ASSET ACQUISITION AGREEMENT

 

Between

 

Health Nutz, LLC dba Yumnuts

 

And

 

Cell-nique Corporation

 

 

 

 

TABLE OF CONTENTS

 

1. ACQUISITION OF THE ASSETS 4   1.01. ACQUISITION OF THE ASSETS FROM THE
TRANSFEROR 4   1.02. ASSUMPTION OF LIABILITIES FROM THE TRANSFEROR 4   1.03.
CONSIDERATION FOR THE ASSETS 5   1.04. CLOSING 5   1.05. TAX TREATMENT 5      
2. REPRESENTATIONS OF THE TRANSFEROR REGARDING THE ASSETS AND ASSIGNED
LIABILITIES 5       3. REPRESENTATIONS OF THE TRANSFEROR REGARDING THE
TRANSFEROR 6   3.01. ORGANIZATION 6   3.02. THE TRANSFEROR 6   3.03.
AUTHORIZATION 6   3.04. FINANCIAL STATEMENTS, BANK ACCOUNTS AND ACCESS TO ALL
FINANCIAL RECORDS FOR PAST 3 YEARS 7   3.05. ABSENCE OF UNDISCLOSED LIABILITIES
7   3.06. LITIGATION 7   3.07. PERSONAL PROPERTY AND INVENTORY 8   3.08.
INTANGIBLE PROPERTY 8   3.09. LEASES 9   3.10. REAL ESTATE 9   3.11. RESERVED 9
  3.12. TAX MATTERS 9   3.13. CONTRACTS AND COMMITMENTS 10   3.14. COMPLIANCE
WITH AGREEMENTS AND LAWS 11   3.15. RESERVED 12   3.16. EMPLOYEE BENEFIT PLANS
12   3.17. CUSTOMERS AND SUPPLIERS 12   3.18. RESERVED 12   3.19. CONFLICTS OF
INTEREST 12   3.20. INVESTMENT REPRESENTATION 12   3.21. FULL DISCLOSURE 13  
3.22. RESERVED 13   3.23. VENDOR, CO-PACKING AND STORAGE AGREEMENT 13   3.24.
LIMITATION ON REPRESENTATIONS AND WARRANTIES 13       4. REPRESENTATIONS OF THE
TRANSFEREREE REGARDING THE TRANSFEREREE 13   4.01. ORGANIZATION AND AUTHORITY 13
  4.02. CAPITALIZATION OF THE TRANSFEREE 14   4.03. AUTHORIZATION 14   4.04.
REGULATORY APPROVALS 14   4.05. RESERVED 14   4.06. LITIGATION 14   4.07.
BROKER'S FEE 15   4.08. MISCELLANEOUS 15   3.21. FULL DISCLOSURE 15         5.
ACCESS TO INFORMATION 15       6. CONDITIONS TO OBLIGATIONS OF THE TRANSFEREE 16
  6.01. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS 16   6.02. PERFORMANCE BY THE
TRANSFEROR 16

 

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  6.03. CORPORATE PROCEEDINGS

16   6.04. RESERVED 16   6.05. ADVERSE PROCEEDINGS 16   6.06. CLOSING DELIVERIES
BY THE TRANSFEROR 16       7. CONDITIONS TO OBLIGATIONS OF THE TRANSFEROR 17  
7.01. CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS 17   7.02. CORPORATE PROCEEDINGS 17  
7.03. RESERVED 17   7.04. CONSENTS OF LENDERS, VENODRS AND OTHER THIRD PARTIES
17   7.05. ADVERSE PROCEEDINGS 18   7.06. CLOSING DELIVERIES 18         8.
PRE-CLOSING AND POST-CLOSING COVENANTS 18   8.01. POST-CLOSING COVENANTS 18  
10.03. DRAG ALONG 19         9. INDEMNIFICATION 19   9.01. Generally 19   9.02.
CLAIMS FOR INDEMNIFICATION 20   9.03. DEFENSE BY THE INDEMNIFYING PARTY 20  
9.04. INDEMNIFICATION CAP 21   9.05. PAYMENT OF INDEMNIFICATION OBLIGATION 21  
9.06. SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION 22   9.07. SOLE
REMEDY 22         10. RESTRICTIVE COVENANTS 22   10.01. CONFIDENTIALITY 22  
10.02. NON-COMPETE 23   10.03. ADDITIONAL TERMS 23         11. TERMINATION OF
AGREEMENT 23   11.01. TERMINATION BY AGREEMENT OF THE PARTIES 23   11.02.
TERMINATION BY REASON OF BREACH 23         12. NOTICES 23       13. SUCCESSORS
AND ASSIGNS 24       14. ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS 24       15.
SEVERABILITY 25       16. INVESTIGATION OF THE PARTIES 25       17. EXPENSES 25
      18. GOVERNING LAW/JURISDICTION 25       19. SECTION HEADINGS 25       20.
COUNTERPARTS 26       21. CONSULTATION WITH INDEPENDENT COUNSEL 26

 

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Exhibits

 

Exhibit A - Assets Exhibit B - Promissory Note Exhibit C - Tax Allocation
Schedule Exhibit D - Transferee Cap Table Exhibit E - Transferee Liens Exhibit F
- Bill of Sale and Assignment and Assumption Agreement Exhibit G - Inventory
List Exhibit H - Disclosure Memo

 

Schedules to be provided by the Transferor

 

3.02 - The Transferor 3.03 - Third Party Consents 3.04 - Financial Statements
3.06 - Litigation 3.07 - Personal Property 3.08 - Intangible Property 3.13 -
Contracts 3.17 - Customers and Suppliers 3.19 - Conflicts of Interest 3.23 -
Vendor, Co-Packing and Storage Agreements

 

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ASSET ACQUISITION AGREEMENT

 

Agreement (the "Agreement") made as of the 31st day of December, 2011 by and
among, Cell-nique Corporation, a Delaware corporation (the "Transferee" or
“CN”), Health Nutz, LLC dba Yumnuts, a Delaware Limited Liability Company (the
"Transferor" or “YN”), and only with respect to Section 8.01(d) Physicians
Capital Corporation (the “Major Shareholders”), and only with respect to Section
10.02, Tyler Ricks, Jerome Metivier, Michael Cochrane and Gary Cochrane
(collectively, the “Founders”).

 

PRELIMINARY STATEMENT

 

The Transferee desires to acquire, and the Transferor desires to transfer
certain of the Transferor’s assets including without limitation all of its
operating intellectual property assets for the consideration in the transaction
contemplated hereunder.

 

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:

 

1.           ACQUISITION OF THE ASSETS

 

1. 01.      ACQUISITION OF THE ASSETS FROM THE TRANSFEROR.

 

(a)          Subject to and upon the terms and conditions of this Agreement, at
the closing of the transactions contemplated by this Agreement (the "Closing"),
the Transferor shall sell, transfer, convey, assign and deliver to the
Transferee, and the Transferee shall purchase, acquire, accept and assume from
the Transferor, the assets set forth on Exhibit A hereto (the “Purchased
Assets”) and the products held for sale by the transferor which are used in the
operation of the Transferor’s business (the “Inventory”, and together with the
Purchased Assets, the “Assets”).

 

(b)          The Assets shall not include the Transferor’s (i) cash, (ii)
accounts receivable, and (iii) accounts payable.

 

1.02.       ASSUMPTION OF LIABILITIES FROM THE TRANSFEROR.

 

Upon and subject to the terms and conditions of this Agreement, the Transferee
shall assume and become responsible for all liabilities incurred after the
Closing under the Assets (the “Assumed Liabilities”). Schedule 1.02 attached
hereto lists all of the Assumed Liabilities and the dollar amount of these
liabilities as agreed to by the Transferor and the Transferee.

 

Except for the Assumed Liabilities, Transferee is not assuming under this
Agreement or any other Transaction Document any liability of Transferor,
including any of the following (each, an "Unassumed Liability"): (i) liabilities
arising out of any default by Transferor of any provision of any Contract (as
defined in Section 3.13), occurring prior to the Closing Date (as defined in
Section 1.04 below); (ii) any product liability or similar claim for injury to
any Person or property, that arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by Transferor, or
alleged to have been made by Transferor, or that is imposed or asserted to be
imposed by operation of law in connection with any service performed or product
sold or leased by or on behalf of Transferor on or prior to the Closing; (iii)
any Federal, state or local income or other Tax payable with respect to the
Business of the Transferor, the Assets, or other properties or operations of
Transferor for a period prior to the Closing Date; (iv) any liabilities arising
prior to the Closing Date or as a result of the Closing for severance, bonuses,
or any other form of compensation to any employees, agents or independent
contractors of Transferor, (v) any liabilities of Transferor arising or incurred
in connection with the negotiation, preparation and execution of this Agreement
and the Transactions; (vi) any liabilities to give credits or take other
remedial actions for defective or out of date goods for the period of 9 months
after close; (vii) any liabilities for money borrowed; (viii) any liability of
the Transferor or affiliate thereof based upon an act or omission of such person
after the Closing Date; and (ix) any other Liabilities, regardless of when made
or asserted, that are not specifically assumed hereunder.

 

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1.03.       CONSIDERATION FOR THE ASSETS.

 

In consideration for the sale and transfer of the Assets, and subject to the
terms and conditions of this Agreement, Transferee shall, on the Closing Date
(a) issue to Transferor Six Thousand Four Hundred Forty One (6,441) shares of
Series A preferred stock valued at $100 per share, $.00001 par value per share,
of Transferee, (the “Stock Consideration”), plus (b) issue a promissory note, in
the form set forth at Exhibit B hereto (the “Promissory Note”, and together with
the Stock Consideration, the “Consideration”), payable to the Transferor in the
principal amount of the value of the Inventory of the Transferor which shall be
determined as set forth below and which Inventory is estimated to be valued at
Two Hundred Eleven Thousand Six Hundred Fifty Five Dollars ($211,655) as of the
date hereof. The value of the Inventory shall be mutually determined by the
Transferor and the Transferee by way of a physical inventory taken no more than
five (5) days prior to the Closing Date (as defined below), and shall be
adjusted based upon purchases and sales made prior to the Closing.

