EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT

 

by and among

 

CRUZANI, INC.

 

as Buyer,

 

2603088 ONTARIO INC., O/A RECIPE FOOD CO.

 

as Seller

 

AND

 

SANDREA GIBSON

 

as Principal

 

Dated as of September 27, 2018

 

   

   

 

TABLE OF CONTENTS

 

Article I DEFINITIONS

1

1.1

Definitions

1

1.2

Other Definitions

4

 

Article II PURCHASE AND SALE OF STOCK

5

2.1

Stock Purchase

5

2.2

Closing Transactions

5

2.3

INTENTIONALLY OMITTED

5

2.4

Conditions to Buyer’s Obligation to Close

5

2.5

Conditions to Seller’ Obligation to Close

6

 

Article III REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY

7

3.1

Organization and Corporate Power

7

3.2

Authorization of Transactions

8

3.3

Capitalization

8

3.4

Subsidiaries; Investments

8

3.5

Financial Statements

9

3.6

Absence of Undisclosed Liabilities

9

3.7

Absence of Certain Developments

9

3.8

Title to Properties; Sufficiency of Assets

11

3.9

Taxes

11

3.10

Contracts and Commitments

12

3.11

Computer Software and Proprietary Rights

14

3.12

Litigation; Proceedings

16

3.13

Brokerage

16

3.14

Governmental Licenses and Permits

16

3.15

Employees

16

3.16

Employee Benefit Plans.

17

3.17

Insurance

17

3.18

Officers and Directors; Bank Accounts

18

3.19

Affiliate Transactions

18

3.20

Compliance with Laws

18

3.21

Environmental Matters

18

3.22

Indebtedness

19

3.23

Certifications

19

3.24

Customers

19

3.25

Suppliers

19

3.26

Title and Condition of Acquired Assets

19

3.27

Accounts Receivable

19

3.28

Disclosure

20

 

Article IV REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER

20

4.1

Authorization of Transactions

20

4.2

Brokerage

20

4.3

Shares

21

4.4

Litigation

21

4.5

Disclosure

21

 

i

 

Article V REPRESENTATIONS AND WARRANTIES OF BUYER

21

5.1

Organization and Corporate Power

21

5.2

Authorization of Transaction

21

5.3

No Violation

22

5.4

Governmental Authorities and Consents

22

5.5

Litigation

22

 

Article VI INDEMNIFICATION AND RELATED MATTERS

22

6.1

Risk Allocation; Survival

22

6.2

Indemnification

23

6.3

Resolution of Conflicts

25

6.4

Third Party Claims

25

6.5

Right of Offset

26

6.6

Purchase Price Adjustments

26

6.7

Waiver, Release and Discharge

26

6.8

Maximum Contribution

26

 

Article VII ADDITIONAL AGREEMENTS

26

7.1

Tax Matters

26

7.2

Press Releases and Announcements

28

7.3

Further Transfers

28

7.4

Specific Performance

28

7.5

Expenses

28

7.6

Non-Competition, Non-Solicitation and Confidentiality

28

 

Article VIII MISCELLANEOUS

30

8.1

Amendment and Waiver

30

8.2

Notices

30

8.3

Binding Agreement; Assignment

31

8.4

Severability

31

8.5

Construction

31

8.6

Captions

32

8.7

Entire Agreement

32

8.8

Counterparts

32

8.9

Governing Law

32

8.10

Parties in Interest

32

8.11

CONSENT TO JURISDICTION

32

8.12

Delivery by Facsimile and Portable Document Format

32

8.13

Drafting

32

 

ii

 

INDEX OF SCHEDULES

 

Schedule 2.1(a)

Stock Ownership

Schedule 3.1

Organization and Corporate Power

Schedule 3.2

Authorization of Transactions

Schedule 3.3

Capitalization

Schedule 3.4

Subsidiaries

Schedule 3.5

Financial Statements

Schedule 3.6

Absence of Undisclosed Liabilities

Schedule 3.7

Absence of Certain Developments

Schedule 3.8(b)

Real Property Leases and Subleases

Schedule 3.8(c)

Personal Property

Schedule 3.9

Taxes

Schedule 3.10

Contracts and Commitments

Schedule 3.11(a)

Computer Software and Proprietary Rights

Schedule 3.11(b)

Third Party Software, Development Software, IT Software

Schedule 3.11(c)

Computer Non-Proprietary Rights

Schedule 3.11(d)

Infringed Third Party Proprietary Rights

Schedule 3.11(e)

Loss or Expiration of Company Proprietary Rights

Schedule 3.11(f)

Third Party Infringement on Company Proprietary Rights

Schedule 3.11(g)

Open Source Software and Freeware

Schedule 3.11(h)

Disclosure of Company Software

Schedule 3.11(i)

Company Software Development and/or Acquisition

Schedule 3.11(j)

Possession of Source Code and Object Code

Schedule 3.12

Litigation; Proceedings

Schedule 3.13

Brokerage (Company)

Schedule 3.14

Governmental Licenses and Permits

Schedule 3.15(a)

Employees

Schedule 3.15(b)

Agreements Requiring Additional Payments

Schedule 3.16

Employee Benefit Plans

Schedule 3.17

Insurance

Schedule 3.18

Officers and Directors; Bank Accounts

Schedule 3.19

Affiliate Transactions

Schedule 3.20

Compliance With Laws

Schedule 3.21

Environmental Matters

Schedule 3.22

Indebtedness

Schedule 3.23

Certifications

Schedule 3.24

Customers

Schedule 3.25

Suppliers

Schedule 3.26

Title to Assets

Schedule 3.27

Accounts Receivable

Schedule 4.3

Shares

 

iii

 

STOCK PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into on
September 27, 2018, by and among 2603088 Ontario Inc. o/a Recipe Food Co.., a
corporation organized under the laws of the Province of Ontario, Canada (the
“Seller”), Sandrea Gibson, an individual resident of the Province of Ontario,
Canada, (the “Principal”), and Cruzani, Inc., a Nevada corporation (“Buyer”).
Each of the Company, the Seller and the Buyer may be referred to herein as a
“Party” and collectively as the “Parties”.

 

W I T N E S S E T H:

 

WHEREAS, Principal owns all of the issued and outstanding capital stock of the
Seller;

 

WHEREAS, Seller desires to sell, and Buyer desires to purchase, an amount of
stock of the Seller equal to the amount that is eighty percent (80%) of the
outstanding capital stock of the Seller (the “Company Stock”) as provided
herein;

 

NOW, THEREFORE, in consideration of the mutual covenants, agreements and
understandings contained herein, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, the Parties hereto hereby agree
as follows:

 

Article I

DEFINITIONS

 

1.1 Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:

 

“Affiliate” of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person, where
“control” means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of voting
securities or otherwise.

 

“Affiliated Group” means an affiliated group as defined in the Code (or any
similar combined, consolidated or unitary group defined under state, local or
foreign income Tax law).

 

“Business” has the meaning set forth in Section 7.6(b).

 

“Closing Date” has the meaning set forth in Section 2.3(a).

 

“Code” means the Income Tax Act (Canada), as amended from time to time.

 

“Consideration” means up to CAD $237,000 to redeem the Company’s current
investors, which may be in the form of cash or securities of the Buyer, on a
mutually agreeable basis.

 

“Contract” means any contract, license, sublicense, franchise, permit, mortgage,
purchase order, indenture, loan agreement, lease, sublease, agreement,
obligation, instrument or other arrangement or any commitment to enter into any
of the foregoing (in each case, whether written or oral) to which the Company is
a party or by which any of its assets or properties are bound.

 

“Effective Date” means 12:01 a.m. on September 27, 2018.

 

  1

   

 

“Environmental and Safety Requirements” means all federal, state, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law, in each case concerning public
health and safety, worker health and safety and pollution or protection of the
environment, including, without limitation, all those relating to the presence,
use, production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, as the foregoing are enacted and
in effect prior to the Effective Date.

 

“GAAP” means Canadian generally accepted accounting principles.

 

“Income Taxes” means any Tax imposed by a taxing authority based upon or
measured by gross or net income or receipts.

 

“Indebtedness” means (i) all obligations for borrowed money and all obligations
issued in substitution for or exchange of obligations for borrowed money, (ii)
all obligations evidenced by any note, bond, debenture or other debt security,
(iii) all obligations for the deferred purchase price of property or services
with respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise, (iv) any commitment by which a Person assures a creditor against
loss (including, without limitation, contingent reimbursement Liability with
respect to letters of credit), (v) any indebtedness guaranteed in any manner by
a Person (including, without limitation, guarantees in the form of an agreement
to repurchase or reimburse), (vi) any Liabilities under capitalized leases with
respect to which a Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, including, without limitation, any lease termination
payments or charges, (vii) any indebtedness secured by a Lien on a Person’s
assets, (viii) any unsatisfied obligation for withdrawal liability to a
multiemployer plan, (ix) any amounts currently owed to any Person under any
noncompetition, consulting or similar arrangements, (x) any change-of-control or
similar payment or increased cost which is triggered in whole or in part by the
transactions contemplated by this Agreement, (xi) any Liability of the Company
under deferred compensation plans, phantom stock plans, bonus plans, or for
severance payments or similar arrangements made payable in whole or in part as a
result of the transactions contemplated herein, (xii) any off-balance sheet
financing of the Company, (xiii) the gross amount paid or payable with respect
to any employee bonus or retention arrangement or other compensation payable to
any Person as a result of the announcement or consummation or the transactions
contemplated by this Agreement, and (xiv) any accrued and unpaid interest on,
and any prepayment premiums, penalties or similar contractual charges in respect
of, any of the foregoing obligations computed as though payment is being made in
respect thereof on the Closing Date.

 

“Knowledge” as used in the phrases “to the Knowledge of the Company” and “to the
Company’s Knowledge” or phrases of similar import mean the actual knowledge of,
or what should reasonably have been known after making diligent inquiry of, the
Company’s employees.

 

“Letter of Intent” means that certain third revised letter of intent dated
August 29, 2018, between Buyer, the Seller and the Principal.

 

“Liability” means any liability, debt, obligation, of any kind or nature
whatsoever, whether asserted or unasserted, absolute or contingent, known or
unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to
become due.

 

  2

   

 

“Liens” means any mortgages, pledges, security interests, encumbrances, claims,
liens or charges of any kind (including, without limitation, any conditional
sale or other title retention agreements or leases in the nature thereof) or any
agreements to file any of the foregoing, any sales of receivables with recourse,
and any filings or agreements to file a financing statement as debtor under the
Uniform Commercial Code or any similar statute.

 

“Material Adverse Effect” means any event, circumstance, condition, change,
occurrence or effect that individually or in the aggregate with all other
events, circumstances, conditions, changes, occurrences and effects, has or
could reasonably be expected to have a material adverse effect upon the assets,
liabilities, business, financial condition or operating results of the Company
or that could reasonably be expected to prevent or materially delay or impair
the ability of the Company to consummate the transactions contemplated by this
Agreement.

 

“Options” means all options, warrants or other rights, whether or not then
exercisable, to acquire shares of the Company’s capital stock.

 

“Ordinary Course of Business” means ordinary course of business consistent with
past custom and practice (including with respect to quantity and frequency).

 

“Permitted Liens” means (i) mechanic’s and materialmen’s liens and similar
encumbrances arising in the Ordinary Course of Business of the Company that are
not delinquent and not material to the Business, (ii) liens or encumbrances for
federal, state, local, foreign and other taxes or assessments not yet due and
payable or delinquent, and (iii) purchase money encumbrances and encumbrances
securing rental payments under capital lease arrangements that are not
delinquent and not material to the Business.

 

“Person” means an individual, a partnership, a limited liability company, a
corporation, a cooperative, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental authority, body
or entity or any department, agency or political subdivision thereof.

 

“Proprietary Rights” means all of the following in any jurisdiction throughout
the world: (i) patents, patent applications and patent disclosures; (ii)
trademarks, service marks, trade dress, trade names, corporate names, logos and
slogans (and all translations, adaptations, derivations and combinations of the
foregoing) and Internet domain names, together with all goodwill associated with
each of the foregoing; (iii) copyrights and copyrightable works; (iv)
registrations and applications for any of the foregoing; (v) trade secrets and
confidential information (including, without limitation, inventions, ideas,
formulae, compositions, know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, financial, business and marketing
plans, and customer and supplier lists and related information); (vi) computer
software and software systems (including, without limitation, data, source code
and object code, databases and related documentation); and (vii) all other
intellectual property.

