KANAB CORP.

 

SECURITIES PURCHASE AGREEMENT

 

BY AND AMONG

 

KANAB CORP.

 

AND

 

THE INVESTOR

 

EFFECTIVE AS OF MAY 2, 2019

 

 

 

   

 

 

SECURITIES PURCHASE AGREEMENT

 

Common Stock

 

Securities Purchase Agreement (this “Agreement”), effective as of May 2, 2019,
is entered into by and among KANAB CORP., a Wyoming corporation (the “Company”),
and 2050 Motors, Inc., (the “Investor”). Certain capitalized terms used in this
Agreement are defined in Section 7.1 of this Agreement.

 

RECITALS

 

WHEREAS, the Investor desires to purchase from the Company, and the Company
desires to sell to the Investor, newly-authorized Common Stock, no par value per
share, of the Company (the “Common Stock”) upon the terms and conditions set
forth herein (the “Investment Transaction”); and

 

WHEREAS, the Company has requested as a condition and an inducement to its
willingness to enter into this Agreement and to consummate the Investment
Transaction, that the Company and the Investors shall enter into a Stockholders’
Agreement with industry standard definitions, language, protections, and
stockholder rights and protections (the “Stockholders Agreement”).

 

NOW, THEREFORE, in consideration of the foregoing, and of the mutual
representations, warranties, covenants and agreements contained in this
Agreement and other valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:

 

Section 1. Authorization and Sale of Common Shares.

 

1.1 Authorization. The Company shall adopt and file with the Secretary of State
of the State of Wyoming as soon as practicable, if required by law, a
Certificate of Determination or similar document disclosing the issuance of
Common shares to the Investor (the “Amended Certificate”).

 

1.2 Purchase and Sale. On the basis of the representations, warranties, and
agreements contained in this Agreement, and subject to the terms and conditions
of this Agreement, the Investor shall purchase from the Company, and the Company
shall sell, issue, and deliver to the Investor 1,000,000 shares of Common Stock
(such shares of Common Stock issued to the Investor, the “Acquired Shares”), at
a purchase price of $.01 per share (“Per Share Price”), payable by the Investor
as set forth in Section 1.3 hereof.

 

1.3 Payment of Purchase Price. At the Closing, the Investor is contractually
committed to the Aggregate Purchase Price to the Company for development of
KANAB CORP.’s cannabis social network @ www.kanab.club.

 

1.4 Use of Proceeds. The Company shall use the proceeds from the sale of the
Common Shares for strategic investments, mergers and acquisitions, and general
corporate purposes.

 

1.5 The Closing. The closing of the purchase and sale of the Acquired Shares
(“Closing”) shall take place at 10:00 a.m., on May 26, 2019.

 

1.6 Deliveries at Closing. At the Closing or as soon as practicable after the
Secretary of State of Wyoming approves the Company’s Certificate of
Determination or similar documents for its newly-created Common Shares, (a) the
Company shall deliver to the Investor a certificate or certificates representing
the number of Acquired Shares being purchased by the Investor at the Closing,
registered in the name of the Investor, and (b) the Investor shall commit to the
Company the capital funding in cash in the manner set forth in Section 1.3
hereof.

 

   

 

 

Section 2. Representations and Warranties of the Company. Except as set forth in
any required disclosure schedules, dated as of the date of this Agreement and
attached hereto, that have been delivered by the Company to the Investor prior
to the execution and delivery of this Agreement (the “Disclosure Schedule”),
which exceptions shall be deemed to part of the representations and warranties
made hereunder (the Disclosure Schedule shall be arranged in sections
corresponding to the numbered and lettered sections contained in Section 2, and
each such exception set forth in the Disclosure Schedule however shall not be
deemed a disclosure or an exception with respect to any other section or
sections of this Agreement unless reliance of such items to such other section
or sections is specifically referenced to each applicable item in the Disclosure
Schedule), the Company hereby represents and warrants to the Investor as
follows:

 

2.1 Organization, Standing, and Power. The Company is a corporation duly
incorporated, validly existing, and in good standing under the Laws of the State
of Wyoming and has the requisite corporate power and authority to own, lease,
operate and otherwise hold its properties and assets and to carry on its
business as it is now being conducted. The Company is duly qualified or licensed
to do business as a corporation and is in good standing in each jurisdiction in
which the character or location of the property owned, leased, operated, or held
by it or the nature of the business transacted by it makes such qualification or
license necessary, except where the failure to be so qualified or licensed would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.

 

2.2 Authority; Due Execution. The Company has all the requisite corporate power
and authority to execute and deliver, and to perform its obligations hereunder
and to consummate the Investment Transaction contemplated by, this Agreement.
The execution, delivery, and performance by the Company of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, including the Investment Transaction, have been
duly and validly authorized by all necessary corporate action on the part of the
Company. This Agreement and the other Transaction Documents have been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery by the Investor, each will constitute a legal, valid, and
binding obligation of the Company, enforceable against it in accordance with its
terms except to the extent enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratoriums, or similar Laws affecting
creditors’ rights and remedies generally, (ii) the availability of the equitable
remedy of specific performance and injunctive relief is subject to the
discretion of the court before which any proceedings may be brought, or (iii)
applicable federal and state securities Laws with respect to indemnification
provisions contained in the Stockholders Agreement and Registration Rights
Agreement (the “Bankruptcy and Equity Exceptions”).

 

2.3 No Conflict or Required Approvals.

 

(a) Except as set forth in the Disclosure Schedule, neither the execution and
delivery of this Agreement or any of the other Transaction Documents, nor the
consummation by the Company of Investment Transaction contemplated hereby, or
compliance with any of the terms or provisions herein by the Company will: (i)
conflict with or violate any provision of the Articles of Incorporation or
Bylaws, of the Company, assuming the filing of the Amended Certificate of
Determination in relation to the consummation of the Investment Transaction,
(ii) conflict with, violate, or constitute or result in a material breach of any
term, condition, or provision of, or constitute a default (with or without due
notice or lapse of time or both) under, or give rise to any right of
termination, modification, cancellation, or acceleration of any obligation or
the loss of any material benefit under, or require a Consent pursuant to any of
the terms, provisions, or conditions of any material loan or credit agreement,
note, mortgage, indenture, deed of trust, lease, sublease, license, sublicense,
agreement, permit, concession, franchise, security interest, instrument of
indebtedness, plan or other instrument, purchase order, or other agreement or
contract to which the Company is a party or by which it is bound or to which its
properties or assets are subject, (iii) result in the imposition of any Lien
upon any properties or assets of the Company or in the suspension, revocation,
forfeiture or nonrenewal of any material permit or license applicable to the
Company, or (iv) conflict with or violate any judgment, order, writ, injunction,
decree of any court, governmental, regulatory or administrative agency,
commission, authority, instrumentality, or other public body, domestic or
foreign (a “Governmental Entity”), or material law applicable to the Company, or
any of its respective assets or properties; except in the case of clauses (ii),
(iii), or (iv) of this Section 2.3(a), as would not have a Material Adverse
Effect on the Company or its ability to consummate and perform the terms of this
Agreement.

 

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(b) Assuming the accuracy of the representations made by the Investor in Section
3 of this Agreement, no notice to, registration, qualification, designation,
declaration of, or filing by the Company with, or the Consent or Permit of, or
any action by any Governmental Entity or any other Person is required on the
part of the Company in connection with the execution and delivery of this
Agreement or the other Transaction Documents, or the consummation the Investment
Transaction, including, without limitation, the offer, issuance, sale, and
delivery of the Acquired Shares, except: (i) the filing of the appropriate
Certificate of Determination or similar document, which shall be filed on
closing or as soon as practicable, and (ii) the filings as may be required under
applicable provisions of United States federal securities Laws (including, if
applicable, pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the “Securities Act”)), and as may be required under
applicable state securities Laws, each of which will be filed timely within the
applicable periods therefor.

 

2.4 Capitalization.

 

(a) The authorized capital stock of the Company as of the Closing Date, after
giving effect to the filing of the Articles or Certificate of Determination or
similar document but prior to giving effect to the Investment Transaction
contemplated hereby, shall consist of: (i) ten million (10,000,000) shares of
common stock, par value nil per share (“Common Stock”), of which 2,000,000
shares will be issued and outstanding at closing, and no shares shall have been
reserved for issuance pursuant to outstanding Options, none of which have been
issued under an Equity Incentive Plan, and (ii) no shares of preferred stock
(“Preferred Stock”). The Company holds no shares of Common Stock or Preferred
Stock as treasury shares. The rights, privileges, and preferences of the Common
Stock are as stated in a Certificate of Determination or similar documents filed
with the Secretary of State of Wyoming or are subject to Wyoming rules of law.

 

(b) All issued and outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable. All the issued and
outstanding shares of capital stock of the Company have been offered, sold, and
issued by the Company in compliance with all registration or qualification
provisions, or exemptions therefrom, under applicable federal securities Laws
and the blue sky and securities Laws of all other applicable jurisdictions.

 

(c) The Company has reserved no shares of Common Stock for issuance to officers,
directors, employees, agents, and consultants pursuant to any Equity Incentive
Plan duly adopted by the Board of Directors and approved by the Company’s
stockholders prior to the date of this Agreement (the “Equity Incentive Plan”).
As of the date of this Agreement, no shares of Common Stock have been issued
pursuant to restricted stock purchase agreements or Options granted under an
Equity Incentive Plan.