 

1.04.       CLOSING.

 

The Closing shall take place at the offices of YN, on a date and at a time to be
determined, or at such other place, time or date (including by the exchange of
facsimile and/or PDF signatures) as may be mutually agreed upon in writing by
the parties (the "Closing Date"). The transfer of the Assets by the Transferor
to the Transferee by the Transferee shall be deemed, other than for tax
purposes, to occur at 12:01 a.m., EST, on December 31, 2011, subject to post
closing agreements between the parties.

 

1.05.       TAX TREATMENT.

 

For purposes of this transaction, the Transferee and the Transferor have agreed
that for tax purposes the transaction contemplated hereunder shall be treated
under the Code as if the Transferor sold and exchanged all of its assets, for
new shares of the Transferee's stock and the other Consideration set forth
herein. Each of the parties shall report the federal, state, local and other tax
consequences of the purchase and sale contemplated hereby (including the filing
of Internal Revenue Service Form 8594) in a manner consistent with this Section
1.05 and the allocation schedule set forth at Exhibit C hereto.

 

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2.         REPRESENTATIONS OF THE TRANSFEROR REGARDING THE ASSETS AND ASSIGNED
LIABILITIES

 

The Transferor represents and warrants to the Transferee as follows:

 

(a)        The Transferor has good and marketable title to the Assets, free and
clear of any and all liens, charges, encumbrances or third-party rights
whatsoever. If any such encumbrances exist they shall be released by such
secured party. The use of the Assets is not subject to any Lien, and such use
does not encroach on the property or rights of any Person. The Assets constitute
all of the assets required for the continued operation of the Business by
Transferee as operated by Transferor during the past 12 months. The Assets,
taken as a whole, constitute all the properties and assets relating to or used
or held for use in connection with the Business during the past 12 months
(except for inventory sold, cash disposed of, accounts receivable collected,
prepaid expenses realized, Contracts fully performed, properties or assets
replaced by equivalent or superior assets, in each case in the ordinary course
of business). There are no assets or properties used in the operation of the
Business that are owned by any Person other than Transferor that will not be
licensed or leased to Transferee under valid, current license arrangements or
leases. Transferee agrees to purchase the assets of the company “as is” with
regards to physical condition except for the representations made herein.

 

(b)        The Transferor has the full right, power and authority to enter into,
and execute this Agreement and to transfer, convey and sell to the Transferee at
the Closing the Assets. All corporate action of Transferor necessary for such
execution and delivery and the performance hereof and thereof has been duly
taken and, upon consummation of the purchase contemplated hereby, the Transferee
will acquire from the Transferor good and marketable title to the Assets.

 

(c)        The Transferor is not a party to, subject to or bound by any
agreement (other than an agreement requiring certain notices and consents which
have been given or obtained, as applicable) or any judgment, order, writ,
prohibition, injunction or decree of any court or other governmental body which
would prevent the execution or delivery of this Agreement by the Transferor or
the transfer, conveyance and sale of the Assets or the assignment of the
Assigned Liabilities to the Transferee pursuant to the terms hereof.

 

(d)        No broker or finder is entitled to any brokerage or finder's fee or
other commissions in respect of such transactions based upon agreements,
arrangements or understandings made by or on behalf of the Transferor.

 

3.          REPRESENTATIONS OF THE TRANSFEROR REGARDING THE TRANSFEROR

 

The Transferor represents and warrants to the Transferee as follows:

 

3.01.     ORGANIZATION.

 

The Transferor is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite power and authority to own its properties, to carry on its business as
now being conducted, to execute and deliver this Agreement and the agreements
contemplated herein, and to consummate the transactions contemplated hereby and
thereby.

 

3.02.     THE TRANSFEROR.

 

Schedule 3.02 attached hereto sets forth: (i) the name of the Transferor; (ii)
the jurisdiction of organization of the Transferor; (iii) the names of its
managers, members, officers and directors; and (iv)the jurisdictions in which
the Transferor is qualified or holds licenses to do business as a foreign
company.

 

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3.03.      AUTHORIZATION.

 

The execution and delivery by the Transferor of this Agreement and the
agreements provided for herein, and the consummation by the Transferor of all
transactions contemplated hereunder and thereunder by the Transferor, have been
duly authorized by all requisite company action. This Agreement has been duly
executed by the Transferor. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby to which the Transferor is a party constitute the valid and
legally binding obligations of the Transferor, enforceable against it in
accordance with their respective terms. The execution, delivery and performance
by the Transferor of this Agreement and the agreements provided for herein, and
the consummation by the Transferor of the transactions contemplated hereby and
thereby, will not, with or without the giving of notice or the passage of time
or both, (a) to the Transferor’s actual knowledge, violate the provisions of any
law, rule or regulation applicable to the Transferor; (b) violate the provisions
of the Certificate of Organization or the Transferor’s Third Amended and
Restated Limited Liability Company Agreement, dated as of September 30, 2011;
(c) violate any judgment, decree, order or award of any court, governmental body
or arbitrator; or (d) conflict with or result in the breach or termination of
any term or provision of, or constitute a default under, or cause any
acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Transferor pursuant to, any indenture,
mortgage, deed of trust, security agreement or other instrument or agreement to
which the Transferor is a party or by which the Transferor or any of its
properties is or may be bound. Schedule 3.03 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties
(including governmental entities) that are required in connection with the
consummation by the Transferor of the transactions contemplated by this
Agreement.

 

3.04.      FINANCIAL STATEMENTS AND ACCESS TO ALL FINANCIAL RECORDS FOR PAST 3
YEARS.

 

Schedule 3.04 attached hereto contains true, complete and correct copies of the
unaudited, Transferor-prepared balance sheet of the Transferor as of December
31, 2009 and 2010 and the related statements of income, members’ equity,
retained earnings and changes in financial condition of the Transferor for the
fiscal year then ended (collectively, the "Annual Financial Statements"), the
unaudited Transferor-prepared balance sheet of the Transferor as of December 31,
2011 (the "Current Balance Sheet") and the related statements of income,
members’ equity, retained earnings and changes in financial condition of the
Transferor for the period from January 1, 2011 through December 31, 2011
(collectively, the "Current Financial Statements", and together with the Annual
Financial Statements, the “Financial Statements”). The Current Financial
Statements have been prepared in accordance with past practices. The Financial
Statements fairly represent, as of their respective dates, the financial
condition, retained earnings, assets, liabilities, and the results of operations
of the business of the Transferor for the periods therein indicated. Transferor
will provide Transferee with access to all financial records from December 31
2009 to December 31 2011 for a period of 12 months after the close.

 

3.05.      ABSENCE OF UNDISCLOSED LIABILITIES.

 

The Transferor retains any and all liability and/or obligation, secured or
unsecured whether accrued, absolute, contingent, unasserted or otherwise, except
as expressly set forth herein.

 

3.06.      LITIGATION.

 

Except as set forth on Schedule 3.06 attached hereto (a) there is no action,
suit or proceeding to which the Transferor is a party (either as a plaintiff or
defendant) pending or to the Transferor’s actual knowledge, threatened before
any court or governmental agency, authority, body or arbitrator and, to the
actual knowledge of the Transferor, there is no basis for any such action, suit
or proceeding, (b) neither the Transferor nor, to the actual knowledge of the
Transferor, any officer, director or employee of the Transferor, has been
permanently or temporarily enjoined by any order, judgment or decree of any
court or any governmental agency, authority or body from engaging in or
continuing any conduct or practice in connection with the business, assets, or
properties of the Transferor, and (c) to the Transferor’s actual knowledge,
there is not in existence on the date hereof any order, judgment or decree of
any court, tribunal or agency enjoining or requiring the Transferor to take any
action of any kind with respect to its business, assets or properties.

 

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3.07.      PERSONAL PROPERTY AND INVENTORY.

 

Schedule 3.07 attached hereto sets forth: (i) a true, correct and complete, in
all material respects, list of all Assets which constitute tangible personal
property and Inventory owned by the Transferor as of the date hereof having
either a net book value per unit or historical cost per unit; or not owned by
the Transferor but in the possession of or used or useful in the business of the
Transferor (collectively, the "Personal Property"); and (ii) a description of
the owner of, and any agreement relating to the use of, each item of Personal
Property not owned by the Transferor and the circumstances under which such
Property is used. Except as disclosed in Schedule 3.07:

 

(a)         the Transferor has good and marketable title to the Personal
Property, free and clear of all liens, leases, encumbrances, claims under
bailment and storage agreements, equities, conditional sales contracts, security
interests, charges and restrictions, except for liens, if any, for personal
property taxes not due;

 

(b)         no officer or director, nor, to the actual knowledge of the
Transferor, any member or employee of the Transferor, or any spouse, child or
other relative or affiliate thereof, owns directly or indirectly, in whole or in
part, any of the Personal Property described in Schedule 3.07;

 

(c)         to the actual knowledge of the Transferor, each item of Personal
Property not owned by the Transferor is in such condition that upon the return
of such property to its owner in its present condition at the end of the
relevant lease term or as otherwise contemplated by the applicable agreement
between the Transferor and the owner or lessor thereof, the obligations of the
Transferor to such owner or lessor will be discharged; and

 

(d)         the Personal Property is adequate for the conduct of the business of
the Transferor as currently conducted and is in materially good operating
condition and repair, normal wear and tear excepted, and is currently used by
the Transferor in the ordinary course of its business.