 

“Subsidiary” means, with respect to any Person, any corporation, partnership,
limited liability company, association or other business entity of which (i) if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (ii) if a partnership, limited
liability company, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more Subsidiaries of
that Person or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a partnership, limited
liability company, association or other business entity if such Person or
Persons shall be allocated a majority of partnership, limited liability company,
association or other business entity gains or losses or shall be or control the
managing director or general partner of such partnership, limited liability
company, association or other business entity.

 

  3

   

 

“Tax” or “Taxes” means any federal, state, local or foreign income, gross
receipts, capital gains, franchise, alternative or add-on minimum, estimated,
sales, use, goods and services, transfer, registration, value added, excise,
natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock,
social security, unemployment, employment, disability, payroll, license,
employee or other withholding, contributions or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing.

 

“Tax Returns” means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.

 

“Transaction Documents” means this Agreement and any other agreement
contemplated by this Agreement to which the Company or any Seller is a party
including, without limitation, the Employment Agreements.

 

1.2 Other Definitions. Each of the following defined terms has the meaning given
such term in the Section set forth opposite such defined term:

 

Section Reference

 

Defined Term

3.27

 

Accounts Receivable

Preamble

 

Agreement

6.1

 

Applicable Limitation Date

2.4(k)

 

Award Agreement

6.2(c)

 

Basket

3.16(a)

 

Benefit Plans

Preamble

 

Buyer

6.2(a)(i)

 

Buyer Parties

6.2(c)

 

Cap

2.2(a)

 

Closing

2.2(a)

 

Closing Date

2.2(b)

 

Closing Transactions

Preamble

 

Company

3.11(c)

 

Company Proprietary Rights

3.11(a)

 

Company Software

Preamble

 

Company Stock

7.6(c)

 

Confidential Information

3.16(e)

 

Controlled Group

6.7

 

D&O Tail Policy

6.2(c)(ii)

 

Designated Breaches

3.11(b)

 

Development Software

2.4(j)

 

Employment Agreement

3.5

 

Effective Date Balance Sheet

3.5

 

Financial Statements

3.16(j)

 

Foreign Plan

6.2(d)

 

Indemnified Party

6.2(d)

 

Indemnifying Party

6.2(d)

 

Indemnification Notice

3.19

 

Insiders

3.11(b)

 

IT Software

3.8(b)

 

Leased Properties

3.14

 

Licenses

6.2(a)(i)

 

Loss

6.2(a)(i)

 

Losses

3.10(b)

 

Material Contract

3.10(b)

 

Material Contracts

7.6(a)

 

Non-Compete Period

Preamble

 

Parties

Preamble

 

Party

8.12

 

PDF

7.1(c)

 

Pre-Closing Taxes

3.23

 

Product Certifications

3.16(b)

 

Qualified Plan

7.1(c)

 

Straddle Tax Returns

Preamble

 

Seller

Preamble

 

Seller

3.11(b)

 

Third Party Software

 

  4

   

 

ARTICLE II

PURCHASE AND SALE OF STOCK

 

2.1 Stock Purchase. On the terms and subject to the conditions set forth in this
Agreement, (a) on the Closing Date, Buyer shall purchase from Seller, and Seller
shall issue out of its treasury, Company Stock in such amount as results in the
Purchaser owning an eighty percent (80%) interest in the Seller, free and clear
of any Liens, restrictions on transfer, Options, rights, calls, commitments,
proxies or other contract rights; and (b) in consideration of the sale of the
Company Stock and the covenants and agreements of the Seller contained in
Section 7.6, the Buyer shall pay the Seller the Consideration. The Consideration
shall be payable to redeem the Company’s current investors, which may be in the
form of cash or securities of the Buyer, on a mutually agreeable basis. The
Principal shall be entitled to earn back up to fifty percent (50%) of the issued
and outstanding stock of the Seller, pursuant to the milestones set forth in
Schedule 2.1 attached hereto.

 

2.2 Closing Transactions.

 

(a) Closing. Subject to satisfaction or waiver of the conditions contained in
this Agreement, the closing of the transactions contemplated by this Agreement
(the “Closing”) shall take place electronically, commencing at 10:00 a.m. on
September 27, 2018, or on such other date as may be mutually agreeable to Buyer
and Seller. The date and time of the Closing are herein referred to as the
“Closing Date.”

 

(b) Closing Transactions. Subject to the conditions set forth in this Agreement,
the Parties shall consummate the following “Closing Transactions” on the Closing
Date:

 

(i) Seller shall deliver to Buyer certificates representing the Company Stock
purchased by the Buyer;

 

(ii) Seller and Principal shall deliver to Buyer all corporate books and records
of the Company in Seller’s and/or Principal’s possession or under Seller’s
and/or Principal’s control; and

 

(iii) Seller shall pay the aggregate amount of the Indebtedness to the Persons
entitled to receive same on the terms and on the dates agreed to by the Buyer,
Seller and Principal, which such agreement shall be made having in mind the best
interests of the business of the Seller.

 

2.3 INTENTIONALLY OMITTED.

 

2.4 Conditions to Buyer’s Obligation to Close. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment of the following conditions as of the Closing Date:

 

(a) The representations and warranties set forth in Article III and Article IV
hereof shall be true and correct in all respects;

 

(b) The Principal and Seller shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by
each of them under this Agreement on or prior to the Closing, including, without
limitation, the issuance of the Company Stock out of treasury;

 

(c) All consents and approvals by third parties listed on Schedule 3.2 attached
hereto shall have been obtained, all on terms and conditions no less favorable
to the Seller than those in existence as of the date hereof;

 

(d) All governmental and regulatory filings, authorizations and approvals and
other Licenses that are required for the transfer of the Company Stock to Buyer
and the consummation of the transactions contemplated hereby shall have been
duly made and obtained;

 

(e) No action, suit, or proceeding shall be pending or threatened before any
court or quasi-judicial or administrative agency of any federal, state,
provincial, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of
Buyer to own or operate the Company, and no judgment, decree, injunction, order
or ruling shall have been entered which has any of the foregoing effects;

 

(f) The Buyer shall elect directors and officers of the Seller;

 

(g) Since December 31, 2017, there shall have been no event, transaction,
condition or change which has had or could reasonably be expected to have a
Material Adverse Effect;

 

(h) INTENTIONALLY DELETED.

 

(i) Principal and Seller shall have executed each other Transaction Document to
which it is a party and shall have delivered each such Transaction Document to
Buyer, and each such Transaction Document will be in full force and effect;

 

  5

   

  

(j) Principal shall have executed an employment agreement with the Seller on the
terms contained in the Letter of Intent (the “Employment Agreement”) and shall
have delivered such Employment Agreement to Buyer, and such Employment Agreement
will be in full force and effect;

 

(k) Principal shall have executed an award agreement with the Seller (the “Award
Agreement”) and shall have delivered such Award Agreement to Buyer, and such
Award Agreement will be in full force and effect;

 

(l) On or prior to the Closing Date, Principal/Seller shall have delivered or
caused to be delivered to Buyer, each of the following:

 

(i) a certificate from the Principal and Seller in form and substance reasonably
satisfactory to Buyer, dated as of the Closing Date, stating that the
preconditions specified in Sections 2.4(a) and 2.4(b) have been satisfied;

 

(ii) copies of all third party, governmental and regulatory consents, approvals,
filings, releases, terminations, payoff letters, etc., required in connection
with the consummation of the transactions contemplated by this Agreement and the
other Transaction Documents;

 

(iii) certified copies of the articles of incorporation and by-laws of the
Company and the resolutions of the Company’s board of directors authorizing the
execution, delivery and performance of this Agreement and the other Transaction
Documents and approving the consummation of the transactions contemplated hereby
and thereby;

 

(iv) certificates of the appropriate official of the jurisdiction in which the
Company is incorporated and any other state in which the Company does business,
stating that such Company is in good standing, qualified to do business or the
equivalent as of immediately prior to the Closing Date; and

 

(v) such other documents or instruments as Buyer may reasonably request to
effectuate the transactions contemplated hereby.

 

(m) All proceedings to be taken by the Principal and Seller in connection with
the consummation of the Closing Transactions and the other transactions
contemplated hereby and all certificates, instruments and other documents
required to be delivered by Principal and/or Seller to effectuate the
transactions contemplated hereby reasonably requested by Buyer shall be
reasonably satisfactory in form and substance to Buyer.

 

Any condition specified in this Section 2.4 may be waived by Buyer; provided,
however, that no such waiver shall be effective unless it is set forth in a
writing executed by Buyer or unless Buyer agrees in writing to consummate the
transactions contemplated by this Agreement without fulfillment of such
condition.

 

2.5 Conditions to Seller’ Obligation to Close. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
fulfillment of the following conditions as of the Closing Date:

 

(a) The representations and warranties set forth in Article V shall be true and
correct in all material respects and the representations and warranties set
forth in Article V which are qualified by materiality or material adverse effect
shall be true and correct in all respects;

 

  6

   

 

(b) Buyer shall have performed and complied in all material respects with all of
the covenants and agreements required to be performed by it under this Agreement
on or prior to the Closing;

 

(c) All governmental filings, authorizations and approvals that are required for
the consummation of the transactions contemplated hereby shall have been duly
made and obtained;

 

(d) On or prior to the Closing Date, Buyer shall have delivered to the Seller a
certificate from Buyer, in form and substance reasonably satisfactory to the
Seller, dated as of the Closing Date, stating that the preconditions specified
in Sections 2.5(a) and 2.5(b), inclusive, have been satisfied;

 

(e) Buyer shall have executed each other Transaction Document to which it is a
party and shall have delivered each such Transaction Document to the Seller and
each of the other parties thereto, and each such Transaction Document will be in
full force and effect; and

 

(f) No action, suit or proceeding shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable judgment, decree,
injunction, order or ruling would prevent the performance of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded, and
no judgment, decree, injunction, order or ruling shall have been entered which
has any of the foregoing effects.

 

Any condition specified in this Section 2.5 may be waived by Seller provided,
however, that no such waiver shall be effective against Seller unless it is set
forth in a writing executed by the Seller or unless Seller agree in writing to
consummate the transactions contemplated by this Agreement without the
fulfillment of such condition.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES CONCERNING THE SELLER

 

As a material inducement to Buyer to enter into this Agreement, Principal and
Seller hereby jointly and severally represent and warrant as of the Effective
Date, and as of the Closing Date and all times in between that:

 

3.1 Organization and Corporate Power. The Seller is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation or other formation. The Seller is qualified to do business in
every jurisdiction in which such qualification is necessary, except where the
failure to so qualify has not had or would not reasonably be expected to have a
Material Adverse Effect. All jurisdictions in which the Seller is qualified to
do business are set forth on Schedule 3.1. The Seller has all requisite
corporate power and authority and, all licenses, permits and authorizations
necessary to own and operate their properties and to carry on their business as
now conducted. The certificate of incorporation and by-laws (or other
appropriate corresponding organizational documents) of the Seller that has
previously been furnished to Buyer reflect all amendments thereto and are
correct and complete. The minute books containing the records of the meetings of
the stockholders and the board of directors, the stock certificate books and the
stock record books (or other appropriate corresponding corporate records) of the
Seller that have been furnished to Buyer are correct and complete. The Seller is
not in default under or in violation of any provision of their certificate of
incorporation or by-laws (or other appropriate corresponding organizational
documents).

 

  7

   

 

3.2 Authorization of Transactions.

 

(a) The Seller has all requisite corporate power and authority to execute and
deliver this Agreement and each of the other Transaction Documents to which it
is a party and to consummate the transactions contemplated hereby and thereby.
The sole director of the Seller has duly approved this Agreement and all other
Transaction Documents to which the Seller is a party and has duly authorized the
execution and delivery of this Agreement and all other Transaction Documents to
which it is a party and the consummation of the transactions contemplated hereby
and thereby. No other corporate proceedings on the part of the Seller are
necessary to approve and authorize the execution and delivery of this Agreement
or the other Transaction Documents to which the Seller is a party and the
consummation of the transactions contemplated hereby and thereby. This Agreement
and all other Transaction Documents to which the Seller is a party have been
duly executed and delivered by the Seller and constitute the valid and binding
agreements of the Seller, enforceable against the Seller in accordance with
their terms.

 

(b) Except as set forth on Schedule 3.2 attached hereto, the execution, delivery
and performance of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby by the Seller
and/or Principal do not and shall not (a) conflict with or result in any breach
of any of the terms, conditions or provisions of, (b) constitute a default
under, (c) result in a violation of, (d) give any third party the right to
modify, terminate or accelerate or cause the modification, termination or
acceleration of, any obligation under, (e) result in the creation of any Lien
upon the capital stock or the assets of the Seller, or (f) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or other
governmental body or agency, under (i) the provisions of the certificate of
incorporation or by-laws (or the appropriate corresponding organizational
documents) of the Seller, (ii) any Contract to which the Seller is bound, (iii)
any law, statute, rule or regulation to which the Seller is subject or (iv) any
judgment, order or decree to which the Seller is subject.

