WESTERN CAPITAL RESOURCES, INC. (Form: 10-Q, Received: 11/14/2017 14:02:48)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2017

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-52015

Western Capital Resources, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware		47-0848102
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

11550 “I” Street, Suite 150, Omaha, Nebraska 68137

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (402) 551-8888

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☑

	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 14, 2017, the registrant had outstanding 9,390,997 shares of common stock, $0.001 par value per share.

Western Capital Resources, Inc.

Index

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 4. Controls and Procedures		25

PART II. OTHER INFORMATION
Item 5. Other Information		26

Item 6. Exhibits		26

SIGNATURES		27

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONTENTS

	Page

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets	4

Condensed Consolidated Statements of Operations	5

Condensed Consolidated Statements of Cash Flows	6

Notes to Condensed Consolidated Financial Statements	7

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


	September 30, 2017		December 31, 2016
ASSETS

CURRENT ASSETS
Cash	$	8,628,397	$	14,159,975
Loans receivable (less allowance for losses of $784,000 and $1,036,000, respectively)		4,081,657		4,438,276
Accounts receivable (less allowance for doubtful accounts of $19,000 and $13,000, respectively)		994,966		696,657
Inventory, net		9,846,062		9,095,460
Prepaid income taxes		1,106,133		—
Prepaid expenses and other		4,164,032		3,399,433
Other current assets held for sale		1,509,914		1,348,061
TOTAL CURRENT ASSETS		30,331,161		33,137,862

NOTE RECEIVABLE		—		2,920,112

PROPERTY AND EQUIPMENT, net		11,586,783		9,409,234

GOODWILL		5,796,529		5,796,528

INTANGIBLE ASSETS, net		5,277,826		1,295,559

DEFERRED INCOME TAXES		263,000		518,000

OTHER		1,065,936		1,001,466

NONCURRENT ASSETS HELD FOR SALE		6,441,241		6,649,891

TOTAL ASSETS	$	60,762,476	$	60,728,652

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	10,613,642	$	11,626,627
Other current liabilities		1,293,210		1,198,311
Income taxes payable		—		95,551
Note payable – short-term		74,831		55,819
Current portion long-term debt		1,780,000		1,780,000
Current portion capital lease obligations		46,485		46,400
Deferred revenue		1,044,198		1,173,660
Current liabilities held for sale		2,270,928		2,851,395
TOTAL CURRENT LIABILITIES		17,123,294		18,827,763

LONG-TERM LIABILITIES
Notes payable, net of current portion		6,014,885		8,681,545
Capital lease obligations, net of current portion		63,216		94,762
Long-term liabilities held for sale		2,363,924		2,436,080
TOTAL LONG-TERM LIABILITIES		8,442,025		11,212,387

TOTAL LIABILITIES		25,565,319		30,040,150

COMMITMENTS AND CONTINGENCIES (Note 14)

EQUITY

WESTERN SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value, 12,500,000 shares authorized, 9,390,997 and 9,497,871 shares issued and outstanding.		939		950
Additional paid-in capital		29,031,808		28,997,087
Retained earnings		4,481,291		1,643,996
TOTAL WESTERN SHAREHOLDERS’ EQUITY		33,514,038		30,642,033

NONCONTROLLING INTERESTS		1,683,119		46,469

TOTAL EQUITY		35,197,157		30,688,502

TOTAL LIABILITIES AND EQUITY	$	60,762,476	$	60,728,652

See notes to condensed consolidated financial statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three months ended						Nine months ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
REVENUES
Sales and associated fees	$	18,535,592		$	13,066,705		$	67,834,678		$	52,146,348
Financing fees and interest		2,342,285			2,562,569			6,695,439			7,387,757
Other revenue		5,255,124			2,618,391			15,051,477			7,147,375
Total Revenues		26,133,001			18,247,665			89,581,594			66,681,480

COST OF REVENUES
Cost of sales		9,599,712			6,555,044			34,434,610			26,393,767
Provisions for loans receivable losses		326,998			444,689			815,313			1,176,174
Total Cost of Revenues		9,926,710			6,999,733			35,249,923			27,569,941

GROSS PROFIT		16,206,291			11,247,932			54,331,671			39,111,539

OPERATING EXPENSES
Salaries, wages and benefits		9,384,142			5,928,774			27,515,294			17,041,464
Occupancy		3,573,785			2,021,416			9,618,698			5,769,871
Advertising, marketing and development		998,433			983,487			5,117,015			5,021,984
Depreciation		438,822			282,633			1,114,513			797,192
Amortization		216,253			54,528			323,911			164,154
Other		2,469,726			1,954,320			7,878,396			5,978,859
Total Operating Expenses		17,081,161			11,225,158			51,567,827			34,773,524

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS		(874,870	)		22,774			2,763,844			4,338,015

OTHER INCOME (EXPENSES):
Interest income		346			955			131,985			2,964
Interest expense		(121,647	)		(93,366	)		(370,213	)		(320,017	)
Total Other Income (Expense)		(121,301	)		(92,411	)		(238,228	)		(317,053	)

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(996,171	)		(69,637	)		2,525,616			4,020,962

PROVISION FOR INCOME TAXES FOR CONTINUING OPERATIONS		(386,000	)		10,000			863,000			1,485,000

NET INCOME (LOSS) FROM CONTINUING OPERATIONS		(610,171	)		(79,637	)		1,662,616			2,535,962

LESS NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(99,865	)		—			(99,865	)		—

NET INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS		(710,036	)		(79,637	)		1,562,751			2,535,962

DISCONTINUED OPERATIONS
Income from operations of discontinued operations		1,171,159			1,406,994			3,988,232			3,282,043
Provision for income taxes for discontinued operations		440,000			541,000			1,511,000			1,267,000
Income from discontinued operations		731,159			865,994			2,477,232			2,015,043
Less net income from discontinued operations attributable to noncontrolling interests		(4,925	)		(6,004	)		(17,446	)		(14,742	)
Net income from discontinued operations attributable to Western common shareholders		726,234			859,990			2,459,786			2,000,301
NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	16,198		$	780,353		$	4,022,537		$	4,536,263

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
FROM CONTINUING OPERATIONS - Basic and diluted	$	(0.08	)	$	(0.01	)	$	0.17		$	0.27
FROM DISCONTINUED OPERATIONS - Basic and diluted	$	0.08		$	0.09		$	0.26		$	0.21
FROM CONTINUING AND DISCONTINUED OPERATIONS - Basic and diluted	$	0.00		$	0.08		$	0.43		$	0.48

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted from discontinued operations		9,390,997			9,497,608			9,418,009			9,497,559

See notes to condensed consolidated financial statements.

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Nine Months Ended
	September 30, 2017			September 30, 2016
OPERATING ACTIVITIES
Net Income	$	1,662,616		$	2,535,962
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation – continuing operations		1,114,513			797,192
Amortization – continuing operations		323,911			164,154
Share based compensation		34,721			49,263
Deferred income taxes		117,000			632,000
Loss on disposal of property and equipment		22,030			8,014
Changes in operating assets and liabilities:
Loans receivable		356,619			473,376
Accounts receivable		(298,309	)		28,186
Inventory		(750,602	)		(1,238,417	)
Prepaid expenses and other assets		(1,746,082	)		(620,529	)
Accounts payable and accrued expenses		(891,043	)		(1,898,140	)
Deferred revenue and other current liabilities		(34,563	)		(452,611	)
Operating cash flows from discontinued operations		2,047,050			1,778,505
Net cash provided by operating activities		1,957,861			2,256,955

INVESTING ACTIVITIES
Purchase of property and equipment– continuing operations		(1,999,408	)		(1,227,121	)
Acquisition of stores, net of cash acquired		(188,325	)		(588,241	)
Advances on note receivable, net		(513,744	)		—
Proceeds from disposal of property and equipment		16,959			109,350
Investing activities of discontinued operations		(30,023	)		(17,594	)
Net cash used by investing activities		(2,714,541	)		(1,723,606	)

FINANCING ACTIVITIES
Payments on notes payable – short-term		(63,303	)		—
Advances (Payments) on line of credit, net		(998,426	)		1,538,708
Advances on note payable – long-term		—			418,301
Payments on notes payable – long-term– continuing operations		(2,457,450	)		(451,640	)
Common stock redemption		(480,928	)		—
Advances on capital lease		—			185,318
Payments on capital lease		(31,461	)		(75,894	)
Dividend paid		(704,325	)		(474,914	)
Financing activities of discontinued operations		(39,005	)		(1,625,000	)
Net cash used in financing activities		(4,774,898	)		(485,121	)

NET CHANGE IN CASH		(5,531,578	)		48,228

CASH
Beginning of period		14,159,975			7,847,669
End of period	$	8,628,397		$	7,895,897

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid	$	3,648,839		$	3,103,162
Interest paid	$	354,601		$	550,231

Noncash investing and financing activities:
Note receivable balance applied to acquisition of stores (Note 11)	$	3,433,856		$	—
Financed acquisition of stores (Note 11)	$	789,216		$	—
Noncontrolling interest’s equity contribution in acquisition of stores (Note 11)	$	1,550,724		$	—
Long-term debt proceeds used to pay off debt and interest	$	—		$	3,021,699
Long-term debt proceeds used to pay prepaid financing costs	$	—		$	60,000

See notes to condensed consolidated financial statements.

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies –

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared according to the instructions to Form 10-Q and Section 210.8-03(b) of Regulation S-X of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

For further information, refer to the Condensed Consolidated Financial Statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2016. The condensed consolidated balance sheet at December 31, 2016, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Nature of Business

Western Capital Resources, Inc. (WCR) is a parent company owning operating subsidiaries, with percentage owned shown parenthetically, as summarized below.

●

Franchise

○

AlphaGraphics, Inc. (AGI) (99.2% - disposed of October 3, 2017 – see notes 12, and 15) – franchisor of domestic and international AlphaGraphics Business Centers which specialize in the planning, production, and management of visual communications for businesses and individuals throughout the world.

●

Cellular Retail

○

PQH Wireless, Inc. (PQH) (100%) – operates cellular retail stores (280 as of September 30, 2017), as an exclusive dealer of the Cricket brand.

●

Direct to Consumer

○

J & P Park Acquisitions, Inc. (JPPA) (100%) – an online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins, and Wayside Gardens brand names as well as a wholesaler under the Park Wholesale brand.

○

Restorers Acquisition, Inc. (RAI) (100%) – an online and direct marketing distribution retailer of home improvement and restoration products operating under Van Dyke’s Restorers.

○

J & P Real Estate, LLC (JPRE) (100%) – owns real estate utilized as JPPA’s distribution and warehouse facility and the corporate offices of JPPA and RAI.

●

Consumer Finance

○

Wyoming Financial Lenders, Inc. (WFL) (100%) – owns and operates “payday” stores (40 as of September 30, 2017) in seven states (Colorado, Iowa, Kansas, Nebraska, North Dakota, Wisconsin and Wyoming) providing sub-prime short-term uncollateralized non-recourse “cash advance” or “payday” loans typically ranging from $100 to $500 with a maturity of generally two to four weeks, sub-prime short-term uncollateralized non-recourse installment loans typically ranging from $300 to $800 with a maturity of six months, check cashing and other money services to individuals.

○

Express Pawn, Inc. (EPI) (100%) – owns and operates retail pawn stores (three as of September 30, 2017) in Nebraska and Iowa providing collateralized non-recourse pawn loans and retail sales of primarily used merchandise.

References in these financial statement notes to “Company” or “we” refer to Western Capital Resources, Inc. and its subsidiaries. References to specific companies within our enterprise, such “AGI,” “PQH,” “JPPA,” “RAI,” “JPRE,” “WFL” or “EPI” are references only to those companies.

Basis of Consolidation

The consolidated financial statements include the accounts of WCR, its wholly owned subsidiaries and other entities in which the Company owns a controlling financial interest. For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810 applicable to reporting the equity and net income or loss attributable to noncontrolling interests. All significant intercompany balances and transactions of the Company have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect certain reported amounts and disclosures in the consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate to the notes and loans receivable allowance, carrying value and impairment of long-lived goodwill and intangible assets, inventory valuation and obsolescence, estimated useful lives of property and equipment, gift certificate and merchandise credits liability and deferred taxes and tax uncertainties.

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of our prior financial statements and accompanying notes to conform to the presentation as of and for the three and nine month periods ended September 30, 2017.

In accordance with appropriate accounting rules, the Company has reclassified its previously reported financial results to exclude the results of the discontinued operations of the Franchise segment and these results are presented on a historical basis as a separate line in the Company’s condensed consolidated statements of operations and condensed consolidated balance sheets entitled “held for sale.” Also in accordance with appropriate accounting rules, continuing corporate overhead costs previously allocated to discontinued operations has been reallocated to continuing operations. The notes to the condensed consolidated financial statements have been revised to reflect only the results of continuing operations, except where noted.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. This converged standard is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential effects on our financial condition, results of operations and consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), related to recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted and to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), related to the measurement of credit losses on financial instruments. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within that annual period, with early adoption permitted and the standard to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements.

Risks Inherent in the Operating Environment –

Regulatory

The Company’s Consumer Finance segment activities are highly regulated under numerous local, state, and federal laws, regulations and rules, which are subject to change. New laws, regulations or rules could be enacted or issued, interpretations of existing laws, regulations or rules may change and enforcement action by regulatory agencies may intensify. Over the past several years, consumer advocacy groups and certain media reports have advocated governmental action to prohibit or severely restrict sub-prime lending activities of the kind conducted by the Company. The federal Consumer Financial Protection Bureau has indicated that it will use its authority to further regulate the payday industry and has been actively involved in the enforcement of existing consumer-protection laws applicable to the payday industry.

Any adverse change in present local, state, and federal laws or regulations that govern or otherwise affect lending could result in the Consumer Finance segment’s curtailment or cessation of operations in certain or all jurisdictions or locations. Furthermore, any failure to comply with any applicable local, state or federal laws or regulations could result in fines, litigation, store location closure or negative publicity. Any such change or failure would have a corresponding impact on the Company’s and segment’s results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, decrease in operating income through increased legal expenditures or fines, and could also negatively affect the Company’s general business prospects due to lost or decreased operating income or if negative publicity effects its ability to obtain additional financing as needed.

In addition, the passage of federal or state laws and regulations or changes in interpretations of them could, at any point, essentially prohibit the business we conduct in the Consumer Finance segment from conducting its lending business in its current form. Any such legal or regulatory change would certainly have a material and adverse effect on the Company, its operating results, financial condition and prospects, and perhaps even the viability of the business we conduct in the Consumer Finance segment.

3. Loans Receivable –

The Consumer Finance segment’s outstanding loans receivable aging was as follows:

September 30, 2017
	Payday			Installment			Pawn & Title		Total
Current	$	3,348,335		$	258,785		$	317,367	$	3,924,487
1-30		227,700			51,146			—		278,846
31-60		188,750			25,247			—		213,997
61-90		120,350			12,936			—		133,286
91-120		127,408			5,623			—		133,031
121-150		97,366			1,659			—		99,025
151-180		81,905			1,080			—		82,985
		4,191,814			356,476			317,367		4,865,657
Less Allowance		(695,000	)		(89,000	)		—		(784,000	)
	$	3,496,814		$	267,476		$	317,367	$	4,081,657

December 31, 2016
	Payday			Installment			Pawn & Title		Total
Current	$	3,683,603		$	272,703		$	284,460	$	4,240,766
1-30		253,297			44,433			—		297,730
31-60		201,375			27,905			—		229,280
61-90		185,072			18,747			—		203,819
91-120		159,435			15,737			—		175,172
121-150		176,625			8,889			—		185,514
151-180		134,171			7,824			—		141,995
		4,793,578			396,238			284,460		5,474,276
Less Allowance		(953,000	)		(83,000	)		—		(1,036,000	)
	$	3,840,578		$	313,238		$	284,460	$	4,438,276

4. Loans Receivable Allowance –

A rollforward of the Consumer Finance segment’s loans receivable allowance is as follows:

	Nine Months Ended September 30, 2017			Year Ended December 31, 2016
Loans receivable allowance, beginning of period	$	1,036,000		$	1,177,000
Provision for loan losses charged to expense		815,313			1,605,867
Charge-offs, net		(1,067,313	)		(1,746,867	)
Loans receivable allowance, end of period	$	784,000		$	1,036,000

5. Accounts Receivable –

A breakdown of accounts receivables for continuing operations by segment are as follows:

September 30, 2017
	Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	342,876	$	657,868		$	13,222	$	1,013,966
Less allowance		—		(19,000	)		—		(19,000	)
Net account receivable	$	342,876	$	638,868		$	13,222	$	994,966

December 31, 2016
	Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	333,800	$	363,426		$	12,431	$	709,657
Less allowance		—		(13,000	)		—		(13,000	)
Net account receivable	$	333,800	$	350,426		$	12,431	$	696,657

6. Notes Payable – Long Term –

	September 30, 2017			December 31, 2016
Revolving credit facility (with a credit limit of $3,000,000) to a financial institution with monthly payments of interest only at LIBOR plus 3.5% (4.75% at September 30, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018	$	—		$	998,426
Note pa yab le to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		1,502,959			3,091,667
Note pa yab le to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021		2,831,264			3,400,000
Subsidiary note pa yab le to a financial institution with monthly principal payment of $33,334 plus annual paydowns equal to JPRE’s net cash flow from operations due within 120 days of the calendar year end plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), secured by JPRE assets, maturing June 5, 2019 when remaining principal balance is due		2,671,446			2,971,452
Subsidiary note payable to seller with monthly interest payments only at 6%, maturing June 30, 2022		789,216			—
Total		7,794,885			10,461,545
Less current maturities		(1,780,000	)		(1,780,000	)
	$	6,014,885		$	8,681,545

At September 30, 2017 and December 31, 2016, approximately $7,666,000 and $4,510,000 of credit was available under the credit facilities, respectively.

7. Equity –

In March 2017, the Company redeemed 106,874 shares of common stock for $480,928 in a private and unsolicited transaction.

8. Cash Dividends –

Date declared	February 24, 2017
Record date	March 17, 2017
Date paid	March 24, 2017
Dividend per share of common stock	$	0.025

Date declared	May 12, 2017
Record date	July 14, 2017
Date paid	July 24, 2017
Dividend per share of common stock	$	0.025

Date declared	August 28, 2017
Record date	September 18, 2017
Date paid	September 29, 2017
Dividend per share of common stock	$	0.025

9. Other Operating Expense –

A breakout of other expense is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Bank fees	$	379,245	$	320,156	$	1,484,460	$	1,216,555
Collection costs		94,197		85,306		275,619		311,457
Insurance		260,419		174,699		757,690		502,025
Management and advisory fees		193,710		195,425		537,853		577,954
Professional and consulting fees		555,977		368,527		1,704,803		1,174,323
Supplies		341,808		222,745		1,080,325		555,099
Other		644,370		587,462		2,037,646		1,641,446
	$	2,469,726	$	1,954,320	$	7,878,396	$	5,978,859

10. Segment Information –

Segment information related to the three and nine month periods ended September 30, 2017 and 2016 for continuing operations is presented below:

Three Months Ended September 30, 2017 (in thousands)

	Cellular Retail			Direct to Consumer			Consumer Finance		Corporate			Total

Revenue from external customers	$	18,301		$	4,983		$	2,849	$	—		$	26,133
Net income (loss)	$	(223	)	$	(462	)	$	326	$	(251	)	$	(610	)
Expenditures for segmented assets	$	6,408		$	139		$	1	$	7		$	6,555

Three Months Ended September 30, 2016 (in thousands)

	Cellular Retail		Direct to Consumer			Consumer Finance		Corporate			Total

Revenue from external customers	$	9,294	$	5,945		$	3,009	$	—		$	18,248
Net income (loss)	$	72	$	(325	)	$	391	$	(218	)	$	(80	)
Expenditures for segmented assets	$	241	$	50		$	21	$	—		$	312

Nine Months Ended September 30, 2017 (in thousands)

	Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Discontinued Operations		Total

Revenue from external customers	$	52,432	$	29,014	$	8,136	$	—		$	—	$	89,582
Net income (loss)	$	65	$	1,507	$	781	$	(690	)	$	—	$	1,663
Total segmented assets	$	28,375	$	13,462	$	8,080	$	2,162		$	8,683	$	60,762
Expenditures for segment assets	$	7,612	$	341	$	1	$	8		$	—	$	7,962

Nine Months Ended September 30, 2016 (in thousands)

	Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Discontinued Operations		Total

Revenue from external customers	$	27,152	$	30,699	$	8,830	$	—		$	—	$	66,681
Net income (loss)	$	526	$	1,682	$	964	$	(636	)	$	—	$	2,536
Total segmented assets	$	16,472	$	14,723	$	15,735	$	413		$	10,111	$	57,454
Expenditures for segment assets	$	1,688	$	88	$	39	$	—		$	—	$	1,815

11. Acquisition –

In 2016, PQH entered into an agreement to acquire 20 Cricket Wireless retail locations, with an option to purchase an additional 33 locations. The aggregate purchase price for all 53 locations was approximately $6,000,000, subject to reduction in the event that the seller exercised an option to retain a 30% ownership in the acquired business. From November 22, 2016 through June 30, 2017, PQH operated the store locations under a management agreement. Effective July 1, 2017, we consummated the acquisition transaction by acquiring a 70% interest in all 53 locations through a subsidiary of PQH, and the seller, upon exercising its option to retain a 30% ownership interest in the acquired business, contributed its interest to the subsidiary. As a result, PQH owns 70% of the newly formed subsidiary and the seller owns the remaining 30% of that subsidiary.

The provisional fair value of the purchase consideration together with the corresponding fair value of the contribution by noncontrolling interests was allocated to the net tangible assets acquired. We accounted for the acquisition of stores as the purchase of a business under GAAP under the acquisition method of accounting. The assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired was approximately $6,000,000. The excess of the aggregate fair value over the net tangible assets has been treated as a gain on bargain purchase in accordance with ASC 805. The purchase price allocation was based, in part, on management’s knowledge of wireless retail business and is preliminary. Once we complete our analysis to finalize the purchase price allocation, which includes finalizing the valuation report, it is reasonably possible that, there could be significant changes to the preliminary values below. Under the purchase method of accounting, the assets acquired and liabilities assumed were recorded at their provisional fair values as of the purchase date as follows:

	July 1, 2017
Inventory	$	217,000
Property and equipment		1,332,000
Intangible assets		4,306,000
Other assets		103,000
Net assets acquired	$	5,958,000

12. Discontinued Operations –

On September 29, 2017, the Board of Directors of the Company authorized the Company to enter into a sale agreement (see Note 15) for 100% of its stock holdings of AGI, the sole business comprising the Company’s Franchise segment.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations of the Franchise segment in the Condensed Consolidated Balance Sheets. The assets and liabilities have been reflected as held for sale in the unaudited Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, and consist of the following:

	September 30, 2017 (unaudited)		December 31, 2016 (unaudited)
OTHER CURRENT ASSETS:
Accounts receivable (less allowance for losses of $145,000 and $83,000, respectively)	$	1,306,762	$	1,020,210
Prepaid expenses and other		203,152		327,851
TOTAL OTHER CURRENT ASSETS	$	1,509,914	$	1,348,061

NONCURRENT ASSETS:
Property and equipment, net	$	243,147	$	287,386
Intangible assets, net		5,983,031		6,241,386
Other		215,063		121,119
TOTAL NONCURRENT ASSETS	$	6,441,241	$	6,649,891

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	841,097	$	1,375,754
Other liabilities		1,142,999		1,044,061
Income taxes payable		—		170,262
Current portion capital lease obligations		—		7,620
Deferred revenue and other		286,832		253,698
TOTAL CURRENT LIABILITIES	$	2,270,928	$	2,851,395

LONG-TERM LIABILITIES
Deferred income taxes	$	2,155,000	$	2,293,000
Other		208,924		143,080
TOTAL LONG-TERM LIABILITIES	$	2,363,924	$	2,436,080

In accordance with the provisions of ASC 205-20, the Company has not included the results of operations of the Franchise segment in the results from continuing operations. The results of operations for this business have been reflected as discontinued operations in the unaudited Condensed Consolidated Statements of Operations for the nine month periods ended September 30, 2017 and 2016, and consist of the following:

	Nine Months Ended
	September 30, 2017 (unaudited)			September 30, 2016 (unaudited)

REVENUES	$	12,298,655		$	11,451,699

COST OF REVENUES		2,098,486			1,819,491

GROSS PROFIT		10,200,169			9,632,208

OPERATING EXPENSES:
Salaries, wages and benefits		3,194,025			3,426,127
Occupancy		140,428			179,518
Advertising, marketing and development		436,566			271,649
Depreciation		74,263			84,141
Amortization		258,356			258,356
Other		2,108,299			2,037,001
		6,211,937			6,256,792

OPERATING INCOME		3,988,232			3,375,416

INTEREST EXPENSE		—			(93,373	)

INCOME BEFORE INCOME TAXES		3,988,232			3,282,043

PROVISION FOR INCOME TAXES		1,511,000			1,267,000

NET INCOME		2,477,232			2,015,043

Less net income attributable to noncontrolling interests		(17,446	)		(14,742	)

NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	2,459,786		$	2,000,301

13. Pro Forma –

As more fully disclosed in Notes 12 and 15 herein, the Company sold 100% of its stock holdings of AGI on October 3, 2017. The following table presents the unaudited results of continuing operations for the three and nine month periods ended September 30, 2017 and September 30, 2016 (in thousands, except for per share data) as if the disposition of the discontinued operations had been consummated at the beginning of 2016. The pro forma net income below excludes interest expense on debt required to be paid off at closing of the disposition transaction and related tax effect. The pro forma results of continuing operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the disposition occurred at the beginning of the 2016 or the results which may occur in the future.

Three Months Ended September 30, 2017 (in thousands)

	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total

Revenue	$	18,301		$	4,983		$	2,849		$	—		$	26,133
% of total revenue		70.0	%		19.1	%		10.9	%		—	%		100.0	%
Net income	$	(190	)	$	(462	)	$	326		$	(251	)	$	(577	)
Net income attributable to noncontrolling interests	$	100		$	—		$	—		$	—		$	100
Net income attributable to Western common shareholders	$	(290	)	$	(462	)	$	326		$	(251	)	$	(677	)
Earnings per share attributable to Western common shareholders – basic and diluted	$	(0.031	)	$	(0.049	)	$	0.035		$	(0.027	)	$	(0.072	)

Three Months Ended September 30, 2016 (in thousands)
	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total

Revenue	$	9,294		$	5,945		$	3,099		$	—		$	18,248
% of total revenue		50.9	%		32.6	%		16.5	%		—	%		100.0	%
Net income	$	95		$	(325	)	$	391		$	(218	)	$	(57	)
Net income attributable to noncontrolling interests	$	—		$	—		$	—		$	—		$	—
Net income attributable to Western common shareholders	$	95		$	(325	)	$	391		$	(218	)	$	(57	)
Earnings per share attributable to Western common shareholders – basic and diluted	$	0.010		$	(0.034	)	$	0.041		$	(0.023	)	$	(0.006	)

Nine Months Ended September 30, 2017 (in thousands)
	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total

Revenue	$	52,432		$	29,014		$	8,136		$	—		$	89,582
% of total revenue		58.5	%		32.4	%		9.1	%		—	%		100.0	%
Net income	$	183		$	1,507		$	781		$	(690	)	$	1,781
Net income attributable to noncontrolling interests	$	100		$	—		$	—		$	—		$	100
Net income attributable to Western common shareholders	$	83		$	1,507		$	781		$	(690	)	$	1,681
Earnings per share attributable to Western common shareholders – basic and diluted	$	0.009		$	0.160		$	0.083		$	(0.073	)	$	0.179

Nine Months Ended September 30, 2016 (in thousands)
	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total

Revenue	$	27,152		$	30,699		$	8,830		$	—		$	66,681
% of total revenue		40.7	%		46.0	%		13.3	%		—	%		100.0	%
Net income	$	565		$	1,682		$	964		$	(636	)	$	2,575
Net income attributable to noncontrolling interests	$	—		$	—		$	—		$	—		$	—
Net income attributable to Western common shareholders	$	565		$	1,682		$	964		$	(636	)	$	2,575
Earnings per share attributable to Western common shareholders – basic and diluted	$	0.059		$	0.177		$	0.102		$	(0.067	)	$	0.271

14. Commitments and Contingencies –

Pursuant to the Company’s numerous employment agreements, bonuses of approximately $92,000 and $411,000 were accrued for the three and nine month periods ended September 30, 2017, respectively.

15. Subsequent Events –

Sale of Franchise Segment

On October 2, 2017, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with U.S. Business Holdings, Inc. (the “Purchaser”), MBE WorldWide S.p.A. (as guarantor for the Purchaser), BC Alpha, LLC (“BCA”, a wholly owned subsidiary of BC Alpha Holdings II, LLC), and BC Alpha Holdings II, LLC (“BCAH”, a wholly owned subsidiary of the Company). Pursuant to the Agreement, BCA sold all of its shares of capital stock of AGI to the Purchaser. This sale, which closed on October 3, 2017, constitutes the sale of the Company’s franchise segment. The cash purchase price paid by the Purchaser pursuant to the Agreement was $61,500,000, subject to post-closing working capital adjustments. BCA, BCAH, the Company and the Purchaser also agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code, which treats the transaction as an asset purchase for tax purposes subject to satisfaction of applicable legal requirements.

Pursuant to the Agreement, the Company, BCA and BCAH made customary representations and warranties regarding AGI and its business, and agreed to certain covenants, including customary non-compete and no-solicit covenants related to the AGI business for a period of three years from the closing date. In addition, the Agreement requires the Company to indemnify the Purchaser for damages resulting from or arising out of any inaccuracy or breach of any representation, warranty or covenant of the Company, BCA or BCAH in the Agreement and for certain other matters. The Company’s indemnification obligations generally survive for 24 months following the closing. The Company’s maximum aggregate liability for indemnification claims for any such inaccuracies or breaches is generally limited to an indemnification escrow of $6,500,000, 50% of which (less any indemnification claims) is to be disbursed 12 months following the closing, with the remaining balance (less any indemnification claims) to be disbursed 24 months following the closing.

As a result of the transaction, the Company received approximately $49,000,000 in proceeds from the sale, after taking into account the impact of the estimated working capital and similar purchase price adjustments, the escrowing of $6,500,000 of sale proceeds, the payoff of the Company’s current balance on its Fifth Third acquisition credit facility of approximately $4,300,000, and the payoff of an aggregate amount of approximately $1,600,000 in transaction costs and pre-closing AGI liabilities related to the cancellation and redemption of securities at the AGI level that occurred prior to the transaction.

In connection with the transaction, the Company also entered into a Consent and Third Loan Modification Agreement (the “Modification Agreement”) with Fifth Third Bank, as lender (“Fifth Third”), which amended that certain Credit Agreement between the Company and Fifth Third, dated April 22, 2016, as amended (the “Credit Agreement”) to (i) release Fifth Third’s liens on the assets of AGI, BCA and BCAH, (ii) remove AGI, BCA and BCAH as guarantors of the Company’s obligations under the Credit Agreement, and (iii) release Fifth Third’s lien on the Company’s equity interests in BCAH.

Real Estate Debt Payoff

On October 12, 2017 the Company paid off the subsidiary note payable with Fifth Third which had a maturity date of June 5, 2019 and a balance of $2,638,112.

Risks Inherent in Our Consumer Finance Segment

In October 2017, the Consumer Financial Protection Bureau issued final rules affecting the payday lending industry and other market participants who make available certain kinds of high-interest loans. Those rules will generally require lenders to take steps to reasonably determine that borrowers will be able repay the loans according to their terms without needing to reborrow within the following 30 days. The rules also generally prohibit lenders from directly withdrawing payment from a borrower’s bank account after two prior consecutive attempted withdrawals have failed. Finally, the rules prohibit lenders from making loans to customers who have earlier taken out three “covered” loans (i.e., payday loans and certain other kinds of high-interest loans) within 30 days of each other until at least 30 days have passed from the date on which the last such covered loan is no longer outstanding. These rules will become effective on or about July 2019, and are expected to have a material impact on the industry.

We evaluated all events or transactions that occurred after September 30, 2017 up through the date we issued these financial statements. During this period we did not have any material subsequent events that impacted our financial statements other than those listed above.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Some of the statements made in this report are “forward-looking statements,” as that term is defined under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon our current expectations and projections about future events. Whenever used in this report, the words “believe,” “anticipate,” “intend,” “estimate,” “expect” and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this report are primarily located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2), but may be found in other parts of this report as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management’s current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. We will not necessarily update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations embodied in our forward-looking statements, or that might affect the value of the common stock, include but are not limited to:

●

a significant portion of pre-tax net income contributed by the Direct to Consumer segment is seasonal in nature and is earned during the months of March through May and December, and consequently the third quarter of each year typically results in a net loss;

●

the success of new stores related to our expansion plans in the Cellular Retail segment;

●

changes in local, state or federal laws and regulations governing lending practices, or changes in the interpretation of such laws and regulations, affecting our Consumer Finance segment;

●

litigation and regulatory actions directed toward us or the industries in which we operate, particularly in certain key states or nationally;

●

our need for additional financing;

●

unpredictability or uncertainty in financing markets, which could impair our ability to grow our business through acquisitions;

●

changes in Cricket dealer compensation;

●

failure of or disruption caused by a significant vendor;

●

outside factors that affect our ability to obtain product and fulfill orders; and

●

our ability to successfully operate or integrate recent or future business acquisitions.

Other factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Industry data and other statistical information used in this report are based on independent publications, government publications, reports by market research firms or other published independent sources. Some data are also based on our good faith estimates, derived from our review of internal surveys and the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information.

OVERVIEW

Western Capital Resources, Inc. (“WCR” or “Western Capital”) is a holding company with a controlling interest in subsidiaries operating in the following industries and operating segments:

(FLOW CHART)

Our “Cellular Retail” segment is comprised of an authorized Cricket Wireless dealer and involves the retail sale of cellular phones and accessories to consumers through our wholly owned subsidiary PQH Wireless, Inc. and its subsidiaries. Our “Direct to Consumer” segment consists of (1) a wholly owned online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins and Wayside Gardens brand names as well as a wholesaler under the Park Wholesale brand, and (2) a wholly owned online and direct marketing distribution retailer of home improvement and restoration products operating as Van Dyke’s Restorers. Our “Consumer Finance” segment consists of retail financial services conducted through our wholly owned subsidiaries Wyoming Financial Lenders, Inc. and Express Pawn, Inc. Throughout this report, we collectively refer to WCR and its consolidated subsidiaries as “we,” the “Company,” and “us.”

On October 3, 2017 the Company sold 100% of its stock holdings of AlphaGraphics, Inc. (“AGI”), the sole business comprising the Company’s franchise segment, for an aggregate purchase price of $61,500,000 (subject to adjustment) and as more fully explained in Note 15 “Subsequent Events” of the notes to our condensed consolidated financial statements included in this report. AGI net income applicable to the Company’s shareholders for the nine-month period ended September 30, 2017 was $2.46 million, which represents 61.15% of the total net income applicable to the Company’s shareholders for the period.