 

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(d) Except as provided in other Transaction Documents: (i) no stockholder of the
Company or any other Person is entitled to any preemptive rights with respect to
the purchase, sale, or issuance of, or any co-sale rights, rights of first
refusal or similar restrictions with respect to, any equity securities of the
Company, (ii) the Company has no outstanding or authorized options, warrants,
“phantom” equity rights, agreements, subscriptions, calls, demands, or other
rights, commitments, or arrangements (written or oral, or contingent or
otherwise) of any character to purchase or acquire any capital stock or other
equity investments in any security directly or indirectly convertible into or
exchangeable or exercisable for, the capital stock of or other equity interest
in the Company, including, without limitation, any convertible indebtedness
obligations (collectively, “Options”), (iii) the Company has no outstanding
obligations (contingent or otherwise) to issue any Options or to issue or
distribute any capital stock of, or other equity interests in, or assets of the
Company, (iv) there are no outstanding obligations (contingent or otherwise) of
the Company to purchase, redeem, or otherwise acquire any capital stock of or
other equity interests in the Company or any of the Company’s Subsidiaries, or
to pay any dividends or make any other distribution in respect thereof to their
respective securities holders, (v) there are no voting trusts, trusts, proxies
or other similar agreements, understandings, or similar arrangements to which
the Company, is a party or by which the Company was bound with respect to the
voting of any shares of capital stock of the Company, and (vi) there are no
contractual obligations or commitments of any character to which the Company is
a party or by which the Company is bound requiring the registration for sale of
any capital stock of or other equity interests in the Company.

 

(e) None of the Company’s outstanding Common Stock are subject to a right a
first refusal in favor of the Company upon any proposed transfer.

 

2.5 Issuance of Shares. The issuance, sale, and delivery of the Common Shares to
the Investor pursuant to the Investment Transaction have been duly authorized by
all necessary corporate action on the part of the Company. The Common Shares,
when issued, sold, and delivered against payment therefor in accordance with the
provisions of this Agreement, will be duly authorized and validly issued, fully
paid and nonassessable, and the Investor will receive full ownership of the
Common Shares and, when issued, free and clear of any Liens, or preemptive or
other similar rights, except those set forth in the Transaction Documents.
Assuming the accuracy of the representations of the Investors in Section 3 of
this Agreement, and subject to the filings described in Section 2.3(b)(ii)
hereof, the offer and sale of the Common Shares to the Investor in accordance
with the terms and conditions of, and as contemplated by, this Agreement and the
issuance of the Shares in accordance with their terms and the Articles will be
exempt from the registration under the Securities Act and will be exempt from
registration and qualification the securities Laws of all other applicable
jurisdictions.

 

2.6 Subsidiaries. The Company does not have any Subsidiaries and does not
currently own or control, directly or indirectly, any interest in any other
corporation, partnership, trust, joint venture, limited liability company,
association or other business entity.

 

2.7 Financial Statements.

 

(a) The Company is a start-up entity with limited financial history.

 

(b) The Company has not filed any voluntary petition in bankruptcy or suffered
the filing of an involuntary petition by its creditors, suffered the appointment
of a receiver to take possession of substantially all of its assets, or suffered
the attachment or other judicial seizure of substantially all of its assets, or
made an assignment for the benefit of creditors or admitted in writing its
inability to pay its debts generally as the same become due.

 

2.8 No Undisclosed Liabilities. The Company does not have any material
liabilities or obligations of any nature (whether accrued, contingent or
absolute, unliquidated, matured or unmatured, or known, whether due or to become
due and regardless of when asserted) except for those liabilities and
obligations that are: (a) disclosed in the Financial Statements (or in the
footnotes thereto), (b) incurred or arising in the ordinary course of business
since the Balance Sheet Date or in connection with the Investment Transaction,
or (c) set forth in the Section 2.8 of the Company’s Disclosure Schedule.

 

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2.9 Absence of Certain Changes or Events. Since the Agreement Date:

 

(a) the Company has conducted its business in all material respects only in the
ordinary course of business,

 

(b) there has not occurred, and there is not currently existing any
circumstance, event, change, development, or occurrence (including, without
limitation, any damage, destruction, or other casualty loss (whether or not
covered by insurance)) which has had, or that is reasonably likely to have
individually or in the aggregate, a Material Adverse Effect on the Company,

 

(c) there has not been any material change in the accounting methods, principals
or practices of the Company,

 

(d) there has not been:

 

(i) any waiver or compromise or forgiveness by the Company of a valuable right
or material debt owed to it, or any satisfaction or discharge of any Lien, or
payment of any obligation by the Company, except in the ordinary course of
business consistent with past practices and which would not have individually or
in the aggregate a Material Adverse Effect on the Company;

 

(ii) any sale, assignment, transfer, disposition, lease, license, mortgage,
pledge, transfer of a security interest in, or Lien created by the Company
(except for Permitted Liens), with respect to any material properties or assets
of the Company (including any Intellectual Property Rights of the Company),
whether such transfer was by licensure of substantially all of such rights or
otherwise, or the modification of any material indebtedness or other liability
of the Company;

 

(iii) any declaration or setting aside or payment of any dividends or other
distributions with respect to any of the Company’s capital stock or any
redemption, purchase or other acquisition of any shares of the Company’s capital
stock, or any transaction or instrument entered into by the Company which
includes a right to acquire any of its capital stock;

 

(iv) any material change to the compensation or benefits payable or to become
payable to any of its directors, officers or key employees or any material
amendment or change to any employment, severance, or other compensation
agreement or arrangement with any director, officer, employee, or stockholder of
the Company, or any loans or guarantees made by the Company to any directors,
officers, employees, or Affiliates of the Company;

 

(v) any resignation or termination of employment by any officer or key employee
of the Company;

 

(vi) any material change, modification, amendment or termination of any Contract
by which the Company or any of its assets are bound, or any waiver, release or
assignment of any material rights or claims under any of such Contracts or
agreements;

 

(vii) the incurrence of any indebtedness for borrowed money, or the incurrence
of any other liabilities (including, without limitation, any agreement to become
liable for or any assumption) in excess of $10,000 individually or in excess of
$50,000 in the aggregate;

 

 5 

 

 

(viii) any material commitment or transaction (including, but not limited to,
any borrowing, capital expenditure or purchase, sale or lease of assets or
property) other than in the ordinary course of business;

 

(ix) receipt of notice that there has been a material order cancellation by any
major customer of the Company; or

 

(x) any agreement, contract, commitment or arrangement to do any of the
foregoing under this Section 2.9.

 

2.10 Tax Matters. The Company has duly filed or caused to be filed in a timely
manner (within applicable extension periods) all material Tax Returns and forms
required to be filed by it and no material penalties or other charges are or
will become due with respect to any of Tax Returns as the result of the late
filing thereof. All Tax Returns are true and complete in all material respects.
The Company (i) has paid all Taxes due or claimed to be due by any Taxing
authority in connection with any of the Company’s Tax Returns (without regard to
whether or not such Taxes are shown as due on such Tax Returns), as well as all
other Taxes, assessments, and governmental charges which have become due and
payable, including, without limitation, all Taxes which the Company is obligated
to withhold from amounts owing to employees, creditors, and third parties, and
(ii) has established in its Financial Statements adequate reserves (in
conformity with GAAP consistently applied) for the payment of all Taxes which
are accrued but not yet payable. The amounts set up as reserves for Taxes on the
Financial Statements of Company are sufficient for the payment of all unpaid
Taxes, whether or not such Taxes are disputed or are yet due and payable, for or
with respect to the period, and for which the Company may be liable. There is no
federal, state, local or foreign action, suit, proceeding, audit, investigation,
or claim pending or, to the Knowledge of the Company, threatened in respect of
any Taxes for which the Company is or may become liable, nor has any deficiency
or claim for any such Taxes been proposed, asserted or, to the Knowledge of the
Company, threatened by any Taxing authority. The Company has not consented to
any waivers or extensions of any statute of limitations with respect to any
taxable year of the Company. There is no agreement, waiver, or consent providing
for an extension of time with respect to the assessment or collection of any
Taxes against the Company, and no power of attorney granted by the Company with
respect to any tax matters is currently in force. There is no Tax Lien (other
than for current Taxes not yet due and payable), whether imposed by any federal,
state, county or local Taxing authority, domestic or foreign, outstanding
against the assets, properties or business of the Company. Neither the Company
nor any of its present or former stockholders has ever filed an election
pursuant to Section 1362 of the Internal Revenue Code of 1986 (the “Code”), that
the Company be taxed as an S corporation.

 

2.11 Assets. The Company has good and, in the case of real property, marketable
title, or valid leasehold interests in, its properties and assets, real and
personal, reflected in the most recent Financial Statements or thereafter
acquired by the Company (“Company Assets”), free and clear of all Liens, except
for Permitted Liens. All real property owned by the Company is held in fee
simple by the Company and none of the Liens thereon interfere with the enjoyment
and use of such real property. All buildings and all fixtures, equipment, and
other assets and properties which are material or necessary to the business of
the Company held under leases or subleases by any of them are held under valid
instruments enforceable in accordance within their respective terms and each
such instrument is in full force and effect. The Company is in substantial
compliance with the terms of all leases to which it is a party and enjoys
peaceful and undisturbed possession under all such leases. All personal property
of the Company is in good operating condition and repair and is suitable and
adequate for the uses for which it is intended or is being used.

 

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2.12 Contracts and Commitments.

 

(a) The Company is not a party to or subject to or bound by any of the following
Contracts or proposed transactions that involve: (i) an indebtedness obligation
(whether incurred, assumed, guaranteed, contingent, or secured by any asset or
otherwise granting of a Lien) in excess of $50,000 in the aggregate, (ii) an
obligation (contingent or otherwise) of the Company or a payment to the Company
in excess of $10,000 individually or in excess of $50,000 in the aggregate,
(iii) any non-compete or exclusivity provisions with respect to any line of
business or geographic area that restricts the business of the Company, or that
otherwise restrict the ability of the Company to compete in any business or
geographic area or with any Person, (iv) the license of any Intellectual
Property Rights, trade secret, or other proprietary right to or from the
Company, or (v) indemnification by the Company, including, without limitation,
indemnification with respect to infringements of proprietary rights.

 

(a) The Company has not: (i) incurred an indebtedness for borrowed money or
incurred any other liabilities (whether incurred, assumed, guaranteed, or
secured by any asset or otherwise granting of a Lien) in excess of $10,000
individually or in excess of $50,000 in the aggregate, which is not paid in
full, (ii) declared, set aside, or paid any dividends or other distributions
with respect to any of the Company’s capital stock or any redemption, purchase
or other acquisition of any shares of the Company’s capital stock (other than
pursuant to a termination of employment or services of an employee or consultant
pursuant to any option agreement or other agreement approved by the Board),
(iii) sold, assigned, transferred, licensed mortgaged, pledged, or otherwise
disposed of any of the properties or assets or rights of the Company (other than
a sale of inventory in the ordinary course of business), (iv) made any loans or
advances to any Person (other than advances for ordinary travel expenses or
trade payables incurred in the ordinary course of business),or (v) guaranteed or
indemnified any indebtedness of any other Person.

