01 Financial
Statements and Exhibits.
(a)
Financial Statements of Business Acquired.
The
financial statements of Azure Energy, LLC required by this Item are not included in this Current Report and will be filed by amendment
no later than 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed with the SEC.
(b)
Pro Forma Financial Information.
The
unaudited pro forma condensed consolidated financial information of the Company in connection with the acquisition will be filed by amendment
no later than 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed with the SEC.
(d)
Exhibits.
Exhibit
No.
Description
3.1
Certificate
of Designation of Preferences and Rights of Series B Preferred Stock filed with the Secretary of State of the State of Delaware on
September 18, 2026
10.1*
Asset Purchase Agreement by and among Algorhythm Holdings, Inc., Azure Energy, LLC, Azure Energy, S.R.L. (solely for Sections 2.09 and 3.02(c)), Azure Holdings, LLC, and parties set forth on the signature page hereto, dated September 15, 2026
10.2**
Option Agreement by and among Algorhythm Holdings, Inc., Azure Energy, LLC, Tangen Family Trust, and 1979, FLP, dated September 15, 2026
10.3*
Form of Employment Agreement entered into with Andrew Thompson and Ryan J. Smith
10.4*
Employment Agreement entered into with Leticia Raele
10.5
Form of Separation Agreement entered into with Gary Atkinson and Alex Andre
10.6*
Form of Consulting Agreement entered into with Gary Atkinson and Alex Andre
10.7**
Funding Agreement, dated September 15, 2026, among Algorhythm Holdings, Inc., Gary Atkinson, and Alex Andre
10.8
Trust Agreement, dated September 11, 2026, between Algorhythm Holdings, Inc. and The Bryn Mawr Trust Company of Delaware
10.9
Exchange
Agreement, dated September 15, 2026, between Algorhythm Holdings, Inc. and Streeterville Capital, LLC
10.10
Secured
Pre-Paid Purchase #5, dated September 15, 2026, between Algorhythm Holdings, Inc. and Streeterville Capital, LLC
99.1
Press Release, dated September 15, 2026
99.2
Press Release, dated September 15, 2026
104
Cover
Page Interactive Data File (embedded within the Inline XBRL document)
*
Certain schedules and exhibits have been omitted pursuant to Items 601(a)(5) and 601(b)(2) of Regulation S-K. The Company will furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.
**
In accordance with Item 601(b)(10) of Regulation S-K, certain provisions or terms of the agreement have been redacted. The Company will
provide an unredacted copy on a supplemental basis to the SEC or its staff upon request.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date:
September 21, 2026
ALGORHYTHM
HOLDINGS, INC.
By:
/s/
Andrew Thompson
Name:
Andrew
Thompson
Title:
Chief
Executive Officer
EX-3.1
EX-3.1
Filename: ex3-1.htm · Sequence: 2
Exhibit
3.1
CERTIFICATE
OF DESIGNATION OF PREFERENCES AND RIGHTS OF
SERIES
B PREFERRED STOCK
of
Algorhythm
Holdings, Inc.,
a
Delaware corporation
Pursuant
to Section 151 of the Delaware General Corporation Law
The
undersigned, Gary Atkinson, hereby certifies that:
1.
He is the Chief Executive Officer of Algorhythm Holdings, Inc., a Delaware corporation (“Corporation”).
2.
A resolution was adopted and approved by the Board of Directors of the Corporation at a meeting duly held on September 10, 2026 authorizing
and approving the Certificate of Designation of Preferences and Rights of Series B Preferred Stock (this “Certificate”)
of the Corporation set forth below.
3.
No shares of Series B Preferred Stock have been issued as of the date hereof.
IN
WITNESS WHEREOF, the undersigned does hereby execute this Certificate and does hereby acknowledge that this instrument constitutes his
act and deed and that the facts stated herein are true.
Algorhythm
Holdings, Inc.
By:
/s/
Gary Atkinson
Name:
Gary
Atkinson
Title:
Chief
Executive Officer
Dated:
September
11, 2026
CERTIFICATE
OF DESIGNATION OF PREFERENCES AND RIGHTS OF
SERIES
B PREFERRED STOCK
of
Algorhythm
Holdings, Inc.,
a
Delaware corporation
The
Chief Executive Officer of Algorhythm Holdings, Inc. (the “Corporation”), a corporation organized and existing under
the laws of the State of Delaware, does hereby certify that, pursuant to the authority contained in the Corporation’s Certificate
of Incorporation (“Certificate”) and pursuant to Section 151 of the Delaware General Corporation Law, and in accordance
with the provisions of the resolution creating a series of the class of the Corporation’s authorized preferred stock designated
as the Series B Preferred Stock as follows:
FIRST:
The Certificate authorizes the issuance by the Corporation of 800,000,000 shares of common stock, par value $0.01 per share (the “Common
Stock”), and 1,000,000 shares of preferred stock, par value of $1.00 per share (“Preferred Stock”), and
further, authorizes the Board of Directors (“Board”) of the Corporation, by resolution or resolutions, at any time
and from time to time, to divide and establish any or all of the unissued shares of Preferred Stock not then allocated to any series
into one or more series and to designate the rights, preferences and limitations of each series.
SECOND:
At a duly held meeting of the Board on September 10, 2026, the Board designated 100,000 shares of the Preferred Stock as Series B Preferred
Stock pursuant to a resolution providing that a series of preferred stock of the Corporation be and hereby is created and that the designation
and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the
shares of such Series B Preferred Stock, and the qualifications, limitations and restrictions thereof, are as follows:
SERIES
B PREFERRED STOCK
Section
1. Definitions. Capitalized terms used but not otherwise defined herein shall have meanings set forth in Section 11 below.
Section
2. Powers and Rights of Series B Preferred Stock. There is hereby designated a class of Preferred Stock of the Corporation as
Series B Preferred Stock, par value $1.00 per share (the “Series B Stock”). The number of shares, powers, terms, conditions,
designations, preferences and privileges, relative, participating, optional and other special rights, and qualifications, limitations
and restrictions of the Series B Stock shall be as set forth in this Certificate of Designation of Preferences and Rights of Series B
Preferred Stock (this “Certificate of Designation”). For purposes hereof, a holder of a share or shares of Series
B Stock, with respect to their rights as related to the Series B Stock, shall be referred to as a “Series B Holder.”
Section
3. Number and Stated Value. The number of authorized shares of Series B Stock is 100,000 shares. Each share of Series B Stock
shall have a stated value of $1,000.00 (the “Stated Value”).
Section
4. Ranking. All shares of Series B Stock shall be: (i) senior in rank to the Common Stock and any other class or series of Preferred
Stock of the Corporation, whether now existing or hereafter created, other than the Series A Preferred Stock of the Corporation (the
“Series A Stock”); and (ii) junior in rank to the Series A Stock, in each case with respect to dividends, distributions
and payments upon the liquidation, dissolution or winding up of the Corporation.
Section
5. Dividends. The Series B Stock shall not participate in any dividends, distributions or payments made to the holders of the
shares of Common Stock unless and until such time as the shares of Series B Stock are converted into shares of Common Stock in accordance
with the terms of Section 8 below.
Section
6. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, after the payment in full of any amounts payable to the holders of the Series A Stock in connection therewith, each
share of Series B Stock shall be entitled to be paid an amount per share of Series B Stock equal to the Stated Value (the “Series
B Preferred Liquidation Amount”) out of the assets of the Corporation available for distribution to its shareholders before
any payment shall be made to the holders of Common Stock by reason of their ownership thereof. If upon any such liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation available for distribution to its shareholders shall be insufficient
to pay the Series B Preferred Liquidation Amount, the Series B Holders shall share ratably in any distribution of the assets available
for distribution in proportion to the number of shares of Series B Stock then held by them. Following the payment of the Series B Preferred
Liquidation Amount, if there are any remaining assets of the Corporation available for distribution to its shareholders, the Series B
Holders shall not participate in any such distribution.
Section
7. No Redemption. The Series B Stock shall not be redeemable by the Corporation. Additionally, notwithstanding anything in this
Certificate of Designation to the contrary, the Series B Stock shall not be redeemable at the option of any Series B Holder, and no Series
B Holder shall have any right, under any circumstance or upon the occurrence of any event, to require, demand or compel the Corporation
to redeem, repurchase or otherwise acquire any shares of Series B Stock, or to otherwise require the Corporation to transfer cash or
other assets in respect of the Series B Stock.
Section
8. Conversion.
(a) Conversion
Right. Subject to the terms of Section 8(b) below, each holder of Series B Stock
shall have the right, at any time and from time to time, to convert all or any portion of
such holder’s shares of Series B Stock into shares of Common Stock at the Conversion
Rate.
(b) Stockholder
Approval Required. Notwithstanding the terms of Section 8(a), no shares of Series
B Stock shall be convertible into shares of Common Stock, and no Series B Holder shall have
the right to convert any shares of Series B Stock into shares of Common Stock, unless and
until Stockholder Approval (as defined below) has been obtained. Any attempt to convert shares
of Series B Stock into shares of Common Stock prior to the time Stockholder Approval has
been obtained shall be null and void ab initio, and of no force or effect.
2
(c) Conversion
Rate. Each share of Series B Stock shall be convertible into that number of shares of
Common Stock equal to the Stated Value divided by the Conversion Price (the “Conversion
Rate”). The “Conversion Price” shall be $0.2359 per share of
Common Stock.
(d) Mechanics
of Conversion. To convert shares of Series B Stock into shares of Common Stock, a Series
B Holder shall deliver to the Corporation a written notice of conversion specifying the number
of shares of Series B Stock to be converted. Upon receipt of a valid conversion notice, in
the form attached hereto as Exhibit A, from a Series B Holder following receipt of
Stockholder Approval, the Corporation shall, as promptly as practicable and in any event
within three (3) Trading Days, issue and deliver to such holder the number of shares of Common
Stock issuable upon such conversion.
(e) Reservation
of Shares. The Corporation shall at all times reserve and keep available, out of its
authorized but unissued shares of Common Stock, a sufficient number of shares of Common Stock
to complete the conversion of all outstanding shares of Series B Stock into shares of Common
Stock.
(f) Adjustment
Upon Dividend, Distribution, Subdivision, or Combination of Common Stock. If the Corporation
shall, at any time or from time to time after the issuance of any shares of Series B Stock:
(i) pay a dividend or make any other distribution payable in shares of Common Stock; (ii)
subdivide (by stock split, recapitalization, or otherwise) its outstanding shares of Common
Stock into a greater number of shares; or (iii) combine (by combination, reverse stock split,
or otherwise) its outstanding shares of Common Stock into a lesser number of shares, the
Conversion Price in effect immediately prior to any such dividend, distribution, subdivision,
or combination shall be proportionately adjusted, and the number of shares of Common Stock
issuable upon conversion of each share of Series B Stock shall be proportionately adjusted.
Any adjustment under this Section 8(f) shall become effective at the close of business
on the date the dividend, distribution, subdivision, or combination becomes effective.
(g) Adjustment
upon Reorganization, Reclassification, Consolidation, Merger, or Sale of Assets. In the
event of any: (i) capital reorganization of the Corporation; (ii) reclassification of the
Common Stock (other than a change in par value or as a result of a stock dividend, distribution,
subdivision, or combination of shares described in Section 8(f)); (iii) consolidation or
merger of the Corporation with or into another Person, or (iv) sale of all or substantially
all of the Corporation’s assets to another Person, in each case that entitles the holders
of Common Stock to receive stock, securities, or assets with respect to or in exchange for
Common Stock, each share of Series B Stock shall, immediately after such transaction, continue
to remain outstanding and shall thereafter be convertible into the kind and number of shares
of stock and other securities and assets of the Corporation or of the successor Person resulting
from such transaction to which such share of Series B Stock would have been entitled to receive
upon the completion of such transaction had such share of Series B Stock been converted into
shares of Common Stock immediately prior to the completion of such transaction. The Corporation
shall not effect any such transaction unless, prior to the consummation thereof, the successor
Person (if other than the Corporation) agrees to assume, by written instrument, the obligation
to deliver to the Series B Holders, upon conversion of their shares of Series B Stock, such
shares of stock, securities, or assets that such holders would have been entitled to receive
had the shares of Series B Stock had been converted into shares of Common Stock immediately
prior to such transaction.
3
(h) Fractional
Shares. No fractional shares of Common Stock shall be issued upon conversion of the Series
B Stock. In lieu of any fractional share to which a Series B Holder would otherwise be entitled,
the Corporation shall, at its election, either: (i) pay a cash adjustment to the Series B
Holder in respect of such fractional share in an amount equal to such fraction multiplied
by the Conversion Price; or (ii) round up the number of shares of Common Stock otherwise
receivable by the Series B Holder to the next whole share of Common Stock.
(i) Notice
of Adjustments. Upon any adjustment of the Conversion Price or the number of shares of
Common Stock issuable upon conversion of the Series B Stock pursuant to this Section 8,
the Corporation shall, as promptly as reasonably practicable and in any event within ten
(10) Trading Days thereafter, furnish to each holder of Series B Stock a certificate of an
executive officer of the Corporation setting forth in reasonable detail such adjustment and
the facts upon which it is based and certifying the calculation thereof.
Section
9. Voting Rights.
(a) Until
such time as Stockholder Approval has been obtained, the Series B Stock shall not be entitled
to vote on any matter submitted to the holders of Common Stock for a vote, except as otherwise
required by the Delaware General Corporation Law, other applicable law or as provided in
this Certificate of Designation. Immediately after receipt of Stockholder Approval, the Series
B Stock shall have the voting rights set forth in Section 9(b).
(b) The
Corporation may not, and shall not, amend or repeal this Certificate of Designation without
the prior written consent of the Required Holders. In such event, each Series B Holder shall
have one vote in respect of each share of Series B Stock held by such holder of record on
the books of the Corporation. The Series B Holders shall vote separately as a single class,
in person or by proxy, either in writing without a meeting or at an annual or special meeting
of such Series B Holders. Any such amendment or repeal of this Certificate of Designation
that is effectuated without such vote or consent shall be null and void ab initio,
and of no force or effect.
(c) Notwithstanding
anything in this Certificate of Designation to the contrary, in no event shall any amendment
to this Certificate of Designation provide the holders of Series B Stock with rights or preferences
as to dividends, distributions and payments upon the liquidation, dissolution or winding
up of the Corporation that are senior or pari passu to those of the Series A Stock. Any amendment
that provides the holders of Series B Stock with rights or preferences as to dividends, distributions
and payments upon the liquidation, dissolution or winding up of the Corporation that are
senior or pari passu to those of the Series A Stock shall be null and void ab initio,
and of no force or effect.
Section
10. Reissuance. Any shares of Series B Stock converted by the Corporation shall be automatically cancelled and retired and shall
not be reissued, sold, or transferred.
4
Section
11. Definitions. In addition to the terms defined elsewhere in this Certificate of Designation, the following terms, as used herein,
have the following meanings:
(a) “Person”
means any individual, corporation, limited liability company, partnership, association, trust,
or other entity or organization.
(b) “Required
Holders” means the holders of a majority of the shares of Series B Stock then issued
and outstanding.
(c) “Stockholder
Approval” means all such approvals as may be required by the applicable rules of
The Nasdaq Stock Market, national securities exchange or other electronic trading system
on which the Common Stock is then listed for trading or under applicable law from the stockholders
of the Corporation with respect to the transactions pursuant to which the obligation to issue
the shares of Series B Stock relate, the issuance of the Series B Stock, and the right of
the Series B Holders to convert the Series B Stock into shares of Common Stock as provided
in this Certificate of Designation.
(d) “Trading
Day” means any day on which The Nasdaq Stock Market, national securities exchange
or other electronic trading system on which the Common Stock is then listed for trading,
is open for trading.
Section
12. Miscellaneous.
(a) Legend.
Any certificates representing the Series B Stock shall bear a restrictive legend in substantially
the following form (and a stop transfer order may be placed against transfer of such stock
certificates):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAVE THEY BEEN
REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED, OR HYPOTHECATED UNLESS THEY HAVE BEEN QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS,
IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS THAT ARE SET IN THAT CERTAIN
CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF SERIES B PREFERRED STOCK DATED SEPTEMBER 11, 2026.
5
(b) Uncertificated
Shares; Lost or Mutilated Certificates. The shares of Series B Stock shall be issued
to each Series B Holder in uncertificated (book entry) form by the stock transfer agent of
the Corporation unless a Series B Holder requests that such Series B Stock be issued to such
Series B Holder in certificated form. If any certificate for the Series B Stock held by the
Series B Holder thereof shall be mutilated, lost, stolen or destroyed, the Corporation shall
execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate,
a new certificate for the share of Series B Stock so mutilated, lost, stolen or destroyed,
but only upon receipt of such evidence of such loss, theft or destruction of such certificate,
and of the ownership hereof, and indemnity, if requested, as is reasonably satisfactory to
the Corporation.
(c) Waiver.
Any waiver by the Corporation or the Series B Holder of a breach of any provision of this
Certificate of Designation shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this Certificate of Designation.
The failure of the Corporation or the Series B Holder to insist upon strict adherence to
any term of this Certificate of Designation on one or more occasions shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Certificate of Designation. Any waiver must be in writing
and signed by the Person granting such waiver.
(d) Severability.
If any provision of this Certificate of Designation is determined to be invalid, illegal
or unenforceable, the balance of this Certificate of Designation shall remain in effect and
fully enforceable in accordance with its terms. If any provision of this Certificate of Designation
is determined to be inapplicable to any Person or circumstance, it shall nevertheless remain
applicable to all other Persons and circumstances.
(e) Interpretation.
If the Corporation or any Series B Holder shall commence an action or proceeding to enforce
any provisions of this Certificate of Designation, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.
6
Exhibit
A
Conversion
Notice
The
undersigned holder (the “Holder”) of shares of Series B Preferred Stock, par value $1.00 per share (the “Series
B Stock”), of Algorhythm Holdings, Inc., a Delaware corporation (the “Corporation”), hereby irrevocably
elects to convert the number of shares of Series B Stock indicated below into shares of common stock, par value $0.01 per share (the
“Common Stock”), of the Corporation, according to the terms and conditions of the Certificate of Designation of Preferences
and Rights of Series B Preferred Stock of the Corporation, as the same may be amended from time to time (the “Certificate of
Designation”), as of the date written below. Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Certificate of Designation.
The
Holder is relying on the Corporation’s representation and warranty, as set forth in the Certificate of Designation and otherwise
made to the Holder, that, as of the date hereof, Stockholder Approval (as defined in the Certificate of Designation) has been obtained,
and that this conversion is not being effected in violation of Section 8(b) of the Certificate of Designation. The Corporation shall
be solely responsible for any breach of the foregoing representation and warranty, and the Holder shall have no liability therefor.
Date
of Conversion:
________________________________________
Number
of Shares of Series B
Stock
to be Converted:
________________________________________
Stated
Value per Share:
________________________________________
Applicable
Conversion Price:
________________________________________
Number
of Shares of Common Stock to be Issued
(Number
of shares of Series B Stock to be converted, multiplied by the Stated Value, divided by the Conversion Price):
________________________________________
Shares
of Series B Stock Remaining After Conversion (if any):
________________________________________
Please
issue the shares of Common Stock into which the shares of Series B Stock are being converted according to the following instructions:
Name
of Holder:
________________________________________
Address:
________________________________________
Tax
ID / SSN:
________________________________________
DTC
Participant Number (if applicable):
________________________________________
Account
Number (if applicable):
________________________________________
The
Corporation shall, as promptly as practicable and in any event within three (3) Trading Days following receipt of this Notice of Conversion
(and, if applicable, receipt of the certificate(s) representing the shares of Series B Stock being converted), issue and deliver to the
Holder the number of shares of Common Stock issuable upon such conversion in accordance with Section 8(d) of the Certificate of Designation.
HOLDER:
By:
Name:
Title:
Date:
2
EX-10.1
EX-10.1
Filename: ex10-1.htm · Sequence: 3
Exhibit 10.1
ASSET
PURCHASE AGREEMENT
This
Asset Purchase Agreement (this “Agreement”), dated as of September 15, 2026, is entered into by and among Azure Energy,
LLC, a Delaware limited liability company (the “Seller”), Azure Energy, S.R.L., a Costa Rica company (“Azure
S.R.L.”) (solely for the purposes of Sections 2.09 and 3.02(c)), Algorhythm Holdings, Inc., a Delaware corporation (“Parent”),
Azure Holdings, LLC, a Nevada limited liability company (the “Buyer”), and the other parties set forth on the signature
page hereto.
Recitals
WHEREAS,
Seller is engaged in the business of developing firm-capacity renewable energy infrastructure built around converting waste and biomass
into clean, dispatchable power (the “Business”); and
WHEREAS,
Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller, substantially all the assets, and certain
specified liabilities, of the Business, subject to the terms and conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE
I
Definitions
The
following terms have the meanings specified or referred to in this ARTICLE I:
“2025
Financial Statements” has the meaning set forth in Section 4.04.
“Accounts
Receivable” has the meaning set forth in Section 2.02(g).
“Action”
means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation,
citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law
or in equity.
“Affiliate”
of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person. The term “control” (including the terms “controlled by” and “under
common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement”
has the meaning set forth in the preamble.
“Allocation
Schedule” has the meaning set forth in Section 2.06.
“Ancillary
Documents” means the Bill of Sale, the Assignment and Assumption Agreement, the Intellectual Property Assignment, the Option
Agreement, the Certificate of Designation and the other agreements, instruments and documents required to be delivered at the Closing.
“Andre
Employment Agreement” means that certain Amended and Restated Employment Agreement,
dated July 22, 2026, by and between Alex Andre and Parent.
“Assigned
Contracts” has the meaning set forth in Section 2.01(d).
“Assignment
and Assumption Agreement” has the meaning set forth in Section 3.02(a)(ii).
“Assumed
Liabilities” has the meaning set forth in Section 2.03.
“Atkinson
Employment Agreement” means that certain Second Amended and Restated Employment Agreement,
dated July 22, 2026, by and between Gary Atkinson and Parent.
“Azure
S.R.L.” has the meaning set forth in the preamble.
“Balance
Sheet” has the meaning set forth in Section 4.04.
“Balance
Sheet Date” has the meaning set forth in Section 4.04.
“Basket”
has the meaning set forth in Section 7.04(a).
“Benefit
Plan” has the meaning set forth in Section 4.19(a).
“Bill
of Sale” has the meaning set forth in Section 3.02(a)(i).
“Board
of Directors” means the board of directors of Parent.
“Books
and Records” has the meaning set forth in Section 2.01(m).
“Business”
has the meaning set forth in the recitals.
“Business
Day” means any day except Saturday, Sunday or any other day on which commercial banks located in New York, New York are authorized
or required by Law to be closed for business.
“Business
IT Systems” means all Software, computer hardware, servers, networks, platforms, peripherals, and similar or related items
of automated, computerized, or other information technology (IT) networks and systems (including telecommunications networks and systems
for voice, data, and video) owned, leased, licensed, or used (including through cloud-based or other third-party service providers) in
the conduct of the Business.
“Buyer”
has the meaning set forth in the preamble.
“Certificate
of Designation” means the certificate of designation for the Series B Preferred Stock in the form attached hereto as Exhibit
A.
“Cap”
has the meaning set forth in Section 7.04(a).
“CERCLA”
means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization
Act of 1986, 42 U.S.C. §§ 9601 et seq.
2
“Closing”
has the meaning set forth in Section 3.01.
“Closing
Date” has the meaning set forth in Section 3.01.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Common
Stock” means the common stock, par value $0.01 per share, of Parent.
“Contracts”
means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and
all other agreements, commitments and legally binding arrangements, whether written or oral.
“Copyrights”
has the meaning set forth in the definition of Intellectual Property.
“Current
Assets” means the current assets of the Business only to the extent acquired pursuant to the terms of this Agreement.
“Current
Liabilities” means the current liabilities of the Business only to the extent assumed pursuant to the terms of this Agreement.
“De
Minimis Threshold” has the meaning set forth in Section 7.04(a).
“Direct
Claim” has the meaning set forth in Section 7.05(c).
“Disclosure
Schedules” means the Disclosure Schedules delivered by Seller, Parent and Buyer concurrently with the execution and delivery
of this Agreement.
“Dollars”
or “$” means the lawful currency of the United States.
“Encumbrance”
means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security
interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction
on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“Environmental
Attributes” means any emissions and renewable energy credits, energy conservation credits, benefits, offsets and allowances,
emission reduction credits or words of similar import or regulatory effect (including emissions reduction credits or allowances under
all applicable emission trading, compliance or budget programs, or any other federal, state or regional emission, renewable energy or
energy conservation trading or budget program) that have been held, allocated to or acquired for the development, construction, ownership,
lease, operation, use or maintenance of the Business or the Purchased Assets or as of: (a) the date of this Agreement; and (b) future
years for which allocations have been established and are in effect as of the date of this Agreement.
“Environmental
Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom,
by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement
proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal
injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from:
(a) the presence of, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental
Law or term or condition of any Environmental Permit.
3
“Environmental
Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating
to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety,
or the environment (including ambient or indoor air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the
presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation,
discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental
Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976,
as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control
Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976,
as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§
11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; the
Federal Insecticide, Fungicide and Rodenticide Act of 1910, as amended, 7 U.S.C. §§ 136 et seq.; the Oil Pollution Act of 1990,
as amended, 33 U.S.C. §§ 2701 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§
651 et seq.
“Environmental
Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating
to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.
“Environmental
Permit” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or
issued, granted, given, authorized by or made pursuant to Environmental Law.
“Environmental
Professional” means an individual licensed by a Governmental Authority to act on behalf of such Governmental Authority to oversee
environmental site investigation and remediation.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“ERISA
Affiliate” means all employers, trades, or businesses (whether or not incorporated) that would be treated together with Seller
or any of its Affiliates as a “single employer” within the meaning of Section 414 of the Code.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Excluded
Assets” has the meaning set forth in Section 2.02.
“Excluded
Contracts” has the meaning set forth in Section 2.02(a).
4
“Excluded
Liabilities” has the meaning set forth in Section 2.04.
“FERC”
has the meaning set forth in Section 4.17(a).
“Financial
Statements” has the meaning set forth in Section 4.04.
“GAAP”
means United States generally accepted accounting principles in effect from time to time.
“Government
Contracts” has the meaning set forth in Section 4.07(a)(viii).
“Governmental
Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality
of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental
authority, including Environmental Professionals (to the extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
“Governmental
Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental
Authority.
“Hazardous
Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral
or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import
or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes,
asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls and per- and
poly-fluoroalkyl substances (PFAS) and other emerging contaminants.
“HSR
Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Indemnified
Party” has the meaning set forth in Section 7.05.
“Indemnifying
Party” has the meaning set forth in Section 7.05.
“Insurance
Policies” has the meaning set forth in Section 4.15.
5
“Intellectual
Property” means any and all rights in, arising out of, or associated with any of the following in any jurisdiction throughout
the world: (a) issued patents and patent applications (whether provisional or non-provisional), including divisionals, continuations,
continuations-in-part, substitutions, reissues, reexaminations, extensions, or restorations of any of the foregoing, and other Governmental
Authority-issued indicia of invention ownership (including certificates of invention, petty patents, and patent utility models) (“Patents”);
(b) trademarks, service marks, brands, certification marks, logos, trade dress, trade names, and other similar indicia of source or origin,
together with the goodwill connected with the use of and symbolized by, and all registrations, applications for registration, and renewals
of, any of the foregoing (“Trademarks”); (c) copyrights and works of authorship, whether or not copyrightable, and
all registrations, applications for registration, and renewals of any of the foregoing (“Copyrights”); (d) internet
domain names and social media account or user names (including “handles”), whether or not Trademarks, all associated web
addresses, URLs, websites and web pages, social media sites and pages, and all content and data thereon or relating thereto, whether
or not Copyrights; (e) mask works, and all registrations, applications for registration, and renewals thereof; (f) industrial designs,
and all Patents, registrations, applications for registration, and renewals thereof; (g) trade secrets, know-how, inventions (whether
or not patentable), discoveries, improvements, technology, business and technical information, databases, data compilations and collections,
tools, methods, processes, techniques, and other confidential and proprietary information and all rights therein (“Trade Secrets”);
(h) computer programs, operating systems, applications, firmware and other code, including all source code, object code, application
programming interfaces, data files, databases, protocols, specifications, and other documentation thereof (“Software”);
(i) rights of publicity; and (j) all other intellectual or industrial property and proprietary rights.
“Intellectual
Property Agreements” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants
not to sue, waivers, releases, permissions, domain name registration agreements, terms of service and other Contracts, whether written
or oral, relating to any Intellectual Property that is used or held for use in the conduct of the Business as currently conducted or
proposed to be conducted to which Seller is a party, beneficiary or otherwise bound.
“Intellectual
Property Assets” means all Intellectual Property that is owned by Seller and used or held for use in the conduct of the Business
as currently conducted or proposed to be conducted, together with all (i) royalties, fees, income, payments, and other proceeds now or
hereafter due or payable to Seller with respect to such Intellectual Property; and (ii) claims and causes of action with respect to such
Intellectual Property, whether accruing before, on, or after the date hereof, including all rights to and claims for damages, restitution,
and injunctive and other legal or equitable relief for past, present, or future infringement, misappropriation, or other violation thereof.
“Intellectual
Property Assignment” has the meaning set forth in Section 3.02(a)(iii).
“Intellectual
Property Registrations” means all Intellectual Property Assets that are subject to any issuance, registration, or application
by or with any Governmental Authority or authorized private registrar in any jurisdiction, including issued Patents, registered Trademarks,
domain names and Copyrights, and pending applications for any of the foregoing.
“Interim
Balance Sheet” has the meaning set forth in Section 4.04.
“Interim
Financial Statements” has the meaning set forth in Section 4.04.
“Inventory”
has the meaning set forth in Section 2.01(a).
“Knowledge”
or any other similar knowledge qualification, means the actual or constructive knowledge of any director or officer of Parent, Buyer
or Seller, as applicable, after due inquiry.
“Law”
means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement
or rule of law of any Governmental Authority.
“Leased
Real Property” has the meaning set forth in Section 4.10(b).
“Leases”
has the meaning set forth in Section 4.10(b).
6
“Liabilities”
means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent,
accrued or unaccrued, matured or unmatured or otherwise.
“Licensed
Intellectual Property” means all Intellectual Property in which Seller holds any rights or interests granted by other Persons,
including any of Seller’s Affiliates, that is used or held for use in the conduct of the Business as currently conducted or proposed
to be conducted.
“Losses”
means losses, damages, Liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever
kind, including reasonable attorneys’ fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing
any insurance providers; provided, however, that “Losses” shall not include punitive, consequential, incidental, special,
exemplary or speculative damages, except to the extent actually awarded to a Governmental Authority or other third party.
“Material
Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become,
individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or
assets of the Business, (b) the value of the Purchased Assets, or (c) the ability of Seller to consummate the transactions contemplated
hereby on a timely basis; provided, however, that “Material Adverse Effect” shall not include any event, occurrence,
fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii)
conditions generally affecting the industries in which the Business operates; (iii) any changes in financial or securities markets in
general; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any
action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written
request of Parent or Buyer; (vi) any changes in applicable Laws or accounting rules, including GAAP; (vii) the public announcement, pendency
or completion of the transactions contemplated by this Agreement; (viii) any natural or man-made disasters or acts of God; or (ix) any
epidemics, pandemics, or disease outbreaks or any worsening thereof; provided further, however, that any event, occurrence, fact,
condition or change referred to in clauses (i) through (iv) immediately above shall be taken into account in determining whether a Material
Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change
has a disproportionate effect on the Business compared to other participants in the industries in which the Business operates.
“Material
Contracts” has the meaning set forth in Section 4.07(a)(i).
“Material
Customers” has the meaning set forth in Section 4.14(a).
“Material
Suppliers” has the meaning set forth in Section 4.14(b).
“Non-Retained
Individual” means any individual whom Buyer elects to not offer employment to or retain in connection with the transactions
contemplated hereby.
“Option”
has the meaning set forth in Section 2.09.
“Option
Agreement” has the meaning set forth in Section 2.09.
7
“Optionors”
means Tangen Family Trust, a Washington trust, and 1979, FLP, a North Carolina limited partnership.
“Owned
Real Property” has the meaning set forth in Section 4.10(a).
“Parent”
has the meaning set forth in the preamble.
“Patents”
has the meaning set forth in the definition of Intellectual Property.
“Parent
Material Contract” has the meaning set forth
in Section 5.16(a).
“Parent
SEC Documents” has the meaning set forth in Section 5.08(a).
“Parent
Subsidiaries” has the meaning set forth in Section 5.01.
“Parent
Tangible Personal Property” has the meaning set forth in Section 5.15.
“Permits”
means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained,
or required to be obtained, from Governmental Authorities.
“Permitted
Encumbrances” has the meaning set forth in Section 4.08(a).
“Person”
means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization,
trust, association or other entity.
“Platform
Agreements” has the meaning set forth in Section 4.11(h).
“Pre-Closing
Tax Period” means any Tax period ending on or before the Closing Date and, with respect to any Straddle Period, the portion
of such Tax period ending on and including the Closing Date.
“Purchase
Price” has the meaning set forth in Section 2.05.
“Purchased
Assets” has the meaning set forth in Section 2.01.
“Purchaser
Indemnitees” has the meaning set forth in Section 7.02.
“Real
Property” means, collectively, the Owned Real Property and the Leased Real Property.
“Release”
means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient
or indoor air, surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
“Representative”
means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants
and other agents of such Person.
8
“Restricted
Business” means the business of developing, owning or operating firm-capacity renewable energy infrastructure that converts
waste and biomass into dispatchable power, as conducted by the Business as of the Closing Date.
“Restricted
Period” has the meaning set forth in Section 6.02(a).
“Sarbanes-Oxley
Act” has the meaning set forth in Section 5.08(a).
“SEC”
means the U.S. Securities and Exchange Commission.
“SEC
Reports” means all reports, schedules, forms, statements and other documents required to be filed or furnished by Parent with
the SEC under applicable securities Laws.
“Securities”
has the meaning set forth in Section 2.05.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Seller”
has the meaning set forth in the preamble.
“Seller
Board Designees” has the meaning set forth in Section 6.11.
“Seller
Indemnitees” has the meaning set forth in Section 7.03.
“Seller
Subsidiary” has the meaning set forth in Section 4.01.
“Series
B Preferred Stock” means a new series of preferred stock of Parent that has the rights, preferences and privileges set forth
in the Certificate of Designation.
“Short
Sales” means all “short sales”
as defined in Rule 200 of Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, swaps, “put equivalent positions”
(as defined in Rule 16a-1(h) under the Exchange Act) or similar arrangements (including on a total return basis), or sales or other
transactions through non-U.S. broker dealers or foreign regulated brokers.
“Software”
has the meaning set forth in the definition of Intellectual Property.
“Tangible
Personal Property” has the meaning set forth in Section 2.01(d).
“Taxes”
means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary,
franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise,
severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties
or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.
9
“Tax
Return” means any return, declaration, report, claim for refund, information return or statement or other document relating
to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Third-Party
Claim” has the meaning set forth in Section 7.05(a).
“Trade
Secrets” has the meaning set forth in the definition of Intellectual Property.
“Trademarks”
has the meaning set forth in the definition of Intellectual Property.
“Union”
has the meaning set forth in Section 4.21(b).
ARTICLE
II
Purchase
and Sale
Section
2.01 Purchase and Sale of Assets. Subject to the
terms and conditions set forth herein, at the Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer, and Buyer shall
purchase from Seller, free and clear of any Encumbrances other than Permitted Encumbrances, all of Seller’s right, title and interest
in, to and under all of the assets, properties and rights of every kind and nature, whether real, personal or mixed, tangible or intangible
(including goodwill), wherever located and whether now existing or hereafter acquired (other than the Excluded Assets), that relate to,
or are used or held for use in connection with, the Business (collectively, the “Purchased Assets”), including, without
limitation, the following:
(a)
all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories (“Inventory”);
(b)
all Contracts, including Intellectual Property Agreements, set forth on Section 2.01(d) of the Disclosure Schedules (the “Assigned
Contracts”);
(c)
all Intellectual Property Assets;
(d)
all furniture, fixtures, equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones and other tangible
personal property (the “Tangible Personal Property”);
(e)
all Owned Real Property and Leased Real Property;
(f)
all Permits that are held by Seller and required for the conduct of the Business as currently conducted or for the ownership and use
of the Purchased Assets, including, without limitation, (i) Environmental Permits, (ii) Environmental Attributes, renewable energy credits,
carbon credits, and similar environmental commodities, (iii) power purchase agreements, off-take contracts, interconnection agreements,
and energy supply contracts, (iv) land rights, easements, rights-of-way, surface use agreements, and lease rights relating to project
sites, and (v) those items listed on Section 4.17(b) and Section 4.18(b) of the Disclosure Schedules;
10
(g)
all rights to any Actions of any nature available to or being pursued by Seller to the extent related to the Business, the Purchased
Assets or the Assumed Liabilities, whether arising by way of counterclaim or otherwise;
(h)
all prepaid expenses, credits, advance payments, claims, security, refunds, rights of recovery, rights of set-off, rights of recoupment,
deposits, charges, sums and fees (including any such item relating to the payment of Taxes);
(i)
all of Seller’s rights under warranties, indemnities and all similar rights against third parties to the extent related to any
Purchased Assets;
(j)
all insurance benefits, including rights and proceeds, arising from or relating to the Business, the Purchased Assets or the Assumed
Liabilities;
(k)
originals, or where not available, copies, of all books and records, including, but not limited to, books of account, ledgers and general,
financial and accounting records, machinery and equipment maintenance files, customer lists, customer purchasing histories, price lists,
distribution lists, supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research
and development files, records and data (including all correspondence with any Governmental Authority), sales material and records (including
pricing history, total sales, terms and conditions of sale, sales and pricing policies and practices), strategic plans, internal financial
statements, marketing and promotional surveys, material and research and files relating to the Intellectual Property Assets and the Intellectual
Property Agreements (“Books and Records”); and
(l)
all goodwill and the going concern value of the Business.
Section
2.02 Excluded Assets. Notwithstanding the foregoing,
the Purchased Assets shall not include the following assets (collectively, the “Excluded Assets”):
(a)
Contracts, including Intellectual Property Agreements, that are not Assigned Contracts (the “Excluded Contracts”);
(b)
the corporate seals, organizational documents, minute books, stock books, Tax Returns, books of account or other records having to do
with the corporate organization of Seller;
(c)
all Benefit Plans and assets attributable thereto;
(d)
the assets, properties and rights specifically set forth on Section 2.02(d) of the Disclosure Schedules;
(e)
the rights that accrue or will accrue to Seller under this Agreement and the Ancillary Documents;
(f)
cash and cash equivalents; and
(g)
all accounts or notes receivable held by Seller, and any security, claim, remedy or other right related to any of the foregoing (“Accounts
Receivable”);
11
Section
2.03 Assumed Liabilities. Subject to the terms and
conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge only the following Liabilities of Seller (collectively,
the “Assumed Liabilities”), and no other Liabilities:
(a)
all trade accounts payable of Seller to third parties in connection with the Business that remain unpaid and are not delinquent as of
the Closing Date and that either are reflected on the Balance Sheet Date or arose in the ordinary course of business consistent with
past practice since the Balance Sheet Date;
(b)
all Liabilities in respect of the Assigned Contracts but only to the extent that such Liabilities thereunder are required to be performed
after the Closing Date, were incurred in the ordinary course of business and do not relate to any failure to perform, improper performance,
warranty or other breach, default or violation by Seller on or prior to the Closing; and
(c)
those Liabilities of Seller set forth on Section 2.03(c) of the Disclosure Schedules.