We intend to use the net proceeds, after payment of income taxes and debt reduction, for future acquisitions.

Discussion of Critical Accounting Policies

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America applied on a consistent basis. The preparation of these financial statements requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. We evaluate these estimates and assumptions on an ongoing basis. We base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary materially from these estimates under different assumptions or conditions.

Our significant accounting policies are discussed in Note 1, “Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies,” of the notes to our condensed consolidated financial statements included in this report. We believe that the following critical accounting policies affect the more significant estimates and assumptions used in the preparation of our condensed consolidated financial statements.

Loan Loss Allowance

Included in loans receivable are unpaid principal, interest and fee balances of payday, installment, pawn and title loans that have not reached their maturity date, and “late” payday loans that have reached maturity within the last 180 days and have remaining outstanding balances. Late payday loans generally are unpaid loans where a customer’s personal check has been deposited and the check has been returned due to non-sufficient funds in the customer’s account, a closed account, or other reasons. All returned items are charged-off after 180 days, as collections after that date have not been significant. Loans are carried at cost plus accrued interest or fees through maturity date, less payments made and a loans receivable allowance.

We do not specifically reserve for any individual payday, installment or title loan. We aggregate loan types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management’s judgment regarding recent trends noted in the portfolio. This methodology takes into account several factors, including (1) the amount of loan principal, interest and fee outstanding, (2) historical charge offs from loans that originated during the last 24 months, (3) current and expected collection patterns and (4) current economic trends. We utilize a software program to assist with the tracking of its historical portfolio statistics. A loan loss allowance is maintained for anticipated losses for payday and installment loans based primarily on our historical percentages by loan type of net charge offs, applied against the applicable balance of loan principal, interest and fees outstanding. We also periodically perform a look-back analysis on its loan loss allowance to verify the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. We are aware that as conditions change, it may also need to make additional allowances in future periods. Loan losses or charge-offs of pawn or title loans are not recorded because the value of the collateral exceeds the loan amount. See Note 4 to our condensed consolidated financial statements included in this report for a rollforward of our loans receivable allowance.

Valuation of Long-lived and Intangible Assets

We assess the possibility of impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment review include significant underperformance relative to expected historical or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the overall business, and significant negative industry events or trends. In addition, we conduct an annual goodwill impairment test as of October 1 each year. We assess our goodwill for impairment at the reporting unit level by applying a fair value test. This fair value test involves a two-step process. The first step is to compare the carrying value of our net assets to our fair value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of the impairment, if any.

Results of Operations – Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

Net income attributable to our common shareholders was $0.02 million, or $0.00 per share (basic and diluted), for the quarter ended September 30, 2017, compared to net income of $0.78 million, or $0.08 per share (basic and diluted), for the quarter ended September 30, 2016. Net loss from continuing operations attributable to our common shareholders was $0.71 million, or ($0.08) per share (basic and diluted), for the quarter ended September 30, 2017, compared to net loss of $0.08 million, or ($0.01) per share (basic and diluted), for the quarter ended September 30, 2016. Net income from discontinued operations attributable to our common shareholders was $0.73 million, or $0.08 per share (basic and diluted), for the quarter ended September 30, 2017 compared to $0.86 million, or $0.09 per share (basic and diluted) for the quarter ended September 30, 2016.

We expect segment operating results and earnings per share to change throughout 2017 due, at least in part, to the seasonality of the Direct to Consumer and Cellular Retail segments, growth in the Cellular Retail segment, discontinued operations of our Franchise segment, and potential mergers and acquisitions activity.

Following is a discussion of operating results by segment.

The following table provides quarter-over-quarter revenues and net income attributable to WCR common shareholders by continuing operating segment (in thousands):

	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total
Three Months Ended September 30, 2017
Revenues	$	18,301		$	4,983		$	2,849		$	—		$	26,133
% of total revenue		70.0	%		19.1	%		10.9	%		—	%		100.0	%
Net income (loss)	$	(223	)	$	(462	)	$	326		$	(251	)	$	(610	)
Net income (loss) attributable to WCR common shareholders	$	(323	)	$	(462	)	$	326		$	(251	)	$	(710	)

Three Months Ended September 30, 2016
Revenues	$	9,294		$	5,945		$	3,009		$	—		$	18,248
% of total revenue		50.9	%		32.6	%		16.5	%		—	%		100.0	%
Net income (loss)	$	72		$	(325	)	$	391		$	(218	)	$	(80	)
Net income (loss) attributable to WCR common shareholders	$	72		$	(325	)	$	391		$	(218	)	$	(80	)

Cellular Retail

A summary table of the number of Cricket cellular retail stores we operated during the quarter ended September 30, 2017 and 2016 follows:

	2017			2016
Beginning		268			116
Acquired/ Launched		15			10
Closed		(3	)		—
Ending		280			126

The Cellular Retail segment revenues increase period over period is a result of operating significantly more stores period over period. Included in the growth in the number of locations are 53 mature stores we acquired a 70% ownership interest in effective July 1, 2017. We had previously operated these locations since November 22, 2016 under the management agreement. In addition to operating these additional mature locations, we also operated an additional 100 locations (net of closed locations), most of which were launched. While the launching of the new locations contributed to revenue growth, it also contributed to the decline in segment net income period over period.

Direct to Consumer

The Direct to Consumer segment has seasonal sources of revenue and historically experiences a greater proportion of annual revenue and net income in the months of March through May and December due to the seasonal products it sells. For the current quarter and comparable prior year period, the Direct to Consumer segment had net loss of ($0.46) million and ($0.33) million, respectively. Revenues for the three month period ended September 30, 2017 were $4.98 million compared to the comparable period in 2016 of $5.95 million.

Consumer Finance

A summary table of the number of consumer finance locations we operated during the quarters ended September 30, 2017 and 2016 follows:

	2017		2016
Beginning		41		46
Acquired/ Launched		—		—
Closed		—		(1	)
Ending		41		45

Our Consumer Finance segment revenues decreased for the quarter ended September 30, 2017 compared to the quarter ended September 30, 2016 due to the closing of five locations in South Dakota at the end of 2016. Revenue decreased 5.32% period over period while net income decreased 16.62%.

Corporate

Costs related to our Corporate segment were $0.25 million for the quarter ended September 30, 2017 compared to $0.22 million for the quarter ended September 30, 2016. In accordance with authoritative guidance applicable to discontinued operations, prior year comparable Corporate costs have been increased from those reported in previously filed reports as a result of continuing corporate overhead previously allocated to discontinued operations being reallocated to corporate.

Results of Operations – Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016

Net income attributable to our common shareholders was $4.02 million, or $0.43 per share (basic and diluted), for the nine-month period ended September 30, 2017, compared to net income of $4.54 million, or $0.48 per share (basic and diluted), for the nine-month period ended September 30, 2016. Net income from continuing operations attributable to our common shareholders was $1.56 million, or $0.17 per share (basic and diluted), for the nine-month period ended September 30, 2017, compared to net income of $2.54 million, or $0.27 per share (basic and diluted), for the nine-month period ended September 30, 2016. Net income from discontinued operations attributable to our common shareholders was $2.46 million, or $0.26 per share (basic and diluted), for the nine-month period ended September 30, 2017 compared to net income of $2.00 million, or $0.21 per share (basic and diluted) for the nine-month period ended September 30, 2016.

Following is a discussion of operating results by segment.

The following table provides period-over-period revenues and net income attributable to WCR common shareholders by continuing operating segment (in thousands):

	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total
Nine Months Ended September 30, 2017
Revenues	$	52,432		$	29,014		$	8,136		$	—		$	89,582
% of total revenue		58.5	%		32.4	%		9.1	%		—	%		100.0	%
Net income (loss)	$	65		$	1,507		$	781		$	(690	)	$	1,663
Net income (loss) attributable to WCR common shareholders	$	(35	)	$	1,507		$	781		$	(690	)	$	1,563

Nine Months Ended September 30, 2016
Revenues	$	27,152		$	30,699		$	8,830		$	—		$	66,681
% of total revenue		40.7	%		46.0	%		13.3	%		—	%		100.0	%
Net income (loss)	$	526		$	1,682		$	964		$	(636	)	$	2,536
Net income (loss) attributable to WCR common shareholders	$	526		$	1,682		$	964		$	(636	)	$	2,536

Cellular Retail

A summary table of the number of Cricket cellular retail stores we operated during the nine month periods ended September 30, 2017 and 2016 follows:

	2017			2016
Beginning		198			99
Acquired/ Launched		93			33
Closed		(11	)		(6	)
Ending		280			126

The increase in Cellular Retail segment revenues in the current nine month period compared to the same period in the prior year is due to operating approximately 154 additional locations during at least some portion of the comparable periods. Included in the increased location count are 53 locations we operated under a management agreement effective November 22, 2016 and subsequently acquired a 70% ownership interest in effective July 1, 2017.

Direct to Consumer

The Direct to Consumer segment has seasonal sources of revenue and historically experiences a greater proportion of annual revenue and net income in the months of March through May and December due to the seasonal products it sells. Revenues for the nine month period ended September 30, 2017 were $29.01 million compares to $30.70 million for the comparable period in 2016.

Consumer Finance

A summary table of the number of consumer finance locations we operated during the nine month periods ended September 30, 2017 and 2016 follows:

	2017		2016
Beginning		41		47
Acquired/ Launched		—		—
Closed		—		(2	)
Ending		41		45

Our Consumer Finance segment revenues decreased for the nine month period ended September 30, 2017 compared to the nine month period ended September 30, 2016 as a result of the store closings in South Dakota at the end of 2016. Revenue decreased 7.86% period over period while net income decreased 18.98%.

Corporate

Costs related to our Corporate segment were $0.69 million for the nine month period ended September 30, 2017 compared to $0.64 million for the nine month period ended September 30, 2016. As previously noted in this report, continuing corporate overhead costs previously allocated to the discontinued operations has been reallocated to corporate.

Liquidity and Capital Resources

Summary cash flow data is as follows:

	Nine Months Ended September 30,
	2017			2016
Cash flows provided (used) by:
Operating activities	$	1,957,861		$	2,256,955
Investing activities		(2,714,541	)		(1,723,606	)
Financing activities		(4,774,898	)		(485,121	)


Net decrease in cash		(5,531,578	)		48,228
Cash, beginning of period		14,159,975			7,847,669
Cash, end of period	$	8,628,397		$	7,895,897

At September 30, 2017, we had cash of $8.63 million compared to cash of $7.90 million on September 30, 2016. Both comparable periods include cash flows utilized for growth in our Cellular Retail segment. In July of 2017, we reduced our outstanding credit facility balance by $1 million.

As previously noted, effective July 1, 2017 we closed on an acquisition of Cricket retail stores. Prior to closing, we advanced funds pursuant to a Note Receivable arrangement with the sellers. Advances made pre-closing were included in investing activities and at closing the Note Receivable balance was applied to the purchase price. Included in the amount applied, which is not included in cash flows from investing activities for the nine months ended September 30, 2017 was $2.92 million advanced in 2016. Amounts advanced in 2016 together with amounts advanced in 2017 and paid at closing totaled approximately $3.62 million.

As previously noted, on October 3, 2017 we sold all of our shares of capital stock of our discontinued franchise operations. The transaction resulted in $49 million of liquidity to the Company. Post-closing we extinguished an additional $2.7 million of debt. The balance of approximately $46 million will be used to pay an estimated $22 million of income taxes and for acquisitions.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2017.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

We utilize the Committee of Sponsoring Organization’s Internal Control – Integrated Framework, 2013 version, for the design, implementation and assessment of the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

As of September 30, 2017, our Chief Executive Officer and Chief Financial Officer carried out an assessment of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934. Based on this assessment, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures are effective as of September 30, 2017.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 5. Other Information

On November 1, 2017, the Company entered into a Second Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated July 21, 2012, as earlier amended on each of October 1, 2014 and July 1, 2015. The amended and restated agreement eliminates the Company’s unilateral right to terminate the agreement in connection with a change in control of the Company. As a result, any termination of the amended and restated agreement in connection with a change in control of the Company will require the mutual consent of both the Company and Blackstreet Capital Management.

Item 6. Exhibits

Exhibit		Description

2.1		Purchase and Sale Agreement with U.S. Business Holdings, Inc. and MBE WorldWide S.p.A, dated effective as of October 2, 2017 ( filed herewith ).

10.1		Amended and Restated Employment Agreement with Angel Donchev, dated effective as of August 16, 2017 ( filed herewith ).

10.2		Second Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated effective as of November 1, 2017 ( filed herewith ).

10.3		Consent and Second Loan Modification Agreement with Fifth Third Bank, dated effective as of July 1, 2017 ( filed herewith ).

10.4		Consent and Third Loan Modification Agreement with Fifth Third Bank, dated effective as of October 3, 2017 ( filed herewith ).

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ( filed herewith ).

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ( filed herewith ).

32		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ( filed herewith ).

101.INS		XBRL Instance Document ( filed herewith ).

101.SCH		XBRL Schema Document ( filed herewith ).

101.CAL		XBRL Calculation Linkbase Document ( filed herewith ).

101.DEF		XBRL Definition Linkbase Document ( filed herewith ).

101.LAB		XBRL Label Linkbase Document ( filed herewith ).

101.PRE		XBRL Presentation Linkbase Document ( filed herewith ).

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 14, 2017	Western Capital Resources, Inc.
	(Registrant)

	By:	/s/ John Quandahl
		John Quandahl
		Chief Executive Officer and Chief Operating Officer

	By:	/s/ Angel Donchev
		Angel Donchev
		Chief Financial Officer

Exhibit 2.1

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (“ Agreement ”) is made as of this 2 ^nd day of October, 2017, (the “ Effective Date ”) by and among the following (the “ Parties ”):

U.S. Business Holdings, Inc., a Delaware corporation, with an address of 143 Union Boulevard, Suite 800, Lakewood, Colorado 80228 (“ Purchaser ”),

MBE WorldWide S.p.A., an Italian Societa per Azioni, with an address of V. le Lunigiana, 35-37, Milan, Italy (“ Guarantor ”),

BC Alpha LLC, a Delaware limited liability company, with an address of c/o Western Capital Resources, Inc., 11550 “I” Street, Suite 150, Omaha, Nebraska 68137 (“ Seller ”),

BC Alpha Holdings II, LLC, a Delaware limited liability company with an address of c/o Western Capital Resources, Inc., 11550 “I” Street, Suite 150, Omaha, Nebraska 68137 (“ Seller’s Owner ”), and

Western Capital Resources, Inc. a Delaware corporation with an address of 11550 “I” Street, Suite 150, Omaha, Nebraska 68137 (“ WCR ”)

with reference to the following facts and circumstances:

As of the Effective Date, the Seller owns approximately 99.2% of the capital stock of AlphaGraphics, Inc., a Delaware corporation with an address of 215 South State Street, Suite 320, Salt Lake City, Utah 84111 (the “ Company ”).

Seller’s Owner owns all of the membership interests of Seller.

WCR owns all of the membership interests of Seller’s Owner.

Guarantor owns all of the capital stock of Purchaser.

The Purchaser desires to acquire all of the capital stock of the Company in order to operate the Business (hereinafter defined).

Subject to the satisfaction of the Conditions (hereinafter defined), the Seller shall sell, and the Purchaser shall purchase, all of the capital stock of the Company.

Seller’s Owner and WCR (collectively, the “ Ownership Group ”) are parties to this Agreement solely for the purposes of, and only to the extent provided in, Section 8 (Seller Warranties), Section 9 (Indemnities), Section 10 (Purchaser’s Remedies), Section 11 (Limitation of Liability), Section 13 (Tax), Section 14 (Confidentiality and Non-Disclosure), Section 15 (Non-Competition Covenants), Section 16 (Release), Section 18 (Announcements), and Section 19 (Further Assurances), Section 20 (Assignment), Section 24 (General).

NOW, THEREFORE, for an in consideration of the foregoing recitals and for the consideration hereinafter set forth, the Parties agree as follows:

Definitions . Unless defined elsewhere in this Agreement, capitalized terms have the meanings set out for them below.

Accounts means (i) the Audited Accounts and (ii) the Management Accounts.

Accounts Dates means both the Audited Accounts Date and the Management Account Date.

Adjusted Net Working Capital means the Net Working Capital, as reflected on the Estimated Closing Working Capital Statement, less the amount, if any, of the Excess Cash Distribution. If no Excess Cash Distribution is permissible (in accordance with Section 17.e ) or no Excess Cash Distribution is otherwise made, the Adjusted Net Working Capital shall then be equal to the Net Working Capital set forth on the Estimated Closing Working Capital Statement.

Affiliate means any entity that, directly or indirectly, owns or controls or is owned or controlled by, another entity. For the purposes of this definition, “control” means the power to direct the management and policies of such entity, whether directly or indirectly.

AIM Account means the separate and segregated assets and liabilities related to the collection and disbursement of the AIM Funds in accordance with the Franchise Agreements.

AIM Balance means an amount equal to (i) the intercompany accounts payable by the AIM Account to the Company as of the close of business on the Closing Date, less (ii) the intercompany accounts payable owed by the Company to the AIM Account as of the close of business on the Closing Date.

AIM Funds means the AlphaGraphics Integrated Marketing Fees, collected and held by the Company from Franchisees as provided in the Franchise Agreements.

AIM Closing Schedule is the schedule calculating the AIM Balance, prepared in accordance with calculation set forth on Part 2 of Schedule 2 .

AIM Shortfall is defined in Section 6.e .

Amount Claimed is defined in Section 7.b .

Assets means all (i) personal property (tangible and intangible) used by the Company in the operation of the Business, including all Intellectual Property; and (ii) all real estate used by the Company in the operation of the Business; in either case, whether owned, leased, licensed or otherwise made available to the Company, all as set forth on Schedule 7 (provided that, in the case of personal property, Schedule 7 lists only those such Asset(s) that have a book value in excess of $50,000).

Audited Accounts means the audited financial statements of the Company, prepared in accordance with GAAP for the fiscal year ended on the Audited Accounts Date, including the balance sheet, income statement, cash flow, associated footnotes and changes in shareholders’ equity, as disclosed to Purchaser. For the avoidance of doubt, the Audited Accounts do not account for, or otherwise include, the AIM Account.

Audited Accounts Date means December 31, 2016, the end of the Company’s most recent fiscal year.

BCP means Blackstreet Capital Partners II, LP, a limited partnership with an address of 5425 Wisconsin Avenue, Suite 701, Chevy Chase, MD 20815.

Business means the operation of the AlphaGraphics® franchised business to provide the Retail Service pursuant to a Franchise Agreement with a Franchisee or a Master Franchise Agreement with a Master Franchisee, as applicable.

Business Day means any day, excluding Saturday, Sunday or any other day on which commercial banks in New York, New York USA are authorized or required by Law to close.

Cash Consideration means SIXTY-ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($61,500,000.00) , as may be adjusted as set forth herein.

Claim Notice is defined in Section 7.b .

Closing means the exchange of documents, instruments and funds for the completion of the sale and purchase of the Shares in accordance with this Agreement.

Closing Cash Amount means the Cash Consideration, (i) less the Escrow Amount, (ii) less the Reverse Split Payment, (iii) less the Option Cancellation Payment, (iv) (1) plus the amount, if any, by which the Adjusted Net Working Capital, as reflected on the Estimated Closing Working Capital Statement, is greater than the Closing Net Working Capital Target, or minus (2) the amount, if any, by which the Net Working Capital as reflected on the Estimated Closing Working Capital Statement is less than Closing Net Working Capital Target, (v) (1) plus the amount, if any, by which the AIM Balance as reflected on the Estimated AIM Closing Statement is greater than zero, or minus (2) the amount, if any, by which the AIM Balance as reflected on the Estimated AIM Closing Statement is less than zero, and (vi) minus the amount, if any, by which the USC Balance, as reflected on the Estimated USC Closing Statement, is less than zero.

Closing Date is defined in Section 4 .

Closing Net Working Capital Schedule is the schedule calculating the Net Working Capital of the Company as of the Closing, prepared in accordance with Pro Forma Working Capital Schedule, including, but separately accounting for, the USCs.

Closing Net Working Capital Target means ZERO DOLLARS ($0.0).

Commitment Letter is defined in Section 12.d .

Company Parties is defined in Section 16.a .

Conditions means the conditions to Closing identified in Section 4 and Schedule 1 .

aa.

Confidential Information means (i) all confidential information relating to the Company, the Franchisees or the Business, including all data and information that is a trade secret or competitively sensitive, financial information (including revenue and cost history and forecasts), employee data, sales information, business plans, accounting and Tax records, and similar material, whether or not such information is reduced to tangible form or marked “confidential;” and (ii) all information which has been directly derived or obtained from the information described in (i).

bb.

Current FDDs is defined in Section 17.a of Schedule 3.

cc.

Data Room means the “Cristobal” iDeals data room comprising the actual copies of documents and other information relating to the Company and Ownership Group made available to the Purchaser online through the iDeals website.

dd.

De Minimis Amount is defined in Section 11 .

ee.

DGCL means the Delaware General Corporation Law, as amended.

ff.

Disagreement Notice is defined on Schedule 2 .

gg.

Discontinued Subsidiaries means those Subsidiaries (whether corporations, LLCs or other forms) owned or controlled in whole or in part by the Company, inside or outside the United States, from January 1, 2007 but no longer active or existing as of the Closing Date.

hh.

Disclosure Letter means the disclosure letter in the agreed form, delivered to the Purchaser on or prior to the Effective Date and signed by the Seller and initialed by the Purchaser on the Effective Date, as may be supplemented pursuant to Section 24.b .

ii.

Dispute has the meaning set forth in Section 24.l .

jj.

Draft AIM Closing Schedule is defined on Schedule 2 .

kk.

Draft Closing Net Working Capital Schedule is defined on Schedule 2 .

ll.

Due Diligence means the Seller’s production, and the Purchaser’s inspection, of documents, records, material and information pertaining to the Company’s formation, ownership, history, financial and operating records and other matters.

mm.

Effective Date has the meaning set forth in the first paragraph of this Agreement.

nn.

Employee Detail List means the list of all Employees showing the hire date, base salary and other compensation and benefits detail, included as part of Schedule 4 .

oo.

Employees means all those persons employed by the Company as of the date of this Agreement as identified on Schedule 4.

pp.

Encumbrances means any option or right to acquire, option or right of preemption, any mortgage, pledge, lien, assignment (collateral or absolute), assignation, hypothecation, restriction, security interest (including any created by law), guarantee, title retention or other agreement or arrangement creating an interest in the relevant property.

qq.

Escrow Account means the separate designated interest-bearing deposit account to hold the Escrow Amount to be deposited by Purchaser with the Escrow Agent at Closing.

rr.

Escrow Agent means Access National Bank.

ss.

Escrow Agreement means that agreement among the Parties and the Escrow Agent establishing the Escrow Account.

tt.

Escrow Amount means SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000.00) , being that portion of the Cash Consideration paid by Purchaser into the Escrow Account.

uu.

Estimated AIM Closing Statement has the meaning set forth in Section 3 .

vv.

Estimated Closing Working Capital Statement has the meaning set forth in Section 3 .

ww.

Estimated USC Closing Statement has the meaning set forth in Section 3 .

xx.

Excess Cash Distribution has the meaning set forth in Section 17.e .

yy.

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

zz.

Executive Agreement means the agreement between the Company and Ms. Burke, to be executed and delivered at Closing in the form attached hereto as Schedule 5 .

aaa.

FDD means franchise disclosure documents (including documents prepared as “Franchise Disclosure Documents,” “FDDs,” “Uniform Franchise Offering Circulars,” or “UFOCs”) prepared in accordance with the FTC Rule (or its predecessor) and all variations of such forms which have been approved for use or used in any state or jurisdiction requiring the filing and/or approval of any Franchise Agreement and/or FDDs.

bbb.

Final Determination means either (i) the Seller’s and the Purchaser’s agreement in writing (such written agreement not to be unduly withheld or delayed following any oral agreement between the parties); or (ii) the judgment of a court or arbitration proceedings in respect of the claim and either no right of appeal lies in respect of such judgment or the parties are debarred, whether by passage of time or otherwise, from exercising any such right of appeal.

ccc.

Financing is defined in Section 12.d .

ddd.

Franchise Agreements means those franchise agreements (including schedules, exhibits, riders, addenda, amendments, and modifications thereto) currently in effect between the Company and Franchisees to operate the Business and provide the Retail Service in the United States.

eee.

Franchise Brokers means Third Party brokers, intermediaries, referral firms or finders engaged by the Company to identify and refer potential franchisees.

fff.

Franchise Law means the FTC Rule and any other Law regulating the offer or sale of franchises or governing the relationships between franchisors and franchisees.

ggg.

Franchisee means a Third Party who is a party (as the franchisee) to a Franchise Agreement with the Company to provide the Retail Service in the United States. All Franchisees are identified on Schedule 8 .

hhh.

Fraud means intentional or willful misrepresentation of material facts which constitutes common law fraud under the laws of the State of Delaware.

iii.

FTC means the Federal Trade Commission.

jjj.

FTC Rule means the FTC trade regulation rule entitled “Disclosure Requirements and Prohibitions Concerning Franchise,” 16 C.F.R. Section 436.1 et seq.

kkk.

GAAP means United States Generally Accepted Accounting Principles, consistently applied.

lll.

General Warranty Period End Date means the day that is twenty-four (24) months after the Closing.

mmm.

Governmental Body means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

nnn.

Historic FDDs is defined in Section 16.b of Schedule 3.

ooo.

Independent Accountant means CBIZ, Inc., that is, the accountant to whom initial disputes about the Net Working Capital shall be referred for resolution in accordance with this Agreement.

ppp.

Intellectual Property means all legal and beneficial rights in each of the following: copyrights, trade and service marks, trade names, domain names, rights in logos, inventions, Confidential Information, registered designs, design rights, patents and patent applications, rights protecting goodwill or reputation, computer software and data, databases, all rights of privacy, all intangible rights and privileges of a nature similar to the foregoing, anywhere located, whether or not registered.

qqq.

IRC means the United States Internal Revenue Code of 1986, as amended.

rrr.

Law means any and all (a) United States federal, state and local laws, statutes, directives, orders, regulations, rules, judgments, injunctions, treaties, writs, codes and ordinances, including the requirements of the US Federal Trade Commission, the Securities and Exchange Commission, and (b) all other disclosure and reporting requirements, and all rules, regulations, and codes adopted by any Governmental Body or Tax Authority.

sss.

Lender is defined in Section 12.d .

ttt.

Liability means all Loss, liabilities, Tax, duties and obligations of every description (including, for the avoidance of doubt, any and all out of pocket costs, expenses, losses or expenditures reasonably incurred in investigating or defending against any liability that may arise), whether deriving from contract, Law or otherwise, whether present or future, actual or contingent, ascertained, unknown or disputed, and whether owed or incurred severally or jointly or as principal or surety.

uuu.

Licensed IP means all Intellectual Property used by the Company that is not Owned IP, as set forth on Schedule 7 .

vvv.

Loss means any and all losses, liabilities, costs, deficiencies, penalties, demands, fines, assessments, Taxes, interest, expenses (including reasonable professional fees), court costs, damages, duties, expenditures, amounts of judgments, awards, settlements or demands that are owed, imposed upon or otherwise incurred, suffered or sustained by the relevant Party, including any amounts paid in investigation or settlement.

www.

Management Accounts means the unaudited monthly accounts of the Company prepared in accordance with GAAP, including a balance sheet, income statement and cash flow statement, from the Audited Accounts Date and ending on the Management Accounts Date. For the avoidance of doubt, the Management Accounts do not account for, or otherwise include, the AIM Account.

xxx.

Management Accounts Date means the day as of which the Management Accounts are stated, which shall be the Effective Date; provided, however, if the Effective Date does not occur on the last day of a calendar month, the Management Accounts shall be stated as of the last day of the calendar month immediately preceding the Effective Date.

yyy.

Master Franchise Agreement means a master franchise agreement or franchise agreement (including schedules, exhibits, riders, addenda, amendments, and modifications thereto) entered into between the Company and a Master Franchisee since July 1, 2012 to provide the Retail Service in any country other than the United States.

zzz.

Master Franchisee means a Third Party who is a party to a Master Franchise Agreement with the Company in effect as of the Effective Date. All Master Franchisees are identified on Schedule 8 .

aaaa.

Material Adverse Change means any change, effect, event, occurrence, condition or development that has had or would be reasonably expected to have a material adverse effect on the business, assets, properties, condition, liabilities or operating results of the Company or the Business, taken as a whole; provided, however , that, any change, effect, event, occurrence, condition or development resulting from any of the following shall not constitute a Material Adverse Change, nor shall the occurrence, impact or results of such events be taken into account in determining whether there has been or will be a Material Adverse Change: (i) changes of Law after the Effective Date, (ii) changes in GAAP or interpretations thereof, (iii) any change, event or effect in general economic conditions, in conditions pertaining specifically to the industry in which the Company operates, or in the securities markets of the U.S. in general that does not affect the Company in a materially disproportionate manner; (iv) any action required by this Agreement or any Transaction Document or at the specific request of Purchaser, other than the actions contemplated by or related to the Reverse Split or the Reverse Split Payment, (v) the announcement, pendency or completion of the transactions contemplated hereby, including the public announcement thereof on relationships with customers, suppliers, employees and Franchisees (excluding any claim or litigation from any person challenging the transactions contemplated hereby, asserting claims arising out of or related to the transaction contemplated hereby or the exercising any appraisal or similar rights), and (vi) the occurrence of any acts of terrorism, war or natural disaster.

bbbb.

Material Suppliers means those Suppliers that have provided at least $250,000 in goods and/or services to the Company in 2016 or 2017 (on an annualized basis).

cccc.

Minority Shareholder means any person, trust or other entity that owns Shares of the Company other than the Seller. The Minority Shareholders, their ownership interests and the amount of the Reverse Split Payment to each Minority Shareholder are set forth on Schedule 9 .

dddd.

Minority Shares means the Shares owned by the Minority Shareholders.

eeee.

Net Working Capital means: (a) Surplus Cash (if any), the Restricted Cash, accounts receivable, pre-paid expenses and other current assets, less (b) accounts payable, accrued liabilities and deferred revenue and other current liabilities, all booked in accordance with GAAP. Net Working Capital does not include (a) the AIM Balance, the AIM Funds or other similar payments from Franchisees to support marketing, advertising and promotion, or any component of the AIM Account, (b) Universal Service Credits, (c) deferred Taxes, Tax refunds, accrued Taxes, or Taxes payable (including, without limitation, any sales or payroll Taxes), whether included as an asset or liability, or any affect that the Company’s deferred Taxes would otherwise have on Net Working Capital, (d) the Reverse Split Payment, (e) the Option Cancellation Payment, and (f) other items as identified on Schedule 2 .

ffff.

Option Cancellation Agreements mean those certain Option Cancellation and Redemption Agreements between the Company, Seller and each Option Holder providing for the cancellation of all stock options held by the Option Holder.

gggg.

Option Cancellation Payment means Six Hundred Ninety Six Thousand Five Hundred Sixty Seven Dollars and 87/100 (696,567.87) , being that portion of the Cash Consideration to be paid by Purchaser to the Company to be delivered to the Option Holders pursuant to the Option Cancellation Agreements, as described in Section 2.b. Such payment, plus the portion of the Option Redemption Payment (as such term is defined in the Option Cancellation Agreement) that the Option Holders direct to be held in the Escrow Account pursuant to the Option Cancellation Agreements, represents the consideration paid to cancel all stock options held by the Option Holders.

hhhh.

Option Holders is defined in Section 2.b .

iiii.

Owned IP means all Intellectual Property owned by the Company and identified as such on Schedule 7 .

jjjj.

Permitted Encumbrance means (a) Encumbrances for current Taxes and assessments not yet due or being contested in good faith by appropriate proceedings, (b) Encumbrances as reflected in title or other public records relating to real property owned or leased by the Company, (c) Encumbrances that would be disclosed by an accurate survey, (d) Encumbrances arising from or created by municipal and zoning ordinances, and (e) Encumbrances arising out of work performed, services provided or materials delivered that are not reflected in the public records and that arise in the ordinary course of business.

kkkk.

Pro Forma Working Capital Schedule has the meaning set forth in Part 1 of Schedule 2 .

llll.

Purchaser Indemnified Party (individually) or Purchaser Indemnified Parties (collectively) means the Purchaser and its Affiliates (including the Company), and its and their respective employees, officers, directors, partners, managers, members, equity-holders, agents, representatives, successors and assigns (but excluding the Seller and all members of the Ownership Group).

mmmm.

Released Claims is defined in Section 16.a .

nnnn.

Reasonable Best Efforts means the prompt, continuous and diligent efforts by the relevant Party using the skills, experience and resources such Party has available to it, but not requiring such Party (a) to spend an amount of money or effort in connection with making such efforts that is in excess of what is reasonable in light of the industry and geography in which the Party operates; or (b) to sell or otherwise divest itself of any part of its business or assets or accept any obligation to do so.

oooo.

Reporting Entity means Seller or that member of the Ownership Group that has consolidated the Company and the Business into that Party’s United States Federal Income Tax Return for the relevant time period.

pppp.

Reminder Claim Notice is defined in Section 7.b .

qqqq.

Response Notice is defined in Section 7.b .

rrrr.

Restricted Affiliate is defined in Section 15 .

ssss.

Restricted Cash means cash and cash equivalents held by the Company pursuant to its Franchise Agreements #031 and #012 for locations in Tucson, Arizona.

tttt.

Restricted Competitor is defined in Section 15 .

uuuu.

Retail Service means the customized print and marketing communication products and services offered to businesses by the Franchisees pursuant to the Franchise Agreements and by the Master Franchisees pursuant to the Master Franchise Agreements using the Company’s AlphaGraphics® franchise system and offered under the AlphaGraphics® trademarks, service marks and other commercial symbols, including visual communication services as described in the Franchise Agreements and Master Franchise Agreements.

vvvv.

Reverse Split is defined in Section 2.a .

wwww.

Reverse Split Payment means FOUR HUNDRED EIGHTY NINE THOUSAND TWENTY DOLLARS AND 64/100 ($489,020.64) , being that portion of the Cash Consideration to paid by Purchaser at the direction of the Seller to the Minority Shareholders on behalf of the Company as a result of the reverse split described in Section 2.a .

xxxx.

Rules has the meaning set forth in Section 24.l .

yyyy.

Schedules means those agreements, terms and conditions set forth on schedules to be delivered separately to Purchaser concurrently with the execution and delivery of this Agreement, which are incorporated into and part of this Agreement. The Schedules include:

Schedule 1 Closing Matters

ii.

Schedule 2 Closing Net Working Capital Calculation; AIM Balance

iii.

Schedule 3 Seller Warranties

iv.

Schedule 4 Directors, Officers and Employees (including the Employee Detail List)

Schedule 5 Executive Agreements

vi.