 

2.13 Licensing, Manufacturing, and Marketing Rights Agreements. The Company has
not granted rights to manufacture, produce, assemble, license, market, sell or
distribute the Company’s products to any other Person and is not bound by any
agreement that limits or restricts the Company’s exclusive right to develop,
manufacture, license, market, sell or distribute the Company’s products.

 

2.14 Customers and Suppliers. No customer or supplier of the Company that
accounted for more than 5% of the Company’s total sales or purchases, as
appropriate, during the preceding 12 months has notified the Company that it
intends to discontinue its relationship with the Company.

 

2.15 Permits; No Violations; and Compliance with Laws.

 

(a) The Company holds all material Permits necessary for them to own, lease, and
operate their respective assets and properties and to lawfully carry on its
business as now conducted. All such material Permits are, and at each Closing
will be, valid and in full force and effect, and the Company is, and at each
Closing each of them shall be, in substantial compliance with all conditions and
requirements of such Permits and all rules and regulations relating thereto. The
Company has not received any written claim or written notice nor has any
Knowledge indicating that the Company is currently not in compliance with the
terms of any such Permits, except where the failure to be in compliance with the
terms of any such Permits, have not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company.

 

(b) The Company (i) is not in conflict with or in violation of any provision of
its Articles of Incorporation or Bylaws, (ii) is not in conflict with or in
violation or breach of, or in default under (with or without due notice or lapse
of time or both) material loan or credit agreement, note, mortgage, indenture,
deed of trust, lease, sublease, license, sublicense, agreement, Permit,
concession, franchise, security interest, instrument of indebtedness, plan or
other instrument, purchase order, or other agreement or Contract to which the
Company or by which it is bound or to which its properties or assets are
subject, (iii) is not in conflict with or in violation of any judgment, order,
writ, or decree of any Governmental Entity to which it the Company is a party or
by which it is bound, or, to the Knowledge of the Company, of any provision of
any Laws of the United States and of all other jurisdictions applicable to the
Company or any of its assets or properties, and any Governmental Entity in
respect of the conduct of its business, and (iv) to the Knowledge of the
Company, has not performed any act, the occurrence of which would result in the
Company’s loss of any right granted under any material license, distribution or
other agreement.

 

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2.16 No Litigation. There is not now pending or, to the Knowledge of the
Company, threatened in writing, any litigation, suit, claim, action, or
proceeding, including, without limitation, arbitration proceeding, mediation, or
other alternative dispute resolution proceeding, to which the Company is or will
be a party (or, as applicable, to the Knowledge of the Company, any of its
directors, officers or employees in their capacities as such is or will be a
party) or by which its property or assets will or may be bound or affected in or
before or by any Governmental Entity which: (a) is against the Company or any
director, officer, or employee of the Company, including, without limitation,
actions involving the prior employment of any of the Company’s employees, their
services provided in connection with the Company’s business, or any information
or actions allegedly proprietary to any of their prior employers or their
obligations under any agreement with prior employers, (b) challenges or seeks to
question the validity of the Investment Transaction or prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, (c)
would be reasonably likely to threaten, impede, impair or adversely affect the
obligation of the Company to consummate the transactions contemplated by the
Agreement, or (d) which is reasonably likely to have a Material Adverse Effect
on the Company. In addition to the foregoing, there is no judgment, decree,
writ, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or, to the Knowledge of the Company, against any
of its directors, officers, or employees which would affect the Company. The
Company has not received any written notification of, and to the Knowledge of
the Company, there is no, investigation by any Governmental Entity involving the
Company or any of its respective assets that would reasonably be likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
There is no litigation, suit, claim, action, or proceeding by the Company
pending or which the Company intends to initiate.

 

2.17 Intellectual Property Rights.

 

(a) Section 2.17 of the Disclosure Schedule contains an accurate and complete
list of all material Intellectual Property Rights owned by the Company, setting
forth (i) all issued or registered Trademarks, Copyrights, and Mask Works, all
Domains, and all issued or pending Patents that are owned by the Company and
(ii) all Licenses to which the Company is a party (other than “shrink-wrap” or
off-the-shelf software and databases and other works of authorship licensed to
the Company under non-exclusive Licenses granted to end-user customers by third
parties in the ordinary course of business of such third parties’ businesses but
including any open source and similar license), and such listing accurately
states, as to each such License, whether the Company is the licensee or
licensor. True and complete copies of all Licenses have been furnished to the
Investor. The capitalized terms used in this Section 2.17 are defined within the
definition of Intellectual Property Rights in Section 7.1(a) hereof.

 

(b) The Company is the sole and exclusive owner of, or has a valid license or
otherwise possesses valid rights to use all Intellectual Property Rights
necessary provide, produce, use, sell and license the services and products
currently provided, produced, used, sold and licensed by the Company and to
conduct the business of the Company as it is currently conducted, free and clear
of all Liens.

 

(c) The Company is not under any obligation to pay any royalty or other
compensation to a third party or to obtain any approval or consent for the use
of any Intellectual Property used in or necessary for its business as currently
conducted.

 

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(d) To the Knowledge of the Company, the conduct of the business of the Company
as it is currently conducted and the products or services produced, sold or
licensed by or under development by the Company does not infringe,
misappropriate or otherwise violate the Intellectual Property Rights of any
third party, or give rise to any obligations to any Person as a result of
co-authorship, co-inventorship, or an express or implied contract for any use or
transfer. There are no pending or, to the Knowledge of the Company, threatened
any litigation, suit, claim, action, proceeding, hearing, investigation to
demand that challenges the liability, validity, enforceability, or the use or
ownership by the Company of any portion of the Intellectual Property Rights
owned by the Company or, to the Knowledge of the Company, licensed to the
Company. The Company has not received any written notice of any infringement or
misappropriation by, or conflict with, any third party with respect to such
Intellectual Property Rights, and the Company has not received any notice of
claims of infringement or misappropriation of or other conflict with any
Intellectual Property Right of any third party. None of the Company’s present
products (or those under development) or services incorporate, are based upon or
are derived or adapted from, any Intellectual Property Right of any other Person
in material violation of any statutory or other legal obligation or any
agreement to which the Company is a party or by which it is bound.

 

(e) The Company has (i) taken commercially reasonable steps to register or
otherwise protect all material Intellectual Property Rights owned by the
Company, and (ii) taken reasonable steps in accordance with normal industry
practice to maintain the confidentiality of its trade secrets and other
confidential Intellectual Property Rights, and, to the Knowledge of the Company,
there has been no act or omissions by the Company, the result of which would be
to materially impair the rights of the Company to apply for or enforce
appropriate legal protection of such Intellectual Property Rights, with the
exception of any public disclosures or offers of sale that may create prior art
with respect to future patent applications. To the Knowledge of the Company, no
Intellectual Property Rights owned by the Company is being infringed, diluted,
misappropriated or otherwise violated by any third party and no litigation,
suit, claim, action, or proceeding by the Company is pending against any third
party in connection with any Intellectual Property Rights owned by the Company.
Except as set forth in Schedule 2.17(g) of the Disclosure Schedule, none of the
Intellectual Property Rights owned by the Company, or to the Knowledge of the
Company, licensed to the Company is subject to any outstanding judgment, order,
decree, stipulation, injunction or charge. No former employees, officers,
directors or independent contractors of the Company has asserted in writing any
or, to the Knowledge of the Company, have any, valid claim or valid right to any
of the Intellectual Property Rights used in or necessary for the conduct of the
Company’s business as now conducted or as currently proposed to be conducted.

 

(f) The Company has taken reasonable steps in accordance with normal industry
practice to preserve and maintain, reasonably complete notes and records
(including, without limitation, drawings, flow charts and prototypes) relating
to its know-how, inventions, processes, procedures, drawings, specifications,
designs, plans, written proposals, technical data, works of authorship and other
proprietary technical information, sufficient to cause such proprietary
information to be readily identified, understood and available.

 

(g) The Company has valid Licenses for all software used in the conduct of the
business of the Company as it is currently conducted and the Company has not
been the subject of, or have been given notice of, any actual or proposed or
threatened software license audit by the Business Software Alliance or any other
entity, association or Person. None of the software necessary for the business
of the Company is subject to an open source software license (including without
limitation any GNU General Public License, Creative Commons License, or any
similar open source license). Neither execution of this Agreement nor completion
of the transaction contemplated herein will invalidate or violate any License or
other agreement with respect to the Intellectual Property Rights owned or used
by the Company or any confidentiality agreement or non-disclosure agreement or
provision to which the Company is subject.

 

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2.18 Employee Matters and Benefit Plans.

 

(a) Employment Matters. The Company is in material compliance with all
applicable Laws relating to the employment and employment practices, including
Laws regarding discrimination, harassment, affirmative action, terms and
conditions of employment, wage and hour requirements (including the proper
classification of, compensation paid to, and related withholding with respect to
employees, leased employees, consultants, and independent contractors), leaves
of absence, equal opportunity, reasonable accommodation of disabilities,
occupational health and safety requirements, collective bargaining, workers’
compensation insurance and the payment of social security and other Taxes. The
Company is not delinquent in payments to any of its employees, consultants, and
independent contractors for wages, salaries, commissions, bonuses, or other
direct compensation for service performed through the date hereof or any
required reimbursements. The Company is not a party to, nor to the Knowledge of
the Company is threatened with, any material litigation, action, suit, or
proceeding by any current or former employee, including without limitation in
respect to deferred salary, benefits or severance.

