EXHIBIT 10.1

 

AGREEMENT FOR SALE AND PURCHASE

OF BUSINESS ASSETS

 

This AGREEMENT FOR SALE AND PURCHASE OF BUSINESS ASSETS (this "Agreement"),
dated as of May 24, 2016 (the "Closing Date"), is between Oregon Analytical
Services LLC (the "Seller"), an Oregon limited liability company, Sara Lausmann
(the "Selling Member"), and EVIO Labs Eugene, LLC. (the "Buyer"), an Oregon
limited liability company.

 

RECITALS

 

A. The Seller operates a business primarily engaged in testing and screening
services for the medical and recreational marijuana industries. The Seller's
principal place of business is 1686 Pearl Street, Eugene, OR 97401. The Seller
owns equipment, inventory, contract rights, leasehold interests, real property,
and miscellaneous assets used in connection with the operation of its business.

 

B. The Buyer desires to acquire substantially all the assets used or useful, or
intended to be used, in the operation of the Seller's business, and the Seller
desires to sell such assets to the Buyer.

 

AGREEMENT

 

The parties agree as follows:

 

Article I. ASSETS PURCHASED; LIABILITIES ASSUMED

 

Section 1.01 Assets Purchased. Subject to the terms and conditions set forth in
this Agreement, the Seller agrees to sell to the Buyer and the Buyer agrees to
purchase from the Seller the following assets (the "Assets"):

 

(a)

All equipment, tools, furniture, and fixtures listed on attached Schedule
1.01(a), together with any replacements or additions to the equipment made
before the Closing;

(b)

All inventories of supplies, raw materials, parts, and finished goods owned by
the Seller, together with any replacements or additions to the inventories made
before the Closing, but excluding inventory disposed of in the ordinary course
of the Seller's business;

(c)

All the Seller's rights under Contracts listed on Schedule 8.07;

 

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(d)

Leasehold improvements installed by the Seller on the premises that are the
subject of the lease agreement identified in item _____ on Schedule 1.01(d);

(e)

All the Seller's rights under purchase orders, including those entered into in
the ordinary course of business before the Closing;

(f)

The Seller's name and goodwill;

(g)

All patents, trademarks, trade names, copyrights, service marks, and domain
names of the Seller as listed on Schedule 8.13, all registrations for them, all
applications pending for them, and all other proprietary rights and intangible
property of the Seller, including trade secrets, inventions, technology,
software, operating systems, customer lists, customer relationships, customer
agreements, customer understandings, drawings, blueprints, know-how, formulae,
slogans, processes, and operating rights and all other similar items and all
such items acquired by the Seller or coming into existence on or before the
Closing Date;

(h)

To the extent transferable, all approvals, authorizations, consents, licenses,
permits, franchises, tariffs, orders, and other registrations of any federal,
state, or local court or other governmental department, commission, board,
bureau, agency, or instrumentality held by the Seller and required or
appropriate for the conduct of the business of the Seller, including without
limitation all such items listed on Schedule 1.01(h) and all such items granted
or received on or before the Closing Date;

(i)

All accounts receivable and other receivables of the Seller, including without
limitation all receivables listed on Schedule 1.01(i) and all receivables
arising on or before the Closing Date, other than to the extent that those
receivables have been collected by the Seller in the ordinary course of business
before the Closing Date;

(j)

All choses in action, causes of action, rights of recovery and setoff, warranty
rights, and other similar rights of the Seller, including without limitation all
such items listed on Schedule 1.01(j) and all such items arising or acquired on
or before the Closing Date;

(k)

All prepaid and deferred items of the Seller, other than prepaid insurance and
taxes, but including without limitation prepaid rent and unbilled charges and
deposits relating to the business of the Seller and all other such items
reflected on the Financial Statements described in Section 8.04;

(l)

All assignable rights, if any, to all telephone lines and numbers used in the
conduct of the business of the Seller, including without limitation those listed
on Schedule 1.01(m).

 

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Section 1.02 Liabilities.

 

(a)

Assumed Liabilities.

 

(i)

The Buyer will accept the assignment and assume responsibility for all unfilled
orders from customers of the Seller assigned to the Buyer pursuant to Section
1.01(e) and will assume responsibility of payment for purchase orders for
inventory items that have been placed by the Seller before the Closing but that
will not be delivered until after the Closing. The Buyer will assume and perform
the Seller's obligations under the Contracts listed on Schedule 8.07 arising on
or after the Closing Date.

(ii)

The Buyer will accept the assignment and assume responsibility for Seller's
obligations pursuant to the promissory note between Seller and Benjamin M.
Nelson dated January 10, 2015 and attached hereto as Exhibit I.

 

(b)

Liabilities Not Assumed. Except for the liabilities and obligations to be
assumed by the Buyer under Section 1.02(a), the Buyer will not assume and will
not be liable for any liabilities of the Seller, known or unknown, contingent or
absolute, accrued or other, and the Assets will be free of all liabilities,
obligations, liens, and encumbrances. Without limiting the generality of the
foregoing and except as otherwise provided above, the Buyer will not be
responsible for any of the following:

 

(i)

Liabilities, obligations, or debts of the Seller, whether fixed, contingent, or
mixed, and whether based on events occurring before or after the Closing,
including without limitation those based on tort, contract, statutory, or other
claims or involving fines or penalties payable to any governmental authority;

(ii)

Liabilities, obligations, or debts of the Seller for any federal, state, or
local tax, including without limitation federal income taxes, state income and
excise taxes, state and local real and personal property taxes, and federal,
state, and local withholding and payroll taxes;

(iii)

Liabilities or obligations of the Seller to employees for salaries, bonuses, or
health and welfare benefits or with respect to any profit-sharing, stock bonus,
pension, retirement, stock purchase, option, bonus, or deferred compensation
plan or for any other benefits or compensation (including without limitation
accrued vacation);

(iv)

Liabilities or obligations of the Seller for employee severance payments or
arrangements resulting from termination of the Seller's employees;

(v)

Liabilities or obligations of the Seller relating to issuances of securities;

(vi)

Liabilities or obligations of the Seller incurred in connection with
distributions to members or any corporate dissolution; and

(vii)

Liabilities or obligations of the Seller under any environmental law.

 

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Article II. [RESERVED]

 

Article III. ALLOCATION OF PURCHASE PRICE

 

Buyer will retain qualified third party valuation expert to allocate purchase
price.

 

Article IV. PURCHASE PRICE

 

Section 4.01 Purchase Price. The purchase price for the Assets (the "Purchase
Price") will be:

 

(a)

$972,500.00 for all Assets other than Inventory; and

(b)

The assumption by the Buyer of:

 

(i)

The liabilities of the Seller to the extent and in the amounts identified in
Section 1.02, to the extent that such liabilities are not paid or discharged
before the Closing Date;

(ii)

All liabilities of the Seller of a type identified in Section 1.02 and incurred
in the ordinary course of business on or before the Closing Date (to the extent
that such liabilities are not paid or discharged before the Closing Date);

(iii)

All obligations of the Seller under any lease, contract, agreement, commitment,
understanding, purchase order, sales order, document, or instrument entered into
by the Seller between the date of this Agreement and the Closing Date that the
Buyer, in its sole discretion, elects on or before the Closing Date to assume.

 

Section 4.02 Closing Inventory. Immediately before Closing, the Seller will take
a closing inventory of merchandise and supplies. The Buyer will have the right
to observe and inspect the taking of the inventory.

 

Section 4.03 Inventory. The Purchase Price for the Seller's inventory of
merchandise and supplies will be computed at the Seller's cost, as reflected in
the Seller's records of inventories on hand at the Closing.