Section
2.04 Excluded Liabilities. Notwithstanding the provisions
of Section 2.03 or any other provision in this Agreement to the contrary, Buyer shall not assume and shall not be responsible to pay,
perform or discharge any Liabilities of Seller or any of its Affiliates of any kind or nature whatsoever other than the Assumed Liabilities
(the “Excluded Liabilities”). Seller shall, and shall cause each of its Affiliates to, pay and satisfy in due course
all Excluded Liabilities that they are obligated to pay and satisfy. Without limiting the generality of the foregoing, the Excluded Liabilities
shall include, but not be limited to, the following:
(a)
any Liabilities of Seller arising or incurred in connection with the negotiation, preparation, investigation and performance of this
Agreement, the Ancillary Documents and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses
of counsel, accountants, consultants, advisers and others;
(b)
any Liability for Taxes of Seller (or any stockholder or Affiliate of Seller), or relating to the Business, the Purchased Assets or the
Assumed Liabilities, for any Pre-Closing Tax Period, including (i) Taxes arising out of the transactions contemplated hereby or that
are Seller’s responsibility under Section 6.08; or (ii) Taxes that become a Liability of Buyer by operation of contract or Law,
including under any successor or transferee liability doctrine;
(c)
any Liabilities relating to or arising out of the Excluded Assets;
(d)
any Liabilities in respect of any pending or threatened Action arising out of, relating to or otherwise in respect of the operation of
the Business or the Purchased Assets to the extent such Action relates to such operation on or prior to the Closing Date;
(e)
any Liabilities of Seller arising under or in connection with any Benefit Plan providing benefits to any present or former employee of
Seller;
(f)
any Liabilities of Seller for any present or former employees, officers, directors, retirees, independent contractors or consultants
of Seller, including, without limitation, any Liabilities associated with any claims for wages or other benefits, bonuses, accrued vacation,
workers’ compensation, severance, retention, termination or other payments;
12
(g)
any Environmental Claims, or Liabilities under Environmental Laws, to the extent arising out of or relating to facts, circumstances or
conditions existing on or prior to the Closing or otherwise to the extent arising out of any actions or omissions of Seller;
(h)
any trade accounts payable of Seller: (i) to the extent not accounted for on the Interim Balance Sheet; (ii) that constitute intercompany
payables owing to Affiliates of Seller; (iii) that constitute debt, loans or credit facilities to financial institutions; or (iv) that
did not arise in the ordinary course of business;
(i)
any Liabilities of the Business relating or arising from unfulfilled commitments, quotations, purchase orders, customer orders or work
orders that: (i) do not constitute part of the Purchased Assets issued by the Business’ customers to Seller on or before the Closing;
(ii) did not arise in the ordinary course of business; or (iii) are not validly and effectively assigned to Buyer pursuant to this Agreement;
(j)
any Liabilities to indemnify, reimburse or advance amounts to any present or former officer, director, employee or agent of Seller (including
with respect to any breach of fiduciary obligations by same), except for indemnification of same pursuant to Section 7.03 as Seller Indemnitees;
(k)
any Liabilities under the Excluded Contracts or any other Contracts, including Intellectual Property Agreements: (i) that are not validly
and effectively assigned to Buyer pursuant to this Agreement; (ii) that do not conform to the representations and warranties with respect
thereto contained in this Agreement; or (iii) to the extent such Liabilities arise out of or relate to a breach by Seller of such Contracts
prior to Closing;
(l)
any Liabilities associated with debt, loans or credit facilities of Seller and/or the Business owing to financial institutions; and
(m)
any Liabilities arising out of, in respect of or in connection with the failure by Seller or any of its Affiliates to comply with any
Law or Governmental Order.
Section
2.05 Purchase Price. The aggregate purchase price
for the Purchased Assets (the “Purchase Price”) shall be an amount of Securities equal in value to Twenty-Three Million
Dollars ($23,000,000) and shall consist of: (a) 4,076,312 shares of Common Stock (which is equal to 19.99% of the issued and outstanding
shares of Common Stock as of September 14, 2026); and (b) 22,038 shares of Series B Preferred Stock (collectively, the “Securities”).
Section
2.06 Allocation of Purchase Price. Seller and Buyer
agree that the Purchase Price and the Assumed Liabilities (plus other relevant items) shall be allocated among the Purchased Assets for
all purposes (including Tax and financial accounting) as shown on the allocation schedule (the “Allocation Schedule”).
A draft of the Allocation Schedule shall be prepared by Buyer and delivered to Seller within thirty (30) days following the Closing
Date. If Seller notifies Buyer in writing that Seller objects to one or more items reflected in the Allocation Schedule, Seller and Buyer
shall negotiate in good faith to resolve such dispute; provided, however, that if Seller and Buyer are unable to resolve any dispute
with respect to the Allocation Schedule within sixty (60) days following the Closing Date,
such dispute shall be submitted for resolution to an impartial nationally recognized firm of independent
certified public accountants, other than Seller’s accountants or Buyer’s accountants, appointed by mutual agreement of Buyer
and Seller, acting as experts and not arbitrators. The fees and expenses of such accounting firm shall be borne equally by Seller
and Buyer. Buyer and Seller shall file all Tax Returns (including amended returns and claims for refunds) and information reports in
a manner consistent with the Allocation Schedule.
13
Section
2.07 Withholding Tax. Parent shall be entitled to
deduct and withhold from the Purchase Price all Taxes that Parent may be required to deduct and withhold under any provision of Tax Law.
All such withheld amounts shall be treated as delivered to Seller hereunder.
Section
2.08 Third Party Consents. To the extent that Seller’s rights under any Contract
or Permit constituting a Purchased Asset may not be assigned to Buyer without the consent of another Person, this Agreement shall not
constitute an agreement to assign the applicable Purchased Asset if an attempted assignment, without such consent, would constitute a
breach thereof or be unlawful. If any such consent is not obtained, or if an attempted assignment would be ineffective or would impair
Buyer’s rights under the applicable Purchased Asset such that Buyer would not receive the benefit of all such rights, then, following
the Closing and at Seller’s expense, Seller shall, to the maximum extent permitted by Law and the applicable Purchased Asset, act
as Buyer’s agent to obtain for Buyer the benefits thereunder, and shall cooperate with Buyer in any other reasonable arrangement
designed to provide such benefits to Buyer.
Section
2.09 Option. During the 36-month period following the Closing Date, Parent shall have the exclusive option (the “Option”),
exercisable in Parent’s sole and absolute discretion, to acquire 79.0286% of the issued and outstanding equity securities of Azure
S.R.L. from Optionors for an aggregate purchase price of Thirty Million Dollars ($30,000,000). Parent may pay up to fifty percent (50%)
of such purchase price in cash, with the remainder payable in shares of Series B Preferred Stock. Parent shall determine the proportion
of cash and Series B Preferred Stock in its sole discretion at the time the Option is exercised. The Option will be evidenced by an option
agreement, substantially in form attached hereto as
Exhibit B (the “Option Agreement”), to be entered into by and among
Parent, Seller, Azure S.R.L. and Optionors at Closing.
ARTICLE
III
Closing
Section
3.01 Closing. The consummation of the transactions contemplated herein (the “Closing”)
shall occur simultaneously with the execution of this Agreement on the date hereof (the “Closing Date”) and shall take place
remotely by electronic exchange of documents and signatures.
Section
3.02 Closing Deliverables.
(a)
At the Closing, Seller shall deliver to Parent and Buyer the following:
(i)
a bill of sale in form and substance satisfactory to Buyer (the “Bill of Sale”) and duly executed by Seller, transferring
the Tangible Personal Property to Buyer;
14
(ii)
an assignment and assumption agreement in form and substance satisfactory to Buyer (the “Assignment and Assumption Agreement”)
and duly executed by Seller, effecting the assignment to and assumption by Buyer of the Purchased Assets and the Assumed Liabilities;
(iii)
an assignment in form and substance satisfactory to Buyer (the “Intellectual Property Assignment”) and duly executed
by Seller, transferring all of Seller’s right, title and interest in and to the Intellectual Property Assets to Buyer;
(iv)
a Limited Power of Attorney in the form attached hereto as Exhibit C, duly executed by Seller;
(v)
such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer,
as may be required to give effect to this Agreement.
(b)
At Closing, Seller shall deliver to Parent and Optionors the following:
(i)
the Option Agreement duly executed by Seller; and
(ii)
such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer,
as may be required to give effect to this Agreement.
(c)
At Closing, Azure S.R.L. and Optionors shall deliver to Parent and Seller the following:
(i)
the Option Agreement duly executed by Azure S.R.L and Optionors.
(ii)
such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Seller,
as may be required to give effect to this Agreement.
(d)
At the Closing, Buyer shall deliver to Seller the following:
(i)
the Assignment and Assumption Agreement duly executed by Buyer;
(ii)
such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Seller,
as may be required to give effect to this Agreement.
(e)
At the Closing, Parent shall deliver to Seller the following:
(i)
Certificates or a book entry statement evidencing the Securities;
(ii)
the Certificate of Designation, duly executed by Buyer and filed, or ready to be filed, with the Secretary of State of Delaware;
15
(iii)
a certificate of the Secretary of Parent, dated as of the Closing Date, attaching true, correct and complete copies of the resolutions
duly adopted by the board of directors of Parent (and any committee of disinterested and independent directors thereof) approving and
authorizing this Agreement, the Ancillary Documents, the issuance of Securities by the Parent,
and the post-Closing arrangements described herein, and certifying that (i) such resolutions were duly adopted at a time when a majority
of the approving directors were disinterested and independent of Seller and its Affiliates, (ii) such resolutions have not been amended,
modified or rescinded, and (iii) such resolutions remain in full force and effect as of the Closing Date; and
(iv)
such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Seller,
as may be required to give effect to this Agreement.
(f)
At the Closing, Parent shall deliver to Seller, Azure S.R.L. and Optionors the following:
(i)
the Option Agreement duly executed by Parent; and
(ii)
such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Seller,
as may be required to give effect to this Agreement.
ARTICLE
IV
Representations
and warranties of seller
Except
as set forth in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Parent and Buyer
that the statements contained in this ARTICLE IV are true and correct as of the date hereof (unless such representation is made as of
a specific date therein, in which case, such representation shall be accurate as of that specific date).
Section
4.01 Organization and Qualification of Seller. Seller
(and each of Seller’s subsidiaries, if any (the “Seller Subsidiaries”)), has been duly incorporated, organized
or formed and validly exists as a corporation or limited liability company in good standing under the Laws of its jurisdiction of incorporation,
organization or formation (in the case of Seller, the State of Delaware). Each of Seller and the Seller Subsidiaries has all requisite
power and authority to carry on its business as currently conducted and to own, lease and operate its properties. Each of Seller and
the Seller Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability
company in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct
of its business makes such qualification necessary, except, in each case, for those failures to be so qualified or in good standing that
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
16
Section
4.02 Authority of Seller. Seller has full corporate
power and authority to enter into this Agreement and the Ancillary Documents to which Seller is or will be a party, to carry out its
obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by
Seller of this Agreement and any Ancillary Document to which Seller is or will be a party, the performance by Seller of its obligations
hereunder and thereunder and the consummation by Seller of the transactions contemplated hereby and thereby have been duly authorized
by all requisite corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller, and (assuming
due authorization, execution and delivery by Parent, Buyer and Azure S.R.L) this Agreement constitutes a legal, valid and binding obligation
of Seller enforceable against Seller in accordance with its terms. When each Ancillary Document to which Seller is or will be a party
has been duly executed and delivered by Seller (assuming due authorization, execution and delivery by each other party thereto), such
Ancillary Document will constitute a legal and binding obligation of Seller enforceable against it in accordance with its terms.
Section
4.03 No Conflicts; Consents. The execution, delivery
and performance by Seller of this Agreement and the Ancillary Documents to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any
provision of the certificate of formation, limited liability company agreement or other organizational documents of Seller; (b) conflict
with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Seller, the Business or the Purchased
Assets; (c) except as set forth in Section 4.03 of the Disclosure Schedules, require the consent, notice or other action by any Person
under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time
or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify
or cancel any Contract or Permit to which Seller is a party or by which Seller or the Business is bound or to which any of the Purchased
Assets are subject (including any Assigned Contract); or (d) result in the creation or imposition of any Encumbrance other than Permitted
Encumbrances on the Purchased Assets. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any
Governmental Authority is required by or with respect to Seller in connection with the execution and delivery of this Agreement or any
of the Ancillary Documents to which Seller is or will be a party and the consummation of the transactions contemplated hereby and thereby,
except for such filings as may be required under the HSR Act.
Section
4.04 Financial Statements. True and complete copies
of Seller’s: (a) unaudited balance sheet and income statement, each prepared on a cash basis, as of and for the year ended December
31, 2025 (collectively, the “2025 Financial Statements”), and (b) unaudited balance sheet and income statement, each
prepared on a cash basis, as of and for the seven-month period ended July 31, 2026 (collectively, the “Interim Financial Statements”
and together with the 2025 Financial Statements, the “Financial Statements”) are included in Section 4.04 of the Disclosure
Schedules. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved,
subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not
be materially adverse) and the absence of notes. The Financial Statements are based on the books and records of the Business, and fairly
present in all material respects the financial condition of the Business as of the respective dates they were prepared and the results
of the operations of the Business for the periods indicated. The balance sheet of the Business at December 31, 2025 is referred to herein
as the “Balance Sheet”. The balance sheet of the Business at July 31, 2026 is referred to herein as the “Interim
Balance Sheet” and the date thereof is referred to herein as the “Balance Sheet Date”.
17
Section
4.05 Undisclosed Liabilities. Except as set forth
in Section 4.05 of the Disclosure Schedules, Seller has no Liabilities with respect to the Business, except: (a) those that are adequately
reflected or reserved against in the Interim Balance Sheet as of the Balance Sheet Date, and (b) those that have been incurred in the
ordinary course of business consistent with past practice since the Balance Sheet Date and that are not, individually or in the aggregate,
material in amount.
Section
4.06 Absence of Certain Changes, Events and Conditions. Except
as set forth in Section 4.06 of the Disclosure Schedules, since the Balance Sheet Date, the Business has been conducted in the ordinary
course of business consistent with past practice, and there has not been any:
(a)
event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(b)
declaration or payment of any dividends or distributions on or in respect of any of Seller’s capital stock or redemption, purchase
or acquisition of Seller’s capital stock;
(c)
material change in any method of accounting or accounting practice for the Business, except as required by GAAP or as disclosed in the
notes to the Financial Statements;
(d)
material change in cash management practices and policies, practices and procedures with respect to collection of Accounts Receivable,
establishment of reserves for uncollectible Accounts Receivable, accrual of Accounts Receivable, inventory control, prepayment of expenses,
payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;
(e)
entry into any Contract that would constitute a Material Contract;
(f)
incurrence, assumption or guarantee of any indebtedness for borrowed money in connection with the Business except unsecured current obligations
and Liabilities incurred in the ordinary course of business consistent with past practice;
(g)
transfer, assignment, sale or other disposition of any of the Purchased Assets shown or reflected in the Balance Sheet, except for the
sale of Inventory in the ordinary course of business;
(h)
cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets;
(i)
transfer or assignment of or grant of any license or sublicense under or with respect to any material Intellectual Property Assets or
Intellectual Property Agreements (except non-exclusive licenses or sublicenses granted in the ordinary course of business consistent
with past practice);
(j)
abandonment or lapse of or failure to maintain in full force and effect any Intellectual Property Registration, or failure to take or
maintain reasonable measures to protect the confidentiality or value of any Trade Secrets included in the Intellectual Property Assets;
(k)
material damage, destruction or loss, or any material interruption in use, of any Purchased Assets, whether or not covered by insurance;
(l)
acceleration, termination, material modification to or cancellation of any Assigned Contract or Permit;
18
(m)
material capital expenditures that would constitute an Assumed Liability;
(n)
imposition of any Encumbrance (other than Permitted Encumbrances) upon any of the Purchased Assets;
(o)
(i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation or
benefits in respect of any current or former employees, officers, directors, independent contractors or consultants of the Business,
other than as provided for in any written agreements or required by applicable Law; (ii) change in the terms of employment for any employee
of the Business or any termination of any employees for which the aggregate costs and expenses exceed One Thousand Dollars ($1,000);
or (iii) action to accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, director,
consultant or independent contractor of the Business;
(p)
hiring or promoting any person as or to (as the case may be) an officer or hiring or promoting any employee below officer except to fill
a vacancy in the ordinary course of business;
(q)
adoption, modification or termination of any: (i) employment, severance, retention or other agreement with any current or former employee,
officer, director, independent contractor or consultant of the Business; (ii) Benefit Plan; or (iii) collective bargaining or other agreement
with a Union, in each case whether written or oral;
(r)
any loan to (or forgiveness of any loan to), or entry into any other transaction with, any current or former directors, officers or employees
of the Business;
(s)
adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under
any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;
(t)
purchase, lease or other acquisition of the right to own, use or lease any property or assets in connection with the Business for an
amount in excess of One Thousand Dollars ($1,000), individually (in the case of a lease, per annum) or Five Thousand Dollars ($5,000)
in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of Inventory
or supplies in the ordinary course of business consistent with past practice; or
(u)
Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.
19
Section
4.07 Material Contracts.
(a)
Section 4.07(a) of the Disclosure Schedules lists each of the following Contracts: (x) by which any of the Purchased Assets are bound
or affected or (y) to which Seller is a party or by which it is bound in connection with the Business or the Purchased Assets (such Contracts,
together with all Contracts concerning the occupancy, management or operation of any Real Property (including without limitation, brokerage
contracts) listed or otherwise disclosed in Section 4.10(a) of the Disclosure Schedules and all Intellectual Property Agreements set
forth in Section 4.11(b) of the Disclosure Schedules, being “Material Contracts”):
(i)
all Contracts involving aggregate consideration in excess of Ten Thousand Dollars ($10,000) and that, in each case, cannot be cancelled
without penalty or without more than ninety (90) days’ notice;
(ii)
all Contracts that require Seller to purchase or sell a stated portion of the requirements or outputs of the Business or that contain
“take or pay” provisions;
(iii)
all Contracts that provide for the indemnification of any Person or the assumption of any Tax, environmental or other Liability of any
Person;
(iv)
all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any other Person
or any real property (whether by merger, sale of stock, sale of assets or otherwise);
(v)
all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing
consulting and advertising Contracts;
(vi)
all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) and that are not cancellable
without material penalty or without more than ninety (90) days’ notice;
(vii)
except for Contracts relating to trade payables, all Contracts relating to indebtedness (including, without limitation, guarantees);
(viii)
all Contracts with any Governmental Authority (“Government Contracts”);
(ix)
all Contracts that limit or purport to limit the ability of Seller to compete in any line of business or with any Person or in any geographic
area or during any period of time;
(x)
all joint venture, partnership or similar Contracts;
(xi)
all Contracts for the sale of any of the Purchased Assets or for the grant to any Person of any option, right of first refusal or preferential
or similar right to purchase any of the Purchased Assets;
(xii)
all powers of attorney with respect to the Business or any Purchased Asset;
(xiii)
all collective bargaining agreements or Contracts with any Union; and
20
(xiv)
all other Contracts that are material to the Purchased Assets or the operation of the Business and not previously disclosed pursuant
to this Section 4.07.
(b)
Each Material Contract is in full force and effect and is a valid and binding agreement enforceable against Seller and, to Seller’s
Knowledge, the other party or parties thereto, in accordance with its terms. None of Seller or, to Seller’s Knowledge, any other
party thereto is in breach of or default under (or is alleged to be in breach of or default under) in any material respect, or has provided
or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice
or lapse of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would
cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct
copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made
available to Buyer. There are no material disputes pending or threatened under any Contract included in the Purchased Assets.
Section
4.08 Title to Purchased Assets. Seller has good and
valid title to, or a valid leasehold interest in, all of the Purchased Assets. All such Purchased Assets (including leasehold interests)
are free and clear of Encumbrances except for the following (collectively referred to as “Permitted Encumbrances”):
(a)
those items set forth in Section 4.08 of the Disclosure Schedules;
(b)
liens for Taxes not yet due and payable;
(c)
mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or incurred in the ordinary course
of business consistent with past practice or amounts that are not delinquent and that are not, individually or in the aggregate, material
to the Business or the Purchased Assets;
(d)
easements, rights of way, zoning ordinances and other similar encumbrances affecting Real Property that are not, individually or in the
aggregate, material to the Business or the Purchased Assets, that do not prohibit or interfere with the current operation of any Real
Property and that do not render title to any Real Property unmarketable; or
(e)
other than with respect to Owned Real Property, liens arising under original purchase price conditional sales contracts and equipment
leases with third parties entered into in the ordinary course of business consistent with past practice that are not, individually or
in the aggregate, material to the Business or the Purchased Assets.
Section
4.09 Condition and Sufficiency of Assets. Except
as set forth in Section 4.09 of the Disclosure Schedules, the buildings, plants, structures, furniture, fixtures, machinery, equipment,
vehicles and other items of tangible personal property included in the Purchased Assets are structurally sound, are in good operating
condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture,
fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or cost. The Purchased Assets are sufficient for the continued
conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitute all of the
rights, property and assets necessary to conduct the Business as currently conducted. None of the Excluded Assets are material to the
Business.
21
Section
4.10 Real Property.
(a)
Section 4.10(a) of the Disclosure Schedules sets forth each parcel of real property owned by Seller and used in or necessary for the
conduct of the Business as currently conducted (together with all buildings, fixtures, structures and improvements situated thereon and
all easements, rights-of-way and other rights and privileges appurtenant thereto, collectively, the “Owned Real Property”),
including with respect to each property, the address location and use. Seller has delivered to Buyer copies of the deeds and other instruments
(as recorded) by which Seller acquired such parcel of Owned Real Property, and copies of all title insurance policies, opinions, abstracts
and surveys in the possession of Seller with respect to such parcel. With respect to each parcel of Real Property:
(i)
Seller has good and marketable fee simple title, free and clear of all Encumbrances, except: (A) Permitted Encumbrances; and (B) those
Encumbrances set forth on Section 4.10(a)(i) of the Disclosure Schedules;
(ii)
except as set forth on Section 4.10(a)(ii) of the Disclosure Schedules, Seller has not leased or otherwise granted to any Person the
right to use or occupy such Owned Real Property or any portion thereof; and
(iii)
there are no unrecorded outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or
any portion thereof or interest therein.
(b)
Section 4.10(b) of the Disclosure Schedules sets forth each parcel of real property leased by Seller and used in or necessary for the
conduct of the Business as currently conducted (together with all rights, title and interest of Seller in and to leasehold improvements
relating thereto, including, but not limited to, security deposits, reserves or prepaid rents paid in connection therewith, collectively,
the “Leased Real Property”), and a true and complete list of all leases, subleases, licenses, concessions and other
agreements (whether written or oral), including all amendments, extensions renewals, guaranties and other agreements with respect thereto,
pursuant to which Seller holds any Leased Real Property (collectively, the “Leases”). Seller has delivered to Buyer
a true and complete copy of each Lease. With respect to each Lease:
(i)
such Lease is valid, binding, enforceable and in full force and effect, and Seller enjoys peaceful and undisturbed possession of the
Leased Real Property;
(ii)
Seller is not in breach of or default under such Lease, and no event has occurred or circumstance exists that, with the delivery of notice,
passage of time or both, would constitute such a breach or default, and Seller has paid all rent due and payable under such Lease;
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(iii)
Seller has not received nor given any notice of any default or event that with notice or lapse of time, or both, would constitute a default
by Seller under any of the Leases and, to the Knowledge of Seller, no other party is in default thereof, and no party to any Lease has
exercised any termination rights with respect thereto;
(iv)
Seller has not subleased, assigned or otherwise granted to any Person the right to use or occupy such Leased Real Property or any portion
thereof; and
(v)
Seller has not pledged, mortgaged or otherwise granted an Encumbrance on its leasehold interest in any Leased Real Property.
(c)
Seller has not received any written notice of: (i) violations of building codes and/or zoning ordinances or other governmental or regulatory
Laws affecting the Real Property; (ii) existing, pending or threatened condemnation proceedings affecting the Real Property; or (iii)
existing, pending or threatened zoning, building code or other moratorium proceedings, or similar matters that could reasonably be expected
to materially and adversely affect the ability to operate the Real Property as currently operated. Neither the whole nor any material
portion of any Real Property has been damaged or destroyed by fire or other casualty.
(d)
The Real Property is sufficient for the continued conduct
of the Business after the Closing in substantially the same manner as conducted prior to the Closing and constitutes all of the real
property necessary to conduct the Business as currently conducted.
Section
4.11 Intellectual Property.
(a)
Section 4.11(a) of the Disclosure Schedules contains a correct, current and complete list of: (i) all Intellectual Property Registrations,
specifying as to each, as applicable: the title, mark, or design; the jurisdiction by or in which it has been issued, registered or filed;
the patent, registration or application serial number; the issue, registration or filing date; and the current status; (ii) all unregistered
Trademarks included in the Intellectual Property Assets; (iii) all proprietary Software included in the Intellectual Property Assets;
and (iv) all other Intellectual Property Assets that are used or held for use in the conduct of the Business as currently conducted or
proposed to be conducted.
(b)
Section 4.11(b) of the Disclosure Schedules contains a correct, current and complete list of all Intellectual Property Agreements, specifying
for each the date, title, and parties thereto, and separately identifying the Intellectual Property Agreements: (i) under which Seller
is a licensor or otherwise grants to any Person any right or interest relating to any Intellectual Property Asset; (ii) under which Seller
is a licensee or otherwise granted any right or interest relating to the Intellectual Property of any Person; and (iii) that otherwise
relate to Seller’s ownership or use of any Intellectual Property in the conduct of the Business as currently conducted or proposed
to be conducted, in each case identifying the Intellectual Property covered by such Intellectual Property Agreement. Seller has provided
Buyer with true and complete copies (or in the case of any oral agreements, a complete and correct written description) of all such Intellectual
Property Agreements, including all modifications, amendments and supplements thereto and waivers thereunder. Each Intellectual Property
Agreement is valid and binding on Seller in accordance with its terms and is in full force and effect. Neither Seller nor any other party
thereto is, or is alleged to be, in breach of or default under, or has provided or received any notice of breach of, default under, or
intention to terminate (including by non-renewal), any Intellectual Property Agreement.
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(c)
Except as set forth in Section 4.11(c) of the Disclosure Schedules, Seller is the sole and exclusive legal and beneficial, and with respect
to the Intellectual Property Registrations, record, owner of all right, title and interest in and to the Intellectual Property Assets,
and has the valid and enforceable right to use all other Intellectual Property used or held for use in or necessary for the conduct of
the Business as currently conducted or as proposed to be conducted, in each case, free and clear of Encumbrances other than Permitted
Encumbrances. The Intellectual Property Assets and Licensed Intellectual Property are all of the Intellectual Property necessary to operate
the Business as presently conducted or proposed to be conducted. Seller has entered into binding, valid and enforceable written Contracts
with each current and former employee and independent contractor who is or was involved in or has contributed to the invention, creation,
or development of any Intellectual Property during the course of employment or engagement with Seller whereby such employee or independent
contractor: (i) acknowledges Seller’s exclusive ownership of all Intellectual Property Assets invented, created or developed by
such employee or independent contractor within the scope of his or her employment or engagement with Seller; (ii) grants to Seller a
present, irrevocable assignment of any ownership interest such employee or independent contractor may have in or to such Intellectual
Property, to the extent such Intellectual Property does not constitute a “work made for hire” under Applicable Law; and (iii)
irrevocably waives any right or interest, including any moral rights, regarding such Intellectual Property, to the extent permitted by
applicable Law. Seller has provided Buyer with true and complete copies of all such Contracts. All assignments and other instruments
necessary to establish, record, and perfect Seller’s ownership interest in the Intellectual Property Registrations have been validly
executed, delivered, and filed with the relevant Governmental Authorities and authorized registrars.
(d)
Neither the execution, delivery, or performance of this Agreement, nor the consummation of the transactions contemplated hereunder, will
result in the loss or impairment of or payment of any additional amounts with respect to, or require the consent of any other Person
in respect of, Buyer’s right to own or use any Intellectual Property Assets or Licensed Intellectual Property in the conduct of
the Business as currently conducted and as proposed to be conducted. Immediately following the Closing, all Intellectual Property Assets
will be owned or available for use by Buyer on the same terms as they were owned or available for use by Seller immediately prior to
the Closing.
(e)
All of the Intellectual Property Assets and Licensed Intellectual Property are valid and enforceable, and all Intellectual Property Registrations
are subsisting and in full force and effect. Seller has taken all reasonable and necessary steps to maintain and enforce the Intellectual
Property Assets and Licensed Intellectual Property and to preserve the confidentiality of all Trade Secrets included in the Intellectual
Property Assets, including by requiring all Persons having access thereto to execute binding, written non-disclosure agreements. All
required filings and fees related to the Intellectual Property Registrations have been timely submitted with and paid to the relevant
Governmental Authorities and authorized registrars. Seller has provided Buyer with true and complete copies of all file histories, documents,
certificates, office actions, correspondence, assignments, and other instruments relating to the Intellectual Property Registrations.
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(f)
The conduct of the Business as currently and formerly conducted and as proposed to be conducted, including the use of the Intellectual
Property Assets and Licensed Intellectual Property in connection therewith, and the products, processes, and services of the Business,
have not infringed, misappropriated, or otherwise violated and will not infringe, misappropriate, or otherwise violate the Intellectual
Property or other rights of any Person. No Person has infringed, misappropriated, or otherwise violated any Intellectual Property Assets
or Licensed Intellectual Property.
(g)
There are no Actions (including any opposition, cancellation, revocation, review, or other proceeding), whether settled, pending or threatened
(including in the form of offers to obtain a license): (i) alleging any infringement, misappropriation, or other violation of the Intellectual
Property of any Person by Seller in the conduct of the Business; (ii) challenging the validity, enforceability, registrability, patentability,
or ownership of any Intellectual Property Assets or Licensed Intellectual Property; or (iii) by Seller or any other Person alleging any
infringement, misappropriation, or other violation by any Person of any Intellectual Property Assets. To Seller’s Knowledge, there
are no facts or circumstances that could reasonably be expected to give rise to any such Action. Seller is not subject to any outstanding
or prospective Governmental Order (including any motion or petition therefor) that does or could reasonably be expected to restrict or
impair the use of any Intellectual Property Assets or Licensed Intellectual Property.
(h)
Section 4.11(h) of the Seller Disclosure Schedules contains a correct, current, and complete list of all social media accounts used by
Seller in the conduct of the Business. Seller has complied with all terms of use, terms of service, and other Contracts and all associated
policies and guidelines relating to its use of any social media platforms, sites, or services in the conduct of the Business (collectively,
“Platform Agreements”). There are no Actions settled, pending, or threatened alleging: (i) any breach or other violation
of any Platform Agreement by Seller; or (ii) defamation, any violation of publicity rights of any Person, or any other violation by Seller
in connection with its use of social media in the conduct of the Business.
(i)
All Business IT Systems are in good working condition and are sufficient for the operation of the Business as currently conducted and
as proposed to be conducted. In the past 18 months, there has been no malfunction, failure, continued substandard performance, denial-of-service,
or other cyber incident, including any cyberattack, or other impairment of the Business IT Systems that has resulted or is reasonably
likely to result in disruption or damage to the Business and that has not been remedied. Seller has taken all commercially reasonable
steps to safeguard the confidentiality, availability, security, and integrity of the Business IT Systems, including implementing and
maintaining appropriate backup, disaster recovery, and Software and hardware support arrangements.
(j)
Seller has complied with all applicable Laws and all internal or publicly posted policies, notices, and statements concerning the collection,
use, processing, storage, transfer, and security of personal information in the conduct of the Business. In the past 18 months, Seller
has not: (i) experienced any actual, alleged, or suspected data breach or other security incident involving personal information in its
possession or control; or (ii) been subject to or received any written notice of any audit, investigation, complaint, or other Action
by any Governmental Authority or other Person concerning Seller’s collection, use, processing, storage, transfer, and protection
of personal information or actual, alleged, or suspected violation of any applicable Law concerning privacy, data security, or data breach
notification, in each case in connection with the conduct of the Business, and to Seller’s Knowledge, there are no facts or circumstances
that could reasonably be expected to give rise to any such Action.
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Section
4.12 Inventory. All Inventory, whether or not reflected
in the Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice,
except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which
adequate reserves have been established. All Inventory is owned by Seller free and clear of all Encumbrances, and no Inventory is held
on a consignment basis. The quantities of each item of Inventory (whether raw materials, work-in-process or finished goods) are not excessive,
but are reasonable in the present circumstances of Seller.
Section
4.13 Accounts Receivable. The Accounts Receivable
reflected on the Interim Balance Sheet and the Accounts Receivable arising after the Balance Sheet Date: (a) have arisen from bona fide
transactions entered into by Seller involving the sale of goods or the rendering of services in the ordinary course of business consistent
with past practice; and (b) constitute only valid, undisputed claims of Seller not subject to claims of set-off or other defenses or
counterclaims other than normal cash discounts accrued in the ordinary course of business consistent with past practice; and (c) subject
to a reserve for bad debts shown on the Interim Balance Sheet or, with respect to Accounts Receivable arising after the Balance Sheet
Date, on the accounting records of the Business, are collectible in full within 90 days after billing. The reserve for bad debts shown
on the Interim Balance Sheet or, with respect to Accounts Receivable arising after the Balance Sheet Date, on the accounting records
of the Business, have been determined in accordance with GAAP, consistently applied, subject to normal year-end adjustments and the absence
of disclosures normally made in footnotes.
Section
4.14 Customers and Suppliers.
(a)
Section 4.14(a) of the Disclosure Schedules sets forth with respect to the Business: (i) each customer who has paid aggregate consideration
to Seller for goods or services rendered in an amount greater than or equal to Ten Thousand Dollars ($10,000) during the current fiscal
year or the most recent fiscal year (collectively, the “Material Customers”); and (ii) the amount of consideration
paid by each Material Customer during such periods. Except as set forth in Section 4.14(a) of the Disclosure Schedules, Seller has not
received any notice, and has no reason to believe, that any of the Material Customers has ceased, or intends to cease after the Closing,
to use the goods or services of the Business or to otherwise terminate or materially reduce its relationship with the Business.
(b)
Section 4.14(b) of the Disclosure Schedules sets forth with respect to the Business: (i) each supplier to whom Seller has paid consideration
for goods or services rendered in an amount greater than or equal to Ten Thousand Dollars ($10,000) during the current fiscal year or
the most recent fiscal year (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material
Supplier during such periods. Except as set forth in Section 4.14(b) of the Disclosure Schedules, Seller has not received any notice,
and has no reason to believe, that any of the Material Suppliers has ceased, or intends to cease, to supply goods or services to the
Business or to otherwise terminate or materially reduce its relationship with the Business.
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Section
4.15 Insurance. Section 4.15 of the Disclosure Schedules
sets forth: (a) a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability,
real and personal property, workers’ compensation, business interruption, cyber, vehicular, fiduciary liability and other insurance
maintained by Seller or its Affiliates and relating to the Business, the Purchased Assets or the Assumed Liabilities (collectively, the
“Insurance Policies”); and (b) with respect to the Business, the Purchased Assets or the Assumed Liabilities, a list
of all pending claims and the claims history for Seller since January 1, 2026. Except as set forth on Section 4.15 of the Disclosure
Schedules, there are no claims related to the Business, the Purchased Assets or the Assumed Liabilities pending under any Insurance Policies
as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. Neither
Seller nor any of its Affiliates has received any written notice of cancellation of, premium increase with respect to, or alteration
of coverage under, any of the Insurance Policies. All premiums due on the Insurance Policies have either been paid or, if not yet due,
accrued. All the Insurance Policies: (a) are in full force and effect and enforceable in accordance with their applicable terms; (b)
are provided by carriers who are financially solvent; and (c) have not been subject to any lapse in coverage. None of Seller or any of
its Affiliates is in default under, or has otherwise failed to comply with, in any material respect, any provision contained in any Insurance
Policy. The Insurance Policies are of the type and in the amounts customarily carried by Persons conducting a business similar to the
Business and are sufficient for compliance with all applicable Laws and Contracts to which Seller is a party or by which it is bound.
True and complete copies of all Insurance Policies have been provided to Buyer.
Section
4.16 Legal Proceedings; Governmental Orders.
(a)
Except as set forth in Section 4.16(a) of the Disclosure Schedules, there are no Actions pending or, to Seller’s Knowledge, threatened
against or by Seller: (a) relating to or affecting the Business, the Purchased Assets or the Assumed Liabilities; or (b) that challenge
or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances
exist that may give rise to, or serve as a basis for, any such Action.
(b)
Except as set forth in Section 4.16(b) of the Disclosure Schedules, there are no outstanding Governmental Orders and no unsatisfied judgments,
penalties or awards against, relating to or affecting the Business. Seller is in compliance with the terms of each Governmental Order
set forth in Section 4.16(b) of the Disclosure Schedules. No event has occurred or circumstances exist that may constitute or result
in (with or without notice or lapse of time) a violation of any such Governmental Order.
Section
4.17 Compliance With Laws; Permits.
(a)
Except as set forth in Section 4.17(a) of the Disclosure Schedules, Seller has complied, and is now complying, with all Laws applicable
to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets, including all applicable requirements
of the Federal Energy Regulatory Commission (“FERC”), applicable state public utility commissions, and applicable
environmental and energy regulatory authorities.
(b)
All Permits required for Seller to conduct the Business
as currently conducted or for the ownership and use of the Purchased Assets have been obtained by Seller and are valid and in full force
and effect. All fees and charges with respect to such Permits as of the date hereof have been paid in full. Section 4.17(b) of the Disclosure
Schedules lists all current Permits issued to Seller that are related to the conduct of the Business as currently conducted or the ownership
and use of the Purchased Assets, including the names of the Permits and their respective dates of issuance and expiration. Seller has
complied and is now complying with the terms of all Permits listed on Section 4.17(b) of the Disclosure Schedules. No event has occurred
that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or
limitation of any Permit set forth in Section 4.17(b) of the Disclosure Schedules.
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Section
4.18 Environmental Matters.
(a)
The operations of Seller with respect to the Business and the Purchased Assets are currently and have been in compliance with all Environmental
Laws. Seller has not received from any Person, with respect to the Business or the Purchased Assets, any: (i) Environmental Notice or
Environmental Claim; or (ii) written request for information pursuant to Environmental Law, that, in each case, either remains pending
or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.
(b)
Seller has obtained and is in material compliance with all Environmental Permits (each of which is disclosed in Section 4.18(b) of the
Disclosure Schedules) necessary for the conduct of the Business as currently conducted or the ownership, lease, operation or use of the
Purchased Assets, and all such Environmental Permits are in full force and effect in accordance with Environmental Law, and Seller is
not aware of any condition, event or circumstance that might prevent or impede, after the Closing Date, the conduct of the Business as
currently conducted or the ownership, lease, operation or use of the Purchased Assets. With respect to any such Environmental Permits,
Seller has undertaken all measures necessary to facilitate transferability of the same, and Seller is not aware of any condition, event
or circumstance that might prevent or impede the transferability of the same, and has not received any Environmental Notice or written
communication regarding any material adverse change in the status or terms and conditions of the same.
(c)
None of the Business or the Purchased Assets or any real property currently or formerly owned, leased or operated by Seller in connection
with the Business is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar
state list.
(d)
There has been no Release of Hazardous Materials in contravention of any Environmental Law with respect to the Business or the Purchased
Assets or any real property currently or formerly owned, leased or operated by Seller in connection with the Business, and Seller has
not received an Environmental Notice that any of the Business or the Purchased Assets or real property currently or formerly owned, leased
or operated by Seller in connection with the Business (including soils, groundwater, surface water, buildings and other structure located
thereon) has been contaminated with any Hazardous Material that could reasonably be expected to result in an Environmental Claim against,
or a violation of Environmental Law or term of any Environmental Permit by, Seller.
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(e)
Section 4.18(e) of the Disclosure Schedules contains a complete and accurate list of all active or abandoned aboveground or underground
storage tanks owned or operated by Seller in connection with the Business or the Purchased Assets.
(f)
Section 4.18(f) of the Disclosure Schedules contains a complete and accurate list of all off-site Hazardous Materials treatment, storage,
or disposal facilities or locations used by Seller and any predecessors in connection with the Business or the Purchased Assets as to
which Seller may retain liability. None of these facilities or locations has been placed or proposed for placement on the National Priorities
List (or CERCLIS) under CERCLA, or any similar state list, and Seller has not received any Environmental Notice regarding potential liabilities
with respect to such off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by Seller.
(g)
Seller has not retained or assumed, by contract or operation of Law, any liabilities or obligations of third parties under Environmental
Law.
(h)
Seller has provided or otherwise made available to Buyer and listed in Section 4.18(h) of the Disclosure Schedules: (i) any and all environmental
reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with
respect to the Business or the Purchased Assets or any real property currently or formerly owned, leased or operated by Seller in connection
with the Business that are in the possession or control of Seller related to compliance with Environmental Laws, Environmental Claims
or an Environmental Notice or the Release of Hazardous Materials; and (ii) any and all material documents concerning planned or anticipated
capital expenditures required to reduce, offset, limit or otherwise control pollution and/or emissions, manage waste or otherwise ensure
compliance with current or future Environmental Laws (including, without limitation, costs of remediation, pollution control equipment
and operational changes).
(i)
To Seller’s Knowledge, there is not any condition, event or circumstance concerning the Release or regulation of Hazardous Materials
that might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership, lease, operation,
performance or use of the Business or the Purchased Assets as currently carried out.
(j)
Seller owns and controls all Environmental Attributes (a complete and accurate list of which is set forth in Section 4.18(j) of the Disclosure
Schedules) and has not entered into any contract or pledge to transfer, lease, license, guarantee, sell, mortgage, pledge or otherwise
dispose of or encumber any Environmental Attributes as of the date hereof. Seller is not aware of any condition, event or circumstance
that might prevent, impede or materially increase the costs associated with the transfer (if required) to Buyer of any Environmental
Attributes after the Closing Date.