 

3.3 Capitalization.

 

(a) Schedule 3.3 attached hereto accurately sets forth (i) the authorized and
outstanding capital stock of the Seller, and (ii) the name of each record holder
of shares of the Seller’s capital stock and the number of each class of the
Seller’s capital stock held by each such record holder. All of the issued and
outstanding shares of the Seller’s capital stock have been duly authorized, are
validly issued, fully paid and nonassessable, are not subject to, nor were they
issued in violation of, any preemptive rights, rights of first refusal, or
similar rights, and are owned of record and beneficially by the stock holders of
the Seller in the amounts as set forth on Schedule 3.3, free and clear of all
Options, Contracts, calls, puts, rights to subscribe, conversion rights and
other Liens. Except for this Agreement and except as set forth on Schedule 3.3,
there are no outstanding or authorized Options, rights, Contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which the Seller is a party or which are binding upon the Seller providing for
the issuance, disposition or acquisition of any of their capital stock or any
rights or interests exercisable therefor. Except as set forth in Schedule 3.3,
there is no outstanding or authorized stock appreciation, phantom stock or
similar or corresponding rights with respect to the capital stock of the Seller.
There are no voting trusts, proxies or any other agreements or understandings
with respect to the voting of the capital stock of the Seller. Except as set
forth in Schedule 3.3, the Seller is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock.

 

(b) Principal is the record and beneficial owner of, and has good and marketable
title to, all of the Company Stock of the Seller as set forth on the Schedule
3.3, free and clear of all Liens. The shares of Company Stock owned by the
Principal constitute 100% of the outstanding capital stock of the Seller.

 

3.4 Subsidiaries; Investments. The Seller does not have any Subsidiaries. The
Seller does not control directly or indirectly or have any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association. Except as set forth on Schedule 3.4, the Seller does not own or
control or have any right to acquire (directly or indirectly) any stock,
partnership interest, joint venture interest, equity participation or other
security or interest in any other Person.

 

  8

   

 

3.5 Financial Statements. The Seller has delivered to Buyer and attached hereto
as Schedule 3.5: (i) the Seller’s unaudited balance sheets as of December 31,
2016 and December 31, 2017, and the related statements of operations,
stockholders’ equity and cash flows for the respective twelve-month periods then
ended; and (ii) the Seller’s unaudited balance sheet as of August 31, 2018 (the
“Effective Date Balance Sheet”), and the related statements of operations,
stockholders’ equity and cash flows for the twelve-month period then ended.
Except as set forth on Schedule 3.5, each of the foregoing financial statements
(including in all cases the notes thereto, if any) (the “Financial Statements”)
is accurate and complete in all respects to the extent required by GAAP,
consistently applied, and is consistent with the books and records of the Seller
(which, in turn, are accurate and complete in all respects), present fairly in
all respects the financial condition and results of operations and cash flows of
the Seller as of and for the periods referred to therein, and has been prepared
in accordance with GAAP, consistently applied, subject in the case of unaudited
interim financial statements to changes resulting from normal year-end
adjustments for recurring accruals (which shall not be material individually or
in the aggregate) and to the absence of footnote disclosure.

 

3.6 Absence of Undisclosed Liabilities. The Seller does not have any Liability
arising out of transactions entered into at or prior to the Closing, or any
action or inaction at or prior to the Closing, or any state of facts exist at or
prior to the Closing, including any Taxes with respect to or based upon
transactions or events occurring on or before the Closing, except (i)
Liabilities under Contracts described in Schedule 3.10 or under Contracts which
are not required to be disclosed thereon (but not Liabilities for breaches or
violations thereof), (ii) Liabilities reflected on the face of the Effective
Date Balance Sheet, (iii) Liabilities which have arisen after the date of the
Effective Date Balance Sheet in the Ordinary Course of Business otherwise in
accordance with the terms and conditions of this Agreement (none of which is a
liability for breach of contract, breach of warranty, tort or infringement or a
claim or lawsuit or an environmental liability) and (iv) Liabilities disclosed
on Schedule 3.6, (v) Liabilities and obligations of the Seller pursuant to this
Agreement, and (vi) Liabilities or obligations to the extent expressly disclosed
in the disclosure schedules attached hereto.

 

3.7 Absence of Certain Developments. Except as set forth in Schedule 3.7 and
except as expressly contemplated by this Agreement, since the date of the
Effective Date Balance Sheet, the Seller has conducted the Business only in the
Ordinary Course of Business and the Seller has not:

 

(a) suffered a Material Adverse Effect or suffered any theft, damage,
destruction or casualty loss in excess of $5,000 in the aggregate to its assets,
whether or not covered by insurance;

 

(b) redeemed or repurchased, directly or indirectly, any shares of capital stock
or other equity security or declared, set aside or paid any dividends or made
any other distributions (whether in cash or in kind) with respect to any shares
of its capital stock or other equity security;

 

(c) issued, sold or transferred any notes, bonds or other debt securities, any
equity securities, any securities convertible, exchangeable or exercisable into
shares of its capital stock or other equity securities, or options or other
rights to acquire shares of its capital stock or other equity securities;

 

  9

   

 

(d) borrowed any amount or incurred or become subject to any Indebtedness or
other Liabilities, except Liabilities incurred in the Ordinary Course of
Business and not constituting Indebtedness;

 

(e) discharged or satisfied any Lien or paid any Liability (other than
Liabilities paid in the Ordinary Course of Business), prepaid any amount of
Indebtedness or subjected any portion of its properties or assets to any Lien;

 

(f) sold, leased, assigned or transferred (including, without limitation,
transfers to Seller or any Insider) any of its tangible or intangible assets
(including Proprietary Rights), except for sales of inventory, non-exclusive
licenses granted in the Ordinary Course of Business to unaffiliated third
Persons on an arm’s length basis, or disclosed any confidential information
(other than pursuant to agreements requiring the person to whom the disclosure
was made to maintain the confidentiality of and preserving all rights of the
Company in such confidential information);

 

(g) waived, canceled, compromised or released any rights or claims of material
value, whether or not in the Ordinary Course of Business;

 

(h) entered into, amended or terminated any material Contract or entered into
any other material transaction, whether or not in the Ordinary Course of
Business, or materially changed any business practice;

 

(i) made, granted or promised any bonus or any wage, salary or compensation
increase in excess of $5,000 per year to any director, officer, employee, sales
representative or consultant or made, granted or promised any increase in any
employee benefit plan or arrangement, or amended or terminated any existing
employee benefit plan or arrangement or adopted any new employee benefit plan or
arrangement;

 

(j) made any other change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business or entered into
any transaction with any Insider;

 

(k) conducted its cash management customs and practices other than in the
Ordinary Course of Business (including, without limitation, with respect to
maintenance of working capital balances and inventory levels, collection of
accounts receivable, payment of accounts payable, accrued liabilities and other
Liabilities and pricing and credit policies);

 

(l) made any capital expenditures that aggregate in excess of $5,000;

 

(m) made any loans or advances in excess of $5,000 in the aggregate to, or
guarantees for the benefit of, any Persons;

 

(n) amended or authorized any amendment to its certificate of incorporation,
by-laws or other governing or organizational documents;

 

(o) instituted or settled any claim or lawsuit for an amount involving in excess
of $5,000 in the aggregate or involving equitable or injunctive relief;

 

(p) granted any performance guarantee to its customers other than in the
Ordinary Course of Business and consistent with past policies and practices;

 

(q) acquired any other business or Person (or any significant portion or
division thereof), whether by merger, consolidation or reorganization or by
purchase of its assets or stock or acquired any other material assets; or

 

(r) committed or agreed to any of the foregoing.

 

  10

   

 

3.8 Title to Properties; Sufficiency of Assets.

 

(a) The Seller does not own any real property.

 

(b) The real property leases and subleases listed on Schedule 3.8(b) are valid,
binding, enforceable and in full force and effect and have not been modified,
and with respect to each lease, the Seller holds a valid and existing leasehold
interest under such lease or subleases for the term set forth in Schedule
3.8(b). The leases and subleases listed on Schedule 3.8(b) (the “Leased
Properties”) constitute all of the leases and subleases under which the Seller
holds leasehold or subleasehold interests in real property. The Seller has
delivered to Buyer complete and accurate copies of each of the leases or
subleases listed on Schedule 3.8(b). The Leased Properties constitute all of the
real property used or occupied by the Seller. With respect to each lease and
sublease listed on Schedule 3.8(b), except as set forth on Schedule 3.8(b):

 

(i) the Seller is not in breach or default, and no event has occurred which,
with notice or lapse of time, would constitute such a breach or default or
permit termination, modification or acceleration under the lease or sublease;

 

(ii) no party to the lease or sublease has repudiated any provision thereof and
there are no disputes, oral agreements or forbearance programs in effect as to
the lease or sublease; and

 

(iii) the Seller has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any of its rights and interest in the leasehold or
subleasehold.

 

(c) Except as set forth on Schedule 3.8(c), the Seller owns good and marketable
title to, or a valid leasehold interest in, free and clear of all Liens, all of
the personal property and assets which are shown on the Effective Date Balance
Sheet or acquired by the Seller thereafter or located on the leased properties
used by the Seller (other than employee-owned personal items).

 

(d) Each of the tangible assets of the Seller located upon or used in connection
with the Leased Properties is operated by the Seller in conformity with all
applicable laws and regulations and are usable in the Ordinary Course of
Business.

 

(e) The assets and properties (whether real or personal, tangible or intangible)
owned or leased by the Seller constitute all of the assets and properties
necessary to operate the Business currently conducted by the Seller in a manner
consistent with past practices.

 

3.9 Taxes. Except as set forth on Schedule 3.9, (i) the Seller has timely filed
all Tax Returns which are required to be filed on or before the Closing Date
(taking into account any extension of time with which to file) and all such Tax
Returns are true, complete and accurate, (ii) all Taxes due and payable by the
Seller, whether or not shown on a Tax Return, have been paid by the Principal or
Seller on or before the Closing Date and all Taxes which would be required to be
accrued in accordance with GAAP but are not yet due are shown on the Effective
Date Balance Sheet or are set forth on Schedule 3.9 and no Taxes are delinquent,
(iii) with respect to any periods for which Tax Returns have not yet been
required to be filed or for which Taxes are not yet due and payable, the Seller
has only incurred Liabilities for Taxes in the Ordinary Course of Business and
in a manner and at a level materially consistent with prior periods; (iv) no
deficiency for any amount of Tax has been asserted or assessed by a taxing
authority against the Seller and the Seller does not reasonably expect that any
such assertion or assessment of Tax liability will be made and the Seller does
not have any outstanding claims for any Tax refunds, (v) there is no action,
suit, proceeding or audit or any notice of inquiry of any of the foregoing
pending against or with respect to the Seller regarding Taxes and no action,
suit, proceeding or audit has been threatened against or with respect to the
Seller regarding Taxes, (vi) the Seller has not consented to extend the time in
which any Tax may be assessed or collected by any taxing authority, (vii) the
Seller has not been a member of an Affiliated Group, except the Affiliated Group
of which the Seller is the parent, (viii) no claim has ever been made against
the Seller by a taxing authority in a jurisdiction where the Seller does not
file Tax Returns that the Seller is or may be subject to Taxes assessed by such
jurisdiction, (ix) the Seller does not have Liability for Taxes of any other
Person under relevant federal or provincial tax laws, as a transferee, by
contract, or otherwise, (x) the Seller has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party,
(xi) the Seller has not made any payments, or are not or shall not become
obligated (under any Contract entered into on or before the Closing Date) to
make any payments, that shall be non-deductible under the Code (or any
corresponding provisions of provincial, local or foreign Income Tax law), and
(xii) the Seller will not be required (A) as a result of a change in method of
accounting for a taxable period ending on or prior to the Closing Date, to
include any adjustment in taxable income for any taxable period (or any portion
thereof) or (B) as a result of any “closing agreement,” as described in the Code
(or any corresponding provision of state, local or foreign income Tax law), to
include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Closing
Date. Schedule 3.9 contains a list of provinces, territories and jurisdictions
(whether foreign or domestic) in which the Seller is required to file Tax
Returns, except for those in which the failure of the Seller to file such Tax
Returns will not cause a Material Adverse Effect.