 

3.08.      INTANGIBLE PROPERTY.

 

Schedule 3.08 attached hereto sets forth: (i) a true, correct and complete, in
all material respects, list and, where appropriate, a description of, all Assets
which constitute material items of intangible property owned by, or used or
useful in connection with the business of, the Transferor, including, but not
limited to, supplier and customer lists and related relationships, product
formula and production processes, research and development and work in progress,
trade secrets, know-how, any other confidential information of the Transferor,
United States and foreign patents, trade names, trademarks, trade name and
trademark registrations, copyrights and copyright registrations, and
applications for any of the foregoing (the "Intangible Property"); and (ii) a
true, correct and complete list of all material licenses or similar agreements
or arrangements to which the Transferor is a party, either as licensee or
licensor, with respect to the Intangible Property. Except as otherwise disclosed
in Schedule 3.08 and or Exhibit H:

 

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(a)         the Transferor is the sole and exclusive owner of all right, title
and interest in and to the Intangible Property and all designs, permits, labels
and packages used on or in connection therewith, free and clear of all liens,
security interests, charges, encumbrances, equities or other adverse claims;

 

(b)         the Transferor has the right and authority to use, and the
Transferee shall have the right to continue to use immediately after the Closing
(in a manner consistent with current use), the Intangible Property in connection
with the conduct of the Transferor’s business in the manner presently conducted,
and to the actual knowledge of the Transferor, such use or continuing use does
not and will not conflict with, infringe upon or violate any rights of any other
person, corporation or entity;

 

(c)         the Transferor has not received notice of, and does not have actual
knowledge of any basis for, a pleading or threatened claim, interference action
or other judicial or adversarial proceeding against the Transferor that any of
the operations, activities, products, services or publications of the Transferor
or any of its customers or distributors infringes or will infringe any patent,
trademark, trade name, copyright, trade secret or other property right of a
third party, or that it is illegally or otherwise using the trade secrets,
formulae or property rights of others;

 

(d)         there are no outstanding nor, to the actual knowledge of the
Transferor, any threatened disputes or other disagreements with respect to any
research and development in process or licenses or similar agreements or
arrangements described in Schedule 3.08 or with respect to infringement by a
third party of any of the Intangible Property;

 

(e)         no officer or director of the Transferor nor, to the actual
knowledge of the Transferor, any member or employee of the Transferor, or any
spouse, child or other relative or affiliate thereof, owns directly or
indirectly, in whole or in part, any of the Intangible Property; and

 

(f)         the Transferor does not have any actual knowledge that any third
party is infringing, or has threatened to infringe upon or otherwise violate,
any of the Intangible Property in which the Transferor has ownership rights.

 

3.09.      LEASES.

 

The Transferor does not have any leased property.

 

3.10.      REAL ESTATE.

 

The Transferor does not own any real property or any interest in real property.

 

3.11.      SUBSIDIARIES.

Transferor does not own, directly or indirectly, any interest or investment
(whether equity or debt) in any Person (excluding natural persons).

 

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3.12.      TAX MATTERS.

 

The Transferor has properly filed on a timely basis all Tax Returns (as defined
below) that it was required to file and all such Tax Returns were correct and
complete, except for any error or omission that could not reasonably be expected
to have a material adverse effect on the results of operations, condition
(financial or otherwise), assets, properties, business or prospects (a "Material
Adverse Effect") of the Transferor, taken as a whole. The Transferor has paid on
a timely basis (including any extensions) all Taxes (as defined below) that were
due and payable. All Taxes that Transferor is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the proper governmental entity. No claim has ever been made by
any Governmental Body in a jurisdiction where Transferor does not file Tax
Returns that Transferor is or may be subject to taxation by that jurisdiction.
There are no liens for Taxes on any of the assets of Transferor (except for
liens for Taxes not yet due and payable). Except as otherwise disclosed on
Exhibit H hereto, none of Transferor, the managers(and employees responsible for
Tax matters) of Transferor, or the managers(and employees responsible for Tax
matters) of the parent of any Affiliate of which Transferor was or is a member
has any reason to believe that any Governmental Body might assess any additional
Taxes against Transferor for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of Transferor either
(A) claimed or raised by any Governmental Body in writing or (B) as to which any
directors and officers (and employees responsible for Tax matters) of Transferor
has any knowledge. Transferor is a limited liability company which is treated as
a partnership for federal tax purposes. Other than the Transferor’s Third
Amended and Restated Limited Liability Company Agreement, effective as of
September 30, 2011, the Transferor is not a party to any other joint venture,
partnership, or other arrangement treated as a partnership for federal income
tax purposes.

 

For purposes of this Agreement, "Taxes" means all taxes, including without
limitation income, gross receipts, ad valorem, value-added, excise, real
property, personal property, sales, use, transfer, withholding, employment and
franchise taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof. For purposes of this Agreement,
"Tax Returns" means all reports, returns, declarations, statements, forms or
other information required to be supplied to a taxing authority in connection
with Taxes.

 

3.13.      CONTRACTS AND COMMITMENTS.

 

(a)          Schedule 3.13 attached hereto contains a true, complete and correct
list of the following contracts, agreements, arrangements or other
understandings, whether written or oral (collectively, the "Contracts"):

 

(i)          any material loan agreements and guaranties to which the Transferor
is a party or any of its property is bound;

 

(ii)         all Contracts to which the Transferor or any of its property is
bound which (A) involve payments or receipts by the Transferor of more than
$5,000 in the case of any single contract, agreement, commitment, understanding
or arrangement under which full performance (including payment) has not been
rendered by all parties thereto or (B) under which the consequences of a default
or termination would reasonably be expected to have a Material Adverse Effect;

 

(iii)        all collective bargaining agreements, employment and consulting
agreements, executive compensation plans, bonus plans, deferred compensation
agreements, pension plans, retirement plans, employee stock option or stock
purchase plans and group life, health and accident insurance and other employee
benefit plans, agreements, arrangements or commitments to which the Transferor
is a party or any of its property is bound;

 

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(iv)        all material agency, distributor, sales representative, franchise or
similar agreements to which the Transferor is a party or by which the Transferor
or any of its property is bound;

 

(v)         all material leases, whether operating, capital or otherwise, under
which the Transferor is a lessor or a lessee;

 

(vi)        all Contracts imposing a non-competition or non-solicitation
obligation on the Transferor; and

 

(vii)       any other material agreements or contracts entered into by the
Transferor, excluding all non-disclosure agreements between Transferor and Third
Parties.

 

(b)          Except as set forth on Schedule 3.13:

 

(i)           each Contract is a valid and binding agreement of the Transferor,
enforceable against the Transferor in accordance with its terms, and the
Transferor does not have any actual knowledge that any Contract is not a valid
and binding agreement of the other parties thereto, except where the failure to
be a valid and binding Agreement would not reasonably be expected to result in a
Material Adverse Effect.

 

(ii)          the Transferor has fulfilled all material obligations required
pursuant to the Contracts to have been performed by the Transferor, on its part
prior to the date hereof, and the Transferor, has no reason to believe that the
Transferor will not be able to fulfill, when due, all of its obligations under
the Contracts which remain to be performed after the date hereof, except where
the failure to fulfill all material obligations required pursuant the contract
would not reasonably be expected to result in a Material Adverse Effect;

 

(iii)         the Transferor is not in breach of or default under any Contract,
and no event has occurred which with the passage of time or giving of notice or
both would constitute such a default, result in a loss of rights or result in
the creation of any lien, charge or encumbrance, thereunder or pursuant thereto,
except for such breach, default or events that would not reasonably be expected
to result in a Material Adverse Effect; and

 

(iv)         to the actual knowledge of the Transferor, there is no existing
breach or default by any other party to any Contract, and no event has occurred
which with the passage of time or giving of notice or both would constitute a
default by such other party, result in a loss of rights or result in the
creation of any lien, charge or encumbrance thereunder or pursuant thereto,
except for such breach, default or events that would not reasonably be expected
to result in a Material Adverse Effect.

 

3.14.      COMPLIANCE WITH AGREEMENTS AND LAWS.

 

To its actual knowledge, the Transferor has all requisite licenses, permits and
certificates, including environmental, health and safety permits, from federal,
state and local authorities necessary to conduct its business and own and
operate its Assets (collectively, the "Permits") other than as would not be
reasonably be expected to have a Material Adverse Effect. To its actual
knowledge, the Transferor is not in violation in any material respect of any law
or regulation relating to its Assets, except with regards to labeling
discrepancies as disclosed to Transferee in memo regarding Yumnuts Disclosures
dated December 31, 2011 (Exhibit H). To the Transferor’s actual knowledge, the
business of the Transferor as conducted since the date the business commenced
operations has not violated, and on the date hereof does not violate, in any
material respect, any federal, state, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment discrimination, immigration, occupational safety, environmental
protection, hazardous waste, conservation, or corrupt practices), the
enforcement of which would have a Material Adverse Effect.

 

11

 

 

3.15.      RESERVED.

 

3.16.      EMPLOYEE BENEFIT PLANS.

 

The Transferor does not have, and has never had, any employee benefit plans.

 

3.17.      CUSTOMERS AND SUPPLIERS.

 

Schedule 3.17 attached hereto sets forth a true, correct and complete list of
(a) the name of each customer of the Transferor from 2010 and 2011, and (b) the
names of suppliers from 2010 and 2011 (by dollar volume) of the Transferor.
Except as otherwise set forth on Schedule 3.17, the Transferor has good customer
and supplier relations and none of the customers or suppliers of the Transferor
has notified the Transferor that it intends to discontinue or materially
diminish its relationship with the Transferor.

 

3.18.      RESERVED.

 

3.19.      CONFLICTS OF INTEREST.

 

Except as set forth on Schedule 3.19 attached hereto, no manager, officer,
director nor, to the actual knowledge of the Transferor, any affiliate of any
such person, now has or within the last three (3) years had, either directly or
indirectly:

 

(a)          an equity or debt interest in any corporation, partnership, joint
venture, association, organization or other person or entity which furnishes or
sells or during such period furnished or sold services or products to the
Transferor or purchases or during such period purchased from the Transferor any
goods or services, or otherwise did business with the Transferor during such
period; or

 

(b)          a beneficial interest in any contract, commitment or agreement to
which the Transferor was a party or under which any of them is or was obligated
or bound or to which any of their respective properties may be or may have been
subject, other than stock options and other contracts, commitments or agreements
between the Transferor and such persons in their capacities as employees,
officers or directors of the Transferor.

 

3.20.      INVESTMENT REPRESENTATION.

 

The Transferor is acquiring and shall hold the Stock Consideration issued by the
Transferee hereunder for its own account for investment. The Transferor
acknowledges that the shares representing the Stock Consideration are restricted
securities under Rule 144 of the Rules and Regulations promulgated under the
Securities Act of 1933, as amended, and that the shares representing the Stock
Consideration shall bear the following legend:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO; UNLESS PURSUANT TO THE RULES PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED; OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

 

12

 

 

The Transferor has had the opportunity to request from the Transferee any
information concerning the Transferee which the Transferor has deemed relevant
and the Transferee has provided such information. Transferor understands that
the Stock Consideration are not registered under the Securities Act on the
grounds that the issuance of securities hereunder is exempt from registration
under the Securities Act pursuant to Section 4(2) or regulations promulgated
thereunder, and that Transferee's reliance on such exemption is predicated on
Transferor's representations set forth herein. Transferor represents that it is
an "accredited investor" as such term is defined in Rule 501 (a) promulgated
under the Securities Act and is experienced in evaluating and investing in
companies such as Transferee, is familiar with the risks associated with the
business and operations of Transferee, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment. Transferor understands that the Stock Consideration may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act and applicable state securities laws or an exemption therefrom, and that, in
the absence of an effective registration statement covering the Stock
Consideration or an available exemption from registration under the Securities
Act and applicable state securities laws, the Stock Consideration must be held
indefinitely. Transferor agrees that in no event will it make a transfer or
disposition of any of the Stock Consideration or such other securities, which
have a legend substantially in the form set forth above, unless and until (i)
Transferor shall have notified Transferee of the proposed disposition and (ii)
if requested by Transferee, Transferor shall have furnished to Transferee, at
the expense of Transferor or its transferee, an opinion of counsel reasonably
satisfactory to Transferee to the effect that such transfer may be made without
registration under the Securities Act and applicable state securities laws,
except that no such opinion need be delivered in connection with a transfer or
disposition made pursuant to Rule 144 or Rule 145 promulgated under the
Securities Act.

