EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

dated as of March 3, 2017

among

1847 NEESE INC.

NEESE, INC.

AND

THE OTHER PARTIES SET FORTH ON EXHIBIT A HERETO

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS
1.1	Certain Definitions.		1
ARTICLE II PURCHASE AND SALE OF THE SHARES
2.1	Purchase and Sale of the Shares.		5
2.2	Adjustments to Purchase Price.		6
2.3	Closing.		7
2.4	Transactions to be Effected at the Closing.		7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER
3.1	Authority and Enforceability.		8
3.2	Noncontravention.		8
3.3	The Shares.		8
3.4	Brokers’ Fees.		9
ARTICLE IV REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
4.1	Organization, Qualification and Corporate Power; Authority and Enforceability.		9
4.2	Subsidiaries.		10
4.3	Capitalization.		10
4.4	Noncontravention.		10
4.5	Financial Statements.		11
4.6	Taxes.		11
4.7	Compliance with Laws and Orders; Permits.		12
4.8	No Undisclosed Liabilities.		12
4.9	Tangible Personal Assets.		12
4.10	Real Property.		12
4.11	Intellectual Property.		13
4.12	Absence of Certain Changes or Events.		14
4.13	Contracts.		15
4.14	Litigation.		15
4.15	Employee Benefits.		16
4.16	Labor and Employment Matters.		16
4.17	Environmental.		16
4.18	Insurance.		16
4.19	Brokers’ Fees.		16
4.20	Certain Business Relationships with the Company.		16
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER
5.1	Organization and Capitalization.		17
5.2	Authorization.		17
5.3	Noncontravention.		17
5.4	Brokers’ Fees.		18
ARTICLE VI COVENANTS
6.1	Consents.		18
6.2	Operation of the Company’s Business.		18
6.3	Access.		19
6.4	Transfer of Cash and Cash Equivalents.		19
6.5	Notice of Developments.		19

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TABLE OF CONTENTS

			Page
6.6	No Solicitation.		19
6.7	Taking of Necessary Action; Further Action.		20
6.8	Covenant not to Compete.		20
6.9	Bylaws of the Buyer.		20
6.10	Financial Information.		21
6.11	Management Fee.		21
6.12	No Mandatory Capital Calls.		21
6.13	Disclosure Schedule.		21
6.14	Certain Protective Provisions.		22
6.15	DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.		23
6.16	Home State Bank Obligation.		23
ARTICLE VII CONDITIONS TO OBLIGATIONS TO CLOSE
7.1	Conditions to Obligation of the Buyer.		23
7.2	Conditions to Obligation of the Sellers.		25
ARTICLE VIII TERMINATION; AMENDMENT; WAIVER
8.1	Termination of Agreement.		26
8.2	Effect of Termination.		26
8.3	Amendments.		27
8.4	Waiver.		27
ARTICLE IX INDEMNIFICATION
9.1	Survival.		27
9.2	Indemnification by Sellers.		28
9.3	Indemnification by Buyer.		28
9.4	Indemnification Procedure.		28
9.5	Failure to Give Timely Notice.		29
9.6	Limited on Indemnification Obligation.		29
9.7	Sole and Exclusive Remedy.		30
9.8	Payments.		30
ARTICLE X MISCELLANEOUS
10.1	Press Releases and Public Announcement.		30
10.2	No Third-Party Beneficiaries.		30
10.3	Entire Agreement.		31
10.4	Succession and Assignment.		31
10.5	Construction.		31
10.6	Notices.		31
10.7	Governing Law.		32
10.8	Consent to Jurisdiction and Service of Process.		32
10.9	Headings.		32
10.10	Severability.		32
10.11	Expenses.		33
10.12	Incorporation of Exhibits and Schedules.		33

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TABLE OF CONTENTS

			Page
10.13	Limited Recourse.		33
10.14	Specific Performance.		33
10.15	Counterparts.		33
10.16	Director and Officer Liability and Indemnification.		33
10.17	Privilege, Work Product and Conflict Waiver.		34
10.17	Amendment of Tax Returns.		34

 

Exhibit A – List of Sellers

Exhibit B – Form of Buyer Note

Exhibit C – Form of Buyer Short Term Note 

Disclosure

Schedule

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STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated as of March 3, 2017 (the “ Agreement ”), among 1847 Neese Inc., a Delaware corporation (the “ Buyer ”), Neese, Inc., an Iowa corporation (the “ Company ”), and the other parties set forth on Exhibit A hereto (each, a “ Seller ,” and together, the “ Sellers ”).

BACKGROUND

Each Seller is the record and beneficial owner of the number of shares (the “ Shares ”) of Common Stock, $1.00 par value per share, of the Company (the “ Common Stock ”), set forth opposite each such Seller’s name on Exhibit A . The Sellers collectively own 100% of the issued and outstanding shares of Common Stock. The Sellers desire to sell all of the Shares to the Buyer, and the Buyer desires to purchase all of the Shares from the Sellers, upon the terms and subject to the conditions set forth in this Agreement (such sale and purchase of the Shares, the “ Acquisition ”).

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations and warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I
DEFINITIONS

1.1 Certain Definitions .

(a) When used in this Agreement, the following terms will have the meanings assigned to them in this Section 1.1(a):

“ Action ” means any claim, action, suit, inquiry, hearing, proceeding or other investigation.

“ Affiliate ” means, with respect to a Person, any other Person that, directly or indirectly, through one or more intermediaries, Controls, is Controlled by or is under common Control with, such Person. For purposes of this definition, “ Control ” (including the terms “ Controlled by ” and “ under common Control with ”) means possession of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of stock, as trustee or executor, by Contract or otherwise.

“ Benefit Plan ” means any “employee benefit plan” as defined in ERISA Section 3(3), including any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan (as defined in ERISA Section 3(2)), (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan (as defined in ERISA Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA Section 3(1)) or material fringe benefit plan or program, or (e) stock purchase, stock option, severance pay, employment, change-in-control, vacation pay, company award, salary continuation, sick leave, excess benefit, bonus or other incentive compensation, life insurance, or other employee benefit plan, contract, program, policy or other arrangement, whether or not subject to ERISA, under which any present or former employee of the Company has any present or future right to benefits sponsored or maintained by the Company or any ERISA Affiliate.

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“ Business Day ” means a day other than a Saturday, Sunday or other day on which banks located in New York, NY are authorized or required by Law to close.

“ Closing Working Capital ” means the difference, as of the Closing Date, between (a) the sum of the cash, accounts receivable, inventory, capitalized work in process, prepaid expenses and other current assets of the Company, which shall be reflected on the Closing Date Balance Sheet, less (b) the accounts payable, customer deposits, sales taxes payable, and other current liabilities of the Company as reflected on the Closing Date Balance Sheet, in each case, determined in accordance with GAAP.

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

“ Contract ” means any written agreement, contract, commitment, arrangement or understanding.

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

“ ERISA Affiliate ” means any Person who is, or at any time was, a member of a “controlled group of corporations” within the meaning of Section 414(b) or (c) of the Code and, for the purpose of Section 302 of ERISA and/or Section 412, 4971, 4977, 4980D, 4980E and/or each “applicable section” under Section 414(f)(2) of the Code, within the meaning of Section 412(n)(6) of the Code that includes, or at any time included, the Company or any Affiliate thereof, or any predecessor of any of the foregoing.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ GAAP ” means United States generally accepted accounting principles of Company in effect as of the date of Closing.

“ Governmental Entity ” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to United States federal, state or local government or foreign, international, multinational or other government, including any department, commission, board, agency, bureau, official or other regulatory, administrative or judicial authority thereof.

“ Independent Accounting Firm ” means any nationally recognized independent registered public accounting firm which has not represented the Company or the Seller or any of their Affiliates for the past five years as will be agreed by the Company and the Buyer in writing.

“ IRS ” means the Internal Revenue Service.

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“ Knowledge of the Sellers ” or any similar phrase means the actual knowledge of each Seller, in each case without obligation of inquiry.

“ Law ” means any statute, law, ordinance, rule, regulation of any Governmental Entity.

“ Liability ” means all indebtedness, obligations and other liabilities and contingencies of a Person, whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due.

“ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, hypothecation or other encumbrance in respect of such property or asset.

“ Material Adverse Effect ” means any material adverse effect on the assets, properties, condition (financial or otherwise), operations of the Company and any of its Subsidiaries, taken as a whole, provided, however, that a Material Adverse Effect with respect to any party hereto shall not include: (A) changes in the national or world economy or financial markets as a whole or changes in general economic conditions that affect the industries in which such party and such party’s subsidiaries conduct their business, so long as such changes or conditions do not adversely affect such party and such party’s subsidiaries, taken as a whole, in a materially disproportionate manner relative to other similarly situated participants in the industries or markets in which they operate; (B) any change in applicable Law or GAAP or interpretation thereof after the date hereof, so long as such changes do not adversely affect such party and such party’s subsidiaries, taken as a whole, in a materially disproportionate manner relative to other similarly situated participants in the industries or markets in which they operate; (C) the transactions contemplated by this Agreement becoming public; (D) compliance with the terms of, and taking any action required by, this Agreement, or with respect to any Seller or Company, the taking or not taking any actions at the request of, or with the consent of, Buyer; and (E) acts or omissions of Buyer after the date of this Agreement (other than actions or omissions specifically contemplated by this Agreement).

“ Minimum Requirement ” means the requirement to (a) achieve Preliminary Working Capital or Closing Working Capital, as applicable, of at least $0, and (b) have a cash balance of at least $200,000.

“ Order ” means any award, injunction, judgment, decree, order, ruling, subpoena or verdict or other decision issued, promulgated or entered by or with any Governmental Entity of competent jurisdiction.

“ Permit ” means any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Entity of competent jurisdiction or pursuant to any Law.

“ Person ” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.

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“ Preliminary Working Capital ” means the difference, as of the date of the Preliminary Balance Sheet, between (a) the sum of the cash, accounts receivable, inventory, capitalized work in process, prepaid expenses and other current assets of the Company, as reflected on the Preliminary Balance Sheet, less (b) the accounts payable, customer deposits, sales taxes payable, and other current liabilities of the Company as reflected on the Preliminary Balance Sheet, in each case, determined in accordance with GAAP.

“ Representatives ” means, with respect to any Person, the respective directors, officers, employees, counsel, accountants and other representatives of such Person.

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, joint venture or other legal entity of which such Person (either alone or through or together with any other Subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of a non-corporate Person.

“ Taxes ” means all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severance, stamp, payroll, sales, transfer, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever.

“ Taxing Authority ” means any Governmental Entity having or purporting to exercise jurisdiction with respect to any Tax.

“ Tax Returns ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Transaction Proposal ” means any unsolicited written bona fide proposal made by a third party relating to (i) any direct or indirect acquisition or purchase of all or substantially all assets of the Company, (ii) any direct or indirect acquisition or purchase of a majority of the combined voting power of the Shares, (iii) any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company in which the other party thereto or its stockholders will own 51% or more of the combined voting power of the parent entity resulting from any such transaction, or (iv) any other transaction that is inconsistent with the intent and purpose of this Agreement.

“ Transfer Taxes ” means sales, use, transfer, recording, documentary, stamp, registration and stock transfer Taxes and any similar Taxes.

“ $ ” means United States dollars.

(b) For purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (i) the meaning assigned to each term defined herein will be equally applicable to both the singular and the plural forms of such term and vice versa, and words denoting any gender will include all genders as the context requires; (ii) where a word or phrase is defined herein, each of its other grammatical forms will have a corresponding meaning; (iii) the terms “hereof”, “herein”, “hereunder”, “hereby” and “herewith” and words of similar import will, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement; (iv) when a reference is made in this Agreement to an Article, Section, paragraph, Exhibit or Schedule without reference to a document, such reference is to an Article, Section, paragraph, Exhibit or Schedule to this Agreement; (v) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the same Section in which the reference appears, and this rule will also apply to paragraphs and other subdivisions; (vi) the word “include”, “includes” or “including” when used in this Agreement will be deemed to include the words “without limitation”, unless otherwise specified; (vii) a reference to any party to this Agreement or any other agreement or document will include such party’s predecessors, successors and permitted assigns; (viii) a reference to any Law means such Law as amended, modified, codified, replaced or reenacted as of the date hereof, and all rules and regulations promulgated thereunder as of the date hereof; and (ix) all accounting terms used and not defined herein have the respective meanings given to them under GAAP.

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ARTICLE II
PURCHASE AND SALE OF THE SHARES

2.1 Purchase and Sale of the Shares . Upon the terms and subject to the conditions set forth in this Agreement, at the Closing each Seller will sell, transfer and deliver, and the Buyer will purchase from each Seller, all of the Shares set forth opposite such Seller’s name on Exhibit A for an aggregate purchase price of Two Million, Two Hundred Twenty-Five Thousand Dollars ($2,225,000) in cash, the Buyer Shares (as defined below), the Buyer Notes (as defined below) and the Buyer Short Term Notes (as defined below) (the “ Purchase Price ”), payable as described below.

(a) The cash portion of the Purchase Price shall be Two Million, Two Hundred Twenty-Five Thousand Dollars ($2,225,000) payable by the Buyer at the Closing through the delivery to the Sellers of cash in immediately available funds (the “ Cash Portion ”).

(b) At the Closing, the Buyer will issue to the Sellers 450 shares (the “ Buyer Shares ”) of the Buyer’s Common Stock, $0.001 par value per share (the “ Buyer Common Stock ”), constituting 45% of the issued and outstanding capital stock of the Buyer on the Closing Date on a fully-diluted basis (assuming the exercise, conversion or exchange of all securities of the Buyer that are exercisable or exchangeable for, or convertible into, the Buyer Common Stock) and after giving effect to the Closing.

(c) At the Closing, the Buyer will issue to the Sellers an 8% vesting promissory note in the aggregate principal amount of One Million, Eight Hundred Seventy-Five Thousand Dollars ($1,875,000) in the form of Exhibit B (each a “ Buyer Note ”) and, collectively, the “ Buyer Notes ”).

(d) At the Closing, the Buyer and Company will issue to the Sellers a short term promissory note in the form of Exhibit C (each a “ Buyer Short Term Note ” and, collectively, the “ Buyer Short Term Notes ”) that matures on the first anniversary of the Closing Date and is in the principal amount of One Million, Twenty-Five Thousand Dollars ($1,025,000) that bears interest at a simple rate of 10% with interest payable currently on a monthly basis. The principal amount of, and all accrued, but unpaid, interest on, the Buyer Short Term Notes shall be prepaid when the Company’s cash on hand exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the principal and accrued, but unpaid, interest thereon is fully prepaid.

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2.2 Adjustments to Purchase Price .

(a) Working Capital Adjustment .

(i) At the Closing, the Sellers shall deliver to the Buyer an unaudited balance sheet of the Company (the “ Preliminary Balance Sheet ”) as at February 27, 2017 together with a certificate of the Sellers stating that the Preliminary Balance Sheet was prepared in accordance with GAAP so as to present fairly in all material respects the financial condition of Company as of such date.

(ii) As soon as practicable following the Closing Date (but not later than sixty (60) days after the Closing Date), the Buyer shall cause its auditor to prepare and deliver to the Sellers an unaudited balance sheet of the Company (the “ Closing Date Balance Sheet ”) and all calculations, work papers and supporting documents (the “Supporting Documentation” ) as of the Closing Date. The Closing Date Balance Sheet shall be prepared in accordance with GAAP in a manner consistent with the Preliminary Balance Sheet so as to present fairly in all material respects the financial condition of the Company.

(iii) If the Closing Working Capital reflects that the Minimum Requirement has been achieved, then no adjustment shall be made. If the Closing Working Capital reflects that the Minimum Requirement has not been achieved, then the Sellers shall promptly (and, in any event, within seven (7) days) pay to the Buyer an amount in cash that is equal to the deficiency in Closing Working Capital or cash, as applicable, below the Minimum Requirement.

(iv) In the event the Sellers do not agree with the Closing Working Capital as reflected on the Closing Date Balance Sheet, the Sellers shall so inform the Buyer in writing within twenty (20) days of the Sellers’ receipt of such Balance Sheet and the Supporting Documentation, such writing to set forth the objections of the Sellers in reasonable detail. If the Sellers and the Buyer cannot reach agreement as to any disputed matter relating to the Closing Working Capital within fifteen (15) days after notification by the Sellers to the Buyer of a dispute, they shall forthwith refer the dispute to an Independent Accounting Firm mutually agreeable to the Sellers and the Buyer for resolution, with the understanding that such firm shall resolve all disputed items within twenty (20) days after such disputed items are referred to it. If the Buyer and the Sellers are unable to agree on the choice of an Independent Accounting Firm, they shall select an Independent Accounting Firm by lot (after excluding their respective regular outside accounting firms). Each of the Sellers, on the one hand, and the Buyer, on the other hand, shall bear one-half of the costs of such accounting firm. The Accountant shall act as an arbitrator and shall determine, based solely on presentations by the parties (and not by independent review) and the terms of this Agreement, only those disputed items among the parties and shall render a written report to the parties containing the resolution of each such dispute, a brief summary of the Accountant’s reasoning for the resolution of each such dispute and the resulting calculations and shall have no right, authority or discretion to employ any accounting standards or principles except for those provided for in this Agreement. The Accountant shall have the full and exclusive authority to decide all the issues still then in dispute. The decision of the accounting firm with respect to all disputed matters relating to the Closing Working Capital shall be deemed final and conclusive and shall be binding upon the Sellers and the Buyer. In addition, if the Sellers do not object to the Closing Working Capital within the 20-day period referred to above, the Closing Working Capital, as reflected on the Closing Date Balance Sheet as so prepared, shall be deemed final and conclusive and binding upon the Sellers and the Buyer.

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(v) The Sellers shall be entitled to have access to the books and records of the Company and the Buyer’s work papers prepared in connection with the Closing Date Balance Sheet and shall be entitled to discuss such books and records and work papers with the Buyer and those persons responsible for the preparation thereof.

(b) Adjustment for Outstanding Indebtedness . The Cash Portion shall be decreased by the amount of any outstanding indebtedness of the Company existing as of the Closing Date, except for the outstanding indebtedness to Home State Bank which currently is approximately $800,000.

2.3 Closing . The consummation of the Acquisition (the “ Closing ”) will take place by the reciprocal delivery of closing documents by electronic mail, regular mail, fax or any other means mutually agreed upon by the parties hereto on a date that is no later than two (2) Business Days immediately following the day on which the last of the conditions to closing contained in Article VII (other than any conditions that by their nature are to be satisfied at the Closing) is satisfied or waived in accordance with this Agreement or at such other location or on such other date as the Buyer and the Company may mutually determine (the date on which the Closing actually occurs is referred to as the “ Closing Date ”). The Parties anticipate that the Closing will occur on or before March 3, 2017.

2.4 Transactions to be Effected at the Closing .

(a) At the Closing, the Buyer will (i) pay to each of the Sellers their pro rata portion of the Cash Portion of the Purchase Price, adjusted in accordance with subsection 2.2(a) above and less the amounts paid pursuant to subsection 2.2(b) above by paying such sum to each Seller by transfer of immediately available funds in accordance with instructions provided by the each Seller, (ii) issue to each of the Sellers their pro rata portion of the Buyer Shares, by issuing to each Seller a certificate representing the number of Buyer Shares set forth for such Seller on Exhibit A , (iii) issue to each of the Sellers their pro rata portion of Buyer Notes and the Buyer Short Term Notes, by issuing to each Seller (A) a Buyer Note representing the principal amount of Buyer Notes set forth for such Seller on Exhibit A and (B) a Buyer Short Term Note representing the principal amount of Buyer Short Term Notes set forth for such Seller on Exhibit A , and (iv) deliver to the Sellers all other documents, instruments or certificates required to be delivered by the Buyer at or prior to the Closing pursuant to this Agreement.

(b) At the Closing, each Seller will deliver to the Buyer (i) a certificate or certificates representing their Shares duly endorsed or accompanied by stock powers duly endorsed in blank and (ii) all other documents, instruments or certificates required to be delivered by the Seller at or prior to the Closing pursuant to this Agreement.

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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER

Each of the Sellers, for himself or herself as the case may be, represents and warrants to the Buyer that each statement contained in this Article III is true and correct as of the date hereof, except as set forth in the schedule accompanying this Agreement (the “ Disclosure Schedule ”). The Disclosure Schedule has been arranged for purposes of convenience only, in sections corresponding to the Sections of this Article III and Article IV. Each section of the Disclosure Schedule will be deemed to incorporate by reference all information disclosed in any other section of the Disclosure Schedule.

3.1 Authority and Enforceability . The Seller has the requisite legal capacity to execute and deliver this Agreement, to perform the Seller’s obligations hereunder and to consummate the Acquisition and the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Seller and, assuming the due authorization, execution and delivery by each other party hereto, constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

3.2 Noncontravention .

(a) Except as set forth in Section 3.2(a) of the Disclosure Schedule , neither the execution and the delivery of this Agreement nor the consummation of the Acquisition or the other transactions contemplated by this Agreement will, with or without the giving of notice or the lapse of time or both, (i) to the actual knowledge of the Seller and assuming compliance with the filing and notice requirements set forth in Section 3.2(b)(i), violate any Law applicable to the Seller or (ii) violate any Contract to which the Seller is a party, except to the extent that any such violation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) The execution and delivery of this Agreement by the Seller does not, and the performance of this Agreement by the Seller will not, require any consent, approval, authorization or Permit of, or filing with or notification to, any Governmental Entity, except as (i) set forth in Section 3.2(b) of the Disclosure Schedule or (ii) where the failure to take such action would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

3.3 The Shares .

(a) The Seller holds of record and owns beneficially all of the issued and outstanding shares of capital stock of the Company set forth opposite such Seller’s name on Exhibit A , free and clear of all Liens, other than (i) Liens for current real or personal property Taxes that are not yet due and payable or that may hereafter be paid without material penalty or that are being contested in good faith, (ii) statutory Liens of landlords and workers’, carriers’ and mechanics’ or other like Liens incurred in the ordinary course of business or that are being contested in good faith, (iii) Liens and encroachments which do not materially interfere with the present or proposed use of the properties or assets they affect, (iv) Liens that will be released prior to or as of the Closing, (v) Liens arising under this Agreement, (vi) Liens created by or through the Buyer, and (vii) Liens set forth on Section 3.3(a) of the Disclosure Schedule (the “ Permitted Liens ”).

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(b) The number of Shares set forth opposite the Seller’s name on Exhibit A correctly sets forth all of the capital stock of the Company owned of record or beneficially by the Seller.

(c) Except as set forth in Section 3.3(c) of the Disclosure Schedule or otherwise in this Agreement, the Seller is not party to any Contract obligating the Seller to vote or dispose of any shares of the capital stock of, or other equity or voting interests in, the Company.

3.4 Brokers’ Fees . Except as set forth in Section 3.4 of the Disclosure Schedule , the Seller does not have any Liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement, the Acquisition or the transactions contemplated by this Agreement.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY

Each of the Sellers, jointly and severally, represents and warrants to the Buyer that each statement contained in this Article IV is true and correct as of the date hereof, except as set forth in the Disclosure Schedule.

4.1 Organization, Qualification and Corporate Power; Authority and Enforceability .

(a) The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Iowa, and has all requisite corporate power and authority, directly or indirectly, to own, lease and operate its properties and assets and to carry on its business as it is now being conducted. The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in those jurisdictions as set forth in Section 4.1 of the Disclosure Schedule .

(b) The Company has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary action on the part of the Company, and no other action is necessary on the part of the Company to authorize this Agreement or to consummate the Acquisition or the other transactions contemplated hereby. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by each other party hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (ii) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

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4.2 Subsidiaries . The Company does not have any Subsidiaries.

4.3 Capitalization .

(a) The authorized capital stock of the Company consists of 100,000 shares of Common Stock, par value $1.00 per share, of which 2,000 shares are issued and outstanding. No other capital stock of the Company is authorized, issued or outstanding.

(b) There are no outstanding options, warrants or other securities or subscription, preemptive or other rights convertible into or exchangeable or exercisable for any shares of capital stock or other equity or voting interests of the Company and there are no “phantom stock” rights, stock appreciation rights or other similar rights with respect to the Company. There are no Contracts of any kind to which the Company is a party or by which the Company is bound, obligating the Company to issue, deliver, grant or sell, or cause to be issued, delivered, granted or sold, additional shares of capital stock of, or other equity or voting interests in, or options, warrants or other securities or subscription, preemptive or other rights convertible into, or exchangeable or exercisable for, shares of capital stock of, or other equity or voting interests in, the Company, or any “phantom stock” right, stock appreciation right or other similar right with respect to the Company, or obligating the Company to enter into any such Contract.

(c) There are no securities or other instruments or obligations of the Company, the value of which is in any way based upon or derived from any capital or voting stock of the Company or having the right to vote (or convertible into, or exchangeable or exercisable for, securities having the right to vote) on any matters on which the Company’s stockholders may vote.

(d) There are no Contracts, contingent or otherwise, obligating the Company to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity or voting interests in, the Company. There are no voting trusts, registration rights agreements or stockholder agreements to which the Company is a party with respect to the voting of the capital stock of the Company or with respect to the granting of registration rights for any of the capital stock of the Company. There are no rights plans affecting the Company.

(e) Except as set forth in Section 4.3(e) of the Disclosure Schedule , there are no bonds, debentures, notes or other indebtedness of the Company.

4.4 Noncontravention .

(a) Neither the execution and delivery of this Agreement nor the consummation of the Acquisition and the other transactions contemplated by this Agreement will, with or without the giving of notice or the lapse of time or both, (i) violate any provision of the certificate of incorporation or bylaws (or comparable organization documents, as applicable) of the Company, (ii) to the Knowledge of the Seller and assuming compliance with the filing and notice requirements set forth in Section 4.4(b)(i), violate any Law applicable to the Company on the date hereof or (iii) except as set forth in Section 4.4(a) of the Disclosure Schedule , violate any Contract to which the Company is a party, except in the case of clauses (ii) and (iii) to the extent that any such violation would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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(b) To the Knowledge of Seller, the execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or Permit of, or filing with or notification to, any Governmental Entity, except for (i) the filings set forth in Section 4.4(b) of the Disclosure Schedule or (ii) where the failure to take such action would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.5 Financial Statements . Section 4.5 of the Disclosure Schedule contains true and complete copies of (i) the unaudited balance sheet of the Company as of December 31, 2015 and the related unaudited statements of income, stockholders’ equity and cash flows for the two years ended December 31, 2015 and December 31, 2014 (the “ Annual Financial Statements ”) and (ii) the unaudited balance sheet of the Company as of September 30, 2016 and the related statements of income, stockholders’ equity and cash flows for the nine-month period ended September 30, 2016 (the “ Interim Financial Statements ” and, together with the Annual Financial Statements, the “ Financial Statements ”). Except as set forth in Section 4.5 of the Disclosure Schedule , the Financial Statements have been prepared in accordance with accounting principles of Company applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and, on that basis, fairly present, in all material respects, the financial condition and results of operations of the Company as of the indicated dates and for the indicated periods (subject to normal year-end adjustments and the absence of notes), excepting as set forth in Buyer’s quality of earnings report that has been prepared. Section 4.5 of the Disclosure Schedule indicates the material differences between the Company’s accounting principles and GAAP.

4.6 Taxes . Except as set forth in Section 4.6 of the Disclosure Schedule :

(a) All material Tax Returns required to have been filed by the Company have been filed, and each such Tax Return reflects the liability for Taxes in all material respects. All Taxes shown on such Tax Returns as due have been paid or accrued.

(b) To the Knowledge of the Seller, there is no audit pending against the Company in respect of any Taxes. There are no Liens on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax, other than Liens for Taxes not yet due and payable.

(c) The Company has withheld and paid or accrued for all material Taxes required to have been withheld and paid or accrued for in connection with amounts paid or owing to any third party.

(d) The Company has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(e) The Company is not a party to any Tax allocation or sharing agreement.

 

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4.7 Compliance with Laws and Orders; Permits . To the Knowledge of the Seller:

(a) The Company is in compliance with all Laws and Orders to which the business of the Company is subject, except where such failure to comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) The Company owns, holds, possesses or lawfully uses in the operation of its business all Permits that are necessary for it to conduct its business as now conducted, except where such failure to own, hold, possess or lawfully use such Permit would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.8 No Undisclosed Liabilities . Except as set forth in Section 4.8 of the Disclosure Schedule , the Company does not have any Liability, except for (a) Liabilities set forth on the Interim Financial Statements (required to be recorded in its financial statements in accordance of GAAP) and (b) Liabilities which have arisen since the date of the Interim Financial Statements in the ordinary course of business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law).

4.9 Tangible Personal Assets .

(a) Except as set forth in Section 4.9 of the Disclosure Schedule , the Company has good title to, or a valid interest in, all of its tangible personal assets, free and clear of all Liens, other than (i) Permitted Liens or (ii) Liens that, individually or in the aggregate, do not materially interfere with the ability of the Company thereof to conduct its business as currently conducted and do not adversely affect the value of, or the ability to sell, such personal properties and assets.

(b) The Company’s tangible personal assets are in operating condition and working order and repair, when taken as a whole, subject to ordinary wear and tear and repairs from time to time in the ordinary course of business and are suitable for the purposes for which they are currently being used.

4.10 Real Property .

(a) Owned Real Property . The Company does not own any real property.

(b) Leased Real Property . Section 4.10(b) of the Disclosure Schedule contains a list of all leases and subleases (collectively, the “ Real Property Leases ”) under which the Company is either lessor or lessee (the “ Real Property ”). The Seller has heretofore made available to the Buyer true and complete copies of each Real Property Lease. To the Knowledge of the Seller, (i) all Real Property Leases are valid and binding Contracts of the Company and are in full force and effect (except for those that have terminated or will terminate by their own terms), and (ii) neither the Company or any other party thereto, is in violation or breach of or default (or with notice or lapse of time, or both, would be in violation or breach of or default) under the terms of any such Contract, in each case, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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4.11 Intellectual Property .