 

(b) Labor Matters. The Company is not, and has never been, a party to any union
contract, collective bargaining agreement, or similar Contract, and there is no
past or pending labor union organizing activity or, to the Knowledge of the
Company, any such activity threatened with respect to the Company or any
employees. No work stoppage, slowdown, labor strike or other labor trouble
against the Company (including, without limitation, any organizational drive) is
pending or, to the Knowledge of the Company, threatened, nor has there been any
such activity.

 

2.19 Related-Party Transactions. The Company stipulates that:

 

(a) the Company is not indebted, directly or indirectly, to any directors,
officers, employees or stockholders of the Company or to the Immediate Family
Members of any such Person, or to any Affiliate of the foregoing, other than
amounts payable in connection with advances of expenses incurred in the ordinary
course of business or for employee benefits made available to all employees.
None of the directors, officers, employees or stockholders of the Company or the
Immediate Family Members of any such Person are indebted, directly or
indirectly, to the Company.

 

(b) to the Knowledge of the Company, no employee, officer or director of the
Company or Immediate Family Members of such Person, or any Affiliate of the
foregoing has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship or any firm or corporation that competes with the Company
(other than the ownership of less than 2% of the common equity of
publicly-traded companies that may compete with the Company).

 

(c) with the exception of Vikram Grover, President and Founder of KANAB CORP.,
no employee, officer or director of the Company or immediate family member of
such Person, or any Affiliate of the foregoing (i) is directly or indirectly
interested in any material Contract or proposed transaction with the Company,
other than standard employment agreements, Options granted under the Equity
Incentive Plan approved by the Board of Directors, and indemnification
agreements with officers and directors of the Company approved by the Board of
Directors (all of such approvals reflected in the written minutes of the Board
of Directors previously provided to the Investor), or (ii) has a material
relationship (including, without limitation, commercial, banking, industrial,
legal, accounting, consulting, charitable or familial relationship) with any
customer, service provider, supplier, licensee or licensor, or joint venture
partner of the Company.

 

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2.20 Environmental Matters.

 

(a) Except as would not have, individually or in the aggregate, a Material
Adverse Effect on the Company: (i) to the Knowledge of the Company, no Hazardous
Materials have been generated, transported, used, disposed, stored or treated by
the Company and no Hazardous Materials have been released, discharged, disposed,
transported, placed or otherwise caused to enter the soil or water in violation
with any Environmental Law in, under, or affecting any current or previously
owned or lease real properties of the Company, or any Participation Facility or
any Owned Property of the Company; (ii) to the Knowledge of the Company, the
Company and the operation of its business, and all of its current and previously
owned or operated Participation Facilities and its Owned Properties are, and
have been, in compliance in all material respects with all applicable
Environmental Laws; and (iii) there is no suit, claim, action, or proceeding
pending or, to the Knowledge of the Company, threatened before any Governmental
Entity or other forum in which the Company, or any current or previously owned
or operated Participation Facility or Owned Property has been or, to the
Knowledge of the Company with respect to threatened proceedings, may be named as
a defendant or a potentially responsible party (x) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or (y) relating to
the release into the environment of any Hazardous Material in violation of
applicable Law, whether or not occurring at, on, under, or involving a site
owned, leased, or operated by the Company, or any of its Participation
Facilities or Owned Properties (or the Company in respect of any Participation
Facility or Owned Property).

 

(b) The Company has provided to the Investors, true and complete copies of all
material environmental records, reports, notifications, engineering studies,
environmental studies and assessments, Permits and pending Permit applications,
certificates of need, and related correspondence.

 

2.21 Corporate Documents; Minute Book and Records. A copy of the minute books of
the Company, which have been furnished or otherwise made available to the
Investor, contains the minutes of all meetings (or written consents without a
meeting) of the Board of Directors and of the stockholders of the Company since
the Company’s date of incorporation, and accurately reflects (in all material
respects) all actions by the Board of Directors and stockholders with respect to
all transactions referred to in such minutes. The books of account, ledger,
order books, records and documents of the Company, each of which have been
furnished or otherwise made available to the Investor, accurately and completely
reflect all material information relating to the business of the Company, the
nature, acquisition, maintenance and, location and collection of each of, its
assets, and the nature of all transactions giving rise to the obligations or
accounts receivable of the Company.

 

2.22 Full Disclosure. The Company has made available or provided to the Investor
all information reasonably available to the Company that the Investor have
requested in connection with their decision whether to purchase the Acquired
Shares, including certain of the Company’s projections describing the proposed
business plan. No representation or warranty of the Company contained in this
Agreement, the exhibits hereto, any certificate furnished at Closing or in the
other Transaction Documents contain any untrue statement of a material fact nor,
to the Knowledge of the Company, omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.

 

2.23 Certain Business Practices. Neither the Company nor, to the Knowledge of
the Company, any director, officer, agent or employee of the Company acting on
behalf of the Company has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity
regarding the business of the Company, or (b) made, offered, promised, or
authorized any unlawful payment or gift of any money or anything of value to or
for the benefit of foreign or domestic government officials or employees or to
foreign or domestic political parties or campaigns, in each case in violation of
the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). Neither the
Company nor, to the Knowledge of the Company, any director, officer, agent or
employee of the Company have made or authorized any bribe, payoff, kickback,
payment for influence, rebate or other unlawful payment of funds or received or
retained such funds in violation of any Law.

 

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2.24 Real Property Holding Corporation. The Company is not now and has never
been a “United States real property holding corporation” as defined in Section
897(c)(2) of the Code and regulations promulgated thereunder.

 

2.25 Qualified Small Business Stock. As of and immediately following the
Closing, the Company meets and will meet all of the requirements for
qualification as a “qualified small business” set forth in Section 1202(d) of
the Code, including without limitation the following: (i) the Company will be a
domestic C corporation, (ii) the Company’s (and any predecessor’s) aggregate
gross assets, as defined by Section 1202(d)(2) of the Code, at no time between
the date of its incorporation and the Closing, have exceeded U.S. $50 million,
taking into account the assets of any corporations required to be aggregated
with the Company in accordance with Section 1202(d)(3)of the Code, (iii) the
Company has not made any purchases of its own stock described in Section
1202(c)(3)(B) of the Code during the one year period preceding the Closing, and
(iv) the Company is an eligible corporation as defined by Section 1202(e)(4) of
the Code; provided, however, that in no event shall the Company be liable to the
Investor or any other party for damages arising from subsequently proven or
identified error in the Company’s determination with respect to the
applicability or interpretation of Section 1202 of the Code, unless the Company
is grossly negligent or fraudulent in its determination.

 

2.26 Small Business Concern. The Company is a “small business concern” under the
Small Business Investment Act of 1958 (the “Small Business Act”) as defined in
Section 121.301 of Title 13 of the Code of Federal Regulations promulgated
thereunder.

 

2.27 No Investment Company. The Company is not an “investment company” within
the meaning of the Investment Company Act of 1940, as amended.

 

Section 3. Representations and Warranties of the Investors. Each of the
Investors, severally and not jointly, the Investor hereby represents and
warrants to the Company as follows:

 

3.1 Organization, Standing, and Power. Each such Investor which is not an
individual (an “Entity Investor”) is a limited partnership, limited liability
company, or a corporation which has been duly organized and is validly existing
and in good standing under the laws of its jurisdiction of formation,
organization, or incorporation, as the case may be, and has the requisite power
an authority to own, lease, operate and otherwise hold its properties and assets
and to carry on its business as it is now being conducted.

 

3.2 Authority; Due Execution.

 

(a) Each such Entity Investor has all the requisite power and authority to
execute and deliver, and to perform its obligations hereunder and to consummate
the Investment Transaction contemplated by, this Agreement. The execution,
delivery, and performance by each such Entity Investor of this Agreement and the
other Transaction Documents to which they are a party, and the consummation of
the transactions contemplated hereby and thereby, including the Investment
Transaction, have been duly and validly authorized by all necessary action on
the part of each such Entity Investor. This Agreement and other Transaction
Documents to which they are a party have been duly executed and delivered by
each such Entity Investor and, assuming valid authorization, execution and
delivery hereof by the Company and each other Investors to this Agreement, each
will constitute a legal, valid and binding obligation of such Equity Investor
enforceable against it in accordance with its terms (except to the extent
enforceability may be limited by the Bankruptcy and Equity Exceptions).

 

(b) Each such Investor has the full legal capacity to execute and deliver, and
to perform its obligations hereunder and to consummate the Investment
Transaction contemplated by this Agreement. This Agreement and the other
Transaction Documents to which they are a party have been duly executed and
delivered by such non-Entity Investor and, assuming valid authorization,
execution and delivery hereof by the Company, and each other Investors to this
Agreement, will constitute a legal, valid and binding obligation of such
Investor enforceable against it in accordance with its terms (except to the
extent enforceability may be limited by the Bankruptcy and Equity Exceptions).

 

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3.3 No Conflict or Required Approvals. Neither the execution and delivery of
this Agreement and the other Transaction Documents to which they are a party,
nor the consummation by the Investor of Investment Transaction contemplated
hereby, or compliance with any of the terms or provisions herein by the Investor
will (a) if an Entity Investor, conflict with or violate any provision of, or
require a Consent under such Entity Investor’s organizational, operating, and
governance documents, (b) conflict with, violate, or constitute or result in a
material breach of any term, condition, or provision of, or constitute a default
(with or without due notice or lapse of time or both) under, or require a
Consent pursuant to any of the terms, provisions, or conditions any credit
agreement, note, indenture, lease, or other instrument to which such Investor or
by which any of its properties or assets are subject bound, or (c) conflict with
or violate any judgment, order, writ, injunction, decree of any Governmental
Entity or material Law applicable to such Investor or any of its assets or
properties is subject. No notice, registration, qualification, designation,
declaration, or filing with, or the Consent or Permit of, or any action by any
Governmental Entity is required on the part of an Investor in connection with
the execution and delivery of this Agreement or the other Transaction Documents,
or the consummation the Investment Transaction.