Schedule 6 Pre-Closing Undertakings

vii.

Schedule 7 Assets (including Intellectual Property Registration list)

viii.

Schedule 8 List of Franchisees and Master Franchisees

ix.

Schedule 9 Shareholders

Schedule 10 Purchase Price Allocation

xi.

Schedule 11 Side Letter from Blackstreet Capital Management LLC to Purchaser

xii.

Schedule 12 List of Current and Historic FDDs

zzzz.

Seller Indemnified Party (individually) or Seller Indemnified Parties (collectively) means the Seller, each member of the Ownership Group and their respective Affiliates, and its and their respective employees, officers, directors, partners, managers, members, equity-holders, agents, representatives, successors and assigns (but excluding the Company).

aaaaa.

Seller Indemnifying Parties means collectively the Seller and each member of the Ownership Group, and Seller Indemnifying Party means an individual party within the Seller Indemnifying Parties.

bbbbb.

Seller Releasing Parties is defined in Section 16.a .

ccccc.

Seller Warranties means the representations and warranties of the Seller set forth herein, including on Schedule 3 .

ddddd.

Shareholders means the Seller and all others owning any of the Shares.

eeeee.

Shareholder Agreements means all agreements between the Company and any holder of the Company’s Shares.

fffff.

Shares means the shares of issued and outstanding capital stock, however designated, of the Company, representing the entirety of all ownership interests in the Company.

ggggg.

Stock Option Agreements means those agreements between the Company and any Third Party, including Ms. Burke and Mr. Grohs, entitling those individuals, under certain circumstances, to obtain the option to purchase certain of the Company’s Shares.

hhhhh.

Surplus Cash means, if positive, the Company’s cash and cash equivalents as of the Closing, less the Universal Service Credits earned by or creditable to any Franchisee as of the Closing (as may be further adjusted pursuant to Section 6.c ).

iiiii.

Subsidiary means an Affiliate owned or controlled, directly or indirectly, by another entity.

jjjjj.

Supplier means any firm whose goods or services are used by the Company or the Franchisees in the performance of the Business.

kkkkk.

Tax or Taxes means (i) any U.S. federal, state, local, or non-U.S. income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under IRC Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value-added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not, (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of being a member of a consolidated, combined, unitary or aggregate group for any Tax period, and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) as a result of being a transferee or successor to any person.

lllll.

Tax Authority means the United States Internal Revenue Service, and all other federal, state, provincial and local authorities competent to impose, collect or administer any Tax.

mmmmm.

Tax Claim is defined in Section 13 .

nnnnn.

Tax Covenant means those undertakings of Seller and the Ownership Group set forth in Section 13 .

ooooo.

Tax Return means any return, declaration, report, schedule, notice, form, claim for refund, or information return or statement (including any attachment thereto and any amendment thereof) filed with or submitted to, or required to be filed with or submitted to, any Governmental Body.

ppppp.

Third Party means any person who is not a Party to this Agreement.

qqqqq.

Third Party Claim is defined in Section 11 .

rrrrr.

Transaction means the execution and delivery of this Agreement and the other documents and instruments contemplated herein, the payment of the Cash Consideration, and the other acts necessary or desirable to effect the intention of the Parties as set forth in this Agreement.

sssss.

Transaction Documents means this Agreement (including all of its Schedules) and all other documents and instruments contemplated by or referred to herein.

ttttt.

USC Funds has the meaning set forth in Part 1 of Schedule 2 .

uuuuu.

Universal Service Credits (or “USCs”) means all value credited or creditable by the Company as of Closing to certain Franchisees who are entitled by the terms of their Franchise Agreements to a credit usable by the Franchisee (a) to pay for certain services provided by the Company, (b) to pay for marketing and promotional activities, or, (c) in some circumstances, to offset against funds otherwise payable by the Franchisee to the Company, in any case whether those Universal Service Credits are creditable to the Franchisee who earned them, or have been transferred by that Franchisee to another Franchisee. For the avoidance of doubt, any Liabilities associated with Franchise Agreements #031 and #012 for locations in Tucson, Arizona are not, and shall not be included in the calculation of, the USCs.

vvvvv.

USC Balance means an amount equal to the Company’s cash and cash equivalents (excluding Surplus Cash, if any) as of the close of business on the Closing Date, less the Universal Service Credits earned by or creditable to any Franchisee as of the close of business on the Closing Date.

wwwww.

USC Shortfall has the meaning set forth in Section 6.d .

xxxxx.

Unlimited Warranties means those warranties identified as such on Schedule 3 .

yyyyy.

Working Capital Shortfall has the meaning set forth in Section 6.c .

References to any law, statute or regulation shall be construed as a reference to the same as it may have been, or may from time to time be, consolidated, amended, modified or re-enacted.

Reference to this Agreement includes all schedules to it.

The word “including” means “including, without limitation.”

References to “indemnify” or “indemnifying” any person against circumstances include indemnifying and holding such person harmless from all actions, claims and proceedings from time to time made against that person and all loss or damage and all payments, costs and expenses made or incurred as a consequence of, or which would not have arisen but for, that circumstance.

Reference to income, profits or gains earned, accrued or received on or before Closing or with respect to a period ending on or before Closing shall include income, profits or gains deemed or treated for Tax purposes to have been, or as having been, earned, accrued or received before Closing or with respect to that period.

Reference to any event occurring or commencing on or before a particular date or time shall include the case where such event is deemed or treated for Tax purposes to have occurred or commenced on or before that date.

Purchase and Sale of the Shares.

Immediately prior to Closing, the Seller shall cause the Company to take all necessary action pursuant to and in strict compliance with the requirements of the DGCL and the Company’s certificate of incorporation to effect a “reverse split” of the Company’s outstanding common and preferred shares, with the Company to pay cash after the Closing for any fractional shares that would otherwise be held by the Minority Shareholders pursuant to Section 155 of the DGCL (the “ Reverse Split ”) in an aggregate amount equal to the Reverse Split Payment.

Effective as of the Closing, Seller shall terminate the Amended and Restated AlphaGraphics, Inc. 2013 Stock Option Plan, terminate all Stock Option Agreements, and ensure that all options and rights issued under that plan (including options and rights issued to Ms. Burke and Mr. Grohs (collectively, the “ Option Holders ”) are extinguished. In furtherance of the foregoing, the Seller shall cause the Company to enter into the Option Cancellation Agreements with each of the Option Holders, with the Company to pay cash after the Closing to the Option Holders in an aggregate amount equal to the Option Cancellation Payment in accordance with the Option Cancellation Agreements, subject to all required Tax and other mandatory withholdings. The Purchaser shall cause the Company to make such payment and withhold all applicable Taxes and other mandatory withholdings on the entire amount of the Option Redemption Payment (as such term is defined in the Option Cancellation Agreement) in accordance with the terms and conditions of the Option Cancellation Agreements.

Pursuant and subject to the terms of this Agreement, at Closing, the Seller shall sell, and the Purchaser (or its nominee) shall purchase for the Cash Consideration, all legal and beneficial title to the Shares outstanding as of Closing, together with all rights attached or accruing to the Shares, free from all Encumbrances and from all other rights or claims exercisable by any Third Party or any Minority Shareholder.

After the Closing, the Purchaser shall be entitled to exercise all rights attached or accruing to the Shares, including the right to receive all dividends, distributions or any return of capital declared, paid or made by the Company’s competent body.

The Seller waives all rights of preemption over any of the Shares conferred upon the Seller by the constitutional documents of the Company or in any other way, and undertakes to take all steps necessary to ensure that all rights of preemption over the Shares are waived.

The Purchaser reserves the right to appoint a nominee, which shall be an Affiliate of the Purchaser, to effect the purchase of the Shares, provided that the Purchaser shall remain jointly and severally liable with the nominee for the due and punctual fulfillment by the nominee of its obligations to complete the purchase of the Shares and to pay the Cash Consideration in accordance with the terms of this Agreement. If the Purchaser elects to appoint a nominee, the Purchaser shall notify the Seller at least three (3) Business Days prior to Closing.

Further details of the Closing and the actions to be undertaken by the Parties in connection with Closing are set forth in Section 4 below and on Schedule 1 , Closing Matters.

Consideration.

Not fewer than two (2) Business Days prior to the Closing Date, the Seller will prepare and deliver to the Purchaser (i) a calculation of (a) the Company’s estimated Net Working Capital, which shall represent the Seller’s reasonable estimate of the Net Working Capital as of the close of business on the Closing Date and shall be prepared in accordance with the Pro Forma Working Capital Schedule, and (b) the resulting Adjusted Net Working Capital (the “ Estimated Closing Working Capital Statement ”); (ii) Seller’s reasonable estimate of the USC Balance as of the close of business on the Closing Date (the “ Estimated USC Closing Statement ”); and (iii) Seller’s reasonable estimate of the AIM Balance as of the close of business on the Closing Date (the “ Estimated AIM Closing Statement ”).

At Closing, the Purchaser shall pay to or at the direction of the Seller, the Closing Cash Amount.

At Closing, the Purchaser shall deposit the Escrow Amount into the Escrow Account in accordance with Schedule 1 (Closing Matters).

At Closing, the Purchaser shall deliver to the Company an aggregate amount equal to the sum of (i) the Reverse Split Payment, and (ii) the Option Cancellation Payment, with the Purchaser to cause the Company to deliver such amounts to the Minority Shareholders and the Option Holders in accordance with Sections 2.a and 2.b .

After the Closing, the Parties shall confirm the balance of (i) the Company’s Net Working Capital in accordance with Part 1 of Schedule 2 , (ii) the AIM Balance in accordance with Part 2 of Schedule 2 ; and (iii) the USC Balance in accordance with Part 3 of Schedule 2 . The Cash Consideration shall then (1) be adjusted (increased or decreased) as determined by the Closing Net Working Capital Schedule (that is, by the amount by which the Net Working Capital as reflected on the Closing Net Working Capital Schedule is greater or lesser than the Adjusted Net Working Capital) in the manner set out on Part 1 of Schedule 2 , (2) be further adjusted (increased or decreased) as determined by the AIM Closing Schedule (that is, by the amount by which the AIM Balance as reflected on the AIM Closing Schedule is greater or lesser than the AIM Balance as reflected on the Estimated AIM Closing Statement) in the manner set out on Part 2 of Schedule 2 , and (3) be further adjusted (increased or decreased) by the amount by which the Final Determination of the USC Balance is greater or lesser than the USC Balance as reflected on the Estimated USC Closing Statement in the manner set out on Part 1 of Schedule 2 .

Closing; Conditions Precedent.

The Closing shall take place remotely via the exchange of electronic copies of documents on the Effective Date or at such other time and place as the Parties shall mutually agree in writing (the date that the Closing takes place, the “ Closing Date ”), provided that the Conditions have been satisfied or waived prior to the Closing and:

there has been no Material Adverse Change since the date of this Agreement and the Seller and the members of the Ownership Group have certified to the Purchaser, as at the Closing Date, as to the absence of any Material Adverse Change (or, if there has been, that it has been waived by the Purchaser in accordance with the terms hereof); and

ii.

the Seller Warranties, as qualified by the Disclosure Letter, the Historic FDDs and the Current FDDs, shall be materially true and accurate as at the Closing Date (other than those Seller Warranties that speak as of a specific date or time (which need be true and correct only as of such date or time)), and the Seller and members of the Ownership Group shall have so certified to the Purchaser.

As to the Conditions identified on Schedule 1 :

the Seller shall use its Reasonable Best Efforts to fulfill or procure the fulfillment of the Conditions listed in Part 1 of Schedule 1 ; and

ii.

the Purchaser shall use its Reasonable Best Efforts to fulfill or procure the fulfillment of the Conditions listed in Part 2 of Schedule 1 ; and

iii.

each Party shall use its Reasonable Best Efforts to fulfill or procure the fulfillment of the Conditions listed in Parts 3 and 4 of Schedule 1 .

At Closing, each Party shall execute and deliver the documents and instruments set out in the relevant part of Schedule 1 , and shall do or procure the performance of the actions set out in the relevant part of Schedule 1 . The Parties shall provide reasonable assistance to the each other in order to seek the fulfillment of the Conditions.

To the extent permitted by Law, any Party may waive the delivery or performance of any of the Conditions intended to benefit such Party, provided that such waiver must be in writing.

Actions Following the Effective Date; Termination and Expiration

This Agreement may be terminated at any time prior to Closing only:

by the mutual written consent of all Parties hereto;

ii.

if Purchaser is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller or any member of the Ownership Group that would give rise to the failure of any of the Conditions specified in Schedule 1 ; or

iii.

if Seller is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Purchaser or Guarantor that would give rise to the failure of any of the Conditions specified in Schedule 1 .

Upon termination of this Agreement as provided in this Section 5 , this Agreement shall become void and of no further effect, and no Party shall have any claim against any other Party if any of the Conditions is not fulfilled or waived, except that:

Sections 1 (Definitions), 14 (Confidentiality and Non-Disclosure) and 24 (General Terms) shall survive any termination; and

ii.

no Party shall be relieved from liability for any willful breach of any provision of this Agreement.

Net Working Capital; USC Balance; AIM Balance

The agreement of the Parties concerning the calculation of the Net Working Capital and USC Balance of the Company at Closing, and the settlement of disputes about those matters, is set out in Part 1 of Schedule 2 .

The agreement of the Parties concerning the calculation of the AIM Balance as of the Closing, and the settlement of disputes about it, is set out in Part 2 of Schedule 2 .

Following the Final Determination of the Company’s cash and cash equivalents and the Universal Service Credits, if the Final Determination of the USC Balance is both (i) less than the USC Balance on the Estimated USC Closing Statement and (ii) less than zero dollars, the Seller and the Ownership Group, jointly and severally, shall promptly pay to the Purchaser an amount (such amount, the “ USC Shortfall ”) equal to the lesser of (1) the amount equal to (A) the USC Balance on the Estimated USC Closing Statement, minus (B) the Final Determination of the USC Balance, or (2) the amount equal to (Y) zero dollars minus (2) the Final Determination of the USC Balance. The USC Shortfall, if any, shall first be drawn from the Escrow Account. If, however, the USC Balance on the Estimated USC Closing Statement is less than the Final Determination of the USC Balance, such difference shall be deemed to be Surplus Cash, and incorporated into the Final Determination of the Net Working Capital.

Following the Final Determination of the Net Working Capital, if the Adjusted Net Working Capital is greater than the Final Determination of the Net Working Capital (“ Working Capital Shortfall ”), the Seller and the Ownership Group, jointly and severally, shall promptly pay to the Purchaser such difference (which shall first be drawn from the Escrow Account), but if the Adjusted Net Working Capital is less than the Final Determination of the Net Working Capital, then the Purchaser shall promptly pay to the Seller such difference.

Following the Final Determination of the AIM Balance, if the AIM Balance on the Estimated AIM Closing Statement is greater than the Final Determination of the AIM Balance (an “ AIM Shortfall ”), the Seller and the Ownership Group, jointly and severally, shall promptly pay to the Purchaser such difference (which shall first be drawn from the Escrow Account), but if the AIM Balance on the Estimated AIM Closing Statement is less than the Final Determination of the AIM Balance, then the Purchaser shall promptly pay to the Seller such difference.

There shall be no indemnification obligations under Section 9 with respect to any adjustments made to the Cash Consideration pursuant to this Section 6 .

Escrow.

At the Closing, Purchaser shall deposit the Escrow Amount into the Escrow Account in accordance with Schedule 1 .

Following the Final Determination of the Net Working Capital, if there is a Working Capital Shortfall or a USC Shortfall, the Purchaser and Seller shall jointly instruct the Escrow Agent in writing to release an amount equal to such Working Capital Shortfall or USC Shortfall (to the extent that there are sufficient funds in the Escrow Account) to the Purchaser.

Following the Final Determination of the AIM Balance, if there is an AIM Shortfall, the Purchaser and Seller shall jointly instruct the Escrow Agent in writing to release an amount equal to such AIM Shortfall (to the extent that there are sufficient funds in the Escrow Account) to the Purchaser.

The Purchaser may draw on the Escrow Account in settling any claim for indemnification pursuant to Section 9 of this Agreement, subject to the limitations set forth in Section 11 and subject to the Purchaser’s compliance with the following procedure:

Purchaser shall provide Seller with written notice of any claim arising from this Agreement (a “ Claim Notice ”) within thirty (30) calendar days after knowledge thereof. The Claim Notice shall state:

(a)

the nature of the claim, including such information in the possession of the Purchaser at the time of sending the Claim Notice;

(b)

the provision of this Agreement that the Purchaser alleges to have been breached;

(c)

without prejudice to the amount that Purchaser may recover pursuant to the claim, an estimate of the amount claimed, including estimated costs (such amount, as may be modified or amended from time to time pursuant to a further Claim Notice, being the “ Amount Claimed ”).

ii.

Within thirty (30) calendar days starting on the day after receipt of a Claim Notice, the Seller shall give the Purchaser written notice (the “ Response Notice ”) stating:

(a)

whether or not liability for the claim is accepted; and

(b)

if liability for the claim is not accepted, the reasons for such non-acceptance; or

(c)

if liability for the claim is accepted, whether the Amount Claimed is accepted in full or in part. Where only part of the Amount Claimed is accepted, the Response Notice shall include the reasons why the full amount of the Amount Claimed in not accepted.

iii.

If, following receipt of a Claim Notice, the Seller fails to deliver a corresponding Response Notice to the Purchaser within thirty (30) calendar days starting on the day after receipt of a Claim Notice, the Purchaser shall give a second notice of the claim (the “ Reminder Claim Notice ”) to the Seller.

iv.

If the Seller fails to send a Response Notice to the Purchaser with thirty (30) calendar days of receipt of the Reminder Claim Notice, the liability for the claim and the Amount Claimed stated in the Claim Notice shall be deemed to be accepted and the Amount Claimed shall be paid to the Purchaser from the Escrow Account (to the extent that there are sufficient funds in the Escrow Account).

Purchaser shall, at the Seller’s request, provide such information and documentation in connection with a claim under a Claim Notice, within Purchaser’s possession or control, to enable Seller to be informed and take appropriate actions in respect of such claim.

vi.

If Seller, in a Response Notice, accepts the Amount Claimed in whole or in part, then such amount shall be paid to the Purchaser from the Escrow Account (to the extent that there are sufficient funds in the Escrow Account).

vii.

After delivery of a Response Notice, the Parties shall attempt in good faith for thirty (30) days to resolve the claim. If the Parties cannot reach an agreement during the thirty (30)-day period for good faith negotiation, but in any event upon the expiration of such thirty (30)-day period, either Purchaser or Seller may submit the dispute to mandatory, final and binding arbitration to be held in the State of Delaware in accordance with Section 24.l below and the decision of the arbitrator as to the validity and amount of any claim for indemnification in shall be non-appealable, binding and conclusive upon the Parties to this Agreement.

Purchaser’s right and ability to make, and recover any amount in respect of, any claim for indemnification pursuant to Section 9 of this Agreement shall be first sought against the Escrow Amount, and the maximum liability for any and all claims for indemnification pursuant to Section 9.a.i (other than with respect to Unlimited Warranties or Fraud) shall be limited to the amounts in the Escrow Account.

As to the Escrow Account:

on the twelve (12) month anniversary of the Closing Date (or the next Business Day following such day), there shall be released to the Seller from the Escrow Account 50% of the balance remaining in the Escrow Account; and

ii.

on General Warranty Period End Date (or the next Business Day following such day), there shall be released to the Seller the remaining balance of Escrow Account;

iii.

provided, however, that the amount of the Escrow Amount that would otherwise be released to the Seller pursuant to the previous two clauses shall be reduced by the aggregate amount of all then unpaid Amounts Claimed.

If either the Seller or the Purchaser is entitled in accordance with this Section 7 to any amount from the Escrow Account, the Seller and the Purchaser shall, within five (5) Business Days following the Final Determination, jointly instruct the Escrow Agent in writing to release the money to the Seller or the Purchaser, as the case may be.

Interest accruing on the balance in the Escrow Account shall be added to the money in the Escrow Account and shall be distributed to the Purchaser or the Seller, as the case may be, in proportion to the payment of amounts out of the Escrow Account less any applicable Tax withholding, although the Parties hereto agree that for Tax purposes, the Purchaser shall be treated as the owner of the Escrow Amount while such amount is held by the Escrow Agent.

For the avoidance of doubt, if a claim in respect of which a Claim Notice has been provided to the Seller has not been Finally Determined by the General Warranty Period End Date, the Amount Claimed in respect of such claim shall be retained in the Escrow Account and not released until such claim has been Finally Determined.

Seller Warranties.

The Seller and each member of the Ownership Group, jointly and severally, make to the Purchaser the representations and warranties set out in Schedule 3 .

The Seller and each member of the Ownership Group jointly and severally represent and warrant to the Purchaser that (i) each of the Seller Warranties is true, accurate and correct on the Effective Date; and (ii) except for those Seller Warranties that speak as of a specific date or time (which need be true and correct only as of such date or time), each of the Seller Warranties is true, accurate and correct as of the Closing Date.

The Seller and each member of the Ownership Group accepts that the Purchaser is entering into this Agreement in reliance on the representations and warranties in the Seller Warranties, made with the intention of inducing the Purchaser to enter into this Agreement, and that accordingly the Purchaser has been induced to enter into this Agreement by the Seller Warranties.

Each of the Seller Warranties shall be construed as a separate and independent warranty and (except where expressly provided to the contrary) shall not be limited or restricted by reference to or inference from the terms of any other Seller Warranty.

The rights and benefits of the Seller Warranties may be assigned (together with any cause of action arising in connection with any Seller Warranty, indemnity or covenant) by the Purchaser to any person who is a successor in title or Affiliate of the Purchaser.

Except as otherwise provided with respect to any particular warranty appearing on Schedule 3, any reference to the Seller’s knowledge in the Seller Warranties shall mean the actual knowledge of the following individuals: Gay Burke, Aaron Grohs and Ryan Farris.

Indemnities.

If the Closing occurs, and subject to the terms and conditions of this Section 9 and the limitations set forth in Section 11 , the Seller Indemnifying Parties jointly and severally shall indemnify, defend and hold each Purchaser Indemnified Party harmless against any Liability or Loss that such Purchaser Indemnified Party actually incurs or suffers, whether or not involving any Third Party claims, relating to, caused by, arising out of or resulting from in respect of:

Any breach of any Seller Warranty or any Seller Warranty proving false or inaccurate;

ii.

The breach by the Seller or any member of the Ownership Group of any of their covenants;

iii.

Any Seller Parties’ Taxes; and

iv.

Any Taxes imposed on the Company under Treasury Regulation 1.1502-6 (or any comparable provision of foreign, state or local law) as a result of the Company’s (or any predecessor’s) inclusion as a member of an affiliated, consolidated, combined or unitary group on or prior to the Closing Date, including an affiliated group under IRC Section 1504.

If the Closing occurs, and subject to the terms and conditions of this Section 9 , the Purchaser and Guarantor shall, jointly and severally, indemnify, defend and hold each Seller Indemnified Party harmless against any Liability or Loss that such Seller Indemnified Party actually incurs or suffers, whether or not involving any Third Party claims, relating to, caused by, arising out of or resulting from in respect of (i) any failure by the Company to pay and deliver the Reverse Split Payment to the Minority Shareholders or otherwise pay such Reverse Split Payments as required by Law, (ii) to pay and deliver the Option Cancellation Payment to the Option Holders as provided in Sections 2.a . and 2.b ., or (iii) the breach by the Purchaser or Guarantor of any of their covenants.

10.

Purchaser’s Remedies.

The Seller Warranties shall survive Closing.

In the absence of Fraud on the part of any Seller Indemnifying Party, a Purchaser Indemnified Party shall not be entitled to claim that any fact or circumstance causes any of the Seller Warranties to be breached or renders any of the Seller Warranties inaccurate if such fact or circumstance has been accurately set forth in the Disclosure Letter or disclosed in the Historic or Current FDDs.

In the absence of Fraud on the part of any Seller Indemnifying Party, no liability shall attach to the Seller Indemnifying Parties in respect of claims under the Sellers Warranties if and to the extent that the limitations set out in Section 11 or Schedule 3 apply.

The Purchaser Indemnified Parties’ right to indemnification pursuant to Section 9 shall exclude any other remedy available to the Purchaser Indemnified Parties in relation to the breach of (i) any of the Seller Warranties or (ii) any of the obligations undertaken by Seller under this Agreement, except, in either case, to the extent that such breach is the result of Fraud by any Seller Indemnifying Party. In particular, the Purchaser shall not have the right to terminate or rescind this Agreement for a breach of (x) any of the Seller Warranties (except as set forth in Section 5.a.ii ) or (y) any of the obligations undertaken by Seller under this Agreement. For the avoidance of doubt, the foregoing does not limit a Purchaser Indemnified Party’s right to any and all remedies available under Law in relation to a claim arising out of or in relation to the Tax Covenant, the determination of Closing Net Working Capital, or any Fraud by any Seller Indemnifying Party.

11.

Limitations of Liability.

The Seller Indemnifying Parties shall not be required to indemnify, defend and hold harmless the Purchaser Indemnified Parties for any Loss or Liability, unless and until the aggregate amount of all such Losses or Liabilities exceeds TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) (the “ De Minimis Amount ”), at which point the Seller Indemnifying Parties shall indemnify the Purchaser Indemnified Parties only for those Losses or Liabilities in excess of the De Minimis Amount.

The total aggregate liability of the Seller Indemnifying Parties to the Purchaser Indemnified Parties for any Loss or Liability arising due to (i) any breach of any Seller Warranty (other than an Unlimited Warranty) or (ii) any Seller Warranty (other than an Unlimited Warranty) proving false or inaccurate, shall not in any event exceed the then-remaining balance in the Escrow Account, and will be paid solely out of the Escrow Account. Other than payments from the Escrow Account (which shall serve as the sole source of any payments under Section 9 with respect to any breach of any Seller Warranty (other than an Unlimited Warranty) or any Seller Warranty (other than an Unlimited Warranty) proving false or inaccurate), the Seller Indemnifying Parties shall not otherwise be personally liable for any indemnification claims asserted under Section 9 with respect to any breach of any Seller Warranty (other than an Unlimited Warranty) or any Seller Warranty (other than an Unlimited Warranty) proving false or inaccurate.

The total aggregate liability of the Seller Indemnifying Parties to the Purchaser Indemnified Parties for any Loss or Liability arising due to any breach of any Unlimited Warranty or any Unlimited Warranty proving false or inaccurate shall be equal to the amount of the Cash Consideration, with such amount to be paid first from the then-remaining balance in the Escrow Account.

In respect of Loss or Liability to which a Purchaser Indemnified Party is or may be entitled to indemnification hereunder, the Purchaser Indemnified Party shall give the Seller the Claim Notice in accordance with Section 7 (Escrow) and in any event:

With respect to any Loss or Liability with respect to the Tax Covenant, on or before the day that is thirty (30) days after the end of the limitations period provided by the relevant statute of limitations;

ii.

With respect to any Loss or Liability with respect to Unlimited Warranties, on or before the day that is thirty (30) days after the end of the limitations period provided by the relevant statute of limitations; and

iii.

With respect to any other Loss or Liability, on or before the General Warranty Period End Date.

Under no circumstances shall the Seller Indemnifying Parties on or after Closing be entitled to obtain the benefit (whether by exclusion or reduction of liability, credit, payment, refund, set-off or otherwise) more than once of any amount arising for the benefit of the Seller pursuant to this Agreement.

Any indemnification paid by Seller Indemnifying Parties pursuant to this Agreement shall be calculated net of the amount of any indemnification received by a Purchaser Indemnified Party or the Company from any other person (including insurance payments) before the Purchaser Indemnified Party makes a claim against the Seller Indemnifying Parties.

Purchaser acknowledges that the amount of any indemnification to be paid by Seller Indemnifying Parties shall consider the Tax consequence of the Loss and, therefore, the indemnification shall be subject to appropriate deduction if the Loss is deductible by the Purchaser or the Company for Tax purposes to the extent that such deduction gives rise to a cash Tax savings for the Purchaser or the Company.

Any indemnification to be paid by Seller Indemnifying Parties pursuant to this Agreement shall be reduced by the full amount of any reserve, provision or allowance (in the form of an accrued Liability or an offset to an asset or similar item) that was reflected in the Management Accounts or the Final Determination of the Net Working Capital Account relating to the matter for which the Seller Indemnifying Parties would otherwise be required to provide such indemnification.

No delay on the part of a Purchaser Indemnified Party in providing notice to Seller shall relieve the Seller Indemnifying Parties from any obligation or liability unless (and then only to the extent that) Seller Indemnifying Parties are prejudiced thereby.

If a Purchaser Indemnified Party receives notice of a claim by a Third Party against the Purchaser Indemnified Party or the Company after Closing (a “ Third Party Claim ”), that is likely to give rise to a claim for indemnification from the Seller Indemnifying Parties, the Purchaser shall promptly provide the Seller with written notice of the Third Party Claim. The Parties further agree that:

The Seller Indemnifying Parties may, at their own cost and expense, after written notice to the Purchaser, participate and, if the Seller Indemnifying Party so chooses, to assume the defense of the Third Party Claim, provided that the Third Party Claim is not brought by any Affiliate or representative of any Seller Indemnifying Party. If the Seller Indemnifying Party so elects to assume the defense of a Third Party Claim, then the Seller Indemnifying Party shall not be liable to the Purchaser Indemnified Party for legal expenses subsequently incurred by the Purchaser Indemnified Party in connection with the defense of the Third Party Claim, unless the Purchaser Indemnified Party is entitled to assume the defense of the Third Party Claim pursuant to Section 11.j.iii . If the Seller Indemnifying Party assumes such defense, then the Purchaser Indemnified Party shall have the right to participate in the defense of the Third Party Claim and to employ counsel, at its own expense, separate from the counsel employed by the Seller Indemnifying Party, it being understood, however, that the Seller Indemnifying Party shall control such defense. The Seller Indemnifying Party shall not, without the Purchaser Indemnified Party’s prior written consent (with such consent not to be unreasonably withheld, conditioned or delayed), settle or compromise any Third Party Claim, unless (A) the claimant or plaintiff unconditionally releases the Purchaser Indemnified Party from all liability with respect to such Third Party Claim, (B) there is no finding or admission of any violation of Law or any violation of the rights of any person or entity by the Purchaser Indemnified Party, and (C) the sole relief provided is monetary damages. If the Seller Indemnifying Party chooses to defend any Third Party Claim, then the Parties shall cooperate in the defense of the Third Party Claim.

ii.

Purchaser shall and shall cause the Company to cooperate with the Seller Indemnifying Parties by providing timely access to documents, files, data and records in the Company’s possession in relation to the Third Party Claim, and by causing Employees with knowledge of the subject matter to be reasonably available to provide information as may be necessary for the purposes of defending the Third Party Claim.

iii.

If the Seller Indemnifying Party, within fifteen (15) days after receipt of notice under Section 11.j as to a Third Party Claim, chooses not to assume defense of the Third Party Claim or fails to defend the Third Party Claim actively and in good faith, then the Purchaser Indemnified Party shall (upon further notice to the Seller Indemnifying Party) have the right to undertake the defense of the Third Party Claim The Purchaser Indemnified Party shall not admit any liability in relation to or settle any Third Party Claim without the Seller’s prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed.

iv.

The Seller Indemnifying Parties shall indemnify the Purchaser Indemnified Parties in respect of all Liabilities for which a Purchaser Indemnified Party becomes liable in respect of any act or omission of the Purchaser Indemnified Party taken at the direction of the Seller pursuant to this Section 11.j .

Nothing in this Section 11.j shall require the Purchaser or the Company to take or refrain from taking any action that, in good faith, it considers may (i) affect the goodwill, business, or bona fide commercial interests of the Purchaser or the Company; (ii) render any policy of insurance maintained by or available to the Purchaser or the Company void or voidable or entitle the insurer to repudiate or rescind any such policy or the any of insurer’s obligations thereunder; or (iii) give rise to a criminal action or proceeding brought against the Purchaser or the Company or any of their directors, employees, representatives or Affiliates.

Nothing in this Agreement shall affect the Purchaser’s duty to mitigate, in accordance with Law, any Loss that the Purchaser may suffer in respect of any matter that gives rise to a claim of indemnification under this Agreement.

Notwithstanding any limitation of the Seller’s liability in this Agreement (including any information provided in the Disclosure Letter) or under Law, the information contained, included or referred to in the Disclosure Letter shall be deemed to qualify, limit or otherwise affect only a claim for a breach of the Seller Warranties and shall not be deemed to qualify, limit or otherwise affect any other claim hereunder.

Nothing in this Section 11 and no statutory limitation period shall qualify or limit the liability of the Seller Indemnifying Parties in relation to any claim which arises as a consequence of, or is attributable to, or is delayed as a result of, Fraud on the part of any Seller Indemnifying Party, Seller or their representatives.

No Seller Indemnifying Party shall have any liability to a Purchaser Indemnified Party under Section 9 for any indirect, incidental, consequential, special or punitive damages, including loss of future revenue, income or profits, diminution in the value of the Company, any Subsidiary, the Shares or the Business or any multiple thereof or diminution or loss of business reputation or opportunity or any multiple thereof, or damages arising from changes in or interpretations of any Law or GAAP occurring after the date of this Agreement, and no Losses related thereto shall be aggregated for purposes of Section 11.a .

From and after the Closing, other than with respect to claims based on Fraud, the indemnification provisions of Section 9 shall be the sole and exclusive remedy with respect to any and all claims arising out of, in connection with or relating to the Company, the Business, the Shares, this Agreement, the negotiation and execution of this Agreement or any Contract entered into pursuant to this Agreement (except to the extent otherwise expressly set forth therein) or the performance by the Parties of its or their terms, and no other remedy (including injunctive relief) shall be had pursuant to any contract, misrepresentation, strict liability or tort theory or otherwise by any Party and its officers, directors, employees, agents, affiliates, attorneys, consultants, insurers, successors and assigns, all such remedies being hereby expressly waived to the fullest extent permitted under applicable Law. The Purchaser Indemnified Parties shall be entitled to only a single recovery for all Losses or Liabilities that arise in connection with the matter giving rise to a breach of representation, warranty or covenant, even if such matter shall involve breaches of multiple representations, warranties and covenants.

The limitations in this Section 11 do not apply to any claims arising out of or related to: (i) the Minority Shares or any Minority Shareholders (to the extent such claims relate to any time period prior to Closing); (ii) the determination of Net Working Capital pursuant to Part 1 of Schedule 2 ; (iii) the determination of the AIM Balance pursuant to Part 2 of Schedule 2 ; and (iv) the determination of the USC Balance pursuant to Part 1 of Schedule 2 ; for the avoidance of doubt, the De Minimis Amount shall not apply to any claims arising out of or related to those matters.