 

  11

   

 

3.10 Contracts and Commitments.

 

(a) Except as specifically contemplated by this Agreement and except as set
forth in Schedule 3.10 the Seller is not a party to or bound by, whether written
or oral, any:

 

(i) collective bargaining agreement or Contract with any labor union or any
bonus, commissions, pension, profit sharing, retirement or any other form of
deferred compensation or incentive plan or any stock purchase, stock option,
hospitalization insurance or similar plan or practice, whether formal or
informal;

 

(ii) Contract for the employment of any officer, individual employee or other
Person on a full-time, consulting or independent contractor basis or any
severance agreements or change-of-control agreements;

 

(iii) Contract relating to Indebtedness or to mortgaging, pledging or otherwise
placing a Lien on any of its assets, other than a Permitted Lien;

 

(iv) Contracts with respect to the lending or investing of funds;

 

(v) license or royalty Contracts, or management, consulting, or advisory
contracts;

 

(vi) guaranty of any obligation, other than endorsements made for collection;

 

(vii) Contract under which it is lessee of, or holds or operates, any personal
property owned by any other party calling for payments by the Seller or under
which the Seller is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by it;

 

(viii) Contract or group of related Contracts with the same party for the
purchase or sale of supplies, products or other personal property or for the
furnishing or receipt of services which either calls for performance over a
period of more than one year;

 

(ix) Contract or group of related Contracts with the same party continuing over
a period of more than six months from the date or dates thereof, not terminable
by it on 30 days or less notice without penalties;

 

  12

   

 

(x) Contracts relating to the ownership of or investments in any business or
enterprise (including, but not limited to, investments in joint ventures and
minority equity investments);

 

(xi) Contract which prohibits it from freely engaging in business anywhere in
the world;

 

(xii) Contract relating to the distribution, marketing, advertising or sales of
its products and/or services;

 

(xiii) Contracts pursuant to which it subcontracts work to third parties;

 

(xiv) power of attorney;

 

(xv) Contract relating to the acquisition or sale of the Business (or any
material portion thereof);

 

(xvi) Contracts relating to Proprietary Rights except as set forth in Schedule
3.11(b); or

 

(xvii) other Contracts material to it, whether or not entered into in the
Ordinary Course of Business.

 

(b) Except as disclosed in Schedule 3.8(b), Schedule 3.10 or Schedule 3.11(b),
(i) no Contract or commitment required to be disclosed on Schedule 3.8(b),
Schedule 3.10 or Schedule 3.11(b) (each, a “Material Contract” and collectively,
the “Material Contracts”) has been breached or canceled by the other party, and
the Seller has no Knowledge of any anticipated breach by any other party to any
Material Contract, (ii) the Seller has performed all the obligations required to
be performed by them under the Material Contracts to the extent required to be
so performed as of the date hereof or as of the Closing Date and are not in
default under or in breach of any Material Contract, and no event or condition
has occurred or arisen which with the passage of time or the giving of notice or
both would result in a default or breach thereunder, (iii) the Seller does not
have a present expectation or intention of not fully performing any obligation
pursuant to any Material Contract, and (iv) each Material Contract is legal,
valid, binding, enforceable and in full force and effect and will continue as
such following the consummation of the transactions contemplated hereby.

 

(c) The Company has made available to Buyer a true and correct copy of all
written Material Contracts, in each case together with all amendments, waivers
or other changes thereto (all of which are disclosed on Schedule 3.10 or
Schedule 3.11(b)). Schedule 3.10 or Schedule 3.11(b) contains an accurate and
complete description of all material terms of all oral Material Contracts
referred to therein.

 

(d) During the two-year period ending on the date of this Agreement, the Seller
has not used any name or names under which they have invoiced account debtors,
maintained records regarding its assets or otherwise conducted business other
than the exact names set forth on Schedule 3.10 or Schedule 3.11(b).

 

  13

   

 

3.11 Computer Software and Proprietary Rights.

 

(a) Schedule 3.11(a) attached hereto sets forth a complete and correct list of:
(i) all patented or registered Proprietary Rights owned by the Seller,
including, without limitation, Internet domain name registrations; (ii) all
pending patent applications or other applications for registration of
Proprietary Rights owned by the Seller; (iii) all trade names and unregistered
marks owned and used by the Seller; (iv) all computer software owned by and
distributed or maintained by the Seller (“Company Software”), listed by major
point release; and (v) other than Company Software, all other material
unregistered copyrights, mask works and computer software owned by the Seller,
including, without limitation, (e.g., internally developed back office software,
etc.).

 

(b) Schedule 3.11(b) attached hereto sets forth a complete and correct list of:
(i) all computer software licenses or similar agreements or arrangements through
which the Seller embed, integrate, bundle, redistribute, resell or otherwise
sublicense such third party software (“Third Party Software”); (ii) all computer
software licenses or similar agreements or arrangements used by the Seller to
support the development of Computer Software (“Development Software”); (iii) all
computer software licenses or similar agreements or arrangements relating to
information technology used in the operations of the Seller (“IT Software”) for
which the Seller paid more than $10,000 in the aggregate in license fees or pays
more than $5,000 in annual support fees; (iv) all other material licenses or
similar agreements or arrangements, in effect in which the Seller is a licensee
of Proprietary Rights; (v) other than customer contracts entered into in the
Ordinary Course of Business and standard “affiliate” agreements wherein such
affiliates have no right to directly license Computer Software to customers, all
licenses or similar agreements or arrangements in which the Seller is a licensor
of Proprietary Rights, including, without limitation, reseller agreements; and
(vi) all other material agreements or similar arrangements, in effect relating
to the use of Proprietary Rights by the Seller, including, without limitation,
material settlement agreements, consent-to-use or standstill agreements,
standalone source code escrow agreements, outsourcing agreements relating to
software development or information technology, and standalone indemnification
agreements.

 

(c) Except as set forth on Schedule 3.11(c), (i) the Seller owns and possesses
all right, title and interest in and to the Proprietary Rights set forth in
Schedule 3.11(a), has a valid and enforceable right to use pursuant to the
agreements set forth in Schedule 3.11(b), and otherwise own and possess all
right, title and interest in and to all other Proprietary Rights necessary for
the operation of the Seller’s Business as currently conducted, free and clear of
all Liens (other than Permitted Liens) (collectively, the “Company Proprietary
Rights”); (ii) the Seller has not licensed any of their Proprietary Rights to
any third party on an exclusive basis; and (iii) neither Principal nor any of
Principal’s Affiliates own any Company Proprietary Rights.

 

(d) Except as set forth on Schedule 3.11(d), (i) the Seller has not infringed or
misappropriated, and the operation of the Seller’s Business as currently
conducted does not infringe or misappropriate, any Proprietary Rights of any
third party; (ii) there are no facts which indicate a likelihood of any of the
foregoing; and (iii) the Seller has not received any written notices regarding
any of the foregoing (including, without limitation, any demands or offers to
license any Proprietary Rights from any third party or any requests for
indemnification from customers).

 

  14

   

 

(e) Except as set forth on Schedule 3.11(e), (i) no loss or expiration of any of
the Company Proprietary Rights is threatened or pending, except for patents
expiring at the end of their statutory terms (and not as a result of any act or
omission by the Seller, including, without limitation, a failure by the Seller
to pay any required maintenance fees); (ii) all of the Company Proprietary
Rights are valid and enforceable and none of the Company Proprietary Rights has
been misused; (iii) no claim by any third party contesting the validity,
enforceability, use or ownership of any of the Company Proprietary Rights has
been made, is currently outstanding or is threatened; (iv) the Seller has taken
all commercially reasonable action to maintain and protect all of the Company
Proprietary Rights; and (v) the Seller has not disclosed or allowed to be
disclosed, to the extent that would result or reasonably be expected to result
in a Material Adverse Effect, any of its trade secrets or confidential
information to any third party other than pursuant to a written confidentiality
agreement and, except as would not be expected to have a Material Adverse
Effect, the Seller has entered into written confidentiality agreements with all
of its employees and independent contractors acknowledging the confidentiality
of the Company Proprietary Rights.

 

(f) Except as set forth on Schedule 3.11(f), no third party has infringed or
misappropriated or otherwise conflicted with any of the Company Proprietary
Rights and there are no facts that indicate a likelihood of any of the
foregoing.

 

(g) INTENTIONALLY DELETED.

 

(h) INTENTIONALLY DELETED.

 

(i) Except as set forth on Schedule 3.11(i), all Proprietary Rights, including
Company Software, owned by the Company were: (i) developed by employees of the
Seller working within the scope of their employment; (ii) developed by officers,
directors, agents, consultants, contractors, subcontractors or others who have
executed appropriate instruments of assignment in favor of the Seller as
assignee that have conveyed to the Company ownership of all of such Person’s
rights in the Proprietary Rights relating to such developments; or (iii)
acquired in connection with acquisitions in which the Seller obtained
representations and warranties from the transferring party relating to the title
to such Proprietary Rights.

 

(j) INTENTIONALLY DELETED.

 

(k) The computer software, computer firmware, computer hardware (whether general
purpose or special purpose), and other similar or related items of automated,
computerized and/or software system(s) that are used by the Seller in the
conduct of its Business is sufficient in all material respects for the current
needs of the Business as currently conducted and the Seller has purchased a
sufficient number of license seats for all Development Software and IT Software
used in the Business.

 

(l) The Seller has collected, used, imported, exported and protected all
personally identifiable information, and other information relating to
individuals protected by law, in accordance with the privacy policies of the
Seller and in accordance with applicable law, including by entering into
agreements, where applicable, governing the flow of such information across
national borders.

 

  15

   

 

3.12 Litigation; Proceedings. Except as set forth in Schedule 3.12, there are no
actions, suits, proceedings, orders, judgments, decrees or investigations
pending or threatened against or imposing obligations on the Seller at law or in
equity, or before or by any federal, provincial, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there is no basis known for any of the foregoing. Except as set
forth on Schedule 3.12, the Seller has not received any written opinion or legal
advice in writing to the effect that any of the Seller is exposed from a legal
standpoint to any liability or disadvantage which may be material to the
Seller’s Business as presently conducted. The Seller is not subject to any
outstanding order, judgment or decree issued by any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
any arbitrator.

 

3.13 Brokerage. Except as set forth on Schedule 3.13, 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 Seller.

 

3.14 Governmental Licenses and Permits. Except for Product Certifications (as
defined below), Schedule 3.14 contains a complete listing of all permits,
licenses, franchises, certificates, approvals, consents, certificates of
authorization, registrations and other authorizations of foreign, federal,
provincial and local governments or regulatory authorities, or other similar
authorizations (collectively, the “Licenses”) owned or possessed by the Seller
or used by the Seller in the conduct of their Business. Except as indicated on
Schedule 3.14, the Seller owns or possesses all right, title and interest in and
to all Licenses which are necessary to conduct their business as presently
conducted. The Seller is in material compliance with the terms and conditions of
such Licenses. No loss or expiration of any License is pending or threatened or
reasonably foreseeable (including, without limitation, as a result of the
transactions contemplated hereby) other than expiration in accordance with the
terms thereof, which terms do not expire as a result of the consummation of the
transactions contemplated hereby.

 

3.15 Employees.

 

(a) Except as set forth on Schedule 3.15(a), no key executive employee and no
group of employees or independent contractors of the Seller have any plans to
terminate his or her employment or relationship as an independent contractor
with the Seller . The Seller has complied with and is in compliance with all
applicable laws relating to the employment of personnel and labor, including
provisions thereof relating to wages, hours, vacation, overtime, notice, pay in
lieu of notice, termination and severance pay, obligation, human rights,
occupational health and safety, equal opportunity, collective bargaining and the
payment of social security and other Taxes. The Seller is not party to or bound
by any collective bargaining agreement, nor have they experienced any strikes,
grievances, unfair labor practices claims or other material employee or labor
disputes. The Seller has not engaged in any unfair labor practice. There is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Seller. Schedule 3.15(a) sets forth
the names, present annual or, as the case may be, hourly rate of compensation
(including salary, bonuses and commissions) of all persons employed or engaged
by the Seller (including independent contractors) to the extent such persons
earn more than $25,000 per year, and whether, and to what extent, the Seller may
have a contractual obligation to pay severance upon termination of employment.
None of the employees of the Seller, is subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar Contract
relating to, affecting or in conflict with the present business activities of
the Seller.

 

(b) Except as set forth on Schedule 3.15(b), the Seller is not party to any
agreement nor do any facts or circumstances exist which would require the Seller
to pay any additional compensation, bonuses (including, without limitation, any
retention bonuses) or other amounts as a result, in whole or in part, of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, to any employee or former employee of the Seller.

