Exhibit 10.1
PURCHASE AND SALE AGREEMENT
 
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made as of October 10,
2018 (the "Effective Date"), by and among GrowLife, Inc., a Delaware corporation
("Buyer") on the one hand, and EZ Clone Enterprises, Inc.., a California
corporation (the "Company"), Brad Mickelsen, individually and in his capacity as
a shareholder ("Mr. Mickelsen") and William Blackburn, individually and in his
capacity as a shareholder ("Mr. Blackburn") Mr. Mickelsen and Mr. Blackburn
sometimes individually referred to as a "Seller" and collectively as the
"Sellers." The Buyer and Sellers may hereinafter be referred independently as
"Party" or collectively as the "Parties". Capitalized terms used herein are
defined in the text.
 
RECITALS
 
WHEREAS, Sellers own all right, title, and interest in the issued and
outstanding shares of capital stock of the Company (the "Shares").
 
WHEREAS Sellers desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the Shares all upon the terms and subject to the conditions set forth
herein.
 
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto, intending to
be legally bound hereby, agree as follows:
 
AGREEMENT
 
ARTICLE I
PURCHASE AND SALE OF SHARES; CONSIDERATION
 
 
1.01.                      
Purchase and Sale of Shares on the Effective Date and at the First Closing.
 
(a)           On the terms and subject to the conditions set forth in this
Agreement, at the First Closing (as defined herein), Sellers will sell, transfer
and deliver to Buyer, and Buyer will purchase and accept from Sellers, all of
Seller's rights, title and interest in and to Twenty Five Thousand and Five
Hundred (25,500) Shares held by Sellers’ (the "Initial Shares") which represents
fifty–one percent (51%) of the total issued and outstanding stock of the
Company, free and clear of any liens, claims, charges, restrictions,
obligations, and encumbrances.
 
(b)           
In consideration for the sale and delivery to Buyer of the Initial Shares, Buyer
agrees to pay an aggregate Two Million Forty Thousand Even Dollars ($2,040,000),
payable as follows: (i) a cash payment equal to Six Hundred Forty–Five Thousand
Even Dollars ($645,000) by wire transfer of immediately available funds which
shall be allocated in the form and amounts as set forth on Schedule 1.02, and
(ii) One Hundred Seven Million Three Hundred Seven Thousand Six Hundred
Ninety–Two (107,307,692) restricted shares of Buyer’s common stock, at a price
of $0.013 per share, which equates to an aggregate value of One Million Three
Hundred Ninety–FiveThousand Even Dollars ($1,395,000) (collectively, the "First
Closing Purchase Price").
 
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1.02.                      
Purchase and Sale of Shares at Second Closing. Subject to completion of the
First Closing, Buyer shall have the obligation to acquire the remaining
forty–nine percent (49%) ownership interest in Seller for a period of twelve
(12) months after First Closing Date, within which to acquire the remaining
forty-nine (49%) percent, as follows:
 
(a)           
On the terms and subject to the conditions set forth in this Agreement, at the
Second Closing, the Sellers will sell, transfer and deliver to Buyer, and Buyer
will purchase and accept from the Sellers, all of the Sellers' rights, title and
interest in and to the remaining Shares held by the Sellers as identified on
Schedule 1.02 attached hereto (the "Second Closing Shares"), free and clear of
any any liens, claims, charges, restrictions, obligations, and encumbrances.
 
(b)           
In consideration for the sale and delivery to Buyer of the Second Closing Shares
at the Second Closing, Buyer agrees to pay to the Sellers an aggregate purchase
price of One Million Nine Hundred Sixty Thousand Even Dollars ($1,960,000)
payable as follows: (i) a cash payment equal to Eight Hundred Fifty–Five
Thousand Even Dollars ($855,000) to be allocated in the form and amounts as set
forth in Schedule 1.02 attached hereto; and (ii) Eighty – Five Million
(85,000,000) shares of Buyer’s common stock, at a price of 0.013 per share,
which equates to an aggregate value of One Million One Hundred Five Thousand
Even Dollars ($1,105,000) (collectively, the "Second Closing Purchase Price").
in the form and amounts as are set forth on Schedule 1.02.
 
1.03           Allocation of Purchase Price. The Parties agree the First Closing
Purchase Price and Second Closing Purchase Price shall be allocated consistent
(across two (2) tax periods) with the schedule set forth on Schedule 1.02. The
Parties agree that this allocation was arrived at by arm's length negotiation
between them and that no Party will take a position on any income tax return,
before any Governmental Authority, that is inconsistent with such allocation
without the prior written consent of the other Parties.
 