 

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Article V. PAYMENT OF PURCHASE PRICE

 

The price for the Assets will be paid as follows:

 

Section 5.01 Within two business days after the Closing, the Buyer will initiate
a transfer, to the account specified by the Selling Member, $200,000.00 worth of
the Series "C" Preferred Stock of Signal Bay Inc., a Colorado corporation
(OTCMKTS: SGBY), with the number of shares to be 200,000.

 

Section 5.02 At the Closing, the Buyer shall execute a promissory note in favor
of the Selling Member, attached hereto as Exhibit B (the "Note"), in the amount
of $700,000.00 to be paid in the manner described in the Note, as well as the
Security Agreement attached thereto as Exhibit B-1.

 

Section 5.03 At the closing, the Buyer shall pay to Selling Member $12,500.00
via cashier's check, wire transfer, or any other means to which Buyer and
Selling Member agree.

 

Section 5.04 At the Closing, the Buyer shall pay to CR Labs, Inc., an Oregon
business corporation ("CR Labs"), $6,735.00 as payment in full for a debt owed
by Selling Member to CR Labs.

 

Section 5.05 The Buyer shall withhold the remaining $53,265.00 of the Purchase
Price (the "Tax Reserve") until any and all federal, state, or local tax
liabilities, including without limitation federal income taxes, state income and
excise taxes, state and local real and personal property taxes, and federal,
state, and local withholding and payroll taxes, owed by the Seller as of the
Closing Date (the "Tax Liabilities") are paid in full. Buyer shall be entitled
to offset any and all payments towards the Tax Liabilities against the Tax
Reserve. Upon payment in full of the Tax Liabilities, any remaining balance of
the Tax Reserve shall be paid to Selling Member within a reasonable time.

 

Article VI. ADJUSTMENTS

 

The operation of the Seller's business and related income and expenses up to the
close of business on the day before the Closing will be for the account of the
Seller and thereafter for the account of the Buyer. Expenses, including but not
limited to utilities, personal property taxes, rents, real property taxes,
wages, vacation pay, payroll taxes, and fringe benefits of employees of the
Seller, will be prorated between the Seller and the Buyer as of the close of
business on the Closing, the proration to be made and paid, insofar as
reasonably possible, on the Closing, with settlement of any remaining items to
be made within 30 days after the Closing.

 

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Article VII. OTHER AGREEMENTS

 

At the Closing, the parties will execute the following additional agreements
(the "Related Agreements"):

 

(a)

The Note and the Security Agreement described in Section 5.02 above,
substantially in the form attached as Exhibits B and B-1;

(b)

The Assignment and Assumption Agreement, substantially in the form attached as
Exhibit C;

(c)

The Noncompetition Agreement between the Buyer, the Seller, and the Selling
Member, substantially in the form attached as Exhibit D;

(d)

The Earnout Agreement in favor of the Selling Member, attached hereto as Exhibit
E (the "Earnout"), such that the Purchase Price may be supplemented by a payment
calculated and paid as therein provided;

(e)

Employment Agreements between Buyer and Selling Member and Buyer and Michael
Lausmann, attached hereto as Exhibits F-1 and F-2

 

Article VIII. SELLER'S AND SELLING MEMBER'S REPRESENTATIONS AND WARRANTIES

 

Section 8.01 As used in this Agreement, 'Material Adverse Effect' means a
material adverse effect on the business, results of operations, financial
position, assets, or prospects of the Seller, including any occurrence,
condition, change, event, or effect resulting from or relating to changes in
general economic or financial market conditions, which will in any event include
any adverse effect on the members' equity, assets, revenue, or net income of the
Seller in excess of $1,000.00 and 'Material Adverse Change' means any change
that has resulted, will result, or is likely to result from a Material Adverse
Effect."

 

Subject to, and except as disclosed by the Seller in the Schedule of Exceptions
in a numbered paragraph that corresponds to the section for which disclosure is
made, the Seller and the Selling Member represent and warrant to the Buyer as
follows:

 

Section 8.02 Corporate Existence. The Seller is a limited liability company duly
incorporated and legally existing under the laws of the state of Oregon and is
qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to qualify. The Seller has all
requisite corporate power and authority and all material licenses, permits, and
authorizations necessary to own and operate the Assets and to carry on its
business as now conducted. The copies of the Seller's charter documents and
operating agreement that have been furnished to the Buyer's counsel reflect all
amendments made thereto at any time before the Closing Date and are correct and
complete.

 

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Section 8.03 Authorization. The Seller or the Selling Member has duly authorized
the execution, delivery, and performance of this Agreement and all other
agreements contemplated by this Agreement to which the Seller or the Selling
Member is a party, as the case may be. This Agreement and the Related
Agreements, when executed and delivered by the parties thereto, will constitute
the legal, valid, and binding obligation of the Seller or the Selling Member, as
the case may be, enforceable against the Seller or the Selling Member, as the
case may be, in accordance with their respective terms except as the
enforceability thereof may be limited by the application of bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or judicial limits on the right of specific performance. Except as set
forth on Schedule 8.03, the execution and delivery by the Seller and the Selling
Member of this Agreement and the Related Agreements to which the Seller or the
Selling Member is a party, and the fulfillment of and compliance with the
respective terms hereof and thereof by the Seller or the Selling Member, do not
and will not (a) conflict with or result in a breach of the terms, conditions,
or provisions of, or constitute a default under, any Contract; (b) result in the
creation of any lien, security interest, charge, or encumbrance on the Assets;
(c) result in a violation of the operating agreement of the Seller or any law,
statute, rule, or regulation to which the Seller or the Selling Member is
subject; or (d) result in a violation of any order, judgment, or decree to which
the Seller or the Selling Member is subject; or (e) require any authorization,
consent, approval, exemption, or other action by or notice to any court or
administrative or governmental body.

 

Section 8.04 Financial Information. The collected financial information of the
Seller, in the form attached to this Agreement as Schedule 8.04 (the
"[Financials"), fairly presents the financial position of the Seller as of the
date provided. Except as contemplated by or permitted under this Agreement,
there are no adjustments to the Financials that would, individually or in the
aggregate, have a Material Adverse Effect on the Seller's financial condition or
results of operations as reported in the Financials.

 

Section 8.05 Brokers and Finders. Neither the Seller nor the Selling Member has
employed any broker or finder in connection with the transactions contemplated
by this Agreement, or taken action that would give rise to a valid claim against
any party for a brokerage commission, finder's fee, or other like payment.

 

Section 8.06 Transfer Not Subject to Encumbrances or Third-Party Approval. The
execution and delivery of this Agreement and the Related Agreements by the
Seller and the Selling Member, and the consummation of the contemplated
transactions, will not result in the creation or imposition of any valid lien,
charge, or encumbrance on any of the Assets, and will not require the
authorization, consent, or approval of any third party, including any
governmental subdivision or regulatory agency.

 

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Section 8.07 Contracts. Schedule 8.07 contains a complete and accurate list of
each contract, agreement, instrument, lease, and commitment (including license
agreements) to which the Seller is a party (the "Contracts"). The Seller has
delivered a copy of each Contract to the Buyer. Except as otherwise set forth on
Schedule 8.07:

 

(a)

The Seller is not in default under any Contract, nor, to the Seller's and the
Selling Member's best knowledge, does there exist any event that, with notice or
the passage of time or both, would constitute a default or event of default by
the Seller under any Contract.

(b)

No power of attorney or similar authorization given by the Seller is currently
in effect or outstanding. No Contract limits the freedom of the Seller to
compete in any line of business or with any person.

(c)

Each of the Contracts is valid, binding, and enforceable by the Seller in
accordance with its terms and is in full force and effect. There is no pending
or threatened proceeding that would interfere with the quiet enjoyment of any
leasehold of which the Seller is the lessee or sublessee. All other parties to
the Contracts have consented or, before the Closing, will have consented (when
such consent is necessary) to the consummation of the transaction contemplated
by this Agreement without requiring modification of the Seller's rights or
obligations under any Contract.