(a) “ Intellectual Property ” means (i) trade secrets, inventions, confidential and proprietary information, know-how, formulae and processes, (ii) patents (including all provisionals, reissues, divisions, continuations and extensions thereof) and patent applications, (iii) trademarks, trade names, trade dress, brand names, domain names, trademark registrations, trademark applications, service marks, service mark registrations and service mark applications (whether registered, unregistered or existing at common law, including all goodwill attaching thereto), (iv) copyrights, including copyright registrations, copyright applications and unregistered common law copyrights; (v) and all licenses for the Intellectual Property listed in items (i) – (iv) above.

(b) Section 4.11(b) of the Disclosure Schedule sets forth a list that includes all material Intellectual Property owned by the Company (the “ Company-Owned Intellectual Property ”) that is registered or subject to an application for registration (including the jurisdictions where such Company-Owned Intellectual Property is registered or where applications have been filed, and all registration or application numbers, as appropriate).

(c) As of the date hereof all necessary registration, maintenance and renewal fees have been paid and all necessary documents have been filed with the United States Patent and Trademark Office or foreign patent and trademark office in the relevant foreign jurisdiction for the purposes of maintaining the registered Company-Owned Intellectual Property.

(d) Except as set forth on Section 4.11(d) of the Disclosure Schedule , (i) the Company is the exclusive owner of the Company-Owned Intellectual Property free and clear of all Liens (other than Permitted Liens); (ii) to the Knowledge of the Seller no proceedings have been instituted, are pending or are threatened that challenge the rights of the Company in or the validity or enforceability of the Company-Owned Intellectual Property; (iii) to the Knowledge of the Seller, neither the use of the Company-Owned Intellectual Property as currently used by the Company in the conduct of the Company’s business, nor the conduct of the business as presently conducted by the Company infringes, dilutes, misappropriates or otherwise violates in any material respect the Intellectual Property rights of any Person; and (iv) as of the date of this Agreement, the Company has made no claim of a violation, infringement, misuse or misappropriation by any Person, of their rights to, or in connection with, the Company-Owned Intellectual Property.

(e) Except as set forth in Section 4.11(e) of the Disclosure Schedule , the Company has not permitted or licensed any Person to use any Company-Owned Intellectual Property.

(f) Section 4.11(f) of the Disclosure Schedule sets forth a complete and accurate list of all licenses, other than “off the shelf” commercially available software programs, pursuant to which the Company licenses from a Person Intellectual Property that is material to and used in the conduct of the business by the Company.

 

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(g) To the Knowledge of the Seller, the Company is not in default in the performance, observance or fulfillment of any obligation, covenant or condition contained in any Contract pursuant to which any third party is authorized to use any Company-Owned Intellectual Property or pursuant to which the Company is licensed to use Intellectual Property owned by a third party, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.12 Absence of Certain Changes or Events . Except as set forth in Section 4.12 of the Disclosure Schedule , since the date of the Interim Financial Statements, no event has occurred that has had, individually or in the aggregate, a Material Adverse Effect. Without limiting the generality of the foregoing, except as set forth in Section 4.12 of the Disclosure Schedule , since that date:

(a) the Company has not sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business;

(b) the Company has not entered into any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) either involving more than $50,000 or outside the ordinary course of business;

(c) no party (including the Company) has accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) involving more than $50,000 to which the Company is a party or by which any of them is bound;

(d) the Company has not imposed any Liens upon any of its assets, tangible or intangible;

(e) the Company has not made any capital expenditure (or series of related capital expenditures) either involving more than $50,000 or outside the ordinary course of business;

(f) the Company has not made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) either involving more than $50,000 or outside the ordinary course of business;

(g) the Company has not transferred, assigned, or granted any license or sublicense of any rights under or with respect to any Intellectual Property;

(h) there has been no change made or authorized in the certificate of incorporation or bylaws of the Company;

(i) the Company has not issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock;

 

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(j) the Company has not made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the ordinary course of business;

(k) the Company has not entered into any employment contract or modified the terms of any existing such contract or agreement;

(l) the Company has not granted any increase in the base compensation of any of its directors, officers, and employees outside the ordinary course of business;

(m) the Company has not committed to any of the foregoing.

4.13 Contracts .

(a) Except as set forth in Section 4.13(a) of the Disclosure Schedule , as of the date hereof, the Company is not a party to or bound by any: (i) Contract not contemplated by this Agreement that materially limits the ability of the Company to engage or compete in any manner of the business presently conducted by the Company; (ii) Contract that creates a partnership or joint venture or similar arrangement with respect to any material business of the Company; (iii) indenture, credit agreement, loan agreement, security agreement, guarantee, note, mortgage or other evidence of indebtedness or agreement providing for indebtedness in excess of $50,000; (iv) Contract that relates to the acquisition or disposition of any material business (whether by merger, sale of stock, sale of assets or otherwise) other than this Agreement; and (v) Contract that involves performance of services or delivery of goods or materials by or to the Company in an amount or with a value in excess of $50,000 in any 12-month period (which period may extend past the Closing).

(b) The Seller has heretofore made available to the Buyer true and complete copies of each of the Contracts set forth in Section 4.13(a) of the Disclosure Schedule . To the Knowledge of the Seller, (i) all such Contracts are valid and binding, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other law affecting or relating to creditors’ rights generally and general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), (ii) all such Contracts are in full force and effect (except for those that have terminated or will terminate by their own terms), and (iii) neither the Company nor any other party thereto, is in violation or breach of or default under (or with notice or lapse of time, or both, would be in violation or breach of or default under) the terms of any such Contract, in each case, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.14 Litigation . Except as set forth in Section 4.14 of the Disclosure Schedule , there is no Action pending or, to the Knowledge of the Seller, threatened against the Company that (a) challenges or seeks to enjoin, alter or materially delay the Acquisition or (b) would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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4.15 Employee Benefits .

(a) Section 4.15(a) of the Disclosure Schedule includes a list of all Benefit Plans maintained or contributed to by the Company (the “ Company Benefit Plans ”). The Seller has delivered or made available to the Buyer copies of (i) each Company Benefit Plan, (ii) the most recent summary plan description for each Company Benefit Plan for which such a summary plan description is required and (iii) the most recent favorable determination letters from the IRS with respect to each Company Benefit Plan intended to qualify under Section 401(a) of the Code.

(b) Except as set forth in Section 4.15(b) of the Disclosure Schedule , (i) none of the Company Benefit Plans is subject to Title IV of ERISA; (ii) each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code is subject to a favorable determination letter from the IRS and, to the Knowledge of the Seller, no event has occurred and no condition exists that is reasonably likely to result in the revocation of any such determination; and (iii) each Company Benefit Plan is in compliance with all applicable provisions of ERISA and the Code, except for instances of noncompliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.16 Labor and Employment Matters . Section 4.16 of the Disclosure Schedule sets forth a list of all written employment agreements that obligate the Company to pay an annual salary of $50,000 or more and to which the Company is a party. To the Knowledge of the Seller, there are no pending labor disputes, work stoppages, requests for representation, pickets, work slow-downs due to labor disagreements or any actions or arbitrations that involve the labor or employment relations of the Company. The Company is not party to any collective bargaining agreement.

4.17 Environmental . Except (a) as set forth in Section 4.17 of the Disclosure Schedule or (b) for any matter that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, to the Knowledge of the Seller (i) the Company is in compliance with all applicable Laws relating to protection of the environment (“ Environmental Laws ”), (ii) the Company possesses and is in compliance with all Permits required under any Environmental Law for the conduct of its operations and (iii) there are no Actions pending against the Company alleging a violation of any Environmental Law. This Section 4.17 is the sole representation and warranty herein pertaining to environmental matters.

4.18 Insurance . Section 4.18 of the Disclosure Schedule sets forth a list of each insurance policy that covers the Company or its businesses, properties, assets, directors, officers or employees (the “ Policies ”). Such Policies are in full force and effect in all material respects and the Company is not in violation or breach of or default under any of its obligations under any such Policy, except where such default would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.19 Brokers’ Fees . Except as set forth in Section 4.19 of the Disclosure Schedule , which such fees shall be paid prior to or at Closing with the Company’s cash, the Company has no Liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement, the Acquisition or the transactions contemplated by this Agreement.

4.20 Certain Business Relationships with the Company . Except as set forth in Section 4.20 of the Disclosure Schedule , neither the Seller, nor any Affiliate of the Seller, has been involved in any business arrangement or relationship with the Company within the past 12 months, and neither the Seller, nor any Affiliate of the Seller, owns any asset, tangible or intangible, which is used in the Business.

 

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to each of the Sellers that each statement contained in this Article V is true and correct as of the date hereof.

5.1 Organization and Capitalization . The Buyer is a corporation, duly organized, validly existing and in good standing under the laws of the state of Delaware. Buyer’s authorized capital stock is one class of 5,000 shares of $0.001 par value of which 580 shares have been issued by Buyer prior to the Closing and 420 shares will be issued to the Seller at the Closing. There are no other securities of Buyer at the time of the Closing other than debt in an amount that does not exceed $6 million, the Buyer Notes and the Buyer Short Term Notes to be issued to Sellers at the Closing.

5.2 Authorization . The Buyer has the requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by the Buyer of this Agreement, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary action, and no other action on the part of the Buyer is necessary to authorize this Agreement or to consummate the transactions contemplated hereby (other than compliance with the filing and notice requirements set forth in Section 5.3(b)(i)). This Agreement has been duly executed and delivered by the Buyer and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors’ rights generally and (b) general principles of equity, whether such enforceability is considered in a proceeding in equity or at Law.

5.3 Noncontravention .

(a) Neither the execution and the delivery of this Agreement, nor the consummation of the Acquisition and the other transactions contemplated by this Agreement, will, with or without the giving of notice or the lapse of time or both, (i) violate any provision of the certificate of incorporation or bylaws (or comparable organization documents, as applicable) of the Buyer, (ii) violate any Law applicable to the Buyer on the date hereof or (iii) violate any Contract to which the Buyer is a party, except in the case of clauses (ii) and (iii) to the extent that any such violation would not reasonably be expected to prevent or materially delay the consummation of the Acquisition and the other transactions contemplated by this Agreement.

(b) The execution and delivery of this Agreement by the Buyer does not, and the performance of this Agreement by the Buyer will not, require any consent, approval, authorization or Permit of, or filing with or notification to, any Governmental Entity, except for (i) the filings set forth in Section 3.2(b)(i) or (ii) where the failure to take such action would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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5.4 Brokers’ Fees . The Buyer has no Liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement, the Acquisition or the transactions contemplated by this Agreement that could result in any Liability being imposed on the Sellers or the Company.

ARTICLE VI
COVENANTS

6.1 Consents . The Company will use its commercially reasonable efforts to obtain any required third-party consents to the Acquisition and the other transactions contemplated by this Agreement in writing from each Person.

6.2 Operation of the Company’s Business . During the period commencing on the date hereof and ending at the earlier of the Closing and the termination of this Agreement in accordance with Article VIII, the Company, except (i) as otherwise contemplated by this Agreement, (ii) as required by applicable Law or (iii) with the prior written consent of the Buyer (which consent will not be unreasonably withheld or delayed), will use commercially reasonable efforts to carry on its business in a manner consistent with past practice and not take any action or enter into any transaction that would result in the following:

(a) any change in the certificate of incorporation or bylaws of the Company or any amendment of any material term of any outstanding security of the Company;

(b) any issuance or sale of any additional shares of, or rights of any kind to acquire any shares of, any capital stock of any class of the Company (whether through the issuance or granting of options or otherwise);

(c) any incurrence, guarantee or assumption by the Company of any indebtedness for borrowed money other than in the ordinary course of business in amounts and on terms consistent with past practice;

(d) any change in any method of accounting, accounting principle or accounting practice by the Company which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(e) except in the ordinary course of business (i) any adoption or material amendment of any Company Benefit Plan, (ii) any entry into any collective bargaining agreement with any labor organization or union, (iii) any entry into an employment agreement or (iv) any increase in the rate of compensation to any employee in an amount that exceeds 10% of such employee’s current compensation; provided , that the Company may (A) take any such action for employees in the ordinary course of business or pursuant to any existing Contracts or Company Benefit Plans and (B) adopt or amend any Company Benefit Plan if the cost to such Person of providing benefits thereunder is not materially increased;

(f) except in the ordinary course of business, any cancellation, modification, termination or grant of waiver of any material Permits or Contracts to which the Company is a party, which cancellation, modification, termination or grant of waiver would, individually or in the aggregate, have a Material Adverse Effect;

 

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(g) any change in the Tax elections made by the Company or in any accounting method used by the Company for Tax purposes, where such Tax election or change in accounting method may have a material effect upon the Tax Liability of the Company for any period or set of periods, or the settlement or compromise of any material income Tax Liability of the Company;

(h) except in the ordinary course of business, any acquisition or disposition of any business or any material property or asset of any Person (whether by merger, consolidation or otherwise) by the Company;

(i) any grant of a Lien on any properties and assets of the Company that would have, individually or in the aggregate, a Material Adverse Effect; provided, however, Company may grant a Lien on its assets in the ordinary course of business;

(j) any entry into any agreement or commitment to do any of the foregoing.

6.3 Access . The Company will permit the Buyer and its Representatives to have reasonable access at all reasonable times during normal business, and in a manner so as not to interfere with the normal business operations of the Company, to the premises, properties, personnel, books, records (including Tax records), Contracts and documents of or pertaining to the Company.

6.4 Transfer of Cash and Cash Equivalents . On or prior to the Closing, the Company and Sellers will transfer, or cause to be distributed all cash and cash equivalents of the Company to, among other things, pay any fees owed by Company to brokers or advisors (including termination fees under any advisory agreement) and any indebtedness for borrowed money; provided, however, that the Company shall have an amount in cash in its corporate bank account and on hand at its store locations at the Closing that is equal to $200,000 in the aggregate.

6.5 Notice of Developments . The Sellers and the Company will give prompt written notice to the Buyer of any event that would reasonably be expected to give rise to, individually or in the aggregate, a Material Adverse Effect or would reasonably be expected to cause a breach of any of its respective representations, warranties, covenants or other agreements contained herein. The Buyer will give prompt written notice to the Sellers and the Company of any event that could reasonably be expected to cause a breach of any of its representations, warranties, covenants or other agreements contained herein or could reasonably be expected to, individually or in the aggregate, prevent or materially delay the consummation of the Acquisition and the other transactions contemplated by this Agreement. Except as set forth in Section 6.13, the delivery of any notice pursuant to this Section 6.5 will not limit, expand or otherwise affect the remedies available hereunder (if any) to the party receiving such notice.

6.6 No Solicitation .

(a) The Sellers and the Company will, and will cause each of their Representatives to, cease immediately any existing discussions regarding a Transaction Proposal.

 

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(b) From and after the date of this Agreement, without the prior consent of the Buyer, none of the Seller nor the Company will, nor will they authorize or permit any of their respective Representatives to, directly or indirectly through another Person to, (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed to facilitate any inquiries, proposals or offers from any Person that constitute, or would reasonably be expected to constitute, a Transaction Proposal, (ii) participate in any discussions or negotiations (including by way of furnishing information) regarding any Transaction Proposal or (iii) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other Person to do or seek any of the foregoing.

(c) In addition, the Sellers shall immediately communicate to the Buyer the terms of any Transaction Proposal received by any of the Sellers or the Company, or any of their Representatives.

6.7 Taking of Necessary Action; Further Action . Subject to the terms and conditions of this Agreement, each of the Sellers, the Company and the Buyer will take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Acquisition in accordance with this Agreement as promptly as practicable.

6.8 Covenant not to Compete . For a period of three years from and after the Closing (the “ Noncompetition Period ”), the Seller shall not engage directly or indirectly in any business that is competitive with the current business of the Company (the “ Business ”) in any geographic area in which the Business is conducted or in which the Buyer plans to conduct the Business as of the Closing Date; provided, however, that no owner of less than 1% of the outstanding stock of any publicly-traded corporation shall be deemed to engage solely by reason thereof in any of its businesses. During the Noncompetition Period, the Seller shall not induce or attempt to induce any customer, or supplier of the Buyer or any affiliate of the Buyer to terminate its relationship with the Buyer or any Affiliate of the Buyer or to enter into any business relationship to provide or purchase the same or substantially the same services as are provided to or purchased from the Business which might harm the Buyer or any Affiliate of the Buyer. During the Noncompetition Period, the Seller shall not, on behalf of any entity other than the Buyer or an Affiliate of the Buyer, hire or retain, or attempt to hire or retain, in any capacity any Person who is, or was at any time during the preceding twelve (12) months, an employee or officer of the Buyer or an Affiliate of the Buyer. If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 6.8 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

6.9 Bylaws of the Buyer . The Sellers acknowledge and agree that the Buyer Shares and the transfer thereof are governed by the terms and provisions of the bylaws of the Buyer and the Sellers shall not sell, assign, pledge or otherwise transfer all or any portion of the Buyer Shares or any right or interest therein, whether voluntarily, involuntarily, by operation of law, by gift or otherwise, except by a transfer which meets the requirements specified in the bylaws of the Buyer. The Sellers shall otherwise comply with the provisions of the bylaws of the Buyer as they relate to the Buyer Shares.

 

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6.10 Financial Information . The Seller shall cooperate with the Buyer and the Buyer’s independent certified public accounting firm in order to enable the Buyer to create audited financial statements prepared in accordance with the GAAP for the two full fiscal years preceding the Closing Date and for the calendar year 2016, by making available the Seller’s records as they are maintained in the ordinary course of business and answering reasonable questions.

6.11 Management Fee . The Sellers acknowledge and agree that from and after the Closing Date, 1847 Holdings LLC will charge the Company an annual management fee of approximately $250,000, which fee shall cover all of the services provided by it, including the cost of the management consultant that will be engaged to work with the Sellers on a day-to-day basis on transition matters.

6.12 No Mandatory Capital Calls . The Buyer agrees that neither the board of directors of the Buyer nor any stockholder of the Buyer shall have the authority or right to make any mandatory capital call that requires any of the Sellers to contribute capital or any other property to the Buyer from and after the date hereof. For the avoidance of doubt, the Buyer shall under no circumstances be able to require the Sellers as holders of 42% of the equity of the Buyer to invest any funds into the Buyer and the Sellers shall have absolutely no financial liability toward the Buyer as a result of their ownership of the 42% equity stake in the Buyer.

6.13 Disclosure Schedule .

(a) Seller shall have the right from time to time after the date hereof to deliver written updates of the Disclosure Schedule to reflect matters that existed, occurred or arose prior to or after the date hereof up to Closing and were not included on the Disclosure Schedule but should be so included (the “Updated Disclosure Schedule”) or to create new exceptions to the Disclosure Schedule where the text of the Agreement does not expressly contemplate an exception requiring disclosure on the Disclosure Schedule to which Seller obtains or becomes aware of between signing and Closing (the “New Disclosure Schedule”). Disclosures set forth in either the Updated Disclosure Schedule or the New Disclosure Schedule shall be referred to as “Updated Matters.”

(b) If the Updated Matters set forth a situation that would have an adverse effect upon the Company and reflect matters that existed, occurred or arose prior to the date hereof and should have been disclosed upon the signing of this Agreement, then Buyer shall be entitled to (i) terminate this Agreement upon written notice to Seller and Stockholders and, in addition if Seller had Knowledge at that time to avoid such representations and warranties being true, accurate and complete on such signing, then Buyer shall be entitled to (ii) close the transactions contemplated by this Agreement and pursue any and all remedies against Seller related to such breach of representations and warranties.

(c) If the Updated Matters set forth a situation that would have an adverse effect upon the Company and reflect matters that arise after the signing of this Agreement, then Buyer shall be entitled to (i) terminate this Agreement upon written notice to Seller or (ii) waive its rights to terminate this Agreement and its rights to indemnification under Article IX relating to such Updated Matters and proceed with the Closing in which case such Updated Disclosure Schedule and New Disclosure Schedule shall constitute final Disclosure Schedule for the purposes of this Agreement.

 

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6.14 Certain Protective Provisions . For so long as the Sellers and/or their Affiliates beneficially own the Buyer Shares, the Buyer and the Company shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Buyer’s or the Company’s Certificate of Incorporation) the written consent or affirmative vote of the Sellers and/or such Affiliates, given in writing or by vote at a meeting:

(a) liquidate, dissolve or wind-up the business and affairs of the Buyer or the Company, effect any merger or consolidation, or sell substantially all of the assets of the Buyer or the Company, or consent to any of the foregoing;

(b) amend, alter or repeal any provision of the Certificate or Articles of Incorporation or Bylaws of the Buyer or the Company;

(c) create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock, or increase the authorized number of shares of Buyer Common Stock or Company common stock or increase the authorized number of shares of any additional class or series of capital stock;

(d) reclassify, alter or amend any existing security of the Buyer that is pari passu with the Buyer Common Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Buyer, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Buyer Common Stock in respect of any such right, preference, or privilege;

(e) purchase or redeem (or permit any subsidiary to purchase or redeem) any shares of capital stock of the Buyer other than repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Buyer or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;

(f) incur any aggregate indebtedness in excess of $6 million, other than trade credit of Company incurred in the ordinary course of business;

(g) issue any additional shares of Buyer Common Stock or Company common stock or options, warrants, or other securities directly or indirectly convertible into or exchangeable for Buyer Common Stock or Company common stock;

(h) increase or decrease the authorized number of directors constituting the Board of Directors.

 

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6.15 DISCLAIMER OF REPRESENTATIONS AND WARRANTIES . EXCEPT AS EXPRESSLY SET FORTH IN ARTICLES III AND IV OF THIS AGREEMENT NO SELLER MAKES AND EACH EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, WHETHER EXPRESS OR IMPLIED, AND WHETHER BY COMMON LAW, STATUTE, OR OTHERWISE, REGARDING SELLER, THE SHARES OR THE BUSINESS, INCLUDING WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND SUCH OTHER REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY DISCLAIMED. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLES III AND IV, BUYER HAS NOT RELIED ON SELLERS WITH RESPECT TO ANY MATTER IN CONNECTION WITH BUYER’S EVALUATION OF THE COMPANY AND ITS SHARES OTHER THAN THE REPRESENTATIONS AND WARRANTIES OF SELLERS SPECIFICALLY SET FORTH IN ARTICLES III AND IV.

6.16 Home State Bank Obligation . At Closing, the Buyer shall cause the Company to pay off in full the Home State Bank obligation of the Company. The Home State Bank obligation of the Company shall not be accounted for as a deduction in any manner to the Purchase Price.

ARTICLE VII
CONDITIONS TO OBLIGATIONS TO CLOSE

7.1 Conditions to Obligation of the Buyer . The obligation of the Buyer to consummate the Acquisition is subject to the satisfaction or waiver by the Buyer of the following conditions:

(a) The representations and warranties of the Sellers set forth in this Agreement will be true and correct in all respects as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of another date, in which case such representations and warranties will be true and correct as of such other date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein) does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Buyer will have received a certificate signed by the Sellers to such effect.

(b) Each of the Sellers and the Company will have performed all of the covenants required to be performed by it under this Agreement at or prior to the Closing, except where the failure to perform does not have, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or materially adversely affect the ability of each of the Sellers and the Company to consummate the Acquisition or perform its other obligations hereunder. The Buyer will have received a certificate signed by the Sellers to such effect.

(c) The Buyer shall have completed its business, accounting and legal due diligence review of the Company and the Business, its assets and liabilities, and the results thereof shall be reasonably satisfactory to the Buyer.

(d) There shall not have been any occurrence, event, incident, action, failure to act, or transaction since the date of the Interim Financial Statements which has had or is reasonably likely to cause a Material Adverse Effect.

 

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(e) All applicable waiting periods (and any extensions thereof) will have expired or otherwise been terminated, and the parties hereto will have received all other authorizations, consents and approvals of all Governmental Entities in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby.

(f) No temporary, preliminary or permanent restraining Order preventing the consummation of the Acquisition will be in effect.

(g) Each party, as appropriate, shall have obtained any required consents, permits, licenses, approvals or notifications of any lenders, lessors, suppliers, customers or other third parties for which the Buyer will assume responsibility for properly completing any and all necessary forms required when applying for and securing any necessary transfers.

(h) The Sellers shall have (i) obtained releases of any liens or (ii) a payoff letter confirming the payoff due from Company at Closing reasonably acceptable to the Buyer, regarding charges or encumbrances against any of the assets of the Company, at the Sellers’ expense.

(i) The Buyer shall have received such pay-off letters and releases relating to the indebtedness as it shall have requested and such pay-off letters shall be in form and substance satisfactory to it.

(j) The Company and each Seller shall have entered into an employment and noncompetition agreements for a term of two (2) years that include annual aggregate compensation of $270,000 ($135,000 per Seller per annum), in form and substance mutually satisfactory to the Buyer and each Seller.

(k) The Company shall have received new triple net leases for the Real Property, which shall include annual rent of $100,000, a term of ten (10) years and a provision permitting assignment by the Buyer (provided Buyer and Company remain liable thereunder), in form and substance mutually satisfactory to the parties.

(l) The Company shall have delivered evidence reasonably satisfactory to the Buyer of the Company’s corporate organization and proceedings and its existence in the jurisdiction in which it is incorporated, including evidence of such existence as of the Closing.

(m) The Buyer shall have obtained on terms and conditions satisfactory to it all of the financing it needs in order to consummate the transactions contemplated hereby and fund the working capital requirements of the Company after the Closing.

(n) The Preliminary Balance Sheet shall reflect the achievement of the Minimum Requirement.

(o) All actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Buyer.

 

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7.2 Conditions to Obligation of the Sellers . The obligation of the Sellers to consummate the Acquisition is subject to the satisfaction or waiver by the Sellers of the following conditions:

(a) The representations and warranties of the Buyer set forth in this Agreement will be true and correct in all respects as of the date of this Agreement and as of the Closing Date (except to the extent such representations and warranties speak as of another date, in which case such representations and warranties will be true and correct as of such other date), except where the failure of such representations and warranties to be so true and correct does not adversely affect the ability of the Buyer to consummate the Acquisition and the other transactions contemplated by this Agreement. The Sellers will have received a certificate signed on behalf of the Buyer by a duly authorized officer of the Buyer to such effect.

(b) The Buyer will have performed in all material respects all of the covenants required to be performed by it under this Agreement at or prior to the Closing except such failures to perform as do not materially adversely affect the ability of the Buyer to consummate the Acquisition and the other transactions contemplated by this Agreement. The Sellers will have received a certificate signed on behalf of the Buyer by a duly authorized officer of the Buyer to such effect.

(c) All applicable waiting periods (and any extensions thereof) will have expired or otherwise been terminated and the parties hereto will have received all other authorizations, consents and approvals of all Governmental Entities in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby.

(d) No temporary, preliminary or permanent restraining Order preventing the consummation of the Acquisition will be in effect.

(e) Each party, as appropriate, shall have obtained any required consents, permits, licenses, approvals or notifications of any Governmental Entities, lenders, lessors, suppliers, customers or other third parties for which the Buyer will assume responsibility for properly completing any and all necessary forms required when applying for and securing any necessary transfers.

(f) The Buyer and each Seller shall have entered into an employment agreement for a term of two (2) years that include annual aggregate compensation of $270,000, in form and substance mutually satisfactory to the Buyer and each Seller.

(g) The Buyer shall have obtained on terms and conditions satisfactory to it all of the financing it needs in order to consummate the transactions contemplated hereby and fund the working capital requirements of the Company after the Closing.

(h) All actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be satisfactory in form and substance to the Sellers.

 

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(i) The Company shall have received new triple net leases for the Real Property, which shall include annual rent of $100,000, a term of ten (10) years and a provision permitting assignment by the Buyer (provided Buyer and Company remain liable thereunder), in form and substance mutually satisfactory to the parties.

(j) Buyer shall have delivered to Seller the Purchase Price, the Buyer Notes, the Buyer Short Term Notes, and all other Closing deliverables required to be delivered to Seller hereunder.

(k) Sellers shall have received from various third parties releases of their personal guarantees of the obligations of Company.

ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER

8.1 Termination of Agreement . This Agreement may be terminated as follows:

(a) by mutual written consent of the Buyer and the Sellers at any time prior to the Closing;

(b) by either the Buyer or the Sellers if any Governmental Entity will have issued an Order or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement;

(c) by either the Buyer or the Sellers if the Closing does not occur on or before March 3, 2017; provided that the right to terminate this Agreement under this Section 8.1(c) will not be available to any party whose breach of any provision of this Agreement results in the failure of the Closing to occur by such time other than failure to receive the required consents or the releases of Sellers from their respective personal guarantees;

(d) by the Buyer if any of the Sellers or the Company has breached their respective representations and warranties or any covenant or other agreement to be performed by it in a manner such that the Closing conditions set forth in Section 7.1(a) or 7.1(b) would not be satisfied; or

(e) by the Sellers if the Buyer has breached its representations and warranties or any covenant or other agreement to be performed by it in a manner such that the Closing conditions set forth in Section 7.2(a) or 7.2(b) would not be satisfied.

8.2 Effect of Termination . In the event of termination of this Agreement by either the Sellers or the Buyer as provided in Section 8.1, this Agreement will forthwith become void and have no effect, without any Liability (other than with respect to any suit for breach of this Agreement) on the part of the Buyer, the Company or the Sellers (or any stockholder, agent, consultant or Representative of any such party); provided , that the provisions of Sections 10.1, 10.6, 10.7, 10.8, 10.11, 10.14 and this Section 8.2 will survive any termination hereof pursuant to Section 8.1.

 

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8.3 Amendments . This Agreement may not be amended except by an instrument in writing signed on behalf of the Buyer, the Company and the Sellers.