 

  16

   

 

3.16 Employee Benefit Plans.

 

(a) Except as set forth on Schedule 3.16, with respect to current or former
employees of the Seller, the Seller does not maintain and has not maintained,
does not contribute to and has not contributed to, have or had any obligation to
contribute to, have or had any actual or potential Liability with respect to any
(i) deferred compensation or bonus or retirement plans or arrangements, (ii)
qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans, or (iii) employee welfare
benefit plans or other employee benefit plans, stock option or stock purchase
plans, or material fringe benefit plans, programs or arrangements whether in
writing or oral and whether or not terminated (the “Benefit Plans”). The Seller
has not contributed to and have no Liability with respect to any multiemployer
pension plan. The Seller has not maintained or contributed to and have no
Liability with respect to any defined benefit plan. The Seller does not maintain
or contribute to any employee welfare benefit plan or have any obligation under
an arrangement which provides health, accident or life insurance benefits to
former employees, their spouses or dependents, other than in accordance with the
Code.

 

(b) INTENTIONALLY DELETED.

 

(c) INTENTIONALLY DELETED.

 

(d) INTENTIONALLY DELETED.

 

(e) The Seller has not incurred any Liability to the Canada Revenue Agency, any
multiemployer plan or otherwise with respect to any employee pension benefit
plan currently or previously maintained or contributed to by members of the
controlled group of companies that includes or included the Company (the
“Controlled Group”) that has not been satisfied in full, and no condition exists
that presents a risk to the Company of incurring such a Liability.

 

(f) INTENTIONALLY DELETED.

 

(g) INTENTIONALLY DELETED.

 

(h) Except as specifically provided in this Agreement or as set forth in
Schedule 3.15(b), no employee or former employee of the Seller will become
entitled to any material bonus, severance or similar benefit (including
acceleration of vesting or exercise of an incentive award) as a result of the
transactions contemplated hereby, and there is no contract, plan or arrangement
covering any employee or former employee of the Seller that, individually or
collectively, will give rise to a payment that would not be deductible by Buyer
or the Seller by reason of the Code or require payment of an excise tax under
the Code solely as a result of the transactions contemplated hereunder.

 

(i) The Seller does not maintain, contribute to or have any Liability with
respect to any nonqualified deferred compensation plan covered by the Code.

 

(j) INTENTIONALLY DELETED.

 

3.17 Insurance. Schedule 3.17 lists each insurance policy maintained by or on
behalf of the Seller with respect to their properties, assets and business,
together with a claims history for the past two years. All of such insurance
policies are in full force and effect, and the Seller has never been (i) in
default with respect to its Liabilities under any such insurance policies or
(ii) denied insurance coverage. Except as set forth on Schedule 3.17, the Seller
does not have any self-insurance or co-insurance programs, and the reserves set
forth on the Effective Date Balance Sheet are adequate to cover all anticipated
Liabilities with respect to any such self-insurance or coinsurance programs.

 

  17

   

 

3.18 Officers and Directors; Bank Accounts. Schedule 3.18 lists all officers and
directors of the Seller, and all bank accounts, safety deposit boxes and lock
boxes (designating each authorized signatory with respect thereto) of the
Seller.

 

3.19 Affiliate Transactions. Except as disclosed on Schedule 3.19, no officer,
director, employee, stockholder or other Affiliate of the Seller or any
individual related by marriage or adoption to any such Person or any entity in
which any such Person owns any beneficial interest (collectively, the
“Insiders”), is a party to any Contract or transaction with the Seller or which
is pertaining to the Business of any of the Seller or has any interest in any
property, real or personal or mixed, tangible or intangible, used by the Seller
in the conduct of its Business. Schedule 3.19 hereto describes all affiliated
services provided to or on behalf of the Seller by Principal or their Affiliates
and to or on behalf of Principal and such Affiliates by the Seller and all
affiliate transactions or Contracts among the Seller and Principal or their
Affiliates (including, in each case, the costs charged to or by the Seller).

 

3.20 Compliance with Laws. Except as disclosed on Schedule 3.20, the Seller has
complied with and is in compliance with all applicable laws, regulations and
ordinances of foreign, federal, provincial and local governments and all
agencies thereof which are applicable to the Business, business practices
(including, but not limited to, the Seller’s production, marketing, sales and
distribution of its products and services) or any owned or leased properties of
the Seller and to which the Seller may be subject, and no claims have been filed
against the Seller alleging a violation of any such laws or regulations, and the
Seller has not received notice of any such violations. Neither Seller nor the
Principal have, directly or indirectly, paid or delivered any fee, commission or
other sum of money or item or property, however characterized, to any finder,
agent, client, customer, supplier, government official or other party, in the
United States or any other country, which is in any manner related to the
Business, assets or operations of Seller or the Principal, which is, or may be,
with the passage of time or discovery, illegal under any federal, provincial, or
local laws of Canada or any other country having jurisdiction; and Seller nor
the Principal has participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers, and has at
all times done business in an open and ethical manner.

 

3.21 Environmental Matters.

 

(a) The Seller has complied with and is currently in compliance with all
Environmental and Safety Requirements and has no Liabilities, including, without
limitation, corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements, and the Seller has not received any oral
or written notice, report or information regarding any Liabilities, including,
without limitation, corrective, investigatory or remedial obligations arising
under Environmental and Safety Requirements which relate to the Seller, its
disposal practices or any of their properties or facilities.

 

(b) Without limiting the generality of the foregoing, the Seller has obtained
and complied with, and is currently in compliance with, all Licenses and other
authorizations that may be required pursuant to any Environmental and Safety
Requirements for the occupancy of its properties or facilities or the operation
of its business. A list of all such permits, licenses and other authorizations
which are material to the Seller is set forth on Schedule 3.21.

 

(c) Neither this Agreement or the other Transaction Documents nor the
consummation of the transactions contemplated hereby and thereby shall impose
any Liabilities on the Seller or otherwise for site investigation or cleanup, or
notification to or consent of any government agencies or third parties under any
Environmental and Safety Requirements (including, without limitation, any so
called “transaction-triggered” or “responsible property transfer” laws and
regulations).

 

  18

   

 

3.22 Indebtedness. Except as set forth on Schedule 3.22, the Seller is not
subject to any long-term Liabilities or Indebtedness. Schedule 3.22 details the
outstanding balance (including accrued and unpaid interest) for each such
outstanding item of Indebtedness. Except as set forth on Schedule 3.22, there
are no outstanding powers of attorney executed on behalf of the Seller. Except
as set forth on Schedule 3.22, the Seller is not a guarantor or otherwise liable
for any Indebtedness of any other person, firm or corporation other than
endorsements for collection in the Ordinary Course of Business.

 

3.23 Certifications. The Seller holds all material product registrations,
accreditations and other certifications required for the conduct of its Business
(all of such registrations, accreditations and certifications being referred to
herein as “Product Certifications”), which Product Certifications are set forth
on Schedule 3.23 attached hereto. There is no reasonable basis for any present
action rescinding any such Product Certifications and no loss or expiration of
any such Product Certifications is reasonably foreseeable or has had or would
reasonably be expected to have a Material Adverse Effect. Each product
manufactured, sold, leased or delivered by the Seller has been in conformity
with all applicable contractual commitments and all express and implied
warranties, and the Seller does not have any Liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against the Seller giving rise to any
Liability) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth on
the face of the Effective Date Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of the Seller. Schedule 3.23 includes copies of the
standard terms and conditions of sale or lease for the Seller (containing
applicable guaranty, warranty, and indemnity provisions). No product
manufactured, sold, leased or delivered by the Seller is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease set forth in Schedule 3.23.

 

3.24 Customers. Except as disclosed on Schedule 3.24, the Seller has not
received any notice that any of their top twenty customers set forth on the
attached Schedule 3.24 (which lists the top twenty customers of the Seller for
the twelve-month period ending December 31, 2017) has terminated or intends to
terminate or materially reduce its business with the Seller.

 

3.25 Suppliers. The Seller has not received any notice that any of their top ten
suppliers of tangible personal property, Third Party Software or other goods and
services set forth on the attached Schedule 3.25 (which lists the top ten
suppliers of the Seller for the twelve-month period ending December 31, 2017)
has terminated or intends to terminate or materially reduce its business with
the Seller.

 

3.26 Title and Condition of Acquired Assets. Except as disclosed on Schedule
3.26, the Seller is the lawful owner of its business personal property, and has
good title to all it assets, free and clear of any and all liens, mortgages,
pledges, security interests, restrictions, prior assignments, licenses,
easements, encumbrances and claims of any kind or nature whatsoever, direct or
indirect, accrued, absolute, contingent or otherwise. Except as disclosed on
Schedule 3.26, the Seller is the owner of all assets that are utilized in the
operation of its Business. Except as disclosed on Schedule 3.26, to the
Knowledge of the Seller, all of the Seller’s assets are in good operating
condition and sufficient to carry on the Business in the normal course as it is
presently conducted and are free from defects, whether patent or latent. Any
information technology systems used in the operation of the Business are and,
with ordinary maintenance, will continue to be, adequate and sufficient in all
respects to conduct the Business.

 

3.27 Accounts Receivable. Except as set forth on Schedule 3.27, all accounts and
notes receivable reflected on the Effective Date Balance Sheet and all accounts
and notes receivable to be reflected on the books of the Seller as of the
Closing (net of allowances for doubtful accounts as reflected thereon and as
determined in accordance with GAAP) are valid receivables arising in the
ordinary course of business and are current and collectible at the amounts set
forth on the books of the Seller as of the Closing (net of allowances for
doubtful accounts as reflected thereon and as determined in accordance with
GAAP) within ninety (90) days after the Closing. No agreement for deduction,
free goods, discount or other deferred price or quantity adjustment has been
made with respect to any such receivables.

 

  19

   

 

3.28 Disclosure. The Seller has made available to Buyer true, complete and
correct copies of all Contracts and documents concerning all litigation and
administrative proceedings, licenses, insurance policies, lists of suppliers and
customers, and records relating to the Business, and such information covers all
material commitments and material liabilities of the Seller relating to the
transactions contemplated hereby. Neither this Agreement nor any of the
exhibits, attachments, written statements, documents, certificates or other
items prepared for or supplied to Buyer by or on behalf of the Seller or the
Principal with respect to the transactions contemplated hereby contain any
untrue statements or facts or omits a fact necessary to make each statement
contained herein or therein not misleading. There is no fact that the Seller has
not disclosed to Buyer herein and of which the Seller or any of their officers,
managers or executive employees is aware and that could reasonably be
anticipated to have a Material Adverse Effect.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER AND PRINCIPAL

 

As a material inducement to Buyer to enter into this Agreement, the Seller and
Principal jointly and severally represents and warrants, to Buyer as of the
Effective Date, and as of the Closing Date and for all times in between that:

 

4.1 Authorization of Transactions.

 

(a) Principal and Seller have all requisite power, authority and legal capacity
to enter into this Agreement and the other Transaction Documents to which
Principal and Seller are a party and to perform its obligations hereunder and
thereunder. This Agreement and the other Transaction Documents to which
Principal and Seller are a party have been duly executed and delivered by
Principal and Seller and constitute the valid and binding agreements of
Principal and Seller, enforceable in accordance with their respective terms.

 

(b) Neither the execution and the delivery of this Agreement and the other
Transaction Documents to which Principal and Seller are a party, nor the
consummation of the transactions contemplated hereby and thereby, shall (i)
conflict with, result in a breach of any of the provisions of, (ii) constitute a
default under, (iii) result in the violation of, (iv) give any third party the
right to terminate or to accelerate any obligation under, (v) result in the
creation of any Lien upon the Company Stock owned by Principal, or (vi) require
any authorization, consent, approval, execution or other action by or notice to
any court or other governmental body, under the provisions of any Contract to
which Principal and Seller are bound or affected, or any applicable statute,
regulation, rule, judgment, order, decree or other restriction of any
government, governmental agency or court to which Principal and Seller are
subject. No notice to, filing with or authorization, consent or approval of any
government or governmental agency by Principal and Seller are necessary for the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents to which Principal and Seller are a party.

 

4.2 Brokerage. Except as set forth on Schedule 3.13, 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 Principal and Seller.