(d)

The Seller is not aware of any default by any other party to any Contract or of
any event that (whether with or without notice, lapse of time, or both) would
constitute a default by any other party with respect to obligations of that
party under any Contract, and, to the knowledge of the Seller and the Selling
Member, there are no facts that exist indicating that any of the Contracts may
be totally or partially terminated or suspended by the other parties.

(e)

To the Seller's knowledge, no Contract will result in any loss to the Seller on
the performance thereof (including any liability for penalties or damages,
whether liquidated, direct, indirect, incidental, or consequential).

 

Section 8.08 Compliance with Codes and Regulations. The Seller and the Selling
Member have no knowledge, after reasonable investigation, that leasehold
improvements violate any provisions of any applicable building codes, fire
regulations, building restrictions, or other ordinances, orders, or regulations.

 

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Section 8.09 Litigation. Except as set forth on Schedule 8.09, no action, suit,
proceeding, order, investigation, or claim is pending or, to the best of the
Seller's and the Selling Member's knowledge, threatened against the Seller or
its property, at law or in equity, or before or by any governmental department,
commission, board, bureau, agency, or instrumentality; the Seller is not subject
to any arbitration proceedings under collective bargaining agreements or
otherwise or, to the best of the Seller's and the Selling Member's knowledge,
any governmental investigations or inquiries; and, to the best knowledge of the
Seller and the Selling Member, no basis exists for any of the foregoing.

 

Section 8.10 Compliance with Laws. To the best of the Seller's and the Selling
Member's knowledge, (a) the Seller has at all relevant times conducted its
business in compliance with its articles of organization and operating
agreement, and is in compliance with the laws of the State of Oregon, and local
ordinances and zoning laws; and (b) the Seller is not in violation of the laws
of the State of Oregon or local ordinances and zoning laws, other than
violations that singly or in the aggregate do not and, with the passage of time,
will not have a Material Adverse Effect. The Seller is not subject to any
outstanding order, writ, injunction, decree, or judgment and the Seller has not
been charged with, or threatened with a charge of, a violation of any provision
of federal, state, or local law or regulation.

 

Section 8.11 Employment Matters.

 

(a)

Labor Matters.

 

(i)

The Seller is not a party or otherwise subject to any collective bargaining or
other agreement governing the wages, hours, or terms of employment of its
employees.

(ii)

There is no (a) unfair labor practice complaint against the Seller pending
before the National Labor Relations Board or any other governmental authority;
(b) labor strike, slowdown, or work stoppage actually occurring or, to the best
knowledge of the Seller and the Selling Member, threatened against the Seller;
(c) representation petition regarding the Seller's employees pending before the
National Labor Relations Board; or (iv) grievance or any arbitration proceeding
pending arising out of or under collective bargaining agreements applicable to
the Seller.

(iii)

The Seller has not experienced any primary work stoppage or other organized work
stoppage involving its employees in the past two years.

 

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(b)

Employment Claims. Except as disclosed on Schedule 8.11(b), no claim is pending
or, to the Seller's knowledge, threatened by or on behalf of any of its
employees under any federal, state, or local labor or employment laws or
regulations.

(c)

Employee Benefits. Schedule 8.11(c) lists all pension, retirement,
profit-sharing, deferred compensation, bonus, commission, incentive, life
insurance, health and disability insurance, hospitalization, and all other
employee benefit plans or arrangements (including, without limitation, any
contracts or agreements with trustees, insurance companies, or others relating
to any such employee benefit plans or arrangements) established or maintained by
the Seller (the "Plans"), and complete and accurate copies of all of the Plans
have been provided to the Buyer. None of the Plans is a defined benefit pension
plan under Title IV of the Employee Retirement Income Security Act of 1974
(ERISA), as amended.

(d)

Employment Agreements. Except as disclosed on Schedule 8.11(d), each of the
Seller's employees is an "at-will" employee and no written employment,
commission, or compensation agreement of any kind exists between the Seller and
any of its employees. Schedule 8.11(d) lists all of the Seller's employment or
supervisory manuals, employment or supervisory policies, and written information
generally provided to employees (such as applications or notices), and true and
complete copies of those manuals, policies, and written information have been
provided to the Buyer. The Seller does not have any agreements or understandings
with its employees except as reflected in the items listed on Schedules 8.11(c)
and 8.11(d).

(e)

Compensation. Schedule 8.11(e) contains a complete and accurate list of all
officers, employees, and consultants of the Seller, specifying their names and
job designations, the total amount paid or payable as compensation to each of
them, and the basis of such compensation, whether fixed or commission or a
combination thereof, and benefits accrued by them through the date of this
Agreement.

(f)

Severance. Except as set forth on Schedule 8.11(f), the Seller has no severance
pay plan, policy, practice, or agreement with any of its employees.

 

Section 8.12 Tangible Assets.

 

(a)

Real Property. Schedule 8.12(a) contains a complete and accurate list of all
real property owned or leased by the Seller (the "Real Property").

(b)

Personal Property. Schedule 8.12(b) contains a complete and accurate list of all
the tangible personal property owned by the Seller (the "Tangible Personal
Property"). The Assets include all the assets, properties, and rights owned or
used by the Seller in its business.

(c)

Real Property Improvements. All the Improvements to the Real Property are
included in the Assets.

 

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Section 8.13 Intellectual Property. Schedule 8.13 contains a complete and
accurate list of the Seller's patents, trademarks, trade names, copyrights,
technology, domain names, know-how, processes, related applications, and other
intellectual property used in the Business (the "Intellectual Property"). The
Seller owns all its Intellectual Property free and clear of all liens, claims,
and encumbrances. To the Seller's knowledge, the Seller's use of its
Intellectual Property does not create any conflict with or infringe on any
rights of any other person and no claims of conflict or infringement have been
asserted against the Seller. Schedule 8.13 also describes all agreements,
licenses, permits, and other instruments under which the Seller has acquired or
been granted or sold or granted a right to use any Intellectual Property,
together with a brief description of such Intellectual Property.

 

Section 8.14 Leases. The Seller is a party to only the real property leases
described on Schedule 8.07.

 

Section 8.15 Title to and Condition of Assets.

 

(a)

The Seller owns (and at Closing the Buyer will acquire) all the Assets free and
clear of all mortgages, pledges, security interests, options, claims, charges,
or other encumbrances or restrictions of any kind, except for (a) liens
disclosed on Schedule 8.15(a) and (b) liens for taxes not yet due or being
contested in good faith (and for which adequate accruals or reserves have been
established on the Current Balance Sheet).

(b)

The Seller has (and at Closing the Buyer will acquire) good and marketable title
to the Assets.

(c)

All Tangible Personal Property has been maintained and operated in accordance
with manufacturers' specifications and prudent industry practices, is in a good
state of maintenance and repair, ordinary wear and tear excepted, and is
adequate for the conduct of the Seller's business.

(d)

There are no defects or liabilities affecting any of the Tangible Personal
Property that might detract from the value of the property or assets, interfere
with any present or intended use of any of the property or assets, or affect the
marketability of the property or assets, in each case, other than those that
will not have a Material Adverse Effect.

(e)

The plants, buildings, and structures included in the Real Property currently
have access to (a) public roads or valid easements over private streets or
private property for ingress to and egress from the Real Property; and (b) water
supply, storm and sanitary sewer facilities, telephone, gas and electrical
connections, fire protection, drainage, and other public utilities, in each case
as is necessary for the conduct of the Business.