 

3.21.      FULL DISCLOSURE.

 

There are no materially misleading statements in any of the representations and
warranties made by Transferor in this Agreement, the Exhibits or Schedules to
this Agreement, or any certificates or correspondence including the Yumnuts
Disclosures memo dated December 31, 2011 (Exhibit H), delivered by the
Transferor pursuant to this Agreement.

 

3.22.      RESERVED.

 

3.23.      VENDOR, CO-PACKING AND STORAGE AGREEMENT.

 

Schedule 3.23 attached hereto sets forth a list of the Transferor’s outstanding
agreements with vendors, co-packers and storage providers.

 

3.24.      LIMITATION ON REPRESENTATIONS AND WARRANTIES.

The Transferor's representations and warranties in Sections 3.07, 3.08, and 3.13
shall only apply to the Assets and Assumed Liabilities of the Transferor that
are being transferred to or assumed by the Transferee pursuant to this
Agreement.

 

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4.          REPRESENTATIONS OF THE TRANSFEREE REGARDING THE TRANSFEREE

 

The Transferee represents and warrants to the Transferor that:

 

4.01.      ORGANIZATION AND AUTHORITY.

 

The Transferee is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power
and authority (corporate and other) to own its properties and to carry on its
business as now being conducted. The Transferee has full power to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby and thereby.

 

4.02.      CAPITALIZATION OF THE TRANSFEREE.

 

Attached hereto as Exhibit D is the Transferee’s pre and post-closing
capitalization table. On the date hereof, the Transferee's authorized capital
stock consists of 49,000,000 shares of Common Stock, $.00001 par value, of which
10,030,410 shares are issued and outstanding, and 1,000,000 shares of preferred
stock, $.00001 par value, of which 748,559 shares are blank check preferred
stock, none of which are issued and outstanding, and 251,441 shares of which are
designated Series A Preferred Stock, 245,000 shares shares of which are issued
and outstanding. All of the outstanding shares of capital stock of the
Transferee have been and on the Closing Date will be duly and validly issued and
are, or will be as of the Closing Date, fully paid and non-assessable.

 

4.03.      AUTHORIZATION.

 

The execution and delivery of this Agreement by the Transferee, and the
agreements provided for herein, and the consummation by the Transferee of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action. This Agreement and all such other agreements and
written obligations entered into and undertaken in connection with the
transactions contemplated hereby constitute the valid and legally binding
obligations of the Transferee, enforceable against the Transferee in accordance
with their respective terms. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Transferee of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Transferee, (b)
violate the provisions of the Transferee's Certificate of Incorporation or
Bylaws, (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator, or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Transferee pursuant to, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Transferee
is a party or by which the Transferee is or may be bound. The Transferee’s
Certificate of Incorporation and Bylaws are the sole documents that set forth
and govern the rights, preferences and obligations of the Transferee’s
shareholders.

 

4.04.      REGULATORY APPROVALS.

 

No regulatory approvals are needed for the Transferee to consummate the
transactions contemplated by this Agreement.

 

4.05.      RESERVED.

 

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4.06.      LITIGATION.

 

There is no suit, action or legal administrative, arbitration or order,
proceeding or governmental investigation pending or, to the actual knowledge of
the Transferee, threatened, to which the Transferee is a party which, considered
individually or in the aggregate, would reasonably be expected to materially
impair the Transferee's ability to perform its obligations under this Agreement
or to cause a Material Adverse Effect for the Transferee.

 

4.07.      BROKER'S FEE.

 

No broker or finder has acted for the Transferee in connection with this
agreement or the transactions contemplated hereby, and no broker or finder is
entitled to any brokerage or finder's fee or other commissions in respect of
such transactions based upon agreements, arrangements or understandings made by
or on behalf of the Transferee.

 

4.08.      MISCELLANEOUS.

 

(a)          The Transferee has good and marketable title to its real and
intangible assets free and clear of all liens, leases, encumbrances, equities,
security interests, charges and restrictions, except for certain liens, security
agreements and royalty agreements listed on Exhibit E hereto.

 

(b)          The Transferee has not filed its 2010 Tax Returns but intends to
file such Tax Returns no later than February 28, 2012. Except as otherwise set
forth in the preceding sentence, the Transferee has filed on a timely basis all
prior Tax Returns, which were were correct and complete, except for any error or
omission that could not reasonably be expected to have a Material Adverse Effect
on the Transferee. The Transferee has paid on a timely basis (including any
extensions) all Taxes that were due and payable. All Taxes that the Transferee
is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper governmental
entity.

 

(c)          To its actual knowledge, the Transferee has all requisite licenses,
permits and certificates, including environmental, health and safety permits,
from federal, state and local authorities necessary to conduct its business and
own and operate its assets. To its actual knowledge, the Transferee is not in
violation in any material respect of any law or regulation relating to its
assets. To the Transferee’s actual knowledge, the business of the Transferee as
conducted since December 31, 2011 has not violated, and on the date hereof does
not violate, in any material respect, any federal, state, local or foreign laws,
regulations or orders (including, but not limited to, any of the foregoing
relating to employment discrimination, immigration, occupational safety,
environmental protection, hazardous waste, conservation, or corrupt practices),
the enforcement of which would have a Material Adverse Effect on the Transferee.
Notwithstanding, the Transferee believes to be exempt from California
Proposition 65, which as of this date is being evaluated.

 

(d)          There are no materially misleading statements in any of the
representations and warranties made by Transferee in this Agreement or the
Exhibits to this Agreement, or any certificates delivered by the Transferee
pursuant to this Agreement and the Transferee has not omitted to state any fact
necessary to make statements made herein or therein not materially misleading.

 

15

 

 

5.          ACCESS TO INFORMATION

 

From the date of this Agreement until the Closing Date, the Transferor and the
Transferee shall afford the officers, attorneys, accountants and other
authorized representatives of the other party reasonable access upon reasonable
notice and during normal business hours to all management personnel, offices,
properties, books and records, so that the examining party may have an
opportunity to make such investigation as it shall desire to make of the
management, business, properties and affairs of the non-examining party, and the
examining party shall be permitted to make abstracts from, or copies of, all
such books and records. The non-examining party shall furnish to the examining
party such financial and operating data and other information as to the business
of the non-examining party as the examining party shall reasonably request.

 

6.          CONDITIONS TO OBLIGATIONS OF THE TRANSFEREE

 

The obligations of the Transferee under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Transferee:

 

6.01.      CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS.

 

All representations and warranties of the Transferor shall be true and correct
in all material respects on and as of the Closing Date as though such
representations and warranties were made on and as of such date (except where
such representations are made as of a specific date in which case such
representations shall be true and correct as of such date), except for any
changes permitted by the terms hereof or consented to in writing by the
Transferee. The Transferor shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.

 

6.02.      PERFORMANCE BY THE TRANSFEROR.

 

At the Closing, the Transferor shall have delivered to the Transferee a
certificate signed by a duly authorized officer or manager of the Transferor as
to the Transferor's compliance with Section 6.01 hereof.

 

6.03.      Corporate Proceedings.

 

All consents required to be taken on the part of the Transferor to authorize or
carry out this Agreement shall have been taken and the Transferor shall have
delivered to the Transferee a copy of the resolutions of its Members and
Managers, authorizing the execution, delivery and performance of this Agreement
and the transactions contemplated hereby.

 

6.04.      Post Closing Operations

 

Transferee acknowledges that Transferor has not conducted operations of its
business in the ordinary and usual course of business and consistent with past
and current practices since December 31, 2011 at the request of the Transferee.

 

6.05.      ADVERSE PROCEEDINGS.

 

No action or proceeding by or before any court or other governmental body shall
have been instituted or threatened by any governmental body or person whatsoever
which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might affect the right of the Transferor
to transfer the Assets.

 

16

 

 

6.06.      CLOSING DELIVERIES BY THE TRANSFEROR.

 

At the Closing:

 

(a)          the Transferor shall deliver to the Transferee, or shall otherwise
put the Transferee in sole and exclusive control of, all Assets of a tangible
nature and all Assumed Liabilities;

 

 

(b)          the Transferor shall deliver to the Transferee a certificate of the
secretary of the State of Delaware as to the legal existence and good standing
of the Transferor in such state;

 

(c)          the Transferor shall deliver to the Transferee a certificate of an
officer or Manager of the Transferor attesting to the authenticity and
continuing validity of the charter documents delivered pursuant to Subsection
3.02.

 

(d)          the Transferor shall deliver to the Transferee resolutions
approving the terms and transactions contemplated by this Agreement from the
Transferor’s board of managers;

 

(e)          the Transferor shall deliver to the Transferee a Bill of Sale , in
substantially the form attached hereto as Exhibit F, duly executed by an
authorized officer or manager of the Transferor; and

 

(f)          the Transferor shall deliver to the Transferee a copy of a final
Inventory list, determined in accordance with Section 1.03, and attached hereto
as Exhibit G (the “Inventory List”), duly executed by an authorized officer or
manager of the Transferor.

 

7.          CONDITIONS TO OBLIGATIONS OF THE TRANSFEROR

 

The obligations of the Transferor under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Transferor:

 

7.01.      CONTINUED TRUTH OF REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE;
COMPLIANCE WITH COVENANTS AND OBLIGATIONS.