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Section
4.19 Employee Benefit Matters.
(a)
Section 4.19(a) of the Disclosure Schedules contains a true and complete list of each benefit, pension, retirement, supplemental retirement,
compensation, employment, consulting, profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock,
stock-based, change in control, retention, severance, salary continuation, accrued leave, sick leave, vacation, paid time off, health,
medical, welfare, dental, disability, life insurance, accidental death and dismemberment, fringe-benefit, and other similar agreement,
plan, contract, policy, program, practice, or arrangement (and any amendments thereto), in each case whether or not reduced to writing
and whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether
or not tax-qualified and whether or not subject to ERISA, that is or has been established, maintained, sponsored, contributed to, or
required to be contributed to by Seller for the benefit of any current or former employee, officer, director, retiree, independent contractor
or consultant of the Business or any spouse or dependent of such individual, or under which Seller or any ERISA Affiliate has or may
have any Liability, or with respect to which Buyer or any of its Affiliates would reasonably be expected to have any Liability, contingent
or otherwise (each, a “Benefit Plan”). Seller has separately identified in Section 4.19(a) of the Disclosure Schedules
each Benefit Plan that is maintained, sponsored, contributed to, or required to be contributed to by Seller primarily for the benefit
of employees of the Business outside of the United States (each, a “Non-U.S. Benefit Plan”).
(b)
With respect to each Benefit Plan, Seller has made available to Buyer accurate, current and complete copies of each of the following,
as applicable: (i) where the Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the
Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) where applicable, copies of any trust
agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar
agreements, and investment management or investment advisory agreements, now in effect or required in the future as a result of the transactions
contemplated by this Agreement or otherwise; (iv) copies of any summary plan descriptions, summaries of material modifications, summaries
of benefits and coverage, COBRA communications, employee handbooks and any other written communications (or a description of any oral
communications) relating to any Benefit Plan; (v) in the case of any Benefit Plan that is intended to be qualified under Section 401(a)
of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service and any legal opinions
issued thereafter with respect to such Benefit Plan’s continued qualification (or a copy of any pending application for a determination
letter and any related correspondence from the Internal Revenue Service); (vi) in the case of any Benefit Plan for which a Form 5500
must be filed, a copy of the two most recently filed Forms 5500, with all corresponding schedules and financial statements attached;
(vii) actuarial valuations and reports related to any Benefit Plans with respect to the most recently completed plan years; (viii) the
most recent nondiscrimination tests performed under the Code; (ix) copies of material notices, letters or other correspondence from the
Internal Revenue Service, U.S. Department of Labor, U.S. Department of Health and Human Services, Pension Benefit Guaranty Corporation
or other Governmental Authority relating to the Benefit Plan; (x) copies of current and prior Internal Revenue Service or Department
of Labor audits or inquiries; (xi) Fidelity bond and fiduciary liability insurance policies; and (xii) any filings under any amnesty,
voluntary compliance, self-correction, or similar program sponsored by any Governmental Authority, including the Employee Plans Compliance
Resolution System, Voluntary Fiduciary Correction Program, or Delinquent Filer Voluntary Correction Program.
30
(c)
There has been no amendment to, announcement by Seller or any of its Affiliates relating to, or change in employee participation or coverage
under, any Benefit Plan or collective bargaining agreement that would increase the annual expense of maintaining such plan above the
level of the expense incurred for the most recently completed fiscal year (other than on a de minimis basis) with respect to any
director, officer, employee, consultant or independent contractor of the Business, as applicable. Neither Seller nor any of its Affiliates
has any commitment or obligation or has made any representations to any director, officer, employee, consultant or independent contractor
of the Business, whether or not legally binding, to adopt, amend, modify or terminate any Benefit Plan or any collective bargaining agreement.
(d)
Each Benefit Plan that is subject to Section 409A of the Code has been administered in compliance with its terms and the operational
and documentary requirements of Section 409A of the Code and all applicable regulatory guidance (including, notices, rulings and proposed
and final regulations) thereunder. Seller does not have any obligation to gross up, indemnify or otherwise reimburse any individual for
any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code.
(e)
Except as set forth in Section 4.19(e) of the Disclosure
Schedules, neither the execution of this Agreement nor the consummation of any of the transactions contemplated by this Agreement will
(either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, officer, employee,
independent contractor or consultant of the Business to severance pay, any increase in severance pay, or any other payment; (ii) accelerate
the time of payment, funding or vesting, or increase the amount of compensation (including stock or stock-based compensation) due to
any such individual; (iii) increase the amount payable under or result in any other material obligation pursuant to any Benefit Plan;
(iv) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code; (vi) result in payments under
any Benefit Plans that would not be deductible under Section 162(m) of the Code; or (v) require a “gross-up” or other payment
to any “disqualified individual” within the meaning of Section 280G(c) of the Code. Seller has made available to Buyer true
and complete copies of any Section 280G calculations prepared (whether or not final) with respect to any disqualified individual in connection
with the transactions contemplated hereby.
Section
4.20 Employment Matters.
(a)
Section 4.20(a) of the Disclosure Schedules contains a list of all persons who are employees, independent contractors or consultants
of the Business as of the date hereof, including any employee who is on a leave of absence of any nature, paid or unpaid, authorized
or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full-time
or part-time); (iii) hire or retention date; (iv) current annual base compensation rate or contract fee; (v) commission, bonus or other
incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as of the date hereof. Except
as set forth in Section 4.20(a) of the Disclosure Schedules, as of the date hereof, all compensation, including wages, commissions, bonuses,
fees and other compensation, payable to all employees, independent contractors or consultants of the Business for services performed
on or prior to the date hereof have been paid in full and there are no outstanding agreements, understandings or commitments of Seller
with respect to any compensation, commissions, bonuses or fees.
31
(b)
Except as set forth in Section 4.20(b) of the Disclosure Schedules, Seller is not, and has never been, a party to, bound by, or negotiating
any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “Union”),
and there is not, and there has never been, any Union representing or purporting to represent any employee of Seller, and, to Seller’s
Knowledge, no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. Except
as set forth in Section 4.20(b) of the Disclosure Schedules, there has never been, nor has there been any threat of, any strike, slowdown,
work stoppage, lockout, concerted refusal to work overtime or other similar labor disruption or dispute affecting Seller or any employees
of the Business. Seller has no duty to bargain with any Union.
(c)
Seller is and has been in compliance in all material
respects with the terms of the collective bargaining agreements and other Contracts listed on Section 4.20(b) of the Disclosure Schedules
and all applicable Laws pertaining to employment and employment practices to the extent they relate to employees, volunteers, interns,
consultants and independent contractors of the Business, including all Laws relating to labor relations, equal employment opportunities,
fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits,
immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal
and break periods, privacy, health and safety, workers’ compensation, leaves of absence, paid sick leave and unemployment insurance.
All individuals characterized and treated by Seller as consultants or independent contractors of the Business are properly treated as
independent contractors under all applicable Laws. All employees of the Business classified as exempt under the Fair Labor Standards
Act and state and local wage and hour laws are properly classified in all material respects. Seller is in compliance with and has complied
with all immigration laws, including Form I-9 requirements and any applicable mandatory E-Verify obligations. Except as set forth in
Section 4.20(c), there are no Actions against Seller pending, or to Seller’s Knowledge, threatened to be brought or filed, by or
with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant,
volunteer, intern or independent contractor of the Business, including, without limitation, any charge, investigation or claim relating
to unfair labor practices, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation,
reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, employee classification, child
labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’
compensation, leaves of absence, paid sick leave, unemployment insurance or any other employment related matter arising under applicable
Laws.
Section
4.21 Taxes. Except as set forth in Section 4.21 of
the Disclosure Schedules:
(a)
All Tax Returns with respect to the Business required to be filed by Seller for any Pre-Closing Tax Period have been timely filed. Such
Tax Returns are true, complete and correct in all respects. All Taxes due and owing by Seller (whether or not shown on any Tax Return)
have been timely paid.
32
(b)
Seller has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any Employee,
independent contractor, creditor, customer, shareholder or other party, and complied with all information reporting and backup withholding
provisions of applicable Law.
(c)
No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of Seller.
(d)
All deficiencies asserted, or assessments made, against Seller as a result of any examinations by any taxing authority have been fully
paid.
(e)
Seller is not a party to any Action by any taxing authority. There are no pending or threatened Actions by any taxing authority.
(f)
There are no Encumbrances for Taxes upon any of the Purchased Assets nor, to Seller’s Knowledge, is any taxing authority in the
process of imposing any Encumbrances for Taxes on any of the Purchased Assets (other than for current Taxes not yet due and payable).
(g)
Seller is not a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.
(h)
Seller is not, and has not been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1)
of the Code and Treasury Regulations Section 1.6011 4(b).
Section
4.22 Related Party Transactions. Except as set forth on Section 4.23 of the Disclosure Schedules, there are no Contracts or other
arrangements involving the Business in which Seller, its Affiliates, or any of its or their respective directors, officers, or employees
or any immediate family members thereof is a party, has a financial interest, or otherwise owns or leases any Purchased Asset.
Section
4.23 Securities.
(a)
Seller understands that the Securities are “restricted securities” and have not been registered under the Securities Act
or any applicable state securities law. Seller is acquiring the Securities as principal for its own account and not with a view to or
for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities
law. Seller has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution
of such Securities in violation of the Securities Act or any applicable state securities law.
(b)
Seller is: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), (a)(8), (a)(9), (a)(12) or
(a)(13) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act. Such Seller hereby represents that neither such Seller nor any of its Rule 506(d) Related Parties (as defined below) is a “bad
actor” within the meaning of Rule 506(d) promulgated under the Securities Act. For purposes of this Agreement, “Rule 506(d)
Related Party” shall mean a person or entity covered by the “Bad Actor disqualification” provision of Rule 506(d) of
the Securities Act.
33
(c)
Seller, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated
the merits and risks of such investment. Seller is able to bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(d)
Seller understands that Parent files reports and other information with the Securities and Exchange Commission. Seller has had access
to and has reviewed all documents, reports, records and other information relating to Parent and Buyer that Seller has deemed necessary
for Seller to make an informed investment decision with respect to the Securities. Seller acknowledges that it has had the opportunity
to ask representatives of Parent and Buyer questions and request additional information regarding the finances, operations, business
and prospects of Parent and Buyer, that it has had any and all such questions and requests answered to its satisfaction, and that it
understands the risks and other considerations relating to its investment in the Securities.
Section
4.24 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement
or any Ancillary Document based upon arrangements made by or on behalf of Seller.
Section
4.25 Full Disclosure. To Seller’s knowledge,
no representation or warranty by Seller in this Agreement and no statement contained in the Disclosure Schedules to this Agreement or
any certificate or other document furnished to Parent or Buyer pursuant to this Agreement contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they
were made, not misleading in any material respect.
ARTICLE
V
Representations
and warranties of PARENT AND buyer
Except
as set forth in the correspondingly numbered Section of the Disclosure Schedules, Parent and Buyer represent and warrant to Seller that
the statements contained in this ARTICLE V are true and correct as of the date hereof.
Section
5.01 Organization of Parent and Buyer. Each of Parent
and Buyer (and each of Parent’s subsidiaries (the “Parent Subsidiaries”)) has been duly incorporated, organized
or formed and validly exists as a corporation or limited liability company in good standing under the Laws of its jurisdiction of incorporation,
organization or formation (in the case of Parent, the State of Delaware, and in the case of Buyer, the State of Nevada). Each of Parent,
Buyer and the Parent Subsidiaries has all requisite power and authority to carry on its business as currently conducted and to own, lease
and operate its properties. Each of Parent, Buyer and the Parent Subsidiaries is duly qualified to do business and is in good standing
as a foreign corporation, partnership or limited liability company in each jurisdiction in which the character or location of its properties
(owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except, in each case, for those
failures to be so qualified or in good standing that would not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, results of operations, condition (financial or otherwise) or assets of Parent.
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Section
5.02 Authority of Parent and Buyer. Parent and Buyer have full corporate power and
authority to enter into this Agreement and the Ancillary Documents to which Buyer Parent and Buyer are or will be a party, to carry out
their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution
and delivery by Parent and Buyer of this Agreement and any Ancillary Document to which Parent and Buyer are or will be a party, the performance
by Parent and Buyer of their respective obligations hereunder and thereunder and the consummation by Parent and Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Parent and Buyer, as applicable.
This Agreement has been duly executed and delivered by Parent and Buyer, and (assuming due authorization, execution and delivery by Seller
and Azure S.R.L.) this Agreement constitutes a legal, valid and binding obligation of Parent and Buyer enforceable against Parent and
Buyer in accordance with its terms. When each Ancillary Document to which Parent and Buyer is or will be a party has been duly executed
and delivered by Parent and Buyer (assuming due authorization, execution and delivery by each other party thereto), as applicable, such
Ancillary Document will constitute a legal and binding obligation of Parent and Buyer, as applicable, and enforceable against Parent
or Buyer, as applicable, in accordance with its terms.
Section
5.03 Board Approval; Disinterested Authorization. The Board of Directors of Parent (and, to the extent applicable, a committee of
directors who are disinterested and independent of Seller and its Affiliates) has duly approved and authorized this Agreement, the Ancillary
Documents, and each of the transactions and post-Closing arrangements contemplated hereby and thereby, including the issuance of Securities
by the Parent, the Option, the indemnification provisions of ARTICLE VII, and any payment, reimbursement or setoff obligations running
between Parent or Buyer, on the one hand, and Seller or its Affiliates, on the other hand, in each case at a time when a majority of
the directors approving the same were disinterested and independent of Seller and its Affiliates. Such approvals (a) satisfy the requirements
of Section 144 of the Delaware General Corporation Law, (b) comply with the relevant rules of The Nasdaq Stock Market (including Nasdaq
Listing Rules 5605 and 5630) and Parent’s related-person transaction policy, and (c) have not been amended, modified, rescinded
or withdrawn and remain in full force and effect. To Parent’s Knowledge, no director who approved the foregoing had a material
financial or personal interest in Seller or its Affiliates at the time of such approval, other than as disclosed to and considered by
the approving directors.
Section
5.04 No Conflicts; Consents. The execution, delivery
and performance by Parent and Buyer of this Agreement and the Ancillary Documents to which they a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default
under, any provision of the certificate of incorporation, by-laws or other organizational documents of Parent or Buyer; (b) conflict
with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Parent or Buyer; or (c) except
as set forth in Section 5.04 of the Disclosure Schedules, require the consent, notice or other action by any Person under any Contract
to which Parent or Buyer is a party. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any
Governmental Authority is required by or with respect to Parent or Buyer in connection with the execution and delivery of this Agreement
and the Ancillary Documents to which Parent or Buyer is or will be a party and the consummation of the transactions contemplated hereby
and thereby except for such filings as may be required under the HSR Act and such consents, approvals, Permits, Governmental Orders,
declarations, filings or notices that, in the aggregate, would not have a material adverse effect on the ability of Parent or Buyer to
consummate the transactions contemplated hereby on a timely basis.
35
Section
5.05 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement
or any Ancillary Document based upon arrangements made by or on behalf of Parent or Buyer.
Section
5.06 Capitalization.
(a)
As of the date hereof, Parent
has: (i) 800,000,000 shares of Common Stock authorized for issuance, of which 20,391,757 shares are issued and outstanding; and (ii)
1,000,000 shares of preferred stock authorized for issuance, of which 15,000 shares are designated as Series A Preferred Stock. Except
as set forth in the SEC Reports, there are no issued, reserved for issuance or outstanding options, warrants, purchase rights, convertible
securities or other rights or obligations of Parent to issue, deliver or sell any equity securities of Parent, and Parent has no obligation
to repurchase, redeem or otherwise acquire any equity securities of Parent.
(b)
As of the date hereof, Buyer has 1,000 membership units authorized for issuance, of which 100 units are issued and outstanding. There
are no issued, reserved for issuance or outstanding options, warrants, purchase rights, convertible securities or other rights or obligations
of Buyer to issue, deliver or sell any equity securities of Buyer, and Buyer has no obligation to repurchase, redeem or otherwise acquire
any equity securities of Buyer.
Section
5.07 Valid Issuance. The shares of Common Stock and Series B Preferred Stock issuable hereunder, when issued in accordance with the
terms of this Agreement and the Certificate of Designation, will be duly authorized, validly issued, fully paid and non-assessable, free
of preemptive rights, and issued in compliance with applicable securities Laws.
Section
5.08 SEC Reports.
(a)
Except as set forth in Section 5.08(a) of the Disclosure
Schedules, Parent has filed with or furnished to the SEC on a timely basis all SEC Reports required
to be filed or furnished by it since January 1, 2023, including true and complete copies thereof (all such documents, together with all
exhibits and schedules thereto and all information incorporated therein by reference, the “Parent SEC Documents”).
As of their respective filing dates (or, if amended or superseded by a filing prior to the date of this Agreement, then as of the date
of such filing), the Parent SEC Documents complied in all material respects with the applicable requirements of the Securities Act, the
Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including, in each case, the rules and
regulations promulgated thereunder, and none of the Parent SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
36
(b)
The financial statements (including the related notes and schedules thereto) included or incorporated by reference in the Parent SEC
Documents (i) have been prepared in a manner consistent with the books and records of Parent, (ii) have been prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), (iii) comply as to form in all material respects with the applicable accounting
requirements and the published rules and regulations of the SEC with respect thereto, and (iv) fairly present in all material respects
the consolidated financial position of Parent and the consolidated Parent Subsidiaries as of the dates thereof and their respective consolidated
results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring
year-end audit adjustments that were not, or are not expected to be, material in amount). Since January 1, 2023, Parent has not made
any change in the accounting practices or policies applied in the preparation of its financial statements, except as required by GAAP,
SEC rule or policy, or applicable Law. The books and records of Parent have been, and are being, maintained in all material respects
in accordance with GAAP (to the extent applicable) and any other applicable legal and accounting requirements, and reflect only actual
transactions.
(c)
Parent maintains, and since
January 1, 2023 has maintained, disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the Exchange Act that
are reasonably designed and reasonably effective to ensure that all information (both financial and non-financial) relating to Parent
and the Parent Subsidiaries required to be disclosed in Parent’s periodic reports under the Exchange Act is made known to Parent’s
principal executive officer and principal financial officer by others within Parent or any of the Parent Subsidiaries, and that such
information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Parent
maintains a system of “internal control over financial reporting” (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) reasonably sufficient (i) to provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP consistently applied, (B) that transactions are executed only in accordance with the
authorization of management, and (C) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of
Parent’s properties or assets that could have a material effect on the financial statements, and (ii) such that all material information
is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure and
to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.
Section
5.09 Nasdaq Listing.
(a)
The Common Stock is listed for trading on The Nasdaq Stock Market (“Nasdaq”). Except as set forth in the Parent SEC Documents,
Parent is, and since January 1, 2026 has been, in compliance with all applicable listing and maintenance requirements of Nasdaq.
37
(b)
The Parent SEC Documents contain a true and complete description of each notice or communication (whether written or, to Parent’s
Knowledge, oral) received by Parent from Nasdaq since January 1, 2026 relating to any actual, alleged or potential deficiency, non-compliance,
delisting, suspension or termination with respect to the listing of the Common Stock, including any minimum bid price deficiency and
the applicable cure or compliance period relating thereto. Other than as so disclosed, Parent has not received any written notice that
the Common Stock is being, or is threatened to be, delisted, suspended or terminated, and no delisting or suspension proceeding is pending
or, to Parent’s Knowledge, threatened against Parent.
(c)
Parent has not been advised in writing by Nasdaq that the transactions contemplated by this Agreement will be treated as a “reverse
merger” under Nasdaq Listing Rule 5110(a) or otherwise require Parent to submit an initial listing application and satisfy the
initial listing requirements of Nasdaq (including the initial listing bid price and other quantitative standards). No inquiry, submission,
listing of additional shares notification, or written guidance has been exchanged between Parent and Nasdaq with respect to the transactions
contemplated by this Agreement.
Section
5.10 No Integrated Offering. Neither Parent nor any of its Affiliates has taken any action, directly or indirectly, that would cause
the issuance of the Securities contemplated hereby to be integrated with any other offering of securities that would require registration
under the Securities Act. There is no other offering or sale of securities by Parent or any of its Affiliates that is required to be
registered under the Securities Act that would be integrated with the offering of the Securities hereunder, and Parent has not made any
offer or sale of securities that would cause such integration.
Section
5.11 Private Placement. Parent intends that the issuance of the Securities will be exempt from registration under Section 4(a)(2)
of the Securities Act and, if applicable, Rule 506 of Regulation D. Parent has not taken any action that would cause the availability
of that exemption to be impaired.
Section
5.12 Indebtedness. Except as set forth in the Parent SEC Documents, neither Parent nor any of the Parent Subsidiaries has any outstanding
indebtedness for borrowed money or financing arrangements, including any convertible or exchangeable securities or instruments.
Section
5.13 Corporate Records. Since January 1, 2024, all proceedings of the board of directors of Parent, including all committees thereof,
and of the stockholders of Parent, and all consents to actions taken thereby, are, in all material respects, accurately reflected in
the minutes and records contained in the corporate minute books of Parent and made available to Seller. The stockholder ledger of Parent
is true, correct and complete in all material respects.
Section
5.14 No Undisclosed Liabilities. As of the date of this Agreement, except as set forth in the Parent SEC Documents, there are no
Liabilities of Parent or any of the Parent Subsidiaries, individually or in the aggregate, that are required to be recorded or reflected
on a balance sheet prepared in accordance with GAAP, other than:
(a)
Liabilities reflected or reserved against in the consolidated balance sheet of Parent and the consolidated Parent Subsidiaries as of
December 31, 2025, or the footnotes thereto, set forth in the Parent SEC Documents;
38
(b)
Liabilities incurred since December 31, 2025 in the ordinary course of business (none of which is a Liability for tort, breach of contract
or environmental Liability);
(c)
Liabilities incurred in connection with, or as permitted or expressly contemplated by, this Agreement, the Ancillary Documents or the
transactions contemplated hereby or thereby; and
(d)
Liabilities that would not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, results of operations, condition (financial or otherwise) or assets of Parent.
Section
5.15 Properties; Title to Assets.
(a)
All tangible personal property and interests therein, including computers and accessories, furniture, office equipment, communications
equipment, automobiles and other equipment owned or leased by Parent or the Parent Subsidiaries (the “Parent Tangible Personal
Property”) are, to Parent’s Knowledge, in good operating condition and repair and function in accordance with their intended
uses (ordinary wear and tear excepted), have been properly maintained and are suitable for their present uses and meet all specifications
and warranty requirements with respect thereto, in each case in all material respects. All of the Parent Tangible Personal Property is
located at the offices or properties of Parent or a Subsidiary.
(b)
Parent or a Subsidiary has good, valid and marketable title in and to, or in the case of assets that are leased or licensed pursuant
to Contracts, a valid leasehold interest or license in, or a right to use, all of the tangible assets reflected on Parent’s most
recent balance sheet included in the Parent SEC Documents. No such tangible asset is subject to any Encumbrances.
Section
5.16 Parent Material Contracts.
(a)
Each material Contract of Parent, as amended to date, that is currently in effect (each, a “Parent Material Contract”
and collectively, the “Parent Material Contracts”) is (i) valid and binding on Parent or the applicable Parent Subsidiaries
that are party thereto and, to Parent’s Knowledge, the counterparties thereto, (ii) in full force and effect, and (iii) enforceable
by and against Parent and/or the Parent Subsidiaries that are a party thereto and, to Parent’s Knowledge, each counterparty thereto,
except, in the case of this clause (iii), as enforceability may be limited by (A) applicable bankruptcy, insolvency, moratorium, reorganization,
fraudulent conveyance or similar Laws in effect that affect the enforcement of creditors’ rights generally, or (B) general principles
of equity. Neither Parent nor the Parent Subsidiaries party thereto, nor, to Parent’s Knowledge, any other party to a Parent Material
Contract, is in material breach or default (whether with or without the passage of time or the giving of notice or both) under the terms
of any such Parent Material Contract. None of Parent or the Parent Subsidiaries has assigned, delegated or otherwise transferred any
of its rights or obligations under any Parent Material Contract, or granted any power of attorney with respect thereto (other than, in
each case, to Parent or one or more of the Parent Subsidiaries).
39
(b)
Except as disclosed in the Parent SEC Documents, each of Parent and the Parent Subsidiaries is in compliance in all material respects
with all covenants, including all financial covenants, in all Parent Material Contracts establishing or evidencing any indebtedness to
which it is a party. The consummation of the transactions contemplated by this Agreement will not cause or result in any event of default
under any Parent Material Contract establishing or evidencing any indebtedness, other than any such event of default that would not,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, results of operations, condition (financial or otherwise) or assets of Parent.
Section
5.17 Sufficiency of Authorized Shares. Parent shall maintain a reserve from its duly authorized shares of Common Stock for issuance
pursuant to this Agreement and the Ancillary Documents in such amount as may then be required to fulfill its obligations in full under
this Agreement and the Ancillary Documents, including, without limitation, the maximum number of shares of Common Stock issuable upon
conversion of all outstanding shares of Series B Preferred Stock.
Section
5.18 Legal Proceedings. Except as set forth in the Parent
SEC Documents: (a) there are no Actions pending or, to Parent’s or the Buyer’s Knowledge, threatened against or by
Parent or Buyer, any Subsidiary of Parent or any of their respective assets or properties that would, individually or in the aggregate,
reasonably be expected to be material to Parent, Buyer and the Parent Subsidiaries, taken as a whole; (b) there are no Governmental Orders
outstanding against Parent or any of the Parent Subsidiaries, or any of their respective assets or properties, that would, individually
or in the aggregate, reasonably be expected to be material to Parent and the Parent Subsidiaries, taken as a whole; and (c) there is
no Action pending or, to Parent’s or the Buyer’s Knowledge, threatened against or by Parent, Buyer or any of the Parent Subsidiaries
that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To the Parent’s
or the Buyer’s Knowledge, no event has occurred or circumstance exists that would reasonably be expected to give rise to, or serve
as a basis for, any such Action.
Section
5.19 Taxes
(a)
All Tax Returns required to be filed by Parent have been timely filed. Such Tax Returns are complete and correct in all material respects.
All material Taxes due and owing by Parent have been timely paid.
(b)
Parent 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, customer, stockholder or other party, and has complied in all material respects with all
information reporting and backup withholding provisions of applicable Law.
(c)
Except as would not be material to Parent, there are no Actions pending or, to Parent’s Knowledge, threatened by any Governmental
Authority with respect to any Tax Liability of Parent.
(d)
Parent has not waived any statute of limitations in respect of Taxes (other than as a result of any extension to file a Tax Return that
is automatically granted) or agreed to any extension of time with respect to a Tax assessment or deficiency, in each case that is in
effect as of the date hereof.
40
(e)
Parent is not party to any agreement relating to the allocation or sharing of Taxes, including any Tax indemnity agreement, other than
customary commercial Contracts entered into in the ordinary course of business the primary purpose of which does not relate to Taxes.
(f)
Parent (i) has not been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code (or similar provision
of local, state or non-U.S. Law), other than any affiliated group of which Parent is the common parent, or (ii) does not have any Liability
for the Taxes of any Person (other than any of the Parent Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any similar provision
of local, state or non-U.S. Law), as a transferee or successor, or by contract, other than customary commercial Contracts entered into
in the ordinary course of business the primary purpose of which does not relate to Taxes.
(g)
As of the date hereof, Parent has not received any written notice from a Governmental Authority in a jurisdiction where Parent does not
file Tax Returns asserting that Parent is or may be subject to taxation by that jurisdiction.
(h)
Parent does not file Tax Returns in any jurisdiction outside of the United States.
Section
5.20 Intellectual Property; Data Privacy and
Security.
(a)
Parent and each Subsidiary thereof (i) owns and possesses, free and clear of all Encumbrances, all right, title and interest in, or has
a valid and enforceable written license or right to use, all Intellectual Property used by it in the operation of its business as presently
conducted, and (ii) owns and possesses all right, title and interest in and to all Intellectual Property created or developed by or on
behalf of, or otherwise under the direction or supervision of, its employees or independent contractors, relating to its business.
(b)
There are no claims against Parent or any Subsidiary of Parent that were either made since January 1, 2023 or are presently pending,
contesting the validity, use, ownership or enforceability of any Intellectual Property of Parent or the applicable Subsidiary, and, to
Parent’s Knowledge, there is no reasonable basis for any such claim. Neither Parent nor any Subsidiary of Parent has infringed
or misappropriated, and the operation of its business as currently conducted does not infringe or misappropriate, any registered Intellectual
Property rights of other Persons. Neither Parent nor any of the Parent Subsidiaries has received any written notice regarding any of
the foregoing (including any demand or offer to license any Intellectual Property rights from any other Person). To Parent’s Knowledge,
no third party has infringed or misappropriated any Intellectual Property of Parent or any Subsidiary of Parent. The transactions contemplated
by this Agreement will not impair the right, title or interest of Parent or any Subsidiary of Parent in and to its Intellectual Property,
and all Intellectual Property of Parent and the Parent Subsidiaries will be owned or available for use by it immediately after the Closing
on terms and conditions identical to those under which Parent or such Subsidiary owned or used such Intellectual Property immediately
prior to the Closing. Parent and the Parent Subsidiaries have taken commercially reasonable steps to protect their Intellectual Property
from infringement, misappropriation and unauthorized disclosure.
41
(c)
For the three years prior to the date hereof, neither Parent nor any of the Parent Subsidiaries has received any written notice of any
actual or alleged breach of security (including theft and unauthorized use, access, collection, processing, storage, disposal, destruction,
transfer, disclosure, interruption or modification by any Person) of (i) the systems, hardware, software, network or equipment of Parent
or any such Subsidiary, including all information stored or contained therein or transmitted thereby, or (ii) any data in the possession
or control of Parent or any Subsidiary of Parent about or from an individual that is protected by or subject to any data protection,
privacy or security Law, including protected health information.
(d)
Parent and each Subsidiary of Parent has complied in all material respects at all times during the three years prior to the date hereof
with all applicable requirements of data protection Law, its own data protection principles, requests from data subjects for access to
data held by it, and any Law relating to the registration of data users. Neither Parent nor any Subsidiary thereof has received any notification
from a Governmental Authority regarding noncompliance with, or violation of, any data protection principles or Law. No Person has claimed
any compensation from Parent or any Subsidiary thereof for the loss of, or unauthorized disclosure or transfer of, personal data, and
no facts or circumstances exist that would reasonably be expected to give rise to any such claim. Neither Parent nor any Subsidiary of
Parent has undergone any audit or regulatory inquiry from any Governmental Authority with respect to privacy or data security of personally
identifiable information, and, to Parent’s Knowledge, neither Parent nor any Subsidiary of Parent is subject to any current inquiry
from any Governmental Authority (including complaints from individuals submitted to such Governmental Authority) regarding the same.
Parent has taken, and has caused each of the Parent Subsidiaries to take, commercially reasonable steps to preserve the availability,
security and integrity of the information systems and the data and information stored thereon that are owned or exclusively controlled
by Parent or any such Subsidiary. During the past three years, Parent has maintained, and has caused the Parent Subsidiaries to maintain,
and each of Parent and the Parent Subsidiaries continues to maintain, safeguards, security measures and procedures to protect against
the unauthorized access, destruction, loss or alteration of customer data or information (including any personally identifiable information)
in their possession or control.
Section
5.21 Insurance. Parent and each Subsidiary of Parent maintains insurance with respect to its properties and its business against
loss or damage of the kinds customarily insured against by companies engaged in the same or similar businesses as Parent or such Subsidiary,
in such amounts as are commercially reasonable and customarily carried under similar circumstances by such other companies. All premiums
for such insurance policies have been paid, and neither Parent nor any of the Parent Subsidiaries has received any written notice of
cancellation, termination or non-renewal with respect to any such insurance policy. Neither Parent nor any Subsidiary thereof has received
any written notice of denial or dispute of coverage for, and, to Parent’s Knowledge, no insurer has otherwise denied or disputed
coverage for, any claim under an insurance policy where the current actual or potential liability of or loss to Parent or any Subsidiary
of Parent may exceed $150,000 in the aggregate.
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Section
5.22 Environmental Laws. Each of Parent and each Subsidiary of Parent is, and since January 1, 2023 has been, in compliance in all
material respects with all Environmental Laws, and there are no, and since January 1, 2023 there have not been any, Actions pending or,
to Parent’s Knowledge, threatened against Parent or any Subsidiary of Parent alleging any failure to so comply. Neither Parent
nor any Subsidiary of Parent has: (a) received any notice of any alleged claim, violation of, or liability under, any Environmental Law,
or any claim of potential liability with regard to any Hazardous Material; (b) disposed of, emitted, discharged, handled, stored, transported,
used or released any Hazardous Material, arranged for the disposal, discharge, storage or release of any Hazardous Material, or exposed
any employee or other individual or property to any Hazardous Material; or (c) entered into any agreement that may require it to guarantee,
reimburse, pledge, defend, hold harmless or indemnify any other Person with respect to Liabilities arising out of Environmental Laws
or Hazardous Material activity. There are no Hazardous Materials in, on or under any properties currently or formerly owned, leased or
used at any time by Parent or any Subsidiary of Parent.
Section
5.23 Affiliate Transactions. Except as described in the Parent SEC Documents, there are no transactions, agreements, arrangements
or understandings between Parent or any of the Parent Subsidiaries, on the one hand, and any director, officer, employee, stockholder,
warrant holder or Affiliate of Parent or any of the Parent Subsidiaries, on the other hand.
ARTICLE
VI
COVENANTS
Section
6.01 Confidentiality. From and after the Closing,
Seller shall, and shall cause its Affiliates to, hold, and shall use its reasonable best efforts to cause its or their respective Representatives
to hold, in confidence any and all information, whether written or oral, concerning the Business, except to the extent that Seller can
show that such information (a) is generally available to and known by the public through no fault of Seller, any of its Affiliates or
their respective Representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective Representatives from
and after the Closing from sources that are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation.
If Seller or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative
process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information
that Seller is advised by its counsel in writing is legally required to be disclosed, provided, however, that Seller shall use
reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded
such information.
Section
6.02 Non-Competition; Non-Solicitation.
(a)
For a period of two years commencing on the Closing Date (the “Restricted Period”), Seller shall not, and shall not
permit any of its Affiliates other than Azure S.R.L. and its subsidiaries (the “Restricted Affiliates”) to, directly
or indirectly: (i) engage in or assist others in engaging in the Restricted Business in the State of North Carolina, in which Business
was actively conducted as of the Closing Date (the “Territory”); (ii) have an interest in any Person that engages
directly or indirectly in the Restricted Business in the Territory in any capacity, including as a partner, shareholder, member, employee,
principal, agent, trustee or consultant; or (iii) cause, induce or encourage any material client, customer, supplier or licensor of the
Business, or any other Person who has a material business relationship with the Business, as of the Closing Date to terminate or modify
any such relationship. Notwithstanding the foregoing, Seller may own, directly or indirectly, solely as an investment, securities of
any Person traded on any national securities exchange if Seller is not a controlling Person of, or a member of a group that controls,
such Person and does not, directly or indirectly, own two-and-a-half percent (2.5%) or more of any class of securities of such Person.
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(b)
During the Restricted Period, Seller shall not, and shall not permit any of its Restricted Affiliates to, directly or indirectly, hire
or solicit any person who is offered employment by Buyer or is or was employed in the Business during the Restricted Period, except pursuant
to a general solicitation that is not directed specifically to any such employees; provided, however, that nothing in this
Section 6.02(b) shall prevent Seller or any of its Affiliates from hiring: (i) any Non-Retained Individuals; (ii) any employee whose
employment has been terminated by Buyer; or (iii) after one hundred eighty (180) days from the date of termination of employment, any
employee whose employment has been terminated by the employee.
(c)
Seller acknowledges that a breach or threatened breach of this Section 6.02 would give rise to irreparable harm to Buyer, for which monetary
damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by Seller of any such
obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach,
be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that
may be available from a court of competent jurisdiction (without any requirement to post bond).
(d)
Seller acknowledges that the restrictions contained in this Section 6.02 are reasonable and necessary to protect the legitimate interests
of Buyer and constitute a material inducement to Buyer to enter into this Agreement and consummate the transactions contemplated by this
Agreement. In the event that any covenant contained in this Section 6.02 should ever be adjudicated to exceed the time, geographic, product
or service or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such
covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other
limitations permitted by applicable Law. The covenants contained in this Section 6.02 and each provision hereof are severable and distinct
covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render
unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such covenant or provision in any other jurisdiction.
Section
6.03 Governmental Approvals and Consents.
(a)
Each party hereto shall, as promptly as possible: (i) make, or cause or be made, all filings and submissions (including those under the
HSR Act) required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or
cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary
for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement and the Ancillary
Documents. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents,
authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing
or impeding the receipt of any required consents, authorizations, orders and approvals.
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(b)
Seller and Buyer shall use reasonable best efforts to give all notices to, and obtain all consents from, all third parties that are described
in Section 4.03 and Section 5.04 of the Disclosure Schedules.
(c)
Without limiting the generality of the parties’ undertakings pursuant to subsections (a) and (b) above, each of the parties hereto
shall use all reasonable best efforts to:
(i)
respond to any inquiries by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated
by this Agreement or any Ancillary Document;
(ii)
avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this
Agreement or any Ancillary Document; and
(iii)
in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated by this
Agreement or any Ancillary Document has been issued, to have such Governmental Order vacated or lifted.
(d)
All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf
of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions
contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Seller or Buyer with Governmental Authorities
in the ordinary course of business, any disclosure that is not permitted by Law or any disclosure containing confidential information)
shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties
will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses,
appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Each party shall give notice
to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators
of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate
in such meeting, discussion, appearance or contact.
(e)
Notwithstanding the foregoing, nothing in this Section
6.03 shall require, or be construed to require, Buyer or any of its Affiliates to agree to: (i) sell, hold, divest, discontinue or limit,
after the Closing Date, any assets, businesses or interests of Buyer or any of its Affiliates; (ii) any conditions relating to, or changes
or restrictions in, the operations of any such assets, businesses or interests that, in either case, could reasonably be expected to
result in a Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of the transactions
contemplated by this Agreement and the Ancillary Documents; or (iii) any material modification or waiver of the terms and conditions
of this Agreement.
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Section
6.04 Books and Records.
(a)
In order to facilitate the resolution of any claims made against or incurred by Seller prior to the Closing, or for any other reasonable
purpose, for a period of seven (7) years after the Closing, Buyer shall:
(i)
retain the Books and Records (including personnel files) relating to periods prior to the Closing in a manner reasonably consistent with
the prior practices of Seller; and
(ii)
upon reasonable notice, afford Seller’s Representatives reasonable access (including the right to make, at Seller’s expense,
photocopies), during normal business hours, to such Books and Records.
(b)
In order to facilitate the resolution of any claims made by or against or incurred by Buyer after the Closing, or for any other reasonable
purpose, for a period of seven (7) years following the Closing, Seller shall:
(i)
retain the books and records (including personnel files) of Seller that relate to the Business and its operations for periods prior to
the Closing; and
(ii)
upon reasonable notice, afford Buyer’s Representatives reasonable access (including the right to make, at Buyer’s expense,
photocopies), during normal business hours, to such books and records.
(c)
Neither Buyer nor Seller shall be obligated to provide the other party with access to any books or records (including personnel files)
pursuant to this Section 6.04 where such access would violate any Law.
Section
6.05 Public Announcements. Unless otherwise required
by applicable Law, Seller shall not make any public announcements in respect of this Agreement or the transactions contemplated hereby
or otherwise communicate with any news media concerning the foregoing without the prior written consent of Parent, which consent shall
not be unreasonably withheld, conditioned or delayed.
Section
6.06 Bulk Sales Laws. The parties hereby waive compliance
with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect
to the sale of any or all of the Purchased Assets to Buyer, it being understood that any Liabilities arising out of the failure of Seller
to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that would not otherwise
constitute Assumed Liabilities shall be treated as Excluded Liabilities.
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Section
6.07 Receivables. From and after the Closing, if
Seller or any of its Affiliates receives or collects any funds relating to any Accounts Receivable or any other Purchased Asset, Seller
or its Affiliate shall remit such funds to Buyer within five (5) Business Days after its receipt thereof. From and after the Closing,
if Buyer or its Affiliate receives or collects any funds relating to any Excluded Asset, Buyer or its Affiliate shall remit any such
funds to Seller within five (5) Business Days after its receipt thereof.
Section
6.08 Transfer Taxes. All transfer, documentary, sales,
use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with
this Agreement and the Ancillary Documents (including any real property transfer Tax and any other similar Tax) (collectively, “Transfer
Taxes”) shall be borne fifty percent (50%) by Seller and fifty percent (50%) by Buyer, and each party shall pay its respective
share directly to the applicable Governmental Authority when due. The party required by applicable Law to file any Tax Return or other
document with respect to such Transfer Taxes shall timely file the same, and the other party shall cooperate with respect thereto as
necessary.