12.	Purchaser and Guarantor Warranties. The Purchaser and Guarantor, jointly and severally, represent and warrant to Seller that:

The Guarantor is a company duly organized and validly existing under the laws of the Republic of Italy, and has all necessary power and authority to conduct its business as it is currently being conducted. The Purchaser is a corporation duly incorporated, validly existing and in active status under the Laws of the State of Delaware, and has all necessary power and authority to conduct its business as it is currently being conducted

The execution and delivery by the Purchaser and Guarantor of this Agreement does not give rise to any claim by a broker, finder, intermediary or other third party for which any of the Seller, any of the Ownership Group or the Company may become liable.

Each of the Purchaser and Guarantor has the requisite capacity, power and authority to execute and deliver this Agreement and any other documents to be executed by it pursuant to this Agreement, and to perform the obligations contemplated by this Agreement. Each of the Purchaser and Guarantor has or shall have by Closing all the relevant corporate resolutions required by it to authorize it to enter into and perform this Agreement.

Purchaser has received and accepted an executed and binding commitment letter dated September 26, 2017 (the “ Commitment Letter ”) from Banca IMI / Mediocredito Italiano S.p.A. (Intesa Sanpaolo Group) (the “ Lender ”), relating to the commitment of the Lender to provide, subject to the terms and conditions thereof, the full amount of the debt financing stated therein (the “ Financing ”). The Purchaser has delivered to Seller true, complete and correct copies of the executed Commitment Letter (including, the exhibits and annexes thereto), as well as all documentation reasonably requested by Seller evidencing Purchaser’s financial capacity to consummate the transactions contemplated hereby. Except as set forth in the Commitment Letter, there are no conditions precedent to the obligations of the Lender to provide the Financing or any contingencies that would permit the Lender to reduce the total amount of the Financing. Other than the Commitment Letter, there are no side letters or other agreements, contracts or arrangements (except for customary engagement letters) relating to the funding or investing, as applicable, of the full amount of the Financing. The
Commitment Letter is valid, binding and enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of loan commitments under applicable Law, including Italian law. The Commitment Letter is in full force and effect, and no event has occurred that, with or without notice, lapse of time, or both, would reasonably be expected to constitute a default or breach or failure to satisfy a condition precedent on the part of the Purchaser under the terms and conditions of the Commitment Letter. As of the Effective Date, the Commitment Letter has not been amended, restated or otherwise modified or waived, and the commitments contained in the Commitment Letter have not been withdrawn, modified or rescinded. The Financing, when funded in accordance with the Commitment Letter, together with Purchaser’s available cash (reasonable evidence of which has been provided to Seller prior to the Effective Date), will provide the Purchaser cash proceeds on the Closing Date in an amount sufficient to consummate the transactions on the terms contemplated hereby, including the payment of the Cash Consideration, and to pay related fees and expenses.

Each of the Purchaser and Guarantor acknowledges that the detailed representations and warranties set forth in Schedule 3 to this Agreement have been negotiated at arm’s length among sophisticated persons and that all information material to its determination to proceed with the transactions contemplated by this Agreement is contained in the representations and warranties of the Seller and each member of the Ownership Group set forth in Schedule 3 . Except for the representations and warranties set forth in Schedule 3 , each of the Purchaser and Guarantor acknowledges that none of the Seller, any Member of the Ownership Group, or any of their respective Affiliates or any person or entity acting on behalf of any of the foregoing makes or has made any other express representation or warranty or any implied representation or warranty to other matter. Each of the Purchaser and Guarantor acknowledges that it has conducted to its satisfaction an independent investigation of the financial condition, results of operations, assets, liabilities, properties and projected operations of the Company and the Business.

13.

Tax.

For purposes of this Section 13 , the following terms shall have the meanings set forth below:

Consolidated Returns means any and all Tax Returns of the Seller Group.

ii.

Post-Closing Tax Period means any taxable period beginning after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.

iii.

Pre-Closing Tax Period means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.

iv.

Seller Group means (A) the affiliated group (as defined in IRC Section 1504(a)) that includes the Company and the Seller Parties, and (B) with respect to each state, local or foreign jurisdiction in which the Company and the Seller Parties file a consolidated, combined or unitary Tax Return and in which the Company is or is required to be included, the group with respect to which such Return is filed.

Seller Parties means, collectively, Seller and the Ownership Group.

vi.

Seller Parties’ Taxes means (A) any and all Taxes relating to the Company and/or the Business that are due and payable with respect to any Pre-Closing Tax Period (which, for the avoidance of doubt, shall include any Taxes allocated to any Pre-Closing Tax Period pursuant to Section 13.g ), (B) any and all Taxes of the Seller Parties due or payable with respect to any Pre-Closing Tax Period, and (C) any and all Taxes relating to or imposed upon the assets of the Company with respect to any Pre-Closing Tax Period (which, for the avoidance of doubt, shall include any Taxes allocated to any Pre-Closing Tax Period pursuant to Section 13.g ).

vii.

Straddle Period means a taxable period that begins before and ends after the Closing Date.

viii.

Transaction Expenses means any obligations of the Company and the Seller Parties for all legal and other expenses incurred in connection with the transactions contemplated herein as of the Closing Date, including the Option Redemption Payments (as defined in the Option Cancellation Agreements) and the Transaction Payroll Taxes.

ix.

Transaction Payroll Taxes means the employer portion of payroll or employment Taxes incurred in connection with any bonuses or other compensatory payments in connection with the transactions contemplated by this Agreement.

The Parties shall jointly make, and shall take any and all actions necessary to effect, an election under IRC Section 338(h)(10) (and any corresponding election under state, local, and foreign law) with respect to the purchase and sale of the Shares of the Company hereunder (collectively, a “ Section 338(h)(10) Elections ”). In connection with the Section 338(h)(10) Elections, the Parties shall exchange completed and executed copies of the following (collectively, “ Tax Election Documents ”): (i) an IRS Form 8023 (Elections Under Section 338 for Corporations Making Qualified Stock Purchases); (ii) an IRS Form 8883 (Asset Allocation Statement Under Section 338), which shall reflect the Allocation Schedule agreed to by Seller and Purchaser pursuant to Section 13.c ; and (iii) any other document, instrument or certificate reasonably requested by Purchaser or the Seller Parties to effectuate the Section 338(h)(10) Elections. Purchaser shall prepare and submit to Seller at Closing a draft of all Tax Election Documents. The Tax Election Documents, as may be modified in accordance with any applicable Net Working Capital adjustment (the “ Final Tax Election Documents ”), shall be timely filed with the Internal Revenue Service by Purchaser and Seller. If Purchaser and Seller do not agree on the final form of any Tax Election Document, Purchaser and Seller shall negotiate in good faith and use their Reasonable Best Efforts to resolve such items. If Purchaser and Seller are unable to reach such agreement within ten (10) days after receipt by Purchaser of such notice, the disputed items shall be resolved by the Independent Accountant and any determination by the Independent Accountant shall be final. The Independent Accountant shall resolve any disputed items within fifteen (15) days of having the item referred to it. If the Independent Accountant is unable to resolve any disputed items before the applicable Tax Election Document must be filed, such Tax Election Document shall be filed as prepared by Purchaser and then amended to reflect the Independent Accountant’s resolution. The costs, fees and expenses of the Independent Accountant shall be borne equally by Purchaser and Seller. Purchaser and the Seller Parties shall prepare, act and file their respective Tax Returns in all respects and for all purposes consistent with the Final Tax Election Documents and the allocation of purchase price set forth therein, and shall not take a position in any proceeding or audit or otherwise that is inconsistent therewith; provided, that, nothing contained herein shall require Purchaser or the Seller Parties to contest or litigate before any Governmental Body, including, without limitation, the United States Tax Court, any proposed deficiency or adjustment by any Tax Authority that challenges the Final Tax Election Documents or the allocation set forth therein. Neither Purchaser nor the Seller Parties shall amend, alter or otherwise modify the Final Tax Election Documents, except with the prior written consent of the other, provided the Parties shall cooperate in good faith to execute and file any amendment or supplement to any Final Tax Election Document required as a result of any adjustment to the purchase price for the Shares pursuant to this Agreement.

The purchase price for the Shares (including without limitation any Liabilities of the Company) shall be allocated among the assets of the Company for all purposes (including Tax and financial reporting) as shown on Schedule 10 (the “ Allocation Schedule ”). Any adjustments to the purchase price for the Shares pursuant to this Agreement shall be allocated in a manner consistent with the Allocation Schedule.

Reserved.

Each covenant contained in this Section 13 shall be construed as a separate and independent covenant and shall not be limited or restricted by reference to or inference from any other covenant in this Section 13 .

Any payments pursuant to this Agreement shall be treated as an adjustment to purchase price for the Shares except as otherwise required by applicable Law.

All Taxes and Tax Liabilities that relate to any Straddle Period shall be allocated to the Pre-Closing Tax Period as follows:

In the case of Taxes (A) based upon, or measured by reference to, income, receipts, profits, wages, capital or net worth, (B) imposed in connection with the sale, transfer or assignment of property, or (C) required to be withheld, such Taxes shall be deemed equal to the amount which would be payable if the taxable year ended with the Closing Date; and

ii.

In the case of other Taxes, such Taxes shall be deemed equal to the amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the Straddle Period elapsed as of the Closing Date and the denominator of which is the number of days in the entire Straddle Period.

The remainder of the Taxes for such Straddle Period shall be allocated to the Post-Closing Tax Period.

The Seller Parties shall be solely responsible for payment of any and all Seller Parties’ Taxes. The Parties acknowledge and agree that the Seller Parties are solely responsible for the payment of the Seller Parties’ Taxes even if Purchaser will prepare the Tax Return to which such Taxes relate and remit such Taxes to the appropriate Governmental Body. The Seller Parties shall prepare and timely file, or cause to be prepared and timely filed:

all Consolidated Returns that include the Company and shall pay all Taxes due in respect of such Returns. All such Tax Returns, to the extent they relate to the Company, shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and in accordance with the Allocation Schedule. Without limiting the generality of the foregoing, the Seller Group shall include the income of the Company (including any deferred items required to be included in income by Treasury Regulation Section 1.1502-13 and any excess loss account taken into income under Treasury Regulation Section 1.1502-19) on the Seller Group’s Consolidated Return for all periods through the end of the Closing Date and pay any federal income Taxes attributable to such income; and

ii.

all Tax Returns of the Company not described in Section 13.h.i relating to taxable periods that end on or before the Closing Date and that are required to be filed on or prior to the Closing Date (taking into account any extensions), and shall pay all Taxes due in respect of such Returns. All such Tax Returns shall be prepared in a manner consistent with past practice (unless otherwise required by Law).

The Seller Parties shall not (and shall cause their Affiliates not to), amend or modify any Tax Return filed on behalf of or otherwise relating to the Company or the Business, unless Purchaser has provided its prior written consent (which shall not be unreasonably withheld, conditioned or delayed).

Purchaser shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns of the Company for taxable periods that end on or before the Closing Date that are not described in Section 13.h and for any Straddle Period, and shall submit payment for all Taxes due in respect of such Returns; provided, however, Seller shall pay to Purchaser an amount equal to the portion of such Taxes for which Seller is responsible pursuant to Section 13.h within three (3) Business Days of Purchaser’s written demand therefor. Any such Tax Return shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and shall be submitted by Purchaser to the Seller Parties (together with schedules, statements and, to the extent requested by the Seller Parties, supporting documentation) at least forty-five (45) days prior to the due date (including extensions) of such Tax Return. If Seller objects to any item on any such Tax Return, it shall, within ten (10) days after delivery of such Tax Return, notify Purchaser in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. If a notice of objection shall be duly delivered, Purchaser and Seller shall negotiate in good faith and use their Reasonable Best Efforts to resolve such items. If Purchaser and Seller are unable to reach such agreement within ten (10) days after receipt by Purchaser of such notice, the disputed items shall be resolved by the Independent Accountant and any determination by the Independent Accountant shall be final. The Independent Accountant shall resolve any disputed items within fifteen (15) days of having the item referred to it. If the Independent Accountant is unable to resolve any disputed items before the due date for such Tax Return, the Tax Return shall be filed as prepared by Purchaser and then amended to reflect the Independent Accountant’s resolution. The costs, fees and expenses of the Independent Accountant shall be borne equally by Purchaser and Seller. The preparation and filing of any Tax Return of the Company that does not relate to a Pre-Closing Tax Period shall be exclusively within the control of Purchaser.

Purchaser and Seller agree with respect to the preparation and filing of any Tax Returns pursuant to this Section 13 and in any Tax Claim (defined below) as follows: (1) to report (and have the Company and any Subsidiary report) any Transaction Expenses (including any Transaction Payroll Taxes) of the Company, if any, and other expenses and deductions (including the amounts in (2) immediately below) whether or not paid or accrued on or prior to the Closing Date as being deductible for income Tax purposes in a Pre-Closing Tax Period (or portion of the Straddle Period ending on the Closing Date) and to not apply the “next day rule” under Treasury Regulation section 1.1502-76(b)(1)(ii)(B) with respect to such deductions; (2) to make (and have the Company and, as necessary, each Subsidiary make) an election under Revenue Procedure 2011-29 to deduct seventy percent (70%) of Seller or Company expenses and deductions that are success-based fees as defined in Treasury Regulation section 1.263(a)-5(f); (3) to report (and have the Company and any Subsidiary report) any gains or income recognized or realized by the Company and any Subsidiary on the Closing Date resulting from any transaction outside the ordinary course of business engaged in by the Company or any Subsidiary on the Closing Date as occurring on the day after the Closing Date pursuant to (or using the principles of) the “next day rule” under Treasury Regulation section 1.1502-76(b)(1)(ii)(B); (4) that no election shall be made by any party (or the Company or any Subsidiary) under Treasury Regulation section 1.1502-76(b)(2) (or any similar provision of applicable Law) to ratably allocate items incurred by the Company or any Subsidiary; and (5) to not waive or elect to forego (and not have the Company or any Subsidiary waive or elect to forego) the carry back of any net operating loss, credit, or other Tax attribute incurred or recognized or realized in a Tax Period beginning before the Closing Date.

Neither Purchaser nor any of its Affiliates shall (or shall cause or permit any of the Company or any Subsidiary to), without the express written consent of Seller (1) amend, refile or otherwise modify any Tax Return relating in whole or in part to any Pre-Closing Tax Period (or with respect to any Straddle Period) of the Company or any Subsidiary, (2) carry back to a Pre-Closing Tax Period any item of income or gain on the Tax Return of the Company or any Subsidiary for a Tax period ending after the Closing Date, (3) make, or cause to be made, any Tax election, or adopt or change any method of accounting, or undertake any extraordinary action on the Closing Date, that would adversely affect any of the Seller Parties or the Seller Group, the Company or any Subsidiary, including (A) reporting any transaction related deduction pursuant to the “next day rule” under Treasury Regulations section 1.1502-76(b)(1)(ii)(B) (or any corresponding or similar provision of state, local, or non-U.S. Tax Law) or (B) electing to ratably allocate items pursuant to an election under Treasury Regulations Section 1.1502-76(b)(2) (or any corresponding or similar provision of state, local, or non-U.S. Tax Law), (4) initiate any discussion with any Governmental Body regarding Taxes of the Company and any Subsidiary with respect to any Pre-Closing Tax Period or Straddle Period, (5) make any voluntary disclosure with respect to Taxes of the Company or any Subsidiary for any Pre-Closing Tax Period or Straddle Period, (6) file past due Tax Returns for a Pre-Closing Tax Period for the Company or any Subsidiary in a jurisdiction where the same has not previously filed Tax Returns or (7) otherwise make any election or take any action or fail to take any action for Pre-closing Tax Periods that would give rise to or increase any Tax for which any of the Seller Parties or the Seller Group would be liable or give rise to or increase any Tax to any of the Seller Parties or the Seller Group for any Pre-Closing Tax Period.

All deposits and refunds of Taxes of the Company and any Subsidiary for any Tax Period ending on or before the Closing Date (and the portion of a Straddle Period ending on the Closing Date as determined in accordance with the same principles provided for in Section 13.g ) (whether in the form of cash received or as a refund applied against any Tax in a future period, and whether on an originally filed Tax Return, amended Tax Return, other refund claim, or as a result of a Tax Proceeding) shall be the property of Seller, as finally determined. To the extent that the Purchaser, the Company, any Subsidiary, or any of their respective Affiliates receives a refund that is the property of Seller pursuant to this Section 13.m , Purchaser shall pay or cause to be paid to the Seller the amount of such refund (and any interest received from the Governmental Body with respect to such refund). The amount due to Seller shall be payable by Purchaser five (5) Business Days after receipt of the refund from the applicable Governmental Body (or, if the refund is in the form of a refund applied against a Tax in a future period, five (5) Business Days after the earlier of the un-extended due date of the Tax Return, estimated Tax vouchers, forms, deposit coupons and the like claiming such application of the refund or other such application against a Tax). Purchaser shall, and shall cause its Affiliates, the Company, and their Subsidiaries, to take all commercially reasonable actions requested by Seller to timely claim any refunds that will give rise to a payment under this Section 13.m , provided that Seller shall reimburse Purchaser for all reasonable costs and expenses associated therewith if the claim is not made by the filing of an original Tax Return or IRS Form 1139 (or equivalent state Tax form).

Notwithstanding anything to the contrary in this Agreement, all transfer, real estate property transfer, documentary, sales, use, stamp, registration, value added, and other such taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be borne equally by Seller and Purchaser, regardless of the person liable for such obligations under Law or the person making payment to the applicable Governmental Body or other third party. Seller and Purchaser shall cooperate with each other and use their commercially reasonable efforts to minimize the amount of such transfer Taxes.

Purchaser and Seller will promptly notify the other Party in writing upon receipt by such Party (or any of its Affiliates) of notice of any pending or threatened audit, examination or proceeding by a Governmental Body involving or relating to the Company or the Seller Group (a “ Tax Claim ”) relating to any Pre-Closing Tax Period. Seller may, at its own expense, participate in, and upon written notice to Purchaser, assume the defense of any Tax Claim against the Company relating to any Pre-Closing Tax Period that ends on or prior to the Closing Date for which the Seller Indemnifying Parties may have an obligation to indemnify the Company, the Purchaser and their Affiliates with respect to such Tax Claim and all Losses related thereto pursuant to this Agreement, provided that Seller shall and at all times conduct the defense of the Tax Claim in good faith and in a reasonably diligent manner. Except with Purchaser’s prior written consent (with such consent not to be unreasonably withheld, conditioned or delayed), Seller shall not admit any liability in relation to or settle any Tax Claim if Purchaser, the Company or any Affiliate of either of them may incur or suffer liability for Taxes as a result. With respect to any Tax Claim relating to any Straddle Period, Seller will have the right to participate jointly with the Purchaser in representing the interests of the Company in such Tax Claim and to employ counsel of its choice at its expense, but only to the extent that such period includes any Pre-Closing Tax Period. Purchaser and Seller agree to cooperate in the defense of any Tax Claim. To the extent this Section 13.o conflicts with Section 11.j , this Section 13.o shall control.

Purchaser and the Seller Parties shall provide each other with such cooperation and information as either reasonably may request of the other in filing any Tax Return pursuant to this Section 13 or in connection with any audit or proceeding in respect of Taxes of the Company. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by Tax Authorities. Purchaser and the Seller Parties shall retain all Tax Returns, schedules and work papers, records and other documents in their respective possession relating to Tax matters of the Company for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate.

Notwithstanding anything in this Agreement to the contrary, the provisions of this Section 13 shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 30 days.

14.	Confidentiality and Non-Disclosure.

Except as required by Law or as contemplated by a Transaction Document, each Party shall keep confidential and not disclose to any Third Party (other than to such Party’s representatives or Affiliates as necessary for the purpose of performing this Agreement, in which event such Party shall cause its representatives and Affiliates to keep confidential and not disclose to any Third Party) any of the terms or conditions of this Agreement, the Transaction Documents or the matters contemplated by this Agreement, without the prior written consent of the other Parties, provided that the Parties acknowledge that WCR will be required to make filings with the Securities and Exchange Commission disclosing the terms of this Agreement and the transactions contemplated hereby.

If any Party or any of its Affiliates or its or their officers, directors or employees is required to disclose Confidential Information to a Governmental Body, such person may disclose such Confidential Information, provided that, to the maximum extent allowed by Law, notice of the intended disclosure (and the circumstances in which the disclosure is alleged to be required) shall be given to all other Parties prior to such disclosure, and such person shall cooperate with any efforts permitted by Law to limit disclosure or seek protection from further dissemination.

In the event of any breach of this Section 14 , the Parties agree that any non-breaching Party may suffer irreparable harm and that the total amount of monetary damages for any injury to the non-breaching Party will be difficult or impossible to calculate and will therefore be an inadequate remedy. Accordingly, the Parties agree that the non-breaching Party shall be entitled to seek temporary and permanent injunctive relief against the breaching Party and its representatives or Affiliates, as the case may be, in addition to the other rights and remedies to which the non-breaching Party may be entitled.

Nothing in this Section 14 shall prevent a Party from disclosing Confidential Information required to be disclosed for the purpose of satisfying any of the Conditions.

The terms of this Section 14 shall survive Closing for a period of three (3) years.

15.	Non-Competition Covenants.

For the purposes of this Section 15 , Restricted Affiliate means any Affiliate of the Seller and, in the case of a member of the Ownership Group, (i) any company in which such Party holds (together with any other Affiliate of the Seller or any other member of the Ownership Group) equity shares such that they are able to exercise or control the exercise of more than 20% of the votes able to be cast at a general meeting; and (ii) any partnership in which such Party (together with any other Affiliate of the Seller or any other member of the Ownership Group) has the right to a share of more than 20% of the assets or more than 20% of the income of the partnership: provided however , that for the avoidance of doubt, the term Restricted Affiliate shall not include Blackstreet Capital Management LLC or any its Affiliates, subsidiaries or its other portfolio companies, other than the members of the Ownership Group.

For the purposes of assuring the Purchaser of the value of the Shares and the benefit of the goodwill of the Business, the Seller and each member of the Ownership Group hereby undertake to the Purchaser, for a period of three (3) years from the Closing Date, that (save for any interest in the shares or other securities of a company traded on a securities market so long as such interest does not extend to more than 2% of the issued share capital of the company or class of securities concerned), none of them shall, and shall procure that none of its Restricted Affiliates shall, except as otherwise agreed in advance by the Purchaser:

directly or indirectly retain any of the Company’s Employees, consultants, agents, Franchisees or Master Franchisees, nor solicit or encourage any of the Company’s employees, consultants, agents, Franchisees or Master Franchisees to terminate their employment, consulting, agency, Franchise Agreement or Master Franchise Agreement with the Company or to accept any employment, consulting, agency or franchise relationship with any competitor, supplier or client of the Company, nor cooperate with any other in doing or attempting to do so;

ii.

directly or indirectly own any interest in, control or manage a Restricted Competitor.

The foregoing covenant shall not prevent Ms. Gay Burke from providing services to the Company while, at the same time, providing services to the Seller, the Ownership Group and their Restricted Affiliates. For the purposes of this Section 15 , a Restricted Competitor means any company operating in the United States under the trade name Allegra, Sir Speedy, Fastsigns, Instant Imprints, Image 360, Speedpro, Signarama, Cartridge World, “Pip Marketing, Signs, Print,” Proforma, Minuteman Press, Annex Brands or Vistaprint.

Each of the restrictions contained in this Section 15 is separate and distinct and is to be construed separately from the other such restrictions. The Parties acknowledge that each of them considers such restrictions to be reasonable both individually and in the aggregate and that the duration, extent and application of each of such restrictions are no greater than is necessary for the protection of the goodwill of the Business. The Purchaser acknowledges that the Non-Competition Covenants set forth herein are in lieu of and supersede any non-competition undertaking that may arise under Law.

The Seller acknowledges and agrees that the Cash Consideration takes into account and provides adequate remuneration for the Non-Competition Covenants. Each member of the Ownership Group (both individually and in its capacity as direct or indirect owner of the Seller) by executing this Agreement (i) acknowledges and agrees that the Cash Consideration takes into account and provides adequate remuneration for the restrictions contained herein and (ii) agrees that it shall have no further claim from or against the Purchaser in consideration of such restrictions.

16.	Release.

Effective upon the Closing, the Seller and each member of the Ownership Group does hereby, on behalf of itself, its Affiliates, and its and their respective successors, assigns, heirs, executors and administrators (collectively, the “ Seller Releasing Parties ”) FULLY RELEASE AND FOREVER DISCHARGE the Company, any Subsidiary of the Company, and their respective Affiliates (including, after the Closing, each of the Purchaser and its Affiliates), parents, joint venturers, officers, partners, managers, members, directors, shareholders, interest holders, employees, consultants, representatives, successors and assigns, heirs, executors and administrators (collectively, the “ Company Parties ”) from any and all causes of action, suits, liabilities, obligations, debts, claims and demands whatsoever at law, equity, strict liability or otherwise, whether known or unknown, fixed or contingent, suspected or unsuspected, of any nature whatsoever, which such Seller or any of the Seller Releasing Parties ever had, now has, or hereafter may have against any Company Party arising contemporaneously with or prior to the Closing or on account of or arising out of any matter, cause or event occurring contemporaneously with or prior to the Closing (the “ Released Claims ”); provided , that nothing contained herein shall operate to release any rights of any Seller Releasing Party arising under or in connection with this Agreement or the Transaction Documents to which a Seller Releasing Party is a party. The release contained in this Section 16 is effective without regard to the legal nature of the claims raised and without regard to whether any such claims are based upon tort, equity, law, implied or express contract, discrimination of any sort or any other grounds.

The Seller and each member of the Ownership Group, on behalf of itself and the Seller Releasing Parties, agrees never to bring or pursue (or cause to be brought or pursued) any Released Claim against the Company or any other Company Party. The Seller and each member of the Ownership Group agrees that in the event that any Released Claim shall be commenced by the Seller or any of the Seller Releasing Parties against the Company or any other Company Party, the release and discharge contained in Section 16 shall constitute a complete defense to any such claim, suit or action so instituted.

The Seller and each member of the Ownership Group certifies, acknowledges and agrees that they: (i) have read the terms of this Agreement and the release provided hereunder, and that he, she or it understands its terms and effects, including the fact that they have agreed to FULLY RELEASE AND FOREVER DISCHARGE the Company and all other Company Parties from any legal action or other liability of any type related in any way to the matters released pursuant to Section 16.a ; and (ii) has signed this Agreement voluntarily and knowingly in exchange for the consideration described herein, which such Party acknowledges is adequate and satisfactory to she, he or it, as applicable.

The Seller and each member of the Ownership Group hereby represents to the Purchaser and the Company Parties that such Party (i) has not assigned any Released Claims or possible Released Claims against any Company Party, (ii) fully intends to release all Released Claims against the Company Parties including unknown and contingent Released Claims (other than those specifically reserved above), and (iii) has had the opportunity to consult with counsel with respect to the execution and delivery of this general release and had the opportunity to be fully apprised of the consequences hereof. Furthermore, such Party agrees not to institute any Action against any Company Party with respect to any Released Claim.

17.	Matters Pending Closing.

Seller undertakes that, during the period from the Effective Date to Closing, the Company and Business will be operated in the ordinary course of business consistent with past practice (taking into account the matters contemplated by this Agreement), without changing the payment terms (either from its Franchisees or any other party), accounting principles or operating policies, and will use its best efforts to maintain the goodwill of its Franchisees, the Company’s suppliers and the Company’s customers. In any event, the Seller shall not do, or attempt to do, any of the things specified in Schedule 6 without the prior written consent of the Purchaser.

Reserved.

The Seller shall maintain all licenses, permits, approvals and authorizations (public and private) necessary for (a) the carrying on of the Business effectively in the places and in the manner in which the Business is carried on immediately before this Agreement; and (b) the transactions contemplated by this Agreement (including the transfer of control of the Company and the Business to the Purchaser), and shall permit none of such licenses, consents, approvals, permissions, permits or authorities to be suspended cancelled, revoked or amended or not renewed.

If, after the date hereof and before Closing, the Seller becomes aware of any fact or event occurring which constitutes or which would or reasonable might constitute a breach of the Seller Warranties or which would or reasonably might cause any such warranty to be untrue or inaccurate if given in respect of the facts or circumstances as at Closing, the Seller shall, as soon as possible, notify the Purchaser, and shall make any reasonable investigation concerning the fact or circumstance which the Purchaser may request; provided, however, that such disclosure shall not be deemed to cure any breach or otherwise qualify any warranty.

If, as reflected on the Estimated Closing Working Capital Statement, the estimated Net Working Capital is greater than the Closing Net Working Capital Target, then notwithstanding any of the prohibitions set forth in Schedule 6, the Company may distribute cash to the Seller and the Minority Shareholders at or immediately prior to the Closing (the “ Excess Cash Distribution ”), provided further that, as a condition to such distribution, the resulting Adjusted Net Working Capital is not then less than the Closing Net Working Capital Target. After the Closing, the Purchaser shall cause the Company to promptly deliver to the Minority Shareholders their pro rata percentage of such Excess Cash Distribution, along with the Reverse Split Payment.

18.	Announcements.

No press release or public announcement related to this Agreement and the Transaction Documents or the transactions contemplated herein or therein shall be issued or made by the Purchaser or its Affiliates, on the one hand, or the Seller, and member of the Ownership Group or their respective Affiliates, on the other hand, without the written consent of the other Parties hereto (which consent shall not be unreasonably withheld, conditioned or delayed), provided that the Parties acknowledge that WCR will be required to make filings with the Securities and Exchange Commission disclosing the terms of this Agreement and the transactions contemplated hereby, copies of which shall be provided to the other Parties prior to such filing. Notwithstanding anything to the contrary herein, nothing in this Agreement shall (a) prohibit any party to this Agreement or their Affiliates from making any press release, public announcement or disclosure to the extent required by Law (in the reasonable opinion of outside counsel) in which case the non-disclosing parties shall have the right to review such press releases, public announcement or disclosure prior to issuance, distribution or publication, (b) restrict the Seller or the Ownership Group from disclosing any information about the transactions contemplated by this Agreement to their Affiliates and their respective representatives, or (c) prohibit the Purchaser from disclosing any information about the transactions contemplated by this Agreement to its Affiliates, its and their respective representatives, in each case on a confidential basis .

19.	Post-Closing Cooperation and Further Assurances.

Each Party shall retain all information in its possession or control with respect to the Company and the Business for at least four (4) years, but in any case for no less than the period required by Law. If requested by Purchaser upon reasonable notice, including after Closing, Seller shall provide to or at the direction of Purchaser such information as is in the Seller’s possession or control to assist the Purchaser with Purchaser’s reporting, disclosure, filing or other requirements or in order to satisfy audit, accounting, claims defense, regulatory filings, litigation, Tax or other similar requirements. If requested by Seller or any member of the Ownership Group upon reasonable notice, including after Closing, Purchaser shall provide to or at the direction of Seller or such member of the Ownership Group such information as is in the Purchaser’s possession or control to assist the Seller or such member of the Ownership Group with its reporting, disclosure, filing or other requirements or in order to satisfy audit, accounting, claims defense, regulatory filings, litigation, Tax or other similar requirements.

At any time after Closing, the Seller and each member of the Ownership Group shall, at the reasonable request of Purchaser, cooperate with the Purchaser to do or to procure the performance of all such acts and/or execute or procure the execution of all documents and instruments in a form satisfactory to Purchaser which the Purchaser may reasonably consider necessary or appropriate for giving full effect to this Agreement and the other Transaction Documents and securing to the Purchaser and the Company the full benefit of the rights, powers and remedies conferred on Purchaser and the Company in this Agreement and the other Transaction Documents.

20.	Assignment.

The Purchaser may at any time assign this Agreement and/or any of the Transaction Documents or any of its rights thereunder, and any causes of action arising in connection with them, to any person who is an Affiliate or successor in title to the Purchaser, provided that no such assignment shall relieve Purchaser from its obligation to pay the Cash Consideration or otherwise perform its obligations toward Seller hereunder. Neither the Seller nor any member of the Ownership Group may assign, transfer or delegate any of its rights or obligations under this Agreement or any of the other Transaction Documents.

21.	Third Party Rights.

The Parties to this Agreement do not intend that any term or benefit of this Agreement should be enforceable by any person who is not a Party.

22.	No Set Off.

Neither the Purchaser nor any Purchaser Indemnified Party shall have the right to satisfy, in whole or in part, any amounts owing to the Purchaser or such Purchaser Indemnified Party under this Agreement, including under Section 9 , or any of the documents and instruments executed and delivered pursuant hereto, by setting off any amounts owed to the Seller or any member of the Ownership Group.

23.	Reserved.

24.	General.

The Guarantor is joining and entering into this Agreement solely for the purposes of unconditionally and irrevocably guaranteeing to each of the Seller and the Ownership Group all of the Purchaser’s obligations hereunder and to make the representations and warranties set forth in Section 12 .

The Disclosure Letter will be arranged to correspond to the representations and warranties in Schedule 3 to this Agreement, and the disclosure in any section of the Disclosure Letter shall qualify the corresponding provision in Section 3 and any other section or provision of this Agreement or Schedule 3 to which it is reasonably apparent from such disclosure that such disclosure relates. No reference to or disclosure of any item or other matter in this Disclosure Letter shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in this Disclosure Letter. The information set forth in the Disclosure Letter is disclosed solely for the purposes of this Agreement, and no information set forth therein shall be deemed to be an admission by any Party hereto to any third party of any matter whatsoever, including of any violation of Law or breach of any agreement. If, prior to the Closing, Seller delivers to Purchaser a supplement, modification or update to the Disclosure Letter that refers to any matter arising after the Effective Date that is necessary to be disclosed to make any Seller Warranty correct when made as of the Closing. Such information shall be deemed to amend this Agreement and the Disclosure Letter effective as of the Effective Date for all purposes hereunder.

Each Party shall bear all costs and expenses incurred by it in connection with the preparation and negotiation of this Agreement and the other Transaction Documents, and all other matters required or carried out in connection with the completion of the Transaction. For the avoidance of doubt, none of the costs incurred by the Seller or any member of the Ownership Group shall be borne by the Company, and none of the costs incurred by the Purchaser shall be borne by the Company.

The waiver, express or implied, by any Party of any right under this Agreement, or any failure to perform or breach by another Party, shall not constitute or be deemed a waiver of any other right under this Agreement.

This Agreement and the other Transaction Documents constitute the whole agreement among the Parties in relation to the subject matter thereof, and supersede any previous agreement among the Parties with regard to such matters. No Party has entered into this Agreement in reliance upon any representation, warranty or undertaking which is not set out or referred to in this Agreement.

This Agreement (other than obligations that have already been fully performed) remains in full force and effect after Closing.

No amendment, change or addition to this Agreement shall be effective or binding on any Party unless reduced to writing and executed by all Parties.

Nothing in this Agreement shall be deemed to constitute a partnership, joint venture, association or other cooperative undertaking among the Parties or any of them.

This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument.

All notices given in connection with this Agreement shall be in writing and shall be delivered by recognized delivery service (such as Federal Express or DHL) with confirmation of receipt, to the addresses set forth at the beginning of this Agreement. Notices shall be deemed effective on the day of receipt with respect to any notice received on a Business Day during normal working hours, or on the following Business Day with respect to any notice received either on a Business Day after normal working hours or on any day which is not a Business Day.