 

3.4 Investment Intent. Such Investor: (a) is the sole and true party in
interest, and is acquiring its respective portion of the Common Shares, and will
acquire the Shares solely for its own account, not as a nominee or agent, for
investment purposes only, and not with an intent or a view to the sale or
distribution of any part thereof within the meaning of Section 2(a)(11) of the
Securities Act, (b) does not have any present intent of making a Transfer of,
granting a participation in, or otherwise distributing the Shares (collectively,
the “Securities”) in a manner contrary to the Securities Act or the securities
Laws of any other applicable jurisdiction, (c) does not have any contract,
undertaking, agreement, or arrangement with any Person to Transfer, grant any
participation in, or otherwise distribute any of the Securities to such Person,
and (d) does not presently have any reason to anticipate any change in
circumstances or other particular occasion or event which would cause such
Investor to need to sell the Securities, except in accordance with the terms of
this Agreement and in compliance with all applicable federal and state
securities Laws.

 

3.5 Restricted Securities; Transfer Restrictions.

 

(a) Such Investor affirms that it has been advised and understands that (i) none
of the Securities have been registered under the Securities Act or registered or
qualified under the securities Laws of any other jurisdiction and are being sold
in reliance upon an exemption from registration under such Laws, (ii) such
Investor may not Transfer the Securities unless they are subsequently registered
and qualified under such Laws or, in the opinion of counsel reasonably
satisfactory to the Company, an exemption from such registration and
qualification is available, (iii) if an exemption from registration or
qualification is available, it may be conditioned on various legal, procedural
and other requirements which are outside of the Investor’s control and which the
Company has no obligation and may not be able to satisfy, and (iv) such Investor
is familiar with Rule 144 and Rule 144A as presently in effect and recognizes
that in the future the Company may not satisfy the requirements which would
permit it to sell the Securities pursuant to Rule 144 or Rule 144A promulgated
under the Securities Act.

 

(b) Such Investor understands and acknowledges that only the Company can
register the Securities under applicable securities Laws, and that the Company
has no obligation to register or qualify the Securities under the Securities Act
or the securities Laws of any other jurisdiction except as set forth in the
Registration Rights Agreement.

 

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3.6 Knowledge, Experience, and Financial Capability.

 

(a) Such Investor has sufficient knowledge and experience in financial and
business matters and investing in companies similar to the Company so that it is
capable of evaluating the merits and risks of the investment contemplated by
this Agreement and understands and acknowledges that an investment in the
Securities and the Company involves certain risks. Such Investor recognizes that
no public market for the Securities exists and none is expected to develop and,
as result, when considered in relation to the Transfer restrictions identified
in Section 3.5 hereof, that an investment in the Securities may not be liquid
and that such Investor must bear the economic risk of the investment
indefinitely. Such Investor is a sophisticated investor and has carefully
considered and evaluated the risks and benefits of an investment in the
Securities and the Company and such Investor has taken full cognizance of,
understands, and is willing to bear the risks related to the purchase of the
Securities.

 

(b) Such Investor further represents that it has adequate means of providing for
its current needs and possible contingencies, it can afford to bear the economic
risk of holding the Securities for an indefinite period of time, it has no need
for liquidity in its investment in the Securities, and it has the net worth
sufficient to bear the risks of and to sustain a complete loss of such
Investor’s entire investment in the Company. Such Investor has been represented
by counsel and other advisors of its choosing.

 

3.7 Accredited Investor; Not a Bad Actor. Such Investor is: (a) an “accredited
investor” as such term is defined in Rule 501(a) promulgated under the
Securities Act, and (b) is not subject to any “bad actor” disqualification as
set forth in Rule 506(d) of Regulation D or any similar disqualification
provision that could adversely affect the Company’s reliance on any federal or
state securities registration exemption or that could otherwise adversely affect
the offering of the Securities.

 

3.8 Information Disclosed to Investor. Such Investor represents, acknowledges
and confirms that prior to the sale of the Acquired Shares to such Investor
pursuant to this Agreement, such Investor (a) has been given an the opportunity
to ask questions of, and receive answers from, representatives of the Company
concerning Company and the terms and conditions of the sale of the Acquired
Shares by the Company to such Investor and (b) has been given the opportunity to
obtain any additional information which such Investor deemed necessary to verify
the accuracy of the information supplied to it. Such Investor confirms that it
has been furnished with all such requested information and all questions asked
by such Investor have been answered to its full satisfaction. Such Investor
represents that in connection with its purchase of the Securities, it has not
relied on any statement or representation by the Company, or any of its officers
and directors, or any of their attorneys or agents, except as specifically set
forth herein or provided pursuant to this Section 3.8. Such Investor confirms
that it is aware and understands that no federal or state agency has made any
finding or determination as to the fairness of this offering nor has made any
recommendation or endorsement of the Securities. None of the representations or
warranties of the Investor in this Section 3.8 shall limit or modify the
representations and warranties of the Company set forth in Section 2 hereof or
the right of the Investors to rely thereon.

 

3.9 No General Solicitation. Such Investor represents and certifies that such
Investor is not acquiring the Securities as a result of any form of “general
solicitation” or “general advertising” as those terms are used in Rule 502(c) of
Regulation D promulgated under the Securities Act.

 

3.10 Reliance on Investor’s Representations. Such Investor acknowledges and
understands that the representations, warranties, and covenants contained in
this Section 3 of the Agreement are being furnished, in part, and will be relied
on by the Company in determining whether this offering of the Securities is
exempt from registration under the Securities Act and the securities laws of all
other applicable jurisdictions and, accordingly, confirms that all such
statements contained herein are true, complete, and accurate as of the date
hereof, and shall be true, accurate, and complete as of the date that this
Agreement is executed and delivered, and shall survive the Closing. If any
events occur or circumstances exist prior to the issuance of the Acquired Shares
to such Investor which would make any of the representations, warranties,
agreements, or other information of an Investor set forth herein untrue or
inaccurate, such Investor agrees to immediately notify the Company in writing of
such fact specifying which representations, warranties, or covenants are not
true, correct, or accurate, and the reasons therefor.

 

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3.11 Investor Source of Funds.

 

(a) Compliance with International Trade Control Laws and OFAC Regulations. Such
Investor represents and warrants that such Investor is not now nor shall it be
at any time hereafter an individual, corporation, partnership, joint venture,
association, joint stock company, trust, trustee, estate, limited liability
company, unincorporated organization, real estate investment trust, government
or any agency or political subdivision thereof, or any other form of entity with
whom a United States citizen, entity organized under the Laws of the United
States or its territories or entity having its principal place of business
within the United States or any of its territories (collectively, a “U.S.
Person”), is prohibited from transacting business of the type contemplated by
this Agreement, whether such prohibition arises under United States Law,
executive orders and lists published by the Office of Foreign Assets Control,
U.S. Department of the Treasury (“OFAC”) (including those executive orders and
lists published by OFAC with respect to Persons that have been designated by
executive order or by the sanction regulations of OFAC as Persons with whom U.S.
Persons may not transact business or must limit their interactions to types
approved by OFAC “Specially Designated Nationals and Blocked Persons”) or
otherwise. Neither such Investor nor any Person who owns an interest in the
Investor, if an Entity (collectively, a “Purchaser Party”), is now nor shall be
at any time hereafter a Person with whom a U.S. Person, including a “financial
institution” as defined in 31 U.S.C. § 5312(a)(2) (“Financial Institution”), is
prohibited from transacting business of the type contemplated by this Agreement,
whether such prohibition arises under United States Law, regulation, executive
orders and lists published by the OFAC (including those executive orders and
lists published by OFAC with respect to Specially Designated Nationals and
Blocked Persons) or otherwise.

 

(b) Investor’s Funds. Such Investor represents and warrants that such Investor
has taken, and shall continue to take hereafter, such measures as are required
by Law to assure that the funds used to pay to the Company any portion of the
Aggregate Purchase Price are derived from: (i) transactions that do not violate
United States Law nor, to the extent such funds originate outside the United
States, do not violate the laws of the jurisdiction in which they originated;
and (ii) permissible sources under United States Law and to the extent such
funds originate outside the United States, under the laws of the jurisdiction in
which they originated.

 

(c) Anti-Money Laundering Laws. Such Investor represents and warrants that
neither such Investor nor any Person providing funds to the Investor: (i) is
under investigation by any governmental authority for, or has been charged with,
or convicted of, money laundering, drug trafficking, terrorist related
activities, any crimes which in the United States would be predicate crimes to
money laundering, or any violation of any Anti Money Laundering Laws; (ii) has
been assessed civil or criminal penalties under any Anti-Money Laundering Laws;
or (iii) has had any of its funds seized or forfeited in any action under any
Anti Money Laundering Laws.

 

3.12 Foreign Investors. If such Investor is not a U.S. Person, such Investor
hereby represents and warrants that it has satisfied the full observance of the
Laws of its jurisdiction in connection with this Agreement and the other
Transaction Documents and the subscription for the Acquired Shares, including,
without limitation, the receipt of any Consents from or actions to be taken by
any Governmental Entity in such jurisdiction required as a condition to the
Investment Transaction and the satisfaction of any other applicable legal
requirements within such jurisdiction for the purchase of the Acquired Shares.
The subscription and payment by the Investors for, and the continued beneficial
ownership of, the Securities will not violate any applicable securities of other
Laws of the Investor’s jurisdiction.

 

 15 

 

 

3.13 No Litigation. There is not now pending or, to the Knowledge of such
Investor, threatened, any material litigation, suit, claim, action, or
proceeding, including, without limitation, arbitration proceeding, mediation, or
other alternative dispute resolution proceeding, to which such Investor, is or
will be a party or by which its property or assets will or may be bound or
affected which (a) challenges or seeks to question, prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, or (b)
would be reasonably likely to threaten, impede, impair or adversely affect the
obligation of such Investor to consummate the transactions contemplated by the
Agreement.

 

Section 4. Additional Agreements.

 

4.1 Transfer Restrictions. The Investor hereby agrees that such Investor will
not, directly or indirectly, Transfer or offer to Transfer any of the
Securities, or any of its interests therein (or solicit any offers to buy,
purchase, or otherwise acquire or take a pledge of the Securities), except in
compliance with this Agreement and the Securities Act, the securities laws of
all other applicable jurisdictions, and the rules and regulations promulgated
thereunder.