8.4 Waiver . At any time prior to the Closing, the Buyer may (a) extend the time for the performance of any of the covenants, obligations or other acts of the Sellers and the Company or (b) waive any inaccuracy of any representations or warranties or compliance with any of the agreements, covenants or conditions of the Sellers or any conditions to its own obligations. Any agreement on the part of the Buyer to any such extension or waiver will be valid only if such waiver is set forth in an instrument in writing signed on its behalf by its duly authorized officer. At any time prior to the Closing, the Sellers and the Company, may (a) extend the time for the performance of any of the covenants, obligations or other acts of the Buyer or (b) waive any inaccuracy of any representations or warranties or compliance with any of the agreements, covenants or conditions of the Buyer or any conditions to their own obligations. Any agreement on the part of the Sellers and the Company to any such extension or waiver will be valid only if such waiver is set forth in an instrument in writing signed by the Sellers and the Company. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights. The waiver of any such right with respect to particular facts and other circumstances will not be deemed a waiver with respect to any other facts and circumstances, and each such right will be deemed an ongoing right that may be asserted at any time and from time to time.

ARTICLE IX
INDEMNIFICATION

9.1 Survival . The representations and warranties made herein and in any certificate delivered in connection herewith shall survive for a period of twenty-four (24) months following the Closing Date, at which time they shall expire; provided, however, that (i) the representations and warranties set forth in Sections 3.1, 3.3, 3.4, 4.1, 4.3, and 4.19 of this Agreement (the “ Fundamental Representations ”) shall survive until the expiration of the applicable statute of limitations and (ii) the representations and warranties in Section 4.6 of this Agreement shall survive until the expiration of the applicable statute of limitations. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties, then notwithstanding any statement herein to the contrary, the relevant representations and warranties shall survive as to such claim, until such claim is finally resolved. Unless a specified period is set forth in this Agreement (in which event such specified period will control), all agreements and covenants contained in this Agreement will survive the Closing and remain in effect until thirty (30) days after the expiration of the applicable statutes of limitations. To avoid any doubt, the parties agree that the time limitations herein limit the time in which a claim may be brought even though such time limits may be less than those otherwise afforded under applicable statutes of limitations. In the event that a claim has been brought within such time periods, the running of such time prior to the final adjudication of such claim shall not time bar the continuation of such claim.

 

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9.2 Indemnification by Sellers . From and after the Closing, the Sellers agree, severally and not jointly, to indemnify, defend and save Buyer and its Affiliates, stockholders, officers, directors, employees, agents and representatives (each, a “ Buyer Indemnified Party ” and collectively, the “ Buyer Indemnified Parties ”) harmless from and against any and all liabilities, deficiencies, demands, claims, Actions, assessments, losses, costs, expenses, interest, fines, penalties and damages (including fees and expenses of attorneys and accountants and costs of investigation) (individually and collectively, the “ Losses ”) suffered, sustained or incurred by any Buyer Indemnified Party arising out of or otherwise by virtue of: (a) any breach of any of the representations or warranties of the Sellers or the Company contained in Article III or IV of this Agreement or (b) the failure of Sellers to perform any of their covenants or obligations contained in this Agreement.

Notwithstanding anything herein to the contrary, the obligation of the Sellers hereunder for a breach of a representation and warranty under Article IV shall be apportioned fifty percent (50%) by each Seller and shall not be joint and several.

9.3 Indemnification by Buyer . From and after the Closing, the Buyer agrees to indemnify, defend and save the Sellers and to the extent applicable, the Sellers’ Affiliates, employees, agents and representatives (each, a “ Seller Indemnified Party ” and collectively the “ Seller Indemnified Parties ”) harmless from and against any and all Losses sustained or incurred by any Seller Indemnified Party arising out of or otherwise by virtue of: (a) any breach of any of the representations and warranties of Buyer contained in Article V of this Agreement or (b) the failure of Buyer to perform any of its covenants or obligations contained in this Agreement.

9.4 Indemnification Procedure .

(a) If a Buyer Indemnified Party or a Seller Indemnified Party seeks indemnification under this Article IX, such party (the “ Indemnified Party ”) shall give written notice to the other party (the “ Indemnifying Party ”) of the facts and circumstances giving rise to the claim. In that regard, if any Action, Liability or obligation shall be brought or asserted by any third party which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this Article IX (a “ Third-Party Claim ”), the Indemnified Party shall promptly notify the Indemnifying Party of such Third-Party Claim in writing, specifying the basis of such claim and the facts pertaining thereto, and the Indemnifying Party, if the Indemnifying Party so elects, shall assume and control the defense thereof (and shall consult with the Indemnified Party with respect thereto), including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all necessary expenses. If the Indemnifying Party elects to assume control of the defense of a Third-Party Claim, the Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless (i) the Indemnifying Party has been advised by the Indemnifying Party’s counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party, or (ii) the Indemnifying Party has failed to assume the defense and employ counsel; in which case the fees and expenses of the Indemnified Party’s counsel shall be paid by the Indemnifying Party. All claims other than Third-Party Claims (a “ Direct Claim ”) may be asserted by the Indemnified Party giving notice to the Indemnifying Party. Absent an emergency or other extenuating circumstance, the Indemnified Party shall give written notice to the Indemnifying Party of such Direct Claim prior to taking any material actions to remedy such Direct Claim.

 

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(b) In no event shall the Indemnified Party pay or enter into any settlement of any claim or consent to any judgment with respect to any Third-Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed) if such settlement or judgment would require the Indemnifying Party to pay any amount. The Indemnifying Party may enter into a settlement or consent to any judgment without the consent of the Indemnified Party so long as (i) such settlement or judgment involves monetary damages only and (ii) a term of the settlement or judgment is that the Person or Persons asserting such Third-Party Claim unconditionally release all Indemnified Parties from all liability with respect to such claim; otherwise the consent of the Indemnified Party shall be required in order to enter into any settlement of, or consent to the entry of a judgment with respect to, any Third-Party Claim, which consent shall not be unreasonably withheld, conditioned or delayed.

9.5 Failure to Give Timely Notice . A failure by an Indemnified Party to provide notice as provided in Section 9.4 will not affect the rights or obligations of any Person except and only to the extent that, as a result of such failure, any Person entitled to receive such notice was damaged as a result of such failure to give timely notice. Nothing contained in this Section 9.5 shall be deemed to extend the period for which Sellers’ representations and warranties will survive Closing as set forth in Section 9.1 above.

9.6 Limited on Indemnification Obligation . Notwithstanding anything in this Agreement to the contrary, the liability of the Sellers to the Buyer Indemnified Parties with respect to claims for indemnification pursuant to Section 9.4(a) (but not with respect to the Fundamental Representations for which recovery shall not be so limited) is subject to the following limitations:

(a) The Sellers shall not, in the aggregate, be liable to the Buyer Indemnified Parties for Losses arising under Section 9.4(a) (other than with respect to Fundamental Representations for which recovery shall not be so limited) to the extent that the amounts otherwise indemnifiable for such breaches exceeds the Cash Portion of the Purchase Price.

(b) The Sellers shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 9.4(a) (other than with respect to Fundamental Representations for which recovery shall not be so limited) until and unless the aggregate amounts indemnifiable for such breaches exceeds $50,000. In the event the Buyer Indemnified Parties’ claim for Losses, in the aggregate, exceed $50,000, the Buyer Indemnified Parties shall be entitled to the entire amount of such Losses back to the first dollar.

(c) The Sellers shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 9.4 unless the claim therefor is asserted in writing on or prior to the expiration of the applicable representations and warranties.

(d) Losses payable by an Indemnifying Party under this Article IX shall not include punitive damages, damages related to mental or emotional distress, lost profits, exemplary damages, consequential damages or damages calculated as a multiple of earnings.

 

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(e) Each Buyer Indemnified Party shall use commercially reasonable efforts to take and shall cause its affiliates to take all reasonable steps to mitigate any Losses upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto.

(f) Losses otherwise subject to indemnity hereunder will be calculated after application of any received insurance proceeds actually received by the Indemnitee (net of costs of recovery and the value of any associated increase in premiums).

(g) In calculating any Losses, there shall be deducted any indemnification, contribution or other similar payment actually recovered by any Buyer Indemnified Party from any third person directly in connection with such claim, less any costs of receiving such recovery.

(h) To avoid doubt, the parties understand and agree that notwithstanding anything herein to the contrary, the provisions of this Article IX shall not apply to (i) the Non-Competitive Provisions of this Agreement of either of the Sellers, the Employment Agreements referred to in Section 4.16, or the Lease as such documents shall be separately enforceable in accordance with their terms.

(i) Adjustment to Purchase Price . All indemnification payments pursuant to this Article IX shall be deemed to be adjustments to the Purchase Price.

9.7 Sole and Exclusive Remedy . Except with respect to claims for specific performance or other equitable remedies and for claims (i) based upon fraud, in respect of any breach of any representations, warranties, covenant agreements or obligations required to be performed on or after Closing pursuant to this Agreement, this Article IX shall be the sole and exclusive remedy for Losses of any Indemnified Party and each party waives all statutory common law and other claims with respect thereto, other than claims for indemnification under this Article IX from and after the Closing with respect to breaches of this Agreement.

9.8 Payments . Payments of all amounts owing by an Indemnifying Party under this Article IX shall be made promptly upon the determination in accordance with this Article IX that an indemnification obligation is owing by the Indemnifying Party to the Indemnified Party.

ARTICLE X
MISCELLANEOUS

10.1 Press Releases and Public Announcement . Neither the Buyer on the one hand, nor the Sellers or the Company on the other, will issue any press release or make any public announcement relating to this Agreement, the Acquisition or the other transactions contemplated by this Agreement without the prior written approval of the other party; provided, however, that the Buyer may make regulatory filings referring to this Agreement or attaching a copy hereof as may be required by applicable law.

10.2 No Third-Party Beneficiaries . This Agreement will not confer any rights or remedies upon any Person other than the parties hereto and their respective successors and permitted assigns.

 

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10.3 Entire Agreement . This Agreement (including the Exhibits and the Schedules hereto) constitutes the entire agreement among the parties hereto and supersedes any prior understandings, agreements or representations by or among the parties hereto, written or oral, to the extent they related in any way to the subject matter hereof.

10.4 Succession and Assignment . This Agreement will be binding upon and inure to the benefit of the parties named herein and their respective successors and permitted assigns. No party hereto may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval, in the case of assignment by the Buyer, by the Sellers, and, in the case of assignment by the Sellers or the Company, the Buyer.

10.5 Construction . The parties have participated jointly in the negotiation and drafting of this Agreement, and, in the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.

10.6 Notices . All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally against written receipt or by facsimile transmission or mailed (by registered or certified mail, postage prepaid, return receipt requested) or delivered by reputable overnight courier, fee prepaid, to the parties hereto at the addresses of the parties as specified below:

	If to the Buyer:	1847 Neese Inc. c/o 1847 Holdings LLC 590 Madison Avenue, 21 st Floor New York, NY 10022 Attn: Ellery W. Roberts, CEO Facsimile: 917.793.5950
	with a copy to:	Bevilacqua PLLC 1629 K Street, NW, Suite 300 Washington, DC 20006 Attn: Louis A. Bevilacqua Email: lou@bevilacquapllc.com
	If to the Company:	Neese, Inc. 303 Division St. E. Grand Junction, IA 50107 Attn: Alan Neese, President Facsimile:
	If to the Sellers:	Alan Neese 303 Division St. E. Grand Junction, IA 50107 Facsimile:

 

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		Katherine Neese 303 Division St. E. Grand Junction, IA 50107 Facsimile:
	with a copy to:	Lane & Waterman LLP 220 North Main Street, Suite 600 Davenport, IA 52801 Attn: R. Scott Van Vooren Email: svanvooren@l-wlaw.com

Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties notice in the manner set forth herein.

10.7 Governing Law . This Agreement will be governed by, and construed in accordance with, the Laws of the State of Iowa, without giving effect to any choice of Law or conflict of Law provision or rule that would cause the application of the Laws of any jurisdiction other than the State of Iowa.

10.8 Consent to Jurisdiction and Service of Process . EACH OF THE PARTIES HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF IOWA AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE ACQUISITION OR THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS , AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL AND NONAPPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE ACQUISITION OR THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

10.9 Headings . The descriptive headings contained in this Agreement are included for convenience of reference only and will not affect in any way the meaning or interpretation of this Agreement.

10.10 Severability . If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms of such illegal, invalid or unenforceable provision as may be possible.

 

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10.11 Expenses . Except as otherwise provided in this Agreement, whether or not the Acquisition is consummated, all expenses incurred in connection with this Agreement and the transactions contemplated hereby will be paid by the party incurring such expenses. As used in this Agreement, “expenses” means the out-of-pocket fees and expenses of the financial advisor, counsel and accountants incurred in connection with this Agreement and the transactions contemplated hereby.

10.12 Incorporation of Exhibits and Schedules . The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

10.13 Limited Recourse . Notwithstanding anything in this Agreement to the contrary, the obligations and Liabilities of the parties hereunder will be without recourse to any stockholder of such party or any of such stockholder’s affiliates (other than such party), or any of their respective Representatives or agents (in each case, in their capacity as such).

10.14 Specific Performance . The parties hereto agree that irreparable damage would occur in the event that any provision of this Agreement was not performed in accordance with the terms hereof and that the parties will be entitled to specific performance of the terms hereof in addition to any other remedy at Law or equity.

10.15 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 facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g. , www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

10.16 Director and Officer Liability and Indemnification .

(a) For a period of five years after the Closing, the Company shall not and Buyer shall not permit Company to amend, repeal or modify any provision in its articles, bylaws or other governance documents relating to exculpation or indemnification of former offices and directors (unless required by law), it being the intent of the parties that the officers and directors of the Company prior to the Closing shall continue to be entitled to such exculpation and indemnification to the greatest extent permitted under the laws of the jurisdiction of incorporation of Company.

(b) After the Closing, Company shall exculpate (to the greatest extent permitted by applicable law), and shall indemnify, defend and hold harmless, each of the directors and officers of Company immediately prior to Closing against all Losses arising out of any violations or alleged violations of fiduciary care or loyalty to the Company in their capacities as officers and directors of the Company, to the fullest extent permitted under applicable law or the articles, bylaws or other governance documents of the Company in effect as of the date of this Agreement (to the extent consistent with applicable law).

 

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10.17 Privilege, Work Product and Conflict Waiver .

(a) It is acknowledged by the parties that Lane & Waterman LLP (“ Counsel ”) has represented each Seller and Company in connection with this Agreement. Buyer and Company agree that any attorney-client privilege, attorney work-product protection, and expectation of client confidence attaching as a result of Counsel’s representation of each Seller and Company in connection with this Agreement and transactions contemplated thereby, and all information and documents covered by such privilege or protection, shall belong to and be controlled by each Seller and may be waived only by both Sellers, and shall not pass to or be claimed or used by Buyer or Company.

(b) The attorney-client privilege, attorney work-product protection, and expectation of client confidence arising from Counsel’s representation of each Seller and Company prior to the Closing concerning any subject matter with respect to which Seller and Company has or may have an indemnification obligation hereunder, and all information and documents covered by such privilege or protection, shall belong to and be controlled by each Seller and may be waived only by both Sellers, and shall not pass to or be claimed or used by Buyer or Company.

(c) Sellers, Buyer and Company agree that, notwithstanding any current or prior representation of Seller and Company by Counsel, Counsel shall be allowed to represent each Seller in any existing or future matters or disputes adverse to Buyer or Company relating to this Agreement or the transactions contemplated thereby. Buyer and Company hereby waive any conflicts that may arise in connection with such representation. Buyer and Company agree that Counsel may represent Sellers in such a matter or dispute, before or after Closing, even though the interests of Company or Buyer may be directly adverse to any Seller.

(d) At or prior to Closing, Company shall deliver to each Seller a warranty bill of sale conveying all such documents covered under Section 10.17(a) and Section 10.17(b) in whatever format such documents may then exist.

10.17 Amendment of Tax Returns . Except to the extent required by Law, following the Closing, Company shall not file or cause to be filed any amended tax return for Company with respect to any tax period ending on or prior to the Closing Date without Sellers’ prior written consent. Any tax refund for years prior to the Closing Date shall belong to Seller.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. 

  

	BUYER :   1847 NEESE INC.
	By:	/s/ Ellery W. Roberts
	Name:	Ellery W. Roberts
	Title:	Chief Executive Officer
	COMPANY :   NEESE, INC.
	By:	/s/ Alan Neese
	Name:	Alan Neese
	Title:	President
	SELLERS :
	/s/ Alan Neese
	ALAN NEESE
	/s/ Katherine Neese
	KATHERINE NEESE

[Signature Page to Stock Purchase Agreement]

 

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EXHIBIT 10.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

1847 NEESE INC.

8% VESTING PROMISSORY NOTE

Up to US $1,875,000

March 3, 2017

FOR VALUE RECEIVED , 1847 Neese Inc., a Delaware corporation, and Neese, Inc., an Iowa corporation, (jointly and severally the “ Company ”), promise to pay to Alan Neese and Katherine Neese (collectively, the “ Holder ”), to the extent Vested (as defined below), the principal sum of up to One Million, Eight Hundred Seventy Five Thousand Dollars ($1,875,000) (the “ Principal ”) in lawful money of the United States of America, with interest payable on the Vested portion of Principal at the rate of eight percent (8%) per annum. To the extent Vested, the unpaid Principal and all accrued but unpaid interest on such Vested portion of Principal shall be paid in full to the Holder on the last day of the thirty ninth month following the date of this Note (the “ Maturity Date ”).

Capitalized terms used herein but not defined herein shall have the meaning ascribed to them in that certain Stock Purchase Agreement, dated March 3, 2017 (the “ Purchase Agreement ”), among the Holder, Neese, Inc. and the Company, pursuant to which the Company is acquiring the Shares from the Holder.

The following is a statement of the rights of the Holder of this Note and the terms and conditions to which this Note is subject, and to which the Holder, by acceptance of this Note, agrees:

1. Principal Repayment . If, and to the extent, that the Principal is Vested, the Vested portion of the Principal along with all accrued, but unpaid interest on the Vested portion of the Principal, shall be paid in one lump sum on the Maturity Date.

2. Interest . Interest (the “ Interest ”) shall accrue on the unpaid Vested portion of Principal from the first day of the applicable measurement year to which the Vested portion of Principal applies until such Vested portion of Principal is repaid in full at the rate of eight percent (8%) per annum, compounding annually. The portion of accrued, but unpaid, Interest on the Vested portion of the Principal is payable at Maturity. All computations of the Interest rate hereunder shall be made on the basis of a 360-day year of twelve 30-day months. In the event that any Interest rate provided for herein shall be determined to be unlawful, such Interest rate shall be computed at the highest rate permitted by applicable law. Any payment by the Company of any Interest amount in excess of that permitted by law shall be considered a mistake, with the excess being applied to the Principal of this Note without prepayment premium or penalty.

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3. Vesting .

(a) General . The payment of the Principal and accrued Interest thereon is subject to vesting in accordance with this Section 3. The Company shall only be required to pay the Vested portion of the Principal and Interest on the Vested portion of the Principal on the Maturity Date. For purposes of this Note, “ Vested ” means the percentage of the Principal that has vested (i.e., has become payable to the Holder) in accordance with this Section 3. For the avoidance of doubt, under no circumstances shall the Principal amount of this Note exceed $1,875,000.

(b) Adjusted EBITDA Target and Annual Adjusted EBITDA Reporting . The Adjusted EBITDA (as defined below) target for purposes of vesting under this Section 3 is One Million, Three Hundred Thousand Dollars ($1,300,000) (the “ Adjusted EBITDA Target ”). Within ninety (90) days after the end of each twelve-month period following the Closing Date the Company shall report to the Holder the Adjusted EBITDA achieved by Neese, Inc. during such fiscal year. The report shall be based upon the audited annual and reviewed quarterly financial statements of Neese, Inc. that are prepared in accordance with U.S. GAAP by Neese, Inc.’s external auditor. The Holder shall be entitled to receive copies of the audited and reviewed financial statements of Neese, Inc. and all work papers and computations with supporting detail upon which such Adjusted EBITDA calculations are based. For purposes of this Section 3, “ Adjusted EBITDA ” means the earnings before interest, taxes, depreciation and amortization expenses, in accordance with generally accepted accounting principles applied on a basis consistent with the accounting policies, practices and procedures used to prepare the financial statements of Neese, Inc. as of the Closing Date (“ GAAP ”), plus to the extent deducted in calculating such net income, (i) all expenses related to the transactions contemplated hereby and/or potential or completed future financings or acquisitions, including legal, accounting, due diligence and investment banking fees and expenses, (ii) all management fees, allocations or corporate overhead (including executive compensation) or other administrative costs that arise from the ownership of Neese, Inc., by 1847 Neese, Inc. including allocations of supervisory, centralized or other parent-level expense items, (iii) one-time extraordinary expenses or losses, (iv) any reserves or adjustments to reserves which are not consistent with GAAP. Additionally, for purposes of calculating Adjusted EBITDA under this Note, (i) the purchase and sales prices of goods and services sold by or purchased by Neese, Inc. to or from 1847 Neese, Inc., its subsidiaries or affiliates shall be adjusted to reflect the amounts that Neese, Inc. would have realized or paid if dealing with an independent third party in an arm’s-length commercial transaction, and (ii) inventory items shall be property categorized as such and shall not be expenses until such inventory is sold or consumed.

(c) Vesting . On or prior to the Maturity Date, the Company shall notify the Holder of the portion of the Principal that has Vested. The Principal shall vest in accordance with the following formula:

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	·	Fiscal Year 2017 – If Adjusted EBITDA for the fiscal year ending December 31, 2017, exceeds Adjusted EBITDA Target, then a portion of the Principal amount of this Note that is equal to sixty percent (60%) of such excess shall Vest. Interest shall be payable on such Vested portion of Principal from January 1, 2017 through the Maturity Date.
	·	Fiscal Year 2018 - If Adjusted EBITDA for the fiscal year ending December 31, 2018, exceeds Adjusted EBITDA Target, then a portion of the Principal amount of this Note that is equal to sixty percent (60%) of such excess shall Vest. Interest shall be payable on such Vested portion of Principal from January 1, 2018 through the Maturity Date.
	·	Fiscal Year 2019 - If Adjusted EBITDA for the fiscal year ending December 31, 2019, exceeds Adjusted EBITDA Target, then a portion of the Principal amount of this Note that is equal to sixty percent (60%) of such excess shall Vest. Interest shall be payable on such Vested portion of Principal from January 1, 2019 through the Maturity Date.

For the avoidance of doubt, the Principal amount of this Note shall not exceed $1,875,000, however, interest shall accrue on Vested portions of the Principal amount of this Note that do, in the aggregate, exceed $1,875,000 depending on the extent that Adjusted EBITDA exceeds Adjusted Target EBITDA in each measurement year

4. Events of Default . In the event that any of the following (each, an “ Event of Default ”) shall occur:

(a) Non-Payment . The Company shall default in the payment of the Vested portion of the Principal of, or accrued Interest on the Vested Portion of Principal of, this Note as and when the same shall become due and payable, whether by acceleration or otherwise; or

(b) Default in Covenants . The Company shall default in any material manner in the observance or performance of any covenants or agreements set forth in the Purchase Agreement, this Note, or any other agreement entered into in connection with the transactions contemplated by the Purchase Agreement (collectively, the “ Transaction Documents ”); or

(c) Breach of Representations and Warranties . The Company materially breaches any representation or warranty contained in the Transaction Documents; or

(d) Bankruptcy . The Company shall: (i) admit in writing its inability to pay its debts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general assignment for the benefit of creditors; (iii) in the absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property; or (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief;

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then, and so long as such Event of Default is continuing for a period of two (2) business days in the case of non-payment under Section 4(a), or for a period of thirty (30) calendar days in the case of events under Sections 4(b) and 4(c) (and the event which would constitute such Event of Default, if curable, has not been cured), by written notice to the Company from the Holders of a majority in interest of the principal amount of the Notes then outstanding (or from any collateral agent acting on behalf of such Holders), all obligations of the Company under this Note shall be immediately due and payable without presentment, demand, protest or any other action nor obligation of the Holder of any kind, all of which are hereby expressly waived, and Holder may exercise any other remedies the Holder may have at law or in equity. If an Event of Default specified in Section 4(d) above occurs, the principal of, and accrued interest on, all the Notes shall automatically, and without any declaration or other action on the part of any Holder, become immediately due and payable.

5. Holder Not Deemed a Stockholder . No Holder, as such, of this Note shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Note be construed to confer upon the Holder hereof, as such, any of the rights at law of a stockholder of the Company.

6. Mutilated, Destroyed, Lost or Stolen Notes . If this Note shall become mutilated or defaced, or be destroyed, lost or stolen, the Company shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note certificate. In the case of a mutilated or defaced Note certificate, the Holder shall surrender such Note certificate to the Company. In the case of any destroyed, lost or stolen Note certificate, the Holder shall furnish to the Company: (i) evidence to its satisfaction of the destruction, loss or theft of such Note certificate and (ii) such security or indemnity (which shall not include the posting of any bond) as may be reasonably required by the Company to hold the Company harmless.

7. Waiver of Demand, Presentment, etc. The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder. The Company agrees that, in the event of an Event of Default, to reimburse the Holder for all reasonable costs and expenses (including reasonable legal fees of one counsel) incurred in connection with the enforcement and collection of this Note.

8. Payment . All payments with respect to this Note shall be made in lawful money of the United States of America, at the address of the Holder as of the date hereof or as designated in writing by the Holder from time to time. The receipt by the Holder of immediately available funds shall constitute a payment of principal and interest hereunder and shall satisfy and discharge the liability for principal and interest on this Note to the extent of the sum represented by such payment. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.

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9. Assignment . The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the successors and permitted assigns of the parties hereto. To complete an assignment or transfer this Note, the Holder shall deliver a completed and executed Form of Assignment attached hereto as Exhibit A and surrender and deliver this Note, duly endorsed, to the Company’s office or such other address which the Company shall designate, upon receipt of which a new Note, in substantially the form of this Note (any such new Note, a “ New Note ”), evidencing the portion of this Note so transferred shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Note that the Holder has in respect of this Note. Interest and principal are payable only to the registered Holder of this Note set forth on the books and records of the Company.

10. Waiver and Amendment . Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holders of a majority in principal amount of the Notes then outstanding.

11. Notices . Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if given in accordance with the provisions of the Purchase Agreement.

12. Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced solely and exclusively in accordance with the laws of the state of Iowa without regard to any statutory or common-law provision pertaining to conflicts of laws. The Parties agree that state and federal courts of competent jurisdiction in the State of Iowa shall have concurrent jurisdiction for purposes of entering temporary, preliminary and permanent injunctive relief with regard to any action arising out of any breach or alleged breach of the Note. The Parties agree to submit to the personal jurisdiction of such courts and any other applicable court within the state of Iowa. The Parties waive any claim that that any of the foregoing courts is an inconvenient forum.

13. Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms.

14. Headings . Section headings in this Note are for convenience only, and shall not be used in the construction of this Note.

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15. Other Covenants .

(a) From the date hereof and through and including the Maturity Date, Company agrees to act in good faith to continue to operate Neese, Inc.’s business as conducted prior to the Closing and, in connection therewith, to (i) provide reasonably adequate funding of Neese, Inc.’s growth and operations, (ii) use all reasonable commercial efforts to exploit market opportunities, and generally use good faith efforts to maximize Adjusted EBITDA, (iii) Company shall not take, and shall cause their affiliates to refrain from taking any action any purpose of which is to impede the ability of the Note to fully vest; and

(b) Subject to the last sentence of this Section 16(b), until the Maturity Date, Company shall (i) not sell all or substantially all of the assets of Neese, Inc., (ii) not sell more than 50% of the voting securities of the Company, or (iii) merge or consolidate Neese, Inc. with or into another entity (collectively a “ Fundamental Change ”). If, prior to the expiration of the Maturity Date, a Fundamental Change occurs, the maximum aggregate Principal amount of $1,875,000 plus interest thereon shall thereupon be automatically accelerated and deemed Vested and become immediately due and payable. In addition, if Alan Neese and/or Katherine Neese are terminated for any reason other than for Cause under their respective Employment Agreements with Neese, Inc. then the maximum aggregate principal amount of $1,875,000 plus interest thereon shall thereupon be automatically accelerated and deemed Vested and become immediately due and payable. For the purposes of this Note, Cause shall have the same meaning as set forth in the Employment Agreements of Alan Neese and/or Katherine Neese.

16. Fees and Costs . The Company, in case of suit on this Note, agrees to pay to Holder the reasonable attorney's fees and the costs of collection.

[Signature Page Follows]

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IN WITNESS WHEREOF , the Company has caused this Note to be issued as of the date first above written.

	1847 Neese Inc.
	By:	/s/ Ellery W. Roberts
	Name:	Ellery W. Roberts
	Title:	Chief Executive Officer

	Neese, Inc.
	By:	/s/ Alan Neese
	Name:	Alan Neese
	Title:	Alan Neese

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Exhibit A

FORM of assignment

TO: 1847 Neese Inc. and Neese, Inc.

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________ (name), _______________________ (address), US$___________ of 8% Vesting Promissory Notes (“Notes”) of 1847 Neese Inc. and Neese, Inc. (jointly and severally the “Company”), including any and all accrued and unpaid interest owing thereon, registered in the name of the undersigned on the records of the Company represented by the within certificate, and irrevocably appoints ________________ the attorney of the undersigned to transfer the said securities on the books or register with full power of substitution.

DATED this ________ day of, __________________, 20 ____.

(Signature of Registered Note Holder)
(Print name of Registered Note Holder)

Instructions:

1.	Signature of Holder must be the signature of the person appearing on the face of the Note.
2.	If the transfer of Note is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Company.

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EXHIBIT 10.3

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

1847 NEESE INC.

10% SHORT TERM PROMISSORY NOTE

US $1,025,000

March 3, 2017

FOR VALUE RECEIVED , 1847 Neese Inc., a Delaware corporation, and Neese, Inc., an Iowa corporation, (jointly and severally the “ Company ”), promise to pay to Alan Neese and Katherine Neese (collectively, the “ Holder ”), the principal sum of One Million Twenty-Five Thousand Dollars ($1,025,000) (the “ Principal ”) in lawful money of the United States of America, with interest payable on the outstanding Principal amount at the simple rate of ten percent (10%) per annum. The unpaid Principal and all accrued but unpaid interest on such unpaid Principal shall be paid in full to the Holder on the first anniversary of the date of this Note (the “ Maturity Date ”).