Section
6.09 Tax Clearance Certificates. If requested by
Buyer, Seller shall notify all of the taxing authorities in the jurisdictions that impose Taxes on Seller or where Seller has a duty
to file Tax Returns of the transactions contemplated by this Agreement in the form and manner required by such taxing authorities, if
the failure to make such notifications or receive any available tax clearance certificate (a “Tax Clearance Certificate”)
could subject Buyer to any Taxes of Seller. If any taxing authority asserts that Seller is liable for any Tax, Seller shall promptly
pay any and all such amounts and shall provide evidence to Buyer that such liabilities have been paid in full or otherwise satisfied.
Section
6.10 Further Assurances. Following the Closing, each of the parties hereto shall, and
shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and
take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated
by this Agreement and the Ancillary Documents.
Section
6.11 Corporate Matters. Immediately after the Closing: (i) Parent shall terminate the employment of Gary Atkinson not-for-”Cause”
(as such term is defined in the Atkinson Employment Agreement) pursuant to Section 5.2 of the Atkinson Employment Agreement; (ii) Parent
shall terminate the employment of Alex Andre not-for-”Cause” (as such term is defined in the Andre Employment Agreement),
pursuant to Section 5.2 of the Andre Employment Agreement; and (iii) Gary Atkinson will resign as a member of the Board of Directors.
Prior to the Closing and subject to applicable Law, the Board of Directors shall take all actions reasonably necessary to cause, effective
as of the Closing: (i) Parent to enter into an employment agreement with Andrew Thompson, in form and substance reasonably satisfactory
to Parent and Andrew Thompson, pursuant to which Andrew Thompson shall be appointed to serve as the Chief Executive Officer of Parent;
and (ii) two (2) directors nominated by Seller (the “Seller Board Designees”) to be appointed to the Board of Directors.
Each Seller Board Designee shall serve from the Closing Date until his or her successor has been duly elected and qualified or until
his or her earlier death, disability, resignation or removal.
Section
6.12 Seller Preservation Covenant. During the period commencing on the Closing Date and ending on the second (2nd) anniversary of
the Closing Date (or, if later, the date on which all pending indemnification claims have been finally resolved), Seller shall not dissolve,
liquidate or distribute all or substantially all of its assets unless Seller has first established a reserve reasonably expected to satisfy
pending indemnification obligations or provided Buyer with a creditworthy guaranty.
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Section
6.13 Short Sales Prohibition. During the period
commencing on the date hereof and ending on the earlier of (a) the six (6)-month anniversary of the Closing Date, and (b) the date on
which all Securities held by Seller have been registered for resale under the Securities Act (such period, the “Lock-Up Period”),
Seller covenants that neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will, directly or indirectly,
execute any Short Sales of Parent’s securities. Upon expiration of the Lock-Up Period, this Section 6.13 shall be of no further
force or effect.
ARTICLE
VII
IndemnificatioN
Section
7.01 Survival. Subject to the limitations and other
provisions of this Agreement, the representations and warranties contained herein shall remain in full force and effect until the date
that is two years from the Closing Date; provided, however, that the representations and warranties in: (i) Section 4.01, Section
4.02, Section 4.03, Section 4.24, Section 5.01, Section 5.02, Section 5.04 and Section 5.05 shall survive until the date that is six
(6) years from the Closing Date; and (ii) Section 4.21 shall survive for the full period of all applicable statutes of limitations (giving
effect to any waiver, mitigation or extension thereof) plus sixty (60) days. All covenants and agreements of the parties contained herein
shall survive the Closing for the period explicitly specified therein or, if no period is specified, two (2) years from the Closing Date.
Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in
writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period
shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally
resolved.
Section
7.02 Indemnification By Seller. Subject to the other
terms and conditions of this ARTICLE VII, from and after Closing, Seller shall indemnify and defend each of Parent and Buyer, and each
of their respective Affiliates and Representatives (collectively, the “Purchaser Indemnitees”) against, and shall
hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by,
or imposed upon, the Purchaser Indemnitees based upon, arising out of, with respect to or by reason of:
(a)
any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement, the Ancillary Documents
or in any certificate or instrument delivered by or on behalf of Seller pursuant to this Agreement, as of the date such representation
or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and
warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such
specified date);
(b)
any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement, the Ancillary
Documents or any certificate or instrument delivered by or on behalf of Seller pursuant to this Agreement;
(c)
any Excluded Asset or any Excluded Liability;
48
(d)
any Third-Party Claim based upon, resulting from or arising out of the business, operations, properties, assets or obligations of Seller
or any of its Affiliates (other than the Purchased Assets or Assumed Liabilities) conducted, existing or arising on or prior to the Closing
Date; or
(e)
any Losses arising out of (i) the failure of Seller to have obtained, on or prior to the Closing, any material Permit required under
applicable energy Laws for the conduct of the Business, (ii) any interconnection agreement, power purchase agreement or off-take contract
of the Business not being in full force and effect as of the Closing, or (iii) any material violation by Seller, on or prior to the Closing,
of any FERC order or applicable state energy regulatory requirement, in each case of which Seller had Knowledge as of the Closing.
Section
7.03 Indemnification By Buyer. Subject to the other
terms and conditions of this ARTICLE VII, from and after the Closing, Parent and Buyer shall indemnify and defend each of Seller and
its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall hold
each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or
imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of:
(a)
any inaccuracy in or breach of any of the representations or warranties of Parent or Buyer contained in this Agreement or in any certificate
or instrument delivered by or on behalf of Parent or Buyer pursuant to this Agreement, as of the date such representation or warranty
was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that
expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
(b)
any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Parent or Buyer pursuant to this Agreement;
or
(c)
any Assumed Liability.
Section
7.04 Certain Limitations. The indemnification provided
for in Section 7.02 and Section 7.03 shall be subject to the following limitations:
(a)
Seller shall not be liable to the Purchaser Indemnitees for any individual or series of related Losses under Section 7.02(a) that do
not exceed Twenty-Five Thousand Dollars ($25,000) (the “De Minimis Threshold”), and any such Losses shall not be counted
toward the Basket. Seller shall not be liable to the Purchaser Indemnitees for indemnification under Section 7.02(a) until the aggregate
amount of all Losses in respect of indemnification under Section 7.02(a) exceeds Two Hundred Thirty Thousand Dollars ($230,000) (the
“Basket”), in which event Seller shall be required to pay or be liable for all such Losses from the first dollar.
The aggregate amount of all Losses for which Seller shall be liable pursuant to Section 7.02(a) shall not exceed Two Million Three Hundred
Thousand Dollars ($2,300,000), equal to ten percent (10%) of the Purchase Price (the “Cap”). For the avoidance of
doubt, any Losses payable by Seller in respect of which the foregoing thresholds are satisfied shall be satisfied solely in accordance
with the payment mechanics set forth in Section 7.06, including Seller’s right to satisfy such Losses by surrender of Securities
and/or setoff.
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(b)
Neither Parent nor Buyer shall be liable to the Seller Indemnitees for indemnification under Section 7.03(a) until the aggregate amount
of all Losses in respect of indemnification under Section 7.03(a) exceeds the Basket, in which event Parent and Buyer shall be required
to pay or be liable for all such Losses from the first dollar. The aggregate amount of all Losses for which Parent and Buyer shall be
liable pursuant to Section 7.03(a) shall not exceed the Cap.
(c)
Notwithstanding the foregoing, the limitations set forth in Section 7.04(a) and Section 7.04(b) shall not apply to Losses based upon,
arising out of, with respect to or by reason of any inaccuracy in or breach of any representation or warranty in Section 4.01, Section
4.02, Section 4.03, Section 4.21, Section 4.24, Section 5.01, Section 5.02, Section 5.04 and Section 5.05. Notwithstanding the foregoing,
no party shall be liable under this ARTICLE VII for punitive, consequential, incidental, special, exemplary or speculative damages, except
to the extent such damages are actually awarded to a third party.
(d)
For purposes of this ARTICLE VII, solely for purposes of determining the existence of any inaccuracy in, or breach of, any representation
or warranty, any inaccuracy in or breach of any representation or warranty shall be determined without regard to any materiality, Material
Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty. For the avoidance
of doubt, all such materiality, Material Adverse Effect and similar qualifications shall be given full effect for purposes of calculating
the amount of any Loss arising out of or resulting from any such inaccuracy or breach.
Section
7.05 Indemnification Procedures. The party making
a claim under this ARTICLE VII is referred to as the “Indemnified Party”, and the party against whom such claims are
asserted under this ARTICLE VII is referred to as the “Indemnifying Party”.
(a)
Third-Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by
any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a
“Third-Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof,
but in any event not later than thirty (30) calendar days after receipt of such notice of such Third-Party Claim. The failure to give
such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to
the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall
describe the Third-Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate
the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying
Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third-Party
Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate
in good faith in such defense; provided, that if the Indemnifying Party is Seller, such Indemnifying Party shall not have the
right to defend or direct the defense of any such Third-Party Claim that: (x) is asserted directly by or on behalf of a Person that is
a supplier or customer of the Business, or (y) seeks an injunction or other equitable relief against the Indemnified Party. In the event
that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 7.05(b), it shall have the right to take
such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in
the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third-Party
Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements
of such counsel shall be at the expense of the Indemnified Party, provided, that if in the reasonable opinion of counsel to the
Indemnified Party: (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available
to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot
be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction
for which the Indemnified Party determines counsel is required. If the Indemnifying Party elects not to compromise or defend such Third-Party
Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to
diligently prosecute the defense of such Third-Party Claim, the Indemnified Party may, subject to Section 7.05(b), pay, compromise, or
defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party
Claim. Seller, Parent and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party
Claim, including making available (subject to the provisions of Section 6.01) records relating to such Third-Party Claim and furnishing,
without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.
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(b)
Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter
into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section
7.05(b). If a firm offer is made to settle a Third-Party Claim without leading to Liability or the creation of a financial or other obligation
on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all
Liabilities and obligations in connection with such Third-Party Claim and the Indemnifying Party desires to accept and agree to such
offer, the Indemnifying Party shall give written notice to that effect to the Indemnified Party. If the Indemnified Party fails to consent
to such firm offer within ten (10) days after its receipt of such notice, the Indemnified Party may continue to contest or defend such
Third-Party Claim and in such event, the maximum liability of the Indemnifying Party as to such Third-Party Claim shall not exceed the
amount of such settlement offer. If the Indemnified Party fails to consent to such firm offer and also fails to assume defense of such
Third-Party Claim, the Indemnifying Party may settle the Third-Party Claim upon the terms set forth in such firm offer to settle such
Third-Party Claim. If the Indemnified Party has assumed the defense pursuant to Section 7.05(a), it shall not agree to any settlement
without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed).
(c)
Direct Claims. Any Action by an Indemnified Party
on account of a Loss which does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by the Indemnified
Party giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty
(30) days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall
not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying
Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in
reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably
practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days
after its receipt of such notice to respond in writing to such Direct Claim. The Indemnified Party shall allow the Indemnifying Party
and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to
what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s
investigation by giving such information and assistance (including access to the Indemnified Party’s premises and personnel and
the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably
request. If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to
have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified
Party on the terms and subject to the provisions of this Agreement.
Section
7.06 Payments.
(a)
Satisfaction of Losses. Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this
ARTICLE VII, the Indemnifying Party shall satisfy its obligations within thirty (30) Business Days of such agreement or final, non-appealable
adjudication. Notwithstanding anything to the contrary in this Agreement, where Seller is the Indemnifying Party, Seller may elect, in
its sole discretion, to satisfy any such obligation, in whole or in part, by any one or more of the following methods: (i) by surrendering
to Parent that number of shares of Series B Preferred Stock and/or Common Stock (valued at the same per-share value ascribed to such
Securities in determining the Purchase Price under Section 2.05) having an aggregate value equal to the Loss; (ii) by setoff against
any amounts then or thereafter payable to Seller or its Affiliates under this Agreement; or (iii) by wire transfer of immediately available
funds.
(b)
Interest. Should the Indemnifying Party fail to satisfy any such obligation within the thirty (30) Business Day period (by any
permitted method), any unpaid amount shall accrue interest from and including the date of agreement or final, non-appealable adjudication
to but excluding the date of payment at a rate per annum equal to five percent (5%), calculated daily on the basis of a 365-day year
and the actual number of days elapsed.
(c)
Sole Recourse; No Liability for Parent Obligations. Any Losses payable to a Purchaser Indemnitee pursuant to this ARTICLE VII
shall be satisfied by Seller solely in accordance with Section 7.02, and in no event shall Seller be liable for, or be required to indemnify
any Purchaser Indemnitee against, any Liabilities or obligations of Parent, Buyer or any of their respective Affiliates (including any
Liabilities of Parent arising prior to or after the Closing that do not constitute Excluded Liabilities).
51
Section
7.07 Tax Treatment of Indemnification Payments. All
indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Purchase Price for Tax purposes,
unless otherwise required by Law.
Section
7.08 Effect of Investigation and Knowledge. Notwithstanding
anything to the contrary in this Agreement, no Indemnified Party shall be entitled to indemnification, payment or reimbursement for,
and the Indemnifying Party shall have no liability with respect to, any Loss arising out of or relating to any inaccuracy in or breach
of any representation, warranty, covenant or agreement to the extent that the Indemnified Party or any of its Representatives had actual
knowledge of such inaccuracy or breach (or of the facts or circumstances giving rise thereto) on or prior to the Closing. For the avoidance
of doubt, any matter disclosed in writing to, or otherwise within the actual knowledge of, the Indemnified Party or its Representatives
on or prior to the Closing shall be deemed waived for purposes of the indemnification obligations under this ARTICLE VII.
Section
7.09 Exclusive Remedies. Subject to and except for Section 6.02 and Section 8.11, the
parties acknowledge and agree that from and after the Closing Date their sole and exclusive remedy with respect to any and all claims
(other than claims arising from fraud or willful misconduct on the part of a party hereto in connection with the transactions contemplated
by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating
to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this ARTICLE VII. In furtherance
of the foregoing, except with respect to Section 6.02 and Section 8.11, each party hereby waives, from and after Closing, to the fullest
extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant,
agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other
parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in this ARTICLE VII. Nothing in this Section 7.09 shall limit any Person’s right to
seek and obtain any equitable relief to which any Person shall be entitled or to seek any remedy on account of any party’s fraud
or willful misconduct.
ARTICLE
VIII
MiscellaneouS
Section
8.01 Expenses. Except as otherwise expressly provided
herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not any Closing shall have occurred.
52
Section
8.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications
hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt);
(b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by
e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business
Day if sent after normal business hours of the recipient: or (d) on the third day after the date mailed, by certified or registered mail,
return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or
at such other address for a party as shall be specified in a notice given in accordance with this Section 8.02):
If
to Seller, Azure S.R.L. or the Optionors:
Azure
Energy, LLC
2459
Wilkinson Blvd, Suite 120-C
Charlotte,
NC 28208
E-mail:
[_______________]
Attention:
Andrew Thompson
with
a copy to:
Manatt,
Phelps & Phillips, LLP
Times
Square Tower
7
Times Square, 23rd Floor
New
York, NY 10036
E-mail:
MOgurick@manatt.com
Attention:
Matthew Ogurick, Esq.
If
to Parent or Buyer:
Algorhythm
Holdings, Inc.
6301
NW 5th Way, Suite 2900
Fort
Lauderdale, FL 33309
E-mail:
[_______________]
Attention:
Gary Atkinson, Chief Executive Officer
with
a copy to:
Sichenzia
Ross Ference Carmel LLP
1185
Avenue of the Americas, 26th Floor
New
York, NY 10036
E-mail:
gischenzia@srfc.law
Attention:
Gregory Sichenzia, Esq.
Section
8.03 Interpretation. For purposes of this Agreement,
(a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without
limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,”
“hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references
herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and
Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document
as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means
such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder.
This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party
drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed
with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
53
Section
8.04 Headings. The headings in this Agreement are
for reference only and shall not affect the interpretation of this Agreement.
Section
8.05 Severability. If any term or provision of this
Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.
Except as provided in Section 6.02(d), upon such determination that any term or other provision is invalid, illegal or unenforceable,
the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated
to the greatest extent possible.
Section
8.06 Entire Agreement. This Agreement and the Ancillary
Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein
and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject
matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the Ancillary Documents,
the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements
in the body of this Agreement will control.
Section
8.07 Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party
may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably
withheld, conditioned or delayed.
Section
8.08 No Third-Party Beneficiaries. Except as provided
in ARTICLE VII, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
Section
8.09 Amendment and Modification; Waiver. This Agreement
may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of
the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any
party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written
waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay
in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege.
Section
8.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a)
This Agreement shall be governed by and construed in accordance with the internal laws of the State of North Carolina without giving
effect to any choice or conflict of law provision or rule (whether of the State of North Carolina or any other jurisdiction).
54
(b)
Submission to Jurisdiction. ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE ANCILLARY DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY SHALL BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA (CHARLOTTE DIVISION) OR THE SUPERIOR COURT OF THE STATE OF NORTH CAROLINA (INCLUDING THE NORTH CAROLINA BUSINESS COURT),
AND THE APPELLATE COURTS THEREFROM, IN EACH CASE SITTING IN MECKLENBURG COUNTY, NORTH CAROLINA. EACH PARTY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY
MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT
IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY
PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c)
Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY DOCUMENTS
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE
EVENT OF A LEGAL ACTION; (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY;
AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 8.10(c).
Section
8.11 Specific Performance. The parties agree that
irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at
law or in equity.
Section
8.12 Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered
by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original
signed copy of this Agreement.
[Signature
page follows]
55
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their duly authorized
officers/representatives.
ALGORHYTHM
HOLDINGS, INC.
By:
/s/ Gary Atkinson
Name:
Gary Atkinson
Title:
Chief Executive Officer
AZURE
HOLDINGS, LLC
By:
/s/ Gary Atkinson
Name:
Gary Atkinson
Title:
Chief Executive Officer
AZURE
ENERGY, LLC
By:
/s/ Andrew Thompson
Name:
Andrew Thompson
Title:
Managing Partner
Solely for the purposes of Section 2.09
and 3.02(c):
AZURE ENERGY, S.R.L.
By:
/s/ Kevin Tangen
Name:
Kevin S. Tangen
Title:
President
TANGEN FAMILY TRUST
By:
/s/ Kevin Tangen
Name:
Kevin Tangen
Title:
Authorized Signatory
1979, FLP
By:
/s/ Andrew Thompson
Name:
Andrew Thompson
Title:
Authorized Signatory
[Signature
Page to Asset Purchase Agreement]
56
EXHIBIT
A
Form
of Certificate of Designation of Series B Preferred Stock
EXHIBIT
B
Form
of Option Agreement
EXHIBIT
C
FORM
OF LIMITED POWER OF ATTORNEY
EX-10.2
EX-10.2
Filename: ex10-2.htm · Sequence: 4
Exhibit 10.2
OPTION
AGREEMENT
This
OPTION AGREEMENT (this “Agreement”), dated as of September 15, 2026 (the “Effective Date”), is
entered into by and among Algorhythm Holdings, Inc., a Delaware corporation (the “Optionee”), Azure Energy, LLC, a
Delaware limited liability company (“Target”), Tangen Family Trust, a Washington trust (“TFT”),
and 1979, FLP, a North Carolina limited partnership (“1979 FLP”; together with TFT, the “Optionors”).
Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Asset Purchase Agreement
(as defined below).
WHEREAS,
Target, Optionee, Azure Energy, S.R.L., a Costa Rica company (“Azure S.R.L.”), Optionors and Azure Holdings, LLC,
a Nevada limited liability company (“Azure Holdings”), have entered into that certain asset purchase agreement, dated
as of September 15, 2026 (the “Asset Purchase Agreement”), pursuant to which Optionors granted Optionee the option
to enter into a binding agreement to purchase 79.0286% of the issued and
outstanding equity securities of Azure S.R.L. from Optionors; and
WHEREAS,
the parties hereto wish to enter into this Agreement to set forth the terms and conditions governing all matters related to the option
granted hereunder.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Grant
of Option. In satisfaction of the obligations of Optionors under Section 2.09 of the Asset Purchase Agreement and for other good
and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Optionors hereby grant to Optionee an exclusive
and irrevocable option to purchase 79.0286% of the issued and outstanding
equity securities of Azure S.R.L. from Optionors (the “Optionor Securities”) on the terms and conditions
set forth herein (the “Option”).
2. Option
Term. The term of the Option shall commence on the Effective Date and automatically expire at 11:59 p.m. Eastern Time on the three-year
anniversary of the Effective Date (the “Option Termination Date”), unless duly extended, exercised, or sooner terminated
as provided in this Agreement (the “Option Term”).
3. Purchase
Price.
(a) The
aggregate purchase price for the Optionor Securities shall be Thirty Million Dollars ($30,000,000) (the “Purchase Price”).
(b) Optionee
may pay up to fifty percent (50%) of the Purchase Price in cash, with the remainder payable in shares of Series B Preferred Stock, par
value $1.00 per share, of Optionee (the “Series B Preferred Stock”). Optionee shall determine in its sole and absolute
discretion the proportion of cash to shares of Series B Preferred Stock that will comprise the consideration to be remitted to Optionors
for payment of the Purchase Price.
(c) No
separate option payment or option premium shall be payable by Optionee for the grant of the Option. The consideration for the grant of
the Option is the satisfaction of Optionors’ obligations under Section 2.09 of the Asset Purchase Agreement, the mutual covenants
and agreements made by the parties hereto and Azure Holdings in the Asset Purchase Agreement, including but not limited to the purchase
price paid by Optionee to Target thereunder, and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged.
4. Exercise
of Option.
(a) At
any time during the Option Term, Optionee may exercise the Option by delivering to Optionors a written notice, substantially in the form
attached hereto as Exhibit A, of Optionee’s intention to exercise the Option (the “Exercise Notice”),
specifying: (i) the date on which the closing of the Equity Purchase (as defined below) shall occur (the “Closing Date”),
which shall be no earlier than thirty (30) days and no later than sixty (60) days after delivery of the Exercise Notice; and (ii) the
proportion of the Purchase Price to be paid by Optionee in cash and shares of Series B Preferred Stock.
(b) Upon
delivery of the Exercise Notice to Optionors, Optionors and Optionee shall negotiate in good faith, draft and execute a definitive equity
purchase agreement, in form and substance mutually agreeable to the parties, for the purchase by Optionee of the Optionor Securities
from Optionors (the “Equity Purchase Agreement”; the transactions contemplated therein, the “Equity Purchase”).
The Equity Purchase Agreement will contain the transaction terms set forth herein along with customary representations, warranties, covenants,
and closing conditions for transactions of this nature.
(c) The
closing of the Equity Purchase (the “Closing”) shall take place on the Closing Date.
(d) If
Optionee does not deliver an Exercise Notice to Optionors on or before the Option Termination Date, the Option shall terminate automatically
without any further action by any party hereto and no party hereto shall have any further obligations hereunder except for those obligations
that expressly survive the termination of this Agreement.
5. Default
by Optionors. If any Optionor fails to perform any of its obligations or is otherwise in default hereunder, Optionee shall have the
right to terminate this Agreement and/or seek such other relief as Optionee may have at law or in equity, including, without limitation,
seeking injunctive relief to prevent a sale of some or all of the Optionor Securities to a party other than Optionee and the filing of
an action for specific performance.
6. Regulatory
Approvals.
(a) The
parties acknowledge that the exercise of the Option by Optionee and the issuance of shares of Series B Preferred Stock by Optionee to
Optionors in connection therewith may require: (i) compliance with applicable federal, state, local and foreign securities laws and regulations;
(ii) approvals pursuant to the applicable rules and regulations of The Nasdaq Stock Market or by the stockholders of Optionee, (iii)
filings with the Federal Trade Commission and Department of Justice under Hart-Scott-Rodino Antitrust Improvements Act of 1976 (if applicable),
and (iv) foreign regulatory approvals necessary for the transfer of the Optionor Securities. The Closing shall be conditioned upon the
receipt of all such required approvals.
2
(b) The
parties shall cooperate in good faith to obtain all governmental approvals necessary to effect the transfer of the Optionor Securities.
7. Covenants
During Option Term. During the Option Term, except: (i) with the written consent of Optionee, which consent may not be unreasonably
withheld, delayed or conditioned; (ii) as otherwise expressly permitted by the terms of this Agreement; or (iii) as required by law,
Azure S.R.L. shall conduct its business in the ordinary course in substantially the same manner as currently conducted and in material
compliance with all laws, and use commercially reasonable efforts to preserve intact its present operations, organization and goodwill.
Additionally, during the Option Term, except with the written consent of Optionee, which consent may not be unreasonably withheld, delayed
or conditioned, Azure S.R.L. will not:
(a) transfer,
issue, sell or dispose of any equity interests or other securities of Azure S.R.L. or grant options, warrants, calls or other rights
to purchase or otherwise acquire equity interests or other securities of Azure S.R.L.;
(b) (i)
incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Azure S.R.L. (other than equipment financing or trade credit in the ordinary
course of business), guarantee any debt securities of another Person, or enter into any arrangement having the economic effect of any
of the foregoing; or (ii) make any loans, advances or capital contributions to any other Person (other than the extension of trade credit
or advances to employees in the ordinary course of business);
(c) amend
the articles of organization, operating agreement or other comparable governing documents of Azure S.R.L.;
(d) mortgage,
pledge, create or otherwise grant any encumbrance on any property or assets, whether tangible or intangible, of Azure S.R.L. having a
fair market value in excess of $10,000, other than encumbrances that will be released at the Closing;
(e) enter
into, renew, modify or revise any contract with any officer, director or employee of Azure S.R.L., other than in the ordinary course
of business, or terminate the employment of any executive officer of Azure S.R.L. other than for cause;
(f) change
the methods, principles or practices of accounting of Azure S.R.L. in any manner that would have a material adverse effect on Azure S.R.L.,
except as required by law, any governmental authority or changes in U.S. generally accepted accounting principles;
(g) make,
change or rescind any material tax election inconsistent with its past practice, amend any material tax return or file any material claim
for refund, settle or compromise any material tax liability of Azure S.R.L., enter into any closing or similar agreement with respect
to taxes, or consent to any extension or waiver of the statute of limitations on the assessment or collection of any tax;
3
(h) transfer,
sell or otherwise dispose of, or lease or exclusively license, any property or assets of Azure S.R.L. outside of the ordinary course
of business for which the aggregate consideration paid or payable: (i) in any individual transaction is in excess of $10,000; or (ii)
in the aggregate is in excess of $25,000;
(i) purchase
or otherwise acquire (whether by merger or otherwise), or lease or license, any property or assets outside of the ordinary course of
business for which the aggregate consideration paid or payable: (A) in any individual transaction is in excess of $10,000; or (B) in
the aggregate is in excess of $25,000;
(j) enter
into or materially amend or modify or terminate any material contract or any contract that, if it was in effect on the date hereof, would
have been a material contract, or waive any material default under, or release, settle, or compromise any material claim against Azure
S.R.L. or any material liability owing to Azure S.R.L. under any material contract or such other contract;
(k) except
in the ordinary course of business consistent with past practice: (i) make any capital expenditures in excess of $10,000 individually
or $25,000 in the aggregate; or (ii) authorize any capital expenditure in excess of $10,000 individually or $25,000 in the aggregate,
regardless of whether such expenditure is expected to be actually incurred before or after the Closing;
(l) settle,
release, waive or compromise any pending or threatened legal, administrative or other proceeding; or
(m) authorize
any of, or commit or agree to take any of, the foregoing actions.
8. Representations
and Warranties of Optionors. Each Optionor represents and warrants to Optionee that as of the Effective Date:
(a) Optionor
has good and valid title to its respective Optionor Securities, free and clear of all liens and encumbrances, except as created by this
Agreement.
(b) Upon
exercise of the Option and payment of the Purchase Price, Optionee will have good and valid title to Optionor’s respective Optionor
Securities and Optionor’s respective Optionor Securities will pass to Optionee free and clear of all liens and encumbrances.
(c) Except
for this Agreement: (i) there are no outstanding options, warrants, agreements, conversion rights, preemptive rights, or other rights
to subscribe for, purchase or otherwise acquire all or any part of Optionor’s respective Optionor Securities; (ii) there are no
voting trusts or other agreements or understandings to which Optionor is a party with respect to Optionor’s respective Optionor
Securities, and (iii) there is no indebtedness of Optionor that has general voting rights with respect to Optionor’s respective
Optionor Securities.
(d) There
are no restrictions on the transfer of the Optionor’s respective Optionor Securities.
4
(e) Optionor
has the power and authority to execute and deliver this Agreement and perform its obligations hereunder.
(f) This
Agreement, when executed by the other parties hereto, constitutes a legal, valid, and binding obligation of Optionor.
(g) The
execution and performance of Optionor’s obligations under this Agreement does not and will not violate any law or agreement to
which Optionor is a party.
(h) If
Optionor is an entity, it is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization.
9. Representations
and Warranties of Target and Azure S.R.L.. Target and Azure S.R.L. represent and warrant to Optionee that as of the Effective Date:
(a) The
Optionor Securities represent 79.0286% of the issued and outstanding
equity interests in Azure S.R.L.
(b) The
Optionor Securities have been validly authorized and issued and are fully paid and non-assessable.
(c) No
Person has a right to purchase any equity securities in Azure S.R.L.
(d) Except
for this Agreement: (i) there are no outstanding options, warrants, agreements, conversion rights, preemptive rights, or other rights
to subscribe for, purchase or otherwise acquire all or any part of any equity securities of Azure S.R.L., (ii) there are no voting trusts
or other agreements or understandings to which Azure S.R.L. is a party with respect to the voting of any equity interests in Azure S.R.L.,
and (iii) there is no indebtedness of Azure S.R.L. issued and outstanding having general voting rights with respect to any equity interest
in Azure S.R.L.
(e) Except
for this Agreement, there are no outstanding obligations of any Person to repurchase, redeem or otherwise acquire outstanding equity
interests in Azure S.R.L.
(f) Azure
S.R.L. has no equity interests reserved for issuance.
(g) This
Agreement, when executed by the other parties hereto, constitutes a legal, valid, and binding obligation of Azure S.R.L.
(h) The
execution and performance of Azure S.R.L.’s obligations under this Agreement does not and will not violate any law or agreement
to which Azure S.R.L.is a party.
(i) Azure
S.R.L. is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization.
5
10. Representations
and Warranties of Optionee and Azure Holdings. Each of Optionee and Azure Holdings represents and warrants to the Target, Optionors
and Azure S.R.L. that, as of the Effective Date:
(a) each
of the representations and warranties of Optionee and Azure Holdings set forth in Section 5 of the Asset Purchase Agreement is true and
correct as of the Effective Date, in each case as if such representations and warranties were set forth in full herein and made as of
the Effective Date, and each such representation and warranty is hereby incorporated into this Agreement by reference as if fully set
forth herein; and
(b) Optionee
has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder, including
the exercise of the Option and consummation of the Equity Purchase in accordance with the terms hereof, and the execution, delivery and
performance of this Agreement by Optionee have been duly authorized by all necessary corporate action on the part of Optionee, including
all requisite approvals of the board of directors of Optionee, in each case obtained prior to the Effective Date.
11. Assignment
of Option. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs or
successors and permitted assigns, as applicable. Optionee may assign its interest in this Agreement without the prior written consent
of Optionors, provided: (i) Optionee gives Optionors written notice of such assignment within five (5) days after such assignment and
(ii) Optionee’s assignee executes an instrument in form reasonably satisfactory to Optionors agreeing to be bound by all the terms
and conditions of this Agreement. Upon any assignment of Optionee’s entire interest under this Agreement, Optionee shall be relieved
of all further liability under this Agreement.
12. Notices.
Unless specifically stated otherwise in this Agreement, all notices, waivers, and demands required or permitted hereunder shall be in
writing and delivered to the addresses set forth below, by one of the following methods: (i) hand delivery, whereby delivery is deemed
to have occurred at the time of delivery; (ii) a nationally recognized overnight courier company, whereby delivery is deemed to have
occurred the business day following deposit with the courier; (iii) registered United States mail, signature required and postage-prepaid,
whereby delivery is deemed to have occurred on the third business day following deposit with the United States Postal Service; or (iv)
electronic transmission (facsimile or email) provided that the transmission is completed no later than 5:30 p.m. Eastern Time on a business
day and the original also is sent via overnight courier or United States Mail, whereby delivery is deemed to have occurred at the end
of the business day on which electronic transmission is completed.
If
to Target or Optionors:
Azure
Energy, LLC
2459
Wilkinson Blvd, Suite 120-C
Charlotte,
NC 28208
E-mail:
[________________]
Attention:
Andrew Thompson
with
a copy to:
Manatt,
Phelps & Phillips, LLP
Times
Square Tower
7
Times Square, 23rd Floor
New
York, NY 10036
E-mail:
MOgurick@manatt.com
Attention:
Matthew Ogurick, Esq
6
If
to Optionee:
Algorhythm
Holdings, Inc.
6301
NW 5th Way, Suite 2900
Fort
Lauderdale, FL 33309
E-mail:
[________________]
Attention:
Gary Atkinson, Chief Executive Officer
with
a copy to:
Sichenzia
Ross Ference Carmel LLP
1185
Avenue of the Americas, 26th Floor
New
York, NY 10036
E-mail:
gsichenzia@srfc.law
Attention:
Gregory Sichenzia, Esq.
Any
party to this Agreement may change its address for purposes of this Section 12 by giving written notice as provided in this Section 12.
All notices and demands delivered by a party’s attorney on a party’s behalf shall be deemed to have been delivered by said
party. Notices shall be valid only if served in the manner provided in this Section 12.
13. Miscellaneous.
(a) Entire
Agreement. This Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject
matter contained herein and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect
to such subject matter. This Agreement is entered into after full investigation by each party and neither party is relying upon any statement
or representation made by the other party not set forth in this Agreement.
(b) Amendments.
This Agreement can only be amended by a writing signed by each of the parties hereto. The observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of
the party making the waiver.
(c) Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable Law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms
(d) Time
of Essence. Optionors and Optionee hereby acknowledge and agree that time is strictly of the essence with respect to each and every
term, condition, obligation, and provision hereof and that failure to timely perform any of the terms, conditions, obligations, or provisions
hereof by either party shall constitute a material breach of and a non-curable (but waivable) default under this Agreement by the party
so failing to perform.
(e) Further
Assurances. The parties shall from time to time and at all times hereafter make, do, execute, or cause or procure to be made, done
and executed such further acts, deeds, conveyances, consents and assurances without further consideration, which may reasonably be required
to effect the transactions contemplated by this Agreement.
7
(f) Termination.
This Agreement shall terminate automatically without any action by any of the parties hereto upon the earliest of: (i) the Closing; (ii)
the expiration of the Option Term without exercise; or (iii) mutual written agreement. Upon termination, neither party shall have further
obligations except for those obligations under this Section 13 that survive termination.
(g) Governing
Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of North Carolina without
giving effect to any choice or conflict of law provision or rule (whether of the State of North Carolina or any other jurisdiction).
(h) Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which when taken together
shall constitute one and the same document.
[Signaure
Page Follows]
8
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their duly authorized
officers/representatives.
AZURE ENERGY, LLC
By:
/s/ Andrew Thompson
Name:
Andrew Thompson
Title:
Managing Partner
AZURE ENERGY, S.R.L.
By:
/s/ Kevin Tangen
Name:
Kevin S. Tangen
Title:
President
ALGORHYTHM HOLDINGS, INC.
By:
/s/ Gary Atkinson
Name:
Gary Atkinson
Title:
Chief
Executive Officer
TANGEN FAMILY
TRUST
By:
/s/ Kevin Tangen
Name:
Kevin Tangen
Title:
Authorized Signatory
1979, FLP
By:
/s/ Andrew Thompson
Name:
Andrew Thompson
Title:
Authorized Signatory
[Signature
Page to Option Agreement]
Exhibit
A
NOTICE
OF EXERCISE OF OPTION
(Pursuant
to Section 4 of the Option Agreement)
Reference
is made to that certain Option Agreement, dated as of September 15, 2026 (the “Option Agreement”), by and among Algorhythm
Holdings, Inc., a Delaware corporation (the “Optionee”), Azure Energy, LLC, a Delaware limited liability company (“Target”),
Tangen Family Trust, a Washington trust (“TFT”), and 1979, FLP, a North Carolina limited partnership (together with TFT,
the “Optionors”). Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms
in the Option Agreement.
Optionee
hereby notifies Optionors, pursuant to Section 4 of the Option Agreement, of Optionee’s irrevocable election to exercise the Option
in full, and to purchase all of the Optionor Securities, on the terms and subject to the conditions set forth in the Option Agreement
and as specified below:
Date
of this Notice:
Proposed
Closing Date:
(no
earlier than 30, nor later than 60, days after the date of this Notice)
Proportion
of Purchase Price:
Cash
Portion (up to 50%):
Series
B Preferred Stock Portion:
OPTIONEE:
ALGORHYTHM
HOLDINGS, INC.
By:
Name:
Title:
Date:
EX-10.3
EX-10.3
Filename: ex10-3.htm · Sequence: 5
Exhibit
10.3
EXECUTIVE
EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (the “Agreement”) is made and entered into as of September 15, 2026 (the “Effective
Date”), by and between [______________] (the “Executive”) and Algorhythm Holdings, Inc., a Delaware corporation
(the “Company”), and sets forth the terms and conditions with respect to the Executive’s employment with the
Company during the Term (as defined below).
WHEREAS,
the Board of Directors of the Company has determined to appoint the Executive as the [______________] of the Company as of the Effective
Date; and
WHEREAS,
the Company desires to employ the Executive as its [______________], and the Executive desires to accept such employment, on the terms
and conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1.
Term.
The Executive’s term of employment under this Agreement (such term of employment, as it may be extended or terminated, is herein
referred to as the “Employment Term”) shall be for a term commencing on the Effective Date and, unless terminated earlier
as provided in Section 5 hereof, ending on the third anniversary of the Effective Date (the “Original Employment Term”);
provided that, on such third anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary
thereof, a “Renewal Date”), the Agreement shall be deemed to be automatically extended, upon the same terms and conditions,
for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement
at least ninety 90 days’ prior to the applicable Renewal Date. The period during which the Executive is employed by the Company
hereunder is hereinafter referred to as the “Employment Term.”
2.
Position and Duties.
2.1
Position. During the Employment Term, the Executive
shall serve as the [______________] of the Company, reporting to the [______________]. In this capacity the Executive shall have such
duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities
in similarly sized companies, and shall have primary responsibility for [______________].
2.2
Duties. During the Employment Term, the Executive
shall devote substantially all of the Executive’s business time (excluding periods of vacation and other approved leaves of absence)
to the performance of the Executive’s duties hereunder and will not engage in any other business, profession, or occupation for
compensation or otherwise which would conflict or interfere with the performance of such services either directly or indirectly without
the prior written consent of the Board. Notwithstanding the foregoing, the Executive will be permitted to (a) with the prior written
consent of the Board act or serve as a director, trustee, committee member, or principal of any type of business, civic, or charitable
organization as long as such activities are disclosed in writing to the Company’s Board of Directors, and (b) purchase or own less
than five percent (5%) of the publicly traded securities of any corporation; provided that, such ownership represents a passive investment
and that the Executive is not a controlling person of, or a member of a group that controls, such corporation; and provided further that,
the activities described in clauses (a) and (b) do not interfere with the performance of the Executive’s duties and responsibilities
to the Company as provided hereunder, including, but not limited to, the obligations set forth in 12 hereof. Notwithstanding anything
herein to the contrary, for the sake of clarity, the Executive’s ownership interests in, and the positions the Executive holds
with, Azure Energy, LLC and its affiliates, in each case as disclosed in writing to the Board, and the performance by Executive of his
duties and responsibilities thereunder have been expressly approved by the Board and shall not constitute a breach of any provision of
this Agreement.
3.
Place of Performance.
The principal place of Executive’s employment shall be the Company’s principal executive office located at 2459 Wilkinson
Blvd, Suite 120-C, Charlotte, North Carolina 28208; provided that, the Executive may be required to travel from time to time on Company
business during the Employment Term. The Executive may work remotely from Executive’s primary residence so long as doing so does
not interfere with the Executive’s responsibilities under this Agreement; provided that, subject to any health or safety concerns
related to the COVID-19 pandemic or other similar extraordinary circumstances, the Executive shall be required to spend on average two
(2) days per week in the office.
4.
Compensation.
4.1
Base Salary. The Company shall pay the Executive
an annual base salary of $[______________]. The annual base salary shall be paid in periodic installments in accordance with the Company’s
customary payroll practices and applicable wage payment laws, but no less frequently than monthly. The Executive’s base salary
shall be reviewed at least annually by the Board (or a committee thereof) and the Board may, but shall not be required to, increase the
base salary during the Employment Term. However, the Executive’s base salary may not be decreased during the Employment Term without
the Executive’s written consent. The Executive’s annual base salary, as in effect from time to time, is hereinafter referred
to as “Base Salary”.