 

The representations and warranties of the Transferee in this Agreement shall be
true on and as of the Closing Date as though such representations and warranties
were made on and as of such date (except where such representations are made as
of a specific date, in which case such representations shall be true and correct
as of such date), except for any changes consented to in writing by the
Transferor. The Transferee shall have performed and complied with all terms,
conditions, covenants, obligations, agreements and restrictions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.

 

7.02.      CORPORATE PROCEEDINGS.

 

All corporate and other proceedings required to be taken on the part of the
Transferee to authorize or carry out this Agreement shall have been taken.

 

7.03.      RESERVED.

 

17

 

 

7.04.      CONSENTS OF LENDERS, VENDORS AND OTHER THIRD PARTIES.

 

The Transferee shall have received all requisite consents and approvals of all
lenders, vendors and other third parties whose consent or approval is required
in order for the Transferee to consummate the transactions contemplated by this
Agreement.

 

7.05.      ADVERSE PROCEEDINGS.

 

No action or proceeding by or before any court or other governmental body shall
have been instituted or threatened by any governmental body or person whatsoever
which shall seek to restrain, prohibit or invalidate the transactions
contemplated by this Agreement or which might reasonably be expected to
adversely affect the obligation of the Transferee to pay the Consideration to
the Transferor.

 

7.06.      CLOSING DELIVERIES.

 

At the Closing the Transferee shall deliver to the Transferor:

 

(a)         such certificates of the Transferee's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 7
as the Transferor shall reasonably request;

 

(b)         a certificate of the Secretary of State of the State of Delaware as
to the legal existence and good standing of the Transferee in such state;

 

(c)         a certificate of the Secretary of the Transferee attesting to the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement, and the authenticity and continuing validity of the Transferee's
charter documents and by-laws;

 

(d)         certificates representing the Stock Consideration;

 

(e)         the Inventory List, duly executed by an authorized officer of the
Transferee; and

 

(f)          the Promissory Note, duly executed by an authorized officer of the
Transferee.

 

8.          PRE-CLOSING AND POST-CLOSING COVENANTS

 

8.01.      POST-CLOSING COVENANTS.

 

(a)          Consents. Following the Closing, the Transferor shall use its
reasonable best efforts to obtain promptly all consents, waivers, approvals,
authorizations or orders (including, without limitation, from vendors), and the
Transferee and the Transferor shall cooperate with each other to promptly make
all filings (including, without limitation) required in connection with the
authorization, execution and delivery of this Agreement by the parties hereto
and the consummation by them of the transactions contemplated hereby.

 

18

 

 

(b)          Registration Statement. In the event that the Transferee files a
registration statement with the Securities and Exchange Commission (whether
directly, in connection with a “reverse merger”, or otherwise) covering any of
its equity after the Closing, the Transferee shall include all of the Stock
Consideration issued to Transferor hereunder (or any securities such stock
consideration is convertible into) in such Registration Statement, provided,
that if the underwriter of an underwritten offering determines in good faith
that marketing factors require a limitation on the number of shares to be
included in such Registration Statement, the number of shares that may be
included in the underwriting shall be allocated among the holders of shares
being registered in such Registration Statement (including the Transferor), pro
rata based on the total number of all shares being registered by holders in such
Registration Statement.

 

(c)          Board Observer Rights. Following the Closing, the Transferor shall
have, for so long as the Transferor (or its affiliates) own(s) any equity
securities of the Transferee, the right to designate a representative from time
to time and who shall initially be Tyler M. Ricks, to attend all meetings of the
Transferee’s Board of Directors (including special meetings and committee
meetings) and in connection therewith shall provide such representative copies
of all notices, minutes, consents, and other materials that the Transferee
provides to its directors at the same time as provided to its directors. Such
representative shall be a nonvoting observer.

 

(d)          Drag Along Rights. For so long as the Transferor (or its
affiliates) own(s) any equity securities of the Transferee, the Major
Shareholders shall not transfer, and shall not consent to any other shareholder
transferring, any equity securities of the Transferee without first providing
the Transferor reasonable prior written notice and a right to participate
pro-rata in such transfer.

 

(e)          Information Rights. Following the Closing, the Transferee shall
deliver to the Transferor for so long as the Transferor (or its affiliates)
own(s) any equity securities of the Transferee: (i) as soon as practicable, but
in any event within 135 days after the end of each fiscal year of the
Transferee, the [audited] balance sheet as of the end of such fiscal year, and
statements of income and cash flows for such year, prepared in accordance with
accounting principles generally accepted in the United States (“GAAP”)
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year; and (ii) as soon as practicable, but in
any event within 45 days after the end of each of the first three quarters of
each fiscal year of the Transferee, an unaudited income statement for such
quarter, statement of cash flows for such quarter and an unaudited balance sheet
as of the end of such quarter, prepared in accordance with GAAP consistently
applied and setting forth in each case in comparative form the figures for the
previous fiscal quarter. The information rights set forth in this Section
8.01(e) shall terminate upon the consummation of the Transferee’s first firm
commitment underwritten public offering of its common stock registered under the
Securities Act of 1933, as amended. Notwithstanding the above information may
not be disclosed prior to filings with Securities and Exchange Commission.

 

(f)          Notice. For so long as the Transferor (or its affiliates) own(s)
any equity securities of the Transferee, the Transferee shall not, either
directly or indirectly, by amendment, merger, consolidation or otherwise, do any
of the following without providing 15 day prior written notice of the Transferor
or less if parties mutually agree to shorten notice period: (i) create, or
authorize the creation of, or issue or obligate itself to issue (including by
reclassification, alteration or amendment of any existing security of the
Transferee) shares of any additional class or series of capital stock, or any
other security convertible into or exercisable for any equity security, having
rights, preferences or privileges, including but not limited to, voting,
dividend, or distribution of assets upon liquidation, merger or otherwise, which
ranks senior or pari passu with the Series A Preferred Stock; (ii) increase the
authorized number of Series A Preferred Stock; (iii) change the principal
business of the Transferee; or (iv) make any assignment for the benefit of
creditors or commence any bankruptcy, dissolution, termination of corporate
existence, or any other similar action.

 

19

 

 

9.          INDEMNIFICATION

 

9.01.      Generally.

 

(a)          By the Transferor. The Transferor shall indemnify and hold harmless
the Transferee, its directors, officers, employees and agents (the "Transferee
Indemnitees") from and against all actual claims, damages, losses, liabilities,
costs and expenses including, without limitation, settlement costs and any
reasonable legal, accounting or other expenses for investigating or defending
any actions or threatened action (but expressly excluding indirect, incidental,
exemplary, special, consequential or punitive damages (including, without
limitation, diminution in value, loss of future revenue or income, or loss of
business reputation or opportunity)) (collectively, the "Losses") actually
incurred by the Transferee Indemnitees in connection with each and all of the
following:

 

(i)          any misrepresentation or breach of any representation or warranty
made by the Transferor in this Agreement;

 

(ii)         any breach of any covenant, agreement or obligation of the
Transferor contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement; and

 

(iii)        any liability of the Transferor other than the Assumed Liabilities.

 

(b)          By the Transferee. The Transferee shall indemnify and hold harmless
the Transferor, its members, managers, officers, employees and agents (the
"Transferor Indemnitees") from and against all Losses actually incurred by the
Transferor Indemnitees in connection with each and all of the following:

 

(i)          any misrepresentation or breach of any representation or warranty
made by the Transferee in this Agreement;

 

(ii)         any breach of any covenant, agreement or obligation of the
Transferee contained in this Agreement or any other agreement, instrument or
document contemplated by this Agreement; and

 

(iii)        any Assumed Liabilities.

 

9.02.      CLAIMS FOR INDEMNIFICATION.

 

Whenever any claim shall arise for indemnification under this Section 9, the
party seeking indemnification (the "Indemnified Party"), shall promptly notify
the other party (the "Indemnifying Party") in writing of the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party; provided, however, that if a suit shall have been instituted
against the Indemnified Party and the Indemnifying Party shall not have taken
control of such suit after notification thereof as provided in Section 9.03 of
this Agreement, the Indemnified Party shall have the right to settle or
compromise such claim upon giving prior written notice to the Indemnifying Party
as provided in Section 9.03.

 

20

 

 

9.03.      DEFENSE BY THE INDEMNIFYING PARTY.

 

In connection with any claim which may give rise to indemnity hereunder
resulting from or arising out of any claim or legal proceeding by a person other
than the Indemnified Party, the Indemnifying Party, at its sole cost and
expense, may, upon written notice to the Indemnified Party, assume the defense
of any such claim or legal proceeding if the Indemnifying Party acknowledges to
the Indemnified Party in writing the obligation of the Indemnifying Party to
indemnify the Indemnified Party with respect to all elements of such claim. If
the Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall select counsel reasonably acceptable to
the Indemnified Party to conduct the defense of such claims or legal proceedings
and at the sole cost and expense of the Indemnifying Party shall take all steps
necessary in the defense or settlement thereof. The Indemnifying Party shall not
consent to a settlement of, or the entry of any judgment arising from, any such
claim or legal proceeding, without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed) unless the
settlement is only for cash and includes a full release of the Indemnifying
Party. Without limitation, it shall not be deemed unreasonable to withhold
consent to a settlement if equitable relief against the Indemnified Party is
contemplated, awarded or stipulated, the Indemnified Party is required to make
an admission of civil liability or to the commission of a crime, or money is
required to be paid by the Indemnified Party. The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date such claim is made: (a) the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. If the Indemnifying Party thereafter seeks to question
the manner in which the Indemnified Party defended such third party claim or the
amount or nature of any such settlement, the Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that the Indemnified Party
did not defend or settle such third party claim in a reasonably prudent manner.

 

9.04.      INDEMNIFICATION CAP.

 

Notwithstanding anything to the contrary herein, if the Transferor is the
Indemnifying Party, the aggregate liability of the Indemnifying Party hereunder
for Losses under this Section 9 shall be limited to lower of the aggregate value
of the Consideration on (a) the date of the Closing, or (b) the date of the
resolution of the claim as determined in good faith by the Transferor with the
cooperation of the Transferee. Except for payments of the Consideration, the
Indemnifying Party shall not be liable under Section 9.02 unless and until the
aggregate Losses for which it would otherwise be liable under Section 9.02
exceeds (i) Ten Thousand Dollars ($10,000) for manufacturer chargebacks from
distributors and customers or (ii) exceeds Twenty Five Thousand Dollars
($25,000) for all other claims inclusive of (i) above, and then (as to both (i)
and (ii) above, only in excess of such amount.