Capitalized terms used herein but not defined herein shall have the meaning ascribed to them in that certain Stock Purchase Agreement, dated March 3, 2017 (the “ Purchase Agreement ”), among the Holder, Neese, Inc. and the Company, pursuant to which the Company is acquiring the Shares from the Holder.

The following is a statement of the rights of the Holder of this Note and the terms and conditions to which this Note is subject, and to which the Holder, by acceptance of this Note, agrees:

1. Principal Repayment . The unpaid Principal along with all accrued, but unpaid interest on the unpaid Principal, shall be paid in one lump sum on the Maturity Date; provided, however that the unpaid Principal, and all accrued, but unpaid, interest thereon shall be prepaid if at any time, and from time to time until the Maturity Date, the Company’s cash on hand exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the unpaid Principal and accrued, but unpaid, interest thereon is fully prepaid.

2. Interest . Interest (the “ Interest ”) shall accrue on the unpaid Principal from the date hereof until the unpaid Principal is repaid in full at the rate of ten percent (10%) per annum. Interest shall be payable monthly in arrears on or before the tenth (10 ^th ) day of each succeeding month with the first interest payment covering the period from the date of issuance of this Note until March 31, 2017. All computations of the Interest rate hereunder shall be made based on a 360-day year of twelve 30-day months. In the event that any Interest rate provided for herein shall be determined to be unlawful, such Interest rate shall be computed at the highest rate permitted by applicable law. Any payment by the Company of any Interest amount in excess of that permitted by law shall be considered a mistake, with the excess being applied to the unpaid Principal of this Note without prepayment premium or penalty.

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3. Events of Default . In the event that any of the following (each, an “ Event of Default ”) shall occur:

(a) Non-Payment . The Company shall default in the payment of the unpaid Principal of, or accrued Interest on the unpaid Principal of, this Note as and when the same shall become due and payable, whether by acceleration or otherwise; or

(b) Default in Covenants . The Company shall default in any material manner in the observance or performance of any covenants or agreements set forth in the Purchase Agreement, this Note, or any other agreement entered into in connection with the transactions contemplated by the Purchase Agreement (collectively, the “ Transaction Documents ”); or

(c) Breach of Representations and Warranties . The Company materially breaches any representation or warranty contained in the Transaction Documents; or

(d) Bankruptcy . The Company shall: (i) admit in writing its inability to pay its debts as they become due; (ii) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general assignment for the benefit of creditors; (iii) in the absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property; or (iv) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief;

then, and so long as such Event of Default is continuing for a period of two (2) business days in the case of non-payment under Section 3(a), or for a period of thirty (30) calendar days in the case of events under Sections 3(b) and 3(c) (and the event which would constitute such Event of Default, if curable, has not been cured), by written notice to the Company from the Holders of a majority in interest of the principal amount of the Notes then outstanding (or from any collateral agent acting on behalf of such Holders), all obligations of the Company under this Note shall be immediately due and payable without presentment, demand, protest or any other action nor obligation of the Holder of any kind, all of which are hereby expressly waived, and Holder may exercise any other remedies the Holder may have at law or in equity. If an Event of Default specified in Section 3(d) above occurs, the principal of, and accrued interest on, all the Notes, less any prepaid amounts under Section 1, shall automatically, and without any declaration or other action on the part of any Holder, become immediately due and payable.

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4. Holder Not Deemed a Stockholder . No Holder, as such, of this Note shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Note be construed to confer upon the Holder hereof, as such, any of the rights at law of a stockholder of the Company.

5. Mutilated, Destroyed, Lost or Stolen Notes . If this Note shall become mutilated or defaced, or be destroyed, lost or stolen, the Company shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note certificate. In the case of a mutilated or defaced Note certificate, the Holder shall surrender such Note certificate to the Company. In the case of any destroyed, lost or stolen Note certificate, the Holder shall furnish to the Company: (i) evidence to its satisfaction of the destruction, loss or theft of such Note certificate and (ii) such security or indemnity (which shall not include the posting of any bond) as may be reasonably required by the Company to hold the Company harmless.

6. Waiver of Demand, Presentment, etc. The Company hereby expressly waives demand and presentment for payment, notice of nonpayment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, bringing of suit and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereunder, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder. The Company agrees that, in the event of an Event of Default, to reimburse the Holder for all reasonable costs and expenses (including reasonable legal fees of one counsel) incurred in connection with the enforcement and collection of this Note.

7. Payment . All payments with respect to this Note shall be made in lawful money of the United States of America, at the address of the Holder as of the date hereof or as designated in writing by the Holder from time to time. The receipt by the Holder of immediately available funds shall constitute a payment of principal and interest hereunder and shall satisfy and discharge the liability for principal and interest on this Note to the extent of the sum represented by such payment. Payment shall be credited first to the accrued interest then due and payable and the remainder applied to principal.

8. Assignment . The rights and obligations of the Company and the Holder of this Note shall be binding upon, and inure to the benefit of, the successors and permitted assigns of the parties hereto. To complete an assignment or transfer this Note, the Holder shall deliver a completed and executed Form of Assignment attached hereto as Exhibit A and surrender and deliver this Note, duly endorsed, to the Company’s office or such other address which the Company shall designate, upon receipt of which a new Note, in substantially the form of this Note (any such new Note, a “ New Note ”), evidencing the portion of this Note so transferred shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Note that the Holder has in respect of this Note. Interest and principal are payable only to the registered Holder of this Note set forth on the books and records of the Company.

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9. Waiver and Amendment . Any provision of this Note, including, without limitation, the due date hereof, and the observance of any term hereof, may be amended, waived or modified (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holders of a majority in principal amount of the Notes then outstanding.

10. Notices . Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if given in accordance with the provisions of the Purchase Agreement.

11. Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced solely and exclusively in accordance with the laws of the state of Iowa without regard to any statutory or common-law provision pertaining to conflicts of laws. The Parties agree that state and federal courts of competent jurisdiction in the State of Iowa shall have concurrent jurisdiction for purposes of entering temporary, preliminary and permanent injunctive relief with regard to any action arising out of any breach or alleged breach of the Note. The Parties agree to submit to the personal jurisdiction of such courts and any other applicable court within the state of Iowa. The Parties waive any claim that that any of the foregoing courts is an inconvenient forum.

12. Severability . If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions shall be excluded from this Note, and the balance of this Note shall be interpreted as if such provisions were so excluded and shall be enforceable in accordance with its terms.

13. Headings . Section headings in this Note are for convenience only, and shall not be used in the construction of this Note.

14. Fees and Costs . The Company, in case of suit on this Note, agrees to pay to Holder the reasonable attorney's fees and the costs of collection.

[Signature Page Follows]

IN WITNESS WHEREOF , the Company has caused this Note to be issued as of the date first above written.

	1847 Neese Inc.
	By	/s/ Ellery W. Roberts
	Name:	Ellery W. Roberts
	Title:	Chief Executive Officer

	Neese, Inc.
	By:	/s/ Alan Neese
	Name:	Alan Neese
	Title:	President

5

Exhibit A

FORM of assignment

TO: 1847 Neese Inc. and Neese, Inc.

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________ (name), __________________________ (address), US$____________ of 10% Short Term Promissory Notes (“Notes”) of 1847 Neese Inc. and Neese, Inc. (jointly and severally the “Company”), including any and all accrued and unpaid interest owing thereon, registered in the name of the undersigned on the records of the Company represented by the within certificate, and irrevocably appoints ________________ the attorney of the undersigned to transfer the said securities on the books or register with full power of substitution.

DATED this ________ day of, __________________, 20 ____.

(Signature of Registered Note Holder)
(Print name of Registered Note Holder)

Instructions:

1.	Signature of Holder must be the signature of the person appearing on the face of the Note.
2.	If the transfer of Note is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Company.

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EXHIBIT 10.4

AGREEMENT OF LEASE

This Agreement of Lease (this “Lease”) is entered into as of March 3, 2017 by and between K&A HOLDINGS, LLC (collectively the “Landlord”), and NEESE, INC. (“Tenant”).

In consideration of the mutual covenants and agreements contained herein, Landlord and Tenant agree as follows:

1. BASIC PROVISIONS AND DEFINITIONS . For purposes of this Lease, the following capitalized terms shall have the meaning set forth in this paragraph, unless such meanings are expressly contradicted, limited or expanded elsewhere herein:

(a) Commencement Date : March 3, 2017

(b) Landlord’s Address : 605 11 ^th Street South, Grand Junction, IA 50107

(c) Tenant’s Address : 303 Division Street, Grand Junction, IA 50107

(d) Premises : See attached Exhibit A

(e) Lease Term : The Lease term shall commence on the Commencement Date and shall terminate ten (10) years from such date.

(f) Base Rent : Base Rent shall be $100,000 per annum, payable in equal monthly installments, in advance, at the rate of $8,333.33 per month on the first (1 ^st ) day of each month.

(g) Deposit : Tenant shall deposit $8,333.33 with Landlord to be held by Landlord during the Lease Term.

(h) Permitted Use : The sale of products and services for agricultural, construction, lawn and garden products, office space and other lawful matters in connection therewith.

2. DEMISED PREMISES . Landlord does hereby lease to Tenant and Tenant does hereby lease from Landlord those certain Premises identified above which Premises are more particularly identified on Exhibit A attached to this Lease and made a part hereof.

3. LEASE TERM . The lease of the Premises shall be for the period set forth in Section 1(e) of this Lease unless sooner terminated or extended as hereinafter provided.

4. BASE RENT, ADDITIONAL RENT AND ADJUSTMENTS .

(a) Tenant shall pay the Base Rent specified in Section 1(f).

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(b) In addition to the Base Rent, all other payments to be made by Tenant hereunder to any party shall be deemed, for the purpose of securing their collection, to be “Additional Rent” under this Lease, whether so designated or not, and shall be due and payable on demand or together with the next succeeding installment of the Base Rent, whichever shall first occur; and Landlord shall have the same rights and remedies upon Tenant’s failure to pay the same as for the non-payment of the Base Rent. Landlord, at its election, shall have the right, (but not the obligation) to pay for or perform any act which requires the expenditure of any sums of money by reason of the failure or neglect of Tenant to perform any of the provisions of this Lease within any applicable grace period, and in the event Landlord shall elect to pay such sums or perform such acts requiring money expenditures, Tenant agrees to pay Landlord, upon demand, all such sums, which shall be deemed for the purpose of securing the collection thereof to be Additional Rent hereunder.

(c) In the event the Commencement Date of the Lease Term is other than the first day of a calendar month, the Base Rent, Additional Rent and other charges reserved under this Lease for the portion of such partial month shall be prorated based on a thirty (30) day month and shall be paid on the Commencement Date of the Lease Term.

5. PAST DUE RENTS . If Tenant shall fail to pay any Base Rent, Additional Rents or other charges within 10 days after the same become due and payable, such unpaid amounts shall bear interest from the due date thereof to the date of payment at eighteen percent (18%) per annum (the “Default Interest Rate”); provided, however, that such Default Interest Rate shall not exceed the maximum legal rate of interest allowed to be charged to Tenant under any applicable law of the State of Iowa.

6. PLACE OF PAYMENTS . All payments required to be paid by Tenant to Landlord shall be made payable to the order of the Landlord, and all such payments shall be delivered to the Landlord’s Address specified in Section 1(b) or as otherwise directed by Landlord in writing.

7. OWNERSHIP OF IMPROVEMENTS .

(a) All betterments and improvements in or upon the Premises, made by either party (except Tenant’s personal property, furniture, signs and trade fixtures) including all affixed lighting fixtures, heating, ventilating and air conditioning equipment, and all pipes, ducts, conduits, wiring, paneling, partitions, floor covering, railing, mezzanine floors, galleries and the like, shall become the property of Landlord and shall remain upon and be surrendered with the Premises as a part thereof at the expiration or sooner termination of the Lease Term.

(b) In no event shall Tenant assign, lien, encumber, chattel mortgage or create a security interest in leasehold improvements which have been incorporated in the Premises including, but not limited to, affixed lighting fixtures, heating, ventilating and air conditioning equipment.

8. TENANTS INSTALLATIONS . Tenant shall fully equip the Premises with all trade fixtures and equipment necessary for the proper operation of Tenant’s business.

9. PERMITTED USE . Tenant agrees to and shall use the Premises solely for the purpose of conducting the Permitted Use specified in Paragraph 1(h) and for no other business of purpose.

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10. OPERATION OF BUSINESS . Tenant agrees as follows:

(a) to continuously and uninterruptedly occupy and use during the Lease Term the entire Premises for the Permitted Use and to conduct Tenant’s business therein in a reputable manner;

(b) to apply for, secure, maintain and comply with all licenses or permits which may be required for the conduct by Tenant of the business permitted to be conducted in the Premises and to pay when due all license and permit fees and charges of a similar nature in connection therewith; and

(c) not to operate its business under this Lease so as to breach or violate any restrictive covenant contained in any other agreement or lease entered into by Tenant, or violate any restrictive agreement contained in any contract, judgment or decree of a court of competent jurisdiction entered into or imposed upon Tenant, and Tenant represents that its execution of this Lease and operation of the Permitted Use will not violate any of such restrictive covenants or agreements.

11. LAWS, WASTE OR NUISANCE .

(a) Tenant agrees, at Tenant’s sole cost and expense (i) to comply with all present and future governmental laws, ordinances, orders and regulations concerning Tenant’s use of the Premises (including Tenant’s alterations and additions thereto); and (ii) to comply with all present and future rules, regulations and recommendations of the Board of Fire Underwriters and organizations establishing insurance rates concerning Tenant’s use of the Premises (including Tenant’s alterations and additions thereto); and

(b) Tenant further agrees not to suffer, permit or commit any waste, nor to allow, suffer or permit any odors, vapors, steam, water, vibrations, noises or undesirable effects to emanate from the Premises or any equipment or installation therein or otherwise to allow, suffer or permit the Premises or any use thereof to constitute a nuisance or unreasonably to interfere with the safety, comfort or enjoyment of the Premises by Landlord or any other occupants of the Premises or their customers, invitees or any others lawfully in or upon the Premises. Upon written notice by Landlord to Tenant that any of the aforesaid is occurring, Tenant agrees forthwith to cease and discontinue the same and within ten (10) days thereafter to make such changes in the Premises and/or install or remove such apparatus or equipment therein or therefrom as may be required by Landlord for the purpose of obviating any such condition. If any such condition is not so remedied within the ten (10) day period, then Landlord may, at its option, enter upon the Premises and cure such condition in any manner Landlord shall deem necessary and add the cost and expense incurred by Landlord together with all damages, including reasonable attorneys’ fees, sustained by Landlord to the next installment of the Base Rent due and Tenant agrees to pay such amount. Tenant hereby further agrees to indemnify and save Landlord free and harmless of and from all fines, claims, demands, actions, proceedings, judgments and damages (including court costs and reasonable attorneys’ fees) of any kind or nature by anyone whomsoever arising or growing out of any breach or non-performance by Tenant of the covenants contained in this Section 11(b).

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12. ASSIGNMENT AND SUBLETTING .

(a) Tenant shall not assign or sublet the Premises, in whole or in part, without the prior written permission and consent of Landlord.

(b) Other than the foregoing permitted assignment or subletting, Tenant shall not voluntarily, involuntarily or by operation of law assign, transfer, mortgage or otherwise encumber this Lease or any interest of Tenant therein, in whole or in part, nor sublet or assign the whole or any part of the Premises or permit the Premises or any part thereof to be used or occupied by others. Any attempt to encumber, assign the Lease or sublet the Premises not in compliance with the provisions of this Section 12 shall be void and of no force and effect.

13. REPAIRS .

(a) Landlord shall not be required to make any repairs or improvements of any kind upon or to the Premises, except for necessary repairs to the foundations and structural repairs to the exterior of the building (excluding the interior of all walls and the exterior and interior of all windows, glass, showcases, doors, door frames and bucks) of which the Premises forms a part and the sewer and water lines servicing the Premises that are located outside of the Premises, unless the necessity for any of such repairs shall have been occasioned by any action, omission to act or negligence of Tenant, its assignees, subtenants, invitees, concessionaires or licensees, or their respective employees, agents, or contractors, in which event Tenant agrees to make such repairs, at Tenant’s sole cost and expense. Landlord shall not be required to commence any such repair until after notice from Tenant that the same is necessary, which notice, except in case of an emergency, shall be in writing and shall allow Landlord a reasonable time in which to commence and complete such repair. Landlord shall use reasonable efforts to do said repair work with minimum inconvenience, annoyance, disturbance or loss of business to Tenant, as may be reasonably possible under the circumstances consistent with accepted construction practice in the vicinity, and so that such work shall be expeditiously completed, but in no event shall Landlord be required to incur any additional expenses for work to be done during hours or days other than regular business hours and days.

(b) Subject to the provisions of Section 13(a), Tenant agrees at Tenant’s sole cost and expense to keep and maintain the Premises and each and every part thereof in good repair, order and condition and to make all repairs and replacements thereto, and to the fixtures and equipment therein and the appurtenances thereto, including without limiting the generality of the foregoing, the exterior and interior windows and window frames, doors and door frames, entrances, store fronts, including store front metal work, signs, showcases, floor coverings, interior walls, partitions and the lighting, electrical heating, air conditioning, plumbing, and sewage systems, equipment, fixtures and facilities within and serving the Premises, and the floor slab and that portion of any pipes, lines, ducts, wires or conduits installed by Landlord or Tenant contained under, above or within, and exclusively serving, the Premises. Tenant shall keep and maintain the Premises in a first-class and attractive condition throughout the Lease Term. Tenant shall replace all damaged or broken glass with glass of equal quality with that broken or damaged, except in the case of damage or destruction by fire or other insurable casualty or by eminent domain, the obligations of Landlord and Tenant shall be controlled as hereinafter provided.

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(c) Tenant may, without prior notice to Landlord, at Tenant’s sole cost and expense paint, paper or change floor coverings in and to the interior of the Premises only, provided that (i) the structural integrity of the building shall not be affected or diminished; (ii) the value of the building, which is part of the Premises, is not thereby diminished; (iii) the exterior appearance of the Premises, is not thereby altered or changed. In all other instances, Tenant shall secure prior written approval and consent of Landlord.

(d) Tenant shall submit to Landlord plans and specifications for any such remodeling work, together with a statement of the estimated cost of such work and the name of the proposed contractor whom Tenant proposes to engage to perform the same within sixty (60) days prior to the date Tenant is to commence any such remodeling work. After receiving Landlord’s written approval, and prior to the commencement of any such work, Tenant agrees to deliver to Landlord a policy or certificate of workmen’s compensation insurance in statutory limits from Tenant’s contractor as well as evidence of the maintenance by Tenant of the insurance coverages to be maintained by Tenant hereunder. Such work may thereupon be commenced and shall be diligently prosecuted to completion in accordance with such approved plans and specifications and in accordance with all applicable laws, ordinances, rules and requirements of Landlord’s insurance carriers, subject, however, to the terms of Tenant’s indemnity set forth herein and Tenant’s obligation to insure such assumed liability under Tenant’s Comprehensive General Liability policy.

(e) “Repairs,” as used in this Section 13, shall mean all repairs, replacements, renewals, alterations, additions, improvements and betterments.

14. TENANT’S FAILURE TO REPAIR . If Tenant shall fail, refuse or neglect to make repairs in accordance with the terms and provisions of this Lease or if Landlord is required to make any repairs by reason of any act, omission to act or negligence of Tenant, or its assignees, subtenants, concessionaires or licensees, or their respective employees, agents or contractors, Landlord shall have the right, at its option, after Landlord shall have given to Tenant a ten (10) day notice (except in case of an emergency), to make such repairs on behalf of and for the account of Tenant and to enter upon the Premises for such purposes and (i) deduct such costs from the Deposit specified in Section 1(g) or (ii) add the cost and expense thereof to the next installment of the Base Rent due, and Tenant agrees to pay such amount, but nothing contained in this Paragraph 14 shall be deemed to impose any duty upon Landlord or affect in any manner the obligations assumed by Tenant hereunder. Any cost or expense incurred by Landlord and chargeable to Tenant as herein provided shall be reduced to the extent that Landlord is reimbursed therefor under any insurance policy.

15. COVENANT AGAINST LIENS . Tenant shall do all things necessary to prevent the filing of any mechanics’ or other liens against the Premises or any other portion of the Premises or the interest of the Landlord or any ground or underlying lessors therein or the interest of any mortgagees or holders of any deed of trust covering the Premises by reason of any work, labor, services or materials performed or supplied or claimed to have been performed or supplied to Tenant, or anyone holding the Premises, or any part thereof, through or under Tenant. If any such lien shall at any time be filed, Tenant shall either cause the same to be vacated and cancelled of record within thirty (30) days after the date of the filing thereof or, if Tenant in good faith determines that such lien should be contested, Tenant shall furnish such security, by surety bond or otherwise as is prescribed by law to release the same as a lien against the real property and to prevent any foreclosure of such lien during the pendency of such contest. If Tenant shall fail to vacate or release such lien in the manner and within the time period aforesaid, then, in addition to any other right or remedy of Landlord resulting from Tenant’s said default, Landlord may, but shall not be obligated to, vacate or release the same either by paying the amount claimed to be due or by procuring the release of such lien by giving security or in such other manner as may be prescribed by law. Tenant shall repay to Landlord, on demand, all sums disbursed or deposited by Landlord pursuant to the foregoing provisions of this Paragraph 15, including Landlord’s cost and expenses and reasonable attorneys’ fees incurred in connection therewith. Nothing contained herein shall imply any consent or agreement on the part of Landlord or any ground or underlying lessors or mortgagees or holders of deeds of trust of the Premises to subject their respective estates or interest to liability under any mechanics’ or other lien law, whether or not the performance or the furnishing of such work, labor, services or materials to Tenant or anyone holding the Premises, or any part thereof, through or under Tenant, shall have been consented to by Landlord and/or any of such parties.

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16. UTILITIES .

(a) Tenant shall use the utilities (including water, gas, electricity, sewers and telephone supplied to or serving the Premises) in accordance with the rules and regulations of the public utility company or the governmental agency supplying the same. Landlord shall not be liable in damages or otherwise for any interruption in the supply of any utility to the Premises nor shall any such interruption constitute any ground for an abatement of any of the rents reserved hereunder, Tenant shall not at any time overburden or exceed the capacity of the mains, feeders, ducts, conduits or other facilities by which such utilities are supplied to, distributed in or serve the Premises. If Tenant desires to install any equipment which shall require additional utility facilities or utility facilities of a greater capacity than the facilities to be provided by Landlord, such installation shall be subject to Landlord’s prior written approval of Tenant’s plans and specifications therefor. If approved by Landlord, Tenant agrees to pay the cost for providing such additional utility facilities or utility facilities of greater capacity, and any such installations shall be in accordance with all applicable laws, rules and regulations relating thereto.

(b) Landlord shall not be responsible for providing any meters or other devices for the measurement of utilities supplied to the Premises. Tenant shall make application for and arrange for the installation of all such meters or other devices and Tenant shall be solely responsible for and promptly pay, when due and payable, all charges for water, sewer, electricity, gas telephone and any other utility used or consumed in the Premises.

17. TAXES .

(a) Tenant shall, in all instances, pay all real estate taxes which may be levied or assessed by the lawful taxing authorities against the land, buildings and all other improvements and betterments constituting the Premises. The term “taxes” shall mean and include all real estate taxes, assessments, and other governmental levies and charges of every kind and nature whatsoever, general and special, extraordinary and ordinary. Tenant shall pay real estate taxes to Landlord monthly along with the Base Rent.

(b) Any fiscal tax year or years commencing during any lease year or partial lease year hereof, shall be deemed to correspond to such lease year or partial lease year, except that with respect to the first and last lease years of the Lease Term, the taxes for the then current fiscal tax year or years and the tax charge payable by Tenant shall be prorated from the Commencement Date of the first lease year or partial lease year and to the end of the last lease year, as to which Tenant’s obligation shall survive the expiration of the Lease Term.

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(c) Tenant agrees to pay, prior to delinquency, any and all taxes and assessments levied or assessed during the Lease Term upon or against (i) all furniture, fixtures, signs, equipment and any other personal property installed or located within the Premises; (ii) all alterations, additions, betterments or improvements of whatsoever kind or nature, made by Tenant to the Premises, as the same may be separately levied, taxed and assessed against or imposed directly upon Tenant by the taxing authorities; and (iii) the rentals payable hereunder by Tenant to Landlord (other than Landlord’s Federal, State and local income taxes thereon).

(d) Tenant shall have the right to contest the validity or amount of any tax by appropriate proceedings. Landlord shall execute and deliver all documents appropriate to the contest of any such taxes requested by Tenant.

18. INDEMNITY .

(a) Tenant hereby agrees to defend, pay, indemnify and save free and harmless Landlord, and/or any fee owner or ground or underlying lessors of the Premises, from and against any and all claims, demands, fines, suits, actions proceedings, orders, decrees and judgments of any kind or nature by or in favor of anyone whomsoever and from and against any and all costs and expenses, including reasonable attorneys’ fees, resulting from or in connection with loss of life, bodily or personal injury or property damage arising, directly or indirectly, out of or from or on account of any occurrence in, upon, at or from the Premises or occasioned wholly or in part through the use and occupancy of the Premises or any improvements therein or appurtenances thereto, or by any act or omission or negligence of Tenant or any subtenant, concessionaire or licensee of Tenant, or their respective employees, agents or contractors in, upon, at or from the Premises or its appurtenances; except nothing herein mentioned shall excuse or exculpate Landlord or its employees, agents or contractors from its or their negligence, and in such case the indemnification and hold harmless provided herein shall not apply.

(b) Tenant and all those claiming by, through or under Tenant shall store their property in and shall occupy and use the Premises and any improvements therein and appurtenances thereto solely at their own risk and Tenant and all those claiming by, through or under Tenant hereby release Landlord, to the full extent permitted by law, from all claims of every kind, including loss of life, personal or bodily injury, damage to merchandise, equipment, fixtures or other property, or damage to business or for business interruption, arising, directly or indirectly, out of or from or on account of such occupancy and use or resulting from any present or future condition or state of repair thereof.

(c) Landlord shall not be responsible or liable for damages at any time to Tenant, or to those claiming by, through or under Tenant, for any loss of life, bodily or personal injury, or damage to property or business, or for business interruption, that may be occasioned by or through the acts, omissions or negligence of any other persons, or any other tenants or occupants of any other premises of Landlord.

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(d) Landlord shall not be responsible or liable for damages at any time for any defects, latent or otherwise, in any buildings or improvements on the Premises or any of the equipment, machinery, utilities, appliances or apparatus therein, nor shall Landlord be responsible or liable for damages at any time for loss of life, or injury or damage to any person or to any property or business of Tenant, or those claiming by, through or under Tenant, caused by or resulting from the bursting, breaking, leaking, running, seeping, overflowing or backing up to water, steam, gas, sewage, snow or ice in any part of the Premises or caused by or resulting from acts of God or the elements, or resulting from any defect or negligence in the occupancy, construction, operation or use of any buildings or improvements upon the Premises, or any of the equipment, fixtures, machinery, appliances or apparatus therein.

(e) Tenant expressly acknowledges that all of the foregoing provisions of this Section 18 shall apply and become effective from and after the date Tenant or its agents enter upon the Premises to undertake activities permitted hereunder.

19. TENANT’S ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES .

(a) The use of the Premises shall at all times comply with, and Tenant shall not be in violation of, in connection with its use, maintenance or operation of the Premises and the conduct of the business related thereto, any applicable federal, state, county or local statutes, laws, regulations, rules, ordinances, codes, licenses and permits of all governmental authorities relating to environmental matters, including by way of illustration and not by way of limitation (i) the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act of 1976, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (and any amendments or extensions thereof), and the Toxic Substances Control Act; and (ii) all other applicable environmental requirements, including any environmental laws of the state where the Premises are located.

(b) Without limiting the generality of Section 19(a) above, Tenant (i) will operate the Premises and will at all times receive, handle, use, store, treat, ship and dispose of all hazardous substances, petroleum products and waste in strict compliance with all applicable environmental, health or safety statutes, ordinances, orders, rules, regulations or requirements; and (ii) will remove prior to the termination of this Lease from and off the Premises, all hazardous substances, petroleum products and waste.

(c) No hazardous or toxic materials, substances, pollutants, contaminants or wastes will be released into the environment, or deposited, discharged, place or disposed of at, on or near the Premises, nor will the Premises be used at any time by any person as a landfill or a waste disposal site.

(d) Tenant shall immediately notify Landlord of any notices of any violation of any of the matters referred to in Sections 19(a) through 19(d) relating to the Premises or its use.

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(e) At any time during the Lease term or thereafter, including after the termination of this Lease, Tenant covenants at its sole cost and expense, to remove or take remedial action with regard to any materials released to the environment at, on or near the Premises during the Lease term or extensions thereof for which any removal or remedial action is required pursuant to law, ordinance, order, rule, regulation or governmental action; provided that (i) no such removal or remedial action shall be taken except after reasonable advance written notice to Landlord, and (ii) any such removal or remedial action shall be undertaken in a manner so as to minimize any impact on the business conducted at the Premises or any adjacent property.

(f) Tenant shall at all times retain any and all liabilities arising from the handling, treatment, storage, transportation or disposal of hazardous or toxic materials, substances, pollutants, contaminants, petroleum products or wastes by Tenant wherever located.

(g) Tenant shall indemnify and hold Landlord harmless from and against any and all (i) liabilities, losses, claims, damages and costs; and (ii) attorneys’, accountants’ and consultants’ fees and expenses, court costs and all other out-of-pocket expenses incurred or suffered by Landlord by reason of, resulting from, in connection with, or arising in any manner whatsoever out of the breach of any warranty or covenant or the inaccuracy of any representation of Tenant contained or referred to in this Section 19.