 

4.2 Legends. The Investor confers full authority upon the Company to affix, when
issued, appropriate legends relating to applicable Transfer restrictions to the
face of the certificate or certificate representing the Securities or on any
other document representing the Securities, including, without limitation, the
following:

 

(a) “THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY OTHER JURISDICTION AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND THE SECURITIES LAWS OF ALL
OTHER APPLICABLE JURISDICTIONS UNLESS, IN THE OPINION OF COUNSEL TO THE COMPANY,
SUCH REGISTRATION IS NOT REQUIRED.”

 

(b) any legend set forth in, or required by, the Other Transaction Documents and
the securities Laws of any other applicable jurisdiction, if any.

 

4.3 Investor’s Indemnification Agreement. The Investor acknowledges that
understands the meaning and legal consequences of the representations,
warranties and covenants contained in Section 3 of this Agreement, especially as
it relates to the reliance referenced in Section 3.10 hereof, and agrees to
indemnify and hold harmless the Company and its agents, employees, and
representatives from and against any and all losses (including reasonable
attorney’s fees), damage or liabilities due to or arising out of any
misrepresentations, misstatements, or omissions with respect to any of the
representations or warranties, or a breach of any of the covenants or
agreements, contained in this Agreement by the Investor.

 

4.4 Reservation of Shares. The Company hereby agrees that:

 

(a) It will make best efforts to have authorized and will reserve and keep
available, solely for issuance and delivery to the holder of the Shares, that
number of shares of its Common Stock (or other securities and property) that may
be required from time to time for issuance and delivery of the Shares.

 

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(b) it shall take all necessary steps to ensure that the Shares, when issued in
accordance with this Agreement, shall be duly and validly issued, shall be fully
paid and nonassessable, free and clear of any Liens of any kind whatsoever, and
free from all preemptive rights of any security holders of the Company.

 

(c) it shall take all action as may be necessary to assure that such Shares (and
any other securities and property) may be issued and delivered as provided
herein and as set forth in the Articles without violation of any applicable Law,
or of any requirements, of any domestic securities exchange or inter dealer
quotation system upon which the Common Stock may then be listed; provided,
however, that the Company shall not be required to effect a registration under
federal or state securities Laws.

 

4.5 Information Rights.

 

(a) The Company covenants and agrees with the Investor that for so long as the
Investor continues to own beneficially any shares of Common Stock (subject to
adjustment to reflect stock splits, stock dividends, and other combinations or
subdivisions of the Common Stock), the Company shall (i) permit such Investor to
visit and inspect the properties of the Company and to discuss the Company’s
business and finances with officers of the Company, in each case during normal
business hours following reasonable notice, which right may be exercised through
any agent or employee of such Investor designated by it or by a certified public
accountant designated by such Investor and (ii) promptly upon request, furnish
to such Investor such other information bearing on the financial condition and
operations of the Company as the Investor may from time to time reasonably
request; provided, however, that in each case the Company shall not be obligated
pursuant to this Section 4.5(a) to provide access to any information that the
Company reasonably and in good faith considers to be a trade secret or
confidential information (unless covered by an enforceable confidentiality
agreement, in form acceptable to the Company) or the disclosure of which would
adversely affect the attorney-client privilege between the Company and its
counsel.

 

(b) The Company covenants and agrees with the Investor that for so long as the
Investor continues to own beneficially or of record any shares of Common Stock
(subject to adjustment to reflect stock splits, stock dividends, and other
combinations or subdivisions of the Common Stock or the Common Stock), the
Company shall provide to such Investor its financial statements and exhibits.

 

(i) a certificate of compliance at the time of delivery of each monthly and
annual statement, executed by the chief financial officer (or other financial
manager or controller) in the case of monthly statements, stating that such
officer has caused this Agreement and the terms of the Common Stock to be
reviewed and has no knowledge of any default by the Company in the performance
or observance of any of the provisions of this Agreement or the terms of the
Common Stock or, if such officer has such knowledge, specifying such default and
the nature thereof;

 

(ii) notice of changes that are reasonably likely to have a Material Adverse
Effect promptly after the Company obtains knowledge thereof;

 

(iii) promptly after the Company’s Knowledge thereof, notice of all material any
litigation, suit, claim, action, or proceeding, including, without limitation,
arbitration proceeding, mediation, or other alternative dispute resolution
proceeding, before any Governmental Entity to which the Company is a party;

 

(iv) such other notices, information and data with respect to the Company as the
Company delivers to the holders of its capital stock at the same time it
delivers such items to such holders; and

 

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(c) Except as otherwise agreed to by the Company, all information received by
such Investor with respect to the Company pursuant to this Section 4.5 shall be
subject to, the Investor shall be bound by, the terms of confidentiality by and
between the Company and the Investor to be signed under separate cover if
required.

 

4.6 Nondisclosure Agreements. Following the Closing Date, the Company shall
cause all employees, officers, directors and independent contractors of the
Company to execute and deliver PIIA Agreements and Non-Competition Agreements
substantially in a form provided to the Investor or as approved by the Board of
Directors of the Company after the Closing Date.

 

4.7 Books and Records. The Company shall keep proper books of record and account
in which true and complete entries will be made of all transactions in
accordance with GAAP applied on a basis consistent with prior periods.

 

4.8 Further Assurances. On or after the Closing, each of the parties shall
execute and deliver, or cause to be executed and delivered, such further
documents, certificates, and instruments and to perform such further acts as may
be reasonably required to issue and convey the Securities to the Investors, all
on terms contained herein, and otherwise to comply with the terms of this
Agreement and consummate the transactions herein provided.

 

Section 5. Conditions to the Obligations of the Purchaser at the Closing. The
obligation of the Investor to purchase the Acquired Shares at the Closing is
subject to the fulfillment, or the waiver by the Investor, of each of the
following conditions on or before the Closing Date.

 

5.1 Accuracy of Representations and Warranties. Each of the representations and
warranties of the Company contained in Section 2 of this Agreement shall be true
and correct in all material respects on and as of the Closing with the same
effect as though such representations and warranties had been made on and as of
that date.

 

5.2 Performance. The Company shall have performed and complied in all material
respects with all covenants, agreements and conditions contained in this
Agreement required to be performed or complied with by the Company prior to or
at the Closing.

 

5.3 No Litigation. There shall be no action, suit or proceeding pending, or, to
the Knowledge of the Company, threatened, which (a) seeks to restrain, enjoin,
or prevent the consummation of the transactions contemplated by this Agreement
or the other Transaction Documents, (b) challenges the validity of, or seeks to
recover damages or to obtain other relief in connection with the transactions
contemplated by this Agreement or the other Transaction Documents, (c) affects
adversely the right of the Investor to acquire the Acquired Shares, or (d)
affects adversely the business, assets, properties, operation (financial or
otherwise), or prospects of the Company (and no such injunction, judgment,
order, decree, ruling or charge shall be in effect).

 

5.4 No Material Adverse Change. Since the Balance Sheet Date, there shall have
been no change in the financial condition, results of operations, business,
business prospects, personnel, assets, or liabilities (whether contingent or
absolute, matured or unmatured, known or otherwise) of the Company which has or
may cause a Material Adverse Effect.

 

5.5 Compliance Certificate. The Company shall deliver to the Investor a
certificate, executed by the chief executive officer and chief financial officer
of the Company, dated as of the Closing Date, certifying the fulfillment of the
conditions specified in Section 5.1 through 5.4 of this Agreement.

 

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5.6 Qualifications. All material notices, registrations, qualifications,
designations, declarations, or filings with, Consents or Permits of, or any
action by any Governmental Entity of the United States or of any other
jurisdiction that are required prior to the Closing in connection with the
lawful issuance and sale of the Acquired Shares pursuant to this Agreement shall
be duly obtained and effective as of the Closing.

 

5.7 Amended Articles. The Company shall have filed the Certificate of
Determination or such appropriate and required documents for this Offering with
the Secretary of State of the State of Wyoming (“State Secretary”) on Closing or
as soon as practicable, which shall continue to be in full force and effect as
of the Closing.

 

5.8 Secretary Certificate and Documents. The Company shall have delivered to the
Investor a certificate of the Secretary of the Company, certifying: (a) the
Articles of Incorporation of the Company, as amended and restated by the Amended
Articles, certified by the State Secretary, (b) the Bylaws of the Company as of
the Closing, (c) resolutions or written consents of the Board of Directors of
the Company evidencing the taking of all corporate action necessary to authorize
and approve the execution and delivery of the Transaction Documents, and the
transactions contemplated under the Transaction Documents, including the
consummation of the Investment Transaction, (d) resolutions or written consents
of the stockholders of the Company, if required, approving the Amended Articles,
(e) certificates, as of a recent date, as to the corporate good standing of the
Company issued by the State Secretary, and as to the corporate good standing and
qualification as a foreign corporation of the Company issued by the Secretary of
State of each jurisdiction in which the nature of the business transacted by it
or the character or location of its properties requires such qualification, and
(f) the incumbency of each individual authorized to sign, in the name and on
behalf of the Company, this Agreement and the other Transaction Documents.

 

5.9 Stockholders Agreement. The Company and the Investor shall have executed and
delivered the Stockholders Agreement as soon as practicable after closing. While
any such Agreement is pending, industry standard protections for the Company and
the Investor shall apply subject to the rule(s) of law in the State of Wyoming
and the United States.

 

5.10 Stockholder Rights. The Company shall have obtained enforceable waivers or
shall have fully satisfied (including, without limitation, timely notification)
in respect of any rights of first refusal, preemptive rights, and similar rights
directly or indirectly affecting any of its securities.

 

5.11 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Investor, and the Investor shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request.

 

Section 6. Condition to the Obligations of the Company. The obligations of the
Company to issue, sell, and deliver the Acquired Shares to the Investor at the
Closing are subject to fulfillment, or the waiver by the Company, of each of the
following conditions on or before the Closing Date:

 

6.1 Accuracy of Representations and Warranties. Each of the representations and
warranties of the Investor contained in Section 3 shall be true in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of that date.