4.2
Annual Bonus. For each fiscal year of the Employment
Term, the Executive shall be eligible to receive an annual bonus (the “Annual Bonus”) of up to fifty percent (50%)
of the Base Salary. Of this amount, fifty percent (50%) of the Annual Bonus will be earned in full by the Executive if the Executive
is continuously employed by the Company for the entirety of the applicable fiscal year. The remaining fifty percent (50%) of the Annual
Bonus will be subject to the satisfaction of the following performance objectives (the “Performance Bonus”):
(a)
Two-thirds (2/3) of the Performance Bonus will be earned in full by the Executive if the Executive [______________] during the applicable
fiscal year; and
(b)
The remaining one-third (1/3) of the Performance Bonus will be earned in full by the Executive if the Company generates at least $10
million of revenue during the fiscal year ended December 31, 2026 and, in the following fiscal years, if the Company generates that amount
of revenue as shall be determined annually by the Board.
Any
earned Annual Bonus will be paid within the period necessary for compliance with Section 409A (“Section 409A” of the
Internal Revenue Code of 1986, as amended (the “Code”). Except as otherwise provided in Section 5 hereof, the Executive
must be employed by the Company on the last day of the applicable fiscal year in order to be eligible to earn any part of the Annual
Bonus.
2
4.3
Change in Control Bonus. If, and each time, a Change of Control (as defined below) occurs during the Employment Term, the
Executive shall be entitled to receive a lump sum payment equal to the product of (x) the sum of the Executive’s Base Salary and
the maximum Annual Bonus that could be earned by the Executive, in each case as in effect for the fiscal year in which the Change in
Control occurs, multiplied by (y) the greater of (i) the number of years, including any fractional year, then remaining in the Employment
Term as of the date on which the Change in Control occurs and (ii) two (2), which shall be paid to the Executive immediately after the
Change in Control occurs.
4.4
Equity Awards.
(a)
General. During the Employment Term, the Executive shall be eligible to participate in the Company’s 2022 Equity Incentive
Plan (the “2022 Equity Incentive Plan”) or any successor plan, subject to the terms of the 2022 Equity Incentive Plan
or successor plan, as determined by the Board (or a committee thereof) in its discretion. As used in this Agreement, “Common Stock”
means the Company’s common stock, par value $0.01 per share.
(b)
Registration Rights. In the event that the shares of Common Stock underlying the Inducement Award or any Annual Equity Award (each
as defined below) have not been registered for sale by the Executive under the Registration Statement on Form S-8, File Number 333-268106,
filed by the Company with the Securities and Exchange Commission
(the “SEC”)
on November 1, 2022 (the “Registration Statement”), the Company agrees that,
on or prior to the first anniversary of the Effective Date, it will amend the Registration Statement and take such other action as may
be necessary to register such shares of Common Stock for sale by the Executive under the Registration Statement or file an additional
registration statement on Form S-8 or other form of registration statement with the SEC and take such other action as may be necessary
to register such shares of Common Stock for sale by the Executive.
(c)
Inducement Equity Award. As an inducement material to the Executive’s acceptance of employment as [______________]
of the Company, and in reliance on Nasdaq Listing Rule 5635(c)(4),
the Company shall grant to the Executive on the Effective Date an award (the “Inducement Award”)
of 2,119,542 restricted shares of Common Stock (the “Inducement Shares”).
Of this number, 1,059,771 Inducement Shares shall not be subject to any contractual restrictions and shall be fully vested on the date
of grant. The remaining 1,059,771 Inducement Shares shall be represented by a restricted stock award agreement substantially in the form
attached hereto as Exhibit A. The Inducement Award shall be granted outside the 2022 Equity Incentive Plan as an employment inducement
award, shall be approved by the Compensation Committee of the Board, the Board or by a majority of the Company’s independent directors,
and the Company shall make any announcement or filing required by Nasdaq Listing Rule 5635(c)(4). The Company shall satisfy applicable
tax withholding obligations by withholding shares otherwise deliverable under the Inducement Award having a value equal to such obligations,
unless the Executive elects to satisfy them in cash. The Executive acknowledges that the Executive may make an election under Section
83(b) of the Code with respect to the unvested portion of the Inducement Award within thirty (30) days following the date of grant, and
that any such election is the Executive’s sole responsibility.
3
(d)
Annual Equity Incentive Award. Not later than one hundred eighty (180) days following the Effective Date, and thereafter not later
than ninety (90) days following the commencement of each fiscal year during the Employment Term, the Compensation Committee of the Board
shall establish the Executive’s annual equity incentive award (each, an “Annual
Equity Award”). The Compensation Committee shall
determine each Annual Equity Award in reliance on the written determination of an independent, nationally recognized executive compensation
consultant selected by the Board and retained at the Company’s expense, which consultant shall assess the Executive’s total
direct compensation against a peer group of similarly situated companies approved by the Compensation Committee. The grant date value
of each Annual Equity Award shall be the greater of (i) four (4) times the Base Salary in effect on the date of determination and (ii)
the value determined by such consultant. The form of each Annual Equity Award, including whether it is granted as stock options, restricted
stock, restricted stock units, performance shares or a combination thereof, and the vesting schedule applicable thereto, shall be determined
by the Compensation Committee; provided that no Annual Equity Award shall be subject to a vesting period longer than four (4) years.
Each Annual Equity Award shall be granted under the 2022 Equity Incentive Plan to the extent shares are then available for issuance thereunder,
and to the extent shares are not then available, shall be subject to the staged grant, best efforts and cash settlement provisions set
forth in the immediately following paragraph. If the Compensation Committee has not established an Annual Equity Award within the period
specified above, the Executive shall be entitled to an Annual Equity Award with a grant date value equal to four (4) times the Base Salary
then in effect.
(e)
Availability of Shares. The grant of any Annual Equity Award is subject to the availability of shares for issuance under the 2022
Equity Incentive Plan. To the extent shares are available for issuance on the date an Annual Equity Award is to be granted, that portion
of the Annual Equity Award shall be granted on that date. The balance of the Annual Equity Award shall be granted on the fifth business
day following stockholder approval of an increase in the number of shares available for issuance under the 2022 Equity Incentive Plan
sufficient to permit such grant, and the Company shall use its best efforts to obtain such approval at its next annual or special meeting
of stockholders. Vesting of the entire Annual Equity Award shall be measured from the date the Annual Equity Award was to be granted
as though it had been granted in full on that date. If such stockholder approval has not been obtained within twelve (12) months following
that date, the Company shall pay to the Executive, in cash, an amount equal to the value of the ungranted portion of the Annual Equity
Award as of the last day of such twelve (12) month period, such payment to be made within thirty (30) days thereafter.
(f)
Conflict of Terms. In the event of a conflict between the terms of this Agreement and the Inducement Award, any Annual Equity
Award, the 2022 Equity Incentive Plan, or any award or grant notice issued in connection therewith (each, an “Award
Notice”), the terms of this Agreement shall control and supersede the conflicting terms of
any such award, the 2022 Equity Incentive Plan, and any Award Notice.
4.5
Perquisites. During the Employment Term, the
Company shall provide to the Executive all employee and executive perquisites which other senior executives of the Company are generally
entitled to receive, in accordance with Company policy set by the Board from time to time.
4
4.6
Benefit Plans. During the Employment Term, the
Executive shall be entitled to participate in all employee and executive benefit plans of the Company, as in effect from time to time
(collectively, “Employee Benefit Plans”) including, but not limited to, equity, pension, thrift, profit sharing, 401(k),
medical coverage, education, or other retirement or welfare benefits that the Company has adopted or may adopt, maintain or contribute
to for the benefit of its executives at a level commensurate with the Executive’s position subject to satisfying the applicable
eligibility requirements. Such benefits, in the aggregate, shall be no less favorable than is provided to other similarly situated executives
of the Company. The Company reserves the right to amend or terminate any Employee Benefit Plans at any time in its sole discretion, subject
to the terms of such Employee Benefit Plan and applicable law.
4.7
Vacation; Paid Time Off. During the Employment
Term, the Executive shall be entitled to the prescribed number of weeks of paid vacation days per calendar year (prorated for partial
years) in accordance with the Company’s vacation policies, as in effect from time to time. The Executive shall receive other paid
time off in accordance with the Company’s policies for executive officers as such policies may exist from time to time.
4.8
Business Expenses. The Executive shall be entitled
to reimbursement for all reasonable and necessary out-of-pocket business, entertainment, and travel expenses incurred by the Executive
in connection with the performance of the Executive’s duties hereunder in accordance with the Company’s expense reimbursement
policies and procedures.
4.9
Indemnification.
(a)
The Company will enter into a standard form of officer and director indemnification agreement with the Executive, in the form of which
is approved by the Board.
(b)
The Company will use commercially reasonable efforts to maintain third party directors and officers indemnification insurance for the
Executive on the same terms and conditions as apply to the members of the Board and similarly situated executive officers.
4.10
Clawback Provisions. Notwithstanding any other
provisions in this Agreement to the contrary, any incentive-based or other compensation paid to the Executive under this Agreement or
any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, or stock exchange
listing requirement will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation,
or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock
exchange listing requirement).
5.
Termination of Employment.
The Employment Term and the Executive’s employment hereunder may be terminated by either the Company or the Executive at any time
and for any reason; provided that, unless otherwise provided in this Agreement, either party shall be required to give the other party
at least thirty (30) days advance written notice of any termination of the Executive’s employment. On termination of the Executive’s
employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this 55 and shall
have no further rights to any compensation or any other benefits from the Company or any of its affiliates.
5
5.1
Expiration of the Term, For Cause, or Without Good Reason.
(a)
The Executive’s employment hereunder may be terminated upon the Executive’s election not to renew the Agreement in accordance
with 11 hereof, by the Company for Cause, or by the Executive without Good Reason. If the Executive’s employment is terminated
upon the Executive’s election not to renew the Agreement, by the Company for Cause, or by the Executive without Good Reason, the
Executive shall be entitled to receive:
(i)
any accrued but unpaid Base Salary and accrued but unused vacation which shall be paid within one (1) week following the Termination
Date (as defined below) in accordance with the Company’s customary payroll procedures;
(ii)
any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall
be paid on the otherwise applicable payment date except to the extent payment is otherwise deferred pursuant to any applicable deferred
compensation arrangement;
(iii)
any other accrued but unpaid compensation or consideration owed to the Executive;
(iv)
reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance
with the Company’s expense reimbursement policy; and
(v)
such employee benefits (including equity compensation), if any, to which the Executive may be entitled under the Company’s employee
benefit plans and equity incentive plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any
payments in the nature of severance or termination payments except as specifically provided herein.
Items
5.1(a)(i) through 5.1(a)(v) are referred to herein collectively as the “Accrued Amounts”. The treatment of any outstanding
equity awards shall be determined in accordance with the terms of the 2022 Equity Incentive Plan and the applicable award agreements
and notices.
(b)
For purposes of this Agreement, “Cause” shall mean:
(i)
the Executive’s willful failure, without substantial justification, to perform Executive’s duties (other than any such failure
resulting from incapacity due to physical or mental illness);
(ii)
the Executive’s willful failure to comply with any valid and legal directive of such officer or director as may be designated by
the Board;
(iii)
the Executive’s willful engagement in illegal conduct which is, in each case, materially injurious to the Company or its affiliates;
6
(iv)
the Executive’s conviction of embezzlement, misappropriation, or fraud, whether or not related to the Executive’s employment
with the Company;
(v)
the Executive’s conviction of or plea of guilty to a crime that constitutes a felony (or state law equivalent) or a crime that
constitutes a misdemeanor involving moral turpitude, if such felony or other crime is work-related, materially impairs the Executive’s
ability to perform services for the Company, or results in material reputational or financial harm to the Company or its affiliates;
(vi)
the Executive’s material violation of the Company’s written policies or codes of conduct, including written policies related
to discrimination, harassment, performance of illegal or unethical activities, and unethical misconduct:
(vii)
the Executive’s willful unauthorized disclosure of Confidential Information (as defined below); or
(viii)
the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive
and the Company.
For
purposes of this provision, no act on the part of the Executive shall be considered “willful” unless it is done, or omitted
to be done by the Executive in bad faith. Any act, however, based on authority given pursuant to a resolution duly adopted by the Board
or on the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good
faith and in the best interests of the Company.
Termination
of the Executive’s employment shall not be deemed to be for Cause unless and until the Company delivers to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the Board (after thirty (30) days prior written
notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board),
finding that the Executive has engaged in the conduct described in any of (i)-(viii) above, and that the Executive’s employment
should accordingly be terminated for Cause.
(c)
For purposes of this Agreement, the Executive may not be subject to any of the following events without Executive’s written consent.
For the purposes of this Agreement, it shall be deemed a “Good Reason” for the Executive to terminate employment in
the event that the Company subjects the Executive to any of the following occurrences:
(i)
a material reduction in the Executive’s Base Salary;
(ii)
a relocation of the Executive’s principal place of employment by more than fifty (50) miles;
(iii)
any material breach by the Company of any material provision of this Agreement or any material provision of any other agreement between
the Executive and the Company;
7
(iv)
the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such
assumption occurs by operation of law;
(v)
a material, adverse change in the Executive’s title, authority, duties, or responsibilities (other than temporarily while the Executive
is physically or mentally incapacitated or as required by applicable law) taking into account the Company’s size, status as a public
company, and capitalization as of the date of this Agreement; or
(vi)
a material adverse change in the reporting structure applicable to the Executive.
The
Executive cannot terminate employment for Good Reason unless the Executive has provided written notice to the Company of the existence
of the circumstances providing grounds for termination for Good Reason within fifteen (15) days of the initial existence of such grounds
and the Company has had at least fifteen (15) days from the date on which such notice is provided to cure such circumstances. If the
Executive does not terminate employment for Good Reason within thirty (30) days after the first occurrence of the applicable grounds,
then the Executive will be deemed to have waived the right to terminate for Good Reason with respect to such grounds.
5.2
Non-Renewal by the Company, Without Cause, or for Good Reason.
The Employment Term and the Executive’s employment hereunder may be terminated by the Executive for Good Reason or by the Company
without Cause or on account of the Company’s election to not renew the Agreement in accordance with 11 hereof. In the event of
such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive’s compliance with
Section 6, Section 7, Section 8 and Section 9 of this Agreement and the Executive’s execution of a release of claims in favor of
the Company, its affiliates and their respective officers and directors in a form provided by the Company (the “Release”)
which becomes effective within twenty-one (21) days following the Termination Date (such twenty-one (21) -day period, the “Release
Execution Period”), the Executive shall be entitled to receive the Accrued Amounts and the following severance benefits:
(a)
a lump sum payment equal to two (2) times the sum of the Executive’s Base Salary and target Annual Bonus (assuming the maximum
Annual Bonus would have been earned) for the year in which the Termination Date occurs, which, unless otherwise provided in this Agreement,
shall be paid immediately after the expiration of the Release Execution Period;
(b)
If the Executive timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”), the Company shall maintain for Executive the same health insurance policies that it had in place on
the Termination Date for the duration of the time that Executive utilizes COBRA and shall reimburse the Executive for the monthly COBRA
premium paid by the Executive for the Executive and the Executive’s spouse and dependents. Such reimbursement shall be paid to
the Executive on the fifth day of the month immediately following the month in which the Executive timely remits the premium payment.
The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the eighteen-month anniversary of the Termination
Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive
obtains substantially similar coverage from another employer or other source (which, for the sake of clarity, the Executive has no obligation
whatsoever to obtain). Notwithstanding the foregoing, if the Company making payments under this 8(b) would violate the nondiscrimination
rules applicable to non-grandfathered plans under the Affordable Care Act (the “ACA”), or result in the imposition
of penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform this 8(b) in
a manner as is necessary to comply with the ACA.
8
(c)
The treatment of any outstanding equity awards shall be determined in accordance with the terms of the 2022 Equity Incentive Plan and
the applicable award agreements and notices.
(d)
Notwithstanding the foregoing, all outstanding equity-based compensation awards, including the Inducement Award and any Annual Equity
Award, shall remain outstanding and shall vest in full immediately on the Termination Date.
5.3
Death or Disability.
(a)
The Executive’s employment hereunder shall terminate automatically on the Executive’s death during the Employment Term, and
the Company may terminate the Executive’s employment on account of the Executive’s Disability.
(b)
If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability,
the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:
(i)
the Accrued Amounts; and
(ii)
a lump sum payment equal to the Annual Bonus that the Executive would have earned for the fiscal year in which the Termination Date occurs
(assuming the maximum Annual Bonus would have been earned), which shall be payable on the date that annual bonuses are paid to the Company’s
similarly situated executives, but in no event later than two-and-a-half (2 1/2) months following the end of the fiscal year in which
the Termination Date occurs.
Notwithstanding
any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner
which is consistent with federal and state law.
(c)
For purposes of this Agreement, “Disability” shall mean a condition that entitles the Executive to receive long-term
disability benefits under the Company’s long-term disability plan, or if there is no such plan, the Executive’s inability,
due to physical or mental incapacity, to perform the essential functions of the Executive’s job, with or without reasonable accommodation,
for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days.
Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and
the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive
shall be final and conclusive for all purposes of this Agreement.
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5.4
Change in Control Termination.
(a)
Notwithstanding any other provision contained herein, if the Executive’s employment hereunder is terminated by the Executive for
Good Reason, by the Company on account of the Company’s election to not renew the Agreement in accordance with 11 hereof or by
the Company without Cause (other than on account of the Executive’s death or Disability), in each case within twelve (12) months
following a Change in Control, the Executive shall be entitled to receive the Accrued Amounts and the compensation described in Section
5.2 hereof, and, subject to the Executive’s compliance with Section 6, Section 7, Section 8 and Section 9 of this Agreement, the
Executive shall be entitled to receive a lump sum payment equal to the sum of the Executive’s Base Salary and Annual Bonus (assuming
the maximum Annual Bonus would have been earned) for the year in which the Termination Date occurs (or if greater, the year immediately
preceding the year in which the Change in Control occurs), which shall be paid immediately following the termination of the Executive’s
employment. For the sake of clarity, the compensation payable to the Executive under this Section 5.4 is in addition to, and not in substitution
for or as an alternative to, the compensation payable to the Executive under Section 5.2 hereof. Accordingly, in the event that Executive’s
employment hereunder is terminated by the Executive for Good Reason, by the Company on account of its election to not renew the Agreement
in accordance with 11 hereof or by the Company without Cause, in each case within twelve (12) months following a Change in Control, the
Executive will be entitled to receive the compensation described in Section 5.2 hereof and will also receive the compensation described
in this Section 5.4.
(b)
If the Executive timely and properly elects health plan continuation coverage under COBRA, the Company shall reimburse the Executive
for the monthly COBRA premium paid by the Executive for the Executive and the Executive’s spouse and dependents. Such reimbursement
shall be paid to the Executive on the fifth day of the month immediately following the month in which the Executive timely remits the
premium payment. The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the eighteen-month anniversary
of the Termination Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date
on which the Executive obtains substantially similar coverage from another employer or other source (which, for the sake of clarity,
the Executive has no obligation whatsoever to obtain). Notwithstanding the foregoing, if the Company’s payments under this 10(b)
would violate the nondiscrimination rules applicable to non-grandfathered, insured group plans under the ACA, or result in the imposition
of penalties under the ACA, the parties agree to reform this 10(b) in a manner as is necessary to comply with the ACA.
(c)
Notwithstanding the terms of the 2022 Equity Incentive Plan or any applicable award agreements or notices, as applicable, all outstanding
equity-based compensation awards, including the Inducement Award and any Annual Equity Award, shall remain outstanding and shall vest
in full immediately prior to the consummation of the Change in Control.
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(d)
For purposes of this Agreement, “Change in Control” shall mean the occurrence of any of the following after the Effective
Date:
(i)
any person or group of persons, excluding for this purpose, (A) the Company or any subsidiary of the Company, or (B) any employee benefit
plan of the Company or any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Company, through a single transaction
or a series of transactions, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than thirty percent (30%) or more of the of the combined voting power of
the Company’s then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result
of a change in ownership percentage resulting solely from an acquisition of securities by the Company;
(ii)
a majority of the individuals who, as of the date hereof, constitute the Board are replaced during any twelve-month period for any reason;
or
(iii)
consummation of a reorganization, merger or consolidation of the Company or sale or other disposition of all or substantially all of
the assets of the Company through a single transaction or a series of transactions (a “Business Combination”), in
each case, unless, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial
owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the
election of directors of the company after such Business Combination (including, without limitation, an entity which, as a result of
such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership immediately prior to such Business Combination; or
(iv)
approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
For
the purposes of this Section 5.4, “group” includes, but is not limited to, persons that own an entity that enters into a
merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
5.5
Notice of Termination. Any termination of the
Executive’s employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant
to 9(a) hereof on account of the Executive’s death) shall be communicated by written notice of termination (“Notice of
Termination”) to the other party hereto in accordance with 2524 hereof. The Notice of Termination shall specify:
(a)
The termination provision of this Agreement relied upon;
(b)
To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment
under the provision so indicated; and
(c)
The applicable Termination Date.
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5.6
Termination Date. The Executive’s “Termination
Date” shall be:
(a)
If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s
death;
(b)
If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined
that the Executive has a Disability;
(c)
If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the
Executive;
(d)
If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination,
which shall be no less than thirty (30) days following the date on which the Notice of Termination is delivered to the Executive; provided
that, the Company shall have the option to provide the Executive with a lump sum payment equal to thirty (30) days’ Base Salary
in lieu of such notice, which shall be paid in a lump sum on the Executive’s Termination Date and for all purposes of this Agreement,
the Executive’s Termination Date shall be the date on which such Notice of Termination is delivered to the Executive;
(e)
If the Executive terminates the Executive’s employment hereunder with or without Good Reason, the date specified in the Executive’s
Notice of Termination, which shall be no less than five (5) days following the date on which the Notice of Termination is delivered to
the Company; provided that, the Company may waive all or any part of the five (5) day notice period for no consideration by giving written
notice to the Executive and for all purposes of this Agreement, the Executive’s Termination Date shall be the date determined by
the Company; and
(f)
If the Executive’s employment hereunder terminates because either party provides notice of non-renewal pursuant to 11 hereof, the
Renewal Date immediately following the date on which the applicable party delivers notice of non-renewal.
Notwithstanding
anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from
service” within the meaning of Section 409A.
5.7
Resignation of All Other Positions. On termination
of the Executive’s employment hereunder for any reason, the Executive agrees to resign, effective on the Termination Date, or shall
be deemed to have resigned, from all positions that the Executive holds as an officer or member of the Board (or a committee thereof)
of the Company or any of its affiliates.
6.
Cooperation.
The parties agree that certain matters in which the Executive will be involved during the Employment Term may necessitate the Executive’s
cooperation in the future. Accordingly, following the termination of the Executive’s employment for any reason, to the extent reasonably
requested by the Board, the Executive shall cooperate with the Company in connection with matters arising out of the Executive’s
service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of the Executive’s other
activities. The Company shall reimburse the Executive for reasonable expenses incurred in connection with such cooperation and, to the
extent that the Executive is required to spend substantial time on such matters, the Company shall compensate the Executive at an hourly
rate based on the Executive’s Base Salary on the Termination Date.
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7.
Confidential Information.
The Executive understands and acknowledges that during the Employment Term, the Executive will have access to and learn about Confidential
Information, as defined below.
7.1
Confidential Information Defined.
(a)
Definition.
(i)
For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all information not generally
known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes,
practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts,
terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs,
computer software, applications, operating systems, software design, web design, work-in-process, databases, device configurations, embedded
data, compilations, metadata, technologies, manuals, records, articles, systems, material, sources of material, supplier information,
vendor information, financial information, results, accounting information, accounting records, legal information, marketing information,
advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel
information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings,
sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles,
models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental
processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing
information, factory lists, distributor lists, and buyer lists of the Company or any existing or prospective customer, supplier, investor
or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.
(ii)
The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that
is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential
or proprietary in the context and circumstances in which the information is known or used.
(iii)
The Executive understands and agrees that Confidential Information includes information developed by Executive in the course of employment
by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information
shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided
that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.
(b)
Company Creation and Use of Confidential Information. The Executive understands and acknowledges that the Company has invested,
and continues to invest, substantial time, money, and specialized knowledge into developing its resources, creating a customer base,
generating customer and potential customer lists, training its employees, and improving its offerings relating to its artificial intelligence
business and such other businesses as the Company may engage in during the Employment Term. The Executive understands and acknowledges
that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential
Information provides the Company with a competitive advantage over others in the marketplace.
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(c)
Disclosure and Use Restrictions. The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential;
(ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed,
published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company)
not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and,
in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s
authorized employment duties to the Company or with the prior consent of such officer or director as may be designated by the Board acting
on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties
or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other
resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises
or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company
or with the prior consent of such officer or director as may be designated by the Board acting on behalf of the Company in each instance
(and then, such disclosure shall be made only within the limits and to the extent of such duties or consent).
(d)
Permitted disclosures. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required
by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency,
provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. The Executive shall
promptly provide written notice of any such order to such officer or director of the Company as may be designated by the Board.
(e)
Permitted Communications. Nothing herein prohibits or restricts the Executive (or the Executive’s attorney) from initiating
communications directly with, responding to an inquiry from, or providing testimony before the Securities and Exchange Commission (SEC),
the Financial Industry Regulatory Authority (FINRA), any other self-regulatory organization, or any other federal or state regulatory
authority regarding a possible securities law violation.
(f)
Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”).
Notwithstanding any other provision of this Agreement:
(i)
The Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade
secret that:
(A)
is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2)
solely for the purpose of reporting or investigating a suspected violation of law; or
14
(B)
is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii)
If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose
the Company’s trade secrets to the Executive’s attorney and use the trade secret information in the court proceeding if the
Executive:
(A)
files any document containing trade secrets under seal; and
(B)
does not disclose trade secrets, except pursuant to court order.
The
Executive understands and acknowledges that the Executive’s obligations under this Agreement with regard to any particular Confidential
Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after
the Executive begins employment by the Company) and shall continue during and after the Executive’s employment by the Company until
such time as such Confidential Information has become public knowledge other than as a result of the Executive’s breach of this
Agreement or breach by those acting in concert with the Executive or on the Executive’s behalf.
8.
Restrictive Covenants.
8.1
Acknowledgement.
(a)
The Executive acknowledges and agrees that, as a result of the nature of the Company’s business and the nature of the Executive’s
position with the Company, the Executive has been or will come into contact with, and will have access to, Confidential Information belonging
to the Company. The Executive acknowledges that the aforementioned Confidential Information is unique and not generally known to the
public with respect to the Company and has been developed, acquired, and compiled by the Company at its great effort and expense.
(b)
The Executive further acknowledges and agrees that any disclosure or use of the Company’s Confidential Information by the Executive,
other than in connection with the Company’s business or as specifically authorized by the Company, will be or may become highly
detrimental to the business of the Company, and serious loss of business and damage to the Company will or may result.
(c)
Accordingly, the Executive agrees to hold all Confidential Information in the strictest confidence and agrees to safeguard and not use,
disclose, divulge or reveal the Company’s Confidential Information to any person, either during the Executive’s employment
or at any time after the termination of the Executive’s employment with the Company, without specific prior written authorization
from an officer or director of the Company as may be designated by the Board.
15
8.2
Non-Competition.
(a)
Because of the Company’s legitimate business interest as described herein and the good and valuable consideration offered to the
Executive, during the Employment Term and for the one (1) year, beginning on the last day of the Executive’s employment with the
Company, except in the instance where Executive is terminated by the Company without Cause or the Executive terminates for a Good Reason,
the Executive agrees and covenants not to engage in Prohibited Activity.
(b)
For purposes of this Section, “Prohibited Activity” is activity in which the Executive contributes the Executive’s
knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent,
employee, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in its artificial
intelligence business and such other businesses as the Company may be engaged in during the Employment Term within 20 miles of the Company’s
main office. Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary
information, or Confidential Information.
(c)
Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of
any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of,
or a member of a group that controls, such corporation.
(d)
This Section does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot
be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction
or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, or order.
8.3
Non-Solicitation of Employees. The Executive
agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment
of any employee of the Company, or attempt to do so during one (1) year, beginning on the last day of the Executive’s employment
with the Company.
8.4
Non-Solicitation of Customers. The Executive
understands and acknowledges that because of the Executive’s experience with and relationship to the Company, the Executive will
have access to and learn about much or all of the Company’s customer information. “Customer Information” includes,
but is not limited to, names, phone numbers, addresses, email addresses, order history, order preferences, chain of command, decision
makers, pricing information, and other information identifying facts and circumstances specific to the customer and relevant to sales
or services. The Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant
and irreparable harm to the Company. The Executive agrees and covenants that for a period of one (1) year beginning on the last day of
the Executive’s employment with the Company, not to use the Company’s Confidential Information for purposes of offering or
goods or services similar to or competitive with those offered by the Company.
16
This
restriction shall only apply to:
(a)
Customers or prospective customers the Executive contacted in any way during the twelve (12) months prior to termination;
(b)
Customers about whom the Executive has trade secret or confidential information; and
(c)
Customers about whom the Executive has information that is not available publicly.
9.
Remedies.
In the event of a breach or threatened breach by the Executive of Section 7, Section 8 or Section 9 of this Agreement, the Executive
hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent
injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, and that money
damages would not afford an adequate remedy, without the necessity of showing any actual damages, and without the necessity of posting
any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages,
or other available forms of relief.
10.
Proprietary Rights.
10.1
Work Product. At all times while Executive is employed by the Company, the Executive is free to use Work Product and Intellectual
Property which is not gained as result of a breach of this Agreement. “Work Product” and “Intellectual Property”
that is developed by Executive through Executive’s own skill, knowledge, know-how and experience without the assistance or use
of Company assets, that does not relate to the Executive’s work for the Company may, however, be owned and used by the Executive
to whatever extent and in whichever way Executive chooses both during and after the Employment Term. Except as set forth in this paragraph
“Work Product” and “Intellectual Property” shall belong to the Company. The term “Work Product”
shall mean all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research,
proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended,
conceived, or reduced to practice by the Executive individually or jointly with others during the Employment Term that relate to the
business or contemplated business, products, activities, research, or development of the Company. “Work Product” does not
include any of the foregoing that are (a) trade secrets, inventions, products, ideas, processes, formulas, know-how, improvements, discoveries,
developments, designs and techniques; and (b) information regarding plans for research, development, new products, marketing and selling,
business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers, distributors and customers; and
(c) information regarding the skills and compensation of other employees of the Company. The term “Intellectual Property Rights”
shall mean any and all rights in and to the Company’s US and foreign (a) patents, patent disclosures and inventions (whether patentable
or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations
of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including
computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other
intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and
renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any
part of the world.
17
10.2
Work Made for Hire. Except as otherwise excluded by this paragraph, the Executive acknowledges that, by reason of being employed
by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter
is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the
extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the
Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the
right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all
rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s
rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company
would have had in the absence of this Agreement.
10.3
Further Assurances; Power of Attorney. During and after the Employment Term, the Executive agrees to reasonably cooperate with
the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property
Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation,
giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments,
and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of
attorney to execute and deliver any such documents on the Executive’s behalf in the Executive’s name and to do all other
lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance
of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the
Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of
attorney is coupled with an interest and shall not be affected by the Executive’s subsequent incapacity.
10.4
No License. The Executive understands that this Agreement does not, and shall not be construed to grant the Executive any license
or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software,
or other tools made available to the Executive by the Company.
11.
Security.
11.1
Security and Access. The Executive agrees and
covenants (a) to comply with all Company security policies and procedures as in force from time to time, including without limitation
those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company
intranet, internet, social media and instant messaging systems, computer systems, email systems, computer networks, document storage
systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication
technologies (“Facilities and Information Technology Resources”); (b) not to access or use any Facilities and Information
Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources
in any manner after the termination of the Executive’s employment by the Company, whether termination is voluntary or involuntary.
The Executive agrees to notify the Company promptly in the event the Executive learns of any violation of the foregoing by others, or
of any other misappropriation or unauthorized access, use, reproduction, or reverse engineering of, or tampering with any Facilities
and Information Technology Resources or other Company property or materials by others.
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11.2
Exit Obligations. Upon (a) voluntary or involuntary
termination of the Executive’s employment or (b) the Company’s request at any time during the Executive’s employment,
the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification
cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines,
equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, email messages, recordings, tapes, disks, thumb
drives or other removable information storage devices, hard drives, negatives, and data and all Company documents and materials belonging
to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information
or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or
any of its business associates or created by the Executive in connection with the Executive’s employment by the Company; and (ii)
delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive’s possession
or control, including those stored on any non-Company devices, networks, storage locations, and media in the Executive’s possession
or control.
12.
Publicity. The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives
and licensees, of the Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection
with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising
and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic
forms and media throughout the world, at any time during or after the Employment Term, for all legitimate commercial and business purposes
of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to the Executive.
The Executive hereby forever waives and releases the Company and its directors, officers, employees, and agents from any and all claims,
actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time
during or after the Employment Term, arising directly or indirectly from the Company and its agents’, representatives’, and
licensees’ exercise of their rights in connection with any Permitted Uses.
13.
Governing Law; Jurisdiction and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of Florida
without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought
only in a state or federal court located in the state of Broward, County. The parties hereby irrevocably submit to the exclusive jurisdiction
of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
14.
Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between
the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements,
representations, and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement
can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement. In
the event of a conflict between the terms of this Agreement and the terms of any other agreement to which the Executive and the Company
are a party, the terms of this Agreement shall control and supersede the conflicting terms of the other agreement.
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15.
Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed
to in writing and signed by the Executive and such officer or director of the Company as may be designated by the Board. No waiver by
either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the
other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent
time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a
waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
16.
Severability. Should any provision of this Agreement
be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as
unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which
shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set
forth in this Agreement. The parties further
agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such
unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the
offending provision, adding additional language to this Agreement, or by making such other modifications as it deems warranted to carry
out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that
this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more
of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above,
this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
17.
Captions.
Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement
is to be construed by reference to the caption or heading of any section or paragraph.
18.
Counterparts.
This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
19.
Tolling.
Should the Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will
run from the first date on which the Executive ceases to be in violation of such obligation.
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20.
Section 409A.
20.1
General Compliance. This Agreement is intended
to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding
any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies
with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation
pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent
possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.
Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service”
under Section 409A. In the event that the Executive is liable for all or any portion of any taxes, penalties, interest, or other expenses
that may be incurred by the Executive on account of non-compliance with Section 409A, the Company shall reimburse the Executive for all
such expenses within 10 days of receiving a request for such reimbursement from the Executive accompanied by supporting documentation
evidencing the amount of such expenses.
20.2
Specified Employees. Notwithstanding any other
provision of this Agreement to the contrary, if any payment or benefit to be provided to the Executive in connection with the Executive’s
termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section
409A and the Executive is determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment
or benefit shall not be paid until the first business day following the six-month anniversary of the Termination Date or, if earlier,
on the Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise
have been paid to the Executive before the Specified Employee Payment Date and interest on such amounts for the period commencing on
the Termination Date and ending on the Specified Employee Payment Date calculated based on the applicable federal rate published by the
Internal Revenue Service for the month in which the Executive’s separation from service occurs (the aggregate of all such payments
and interest thereon, the “Deferred Payment”) shall be paid to the Executive in a lump sum on the Specified Employee
Payment Date.
20.3
Rabbi Trust.
(a)
Creation of Rabbi Trust. Immediately upon the earliest to occur of: (a) the date that the Executive’s employment hereunder
is terminated by the Executive for Good Reason, by the Company on account of its election to not renew the Agreement in accordance with
11 hereof, or by the Company without Cause; (b) the date that the Company enters into an agreement or series of agreements that results
in, or may in the future result in, a Change in Control; or (c) the date that a Change in Control occurs, the Company will establish
a “rabbi trust” (the “Rabbi Trust”) for the sole benefit of the Executive to secure the payment of the
Deferred Payments. The trustee of the Rabbi Trust (the “Trustee”) will be a bank or trust company chosen by the Executive
in his sole and absolute discretion. Immediately upon the occurrence of any of the events described in Section 20.3(a) or (c) hereof,
the Company will deposit in the Rabbi Trust the maximum amount of cash necessary to complete the Deferred Payment on the Specified Employee
Payment Date. On the Specified Employee Payment Date, the Trustee will pay the Deferred Payment to the Executive from the cash held by
Rabbi Trust. The Company will remain liable to pay all or any portion of the Deferred Payment that for any reason is not paid to the
Executive from the Rabbi Trust. The Company will be solely responsible for all costs and expenses associated with creating, maintaining,
and, after the Deferred Payment has been paid in full to the Executive, terminating the Rabbi Trust.
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(b)
IRS Compliance. Notwithstanding anything herein
to the contrary, the Rabbi Trust shall be established, and the trust agreement governing the Rabbi Trust shall be drafted, substantially
in the form of the model trust set forth in Internal Revenue Service Revenue Procedure 92-64, as the same may be amended, restated, or
superseded from time to time. Notwithstanding any other provision of this Agreement or of the trust agreement establishing the Rabbi
Trust, all assets held in the Rabbi Trust shall at all times remain subject to the claims of the Company’s general creditors in
the event of the Company’s “insolvency” (as defined in the trust agreement establishing the Rabbi Trust), and neither
the Executive nor his beneficiaries shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Rabbi
Trust prior to the time such assets are paid to the Executive in accordance with the terms of the Rabbi Trust. The parties shall ensure
that the Rabbi Trust shall provide that, upon the Company becoming insolvent, the Company shall give the Trustee prompt written notice
of that fact, and the Trustee shall thereafter suspend all payments to the Executive from the Rabbi Trust and shall hold the assets of
the Rabbi Trust for the benefit of the Company’s general creditors until such time as a court of competent jurisdiction directs
otherwise or the Trustee is satisfied that the Company is no longer insolvent.
20.4
Reimbursements. To the extent required by Section
409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a)
the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)
any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the
calendar year in which the expense was incurred; and
(c)
any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
20.5
Tax Gross-Ups. Unless otherwise provided in this
Agreement, any tax gross-up payments provided under this Agreement shall be paid to the Executive on or before December 31 of the calendar
year immediately following the calendar year in which the Executive remits the related taxes.
21.
Section 4999.
21.1
Gross-Up Payment. In the event that the Company or the Executive determines that any payment, distribution or benefits that the
Executive receives or will receive from, on behalf of or with respect to the Company (including, without limitation, accelerated vesting
of equity awards and severance payments and benefits), whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise (in the aggregate, such payments and benefits are referred to herein as the “Payment”),
would subject Executive to the excise tax imposed by Section 4999 of the Code (together with any interest or penalties that would be
imposed with respect to such excise tax, the “Excise Tax”), then the Executive shall be entitled to receive from the
Company an additional payment (the “Gross-Up Payment”) in an amount such that the net amount of the Payment and the
Gross-Up Payment retained by the Executive after the payment by the Executive of all Excise Taxes on the Payment and all federal, state
and local income tax, employment tax and Excise Taxes on the Gross-Up Payment shall be equal to the Payment. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed: (x) to be subject to federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-Up Payment is to be made; (y) to be subject to applicable state
and local income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up Payment is to be made, net
of the reduction in federal income taxes which could be obtained from the deduction of such state and local taxes; and (z) to have otherwise
allowable deductions for federal income tax purposes at least equal to those that would be disallowed because of the inclusion of the
Gross-Up Payment in the Executive’s adjusted gross income.
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21.2
Timing of Payment. The Gross-Up Payment will be paid to the Executive at the same time as the Payment to which it relates; provided,
however, that if the amount of the Gross-Up Payment for a portion of the Payment cannot be calculated prior to the time that the
Payment is made, the Gross-Up Payment for that portion of the Payment shall be paid to the Executive within ten (10) days after the Payment
is made. Once a Gross-Up Payment has been received by the Executive, the Executive shall not be obligated to return to the Company any
portion of the Gross-Up Payment so received in the event it is subsequently determined that the amount of the Gross-Up Payment received
by the Executive was in excess of the amount the Company should have paid to the Executive.
21.3
Excise Tax Calculation. All determinations required to be made under this Section 21, including whether and when a Gross-Up Payment
is required and the amount of the Gross-Up Payment and the assumptions to be utilized in arriving at the determination (collectively,
“Tax Determinations”), will be made by a reputable certified public accounting firm selected by the Company with the
consent of the Executive, which should not unreasonably be withheld (the “Accounting Firm”), which will provide detailed
supporting calculations both to the Company and the Executive within twenty (20) days after the receipt by the Company of a request from
the Executive for a Tax Determination with respect to a proposed or completed Payment or such earlier time as is requested by the Executive.
All fees and expenses of the Accounting Firm for Tax Determinations will be borne solely by the Company.