 

  20

   

 

4.3 Shares. Principal holds of record and owns beneficially the shares of
Company Stock set forth opposite Principal’s name on Schedule 2.1, and at the
Closing Seller will issue out of treasury to Buyer good and marketable title to
Company Stock, in each case free and clear of any Liens, restrictions on
transfer (other than any restrictions under any securities act and applicable
provincial securities laws), options, warrants, rights, calls, commitments,
proxies or other contract rights. Except as set forth on Schedule 4.3, Principal
is not a party to any option, warrant, right, Contract, call, put or other
agreement or commitment providing for the disposition or acquisition of any
capital stock of the Company (other than this Agreement). Except as set forth on
Schedule 4.3, Principal is not a party to any voting trust, proxy or other
agreement or understanding with respect to the voting of any capital stock of
the Seller.

 

4.4 Litigation. There are no actions, suits, proceedings or orders pending or
threatened against or affecting Principal or Seller at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would adversely affect Principal’s or Seller’s performance under this Agreement
and the other Transaction Documents to which Principal and Seller are a party or
the consummation of the transactions contemplated hereby or thereby.

 

4.5 Disclosure. The Seller has made available to Buyer true, complete and
correct copies of all Contracts and documents concerning all litigation and
administrative proceedings, licenses, insurance policies, lists of suppliers and
customers, and records relating to the business, and such information covers all
material commitments and material liabilities of the Seller relating to the
transactions contemplated hereby. Neither this Agreement nor any of the
exhibits, attachments, written statements, documents, certificates or other
items prepared for or supplied to Buyer by or on behalf of the Seller or the
Principal with respect to the transactions contemplated hereby contain any
untrue statements or facts or omits a fact necessary to make each statement
contained herein or therein not misleading. There is no fact that the Seller has
not disclosed to Buyer herein and of which the Seller or any of their officers,
managers or executive employees is aware and that could reasonably be
anticipated to have a Material Adverse Effect.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

 

As a material inducement to Seller to enter into this Agreement, Buyer hereby
represents and warrants to Seller as of the Effective Date, and as of the
Closing Date and for all times in between that:

 

5.1 Organization and Corporate Power. Buyer is duly organized, validly existing
and in good standing under the laws of the State of Nevada, with full power and
authority to enter into this Agreement and the other Transaction Documents to
which Buyer is a party and perform its obligations hereunder and thereunder.

 

5.2 Authorization of Transaction. The Buyer has the requisite corporate power
and authority to execute and deliver this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The board of directors of the Buyer has duly
approved this Agreement and all other Transaction Documents to which the Buyer
is a party and has duly authorized the execution and delivery of this Agreement
and all other Transaction Documents to which it is a party and the consummation
of the transactions contemplated hereby and thereby. No other corporate
proceedings on the part of the Buyer are necessary to approve and authorize the
execution and delivery of this Agreement or the other Transaction Documents to
which the Buyer is a party and the consummation of the transactions contemplated
hereby and thereby. This Agreement and all other Transaction Documents to which
the Buyer is a party have been duly executed and delivered by the Buyer and
constitute the valid and binding agreements of the Buyer, enforceable against
the Buyer in accordance with their terms.

 

  21

   

 

5.3 No Violation. Buyer is not subject or party to any applicable law, or rule
or regulation of any governmental authority, or any Contract, or any license,
franchise or permit, or subject to any order, writ, injunction or decree, which
would be breached or violated by its execution, delivery or performance of this
Agreement and the other Transaction Documents to which Buyer is a party.

 

5.4 Governmental Authorities and Consents. Buyer is not required to submit any
notice, report or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement and the other Transaction
Documents to which Buyer is a party or the consummation of the transactions
contemplated hereby or thereby. No consent, approval or authorization of any
governmental or regulatory authority is required to be obtained by Buyer in
connection with its execution, delivery and performance of this Agreement and
the other Transaction Documents to which Buyer is a party or the transactions
contemplated hereby or thereby.

 

5.5 Litigation. There are no actions, suits, proceedings or orders pending or,
to Buyer’s knowledge, threatened against or affecting Buyer at law or in equity,
or before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
would adversely affect Buyer’s performance under this Agreement and the other
Transaction Documents to which Buyer is a party or the consummation of the
transactions contemplated hereby or thereby.

 

ARTICLE VI

INDEMNIFICATION AND RELATED MATTERS

 

6.1 Risk Allocation; Survival.

 

(a) Survival of Representations, Warranties, Covenants and Agreements. All
representations, warranties, covenants and agreements set forth in this
Agreement, the Transaction Documents or in any writing or certificate delivered
in connection with this Agreement or the transactions contemplated by this
Agreement shall survive the Closing Date except (and the only to the extent) as
otherwise provided below. Notwithstanding the foregoing, no Party shall be
entitled to recover for any Loss pursuant to Section 6.2(a)(i)(A) or Section
6.2(a)(ii)(A) unless written notice of a claim thereof is delivered to the other
Party prior to the Applicable Limitation Date. For purposes of this Agreement,
the term “Applicable Limitation Date” shall mean the twenty-four (24) month
anniversary of the Closing Date; provided, however, that the Applicable
Limitation Date with respect to the following Losses shall be as follows: (i)
with respect to any Loss arising from or related to a breach of the
representations and warranties of the Principal and Seller set forth in Section
3.9 (Taxes) or Section 3.16 (Employee Benefit Plans), the Applicable Limitation
Date shall be the 30th day after expiration of the statute of limitations
(including any extensions thereto to the extent that such statute of limitations
may be tolled) applicable to the Tax which gave rise to such Loss, (ii) with
respect to any Loss arising from or related to a breach of the representations
and warranties of the Principal and Seller set forth in Section 3.1
(Organization and Corporate Power), Section 3.2 (Authorization of Transactions),
Section 3.3 (Capitalization), Section 3.7(b) (Redemption of Stock and Payment of
Dividends), Section 3.19 (Affiliate Transactions), Section 3.22 (Indebtedness),
Section 4.1 (Authorization of Transactions), or Section 4.3 (Shares), there
shall be no Applicable Limitation Date (i.e., such representations and
warranties shall survive forever), (iii) with respect to any Loss arising from
or related to a breach of the representations and warranties of the Company and
Seller set forth in Section 3.21 (Environmental), the Applicable Limitation Date
shall be the fifth anniversary of the Closing Date and (iv) with respect to any
Loss arising from or related to a breach of the representations and warranties
of Buyer set forth in Section 5.2 (Authorization of Transactions), there shall
be no Applicable Limitation Date (i.e., such representations and warranties
shall survive forever).

 

  22

   

 

(b) Exclusive Remedy; Special Rule For Fraud. From and after the Closing Date,
the provisions of this Article VI shall be the sole and exclusive remedy for
monetary damages arising out of or resulting from the breach of any
representations, warranties or covenants made pursuant to this Agreement;
provided, however, that notwithstanding anything in this Article VI to the
contrary, in the event any Party to this Agreement perpetrates a fraud on
another Party hereto, any Party which suffers any Loss by reason thereof shall
be entitled to seek recovery therefor against the Person or Persons who
perpetrated such fraud without regard to any limitation set forth in this
Agreement (whether a temporal limitation, a dollar limitation or otherwise).

 

(c) Risk Allocation. The representations, warranties, covenants and agreements
made herein, together with the indemnification provisions herein, are intended
among other things to allocate the economic cost and the risks inherent in the
transactions contemplated hereby between the Parties and, accordingly, a Party
shall be entitled to the indemnification or other remedies provided in this
Agreement by reason of any breach of any such representation, warranty, covenant
or agreement by another Party notwithstanding whether any employee,
representative or agent of the Party seeking to enforce a remedy knew or had
reason to know of such breach and regardless of any investigation by such Party.

 

6.2 Indemnification.

 

(a) Seller Indemnification.

 

(i) Principal and Seller shall jointly and severally indemnify Buyer and its
respective officers, directors, employees, agents, representatives, Affiliates,
successors and permitted assigns (collectively, the “Buyer Parties”) and hold
each of them harmless from and against and pay on behalf of or reimburse such
Buyer Parties in respect of any loss, liability, damage, debt, obligation,
deficiency, Tax, penalty, assessment, fine, claim, cause of action or other
loss, fee, cost or expense of any kind or nature whatsoever, whether or not
arising out of third party claims and regardless of when asserted (including,
without limitation, interest, penalties, reasonable attorneys’ fees and
expenses, court costs and all amounts paid in investigation, defense or
settlement of any of the foregoing) to the extent of the actual amount thereof
(collectively, “Losses” and individually, a “Loss”) which any such Buyer Party
may suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of, (A) any misrepresentation or the
breach of any representation or warranty made by the Seller contained in this
Agreement (other than the representations and warranties contained in Article IV
of this Agreement), or any Schedule hereto or any certificate delivered by the
Seller or Principal to Buyer with respect hereto or thereto in connection with
the transactions contemplated hereby, in each case, without giving effect to any
materiality qualifier contained in Section 3.20, or (B) the breach of any
covenant or agreement made by the Seller contained in this Agreement or Schedule
hereto or any certificate delivered by the Seller to Buyer with respect hereto
or thereto in connection with the transactions contemplated by this Agreement.

 

(ii) Principal and Seller shall jointly and severally indemnify the Buyer
Parties and hold each of them harmless from and against and pay on behalf of or
reimburse such Buyer Parties in respect of any Loss which any such Buyer Party
may suffer, sustain or become subject to, as the result of, in connection with,
relating to or incidental to or by virtue of: (A) the breach of any
representation or warranty made by Seller contained in Article IV of this
Agreement, or any certificate delivered by Seller to Buyer with respect hereto
or thereto in connection with the transactions contemplated hereby; or (B) the
breach of any covenant or agreement made by Seller contained in this Agreement,
or any certificate delivered by Seller to Buyer with respect hereto or thereto
in connection with the transactions contemplated hereby.

 

  23

   

 

(b) Buyer Indemnification. Buyer shall indemnify Seller and Principal and hold
them harmless from and against and pay on behalf of or reimburse Seller and
Principal in respect of any Loss which Seller or Principal may suffer, sustain
or become subject to, as the result of, in connection with, relating to or
incidental to or by virtue of: (i) the breach by Buyer of any representation or
warranty made by Buyer contained in this Agreement, or any certificate delivered
by Buyer to Seller or Principal with respect thereto in connection with the
Closing; and (ii) the breach of any covenant or agreement made by Buyer
contained in this Agreement, or any certificate or schedule delivered by Buyer
with respect hereto in connection with the transactions contemplated hereby.

 

(c) Limitations on Indemnity. The indemnification provided for in subsections
(a) and (b) above is subject to the following limitations:

 

(i) No Party will be liable hereunder with respect to claims referred to in
subsection (a)(i)(A), (a)(ii)(A) or subsection (b) above with respect to any
representation or warranty unless or until the other Party gives written notice
thereof to such Party within the Applicable Limitation Date, if any, with
respect to such representation or warranty. Notwithstanding any implication to
the contrary contained in this Agreement, so long as a Party delivers written
notice of a claim no later than the Applicable Limitation Date, the other Party
shall be required to indemnify hereunder (pursuant to the terms of this Section
6.1) for all Losses which such Parties may incur (subject to the Basket and the
Cap, if applicable) in respect of the matters which are the subject of such
claim, regardless of when incurred.

 

(ii) Principal and/or Seller shall not be liable to the Buyer, and Buyer shall
not be liable to Seller and/or Principal, for any Loss arising under subsection
(a)(i)(A) or subsection (b)(i) above (A) unless and until the aggregate amount
of all Losses exceeds $25,000 (the “Basket”), in which case such Party(ies)
shall be liable for all Losses, including the initial $25,000, and (B) to the
extent that the aggregate amount of all such Losses indemnified by Principal,
Seller or Buyer exceeds $200,000 (the “Cap”); provided, however, that the
foregoing limitations (i.e., the Basket and the Cap) shall not apply with
respect to any Loss arising from or related to a breach of (x) any covenants of
the Buyer, the Company or Seller or (y) the representations and warranties of
the Seller set forth in Section 3.1 (Organization and Corporate Power), Section
3.2 (Authorization of Transactions), Section 3.3 (Capitalization), Section
3.7(b) (Redemption of Stock and Payment of Dividends), Section 3.9 (Taxes),
Section 3.16 (Employee Benefit Plans), Section 3.19 (Affiliate Transactions),
Section 3.22 (Indebtedness), Section 4.1 (Authorization of Transactions) or
Section 4.3 (Shares) or the representations and warranties of Buyer set forth in
Section 5.1 (Organization and Corporate Power) or Section 5.2 (Authorization of
Transactions) (collectively, the “Designated Breaches”); provided further,
however, that no Party shall be liable to the extent the aggregate amount of all
Losses resulting from Designated Breaches exceeds its share of the aggregate
amount of the Consideration.