 

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6.2 Performance. The Investor shall have performed and complied, in all material
respects, with all covenants, agreements and conditions contained in the
Agreement required to be performed or complied with by the Investor prior to or
at the Closing.

 

6.3 No Litigation. There shall be no action, suit, investigation or proceeding
pending, or to the Knowledge of any of the Investor threatened, which (a) seeks
to restrain, enjoin, or prevent the consummation of the transactions
contemplated by this Agreement or the other Transaction Documents, (b)
challenges the validity of, or seeks to recover damages or to obtain other
relief in connection with the transactions contemplated by this Agreement or the
other Transaction Documents.

 

6.4 Qualifications. All material notices, registrations, qualifications,
designations, declarations, or filings with, Consents or Permits of, or any
action by any Governmental Entity of the United States or of any other
jurisdiction that are required prior to the Closing in connection with the
lawful issuance and sale of the Acquired Shares pursuant to this Agreement shall
be duly obtained and effective as of the Closing.

 

6.5 Stockholders Agreement. The Company and the Investor shall have executed and
delivered the Stockholders Agreement as soon as practicable after closing. While
any such Agreement is not in effect, industry standard protections for the
Company and the Investor shall apply subject to the rule of law.

 

6.6 Registration Rights Agreement. Not applicable.

 

6.7 Payment of Purchase Price. Th Investor shall have paid to the Company the
Aggregate Purchase Price for the Acquired Shares as set forth in Section 1.3 of
this Agreement.

 

Section 7. General Provisions.

 

7.1 Definitions.

 

(a) Except as otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:

 

“Affiliate” means, with respect to any Person, (i) a Person that directly, or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first-mentioned Person, and (ii) an
“associate” as that term is defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934 as in effect on the date of this Agreement. For
purposes of this definition, the term “control” (including the term
“controlling,” “controlled by” and “under common control,” or correlative terms)
means the possession, direct or indirect, of the power to direct the management
and policies of a Person, whether as an officer or director, through the
ownership of voting securities, by contract or otherwise.

 

“Anti-Money Laundering Laws” shall mean Laws and sanctions, state and federal,
criminal and civil, that: (i) limit the use of and/or seek the forfeiture of
proceeds from illegal transactions; (ii) limit commercial transactions with
designated countries or individuals believed to be terrorists, narcotics dealers
or otherwise engaged in activities contrary to the interests of the United
States; (iii) require identification and documentation of the parties with whom
a Financial Institution conducts business; or (iv) are designed to disrupt the
flow of funds to terrorist organizations. Such laws, regulations and sanctions
shall be deemed to include the USA PATRIOT Act of 2001, Pub. L. No. 107-56, the
Bank Secrecy Act, 31 U.S.C. §§ 5311 et seq., the Trading with the Enemy Act, 50
U.S.C. App. §§ 1 et seq., the International Emergency Economic Powers Act, 50
U.S.C. §§ 1701 et seq., and the sanction regulations promulgated pursuant
thereto by the OFAC, as well as laws relating to prevention and detection of
money laundering in 18 U.S.C. §§ 1956 and 1957.

 

 20 

 

 

“Board of Directors” or “Board” means the board of directors of the Company.

 

“Business Day” shall mean any day other than a Saturday, Sunday, or other day on
which commercial banks in the State of Wyoming are authorized or required by Law
or executive order to close.

 

“Bylaws” means, unless the context otherwise requires, the bylaws of the
Company, as amended through and in effect on the Closing Date.

 

“Consent” shall mean any consent, order, approval, authorization, clearance,
exemption, exception, waiver, ratification, or similar affirmation by any
Person.

 

“Contract” means any oral or written agreement, contract, debenture, note, bond,
mortgage, license, instrument, franchise or other obligation, commitment,
arrangement or understanding.

 

“Employee Benefit Plan” means employee benefit plan, agreement or arrangement
that is a pension, profit-sharing, post-retirement, supplemental retirement,
vacation, sick leave, disability, death benefit, group insurance,
hospitalization, medical, dental, life, Section 125 of the Code “cafeteria” or
“flexible” benefit, employee loan, education assistance or fringe benefit plan,
whether written or oral, including, without limitation, any “employee benefit
plan” (within the meaning of Section 3(3) of ERISA, inclusive of any “employee
pension benefit plan” as defined in Section 3(2) of ERISA, and any “employee
welfare benefit plan” (as defined in Section 3(1) of ERISA), any “multi-employer
plan” (as defined in Section 3(37) of ERISA), or other Contracts or employee
benefit plan, whether or not subject to ERISA and whether or not funded, to
which Company is a party, for the benefit of any current or former employee,
director, officer, consultant or independent contractor of the Company have any
present or future rights to benefits, or with respect to which Company or any of
its ERISA Affiliates has any current or future liability or which are
maintained, contributed to or sponsored by Company.

 

“Environmental Laws” means all Laws relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata) and which are administered, interpreted, or
enforced by the United States Environmental Protection Agency and state, local,
and foreign agencies with jurisdiction over, and including common law in respect
of, pollution or protection of the environment, including the Comprehensive
Environmental Response Compensation and Liability act, as amended, 42 U.S.C.
9601 et seq., the Resource Conservation and Recovery act, as amended, 42 U.S.C.
6901 et seq., and other Laws relating to emissions, discharges, releases, or
threatened releases of any Hazardous Material, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of any Hazardous Material.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any Person that is a member of a “controlled group of
corporations” with, or is under “common control” with, or is a member of the
same “affiliated service group” with Seller, as defined in Section 414 of the
Code.

 

“Hazardous Materials” means (i) any hazardous substance, hazardous material,
hazardous waste, regulated substance, or toxic substance (as those terms are
defined by any applicable Environmental Laws) and (ii) any chemicals,
pollutants, contaminants, petroleum, petroleum products, or oil and
(specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of Governmental Entities and any
polychlorinated biphenyls).

 

 21 

 

 

“Immediate Family Member” means a Person’s spouse, parents, children, siblings,
mothers and fathers-in-law, sons and daughters-in-law, and brothers and
sisters-in-law

 

“Intellectual Property” means all of the following: (i) U.S. and foreign
registered and unregistered trademarks, trade dress, service marks, logos, trade
names, corporate names and all registrations and applications to register the
same jurisdiction, including any extension, modification or renewal of any such
registration or application (the “Trademarks”); (ii) issued U.S. and foreign
patents and pending patent applications, patent disclosures, and any and all
divisions, continuations, continuations in part, continuing prosecution
applications, reissues, reexaminations, and extensions thereof, any counterparts
claiming priority therefrom or from which priority may be claimed, utility
models, patents of importation or confirmation, certificates of invention and
like statutory rights (the “Patents”); (iii) U.S. and foreign registered and
unregistered copyrights (including any work of authorship in which copyright
does or may subsist under the law of any jurisdiction), rights of publicity,
database rights and moral rights in both published works and unpublished works
and all registrations and applications to register the same (the “Copyrights”);
(iv) U.S. and foreign rights in any semiconductor chip product works or “mask
works” as such term is defined in 17 U.S.C. § 901, et seq., and any
registrations or applications therefor (the “Mask Works”); (v) all categories of
trade secrets as defined in the Uniform Trade Secrets Act including, but not
limited to, technology, inventions, and business information and other
confidential information, and rights to limit the use or disclosure thereof by a
Third party, including such rights in inventions, discoveries and ideas, whether
patented, patentable or not in any jurisdiction; know-how, customer lists,
technical information, proprietary information, technologies, processes and
formulae, software, data, plans, drawings and blue prints, whether tangible or
intangible and whether stored, compiled, or memorialized physically,
electronically, photographically or otherwise (the “Trade Secrets”); all
licenses and agreements pursuant to which the Company or any of the Company’s
Subsidiaries has acquired rights in or to any Trademarks, Patents, Copyrights or
Mask Works, or licenses and agreements pursuant to which the Company has
licensed or transferred the right to use any of the foregoing (the “Licenses”);
(vi) all United States and foreign Internet domain name applications and
registrations, social media identifiers, and advertising keyword rights owned or
used by the Company or any of the Company’s Subsidiaries or otherwise used in
conjunction with the business of the Company or any of the Company’s
Subsidiaries (the “Domains”); and (vii) any similar intellectual property or
proprietary rights similar to any of the foregoing, licenses, immunities,
covenants not to sue and the like relating to the foregoing, and any claims or
causes of action arising out of or related to any infringement, misuse or
misappropriation of any of the foregoing.

 

“Knowledge” means (i) with respect to a Stockholder, the knowledge of the
Shareholder that is obtained or would have been obtained after reasonable
investigation, (ii) with respect to the Company, all matters known or that
should have been known by the chief executive officer, chief financial officer,
and each of the other executive officers of the Company after reasonable
investigation, and (iii) with respect to the Investor, the actual knowledge of
the Investor.

 

“Law” means any code, law, ordinance, regulation, reporting or licensing
requirement, rule, or statute applicable to a Person or its assets, properties,
liabilities, or business, including those promulgated, interpreted, or enforced
by any Governmental Entity.

 

“Liens” shall mean all liens, encumbrances, charges, pledges, claims, security
interests, equities, options, warrants, rights to purchase or acquire, and other
defects in title.

 

 22 

 

 

“Material Adverse Effect” means any change, effect, event, occurrence, or state
of facts (each, an “Event”) which individually, or together with other changes,
effects, events, occurrences, or states of facts, that has, or would be
reasonably expected to, materially and adversely affect: (a) the Company’s
ability to consummate Investment Transaction without material delay, or (b) the
financial condition, business, properties, assets, operations, results of
operations, or prospects of the Company and its Subsidiaries, taken as a whole[;
provided, however, that none of the following shall be deemed either alone or in
combination to constitute, and none of the following shall be taken into account
in determining whether there has been or would be, a Material Adverse Effect:
(i) any Event resulting from general economic or political conditions or
generally affecting financial, credit, foreign exchange, securities or capital
markets (including changes in interest rates or exchange rates), including any
disruption thereof, in the United States or elsewhere in the world market, (ii)
any Events affecting in the general conditions in the industry of such Person
and its Subsidiaries, taken as a whole, and (iii) any Events resulting from
business conditions in the United States generally or in the geographic regions
in which the Company or its Subsidiaries operate.