If any term or provision of this Agreement is or becomes invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not be affected or impaired.

This Agreement is governed by and intended to be construed in accordance with the laws of the State of Delaware, without regard to its conflicts of laws rules which might require the application of the law of another jurisdiction. Subject to Section 24.m below, any dispute hereunder (“ Dispute ”) shall be settled by arbitration in State of Delaware, and, except as herein specifically stated, in accordance with the J.A.M.S. Streamlined Arbitration Rules and Procedures then in effect (the “ Rules ”). The arbitration provisions of this Section 24.l shall govern over any conflicting rules that may now or hereafter be contained in the Rules. Any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction over the subject matter thereof. The arbitrator shall have the authority to grant any equitable and legal remedies that would be available in any judicial proceeding instituted to resolve a Dispute. Any such arbitration will be conducted before a single arbitrator who will be compensated for his or her services at a rate to be determined by the parties or by J.A.M.S., but based upon reasonable hourly or daily consulting rates for the arbitrator in the event the parties are not able to agree upon his or her rate of compensation. The Parties will cooperate with J.A.M.S. in promptly selecting from a list of arbitrators who are lawyers familiar with Delaware contract law one (1) arbitrator from the J.A.M.S. panel of neutrals; provided, however, that (i) such arbitrator cannot work for a firm then performing or who has previously performed services for either Party, and (ii) each Party will have the opportunity to make such reasonable objection to any of the arbitrators listed as such party may wish. In the event that the Parties cannot agree on an arbitrator within three (3) Business Days after either Party’s issuance of a written demand for arbitration, J.A.M.S. will select the arbitrator. Purchaser and the Seller will bear the expense of deposits and advances required by the arbitrator in equal proportions, but either Party may advance such amounts, subject to recovery as an addition or offset to any award. The arbitrator will award to the prevailing party all costs, fees and expenses related to the arbitration, including reasonable fees and expenses of attorneys, accountants and other professionals incurred by the prevailing Party. For any Dispute submitted to arbitration, the burden of proof will be as it would be if the claim were litigated in a judicial proceeding. Upon the conclusion of any arbitration proceedings hereunder, the arbitrator will render findings of fact and conclusions of law and a written opinion setting forth the basis and reasons for any decision reached and will deliver such documents to each Party to this Agreement along with a signed copy of the award. The arbitrator may not award punitive damages. The arbitrator chosen in accordance with the provisions of this Section 24.l will not have the power to alter, amend or otherwise affect the provisions of this Agreement, including the terms of these arbitration provisions. At the request of any Party, the mediators, arbitrators, attorneys, parties to the mediation or arbitration, witnesses, experts, court reporters, or other persons present at a mediation or arbitration shall agree in writing to maintain the strict confidentiality of the proceedings. A Party may apply either to a court of competent jurisdiction, or to an arbitrator if one has been appointed, for prejudgment remedies and emergency relief pending final determination of a claim in accordance with this Section 24.l . The appointment of an arbitrator does not preclude a Party from seeking prejudgment remedies or injunctive or other emergency relief from a court of competent jurisdiction.

Notwithstanding anything herein to the contrary, each Party agrees that in the event of a breach of this Agreement by such Party, money damages would be inadequate and the other parties would have no adequate remedy at law. Accordingly, each Party agrees that the each other Party shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the other Party’s obligations hereunder not only by an Action or Actions for damages, but also by an Action or Actions for equitable relief, including injunction and specific performance, in any court of the United States or any other state having jurisdiction. If any such Action is brought by a Party to enforce this Agreement, each other Party, as applicable, hereby waives the defense that there is an adequate remedy at law or the requirement for the posting of any bond or similar security. The Parties hereby irrevocably submit to the exclusive jurisdiction of the federal and state court located in the State of Delaware with respect to any Party seeking injunctive relief and/or specific performance hereunder and hereby waive, and agree not to assert, as a defense in such action or proceeding that it is not subject thereto or that such action or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the Parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard in such a Delaware state or Federal court. With respect to any such action, venue shall lie solely in the State of Delaware. The Parties hereto consent to and grant any such court jurisdiction over the person of such Parties and over the subject matter of such action or proceeding.

Except as specifically otherwise provided herein, arbitration will be the sole and exclusive remedy of the parties for any Dispute arising out of this Agreement.

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

[Balance of Page Intentionally Left Blank. Signature Page Follows]

SIGNATURES

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

SELLER		GUARANTOR

BC Alpha LLC		MBE WorldWide S.p.A.

By:	/s/ John Quandahl	By:	/s/ Paolo Fiorelli

John Quandahl		Paolo Fiorelli

Manager		Chairman and CEO

SELLER’S OWNER		WCR

BC Alpha Holdings II, LLC		Western Capital Resources, Inc.

By:	/s/ Gay Burke	By:	/s/ John Quandahl

Gay Burke		John Quandahl

Manager		Chief Executive Officer

PURCHASER

U.S. Business Holdings, Inc.

By:	/s/ Paolo Fiorelli

Paolo Fiorelli

President

Signature Page to Purchase and Sale Agreement

SCHEDULE 1
To the Purchase and Sale Agreement

Part 1: Matters to be effected or delivered by the Seller at Closing:

Delivery to the Purchaser all of the Shares (other than the Minority Shares that became fractional shares as a result of the reverse split described in Section 2.a of the Agreement), properly endorsed and assigned to Purchaser, along with the Share Register, showing the transfer of such Shares to the Purchaser, all in accordance with the terms of this Agreement.

A resolution of the Seller, authorizing, inter alia, the execution, delivery and performance of this Agreement, and appointing the Seller’s signatories thereto, certified by the Seller’s secretary.

Consents, in form and substance reasonably satisfactory to the Purchaser, of all Third Parties whose consent is required for the Purchaser to acquire the Shares and the Company and operate the Business after Closing, including notice to the provider of the Company’s Adobe software.

Termination, in form and substance reasonable satisfactory to the Purchaser, of the Company’s former Master Franchise Agreement in Russia.

Evidence, in form and substance reasonably satisfactory to the Purchaser, of the termination, without further liability to the Company or the Purchaser, of all loans, credit facilities, financing arrangements, and similar arrangements (including UCC termination statements) involving the Company or the Assets, except only for those equipment leases identified on Schedule 7 (Assets).

Terminations, in writing and on terms reasonably acceptable to Purchaser, of the all loans, security agreements, management agreements and all other arrangements of any kind whatsoever between the Company and Seller or any member of the Ownership Group or BCP or any of its Affiliates including (a) the Subordinated Intercompany Note and Security Agreement dated as of April 1, 2016 in the amount of $1,000,000.00 made by the Company to the order of WCR; (b) Guaranty Fee Agreement dated as of April 21, 2016 by and among the Company, J&P Park Acquisition, Inc., Restorers Acquisitions, Inc. and WCR; and (c) the Management and Advisory Agreement dated as of October 1, 2014 between the Company and WCR, as each of the foregoing may have been amended prior to Closing.

Letters of resignation, containing waivers and releases of all claims against the Company, from all directors of the Company, and such officers of the Company as the Parties shall agree, dated as of the Closing Date.

All corporate books, records and seals of the Company.

Revocations of all instructions, mandates and authorizations to the Company’s bankers, brokers, agents and any others authorized to act on the Company’s behalf or instruction, replaced with such instructions as the Purchaser shall reasonably require.

SCHEDULE 1

Page 1

10.

Signature cards, log-on identification and passwords, and all other means by which the Purchaser’s personnel can have immediate access to the Company’s bank accounts.

11.

Print-outs, screen-shots or other real-time evidence of the state of the Company’s bank accounts as of Closing (including any bank accounts holding the AIM Funds).

12.

Keys, access codes and all other means by which the Purchaser has access to all parts of the Company’s premises.

13.

A “date down” of the Seller’s representations and warranties, confirming the absence of any Material Adverse Change from the Effective Date, in form and substance satisfactory to Purchaser.

14.

The Disclosure Letter, updated as contemplated by this Agreement.

15.

The side letter from BCP to Purchaser.

Part 2: Matters to be effected or delivered by Purchaser at Closing:

The Closing Cash Amount, paid by wire transfer to or at the direction of the Seller.

The Escrow Amount to the Escrow Account.

The Reverse Split Payment, paid by wire transfer to the Company and then to be paid post-Closing by the Company to the Minority Shareholders in proportion to their relative pre-Closing ownership percentages and in the amounts specified in Schedule 9.

The Option Cancellation Payment, paid by wire transfer to the Company and then to be paid by the Company to the Option Holders in accordance with their respective Option Cancellation Agreements.

A corporate resolution from the Purchaser, authorizing, inter alia, the execution, delivery and performance of this Agreement, and appointing the Purchaser’s signatories hereto, certified by the Purchaser’s corporate secretary.

Appointment by the Purchaser of Directors of the Company.

Part 3: Matters to be effected or delivered by the Company and Ms. Burke:

The Executive Agreement

SCHEDULE 1

Page 2

SCHEDULE 2
To the Purchase and Sale Agreement

Part 1 Closing Net Working Capital Calculation

Preparation

Attached to this Schedule 2 is the agreed methodology for the calculation of Net Working Capital, based on the line items appearing in the Company’s December 31, 2016 balance sheet and by reference to specific general ledger account numbers (the “ Pro Forma Working Capital Schedule ”).

The Pro Forma Working Capital Schedule will also include (but separately account for) all Universal Service Credits earned by or creditable to any Franchisee as of Closing and the Company’s cash and cash equivalents (excluding restricted cash) up to an amount equal to such Universal Service Credits (such cash and cash equivalents, the “ USC Funds ”), which shall be calculated prior to the calculations of Net Working Capital so as to incorporate the resulting calculations of Surplus Cash, if any, into the Net Working Capital calculations. For the avoidance of doubt, although the Universal Service Credits are separately accounted for in the Pro Forma Working Capital Schedule and are excluded from the calculation of Net Working Capital, they are included in the matters covered by the Closing Matters Escrow and subject to the review, adjustment and dispute resolution procedures set forth in this Schedule 2 .

Purchaser shall, as soon as reasonably practical but in any event on the day that is ninety (90) days following the Closing Date, prepare and deliver to Seller a draft of the Closing Net Working Capital Schedule (the “ Draft Closing Net Working Capital Schedule ”). The Draft Closing Net Working Capital Schedule shall be prepared as of the Closing Date in accordance with this Schedule 2 and give a figure for each element that makes up the Pro Forma Net Working Capital Schedule, including the USC Funds and the Universal Service Credits.

All amounts used to in the calculation Net Working Capital shall be prepared and determined in accordance with GAAP, applied on a basis consistent with past practice and the Pro Forma Working Capital Schedule included in this Schedule 2 .

The Closing Net Working Capital Schedule shall, absent manifest error, be prepared using data extracted from the accounting and financial systems and records of the Company.

The provisions of this Part 1 of Schedule 2 and the line entries comprising the Closing Net Working Capital Schedule shall be interpreted so as to avoid double counting (whether positive or negative) of any item included in Net Working Capital. For the avoidance of doubt, USCs, the USC Funds, the AIM Account, the AIM Funds and the AIM Balance (including any components thereof) shall not be included in the calculation of Net Working Capital.

SCHEDULE 2

Page 1

II.

Access to Information and Evaluation

Purchaser and Seller shall, in connection with the preparation and review of the Draft Closing Net Working Capital Schedule or any dispute or any review by the Independent Accountant:

provide or ensure the provision of such information and documents within their possession or control as may be reasonably requested by the Seller, the Purchaser, or the Independent Accountant, as the case may be; and

permit representatives of the Seller and the Purchaser (or their accountants) or the Independent Accountant to have access to and to take extracts from and copies of relevant books, correspondence, accounts or other records in the Purchaser’s or Seller’s possession or control which include information relating to the matters set out in the Draft Closing Net Working Capital Schedule.

III.

Seller’s Evaluation of the Draft Closing Net Working Capital Schedule

Within thirty (30) calendar days after receipt of the Draft Closing Net Working Capital Schedule, Seller may give notice in writing to the Purchaser that Seller disagrees with the Draft Closing Net Working Capital Schedule or any element thereof, stating reasons for such disagreement in reasonable detail (the “ Disagreement Notice .”)

If Seller does not deliver a Disagreement Notice as so required, then the Draft Closing Net Working Capital Schedule shall become final and binding and deemed to be a Final Determination between the Parties and shall be the Closing Net Working Capital Schedule.

If Seller delivers a Disagreement Notice to Purchaser, the Parties shall seek in good faith to resolve the matters in dispute. If the Parties reach agreement with respect to the proper contents of the Draft Closing Net Working Capital Schedule and make revisions thereto, the Draft Closing Net Working Capital Schedule, as so revised, shall be final and binding between the Parties and shall be the Closing Net Working Capital Schedule. If the matters in dispute are not resolved by the Parties within thirty (30) calendar days from Purchaser’s receipt of the Disagreement Notice, then the Parties shall jointly instruct the Independent Accountant to determine the proper contents of the Closing Net Working Capital Schedule and the Net Working Capital.

IV.

The Independent Accountant

The Independent Accountant shall act as an expert and not as an arbitrator, and the decision of the Independent Accountant as to any matter in dispute and as to the proper contents of the Closing Net Working Capital Schedule and the calculation of Net Working Capital shall be binding on the Parties.

The Purchase and Seller hereby undertake that if any disagreement or dispute under this Agreement is referred to the Independent Accountant:

the Parties will use their Reasonable Best Efforts to cooperate with the Independent Accountant in resolving such disagreement or dispute, and for that purpose will provide him all such information within their possession or control as he may reasonably require;

SCHEDULE 2

Page 2

the Independent Accountant shall have the right to seek such professional assistance and advice as he may reasonably require in fulfilling his duties;

the Purchaser and Seller shall each pay one half of the fees and expenses of the Independent Accountant (including any professional fees he may incur);

the Independent Account shall apply the accounting principles, policies, practices and methods set out in this Agreement, including in this Schedule 2 and the Pro-Forma Working Capital Schedule; and

the Independent Accountant shall make his determination as soon as reasonably practicable, within thirty (30) calendar days after his appointment.

Closing Net Working Capital Schedule; Adjustment to Cash Consideration

Upon the resolution of any dispute concerning the contents of the Draft Closing Net Working Capital Schedule (however resolved), the Draft Closing Net Working Capital Schedule shall be amended to accord with the resolution and shall, as amended, be the Closing Net Working Capital Schedule and be final and binding between the Parties.

If the USC Balance as determined in accordance with this Schedule 2 is greater than the USC Balance set forth on the Estimated USC Closing Statement, then such difference shall be deemed to be Surplus Cash and incorporated into the determination of Net Working Capital in this Schedule 2 .

If USC Balance as determined in accordance with this Schedule 2 is both (i) less than the USC Balance set forth on the Estimated USC Closing Statement and (ii) less than zero dollars, the Seller shall pay to the Purchaser an amount equal to the lesser of (i) the amount by which the USC Balance as determined in accordance with this Schedule 2 is less than the USC Balance set forth on the Estimated USC Closing Statement, or (ii) the amount by which the USC Balance as determined in accordance with this Schedule 2 is less than zero dollars.

Following the determination of the Net Working Capital in accordance with this Schedule 2 , the Net Working Capital shall be compared to the Adjusted Net Working Capital.

If the Net Working Capital as determined in accordance with this Schedule 2 is less than the Adjusted Net Working Capital, then the Seller shall pay the Purchaser the amount by which the Net Working Capital as determined in accordance with this Schedule 2 is less than the Adjusted Net Working Capital.

If the Net Working Capital as determined in accordance with this Schedule 2 is greater than the Adjusted Net Working Capital, then the Purchaser shall pay to the Seller the amount by which the Net Working Capital as determined in accordance with this Schedule 2 is greater than the Adjusted Net Working Capital.

SCHEDULE 2

Page 3

Part 2 - AIM Balance

Preparation

Purchaser shall, as soon as reasonably practical but in any event on the day that is ninety (90) days following the Closing Date, prepare and deliver to Seller a draft of the AIM Closing Schedule (the “ Draft AIM Closing Schedule ”). The Draft AIM Closing Schedule shall be prepared as of the Closing Date in accordance with this Schedule 2 and give a figure for each element that makes up the AIM Balance.

The figures to be used in the AIM Closing Schedule shall be prepared in accordance with the GAAP.

The AIM Closing Schedule shall, absent manifest error, be prepared using data extracted from the accounting and financial systems and records of the Company.

II.

Access to Information and Evaluation

Purchaser and Seller shall, in connection with the preparation and review of the Draft AIM Closing Schedule or any dispute or any review by the Independent Accountant:

III.

Seller’s Evaluation of the Draft AIM Closing Schedule

Within thirty (30) calendar days after receipt of the Draft AIM Closing Schedule, Seller may give notice in writing to the Purchaser that Seller disagrees with the Draft AIM Closing Schedule or any element thereof, stating reasons for such disagreement in reasonable detail (the “ Disagreement Notice .”)

If Seller does not deliver a Disagreement Notice as so required, then the Draft AIM Closing Schedule shall become final and binding between the Parties and shall be the AIM Closing Schedule.

If Seller delivers a Disagreement Notice to Purchaser, the Parties shall seek in good faith to resolve the matters in dispute. If the Parties reach agreement with respect to the proper contents of the Draft AIM Closing Schedule and make revisions thereto, the Draft AIM Closing Schedule, as so revised, shall be final and binding between the Parties and shall be the AIM Closing Schedule. If the matters in dispute are not resolved by the Parties within thirty (30) calendar days from Purchaser’s receipt of the Disagreement Notice, then the Parties shall jointly instruct the Independent Accountant to determine the proper contents of the AIM Closing Schedule and the AIM Balance.

SCHEDULE 2

Page 4

IV.

The Independent Accountant

The Independent Accountant shall act as an expert and not as an arbitrator, and the decision of the Independent Accountant as to any matter in dispute and as to the proper contents of the AIM Closing Schedule and the AIM Balance shall be binding on the Parties.

The Purchase and Seller hereby undertake that if any disagreement or dispute under this Agreement is referred to the Independent Accountant:

the Independent Accountant shall have the right to seek such professional assistance and advice as he may reasonably require in fulfilling his duties;

the Purchaser and Seller shall each pay one half of the fees and expenses of the Independent Accountant (including any professional fees he may incur);

the Independent Account shall apply the accounting principles, policies, practices and methods set out in this Agreement, including in this Schedule 2 ; and

the Independent Accountant shall make his determination as soon as reasonably practicable, within thirty (30) calendar days after his appointment.

AIM Closing Schedule; Adjustment to Cash Consideration

Upon the resolution of any dispute concerning the contents of the Draft AIM Closing Schedule (however resolved), the Draft AIM Closing Schedule shall be amended to accord with the resolution and shall, as amended, be the AIM Closing Schedule and be final and binding between the Parties.

Following the determination of the AIM Balance in accordance with this Schedule 2 , the AIM Balance shall be compared to the AIM Balance set forth on the Estimated AIM Closing Statement.

If the AIM Balance as determined in accordance with this Schedule 2 is less than the AIM Balance set forth on the Estimated AIM Closing Statement, then the Seller shall pay the Purchaser the amount by which the AIM Balance as determined in accordance with this Schedule 2 is less than the AIM Balance set forth on the Estimated AIM Closing Statement.

If the AIM Balance as determined in accordance with this Schedule 2 is greater than the AIM Balance set forth on the Estimated AIM Closing Statement, then the Purchaser shall pay to the Seller the amount by which the AIM Balance as determined in accordance with this Schedule 2 is greater than the AIM Balance set forth on the Estimated AIM Closing Statement.

SCHEDULE 2

Page 5

SCHEDULE 3
To the Purchase and Sale Agreement

Seller and the Ownership Group represent and warrant to Purchaser that the statements in this Schedule 3 are correct and complete as of the Effective Date and as of the Closing Date (except for those Seller Warranties that speak as of a specific date or time (and which are correct and complete only as of such date or time)), except as set forth in the Disclosure Letter and any Historic or Current FDD.

The Unlimited Warranties are those matters set forth in Section 1 (Capacity and Interests of Seller and the Ownership Group), Section 2 (The Shares), Section 5 (Insolvency) and Section 13 (Tax).

Capacity and Interests of the Seller and the Ownership Group

Seller and each member of the Ownership Group have each duly authorized the execution, delivery and performance of this Agreement and the other documents referred to in it that are to be executed by them, and, when executed and delivered, this Agreement and each of the other such documents will constitute a legal, valid and binding agreement of the them, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

The execution, delivery and performance of this Agreement and the other documents referred to in it (i) do not conflict in any respect with, or constitute a breach or default under, the constitutional documents of the Seller or any member of the Ownership Group, (ii) do not materially violate or materially conflict with any terms and conditions of any material contract to which the Seller or any member of the Ownership Group is a party; (iii) do not in any material respect conflict with any Law generally applicable to the Company, the Seller or any member of the Ownership Group; (iv) will not result in a breach of any order, judgment or decree of any Governmental Body or enforceable undertaking given to any Governmental Body; and (v) do not require notification to or the consent of any Governmental Body or, to the knowledge of the Seller, any person not a party hereto.

Except only for payments made by Franchisees and Master Franchisees to Company under the relevant Franchise Agreements and Master Franchise Agreements, none of the Seller or any member of the Ownership Group, or any director, officer or executive employee, of any of them, holds an ownership interest in, provides services to, or receives payment from, any Franchisee or Master Franchisee.

All agreements between the Company, on the one hand, and the Seller or any member of the Ownership Group, on the other hand (including agreements for financing and management) have been terminated as of Closing, and the Company has no obligation (whether to pay money or otherwise) under any such agreement after Closing.

SCHEDULE 3

Page 1

The Shares

a. Prior to the Reverse Split, the authorized equity interests of the Company consist solely of 2,000,000 shares of common stock, par value $0.0001 per share, and 605,000 shares of preferred stock, par value $0.0001 per share. Following the Reverse Split, the authorized equity interests of the Company consist solely of 200,000 shares of common stock, par value $0.0001 per share, and 60,500 shares of preferred stock, par value $0.0001 per share. All of the issued and outstanding Shares are held by the Persons and in such amounts as set forth on Schedule 9, in each case, free and clear of all Encumbrances. The Shares have not been issued in violation of any federal or state securities Laws and are owned beneficially and of record by the relevant Persons as set forth on Schedule 9. The Shares have been duly authorized and are validly issued, fully paid and nonassessable, and are not subject to and were not issued in violation of any preemptive or similar rights.

Except as set forth on Schedule 9 with respect to the Minority Shares, the Seller is the sole legal and beneficial owner of, and has good and marketable title to, all of the Shares, free from all Encumbrances.

The copy of the organizational documents of the Company annexed to the Disclosure Letter is true, complete and up-to-date, and sets out in full the rights and restrictions attached to the Shares.

Except as set forth in the Disclosure Letter, there are no (i) securities or other equity interests of the Company issued or outstanding or any subscriptions, options, warrants, calls, rights, convertible securities or other agreements or commitments of any character obligating the Company to issue, transfer, sell, redeem or otherwise acquire, or to cause the issuance, transfer, sale, redemption or acquisition of, any of the Company’s securities or other equity interests, (ii) stock appreciation, phantom stock or similar rights with respect to the Company, or (iii) voting trusts, proxies or any other Contracts or understandings with respect to the voting of any of the Company’s securities or other equity interests.

The Company is a corporation duly incorporated, validly existing and in active status under the Laws of the State of Delaware.

The Reverse Split was properly authorized by all necessary corporate and shareholder action in full compliance with the requirement of the DGCL and the constitutional documents of the Company and did not conflict with or otherwise breach or trigger any rights under any agreement to which the Company, Seller or any member of the Ownership Group is a party.

The Reverse Split Payment in the amounts to each Minority Shareholder as stated in Schedule 9 represents the full amount due to any Minority Shareholder as a result of the creation of any fractional shares arising out of the Reverse Split. Except for the Minority Shareholders, no person is entitled to payment of any portion of the Reverse Split Payment.

SCHEDULE 3

Page 2

Licenses and Consents; Corporate Status

Except with respect to (i) licenses, consents, approvals, permissions, permits and authorizations related to franchise matters (as to which certain representations and warranties are made in Section 6 and Sections 16 through 19 of this Schedule 3), (ii) real estate licenses and permits (as to which certain representations and warranties are made in Section 10 of this Schedule 3), (iii) licenses and permits related to employee matters (as to which certain representations and warranties are made in Section 7 and Section 14 of this Schedule 3), and (iv) licenses and permits concerning Owned IP (as to which certain representations and warranties are made in Section 9 of this Schedule 3), all other licenses, consents, approvals, permissions, permits and authorizations (public and private, including those required from lenders to the Seller or any member of the Ownership Group and/or the Company) necessary for (1) the carrying on of the Business effectively in the places and in the manner in which the Business is carried on as of the date of this Agreement, and (2) the transactions contemplated hereby (including the transfer, and related change of control, of the Company and the Business to the Purchaser), have been obtained and all such licenses, consents, approvals, permissions, permits and authorizations are valid and subsisting and the transfer of the Shares will not violate or cause any of them to be suspended, cancelled, revoked, amended or not renewed on the same terms because of the transaction contemplated in this Agreement, except as set forth in the Disclosure Letter or to the extent that any failures to have such licenses, consents, approvals, permissions, permits and authorizations would not, individually or in the aggregate, result in a Material Adverse Change to the Company.

The minute books and other corporate records of the Company are in the Company’s possession, have been in all material respects properly kept and are up-to-date, and contain in all material respects an accurate and complete record of the matters that should be dealt with in those books in accordance with Law, and no notice or allegation that any of them is incorrect or should be rectified has been received.

Due compliance has been made with all legal requirements in connection with (i) the formation of the Company; (ii) the allotment, issue, purchase and redemption of shares, debentures and other securities of the Company; (iii) amendments to the certificate or articles of incorporation of the Company; and (iv) the passing of resolutions by the Company. The Company is duly qualified or licensed to do business as a foreign corporation in each jurisdiction in which the character of the properties owned by it, or the nature of the Business, makes such licensing or qualification necessary, except where the failure to effect or maintain such licensure or qualification would not, individually or in the aggregate, result in a Material Adverse Change.

The Company has not entered into any transaction ultra vires or outside the powers or authority of the Company or its directors.

Except as set forth in the Disclosure Letter, the Company is a member of no corporate or unincorporated body, undertaking or association.

Since July 1, 2012, the Company has had no Subsidiaries except as listed on the Disclosure Letter. The Company does not own or hold the right to acquire, nor, except for the Discontinued Subsidiaries, has it owned or held at any time since its formation, directly or indirectly, any stock, partnership interest or joint venture interest or other equity ownership interest in any other corporation, organization or any other person. The Company is not a participant in any joint venture, partnership or similar arrangement.

The Discontinued Subsidiaries have all been properly terminated in accordance with their respective constitutional documents and Law, and the Company has no Liability with respect to any Discontinued Subsidiary.

SCHEDULE 3

Page 3

Except (i) as set forth in the Accounts, (ii) the Disclosure Letter or (iii) as contemplated by Section 17.e of the Agreement, no dividend, interim dividend or other distribution, whether paid or still outstanding, has been declared or paid after December 31, 2016, nor is there any right outstanding to distribution from, or payment based on, reserves or profits of the Company.

Since January 1, 2013, the Company has not traded or otherwise carried out any business activities other than the Business and is not subject to any agreement or arrangement to do so.

Audited Accounts and Management Accounts

A true, complete and accurate copy of the Audited Accounts and Management Accounts is annexed to the Disclosure Letter.

Except as set forth in the Disclosure Letter and subject to, in the case of the Management Accounts, any year-end adjustments and the absence of footnote disclosure, the Accounts were prepared in accordance with GAAP, applied on a consistent basis.

The Accounts fairly present, in all material respects:

The assets and liabilities (whether accrued or contingent) of the Company for the periods ending on each of the Accounts Dates;

ii.

A true and fair view of the state of affairs and the financial position of the Company and its profits and losses for the periods ending on each of the Accounts Dates.

The Accounts are complete and accurate in all material respects.

Since January 1, 2014, the profits and losses of the Business as shown by the Accounts have not (except as therein disclosed) been affected to a material extent by any non-recurring, exceptional, extraordinary or short-term item or by any other matter that has rendered profits or losses unusually high or low.

All accounting records of the Company supporting the Accounts have been kept on a basis consistent with the Company’s historical practice, are in its possession, kept up to date, and are materially complete and accurate.

Except as set forth in the Disclosure Letter, the Management Accounts have been prepared in accordance with GAAP, applied on a basis consistent with the accounting principles, standards and practices adopted for the Audited Accounts.

The Company has provided the Purchaser with access to the Company’s internal accounting controls over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act).

There are no material liabilities of the Company that would be outstanding as of the Closing Date other than those (i) specifically included or provided for in full in the Audited Accounts or the Management Accounts, (ii) liabilities incurred in connection with this Agreement or the transactions contemplated hereby, (iii) commercial liabilities incurred since the date of the Management Accounts Date in the ordinary course of business, and (iv) contractual liabilities under contracts disclosed in the Disclosure Letter or contracts that, individually, would not result in liabilities to the Company in excess of $250,000.

SCHEDULE 3

Page 4

All accounts receivable reflected in the Accounts, and all accounts receivable arisen since the Audited Accounts Date which are reflected in the Management Accounts up to the date on which the Management Accounts were prepared, are in existence for the amounts reflected therein, and arise from bona fide sales and transactions actually made in the ordinary course of business consistent with past practice.

The Company has made no gifts or contributions (whether charitable, political or otherwise) except as properly recorded in the Accounts, and the Company has made no commitment to make any such gift or contribution that has not been paid as of the Accounts Dates.

Insolvency

No order has been made or petition presented, meeting convened or resolution passed for the winding up of the Seller, the Company, the Business or any member of the Ownership Group, or for a liquidator, receiver or other insolvency practitioner to be appointed in respect of any of them. No administration order has been made and no petition for such an order has been presented in respect of the Seller, Company or the Business, and none of the Company, the Seller or any member of the Ownership Group is insolvent or unable to pay its debts, and has not stopped paying its debts, as they come due.

No voluntary arrangement with creditors or analogous arrangement has been proposed with respect to the Company, the Seller or any member of the Ownership Group.

No receiver (which expression includes an administrator, receiver and manager) has been appointed in respect of the Company, the Seller or any member of the Ownership Group or any of their assets. No distress, distraint, charge order, garnishment, execution or other similar process has been levied or applied for in respect of any of their assets.

No examiner has been appointed over the whole or any part of the property, assets or undertaking of the Business, the Company or the Seller.

No event analogous to any of the foregoing has occurred in any jurisdiction in relation to the Company, the Seller, the Business or any member of the Ownership Group.

Compliance with Franchise Laws

The Company is and has been since July 1, 2012 in compliance in all material respects with all Franchise Laws. Since July 1, 2012, a ll FDDs of the Company which were registered or filed with any Governmental Bodies were, when effective, true and complete, and complied i n all material respects with all Franchise Laws. The Disclosure Letter sets forth accurately the current status of all U.S. state registrations and filings.

Since July 1, 2012, the Company has not offered or sold any Franchise at times or in jurisdictions in violation of Franchise Laws.

SCHEDULE 3

Page 5

Directors, Officers and Employees

The Directors identified on Schedule 4 are the only members of the board of directors of the Company at the date of this Agreement.

Except as set forth in the Disclosure Letter, no person is or has been a “shadow director” of the Company.

Except only for the agreement between the Company and Ms. Burke which has been terminated as of Closing with no further obligation on the part of the Company, there are no contracts of service between the Company and any of its Directors.

The Company has made no loans to any Director, officer or Employee, and the Company has no debts or other financial obligations payable to any of its Directors, officers or Employees other than for salary, commissions and other ordinary compensation as reflected in the Accounts.

All Employees are employees-at-will. Except as identified in the Disclosure Letter, no Employee has an employment contract with the Company (whether written or oral).

The Employees identified as such on the Employee Detail List included in Schedule 4 are the only persons employed by the Company; the Company employs no person other than the Employees.

The Company employs Employees only in Utah, Texas, Florida, Ohio, Tennessee, Pennsylvania, Arizona, Kansas, California and New York. All Employees are entitled to work in the United States, and the Company has properly confirmed, and kept records about, each Employee’s, and each former employee’s, eligibility for employment in the jurisdiction in which such person works or has worked.

The Employee Detail List included as Schedule 4 contains or has attached to it true and accurate details of:

The total number of Employees (including all those who are on maternity or parental leave, absent on grounds of disability, or other otherwise not present but who are entitled to return to work with the Company, whether pursuant to a statutory or contractual right or otherwise);

ii.

The name, salary, bonuses, other monetary remuneration and title/position for each Employee.

There are no proposals (written or oral) to terminate the employment of any Employee or to vary or amend any Employee’s terms and conditions of employment (whether to the Employee’s detriment or benefit), except as (i) identified in the Disclosure Letter or (ii) required by Law. As of the Effective Date, the Company has not received a notice of resignation from any Employee.

As of the Effective Date there is no outstanding offer of employment to any person, although the Company has open positions for which it is soliciting potential employees.

SCHEDULE 3

Page 6

No Employee is a parent, spouse or child of any director, officer or executive employee of the Company, the Seller or any member of the Ownership Group.

Except as set forth in the Disclosure Letter, to the Seller’s knowledge no Employee is a parent, spouse or child of any owner, officer, director or executive employee of any Franchisee or any Master Franchisee.

At Closing, there will be no person previously employed by the Company who has, or who may in the future come to have, a contractual or statutory right to return to work at, or to be reinstated by, or to any other compensation from, the Company.

Except only for the Stock Option Agreements (which have been terminated as of Closing, with no further obligation due from the Company except as set forth in the Option Cancellation Agreements), no arrangement for employment of any Employee provides that a change in control of the Company shall entitle such Employee to treat the change in control as amounting to a breach of contract or entitling the Employee to any payment or benefit whatsoever, or entitling the Employee to terminate the employment relationship for cause.

There are no share incentive, share option, profit sharing, bonus or other incentive arrangements or programs for or affecting any Employee except as identified in the Disclosure Letter. No part of any Employee’s compensation is based on commission except as identified in the Disclosure Letter. Since July 1, 2012, no former employee of the Company has made any written claim to incentive compensation, commission or other payment relative to that former employee’s employment with the Company, except as identified in the Disclosure Letter.

The Company has not entered into any contract with any Director, officer, Employee that contains provisions for payments, allowances, benefits, bonuses and/or other undertakings whereby the Company is bound to compensate any individual for Taxes paid pursuant to Section 4999 or 409A of the IRC.

The Company does not maintain a written severance policy, and except as set forth in the Disclosure Letter, no employee has an agreement, oral or written, providing for severance or termination payments upon the termination of employment.

The Company’s hiring, promotion and termination policies and practices comply, and since January 1, 2015 have complied, with Law, including laws prohibiting discrimination based on race, sex, color, national origin, religion or other categories protected by Law.