21.4
Underpayments by the Company. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the
Tax Determinations hereunder, it is possible that Gross-Up Payments that should have been made by the Company to the Executive were not
made (such underpayments, the “Underpayment”). In the event that the Executive thereafter is required to make a payment
of any Excise Tax, the Company shall pay Executive the amount of the Underpayment plus any applicable interest or penalties within ten
(10) days of the date the Executive informs the Company of the obligation of the Executive to pay the Excise Tax. The Company shall reimburse
the Executive for all costs and expenses incurred by the Executive in resolving any matters related to the determination and payment
by Executive of any additional Excise Tax, including but not limited to the costs and expenses incurred by the Executive to resolve such
matters with the Internal Revenue Service and other local, state and federal government agencies in connection therewith.
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22.
Notification to Subsequent Employer.
When the Executive’s employment with the Company terminates, the Executive agrees to notify any subsequent employer of the restrictive
covenants sections contained in this Agreement. The Executive will also deliver a copy of such notice to the Company before the Executive
commences employment with any subsequent employer. In addition, the Executive authorizes the Company to provide a copy of the restrictive
covenants sections of this Agreement to third parties, including but not limited to, the Executive’s subsequent, anticipated, or
possible future employer.
23.
Successors and Assigns.
This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall
be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor to or assignee
of (whether direct or indirect, by purchase, merger, consolidation, or otherwise) all or substantially all of the business or assets
of the Company. This Agreement shall inure to the benefit of the Company and its permitted successors and assigns.
24.
Notice. Notices and all other communications provided for in this Agreement
shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight
carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
If to the Company:
Algorhythm
Holdings, Inc.
6301
NW 5th Way, Ste. 2900
Fort
Lauderdale, FL 33309
If
to the Executive:
To
that address set forth on the Company’s books and records as updated by the Executive from time to time
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25.
Representations of the Executive.
The Executive represents and warrants to the Company that:
(a)
The Executive’s acceptance of employment with the Company and the performance of duties hereunder will not conflict with or result
in a violation of, a breach of, or a default under any contract, agreement, or understanding to which the Executive is a party or is
otherwise bound.
(b)
The Executive’s acceptance of employment with the Company and the performance of duties hereunder will not violate any non-solicitation,
non-competition, or other similar covenant or agreement of a prior employer.
26.
Withholding.
Unless otherwise provided in this Agreement, the Company shall have the right to withhold from any amount payable hereunder any Federal,
state, and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
27.
Survival.
Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive
such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
28.
Acknowledgement of Full Understanding.
THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE
EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE EXECUTIVE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF THE EXECUTIVE’S
CHOICE BEFORE SIGNING THIS AGREEMENT.
[signature
page follows]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ALGORHYTHM HOLDINGS, INC.
By:
Harvey Judkowitz
Chairman of the Board of Directors
EXECUTIVE
_________________________________ [______________]
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Exhibit
A
Form
of Stock Award Agreement
EX-10.4
EX-10.4
Filename: ex10-4.htm · Sequence: 6
Exhibit
10.4
EMPLOYMENT
AGREEMENT
This
Employment Agreement (the “Agreement”) is made and entered into as of September 15, 2026 (the “Effective
Date”), by and between Leticia Raele (the “Executive”) and Algorhythm Holdings, Inc., a Delaware corporation
(the “Company”), and sets forth the terms and conditions with respect to the Executive’s employment with the
Company during the Term (as defined below).
WHEREAS,
the Executive has served as the Controller of the Company since September 15, 2025; and
WHEREAS,
the Company and the Executive wish to amend the terms of Executive’s employment with the Company pursuant to which the Company
will employ the Executive as its Chief Accounting Officer and Interim Chief Financial Officer on the terms and conditions set forth herein.
NOW,
THEREFORE, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties agree as follows:
1.
Term. The Executive’s term of employment under this Agreement (such term of
employment, as it may be extended or terminated, is herein referred to as the “Employment Term”) shall be for a term commencing
on the Effective Date and, unless terminated earlier as provided in Section 5 hereof, ending on the second anniversary of the Effective
Date (the “Original Employment Term”); provided that, on such second anniversary of the Effective Date and each annual
anniversary thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the Agreement shall be deemed
to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written
notice of its intention not to extend the term of the Agreement at least ninety 90 days’ prior to the applicable Renewal Date.
The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the “Employment Term.”
2.
Position and Duties.
2.1
Position. During the Employment Term, the Executive shall serve as the Chief Accounting Officer and Interim Chief Financial Officer
of the Company, reporting to the Chief Executive Officer of the Company. In this capacity the Executive shall have such duties, authorities
and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similarly sized
companies and such other duties and responsibilities as the Chief Executive Officer shall designate that are consistent with the Executive’s
position as the Chief Accounting Officer and Interim Chief Financial Officer of the Company.
2.2
Duties. During the Employment Term, the Executive shall devote substantially all of the Executive’s business time (excluding
periods of vacation and other approved leaves of absence) to the performance of the Executive’s duties hereunder and will not engage
in any other business, profession, or occupation for compensation or otherwise which would conflict or interfere with the performance
of such services either directly or indirectly without the prior written consent of the Board of Directors of the Company (the “Board”).
Notwithstanding the foregoing, the Executive will be permitted to (a) with the prior written consent of the Board act or serve as a director,
trustee, committee member, or principal of any type of business, civic, or charitable organization as long as such activities are disclosed
in writing to the Board, and (b) purchase or own less than five percent (5%) of the publicly traded securities of any corporation; provided
that, such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that
controls, such corporation; and provided further that, the activities described in clauses (a) and (b) do not interfere with the performance
of the Executive’s duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations
set forth in Section 2 hereof.
3.
Place of Performance. The principal place of Executive’s employment shall be
the Company’s office located in Fort Lauderdale, Florida; provided that, the Executive may be required to travel from time to time
on Company business during the Employment Term. The Executive may work remotely from Executive’s primary residence so long as doing
so does not interfere with the Executive’s responsibilities under this Agreement; provided that, subject to any health or safety
concerns related to the COVID-19 pandemic or other similar extraordinary circumstances, the Executive shall be required to spend on average
two (2) days per week in the office.
4.
Compensation.
4.1
Base Salary. The Company shall pay the Executive an annual base salary of $270,000. The annual base salary shall be paid in periodic
installments in accordance with the Company’s customary payroll practices and applicable wage payment laws, but no less frequently
than monthly. The Executive’s base salary shall be reviewed at least annually by the Board (or a committee thereof) and the Board
may, but shall not be required to, increase the base salary during the Employment Term. However, the Executive’s base salary may
not be decreased during the Employment Term without the Executive’s written consent. The Executive’s annual base salary,
as in effect from time to time, is hereinafter referred to as “Base Salary”.
4.2
One-Time Bonuses. On the Effective Date, the Executive shall be entitled to receive a one-time signing bonus of $25,000. In the
event the Executive is employed by the Company on December 31, 2026, the Executive shall be entitled to receive an additional one-time
bonus of $25,000 (collectively, the “One-Time Bonuses”). The One-Time Bonuses are in addition to, and not in lieu
of, the Annual Bonus.
4.3
Annual Bonus. For each fiscal year of the Employment Term, the Executive shall be eligible to receive an annual bonus (the “Annual
Bonus”) of up to twenty percent (20%) of the Base Salary. The Chief Executive Officer will determine the terms of the Annual
Bonus, including the performance objectives if any, to be achieved. Any earned Annual Bonus will be paid within the period necessary
for compliance with Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”).
Except as otherwise provided in Section 5 hereof, the Executive must be employed by the Company on the last day of the applicable fiscal
year in order to be eligible to earn any part of the Annual Bonus. The Annual Bonus is in addition to, and not in lieu of, the One-Time
Bonuses.
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4.4
Stock Option.
(a)
On the Effective Date, the Executive shall be granted a stock option under the Company’s 2022 Equity Incentive Plan, substantially
in the form attached hereto as Exhibit A (the “Stock Option”), exercisable into 1,144,552 shares of the Company’s
common stock, par value $0.01 per share (the “Common Stock”). The Stock Option shall vest over a two (2)-year period
in accordance with the following schedule: (i) 25% of the shares on the Effective Date; and (ii) the remaining 75% of the shares in equal
quarterly installments over the remaining two (2) years of the vesting period. The Stock Option shall be granted outside of the 2022
Equity Incentive Plan (the “Plan”) as an employment inducement award.
(b)
In the event that the shares of Common Stock underlying the Stock Option (each as defined below) have not been registered for sale by
the Executive under the Registration Statement on Form S-8, File Number 333-268106, filed by the Company with the Securities and Exchange
Commission (the “SEC”) on November 1, 2022 (the “Registration Statement”), the Company agrees that,
on or prior to the first anniversary of the Effective Date, it will amend the Registration Statement and take such other action as may
be necessary to register such shares of Common Stock for sale by the Executive under the Registration Statement or file an additional
registration statement on Form S-8 or other form of registration statement with the SEC and take such other action as may be necessary
to register such shares of Common Stock for sale by the Executive.
(c)
Notwithstanding the fact that the Stock Option is being issued outside of the Plan, this Agreement shall be subject to the terms of the
Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it may be amended from time to time are
hereby incorporated herein by reference. In the event of a conflict between the terms of this Agreement and the Plan, the stock option
grant notice issued in connection with the grant of the Stock Option (the “Stock Option Grant Notice”), or the Stock
Option Agreement attached to the Stock Option Grant Notice (the “Stock Option Agreement”), the terms of this Agreement
shall control and supersede the conflicting terms of the Plan, the Stock Option Grant Notice, and the Stock Option Agreement.
4.5
Perquisites. During the Employment Term, the Company shall provide to the Executive all employee and executive perquisites which
other senior executives of the Company are generally entitled to receive, in accordance with Company policy set by the Board from time
to time.
4.6
Benefit Plans. During the Employment Term, the Executive shall be entitled to participate in all employee and executive benefit
plans of the Company, as in effect from time to time (collectively, “Employee Benefit Plans”) including, but not limited
to, equity, pension, thrift, profit sharing, 401(k), medical coverage, education, or other retirement or welfare benefits that the Company
has adopted or may adopt, maintain or contribute to for the benefit of its executives at a level commensurate with the Executive’s
position subject to satisfying the applicable eligibility requirements. Such benefits, in the aggregate, shall be no less favorable than
is provided to other similarly situated executives of the Company. The Company reserves the right to amend or terminate any Employee
Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.
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4.7
Vacation; Paid Time Off. During the Employment Term, the Executive shall be entitled to the prescribed number of weeks of paid
vacation days per calendar year (prorated for partial years) in accordance with the Company’s vacation policies, as in effect from
time to time. The Executive shall receive other paid time off in accordance with the Company’s policies for executive officers
as such policies may exist from time to time.
4.8
Business Expenses. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment,
and travel expenses incurred by the Executive in connection with the performance of the Executive’s duties hereunder in accordance
with the Company’s expense reimbursement policies and procedures.
4.9
Indemnification.
(a)
The Company will enter into a standard form of officer and director indemnification agreement with the Executive, in the form of which
is approved by the Board.
(b)
The Company will use commercially reasonable efforts to maintain third party directors and officers indemnification insurance for the
Executive on the same terms and conditions as apply to the members of the Board and similarly situated executive officers.
4.10
Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based or other compensation
paid to the Executive under this Agreement or any other agreement or arrangement with the Company which is subject to recovery under
any law, government regulation, or stock exchange listing requirement will be subject to such deductions and clawback as may be required
to be made pursuant to such law, government regulation, or stock exchange listing requirement (or any policy adopted by the Company pursuant
to any such law, government regulation or stock exchange listing requirement).
5.
Termination of Employment. The Employment Term and the Executive’s employment
hereunder may be terminated by either the Company or the Executive at any time and for any reason; provided that, unless otherwise provided
in this Agreement, either party shall be required to give the other party at least thirty (30) days advance written notice of any termination
of the Executive’s employment. On termination of the Executive’s employment during the Employment Term, the Executive shall
be entitled to the compensation and benefits described in this Section 5 and shall have no further rights to any compensation or any
other benefits from the Company or any of its affiliates.
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5.1
Expiration of the Term, For Cause, or Without Good Reason.
(a)
The Executive’s employment hereunder may be terminated upon the Executive’s election not to renew the Agreement in accordance
with Section 1 hereof, by the Company for Cause, or by the Executive without Good Reason. If the Executive’s employment is terminated
upon the Executive’s election not to renew the Agreement, by the Company for Cause, or by the Executive without Good Reason, the
Executive shall be entitled to receive:
(i)
any accrued but unpaid Base Salary and accrued but unused vacation which shall be paid within one (1) week following the Termination
Date (as defined below) in accordance with the Company’s customary payroll procedures;
(ii)
any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall
be paid on the otherwise applicable payment date except to the extent payment is otherwise deferred pursuant to any applicable deferred
compensation arrangement;
(iii)
any other accrued but unpaid compensation or consideration owed to the Executive;
(iv)
reimbursement for unreimbursed business expenses properly incurred by the Executive, which shall be subject to and paid in accordance
with the Company’s expense reimbursement policy; and
(v)
such employee benefits (including equity compensation), if any, to which the Executive may be entitled under the Company’s employee
benefit plans and equity incentive plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any
payments in the nature of severance or termination payments except as specifically provided herein.
Items
5.1(a)(i) through 5.1(a)(v) are referred to herein collectively as the “Accrued Amounts”. The treatment of any outstanding
equity awards shall be determined in accordance with the terms of the 2022 Equity Incentive Plan and the applicable award agreements
and notices.
(b)
For purposes of this Agreement, “Cause” shall mean:
(i)
the Executive’s willful failure, without substantial justification, to perform Executive’s duties (other than any such failure
resulting from incapacity due to physical or mental illness);
(ii)
the Executive’s willful failure to comply with any valid and legal directive of such officer or director as may be designated by
the Board;
(iii)
the Executive’s willful engagement in illegal conduct which is, in each case, materially injurious to the Company or its affiliates;
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(iv)
the Executive’s conviction of embezzlement, misappropriation, or fraud, whether or not related to the Executive’s employment
with the Company;
(v)
the Executive’s conviction of or plea of guilty to a crime that constitutes a felony (or state law equivalent) or a crime that
constitutes a misdemeanor involving moral turpitude, if such felony or other crime is work-related, materially impairs the Executive’s
ability to perform services for the Company, or results in material reputational or financial harm to the Company or its affiliates;
(vi)
the Executive’s material violation of the Company’s written policies or codes of conduct, including written policies related
to discrimination, harassment, performance of illegal or unethical activities, and unethical misconduct:
(vii)
the Executive’s willful unauthorized disclosure of Confidential Information (as defined below); or
(viii)
the Executive’s material breach of any material obligation under this Agreement or any other written agreement between the Executive
and the Company.
For
purposes of this provision, no act on the part of the Executive shall be considered “willful” unless it is done, or omitted
to be done by the Executive in bad faith. Any act, however, based on authority given pursuant to a resolution duly adopted by the Board
or on the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good
faith and in the best interests of the Company.
Termination
of the Executive’s employment shall not be deemed to be for Cause unless and until the Company delivers to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the Board (after thirty (30) days prior written
notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board),
finding that the Executive has engaged in the conduct described in any of (i)-(viii) above, and that the Executive’s employment
should accordingly be terminated for Cause.
(c)
For purposes of this Agreement, the Executive may not be subject to any of the following events without Executive’s written consent.
For the purposes of this Agreement, it shall be deemed a “Good Reason” for the Executive to terminate employment in
the event that the Company subjects the Executive to any of the following occurrences:
(i)
a material reduction in the Executive’s Base Salary;
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(ii)
a relocation of the Executive’s principal place of employment by more than twenty (20) miles;
(iii)
any material breach by the Company of any material provision of this Agreement or any material provision of any other agreement between
the Executive and the Company;
(iv)
the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such
assumption occurs by operation of law;
(v)
a material, adverse change in the Executive’s title, authority, duties, or responsibilities (other than temporarily while the Executive
is physically or mentally incapacitated or as required by applicable law) taking into account the Company’s size, status as a public
company, and capitalization as of the date of this Agreement; or
(vi)
a material adverse change in the reporting structure applicable to the Executive.
The
Executive cannot terminate employment for Good Reason unless the Executive has provided written notice to the Company of the existence
of the circumstances providing grounds for termination for Good Reason within fifteen (15) days of the initial existence of such grounds
and the Company has had at least fifteen (15) days from the date on which such notice is provided to cure such circumstances. If the
Executive does not terminate employment for Good Reason within thirty (30) days after the first occurrence of the applicable grounds,
then the Executive will be deemed to have waived the right to terminate for Good Reason with respect to such grounds.
5.2
Without Cause or for Good Reason. The Employment Term and the Executive’s employment hereunder may be terminated by the
Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive
the Accrued Amounts and subject to the Executive’s compliance with Section 7 and Section 8 of this Agreement and the Executive’s
execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided
by the Company (the “Release”) which becomes effective within twenty-one (21) days following the Termination Date
(such twenty-one (21) -day period, the “Release Execution Period”), the Executive shall be entitled to receive the
Accrued Amounts and the following severance benefits:
(a)
a lump sum payment equal to the sum of the Executive’s Base Salary and target Annual Bonus (assuming the maximum Annual Bonus would
have been earned) for the year in which the Termination Date occurs, which, unless otherwise provided in this Agreement, shall be paid
immediately after the expiration of the Release Execution Period;
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(b)
If the Executive timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”), the Company shall maintain for Executive the same health insurance policies that it had in place on
the Termination Date for the duration of the time that Executive utilizes COBRA and shall reimburse the Executive for the monthly COBRA
premium paid by the Executive for the Executive and the Executive’s spouse and dependents. Such reimbursement shall be paid to
the Executive on the fifth day of the month immediately following the month in which the Executive timely remits the premium payment.
The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the eighteen-month anniversary of the Termination
Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive
obtains substantially similar coverage from another employer or other source (which, for the sake of clarity, the Executive has no obligation
whatsoever to obtain). Notwithstanding the foregoing, if the Company making payments under this Section 5.2(b) would violate the nondiscrimination
rules applicable to non-grandfathered plans under the Affordable Care Act (the “ACA”), or result in the imposition
of penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform this Section
5.2(b) in a manner as is necessary to comply with the ACA.
(c)
The treatment of any outstanding equity awards shall be determined in accordance with the terms of the 2022 Equity Incentive Plan and
the applicable award agreements and notices.
(d)
Notwithstanding the foregoing, all outstanding equity-based compensation awards, including the Stock Option, shall remain outstanding
and shall vest in full immediately on the Termination Date.
5.3
Death or Disability.
(a)
The Executive’s employment hereunder shall terminate automatically on the Executive’s death during the Employment Term, and
the Company may terminate the Executive’s employment on account of the Executive’s Disability.
(b)
If the Executive’s employment is terminated during the Employment Term on account of the Executive’s death or Disability,
the Executive (or the Executive’s estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:
(i)
the Accrued Amounts; and
(ii)
a lump sum payment equal to the Annual Bonus that the Executive would have earned for the fiscal year in which the Termination Date occurs
(assuming the maximum Annual Bonus would have been earned), which shall be payable on the date that annual bonuses are paid to the Company’s
similarly situated executives, but in no event later than two-and-a-half (2 1/2) months following the end of the fiscal year in which
the Termination Date occurs.
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Notwithstanding
any other provision contained herein, all payments made in connection with the Executive’s Disability shall be provided in a manner
which is consistent with federal and state law.
(c)
For purposes of this Agreement, “Disability” shall mean a condition that entitles the Executive to receive long-term
disability benefits under the Company’s long-term disability plan, or if there is no such plan, the Executive’s inability,
due to physical or mental incapacity, to perform the essential functions of the Executive’s job, with or without reasonable accommodation,
for one hundred eighty (180) days out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days.
Any question as to the existence of the Executive’s Disability as to which the Executive and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and
the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive
shall be final and conclusive for all purposes of this Agreement.
5.4
Notice of Termination. Any termination of the Executive’s employment hereunder by the Company or by the Executive during
the Employment Term (other than termination pursuant to Section 5.3(a) hereof on account of the Executive’s death) shall be communicated
by written notice of termination (“Notice of Termination”) to the other party hereto in accordance with Section 23
hereof. The Notice of Termination shall specify:
(a)
The termination provision of this Agreement relied upon;
(b)
To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive’s employment
under the provision so indicated; and
(c)
The applicable Termination Date.
5.5
Termination Date. The Executive’s “Termination Date” shall be:
(a)
If the Executive’s employment hereunder terminates on account of the Executive’s death, the date of the Executive’s
death;
(b)
If the Executive’s employment hereunder is terminated on account of the Executive’s Disability, the date that it is determined
that the Executive has a Disability;
(c)
If the Company terminates the Executive’s employment hereunder for Cause, the date the Notice of Termination is delivered to the
Executive;
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(d)
If the Company terminates the Executive’s employment hereunder without Cause, the date specified in the Notice of Termination,
which shall be no less than thirty (30) days following the date on which the Notice of Termination is delivered to the Executive; provided
that, the Company shall have the option to provide the Executive with a lump sum payment equal to thirty (30) days’ Base Salary
in lieu of such notice, which shall be paid in a lump sum on the Executive’s Termination Date and for all purposes of this Agreement,
the Executive’s Termination Date shall be the date on which such Notice of Termination is delivered to the Executive;
(e)
If the Executive terminates the Executive’s employment hereunder with or without Good Reason, the date specified in the Executive’s
Notice of Termination, which shall be no less than five (5) days following the date on which the Notice of Termination is delivered to
the Company; provided that, the Company may waive all or any part of the five (5) day notice period for no consideration by giving written
notice to the Executive and for all purposes of this Agreement, the Executive’s Termination Date shall be the date determined by
the Company; and
(f)
If the Executive’s employment hereunder terminates because either party provides notice of non-renewal pursuant to Section 1 hereof,
the Renewal Date immediately following the date on which the applicable party delivers notice of non-renewal.
Notwithstanding
anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a “separation from
service” within the meaning of Section 409A.
5.6
Resignation of All Other Positions. On termination of the Executive’s employment hereunder for any reason, the Executive
agrees to resign, effective on the Termination Date, or shall be deemed to have resigned, from all positions that the Executive holds
as an officer or member of the Board (or a committee thereof) of the Company or any of its affiliates.
6.
Cooperation. The parties agree that certain matters in which the Executive will be
involved during the Employment Term may necessitate the Executive’s cooperation in the future. Accordingly, following the termination
of the Executive’s employment for any reason, to the extent reasonably requested by the Board, the Executive shall cooperate with
the Company in connection with matters arising out of the Executive’s service to the Company; provided that, the Company shall
make reasonable efforts to minimize disruption of the Executive’s other activities. The Company shall reimburse the Executive for
reasonable expenses incurred in connection with such cooperation and, to the extent that the Executive is required to spend substantial
time on such matters, the Company shall compensate the Executive at an hourly rate based on the Executive’s Base Salary on the
Termination Date.
7.
Confidential Information. The Executive understands and acknowledges that during
the Employment Term, the Executive will have access to and learn about Confidential Information, as defined below.
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7.1
Confidential Information Defined.
(a)
Definition. For purposes of this Agreement, “Confidential Information” includes, but is not limited to, all
information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly
to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques,
agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade
secrets, computer programs, computer software, applications, operating systems, software design, web design, work-in-process, databases,
device configurations, embedded data, compilations, metadata, technologies, manuals, records, articles, systems, material, sources of
material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal
information, marketing information, advertising information, pricing information, credit information, design information, payroll information,
staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls,
security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications,
algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original
works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists,
client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company or any
existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted
information to the Company in confidence. The Executive understands that the above list is not exhaustive, and that Confidential Information
also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear
to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.
The Executive understands and agrees that Confidential Information includes information developed by Executive in the course of employment
by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information
shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided
that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive’s behalf.
(b)
Company Creation and Use of Confidential Information. The Executive understands and acknowledges that the Company has invested,
and continues to invest, substantial time, money, and specialized knowledge into developing its resources, creating a customer base,
generating customer and potential customer lists, training its employees, and improving its offerings relating to its artificial intelligence
business and such other businesses as the Company may engage in during the Employment Term. The Executive understands and acknowledges
that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential
Information provides the Company with a competitive advantage over others in the marketplace.
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(c)
Disclosure and Use Restrictions. The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential;
(ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed,
published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company)
not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and,
in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive’s
authorized employment duties to the Company or with the prior consent of such officer or director as may be designated by the Board acting
on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties
or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other
resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises
or control of the Company, except as required in the performance of the Executive’s authorized employment duties to the Company
or with the prior consent of such officer or director as may be designated by the Board acting on behalf of the Company in each instance
(and then, such disclosure shall be made only within the limits and to the extent of such duties or consent).
(d)
Permitted disclosures. Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required
by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency,
provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. The Executive shall
promptly provide written notice of any such order to such officer or director of the Company as may be designated by the Board.
(e)
Permitted Communications. Nothing herein prohibits or restricts the Executive (or the Executive’s attorney) from initiating
communications directly with, responding to an inquiry from, or providing testimony before the Securities and Exchange Commission (SEC),
the Financial Industry Regulatory Authority (FINRA), any other self-regulatory organization, or any other federal or state regulatory
authority regarding a possible securities law violation.
(f)
Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016 (“DTSA”).
Notwithstanding any other provision of this Agreement:
(i)
The Executive will not be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade
secret that:
12
(A)
is made (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (2)
solely for the purpose of reporting or investigating a suspected violation of law; or
(B)
is made in a complaint or other document filed under seal in a lawsuit or other proceeding.
(ii)
If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose
the Company’s trade secrets to the Executive’s attorney and use the trade secret information in the court proceeding if the
Executive:
(A)
files any document containing trade secrets under seal; and
(B)
does not disclose trade secrets, except pursuant to court order.
The
Executive understands and acknowledges that the Executive’s obligations under this Agreement with regard to any particular Confidential
Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after
the Executive begins employment by the Company) and shall continue during and after the Executive’s employment by the Company until
such time as such Confidential Information has become public knowledge other than as a result of the Executive’s breach of this
Agreement or breach by those acting in concert with the Executive or on the Executive’s behalf.
8.
Restrictive Covenants.
8.1
Acknowledgement. The Executive acknowledges and agrees that, as a result of the nature of the Company’s business and the
nature of the Executive’s position with the Company, the Executive has been or will come into contact with, and will have access
to, Confidential Information belonging to the Company. The Executive acknowledges that the aforementioned Confidential Information is
unique and not generally known to the public with respect to the Company and has been developed, acquired, and compiled by the Company
at its great effort and expense. The Executive further acknowledges and agrees that any disclosure or use of the Company’s Confidential
Information by the Executive, other than in connection with the Company’s business or as specifically authorized by the Company,
will be or may become highly detrimental to the business of the Company, and serious loss of business and damage to the Company will
or may result. Accordingly, the Executive agrees to hold all Confidential Information in the strictest confidence and agrees to safeguard
and not use, disclose, divulge or reveal the Company’s Confidential Information to any person, either during the Executive’s
employment or at any time after the termination of the Executive’s employment with the Company, without specific prior written
authorization from an officer or director of the Company as may be designated by the Board.
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8.2
Non-Competition. Because of the Company’s legitimate business interest as described herein and the good and valuable consideration
offered to the Executive, during the Employment Term and for the one (1) year, beginning on the last day of the Executive’s employment
with the Company, except in the instance where Executive is terminated by the Company without Cause or the Executive terminates for a
Good Reason, the Executive agrees and covenants not to engage in Prohibited Activity.
For
purposes of this Section 8, “Prohibited Activity” is activity in which the Executive contributes the Executive’s
knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent,
employee, partner, director, stockholder, officer, volunteer, intern, or any other similar capacity to an entity engaged in the business
of developing, owning or operating firm-capacity renewable energy infrastructure that converts waste and biomass into dispatchable power
and such other businesses as the Company may be engaged in during the Employment Term within 20 miles of the Company’s main office.
Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary information,
or Confidential Information. Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the
publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is
not a controlling person of, or a member of a group that controls, such corporation. This Section 8 does not, in any way, restrict or
impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying
with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided
that such compliance does not exceed that required by the law, regulation, or order.
8.3
Non-Solicitation of Employees. The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt
to hire or recruit, or induce the termination of employment of any employee of the Company, or attempt to do so during one (1) year,
beginning on the last day of the Executive’s employment with the Company.
8.4
Non-Solicitation of Customers. The Executive understands and acknowledges that because of the Executive’s experience with
and relationship to the Company, the Executive will have access to and learn about much or all of the Company’s customer information.
“Customer Information” includes, but is not limited to, names, phone numbers, addresses, email addresses, order history,
order preferences, chain of command, decision makers, pricing information, and other information identifying facts and circumstances
specific to the customer and relevant to sales or services. The Executive understands and acknowledges that loss of this customer relationship
and/or goodwill will cause significant and irreparable harm to the Company.
14
The
Executive agrees and covenants that for a period of one (1) year beginning on the last day of the Executive’s employment with the
Company, not to use the Company’s Confidential Information for purposes of offering or goods or services similar to or competitive
with those offered by the Company. This restriction shall only apply to:
(a)
Customers or prospective customers the Executive contacted in any way during the twelve (12) months prior to termination;
(b)
Customers about whom the Executive has trade secret or confidential information; and
(c)
Customers about whom the Executive has information that is not available publicly.
9.
Remedies. In the event of a breach or threatened breach by the Executive of Section
7 or Section 8 of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to
other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from
any court of competent jurisdiction, and that money damages would not afford an adequate remedy, without the necessity of showing any
actual damages, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition
to, not in lieu of, legal remedies, monetary damages, or other available forms of relief.
10.
Proprietary Rights.
10.1
Work Product. At all times while Executive is employed by the Company, the Executive is free to use Work Product and Intellectual
Property which is not gained as result of a breach of this Agreement. “Work Product” and “Intellectual Property”
that is developed by Executive through Executive’s own skill, knowledge, know-how and experience without the assistance or use
of Company assets, that does not relate to the Executive’s work for the Company may, however, be owned and used by the Executive
to whatever extent and in whichever way Executive chooses both during and after the Employment Term. Except as set forth in this paragraph
“Work Product” and “Intellectual Property” shall belong to the Company. The term “Work Product”
shall mean all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research,
proposals, materials, and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended,
conceived, or reduced to practice by the Executive individually or jointly with others during the Employment Term that relate to the
business or contemplated business, products, activities, research, or development of the Company. “Work Product” does not
include any of the foregoing that are (a) trade secrets, inventions, products, ideas, processes, formulas, know-how, improvements, discoveries,
developments, designs and techniques; and (b) information regarding plans for research, development, new products, marketing and selling,
business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers, distributors and customers; and
(c) information regarding the skills and compensation of other employees of the Company. The term “Intellectual Property Rights”
shall mean any and all rights in and to the Company’s US and foreign (a) patents, patent disclosures and inventions (whether patentable
or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names, and domain names, and other similar designations
of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including
computer programs), and rights in data and databases, (d) trade secrets, know-how, and other confidential information, and (e) all other
intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and
renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any
part of the world.
15
10.2
Work Made for Hire. Except as otherwise excluded by this paragraph, the Executive acknowledges that, by reason of being employed
by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter
is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the
extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the
Executive’s entire right, title, and interest in and to all Work Product and Intellectual Property Rights therein, including the
right to sue, counterclaim, and recover for all past, present, and future infringement, misappropriation, or dilution thereof, and all
rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s
rights, title, or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company
would have had in the absence of this Agreement.
10.3
Further Assurances; Power of Attorney. During and after the Employment Term, the Executive agrees to reasonably cooperate with
the Company to (a) apply for, obtain, perfect, and transfer to the Company the Work Product as well as any and all Intellectual Property
Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation,
giving testimony and executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments,
and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of
attorney to execute and deliver any such documents on the Executive’s behalf in the Executive’s name and to do all other
lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance, and maintenance
of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the
Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of
attorney is coupled with an interest and shall not be affected by the Executive’s subsequent incapacity.
10.4
No License. The Executive understands that this Agreement does not, and shall not be construed to grant the Executive any license
or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software,
or other tools made available to the Executive by the Company.
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11.
Security.
11.1
Security and Access. The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in
force from time to time, including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities
access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems,
email systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all
other Company facilities, IT resources and communication technologies (“Facilities and Information Technology Resources”);
(b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access
or use any Facilities and Information Technology Resources in any manner after the termination of the Executive’s employment by
the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event the Executive
learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or reverse
engineering of, or tampering with any Facilities and Information Technology Resources or other Company property or materials by others.
11.2
Exit Obligations. Upon (a) voluntary or involuntary termination of the Executive’s employment or (b) the Company’s
request at any time during the Executive’s employment, the Executive shall (i) provide or return to the Company any and all Company
property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices,
computers, cell phones, smartphones, PDAs, pagers, fax machines, equipment, speakers, webcams, manuals, reports, files, books, compilations,
work product, email messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, negatives,
and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those
that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether
they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with the
Executive’s employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to
the Company that remain in the Executive’s possession or control, including those stored on any non-Company devices, networks,
storage locations, and media in the Executive’s possession or control.
12.
Publicity. The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives
and licensees, of the Executive’s name, voice, likeness, image, appearance, and biographical information in, on or in connection
with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising
and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic
forms and media throughout the world, at any time during or after the Employment Term, for all legitimate commercial and business purposes
of the Company (“Permitted Uses”) without further consent from or royalty, payment, or other compensation to the Executive.
The Executive hereby forever waives and releases the Company and its directors, officers, employees, and agents from any and all claims,
actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time
during or after the Employment Term, arising directly or indirectly from the Company and its agents’, representatives’, and
licensees’ exercise of their rights in connection with any Permitted Uses.
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13.
Governing Law; Jurisdiction and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of Florida
without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought
only in a state or federal court located in Broward County, Florida. The parties hereby irrevocably submit to the exclusive jurisdiction
of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
14.
Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between
the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements,
representations, and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement
can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement. In
the event of a conflict between the terms of this Agreement and the terms of any other agreement to which the Executive and the Company
are a party, the terms of this Agreement shall control and supersede the conflicting terms of the other agreement. For the sake of clarity,
the parties acknowledge and agree that the terms of this Agreement supersede in their entirety the terms of that certain Change of Control
Agreement, dated July 22, 2026, between the Company and the Executive.
15.
Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed
to in writing and signed by the Executive and such officer or director of the Company as may be designated by the Board. No waiver by
either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the
other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent
time, nor shall the failure of or delay by either of the parties in exercising any right, power, or privilege hereunder operate as a
waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power, or privilege.
16.
Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified,
or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the
remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become
a part hereof and treated as though originally set forth in this Agreement. The
parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu
of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting
any or all of the offending provision, adding additional language to this Agreement, or by making such other modifications as it deems
warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties
expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event,
should one or more of the provisions of this Agreement be held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as
provided above, this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions had not been set forth herein.
18
17.
Captions. Captions and headings of the sections and paragraphs of this Agreement
are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any
section or paragraph.
18.
Counterparts. This Agreement may be executed in separate counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
19.
Tolling. Should the Executive violate any of the terms of the restrictive covenant
obligations articulated herein, the obligation at issue will run from the first date on which the Executive ceases to be in violation
of such obligation.
20.
Section 409A.
20.1
General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and
administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement
may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement
that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral
shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under
this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment
shall only be made upon a “separation from service” under Section 409A. In the event that the Executive is liable for all
or any portion of any taxes, penalties, interest, or other expenses that may be incurred by the Executive on account of non-compliance
with Section 409A, the Company shall reimburse the Executive for all such expenses within 10 days of receiving a request for such reimbursement
from the Executive accompanied by supporting documentation evidencing the amount of such expenses.
20.2
Specified Employees. Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit to be provided
to the Executive in connection with the Executive’s termination of employment is determined to constitute “nonqualified deferred
compensation” within the meaning of Section 409A and the Executive is determined to be a “specified employee” as defined
in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first business day following the six-month anniversary
of the Termination Date or, if earlier, on the Executive’s death (the “Specified Employee Payment Date”). The
aggregate of any payments that would otherwise have been paid to the Executive before the Specified Employee Payment Date and interest
on such amounts for the period commencing on the Termination Date and ending on the Specified Employee Payment Date calculated based
on the applicable federal rate published by the Internal Revenue Service for the month in which the Executive’s separation from
service occurs (the aggregate of all such payments and interest thereon, the “Deferred Payment”) shall be paid to
the Executive in a lump sum on the Specified Employee Payment Date.
19
20.3
Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall
be provided in accordance with the following:
(a)
the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)
any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the
calendar year in which the expense was incurred; and
(c)
any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
20.4
Tax Gross-Ups. Unless otherwise provided in this Agreement, any tax gross-up payments provided under this Agreement shall be paid
to the Executive on or before December 31 of the calendar year immediately following the calendar year in which the Executive remits
the related taxes.
21.
Notification to Subsequent Employer. When the Executive’s employment with the
Company terminates, the Executive agrees to notify any subsequent employer of the restrictive covenants sections contained in this Agreement.
The Executive will also deliver a copy of such notice to the Company before the Executive commences employment with any subsequent employer.
In addition, the Executive authorizes the Company to provide a copy of the restrictive covenants sections of this Agreement to third
parties, including but not limited to, the Executive’s subsequent, anticipated, or possible future employer.
22.
Successors and Assigns. This Agreement is personal to the Executive and shall not
be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported
assignment. The Company may assign this Agreement to any successor to or assignee of (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit
of the Company and its permitted successors and assigns.
23.
Notice. Notices and all other communications provided for in this Agreement shall
be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier
to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
If
to the Company:
Algorhythm
Holdings, Inc.
800
Corporate Drive, Suite 216
Fort
Lauderdale, FL 33334
20
If
to the Executive:
To
that address set forth on the Company’s books and records as updated by the Executive from time to time
24.
Representations of the Executive. The Executive represents and warrants to the Company
that: (a) the Executive’s acceptance of employment with the Company and the performance of duties hereunder will not conflict with
or result in a violation of, a breach of, or a default under any contract, agreement, or understanding to which the Executive is a party
or is otherwise bound; and (b) the Executive’s acceptance of employment with the Company and the performance of duties hereunder
will not violate any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer.
25.
Withholding. Unless otherwise provided in this Agreement, the Company shall have
the right to withhold from any amount payable hereunder any Federal, state, and local taxes in order for the Company to satisfy any withholding
tax obligation it may have under any applicable law or regulation.
26.
Survival. Upon the expiration or other termination of this Agreement, the respective
rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out
the intentions of the parties under this Agreement.
27.
Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT
THE EXECUTIVE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE
EXECUTIVE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF THE EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.
[signature
page follows]
21
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ALGORHYTHM HOLDINGS, INC.
By:
/s/
Andrew Thompson
Andrew
Thompson
Chief Executive Officer
EXECUTIVE
/s/
Leticia Raele
Leticia
Raele
22
EX-10.5
EX-10.5
Filename: ex10-5.htm · Sequence: 7
Exhibit
10.5
SEPARATION
AGREEMENT AND RELEASE
THIS
SEPARATION AGREEMENT AND RELEASE (this “Agreement”), dated September 15, 2026 (the “Effective Date”), is entered
into by and between Algorhythm Holdings, Inc., a Delaware corporation (the “Company”), and [_________] (“Executive”).
WHEREAS,
the Company and Executive are parties to that certain Employment Agreement, dated [__________] (the “Employment Agreement”),
and that certain Indmenification Agreement, dated [__________] (the “Indemnification Agreement”); and
WHEREAS,
on the Effective Date, the Company terminated Executive’s employment without “Cause” (as such term is defined in the
Employment Agreement) pursuant to Section 5.2 of the Employment Agreement effective on the Effective Date; and
WHEREAS,
the Company and Executive wish to settle in full certain claims that Executive may have now or in the future against the Company on the
terms set forth herein.
NOW,
THEREFORE, in consideration of the foregoing premises and representations, warranties, covenants and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1.
Separation Payment. In consideration for the release of the Released Claims by Executive in this Agreement and the other representations,
warranties, covenants and agreements made by Executive in this Agreement, the Company agrees to make a one-time payment of [__________]
Dollars ($[__________]) (the “Separation Payment”) to Executive on the Effective Date. For the sake of clarity, the Separation
Payment payable to Executive under this Agreement is in addition to, and not in lieu of, any compensation and benefits owed to Executive
under the Employment Agreement or any other agreement to which Executive and the Company are parties on the Effective Date.
2.
Release of Claims.