 

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9.05.    PAYMENT OF INDEMNIFICATION OBLIGATION.

 

If the Indemnifying Party shall be the Transferor, all indemnification by the
Indemnifying Party shall be effected by repayment of the Consideration at the
Current Market Price (as defined below) of such Consideration, reduction of the
amounts due under the Promissory Note, or a cash payment, or a combination
thereof, at the sole option of the Transferor. If the Indemnifying Party shall
be the Transferee, all indemnification by the Indemnifying Party shall be
effected by payment of cash. The “Current Market Price” means the average
Closing Ask Prices (as defined below) of the Stock Consideration for the three
(3) trading days immediately prior to, but not including, the Conversion Date
for the Common Stock on the OTC Pink Sheets, NASD OTC Bulletin Board, NASDAQ
SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New
York Stock Exchange, as applicable, or if not then trading on any of the
foregoing, the per share valuation of such Stock Consideration utilized by the
Transferor in the exercise of good faith. “Closing Ask Price” means the closing
ask price as reported by the OTC Bulletin Board, NASDAQ or other market or
exchange, as applicable. Notwithstanding, Transferee shall not sell or transfer
any Stock Consideration received hereunder prior to the expiration of the one
year anniversary of the Closing Date.

 

9.06.    SURVIVAL OF REPRESENTATIONS; CLAIMS FOR INDEMNIFICATION.

 

All representations and warranties made by the Transferor and the Transferee in
this Agreement, or in any instrument or document furnished in connection with
this Agreement or the transactions contemplated hereby, shall survive the
Closing and the consummation of the transactions contemplated hereby for 12
months. Notwithstanding the foregoing, (a) the representations and warranties of
the Transferor contained in Sections 2, 3.01, 3.02, and 3.03 and of the
Transferee contained in Sections 4.01, 4.02, and 4.03 shall survive the Closing
and the consummation of the transactions contemplated hereby without limitation,
and (b) any valid claim that is properly asserted in writing pursuant to Section
9.01 and/or 9.02 prior to the expiration as provided in this Section 9.06 of the
representation or warranty that is the basis for such claim shall survive until
such claim is finally resolved and satisfied. Notwithstanding anything herein to
the contrary, the covenants set forth herein at Section 8.01 hereof shall
survive for an indefinite period of time unless otherwise set forth in such
section.

 

9.07.    SOLE REMEDY.

 

Except as otherwise explicitly provided in this Agreement, any Exhibit or
Schedule hereto, the parties agree that the sole and exclusive remedy of any
party hereto with respect to this Agreement, the Exhibits or Schedules hereto
and the transactions contemplated hereby or thereby shall be limited to the
indemnification provisions set forth in this Section 9 and, in furtherance of
the foregoing, each of the parties, hereby waives and releases the other parties
hereto from, to the fullest extent permitted under any law, any and all rights,
claims and causes of action such party may have against any other party hereto.

 

10.         RESTRICTIVE COVENANTS

 

10.01.    CONFIDENTIALITY.

 

The Transferor acknowledges that the Confidential Information (as defined below)
is a valuable and unique asset and covenants that it will not disclose any such
Confidential Information after Closing to any person for any reason whatsoever,
unless such information is (a) within the public domain through no wrongful act
of the Transferor, (b) has been rightfully received from a third party without
restriction and without breach of this Agreement, (c) is required by law to be
disclosed or is disclosed for purposes of defending claims related to the
Transferor in a manner designed to protect the confidentiality of the
Confidential Information, or (d) represents historical information reasonably
required by a prospective purchaser of the Transferor. “Confidential
Information” means information relating to the business of the Transferor that
is not in the public domain or readily determinable by reference to publicly
available sources and specifically including, without limitation, information
and knowledge pertaining to products and services offered, innovations, ideas,
plans, trade secrets, proprietary information, advertising, sales methods and
systems, sales and profit figures, customer and client lists, and relationships
with dealers, customers, clients, suppliers and others who have business
dealings with such parties.

 

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10.02.    NON-COMPETE.

 

The Transferor agrees that for 12 months following the withdrawal from
observational board advisor role if party is an advisor or upon close of this
agreement if not an advisor (the “Non-Competition Period”) the observational
advisor shall not, directly or indirectly, either for themselves or for any
other person, partnership, corporation or company, participate in any business
with revenues less than $50 million that manufactures flavored nuts products to
any health food stores in the United States of America. If at any time the
Transferee requests Transferor to change its board advisor member, the
Transferor will work in good faith to assign a new board advisor.

 

10.03.    ADDITIONAL TERMS.

 

The Transferor acknowledges that the restrictions contained in this Section 10
are reasonable and necessary to protect the legitimate interest of the
Transferee, and that any violation will result in irreparable injury to the
Transferee. The Transferor agrees that for the first 12 months following the
Closing Date, the Transferee shall be entitled to seek injunctive or other
equitable relief to prevent breaches of the provisions of this Section 10 and to
enforce specifically the terms of this Section 10. In the event that any of the
provisions of this Section 10 are adjudicated to exceed the time, geographic,
product or service, or other limitations permitted by applicable law in any
jurisdiction, then such provision shall be deemed reformed in such jurisdiction
to the maximum time, geographic, product or service, or other limitation
permitted by applicable law. The covenants and limitations set forth in this
Section 10 shall be binding upon the successors and assigns of the Transferor
and Transferee, including any acquirer of all or substantially all the assets or
business of the Transferor or Transferee.

 

11.         TERMINATION OF AGREEMENT

 

11.01.    TERMINATION BY AGREEMENT OF THE PARTIES.

 

This Agreement may be terminated by the mutual written agreement of the parties
hereto prior to the Closing Date. This Agreement shall automatically terminate
if the Closing Date shall not occur on or before January 30, 2012; provided that
such date may be extended by the mutual written consent of the Transferor and
the Transferee. In the event of any such termination, the Transferee shall have
no further obligation or liability to the Transferor under this Agreement, and
the Transferor shall have no further obligation or liability to the Transferee
under this Agreement.

 

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11.02.    TERMINATION BY REASON OF BREACH.

 

This Agreement may be terminated by the Transferor, if at any time prior to the
Closing there shall occur a material breach of any of the representations,
warranties or covenants of the Transferee or the failure by the Transferee to
perform any condition or obligation hereunder, and may be terminated by the
Transferee, if at any time prior to the Closing there shall occur a material
breach of any of the representations, warranties or covenants of the Transferor
or the failure of the Transferor to perform any condition or obligation
hereunder. Written notice of any such termination must be delivered by the
terminating party to the non-terminating party and non-terminating party shall
have 30 days to cure said breach. If such breach shall remain uncured by the
31st day then this Agreement shall be deemed terminated.

 

12.         NOTICES

 

All notices, requests, consents, instructions and other communications required
or permitted to be given hereunder shall be in writing and sent by
nationally-recognized, next-day delivery service or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed as set
forth below or by facsimile transmission confirmed in writing by next-day
delivery service or by E-mail; receipt shall be deemed to occur on the date of
actual receipt if delivered by registered or certified mail, if sent by
facsimile or E-mail six (6) hours from the time of transmission (provided such
facsimile or E-mail is sent within two hours prior to the end of normal business
hours on a business day or, if not, on the next business day) and confirmed in
writing by next-day delivery service, or one (1) business day after it is sent
by nationally-recognized, next-day delivery service.

 

  To the Transferee: Cell-nique Corporation     12 Old Stage Coach Rd    
Weston, CT 06883     Attention:  Dan Ratner, President     Facsimile:
203.557.3148     E-mail: dan@cell-nique.com           With a copy     to: Jeff
Stein, Esq.     1000 Woodbury Rd, Suite 110     Woodbury, NY 11797         To
the Transferor: Health Nutz, LLC dba Yumnuts     Attention: Tyler Ricks     320
Fleming Lane     Fairfield, CT 06824     E-mail: ricks.tyler@gmail.com    
E-mail: metivier3@hotmail.com           With a copy (which shall not constitute
notice)     to: Robinson & Cole LLP     1055 Washington Boulevard     Stamford,
CT  06901-2249     Attn: Eric J. Dale, Esq.     Facsimile: (203) 462-7599    
E-mail: edale@rc.com

 

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13.         SUCCESSORS AND ASSIGNS

 

This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Transferee,
on the one hand, and the Transferor, on the other hand, may not assign their
respective obligations hereunder without the prior written consent of the other
party. Any assignment in contravention of this provision shall be void. No
assignment shall release the Transferee or the Transferor from any obligation or
liability under this Agreement.

 

14.         ENTIRE AGREEMENT; AMENDMENTS; ATTACHMENTS

 

(a)           This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. This agreement may only be modified or amended by a
written instrument executed by the Transferee and the Transferor.

 

(b)           If the provisions of any Exhibit to this Agreement are
inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits attached hereto are hereby incorporated as
integral parts of this Agreement.

 

15.         SEVERABILITY

 

Any provision of this Agreement which is invalid, illegal or unenforceable in
any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement invalid, illegal or unenforceable in any other
jurisdiction.

 

16.         INVESTIGATION OF THE PARTIES

 

Any representations and warranties contained herein which are made to the best
knowledge of a party shall require that such party make reasonable investigation
and inquiry with respect thereto to ascertain the correctness and validity
thereof.

 

17.         EXPENSES

 

Except as otherwise expressly provided herein, each party will pay all their
respective fees and expenses (including, without limitation, legal and
accounting fees and expenses) incurred by them in connection with the
transactions contemplated hereby. The Transferor shall be responsible for
payment of all sales or transfer taxes arising out of the conveyance of the
Assets.

 

18.       GOVERNING LAW/JURISDICTION

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. Subject to Section 10.3, each of the parties hereto
(a) submits to the exclusive jurisdiction of any state or federal court sitting
in the State of New York in any action or proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, (c) waives any claim of inconvenient forum or other challenge to
venue in such court, (d) agrees not to bring any action or proceeding arising
out of or relating to this Agreement or the transactions contemplated hereby in
any other court and (e) waives any right it may have to a trial by jury with
respect to any action or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby. Each party hereto agrees to accept
service of any summons, complaint or other initial pleading made in the manner
provided for the giving of notices in Section 12; provided, however, that
nothing in this Section 18 shall affect the right of any party hereto to serve
such summons, complaint or other initial pleading in any other manner permitted
by Law.