 

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(f)

None of the material structures on the Real Property encroaches on real property
of another person, and no structure of any other person substantially encroaches
on any of the Real Property.

(g)

To the best of Seller's knowledge, neither the current operations on the Real
Property nor any improvements on the Real Property violate any applicable
building code, zoning requirement, or other statute or ordinance, and the Seller
has not received any notice of any pending or contemplated special assessments
against the Real Property.

(h)

There are no material structural defects in any structure on the Real Property;
all electrical wiring, heating, cooling, and plumbing systems are in good
working order; all utility connections enter the Real Property through either
adjoining public streets or private easements that will inure to the benefit of
the Buyer; and no structures are located on utility lines or encroach on utility
rights-of-way.

(i)

The Assets are provided without any warranty, whether express or implied. This
applies in part but not exclusively to a warranty of marketability and
suitability for a particular purpose as well as a warranty of non-violation of
applicable law. Assets are taken AS-IS, WHERE-IS, with all faults and defects.

 

Section 8.16 Undisclosed Liabilities. The Seller does not have any liability or
obligation (whether absolute, accrued, contingent, or other, and whether due or
to become due) that is not accrued, reserved against, or disclosed in the
Current Balance Sheet, other than liabilities incurred in the ordinary course of
business consistent with past practice since the date of the Current Balance
Sheet or that individually or in the aggregate will not have a Material Adverse
Effect.

 

Section 8.17 Absence of Certain Changes or Events. Since the date of the Current
Balance Sheet, there has not been:

 

(a)

Any Material Adverse Change or any event, occurrence, development, or state of
circumstances or facts that could reasonably be expected to result in a Material
Adverse Change;

(b)

Any damage, destruction, or casualty loss, whether insured against or not, to
any of the Assets;

(c)

Any entry into any agreement, commitment, or transaction (including, without
limitation, any borrowing, capital expenditure, or capital financing or any
amendment, modification, or termination of any existing agreement, commitment,
or transaction) by the Seller, except agreements, commitments, or transactions
in the ordinary course of business and consistent with past practices or as
expressly contemplated in this Agreement;

(d)

Any conduct of business that is outside the ordinary course of business or not
substantially in the manner that the Seller previously conducted its business;

(e)

Any purchase or other acquisition of property or any sale, lease, or other
disposition of property, or any expenditure, except in the ordinary course of
business;

 

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(f)

Any incurrence of any noncontract liability known to the Seller that, either
singly or in the aggregate, is material to the Business, results of operations,
financial condition, or prospects of the Seller;

(g)

Any encumbrance or consent to encumbrance of any property or assets except in
the ordinary course of business; or

(h)

Any change in the assets, liabilities, licenses, permits, or franchises of the
Seller, or in any agreement to which the Seller is a party or is bound, that has
had or reasonably could be expected to have a Material Adverse Effect.

 

Section 8.18 Environmental Conditions.

 

(a)

Definitions. As used in this Agreement,

 

(i)

"Environmental Law" means any federal, state, or local statute, ordinance, or
regulation pertaining to the protection of the environment and any applicable
orders, judgments, decrees, permits, licenses, or other authorizations or
mandates under such statutes, ordinances, or regulations; and

(ii)

"Hazardous Substance" means any hazardous, toxic, radioactive, or infectious
substance, material, or waste as defined, listed, or regulated under any
Environmental Law.

 

(b)

Compliance. Except as disclosed on Schedule 8.18, the Seller, the Seller's
business, and the Assets are in compliance with all Environmental Laws and the
Seller has all permits required under Environmental Laws in connection with the
construction, ownership, or operation of the Assets and the Seller's business.
The Seller is not aware of and has not received notice of any past, present, or
anticipated future events, conditions, activities, investigation, studies,
plans, or proposals that (a) would interfere with or prevent compliance by the
Seller, the Seller's business, or the Assets with any Environmental Law or (b)
may give rise to any common-law or other liability, or otherwise form the basis
of a claim, action, suit, proceeding, hearing, or investigation, involving the
Seller, the Seller's business, or the Assets and related in any way to Hazardous
Substances or Environmental Laws.

 

 13

 

 

(c)

Hazardous Substances. Except as disclosed on Schedule 9.17:

 

(i)

No Hazardous Substance has been disposed of, spilled, leaked, or otherwise
released on, in, under, or from, or otherwise come to be located in the soil or
water (including surface water and groundwater) on or under, the Real Property
or any other real property owned, leased, or occupied by the Seller in
connection with the Seller's business now or in the past;

(ii)

None of the Assets have incorporated into them any asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls (in electrical equipment or
otherwise), lead-based paint, or any other Hazardous Substance that is
prohibited, restricted, or regulated when present in buildings, structures,
fixtures, or equipment;

(iii)

All wastes generated in connection with the Seller's business are and have been
transported to and disposed of at an authorized waste disposal facility in
compliance with all Environmental Laws; and

(iv)

The Seller is not liable under any Environmental Law for investigation,
remedial, removal, or other response costs, natural resources damages, or other
claims (including administrative orders) arising out of the release or
threatened release of any Hazardous Substance at the Real Property or any other
facility, and no basis exists for any such liability.

(v)

Underground Storage Tanks. Except as disclosed on Schedule 8.18, there are no
underground storage tanks on the Real Property (whether or not regulated and
whether or not out of service, closed, or decommissioned).

 

(d)

Environmental Records. Except as disclosed on Schedule 8.18, the Seller has
disclosed and made available to the Buyer true, complete, and correct copies or
results of any reports, studies, analyses, tests, monitoring, correspondence
with governmental agencies, or other documents in the possession of or initiated
by the Seller or otherwise known to the Seller and pertaining to the existence
of Hazardous Substances, to compliance with Environmental Laws, or to any other
environmental concern relating to the Assets or the Seller's business.

 

Section 8.19 Receivables. Each of the Seller's receivables (including accounts
receivable, loans receivable, and advances) that is reflected in the Current
Balance Sheet, and each of the receivables that has arisen since that date, has
arisen only from bona fide transactions in the ordinary course of the Seller's
business and will be fully collected when due, without resort to litigation and
without offset or counterclaim.

 

 14

 

  

Section 8.20 Inventories. The Seller's inventories, whether finished goods, work
in process, or raw materials, shown on the Current Balance Sheet or thereafter
acquired are all items of a quality usable or saleable in the ordinary and usual
course of the Seller's business, except for inventory items that are obsolete or
not usable or saleable in the ordinary course of business and that have been
written down to an amount not in excess of realizable market value or for which
adequate reserves or allowances have been provided. The values at which
inventories are carried reflect an inventory valuation policy consistent with
the Seller's past practice and in accordance with generally accepted accounting
principles consistently applied.

 

Section 8.21 Bank Accounts. All bank accounts of the Seller are covered in their
entirety by FDIC insurance.

 

Section 8.22 Investment.

 

(a)

The Selling Member understands that the Shares are a speculative investment and
involves a risk of loss of the Seller's investment.

(b)

The Selling Member understands that the Seller may be unable to liquidate its
investment in the Shares.

(c)

The Selling Member has the knowledge and experience in financial and business
matters necessary to make the Seller capable of evaluating the merits and risks
of an investment in the Shares.

(d)

The Selling Member has had the opportunity to ask questions and receive answers
concerning the Buyer and the terms and conditions of the issuance of the Shares,
and to obtain any additional information deemed necessary by the Selling Member
to evaluate the merits and risks of an investment in the Shares. The Selling
Member has obtained all the information it desires in connection with the
Shares.

(e)

The Selling Member is acquiring the Shares solely for the Selling Members own
account, for investment, and not with a view to or for resale in connection with
any distribution of the Shares.

(f)

The Selling Member has no oral or written agreement or plan to sell, assign, or
otherwise negotiate the Shares.