The Company complies, and since July 1, 2012 has complied, with Law regarding the payment of minimum wage and the proper classification of employees as “exempt” and “non-exempt” for overtime eligibility.

With respect to each Employee, and to every former employee of the Company, there are no current or pending disputes or claims (other than routine claims for benefits under employee benefit plans sponsored by the Company), whether individual or collective, and whether by the Company or Employee (or former employee), and to the knowledge of the Seller, no claims have been threatened.

SCHEDULE 3

Page 7

Since July 1, 2012, no independent contractor, Franchisee, owner or employee of a Franchisee, or consultant has claimed that he or she is an employee, worker or agent of the Company, and, to Seller’s knowledge, there are no facts or circumstances that may give rise to any such claim. Since July 1, 2012, no Tax Authority or other Governmental Body has, in respect of any current or former independent contractor or consultant, challenged or objected to their treatment as independent contracts or self-employed consultants, and no such challenge is pending or to Seller’s knowledge threatened, and, to Seller’s knowledge, there are no facts or circumstances which may give rise to such challenge or objection.

Except as reflected in the Accounts, there is no obligation or amount due to or in respect of any Employee or any former employee of the Company in connection with or arising from his employment or termination of employment which is in arrears or unsatisfied, other than reimbursement for current expenses, remuneration for the current period since the Management Accounts Date, and vacation pay, sick leave and other “paid time off” for the current year.

Reserved.

The Company is not, and since July 1, 2012 has never been, a “federal contractor” for the purposes of the US Department of Labor’s Office of Federal Compliance Programs.

No trade union, works council, staff association or other body representing or purporting to represent employees is recognized by the Company in any way for bargaining, information or consultation purposes. There are no agreements (whether legally binding or not) with any representative body in relation to the Employees, and there are no pending requests for recognition, consultation or employee representation. The Company is not and since July 1, 2012 has never been involved in any strike, lockout or other industrial action or trade dispute, or in negotiation with any trade union or other organization representing employees, and no such strike or lockout is pending or, to Seller’s knowledge, threatened.

Except as set forth in the Disclosure Letter, the Company is under no legal obligation to pay pensions, gratuities, allowances, insurance or other benefits to any of its past or present directors, officers or employees or their dependents, nor is the Company in the habit of making voluntary payments in relation of such matters, except for what is provided for in the Audited Accounts and Management Accounts.

aa.

The Company does not, and since July 1, 2012 has not, operated, sponsored or participated in, or is otherwise under any liability or obligation with respect to, any plan subject to Title IV of the Employment Retirement Income Security Act (“ERISA”), or any “multiemployer plan” any “multiple employer plan,” as such terms are defined under ERISA (whether a defined benefits program or otherwise).

bb.

The Company sponsors a defined contribution 401(K) plan for the benefit of its eligible employees (the “401(k) Plan”. The Company has timely made (or properly accrued for) all required contributions to the 401(k) Plan through the Closing Date. The 401(k) Plan operates in compliance with the 401(k) Plan documents and Law, and all funds subject to the 401(k) Plan are held and invested as required by Law and the 401(k) Plan documents. The Company maintains a fidelity bond in connection with its administration of the 401(k) Plan as required by ERISA.

SCHEDULE 3

Page 8

cc.

The Company’s dispute with Kevin K. Cushing, the Company’s former President and Chief Executive Officer, including those matters alleged in Mr. Cushing’s lawsuit against the Company, filed on February 10, 2012, have been finally and completely resolved, and the Company has no liability for the payment of funds (whether to or on behalf of Mr. Cushing or otherwise), and no obligation to take any action, or inability to take any action, as a result of that dispute or its settlement.

Assets (Personal Property)

Except as set forth in the Disclosure Letter or otherwise acquired after the Accounts Date in the ordinary course of business, all Assets owned by the Company are identified as such in the Audited Accounts and Management Accounts, and the Company has good and marketable title to them, free from any Encumbrance other than Permitted Encumbrances.

All Assets having a book value in excess of $50,000 which are currently made available to the Company under any currently active lease, license, installment purchase plan, retained title agreement, or other similar arrangement, are properly identified as such on Schedule 7 and in the Audited Accounts and Management Accounts, and the Company has paid all rent, installment payments, service payments, license fees and other payments required to be paid under such agreements through the date of the Management Accounts.

Since July 1, 2012, all Assets (whether owned by the Company or used under a license, lease or other arrangement) were acquired for the Company’s use from a third party (that is, no one who is a current or former officer, director or employee of the Company, the Seller, or any member of the Management Group) or a spouse, parent or child of any such person) on an arm’s length basis.

All machinery, vehicles and office equipment used in connection with the Business are in good condition and repair (ordinary wear and tear excepted).

Intellectual Property

Except as set forth in the Disclosure Letter, the Company owns the Owned IP, and the Owned IP is properly so identified on Schedule 7 . Except as set forth in the Disclosure Letter, the Company has received no written communication from any third party that the Company’s ownership or use of the Owned IP conflicts with their rights. Except as set forth in the Disclosure Letter, there is no agreement granting any third party any license or right to use or purchase the Owned IP.

Except as set forth in the Disclosure Letter, and except for those six locations in the United States identified in the Current U.S. FDD (namely, locations in Chicago, Illinois; Baltimore, Maryland; Fargo, South Dakota; St. Louis Park, Minnesota: Pittsfield, New Hampshire; and Muncie, Indiana), to Seller’s knowledge there are no infringements on any of the Company’s Owned IP, nor to Seller’s knowledge is there any party who has claimed, or has the ability to claim, rights superior to the Company’s in the Owned IP.

Except as set forth in the Disclosure Letter, all Owned IP (including domain names and trademarks) that has been registered with any Governmental Body, domain name registrar or other authority is properly so registered, all such registrations are current, and identified on Schedule 7 . All Owned IP is properly registered in all jurisdictions where the franchise business related to any Franchise Agreements or Master Franchise Agreements is located.

SCHEDULE 3

Page 9

Except as set forth in the Disclosure Letter, the Owned IP comprised of software programs operates in general accordance with any description thereof in the manuals (if any) provided for its use.

Reserved.

Except as set forth in the Disclosure Letter, to Seller’s Knowledge, the Company has obtained and maintained all permissions and certificates required by applicable Law for the Company to export any Owned IP comprised of software programs that it has provided to any Master Franchisee for use outside the United States, and to the Seller’s knowledge, the Company has obtained and maintained all permissions and certificates required under applicable Law for such Owned IP comprised of software programs to be imported into and used in the country where it is used.

Except as set forth in the Disclosure Letter, the Company licenses or otherwise is able to use the Licensed IP pursuant to licenses, leases or other agreements properly entered into on standard arm’s length terms, and all license fees and other payments payable by the Company for access to and use of the Licensed IP are fully paid or payable in the ordinary course of business in accordance with past practice as of the date of the Management Accounts. Without limiting the generality of the foregoing, except as set forth in the Disclosure Letter, all elements of the Company’s MIS System (that is, the business management software, applications and communications systems that the Company periodically provides to Franchisees) have been properly obtained and maintained by the Company, such that the Company’s provision of the MIS System to the Franchisees is in full compliance with the terms under which the Company has obtained all elements of the MIS System from the relevant Supplier of the Company.

Except as set forth in the Disclosure Letter, each person (Employee or otherwise) who has created Intellectual Property on behalf of the Company in the course of such person’s engagement or employment by the Company is bound by a written agreement vesting all rights to, and ownership of, such Intellectual Property solely and absolutely in the Company, and irrevocably waiving their moral rights to such Intellectual Property.

Except as set forth in the Disclosure Letter, the Owned IP and the Licensed IP comprise all of the Intellectual Property used by the Company.

10.

Real Estate

The Company owns no Real Estate, and since June 30, 2012, it has not owned any interest in Real Estate.

The Company currently leases premises at Parkside Tower, 215 South State Street, Salt Lake City, Utah 84111. The lease and all amendments, exhibits, schedules and attachments to it (including any ancillary documents, such as estoppels or subordination and attornment agreements) have been fully disclosed to Purchaser. The lease expires June 30, 2018.

SCHEDULE 3

Page 10

The lease is in full force and effect, and the Company, as tenant, is in material compliance with all of its obligations thereunder, and has received no notice (whether written or oral) from the landlord, landlord’s lender or any other party claiming that the Company is in breach, default or noncompliance with the lease.

All rent, operating expenses, security deposits and other sums payable by the Company as tenant under the lease through the Closing Date have been fully and properly paid or properly accrued as of the Closing Date.

To the knowledge of Seller, all obligations of the landlord that should, under the terms of the lease, have been performed as of the Closing Date, have been fully and satisfactorily performed (including, without limitation, any build-out, finish work and other construction required for the Company’s occupancy).

The Company has received no written notice that the landlord is in breach or default of any of the landlord’s obligations to its mortgagee or any other party who may have or claim an interest in the leased premises.

Except for any lender of the landlord to whom the Company has executed a subordination or attornment agreement, to the Seller’s knowledge there is no Encumbrance affecting the leased premises other than Permitted Encumbrances.

The Company has maintained all insurance policies required of the Company as tenant under the lease since the inception of the lease, all such insurance is in full force and effect, and the Company has paid all premiums therefor through the Closing Date.

To the Seller’s knowledge, the leased premises is in full compliance with applicable Law, including building codes, Laws intended to protect the environment and to regulate the use, storage and discharge of toxic or otherwise hazardous materials, and Laws intended to allow access to and use of the premises by people with disabilities.

No consent or approval by the landlord is required for the Company to continue its occupancy of the premises after Closing.

11.

Insurance

The Disclosure Letter sets forth all currently effective insurance policies of the Company. In respect of all such policies:

All premiums have been paid to date;

ii.

All the policies are in force;

iii.

To Seller’s knowledge, there are no circumstances which might lead to suppression or limitation of the insurer’s liability;

iv.

No claim is outstanding.

All insurance coverage (except only for the professional liability coverage discussed in item 11.c below) will continue in force after the Closing of the transactions contemplated by the Agreement.

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The professional liability policy maintained by the Company can be continued in force after closing on terms reasonably similar to those in place through Closing, subject to the consent of the insurer and the payment of any additional premium therefor.

12.

Litigation

Except as set forth in the Disclosure Letter, the Company is not involved in any dispute or litigation, governmental or administrative investigation, arbitration or court proceedings, either as a plaintiff or defendant. To Seller’s knowledge, there is no litigation, investigation or proceeding threatened against the Company or related to the Business.

None of the Company, the Seller, any member of the Ownership Group, or any of their officers, directors or employees is being investigated or prosecuted for any civil or criminal offense related to the Business or, in the case or any officer, director or employee, related to his or her participation in the Business and/or the relevant member of the Ownership Group, and, to the Seller’s knowledge there are no such investigations or prosecutions pending or threatened.

Except as set forth in the Disclosure Letter, no dispute, mediation, arbitration or litigation for amounts above $10,000 commenced by or against the Company, or that have been threatened to be commenced, have been settled or compromised during the period of five years ending on the date of this Agreement.

None of the Company, the Seller or Seller’s Owner is subject to any order or judgment given by any court or Governmental Body, and none of them is a party to any undertaking, settlement, consent agreement or assurance given to any court or Governmental Body. WCR is not subject to any order or judgment given by any court or Governmental Body, and is not a party to any undertaking, settlement, consent agreement or assurance given to any court or Governmental Body, which would prohibit, affect or limit the Transaction or Purchaser’s ability to own and operate the Business after Closing.

13.

Tax

For purposes of this Item 13, “ Seller Parties ” means, collectively, Seller and the Ownership Group.

Returns and Compliance

For any Tax Period ending after June 30, 2012, the Company and the Seller Parties have duly, and within appropriate time limits, made and filed all Tax Returns required to be filed, given all notices and supplied all other information required to be given or supplied to all relevant Governmental Bodies in connection with such Tax Returns, and have maintained all records required to be maintained for all Tax purposes. All such Tax information is complete, up-to-date and accurate in all material respects, and all such Tax Returns and notices were complete, up-to-date, accurate and in compliance with the IRC in all material respects as of the date filed. All Taxes shown as due on such Tax Returns have been paid to the appropriate Governmental Bodies on a timely basis.

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ii.

The Data Room includes complete and accurate copies of all Tax Returns (including without limitation all amendments thereto) filed by or on behalf of the Company and/or the Business, examination reports, and statements of deficiencies filed by, assessed against, or agreed to by the Seller Parties (or any of them) with respect to the Company and/or the Business for any Tax period ending after June 30, 2012, except for Tax Periods that the Company was included as part of a consolidated or combined or unitary group (in which case separate estimated Income Tax calculations for the Company have been included in the Data Room).

iii.

Since July 1, 2012, except as set forth in the Disclosure Letter, the Company and the Seller Parties have not received any written claim or notice by any Governmental Body in a jurisdiction where Tax Returns are not filed by or on behalf of the Company asserting that the Company may be subject to taxation in that jurisdiction.

iv.

None of the Seller Parties is a foreign corporation, foreign partnership, foreign trust, or foreign estate (as those terms are defined in the IRC and Treasury Regulations promulgated thereunder). Neither the Company nor any of the Seller Parties has been a United States real property holding corporation within the meaning of IRC Section 897(c)(2) for any Tax period ending after June 30, 2012.

For any Tax Period ending after June 30, 2012, the Seller Parties have disclosed on all requisite federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of IRC Section 6662.

vi.

Except as set forth in the Disclosure Letter or in any Tax Return, neither the Company nor any of the Seller Parties will be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of (a) change in method of accounting for a taxable period ending on or prior to the Closing Date under IRC Section 481(c) (or any corresponding or similar provision of state, local or foreign income Tax law); (b) “closing agreement” as described in IRC Section 7121 (or any corresponding or similar provision of state, local or foreign income Tax law); or (c) installment sale or open transaction disposition made on or prior to the Closing Date.

vii.

For any Tax Period ending after June 30, 2012, neither the Company nor any of the Seller Parties has engaged in any reportable transaction as defined in Treasury Regulation Section 1.6011-4(b).

viii.

For any Tax Period ending after June 30, 2012, neither the Company nor any of the Seller Parties has been notified in writing of any proposed Tax claims, liens or assessments against the Company or the Seller Parties.

ix.

Except as set forth in the Disclosure Letter, there is no Tax sharing agreement, Tax allocation agreement, Tax indemnity obligation, or similar agreement, arrangement, understanding or practice with respect to Taxes, in each case, by and between the Company or a Seller Party, and an entity other than the Company or a Seller Party, except for agreements, arrangements, understandings, or practices entered into in the ordinary course of business. The Company is not a party to any joint venture, partnership or other agreement, contract or arrangement (whether in writing or verbally) which could be treated as a partnership for federal income Tax purposes.

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Except as set forth in the Disclosure Letter, the 2014 reverse subsidiary merger involving the Company and the Seller Parties qualified as a reorganization within the meaning of IRC Section 368(a)(1)(A) and IRC Section 368(a)(2)(E).

xi.

Since the Audited Accounts Date, there has not been, with respect to the Company, any action by or on behalf of the Company to make, change or rescind any Tax election except in connection with the preparation and filing of Tax Returns, or to amend any Tax Return.

xii.

For any Tax Period ending after June 30, 2012: (a) the Company does not have a permanent establishment in any country outside the United States and is not subject to Tax in a jurisdiction outside the United States; (b) the Company has not entered into a gain recognition agreement pursuant to Treasury Regulation Section 1.367(a)-8; and (c) the Company has not transferred an intangible the transfer of which would be subject to the rules of IRC Section 367(d).

Tax Claims, Liabilities and Reliefs

Except as set forth in the Disclosure Letter, the amount of Taxes payable by the Company does not, to any material extent, depend on any concession, agreement or other formal or informal arrangement with any Tax Authority.

ii.

All Taxes which the Company and/or the Seller Parties are required by Law to withhold or collect for payment (including Taxes required to be withheld from payments made to any past or present director, officer or employee) have been duly withheld and collected and have been timely paid to the appropriate Tax Authority.

Investigations and Inquiries

Except as set forth in the Disclosure Letter, there is no action, suit, investigation, examination, inquiry, audit, dispute, claim or assessment pending or threatened in writing with respect to Taxes of the Company or the Seller Parties.

ii.

Except as set forth in the Disclosure Letter, for any Tax Period ending after June 30, 2012, neither the Company nor any of the Seller Parties has given or been requested to give waivers or extension (or is or would be subject to a waiver or extension given by any other person) of any statute of limitations relating to Taxes except for extending Tax Return due dates.

Power of Attorney

Except as set forth in the Disclosure Letter, for any Tax Period ending after June 30, 2012, no power of attorney or similar authority has been given with regard to the Company or the Business that is still in force.

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Secondary Liabilities

Since July 1, 2012, the Company has not been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes (other than with the Seller Group). For any Tax Period ending after June 30, 2012, the Company does not have any Liability for the Taxes of any person (other than the Seller Group) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law).

ii.

Reserved.

Transfer Pricing

For any Tax Period ending after June 30, 2012, the Company is not subject to any transaction or arrangement with any Seller Party or any Affiliate thereof with respect to which the Internal Revenue Service has the authority to reallocate items of gross income, deductions, credits, or allowances pursuant to IRC Section 482.

14.

Employee Benefits

Except as set forth in the Disclosure Letter, no Tax Authority or other Governmental Body has, in respect of any current or former independent contractor or consultant, challenged or objected to their treatment as independent contractors or self-employed consultants, and no such challenge is pending or threatened, and there are no facts or circumstances which may give rise to such challenge or objection.

The Disclosure Letter contains a complete and correct list of: (i) each “employee benefit plan,” as defined in Section 3(3) of ERISA, and (ii) each other benefit plan, policy, program, arrangement or agreement which is sponsored or maintained by the Company, or pursuant to which the Company is otherwise bound or otherwise has any Liability, for the benefit of its employees, former employees, consultants or other representatives, including without limitation any nonqualified deferred compensation plan (each, an “ Employee Plan ”). Each Employee Plan (i) has been operated and administered in material compliance with its terms and all applicable requirements of ERISA, the IRC and other Law, and (ii) intended to be qualified under IRC Section 401(a) has received a favorable determination letter from the Internal Revenue Service and there have been no amendments or modifications to such plan since the date of such letter which would cause the loss of qualified status of such plan. Neither the Company, the Seller Parties nor any of their ERISA Affiliates maintains, sponsors or is required to contribute to, either currently or at any time in the past, or otherwise has any Liability with respect to, any Employee Plan that (i) is a “multiemployer plan” within the meaning of Section 3(37) of ERISA, (ii) is subject to the funding requirements of Section 412-430 of the IRC or Title IV of ERISA, or (iii) provides for post-retirement medical, life insurance or other welfare-type benefits (other than as required by Part 6 of Subtitle B of Title I of ERISA or IRC Section 4980B or under a similar state law). Except as set forth in the Disclosure Letter, neither the Company nor any of the Seller Parties is bound by or otherwise has any Liability with respect to any Employee Plan.

Without limiting the generality of subsection (b) immediately above, the 401(k) Plan has been funded, administered and operated in compliance with all requirements of the IRC and other Law, and the Company and participating Employees are properly entitled to the beneficial Tax treatment allowed for such plans.

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The Company has no obligation whatsoever to pay any nonqualified deferred compensation to any person who would be subject to IRC Section 409(A).

The Company and the Seller Parties have paid all required contributions to all applicable Governmental Bodies for unemployment insurance and workers’ compensation accounts and, therefore, Purchaser has no duty to withhold any amount of the Cash Consideration for such purpose.

Neither the execution of this Agreement nor the consummation of any of the transactions contemplated by this Agreement will result in “excess parachute payments” within the meaning of IRC Section 280G(b).

The Amended and Restated AlphaGraphics, Inc. 2013 Stock Option Plan (the “Option Plan”) was established and administered in compliance with all applicable requirements of the IRC. The Option Plan was validly terminated, and all stock options and other awards thereunder were validly extinguished, prior to Closing. No participant in the Option Plan has or will hereafter acquire any right to purchase stock in the Company or any other equity (or quasi-equity) interest in the Company. Except for the Option Cancellation Payment payable to the Option Holders pursuant to the Option Cancellation Agreements, no participant in the Option Plan has or will have any claim against the Company or Purchaser as a result of or in connection with the termination of the Option Plan or the extinguishment of all stock options and other awards thereunder.

15.

Compliance with Law

Except with respect to (i) Laws related to franchise matters (as to which certain representations and warranties are made in Section 6 and Sections 16 through 19 of this Schedule 3), (ii) Laws related to real estate licenses and permits (as to which certain representations and warranties are made in Section 10 of this Schedule 3), (iii) Laws related to employee matters (as to which certain representations and warranties are made in Section 7 of this Schedule 3), (iv) Laws related to Tax matters (as to which certain representations and warranties are made in Section 13 of this Schedule 3), and (v) Laws concerning Owned IP (as to which certain representations and warranties are made in Section 9 of this Schedule 3), since July 1, 2012, the Business has been conducted in material compliance with Law, and since July 1, 2012, neither the Company nor any of its Directors or officers, nor, to the Seller’s knowledge, any Employees, has committed or is liable for any criminal, illegal or wrongful act related to the Business.

Since July 1, 2012, none of Company, the Seller or any member of the Ownership Group has received written notification that any investigation or inquiry is being conducted or has been conducted by any Governmental Body with respect to the Business or the Company or which would require disclosure in the Current FDDs.

Since July 1, 2012, none of the Company, its officers or Directors, or to Seller’s knowledge, any Employees, has made, or offered to make, any gift, bribe, inducement, kick-back or other improper payment to or on behalf of any person, including anyone representing, or claiming to represent, any Government Authority (including any Government Authority outside the United States).

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Except as set forth in the Disclosure Letter , since July 1, 2012, the software provided by the Company to the Franchisees operates and maintains data in compliance with Law generally applicable to the Company and its Business, including laws intended to protect consumer privacy and data security.

16.

Franchise Disclosure Documents

Schedule 12.a to the Agreement sets forth a complete list of all FDDs that are currently in use by the Company (the “ Current FDDs ”).

Schedule 12.b to the Agreement sets forth a complete list of all FDDs, offering circulars and similar disclosure documents that were issued, disseminated or otherwise used by the Company since July 1, 2012 in connection with the offer and sale of a franchise (collectively with the Current FDDs, the “ Historic FDDs ”).

Schedule 12.c sets forth accurately the current status of all U.S. state franchise registrations and filings.

Since July 1, 2012, prior to the execution of any Franchise Agreement, the Company has timely delivered to each Franchisee a complete and accurate copy of the applicable Historic FDD in compliance with Franchise Laws, and has obtained executed receipts thereof from all such Franchisees.

Since July 1, 2012, the Company’s Current and Historic FDDs are, and have been, in material compliance with Law, including the rules of the Federal Trade Commission and those states where the Company does business that require the registration or filing of franchise disclosure materials. Since July 1, 2012, the Company has not solicited potential franchisees in jurisdictions, or at times, when such solicitation was not permitted by Law.

17.

Franchisees

Seller has made available to the Purchaser true and complete copies of all currently effective Franchise Agreements (including all written amendments, addenda and modifications thereto), and except as set forth in the Disclosure Letter, there are no other material amendments, modifications or waivers of any material rights or benefits of the Company, or material obligations of any Franchisee, under any such Franchise Agreements.

The Disclosure Letter sets forth the Franchise Agreements currently in effect which are or were due to expire during the period between January 1, 2017 and the Effective Dates, and whether or not such Franchisee has extended or renewed the Franchisee’s Franchise Agreement.

A list of the top 25 Franchisees ranked in order based on gross sales reported by each Franchisee for the 12 months ended on the Audited Accounts Date is included in Schedule 8 .

Except as set forth in the Disclosure Letter, each Franchise Agreement is a legal, valid and binding obligation of the Company, except as such may be limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally and by general equitable principles, and, to the Seller’s knowledge, of each Franchisee thereto (as may be limited by bankruptcy, insolvency, reorganization or other Laws affecting creditors’ rights generally and by general equitable principles), and is in full force and effect.

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No Franchise Agreement obligates the Company to buy back or otherwise acquire the stock of the Franchisee or substantially all of the assets of the Franchisee’s Business, except for any state addendum to a Franchise Agreement that imposes, applies or references the state’s statutory requirements.

Except as set forth in the Disclosure Letter, the Company: (i) has not sold, assigned, transferred, conveyed, pledged, or granted a security interest in, any interest in any of the Franchise Agreements or the Company’s rights thereunder, (ii) is the sole beneficiary of the Franchise Agreements (other than the Franchisees and any other counterparties thereto) and (iii) owns the rights of the Company as the franchisor thereunder, free and clear of any liens.

Except as set forth in the Disclosure Letter, since October 1, 2016 (i) the Company is not in receipt of a written demand or written request from any Franchisee with respect to Franchisee’s Franchise Agreement, for amendment or early termination, cancellation, rescission or other cessation thereof or (ii) to Seller’s knowledge no Franchisee has asserted to the Company an intention to cease operating its franchised Business or not renew its Franchise Agreement.

Except as set forth in the Disclosure Letter , to Seller’s knowledge, since July 1, 2012, no Franchisee or employee of a Franchisee is or has been classified by any Governmental Body as an employee of the Company.

Except as set forth in the Disclosure Letter, since July 1, 2012, no Franchisee has been terminated due to a conviction of a crime by Franchisee or Franchisee’s owners.

No Franchisee will be entitled under any Franchise Agreement to terminate, suspend or cancel the Franchisee’s Franchise Agreement as a result of this Agreement or the transactions contemplated hereby, and no Franchisee is required under any Franchise Agreement to acknowledge or consent to the change of control of the Company contemplated hereby.

Except as set forth in the Disclosure Letter, and excluding (i) defaults in the Franchisee’s payment obligation of less than $25,000 (ii) defaults relating to the Franchisee’s failure to comply with the Company’s system standards, as such system standards are set forth in the following System Standards files located in the Data Room: 35_04.28_ag_System Standards 2017.pdf and 35_09.23_ag_Operations Manual 2015.pdf, (iii) the failure of any Franchisees to pay any minimum royalties pursuant to the applicable Franchise Agreement, and (iv) failure of the Franchisees to maintain required insurance policies or name Company or any of its Affiliates as an additional insured, to Seller’s knowledge, no Franchisee is currently in material default under the terms of its Franchise Agreement, which in the ordinary course of business would warrant the issuance of a formal notice of default by the Company to the Franchisee nor has the Company knowingly waived in writing any material default of any Franchisee. As used in the previous sentence, “material default” means any material act or material omission by a Franchisee that would entitle the Company to terminate the Franchise Agreement or to notify the Franchisee of the Company’s intention to terminate the Franchise Agreement if the Franchisee does not cure such material breach or material default within the applicable cure period.

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Except as set forth in the Disclosure Letter, since July 1, 2012, to Seller’s knowledge, all former Franchisees are in material compliance with their obligations that survive the termination or other cessation of their Franchise Agreements, except to the extent permitted by any mutual termination agreement or settlement agreement.

To Seller’s knowledge, since July 1, 2012, no event has occurred that, with or without notice or lapse of time, would constitute a material breach or material default by the Company under a Franchise Agreement, nor is the Company in receipt of a written communication from a Franchisee alleging that the Company is in material default under, or in material breach of, any Franchise Agreement, which the Company believes presents a high risk of resulting in the issuance of a formal notice of default by such Franchisee.

The Company’s AIM Funds are held by the Company in separate bank account. Since July 1, 2012, except as set forth in the Disclosure Letter, (i) the Company has not used any money in the AIM Funds except as permitted by the Franchise Agreements, by any Historic FDDs or by Law and (ii) the Company has not been in receipt of any written claim or demand for damages from or on behalf of a Franchisee with respect to the expenditure or management of any AIM funds collected by the Company from a Franchisee.

Except as set forth in the Disclosure Letter, to the Seller’s knowledge, no Franchisee is currently in breach of any payment due under its lease of the premises of the franchised Business.

Except as set forth in the Franchise Agreements or as set forth in the Disclosure Letter, there are no contractual limitations prohibiting the Company or its Affiliates from developing or operating any ALPHAGRAPHICS® Businesses, or selling franchises or licensing others to do so in any geographic area or location.

Since July 1, 2012, the Company has properly accounted for all Universal Service Credits earned, but not yet used, by any Franchisee.

During the past 12 months, all discounts, rebates and other concessions paid to the Company from Suppliers whose goods or services are used by Franchisees have been accurately and appropriately credited to each Franchisee using such good or service. Except as set forth in the Disclosure Letter, the Company does not participate in any purchasing or distribution cooperative.

Seller has made available to Purchaser all organizational and operational documents and material correspondence between the Company and any franchisee advisory boards/councils during the past 12 months, as well as the current membership and officers/executives of any such boards/councils, and a list of any current advertising, marketing or cooperative funds or accounts to which Franchisees contribute, and financial statements for said funds.

Except only for the Network Leadership Council, which is an advisory council consisting of Franchisees and members of Company management, to Seller’s knowledge, except as set forth in the Disclosure Letter, there is no union, council, organization or consortium representing or purporting to represent the Franchisees or any of them in their relationship with the Company.

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Reserved.

To Seller’s knowledge, except as set forth in the Disclosure Letter, there are currently no area or regional representatives, development agents or regional directors, other than employees of the Company, that currently provide any material support services to Franchisees on behalf of the Company.

Except as granted in the Franchise Agreements, the Company has not entered into any agreement, written or oral, giving any Third Party or any Franchisee any right of first refusal, right of first offer, exclusivity, or similar right or option to operate the Retail Service using the ALPHAGRAPHICS® trademarks at any U.S. location or in any U.S. geographic territory.

Except as set forth in the Disclosure Letter, no Franchise Agreement imposes on the Company an obligation to guarantee the Franchisee’s lease obligations, financing obligations to a Third Party unaffiliated with the Franchisee, or other material obligations to a Third Party unaffiliated with the Franchisee. Seller, the Company and their Affiliates are not (i) leasing or subleasing any real or personal property to any Franchisee; and (ii) have no currently outstanding offer regarding, or are currently a party to, any financing arrangement with any Third Party in which Seller, the Company or their Affiliates: (w) provide financing to a Franchisee (provided that uncollected accounts receivable does not constitute financing for purposes of this Section 17.x.(ii)(w)); (x) guarantee a note, lease or other obligation of a Franchisee; (y) receive a benefit from a lender in exchange for financing a franchise purchase; or (z) have a written arrangement for a lender to offer financing to a Franchisee.

Except as set forth in the Disclosure Letter, there is no action pending or, to the knowledge of the Seller, threatened against the Company, Seller or their Affiliates related to any Franchise of the Company or the Company’s ALPHAGRAPHICS® franchise system.

18.

Franchise Brokers

All agreements with Franchise Brokers are in writing and are identified on the Disclosure Letter.

All payments due and payable by the Company to all Franchise Brokers have been paid or are properly accounted for in the Accounts.

Except as set forth in the Disclosure Letter, no person other than a Franchise Broker has, or will have, any claim to a commission or other payment from the Company as a result of any action to solicit or engage a Franchisee prior to Closing.

19.

Master Franchisees

As set forth in the Disclosure Letter, seller has provided Purchaser with true and complete copies of all Master Franchise Agreements, and there are no further contracts, agreements or arrangements, whether written or oral, for the distribution of the Retail Service, the performance of the Business or the use of any of the Company’s Intellectual Property outside the United States.

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Page 20

Except as set forth in the Disclosure Letter, the Company’s former Master Franchise Agreements in Russia and Mexico have been properly terminated in accordance with their terms, and the Company has and, to the knowledge of the Seller, will have, no further liability or obligation arising under either of those Master Franchise Agreements.

Neither the Company nor the Seller, Seller’s Owner or any member of the Ownership Group (or any director, officer or management employee of any of them) owns, controls or is employed by any Master Franchisee.

All Master Franchise agreements are between the Company and Third Parties, and the Company maintains no subsidiaries outside the United States through which it engages Master Franchisees.

Reserved.

Except as set forth in the Disclosure Letter, no Master Franchisee has, during the past 12 months, ceased or indicated an intention to cease doing business with the Company nor, to Seller’s knowledge, is likely to do so as a result of this Agreement.

To Seller’s knowledge, since July 1, 2012 no Master Franchisee or employee or franchisee of any Master Franchisee has been classified as an employee of the Company.

To Seller’s knowledge, no Master Franchisee will be entitled to terminate, suspend or vary the terms of any contract with the Company as a result of this Agreement or the transactions contemplated hereby, and no Master Franchisee is required to acknowledge or consent to the change of control of the Company.

To Seller’s knowledge, no Master Franchisee is currently in material default under the terms of its Master Franchise Agreement. As used in the previous sentence, “material default” means any act or omission by the Franchisee that would entitle the Company to terminate the Master Franchise Agreement or to notify the Master Franchisee of the Company’s intention to terminate the Master Franchise Agreement if the Master Franchisee does not cure such breach or default within the applicable cure period.

To Seller’s knowledge, since July 1, 2012, the “gross sales,” and other information provided by each Master Franchisee to the Company is correct.

Except as set forth in the Disclosure Letter or properly recorded in the Accounts, to Seller’s knowledge, the Company has no obligation (financial or otherwise) to any Master Franchisee except as set forth in the relevant Master Franchise Agreement, or as otherwise required by applicable Law.

To Seller’s knowledge, the Company (i) is not currently in default with respect to any payment obligation currently owed to a Master Franchise and (ii) since July 1, 2012 no Master Franchisee has notified the Company in writing that it believes the Company has breached or is in default of its obligations under any Master Franchise Agreement.

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Except as set forth in the Disclosure Letter, to Seller’s knowledge, all agreements between any Master Franchisee and any third party (including franchisees of the Master Franchisee) are in full force and effect, and there is no material breach or material default by any party thereunder.

To Seller’s knowledge, there is no threatened or pending investigation by any Governmental Body concerning unlawful business practices, operations or policies of any Master Franchisee.

To Seller’s knowledge, no Master Franchisee (i) currently has any criminal record, or (ii) is currently identified on any list maintained by the U.S. Treasury Department’s Office of Foreign Assets Control as being subject to any restriction, sanction or prohibition by the United States government.

To Seller’s knowledge, since July 1, 2012, no Master Franchisee nor any officer, director, owner or employee of any Master Franchisee has made, or has offered to make, any gift, bribe, inducement, kick-back or other improper payment to or on behalf of any person, including anyone representing, or claiming to represent, any Government Authority, in connection with the Business.

Except for the Franchise Agreements, the Master Franchise Agreements, and as set forth in the Disclosure Letter, there is no written agreement by the Company giving any Third Party any currently effective right of first refusal, right of first offer, or similar right or option to operate an ALPHAGRAPHICS® franchised Business anywhere in the world.

20.

Material Suppliers

All agreements with the Material Suppliers are in writing. Accurate, complete and current agreements with Material Suppliers have been included in the Data Room.

All agreements with Material Suppliers are in full force and effect, and neither the Company, nor, to the Seller’s knowledge, any Material Supplier has defaulted in its obligations under any such agreement. The Company has received no written notice claiming that the Company has breached or defaulted in its obligations under any Material Supplier agreement.