 

(iii) All calculations of “Losses” shall take into account any tax benefit
actually realized by the Indemnified Party in connection with an indemnity claim
hereunder, and proceeds of insurance actually received (less costs of collection
and reasonably estimated cost of future demonstrable premium increases and
retro-premium obligations) by the Indemnified Party in connection with an
indemnity claim hereunder (but not in the event of the successful enforcement of
a subrogation claim against the Indemnified Party). Buyer and Seller shall take
commercially reasonable actions, consistent with prudent business practices, as
may be necessary to mitigate their damages and possible indemnified claims,
which cost of mitigation shall be covered by the indemnity set forth herein.

 

  24

   

 

(d) Procedure. If a Party hereto seeks indemnification under this Article VI,
such party (the “Indemnified Party”) shall give written notice (the
“Indemnification Notice”) to the other Party(ies) (the “Indemnifying Party”)
promptly after receiving written notice of any action, lawsuit, proceeding,
investigation or other claim against it (if by a third party) describing the
claim, the amount thereof (if known and quantifiable), and the basis thereof;
provided that the failure to so notify the Indemnifying Party promptly shall not
relieve the Indemnifying Party of its or his Liabilities hereunder except to the
extent such failure shall have prejudiced the Indemnifying Party. The
Indemnification Notice shall (i) state the aggregate amount of Losses or an
estimate thereof, in each case to the extent known or determinable at such time;
(ii) specify in reasonable detail the individual items of such Losses included
in the amount so stated, the date each such item was paid or properly accrued or
arose (to the extent known or determinable at such time), and the nature of the
misrepresentation, breach or claim to which such item is related; and (iii)
specify whether the Losses, together with previously incurred Losses, are
expected to exceed the Basket.

 

6.3 Resolution of Conflicts. If the Indemnifying Party shall so object in
writing to any claim or claims by the Indemnified Party made in any
Indemnification Notice pursuant to Section 6.2(d) above, the Indemnified Party
shall have thirty (30) days from the receipt of such objection to respond in a
written statement to the objection. If after such thirty (30) day period there
remains a dispute as to any claims, Seller and Buyer shall attempt in good faith
for thirty (30) days to agree upon the rights of the respective parties with
respect to such claims. If Seller and Buyer should so agree, a memorandum
setting forth such agreement shall be prepared and signed by Buyer and Seller.

 

6.4 Third Party Claims.

 

(a) If any action, lawsuit, proceeding, investigation or other claim shall be
brought or asserted by any third party which, if adversely determined, would
entitle the Indemnified Party to indemnity pursuant to Article VI, the
Indemnified Party shall promptly notify the Indemnifying Party of the same in
writing, specifying in detail the basis of such claim and the facts pertaining
thereto and the Indemnifying Party shall be entitled to participate in the
defense of such action, lawsuit, proceeding, investigation or other claim giving
rise to the Indemnified Party’s claim for indemnification at the Indemnifying
Party’s expense, and at the Indemnifying Party’s option (subject to the
limitations set forth below) shall be entitled to appoint lead counsel of such
defense with a nationally recognized reputable counsel reasonably acceptable to
the Indemnified Party.

 

(b) Notwithstanding any provision herein to the contrary, the Indemnifying Party
shall not have the right to assume control of such defense and shall pay the
fees and expenses of counsel retained by the Indemnified Party, if the claim
which the Indemnifying Party seeks to assume control (i) seeks non-monetary
relief, (ii) involves criminal or quasi-criminal allegations, (iii) involves a
claim to which the Indemnified Party reasonably believes an adverse
determination would be materially detrimental to or injure the Indemnified
Party’s reputation or future business prospects, or (iv) involves a claim which,
upon petition by the Indemnified Party, the appropriate court rules that the
Indemnifying Party failed or is failing to vigorously prosecute or defend.

 

(c) If the Indemnifying Party is permitted to assume and control the defense and
elects to do so, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnifying Party in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless the employment thereof has been specifically authorized by the
Indemnifying Party in writing. If the Indemnifying Party does elect to assume
and control the defense as provided herein, then the Indemnified Party shall
cooperate in the preparation and presentation of defense and shall provide the
Indemnifying Party with reasonable access to such documents and other materials
reasonably necessary for such defense.

 

  25

   

 

(d) If the Indemnifying Party shall control the defense of any such claim, the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party before entering into any settlement of a claim or ceasing to defend such
claim, if pursuant to or as a result of such settlement or cessation, injunction
or other equitable relief will be imposed against the Indemnified Party, if such
settlement does not expressly unconditionally release the Indemnified Party from
all Liabilities with respect to such claim and all other claims arising out of
the same or similar facts and circumstances, with prejudice, or if such
settlement could adversely affect any Tax or other Liability of Buyer or any
Affiliate of Buyer.

 

6.5 Right of Offset. Notwithstanding anything else contained in this Agreement
to the contrary, upon notice to the Seller specifying in reasonable detail the
basis for such offset, Buyer shall be entitled to set-off any and all amounts
determined to be owing by Seller pursuant to Section 2.3 or Article VI against
amounts otherwise payable under this Agreement or any of the other Transaction
Documents.

 

6.6 Purchase Price Adjustments. Amounts paid to or on behalf of Seller, or the
Buyer Parties as indemnification shall be treated as adjustments to the
Consideration.

 

6.7. INTENTIONALLY DELETED.

 

6.8 Maximum Contribution. If and to the extent any provision of this Article VI
is unenforceable for any reason, the Indemnifying Party hereby agrees to make
the maximum contribution to the payment and satisfaction of any Loss for which
indemnification is provided for in Section 6.2 which is permissible under
applicable legal requirements.

 

ARTICLE VII

ADDITIONAL AGREEMENTS

 

7.1 Tax Matters.

 

(a) Taxes. All transfer, documentary, sales, use, stamp, registration and other
such Taxes and fees (including any penalties, interest and additions) incurred
in connection with this Agreement, shall be paid by Seller when due, and Seller
will, at their own expense, file all necessary Tax Returns and other
documentation with respect to such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, Buyer
will, and will cause the Seller to, join in the execution of any such Tax
Returns and documentation.

 

(b) Tax Periods Ending on or Before the Effective Date. Principal shall prepare
or cause to be prepared and file or cause to be filed all Tax Returns for the
Seller for all periods ending on or prior to the Effective Date or for which the
date of measurement for such Tax occurs prior to the Effective Date which are
filed after the Effective Date, and if required by applicable law, any of the
other Parties hereto will execute and join in the execution of any such filing.
All such Tax Returns shall be prepared in accordance with past practice insofar
as they relate to such Seller. Principal shall permit Buyer to review and
comment on each such Tax Return prior to filing.

 

  26

   

 

(c) Tax Periods Beginning Before and Ending After the Effective Date. Buyer
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the Seller for Tax periods which begin before the Effective Date and
end after the Effective Date (the “Straddle Tax Returns”). Buyer shall permit
Seller to review and comment on each such Tax Return prior to filing. Any
portion of any Tax which must be paid in connection with the filing of a
Straddle Tax Return, to the extent attributable to any period or portion of a
period ending on or before the Effective Date, shall be referred to herein as
“Pre-Closing Taxes.” If the Pre-Closing Taxes involve a period which begins
before and ends after the Effective Date, such Pre-Closing Taxes shall be
calculated as though the taxable year of the Seller terminated as of the close
of business on the Effective Date; provided however, that in the case of a Tax
not based on income, receipts, proceeds, profits or similar items, Pre-Closing
Taxes shall be equal to the amount of Tax for the taxable period multiplied by a
fraction, the numerator of which shall be the number of days from the beginning
of the taxable period through the Effective Date and the denominator of which
shall be the number of days in the taxable period. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company.

 

(d) With respect to Tax Returns for the Seller for any Straddle Period, Buyer
shall provide to Principal a copy of such completed Tax Returns and a statement
(with which Buyer will make available supporting schedules and information)
certifying the amount of Tax shown on such Tax Return that is allocable to a
period prior to the Effective Date at least fifteen (15) days prior to the due
date (including any extension thereof) for filing of such Tax Return. Seller
shall pay, or if Seller do not pay, Buyer shall be entitled to set off against
amounts otherwise payable under this Agreement or any of the other Transaction
Documents, any amount owing on such Tax Return if for a period ending on or
before the Effective Date, or if for a Straddle Period. Buyer shall, with
respect to any Tax Return which Buyer is responsible under this Section 7.1(d)
for preparing and filing, make the Tax Return and related Tax workpapers
available for review by the Seller.

 

(e) Cooperation on Tax Matters.

 

(i) Seller, Principal and Buyer shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section 7.1 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include signing any Tax
Return, amended Tax Returns, claims or other documents necessary to settle any
Tax controversy, the retention and (upon the other party’s request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Buyer agrees to retain all books and records
with respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Seller, any extensions thereof)
of the respective taxable periods, and to abide by all record retention
agreements entered into with any relevant taxing authority and to give the
Seller reasonable written notice prior to transferring, destroying or discarding
any such books and records.

 

(ii) Principal shall have the right to participate in and to direct Buyer in
respect of any Tax proceeding to the extent it (a) relates to a pre-Closing
taxable year or a Pre-Closing Tax of the Seller, and (b) could increase Seller’
liability hereunder; provided, however, that Buyer shall not be required to
follow Seller’ direction in any case in which the consequence could be to
increase the Tax liability of, or otherwise have an adverse effect on, the
Company or Buyer for which Seller would have no obligation to indemnify in full.
Seller shall have no right to require the Company to settle or compromise any
such proceeding, but Buyer agrees to settle upon terms proposed by the Seller if
and to the extent Buyer reasonably determines that doing so will not increase
the Tax liability of, or otherwise have an adverse effect on, the Company or
Buyer.

 

(iii) Buyer, the Company and Seller further agree, upon request by the other, to
use their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).

 

  27

   

 

7.2 Press Releases and Announcements. After the Closing Date, the parties may
make a public announcement regarding the transactions consummated hereunder
provided that, prior to such announcement, the timing, form and content of such
announcement is approved in writing by Buyer, on the one hand, and Principal, on
the other hand.

 

7.3 Further Transfers. Seller shall execute and deliver such further instruments
of conveyance and transfer and take such additional action as Buyer may
reasonably request to effect, consummate, confirm or evidence the issuance to
Buyer of the Company Stock from treasury, and any other transactions
contemplated hereby, provided that Buyer shall reimburse Seller within fifteen
(15) days the reasonable out of pocket expenses actually incurred by Seller in
connection therewith.

 

7.4 Specific Performance. Principal acknowledges that the Seller’s Business is
unique and recognizes and affirms that in the event of a breach of this
Agreement by Principal, money damages may be inadequate and Buyer may have no
adequate remedy at law. Accordingly, each Seller agrees that Buyer shall have
the right, in addition to any other rights and remedies existing in its favor,
to enforce its rights and such Principal’s obligations hereunder not only by an
action or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief. If any such action is
brought by Buyer to enforce this Agreement, Principal hereby waives the defense
that there is an adequate remedy at law.

 

7.5 Expenses. Except as otherwise provided herein, Buyer and Principal shall pay
all of their own fees, costs and expenses (including, without limitation, fees,
costs and expenses of legal counsel, investment bankers, brokers or other
representatives and consultants and appraisal fees, costs and expenses) incurred
in connection with the negotiation of the Letter of Intent, this Agreement, the
other Transaction Documents, the performance of their respective obligations
hereunder and thereunder, and the consummation of the transactions contemplated
hereby and thereby.

 

7.6 Non-Competition, Non-Solicitation and Confidentiality.

 

(a) Non-Competition. During the period beginning on the Closing Date and ending
on the fifth anniversary of the Closing Date (the “Non-Compete Period”),
Principal shall not, and shall not allow any of his Affiliates to, engage in, or
be connected with any business, business operation, or activity (whether as an
owner, partner, shareholder, member, joint venturer, operator, promoter,
manager, employee, officer, director, consultant, advisor, independent
contractor, agent, representative or otherwise), directly or indirectly, which
consists in whole or in part of the Business (as defined herein) in any state of
the United States in which the Seller is engaged in the Business as of the
Effective Date, or has previously conducted the Business during the previous
five (5) year period ending on the Effective Date; provided, however, that
ownership of less than one percent (1%) of the outstanding stock of any
publicly-traded corporation shall not be deemed to be engaging solely by reason
thereof in any of its Business. The Principal expressly acknowledges and agrees
that each and every restriction imposed by this Section 7.6 is reasonable with
respect to subject matter, time period and geographical area. To the extent that
the Principal remains employed by the Company after the Closing, such employment
shall not be deemed a violation of this Section 7.6(a).