(g)

The Selling Member understands that the Seller must bear the economic risk of
owning the Shares for an indefinite period of time.

 

Section 8.23 Accuracy of Representations and Warranties. None of the
representations or warranties of the Seller or the Selling Member contain or
will contain any untrue statement of a material fact or omit or will omit or
misstate a material fact necessary in order to make statements in this Agreement
not misleading.

 

 15

 

  

Article IX. REPRESENTATIONS OF BUYER

 

The Buyer represents and warrants to the Seller and the Selling Member as
follows:

 

Section 9.01 Company Existence. The Buyer is a limited liability company duly
organized and legally existing under the laws of the state of Oregon. The Buyer
has all requisite corporate or individual power and authority to enter into this
Agreement and the Related Agreements and to perform its obligations under them.

 

Section 9.02 Authorization. The execution, delivery, and performance of this
Agreement and the related agreements have been duly authorized and approved by
the board of directors and members of the Buyer. This Agreement and the Related
Agreements constitute valid and binding agreements of the Buyer, enforceable in
accordance with their terms, except as enforceability may be limited by
bankruptcy, reorganization, insolvency, or similar laws affecting the
enforcement of creditors' rights or by the application of general principles of
equity.

 

Section 9.03 Brokers and Finders. The Buyer has not employed any broker or
finder in connection with the transactions contemplated by this Agreement and
has taken no action that would give rise to a valid claim against any party for
a brokerage commission, finder's fee, or other like payment.

 

Section 9.04 No Conflict with Other Instruments or Agreements. The execution,
delivery, and performance by the Buyer of this Agreement and the Related
Agreements will not result in a breach or violation of, or constitute a default
under, the Buyer's Articles of Organization or Bylaws or any material agreement
to which the Buyer is a party or by which the Buyer is bound.

 

Section 9.05 Governmental Authorities. Except as set forth on Schedule 9.05, (a)
the Buyer is not required to submit any notice, report, or other filing with any
governmental or regulatory authority in connection with the Buyer's execution
and delivery of this Agreement and the Related Agreements and the consummation
of the purchase and (b) the Buyer is not required to obtain any consent,
approval, or authorization of any governmental or regulatory authority in
connection with the Buyer's execution, delivery, and performance of this
Agreement and the Related Agreements and the consummation of the purchase of the
Assets.

 

Section 9.06 Accuracy of Representations and Warranties. None of the
representations or warranties of the Buyer contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make the statements contained herein not misleading.

 

 16

 

  

Article X. COVENANTS OF SELLER AND SELLING MEMBER

 

Section 10.01 Seller's Operation of Business Before Closing. The Seller and the
Selling Member agree that between the date of this Agreement and the Closing,
the Seller will:

 

(a)

Continue to operate the business that is the subject of this Agreement in the
usual and ordinary course and in substantial conformity with all applicable
laws, ordinances, regulations, rules, or orders, and will use its best efforts
to preserve its business organization and to preserve the continued operation of
its business with its customers, suppliers, and others having business relations
with the Seller;

(b)

Not assign, sell, lease, or otherwise transfer or dispose of any of the Assets
used in the performance of its business, whether now owned or hereafter
acquired, except in the normal and ordinary course of business and in connection
with its normal operation;

(c)

Maintain all the Assets other than inventory in their present condition,
reasonable wear and tear and ordinary usage excepted, and maintain the inventory
at levels normally maintained; and

(d)

Notify the Buyer promptly in the event of any material change in the Assets or
the Seller's business before Closing or any material adverse change in the
financial condition of the Seller or of any breach of a representation or
warranty provided in this Agreement.

 

Section 10.02 Access to Premises and Information. At reasonable times before the
Closing, the Seller will provide the Buyer and its representatives with
reasonable access during business hours to the assets, titles, contracts, and
records of the Seller and will furnish such additional information concerning
the Seller's business as the Buyer from time to time may reasonably request.

 

Section 10.03 Employee Matters.

 

(a)

Before the Closing, the Seller will deliver to the Buyer a list of the names of
all persons on the Seller's payroll, together with a statement of amounts paid
to each during the Seller's most recent fiscal year and amounts paid for
services from the beginning of the current fiscal year to the Closing. Before
the Closing, the Seller will also provide the Buyer with a schedule of all
employee bonus arrangements and a schedule of other material compensation or
personnel benefits or policies in effect.

 (b)

Before the Closing, the Seller will not, without the Buyer's prior written
consent, enter into any material agreement with its employees, increase the rate
of compensation or bonus payable to or to become payable to any employee, or
effect any changes in the management, personnel policies, or employee benefits,
except in accordance with existing employment practices.

 

 17

 

 

(c)

The Seller will undertake all action necessary or appropriate to permit the
Buyer, if the Buyer so desires, to take over the Seller's pension and
profit-sharing plan as a successor employer, and will cooperate with the Buyer
with respect to this undertaking.

 (d)

As of the Closing, the Seller will terminate all of its employees who do not
have employment agreements that are transferable to the Buyer and will pay each
employee all wages, commissions, and accrued vacation pay earned up to the time
of termination, including overtime pay.

 

Section 10.04 Change of Name. At the Closing, the Seller and Selling Member will
take all action necessary or appropriate to permit the Buyer to legally commence
using the Seller's name as of the day after Closing, including but not limited
to the dissolution of Seller with the Oregon Secretary of State.

 

Section 10.05 Conditions and Best Efforts. The Seller and the Selling Member
will use their best efforts to effectuate the transactions contemplated by this
Agreement and the Related Agreements and to fulfill all the conditions of their
obligations under this Agreement and the Related Agreements, and will do all
acts and things as may be required to carry out their respective obligations
under this Agreement and the Related Agreements.

 

Section 10.06 No Negotiations with Others. Except as otherwise permitted by this
Agreement, or with the Buyer's prior written consent, the Seller and the Selling
Member will refrain, and will cause the Seller's officers, directors, and
employees and any investment banker, lawyer, accountant, or other agent retained
by the Seller or the Selling Member to refrain, from initiating or soliciting
any inquiries or making any proposals with respect to, or engaging in
negotiations concerning, or providing any confidential information or data to,
or having any discussions with any person relating to, any acquisition, business
combination or purchase of all or any significant portion of the assets of, or
any equity interest in, the Seller. The Seller and the Selling Member will
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any parties conducted heretofore with respect
to any of the foregoing.

 

Section 10.07 Press Releases. No notice to customers, press release, or other
public announcement concerning the transactions contemplated by this Agreement
will be made by the Seller [or the Selling Member] without the Buyer's prior
written consent, which consent will not be unreasonably withheld; but, however,
nothing in this section will prevent a party from supplying such information or
making statements as required by governmental authority or as necessary for a
party to satisfy its legal obligations (prompt notice of which must in any such
case be given to the other party or parties).

 

Section 10.08 Bank Accounts. At all times before the Closing, all bank accounts
of the Seller will be covered in their entirety by FDIC insurance.

 

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Article XI. COVENANTS OF BUYER

 

Section 11.01 Conditions and Best Efforts. The Buyer will use its best efforts
to effectuate the transactions contemplated by this Agreement and the Related
Agreements and to fulfill all the conditions of the Buyer's obligations under
this Agreement and the Related Agreements, and will do all acts and things as
may be required to carry out the Buyer's obligations and to consummate this
Agreement and the Related Agreements.

 

Section 11.02 Confidential Information. If for any reason the sale of Assets
contemplated by this Agreement is not consummated, the Buyer will promptly
return to the Seller and will not disclose to third parties any confidential
information received from the Seller or the Selling Member in the course of
investigating, negotiating, and performing the transactions contemplated by this
Agreement.