No Material Supplier will be entitled to terminate, suspend or vary the terms of any contract with the Company as a result of this Agreement or the transactions contemplated hereby, and no Material Supplier is required to acknowledge or consent to the change of control of the Company.

All agreements with Material Suppliers have been concluded on an arm’s-length basis, and there are no rebates, refunds, discounts or other concessions payable to or by the Company or the Material Supplier or otherwise in connection with the relevant agreement that are not clearly set forth in the relevant agreement and properly accounted for in the Accounts.

None of the Seller, the Seller’s Owner or any member of the Ownership Group, or any of their directors, officers or employees, owns or is employed by a Material Supplier.

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21.

Guarantees and Indemnities

Except as set forth in the Disclosure Letter, there is no outstanding guarantee, indemnity, grant of suretyship or security given by the Company on behalf of any person, including the Seller, the Seller’s Owner, or any member of the Ownership Group, or any director, officer or employee of any of them.

Except as set forth in the Disclosure Letter, none of the Company’s Assets has been pledged to or used by the Seller, the Seller’s Owner, or any member of the Ownership Group as collateral security for such person’s obligations, whether for the repayment of borrowed money or otherwise.

22.

Borrowings and Bank Facilities

Aside from overdraft facilities associated with the Company’s operating accounts, trade debt payable in the ordinary course and capital leases reflected in the Accounts, the Company has no debt.

The Company has not exceeded the amount of its overdraft facility, nor is it in breach of the terms of any other loan or credit facility, and the total amount borrowed by the Company from any source whatever does not exceed any limitation on its borrowing contained in the Company’s constitutive documents, loan agreements, or any other agreement to which the Company is a party.

Except as set forth in the Disclosure Letter, full and accurate details of all overdraft, loan and other credit facilities of the Company have been provided by the Seller to the Purchaser, and no amount of such overdraft, loan or other credit facility is outstanding other than what is in the ordinary course of business consistent with past practice, and neither the Seller nor the Company has done anything or omitted to do anything whereby the continuance of any such facilities in full force and effect might be affected or prejudiced.

Without limiting the generality of Item 20.c above, as of and after Closing, the Company will have no arrangement with the Seller, the Seller’s Owner or any member of the Ownership Group for borrowing money or extending credit.

23.

Trading and Contractual Arrangements

Except as set forth in the Disclosure Letter, the Company has not granted credit terms to any Franchisee, Master Franchisee or any other person exceeding 30 days, other than in the ordinary course of business consistent with past practice.

Except as set forth in the Disclosure Letter, to Seller’s knowledge, no debtor of the Company is in default of any payment terms, or any other facts or circumstances existing at the date of this Agreement which might give rise to any such default, except for what is ordinary course of business consistent with past practice.

The Company is not party to any agreement, except as set forth in the Disclosure Letter, that contains:

Any partnership or joint venture arrangement;

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Page 23

ii.

Any arrangement that may be terminated by another party or under which the amounts payable by Company under such contract increase as a result of a change in the control, management or shareholders of the Company;

iii.

Any non-competition, exclusivity or non-solicitation covenant, or any other limitation on the ability to engage in any business or to pursue any customer or to purchase from any supplier in any jurisdiction (except only for the “protected area” terms of the Franchise Agreements and Master Franchise Agreements);

iv.

Any commitment to continue in any line of business, or to maintain a business in a particular location, or not to alter a business practice;

Any arrangement or agreement entered into outside the ordinary course of business;

vi.

Any arrangement or agreement that is known to Seller to be suffering from any invalidity or in respect of which there are grounds for termination, rescission, avoidance or repudiation by any other party which may have a material adverse impact on the Company or the Business;

vii.

Any arrangement that involves payment by reference to fluctuations in any interest rate, index of retail prices or other index, or the rate of the exchange of currencies (except as may be set forth in the Franchise Agreements or the Master Franchise Agreements);

viii.

Any agreement granting any person a right to acquire any business or material asset of the Company (other than goods and services sold in the ordinary course of business).

Except as set forth in the Disclosure Letter , no offer, tender or the like has been given or made by the Company on or before the date of this Agreement and remains outstanding that is capable of giving rise to a contract merely by the unilateral act of another person.

Except as set forth in the Disclosure Letter, there is no agreement between the Company and the Seller or any member of the Ownership Group or any of their officers, directors or employees (or any parent, spouse or child of any of them) for the provision of goods, services or otherwise that will not be terminated at Closing without further liability by the Company.

24.

Business since the Audited Accounts Date

Since the Audited Accounts Date and except as set forth in the Disclosure Letter:

The Company has conducted the Business in the ordinary and usual course so as to maintain the same going concern without any interruption or alteration in the nature, scope or manner of the Business or the Assets.

ii.

Except as set out in the Management Accounts or as contemplated by the Excess Cash Distribution, the Company has not declared, resolved to declare, or paid any dividend, distribution or other payment from the Company’s capital to the Seller, the Seller’s Owner or any member of the Ownership Group.

SCHEDULE 3

Page 24

iii.

The Company has not entered into guarantee, indemnity or suretyship to pay funds or otherwise perform in the event of default in payment or performance by any person.

iv.

The Company has not granted any power of attorney, proxy or similar authority to carry out any transaction to any individual (other than an officer or Director of the Company) or entity.

No broker, finder, intermediary or other third party has any claim for payment as a result of this Agreement or the transactions contemplated hereby for which the Purchaser or the Company may become liable.

vi.

There has been no material deterioration in the financial condition or performance of the Company, and, to Seller’s knowledge, no facts or circumstances exist which might reasonably be expected to cause such a deterioration.

vii.

No loan has been made by the Company to any Director, officer or Employee or to any Third Party.

viii.

No acquisition, disposition or grant of any interest in any real property involved in the Business has occurred.

ix.

There has been no refinancing of the Company, nor any application for the admission of any shares of the Company to any stock or investment exchange.

No changes have been made to any accounting policy, method or practice.

xi.

No event or circumstance that would have constituted a Material Adverse Change has occurred.

xii.

The Company has not committed or agreed to do any of the foregoing.

25.

Relationship between the Company and the Seller, Seller’s Owner and other members of the Ownership Group

As of Closing, the Company will have properly terminated all of its contracts and other arrangements with Seller, the Seller’s Owner, all other members of the Ownership Group, BCP and any their Affiliates, and none of them has, or will come to have, any claim against the Company, the Assets or the Business for the payment of money or the performance of any undertaking after Closing.

26.

Brokers

There are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Company for which the Purchaser or its Affiliates would be liable or to which the Company is bound.

SCHEDULE 3

Page 25

27.

Disclosure

Except for the representations and warranties expressly set forth in this Schedule 3 (as modified by the Disclosure Letter and the Current FDDs filed by the Company), neither Seller nor any member of the Ownership Group, nor any of their respective directors, officers, employees, Affiliates, shareholders, partners, members, managers or representatives (or any Affiliate of any of the foregoing), or any other person or entity on behalf of any of the foregoing makes or has made any representation or warranty, either express or implied (or written or oral) upon which the Purchaser is relying or has relied. Without limiting the generality of the foregoing, neither Seller nor any member of the Ownership Group, nor any of their respective directors, officers, employees, Affiliates, shareholders, partners, members, managers or representatives (or any Affiliate of any of the foregoing) shall have or be subject to any liability or obligation to the Purchaser or any of its Affiliates (or any Purchaser Indemnified Persons) or any other person or entity resulting from the distribution to or use by any of them of, any of the Due Diligence provided or made available in the Data Room to the Purchaser or any of its directors, officers, employees, Affiliates, shareholders, partners, members, managers or representatives (or any Affiliate of any of the foregoing) or any other person or entity (including any information, documents or material made available in the Data Room, management presentations or in any other form in expectation of or in any way relating to the Transaction) at any time (whether prior to, on or after the execution of the Agreement); provided, however, that this limitation shall not otherwise bar an otherwise valid claim by a Purchaser Indemnified Person for indemnification under Section 9 of this Agreement.

SCHEDULE 3
Page 26

Exhibit 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into effective as of August 16, 2017, by and between Western Capital Resources, Inc., a Delaware corporation (“Company”), and Angel Donchev, a resident of the District of Columbia (“Employee”), and amends and restates an earlier Employment Agreement between the parties dated as of February 9, 2015 (the “Original Agreement”).

BACKGROUND

A. The Company desires to employ Employee to assist the Company by rendering services on the terms and conditions provided in this Agreement, and Employee desires to render services for the Company as provided herein.

B. The success of the Company depends, to a significant extent, upon the Company maintaining the secrecy of its proprietary information.

C. While employed by the Company, Employee will be entrusted with certain of its most sensitive information. Employee recognizes that it is important that the Company protect its rights with respect to its confidential information. For the Company’s legitimate protection, Employee is willing to reiterate, as set forth in the Original Agreement, several promises to the Company that reasonably restrict Employee’s activities after Employee is no longer employed by the Company, and Employee acknowledges and agrees that Employee earlier received in connection with entering into the Original Agreement, and is now receiving by virtue of his appointment to the office of Chief Financial Officer pursuant to this Agreement, adequate and valuable consideration for making those promises and entering into this Agreement.

D. Prior to entering into this Agreement, Employee has had sufficient time to consider the Company’s offer and its terms, including the restrictive covenants contained in this Agreement. Employee enters into this Agreement voluntarily, without coercion or duress. Employee has had the opportunity to consult with legal counsel of Employee’s choice prior to entering into this Agreement.

NOW, THEREFORE, in consideration of the above premises and the terms and conditions below, the Company and Employee understand and agree as follows:

AGREEMENT

1. Employment .

a. Term . The Company hereby employs Employee, and Employee hereby accepts such employment, for a term commencing as of August 15, 2017 and continuing thereafter through the close of business on April 30, 2019, unless sooner terminated in accordance with the provisions of Section 5 (the “Term”).

b. Position and Duties . Employee shall serve as the Chief Investment Officer and Chief Financial Officer of the Company, and Employee’s primary duties and responsibilities in such capacity shall include (i) sourcing deals, leading due-diligence investigations, performing financial evaluations and models, integrating acquired businesses, assisting with any required financing, strategic planning and modeling, assisting in the sale of Company subsidiaries or parts thereof, provide strategic direction and analysis for the Company and its subsidiaries as needed and (ii) review the 10K, 10Q filings and various public disclosures of the Company and ensure they are accurate and filed in a timely manner, oversee the Company’s finance department, ensure that consolidated monthly financial statements are accurate and published in a timely manner, oversee the Company’s outside SOX consultants and the internal audit work and SOX testing performed by the Company’s controller, perform various investor relations functions for the Company, manage the Company’s banking relationship and the required reporting associated with it, and (iii) such other duties as may be assigned to Employee by the Chief Executive Officer of the Company or the Board of Directors of the Company (the “Board”). The Company specifically agrees that Employees duties will not include preparation of tax-related documentation and filings, and that such documentation and filings shall be prepared and reviewed by tax experts. Employee will duly, loyally and diligently perform all the duties, responsibilities and requirements to the Company in a timely and proficient manner during Employee’s employment. The Company agrees that all subsidiary CFOs will report to employee when it comes to public company/SOX related items, or other items required for Employee to perform his duties. Employee shall be able to work remotely from anywhere, and shall not be required to relocate for the term of his employment.

c. Permitted Activities . Notwithstanding Employee’s duties and obligations described herein, the parties wish to make it clear that Employee may: (i) serve on industry, trade, civic or charitable boards or committees; as well as continue to serve on the boards of directors of Swift Spinning, Inc. and AlphaGraphics, Inc.; (ii) engage in charitable activities and community affairs; and (iii) manage his own personal investments, including but not limited to real estate, as long as none of the above such activities materially interfere with the performance of Employee’s duties and responsibilities.

2. Employee’s Compensation and Benefits .

a. Base Salary . Employee will receive a gross annualized base salary of $300,000, less applicable legally required withholdings and such other deductions as Employee voluntarily authorizes in writing. The base salary shall be payable in a manner that is consistent with the Company’s ordinary payroll practices.

b. Bonus . Employee will be eligible to receive an annual bonus with an initial target of $135,000 tied to Employee accomplishing annual goals as set by the Company’s CEO and/or Board.

c. Health Insurance . Employee and his immediate family members will be entitled to participate in the Company’s health insurance plan that the Company offers to employees on the terms and conditions governing such plan.

d. Vacation . Employee is eligible to take up to four weeks of paid vacation days in each calendar year. Any vacation time not taken by Employee during the calendar year may not be carried forward into any succeeding calendar year.

e. Expense Reimbursement . Employer shall promptly reimburse Employee for reasonable out-of-pocket expenses incurred on behalf of Employer by Employee in connection with the performance of Employee’s duties hereunder, including but not limited to monthly cellular phone bills, Internet service provider bills, printer and office supplies and business travel-related expenses. Employee shall endeavor to book flights in advance and stay in reasonably priced hotels.

f. Options Vesting Acceleration. In consideration for entering into this Agreement, the Company shall allow the accelerated vesting of any unvested options issued to Employee pursuant to the Stock Option Agreement dated February 9, 2015 by and between Employee and the Company (the “Option Agreement”). Upon the execution of this Agreement, all 65,000 shares subject to the Option Agreement shall be deemed fully vested and the initial three-year term of employment under the Original Agreement shall be deemed to have occurred for purposes of the Option Agreement.

3. Company Property . Employee understands that during Employee’s employment with the Company, Employee will be provided with, use and/or possess Company property. Company property includes but is not limited to internal memoranda, records, forms, computer programs, contacts, phone numbers, customer lists, customer data or information, and other proprietary information pertaining to the Company’s business. Upon termination of Employee’s employment or upon the written request of the Company, Employee shall promptly return all Company property to the Company in good condition. Employee agrees not to retain, download, divert or transfer in any manner any files, documents, information or other data that are the property of the Company. Employee will not retain any copies or reproductions of records, documents, data or other tangible items of Company.

4. Nondisclosure of Confidential Information .

a. Definition . For purposes of this Agreement, “Confidential Information” means any and all sensitive, confidential, proprietary and trade secret information concerning or relating to the Company, including any information which derives independent economic value from not being generally known to or readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use. Examples of Confidential Information which are not to be disclosed or used except as required by Employee’s employment with the Company or as expressly authorized in writing by the Company include, but are not limited to, the following: (i) information concerning actual or potential customers, including their identities, contact information, financial information concerning their actual or prospective business operations, identity and quantity of products or services provided by the Company, any unpublished written materials furnished by or about them to the Company, pricing information relating to products, services and materials the Company provides to customers, customer cost information, and other customer information, data, and documents; (ii) information encompassed in all proposals, marketing and sales plans, financial information, processes and methods by which products or services are provided, information relating to the cost and pricing of the Company of labor and materials provided to customers, and all methods, concepts, know-how or ideas in or related to the business of the Company; and (iii) information concerning the Company’s ownership, management, financial condition, financial operations, business activities or practices, sales activities, marketing activities or plans, research and development, pricing practices, legal matters, and strategic business plans including acquisitions. Failure to mark any of the Confidential Information as confidential will not affects its status as Confidential Information.

b. Confidential Information . Employee shall keep confidential and not disclose to anyone or use, either during or after Employee’s employment with the Company, any Confidential Information of the Company except as required by Employee’s employment with the Company or as expressly authorized in writing by the Company. The contractual obligations contained herein shall be in addition to any and all obligations of confidentiality imposed by law. The obligations of this Section shall continue in full force and effect for three years after the termination of this Agreement and the termination of Employee’s employment with the Company, except as otherwise noted in Section 17 below.

c. Exceptions . The foregoing obligations of confidentiality shall not apply to any information that is generally known outside the Company or readily ascertainable by proper means (for purposes hereof, “proper means” does not include obtaining information by means of court order or subpoena or other judicial or administrative means) or that hereafter becomes generally known outside of the Company through no fault of Employee or by the Company’s voluntary disclosure. Confidential Information is not considered to be generally known or readily ascertainable because such has been disseminated subject to an obligation to keep such information confidential.

d. Ownership and Use of Confidential Information . Employee acknowledges that the Company shall at all times be and remain the owner of all Confidential Information disclosed to and acquired by Employee during Employee’s employment with the Company. Employee acknowledges that Employee may use Confidential Information only for the limited purposes for which it was disclosed under this Agreement and Employee’s employment with the Company. Employee shall use Employee’s best efforts to preserve the confidentiality of such Confidential Information. Employee agrees not to remove from the premises of the Company or the sites at which Employee works, except as an employee of the Company in pursuit of the business of the Company or except as specifically permitted in writing by the Company, any document or object containing or reflecting Confidential Information. Employee recognizes that all such documents and objects are the sole and exclusive property of the Company and Employee shall safeguard such information and property against disclosure, theft or damage.

e. Return of Confidential Information . Upon termination of employment or at such earlier time as the Company may request in writing, Employee shall immediately return to the Company all Confidential Information and shall not retain copies of such Confidential Information.

5. Termination . Employee’s employment will terminate prior to the end of the Term in any of the following circumstances:

a. Resignation . Employee may terminate Employee’s employment upon at least 30 days’ advance written notice for any reason. In the Company’s sole discretion, the Company may relieve Employee of Employee’s duties and responsibilities any time during the notice period while continuing to provide Employee with Employee’s pay and benefits through the last day of the notice period.

b. Death . Employee’s employment will automatically terminate upon Employee’s death.

c. Disability . The Company may terminate Employee’s employment due to disability, meaning that Employee has a physical or mental impairment that substantially limits one or more major life activities and is such that Employee, even with reasonable accommodations, cannot perform the essential functions of Employee’s position.

d. Without Cause . The Company may terminate Employee’s employment without “Cause,” defined below, upon at least 30 days’ advance written notice.

e. Cause . The Company may terminate Employee’s employment immediately for “Cause” at any time during the Term. For purposes of this Agreement, the term “Cause” shall mean any of the following:

Employee’s theft, dishonesty or fraud which has, or could reasonably be expected to have, an adverse effect on the Company, its business, or interests as determined in the Company’s sole discretion;

Employee embezzles or misappropriates assets of the Company;

Employee fails to follow the reasonable and lawful instructions of the Chief Executive Officer of the Company or the Board; provided, however, the Company will not have Cause if Employee has cured, to the Company’s satisfaction, such failure(s) within 30 days after Employee shall have received written notice from the Company of the particulars of such failure(s);

The Company has a reasonable belief Employee engaged in some form of conduct prohibited by Company policy or the law;

Employee fails to devote the working time, attention, skill and efforts to the business of the Company as required by Section 1 of this Agreement in a manner acceptable to the Company; provided, however, the Company will not have Cause if Employee has cured, to the Company’s satisfaction, such failure within 30 days after Employee shall have received written notice from the Company of the particulars of such failure;

Employee breaches a fiduciary duty or responsibility to the Company after 30 days’ advance written notice; provided, however, the Company will not have Cause if Employee has cured, to the Company’s satisfaction, such breach within 30 days after Employee shall have received written notice from the Company of the particulars of such breach; or

The serious misconduct or gross negligence of Employee that results or could reasonably be expected to result in damage to the Company, its business, or interests.

6. Payments Upon Termination . Following any termination of Employee’s employment under this Agreement, all compensation and benefits provided to Employee under this Agreement shall cease to accrue as of the date of such termination, with Employee entitled to all base salary and benefits hereunder accrued through the effective date of termination, except as set forth in the paragraphs below.

f. In the case of a termination arising under Section 5(b) from Employee’s death or under Section 5(c) from Employee’s incapacity or disability, the Company shall, for a period of one month following death, incapacity or disability, pay to Employee’s representative or estate an amount equal to Employee’s regular monthly installment of base salary and continue the benefit programs in which Employee was participating at the time of death, incapacity or disability, including paying all premiums for coverage for dependent family members.

g. In the case of a termination arising under Section 5(d) from the Company’s termination of Employee without Cause, then, subject in all cases to Employee’s execution and delivery to the Company of a release and waiver of claims in customary and negotiated form reasonably acceptable to the Company, the Company shall: (i) pay Employee severance pay in the form of continuation of Employee’s then-current base salary, less standard deductions and withholdings, for a period of 12 months from the effective date of Employee’s termination of employment with Company, with such payments to be made at the same time as the base salary otherwise would have been payable had Employee not been terminated; and (ii) if Employee elects continued coverage under COBRA, reimburse him for his health insurance premiums (for both himself and his family) for a period of 12 months from the effective date of Employee’s termination of employment with Company, but only if and to the extent that the Company was paying such premiums at the time of termination.

h. In the case of a termination arising under Section 5(e) from the Company’s termination with Cause or under Section 5(a) from the resignation of the Employee, then (i) no severance or continued benefits shall be due to Employee and (ii), if there are any damages to the Company arising by virtue of the events, actions or omissions constituting Cause, then the Company shall be entitled to offset the amount of any such damages against any amounts owed to Employee under this Section.

7. Indemnity . The Company will indemnify, defend and hold harmless the Employee, to the maximum extent permitted by applicable law, against all costs, charges and expenses incurred or sustained by Employee in connection with any action, suit or proceeding (including reasonable attorneys’ fees) to which Employee may be made a party by reason of Employee’s employment with Company or of any subsidiary or affiliate of the Company (other than with respect to a claim brought against Employee by the Company itself). Employee shall also be covered under a directors and officers liability insurance policy paid for by the Company to the extent that the Company maintains such a liability insurance policy now or in the future. In addition, the Company shall provide Side A coverage to Employee with a limit of no less than $2 million.

8. Notices . All notices or other communications hereunder will be in writing and will be deemed given on (i) the day given in person, (ii) the next business day if sent by nationally recognized overnight delivery service to the party at the address set forth below or to such other addresses as will be specified by notice to the other party hereunder, or (iii) the next business day if sent by email or facsimile transmission with electronic confirmation obtained:

If to the Company:

John Quandahl

Chief Executive Officer

Western Capital Resources, Inc.

11550 I Street, Suite 150

Omaha, NE 68137

Telephone Number: (402) 551-8888

Fax Number: (402) 733-8545

Email: johnq@wcrimail.com

If to Employee:

Angel Donchev

2410 17th Street NW, Apartment 308

Washington, D.C. 20009

Telephone Number: (202) 531-2021

Email: angel@donchev.com

9. Reasonableness of Restrictions . Employee agrees that the restrictions set forth in this Agreement are reasonable and do not unduly restrict Employee’s post-employment activities.

10. Employee’s Representations . Employee hereby represents and certifies that Employee is not subject to any other agreement or restrictive covenant that Employee violates by entering into employment with the Company. Further, Employee represents that no conflict of interest or breach of Employee’s fiduciary duties will result by entering into employment with and performing duties for the Company. Employee further agrees and certifies that Employee will not use or disclose to the Company any confidential, proprietary or trade secret information belonging to another individual or entity which may not properly be used or disclosed by Employee to the Company. Notwithstanding the above, the Company acknowledges that Employee was previously an employee of Blackstreet Capital Management, LLC (“BCM”) and is party to various agreements with BCM and its affiliates. Employee’s employment with BCM terminated on February 8, 2015, but notwithstanding that termination any then-existing agreements related to investments and carried interest in BCM, its affiliated funds, their general partners, and/or operating companies remained, and shall be permitted to remain, in place. The Company also acknowledges that Employee is a shareholder of Ladary LLC, an entity which currently leases two properties to the Company or its subsidiaries.

11. Remedies . The Company and Employee agree and acknowledge that a violation of this Agreement will cause irreparable harm and damage to the Company which may not be compensated by the receipt of money damages. Thus, in addition to any other relief afforded by law, including damages sustained by a breach of this Agreement and without any necessity of proof of actual damage, the Company will have the right to enforce this Agreement by specific remedies, which will include, among other things, temporary and permanent injunctions to stop the breach, threatened breach, or anticipated breach of this Agreement, it being the understanding of the parties that both damages and injunctions will be proper modes of relief and are not to be considered as alternative remedies. With regard to any proceeding filed or brought by any of the parties against another party, the “prevailing party,” as defined below, shall be entitled to recover all of its reasonable costs and expenses incurred in connection with such dispute, including expenses, court costs, witness fees and legal and accounting fees. The term “prevailing party” means that party whose position is substantially upheld in a final and non-appealable judgment rendered in such proceeding.

12. Entire Agreement . This is the entire agreement between the parties with respect to the matters addressed herein, and supersedes and replaces the Original Agreement (except as noted in the final sentence of this Section). There are no other agreements, written or verbal, between the parties concerning these matters, except the Option Agreement which shall remain in place and the provisions in item 2(f) of this Agreement shall override any conflicting provisions in the Option Agreement.

13. Amendments . This Agreement may be amended or supplemented only in writing and signed by both the Employee and by a duly authorized representative of the Company.

14. Governing Law and Venue . The validity, enforceability, construction and interpretation of this Agreement shall be governed by the laws of the State of Nebraska without regard to its conflicts-of-law principles. Any dispute arising out of or related to this Agreement, or any breach or alleged breach hereof, shall be exclusively decided by a state or federal court in the State of Nebraska. Employee irrevocably waives Employee’s right, if any, to have any disputes between Employee and the Company arising out of or related to this Agreement decided in any jurisdiction or venue other than a court in the State of Nebraska, Douglas County. Employee hereby (a) waives any objection that Employee might have now or hereafter to the foregoing jurisdiction and venue of any such litigation, action or proceeding, (b) irrevocably submits to the exclusive jurisdiction of any such court set forth above in any such litigation, action or proceeding, and (c) waives any claim or defense of inconvenient forum.

15. Blue Pencil Doctrine . In the event that any one or more of the provisions of this Agreement or any application thereof, shall be found to be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions and any application thereof, shall not in any way be affected or impaired thereby. To the extent any provision of this Agreement is judicially determined to be unenforceable, a court of competent jurisdiction may reform any such provision to make it enforceable. The provisions of this Agreement shall, where possible, be interpreted so as to sustain their legality and enforceability.

16. Successors and Assigns . The Company may assign this Agreement to, and this Agreement will bind and inure to the benefit of, any parent, subsidiary, affiliate or successor of the Company. Employee will execute any agreement necessary or appropriate for this Agreement to be assigned to the assignee. This Agreement will not be assignable by Employee.

17. Survival of Provisions . The provisions of this Agreement relating to Employee’s confidentiality obligations, set forth in Sections 4 and 11, will survive the termination of this Agreement and/or Employee’s employment with the Company and will remain in full force and effect for three years thereafter; provided, however, that the obligations of Employee with respect to any trade secrets shall survive any termination of this Agreement and apply thereafter until such trade secrets shall no longer constitute “trade secrets” under applicable law.

18. Counterparts; Delivery . This Agreement may be executed in any number of counterparts, and each such counterpart hereof will be deemed to be an original instrument, and all such counterparts together will constitute but one agreement. Valid and binding signatures to this Agreement may be delivered by electronic transmission, such as facsimile and .PDF.

19. No Waiver . No term or condition of this Agreement will be deemed to have been waived nor shall there be any estoppel to enforce any provision hereof, except by a written instrument executed by the party charged with waiver or estoppel. A party’s delay, waiver or failure to enforce any of the terms of this Agreement or any similar agreement in one instance shall not constitute a waiver of its rights hereunder with respect to other violations of this or any other agreement.

19. Definition . For purposes of Section 3 and 4 of this Agreement, the capitalized term “Company” shall include Western Capital Resources, Inc. together with all of its current and future direct and indirect subsidiary entities.

* * * * * * *

IN WITNESS WHEREOF, the parties have executed this Amended and Restated Employment Agreement on the date first stated above.

ANGEL DONCHEV	WESTERN CAPITAL RESOURCES, INC.

/s/ Angel Donchev	By:	/s/ John Quandahl
		John Quandahl
		Chief Executive Officer

Exhibit 10.2

SECOND AMENDED AND RESTATED

MANAGEMENT AND ADVISORY AGREEMENT

This SECOND AMENDED AND RESTATED MANAGEMENT AND ADVISORY AGREEMENT (the “ Agreement ”), dated as of November 1, 2017, is by and between Western Capital Resources, Inc., a Delaware corporation (the “ Company ”), and Blackstreet Capital Management, LLC, a Delaware limited liability company (“ BCM ”).

WHEREAS, the Company and BCM are parties to that certain Amended and Restated Management and Advisory Agreement, dated as of June 21, 2012, as amended by that certain First Amendment to Amended and Restated Management and Advisory Agreement, dated as of October 1, 2014, and as amended that certain Second Amendment to Amended and Restated Management and Advisory Agreement, dated as of July 1, 2015 (collectively, the “ Original Agreement ”) pursuant to which, among other things, the Company retained BCM to provide certain management and advisory services to the Company; and

WHEREAS, the parties desire to amend the Original Agreement to, among other things, make certain clarifications with respect to the payment of fees; and

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Management Services. During the term of this Agreement (the “ Term ”), BCM hereby agrees:

(a)

to provide the Company with financial, managerial, strategic and operational advice in connection with its day-to-day operations, including, without limitation:

(i)

advice with respect to the investment of funds and cash management;

(ii)

advice with respect to the development and implementation of strategies for improving the operating, marketing and financial performance of the Company and its subsidiaries;

(iii)

advice with regard to growth of new stores, including but not limited to arranging acquisition and financing of such growth;

(iv)

assistance with support for various corporate functions of the Company as well as administrative support in light of the Company’s reduced staffing;

(v)

advice and assistance with respect to analytical services;

(vi)

advice and assistance with respect to lobbying and other regulatory and compliance needs of the Company through BCM’s political and professional contacts and associations (including without limitation membership in the CFSA and a deep and long-standing relationship with one of the largest and most prestigious lobbying firm in the country) and BCM’s knowledge base in the Company’s business areas;

(vii)

advice and assistance with respect to installing and monitor controls and procedures at the Company, which is a specialty of BCM and which the Company is in need of in light of deficiencies in internal controls being identified for the past two years; and

(viii)

advice and assistance with respect to establishing and implementing daily and weekly reporting with checks and balances, to avoid management integrity issues that have previously affected the Company and prevent such issues from happening in the future.

(b)

to allow certain of its qualified personnel to serve on the board of directors (or observe board meetings) of the Company and its subsidiaries, if any (or their equivalents).

(c)

to assist the Company in obtaining debt or equity financing.

Payment of Fees. During the Term, the Company agrees:

(a) Management Fees .

(i)

to pay to BCM (or an affiliate of BCM designated by it) annual management fees equal to the greater of (1) $674,840.28 per annum (increasing 5% per year) (the “ Base Fee ”) or (2) 5% of EBITDA (defined below) per annum (the “ EBITDA-Based Fee ”) in exchange for the services provided to the Company by BCM, as more fully described in Section 1 of this Agreement, with such fee being payable by the Company in accordance with Section 2(a)(i)(A) by ACH or wire transfer of immediately available funds. As used herein, “ EBITDA ” shall mean the Company’s net income plus net interest expense plus taxes, depreciation and amortization plus any fees payable hereunder plus any fees payable to any member of the Company’s board of directors and any fees payable to any member of the Company’s subsidiaries’ board of directors plus any one-time and/or non-recurring expenses and any non-cash items.

(A)

Payment of the fees set forth in Section 2(a)(i) above shall be made as follows: During the period commencing January 1, 2017 and thereafter, for each calendar year, BCM shall invoice (and the Company shall pay) (1) the Monthly Base Fee prior to each month, and (2) at the end of each calendar year (and once the financial results for such period are available), the amount, if any, by which the EBITDA-Based Fee exceeds the Base Fee for such calendar year.

(ii)

to pay BCM, in connection with the closing of any debt or equity financing from any third party, a fee in an amount equal to two percent (2%) of the total amount of funds committed in such financing. Such fee shall be payable directly to BCM from the proceeds of the financing.

(iii)

to pay BCM, in connection with referring any add on acquisitions to the Company and performing due diligence and turnaround services in connection with such acquisitions, a fee in the amount of $400,000 at the closing of such acquisitions and to subsequently increase management fees paid to BCM in Section 2(a) by $60,000 per annum for each add on acquisition in exchange for the services provided to the Company and any add on acquisitions unless such fees are reduced or waived in their entirety by BCM in its sole discretion.

3. Term of Agreement. This Agreement shall continue in full force and effect, until the termination by mutual consent of the parties. Upon any termination, the Company shall be required to pay a termination fee to BCM in an amount equal to the result of (a) the total fees payable pursuant to Section 2(a)(i)(A) above plus the amount, if any, by which the EBITDA Based Fee exceeds the Base Fee for the twelve (12) month period immediately preceding termination multiplied by (b) three (3) in order to compensate BCM for the fixed costs required to set up and maintain this Agreement. For example, based on a Base Fee of $674,840.28, the termination fee would be $2,024,520.84. This termination fee would increase if the EBITDA Based Fee exceeds the Base Fee for the twelve (12) month period immediately preceding termination. The termination fee shall be payable to BCM within two (2) business days of such mutual consent to terminate this Agreement. The obligations of the Company under Section 4 below shall survive any such termination.

4. Waiver of Fees. Notwithstanding the provisions of Paragraphs 2 and 3 of this Agreement, to the extent that the termination of the Agreement occurs in conjunction with a transaction that involves the acquisition, disposition or other transfer of securities, BCM may in its sole and absolute discretion waive such fees if it determines that the receipt of such fees may be prohibited by applicable laws or regulations, including without limitation the Securities Exchange Act of 1934.

5. Expenses; Indemnity.

5.1 Expenses. The Company agrees to pay on demand all expenses incurred by BCM and/or any of its affiliates in connection with this Agreement and the provision of services hereunder, including but not limited to: (i) the fees and disbursements of (a) Manatt, Phelps & Phillips, LLP, or any other special counsel to BCM, (b) Todres and Company, LLP, MN Blum LLC, or any other accountant to the Company and (c) any other consultants or advisors retained by the parties in clauses (a) and (d) arising in connection with the preparation, negotiation and execution of this Agreement and any other agreement executed in connection herewith or the consummation of the transactions contemplated hereby and thereby, including, without limitation, amendments, modifications, restructurings, add on acquisitions and waivers, and exercises and preservations of rights and remedies, and (ii) the out-of-pocket expenses incurred by BCM or any of its affiliates in connection with the provision of services hereunder or the attendance at any meeting of the board of directors (or their equivalent or any committee thereof) of the Company or any of its subsidiaries, if any.