(a)
Release. Effective on the date that Executive has received all compensation owed to him by the Company under the Employment Agreement
(including all compensation owed to Executive that is payable to Executive in the future as a result of the application of Section 409A
of the Internal Revenue Code of 1986, as amended, and any other reason), Executive, for himself and on behalf of his respective heirs,
assigns, beneficiaries, executors, administrators, affiliates, successors and assigns (collectively, the “Releasing Parties”),
does hereby fully and irrevocably remise, release and forever discharge the Company and its respective current and former officers, directors,
employees, partners, equity holders, affiliates, agents, representatives, attorneys, accountants, consultants, successors and assigns
(collectively, the “Released Parties) of and from any and all manner of claims, actions, causes of action, grievances, liabilities,
obligations, promises, damages, agreements, rights, debts and expenses (including claims for attorneys’ fees and costs) of every
kind, either in law or in equity, whether contingent, mature, known or unknown, or suspected or unsuspected, including, without limitation,
any claims arising under any federal, state, local or municipal law, common law or statute, whether arising in contract or in tort, and
any claims arising under any other laws or regulations of any nature whatsoever, that any of the Releasing Parties ever had, now have
or may in the future have, for or by reason of any cause, matter or thing whatsoever with respect to any of the Released Parties, including,
but not limited to, claims under the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection
Act of 1990 (the “ADEA”), Title VII of the Civil Rights Act of 1964, the Executive Retirement Income Security Act of 1974
(excluding claims for vested benefits), the Immigration Reform and Control Act of 1986, the Americans With Disabilities Act, the Family
and Medical Leave Act of 1993, the Fair Labor Standards Act, the Uniformed Services Employment and Reemployment Rights Act, the National
Labor Relations Act, the Worker Adjustment and Retraining Notification Act, the Genetic Information Nondiscrimination Act of 2008, the
Constitution of the United States of America, the Florida Civil Rights Act of 1992, the Florida ADIS Act, the Florida Wage Discrimination
Law, the Florida Equal Pay Law, the Florida Whistleblower Protection Law, the Florida General Labor Regulations, and any similar local
ordinance or workers’ compensation statute, and any other applicable federal, state or local statute, rule, regulation or ordinance
relating to discriminatory hiring or employment practices or civil rights laws based on protected class status, common law claims, including
claims of intentional or negligent infliction of emotional distress, negligent hiring, negligent retention, negligent training, negligent
supervision, defamation, invasion of privacy, breach of a covenant of good faith and fair dealing, promissory estoppel, negligence, wrongful
termination of employment, any claims for or to past or future unpaid salary, commissions, bonuses, incentive payments, expense reimbursements,
health care benefits, life insurance, disability insurance and any other income or benefits Executive received or claim he should receive
and all other claims of any kind, including but not limited to any claims for attorneys’ fees (excluding claims under COBRA), as
well as any and all other claims that Executive may have arising under or in connection with any and all local, state or federal ordinances,
statutes, rules, regulations, executive orders or common law, from the beginning of the world up to and including the date of Executive’s
execution of this Agreement (collectively, the “Released Claims”), including, but not limited to, Released Claims with respect
to the Employment Agreement (except as provided in Section 15 hereof), but specifically excluding Released Claims with respect to this
Agreement, the Indemnification Agreement, that certain stock option issued by the Company to Executive [__________], exercisable into
[__________]shares of the Company’s common stock, $0.01 par value per share (“Common Stock”; such stock option, the
“[__________]”), [__________], and any other agreement entered into between the Company and Executive on or after the Effective
Date. For the sake of clarity, Executive is not releasing any Released Claims with respect to this Agreement, the Indemnification Agreement,
the Stock Options or any other agreement entered into between the Company and Executive on or after the Effective Date.
(b)
No Transfer of Claims. Executive hereby represents, warrants, covenants and agrees that he has not sold, assigned, transferred
or otherwise conveyed, and that he will not sell, assign, transfer or otherwise convey, to any other person or entity all or any portion
of the Released Claims. Executive further covenants and agrees that neither he nor any of the Releasing Parties will sue or bring, or
assign to any third person, any Released Claims or charges against any of the Released Parties with respect to any matter covered by
the release set forth in Section 2(a) of this Agreement, or assert against any of the Released Parties any action, grievance, suit, litigation
or proceeding for any matter covered by the release set forth above.
2
(c)
Newly Discovered Facts. In giving the release set forth in Section 2(a) of this Agreement, Executive acknowledges that he understands
the significance and consequence of such release, and that he may hereafter discover claims or facts in addition to or different from
those which he now knows or believes to exist with respect to the subject matter of this Agreement and which, if known or suspected at
the time of executing this Agreement, may have materially affected this Agreement. Nevertheless, Executive hereby waives any right, claim
or cause of action that might arise as a result of such different or additional claims or facts.
(d)
Scope of Release. The release set forth in Section 2(a) of this Agreement is intended to be enforceable against Executive in accordance
with the express terms and scope thereof, notwithstanding any express negligence rule or any similar directive that would prohibit or
otherwise limit releases because of the simple or gross negligence (whether sole, concurrent, active or passive) or other fault or strict
liability of any of the Released Parties.
3.
Age Discrimination in Employment Act of 1967. Executive acknowledges and confirms that he is waiving any claim under the ADEA
and that:
(a)
he is receiving consideration which is in addition to anything of value to which he otherwise would have been entitled;
(b)
he fully understands the terms of this Agreement and enters into it voluntarily without any coercion on the part of any person or entity;
(c)
he was given adequate time to consider all implications and to freely and fully consult with and seek the advice of legal counsel or
whomever else he deemed appropriate and has done so;
(d)
he acknowledges and confirms that he was not eligible to participate in any other severance offer from the Company;
(e)
the consideration paid or provided to Executive under this Agreement is and will be deemed to be adequate consideration for the representations,
warranties, covenants and agreements made by Executive under this Agreement;
(f)
he was advised in writing, by way of this Agreement, to consult legal counsel before signing this Agreement;
(g)
he was advised in writing, by way of this Agreement, that he has at least 21 calendar days within which to consider this Agreement before
signing it and, in the event that he signs this Agreement during this time period, said signing constitutes a knowing and voluntary waiver
of this time period; and
(h)
he has seven (7) calendar days after executing this Agreement within which to revoke this Agreement. If the seventh (7th)
day falls on a weekend or national holiday, Executive has until the next business day to revoke. If Executive elects to revoke this Agreement,
he will notify the Chief Executive Officer in writing sent by Federal Express Priority Overnight delivery, or by hand delivery with written
receipt, of his revocation. Any determination of whether Executive’s revocation was timely sent will be determined by the date
of actual receipt by the Chief Executive Officer.
4.
Certain Claims. Executive represents and warrants that neither he nor anyone on his behalf has filed any suits, claims or the
like against the Company. To the extent that Executive or any third party seeks redress for a Released Claim covered and released by
this Agreement and a settlement or judgment of said Released Claim is reached or entered, Executive will designate the Company as the
recipient of any such monies allocated to him by the payor or, if that is not possible, Executive will pay to the Company the amount
received from the payor within 72 hours of Executive’s receipt of said monies.
3
5.
Breach of Agreement. In the event the Company breaches any of its obligations under this Agreement, the Employment Agreement,
the Indemnification Agreement or the Stock Options, or the Company takes any action or omits to take any action that has the purpose
or effect of hindering, frustrating or delaying the performance of any of the Company’s obligations under this Agreement, the Employment
Agreement, the Indemnification Agreement, or the Stock Options, then the release set forth in Section 2(a) hereof shall be null and void
immediately and automatically without any further action by any person. In such event, notwithstanding the foregoing and anything in
this Agreement to the contrary, Executive shall be entitled to retain the Separation Payment in its entirety.
6.
Entire Agreement. This Agreement contains the entire agreement between the parties and supersedes all prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter hereto, and no party shall be liable or bound to any other
party in any manner by any warranties, representations, guarantees or covenants except as specifically set forth in this Agreement. Neither
party relied upon any representation or warranty, whether written or oral, made by the other party or any of its or his officers, directors,
employees, agents or representatives, in making its or his decision to enter into this Agreement.
7.
Amendment. This Agreement may not be amended, modified or supplemented except by an instrument or instruments in writing signed
by the party against whom enforcement of any such amendment, modification or supplement is sought.
8.
Extensions and Waivers. The parties hereto entitled to the benefits of a term or provision may: (i) extend the time for the performance
of any of the obligations or other acts of the parties hereto; (ii) waive any inaccuracies in the representations and warranties contained
herein or in any document, certificate or writing delivered pursuant hereto; or (iii) waive compliance with any obligation, covenant,
agreement or condition contained herein. Any agreement on the part of a party to any such extension or waiver shall be valid only if
set forth in an instrument or instruments in writing signed by the party against whom enforcement of any such extension or waiver is
sought. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed
to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement.
9.
Severability. If any provision of this Agreement or the application thereof to any person or circumstance is held to be invalid
or unenforceable to any extent, the remainder of this Agreement shall remain in full force and effect and shall be reformed to render
the Agreement valid and enforceable while reflecting to the greatest extent permissible the intent of the parties hereto.
10.
Governing Law; Jurisdiction and Venue. This
Agreement, for all purposes, shall be construed in accordance with the laws of the State of Florida without regard to conflicts of law
principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court
located in Broward County in the State of Florida. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts
and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
4
11.
Attorneys’ Fees. In the event of any legal, equitable or administrative action or proceeding brought by a party against
the other party under this Agreement, the prevailing party shall be entitled to recover the reasonable fees of its or his attorneys and
any costs incurred in such action or proceeding, including costs of appeal, if any, in such amount as the court or administrative body
having jurisdiction over such action may award.
12.
Additional Representations. The Company represents and warrants that the undersigned has the authority to act on the Company’s
behalf and to bind the Company to this Agreement. Executive represents and warrants that he is of sound mind and judgment, is not under
any impairment, disability, distress or undue influence that would in any way impair his ability to enter into this Agreement, and has
the capacity to act on his own behalf and to bind himself to this Agreement.
13.
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that Executive may not assign his obligations under this Agreement without the prior
written consent of the Company.
14.
Headings; Definitions. The Section headings contained in this Agreement are inserted for convenience of reference only and shall
not affect the meaning or interpretation of this Agreement. All references to Sections contained herein mean Sections of this Agreement
unless otherwise stated. All capitalized terms defined herein are equally applicable to both the singular and plural forms of such terms.
15.
Certain Matters. For the sake of clarity, it is expressly understood and agreed that the terms of Section 21 of the Employment
Agreement are expressly intended to apply to the terms of this Agreement and the compensation, benefits and other consideration receivable
by Executive hereunder, including but not limited to the Separation Payment, pursuant to the terms of Sections 21 and 27 of the Employment
Agreement. Accordingly, notwithstanding anything in this Agreement to the contrary, the release set forth in Setion 2(a) of this Agreement
shall not apply to the terms of Sections 21 and 27 of the Employment Agreement.
16.
Counterparts. This Agreement may be executed in two or more counterparts and delivered via facsimile or other electronic transmission,
each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Remainder
of page intentionally left blank]
5
PLEASE
READ CAREFULLY BEFORE SIGNING. THIS SEPARATION AGREEMENT AND RELEASE INCLUDES A RELEASE OF CERTAIN KNOWN AND UNKNOWN, FORESEEN AND UNFORESEEN,
AND SUSPECTED AND UNSUSPECTED CLAIMS.
IN
WITNESS WHEREOF, the parties hereto have made and signed this Agreement as follows:
ALGORHYTHM HOLDINGS, INC.
EXECUTIVE
By:
Andrew
Thompson
[__________]
Chief
Executive Officer
6
EX-10.6
EX-10.6
Filename: ex10-6.htm · Sequence: 8
Exhibit
10.6
CONSULTING
AGREEMENT
This
Consulting Agreement (this “Agreement”), dated September 15, 2026 (the “Effective Date”), is entered into by
and between Algorhythm Holdings, Inc., a Delaware corporation (the “Company”), and [__________] (“Consultant”).
WITNESSETH:
WHEREAS,
the Company and Consultant desire to enter into an agreement pursuant to which Consultant will provide consulting services to the Company.
NOW,
THEREFORE, in consideration of the foregoing premises and representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and Consultant hereby
agree as follows:
1.
Retention. The Company hereby retains Consultant to provide the consulting services described herein to the Company for a term
commencing on the Effective Date and ending on the 18-month anniversary of the Effective Date (the “Consulting Term”).
2.
Independent Contractor. Consultant and Company acknowledge and agree that the relationship hereunder created is one of an independent
contractor and not one of employment. Consultant shall at all times during the Consulting Term act as an independent contractor and nothing
hereunder shall be construed to be inconsistent with this relationship or status or create or imply a relationship of employer-employee
between the Company and Consultant or his employees or associates. Consultant shall not hold Consultant or his employees or associates
out to third parties as employees or officers of the Company, and shall have no authority to bind or commit the Company, legally or otherwise.
Except as expressly provided herein, neither Consultant nor his employees or associates shall be entitled to any benefits paid by the
Company to its employees. Consultant shall be solely responsible for any tax consequences applicable to Consultant or his employees or
associates by reason of this Agreement and the relationship established hereunder, and the Company shall not be responsible for the payment
of any federal, state or local taxes or contributions imposed under any employment insurance, social security, income tax or other tax
law or regulation with respect to Consultant’s performance of consulting services hereunder.
3.
Consulting Services. Consultant shall provide general corporate consulting and advisory services (the “Consulting Services”)
to the Company as reasonably requested by the Company from time-to-time, provided, however, that in no event shall Consultant
be obligated to provide more than 20 hours of Consulting Services per month. Consultant shall be responsible for determining the method,
details and means of performing the Consulting Services. Consultant shall report to the Chief Executive Officer of the Company or such
other person as the Chief Executive Officer shall designate. Notwithstanding the above, the Company acknowledges and agrees that Consultant
may engage in and pursue such contemporaneous activities and interests as Consultant may desire, for personal profit or otherwise, including
full-time employment with one or more other companies, during the Consulting Term.
4.
Compensation and Reimbursement. Consultant shall be entitled to receive the following compensation and reimbursement hereunder:
(a)
One-Time Payment. On the Effective Date, Consultant shall be entitled to receive, and shall receive, a one-time payment in the
amount of $[__________] (the “One-Time Payment”). The One-Time Payment shall be fully earned by Consultant and payable by
the Company on the Effective Date. Consultant shall be required to promptly repay the One-Time Bonus to the Company if Consultant terminates
this Consulting Agreement pursuant to Section 5(a) within six months following the Effective Date. For the sake of clarity, Consultant
will not be required to repay any of the One-Time Bonus to the Company if the Company terminates this Consulting Agreement at any time
for any reason whatsoever.
(b)
Monthly Retainer. Beginning on the Effective Date and continuing on the one-month anniversary each calendar month thereafter during
the Consulting Term, Consultant shall receive a monthly retainer (the “Monthly Retainer”) equal to $[__________] as an advance
payment for the Consulting Services to be performed during the immediately following 30-day period.
(c)
Restricted Stock Award.
On the Effective Date, Consultant shall be granted a restricted stock award, substantially in the form attached hereto as Exhibit
A (the “Restricted Stock Award”), for a total of 1,000,000 of shares of the Company’s common stock, par value $0.01
per share (the “Common Stock”). The Company covenants and agrees that shares of Common Stock underlying the Restricted Stock
Award shall be issued under the Company’s 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”). The Company
represents and warrants that: (i) all shares of Common Stock authorized for issuance under the 2022 Equity Incentive Plan have been registered
for resale under that certain registration statement on Form S-8, File Number 333-268106, filed
by the Company with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 (the “Registration Statement”);
and (ii) the Company has adequate shares available under the 2022 Equity Incentive Plan to issue all of the Restricted Stock. The Company
covenants and agrees that it will keep the Registration Statement current and active until the Company receives written confirmation
from Consultant that he has sold all of the shares underlying the Restricted Stock Award.
(d)
Amendment to Stock Option.
(i)
The Section entitled “Vesting and Exercisability Schedule” of that certain Stock Option Grant Notice, dated [__________],
executed by the Company and Consultant in connection with that certain stock option for [__________]shares of the Company’s common
stock, par value $0.01 per share (the “Common Stock”), issued by the Company to Consultant on [__________] (the “[__________]Option”),
is hereby deleted in its entirety and replaced with the following:
Vesting
and Exercisability Schedule: The shares subject to the Option shall be vested in full and exercisable in full on the date hereof.
(ii)
Section 9(a) of that certain Stock Option Agreement, dated [__________], executed by the Company and Consultant in connection with the
issuance of the [__________] Option by the Company to Consultant is hereby deleted in its entirety and replaced with the following:
2
(a)
General Rule. Notwithstanding anything contained in the Grant Notice or this Agreement to the contrary, you may exercise the vested
portion of the Option, in whole or in part, at any time on or before the Option Expiration Date.
(e)
Reimbursement. Consultant shall be reimbursed promptly for all reasonable and necessary business-related expenses pre-approved
by the Company and incurred by Consultant on behalf of the Company, including travel to and from the Company, hotel rooms, meals and
other related expenses as well as all expenses incurred by Consultant for any legal opinions needed by Consultant to remove the restrictive
legend(s) on the shares of Common Stock underlying the Restricted Stock Award and the Stock Options and for the deposit of the underlying
shares of Common Stock in Consultant’s brokerage account. Consultant shall submit expense reports to the Company along with copies
of the receipts and invoices supporting the expenses.
5.
Termination.
(a)
Method of Termination. This Agreement may be terminated by the Company or Consultant at any time upon delivery of prior written
notice to the non-terminating party. This Agreement shall terminate automatically on the date of Consultant’s death.
(b)
Effect of Termination. In the event this Agreement is terminated by the Company for any reason whatsoever prior to the end of
the Consulting Term: (i) all Monthly Retainers that have accrued but not yet been paid to Consultant, and all Monthly Retainers that
would have accrued and been payable to Consultant during the remainder of the Consulting Term had the termination not occurred, shall
become due and payable in full to Consultant within 10 days of the date of termination; (ii) notwithstanding anything to the contrary
in the 2022 Equity Incentive Plan, the Restricted Stock Award and the Stock Options (each as amended herein) shall continue to remain
issued and outstanding and will continue to vest in accordance with their respective terms; (iii) all other accrued compensation that
has not yet been paid to Consultant shall be due and payable in full to Consultant within 10 days of the date of termination; and (iv)
all reimbursement due and payable to Consultant shall be remitted to Consultant in full within 10 days of the date of termination of
the Agreement. In the event this Agreement is terminated by Consultant for any reason whatsoever prior to the end of the Consulting Term:
(i) all Monthly Retainers that have accrued but not yet been paid to Consultant shall be paid in full to Consultant within 10 days of
the date of termination; (ii) notwithstanding anything to the contrary in the 2022 Equity Incentive Plan, the Restricted Stock Award
and the Stock Options (each as amended herein) shall continue to remain issued and outstanding but only with respect to shares of Common
Stock that vested prior to the date of termination; (iii) all other accrued compensation that has not yet been paid to Consultant shall
be due and payable in full to Consultant within 10 days of the date of termination; and (iv) all reimbursement due and payable to Consultant
shall be remitted to Consultant in full within 10 days of the date of termination of the Agreement. For the sake of clarity, except as
provided in Section 4(a) hereof, regardless of whether the Agreement is terminated by Consultant or the Company, Consultant shall be
entitled to retain all compensation, benefits and other consideration paid to him hereunder prior to the date of termination.
3
6.
Protection of Confidential Information of the Company. Consultant understands that Consultant’s consulting arrangement with
the Company creates a relationship of trust and confidence between Consultant and the Company. Consultant will not use or disclose, or
allow anyone else to use or disclose, any Confidential Information (as defined below) relating to the Company, its products, services,
suppliers or customers except as may be necessary in the performance of Consultant’s work for the Company or as may be specifically
authorized in advance by appropriate officers of the Company. “Confidential Information” includes, but is not limited to,
information consisting of research and development, patents, trademarks and copyrights, and any applications relating thereto, trade
secrets, technical information, computer programs, software, methodologies, innovations, software tools, know-how, knowledge, designs,
drawings, specifications, concepts, data, reports, processes, techniques, documentation, pricing, marketing plans, customer and prospect
lists, financial information, salaries, business affairs, suppliers, profits, markets, sales strategies, forecasts, and any other information
not available to the general public, whether written or oral, that Consultant knows or has reason to know the Company would like to treat
as confidential for any purpose, such as maintaining a competitive advantage or avoiding undesirable publicity. Consultant will keep
Confidential Information secret and will not allow any unauthorized use of the same, whether or not any document containing it is marked
as confidential. These restrictions, however, will not apply to any information that: (i) is or becomes publicly available without a
breach of this Agreement by Consultant, (ii) can be shown by documentation to have been known to Consultant at the time of its receipt
from the Company, (iii) is received by Consultant from a third party that did not acquire or disclose such information by a wrongful
or tortious act, or (iv) can be shown by documentation to have been independently developed by Consultant without reference to any Confidential
Information.
7.
Notices. All notices, requests, demands, and other communications hereunder must be in writing and shall be deemed to have been
duly given if delivered by hand, first-class registered mail, facsimile, email or other electronic medium to the applicable party and
addressed as follows:
If
to the Company:
Algorhythm
Holdings, Inc.
800
Corporate Drive, Suite 216
Fort
Lauderdale, FL 33334
Attention:
Chief Executive Officer
If
to the Consultant:
To
that address set forth on the books and records of the Company as updated by Consultant from time to time.
8.
Miscellaneous.
(a)
Entire Agreement. This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to the subject matter hereto, and no party shall be liable
or bound to any other party in any manner by any warranties, representations, agreements or covenants except as specifically set forth
in this Agreement. Neither party relied upon any representation or warranty, whether written or oral, made by the other party or any
of its or his officers, directors, employees, agents or representatives, in making its or his decision to enter into this Agreement.
4
(b)
Amendment and Modification. This Agreement may not be amended, modified or supplemented except by an instrument or instruments
in writing signed by the party against whom enforcement of any such amendment, modification or supplement is sought.
(c)
Extensions and Waivers. The parties hereto entitled to the benefits of a term or provision hereof may: (i) extend the time for
the performance of any of the obligations or other acts of the parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered pursuant hereto; or (iii) waive compliance with any
obligation, covenant, agreement or condition contained herein. Any agreement on the part of a party to any such extension or waiver shall
be valid only if set forth in a written instrument or instruments signed by the party against whom enforcement of any such extension
or waiver is sought. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right
or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement hereunder.
(d)
Survival. Notwithstanding any termination of this Agreement and regardless of the reason for termination, the rights and obligations
set forth under Sections 8(e), 8(f), 8(g), and 8(h) shall survive the termination of this Agreement and remain in full force and effect
in accordance with their respective terms, and shall inure to the benefit of Consultant’s successors, assigns, heirs, beneficiaries,
executors and administrators.
(e)
Disclaimer. The Company acknowledges and agrees that any financial or legal advice, guidance, materials or other information provided
to the Company by Consultant is for general informational purposes only. Such information is not intended as, and does not constitute,
professional advice, accounting advice or legal advice, or a substitute for professional advice, accounting advice or legal advice, and
should not be used as such. The Company should contact its auditor, attorney or other appropriate professional to obtain advice with
respect to any particular issue or matter. The execution of this Agreement and the provision of the Consulting Services by Consultant
do not create an auditor-client relationship, an attorney-client relationship or any other professional relationship between the Company
and Consultant. Consultant expressly disclaims all liability relating to the use or interpretation of, or actions taken or not taken
based upon, any advice, guidance, materials or other information provided to the Company by Consultant. The Company’s obligations
under this Section 8(e) shall survive the termination of this Agreement, regardless of the reason for termination, and shall inure to
the benefit of Consultant’s heirs, beneficiaries, successors, assigns, executors and administrators.
(f)
Indemnification. The Company shall indemnify and hold harmless Consultant for all amounts (including, without limitation, judgments,
fines, settlement payments, losses, damages, costs and expenses (including reasonable attorney fees)) incurred or paid by Consultant
in connection with any actions, suits, proceedings, demands or claims arising out of or relating to Consultant’s performance of
services under this Agreement and any and all other agreements entered into between the Company and Consultant prior to the Effective
Date to the fullest extent permitted by law and the Company’s articles of incorporation and bylaws. Expenses incurred by Consultant
in defending or investigating a threatened or pending action, suit, proceeding, demand or claim shall be paid by the Company in advance
of the final disposition of such action, suit, proceeding, demand or claim upon receipt by the Company of an undertaking by or on behalf
of Consultant to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company. To
the extent that the Company reduces the indemnity rights provided for under its certificate of incorporation or bylaws after the Effective
Date, the Company’s indemnity obligations hereunder shall be unaffected to the extent permitted by applicable law. The Company’s
obligations under this Section 8(f) shall survive the termination of this Agreement, regardless of the reason for termination, and shall
inure to the benefit of Consultant’s heirs, beneficiaries, successors, assigns, executors and administrators.
5
(g)
Release. The Company, for itself and on behalf of its current and former subsidiaries, affiliates, directors, officers, equity
holders, employees, agents, representatives, attorneys, accountants, consultants, successors and assigns (collectively, the “Releasing
Party”), does hereby fully and irrevocably remise, release and forever discharge Consultant and his heirs, assigns, beneficiaries,
executors and administrators (collectively, the “Released Parties”), of and from any and all manner of claims, actions, causes
of action, grievances, liabilities, obligations, promises, damages, agreements, rights, debts and expenses (including claims for attorneys’
fees and costs), of every kind, either in law or in equity, whether contingent, mature, known or unknown, or suspected or unsuspected,
including, without limitation, any claims arising under any federal, state, local or municipal law, common law or statute, whether arising
in contract or in tort, and any claims arising under any other laws or regulations of any nature whatsoever, that the Releasing Party
ever had, now has or may in the future have, for or by reason of any cause, matter or thing whatsoever, from the beginning of the world
to the date hereof (collectively, “Claims”), including, but not limited to, any Claims that may in the future arise out of
this Agreement and any Claims under any other agreements to which the Company and Consultant are, or at any time in the past were, parties.
The Releasing Party further agrees and covenants not to sue or bring, or assign to any third person, any Claims or charges against any
of the Released Parties with respect to any matter covered by the release set forth above, and not to assert against any of the Released
Parties any action, grievance, suit, litigation or proceeding for any matter covered by the release set forth above. The Company’s
obligations under this Section 8(g) shall survive the termination of this Agreement, regardless of the reason for termination, and shall
inure to the benefit of Consultant’s heirs, beneficiaries, successors, assigns, executors and administrators.
(h)
Breach. Notwithstanding any provision in this Agreement to the contrary, Consultant shall be entitled to receive the compensation
and reimbursement set forth in Section 4 of this Agreement regardless of any claim by the Company that Consultant has breached any provision
of this Agreement. Additionally, except as provided in Section 4(a) hereof, the Company acknowledges and agrees that it shall have no
right to the return of any portion of the compensation or reimbursement provided to Consultant hereunder. The Company’s obligations
under this Section 8(h) shall survive the termination of this Agreement, regardless of the reason for termination, and shall inure to
the benefit of his heirs, beneficiaries, successors, assigns, executors and administrators.
(i)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that Consultant may not assign his obligations under this Agreement without the prior
written consent of the Company.
(j)
Headings; Definitions. The Section headings contained in this Agreement are inserted for convenience of reference only and shall
not affect the meaning or interpretation of this Agreement. All references to Sections contained herein mean Sections of this Agreement
unless otherwise stated. All capitalized terms defined herein are equally applicable to both the singular and plural forms of such terms.
6
(k)
Severability. If any provision of this Agreement or the application thereof to any person or circumstance is held to be invalid
or unenforceable to any extent, the remainder of this Agreement shall remain in full force and effect and shall be reformed to render
the Agreement valid and enforceable while reflecting to the greatest extent permissible the intent of the parties hereto.
(l)
Governing Law; Jurisdiction and Venue. This
Agreement, for all purposes, shall be construed in accordance with the laws of the State of Florida without regard to conflicts of law
principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court
located in Broward County in the State of Florida. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts
and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
(m)
Attorneys’ Fees. In the event of any legal, equitable or administrative action or proceeding brought by a party against
the other party under this Agreement, the prevailing party shall be entitled to recover the reasonable fees of its or his attorneys and
any costs incurred in such action or proceeding, including costs of appeal, if any, in such amount as the court or administrative body
having jurisdiction over such action may award.
(n)
Certain Matters. For the sake of clarity, it is expressly understood and agreed that the terms of Section 21 of that certain Employment
Agreement, dated [__________], by and between Consultant and the Company (the “Employment Agreement”) are expressly intended
to apply to the terms of this Agreement and the compensation, benefits and other consideration receivable by Consultant hereunder, including,
but not limited to, the One-Time Payment, the Monthly Retainers, the Restricted Stock Award and the Stock Options, pursuant to the terms
of Sections 21 and 27 of the Employment Agreement.
(o) Counterparts.
This Agreement may be executed in two or more counterparts and delivered via facsimile or other electronic transmission, each of
which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Remainder
of page intentionally left blank]
7
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date written above.
CONSULTANT
[__________]
ALGORHYTHM HOLDINGS,
INC.
By:
Andrew Thompson
Chief Executive Officer
8
EX-10.7
EX-10.7
Filename: ex10-7.htm · Sequence: 9
Exhibit
10.7
FUNDING
AGREEMENT
This
Funding Agreement (this “Agreement”), dated September 15, 2026 (the “Effective Date”), is entered into by and
among Algorhythm Holdings, Inc., a Delaware corporation (the “Company”), Gary Atkinson (“Atkinson”) and Alex
Andre (“Andre”; together with Atkinson, the “Executives”).
WITNESSETH:
WHEREAS,
Atkinson and the Company are parties to that certain Second Amended and Restated Employment Agreement, dated July 22, 2026 (the “Atkinson
Employment Agreement”), and that certain Separation Agreement, dated as of the Effective Date (the “Atkinson Separation Agreement”;
together with the Atkinson Employment Agreement, the “Atkinson Agreements”); and
WHEREAS,
Andre and the Company are parties to that certain Amended and Restated Employment Agreement, dated July 22, 2026 (the “Andre Employment
Agreement”; together with the Atkinson Employment Agreement, the “Employment Agreements”), and that certain Separation
Agreement, dated as of the Effective Date (the “Andre Separation Agreement”; together with the Andre Employment Agreement,
the “Andre Agreements”); and
WHEREAS,
on the Effective Date, the Executives were each terminated by the Company not-for-”Cause” (as such term is defined in the
applicable Employment Agreement) pursuant to Section 5.2 of their applicable Employment Agreements; and
WHEREAS,
under the terms of the Atkinson Agreements and Andre Agreements, the Executives are entitled to receive certain compensation from the
Company in connection with the termination of their employment by the Company; and
WHEREAS,
pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), the Executives are prohibited
from receiving compensation from the Company that is related to the termination of their employment that is in excess of certain thresholds
described in Section 409A (such excess compensation, the “Deferred Compensation”) until the day after the date of the six
(6th) month anniversary of the date of the termination of their employment (the “Payment Date”); and
WHEREAS,
the Company has entered into that certain Rabbi Trust Agreement with Bryn Mawr Trust Company of Delaware, dated September 11, 2026, pursuant
to which they created a rabbi trust (the “Rabbi Trust”); and
WHEREAS,
under the applicable Employment Agreements, the Company agreed to fund the Rabbi Trust on the Effective Date with capital equal in amount
to the Deferred Compensation to be held by the Rabbi Trust until the Payment Date and remitted by the Rabbi Trust directly to the Executives
on the Payment Date; and
WHEREAS,
the Company currently has insufficient capital available to fulfill its obligations under the Atkinson Agreements and Andre Agreements
to fully fund the Rabbi Trust on the Effective Date; and
WHEREAS,
the parties hereto wish to enter into this Agreement to provide for the terms and conditions under which the Company will fulfill its
obligations under the Atkinson Agreements and Andre Agreements to fully fund the Rabbi Trust with capital equal in amount to the Deferred
Compensation.
NOW,
THEREFORE, in consideration of the foregoing premises and representations, warranties, covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and each of the Executives
hereby agree as follows:
1.
Funding Arrangement.
(a)
Capital at Lakeside Bank. On the Effective Date, the Company had a total of approximately $[___________] in cash being held at
Lakeside Bank (the “Restricted Cash”). Commencing on the Effective Date and continuing until the sooner to occur of: (i)
the date that the Rabbi Trust has been fully funded with capital equal in amount to the Deferred Compensation; and (ii) the date of the
day immediately preceding the Payment Date: (A) if the Company has less than $1,000,000 of unrestricted cash on hand, 50% of any Restricted
Cash that becomes unrestricted cash shall be immediately deposited by the Company in the Rabbi Trust; and (B) if the Company has at least
$1,000,000 of unrestricted cash on hand, 100% of any Restricted Cash that becomes unrestricted cash shall be immediately deposited by
the Company in the Rabbi Trust. On or after the Payment Date, regardless of how much unrestricted cash the Company has on hand, 100%
of any Restricted Cash that becomes unrestricted cash shall be immediately transferred to the Executives in such proportion as the amounts
then owed by the Company to the Executives.
(b)
Other Sources of Capital. Commencing on the Effective Date and continuing until the sooner to occur of: (i) the date that the
Rabbi Trust has been fully funded with capital equal in amount to the Deferred Compensation, and (ii) the date of the day immediately
preceding the Payment Date, the Reserved Funds (as defined below) shall be immediately deposited in the Rabbi Trust. On or after the
Payment Date, the Reserved Funds shall be immediately transferred to the Executives in such proportion as the amounts then owed by the
Company to the Executives. For the purposes of this Section 1(b), “Reserved Funds” means 65% of all capital received by the
Company from any source, including, but not limited to, capital received from operating activities, the sale of equity securities, or
the issuance of debt.
2.
Enforcement. Commencing on the date hereof and continuing until the Payment Date, if the Company complies fully with the terms
of this Agreement, then the Executives hereby agree to refrain from pursuing any claims they may have against the Company related to
the Company’s failure to fulfill its obligations under the Atkinson Agreements and Andre Agreements, as applicable, to fully fund
the Rabbi Trust. In the event that the Company breaches any terms of this Agreement, then on the date of such breach, the agreement of
the Executives to refrain from pursuing any claims they may have against the Company under the Atkinson Agreements and Andre Agreements,
as applicable, shall terminate automatically without any further action of the parties hereto and be null and void ab initio,
and of no force or effect.
2
3.
Interest. Commencing on the date hereof and continuing until the Payment Date, interest shall accrue on the Deferred Compensation
at the short-term (annual) applicable federal rate published by the Internal Revenue Service for the month in which the Executive’s
employment was terminated by the Company. All such interest shall be paid by the Company to the Executives on the Payment Date.
4.
Default.
(a)
Calculation of Default Amount. In the event the Company fails to pay the all of the Deferred Compensation and interest thereon
in full to the Rabbi Trust by the Payment Date (the amounts of such deficiency collectively, the “Overdue Payments”), then,
on the Payment Date: (i) the amount of the Overdue Payments owed to each of the Executives will automatically increase by 80% (the “Default
Amount”); and (ii) the Company will either pay to each Executive in cash the proportionate amount of the Default Amount owed to
the applicable Executive, or issue that number of shares of its common stock, par value $0.01 per share (the “Common Stock”),
to each Executive equal to: (A) the proportionate amount of the Default Amount owed to the applicable Executive; divided by (B) the volume
weighted average closing price of the shares of Common Stock on the Stock Exchange (as defined below) during the five Trading Days immediately
preceding the Payment Date (the “Settlement Shares”). For the purposes of this Agreement: (x) “Stock Exchange”
means the Nasdaq Stock Market or other national securities exchange or electronic trading system on which the Common Stock is then listed
for trading; and (y) Trading Day means any day on which the Stock Exchange on which the Common Stock is then listed for trading is open
for trading.
(b)
Issuance of Settlement Shares. In the event the Company is obligated to issue Settlement Shares hereunder, the Settlement Shares
will be issued to the Executives under the Company’s 2022 Equity Incentive Plan (the “2022 Equity Incentive Plan”).
The Company covenants and agrees that, on the Payment Date: (i) the shares of Common Stock authorized for issuance under the 2022 Equity
Incentive Plan will be registered for resale under that certain registration
statement on Form S-8, File Number 333-268106, filed by the Company
with the Securities and Exchange Commission (the “SEC”) on November 1, 2022 (the “Registration Statement”); (ii)
the Company will have adequate shares available under the 2022 Equity Incentive Plan to issue all of the Settlement Shares; and (iii)
the Settlement Shares will be issued to the Executive through the Fast Automated Securities Transfer (FAST) Program of the Depository
Trust Company’s Deposit/Withdrawal at Custodian system, without any legends or restrictions on transfer.
The Company will ensure that it has an adequate number of shares of Common Stock available for issuance under the 2022 Equity Incentive
Plan to satisfy its obligations hereunder and will keep the Registration Statement current and active until the Company receives written
confirmation from each of the Executives that they have sold all of their respective Settlement Shares. It is intended by the
parties that the Default Amount shall represent liquidated damages separate from the Deferred Compensation and the parties shall take
all reporting and disclosure positions that are consistent with this intent.
5.
Financial Information. Until such time as the Rabbi Trust or the Executives, as the case may be, have each received all of the
Deferred Compensation, the Company shall provide the Executives with such information as the Executives may reasonably request from time
to time to enforce the terms of this Agreement, including, but not limited to: (a) the amount of unrestricted cash that the Company has
on hand or has transferred to the Rabbi Trust or the Executives under Section 1(a) hereof; and (b) the amount of capital that the Company
has received from all other sources or has remitted to the Rabbi Trust or the Executives under Section 1(b) hereof.
3
6.
Notices. All notices, requests, demands, and other communications hereunder must be in writing and shall be deemed to have been
duly given if delivered by hand, first-class registered mail, facsimile, email or other electronic medium to the applicable party and
addressed as follows:
If
to the Company:
Algorhythm
Holdings, Inc.
800
Corporate Drive, Suite 216
Fort
Lauderdale, FL 33334
Attention:
Chief Executive Officer
If
to the Executives:
To
that address set forth on the books and records of the Company as updated by the applicable Executive from time to time.
7.
Section 409A.
(a)
This Agreement is intended to comply with, or be exempt from, the requirements of Section 409A and shall be interpreted, construed, and
administered in a manner consistent with such intent. In no event shall the Company, directly or indirectly, cause or permit the acceleration
or deferral of a payment under this Agreement or its ancillary documents (including, without limitation, the Rabbi Trust, the Atkinson
Agreements and the Andre Agreements) in a manner that would result in the imposition of additional taxes or interest under Section 409A.
(b)
Each installment payment or other amount payable hereunder shall be treated as a separate payment for purposes of Section 409A. To the
extent that the Deferred Compensation constitutes “nonqualified deferred compensation” within the meaning of Section 409A,
such amounts shall not be paid to the Executives before the day after the date that is six (6) months following the applicable Executive’s
“separation from service” (within the meaning of Section 409A) from the Company (or, if earlier, the date of the applicable
Executive’s death), consistent with Section 409A(a)(2)(B)(i).
(c)
All references in this Agreement to the termination of an Executive’s employment shall mean a “separation from service”
within the meaning of Section 409A.
(d)
All reimbursements or in-kind benefits provided under this Agreement that constitute nonqualified deferred compensation within the meaning
of Section 409A shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement
that: (i) any reimbursement be for expenses incurred during the period of time specified in this Agreement; (ii) the amount of expenses
eligible for reimbursement, or in-kind benefits provided, during a calendar year not affect the expenses eligible for reimbursement,
or in-kind benefits to be provided, in any other calendar year; (iii) the reimbursement of an eligible expense be made no later than
the last day of the calendar year following the year in which the expense was incurred; and (D) the right to reimbursement or in-kind
benefits not be subject to liquidation or exchange for another benefit.
4
8.
Miscellaneous.
(a)
Entire Agreement. This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect to the subject matter hereto, and no party shall be liable
or bound to any other party in any manner by any warranties, representations, agreements or covenants except as specifically set forth
in this Agreement. Neither party relied upon any representation or warranty, whether written or oral, made by the other party or any
of its or his officers, directors, employees, agents or representatives, in making its or his decision to enter into this Agreement.
(b)
Amendment and Modification. This Agreement may not be amended, modified or supplemented except by an instrument or instruments
in writing signed by the party against whom enforcement of any such amendment, modification or supplement is sought.
(c)
Extensions and Waivers. The parties hereto entitled to the benefits of a term or provision hereof may: (i) extend the time for
the performance of any of the obligations or other acts of the parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document, certificate or writing delivered pursuant hereto; or (iii) waive compliance with any
obligation, covenant, agreement or condition contained herein. Any agreement on the part of a party to any such extension or waiver shall
be valid only if set forth in a written instrument or instruments signed by the party against whom enforcement of any such extension
or waiver is sought. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right
or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant or agreement hereunder.
(d)
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
(e)
Headings; Definitions. The Section headings contained in this Agreement are inserted for convenience of reference only and shall
not affect the meaning or interpretation of this Agreement. All references to Sections contained herein mean Sections of this Agreement
unless otherwise stated. All capitalized terms defined herein are equally applicable to both the singular and plural forms of such terms.
(f)
Severability. If any provision of this Agreement or the application thereof to any person or circumstance is held to be invalid
or unenforceable to any extent, the remainder of this Agreement shall remain in full force and effect and shall be reformed to render
the Agreement valid and enforceable while reflecting to the greatest extent permissible the intent of the parties hereto.
5
(g)
Governing Law; Jurisdiction and Venue. This Agreement, for all
purposes, shall be construed in accordance with the laws of the State of Florida without regard to conflicts of law principles. Any action
or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in Broward
County in the State of Florida. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense
of inconvenient forum to the maintenance of any such action or proceeding in such venue.