 

Section 11.03 Press Releases. The buyer will not make or provide any notice to
customers, press release, or other public announcement concerning the
transactions contemplated by this Agreement without the prior written consent of
the Seller [and the Selling Member], which consent will not be unreasonably
withheld; but, however, nothing in this section will prevent a party from
supplying such information or making statements as required by governmental
authority or as necessary for a party to satisfy its legal obligations (prompt
notice of which must in any such case be given to the other party or parties).

 

Article XII. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS

 

The obligation of the Buyer to purchase the Assets is subject to the
fulfillment, before or at the Closing, of each of the following conditions, any
one or portion of which may be waived in writing by the Buyer:

 

Section 12.01 Representations, Warranties, and Covenants of Seller and Selling
Member. All representations and warranties made in this Agreement by the Seller
and the Selling Member will be true in all material respects through the Closing
and neither the Seller nor the Selling Member will have violated or will have
failed to perform in accordance with any covenant contained in this Agreement or
the Related Agreements.

 

Section 12.02 Licenses and Permits. The Buyer will have obtained all licenses
and permits from public authorities necessary to authorize the ownership and
operation of a business using the Assets.

 

Section 12.03 Consents. The Seller will have obtained the third-party consents
required under the terms of the Contracts to be assigned by it under this
Agreement, and such consents will not have required any change to the terms and
conditions of the Contracts other than changes consented to in writing by the
Buyer.

 

Section 12.04 Opinion of Counsel for Seller. The Buyer will have received an
opinion of [name of seller's counsel], in form and content reasonably acceptable
to the Buyer and its legal counsel, to the effect that the Seller's organization
and legal existence are as stated in this Agreement, that the execution,
delivery, and performance of this Agreement and the Related Agreements to which
the Seller or the Selling Member is a party have been duly authorized and are
enforceable against the Seller and the Selling Member in accordance with their
terms, and that, except as specified in the opinion, such counsel does not know
of any litigation, claim, proceeding, or governmental investigation pending or
threatened against the Company.

 

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Section 12.05 No Suits or Actions. At the time of the closing, no action, suit,
or proceeding before any court or any governmental or regulatory authority will
have been commenced and be continuing, and no investigation by any governmental
or regulatory authority will have been commenced and be continuing, and no
action, investigation, suit, or proceeding will be threatened, against the
Seller or the Buyer or any of their affiliates, associates, officers, or
directors, seeking to restrain or prevent or questioning the validity of the
transactions contemplated by this Agreement or the Related Agreements.

 

Section 12.06 Material Adverse Change. From the date of this Agreement to the
Closing, the Seller will not have suffered any Material Adverse Change (whether
or not such change is referred to or described in any supplement to any Schedule
to this Agreement) in its business prospects, financial condition, working
capital, assets, liabilities (absolute, accrued, contingent, or otherwise), or
operations.

 

Section 12.07 Corporate Action. The Seller will have furnished to the Buyer a
copy, certified by the Seller's secretary or assistant secretary, of the
resolutions of the Seller authorizing the execution, delivery, and performance
of this Agreement and the Related Agreements.

 

Article XIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SELLING MEMBER

 

The obligations of the Seller and the Selling Member to consummate the
transactions contemplated by this Agreement and the Related Agreements are
subject to the fulfillment, before or at the Closing, of each of the following
conditions, any one or a portion of which may be waived in writing by the
Seller:

 

Section 13.01 Representation, Warranties, and Covenants of Buyer. All
representations and warranties made in this Agreement by the Buyer will be true
in all material respects through the Closing, and the Buyer will have neither
violated nor failed to perform in accordance with any covenant contained in this
Agreement or the Related Agreements.

 

Section 13.02 No Proceeding or Litigation. At the time of the Closing, no
action, suit, or proceeding before any court or any governmental or regulatory
authority will have been commenced and be continuing, and no investigation by
any governmental or regulatory authority will have been commenced and be
continuing, and no action, investigation, suit, or proceeding will be
threatened, against the Seller or the Buyer or any of their affiliates,
associates, officers, or directors, seeking to restrain or prevent questioning
the validity of the transactions contemplated by this Agreement or the Related
Agreements.

 

Section 13.03 Corporate Action. The Buyer will have furnished to the Seller a
copy, certified by the Buyer's secretary or assistant secretary, of the
resolutions of the Buyer authorizing the execution, delivery, and performance of
this Agreement and the Related Agreements.

 

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Article XIV. RISK OF LOSS

 

The risk of loss, damage, or destruction to any of the Assets will be borne by
the Seller before the Closing. In the event of such loss, damage, or
destruction, the Seller, to the extent reasonable, will replace the lost
property or will repair or cause to repair the damaged property to its condition
before the damage. If replacement, repairs, or restorations are not completed
before the Closing, then the purchase price will be adjusted by an amount agreed
on by the Buyer and the Seller that will be required to complete the
replacement, repair, or restoration after the Closing. If the Buyer and the
Seller are unable to agree, then the Buyer, at its sole option and
notwithstanding any other provision of this Agreement, and on notice to the
Seller, may rescind this Agreement and declare it to be of no further force and
effect, in which event there will be no closing of this Agreement and all the
terms and provisions of this Agreement will be deemed null and void. If, before
the Closing, any Real Property that is the subject of the leases mentioned in
Section 7 is damaged or destroyed, then the Buyer may rescind this Agreement in
the manner provided above unless arrangements for repair satisfactory to all
parties involved are made before the Closing.

 

Article XV. INDEMNIFICATION AND SURVIVAL

 

Section 15.01 Survival of Representations and Warranties. All representations
and warranties made in this Agreement will survive the Closing of this
Agreement. The representations and warranties in this Agreement will terminate
10 years after the Closing Date, and such representations or warranties will
thereafter be without force or effect, except for any claim with respect to
which notice has been given to the potentially indemnifying party before such
expiration date.

 

Section 15.02 Seller's and Selling Member's Indemnification.

 

(a) The Seller and the Selling Member agree to indemnify, defend, and hold the
Buyer, its successors, and assigns harmless from and against any and all claims,
liabilities, obligations, costs, expenses, and reasonable attorney fees
(collectively, "Damages") arising out of or related to:

 

(i)

Any breach or inaccuracy of any representation or warranty of the Seller or the
Selling Member made in this Agreement or any Related Agreement;

(ii)

Any failure by the Seller or the Selling Member to perform any covenant required
to be performed by it pursuant to this Agreement or any Related Agreement; and

(iii)

Any liability or obligation of the Seller arising out of or in connection with
the ownership, use, condition, maintenance, or operation of the Seller's
business or the Assets by the Seller or its members on or before the Closing, in
either case not expressly assumed by the Buyer in accordance with the terms of
this Agreement.

 

 21

 

 

(b)

If any claim is asserted against the Buyer that would give rise to a claim by
the Buyer against the Seller or the Selling Member for indemnification under
Section 15.02, then the Buyer will promptly give written notice to the Seller
concerning such claim and the Seller and the Selling Member will, at no expense
to the Buyer, defend the claim.

 

Section 15.03 Buyer's Indemnification. The Buyer agrees to defend, indemnify,
and hold harmless the Seller and the Selling Member from and against all Damages
arising out of or related to:

 

(a)

Any breach or inaccuracy of any representation or warranty of the Buyer made in
this Agreement or any Related Document;

(b)

Any failure by the Buyer to perform any covenant required to be performed by it
pursuant to this Agreement or any Related Document; and

(c)

Any liability or obligation of the Seller to any third party expressly assumed
by the Buyer in accordance with the terms of this Agreement.

 

Section 15.04 Indemnification Procedure.

 

(a)

Third-Party Claims.