(a)           Working Capital Contribution. As part of and included in the
Purchase Price at the First Closing and Second Closing, as set out in Schedule
1.02, Buyer will have made a capital contribution in respect of the securities
owned by the Buyer in the Company in an amount equal to One Hundred Fifty
Thousand Even Dollars ($150,000) and One Hundred Thousand Even Dollars
($100,000), respectively, payable by wire transfer of immediately available
funds, on or before each respective Closing Date. The capital contributions
shall be used by the Company solely for working capital purposes.
 
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Company and each of the Sellers hereby represent and warrant to Buyer as
follows as of the Effective Date, as of the First Closing Date and as of the
Second Closing Date, except as specifically set forth in the Disclosure Letter
to be delivered separately by the Company to the Buyer within ten (10) business
days the Effective Date, dated as of the Effective Date, and updated if
necessary at least two (2) business days before each of the First Closing and
Second Closing (referring to the appropriate section numbers) (the "Disclosure
Letter"):
 
 
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2.01.                      
Organization and Qualification. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
The Company is duly qualified to do business as a foreign corporation and is in
good standing in all jurisdictions in which the ownership of its properties or
the nature of its business makes such qualification necessary, except to the
extent that the failure to be so qualified, individually or in the aggregate,
has not resulted in and is not reasonably likely to result in a Material Adverse
Effect, and all of such jurisdictions are listed in Section 2.01 of the
Disclosure Letter. As used in this Agreement, "Material Adverse Effect" means a
material adverse effect on (a) the business, assets, operations, financial
condition or prospects of the Company or (b) the ability of any Seller to
perform his obligations under the Transaction Documents. Without limiting the
generality of the foregoing, a Material Adverse Effect will be deemed to have
occurred if any event occurs or condition exists which results in a loss to or
liability of the Company of $50,000 or more.
 
2.02.                      
Power and Authority. The Company has the corporate power and authority to own
its assets and to conduct its business as presently conducted and as presently
planned to be conducted and to execute, deliver and perform the Transaction
Documents to which it is a party.
 
2.03.                      
Execution and Enforceability. This Agreement has been, and on the applicable
Closing Date the other Transaction Documents to which it is a party will be,
duly and validly authorized by all necessary action on the part of the Company.
This Agreement has been, and on the applicable Closing Date the other
Transaction Documents to which it is a party will be, validly executed and
delivered by the Company and constitute (or upon such execution and delivery
will constitute) legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
 
2.04.                      
No Breach, Default, Violation or Consent. Except for the Consents identified on
Section 2.04 of the Disclosure Letter (the "Required Consents"), the execution,
delivery and performance by the Company and the Sellers of the Transaction
Documents to which it or he is a party do not and will not:
 
(a)           
violate the Company's articles of incorporation, as amended to date, or bylaws;
 
(b)           
materially breach or result in a material default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any Consent under, result in the creation of any Lien on the
assets of the Company or Sellers under or give to others any rights of
termination, acceleration, suspension, revocation, cancellation or amendment of
any contract, agreement, lease, license, indenture, commitment, purchase order
or other legally binding business arrangement, whether written, oral or implied,
relating to the Company or any of its assets (collectively, the "Business
Agreements") or any material agreement to which the Company is a party or by
which the Company or any of their respective assets is bound;
 
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(c)           
breach or otherwise violate any order, writ, judgment, injunction or decree
issued by any Governmental Entity (each a "Governmental Order") which names the
Company or is directed to the Company or any of its respective assets;
 
(d)           
violate any law, rule, regulation, ordinance or code of any Governmental Entity
(each a "Governmental Rule"); or
 
(e)           
require any approval, consent, license, permit, order, ratification, waiver or
authorization ("Consent") of, or exemption or other action by, any individual,
firm, corporation, partnership, company, limited liability company, trust, joint
venture, association or other entity, including any Governmental Entity
("Person").
 
2.05.                      
Ownership and Control.
 
(a)           
The authorized capital stock of the Company consists of one hundred thousand
(100,000) shares of common stock, of which fifty thousand (50,000) shares of
common stock are issued and outstanding (the "Shares"). All Shares have been
duly authorized and validly issued and are fully paid and non-assessable, and
were not issued in violation of or subject to any preemptive right or other
rights to subscribe for or purchase shares created by statute, the articles of
incorporation of the Company or any other agreement to which the Company is a
party or by which it is bound. Schedule 1.02 sets forth the names and the number
of shares held by each of the Sellers of the Company. No issued and outstanding
shares of the capital stock of the Company are owned by anyone other than the
Sellers. Each of the Sellers owns and has good and marketable title to all of
the Shares opposite his name. Except as set forth in Section 2.05(a) of the
Disclosure Letter, all Shares were issued in compliance with applicable
securities laws. Immediately following the First Closing, the Buyer shall own
the Initial Shares, free and clear of all Liens. Second Closing, the Buyer shall
own all of the Shares, free and clear of all Liens.
 