(h) All representations, warranties, covenants, agreements and indemnities of Tenant shall survive the termination of this Lease.

20. INSURANCE .

(a) Tenant agrees, during the Lease Term, to procure and maintain insurance against fire, windstorm, vandalism, malicious mischief, water damage and sprinkler leakage and such other perils as are from time to time included in a standard extended coverage endorsement insuring the (i) building improvements and betterments to the Premises; and (ii) any permitted alterations, additions or improvements made by Tenant to the Premises at any time. Such policy of insurance shall be issued in the names and for the benefit of Tenant, Landlord and Landlord’s mortgagee, as their respective interests may appear in an amount equal to 100% of the actual replacement cost of the building improvements insured. If Tenant fails or refuses to procure and maintain the required amount of insurance and as a result thereof Landlord is adjudged a coinsurer then any losses or penalties sustained by Landlord shall be paid for by Tenant upon receipt of a bill from Landlord together with reasonably satisfactory evidence of such loss or penalty.

(b) Each party hereby expressly waives, as against each other, any claim based on negligence or any reason whatsoever for property damages covered by such insurance. All policies shall contain an endorsement containing an express waiver of any right of subrogation by the insurance company against Landlord or Tenant, whichever the case may be (whether named as an insured or not); provided, however, that if such waiver of subrogation provision is unavailable at standard insurance rates and is obtainable only upon the payment of an increase in the standard rate, then the party who would benefit from such provision shall have the option, upon ten (10) days’ prior written notice from the other party, of paying the increase in premium or foregoing the benefit of such provision.

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(c) Tenant agrees to secure and keep in force from and after the date Landlord shall deliver possession of the Premises to Tenant and throughout the Lease Term, at Tenant’s sole cost and expense (i) Comprehensive General Liability Insurance on an occurrence basis with a minimum limit of liability in an amount of Two Million Dollars ($2,000,000.00), including water damage and sprinkler leakage legal liability, and which insurance shall contain a contractual liability endorsement covering the matters set forth in Paragraph 18 hereof on Indemnity. Such insurance shall be issued in the names and for the benefit of Landlord, Landlord’s management company, if any, and Tenant and shall contain an endorsement that Landlord, and Landlord’s management company, if any, although named as insureds, nevertheless shall be entitled to recover under said policies for any loss or damage occasioned to them, their servants, agents and employees by reason of the negligence of Tenant.

21. INSURANCE REQUIREMENTS .

(a) All policies of insurance shall be issued by insurance companies with general policy holder’s rating of not less than A - and a financial rating of not less than Class XI as rated in the most current “Best’s Insurance Reports”, and licensed to do business in the State of Iowa and authorized to issue such policy or policies.

(b) Tenant shall have the right to insure and maintain the insurance coverages required by this Lease under blanket insurance coverages covering other premises so long as such blanket insurance policies specify a stated value for the Premises and comply with the amounts of insurance and the requirements provided hereunder.

(c) The original policy or policies, or duly executed certificates for the same, together with reasonably satisfactory evidence of payment of the premium thereof shall be delivered to Landlord on or before the Commencement Date of the Lease Term and upon renewals of such policies not less than twenty (20) days prior to the expiration of any such coverage.

(d) The minimum limits of any insurance coverage required herein to be carried by Tenant shall not limit Tenant’s liability set forth in Paragraph 18 hereof on Indemnity.

22. CONDEMNATION .

(a) If, during the term (or any extension or renewal) of this Lease, all or a substantial part of the Premises are taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain or by purchase in lieu thereof, and the taking would prevent or materially interfere with the use of the Premises for the purpose for which they are then being used, this Lease shall terminate and the rent shall be abated during the unexpired portion of this Lease effective on the date physical possession is taken by the condemning authority. Tenant shall have no claim to the condemnation award, however, this Paragraph 22(a) shall not prohibit Tenant from making a claim for moving expenses or property owned by Tenant in any condemnation proceeding.

(b) n the event a portion of the Premises shall be taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain or by purchase in lieu thereof, and this Lease is not terminated as provided in Section 22(a) above, Landlord may, at Landlord’s sole risk and expense, restore and reconstruct the building and other improvements on the Premises to the extent necessary to make it reasonable tenantable. The rent payable under this Lease during the unexpired portion of the term shall be adjusted to such an extent as may be fair and reasonable under the circumstances. Tenant shall have no claim to the condemnation award.

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23. FIRE AND CASUALTY .

(a) If the Premises should be totally destroyed by fire or other casualty, or if the Premises should be so damaged so that rebuilding cannot reasonably be completed within one hundred and eighty (180) working days after the date of written notification by Tenant to Landlord of the destruction, this Lease shall terminate and the rent shall be abated for the unexpired portion of the lease, effective as of the date of the written notification.

(b) f the Premises should be partially damaged by fire or other casualty, and rebuilding or repairs can reasonably be completed within one hundred eighty (180) working days from the date of written notification by Tenant to Landlord of the destruction, this Lease shall not terminate, but Landlord may at its sole risk and expense proceed with reasonable diligence to rebuild or repair the building or other improvements to substantially the same condition in which they existed prior to the damage. If the Premises are to be rebuilt or repaired and are untenantable in whole or in part following the damage, and the damage or destruction was not caused or contributed to by act or negligence of Tenant, its agents, employees, invitees or those for whom Tenant is responsible, the rent payable under this Lease during the period for which the Premises are untenantable shall be adjusted to such an extent as may be fair and reasonable under the circumstances. In the event that Lessor fails to complete the necessary repairs or rebuilding within one hundred eighty (180) working days from the date of written notification by Tenant to Landlord of the destruction, except as caused by delay which was beyond the control of Landlord, Tenant may at its option terminate this Lease by delivering written notice of termination to Landlord, whereupon all rights and obligations under this Lease shall cease to exist.

24. DEFAULT .

(a) If Tenant shall fail (i) to pay, when due, any rental charge or other sum payable hereunder within five (5) days after the due date thereof; or (ii) to keep, observe or perform any of the other terms, covenants and conditions herein to be kept, observed and performed by Tenant for more than thirty (30) days after written notice shall have been given to Tenant specifying the nature of such other default, or if such other default so specified shall be of such nature that the same cannot be reasonably cured or remedied within said thirty (30) day period, if Tenant shall not in good faith have commenced the curing or remedying of such default within such thirty (30) day period and shall not thereafter continuously and diligently proceed therewith to completion, then and in any one or more of such events (herein referred to as an “Event of Default”) Landlord shall have the rights and remedies as hereinafter set forth.

(b) No re-entry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease and Tenant hereby specifically waives any law, statute, rule, decree or judgment of any court to the contrary. Notwithstanding any such re-entry without termination, Landlord reserves the right to elect to terminate this Lease for such previous breach.

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(c) In an Event of Default shall occur and shall not be cured in the manner as herein provided (unless Tenant is not entitled to an opportunity to cure such default), Landlord and Tenant covenant and agree that Landlord shall immediately have the following rights and remedies: (i) to immediately re-enter the Premises by summary proceedings, if necessary, and to dispossess Tenant and all other occupants thereof and to remove and dispose of all property therein or to store such property in a public warehouse or elsewhere at the cost and for the account of Tenant without Landlord being deemed guilty or trespass or becoming liable for any loss of damage which may arise out of such action; (ii) to cancel and terminate this Lease upon three (3) days’ notice to Tenant stating that this Lease and the term hereof shall expire and terminate on the date specified in such notice, and upon such specified notice, this Lease and all rights of the Tenant under this Lease shall expire and terminate as if that date were the date definitely fixed in this Lease for the termination of the term; (iii) to cancel and terminate Tenant’s right to possession of the Premises only, and in the event of such election, Tenant shall immediately quit and surrender possession of the Premises only but Tenant shall remain liable for damages as hereinafter provided. Landlord shall have the right, at its election, to pursue any and/or all of such rights together with any other right or remedy which may be available to Landlord under any statute or rule of law then in effect.

(d) The rights and remedies herein reserved by or granted to Landlord and Tenant are distinct, separate and cumulative, and the exercise of any one of them shall not be deemed to preclude, waive or prejudice their right to exercise any or all others.

(e) In the event of any litigation or formal legal proceeding between the parties to this Lease, Landlord and Tenant specifically covenant and agree that the prevailing party in such litigation shall be entitled to recover, in addition to other damages, all court costs, expenses and reasonable attorneys’ fees that it may actually incur in enforcing the terms of this Lease, and the parties expressly waive any statute, rule of law or public policy to the contrary and further covenant and agree that they shall confirm such waiver in writing at the time of commencement of any such action proceeding or counterclaim.

25. ACCESS TO PREMISES . Landlord and its authorized representatives shall have the right to enter upon the Premises during all regular business hours for the purpose of inspecting or exhibiting the same to prospective purchasers, mortgagees and tenants. Landlord shall also have the right to enter upon the Premises during all regular business hours (and in emergencies at all times) for the purpose of making any repairs to the Premises or to the building of which it forms a part as Landlord may deem necessary, and for any other lawful purpose; and in connection therewith, Landlord shall have the right to take materials, tools and equipment in, through or above the Premises that may be required without the same constituting an actual or constructive eviction of Tenant from the Premises or any part thereof. Nothing herein shall be deemed to impose any duty upon Landlord to do any such work which under any provisions of this Lease Tenant shall be required to perform, and the performance thereof by Landlord shall not be a waiver of Tenant’s default in failing to perform the same. During the period commencing twelve (12) months prior to the expiration of the Lease Term (or any renewal term) Landlord may place upon the exterior of the Premises “For Lease”, “To Let” or “For Rent” signs of reasonable size which signs shall not be removed, obliterated or hidden by Tenant.

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26. XCAVATION . If any excavation shall be made upon land adjacent to the Premises, Tenant shall permit the party authorized to cause such excavation to be made to enter upon the Premises for the purpose of doing such work as such party may deem necessary to preserve the wall of the building of which the Premises forms a part from damages and to support the same by proper foundations and shoring, and Tenant hereby waives all claims for inconvenience, disturbance, loss of business or other damages against Landlord and without in any manner affecting Tenant’s obligations under this Lease, nor shall the same constitute any ground for an abatement of any rents hereunder; provided, however, Landlord shall use all reasonable efforts not to interfere with or interrupt the conduct and operation of Tenant’s business in the Premises, but Landlord shall not be required to incur any expense nor perform work during hours or days other than regular business hours and days.

27. SUBORDINATION . Landlord and Tenant agree that this Lease be and the same is subject and subordinate at all times to all covenants, restrictions, easements and ground and underlying leases now or hereafter affecting the fee title of the Premises and to all modifications, amendments and supplements thereto. At Landlord’s option, this Lease may be and the same is subject and subordinate at all times to all mortgages or any other method of financing or refinancing in any amounts, and all advances thereon, which may now or hereafter be placed against or affect any or all of the land and/or the Premises and/or any or all of the buildings and improvements now or at any time hereafter constituting a part of or adjoining the Premises, and to all amendments, renewals, modifications, consolidations, participations, replacements and extensions thereof. The aforesaid provisions shall be self-operative and no further instrument or subordination shall be necessary unless required by any such ground or underlying lessors or mortgagees. Should Landlord or mortgagees desire confirmation of such subordination, the Tenant, within ten (10) days following Landlord’s written request therefor, agrees to execute and deliver, without charge, any and all documents (in form acceptable to such ground or underlying lessors or mortgagees) subordinating this Lease and the Tenant’s rights hereunder. Should any such mortgagees request that the Lease be made superior, rather than subordinate, to any such ground or underlying lease and/or mortgage, then Tenant, within ten (10) days following Landlord’s written request therefor, agrees to execute and deliver, without charge, any and all documents (in form acceptable to such ground or underlying lessors or mortgagees) effectuating such priority.

28. ATTORNMENT . Tenant agrees that in the event of a sale, transfer, or assignment of the Landlord’s interest in the Premises or any part thereof, including the Premises, or in the event that any proceedings are brought for the foreclosure of or for the exercise of any power of sale under any mortgage made by Landlord covering the Premises or any part thereof, including the Premises, to attorn to and to recognize such transferee, purchaser, ground or underlying lessor or mortgagee as Landlord under this Lease.

29. QUIET ENJOYMENT . If Tenant timely pays the rents reserved and performs all of the other terms, covenants and conditions of this Lease on the Tenant’s part to be performed, then Tenant shall peaceably and quietly have, hold and enjoy the Premises during the Lease Term, subject to the terms of this Lease, and to any mortgages, ground or underlying leases, agreements and encumbrances to which this Lease is or may be subordinated.

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30. UNAVOIDABLE DELAYS . The provisions of this Paragraph 30 shall be applicable if there shall occur any strikes, lockouts or labor disputes, inability to obtain labor or materials or reasonable substitutes therefor or acts of God, governmental restrictions, regulations or controls, enemy or hostile governmental action, civil commotion, fire or other casualty or other conditions similar or dissimilar to those enumerated in this Paragraph 30 beyond the reasonable control of the party obligated to perform. If Landlord or Tenant shall, as a direct result of any of the above mentioned events, fail to timely perform any obligation on its part to be performed, then such failure shall be excused and not be a breach of this Lease by the party in question, but only to the extent and for the time occasioned by such event. The provisions of this Paragraph 30 shall not apply to Tenant’s obligation to pay when due, the Base Rent or any Additional Rent or sums or charges, and, in addition, lack of funds and inability to procure financing shall not be deemed to be an event beyond the reasonable control of Tenant. In the event of such an unavoidable delay and as a condition precedent of Tenant claiming or relying upon such delay, Tenant shall give notice in writing describing such event to Landlord within ten (10) days after the occurrence of same.

31. SURRENDER OF PREMISES . Upon the expiration or sooner termination of the Lease Term, Tenant agrees to quit and surrender the premises, broom-clean, in good condition and repair, reasonable use, wear and tear, natural deterioration and insured casualty excepted, together with all keys and combinations to locks, safes and vaults and all improvements, alterations, additions, lighting fixtures and equipment at any time made or installed in, upon or to the interior or exterior of the Premises, except personal property, signs and trade fixtures put in at Tenant’s expense, all of which shall then become the property of Landlord without any claim by Tenant, but the surrender of such property to Landlord shall not be deemed to be a payment of rent or in lieu of any rent reserved hereunder. Before surrendering the Premises, Tenant shall remove all of Tenant’s personal property, signs and trade fixtures and, at Landlord’s option, Tenant shall also remove any alterations, additions, fixtures, equipment and decorations at any time made or installed by Tenant in, upon or to the interior or exterior of the Premises, and Tenant further agrees to repair any damage caused thereby. If Tenant shall fail to remove any of Tenant’s said personal property and trade fixtures, said property shall, at the option of Landlord, either be deemed abandoned and become the exclusive property of Landlord, or Landlord shall have the right to remove and store said property, at the expense of Tenant, without further notice to or demand upon Tenant and hold Tenant responsible for any and all charges and expenses incurred by Landlord therefor. If Tenant shall leave any of said personal property or trade fixtures on the Premise with Landlord’s consent, then Landlord shall have the right to remove and store such property, at the expense of Tenant, upon twenty-four (24) hours’ notice to Tenant and to hold Tenant responsible for any and all charges and expenses incurred therefor. If the Premises be not surrendered as and when aforesaid and after Landlord shall have given to Tenant a three (3) day notice to quit, Tenant shall indemnify Landlord against all loss or liability resulting from the delay by Tenant in so surrendering the same, including, without limitation, any claims made by any succeeding occupant founded on such delay. Tenant’s obligations under this Paragraph 31 shall survive the expiration or sooner termination of the Lease Term. At the termination of the Lease Term, Landlord shall have the right to apply the Deposit specified in Section 1(g) to any damages incurred by Landlord as a result of Tenant’s failure to perform any of its obligations under this Lease.

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32. HOLDING OVER . Should Tenant remain in possession of the Premises after the expiration of the Lease Term (or any renewal term hereof) without the execution of a new lease, such holding over shall be deemed to have created and be construed as a tenancy from month-to-month terminable on thirty (30) days’ written notice by either party to the other, at a monthly rental equal to twice the monthly installment of Base Rent payable during the last month of the Lease Term, subject to all the other conditions, provisions and obligations of the Lease insofar as the same are applicable to a month-to-month tenancy. Tenant shall not interpose any counterclaim or counterclaims in a summary proceeding or other action based on holdover except for mandatory or compulsory counterclaims under the procedural laws of the state where the Premises is located.

33. RELATIONSHIP OF PARTIES . Nothing contained in this Lease shall be deemed, construed or implied as creating the relationship of principal and agent, partnership, joint venture or any other relationship between the parties hereto, other than the relationship of Landlord and Tenant.

34. NO WAIVER . The failure of Landlord or Tenant to insist upon the strict performance of any provisions of this Lease, or the failure of Landlord or Tenant to exercise any right, option or remedy hereby reserved shall not be construed as a future waiver of any such provision, right, option or remedy or as a waiver of a subsequent breach thereof. The consent or approval by Landlord of any act by Tenant requiring Landlord’s consent or approval shall not be construed to waive or render unnecessary the requirement for Landlord’s consent or approval of any subsequent similar act by Tenant. The receipt by Landlord of rent or other charges with knowledge of a breach of any provision of this Lease shall not be deemed a waiver unless such waiver shall be specific, in writing, and signed by the Landlord. No payment by Tenant or receipt by Landlord of a lesser amount than the rents and/or other charges hereby reserved shall be deemed to be other than on account of the earliest rents and/or charges then unpaid, nor shall any endorsement or statement on any check or any letter accompanying any check or payment by Tenant be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rents and or other charges due or Landlord may pursue any other remedy in this Lease or by law provided.

35. NOTICES . Every notice, demand, request or other communications which may be or is required to be given under this Lease shall be in writing and shall be sent by United States Certified or Registered Mail, postage prepaid, return receipt requested, and shall be addressed: (a) if to Landlord, to the Landlord’s Address set forth in Section 1(b), and (b) if to Tenant, to Tenant’s Address set forth in Section 1(c), and the same shall be deemed delivered when deposited in the United States Mail. Either party may designate, by written notice to the other party, any other address for such purposes. Each of the parties hereto waive personal or any service other than as provided for in this Paragraph 35. Either party may, however, give the other party telegraphic notice of the need for emergency repairs subject to subsequent formal notice as above provided.

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36. RECORDING . Tenant agrees not to record this Lease or any memorandum thereof without the prior written consent of Landlord.

37. PARTIAL INVALIDITY . If any provision of this Lease or the application thereof to any person or circumstance shall to any extent be held void or invalid, then the remainder of this Lease or the application of such provision to persons or circumstances other than those as to which it is held void or invalid shall not be affected thereby, and each provision of this Lease shall be valid and enforced to the fullest extent permitted by law.

38. ROVISIONS BINDING . Except as otherwise expressly provided in this Lease, all covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. Each provision of this Lease to be performed by Tenant shall be construed to be both a covenant and a condition, and if there shall be more than one Tenant, they shall all be bound, jointly and severally, by the provisions of this Lease.

39. ENTIRE AGREEMENT, ETC .

(a) This Lease, including the Exhibits and Riders attached hereto, sets forth the entire agreement between the parties. All prior conversations or writings between the parties hereto or their representatives are merged herein and extinguished.

(b) This Lease shall not be modified except by a writing signed by the parties, nor may this Lease be cancelled by Tenant or the Premises surrendered except with the express written authorization of Landlord unless otherwise specifically provided herein.

(c) The initial submission by Landlord to Tenant of this Lease shall be deemed submitted solely for Tenant’s consideration and not for acceptance and execution. Such submissions shall have no binding force and effect, shall not constitute an option for the leasing of the Premises, and shall not confer any rights or impose any obligations upon either party.

(d) The submission by Landlord of this Lease for execution by Tenant and the actual execution and delivery thereof by Tenant to Landlord shall similarly have no binding force and effect unless and until Landlord shall have executed this Lease and a counterpart thereof shall have been delivered to Tenant.

(e) If any provision contained in any attached Rider or Exhibit is inconsistent or in conflict with any printed provisions of this Lease, the provision contained in such Rider or Exhibit shall supersede said printed provision and shall be paramount and superior.

(f) The captions, numbers and index appearing herein are inserted only as a matter of convenience and are not intended to define, limit, construe or describe the scope or intent of any Paragraph, nor in any way affect this Lease.

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40. WAIVER OF LIABILITY . In the event Landlord conveys or transfers its interest in the Premises or in this Lease, except as collateral security for a loan, upon such conveyance or transfer, Landlord (and in the case of any subsequent conveyances or transfers, the then grantor or transferor) shall be entirely released and relieved from all liability with respect to the performance of any covenants and obligations on the part of the Landlord to be performed hereunder from and after the date of such conveyance or transfer, provided that any amounts then due and payable to Tenant by Landlord (or by the then grantor or transferor) or any other obligations then to be performed by Landlord (or by the then grantor or transferor) for Tenant under any provisions of this Lease, shall either be paid or performed by Landlord (or by the then grantor or transferor) or such payment or performance assumed by the grantee or transferee; it being intended hereby that the covenants and obligations on the part of the Landlord to be performed hereunder shall, subject as aforesaid, be binding on Landlord, its successors and assigns only during and in respect of their respective periods of ownership of an interest in the Premises or in the Lease.

41. CONSENTS . Wherever in this Lease express provision is made that Tenant is required to procure Landlord’s written permission, consent or approval, such written permission, consent or approval shall not be unreasonably withheld or delayed. Tenant shall not be entitled to any damages for any withholding or delay of any such permission, consent or approval, it being understood and agreed that Tenant’s sole and only remedies shall be limited to an action for an injunction or declaratory judgment.

42. COUNTERPARTS . This Lease may be executed in one or more counterparts, each of which when executed shall be deemed an original and all of which together shall constitute one and the same instrument. The parties agree that this Lease shall be legally binding upon the electronic transmission, including by facsimile or email of .pdf files, by each party of a signed signature page to this Lease to the other parties or such parties’ legal counsel.

43. INTERPRETATION . The parties agree that (i) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Lease, and (ii) the terms and provisions of this Lease shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Lease.

IN WITNESS WHEREOF , the parties hereto have respectively signed and sealed this Lease as of the date first set forth above.

[ Signature page follows ]

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Signature page to Agreement of Lease dated March 3, 2017

	LANDLORD :
	K&A HOLDINGS, LLC
	By:	/s/ Alan D. Neese
		Alan D. Neese
	By:	/s/ Katherine B. Neese
		Katherine B. Neese

	TENANT :
	NEESE, INC.
	By:	/s/ Alan Neese
	Name:	Alan Neese
	Title:	President

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EXHIBIT A

Description of Premises

Parcel 1 :

Lots 1 and 2 of the Northwest Quarter (NW ¼) of Section 4, Township 83 North, Range 29 West of the 5 ^th P.M., Greene County, Iowa, as shown on the Plat of Survey filed for record on July 19, 2005 in Book 122 at Page 364 of the records of Green County, Iowa, Recorder.

(PIN No. 12-04-104-005)

AND

Parcel 2 :

Lots Eleven (11), Twelve (12), Thirteen (13) and the West Half (W ½) of Lot Fourteen (14), in the South Half of the Southwest Quarter (S ½ S ¼) of Section Thirty-Three (33), Township Eighty-four (84) North, Range Twenty-nine (29) West of the 5 ^th P.M., Green County, Iowa.

(PIN Nos. 08-33-357-001 and 08-33-377-001)

AND

Parcel 3 :

The East Half (E ½) of Lot Fourteen (14) in the Southwest Quarter (SW ¼) of Section Thirty-three (33), Township Eighty-four (84) North, Range Twenty-nine (29) West of the 5 ^th P.M., Green County Iowa.

and

Lots Five (5), Seven (7), Eight (8), Nine (9) and Ten (10), Block Forty-three (43), Original Town of Grand Junction, Greene County, Iowa.

(PIN Nos. 08-33-377-002 and 08-33-377-003)

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EXHIBIT 10.5

MASTER LEASE AGREEMENT

THIS MASTER LEASE AGREEMENT (this " Lease ") is made as of March 3, 2017, between UTICA LEASECO, LLC, its successors and assigns (" Lessor "), and 1847 NEESE INC., a Delaware corporation and NEESE, INC., an Iowa corporation, their successors and permitted assigns (hereafter referred to both individually, and collectively (if more than one), as " Lessee "). Each duty, obligation, representation, warranty, covenant, and agreement of Lessee under this Lease, or any document, exhibit, schedule, rider, or other instrument incorporated herein by reference, is made jointly and severally by each party comprising Lessee, and their respective permitted successors and assigns.

Lessee desires to lease from Lessor the equipment and other property (collectively, the " Equipment ") described in each Equipment Schedule executed pursuant to this Lease (each, a " Schedule "), with each Schedule incorporating by reference the terms and conditions of this Lease. The term “ Lease ” shall also incorporate by reference all Schedules and any Riders entered into with respect to such Schedules). Certain definitions and construction of certain of the terms used in this Lease are provided in Section 19 hereof.

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Lease agree as follows:

1. AGREEMENT TO LEASE; TERM . This Lease is effective as of the date specified above. By entering into a Schedule, Lessor leases the Equipment described therein to Lessee, and Lessee leases such Equipment from Lessor, in each case, subject to the terms and conditions in this Lease and such Schedule all other Schedules, Riders, Exhibits and all of the other documents and agreements executed in connection herewith (collectively, the “ Lease Documents ”). Each Schedule, incorporating the terms and conditions of this Lease, will, at Lessor’s option, constitute a separate instrument of lease. The term of lease with respect to each item of Equipment leased under a Schedule shall commence on the date of execution of such Schedule and continue for the term provided in that Schedule.

2. RENT . Lessee shall pay Lessor (a) the rental installments (“ Basic Rent ”) as and when specified in each Schedule, without demand, and (b) all of the other amounts payable in accordance with this Lease, such Schedule and/or any of the other Lease Documents (“ Other Payments ”, and together with the Basic Rent, collectively, the " Rent "). Upon Lessee’s execution thereof, the related Schedule shall constitute a non-cancelable net lease, and Lessee's obligation to pay Rent, and otherwise to perform its obligations under or with respect to such Schedule and all of the other Lease Documents, are and shall be absolute and unconditional and shall not be affected by any circumstances whatsoever, including any right of setoff, counterclaim, recoupment, deduction, defense or other right which Lessee may have against Lessor, the manufacturer or vendor of the Equipment (the " Suppliers "), or anyone else, for any reason whatsoever (each, an “ Abatement ”). Lessee agrees that all Rent shall be paid in accordance with Lessor’s or Assignee’s written direction. Time is of the essence. If any Rent is not received by Lessor within five (5) calendar days of the due date (or the next business day if the 5th day of such grace period is a Saturday, Sunday, or legal holiday for commercial banks under the laws of the state of the Lessor’s notice address), Lessee shall pay a late charge equal to ten (10%) percent of the amount (the “ Late Fee ”). In addition, in the event that any payment or any other amount due hereunder is not processed or is returned on the basis of insufficient funds, upon demand, Lessee shall pay Lessor a charge equal to five (5%) percent of the amount of such payment.

 

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3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSEE . Lessee represents, warrants and agrees that, as of the effective date of this Lease and of each Schedule: (a) Lessee has the form of business organization indicated, and is and will remain duly organized and existing in good standing under the laws of the place of organization specified, under Lessee’s signature and is duly qualified to do business wherever necessary to perform its obligations under the Lease Documents, including each jurisdiction in which the Equipment is or will be located. Lessee’s legal name is as shown in the preamble of this Lease; and Lessee’s Federal Employer Identification Number and organizational number are as set forth under Lessee’s signature. Within the previous six (6) years, Lessee has not changed its name, done business under any other name, or merged or been the surviving entity of any merger, except as disclosed to Lessor in writing. (b) The Lease Documents (1) have been duly authorized by all necessary action consistent with Lessee’s form of organization, (2) do not require the approval of, or giving notice to, any governmental authority, (3) do not contravene or constitute a default under any applicable law, Lessee’s organizational documents, or any agreement, indenture, or other instrument to which Lessee is a party or by which it may be bound, and (4) constitute legal, valid and binding obligations of Lessee enforceable against Lessee, in accordance with the terms thereof. (c) There are no pending actions or proceedings to which Lessee is a party, and there are no other pending or threatened actions or proceedings of which Lessee has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would have a Material Adverse Effect. As used herein, " Material Adverse Effect " shall mean (i) a materially adverse effect on the business, condition (financial or otherwise), operations, performance or properties of Lessee, or on Lessor’s rights and remedies under this Lease, or (ii) a material impairment of the ability of Lessee to perform its obligations under or remain in compliance with such Schedule or any of the other Lease Documents. Further, Lessee is not in default under any financial or other material agreement that, either individually, or in the aggregate, would have a Material Adverse Effect. (d) All of the Equipment covered by such Schedule is located solely in the jurisdiction(s) specified in such Schedule. (e) Under the applicable laws of each such jurisdiction, such Equipment consists (and shall continue to consist) solely of personal property and not fixtures. Such Equipment is removable from and is not essential to the premises at which it is located. (f) The financial statements of Lessee (copies of which have been furnished to Lessor) have been prepared in accordance with generally accepted accounting principles consistently applied (" GAAP "), and fairly present Lessee's financial condition and the results of its operations as of the date of and for the period covered by such statements, and since the date of such statements there has been no material adverse change in such conditions or operations. (g) With respect to any Collateral, Lessee has good title to, rights in, and/or power to transfer all of the same. (h) The prior owner of the Equipment is not an affiliate of Lessee. (i) The purchase of the Equipment represented an arms’ length transaction and the purchase price for the Equipment specified therein is the amount obtainable in an arms’ length transaction between a willing and informed buyer and a willing and informed seller under no compulsion to sell.