Manatt, Phelps & Phillips, LLP’s or any other legal counsel retained (each, “ Counsel ”) in connection with the provision of services on behalf the Company in its role as special counsel to BCM, may create an attorney-client relationship between such Counsel and the Company. The Company acknowledges that Manatt, Phelps & Phillips, LLP (and, to the extent applicable, any such other Counsel) has represented and continues to represent BCM on numerous matters both related and unrelated to the Company. By signing below, the Company acknowledges Manatt, Phelps & Phillips, LLP’s (and, to the extent applicable, any such other Counsel’s) representation of BCM and recognizes and expressly acknowledges that any joint representation of the Company’s interests shall not be deemed to constitute or give rise to any conflict of interest relating to any Counsel’s continued representation of BCM on matters relating to the Company, this Agreement or otherwise. If, at any time during the course of any Counsel’s representation of the Company there arises an actual or potential conflict with BCM, it is expressly agreed by the parties that (1) such Counsel may continue to represent BCM; (2) nothing stated during such Counsel’s representation of BCM and the Company shall be construed to mean that such Counsel could not continue to represent BCM; (3) any and all confidences, secrets or other privileged communications that any of the Company or BCM has communicated to such Counsel may be shared with BCM; and (4) if such information is shared with BCM, BCM retains the right to waive the confidentiality of such information, even if doing so may raise questions about compliance with applicable legal or regulatory requirements. Having been apprised of these potential conflicts and adverse consequences, the Company, by signing below confirms that it has concluded that they do not outweigh the benefits to it of such Counsel’s joint representation and each of the Company and BCM, by signing below, consent to such joint representation and acknowledge receipt of disclosure of the existence and nature of possible conflicts of interest among BCM and the Company and the possible adverse consequences of such joint representation.

5.2 Indemnity and Liability. In consideration of the execution and delivery of this Agreement by BCM, the Company hereby agrees to indemnify, exonerate and hold each of BCM, and its partners, members, shareholders, affiliates, persons for which they are acting as nominees, trustees, directors, officers, fiduciaries, employees and agents and each of the partners, members, shareholders, affiliates, trustees, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the “Indemnities”) free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation attorneys’ fees and disbursements (collectively, the “Indemnified Liabilities” ), incurred by the Indemnities or any of them as a result of, or arising out of, or relating to the execution, delivery, performance, enforcement or existence of this Agreement except for any such Indemnified Liabilities arising on account of any Indemnity’s willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. None of the Indemnities shall be liable to the Company or any of its affiliates for any act or omission suffered or taken by such Indemnity that does not constitute willful misconduct. Notwithstanding anything to the contrary herein, nothing in this Agreement shall in any way constitute a waiver or limitation of any rights that Company may have under federal or state securities laws (or ERISA, where applicable).

6. Independent Contractor. The Company and BCM agree and acknowledge that BCM shall perform services hereunder as an independent contractor, retaining control over and responsibility for its own operations and personnel. Neither BCM nor its employees shall be considered employees or agents of the Company as a result of this Agreement or the services provided hereunder.

7. Non-Assignability of Agreement. Neither party shall have the right to assign this Agreement without the consent of the other party hereto. BCM acknowledges that its services under this Agreement are unique. Accordingly, any purported assignment by BCM without the consent of the Company shall be void. Notwithstanding the foregoing, BCM may assign all or part of its rights and obligations hereunder to any affiliate of BCM which provides services similar to those called for by this Agreement, in which event BCM shall be released of all of its rights and obligations hereunder.

8. Waiver. No amendment or waiver of any term, provision or condition of this Agreement shall be effective unless in writing and executed by each of BCM and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.

9. Maryland Law, etc.

9.1 Choice of Law. This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of Maryland without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

9.2 Consent to Jurisdiction, etc. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof shall be brought and maintained exclusively in the federal and state courts of the State of Maryland, specifically in Montgomery County, MD. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in Montgomery County, in the State of Maryland for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives, to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of Maryland, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 11 is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceedings any claim that service of process made in accordance with Section 11 does not constitute good and sufficient service of process. The provisions of this Section 9.2 shall not restrict the ability of any party to enforce in any court any judgment obtained in a federal or state court of the State of Maryland.

9.3 Waiver of Jury Trial; Dispute Resolution; Attorneys’ Fees . Each party hereto waives its right to a jury trial of any claim or cause of action arising out of or based upon this Agreement. This waiver is a material inducement for both parties to enter into this Agreement. Each party has reviewed this waiver with its counsel. Any dispute under this Agreement shall be resolved by arbitration conducted in Washington, DC, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, which rules are incorporated by reference into this clause. A single arbitrator shall be chosen by mutual agreement of the parties. If the parties cannot agree on a single arbitrator, then the arbitration shall be conducted by 3 arbitrators whereby each party shall choose 1 arbitrator and those 2 arbitrators shall select a third arbitrator. The arbitration shall be conducted in a single hearing, and the arbitrator(s) shall render his/her/their decision within a reasonable time after the conclusion of the hearing. With regard to any arbitration or other proceeding filed or brought by any of the parties against another party, the Prevailing Party (defined below) shall be entitled to recover all of its reasonable costs and expenses incurred in connection with such dispute, including expenses, court costs, witness fees and legal and accounting fees. The term “Prevailing Party” means that party whose position is substantially upheld in a final judgment rendered in such proceeding. The decision of the arbitrator(s) shall be final and nonappealable. Judgment upon any decision rendered by the arbitrators may be entered by any court having jurisdiction.

10. Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof.

11. Notice. All notices, demands, and communications of any kind which any party may require or desire to serve upon any other party under this Agreement shall be in writing (including telecopier facsimile or similar writing) and shall be served upon such other party and such other party’s copied persons as specified below by personal delivery or telecopier transmission to its address or telecopier number set forth below or to such other telecopy number and address as any party shall have specified by notice to each other party or by mailing a copy thereof by certified or registered mail, or by Federal Express or any other reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party and copies persons at such addresses. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In the case of service by telecopier transmission, it shall be deemed complete on the first business day after the date of receipt of answerback or other confirmation of receipt at such telecopier number. In case of service by mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party or copied person of change of address or telecopy number shall be deemed complete only upon actual receipt by an officer or agent of such party or copied person.

If to the Company, to it at:

Western Capital Resouces, Inc.

11550 “I” Street, Suite 150

Omaha, NE 68137

Attn: Chief Executive Officer

If to BCM, to it at:

Blackstreet Capital Management, LLC

5425 Wisconsin Avenue

Suite 701

Chevy Chase, MD 20815 Telecopy: (240) 332-1333

Attn: Murry N. Gunty

with a copy to:

Manatt, Phelps & Phillips, LLP

1050 Connecticut Avenue, NW, Suite 600

Washington, DC 20036

Attn: Alan M. Noskow

Fax: (202) 637-1595

12. Counterparts, Facsimile Signature. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. This Amendment will become effective when duly executed and delivered by each party hereto. Counterpart signature pages to this Amendment may be delivered by facsimile or electronic delivery (i.e., by email of a PDF signature page) and each such counterpart signature page will constitute an original for all purposes.

13. Severability. If in any judicial or arbitral proceedings a court or arbitrator shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced. To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof shall be found to be invalid or unenforceable, such provision shall be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law.

14. Subordination Agreement. The obligations of the Company to BCM under this Agreement are subordinated to the prior payment in full of any senior debt of the Company and any subordinated debt provided by Blackstreet Capital Partners II, L.P. or its affiliates. Notwithstanding anything to the contrary contained herein, the Company may, at its option and without prior notice to BCM, defer any payment hereunder, which, absent this sentence, would be due hereunder if, for so long as and to the extent that any such payment would be in violation of the terms of any subordination agreement in place with respect to such senior or subordinated debt, and the Company shall not be deemed in default of this Agreement as a result of the deferral of any such payment pursuant to this sentence.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

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

	WESTERN CAPITAL RESOURCES, INC.

	By:	/s/ John Quandahl
	Name:	John Quandahl
	Title:	Chief Executive Officer

	BLACKSTREET CAPITAL MANAGEMENT, LLC

	By:	/s/ Murry N. Gunty
	Name:	Murry N. Gunty
	Title:	Manager

Exhibit 10.3

CONSENT AND SECOND LOAN MODIFICATION AGREEMENT

THIS CONSENT AND SECOND LOAN MODIFICATION AGREEMENT (this “Agreement”), is made and entered into as of July 18, 2017 but effective as of July 1, 2017, by and among WESTERN CAPITAL RESOURCES, INC., a Delaware corporation (the “Borrower”), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (together with the Borrower, collectively, the “Loan Parties”, and each, individually, a “Loan Party”), and FIFTH THIRD BANK, an Ohio corporation (together with its successors and assigns, the “Lender”).

RECITALS :

A. Pursuant to that certain Credit Agreement dated as of April 21, 2016 by and between Borrower and Lender (as amended, modified, restated or supplemented from time to time, the “Credit Agreement”), Lender agreed to make available to Borrower one or more extensions of credit in such amounts as may be set forth in the Credit Agreement. Unless the context otherwise requires, all terms used herein without definition shall have the respective definitions provided therefor in the Credit Agreement.

B. The Loan and Borrower’s obligations under the Credit Agreement, the Note and the other Loan Documents are secured by, among other things, the Security Documents.

C. PQH and New PQH Subsidiary have entered into an Amended and Restated Asset Purchase and Contribution Agreement, dated effective as of July 1, 2017, with the Cricket Sellers, Swathi Anne and Vishal Anne, each a resident of the state of Texas, pursuant to which (a) Cricket Sellers have assigned to Global Vibe, LLC, a Texas limited liability company (“Global”), their right to receive payment of the purchase price payable thereunder, including the portion of the purchase price payable by New PQH Subsidiary executing a promissory note to Cricket Sellers, and their right to receive equity in New PQH Subsidiary in exchange for contributing certain assets to New PQH Subsidiary and (b) Cricket Sellers have agreed to (i) sell to PQH, for $1,800,000 in cash, a 25% undivided interest in substantially all of the assets of Cricket Seller relating to the operation of 58 retail stores selling Cricket branded products and services (which undivided interest PQH will thereupon contribute to New PQH Subsidiary), (ii) sell to New PQH Subsidiary a 45% undivided interest in substantially all of the assets of Cricket Sellers relating to the operation of 58 retail stores selling Cricket branded products and services (in exchange for New PQH Subsidiary’s delivery to Global of a $789,216 promissory note), and (iii) contribute to New PQH Subsidiary the remaining 30% undivided interest in substantially all of the assets of Cricket Sellers relating to the operation of 58 retail stores selling Cricket branded products and services, in exchange for which contribution New PQH Subsidiary will issue to Global a 30% Equity Interest in New PQH Subsidiary (such purchases, sales and contribution being herein called the “Cricket Acquisition”).

D. Borrower has requested that Lender consent to the consummation by PQH and New PQH Subsidiary of the Cricket Acquisition (specifically including the issuance by New PQH Subsidiary of a 30% interest therein to Cricket Sellers or their assigns), the incurring by New PQH Subsidiary of the Indebtedness contemplated thereby and to be evidenced by the Cricket Seller Subordinated Debt, and the guaranty of such Indebtedness by PQH.

E. Borrower has also requested Lender’s waiver of the restrictions in Section 8.06(e)(i) of the Credit Agreement so that Borrower may pay its ordinary quarterly $0.025 per share dividend declared by Borrower’s Board of Directors on March 1, 2017 for the holders of record as of March 15, 2017 (and to be payable on or about March 20, 2017) (the “Quarterly Dividend”). Upon the terms and subject to the conditions contained herein, Lender has agreed to grant its consent to the transactions described in the foregoing Recital paragraph C and to accomplish the foregoing, Borrower and Lender desire to amend the Loan Documents as provided for in this Agreement.

IN CONSIDERATION of the foregoing Recitals and the agreements, representations and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

SECTION 1. Amendments to Loan Documents . Subject to the conditions hereof, the Loan Documents are hereby amended as follows:

(a) New defined terms “Cricket Acquisition”, “Cricket Purchase Agreement”, “Cricket Seller Subordinated Debt”, “Cricket Seller Subordination Agreement”, “Global” and “Second Amendment” are added to Section 1.01 of the Credit Agreement in their proper alphabetical order as follows:

“Cricket Acquisition” means the sales and contribution by Cricket Sellers to PQH and New PQH Subsidiary, and the purchase by PQH and New PQH Subsidiary of, and issuance of 30% of the Equity Interests in New PQH Subsidiary to Cricket Sellers’ assignee, Global, in exchange for, substantially all of the assets relating to Seller’s operation of 54 retail stores selling Cricket branded products and services, all as set forth in the Cricket Purchase Agreement.

“Cricket Purchase Agreement” means that certain Amended and Restated Asset Purchase and Contribution Agreement, dated effective as of July 1, 2017, among Cricket Sellers, Vishal Anne and Swathi Anne, each residents of the State of Texas, PQH and New PQH Subsidiary.

“Cricket Seller Subordinated Debt” means the Indebtedness of New PQH Subsidiary owing to Global evidenced by, and owing pursuant to, the Cricket Seller Subordinated Note, the payment of which is subordinated to the payment of the Obligations pursuant to the Cricket Seller Subordination Agreement.

“Cricket Seller Subordinated Note” means that certain $789,216 Subordinated Promissory Note, dated on or about the date of the Second Amendment, executed by New PQH Subsidiary to the order of Global, as from time to time amended, modified, supplemented or restated in accordance with the terms of the Cricket Seller Subordination Agreement.

“Cricket Seller Subordination Agreement” means the Subordination Agreement, dated on or about the date of the Second Amendment, among Lender, Global, PQH and New PQH Subsidiary, as from time to time amended, modified, supplemented or restated, subordinating the payment of Cricket Seller Subordinated Debt and the PQH guaranty thereof to the payment of the Obligations.

“Global” means Global Vibe, LLC, a Texas limited liability company.

“Second Amendment” means the Consent and Second Loan Modification Agreement, dated effective as of July 1, 2017, between Borrower, Lender and other Loan Parties.

(b) The first sentence of Section 5.12 of the Credit Agreement is amended in its entirety to read as follows:

No Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.12 (and if such Subsidiary is also an Unrestricted MSB Subsidiary, it is designated as such on such Schedule) and all of the outstanding Equity Interests in such Persons have been validly issued, are fully paid and non-assessable and are owned by a Loan Party or, in the case of New PQH Subsidiary, by PQH and Cricket Sellers, in the amounts specified on Part (a) of Schedule 5.12 free and clear of all Liens except those created under the Security Documents.

5.18 Cricket Acquisition . The Cricket Acquisition Agreement is in full force and effect as of the date of the Second Amendment and has not been amended or waived by any party thereto in any material respect. All representations and warranties of the parties to the Cricket Acquisition Agreement are, to the best of Borrower’s knowledge, true and correct in all material respects as of the date of the Second Amendment with the same effect as though made on and as of the such date. All requisite approvals by governmental authorities and regulatory bodies having jurisdiction over Borrower, PQH and New PQH Subsidiary in connection with the Cricket Acquisition have been duly obtained and no such approvals impose any conditions to the consummation of the transactions contemplated by the Cricket Acquisition Agreement or to the conduct of the business of any of Borrower, PQH or New PQH Subsidiary in the same manner as heretofore conducted. None of Borrower, PQH or New PQH Subsidiary has been notified that legal proceedings adverse to the transaction contemplated by the Cricket Acquisition Agreement are contemplated by any Person, including any governmental body or agency.

(d) Section 8.02 of the Credit Agreement is amended by (i) deleting the word “and” from the end of clause (d) thereof, (ii) deleting the period at the end of clause (e) thereof and inserting “; and” in lieu thereof; and (iii) adding a new clause (f) in its proper alphabetical sequence as follows: “(f) the Cricket Seller Subordinated Debt.”

(e) Clause (a) of Section 8.06 is amended in its entirety to read as follows:

(a) (i) each Non-MSB Subsidiary other than New PQH Subsidiary may make Restricted Payments to its shareholders or unit holders (including Borrower), any Non-MSB Subsidiaries of the Borrower that are Guarantors and any other Person that owns a direct Equity Interest in such Non-MSB Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made, and (ii) New PQH Subsidiary may make Restricted Payments to PQH and the Cricket Sellers, provided , that (x) immediately before and immediately after giving pro forma effect to such Restricted Payments to the Cricket Sellers, no Default shall have occurred and be continuing and (y) such Restricted Payments to the Cricket Sellers do not exceed (A) amounts necessary for the Cricket Sellers to pay federal and state income taxes (based on the highest rates applicable to the Cricket Sellers for the applicable year) with respect to the taxable income of New PQH Subsidiary and otherwise payable by the Cricket Sellers as a direct result of their respective ownership interests in New PQH Subsidiary and (B) additional amounts, if any, such that immediately after giving effect to the payment thereof, the Borrower and its Non-MSB Subsidiaries shall be in pro forma compliance with all of the covenants set forth in Article VII, such compliance to be determined on the basis of the financial information most recently delivered to the Lender pursuant to Section 6.01(a) or (b);

(f) Schedule 5.12 to the Credit Agreement is amended in its entirety to read as Schedule 5.12 attached to this Agreement.

SECTION 2. Consent to Cricket Acquisition and Related Matters . Subject to the conditions set forth in this Section 2 and in Section 3 of this Agreement, Lender does hereby (a) consent to the Cricket Acquisition and the related incurring by New PQH Subsidiary of the Cricket Seller Subordinated Debt and the guaranty by PQH thereof, it being understood and agreed that such consent includes Lender’s consent to New PQH Subsidiary not being a wholly-owned Subsidiary; and (b) consent (and reaffirm its earlier provided consent) to the declaration and payment of the Quarterly Dividend (such consent to be effective as of March 1, 2017), provided , that the conditions to such payment contained in clauses (ii) and (iii) of Section 8.06(e) of the Credit Agreement are satisfied, it being understood and agreed that the condition to such payment contained in clause (i) of Section 8.06(e) of the Credit Agreement is hereby waived by the Lender solely with respect to the payment of the Quarterly Dividend.

SECTION 3. Conditions to Actions Set Forth Herein . It is a condition precedent to the obligations of Lender to take the actions on its part contemplated by this Agreement that Borrower shall have delivered to Lender, in form satisfactory to Lender, the following:

(a) the executed original of this Agreement and the Cricket Seller Subordination Agreement;

(b) all documents and instruments, including UCC financing statements and certificates of title, required by law or reasonably requested by Lender to be filed, registered or recorded to create or perfect the Liens intended to be created under the Security Documents;

(c) the results of a search of the UCC (or equivalent) filings made with respect to each Cricket Seller in jurisdictions satisfactory to Lender, copies of the financing statements (or similar documents) disclosed by such search and evidence satisfactory to Lender that the Liens indicated by such financing statements (or similar documents) are permitted by Section 8.02 of the Credit Agreement or have been released;

(d) evidence that all other action that Lender may deem necessary or desirable in order to perfect the Liens created under the Security Documents has been taken (including receipt of duly executed payoff letters, UCC-3 termination statements and Waivers and consent agreements);

(e) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as Lender may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement, the other Loan Documents to be executed in connection with this Agreement and, as applicable, the Cricket Purchase Agreement;

(f) a favorable opinion of Maslon LLP, counsel to Loan Parties, addressed to Lender, as to such matters concerning Loan Parties, this Agreement and the other Loan Documents to be executed in connection therewith as Lender may reasonably request;

(g) true and correct fully-executed copies of the Cricket Acquisition Agreement, including all schedules and exhibits thereto, the Cricket Seller Subordinated Note and all documentation relating to the issuance by New PQH Subsidiary of Equity Interests to Cricket Seller;

(h) a good standing certificate of Cricket Seller issued by the Secretary of State of Texas not more than 30 days prior to the date of this Agreement;

(i) evidence satisfactory to Lender of the consummation of the Cricket Acquisition upon the terms of the Cricket Acquisition Agreement;

(j) evidence satisfactory to Lender that immediately after giving effect to the consummation of the Cricket Acquisition and the incurring of the Cricket Seller Subordinated Debt, the Borrower and its Non-MSB Subsidiaries (including New PQH Subsidiary) shall be in pro forma compliance with all of the covenants set forth in Article VII of the Credit Agreement, such compliance to be determined on the basis of the financial information most recently delivered to the Lender pursuant to Section 6.01(a) or (b) of the Credit Agreement as though the consummation of the Cricket Acquisition and the incurring of the Cricket Seller Subordinated Debt had been consummated as of the first day of the fiscal period covered thereby; and

(k) such other documents, instruments, opinions, certifications, undertakings, further assurances and other matters as Lender shall reasonably request.

SECTION 4. Consent of Guarantors . Loan Parties other than Borrower, in their capacity as “Guarantors” under their Guaranty Agreement in favor of Lender dated April 21, 2016 (as any may be amended, modified, restated or supplemented from time to time, the “Guaranty”), consent to the terms and provisions of the Agreement and the transactions contemplated thereby and confirm and agree that: (a) their obligations under the Guaranty relating to the Guaranteed Obligations (as defined therein) shall be unimpaired by the Agreement; (b) none of them have any defenses, set offs, counterclaims, discounts or charges of any kind against Lender with respect to the Guaranty; and (c) all of the terms and conditions of the Guaranty remain unaltered and in full force and effect and are hereby ratified and confirmed and apply to the Guaranteed Obligations, as modified by the Agreement.

SECTION 5. Miscellaneous .

(a) Any and all references to any Loan Document in any other Loan Document shall be deemed to refer to such Loan Document as amended by this Agreement. This Agreement is deemed incorporated into each of the Loan Documents. To the extent that any term or provision of this Agreement is or may be inconsistent with any term or provision in any Loan Document, the terms and provisions of this Agreement shall control.

(b) Each Loan Party hereby reconfirms and reaffirms all representations and warranties, agreements and covenants made by it pursuant to the terms and conditions of the Loan Documents to which it is a party after giving effect to the closing of the transactions contemplated hereby, except as such representations and warranties, agreements and covenants may have heretofore been amended, modified or waived in writing in accordance with such Loan Documents.

(c) Each Loan Party hereby represents and warrants to Lender that (i) it has the legal power and authority to execute and deliver this Agreement; (ii) its officers/members/managers have been duly authorized to execute and deliver this Agreement and all other Loan Documents to which it is a party and bind it with respect to the provisions hereof and thereof; (iii) no consent, approval, order or authorization of, or registration or filing with, any third party is required in connection with the execution, delivery and carrying out of this Agreement or, if required, has been obtained; and (iv) this Agreement constitutes its legal, valid and binding obligation, enforceable in accordance with its terms.

(d) Each Loan Party acknowledges and agrees that each and every document, instrument or agreement, if any, which at any time has secured payment of the Loan including, but not limited to, the Security Documents executed in connection therewith, hereby continue to secure prompt payment when due of the Loan.

(e) Each Loan Party represents and warrants that (i) no Event of Default exists under the Loan Documents to which it is a party, nor will any occur as a result of the execution and delivery of this Agreement or the performance or observance of any provision hereof or contemplated hereby and (ii) it presently has no claims or actions of any kind at law or in equity against Lender arising out of or in any way relating to the Loan Documents to which it is a party. Each Loan Party hereby expressly waives, releases and relinquishes any and all such defenses, setoffs, claims, counterclaims and causes of action, known or unknown, which may exist at this time.

(f) This Agreement embodies the entire agreement and understanding among the parties relating to the subject matter hereof and supersedes all prior proposals, negotiations, agreements, and understandings relating to such subject matter. Except as amended or modified hereby, the terms and provisions of the Loan Documents remain unchanged, are and shall remain in full force and effect unless and until modified or amended in writing in accordance with their terms, and are hereby ratified and confirmed. Except as expressly provided in Section 2, this Agreement shall not constitute a waiver, release or consent with respect to any provision of any Loan Document, a waiver or forbearance of any default or Event of Default under any Loan Document, or a waiver or release of any of Lender’s rights and remedies (all of which are hereby reserved).

(g) This Agreement may be signed in any number of counterpart copies and by the parties to this Agreement on separate counterparts, but all such copies shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission or electronic mail in “.pdf” format shall be effective as delivery of a manually executed counterpart. Any party so executing this Agreement by facsimile transmission or electronic mail shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission or electronic mail.

(h) This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, excluding its conflict of laws rules.

[signatures on next page]

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


WESTERN CAPITAL, INC.				J&P REAL ESTATE, LLC
By:	/s/ John Quandahl		(SEAL)
Name:		John Quandahl
Title:		CEO		By:	/s/ Steve Irlbeck		(SEAL)
				Name:		Steve Irlbeck
				Title:		Manager

RESTORERS ACQUISITION, INC.				PQH WIRELESS, INC.
				By:	/s/ John Quandahl		(SEAL)
				Name:		John Quandahl
By:	/s/ Bill Powers		(SEAL)	Title:		CEO
Name:		Bill Powers
Title:		President

GREEN COMMUNICATIONS LLC, an Arizona limited liability company				GREEN COMMUNICATIONS, LLC, a Washington limited liability company

By:	/s/ John Quandahl		(SEAL)	By:	/s/ John Quandahl		(SEAL)
Name:		John Quandahl		Name:		John Quandahl
Title:		Manager		Title:		Manager

GREEN COMMUNICATIONS, LLC, an Oregon limited liability company				GO GREEN LLC

By:	/s/ John Quandahl		(SEAL)	By:	/s/ John Quandahl		(SEAL)
Name:		John Quandahl		Name:		John Quandahl
Title:		Manager		Title:		Manager

BC ALPHA HOLDINGS II, LLC				BC ALPHA, LLC

By:	/s/ Gay Burke		(SEAL)	By:	/s/ John Quandahl		(SEAL)
Name:		Gay Burke		Name:		John Quandahl
Title:		Manager		Title:		Manager

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ALPHAGRAPHICS, INC.				J&P PARK ACQUISITIONS, INC.

By:	/s/ Tommy Auger		(SEAL)	By:	/s/ Paul Ambrose		(SEAL)
Name:		Tommy Auger		Name:		Paul Ambrose
Title:		CFO		Title:		President

PQH SOUTH LLC

By: By:	/s/ John Quandahl	(SEAL)
Name:	John Quandahl
Title:	CEO


FIFTH THIRD BANK

By:	/s/ Charles Arndt
Name:		Charles Arndt
Title:		Senior Vice President

Exhibit 10.4

CONSENT AND THIRD LOAN MODIFICATION AGREEMENT

THIS CONSENT AND THIRD LOAN MODIFICATION AGREEMENT (this “Agreement”), is made and entered into as of October 3, 2017, by and among WESTERN CAPITAL RESOURCES, INC., a Delaware corporation (the “Borrower”), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (together with the Borrower, collectively, the “Loan Parties”, and each, individually, a “Loan Party”), and FIFTH THIRD BANK, an Ohio corporation (together with its successors and assigns, the “Lender”).

RECITALS :

B. The Loan and Borrower’s obligations under the Credit Agreement, the Note and the other Loan Documents are secured by, among other things, the Security Documents.

C. The Borrower, BC Alpha Holdings II, LLC, a Delaware limited liability company (“BC Alpha Holdings”), BC Alpha LLC, a Delaware limited liability company (the “Seller”), MBE WorldWide S.p.A., an Itialian Societa per Azioni, and U.S. Business Holdings, Inc., a Delaware corporation (“Purchaser”), have negotiated a Purchase and Sale Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which, among other things, the Seller has agreed to sell to Purchaser, and the Purchaser has agreed to Purchase from the Seller, all of the Seller’s shares of capital stock of AlphaGraphics, Inc., a Delaware corporation (“AlphaGraphics”; and together with BC Alpha Holdings and Seller, the “Released Loan Parties” and each a “Released Loan Party”).

D. Borrower has requested that Lender consent to the purchase and sale of the capital stock of AlphaGraphics pursuant to the Purchase Agreement (the “Acquisition”), release its Liens in the Collateral of each Released Loan Party and release each Released Loan Party from the Security Documents to which it is a party, and Lender has agreed to such requests upon the terms and subject to the conditions contained herein.

SECTION 1. Amendments to Loan Documents .

(a) Schedule 5.12 to the Credit Agreement is amended in its entirety to read as Schedule 5.12 attached to this Agreement.

(b) Schedule 1 to the Pledge Agreement is amended in its entirety to read as Schedule 1 attached to this Agreement.

Guarantor	Guaranteed Amount
J&P Park Acquisitions, Inc.	$2,600,000
Restorers Acquisition, Inc.	$1,000,000

SECTION 2. Consent to Acquisition; Releases .

(a) Lender hereby (i) consents to the Acquisition, (ii) releases its Liens in the Collateral of each Released Loan Party, (iii) releases its Liens in the Collateral of Borrower consisting solely of the Equity Interests of BC Alpha Holdings, and (iv) releases, discharges and acquits each Released Loan Party from (1) the Security Documents to which it is a party, (2) the Guaranty Agreement, and (3) any and all liabilities or obligations under (1) or (2) other than those that are expressly stated therein to survive termination thereof.

(b) Upon the effectiveness of this Agreement, (i) Lender shall deliver to AlphaGraphics, or its designee, certificates No. C-165 and C-166 evidencing Equity Interests of AlphaGraphics, which certificates were previously delivered in physical form to Lender, (ii) the Released Loan Parties or their designees shall be authorized to file, at their sole expense, UCC3 amendments terminating all UCC1 financing statements naming Lender as secured party and any Released Loan Party as debtor, and (iii) Borrower or its designee shall be authorized to file, at its sole expense, a UCC3 amendment to the UCC1 financing statement naming Lender as secured party and Borrower as debtor releasing therefrom the Equity Interests of BC Alpha Holdings.

(c) Released Loan Parties hereby release, discharge and acquit Lender from any and all claims which any of them has had or may have against Lender in connection with the Security Documents of any kind, character or description whatsoever.

SECTION 3. Conditions to Actions Set Forth Herein . The effectiveness of this Agreement and the amendments, releases and other agreements contained herein is conditioned upon the satisfaction of the following conditions:

(a) Receipt by Lender of this Agreement duly executed by each of the Loan Parties;

(b) Receipt by the Lender of a true and correct fully-executed copy of the Purchase Agreement, including all schedules and exhibits thereto;

(d) Receipt by Lender from or on behalf of Borrower, by not later than 5:00 p.m., Cincinnati, Ohio time, on the date of this Agreement, of the sum of $4,343,474.41 via federal funds wire transfer into the account described below in payment of all outstanding principal of and accrued but unpaid interest and fees on the Acquisition Loans:

Bank:	Fifth Third Bank
ABA No.:	042000314
Account Name:	Commercial Loan Wires
Account No.:	72876175
Reference:	Western Capital Resources, Inc.
	Obligor # 0906381926
	Obligation #s 00075 and 00083
Attn:	Commercial Loan Payoffs

(e) Receipt by Lender’s counsel, Wielechowski & Fuller, PC, from or on behalf of Borrower, by not later than 5:00 p.m., Cincinnati, Ohio time, on the date of this Agreement, of the sum of $3,500 via federal funds wire transfer into the account described below in payment of Lender’s attorney’s fees and expenses incurred in connection with the preparation, negotiation and closing of this Agreement and the transactions related hereto:

Bank:	Fifth Third Bank
ABA No.:	042000314
Account Name:	Wielechowski & Fuller, PC
Account No.:	7974171717
Reference:	3009.00045

(f) Receipt by the Lender of such other documents, instruments and information executed and/or delivered by the Loan Parties as Lender shall reasonably request.

SECTION 4. Consent of Guarantors . Loan Parties (other than Borrower and the Released Loan Parties), in their capacity as “Guarantors” under their Guaranty Agreement in favor of Lender dated April 21, 2016 (as any may be amended, modified, restated or supplemented from time to time, the “Guaranty”), consent to the terms and provisions of the Agreement and the transactions contemplated hereby and confirm and agree that: (a) their obligations under the Guaranty relating to the Guaranteed Obligations (as defined therein) shall be unimpaired by the Agreement; (b) none of them have any defenses, set offs, counterclaims, discounts or charges of any kind against Lender with respect to the Guaranty; and (c) all of the terms and conditions of the Guaranty remain unaltered and in full force and effect and are hereby ratified and confirmed and apply to the Guaranteed Obligations, as modified by the Agreement.

SECTION 5. Miscellaneous .

(b) Each Loan Party other than the Released Loan Parties hereby reconfirms and reaffirms all representations and warranties, agreements and covenants made by it pursuant to the terms and conditions of the Loan Documents to which it is a party after giving effect to the closing of the transactions contemplated hereby, except as such representations and warranties, agreements and covenants may have heretofore been amended, modified or waived in writing in accordance with such Loan Documents.

(d) Each Loan Party other than the Released Loan Parties acknowledges and agrees that each and every document, instrument or agreement, if any, which at any time has secured payment of the Loan including, but not limited to, the Security Documents executed in connection therewith, hereby continue to secure prompt payment when due of the Loan.

(h) This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, excluding its conflict of laws rules.

[signatures on next page]

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


WESTERN CAPITAL, INC.				J&P REAL ESTATE, LLC
By:	/s/ John Quandahl		(SEAL)
Name:		John Quandahl
Title:		CEO		By: By:		/s/ Steve Irlbeck	(SEAL)
				Name:		Steve Irlbeck
				Title:		Manager
RESTORERS ACQUISITION, INC.				PQH WIRELESS, INC.
				By:	/s/ John Quandahl		(SEAL)
				Name:		John Quandahl
By: By:		/s/ Bill Powers	(SEAL)	Title:		CEO
Name:		Bill Powers
Title:		President


GREEN COMMUNICATIONS LLC, an Arizona limited liability company				GREEN COMMUNICATIONS, LLC, a Washington limited liability company

By:	/s/ John Quandahl		(SEAL)	By:	/s/ John Quandahl		(SEAL)
Name:		John Quandahl		Name:		John Quandahl
Title:		Manager		Title:		Manager

GREEN COMMUNICATIONS, LLC, an Oregon limited liability company				GO GREEN LLC

By:	/s/ John Quandahl		(SEAL)	By:	/s/ John Quandahl		(SEAL)
Name:		John Quandahl		Name:		John Quandahl
Title:		Manager		Title:		Manager

BC ALPHA HOLDINGS II, LLC				BC ALPHA, LLC

By:	/s/ Gay Burke		(SEAL)	By:	/s/ John Quandahl		(SEAL)
Name:		Gay Burke		Name:		John Quandahl
Title:		Manager		Title:		Manager

[signatures continued on next page]

ALPHAGRAPHICS, INC.			J&P PARK ACQUISITIONS, INC.

By: By:	/s/ Tommy Auger	(SEAL)	By: By:	/s/ Paul Ambrose	(SEAL)
Name:	Tommy Auger		Name:	Paul Ambrose
Title:	CFO		Title:	President

PQH SOUTH LLC

By: By:	/s/ John Quandahl	(SEAL)
Name:	John Quandahl
Title:	CEO


FIFTH THIRD BANK

By:	s/ Charles Arndt
Name:		Charles Arndt
Title:		Senior Vice President

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification

I, John Quandahl, Chief Executive Officer of Western Capital Resources, Inc. certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Western Capital Resources, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated: November 14, 2017

/s/ John Quandahl

JOHN QUANDAHL

Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification

I, Angel Donchev, Chief Financial Officer of Western Capital Resources, Inc., certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Western Capital Resources, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Dated: November 14, 2017

/s/ Angel Donchev

ANGEL DONCHEV

Chief Financial Officer

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Western Capital Resources, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Quandahl, Chief Executive Officer of the Company and I, Angel Donchev, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John Quandahl

John Quandahl

Chief Executive Officer

November 14, 2017

/s/ Angel Donchev

Angel Donchev

Chief Financial Officer

November 14, 2017