 

25

 

 

19.       SECTION HEADINGS

 

The section headings are for the convenience of the parties and in no way alter,
modify, amend, limit, or restrict the contractual obligations of the parties.

 

20.       COUNTERPARTS

 

This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall be one and the same
document.

 

21.       CONSULTATION WITH INDEPENDENT COUNSEL

 

The parties have had the opportunity to consult with their own legal counsel and
other advisors, and are entering into this Agreement voluntarily and with a full
understanding of the meaning and legal effects of each provision contained in
this Agreement. In the event of any dispute regarding the interpretation of any
provision of this Agreement, the parties agree that this Agreement and the
provisions hereof shall not be construed against any one party as the drafter of
this Agreement.

 

[Signature Page Follows]

 

 

 

26

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of January 30, 2012.

 

             TRANSFEREE: Cell-nique Corporation          
By:__________________________                       Name: Dan Ratner    
                  Title: President                            TRANSFEROR: Health
Nutz, LLC dba Yumnuts           By:  ___________________________    
                  Name: Tyler Ricks                       Title:  Chief
Executive Officer  

 

 

Acknowledged and Agreed only with respect to Section 8.01(d):

 

MAJOR SHAREHOLDERS:

 

 

  By:  _______________________________                       Name:          
By:  _______________________________                       Name:           By: 
_______________________________                       Name:

 

Acknowledged and Agreed only with respect to Section 10.02:

 

FOUNDERS:

 

 

  By:  _______________________________                      Name: Tyler Ricks  
        By:  _______________________________                      Name: Jerome
Metivier           By:  _______________________________  
                   Name: Michael Cochrane           By: 
_______________________________                      Name: Gary Cochrane

 

27

 

 

 

THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE
WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

 

Convertible Promissory Note

For

Services Rendered

By

JMS Law Group, PLLC

To

Cell-nique Corporation

 

CONVERTIBLE PROMISSORY NOTE 

 

Date of Issuance: January 1, 2012    

 

Cell-nique Corporation, a Delaware corporation (the “Company”), for value
received hereby promises to pay to JMS Law Group, PLLC, or registered assigns
(the “Attorney” or “Holder”), Fifteen Thousand ($15,000) Dollars (“Principal”)
for services rendered by the Attorney to represent the Company as legal counsel
throughout the United States as per that certain retainer agreement dated
October 1, 2011 (the “Agreement”). The Agreement fully describes the services
and engagement provided by Attorney on behalf of the Company and its brands.

 

Interest on such outstanding Principal shall accrue at the rate of eight percent
(8%) per annum (computed on the basis of a 360 day year for the actual number of
days elapsed), as set forth below, on the date twenty four months (24)
months after the date of this Note, written above (“Maturity”).  Payment for all
amounts due hereunder shall be made by wire transfer in accordance with the
Holder’s instructions.

 

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

 

1.   Payment of Principal and Interest. 

 

          (a)  Payment in Full on Maturity.  Unless this Note is sooner prepaid
or converted pursuant to Section 3 hereof or sooner becomes due and payable
under Section 2 hereof, all outstanding principal of and accrued but unpaid
interest on this Note shall be paid in full on Maturity.

 

          (b)  Interest.  Interest shall accrue on the outstanding principal
amount of this Note, at the rate of eight percent (8%) per annum (the “Coupon
Rate”) computed on the basis of a 360-day year (twelve thirty-day months), from
the date such principal amount is accrued until the earlier of (i) the payment
in full of all outstanding principal of, and accrued interest on, this Note, or
(ii) the conversion of this Note into capital stock of the Company pursuant to
Section 3 hereof.  All payments made under this Note shall be applied first
against accrued but unpaid interest and second against the outstanding principal
balance hereof. 

 

 

 

 

         (c) Forced Repayment. In the event the Company receives financing of at
least One Million ($1,000,000) Dollars either at one time or as part of an
offering, the Company agrees to immediately repay all amounts due under this
Note, out of such proceeds.

 

2.   Events of Default.  If one or more of the following events (each an “Event
of Default”) shall occur:

 

        (a)  the Company shall fail to pay in full any principal, accrued
interest or other amounts due to Holder under this Note when due;

 

        (b)  the Company shall default in the performance of or compliance with
any covenant, agreement or other obligation of the Company contained in this
Note that is not remedied, waived or cured within fifteen (15) days following
such default in performance or noncompliance;

 

        (c)  any representation or warranty of the Company contained herein
shall prove to have been false or incorrect in any material respect as of the
date of this Note;

 

        (d)  the Company shall default (as principal, guarantor or other surety)
in the payment of any principal of, premium (if any) or interest on any
indebtedness for borrowed money to any other party, or shall default in the
performance of or compliance with any other obligation contained in the
documentation evidencing or securing any such other indebtedness, and in
connection with such default such indebtedness becomes due and payable prior to
the date it would otherwise become due and payable, or the Company shall fail to
pay such indebtedness at its stated maturity;

 

        (e)  other than on terms approved beforehand by the Holder (which
approval may be withheld for any reason whatsoever), the Company shall institute
proceedings to be adjudicated as bankrupt or insolvent, or shall consent to
institution of bankruptcy or insolvency proceedings against it or the filing by
it of a petition or answer or consent seeking reorganization or release under
Title XI of the United States Code, or any other applicable federal or state
law, or shall consent to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official of the
Company, or of any substantial part of its property, or shall make an assignment
for the benefit of creditors, or shall take corporate action in furtherance of
any such action;

 

        (f)  within thirty (30) days after the commencement of an action against
the Company (and service of process in connection therewith on the Company)
seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution, or
similar relief under any present or future statute, law, or regulation, such
action shall not have been resolved in favor of the Company or all orders or
proceedings thereunder affecting the operations or the business of the Company
stayed, or the stay of any such order or proceeding shall thereafter be set
aside, or within thirty (30) days after the appointment without the consent or
acquiescence of the Company of any trustee, receiver or liquidator of the
Company, such appointment shall not have been vacated;

 

        (g)  entry of a final judgment in excess of $1,000,000 (including
insured portions) against the Company or for which the Company is otherwise
responsible that is not stayed, bonded or discharged within thirty (30) days;

 

 

 

  

        (h)  any plan of liquidation or dissolution or winding up is adopted by
the Company’s board of directors or shareholders or the Company is involuntarily
dissolved or otherwise wound up; or

 

        (i)  there shall occur, or the Company shall enter into any agreement
providing for, a Change of Control (as defined below) of the Company; the term
“Change of Control” shall mean any transaction or series of related transactions
(including without limitation any reorganization, merger, consolidation, sale of
assets or sale of stock) that will result in (i) the sale of all or
substantially all of the assets of the Company, (ii) a change in ownership of
60% or more of the Company’s then outstanding capital stock, in one or a series
of transactions occurring within a period of six (6) months, other than any such
change of ownership resulting from the sale by the Company of its securities in
connection with one or more financing transactions, or (iii) a consolidation or
merger of the Company with or into any other corporation or corporations (or
other corporate reorganization) immediately after which the shareholders of the
Company hold less than fifty percent (50%) of the voting power of the surviving
corporation;

 

  then, upon the occurrence of any Event of Default described in paragraph (a),
(d), (e), (h) or (i) above, all outstanding principal of this Note and all
accrued but unpaid interest thereon shall be accelerated automatically, without
any further action by any party, and shall become immediately due and payable
(for Subsections (b), (c), (g) after applicable cure period) notwithstanding any
other provision of this Note, without presentment, demand, protest, notice of
protest or other notice of dishonor of any kind, all of which are hereby
expressly waived by the Company; upon the occurrence of any Event of Default
described in paragraph (f) above, the original principal of this Note shall be
reduced to Fifteen Thousand ($15,000) Dollars and all accrued but unpaid
interest thereon shall be accelerated automatically, without any further action
by any party, and shall become immediately due and payable notwithstanding any
other provision of this Note, without presentment, demand, protest, notice of
protest or other notice of dishonor of any kind, all of which are hereby
expressly waived by the Company, and the Company agrees that the payment of such
principal shall be made simultaneously, and as a condition to, the closing of
any such Change of Control transaction, and upon the occurrence of any other
Event of Default described in the other paragraphs above, Holder may, at
Holder’s option, exercisable at any time thereafter, by notice to the Company in
writing, accelerate this Note and declare the entire outstanding principal
balance of this Note and all accrued but unpaid interest thereon immediately due
and payable, without presentment, demand, protest, notice of protest or other
notice of dishonor of any kind, all of which are hereby expressly waived by the
Company.  At any time following any such acceleration as provided in the
preceding sentence, Holder may at its option convert this Note in whole or in
part into shares of Common Stock of the Company at the Default Conversion Price
by written notice to the Company.  Holder may enforce its rights under this Note
and otherwise at law or in equity or both, all remedies available to Holder
under this Note or otherwise shall be cumulative, and no course of dealing
between the Company and Holder or any delay or omission in exercising any power
or right shall operate as a waiver thereof.  The Company shall notify the Holder
immediately in writing of the occurrence of any Event of Default, which
notification shall include a summary of the material facts relating to such
Event of Default and shall specify the date on which such Event of Default
occurred.

 

3.   Conversion.  The outstanding principal amount of and any accrued but unpaid
interest under this Note shall be convertible into capital stock of the Company
as follows:

 

        (a)  Conversion on Change of Control. In the event of a Change in
Control the number of Conversion Shares issuable upon conversion under this
paragraph shall be determined by dividing the outstanding principal balance plus
all accrued and unpaid interest hereunder through the Conversion date by the
lower of either (i) the same equity valuation as determined in the Change of
Control transaction, (ii) the Conversion Price (as defined below), or (iii)
notwithstanding full payment of the Note and conversion, if Attorney is
restricted by the Change of Control, the principal amount of this Note shall
immediately be increased to 125% of the face value of the outstanding balance of
the unconverted unpaid Note(s) (the “Default Conversion Price”).

 

 

 

 

        (b)  Holder Conversion.  The Holder may elect at any time to convert the
outstanding principal amount and accrued interest of this Note, without any
further act of the Company or its shareholders, into Conversion Shares in lieu
of repayment of all outstanding principal and accrued interest under this Note. 
Any such conversion shall be deemed to occur on the notice date and Company
shall issue the Conversion Shares within three business days thereafter.  The
number of Conversion Shares issuable upon conversion under this paragraph shall
be determined by dividing the principal amount of this Note the Note Holder
desires to convert which shall be subtracted from the Principal hereunder
through the Notice date by the (i) the average of the closing market price per
share as traded in the public market for the two lowest out of the five
consecutive trading days immediately preceding such notice, or (ii) if the
Common Stock of the Company is not traded on a public market or exchange, then
the lowest valuation per share price determined by a third party in a financing
(or other equity transaction), acquisition or merger with the Company (the
“Conversion Price”). 