 

(i)

Each indemnified party will, with reasonable promptness after obtaining
knowledge thereof, provide the indemnifying party with written notice of all
third-party actions, suits, proceedings, claims, demands, or assessments that
may be subject to the indemnification provisions of this Section 15.04
(collectively, "Third-Party Claims"), including, in reasonable detail, the basis
for the claim, the nature of Damages, and a good-faith estimate of the amount of
Damages.

(ii)

The indemnifying party will have 15 days after its receipt of the claim notice
to notify the indemnified party in writing whether the indemnifying party agrees
that the claim is subject to Section 15.04 and, if so, whether the indemnifying
party elects to undertake, conduct, and control, through counsel of its choosing
[(subject to the consent of the indemnified party, such consent not to be
withheld unreasonably)], and at its sole risk and expense, the good-faith
settlement or defense of the Third-Party Claim.

(iii)

If within 15 days after its receipt of the claim notice, the indemnifying party
notifies the indemnified party that it elects to undertake the good-faith
settlement or defense of the Third-Party Claim, the indemnified party will
reasonably cooperate with the indemnifying party in connection therewith,
including, without limitation, by making available to the indemnifying party all
relevant information material to the defense of the Third-Party Claim. The
indemnified party will be entitled to participate in the settlement or defense
of the Third-Party Claim, at its own expense, through counsel chosen by the
indemnified party. The indemnified party will have the right to review any
proposed settlement that would impose an obligation or duty on the indemnified
party, and, if the indemnified party objects to such a settlement, the
settlement may not be undertaken. As long as the indemnifying party is
contesting the Third-Party Claim in good faith and with reasonable diligence,
the indemnified party will not pay or settle the Third-Party Claim.
Notwithstanding the foregoing, the indemnified party will have the right to pay
or settle any Third-Party Claim at any time as long as the indemnified party
waives any right to indemnification for such claim from the indemnifying party.

 

 22

 

 

(iv)

If the indemnifying party fails to provide notice that it elects to undertake
the good-faith settlement or defense of the Third-Party Claim, or if the
indemnifying party fails to contest the Third-Party Claim or to undertake or
approve settlement in good faith and with reasonable diligence, the indemnified
party will thereafter have the right to contest, settle, or compromise the
Third-Party Claim at its exclusive discretion, at the risk and expense of the
indemnifying party, and the indemnifying party will thereby waive any claim,
defense, or argument that the indemnified party's defense or settlement of such
Third-Party Claim is in any respect inadequate or unreasonable.

(v)

A party's failure to give timely notice will not constitute a defense (in part
or in whole) to any claim for indemnification by such party, except if, and only
to the extent that, such failure results in any material prejudice to the
indemnifying party.

 

(b)

Claims Other than Third-Party Claims.

 

(i)

Each indemnified party will, with reasonable promptness, deliver to the
indemnifying party written notice of all claims for indemnification under
Section 15.04, other than Third-Party Claims, including, in reasonable detail,
the basis for the claim, the nature of the Damages, and a good-faith estimate of
the amount of the Damages.

(ii)

The indemnifying party will have 30 days after its receipt of the claim notice
to notify the indemnified party in writing regarding whether the indemnifying
party accepts or disputes liability for all or any part of the Damages described
in the claim notice. If the indemnifying party does not so notify the
indemnified party, the indemnifying party will be deemed to accept liability for
all the Damages described in the claim notice.

(iii)

A party's failure to give timely notice will not constitute a defense (in part
or in whole) to any claim for indemnification by such party, except if, and only
to the extent that, such failure results in any material prejudice to the
indemnifying party.

  

Section 15.05 In the event of any Damages for which the Buyer has a right to
indemnity under this Agreement, the Buyer will be entitled to offset the amount
of such Damages against any unpaid amount of the Purchase Price remaining
payable. On giving notice of a claim for indemnity pursuant to Section 15.04,
the Buyer will have the right to withhold payment of that portion of the
Purchase Price that equals the amount of the estimated Damages, and such
withholding will not constitute a default under this Agreement or any Related
Document. The right to indemnification for the Buyer will not be limited to the
amount of setoff under this section.

 

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Article XVI. CLOSING

 

Section 16.01 Time and Place. This Agreement will be closed at the offices of
Signal Bay, Inc., at 62930 O.B. Riley Rd, Bend, OR on May 23, 2016, or at such
other time as the parties may agree in writing (the "Closing").

 

Section 16.02 Obligations of Seller and Selling Member at Closing. At the
Closing, the Seller and the Selling Member will deliver to the Buyer the
following:

 

(a)

Bills of sale, assignments, properly endorsed certificates of title, and other
instruments of transfer, in form and substance reasonably satisfactory to
counsel for the Buyer, necessary to transfer and convey all of the Assets to the
Buyer;

(b)

All agreements, notes, and other paperwork listed in Articles V and VII;

(c)

A cashier's check, certified check, or wire transfer of immediately available
funds for prorated items owing to the Buyer, if any;

(d)

Possession of the business facilities to be conveyed pursuant to this Agreement;
and

(e)

Such other certificates and documents as may be called for by the provisions of
this Agreement.

 

Section 16.03 Buyer's Obligations at Closing. At the Closing, the Buyer will
deliver to the Seller the following:

 

(a)

The Shares described in Section 5.01;

(b)

The Note described in Section 5.02;

(c)

A cashier's check, certified check, or wire transfer in the amount specified in
Section 5.03;

(d)

A cashier's check or a certified check for prorated items owed to the Seller, if
any;

(e)

All agreements, notes, and other paperwork listed in Articles V and VII;

(f)

Such other certificates and documents as may be called for by the provisions of
this Agreement.

 

 24

 

 

Article XVII. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING

 

Section 17.01 Books and Records. Possession and custody of the books and
records, except for the Seller's general ledger, may be retained by the Buyer at
the place of business that the Buyer is acquiring from the Seller under this
Agreement for a period of five years. During this period, the Seller or its
agents will have access to such books and records and may make copies of them.
The Buyer will exercise reasonable care in the safekeeping of such records and
will retain all such records for a period of at least five years. The Seller
will retain its general ledger but will make it available for inspection by the
Buyer from time to time on reasonable request.

 

Section 17.02 Seller's Right to Pay. If the Buyer fails to make any payment of
taxes, assessments, insurance premiums, or other charges that the Buyer is
required to pay to third parties under this Agreement, the Seller has the right,
but not the obligation, to pay the same. The Buyer will reimburse the Seller for
any such payment immediately on the Seller's demand, together with interest at
the same rate provided in the Note from the date of the Seller's payment until
the Buyer reimburses the Seller. Any such payment by the Seller will not
constitute a waiver by the Seller of any remedy available by reason of the
Buyer's default for failure to make the payments.

 

Article XVIII. DEFAULT

 

Section 18.01 Remedies on Default. If the Buyer fails to perform any of the
terms, covenants, conditions, or obligations of this Agreement or the Note, time
of payment and performance being of the essence, then the Seller, subject to the
requirements of the notice provided in Section 20.2, may have any or all of the
following remedies:

 

(a)

The right to declare the full unpaid balance of the Note immediately due and
payable;

(b)

The right to exercise each and all of the remedies granted to the Seller by the
Oregon Uniform Commercial Code;

(c)

The right to declare null and void the Noncompetition Agreement attached hereto
as Exhibit D;

(d)

The right to retake possession of the Assets and resume the Seller's course of
business;

(e)

The right to have a receiver appointed to take possession, manage, and control
the Collateral and collect the profits and pay the net income from the operation
of the business as ordered by a court of competent jurisdiction. The right to
appoint a receiver will be available without regard to the adequacy of the
security for the balance due the Seller or the solvency of the Buyer, or the
absence of waste or danger of loss or destruction of the Collateral and without
the necessity of notice to the Buyer, it being understood that the careful and
prudent management, care, and control of the Collateral is an essential form of
the Seller's security for the faithful performance of the Buyer's obligations
under this Agreement; and

(f)

The right to exercise any other remedy available to the Seller.