 

  28

   

 

(b) Non-Solicitation. Principal agrees that, during the Non-Compete Period,
Principal shall not, and shall not permit any of his Affiliates to, directly or
indirectly,

 

(i) Call upon, solicit or divert to a competitor, any customer whose account is
serviced in whole or in part by the Seller or its Affiliates as of the Effective
Date with the purpose of selling or attempting to sell to any such customer any
services included within that offered by the Seller or its Affiliates as of the
Effective Date; or

 

(ii) Divert, solicit, recruit or take away any customer, supplier, or employee
of the Seller or its Affiliates that conducted business with the Seller at any
time within the twenty-four (24) month period preceding the Effective Date, or
the patronage of any customer or supplier of the Company or its Affiliates that
conducted business with the Company at any time within the twenty-four (24)
month period preceding the Effective Date, or otherwise interfere with or
disturb the relationship existing between the Seller or its Affiliates and any
of its respective customers, suppliers, or employees, directly or indirectly.

 

For the purposes of this Agreement, the term “Business” shall mean the current
business of the Seller and its Affiliates, including without limitation, the
take-out, counter-service and full-service restaurant industry, and any other
areas of business in which the Seller has been engaged in the past, is currently
engaged, or may be engaged from and after the Effective Date.

 

(c) Confidentiality. Principal shall treat and hold as confidential any
information concerning the Business and affairs of the Seller that is not
already generally available to the public (the “Confidential Information”),
refrain from using any of the Confidential Information except in connection with
this Agreement, and deliver promptly to Buyer or destroy, at the request and
option of Buyer, all tangible embodiments (and all copies) of the Confidential
Information which are in her possession or under her control. In the event that
Principal is requested or required (by oral question or request for information
or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Principal shall notify Buyer promptly of the request or requirement
so that Buyer may seek an appropriate protective order or waive compliance with
the provisions of this Section 7.6(c). If, in the absence of a protective order
or the receipt of a waiver hereunder, Principal is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, Principal may disclose the Confidential Information to the
tribunal; provided that said Principal shall use her commercially reasonable
best efforts to obtain, at the request of Buyer, an order or other assurance
that confidential treatment shall be accorded to such portion of the
Confidential Information required to be disclosed as Buyer shall designate,
provided that Buyer shall reimburse Principal within fifteen (15) days for the
reasonable out of pocket expenses actually incurred by Principal in connection
therewith.

 

(d) Non-Disclosure. The Parties shall keep confidential the subject matter
described herein and the fact that negotiations are taking place until the
content and timing of a public announcement are mutually agreed upon or until
the Closing, whichever is earlier, and, in such case such public announcement
shall be made only pursuant to Section 7.2 except if otherwise required by
applicable law, in which case the Party required to make a public disclosure
agrees to inform the other Party prior to any disclosure and such disclosure
shall be prepared jointly by the Seller and Buyer.

 

  29

   

 

(e) Remedy for Breach. Each Seller acknowledges and agrees that in the event of
a breach by a Seller (or any of such Seller’s Affiliates) of any of the
provisions of this Section 7.6, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, the Company,
Buyer and/or their respective successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof,
in each case without the requirement of posting a bond or proving actual
damages; provided, however, that if a bond is required to be posted in order for
Company, Buyer and/or their respective successors or assigns ,to secure an
injunction, then the Parties hereby stipulate that a bond not to exceed the
amount of $1,000 will be sufficient and reasonable in all circumstances to
protect the rights of the Parties.

 

(f) Enforcement. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 7.6 is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.

 

(g) Acknowledgment. Each Seller acknowledges and agrees that (i) the
restrictions contained in this Section 7.6 are reasonable in all respects
(including, without limitation, with respect to the subject matter, time period
and geographical area) and are necessary to protect Buyer’s interest in, and
value of, the Company Stock (including, without limitation, the goodwill
inherent therein), (ii) Seller are primarily responsible for the creation of
such value, and (iii) Buyer would not have consummated the transactions
contemplated hereby without the restrictions contained in this Section 7.6.

 

ARTICLE VIII

MISCELLANEOUS

 

8.1 Amendment and Waiver. This Agreement may be amended and any provision of
this Agreement may be waived, provided that any such amendment or waiver shall
be binding upon a Party only if such amendment or waiver is set forth in a
writing executed by Buyer and Principal. No course of dealing between or among
any persons having any interest in this Agreement shall be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any Party under or by reason of this Agreement.

 

8.2 Notices. All notices, demands and other communications given or delivered
under this Agreement shall be in writing and shall be deemed to have been given
when personally delivered, mailed by first class mail, return receipt requested,
or delivered by express courier service or telecopied (with hard copy to
follow). Notices, demands and communications to Seller shall, unless another
address is specified in writing, be sent to the address or telecopy number
indicated on the signature page attached hereto, and notices, demands and
communications to the Company and Buyer shall, unless another address is
specified in writing, be sent to the address or telecopy number indicated below:

 

Notices to the Company Prior to Closing or Seller:

 

 

 

 

 

Notices to Buyer or, following the Closing, the Company:

 

  30

   

 

8.3 Binding Agreement; Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns; provided that neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by Seller or Buyer or Principal without the prior written consent of
Principal, Seller and Buyer. Notwithstanding the immediately preceding sentence,
without the prior written consent of Seller, each of Buyer and its permitted
assigns may at any time, in its sole discretion, assign, in whole or in part,
(a) its rights and obligations pursuant to this Agreement and the other
Transaction Documents to one or more of its Affiliates; (b) its rights under
this Agreement and the other Transaction Documents for collateral security
purposes to any lender providing financing to Buyer, the Company, such permitted
assign or any of their Affiliates and any such lender may exercise all of the
rights and remedies of Buyer or such permitted assign hereunder and thereunder;
and (c) its rights under this Agreement and the other Transaction Documents, in
whole or in part, to any subsequent purchaser of Buyer, the Company, such
permitted transferee or any of their divisions or any material portion of their
assets (whether such sale is structured as a sale of stock, sale of assets,
merger, recapitalization or otherwise). Notwithstanding anything contained in
this Section 8.3, no assignment permitted by this Agreement shall release Buyer
from any of its obligations contained herein.

 

8.4 Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Agreement.

 

8.5 Construction. The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any person. Nothing in the
Schedules hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Schedule identifies the
exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant. In addition, each of the Parties
acknowledges and agrees that any purchase price adjustments as a result of the
application of any provision of this Agreement or any other of the Transaction
Documents do not prejudice or limit in any respect whatsoever any Party’s rights
to indemnification under any other provision of this Agreement or any other
Transaction Document or pursuant to any other applicable requirements of law.
The word “including” shall mean including without limitation regardless of
whether such words are included in some contexts but not others.

 

  31

   

 

8.6 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.

 

8.7 Entire Agreement. The Schedules identified in this Agreement are
incorporated herein by reference. This Agreement and the documents referred to
herein contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any way,
including, without limitation, the Letter of Intent.

 

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

 

8.9 Governing Law. All questions concerning the construction, validity and
interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the Province of Ontario, Canada, without
giving effect to any choice of law or conflict of law provision (whether of the
State of Texas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the Province of Ontario, Canada.

 

8.10 Parties in Interest. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the Parties and their respective
successors and assigns any rights or remedies under or by virtue of this
Agreement.

 

8.11 CONSENT TO JURISDICTION. THE PARTIES AGREE THAT JURISDICTION AND VENUE IN
ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS AGREEMENT SHALL PROPERLY (BUT
NOT EXCLUSIVELY) LIE IN ANY COURT LOCATED IN toronto, ontario, canada. BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH
RESPECT TO SUCH ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER
IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR
INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. THE PARTIES FURTHER AGREE
THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF
ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL CONSTITUTE VALID AND LAWFUL SERVICE
OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS
PROVIDED BY STATUTE OR RULE OF COURT.

 

8.12 Delivery by Facsimile and Portable Document Format. This Agreement and any
other Transaction Document, and any amendments hereto or thereto, to the extent
signed and delivered by means of a facsimile machine or in portable document
format (“PDF’), shall be treated in all manner and respects as an original
Contract and shall be considered to have the same binding legal effects as if it
were the original signed version thereof delivered in person. At the request of
any party hereto or to any such Contract, each other party hereto or thereto
shall re-execute original forms thereof and deliver them to all other parties.
No party hereto or to any such Contract shall raise the use of a facsimile
machine or PDF to deliver a signature or the fact that any signature or Contract
was transmitted or communicated through the use of facsimile machine or PDF as a
defense to the formation of a Contract and each such party forever waives any
such defense.

 

8.13 Drafting. Both parties hereto acknowledge that each party was actively
involved in the negotiation and drafting of this Agreement and that no law or
rule of construction shall be raised or used in which the provisions of this
Agreement shall be construed in favor or against either party hereto because one
is deemed to be the author thereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.]

 

  32

   

  

IN WITNESS WHEREOF, the Parties have executed this Stock Purchase Agreement as
of the date first written above.

 

 

BUYER:

 

 

 

 

CRUZANI, INC.

 

        By: /s/ Everett M. Dickson

 

 

Everett M. Dickson       Chief Executive Officer          

 

 

SELLER:

 

 

 

 

  2603088 ONTARIO INC. O/A RECIPE FOOD CO.         By: /s/ Sandrea Gibson

 

 

Sandrea Gibson       Director          

 

  PRINCIPAL:         By: /s/ Sandrea Gibson

 

 

SANDREA GIBSON       Individually  

 

 

33

   

 

Schedule 2.1 → Stock Ownership

 

Sandrea Gibson – 100% common shares

 

Milestones schedule for Sandrea Gibson to earn back up to 50% of shares –
attached

 

 

34

   

 

The Company shall grant to Sandrea Gibson additional shares in the capital stock
of Recipe in the amount of six percent (6%) per year for five years (the “Recipe
Shares”), if Recipe achieves the annual financial milestones set forth below
(the intent being that if Recipe achieves such milestones, Gibson shall hold
Fifty Percent (50%) of the issued and outstanding shares of Recipe, which Recipe
Shares will be issued to Gibson upon achievement of such financial milestones.

 

Monthly Sales Forecast

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October

 

 

November

 

 

December

 

 

January

 

 

February

 

 

March

 

 

April

 

 

May

 

 

June

 

 

July

 

 

August

 

 

September

 

 

Total

 

Monthly Forecast restaurant and catering

 

$ 82,900

 

 

$ 107,080

 

 

$ 113,000

 

 

$ 80,000

 

 

$ 88,090

 

 

$ 103,090

 

 

$ 140,616

 

 

$ 150,616

 

 

$ 155,161

 

 

$ 125,616

 

 

$ 101,090

 

 

$ 188,520

 

 

$ 1,435,779

 

Monthly Forecast Bev

 

$ 17,100

 

 

$ 17,100

 

 

$ 20,000

 

 

$ 20,000

 

 

$ 29,000

 

 

$ 29,000

 

 

$ 29,000

 

 

$ 29,000

 

 

$ 29,000

 

 

$ 20,000

 

 

$ 36,480

 

 

$ 36,480

 

 

$ 312,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COGs Food (30% of Sales)

 

$ 24,870

 

 

$ 32,124

 

 

$ 33,900

 

 

$ 24,000

 

 

$ 26,427

 

 

$ 30,927

 

 

$ 42,185

 

 

$ 45,185

 

 

$ 46,548

 

 

$ 37,685

 

 

$ 30,327

 

 

$ 56,556

 

 

$ 430,734

 

COGs Bev (20% of Sales)

 

$ 3,420

 

 

$ 3,420

 

 

$ 4,000

 

 

$ 4,000

 

 

$ 5,800

 

 

$ 5,800

 

 

$ 5,800

 

 

$ 5,800

 

 

$ 5,800

 

 

$ 4,000

 

 

$ 7,296

 

 

$ 7,296

 

 

$ 62,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Expenses

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 28,863

 

 

$ 346,350

 

Variable Expenses

 

$ 24,041

 

 

$ 31,053

 

 

$ 32,770

 

 

$ 23,200

 

 

$ 25,546

 

 

$ 29,896

 

 

$ 40,779

 

 

$ 43,679

 

 

$ 44,997

 

 

$ 36,429

 

 

$ 29,316

 

 

$ 54,671

 

 

$ 416,376

 

Net Income

 

$ 18,807

 

 

$ 28,720

 

 

$ 33,468

 

 

$ 19,938

 

 

$ 30,454

 

 

$ 36,604

 

 

$ 51,990

 

 

$ 56,090

 

 

$ 57,954

 

 

$ 38,640

 

 

$ 41,768

 

 

$ 77,615

 

 

$ 492,047

 

 

 

35