Item 1.01 Entry into a Material Definitive Agreement.
On October 5, 2018, I.AM INC. (“I.AM”) entered into
a management agreement (the “Management Agreement”) with 876CO LLC (the “Manager”). As previously reported,
pursuant to a securities purchase agreement, dated May 23, 2018, as amended by Amendment No. 1 thereto dated June 28, 2018, Amendment
No. 2 thereto dated July 30, 2018, Amendment No. 3 thereto, dated August 31, 2018, and Amendment No. 4 thereto, dated October 2,
2018 (as amended, the “Purchase Agreement”), among Digital Power Lending, LLC (“DPL”) (a wholly-owned subsidiary
of DPW Holdings, Inc.), I.AM, David J. Krause and Deborah J. Krause (collectively with David J. Krause, the “I.AM Stockholders”),
DPL acquired a majority of the outstanding equity of I.AM., and the parties agreed to negotiate in good faith to enter into a management
agreement between I.AM and a separate management company formed and operated by the I.AM Stockholders. The Management Agreement
was entered into in connection with the Purchase Agreement.
Pursuant to the Management Agreement, I.AM engaged the Manager
to manage the operations four “Prep Kitchen” restaurants (the “Original Restaurants”) identified in the
Management Agreement, and such other hospitality venues that I.AM acquires through the efforts of the Manager or David Krause (the
“Additional Management Agreement Restaurants,” and together with the Original Restaurants, the “Management Agreement
Restaurants”).
I.AM agreed to pay the Manager a management fee for each Management
Agreement Restaurant, (a) for each month that such Management Agreement Restaurant is not profitable, $5,000 per month, or (b)
for each month that such Management Agreement Restaurant achieves a gross profit, the greater of 6% of the gross revenue for such
month, or $5,000, provided that in the event that payment of the 6% Management Fee would cause such Management Agreement Restaurant
to become unprofitable, the Manager will only be entitled to receive as much of the 6% Management Fee, if greater than $5,000,
as would cause such Management Agreement Restaurant to break even.
Pursuant to the Management Agreement, other restaurants or hospitality
venues that I.AM acquires and operates will be deemed Additional Non-Management Agreement Restaurants, and for each Additional
Non-Management Agreement Restaurant, the Manager will entitled for (a) each month that such Additional Non-Management Agreement
Restaurant is not profitable, to $2,500, per month, (b) for each month that such Additional Non-Management Agreement Restaurant
achieves a gross profit, the greater of 3% of the gross revenue for such month, or $2,500, provided that in the event that payment
of the 3% fee would cause such Additional Non-Management Agreement Restaurant to become unprofitable, the Manager will only be
entitled to receive as much of the 3% fee, if greater than $2,500, as would cause such Additional Non-Management Agreement Restaurant
to break even.
The Management Agreement has a term of 10 years, subject to
earlier termination as provided therein. In the event that I.AM terminates the Management Agreement for Cause (as defined in the
Management Agreement), the Manager will not be entitled to any further compensation under the Management Agreement. In the event
that I.AM terminates the Management Agreement without Cause, I.AM will be required to pay the Manager $1,000,000, which sum is
separately guaranteed by DPL, pursuant to a guarantee of payment executed by DPL (the “Guarantee”).
The foregoing descriptions of the Management Agreement and
Guarantee are not complete and are qualified in their entirety by reference to the full text of such agreements filed as an exhibits
to this Form 8-K.