 

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Section 18.02 Notice of Default. The Buyer will not be deemed in default for
failure to perform the terms, covenants, and conditions of this Agreement, other
than failure to make payments on the Note, until notice of the default has been
given to the Buyer and the Buyer has failed to remedy the default within 20 days
after the notice. If the Buyer fails to make any payment within 20 days after
its due date under the Note, the Buyer will be deemed in default and the Seller
will not be obligated to give any notice to the Buyer of a declaration of
default.

 

Section 18.03 Cross-Default Provision. A default in this Agreement, including a
default in payment of the Note, will constitute a default in the Related
Agreements described in Sections 5 and 7, and a default in any one or more of
the Related Agreements described in Sections 5 and 7 will constitute a default
in this Agreement.

 

Article XIX. TERMINATION OF AGREEMENT

 

Section 19.01 Right of Parties to Terminate.

 

(a)

This Agreement may be terminated by the Buyer if:

 

(i)

Any of the licenses, permits, or consents described in Sections 13.2 and 13.3
have been denied, not permitted to go into effect, or obtained on terms not
reasonably satisfactory to the Buyer and all reasonable final appeals have been
exhausted; or

(ii)

The Seller breaches any of its obligations under this Agreement in any material
respect.

 

(b)

This Agreement may be terminated by the Seller if:

 

(i)

Any of the consents described in Section 13.3 have not been obtained on terms
satisfactory to the Seller; or

(ii)

The Buyer breaches any of its obligations under this Agreement in any material
respect.

 

Section 19.02 Effect of Termination. If either the Buyer or the Seller decides
to terminate this Agreement pursuant to Section 19.01, such party will promptly
give written notice to the other party to this Agreement of such decision. In
the event of a termination of this Agreement, the parties to this Agreement will
be released from all liabilities and obligations arising under this Agreement
with respect to the matters contemplated by this Agreement, other than for
damages arising from a breach of this Agreement.

 

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Article XX. MISCELLANEOUS PROVISIONS

 

Section 20.01 Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties relating to the subject matter hereof
and supersedes any and all prior understandings, agreements, negotiations and
discussions, both written and oral, between the parties hereto with respect to
the subject matter hereof.

 

Section 20.02 Waiver.Any provision or condition of this Agreement may be waived
at any time, in writing, by the party entitled to the benefit of such provision
or condition. Waiver of any breach of any provision will not be a waiver of any
succeeding breach of the provision or a waiver of the provision itself or any
other provision.

 

Section 20.03 Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with, and shall be governed by, the laws of the State of
Oregon without reference to, and regardless of, any applicable choice or
conflicts of laws principles.

 

Section 20.04 Execution of Agreement; Counterparts; Electronic Signatures.

 

(a)

This Agreement may be executed in several counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
instrument, and shall become effective when counterparts have been signed by
each of the Parties and delivered to the other Parties; it being understood that
all Parties need not sign the same counterparts.

(b)

The exchange of copies of this Agreement and of signature pages by facsimile
transmission (whether directly from one facsimile device to another by means of
a dial-up connection or whether mediated by the worldwide web), by electronic
mail in "portable document format" (".pdf") form, or by any other electronic
means intended to preserve the original graphic and pictorial appearance of a
document, or by combination of such means, shall constitute effective execution
and delivery of this Agreement as to the Parties and may be used in lieu of the
original Agreement for all purposes. Signatures of the Parties transmitted by
facsimile shall be deemed to be their original signatures for all purposes.

 

Section 20.05 Further Assurances. Each of the parties hereto shall from time to
time at the request of the other party hereto, and without further
consideration, execute and deliver to such other party such further instruments
of assignment, transfer, conveyance and confirmation and take such other action
as the other party may reasonably request in order to more effectively fulfill
the purposes of this Agreement.

 

Section 20.06 Severability. The provisions of this Agreement will be deemed
severable and the invalidity or unenforceability of any provision will not
affect the validity or enforceability of the other provisions hereof. If any
provision hereof is determined by a court of competent jurisdiction or an
arbitrator to be invalid or unenforceable, such provision shall be limited to
the extent necessary to make it valid and enforceable, or if necessary, severed
from this Agreement, and the remainder of the Agreement shall be in full force
and effect.

 

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Section 20.07 Attorneys' Fees. If either party brings a claim or lawsuit against
the other party to this Agreement to interpret or enforce any of the terms of
this Agreement, or to interpret or enforce the Promissory Note, the prevailing
party shall, in addition to all other damages, be entitled to reasonable
attorneys' fees and costs, costs of witnesses, and costs of investigation from
the non-prevailing party.

 

Section 20.08 Amendment and Termination. Except as provided in Section 19.01,
this Agreement may be amended or terminated only upon a writing executed by both
Buyer and Sellers.

 

Section 20.09 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Buyer and Sellers and their respective successors and
assigns. Whenever appropriate in this Agreement, references to Buyer or Sellers
shall be deemed to refer to such company's successors or assigns.

 

Section 20.10 Dispute Resolution.

 

(a)

Arbitration. All disputes concerning this Agreement shall be settled by
arbitration, before one arbitrator, in accordance with the commercial
arbitration rules of the American Arbitration Association then in effect. The
arbitrator shall be selected in accordance with such commercial arbitration
rules. A party is entitled to initiate an arbitration proceeding if a dispute
cannot be resolved amicably within ten days after the other party has been
notified of the existence of the dispute. The arbitrator is authorized to grant
injunctive relief and/or specific performance in addition to monetary relief.
The arbitrator hereby is instructed to interpret and enforce this Agreement in
strict accordance with its terms, and in accordance with Oregon law. All
arbitration proceedings shall be held in Portland, OR.

(b)

Equitable Relief. Notwithstanding the foregoing, each party is entitled to bring
an action for temporary or preliminary injunctive relief at any time in any
court of competent jurisdiction in order to prevent irreparable injury that
might result from a breach of this Agreement. Furthermore, upon the occurrence
of an event of default, Sellers is entitled to exercise all of the rights and
remedies described in this Agreement and, at any time, to bring an action in a
court of competent jurisdiction (or, at its election, to initiate an arbitration
proceeding) for purposes of enforcing the terms of this Agreement.

(c)

Award. The award of the arbitrator in any arbitration proceeding shall be final
and may be enforced in any court of competent jurisdiction, and an action to
compel arbitration may be brought in any court of competent jurisdiction. The
unsuccessful party to any arbitration proceeding or to any court action that is
permitted by this Agreement shall pay to the successful party all costs and
expenses, including, without limitation, reasonable attorneys' fees and the fees
of the arbitrator, incurred therein by the successful party. EACH PARTY AGREES
THAT, TO THE EXTENT PERMISSIBLE BY LAW, ALL RIGHTS TO A TRIAL BY A JURY OF ANY
CLAIM CONCERNING THIS AGREEMENT ARE ABSOLUTELY AND FOREVER WAIVED.

 

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Executed as of the date first above written.

 

The parties enter into this Agreement as of the date first written above.

 

Oregon Analytical Services LLC

 

    By:/s/ Sarah Lausmann

 

 

Sarah Lausmann

 

 

Member

 

 

 

 

 By:/s/ Sara LausmannSara Lausmann

Selling Member

  

EVIO Labs Eugene, LLC

 By: /s/ William WaldropWilliam WaldropManaging Member

Member

Signal Bay, Inc

By: /s/ William WaldropWilliam WaldropCEO

 

 

 

 

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