 

        (c) Registration Rights upon Conversion.  The Holder shall be made a
party, on the same basis as other investors to any registration rights
agreement, investors rights agreement, shareholders agreement, or other
agreements setting forth the rights being granted to such investors in future
Offering or upon expiration of 144 restrictions.

 

        (d)  Mechanics of Conversion.

 

        (i)  Upon conversion of this Note under paragraph 3(a) or 3(b) above,
all amounts due and owing under this Note shall be converted automatically,
without any further action by the Holder and whether or not this Note is
surrendered to the Company, into fully paid and nonassessable shares of Common
Stock, which shall be deemed issued and outstanding for all purposes from and
after the time of such conversion as specified in paragraph 3(a) or 3(b) above. 
Within three days after such conversion, the Company shall issue to the Holder a
certificate representing the number of shares of Common Stock, as applicable,
issuable upon such conversion in accordance with the terms of this Note (the
shares actually issuable hereunder being referred to as the “Conversion Shares”)
and a cash payment in lieu of any fractional share otherwise issuable upon such
conversion, in accordance with paragraph 3(e) below; provided, however, that the
Company shall not be obligated to issue to the Holder such certificate or check
unless and until this Note, or an appropriate affidavit of loss, is delivered to
the Company. 

 

        (ii) In the event of any conversion of this Note under this Section 3,
the person in whose name the certificate for Conversion Shares is to be issued
shall be deemed to have become a holder of record of such Conversion Shares on
the date as of which conversion is deemed to occur as specified in paragraphs
3(a) and 3(b) above, as the case may be. 

 

        (iii)    Whichever of the Conversion Price or the Default Conversion
Price is the conversion price at which this Note is actually converted under
this Section 3 shall be referred to herein as the “Note Conversion Price”.

 

        (e)  Fractional Shares.  No fractional Conversion Shares or scrip shall
be issued upon conversion of this Note.  Instead of any fractional Conversion
Shares that would otherwise be issuable upon conversion of this Note, the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to that fractional interest of the price at which the Note was
converted, as applicable.

 

 

 

 

        (f)  Stock Dividends, Splits and Combinations.  If the number of shares
of the class of capital stock of the Company issuable upon conversion of this
Note outstanding at any time after the date of issuance of this Note (the “Issue
Date”) is increased by a stock dividend or other distribution payable in shares
of such stock or by a subdivision, split-up or reclassification of outstanding
shares of such stock, then immediately after the record date fixed for the
determination of stockholders entitled to receive such stock dividend or the
effective date of such subdivision, split-up or reclassification, as the case
may be, the Conversion Price or the Default Conversion Price, as applicable,
shall be reduced appropriately so that the Holder shall be entitled to receive
the number of Conversion Shares that it would have owned immediately following
such action had this Note been converted immediately prior thereto.  If the
number of shares of the class of capital stock of the Company issuable upon
conversion of this Note outstanding at any time after the Issue Date is
decreased by a combination or reclassification of the outstanding Conversion
Shares, then, immediately after the effective date of such combination or
reclassification, the Conversion Price or the Default Conversion Price, as
applicable, shall be increased appropriately so that the Holder shall be
entitled to receive the number of Conversion Shares that it would have owned
immediately following such action had this Note been converted immediately prior
thereto.

 

        (g)  Certain Adjustments.  The Note Conversion Price shall be adjusted
up or down, as the case may be, to take into account any stock split,
combination, stock dividend, recapitalization or similar event after the date
hereof with respect to the Company’s common stock or any other class of capital
stock of the Company in order that the number of shares of Common Stock, as
applicable, issuable upon conversion of this Note and the number of shares of
the Company’s Common Stock issuable upon conversion of the Common Stock, as
applicable, issuable upon conversion of this Note will not be adversely or
positively affected by any such event. 

 

        (h)  Capital Reorganization or Reclassification.  If the Conversion
Shares shall be changed into the same or a different number of shares of any
class or classes of stock or other property, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
or stock dividend provided for above), then in each such event the Holder shall
have the right thereafter to convert this Note into the kind and amount of
shares of stock and other securities and property that would have been
receivable upon such reorganization, reclassification or other change in respect
of the number of Conversion Shares into which this Note could have been
converted immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.

 

        (i)  Merger or Consolidation.  Subject to the terms of Section 2(i)
above, if at any time or from time to time there shall be an acquisition of the
Company by another entity by means of merger, consolidation or otherwise,
resulting in the exchange of the outstanding Conversion Shares for securities or
consideration issued or caused to be issued by the acquiring entity or any of
its affiliates, then, as a part of such acquisition, provision shall be made so
that the Holder shall thereafter be entitled to receive, upon conversion of this
Note, the number of shares of stock or other securities or property of the
acquiring corporation resulting from such acquisition to which the Holder would
have been entitled if the Holder had converted this Note immediately prior to
such acquisition.  In any such case appropriate adjustments shall be made in the
application of the provisions of this Section 3(i) with respect to the rights of
the Holder after such acquisition to the end that the provisions of this
Section 3(i) shall be applicable after that event in as nearly equivalent a
manner as may be practicable.

 

 

 

 

        (j)  Notice to Holder.  In the event the Company shall propose to take
any action of the type described in Sections 3(f), (g), (h), or (i), the Company
shall give notice to the Holder, which notice shall specify the record date, if
any, with respect to any such action and the approximate date on which such
action is to take place.  Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price or the Default Conversion Price, as applicable, and the
number, kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or deliverable
upon conversion of this Note.  In the case of any action that would require the
fixing of a record date, such notice shall be given at least fifteen (15) days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least twenty (20) days prior to the taking of such proposed action. 
Failure to give such notice, or any defect therein, shall not affect the
legality or validity of any such action.

 

        (k)  Costs.  The Company shall pay all documentary, stamp, transfer or
other transactional taxes attributable to the issuance or delivery of Conversion
Shares upon conversion of this Note; provided, however, that the Company shall
not be required to pay any taxes which may be payable in respect of any transfer
involved in the issuance or delivery of any certificate for such shares in a
name other than that of the Holder.

 

        (l)  Reservation of Shares.  The Company shall take all necessary action
to reserve, and shall reserve at all times so long as any principal amount under
this Note remains outstanding, free from statutory or contractual preemptive
rights, out of its authorized but unissued capital stock, solely for the purpose
of effecting the conversion of this Note, sufficient shares of Common Stock to
provide for conversion of the Conversion Shares into Company Common Stock.

 

        (m)  No Impairment.  The Company will not, by amendment of its Amended
and Restated Articles of Incorporation or through any reorganization, transfer
of assets, issuance or sale of securities or otherwise, avoid or seek to avoid
the observance or performance of any of the terms of this Section 3 or the other
provisions of this Note and will at all times in good faith assist in the
carrying out of all provisions hereof and in the taking of all actions as may be
necessary in order to protect the conversion and other rights of the Holder
hereunder against impairment.

 

4.   Assignment.  Subject to the restrictions on transfer described in Section 6
below, the rights and obligations of the Company and the Holder shall be binding
upon and benefit the successors, assigns, heirs, administrators and transferees
of the parties.

 

5.   Waiver and Amendment.  Any provision of this Note may be amended, waived or
modified upon the written consent of the Company and the Holder.  Any amendment,
waiver, modification or consent entered into pursuant to this Section 5 shall be
effective only in the specific instance and for the specific purpose for which
it was given.

 

6.   Transfer of this Note.  The Holder understands that the Company will
instruct any transfer agent not to register the transfer of this Note (or the
Conversion Shares issued upon conversion of this Note) unless the conditions
specified in the legend set out in all capital letters at the top of this Note
are satisfied.

 

7.   Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery; upon confirmed transmission by telecopy or telex if sent
during normal business hours of the recipient (or if not, on the next business
day of the recipient); three days after deposit with the United States Post
Office, by registered or certified mail, postage prepaid; or otherwise upon
delivery by hand or by messenger or one day after deposit with a nationally
recognized courier service, addressed (a) if to Holder, to the Holder’s address
as set forth below, or to such other address as such Holder shall have furnished
to the Company in writing, or (b) if to the Company, if to the Company, one copy
shall be sent to Cell-nique Corporation, PO Box 1131 Weston, CT 06883 Attention:
Dan Ratner, President, or to such other addresses as the Company shall have
furnished to the Holder.

 

 

 

 

8.   No Rights of a Shareholder.  Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
consent or to receive notice as a shareholder in respect of meetings of
shareholders for the election of directors of the Company or any other matters
or any rights whatsoever as a shareholder of the Company prior to the time that
this Note is converted into Conversion Shares pursuant to Section 3.

 

9.   Governing Law.  The Agreement shall be governed by, and construed under,
the laws of the State of New York.

 

10.  Collection Costs.  The Company shall pay on demand all reasonable costs and
expenses, including without limitation reasonable fees and expenses of counsel,
incurred by Holder in connection with enforcement of its rights under this Note.

 

11.  Lost, Stolen or Mutilated Note.  If this Note is lost, stolen, mutilated or
destroyed, the Company will, on such reasonable terms with respect to indemnity
or otherwise as it may in its discretion impose, issue a new note of like
denomination, tenor, and date as this Note.  Any such new note shall constitute
an original contractual obligation of the Company, and the lost, stolen,
mutilated or destroyed, as applicable, Note shall be null and void.

 

12.  Counterparts.  This Note may be executed in counterparts, each of which
shall be enforceable against the party actually executing such counterpart, and
which together shall constitute one instrument.

 

SIGNATURE PAGE TO FOLLOW

 

CONVERTIBLE PROMISSORY NOTE

 

 

 

 

This Note has been executed and delivered as of the date first above written.

 

COMPANY: Cell-nique Corporation         By         Dan Ratner, President        
ACCEPTED AND AGREED:         HOLDER: JMS Law Group, PLLC         By      
Jeffrey M. Stein, Principal         Address:         1000 Woodbury Road, Suite
110A   Woodbury, NY 11797