4. FURTHER ASSURANCES AND OTHER COVENANTS . Lessee agrees as follows: (a) Upon Lessor’s request, Lessee will furnish Lessor with (1) Lessee's balance sheet, statement of income and statement of retained earnings, prepared in accordance with GAAP, certified by a recognized firm of certified public accountants, within one hundred twenty (120) days of the close of each fiscal year of Lessee, (2) Lessee’s quarterly financial report certified by the chief financial officer of Lessee, within sixty (60) days of the close of each fiscal quarter of Lessee, and (3) all of Lessee’s Forms 10-K and 10-Q, if any, filed with the Securities and Exchange Commission (“ SEC ”) as and when filed (by furnishing these SEC forms, or making them publicly available in electronic form, in each case, within the time periods set forth in clauses (1) and (2), Lessee shall be deemed to have satisfied the requirements of clauses (1), (2) and (3)). (b) Lessee shall obtain and deliver to Lessor and/or promptly execute or otherwise authenticate any documents, filings, waivers (including any landlord and mortgagee waivers and/or subordination and lien waiver agreements), releases and other records, and will take such further action as Lessor may request in furtherance of Lessor’s rights under any of the Lease Documents. Lessee covenants that there are currently no mortgages on the premises on which the Equipment is located, and that in the event any mortgages are granted on such premises, Lessee shall immediately obtain mortgagee waivers in form and substance satisfactory to Lessor from any such mortgagees. Lessee will deliver to Lessor any additional information reasonably requested by Lessor relating to the Equipment and/or the general financial condition of Lessee. Lessee irrevocably authorizes Lessor to file UCC financing statements (“ UCCs “), and other filings with respect to the Equipment, including a registration of lien in the lien registry of any appropriate government agency. Without Lessor’s prior written consent, Lessee agrees not to file any corrective or termination statements or partial releases with respect to any UCCs filed by Lessor pursuant to this Lease. (c) Lessee shall provide written notice to Lessor: (1) thirty (30) days prior to any change in Lessee’s name or jurisdiction or form of organization; (2) promptly upon the occurrence of any Event of Default (as defined in Section 15) or event which, with the lapse of time or the giving of notice, or both, would become an Event of Default (a " Default "); and (3) promptly upon Lessee becoming aware of any alleged violation of applicable law relating to the Equipment or this Lease. (d) Lessee has been advised by Lessor that the USA Patriot Act establishes minimum standards of account information to be collected and maintained by Lessor, and that to help the government fight the funding of terrorism and money laundering activities, Federal law requires (to the extent applicable) all financial institutions to obtain, verify and record information that identifies each person who opens an account; and specifically, this means that when Lessee executes this Lease, Lessor may ask for Lessee’s name and address, the date of birth of the officers executing this Lease, and other information that will allow Lessor to identify Lessee; and that Lessor may also ask to see the driver’s license or other identifying documents of the officers of Lessee executing this Lease. (e) Lessee is and will remain in full compliance with all applicable laws including, without limitation, (i) ensuring that no person who owns a controlling interest in or otherwise controls Lessee is or shall be (A) listed on the Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets Control (“ OFAC ”), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation, or (B) a person designated under Sections 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders, and (ii) compliance with all applicable Bank Secrecy Act (“ BSA ”) laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations. (f) within five (5) days of the end of each month, Lessee shall furnish to Lessor a location report listing all locations on which Equipment is located, in form and substance satisfactory to Lessor.

 

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5. CONDITIONS PRECEDENT TO THIS LEASE . On the terms and conditions contained herein, Lessor hereby agrees to lease any Equipment under a Schedule, upon Lessor's determination that all of the following have been satisfied: (a) Lessor having received the following, in form and substance satisfactory to Lessor: (1) evidence as to due compliance with the insurance provisions of Section 11; (2) UCCs, real property waivers and all other filings required by Lessor; (3) a certificate of an appropriate officer of Lessee certifying: (A) resolutions duly authorizing the transactions contemplated in the applicable Lease Documents, and (B) the incumbency and signature of the officers of Lessee authorized to execute such documents; (4) the only manually executed original of the Schedule, and counterpart originals of all other Lease Documents; (5) evidence satisfactory to Lessor of the ownership and title to the Equipment, including, without limitation, certifications of the same; and (6) such other documents, agreements, instruments, certificates, opinions, and assurances, as Lessor may require. (b) All representations and warranties provided by Lessee in favor of Lessor in any of the Lease Documents shall be true and correct on the effective date of the related Schedule (Lessee's execution and delivery of the Schedule shall constitute Lessee’s acknowledgment of the same). (c) There shall be no Default or Event of Default under the Schedule or any other Lease Documents. The Equipment shall be at the locations disclosed in writing to Lessor by Lessee, as evidenced by the Schedule or location report, and shall be in the condition and repair required hereby; and on the effective date of such Schedule Lessee shall have good title to the Equipment described therein, free and clear of any claims, liens, attachments, rights of others and legal processes (" Liens ").

6. ACCEPTANCE UNDER LEASE . Lessee covenants and agrees that Lessee is already in possession of the Equipment and that Lessee’s possession of the Equipment shall be deemed acceptance of the Equipment, even if Lessee fails to execute and deliver a Schedule describing such Equipment. Each Schedule will evidence Lessee's unconditional and irrevocable acceptance under the Schedule of the Equipment described therein.

7. USE AND MAINTENANCE . Except as may be otherwise specified on any Schedule, (a) Lessee shall (1) use the Equipment solely in the continental United States and in the conduct of its business, for the purpose for which the Equipment was designed, in a careful and proper manner, and shall not permanently discontinue use of the Equipment; (2) operate, maintain, service and repair the Equipment, and maintain all records and other materials relating thereto, (A) in accordance and consistent with (i) all maintenance and operating manuals or service agreements, whenever furnished or entered into, including any subsequent amendments or replacements thereof, issued by the supplier or service provider, (ii) the requirements of all applicable insurance policies, (iii) the original purchase agreement under which such Equipment was acquired, so as to preserve all of Lessee’s and Lessor’s rights thereunder, including all rights to any warranties, indemnities or other rights or remedies, as and if applicable, (iv) all applicable laws, and (v) the prudent practice of other similar companies in the same business as Lessee, but in any event, to no lesser standard than that employed by Lessee for comparable equipment owned or leased by it; and (B) without limiting the foregoing, so as to cause the Equipment to be in good repair and operating condition and in at least the same condition as when delivered to Lessee hereunder, except for ordinary wear and tear resulting despite Lessee's full compliance with the terms hereof; (3) provide written notice to Lessor not less than thirty (30) days after any change of the location of any Equipment (or the location of the principal garage of any Equipment, to the extent that such Equipment is mobile equipment) as specified in the Schedule; and (4) not attach or incorporate the Equipment into any property except for other Equipment in such a manner that the Equipment may be deemed to have become an accession to or a part of such other property. (b) Within a reasonable time, Lessee will replace any parts of the Equipment which become worn out, lost, destroyed, damaged beyond repair or otherwise unfit for use, by new or reconditioned replacement parts which are free and clear of all Liens and have a value, utility and remaining useful life at least equal to the parts replaced (assuming that they were in the condition required by this Lease). Any modification or addition to the Equipment that is required by this Lease shall be made by Lessee. An interest in all such parts, modifications and additions to the Equipment immediately shall vest in Lessor, without any further action by Lessor or any other person, and they shall be deemed incorporated in the Equipment for all purposes of the related Schedule. Unless replaced in accordance with this Section, Lessee shall not remove any parts originally or from time to time attached to the Equipment, if such parts are essential to the operation of the Equipment, are required by any other provision of this Lease or cannot be detached from the Equipment without interfering with the operation of the Equipment or adversely affecting the value, utility and remaining useful life which the Equipment would have had without the addition of such parts. Except as permitted in this Section, Lessee shall not make any material alterations to the Equipment. (c) Lessee shall afford Lessor and/or its designated representatives immediate access to the premises where the Equipment is located for the purpose of inspecting and appraising such Equipment and all applicable maintenance or other records relating thereto at any time during normal business hours. If any discrepancies are found as they pertain to the general condition of the Equipment, Lessor will communicate these discrepancies to Lessee in writing. Lessee shall then have thirty (30) days to rectify these discrepancies at its sole expense. Lessee shall pay all expenses of a re-inspection by Lessor’s appointed representative, if corrective measures were required.

 

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8. DISCLAIMER; QUIET ENJOYMENT. (a) THE EQUIPMENT IS LEASED HEREUNDER “AS IS, WHERE IS”. LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE EQUIPMENT, INCLUDING ANY PART, OR ANY MATTER WHATSOEVER, INCLUDING, AS TO EACH ITEM OF EQUIPMENT, ITS DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, TITLE, ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT DISCOVERABLE BY LESSEE), COMPLIANCE OF SUCH ITEM WITH ANY APPLICABLE LAW, CONFORMITY OF SUCH ITEM TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE DOCUMENT OR TO THE DESCRIPTION SET FORTH IN THE RELATED SCHEDULE OR ANY OF THE OTHER LEASE DOCUMENTS, OR ANY INTERFERENCE OR INFRINGEMENT (EXCEPT AS EXPRESSLY PROVIDED IN SECTION 8(b)), OR ARISING FROM ANY COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL LESSOR BE LIABLE, FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT; AND LESSEE HEREBY WAIVES ANY CLAIMS ARISING OUT OF ANY OF THE FOREGOING. Without limiting the foregoing, Lessor will not be responsible to Lessee or any other person with respect to, and Lessee agrees to bear sole responsibility for, any risk or other matter that is the subject of Lessor’s disclaimer; and Lessor's agreement to enter into this Lease and any Schedule is in reliance upon the freedom from and complete negation of liability or responsibility for the matters so waived or disclaimed herein or covered by the indemnity in this Lease. So long as no Event of Default has occurred, Lessee may exercise Lessor’s rights, if any, under any warranty with respect to the Equipment. Lessee’s exercise of such rights shall be at its sole risk, shall not result in any prejudice to Lessor, and may be exercised only during the term of the related Schedule. Lessee shall not attempt to enforce any such warranty by legal proceeding without Lessor's prior written approval. Lessee hereby agrees to indemnify, defend and hold Lessor harmless for any and all losses, claims or damages suffered by Lessor as a result of warranty claims brought or threatened by Lessee. (b) Lessor warrants that during the term of each Schedule, so long as no Event of Default has occurred, Lessee's possession and use of the Equipment leased thereunder shall not be interfered with by Lessor or anyone rightfully claiming an interest through Lessor. The preceding warranty is in lieu of all other warranties by Lessor, whether written, oral or implied, with respect to this Lease or the Equipment. Any actual or purported breach of this warranty shall not give rise to any Abatement, but Lessee may bring a direct cause of action against Lessor for any actual damages directly resulting from any such breach.

9. FEES AND TAXES . Lessee agrees to: (a) (1) if permitted by law, file in Lessee’s own name or on Lessor’s behalf, directly with all appropriate taxing authorities all declarations, returns, inventories and other documentation with respect to any personal property taxes (or any other taxes in the nature of or imposed in lieu of property taxes) due or to become due with respect to the Equipment, and if not so permitted by law, to promptly notify Lessor and provide it with all information required in order for Lessor to timely file all such declarations, returns, inventories, or other documentation, and (2) pay on or before the date when due all such taxes assessed, billed or otherwise payable with respect to the Equipment directly to the appropriate taxing authorities; (b) (1) pay when due as requested by Lessor, and (2) defend and indemnify Lessor on a net after-tax basis against liability for all license and/or registration fees, assessments, and sales, use, property, excise, privilege, value added and other taxes or other charges or fees now or hereafter imposed by any governmental body or agency upon the Equipment or with respect to the manufacture, shipment, purchase, ownership, delivery, installation, leasing, operation, possession, use, return, or other disposition thereof or the Rent hereunder (other than taxes on or measured solely by the net income of Lessor); and (c) indemnify Lessor against any penalties, charges, interest or costs imposed with respect to any items referred to in clauses (a) and (b) above (the items referred to in clauses (a), (b), and (c) above being referred to herein as “ Impositions ”). Any Impositions which are not paid when due and which are paid by Lessor shall, at Lessor's option, become immediately due from Lessee to Lessor, together with interest thereon at the Default Rate. Lessee also agrees to make and cooperate with Lessor with any filings or registrations in any foreign jurisdiction as requested by Lessor.

 

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10. INTENT; GRANTING CLAUSE. (a) Lessee and Lessor intend that each Schedule, referencing or incorporating by reference the terms of this Lease, constitutes the retention of a security interest by Lessor in the Equipment described therein and not a true “lease” as defined in the UCC. Lessee hereby authorizes Lessor to file one or more UCC-1 financing statements as a “notice filing” with the Secretary of State of Lessee’s state of incorporation or formation (as the case may be) and to file any continuation or amendment statements deemed necessary by Lessor to maintain the effectiveness of such filings. (b) In order to secure: (A) the prompt payment of the Rent and all of the other amounts from time to time outstanding with respect hereto and to each Schedule, and the performance and observance by Lessee of all of the provisions hereof and thereof and of all of the other Lease Documents; and (B) the prompt payment, performance and observance by Lessee of all other obligations of Lessee to Lessor under any other agreement or instrument, both now in existence and hereafter created (as the same may be renewed, extended or modified), including (without limitation) any other Master Lease Agreements and all Schedules now or hereafter executed pursuant thereto (collectively, the “Related Lease”); Lessee hereby collaterally assigns, grants, and conveys to Lessor, a security interest in and lien on all of Lessee’s right, title and interest in and to all of the following (whether now existing or hereafter created, and including any other collateral described on any rider hereto; collectively, the “ Collateral ”): (1) the Equipment described in the attached Schedules or otherwise covered thereby (including all inventory, fixtures or other property comprising the Equipment), together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto; (2) all subleases, chattel paper, accounts, security deposits, and general intangibles relating thereto, and any and all substitutions, replacements or exchanges for any such item of Equipment or other collateral, in each such case in which Lessee shall from time to time acquire an interest; and (3) any and all proceeds therefrom or thereby, including without limitation, insurance proceeds. The collateral assignment, security interest and lien granted herein shall survive the termination, cancellation or expiration of this Agreement or a particular Schedule until such time as Lessee’s obligations hereunder, thereunder and under the other Lease Documents are fully and indefeasibly discharged. (c) If a court of competent jurisdiction concludes that any amounts hereunder constitute the payment of interest, it shall be at an interest rate that is equal to the lesser of the maximum lawful rate permitted by applicable law or the effective interest rate used by Lessor in calculating such amounts. To that end, it is agreed that the rate of interest hereunder shall not, at any time, exceed any applicable lawful limitation on the rate or amount of interest that may be chargeable hereunder (the “Interest Rate Limitation”). In the event that the rate of interest otherwise applicable hereunder (including any sums paid independent of this Lease and properly determined under applicable law to be interest) shall exceed the Interest Rate Limitation, the interest rate applicable to this Lease shall automatically be reduced to the maximum interest rate which does not exceed the Interest Rate Limitation, and sums paid as interest which would cause the effective rate of interest hereunder to exceed the Interest Rate Limitation shall be applied to reduce the principal balance due hereunder, if any, or otherwise refunded to Lessee.. (d) Lessee hereby acknowledges and agrees that, to the extent that Lessor’s participation in any purchase and lease of an item or items of Equipment pursuant to this Lease constitutes a financing of Lessee’s acquisition of such item or items of Equipment, Lessee’s repayment of the amounts of such financing shall apply on a “first-in/first-out” basis so that portions of the amounts of such financing used to purchase such item or items of Equipment shall be deemed repaid in the chronological order of the use of such amounts to purchase the same.

11. INSURANCE . Upon acceptance under a Schedule, Lessee shall maintain all-risk insurance coverage with respect to the Equipment insuring against, among other things: (a) any casualty to the Equipment (or any portion thereof), including loss or damage due to fire and the risks normally included in extended coverage, malicious mischief and vandalism, for not less than the greater of full replacement value of the Equipment or the Stipulated Loss Value thereof (as the same may be adjusted pursuant to Section 16 below); and (b) any commercial liability arising in connection with the Equipment, including both bodily injury and property damage with a combined single limit per occurrence of not less than the amount specified in the Schedule; having a deductible reasonably satisfactory to Lessor. Lessor shall have the right to contact Lessee’s insurance provider at any time. Lessee covenants to provide Lessor prior written notice of any changes to the insurance coverage required hereunder. Lessee shall cause to be provided to Lessor, not less than fifteen (15) days prior to the scheduled expiration or lapse of such insurance coverage, evidence satisfactory to Lessor of renewal or replacement coverage. The required insurance policies (including endorsements) shall (i) be in form and amount reasonably satisfactory to Lessor, and written by insurers of recognized reputation and responsibility satisfactory to Lessor (but such insurer shall carry a current rating by A.M. Best Company of at least "A" for a general policyholder and a financial rating of at least "VIII"), (ii) be endorsed to name Lessor and Comerica Bank, N.A. as an additional insured (but without responsibility for premiums) and lender’s loss payee (although in this instance, “lender” is the Lessor) and loss payee, (iii) provide that any amount payable under the required casualty coverage shall be paid directly to Lessor as sole loss payee, and (iv) provide for thirty (30) days’ written notice by such insurer of cancellation, material change, or non- renewal. In the event Lessee fails to maintain insurance for the Equipment as required hereunder, upon Lessor’s receipt of notice of or otherwise knowledge: (i) of an unpaid insurance premium; (ii) of a termination or cancellation of any required insurance policy; or (iii) that a required insurance policy is not to be renewed and Lessee fails to provide replacement coverage at least fifteen (15) days prior to the termination of existing coverage, Lessor may, at its option, procure and substitute another policy of insurance in the amount required pursuant to the foregoing terms of this Lease with such companies as Lessor may select, the cost of which shall be paid by Lessee upon demand. All sums paid by Lessor in procuring said insurance that are not promptly reimbursed by Lessee shall be added to Rent due under the Lease, and shall be immediately due and payable without notice, with interest thereon at the Default Rate.

 

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12. LOSS AND DAMAGE . (a) At all times during the term of this Lease, Lessee shall indemnify and hold Lessor harmless for losses arising from the loss, theft, confiscation, taking, unavailability, damage or partial destruction of the Equipment and Lessee shall not be released from its obligations under any Schedule or other Lease Document in any such event. (b) Lessee shall provide prompt written notice to Lessor of any Total Loss or any material damage to the Equipment. Any such notice must be provided together with any damage reports provided to any governmental authority, the insurer, and any documents pertaining to the repair of such damage, including copies of work orders, and all invoices for related charges. (c) Without limiting any other provision hereof, Lessee shall repair all damage to any item of Equipment from any and all causes, other than a Total Loss, so as to cause it to be in the condition and repair required by this Lease. (d) A “ Total Loss ” shall be deemed to have occurred to an item of Equipment upon: (1) the actual or constructive total loss of any item of the Equipment, (2) the loss, disappearance, theft or destruction of any item of the Equipment, or damage to any item of the Equipment that is uneconomical to repair or renders it unfit for normal use, or (3) the condemnation, confiscation, requisition, seizure, forfeiture or other taking of title to or use of any item of the Equipment or the imposition of any Lien thereon by any governmental authority. On the next rent payment date following a Total Loss (a “ Loss Payment Date ”), Lessee shall pay to Lessor the Basic Rent due on that date plus the greater of the (i) Stipulated Loss Value of or (ii) the entire amount of insurance proceeds received by Lessee in connection with any Total Loss or other loss or damage to the item or items of the Equipment with respect to which the Total Loss has occurred (the “ Lost Equipment ”), together with any Other Payments due hereunder with respect to the Lost Equipment. Notwithstanding anything to the contrary provided herein, to the extent any insurance proceeds are received by Lessee in connection with the Equipment, such proceeds shall be immediately remitted to Lessor to be credited against the amounts owed under this Lease, as determined by Lessor in its sole an absolute discretion. Upon making such payment, (i) the balance owed under the Lease shall not be re-amortized; rather, the payment shall be applied to amounts due under the Lease in inverse chronological order of the Lease termination date, commencing first with the Termination Value (defined below); (ii) Lessee shall remain liable for, and pay as and when due, all future Basic Rent and all Other Payments until paid in full in accordance with the terms of this Lease, and (iii) Lessor shall terminate its interest in any Lost Equipment to the extent it is paid off in full as determined by Lessor, " AS IS WHERE IS ", and “WITH ALL FAULTS”, but subject to the requirements of any third party insurance carrier in order to settle an insurance claim. As used in this Lease, " Stipulated Loss Value " shall mean the product of the portion of the Total Invoice Cost allocated to the Lost Equipment as determined by Lessor in its sole discretion, times the percentage factor applicable to the Loss Payment Date, as set forth in the Schedule of Stipulated Loss Values incorporated in such Schedule. After the final rent payment date of the original term or any renewal term of a Schedule, the Stipulated Loss Value shall be determined as of the last rent payment date during the applicable term of such Schedule, and the applicable percentage factor shall be the last percentage factor set forth in the Schedule of Stipulated Loss Values incorporated in such Schedule. (e) Lessor shall be under no duty to Lessee to pursue any claim against any person in connection with a Total Loss or other loss or damage. (f) If Lessor receives a payment under an insurance policy required under this Lease in connection with any Total Loss or other loss of or damage to an item of Equipment, and such payment is both unconditional and indefeasible, then provided Lessee shall have complied with the applicable provisions of this Section, Lessor shall either (1) credit such proceeds against any amounts owed by Lessee under the Lease in inverse chronological order of the Lease termination date, commencing first with the Termination Value (defined below), or (2) if received with respect to repairs made pursuant to Section 12(c), remit such proceeds to Lessee up to an amount equal to the amount of the costs of repair actually incurred by Lessee, as established to Lessor’s satisfaction.

13. REDELIVERY . (a) If (i) an Event of Default occurs with respect to a Schedule and Lessee is required to surrender or return the Equipment described on such Schedule to Lessor, or (ii) this Lease expires and Lessee does not purchase the Equipment pursuant to Rider No. 1 to the Equipment Schedule, Lessee shall, at Lessor’s option, deliver such Equipment to Lessor, at Lessee’s sole cost and expense, free and clear of all Liens whatsoever, to such place(s) within the continental United States as Lessor shall specify. Lessee shall provide, at its expense, transit insurance for the delivery period in an amount equal to the replacement value of such Equipment and Lessor shall be named as the loss payee on all such policies of insurance. Lessee shall cause: (1) the Supplier’s representative or other qualified person acceptable to Lessor (the “ Designated Person ”) to de-install such Equipment in accordance with the Supplier’s specifications (as applicable) and pack such Equipment properly and in accordance with the Supplier’s recommendations (as applicable); and (2) such Equipment to be transported in a manner consistent with the Supplier’s recommendations and practices (as applicable), at Lessee’s sole cost and expense. Upon surrender or delivery, as applicable, such Equipment shall be: (i) in the same condition as when the related Schedule was executed, ordinary wear and tear excepted; (ii) mechanically and structurally sound, capable of performing the functions for which such Equipment was originally designed, in accordance with the Supplier’s published and recommended specifications (as applicable); (iii) delivered or surrendered, as applicable, with all component parts in good operating condition (and all components must meet or exceed the Supplier’s minimum recommended specifications, unless otherwise agreed by Lessor in writing); (iv) delivered or surrendered, as applicable, with all software and documentation necessary for the operation of such Equipment for the performance of the functions for which such Equipment was originally designed (whether or not such software is embedded in or otherwise is a part of such Equipment); and (v) cleaned and cosmetically acceptable, with all Lessee-installed markings removed and all rust, corrosion or other contamination having been removed or properly treated, and in such condition so that it may be immediately installed and placed in service by a third party. Upon delivery, Lessee shall ensure that such Equipment shall be in compliance with all applicable Federal, state and local laws, and health and safety guidelines. Lessee shall be responsible for the cost of all repairs, alterations, inspections, appraisals, storage charges, insurance costs, demonstration costs and other related costs necessary to cause such Equipment to be in full compliance with the terms of this Lease. (b) If requested by Lessor, Lessee shall also deliver all related records and other data to Lessor, including all drawings, records of maintenance, modifications, additions and major repairs, computerized maintenance history, and any maintenance and repair manuals, if any (collectively, the “ Records ”). All drawings, manuals or other documents delivered to Lessor that are subject to periodic revision will be fully up-to-date and current to the latest revision standard of any particular manual or document. In the event any such Records are missing or incomplete, Lessor shall have the right to cause the same to be reconstructed at Lessee’s expense. (c) In addition to Lessor's other rights and remedies hereunder, if such Equipment and the related Records are not returned in a timely fashion, or if repairs are necessary to place any item of Equipment in the condition required in this Section, Lessee shall (i) continue to pay to Lessor per diem rent at the last prevailing lease rate under the applicable Schedule with respect to such item of Equipment, for the period of delay in redelivery, and/or for the period of time reasonably necessary to accomplish such repairs, and (ii) pay to Lessor an amount equal to the aggregate cost of any such repairs. Lessor's acceptance of such rent on account of such delay and/or repair does not constitute an extension or renewal of the term of the related Schedule or a waiver of Lessor's right to prompt return of such Equipment in proper condition. Such amount shall be payable upon the earlier of Lessor’s demand or the return of such Equipment in accordance with this Lease. (d) Without limiting any other terms or conditions of this Lease, the provisions of this Section are of the essence of each Schedule, and upon application to any court of equity having jurisdiction, Lessor shall be entitled to a decree against Lessee requiring Lessee’s specific performance of its agreements in this Section.

 

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14. INDEMNITY . Lessee shall indemnify, defend and keep harmless Lessor and any Assignee (as defined in Section 17), and their respective members, managers, officers agents and employees (each, an " Indemnitee "), from and against any and all Claims (other than such as may directly and proximately result from the actual, but not imputed, gross negligence or willful misconduct of such Indemnitee), by paying or otherwise discharging same, when and as such Claims shall become due. Lessee agrees that the indemnity provided for in this Section includes the agreement by Lessee to indemnify each Indemnitee from the consequences of its own simple negligence, whether that negligence is the sole or concurring cause of the Claims, and to further indemnify each such Indemnitee with respect to Claims for which such Indemnitee is strictly liable. Lessor shall give Lessee prompt notice of any Claim hereby indemnified against and Lessee shall be entitled to control the defense of and/or to settle any Claim, in each case, so long as (1) no Default or Event of Default has occurred and is then continuing, (2) Lessee confirms, in writing, its unconditional and irrevocable commitment to indemnify each Indemnitee with respect to such Claim, (3) Lessee is financially capable of satisfying its obligations under this Section, (4) Lessor approves the defense counsel selected by Lessee, and (5) there is no reasonable risk of criminal liability being imposed on Lessor or any of its Indemnitees as a result of such Claim. The term " Claims " shall mean all claims, allegations, harms, judgments, settlements, suits, actions, debts, obligations, damages (whether incidental, consequential or direct), demands (for compensation, indemnification, reimbursement or otherwise), losses, penalties, fines, liabilities (including strict liability), financing or securitization losses or charges, other charges that Lessor (or any of its affiliates) has incurred or for which it is responsible, in the nature of interest, Liens, financing charges and any other costs (including attorneys' fees and disbursements and any other legal or non-legal expenses of investigation or defense of any Claim, whether or not such Claim is ultimately defeated or enforcing the rights, remedies or indemnities provided for hereunder, or otherwise available at law or equity to Lessor), of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, by or against any person, arising on account of (A) any Lease Document, including the performance, breach (including any Default or Event of Default) or enforcement of any of the terms thereof, or any early repayment of Lessee’s obligations under the Lease Documents (whether pursuant to acceleration, liquidation or otherwise) or any early termination of the Lease, or (B) the Equipment, or any part or other contents thereof, any substance at any time contained therein or emitted therefrom, including any hazardous substances, or the premises at which the Equipment may be located from time to time, or (C) the ordering, acquisition, delivery, installation or rejection of the Equipment, the possession of any property to which it may be attached from time to time, maintenance, use, condition, ownership or operation of any item of Equipment, and by whomsoever owned, used, possessed or operated, during the term of any Schedule with respect to that item of Equipment, the existence of latent and other defects (whether or not discoverable by Lessor or Lessee) any claim in tort for negligence or strict liability, and any claim for patent, trademark or copyright infringement, or the loss, damage, destruction, theft, removal, return, surrender, sale or other disposition of the Equipment, or any item thereof, including Claims involving or alleging environmental damage, or any criminal or terrorist act, or for whatever other reason whatsoever. If any Claim is made against Lessee or an Indemnitee, the party receiving notice of such Claim shall promptly notify the other, but the failure of the party receiving notice to so notify the other shall not relieve Lessee of any obligation hereunder.