(h)
Attorneys’ Fees. In the event of any legal, equitable or administrative action or proceeding brought by a party against
the other party under this Agreement, the prevailing party shall be entitled to recover the reasonable fees of its or his attorneys and
any costs incurred in such action or proceeding, including costs of appeal, if any, in such amount as the court or administrative body
having jurisdiction over such action may award.
(i)
Counterparts. This Agreement may be executed in two or more counterparts and delivered via facsimile or other electronic transmission,
each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
[Remainder
of page intentionally left blank]
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date written above.
ALGORHYTHM HOLDINGS,
INC.
By:
/s/
Andrew Thompson
Andrew Thompson
Chief Executive Officer
ATKINSON
/s/
Gary Atkinson
Gary Atkinson
ANDRE
/s/
Alex Andre
Alex Andre
6
EX-10.8
EX-10.8
Filename: ex10-8.htm · Sequence: 10
Exhibit 10.8
EX-10.9
EX-10.9
Filename: ex10-9.htm · Sequence: 11
Exhibit
10.9
THE
EXCHANGE CONTEMPLATED HEREIN IS INTENDED TO COMPORT WITH THE REQUIREMENTS OF SECTION 3(a)(9) OF THE SECURITIES ACT OF 1933, AS AMENDED.
Exchange
Agreement
This
Exchange Agreement (this “Agreement”) is entered into as of September
15, 2026 by and between Algorhythm Holdings, Inc., a Delaware corporation (“Company”), and Streeterville Capital,
LLC, a Utah limited liability company (“Investor”).
A.
Pursuant to that certain Securities Purchase Agreement dated August 21, 2025 between Company and Investor (the “Purchase Agreement”),
Company issued to Investor that certain Secured Pre-Paid Purchase #4 in the original principal amount of $10,355,000.00 dated February
17, 2026 (“PPP #4”).
B.
Subject to the terms of an Exchange Agreement dated June 29, 2026, Company and Investor exchanged $3,500,000.00 of the outstanding balance
of PPP #4 for 3,500 shares of Company’s newly created Series A Preferred Stock (such 3,500 shares, the “Series A Shares”).
C.
Subject to the terms of this Agreement, Company and Investor desire to exchange the Series A Shares for that certain Secured Pre-Paid
Purchase #5 in the original principal amount of $4,025,000.00 in substantially the form attached hereto as Exhibit A (“PPP
#5”).
D.
This Agreement, the Officer’s Certificate (as defined below), and any other documents, agreements, or instruments entered into
or delivered in connection with this Agreement, or any amendments to any of the foregoing, are collectively referred to as the “Exchange
Documents”.
E.
Pursuant to the terms and conditions hereof, Investor and Company agree to exchange the Series A Shares for PPP #5.
NOW,
THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the parties hereto agree as follows:
1.
Issuance of PPP #5. Upon execution of this Agreement, Investor will surrender the Series A Shares to Company and Company will
issue to Investor PPP #5. Company and Investor agree that upon surrender, the Series A Shares will be cancelled.
2.
Closing Date; Deliveries. The closing of the transaction contemplated hereby (the “Closing”) along with the
Exchange Documents shall occur on the date that is mutually agreed to by Company and Investor (the “Closing Date”)
by means of the exchange of electronic signatures, but shall be deemed to have occurred at the offices of Capital Law Partners PLLC in
Lehi, Utah. On the Closing Date, prior to or contemporaneously with the execution and delivery of this Agreement, the following events
shall occur:
2.1.
Company shall issue PPP #5 to Investor.
2.2.
Company shall deliver to Investor a fully executed Officer’s Certificate substantially in the form attached hereto as Exhibit
B (the “Officer’s Certificate”) evidencing the Company’s approval of the Exchange and the Exchange
Documents.
2.3.
Mutual delivery of all other Exchange Documents, including without limitation this Agreement.
3.
Holding Period, Tacking and Legal Opinion. Company represents, warrants and agrees that for the purposes of Rule 144 (“Rule
144”) of the Securities Act of 1933, as amended (the “Securities Act”), the holding period of PPP #5 will
include the holding period of the Series A Shares and PPP #4 from February 17, 2026, which date is the date that PPP #4 was fully paid
for. Company agrees not to take a position contrary to this Section 3 in any document, statement, setting, or situation. PPP #5 are being
issued in substitution of and exchange for and not in satisfaction of the Series A Shares. PPP #5 shall not constitute a novation or
satisfaction and accord of the Series A Shares. Company acknowledges and understands that the representations and agreements of Company
in this Section 3 are a material inducement to Investor’s decision to consummate the transactions contemplated herein.
4.
Investor’s Representations, Warranties and Agreements. In order to induce Company to enter into this Agreement, Investor,
for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows: (a) Investor
has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all
of which have been duly authorized by all proper and necessary action, (b) no consent, approval, filing or registration with or notice
to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations
of Investor hereunder, (c) no commission or other remuneration has been paid or given directly or indirectly by Investor to Company for
soliciting the Exchange, and (d) Investor has taken no action which would give rise to any claim by any person for a brokerage commission,
placement agent or finder’s fee or other similar payment by Company related to this Agreement.
5.
Company’s Representations, Warranties and Agreements. In order to induce Investor to enter into this Agreement, Company,
for itself, and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows: (a) Company
has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained herein, all
of which have been duly authorized by all proper and necessary action, (b) no consent, approval, filing or registration with or notice
to any governmental authority is required as a condition to the validity of this Agreement or the performance of any of the obligations
of Company hereunder, (c) no Event of Default (as defined in the Series A Certificate of Designation) has occurred under the Series A
Shares; provided, however, that notwithstanding anything to the contrary in this Agreement, to the extent any Events of Default have
occurred or may hereafter occur, such Events of Default have not been, and are not hereby, waived by Investor, (d) except as specifically
set forth herein, nothing herein shall in any manner release, lessen, modify or otherwise affect Company’s obligations under PPP
#5, (e) the issuance of PPP #5 is duly authorized by all necessary corporate action, (f) Company has not received any consideration in
any form whatsoever for entering into this Agreement, other than the surrender of the Series A Shares, (g) Company has taken no action
which would give rise to any claim by any person for a brokerage commission, placement agent or finder’s fee or other similar payment
by Company related to this Agreement, and (h) the Company’s Board of Directors has duly adopted a resolution authorizing this Agreement
and the other Exchange Documents and ratifying their terms, as indicated by the Officer’s Certificate.
6.
Governing Law; Venue. This Agreement shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Agreement shall be governed by, the internal laws of the State of Utah, without giving
effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of Utah. The provisions set forth in the Purchase Agreement
to determine the proper venue for any disputes are incorporated herein by this reference. COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING
OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
2
7.
Arbitration of Claims. This Agreement shall be subject to the Arbitration Provisions (as defined in the Purchase Agreement).
8.
Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic signature (including pdf
or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) and any counterpart so delivered
shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
9.
Attorneys’ Fees. In the event of any arbitration or action at law or in equity to enforce or interpret the terms of this
Agreement, the parties agree that the prevailing party shall be entitled to an additional award of the full amount of the attorneys’
fees and expenses paid by such prevailing party in connection with the arbitration, litigation and/or dispute without reduction or apportionment
based upon the individual claims or defenses giving rise to the fees and expenses. The “prevailing party” shall be the party
in whose favor a judgment is entered, regardless of whether judgment is entered on all claims asserted by such party and regardless of
the amount of the judgment; or where, due to the assertion of counterclaims, judgments are entered in favor of and against both parties,
then the arbitrator shall determine the “prevailing party” by taking into account the relative dollar amounts of the judgments
or, if the judgments involve nonmonetary relief, the relative importance and value of such relief. Nothing herein shall restrict or impair
an arbitrator’s or a court’s power to award reasonable fees and expenses for frivolous or bad faith pleading.
10.
No Reliance. Company acknowledges and agrees that neither Investor nor any of its officers, directors, members, managers, equity
holders, representatives or agents has made any representations or warranties to Company or any of its agents, representatives, officers,
directors, or employees except as expressly set forth in this Agreement and the Exchange Documents and, in making its decision to enter
into the transactions contemplated by this Agreement, Company is not relying on any representation, warranty, covenant or promise of
Investor or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Agreement.
11.
Severability. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to achieve
the objective of the parties to the fullest extent permitted and the balance of this Agreement shall remain in full force and effect.
12.
Entire Agreement. This Agreement, together with the Exchange Documents and the Transaction Documents (as defined in the Purchase
Agreement), and all other documents referred to herein, supersedes all other prior oral or written agreements among Company, Investor,
its affiliates and persons acting on its behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither Investor nor Company makes any representation, warranty, covenant or undertaking
with respect to such matters.
13.
Amendments. This Agreement may be amended, modified, or supplemented only by written agreement of the parties. No provision of
this Agreement may be waived except in writing signed by the party against whom such waiver is sought to be enforced.
14.
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Investor hereunder
may be assigned by Investor to a third party, including its financing sources, in whole or in part. Company may not assign this Agreement
or any of its obligations herein without the prior written consent of Investor.
3
15.
Continuing Enforceability; Conflict Between Documents. Except as otherwise modified by this Agreement, each of the Exchange Documents
and Transaction Documents shall remain in full force and effect, enforceable in accordance with all of its original terms and provisions,
and PPP #5 shall be in full force and effect from its date of issuance in accordance with its terms. This Agreement shall not be effective
or binding unless and until it is fully executed and delivered by Investor and Company. If there is any conflict between the terms of
this Agreement, on the one hand, and PPP #5 or any other Exchange Document or Transaction Document, on the other hand, the terms of this
Agreement shall prevail.
16.
Time of Essence. Time is of the essence with respect to each and every provision of this Agreement.
17.
Notices. Unless otherwise specifically provided for herein, all notices, demands or requests required or permitted under this
Agreement to be given to Company or Investor shall be given as set forth in the “Notices” section of the Purchase Agreement.
18.
Further Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
[Remainder
of the page intentionally left blank; signature page to follow]
4
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.
INVESTOR:
Streeterville Capital, LLC
By:
/s/
John Fife
John
Fife, President
COMPANY:
Algorhythm Holdings, Inc.
By:
/s/ Gary Atkinson
Gary
Atkinson, Chief Executive Officer
ATTACHMENTS:
Exhibit
A
PPP
#5
Exhibit
B
Officer’s
Certificate
[Signature
Page to Exchange Agreement]
EX-10.10
EX-10.10
Filename: ex10-10.htm · Sequence: 12
Exhibit
10.10
THIS
PRE-PAID PURCHASE (AS DEFINED BELOW) IS ISSUED IN EXCHANGE FOR (WITHOUT ANY ADDITIONAL CONSIDERATION) 3,500 SHARES OF BORROWER’S
(AS DEFINED BELOW) SERIES A PREFERRED STOCK HAVING AN ORIGINAL ISSUE DATE OF February 17, 2026. FOR PURPOSES OF RULE 144 OF THE SECURITIES
ACT OF 1933, AS AMENDED, THIS PRE-paid purchase SHALL BE DEEMED TO HAVE BEEN ISSUED ON february 17, 2026.
SECURED
PRE-PAID PURCHASE #5
September
15, 2026
U.S.
$4,025,000.00
FOR
VALUE RECEIVED, Algorhythm Holdings, Inc., a Delaware corporation (“Company”),
promises to pay to Streeterville Capital, LLC, a Utah limited liability company, or its
successors or assigns (“Investor”), $4,025,000.00 and any interest, fees, charges, and late fees accrued hereunder
in accordance with the terms set forth herein and to pay interest on the Outstanding Balance at the rate of nine percent (9%) per annum
from the date hereof until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 360-day
year comprised of twelve (12) thirty (30) day months, shall compound daily, and shall be payable in accordance with the terms of this
Secured Pre-Paid Purchase #5 (this “Pre-Paid Purchase”), which is issued and made effective as of the date set forth
above (the “Effective Date”). This Pre-Paid Purchase is issued pursuant to that certain Exchange Agreement dated September
15, 2026 by and between Company and Investor. Certain capitalized terms used herein are defined in Attachment 1 attached
hereto and incorporated herein by this reference.
1.
Payment; Prepayment; Maturity Date.
1.1.
Payment. All payments owing hereunder shall be in lawful money of the United States of America, as provided for herein, and delivered
to Investor at the address or bank account furnished to Company for that purpose. All payments shall be applied first to (a) costs of
collection, if any, then to (b) fees and charges, if any, then to (c) accrued and unpaid interest, and thereafter, to (d) principal.
1.2.
Prepayment. Notwithstanding the foregoing, with ten (10) Trading Days’ prior written notice Company may prepay all or any
portion of the Outstanding Balance (less such portion of the Outstanding Balance for which Company has received a Purchase Notice (as
defined below) from Investor where the applicable Purchase Shares (as defined below) have not yet been delivered). For the avoidance
of doubt, during the ten (10) Trading Day prepayment notice period, Investor shall retain the right to submit Purchase Notices, if applicable.
If Company exercises its right to prepay this Pre-Paid Purchase, Company shall make payment to Investor of an amount in cash equal to
110% multiplied by the portion of the Outstanding Balance Company elects to prepay. Company will lose the right to prepay this Pre-Paid
Purchase if: (a) an Event of Default (as defined below) occurs hereunder; or (b) Company elects to prepay this Pre-Paid Purchase and
fails to do so on the date set forth in the prepayment notice sent to Investor.
1.3.
Maturity Date. Any remaining Outstanding Balance will be due and payable in cash on the date that is three (3) years from the
Purchase Price Date.
2.
Security. This Pre-Paid Purchase is secured by the Guaranty (as defined in the Purchase Agreement), the Pledge Agreement (as defined
in the Purchase Agreement), the Security Agreement (as defined in the Purchase Agreement), and the IP Security Agreement (as defined
in the Purchase Agreement).
2
3.
Investor Purchases; Closings.
3.1.
Purchases; Purchase Mechanics. Upon the terms and subject to the conditions of this Pre-Paid Purchase and the other Transaction
Documents (as defined in the Purchase Agreement), Investor, at its sole discretion, shall have the right, but not the obligation, to
purchase from Company, and Company shall issue and sell to Investor, Purchase Shares by the delivery to Company of Purchase Notices as
provided herein.
(a)
Purchase Notice. At any time following the Effective Date, Investor may, by providing written notice to Company in the form set
forth on Exhibit A attached hereto (each, a “Purchase Notice”), require Company to issue and sell Purchase
Shares to Investor, in accordance with the following provisions:
(i)
Investor shall, in each Purchase Notice, indicate the portion of the Outstanding Balance that Investor elects to apply to the purchase
of Purchase Shares pursuant to this Pre-Paid Purchase (each, a “Purchase”, and such amount, the “Purchase
Amount”), in its sole discretion, and the timing of delivery; provided that the Purchase Amount shall not exceed the
Outstanding Balance, or result in Investor exceeding the limitation set forth in Section 3.1(b).
(ii)
Each Purchase Notice shall be delivered to Company in accordance with the notice provisions set forth in the Purchase Agreement.
(iii)
Each Purchase Notice shall set forth the Purchase Amount, the Purchase Share Purchase Price, the number of Purchase Shares to be issued
by Company and purchased by Investor, and the remaining Outstanding Balance following the Closing (as defined below) of the Purchase.
(iv)
Any Purchase Shares issued hereunder must be issued free trading to Investor pursuant to: (1) an effective Registration Statement (as
defined in the Purchase Agreement); or (2) an applicable exemption from registration (e.g., Rule 144).
(v)
In the event the Purchase Share Purchase Price is below the Floor Price, Investor will have the right to elect to have the applicable
Purchase Amount paid in cash rather than Purchase Shares.
(vi)
In the event Company has not obtained the Approval (as defined in the Purchase Agreement) and cannot issue shares pursuant to a Purchase
Notice without exceeding the Exchange Cap (as defined in the Purchase Agreement), Investor will have the right to elect to have the applicable
Purchase Amount paid in cash.
(b)
Ownership Limitation. Notwithstanding anything to the contrary contained in this Pre-Paid Purchase or the other Transaction Documents
(as defined in the Purchase Agreement), Company shall not effect any issuance of Purchase Shares pursuant to this Pre-Paid Purchase to
the extent that after giving effect to such issuance, the issuance would cause Investor (together with its affiliates) to beneficially
own a number of Common Shares exceeding 9.99% of the number of Common Shares outstanding on such date (including for such purpose the
Common Shares issuable upon such issuance) (the “Maximum Percentage”). For purposes of this section, beneficial ownership
of Common Shares will be determined pursuant to Section 13(d) of the 1934 Act (as defined in the Purchase Agreement). The Maximum Percentage
is enforceable, unconditional and non-waivable and shall apply to all affiliates and assigns of Investor.
3
3.2.
Closings. The closing of each purchase and sale of Purchase Shares (each, a “Closing”) shall take place in
accordance with the procedures set forth below:
(a)
Promptly after receipt of a Purchase Notice with respect to each Purchase (and, in any event, not later than two (2) Trading Days after
such receipt), Company will, or will cause its transfer agent to, electronically transfer such number of Purchase Shares to be purchased
by Investor (as set forth in the Purchase Notice) by crediting Investor’s account or its designee’s account at DTC through
its DWAC system or by such other means of delivery as may be mutually agreed upon by the parties hereto, and transmit notification to
Investor that such share transfer has been requested. Promptly upon receipt of such notification, Investor shall pay to Company the aggregate
purchase price for the Purchase Shares (as set forth in the Purchase Notice) by offsetting the Purchase Amount against an equal amount
outstanding under this Pre-Paid Purchase (first towards accrued and unpaid interest, if any, and then towards outstanding principal as
shown in such Purchase Notice). No fractional shares shall be issued, and any fractional amounts shall be rounded to the nearest whole
number of shares. To facilitate the transfer of the Purchase Shares by Investor, the Purchase Shares will not bear any restrictive legends
so long as there is an effective Registration Statement or an available exemption from registration for the resale of such Purchase Shares
(it being understood and agreed by Investor that notwithstanding the lack of restrictive legends, Investor may only sell such Purchase
Shares in compliance with the requirements of the Securities Act (including any applicable prospectus delivery requirements)).
(b)
In connection with each Closing, each of Company and Investor shall deliver to the other all documents, instruments and writings expressly
required to be delivered by either of them pursuant to this Pre-Paid Purchase in order to implement and effect the transactions contemplated
herein.
4.
Events of Default and Remedies.
4.1.
Event of Default. The following are events of default under this Pre-Paid Purchase (each, “Event of Default”):
(a) Company fails to pay any principal, interest, fees, charges, or any other amount when due and payable hereunder; (b) a receiver,
trustee or other similar official shall be appointed over Company or a material part of its assets and such appointment shall remain
uncontested for twenty (20) days or shall not be dismissed or discharged within sixty (60) days; (c) Company becomes insolvent or generally
fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; (d)
Company makes a general assignment for the benefit of creditors; (e) Company files a petition for relief under any bankruptcy, insolvency
or similar law (domestic or foreign); (f) an involuntary bankruptcy proceeding is commenced or filed against Company; (g) Company fails
to observe or perform any covenant set forth in Section 4 or Section 5 of the Purchase Agreement; (h) the occurrence of a Fundamental
Transaction without Investor’s prior written consent; (i) Company fails to timely establish and maintain the Share Reserve (as
defined in the Purchase Agreement); (j) Company fails to deliver any Purchase Shares in accordance with the terms hereof; (k) any money
judgment, writ or similar process is entered or filed against Company or any subsidiary of Company or any of its property or other assets
for more than $500,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) calendar days unless otherwise consented
to by Investor; (l) Company fails to be DWAC Eligible; (m) Company or any subsidiary of Company, breaches any covenant or other term
or condition contained in any Other Agreement in any material respect; (n) Company defaults or otherwise fails to observe or perform
any covenant, obligation, condition or agreement of Company contained herein or in any other Transaction Document (as defined in the
Purchase Agreement) in any material respect, other than those specifically set forth in this Section 4.1 or Section 4 or Section 5 of
the Purchase Agreement; (o) any representation, warranty or other statement made or furnished by or on behalf of Company to Investor
herein, in any Transaction Document, or otherwise in connection with the issuance of this Pre-Paid Purchase is false, incorrect, incomplete
or misleading in any material respect when made or furnished; (p) at any time during the period beginning on the effective date of the
Registration Statement and ending on the six (6) month anniversary of the Purchase Price Date, the Registration Statement is suspended,
halted, declared ineffective or otherwise unavailable for Lender to sell Purchase Shares; (q) a non-management supported preliminary
proxy is filed against Company; and (q) Company or any subsidiary of Company breaches any material covenant or other material term or
condition contained in any Other Agreements.
4
4.2.
Default Remedies. At any time and from time to time following the occurrence of any Event of Default, Investor may accelerate
this Pre-Paid Purchase by written notice to Company, with the Outstanding Balance becoming immediately due and payable in cash. Notwithstanding
the foregoing, upon the occurrence of any Event of Default described in clauses (b) – (f) of Section 4.1, an Event of Default will
be deemed to have occurred and the Outstanding Balance as of the date of the occurrence of such Event of Default shall become immediately
and automatically due and payable in cash. At any time following the occurrence of any Event of Default, upon written notice given by
Investor to Company, the Outstanding Balance will automatically increase by seven-and-a-half percent (7.5%) and interest shall accrue
on the Outstanding Balance beginning on the date the applicable Event of Default occurred at an interest rate equal to the lesser of
eighteen percent (18%) per annum or the maximum rate permitted under applicable law (“Default Interest”). Notwithstanding
the foregoing, and for the avoidance of doubt, Investor may continue making Purchases pursuant to Section 3 at any time following an
Event of Default until such time as the Outstanding Balance is paid in full. In connection with acceleration described herein, Investor
need not provide, and Company hereby waives, any presentment, demand, protest or other notice of any kind, and Investor may immediately
and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available
to it under applicable law. Such acceleration may be rescinded and annulled by Investor at any time prior to payment hereunder and Investor
shall have all rights as a holder of the Pre-Paid Purchase until such time, if any, as Investor receives full payment pursuant to this
Section 4.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Nothing
herein shall limit Investor’s right to pursue any other remedies available to it at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with respect to Company’s failure to timely deliver Purchase Shares pursuant
to a Purchase as required pursuant to the terms hereof.
5.
Unconditional Obligation; No Offset. Company acknowledges that this Pre-Paid Purchase is an unconditional, valid, binding and
enforceable obligation of Company not subject to offset, deduction or counterclaim of any kind. Company hereby waives any rights of offset
it now has or may have hereafter against Investor, its successors and assigns, and agrees to make the payments or Purchases called for
herein in accordance with the terms of this Pre-Paid Purchase.
6.
Waiver. No waiver of any provision of this Pre-Paid Purchase shall be effective unless it is in the form of a writing signed by
the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other
provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver
or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.
7.
Opinion of Counsel. In the event that an opinion of counsel is needed for Purchases under this Pre-Paid Purchase, Investor has
the right to have any such opinion provided by its counsel.
8.
Governing Law; Venue. This Pre-Paid Purchase shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Pre-Paid Purchase shall be governed by, the internal laws of the State
of Utah, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the Purchase
Agreement to determine the proper venue for any disputes are incorporated herein by this reference.
5
9.
Arbitration of Disputes. By its issuance or acceptance of this Pre-Paid Purchase, each party agrees to be bound by the Arbitration
Provisions (as defined in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement.
10.
Cancellation. After repayment of the entire Outstanding Balance, this Pre-Paid Purchase shall be deemed paid in full, shall automatically
be deemed canceled, and shall not be reissued.
11.
Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Pre-Paid Purchase.
12.
Assignments. Company may not assign this Pre-Paid Purchase without the prior written consent of Investor. This Pre-Paid Purchase
and any Purchase Shares issued upon Purchase of this Pre-Paid Purchase may be offered, sold, assigned or transferred by Investor without
the consent of Company.
13.
Notices. Whenever notice is required to be given under this Pre-Paid Purchase, unless otherwise provided herein, such notice shall
be given in accordance with the subsection of the Purchase Agreement titled “Notices.”
14.
Liquidated Damages. Investor and Company agree that in the event Company fails to comply with any of the terms or provisions of
this Pre-Paid Purchase, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate because
of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors.
Accordingly, Investor and Company agree that any fees, balance adjustments, Default Interest or other charges assessed under this Pre-Paid
Purchase are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Investor’s
and Company’s expectations that any such liquidated damages will tack back to the Purchase Price Date for purposes of determining
the holding period under Rule 144).
15.
Severability. If any part of this Pre-Paid Purchase is construed to be in violation of any law, such part shall be modified to
achieve the objective of Company and Investor to the fullest extent permitted by law and the balance of this Pre-Paid Purchase shall
remain in full force and effect.
[Remainder
of page intentionally left blank; signature page follows]
6
IN
WITNESS WHEREOF, Company has caused this Pre-Paid Purchase to be duly executed as of the Effective Date.
COMPANY:
Algorhythm
Holdings, Inc.
By: /s/
Gary Atkinson
Gary
Atkinson, CEO
ACKNOWLEDGED,
ACCEPTED AND AGREED:
INVESTOR:
Streeterville
Capital, LLC
By: /s/
John Fife
John
M. Fife, President
[Signature
Page to Secured Pre-Paid Purchase #5]
ATTACHMENT
1
DEFINITIONS
For
purposes of this Pre-Paid Purchase, the following terms shall have the following meanings:
A1.
“Common Shares” means Company’s common shares, par value $0.01 per share.
A2.
“DTC” means the Depository Trust Company or any successor thereto.
A3.
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.
A4.
“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.
A5.
“DWAC Eligible” means that (a) Company’s Common Shares are eligible at DTC for full services pursuant to DTC’s
operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Company has been approved (without
revocation) by DTC’s underwriting department; (c) Company’s transfer agent is approved as an agent in the DTC/FAST Program;
(d) the Purchase Shares are otherwise eligible for delivery via DWAC; and (e) Company’s transfer agent does not have a policy prohibiting
or limiting delivery of the Purchase Shares via DWAC.
A6.
“Floor Price” means $0.05.
A7.
“Fundamental Transaction” means that (a) (i) Company or any of its subsidiaries shall, directly or indirectly, in
one or more related transactions, consolidate or merge with or into (whether or not Company or any of its subsidiaries is the surviving
corporation) any other person or entity, (ii) Company or any of its subsidiaries shall, directly or indirectly, in one or more related
transactions, sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties
or assets to any other person or entity, (iii) Company or any of its subsidiaries shall, directly or indirectly, in one or more related
transactions, allow any other person or entity to make a purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of voting stock of Company (not including any shares of voting stock of Company held by the person or persons
making or party to, or associated or affiliated with the persons or entities making or party to, such purchase, tender or exchange offer),
(iv) Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, consummate a stock or share
purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with any other person or entity whereby such other person or entity acquires more than 50% of the outstanding shares
of voting stock of Company (not including any shares of voting stock of Company held by the other persons or entities making or party
to, or associated or affiliated with the other persons or entities making or party to, such stock or share purchase agreement or other
business combination), (v) Company or any of its subsidiaries shall, directly or indirectly, in one or more related transactions, reorganize,
recapitalize or reclassify the Common Shares or preferred stock, other than an increase in the number of authorized Common Shares or
a forward or reverse stock split, (vi) Company transfers any material asset to any subsidiary, affiliate, person or entity under common
ownership or control with Company, or (vii) Company pays or makes any monetary or non-monetary dividend or distribution to its shareholders;
or (b) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934
Act and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, of more than 50% of the aggregate ordinary voting power represented by issued and outstanding
voting stock of Company. For the avoidance of doubt: (x) Company or any of its subsidiaries entering into a definitive agreement that
contemplates a Fundamental Transaction will be deemed to be a Fundamental Transaction unless such agreement contains a closing condition
that this Pre-Paid Purchase is repaid in full upon consummation of the transaction; and (y) “Fundamental Transaction” shall
not include a reincorporation by the Company into another State.
A8.
“Other Agreements” means, collectively, (a) all existing and future agreements and instruments between, among or by
Company (or an affiliate), on the one hand, and Investor (or an affiliate), on the other hand, and (b) any financing agreement or a material
agreement that affects Company’s ongoing business operations.
A9.
“Outstanding Balance” means as of any date of determination, the initial principal amount, as reduced or increased,
as the case may be, pursuant to the terms hereof for payment, Purchases, offset, or otherwise, accrued but unpaid interest, collection
and enforcements costs (including attorneys’ fees) incurred by Investor, transfer, stamp, issuance and similar taxes and fees related
to Purchases, and any other fees or charges incurred under this Pre-Paid Purchase.
A10.
“Purchase Notice Date” means the date the applicable Purchase Notice is delivered by Investor to Company.
A11.
“Purchase Agreement” means that certain Securities Purchase Agreement dated August 21, 2025 between Company and Investor.
A12.
“Purchase Price Date” means February 17, 2026.
A13.
“Purchase Shares” means Common Shares purchased pursuant to this Pre-Paid Purchase.
A14.
“Purchase Share Purchase Price” means 90% multiplied by the lowest daily VWAP during the ten (10) Trading Day period
preceding the applicable measurement date.
A15.
“Trading Day” means any day on which Company’s principal market is open for trading.
A16.
“VWAP” means the volume weighted average price of the Common Shares on the principal market for a particular Trading
Day or set of Trading Days, as the case may be, as reported by Bloomberg.
[Remainder
of page intentionally left blank]
EXHIBIT
A
PURCHASE
NOTICE
On
behalf of Streeterville Capital, LLC (“Investor”), the undersigned hereby certifies, with respect to the purchase
of Common Shares of Algorhythm Holdings, Inc. (“Company”) issuable in connection with this Purchase Notice, delivered
pursuant to that certain Secured Pre-Paid Purchase #5, dated as of September 15, 2026 (as amended and supplemented from time to
time), as follows:
A.
Purchase Notice Date: ____________
B.
Purchase Amount: ____________
C.
Purchase Share Purchase Price: ___________
D.
Number of Purchase Shares Due to Investor: ____________________
E.
Outstanding Balance Following Purchase: ____________
Please
transfer the Purchase Shares electronically (via DWAC) to the following account:
Broker:
Address:
DTC#:
Account
#:
Account
Name:
Investor:
Streeterville
Capital, LLC
By:
John
M. Fife, President
EX-99.1
EX-99.1
Filename: ex99-1.htm · Sequence: 13
Exhibit
99.1
Algorhythm
Announces CEO Transition in Connection with Transformational Acquisition and Strategic Refocus
Leadership
Transition Expected to Include New Members of Leadership Team and Board of Directors as Company in Connection With Strategic Repositioning
Fort
Lauderdale, FL, Sept. 15, 2026 (GLOBE NEWSWIRE) -- Algorhythm Holdings, Inc. (the “Company”) (NASDAQ: RIME) –
a leading AI technology company, today announced a planned leadership transition in connection with the Company’s previously announced
evaluation of strategic alternatives and a corporate repositioning.
As
part of the transition, the Company dismissed Gary Atkinson as Chief Executive Officer of the Company following approximately 20 years
of service to the Company. Mr. Atkinson also resigned from the Company’s Board of Directors.
The
leadership transition occurred in connection with the completion of a corporate transaction that resulted in the appointment of a new
Chief Executive Officer, additional members of the Board of Directors and a significant change in the Company’s operating focus.
“I
want to take this opportunity to thank the many employees, business partners, customers and shareholders who have supported the Company
throughout my time here,” said Gary Atkinson. “I am proud of what our team has accomplished together and believe we have
positioned Algorhythm for an exciting new chapter.”
“This
transition was part of a deliberate process by the Company to position itself for its next phase of growth,” continued Atkinson.
“I am excited about the opportunities being pursued by the Company and believe the new leadership team brings a compelling vision
for its future. As a continuing shareholder, I look forward to watching that strategy take shape in the coming weeks and months.”
The
Company’s Board of Directors has been evaluating strategic alternatives designed to strengthen the Company’s financial and
operating profile and enhance long-term shareholder value. As part of that process, the Company was evaluating an proposed acquisition
involving a high-growth, revenue-generating, EBITDA-positive business operating in the energy space.
The
Company will provide additional information in the near future regarding the transaction, new leadership team and future strategic direction
of the Company.
About
Algorhythm Holdings
Algorhythm
Holdings, Inc. is a leading AI technology company that owns and operates SemiCab. Since 2020, SemiCab has enabled major retailers, brands
and transportation providers to address common supply-chain problems globally. Its AI-enabled, cloud-based Collaborative Transportation
Platform achieves the scalability required to predict and optimize millions of loads and hundreds of thousands of trucks. SemiCab uses
real-time data from API-based load tendering and pre-built integrations with TMS and ELD partners to orchestrate collaboration across
manufacturers, retailers, distributors, and their carriers. SemiCab uses AI/ML predictions and advanced predictive optimization models
to enable fully loaded round trips. With SemiCab’s AI platform, shippers pay less and carriers make more without having to change
a thing. For additional information, please go to: http://www.semicab.com.
Investor
Relations Contact
Brendan Hopkins
407-645-5295
investors@algoholdings.com
www.algoholdings.com
Media
Contact
FischTank
PR
Algorhythm@fischtankpr.com
Forward-Looking
Statements
This
press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statement that
is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “expects,”
“anticipates,” “believes,” “will,” “will likely result,” “will continue,”
“plans to,” “potential,” “promising,” and similar expressions. These statements are based on management’s
current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results
to differ materially from those described in the forward-looking statements, including the risk factors described from time to time in
Algorhythm’s reports to the SEC, including, without limitation Algorhythm’s Annual Report on Form 10-K for the year ended
December 31, 2025. You should not place undue reliance on any forward-looking statement, each of which applies only as of
the date of this press release. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking
statements after the date of this press release to conform our statements to actual results or changed expectations, or as a result of
new information, future events or otherwise.
EX-99.2
EX-99.2
Filename: ex99-2.htm · Sequence: 14
Exhibit
99.2
Algorhythm
Completes Transformational $23 Million Acquisition of Leading Renewable Power Plant Developer Serving Fortune 500, AI Data Center and
Advanced Manufacturing Clients
●
Acquired Company Has Over $10 Million in Current Contractual
Backlog.
●
Azure is Generating Positive EBITDA in 2026, and This is
Expected to Scale Significantly Over the Next 12 Months.
●
Azure Holds Project Equity Interests in Multiple Power Plants
Under Construction with Management-Estimated Net Present Value Exceeding $220 Million.
●
Experienced Team Has Participated in the Design and Construction
of 72 Power Generation Facilities Representing 17.5 GW of Generating Capacity.
●
Fort
Lauderdale, FL, Sept. 15, 2026 (GLOBE NEWSWIRE) — Algorhythm Holdings, Inc. (the “Company”) (NASDAQ: RIME)
– a leading business holding company, today announced that it has completed the acquisition of Azure Energy, LLC (“Azure”),
a renewable power plant developer based in Charlotte, NC.
The
transaction was structured as an asset purchase with total consideration of approximately $23 million, consisting of shares of the Company’s
common stock and shares of a new class of preferred stock that will obtain voting rights and become convertible into shares of common
stock after shareholder approval for the transaction is obtained.
The
acquisition represents a transformational strategic transaction for the Company, establishing the Company in the rapidly expanding U.S.
power infrastructure market as artificial intelligence, hyperscale computing and advanced manufacturing drive substantial new demand
for reliable power generation.
Azure
Energy – Experienced Team, Scaling Contract Revenue & EBITDA, Significant Project Level Equity Stakes
Azure
is a leading developer of renewable biomass power generation infrastructure. It was founded in 2025 by Andrew Thompson and Kevin Tangen.
Its team consists of some of the most experienced biomass power plant experts in the US today. Collectively, the team has designed and
built 72 facilities generating 17.5GW of renewable power to date. Azure Energy has already secured equity participation valued at over
$220 million in net present value through multiple power plants under construction in the US today. Azure Energy has significant fee-income
consulting revenues that will be receivable under multi-year contracts, and is generating scaling, positive EBITDA.
Azure’s
current engagements include Fortune 500 companies converting or redeveloping legacy fossil-fuel power facilities with renewable solutions,
new AI data center facilities in Tennessee and Louisiana, and advanced manufacturing facilities. Its growing pipeline includes potential
data center projects in Oregon, Wyoming and across the southeastern United States, additional Fortune 500 prospects, and government-supported
renewable energy projects.
Positioned
at the Intersection of Sustainable Power Infrastructure and AI Data Center Growth
The
rapid expansion of artificial intelligence and hyperscale computing is creating unprecedented demand for new power infrastructure, and
Azure is uniquely positioned to capitalize on this window of opportunity. McKinsey estimates that nearly $7 trillion of cumulative global
data center investment will be required by 2030, including approximately $1.3 trillion supporting the power generation and transmission,
cooling and electrical infrastructure required for AI data centers.
At
the same time, the substantial electricity and water requirements of large-scale data centers are generating increased scrutiny from
communities and governments concerned about grid capacity, utility rates, water resources and environmental impact. These concerns are
increasingly affecting where and how new data centers can be developed.
Azure’s
pyrolysis-to-power (“P2P”) technology is designed to address these challenges. Its power plants utilize renewable biomass
and waste streams to produce reliable, dispatchable power capable of operating independently from traditional electric grid capacity.
This behind-the-meter approach can provide data center developers with dedicated power generation while reducing dependence on constrained
local utility infrastructure.
Azure’s
P2P technology is also designed around sustainability, providing a carbon-neutral power generation pathway while generating millions
of gallons of fresh, potable water per day as a byproduct of the power generation process. The Company believes this combination of dedicated
power, renewable biomass utilization and internally generated water can substantially reduce the demands a data center places on local
power and water resources.
New
Members of Executive Team
As
part of the transaction, Andrew Thompson, co-founder and Managing Partner of Azure Energy, was appointed Chief Executive Officer and
Chairman of the Board of Algorhythm Holdings. Mr. Thompson is a serial entrepreneur with more than 20 years of finance, project finance
and energy project development experience. Kevin Tangen, co-founder of Azure Energy, also joined the Company and will drive the engineering
and technical teams within the Company. Mr. Tangen has over 40 years of deep technical expertise in the renewable power generation space
and is considered a leading expert on Azure’s pyrolysis to power technology
“We
are excited to complete this transaction and begin the next phase of building Azure as part of Algorhythm,” commented Andrew Thompson,
Managing Partner of Azure Energy. “Our team has spent many years developing and constructing complex power generation projects.
We are leaders in the design, construction and supervision of innovative biomass power plants. Our work to date speaks for itself; 72
power plants, 17.5GW delivered to a wide range of satisfied power consumers across the US.”
“Power
availability is rapidly becoming one of the defining infrastructure challenges of the AI era,” continued Thompson. “Azure
has been built around addressing that challenge with scalable, dispatchable and sustainable power solutions designed to meet the unique
requirements of large-scale data centers and other power-intensive customers.”
“Today,
as part of Algorythm, we can significantly scale our business, selectively expanding our role in projects where a stronger balance sheet
has been the only limiting factor to increasing our revenue opportunity 10x or more. Algorhythm will enable us to take on more projects,
accelerate our revenue growth, attract more top-tier talent, and propel us forward, helping us unlock our true value potential. We look
forward to providing additional commercial milestone updates in the coming months as we execute on our business model in 2026 and beyond,”
concluded Mr. Thompson.
About
Algorhythm Holdings
Algorhythm
Holdings, Inc. is a leading holding company that owns and operates Azure Energy and SemiCab.
Azure
Energy is a leading developer of renewable biomass power generation infrastructure. Azure’s uses its pyrolysis-to-power (“P2P”)
technology to design power plants that utilize renewable biomass and waste streams to produce reliable, dispatchable power capable of
operating independently from traditional electric grid capacity. Azure’s P2P technology is also designed around sustainability,
providing a carbon-neutral power generation pathway while generating millions of gallons of fresh, potable water per day as a byproduct
of the power generation process. Azure has designed and built 72 facilities generating 17.5GW of renewable power to date. For additional
information, please go to: https://azure-energy.co/
SemiCab
is an AI technology company that has enabled major retailers, brands and transportation providers to address common supply-chain problems
globally. Its AI-enabled, cloud-based Collaborative Transportation Platform achieves the scalability required to predict and optimize
millions of loads and hundreds of thousands of trucks. For additional information, please go to: http://www.semicab.com.
Investor
Relations Contact
Brendan Hopkins
407-645-5295
investors@algoholdings.com
www.algoholdings.com
Media
Contact
FischTank PR
Algorhythm@fischtankpr.com
Forward-Looking
Statements
This
press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statement that
is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as “expects,”
“anticipates,” “believes,” “will,” “will likely result,” “will continue,”
“plans to,” “potential,” “promising,” and similar expressions. These statements are based on management’s
current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results
to differ materially from those described in the forward-looking statements, including the risk factors described from time to time in
Algorhythm’s reports to the SEC, including, without limitation Algorhythm’s Annual Report on Form 10-K for the year ended
December 31, 2025. You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of
this press release. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements
after the date of this press release to conform our statements to actual results or changed expectations, or as a result of new information,
future events or otherwise.
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