 

“Owned Properties” means any property owned, leased, or operated by the Company
or in which the Company holds a security or other interest (including an
interest in a fiduciary capacity) and, when required by the context, this term
also includes the owner or operation of such property, but only with respect to
such property.

 

“Participation Facilities” means any facility or property in which the Company
participates in the management and, where required by the context, said term
means the owner or operator of such facility or property, but only with respect
to such facility or property.

 

“Permitted Liens” means (i) Liens or imperfections of title which are not,
individually or in the aggregate, material in character, amount, or extent and
which do not materially detract from the value or interfere with the
contemplated use of assets subject thereto or affected thereby, (ii) mechanics’,
materialmen’s, carrier’s, warehousemen’s, landlord’s and similar Liens securing
obligations not yet delinquent, and (iii) Liens for current Taxes not yet due
and payable.

 

“Permits” shall mean all permits, licenses, variances, certificates, filings,
franchises, notices, rights, and Consents of and from all Governmental Entities.

 

“Person” shall mean an individual, corporation, general partnership, limited
partnership, joint venture, limited liability company, limited liability
partnership, unincorporated organization, business trust, association,
corporations, or other entity.

 

“Subsidiaries” or “Subsidiary” means all corporations, limited liability
companies, limited partnerships, and other entities in which the entity in
question owns or controls 50% or more of the outstanding equity or voting
securities or interests either directly or through an unbroken chain of entities
as to each of which 50% or more of the outstanding equity or voting securities
or interests are owned directly or indirectly by such entity in question.

 

“Taxes” means all federal, state, local, foreign and other net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, stamp, occupation, property,
or other taxes, fees, assessments or other charges imposed by a Governmental
Authority, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, and the term “tax” means any of the
foregoing taxes..

 

“Tax Return” means all reports, estimates, declarations of estimated tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to withholding and other payments to third parties.

 

 23 

 

 

“Transfer” shall be construed broadly and shall include to mean, in the context
of a transfer of any of the Securities, any sale, assignment, participation,
gift, bequest, distribution, exchange, pledge, hypothecation, placement of a
lien thereon or a grant of a security interest therein or other encumbrances
thereon, judicial attachment, contribution to a trust or other Person, or other
transfer or disposition (voluntarily or involuntarily, by operation of law or
otherwise, and whether as security or otherwise) by a holder of all or a portion
of its Securities or any right or interest therein. For purposes of this
definition, a “Transfer” shall include the sale, assignment, participation,
gift, bequest, distribution, exchange, pledge, hypothecation, placement of a
lien thereon or a grant of a security interest therein or other encumbrances
thereon, judicial attachment, contribution to a trust or other Person, or other
transfer or disposition (voluntarily or involuntarily, by operation of law or
otherwise, and whether as security or otherwise) of a controlling equity
interest in any Person which owns of record any of the Securities.

 

“Transaction Documents” means, collectively, this Agreement, the Amended
Articles, and the Stockholders Agreement.

 

7.2 Survival of Representations. Unless otherwise set forth in this Agreement,
the representations, warranties, and covenants of the Company and the Investor
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Company or the Investor. The representations and warranties in this Agreement
and in any certificate delivered pursuant hereto shall survive the Closing.

 

7.3 Expenses. Except as otherwise provided in this Agreement, whether or not the
transactions contemplated herein are consummated, each party hereto shall bear
and pay its own fees, costs and expenses incident to preparing, entering into
and carrying out this Agreement and to consummating the transactions
contemplated hereby. Notwithstanding the foregoing, the Company agrees to pay
the reasonable fees and expenses of counsel for the Investor.

 

7.4 No Brokers or Finders. The Company, and the Investor (a) each represent and
warrant to the other party hereto that he or it has neither retained a finder or
broker nor is or will be obligated for any finder’s fees or commissions, in
connection with the transactions contemplated by this Agreement, and (b) each
agree that they will indemnify and save the other party harmless from and
against any and all claims, liabilities or obligations with respect to brokerage
or finders’ fees or commissions, or consulting fees in connection with the
transactions contemplated by this Agreement asserted by any Person on the basis
of any statement or representation alleged to have been made by such
indemnifying party.

 

7.5 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable Law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of this Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of this
Agreement shall be enforceable in accordance with its terms.

 

7.6 Entire Agreement. This Agreement, which includes the Disclosure Schedule and
exhibits hereto, together with the other Transaction Documents, constitutes the
entire agreement among the parties hereto with respect the subject matter
hereof, and supersedes all prior arrangements or understandings with respect to
the subject matter hereof between the parties, both written and oral.

 

7.7 Amendment and Modification. Except as otherwise expressly set forth in this
Agreement, subject to the corporation laws of the State of Wyoming, any term of
this Agreement may be amended, modified, or terminated and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and (a) the holders of at least 80% of the then-outstanding Common
Stock, or (b) for any amendment, modification, termination or waiver effected
prior to the Closing, Investor obligated to purchase 80% of the Common Stock to
be issued at such Closing. Any amendment, modification, termination or waiver
effected in accordance with this Section 7.7 shall be binding upon the Investor,
each transferee of the Securities even if they do not execute such consent, and
each future holder of the Securities, and the Company. No waivers of or
exceptions to any term, condition or provision of this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.

 

 24 

 

 

7.8 Successors and Assigns. This terms and conditions of this Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties to this Agreement or
their respective successors and permitted assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. The Investor’s rights to purchase the
Acquired Shares shall not be assignable except to its Subsidiaries, parent, or
Affiliates.

 

7.9 Notices. All notices or other communications given or made pursuant to this
Agreement shall be in writing and shall be (a) delivered by registered or
certified mail, return receipt requested, postage prepaid, (b) by expedited mail
or package delivery service guaranteeing next Business Day delivery, (or, for
international deliveries, the earliest Business Day that such delivery service
can guarantee delivery if so requested and paid for), or (c) delivered
personally, by hand, to the Persons at the addresses set forth below (or at such
other address as may be provided hereunder):

 

If to Company:

 

KANAB CORP.

LEGALINC CORPORATE SERVICES INC.

5830 E 2nd St. Suite 8

Casper, WY 82609

 

If to Investor:

 

2050 Motors, Inc.

25 N River Lane Suite 2050

Geneva, IL 60134

 

Any notice or other communications to be given or that may be given pursuant to
this Agreement shall be deemed to have been given: (x) three calendar days after
the deposit of such notice or communication in the United States Mail,
registered or certified, return receipt requested, with proper postage affixed
thereto; (y) on the first Business Day after depositing such notice of
communication with Federal Express, Express Mail, or other expedited mail or
package delivery service guaranteeing delivery no later than the next Business
Day if next Business Day delivery service has been requested and paid for (or on
such Business Day as such delivery service has been requested, guaranteed, and
paid for); or (z) upon delivery if hand delivered or telecopied to the
appropriate address and Person as provided hereinabove or to the Person to whose
attention the notice is to be given to the other parties in the manner set forth
in this Section 7.9.

 

7.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wyoming without giving effect to the
choice of law principles thereof that would result in the application of the
Laws of any other jurisdiction.

 

 25 

 

 

7.11 Jurisdiction; Venue. Any action, litigation, suit or proceeding arising out
of or relating to this Agreement or any transaction contemplated hereby shall be
brought solely in federal or state courts of competent jurisdiction in the
courts of the State of Wyoming located in a venue to be mutually determined by
both parties and/or their counsel(s) or, if it has or can acquire jurisdiction,
in the United States District Court for the Central District, and each of the
parties hereto hereby irrevocably consents and submits to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such action, litigation, suit or proceeding and waives any objection it
may now or hereafter have to venue or to convenience of forum, agrees that all
claims in respect of the action, litigation, suit or proceeding shall be heard
and determined only in any such court and agrees not to bring any action or
proceeding arising out of or relating to this Agreement or any transaction
contemplated hereby in any other court. Process in any action or proceeding
referred to in the first sentence of this Section 7.11 may be served on any
party anywhere in the world.

 

7.12 WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. EACH PARTY (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 7.12. EACH PARTY HERETO FURTHER REPRESENTS AND WARRANTS THAT SUCH PARTY
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT SUCH PARTY KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.

 

7.13 Attorney Fees. If any action at law or in equity (including arbitration) is
necessary to enforce or interpret the terms of any Transaction Document, the
prevailing party shall be entitled to reasonable attorneys’ fees, costs, and
necessary disbursements in addition to any other relief to which such party may
be entitled.

 

7.14 No Commitment for Additional Financing. The Company acknowledges and agrees
that the Investor has not made any representation, warranty, undertaking,
commitment or agreement to provide or assist the Company in obtaining any
investment, financing or other capital raising activities other than the
purchase of the Acquired Shares pursuant to the terms and conditions of this
Agreement. No obligation, agreement, or obligation to provide or assist the
Company in obtaining any investment, financing or other capital raising
activities will created only by a written definitive agreement executed and
delivered by the Investor and the Company, and any such agreement will be
binding only on those Investors executing such agreement.

 

7.15 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.

 

7.16 Counterparts; Electronic Signatures. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. A party may
deliver this Agreement by transmitting a facsimile or other electronic signature
of this Agreement signed by such party (via PDF, TIFF, JPEG or the like) to the
other party, which facsimile or other electronic signature shall be deemed an
original for all purposes.

 

[Remainder of Page Intentionally Blank. Signatures on Next Page.]

 

 26 

 

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
on its behalf by its respective officer(s) thereunto duly authorized, all as of
the date first written above.

 

  KANAB CORP.         By: [ex10-1_001.jpg]   Date: 05-26-2019   Name: KANAB
CORP.   Title: CEO

 

Signature Page to

Securities Purchase Agreement

 

Page 1 of 2  

 

 

  2050 MOTORS, INC.         By: [ex10-1_002.jpg]   Date: 05-26-2019   Name:
Vikram Grover, CEO   Title: Investor

 

Signature Page to

Securities Purchase Agreement

 

Page 2 of 2