 

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15. DEFAULT . A default shall be deemed to have occurred hereunder and under a Schedule upon the occurrence of any of the following (each, an " Event of Default "): (a) non-payment of Basic Rent within five (5) days of the applicable rent payment date; (b) non-payment of any Other Payment within five (5) days after it is due; (c) failure to maintain, use or operate the Equipment in compliance with applicable law; (d) breach by Lessee of its covenants pursuant to Section 4(e) hereof; (e) failure to obtain, maintain and comply with all of the insurance coverages required under this Lease that is not cured within five (5) days after notice thereof; (f) any transfer or encumbrance, or the existence of any Lien, except for Permitted Liens; (g) a payment or other default by Lessee under any loan, lease, guaranty or other financial obligation to Lessor (including, without limitation, the Related Lease) or its affiliates which default entitles the other party to such obligation to exercise remedies; (h) a payment or other default by Lessee under any material loan, lease, guaranty or other material financial obligation to any third party which default has been declared; (i) an inaccuracy in any representation or breach of warranty by Lessee (including any false or misleading representation or warranty) in any financial statement or Lease Document, including any omission of any substantial contingent or unliquidated liability or claim against Lessee; (j) the commencement of any bankruptcy, insolvency, receivership or similar proceeding by or against Lessee or any of its properties or business (unless, if involuntary, the proceeding is dismissed within sixty (60) days of the filing thereof) or the rejection of this Lease or any other Lease Document in any such proceeding; (k) the failure by Lessee generally to pay its debts as they become due or its admission in writing of its inability to pay the same; (l) Lessee shall (1) enter into any transaction of merger or consolidation, unless Lessee shall be the surviving entity (such actions being referred to as an " Event "), unless the surviving entity is organized and existing under the laws of the United States or any state, and prior to such Event: (A) such person executes and delivers to Lessor (x) an agreement satisfactory to Lessor, in its sole discretion, containing such person's effective assumption, and its agreement to pay, perform, comply with and otherwise be liable for, in a due and punctual manner, all of Lessee's obligations having previously arisen, or then or thereafter arising, under any and all of the Lease Documents, and (y) any and all other documents, agreements, instruments, certificates, opinions and filings requested by Lessor; and (B) Lessor is satisfied as to the creditworthiness of such person, and as to such person's conformance to the other standard criteria then used by Lessor when approving transactions similar to the transactions contemplated in this Lease; (2) cease to do business as a going concern, liquidate, or dissolve; or (3) sell, transfer, or otherwise dispose of all or substantially all of its assets or property; (m) if Lessee is privately held and effective control of Lessee's voting capital stock/membership interests/partnership interests, issued and outstanding from time to time, is not retained by the present holders (unless Lessee shall have provided thirty (30) days' prior written notice to Lessor of the proposed disposition and Lessor shall have consented thereto in writing); (n) if Lessee is a publicly held corporation and there is a material change in the ownership of Lessee’s capital stock, unless Lessor is satisfied as to the creditworthiness of Lessee and as to Lessee's conformance to the other standard criteria then used by Lessor for such purpose immediately thereafter; (o) there occurs a default or anticipatory repudiation under any guaranty executed in connection with this Lease; (p) failure to satisfy the requirements of any financial covenants set forth herein, or in any rider to this Lease or any Schedule; or (q) failure to timely pay any material suppliers and mechanics for work or repairs to the Equipment; or (r) breach by Lessee of any other covenant, condition or agreement (other than those in items (a)-(q)) under this Lease or any of the other Lease Documents that continues for thirty (30) days after Lessor’s written notice to Lessee (but such notice and cure period will not be applicable unless such breach is curable by practical means within such notice period). The occurrence of an Event of Default with respect to any Schedule shall, at the sole discretion of Lessor, constitute an Event of Default with respect to any or all Schedules to which it is then a party. Notwithstanding anything to the contrary set forth herein, Lessor may exercise all rights and remedies hereunder independently with respect to each Schedule and the Equipment covered by such Schedule.

16. REMEDIES . (a) If an Event of Default occurs with respect to any Schedule, the Lessor thereunder may (in its sole discretion) exercise any one or more of the following remedies with respect to such Schedule and any or all other Schedules to which such Lessor is then a party: (1) proceed at law or in equity, to enforce specifically Lessee’s performance or to recover damages; (2) declare each such Schedule in default, and terminate each such Schedule or otherwise terminate Lessee’s right to use the Equipment and Lessee’s other rights, but not its obligations, thereunder and Lessee shall immediately assemble, make available and, if Lessor requests, return the Equipment to Lessor in accordance with the terms of Section 13 of this Lease; (3) enter any premises where any item of Equipment is located and take immediate possession of and remove (or disable in place) such item (and/or any unattached parts) by self-help, summary proceedings or otherwise without liability; (4) use the premises where the Equipment is located to store, repair, assemble, auction, sell or otherwise deal with the Equipment, without cost or liability to Lessor; (5) sell, re-lease or otherwise dispose of any or all of the Equipment, whether or not in Lessor's possession, at public or private sale, with or without notice to Lessee, and apply or retain the net proceeds of such disposition, with Lessee remaining liable for any deficiency and with any excess being for the account of Lessee; (6) enforce any or all of the preceding remedies with respect to any Equipment, and apply any deposit or other cash collateral, or any proceeds of any such Equipment, at any time to reduce any amounts due to Lessor; (7) demand and recover from Lessee all Liquidated Damages and all Other Payments whenever the same shall be due; and (8) exercise any and all other remedies allowed by applicable law, including the UCC. As used herein, “ Liquidated Damages ” shall mean the liquidated damages (all of which, Lessee hereby acknowledges, are damages to be paid in lieu of future Basic Rent and are reasonable in light of the anticipated harm arising by reason of an Event of Default, and are not a penalty) described in the first sentence of Section 16(b).

 

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Upon the occurrence of the Event of Default described in Section 15(j) hereof, the remedy provided in Clause (8) above shall be automatically exercised without the requirement of prior written notice to Lessee or of any other act or declaration by Lessor, and the Liquidated Damages described therein shall be immediately due and payable. If at any time after the occurrence of an Event of Default or as a result of any early repayment of Lessee’s obligations under the Lease Documents (whether pursuant to acceleration, liquidation or otherwise) or early termination of the Lease, Lessor determines that (i) the cost of Lessor (or any of its affiliates) maintaining the Lease or otherwise extending credit to Lessee has increased or Lessor’s (or any of its affiliates’ ) cost of capital has increased, or (ii) Lessor’s (or any of its affiliates’) rate of return has decreased or (iii) Lessor (or any of its affiliates) has incurred or will incur increased costs, charges, or any loss, whether pursuant to any third party financing or securitization to which Lessor or any of its affiliates is a party or otherwise, then, in each case, the Basic Rent, the Liquidated Damages and the Stipulated Loss Value shall be increased to an amount necessary to compensate Lessor and its affiliates for such increased costs, charges, losses, and reduction in such rate of return. For the avoidance of doubt, if Lessor or any of its affiliates has entered into a securitization or similar financing transaction of which the Lease Documents are a part, the Basic Rent, the Liquidated Damages and the Stipulated Loss Value shall be increased to an amount necessary to repay in full Lessor’s (or any of its affiliates’) outstanding balance under such securitization or similar financing transaction documents in respect of the Lease Documents in the case of any early repayment of Lessee’s obligations under the Lease Documents (whether pursuant to acceleration, liquidation or otherwise) or any early termination of the Lease.

If at any time after the occurrence of an Event of Default, Lessor determines that the cost of maintaining the Lease or otherwise extending credit to Lessee has increased because such Event of Default has the effect of reducing the rate of return on Lessor’s capital or increasing the cost of Lessor’s capital, then the Basic Rent, the Liquidated Damages and the Stipulated Loss Value shall be increased to compensate Lessor for such increased cost and reduction in such rate of return.

(b) If an Event of Default occurs with respect to any Schedule and/or the Equipment covered thereby, upon demand by Lessor, Lessee shall pay to Lessor an amount calculated as the Stipulated Loss Value of the Equipment (determined as of the next rent payment date after the date of the occurrence of the subject Event of Default), together with all other Rent due with respect to the related Schedule as of such determination date, and all Enforcement Costs (defined in Section 16(c)), less a credit for any disposition proceeds, if applicable pursuant to the application provisions in the next sentence. If Lessor demands the Liquidated Damages under this Section 16(b), and recovers and sells the Equipment, any proceeds received in good and indefeasible funds shall be applied by Lessor, with respect to the related Schedule: first , to pay all Enforcement Costs, to the extent not previously paid; second , to pay to Lessor an amount equal to any unpaid Rent due and payable, together with the Liquidated Damage amounts specified in this Section 16(b), to the extent not previously paid; third , to pay to Lessor any interest accruing on the amounts covered by the preceding clauses, at the Default Rate, from and after the date the same becomes due, through the date of payment; and fourth , (A) if the Lessor under such Schedule is also the Lessor under any other Schedules (whether by retaining the same, or as Assignee), to satisfy any remaining obligations under any or all such other Schedules, or (B) if such Lessor is not the Lessor under any other Schedule, or if Lessee’s obligations to such Lessor under such other Schedules have been fully and indefeasibly satisfied, to reimburse Lessee for such amounts to the extent paid by Lessee as Liquidated Damages pursuant to this Section 16(b).

 

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(c) Unless already specifically provided for in Section 16(b), if an Event of Default occurs with respect to any Schedule, Lessee shall also be liable for all of the following (“ Enforcement Costs ”): (1) all unpaid Rent due before, during or after exercise of any of the foregoing remedies, and (2) all reasonable legal fees (including consultation, drafting notices or other documents, expert witness fees, sending notices or instituting, prosecuting or defending litigation or arbitration) and other enforcement costs and expenses incurred by reason of any Default or Event of Default or the exercise of Lessor's rights or remedies, including all expenses incurred in connection with the return or other recovery of any Equipment in accordance with the terms of this Lease or in placing such Equipment in the condition required hereby, or the sale, re- lease or other disposition (including but not limited to costs of transportation, possession, storage, insurance, taxes, lien removal, repair, refurbishing, advertising and brokers’ fees, and reasonable legal fees and costs for inside and outside counsel), and sales or use taxes incurred by Lessor in connection with any disposition of the Equipment after the occurrence of an Event of Default, and all other pre-judgment and post-judgment enforcement related actions taken by Lessor or any actions taken by Lessor in any bankruptcy case involving Lessee, the Equipment, or any other person. From and after the date on which an Event of Default occurs, Lessee shall pay interest to Lessor with respect to all amounts due hereunder until such amounts are received by Lessor in good funds at a per annum interest rate that is the lesser of eighteen (18) percent or the maximum rate permitted by applicable law (the “ Default Rate ”). No right or remedy is exclusive and each may be used successively and cumulatively. Any failure to exercise the rights granted hereunder upon any Default or Event of Default shall not constitute a waiver of any such right. No extension of time for payment or performance of any of Lessee’s obligations hereunder shall operate to release, discharge, modify, change or affect the original liability of Lessee for such obligations, either in whole or in part. In any action to repossess any Equipment or other Collateral, Lessee waives any bonds and any surety or security required by any applicable laws as an incident to such repossession. Notices of Lessor’s intention to accelerate, acceleration, nonpayment, presentment, protest, dishonor or any other notice whatsoever (other than as expressly set forth herein) are waived by Lessee. Any notice given by Lessor of any disposition of the Equipment or any Collateral or other intended action of Lessor which is given in accordance with this Lease at least five (5) business days prior to such action, shall constitute fair and reasonable notice of such action. The execution or acceptance of a Schedule shall not constitute a waiver by Lessor of any pre-existing Default or Event of Default. With respect to any disposition of any Equipment or Collateral pursuant to this Section, (i) Lessor shall have no obligation, subject to the requirements of commercial reasonableness, to clean-up or otherwise prepare the same for disposition, (ii) Lessor may comply with any applicable law in connection with any such disposition, and any actions taken in connection therewith shall not be deemed to have adversely affected the commercial reasonableness of any disposition thereof, (iii) Lessor may disclaim any title or other warranties in connection with any such disposition, (iv) if Lessor purchases any of the Equipment or Collateral at a public or private sale pursuant hereto, Lessor may pay for the same by crediting some or all of Lessee’s obligations under any Schedule, and (v) Lessee shall remain responsible for any deficiency remaining after Lessor’s exercise of its remedies and application of any funds or credits against Lessee’s obligations under any Schedule, and Lessee shall be entitled to any excess after such application.

17. ASSIGNMENT . (a) LESSEE SHALL NOT ASSIGN, DELEGATE, TRANSFER OR ENCUMBER ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR UNDER ANY SCHEDULE, OR ITS LEASEHOLD INTEREST OR ANY COLLATERAL, SUBLET THE EQUIPMENT OR OTHERWISE PERMIT THE EQUIPMENT TO BE OPERATED OR USED BY, OR TO COME INTO OR REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE. Without limiting the foregoing, (1) Lessee may not attempt to dispose of any of the Equipment, and (2) Lessee shall (A) maintain the Equipment free from all Liens, other than Permitted Liens, (B) notify Lessor immediately upon receipt of notice of any Lien affecting the Equipment, and (C) defend Lessor's interest in the Equipment. A “ Permitted Lien ” shall mean any Lien for Impositions, Liens of mechanics, materialmen, or suppliers and similar Liens arising by operation of law, provided that any such Lien is incurred by Lessee in the ordinary course of business, for sums that are not yet delinquent or are being contested in good faith and with due diligence, by negotiations or by appropriate proceedings which suspend the collection thereof and, in Lessor's sole discretion, (i) do not involve any substantial danger of the sale, forfeiture or loss of the Equipment or any interest therein, and (ii) for the payment of which adequate assurances or security have been provided to Lessor. No disposition referred to in this Section shall relieve Lessee of its obligations, and Lessee shall remain primarily liable under each Schedule and all of the other Lease Documents. (b) Lessor may at any time with or without notice to Lessee grant a security interest in, sell, assign, delegate or otherwise transfer (an “ Assignment ”) all or any part of its interest in the Equipment, this Lease or any Schedule and any related Lease Documents or any Rent thereunder, or the right to enter into any Schedule, and Lessee shall perform all of its obligations thereunder, to the extent so transferred, for the benefit of the beneficiary of such Assignment (such beneficiary, including any successors and assigns, an “ Assignee ”). Lessee agrees not to assert against any Assignee any Abatement (without limiting the provisions of Section 2) or Claim that Lessee may have against Lessor, and Assignee shall not be bound by, or otherwise required to perform any of Lessor’s obligations, unless expressly assumed by such Assignee. Lessor shall be relieved of any such assumed obligations. If so directed in writing, Lessee shall pay all Rent and all other sums that become due under the assigned Schedule and other Lease Documents directly to the Assignee or any other party designated in writing by Lessor or such Assignee. Lessee acknowledges that Lessor’s right to enter into an Assignment is essential to Lessor and, accordingly, waives any restrictions under applicable law with respect to an Assignment and any related remedies. Upon the request of Lessor or any Assignee, Lessee also agrees (i) to promptly execute and deliver to Lessor or to such Assignee an acknowledgment of the Assignment in form and substance satisfactory to the requesting party, an insurance certificate and such other documents and assurances reasonably requested by Lessor or Assignee, and (ii) to comply with all other reasonable requirements of any such Assignee in connection with any such Assignment. Upon such Assignment and except as may otherwise be provided herein, all references in this Lease to “Lessor” shall include such Assignee. (c) Subject always to the foregoing, this Lease and each Schedule shall inure to the benefit of, and are binding upon, Lessee’s and Lessor’s respective successors and permitted assigns (and, without limiting the foregoing, shall bind all persons who become bound as a “new debtor” to this Lease and any Schedule, as set forth in UCC Section 9-203(e)).

18. MISCELLANEOUS.

(a) This Lease, each Schedule and any Riders hereto or thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and shall not be amended or modified in any manner except by a document in writing executed by both parties.

 

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(b) This Lease has been negotiated at arm’s length between persons knowledgeable in the matters dealt with herein. In addition, each party to this Lease has been represented by independent legal counsel of such party’s own choice. Accordingly, any rule of law or any other statute, legal decision or common law principle of similar effect that would require interpretation of any uncertainty or ambiguity in this Lease against the party that drafted it, is of no application and is hereby expressly waived. This Lease shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties and this Lease.

(c) If any provision of this Lease, as applied to any party or to any circumstance, shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall in no way affect any other provision of this Lease, the application of any such provision in any other circumstance, or the validity or enforceability of this Lease, and any provision which is found to be void, invalid or unenforceable shall be curtailed and limited only to the extent necessary to bring such provision within the requirements of the law.

(d) Each party to this Lease warrants, represents and agrees that, in executing this Lease, such party (i) does so with knowledge of any and all rights that such party may have with respect to the provisions of this Lease, (ii) has carefully read and considered this Lease and fully understands its contents and the significance of its contents, (iii) is entering into this Lease of such party’s own informed and free will, based upon such party’s own judgment and without any coercion or fear of retaliation, and (iv) has obtained independent legal advice with respect to this Lease.

(e) Lessee hereby waives presentment for payment, protest and demand, notice of protest, demand, dishonor and nonpayment under this Lease, notice of acceleration, notice of intent to accelerate, and any and all other notices or matters of a like nature, and consent to any and all renewals and extensions of the time of payment hereof, including, but not limited to, any notice required under the Civil Code of any applicable jurisdiction(s).

(f) The representations, warranties and agreements of Lessee herein shall be deemed to be continuing and to survive the execution and delivery of this Lease, each Schedule and any other Lease Documents. With respect to each Schedule, the obligations of Lessee under Sections 8, 9, 10, 12, 13 and 14 hereof, together with any of Lessee's obligations under the other provisions of this Lease which have accrued but not been fully satisfied, performed or complied with prior to the expiration or earlier cancellation or termination of such Schedule, shall survive the expiration or earlier cancellation or termination thereof.

(g) All of Lessee’s obligations hereunder and under any Schedule shall be performed at Lessee’s sole expense. Lessee shall reimburse Lessor promptly upon demand for all expenses incurred by Lessor in connection with (1) any action taken by Lessor at Lessee’s request, or in connection with any option, (2) the filing or recording of real property waivers and UCCs, (3) any Enforcement Costs not recovered pursuant to Section 16, (4) all inspections and appraisals, and (5) all lien search reports (and copies of filings) requested by Lessor. If Lessee fails to perform any of its obligations with respect to a Schedule, Lessor shall have the right, but shall not be obligated, to effect such performance, and Lessee shall reimburse Lessor, upon demand, for all expenses incurred by Lessor in connection with such performance. Lessor's effecting such compliance shall not be a waiver of Lessee's default. All amounts payable under this Section, if not paid when due, shall be paid to Lessor together with interest thereon at the Default Rate.

(h) Lessee irrevocably appoints Lessor as Lessee's attorney-in-fact (which power shall be deemed coupled with an interest) to: (1) make minor corrections to manifest errors in factual data in any Schedule and/or any addenda, attachments, exhibits and/or riders to this Lease or any Schedule; and (2) execute, endorse and deliver any documents and checks or drafts relating to or received in payment for any loss or damage under the policies of insurance required by this Lease, but only to the extent that the same relates to the Equipment, or are required by titling agencies in order to reflect Lessor as the lienholder with respect to certificates of title pertaining to motor vehicles (if any) comprising the Equipment.

(i) Lessee agree to execute, acknowledge, deliver and record or file such further instruments (including, without limitation, further deeds of trust, security agreements, financing statements, continuation statements and assignments of rents or leases) and do such further acts as may be necessary, desirable or proper to implement the provisions of the immediately preceding subparagraph or to carry out more effectively the purposes of this Lease.

(j) LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH LESSEE AND/OR LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE.

 

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(k) All notices (excluding billings and communications in the ordinary course of business) hereunder shall be in writing, personally delivered, delivered by overnight courier service, or sent by certified mail, return receipt requested, addressed to the other party at its respective address stated below the signature of such party or at such other address as such party shall from time to time designate in writing to the other party; and shall be effective from the date of receipt.

(l) During the term of this Lease, Lessee shall not prepay any indebtedness owning to any person (other than Lessor) if such prepayment impairs Lessee’s ability to fulfill its obligations hereunder on a timely basis.

(m) During the term of this Lease, Lessee shall not enter into any acquisition, merger, consolidation, reorganization, or recapitalization, or reclassify its capital, or liquidate, wind up, or dissolve (or suffer any liquidation or dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its business, property, or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all of the properties, assets, or other evidence of beneficial ownership of any person or entity, or commit to do any of the foregoing.

(n) During the term of this Lease, Lessee shall not guarantee or otherwise become in any way liable with respect to any obligation of any person or entity except by endorsement of instruments or items of payment for deposit to the account of Lessee which are transmitted or turned over to Lessor.

(o) During the term of this Lease, Lessee shall not take any action concerning or with respect to the Equipment that is inconsistent with the provisions or purposes of this Lease or that would otherwise impair or threaten to impair Lessor’s interest in the Equipment or Lessor’s rights under the Lease.

(p) This Lease shall not be effective unless and until accepted by execution by an officer of Lessor at the address as set forth below the signature of Lessor. THIS LEASE AND ALL OF THE OTHER LEASE DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MICHIGAN (THE “ STATE ”) (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF THE STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT. The parties agree that any action or proceeding arising out of or relating to this Lease may be commenced in any state or Federal court in the State, and agree that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confer personal jurisdiction if served personally or by certified mail to it at the mailing address below Lessee’s signature, or as it may provide in writing from time to time, or as otherwise provided under the laws of the State.

(q) In the event of any litigation between or among the parties hereto respecting or arising out of this Lease, the successful or prevailing party shall be entitled to recover attorneys’ fees and other costs in connection therewith, including any attorneys’ fees incurred after a judgment has been rendered by a court of competent jurisdiction. Any judgment shall include an attorneys’ fees clause which shall entitle the judgment creditor to recover attorneys’ fees incurred to enforce a judgment hereon, which attorneys’ fees shall be an element of post-judgment costs. The parties agree that this attorneys’ fee provision shall not merge into any judgment.

(r) All amounts payable hereunder are payable in lawful money of the United States. Lessee agrees to pay all costs of collection when incurred, including reasonable attorneys’ fees and costs, whether or not a suit or action is instituted to enforce this Lease, including but not limited to court costs, appraisal fees, the cost of searching records, obtaining title reports and title insurance and trustee’s fees, to the extent permitted by applicable law.

(s) This Lease and all of the other Lease Documents may be executed in counterparts. Photocopies or facsimile transmissions of signatures shall be deemed original signatures and shall be fully binding on the parties to the same extent as original signatures. The transfer or possession of the “Original” of this Lease shall be irrelevant to the full or collateral assignment of, or grant of security interest in, any Schedule; provided, however, no security interest in any Schedule may be created through the transfer, possession or control, as applicable, of any counterpart of such Schedule other than the original thereof, which shall be identified as the document or record (as applicable) marked "Original" and all other counterparts shall be marked "Duplicate".

 

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(t) Each right, power and remedy given to Lessor by this Lease or any Rider shall be in addition to all other rights, powers, and remedies given to Lessor by this Lease or any Rider or by virtue of any statute, rule of law, or any other agreement between Lessee and Lessor. Any forbearance or failure or delay by Lessor in exercising any right, power, or remedy hereunder shall not preclude the further exercise thereof. Every right, power, and remedy of Lessor shall continue in full force and effect until such right, power, or remedy is specifically waived by an instrument in writing signed by Lessor.

(u) If Lessor is required by the terms hereof to pay to or for the benefit of Lessee any amount received as a refund of an Imposition or as insurance proceeds, Lessor shall not be required to pay such amount, if any Default has occurred and not been cured or any Event of Default shall have occurred and not been waived by Lessor. In addition, if Lessor is required by the terms hereof to cooperate with Lessee in connection with certain matters, such cooperation shall not be required if a Default or Event of Default has then occurred and is continuing.

(v) To the extent Lessor’s consent is requested or required with respect to any matter, the reasonableness of Lessor's withholding of such consent shall be determined based on the then existing circumstances; provided, that Lessor's withholding of its consent shall be deemed reasonable for all purposes if (i) the taking of the action that is the subject of such request, might result (in Lessor's discretion), in (A) an impairment of Lessor's rights, title or interests hereunder or under any Schedule or other Lease Document, or to the Equipment, or (B) expose Lessor to any Claims or Impositions, or (ii) Lessee fails to provide promptly to Lessor any filings, certificates, opinions or indemnities required by Lessor as a condition to such consent. Neither Lessee nor any of its affiliates will in the future issue any press release or other public disclosure using the name of Lessor or its affiliates or referring to this Agreement or the other Lease Documents without at least five (5) business days' prior notice to Lessor and without the prior written consent of Lessor unless (and only to the extent that) such Lessee or affiliate is required to do so under applicable law and then, in any event, such Lessee or affiliate will consult with Lessor before issuing such press release or other public disclosure. Notwithstanding the foregoing, any Lessee may make such public disclosures with respect to the transactions contemplated by the Lease Documents in connection with all regular and periodic reports (including without limitation any Form 8-Ks) and all registration statements and prospectuses, if any, filed by Lessee with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority. Lessee hereby authorizes Lessor and its affiliates to make mention of Lessor’s participation in this transaction in its marketing, sales materials, printed media, tombstones or web-based material.

(w) The recitals set forth above are incorporated herein by reference.

19. DEFINITIONS AND RULES OF CONSTRUCTION . (a) The following terms when used in this Lease or in any of the Schedules have the following meanings: (1) “ affiliate ”: with respect to any given person, shall mean (i) each person that directly or indirectly owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, five (5) percent or more of the voting stock, membership interest or similar equity interest having ordinary voting power in the election of directors or managers of such person, (ii) each person that controls, is controlled by, or is under common control with, such person, or (iii) each of such person’s officers, directors, members, joint venturers and partners. For the purposes of this definition, “control” of a person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; (2) " applicable law " or " law ": any law, rule, regulation, ordinance, order, code, common law, interpretation, judgment, directive, decree, treaty, injunction, writ, determination, award, permit or similar norm or decision of any governmental authority; (3) “AS IS, WHERE IS” : AS IS, WHERE IS , without warranty, express or implied, with respect to any matter whatsoever; (4) " business day ": any day, other than a Saturday, Sunday, or legal holiday for commercial banks under the laws of the state of the Lessor’s notice address; (5) " governmental authority ": any federal, state, county, municipal, regional or other governmental authority, agency, board, body, instrumentality or court, in each case, whether domestic or foreign; (6) " person ": any individual, corporation, limited liability entity, partnership, joint venture, or other legal entity or a governmental authority, whether employed, hired, affiliated, owned, contracted with, or otherwise related or unrelated to Lessee or Lessor; and (7) " UCC " or " Uniform Commercial Code ": the Uniform Commercial Code as in effect in the State or in any other applicable jurisdiction; and any reference to an article (including Article 2A) or section thereof shall mean the corresponding article or section (however termed) of any such applicable version of the Uniform Commercial Code.

(b) The following terms when used herein or in any of the Schedules shall be construed as follows: (1) " herein ," " hereof ," " hereunder ," etc.: in, of, under, etc. this Lease or such other Lease Document in which such term appears (and not merely in, of, under, etc. the section or provision where the reference occurs); (2) " including ": means including without limitation unless such term is followed by the words "and limited to," or similar words; and (3) " or ": at least one, but not necessarily only one, of the alternatives enumerated. Any defined term used in the singular preceded by "any" indicates any number of the members of the relevant class. Any Lease Document or other agreement or instrument referred to herein means such agreement or instrument as supplemented and amended from time to time. Any reference to Lessor or Lessee shall include their permitted successors and assigns. Any reference to an applicable law shall also mean such law as amended, superseded or replaced from time to time.

20. RIDERS . Riders Nos. 1 through 3 attached hereto are incorporated in this Lease.

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IN WITNESS WHEREOF, the parties hereto have caused this Master Lease Agreement to be duly executed as of the day and year first above set forth. 

UTICA LEASECO, LLC Lessor
By:	/s/ James B Junker
Name:	James B. Junker
Title:	Vice President
905 South Boulevard East Rochester Hills, Michigan 48307
1847 NEESE INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO
303 Division Street East Grand Junction, Iowa 50107 Form of Organization: corporation Jurisdiction of Organization: Delaware Federal Employer Identification No.: 38-3922937 State Tax ID No.: 6179390
NEESE, INC . Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO
303 Division Street East Grand Junction, Iowa 50107 Form of Organization: corporation Jurisdiction of Organization: Iowa Federal Employer Identification No.: 42-1396043 State Tax ID No.: 163297

 

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RIDER NO. 1 TO MASTER LEASE AGREEMENT

To and part of Master Lease Agreement dated as of the 3rd day of March, 2017 (the "Lease"), between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), and 1847 NEESE INC., a Delaware corporation and NEESE, INC., an Iowa corporation, their successors and permitted assigns (hereafter referred to both individually, and collectively (if more than one), as "Lessee").

AUTOMATED CLEARING HOUSE PAYMENTS.

All payments of Basic Rent pursuant to Section 2 of the Lease shall be paid by automatic debit from Lessee’s bank account (the “Bank Account”) specified on the Authorization for Pre-Arranged Payments attached hereto as Exhibit No. 1 (the “Authorization”).

In addition to the conditions precedent specified in Section 5 of the Lease, Lessor’s agreement to purchase and lease Equipment under a Schedule is conditioned upon Lessor having received the Authorization duly executed by Lessee, in form and substance satisfactory to Lessor.

In addition to the representations and warranties made by Lessee in Section 3 of this Lease, Lessee represents, warrants and agrees that, as of the effective date of this Lease and of each Schedule: (a) the Bank Account is Lessee’s primary operating account as of the date of this Lease, and any additional bank accounts specified on Exhibit No. 2 attached hereto constitute all other bank accounts maintained by Lessee as of the date of this Lease; and (b) Lessee shall provide to Lessor prior written notice if at any time the Bank Account ceases to be Lessee’s primary operating account or if Lessee establishes other bank accounts in addition to those specified on Exhibit No. 2 attached hereto.

In addition to the Events of Default specified in Section 15 of this Lease, Lessee’s failure to maintain the Bank Account as its primary operating account, without (a) prior notice to Lessor, (b) the designation of a replacement primary operating account, and (c) execution and delivery to Lessor of an Authorization with respect to such replacement account, shall constitute an Event of Default.

If any payment of Basic Rent or any other amount due under the Lease intended to be paid by automated clearing house debit is not processed or returned on the basis of insufficient funds in the designated bank account, upon demand, Lessee shall pay Lessor a charge equal to five (5) percent of the amount of such payment. 

1847 NEESE INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO
NEESE, INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO

 

15

Exhibit 1

AUTHORIZATION FOR PRE-ARRANGED PAYMENTS

Please fill out and execute this document along with a matching voided check

		CREDITOR
		Name                Utica Leaseco, LLC
		Address      905 South Boulevard East                       City: Rochester Hills                            State: MI                          Zip: 48307
		Account ____________________________
		DEPOSITOR
		Customer Name ______________________________________________               Phone # _________________________
		Address _______________________________________________________________
		City _______________                                       State _______________                                       Zip _______________

From time to time, Depositor may enter into an additional Financing Agreement with Creditor (hereinafter each “Additional Agreement” and collectively the “Additional Agreements”). Such Additional Agreements will require Depositor to remit certain periodic payments and other sums including, but not limited to, applicable insurance charges, interim rent, service and returned item fees or personal property and other taxes and governmental charges associated with the ownership, possession or use of the Property to Creditor. PAYMENTS UNDER THE ADDITIONAL AGREEMENT(S) MAY VARY. Depositor may request to be set-up for Electronic Funds Withdrawal for any Additional Agreement by sending a written request to Creditor. Such request may be sent via mail, facsimile or electronic mail and Creditor may rely on any such request even if the request is not signed by Depositor. Any such request approved by Creditor shall be subject to all of the terms and conditions of this Master Authorization for Electronic Funds Withdrawal Agreement. For any such request approved by Creditor, Depositor hereby requests and authorizes Creditor (or any assignee of Creditor), without notice to Depositor, to issue any check, draft or order for payment on the below referenced Bank Account, as Depositor’s agent, until such time as Depositor delivers written revocation of such authorization to Creditor and the below referenced Bank or Financial Institution (the “Bank”). Creditor hereby authorizes the Bank to debit the Bank Account by an amount equal to the check, draft or order presented for payment. Nothing herein shall require Creditor or Depositor to enter into any Additional Agreements.

_____________ Initials

FINANCIAL INSTITUTION ACCOUNT INFORMATION

Name: ______________________ Phone # Fax #. (____)_______________________

Branch Address: City: _____________________ State: __________________ Zip: _____________________

Checking Account # ABA Routing # (9 digits) :

16

Exhibit 2

Bank Account Information of Lessee

17

RIDER NO. 2 TO MASTER LEASE AGREEMENT

To and part of Master Lease Agreement dated as of the 3rd day of March, 2017 (the "Lease"), between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), and 1847 NEESE INC., a Delaware corporation and NEESE, INC., an Iowa corporation, their successors and permitted assigns (hereafter referred to both individually, and collectively (if more than one), as "Lessee").

LEASE ADMINISTRATION FEE . Lessee shall pay to Lessor a Lease Administration fee in the amount of Three Thousand and 00/100 ($3,000.00) Dollars on the first anniversary of the Base Lease Commencement Date and on each anniversary of the Base Lease Commencement Date thereafter, during the term of this Lease. 

UTICA LEASECO, LLC Lessor
By:	/s/ James B. Junker
Name:	James B. Junker
Title:	Vice President
1847 NEESE INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO
NEESE, INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO

 

18

RIDER NO. 3 TO MASTER LEASE AGREEMENT

To and part of Master Lease Agreement dated as of the 3rd day of March, 2017 (the "Lease"), between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), 1847 NEESE INC., a Delaware corporation and NEESE, INC., an Iowa corporation, their successors and permitted assigns (hereafter referred to both individually, and collectively (if more than one), as "Lessee").

ADDITIONAL CONDITIONS PRECEDENT . In addition to the conditions precedent specified in Section 5 of the Lease, Lessor’s agreement to purchase and lease any Equipment under a Schedule is conditioned upon Lessor having received the following, in form and substance reasonably satisfactory to Lessor: The Master Lease Guaranty (the “Guaranty”), in form and substance satisfactory to Lessor, duly executed by

ELLERY W. ROBERTS

(if more than one, collectively, the “Guarantor”). 

UTICA LEASECO, LLC Lessor
By:	/s/ James B. Junker
Name:	James B. Junker
Title:	Vice President
1847 NEESE INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO
NEESE, INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO

 

19

MASTER LEASE GUARANTY

THIS MASTER LEASE GUARANTY (this " Guaranty ") is executed and delivered by

ELLERY W. ROBERTS

(if more than one, collectively, " Guarantor ") in favor of UTICA LEASECO, LLC, its successors and assigns (" Lessor "), in connection with that certain Master Lease Agreement dated as of the 3rd day of March, 2017, together with all Equipment Schedules executed or to be executed pursuant thereto (the " Lease "), by and between Lessor and 1847 NEESE INC., a Delaware corporation and NEESE, INC., an Iowa corporation, their successors and permitted assigns (hereafter referred to both individually, and collectively (if more than one) as “ Lessee ”). All capitalized terms shall have the meanings defined in the Lease Documents (as such term is defined in the Lease).

In order to induce Lessor to enter into the Lease (execution and delivery hereof being a condition precedent to Lessor’s obligations under the Lease), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby UNCONDITIONALLY GUARANTEES upon a Recourse Event (defined below) (a) to pay Lessor in lawful money of the United States all Rents and other sums due under the Lease Documents, or any substitutions therefor, in the amounts, at the times and in the manner set forth in the Lease Documents; and (b) to perform, at the time and in the manner set forth in the Lease Documents, all of the terms, covenants and conditions therein required to be kept, observed or performed by Lessee (collectively, the “ Obligations ”). If there is more than one guarantor of the Obligations, the obligations of each guarantor are joint and several.

For the purposes of this Guaranty, a “ Recourse Event ” shall be deemed to have occurred in the event any or all of the following have occurred: (a) fraud or material or willful misrepresentation or gross negligence or willful misconduct, or any criminal or illegal activity, by Lessee, Guarantor, any other guarantor of the Obligations, or any Affiliates of any of them (collectively, the “ Lessee Parties ”) in connection with the Lease or any Equipment or any portion thereof; (b) any intentional misapplication by any of the Lessee Parties of dues, rents, revenues, deposits or other proceeds or deposits received in connection with or relating to any Equipment; (c) waste to any Equipment (ordinary wear and tear excepted) or, to the extent of revenue from the applicable Equipment, any intentional or grossly negligent failure to maintain any Equipment in the manner required by the Lease Documents; (d) any removal or disposal of any Equipment or other property in which Lessor has (or purports to have) a leasehold or security interest in violation of the terms of the Lease Documents; (e) any transfer or release of any Equipment in violation of the Lease Documents, or the transfer of a controlling interest in any of the parties constituting Lessee or incurring debt prohibited under the Lease or any Lease Document; (f) the improper application of any insurance proceeds or condemnation awards (to the extent of such proceeds or awards) in violation of any Lease Document; (g) any of the Lessee Parties in connection with any enforcement action or exercise or assertion of any right or remedy in accordance with applicable law (each, an “Action”) by or on behalf of Lessor under or in connection with the Lease or any other Lease Document resulting from an Event of Default, acts (1) in bad faith and (2) in a manner designed to impede or delay Lessor’s rights in connection with any Action, or, in bad faith, seeks to raise or raises an affirmative defense or other defense, non-compulsory counterclaim, offset, judicial intervention or injunctive or other equitable relief of any kind, or asserts in a pleading filed in connection with a judicial proceeding arising from such Event of Default any defense against Lessor or any right in connection with any security for the Lease (each an “ Interference Event ”); (h) Guarantor, any of the Lessee Parties or any other party on behalf of Guarantor or any of the Lessee Parties in bad faith raises any objection or defense, or sends any inconsistent or contrary notice of any kind to anyone, or takes any action to hinder, delay or otherwise interfere with the exercise of Lessor’s (or any nominee of Lessor) rights under any of the Lease Documents; (i) unless the Lessor is acting in bad faith, the failure by Lessee to, within ten (10) Business Days after written demand therefor by Lessor, either (1) fully returns and makes available, to Lessor or Lessor’s nominee, all of the Equipment by consent in lieu of replevin (including the failure to execute and deliver to Lessor or Lessor’s nominee any and all reasonable and customary documentation required by Lessor in connection therewith), (2) agree to and promptly facilitate a consent replevin with respect to the Lease and the Equipment by Lessor under applicable law (including the failure to cooperate in the submission, preparation or execution of any documents necessary for the expeditious handling of any deed-in-lieu or consent replevin), or (3) execute and deliver to Lessor a Stipulation for Entry of Agreed Judgment of Replevin, a Stipulation of Consent Replevin, a Stipulation to a Receiver and any other stipulation, agreed order or pleading reasonably required by Lessor in connection with any such consent replevin or the confirmation of any replevin sale(s); (j) any of the Lessee Parties objects in any way to Lessor (or any nominee of Lessor) holding title to any or all of the Equipment after a replevin, consent replevin, deed-in-lieu transaction or otherwise; (k) if Lessee, Guarantor or any other party in bad faith sues, commences, asserts, brings or files, in any court or other tribunal, in any jurisdiction, any suit, action, litigation, complaint, counterclaim, cross-claim, cross-complaint, third-party complaint or other pleading (or cooperates in any such suit, action or litigation, claim, complaint or other pleading) against Lessor or any of its affiliates or principals in relation to the Equipment, the Lease or the exercise of Lessor’s rights under any or all of the Lease Documents; (l) the failure by Lessee to timely and fully satisfy any environmental obligations under any of the Lease Documents, including any indemnity with respect to environmental matters (whether or not such obligations survive payment in full of the Lease); or (m) the Equipment or Lessee is encumbered by any financing or lien other than the Lease.

 

20

1. This Guaranty is a continuing one and shall terminate only upon full payment of all rents and all other sums due under the Lease Documents and the performance of all of the terms, covenants and conditions therein required to be kept, observed or performed by Lessee, including such payment and performance under all schedules made a part of said Lease Documents, whether to be performed before or after the last rent payment has been made under the Lease Documents. Guarantor expressly waives the right to revoke or terminate this Guaranty, including any statutory right of revocation under the laws of any state. This Guaranty is a guaranty of prompt payment and performance (and not merely a guaranty of collection).

2. Guarantor authorizes Lessor, with Lessee’s consent where required, without notice or demand, and without affecting his liability hereunder, from time to time to: (a) change the amount, time or manner of payment of rent or other sums reserved in the Lease Documents; (b) change any of the terms, covenants, conditions or provisions of the Lease Documents; (c) amend, modify, change or supplement the Lease Documents; (d) consent to Lessee’s assignment of the Lease Documents or to the sublease of all, or any portion, of the equipment covered by the Lease Documents; (e) receive and hold security for the payment of this Guaranty or the performance of the Lease Documents, and exchange, enforce, waive and release any such security; and (f) apply such security and direct the order or manner of sale thereof as Lessor in its discretion may determine.

3. Guarantor waives any right to require Lessor to: (a) proceed against Lessee, any other guarantor or any other person directly or contingently liable for the payment of any of the Obligations; (b) proceed against or exhaust any security held from Lessee, any other guarantor or any other person directly or contingently liable for the payment of any of the Obligations; (c) pursue any other remedy in Lessor’s power whatsoever; or (d) notify Guarantor of any adverse change in Lessee’s financial condition or of any default by Lessee in the payment of any rent or other sums reserved in the Lease Documents or in the performance of any term, covenant or condition therein required to be kept, observed or performed by Lessee. Guarantor waives any defense arising by reason of any disability or other defense of Lessee (except to the extent the Obligations have been paid), any lack of authority of Lessee with respect to the Lease Documents, the invalidity, illegality or lack of enforceability of the Lease Documents from any cause whatsoever, the failure of Lessor to acquire title to the equipment (if applicable) subject to the Lease Documents or to perfect or maintain perfection of any interest therein or the cessation from any cause whatsoever of the liability of Lessee (including, without limitation, discharge in bankruptcy), and any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety, or that might otherwise limit recourse against Guarantor; provided, however, that Guarantor does not waive any defense arising from the due performance by Lessee of the terms and conditions of the Lease Documents. Lessor may, at Lessor’s election, foreclose on any security held by Lessor and sell, lease, transfer or otherwise deal with such Equipment, by one or more judicial or nonjudicial sales, without affecting or impairing in any way the liability of Guarantor. Guarantor waives any defense arising out of any such election by Lessor, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Lessor against Lessee or any security. In the absence of agreeing to the waivers contained in this paragraph, Guarantor may have the right of subrogation or reimbursement against Lessee. For example, if Lessor elects to take back and sell the Equipment through a nonjudicial sale, Guarantor gives up any potential defenses by agreeing to the foregoing waivers. Guarantor also expressly waives any defense or benefit that may be derived from any “one form of action” rule or anti-deficiency statute he would otherwise have under the laws of any state. Upon demand, Guarantor agrees to pay and perform the Obligations regardless of any existing or future offset or claim which may be asserted by Guarantor. This Guaranty and Guarantor’s payment obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Obligations is rescinded or must otherwise be restored or returned by Lessor, all as though such payment had not been made. Lessor’s good faith determination as to whether a payment must be restored or returned shall be binding on Guarantor. Until the payment and performance of all Obligations due or to be performed by Lessee, Guarantor shall have no right of subrogation against Lessee, and waives any right to enforce any remedy which Lessor now has or hereafter may have against Lessee, and waives any benefit of, and any right to participate in, any security now or hereafter held by Lessor. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of dishonor, and notices of acceptance of this Guaranty.

 

21

4. Guarantor represents and warrants to Lessor that:

(a) (1) The execution, delivery and performance hereof by Guarantor do not contravene any law, governmental rule, regulation or order now binding on Guarantor, or contravene the provisions of, or constitute a default under, or result in the creation of any lien or encumbrances upon the property of Guarantor under, any material agreement, indenture or other instrument to which Guarantor is a party or by which he or his property is bound. (2) The financial statements of Guarantor (copies of which have been furnished to Lessor) fairly present Guarantor’s financial condition as of the date of such statements, and since the date of such statements there has been no material adverse change in such condition.

(b) This Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with the terms hereof, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally, and by applicable laws (including any applicable common law and equity) and judicial decisions which may affect the remedies provided herein.

(c) There are no pending actions or proceedings to which Guarantor is a party, and there are no other pending or threatened actions or proceedings of which Guarantor has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would have a Material Adverse Effect. As used herein, “Material Adverse Effect” shall mean (1) a materially adverse effect on the business, condition (financial or otherwise), operations, performance or properties of Guarantor, or (2) a material impairment of the ability of Guarantor to perform his obligations under or to remain in compliance with this Guaranty or of Lessor’s rights and remedies under this Guaranty. Further, Guarantor is not in default under any financial or other material agreement which, either individually or in the aggregate, would have a Material Adverse Effect.

(d) Guarantor acknowledges and agrees that Guarantor will enjoy a substantial economic benefit by virtue of the extension of credit by Lessor to Lessee pursuant to the Lease Documents.

5. Guarantor covenants and agrees as follows: (a) Guarantor will provide to Lessor on or before March 31 and August 31 of each year, financial statements of Guarantor as of the immediately preceding December 31 and July 30, respectively, prepared in reasonable detail and certified as true and correct by Guarantor. (b) Guarantor will promptly execute and deliver to Lessor such further documents, instruments and assurances and take such further action as Lessor from time to time may request in order to carry out the intent and purpose of this Guaranty and to establish and protect the rights and remedies created or intended to be created in favor of Lessor hereunder. (c) Guarantor has been advised by Lessor that the USA Patriot Act establishes minimum standards of account information to be collected and maintained by Lessor, and that to help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account; and specifically, this means that when Guarantor executes this Guaranty, Lessor may ask for Guarantor’s name and address, date of birth, and other information that will allow Lessor to identify Guarantor; and that Lessor may also ask to see the driver’s license or other identifying documents of Guarantor.

6. A default shall be deemed to have occurred under this Guaranty upon the occurrence of any of the following (each, an “Event of Default”): (a) Guarantor shall fail to perform or observe any covenant, condition or agreement to be performed or observed by him hereunder and such failure shall continue unremedied for a period of ten (10) days after the earlier of the actual knowledge of Guarantor or written notice thereof to Guarantor by Lessor; or (B) Guarantor shall (1) be generally not paying his debts as they become due, (2) take action for the purpose of invoking the protection of any bankruptcy or insolvency law, or any such law is invoked against or with respect to Guarantor or his property, and such petition filed against Guarantor is not dismissed within sixty (60) days; or (c) there is an anticipatory repudiation of Guarantor’s obligations pursuant to this Guaranty; or (d) any certificate, statement, representation, warranty or audit contained herein or furnished with respect to this Guaranty by or on behalf of Guarantor proving to have been false in any material respect at the time as of which the facts therein set forth were stated or certified, or having omitted any substantial contingent or unliquidated liability or claim against Guarantor; or (e) a payment or other default by Guarantor under any loan, lease, guaranty or other financial obligation to Lessor or its affiliates which default entitles the other party to such obligation to exercise remedies; or (f) a payment or other default by Guarantor under any material loan, lease, guaranty or other material financial obligation to any third party which default has been declared; (g) Guarantor dies and his obligations in connection with this Guaranty are not assumed by a person reasonably satisfactory to Lessor; or (h) an Event of Default shall have occurred under, and as defined in, the Lease.

 

22

Upon an Event of Default hereunder, Lessor may, at its option (without election of remedies), do any one or more of the following, all of which are hereby authorized by Guarantor:

A. declare this Guaranty and the other Lease Documents to be in default and thereafter sue for and recover from the Guarantor and/or Lessee all liquidated damages, accelerated rentals and/or other sums otherwise recoverable from the Guarantor and/or Lessee under this Guaranty and the other Lease Documents; and/or

B. sue for and recover all damages then or thereafter incurred by Lessor as a result of such Event of Default; and/or

C. seek specific performance of Guarantor’s obligations hereunder.

In addition, Guarantor shall be liable for all reasonable attorneys’ fees and other costs and expenses incurred by reason of any Event of Default or the exercise of Lessor’s remedies hereunder and/or under the Lease Documents, whether or not a lawsuit is filed. No right or remedy referred to in this Section is intended to be exclusive, but each shall be cumulative, and shall be in addition to any other remedy referred to above or otherwise available at law or in equity, and may be exercised concurrently or separately from time to time.

The failure of Lessor to exercise the rights granted hereunder upon any Event of Default shall not constitute a waiver of any such right upon the continuation or reoccurrence of any such Event of Default.

The obligations of Guarantor hereunder are independent of the obligations of Lessee. A separate action or actions may be brought and prosecuted against Guarantor (or any thereof) whether an action is brought against Lessee or whether Lessee be joined in any such action or actions.

7. GUARANTOR AGREES THAT THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF LESSOR AND GUARANTOR HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MICHIGAN, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Guarantor agrees that any action or proceeding arising out of or relating to this Guaranty may be commenced in any state or Federal court in the State of Michigan, and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confer personal jurisdiction if served personally or by certified mail to him at his address hereinbelow set forth, or as he may provide in writing from time to time, or as otherwise provided under the laws of the State of Michigan.

8. GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH GUARANTOR AND LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS GUARANTY OR THE LEASE DOCUMENTS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR AND GUARANTOR HEREBY ACKNOWLEDGES THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT HE HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF HIS OWN FREE WILL, AND THAT HE HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

9. This Guaranty shall inure to the benefit of Lessor, its successors and assigns, and shall be binding upon the personal representatives, heirs and permitted assigns of Guarantor. The obligations of Guarantor hereunder may not be assigned or delegated without the prior written consent of Lessor.

 

23

10. All notices hereunder shall be in writing, personally delivered, delivered by overnight courier service, sent by certified mail, return receipt requested, addressed as follows:

	If to Guarantor:	Ellery W. Roberts 17025 NW 20 th Street Pembroke Pines, Florida 33028
	If to Lessor:	UTICA LEASECO, LLC 905 South Boulevard East Rochester Hills, Michigan 48307

or to such other address as such party shall from time to time designate in writing to the other party; and shall be effective from the date of receipt.

11. This Guaranty constitutes the entire agreement between the parties with respect to the subject matter hereof and shall not be rescinded, amended or modified in any manner except by a document in writing executed by both parties. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

12. This Guaranty may be executed in counterparts. Photocopies or facsimile transmissions of signatures shall be deemed original signatures and shall be fully binding on the parties to the same extent as original signatures.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

24

IN WITNESS WHEREOF, Guarantor has caused this Master Lease Guaranty to be duly executed as of the 3rd day of March, 2017.

	/s/ Ellery W. Roberts
	Name: ELLERY W. ROBERTS

STATE OF FLORIDA	)
	)	SS.
COUNTY OF BROWARD	)

The foregoing instrument was acknowledged before me 2 day of March, 2017, by Ellery W. Roberts, an individual.

	/s/ Isabel Farrelra
	Notary Public, State of Florida
	Acting in the County of Broward
	My commission expires 03/02/2020

 

25

EQUIPMENT SCHEDULE NEESE-0001

This Equipment Schedule NEESE-0001 is executed pursuant to that certain Master Lease Agreement dated as of the 3rd day of March, 2017 (the "Lease"; which is incorporated herein by reference). This Equipment Schedule, together with the Lease and all other schedules and riders thereto, shall constitute one document. To the extent of any conflict or inconsistency between the terms of this Equipment Schedule and the Lease, the terms of this Equipment Schedule shall prevail. Capitalized terms not defined herein shall have the meanings ascribed to them in the Lease

1. LEASE OF EQUIPMENT. Pursuant to Section 5 of the Lease, the Lessor shall lease to Lessee, and the Lessee shall lease from the Lessor, the Equipment set forth in the schedule attached hereto.

TOTAL INVOICE COST: $3,240,000.00

2. TERM. Upon and after the date of execution hereof, the Equipment shall be subject to the terms and conditions provided herein and in the Lease.

A full term of lease with respect to said Equipment shall commence on the date hereof and shall extend for forty-eight (48) months after June 3, 2017 (the "Base Lease Commencement Date").

3. RENT.

a. During the period from the date hereof to the Base Lease Commencement Date (the "Interim Term"), the pro-rated rent for said Equipment shall be as set forth in the schedule below.

b. From and after the Base Lease Commencement Date, the monthly rent for said Equipment during the term of this Lease shall be as set forth in the schedule below.

Payment Date	Amount
4/3/2017	$53,000.00
5/3/2017	$53,000.00
6/3/2017	$53,000.00
7/3/2017	$85,321.63
8/3/2017	$85,321.63
9/3/2017	$85,321.63
10/3/2017	$85,321.63
11/3/2017	$85,321.63
12/3/2017	$85,321.63
1/3/2018	$85,321.63
2/3/2018	$85,321.63
3/3/2018	$85,321.63
4/3/2018	$85,321.63
5/3/2018	$85,321.63
6/3/2018	$85,321.63
7/3/2018	$85,321.63
8/3/2018	$85,321.63
9/3/2018	$85,321.63
10/3/2018	$85,321.63

 

26

11/3/2018	$85,321.63
12/3/2018	$85,321.63
1/3/2019	$85,321.63
2/3/2019	$85,321.63
3/3/2019	$85,321.63
4/3/2019	$85,321.63
5/3/2019	$85,321.63
6/3/2019	$85,321.63
7/3/2019	$85,321.63
8/3/2019	$85,321.63
9/3/2019	$85,321.63
10/3/2019	$85,321.63
11/3/2019	$85,321.63
12/3/2019	$85,321.63
1/3/2020	$85,321.63
2/3/2020	$85,321.63
3/3/2020	$85,321.63
4/3/2020	$85,321.63
5/3/2020	$85,321.63
6/3/2020	$85,321.63
7/3/2020	$85,321.63
8/3/2020	$85,321.63
9/3/2020	$85,321.63
10/3/2020	$85,321.63
11/3/2020	$85,321.63
12/3/2020	$85,321.63
1/3/2021	$85,321.63
2/3/2021	$85,321.63
3/3/2021	$85,321.63
4/3/2021	$85,321.63
5/3/2021	$85,321.63
6/3/2021	$85,321.63

4. LESSEE'S CONFIRMATION. Lessee hereby confirms and warrants to Lessor that the Equipment: (a) was duly delivered to Lessee at the location specified in Section 5 hereof; (b) has been received, inspected and determined to be in compliance with all applicable specifications and that the Equipment is hereby accepted for all purposes of the Lease; and (c) is a part of the "Equipment" referred to in the Lease and is taken subject to all terms and conditions therein and herein provided. Lessee hereby represents and warrants to Lessor that, as of the date hereof, there is no Default or Event of Default under any Schedule or any other Lease Document (as such terms are defined in the Lease).

5. LOCATION OF EQUIPMENT. The location of, and place where the Equipment will be kept and maintained at 303 Division Street East, Grand Junction, Iowa 50107 (the “Equipment Locations”). Lessee agrees and acknowledges that the Equipment shall not be removed from either of the Equipment Locations until all payments, including all fees, charges, monthly payments, and the final payment, have been indefeasibly paid in full to Lessor.

 

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6. COMMERCIAL LIABILITY INSURANCE. The amount of commercial liability insurance referenced in Section 11 of the Lease is $2,000,000.00.

7. PERSONAL PROPERTY TAXES. Lessee agrees that it will (a) list all such Equipment, (b) report all property taxes assessed against such Equipment, and (c) pay all such taxes when due directly to the appropriate taxing authority until Lessor shall otherwise direct in writing.

8. SCHEDULE OF STIPULATED LOSS VALUES. Exhibit A contains a Schedule of Stipulated Loss Values which shall be applicable solely to the Equipment described in this Equipment Schedule.

9. NO SETOFFS OR COUNTERCLAIMS. All payments under the Lease made by or on behalf of Lessee shall be made without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes.

10. RIDERS. Rider No. 1 attached hereto is incorporated in this Equipment Schedule.

11. INSERTION OF INFORMATION. Lessor is hereby authorized to insert such factually correct information as is necessary to complete this Equipment Schedule, including (without limitation) the date of execution, and the rental payment amount(s) and factor(s).

12. CONVEYANCE OF INTEREST. Lessee hereby collaterally assigns, grants, and conveys to Lessor, a security interest in and lien on all of such Lessee’s right, title and interest in and to all of the following (whether now existing or hereafter created, and including any other collateral described on any rider hereto; the “Collateral”; all terms used in this sentence and not otherwise defined in this Lease shall have the definition set forth in the UCC): (a) the Equipment described in such Schedule or otherwise covered thereby (including all inventory, fixtures or other property comprising the Equipment), together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto whether or not furnished by the supplier; (b) all accounts, chattel paper, deposit accounts, documents, other equipment, general intangibles, instruments, inventory, investment property, letter of credit rights and any supporting obligations related to any of the foregoing; (c) all books and records pertaining to the foregoing; (d) all property of such Lessee held by Lessor, including all property of every description, in the custody of or in transit to Lessor for any purpose, including safekeeping, collection or pledge, for the account of such Lessee or as to which such Lessee may have any right or power, including but not limited to cash and (e) to the extent not otherwise included, all insurance, substitutions, replacements, exchanges, accessions, proceeds and products of the foregoing. The conveyance contemplated hereby is solely for the purpose of granting to Lessor a security interest in the Equipment. All Equipment in which an interest is conveyed hereby shall remain in the possession of Lessee pursuant to the Lease.

13. EARLY TERMINATION OPTION. Provided that no default under the Lease Agreement has occurred and is continuing beyond any applicable grace or cure period, Lessee shall have an early buy-out option with respect to all but not less than all of the Equipment, upon the payment of any outstanding rental payments or other fees then due under this Lease, plus the applicable amount for such termination date as set forth in the schedule attached as Exhibit B (after giving effect in all cases to the payment due for the month when the early termination option is exercised) (the “Termination Value”), which Termination Value represents the anticipated fair market value of the Equipment as of the anticipated end date of the Lease. In addition, the Lessee shall pay to Lessor an Administrative Charge to be determined by Lessor to cover its time and expenses incurred in connection with the exercise of the option to purchase, including, but not limited to, reasonable attorney fees and costs. Furthermore, upon the exercise by the Lessee of this option to purchase the Equipment, Lessee shall pay all sales and transfer taxes and all fees payable to any governmental authority as a result of the transfer of title of the Equipment to Lessee. If Lessee desires to exercise this option, it shall provide Lessor with thirty (30) days’ prior written notice of such intention.

14. FEES. Prior to or contemporaneously with the payment of the Total Invoice Cost by Lessor to Lessee, Lessee shall pay to Lessor (a) a security deposit equal to Eighty-Five Thousand Three Hundred Twenty-One and 63/100 ($85,321.63) Dollars; (b) an origination fee equal to one (1.0%) percent of the Total Invoice Cost; (c) an investment banker’s to be paid to GVC Financial, at the direction of Lessee and (d) the cost of any attorney fees incurred by Lessor in connection with the Lease or this Schedule of Equipment.

 

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DATE OF EXECUTION: the 3rd day of March, 2017 

Lessor: UTICA LEASECO, LLC
By:	/s/ James B. Junker
Name:	James B. Junker
Title:	Vice President
1847 NEESE INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO
NEESE, INC. Lessee
By:	/s/ Ellery W. Roberts
Name:	Ellery W. Roberts
Title:	CEO

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EXHIBIT 10.6

MANAGEMENT SERVICES AGREEMENT

BY AND BETWEEN

1847 NEESE INC.

AND

1847 PARTNERS LLC

Dated as of March 3, 2017

MANAGEMENT SERVICES AGREEMENT

MANAGEMENT SERVICES AGREEMENT (as amended, revised, supplemented or otherwise modified from time to time, this “ Agreement ”), dated as of March 3, 2017, by and between 1847 NEESE INC., a Delaware corporation (the “ Company ”), and 1847 PARTNERS LLC, a Delaware limited liability company (the “ Manager ”). Each party hereto shall be referred to as, individually, a “ Party ” and, collectively, the “ Parties .”

BACKGROUND

The Board of Directors of the Company has determined that it would be in the best interests of the Company to appoint the Manager to perform the Services (as such term is defined herein) and, therefore, the Company has agreed to appoint the Manager to perform the Services on the terms and subject to the conditions set forth herein. The Manager has agreed to act as Manager and to perform the Services on the terms and subject to the conditions set forth herein.

The Manager also acts as an external manager for 1847 Holdings LLC (the “ Parent ”), the Company’s parent entity, pursuant to the Management Services Agreement by and between the Manager and the Parent, dated as of April 15, 2013 (the “ Parent MSA ”). This Agreement is an Offsetting Management Services Agreement as defined and referenced in the Parent MSA.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and of 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

For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; any reference to an “Article,” “Section” or an “Exhibit” refers to an Article, Section or an Exhibit, as the case may be, of this Agreement; and the words “herein,” “hereinafter,” “hereof,” “hereto” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision:

“ Affiliate ” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person or (ii) any officer, director, general member, member or trustee of such Person. For purposes of this definition, the terms “controlling,” “controlled by” or “under common control with” shall mean, with respect to any Persons, the possession, direct or indirect, 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, or the power to elect at least 50% of the directors, managers, general members, or Persons exercising similar authority with respect to such Person.

 

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