(b)           
Except as set forth in Section 2.05(b) of the Disclosure Letter, the Company
does not have any stock option plans. Except as set forth in Section 2.05(b) of
the Disclosure Letter, there are no outstanding (i) options, warrants,
convertible securities, calls, preemptive rights, rights of first refusal,
agreements or other rights to which the Company is bound obligating the Company
to issue, deliver, purchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed any of the shares of the Company's capital stock
(collectively, "Rights"), or (iii) options, warrants, sale agreements,
shareholder agreements, pledges, proxies, voting trusts, powers of attorney,
restrictions on transfer or other agreements or instruments which are binding on
the Company and which relate to the ownership, voting or transfer of any of the
Company's capital stock.
 
(c)           
The Company does not have and has never had any subsidiaries or affiliated
companies and does not otherwise own and has never otherwise owned any shares in
the capital or any interest in, or control (directly or indirectly) of, any
other corporation, partnership, association, joint venture or other business
entity.
 
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2.06.                      
Financial Matters.
 
(a)           
The books of account and other financial records of the Company, all of which
have been made available to Buyer, are correct and complete in all material
respects, represent actual, bona fide transactions and have been maintained in
accordance with sound business and accounting practices. Each transaction is
properly and accurately recorded in the books and records of the Company, and
each document upon which entries in the Company's books and records are based is
correct and complete in all respects. The Company maintains an adequate system
of internal accounting controls and does not engage in or maintain any
off-the-books accounts or transactions.
 
(b)           
Attached as Section 2.06(b)(i) of the Disclosure Letter are correct and complete
copies of (i) the Company's most recent unaudited balance sheets and statements
of income, retained earnings and cash flows as of and for its fiscal years ended
December 31, 2016 and December 31, 2017, and (ii) the Company's unaudited
interim consolidated balance sheets and statements of income, retained earnings
and cash flows as of and for the eight months ended August 31, 2018 (the
"Current Financial Statements" and, together with the items described in
clause (i) above, the "Financial Statements"). The Financial Statements fairly
present the financial condition of the Company as at the end of the periods
covered thereby and the results of its operations and the changes in its
financial position for the periods covered thereby, and were prepared on a cash
accrual basis.
 
(c)           
Except as and to the extent otherwise disclosed in the Current Financial
Statements or on Section 2.06(c) of the Disclosure Letter, the Company has no
material liabilities of any kind, whether direct or indirect, fixed or
contingent or otherwise, other than (i) executory obligations under Business
Agreements which are not required to be set forth in the Current Financial
Statements in accordance with modified accrual principles consistently applied
and (ii) liabilities incurred in the ordinary course of business since August
31, 2018 (the "Financial Statement Date"). As used in this Agreement, an action
taken by a Person will be deemed to have been taken in the "Ordinary Course of
Business" of such Person only if that action (A) is consistent in nature, scope
and magnitude with the past practices of such Person and is taken in the
ordinary course of the normal, day-to-day operations of such Person, (B) does
not require authorization by the board of directors or shareholders of such
Person (or by any Person or group of Persons exercising similar authority) and
does not require any other separate or special authorization of any nature and
(C) is similar in nature, scope and magnitude to actions customarily taken,
without any separate or special authorization, in the ordinary course of the
normal, day-to-day operations of other Persons that are in the same line of
business as such Person.
 
(d)           
The Company is not insolvent and will not be rendered insolvent by the
consummation of the transactions contemplated by the Transaction Documents
 
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2.07.                      
Tax Matters.
 
(a)           
The Company has, duly and timely filed all federal, state and local (United
States and all foreign jurisdictions) tax returns required to be filed by it
("Tax Returns") (unless a valid extension therefore has been granted). Each such
Tax Return has been prepared in compliance with applicable law and regulations,
and, except as set forth on Section 2.07(a) of the Disclosure Letter, all such
Tax Returns are true, complete and correct in all material respects. The Company
has duly and timely paid or made adequate provision for the payment of all
taxes, assessments and other governmental charges which have been incurred by
the Company as set forth in the Tax Returns or are otherwise due and payable by
the Company with respect to periods ending on or prior to the Effective Date.
The Company has withheld and paid all taxes to the appropriate Governmental
Entities required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contract, creditor, stockholder or other
third party. All sales taxes required to be collected and remitted by the
Company with respect to periods ending on or prior to the Effective Date have
been (or will be) properly collected and remitted. All necessary sales tax
exemption certificates have been obtained by the Company and all such
certificates have been properly completed and maintained. No Tax Return is under
audit or examination by any taxing authority and there are no applications or
agreements for the extension of the time for the filing of any Tax Return or for
the assessment of any amounts of tax nor any consent to an extension of the
period of limitations applicable to such assessment or to the collection of any
tax. No issue or issues have been raised in connection with any prior inquiry
into, or audit of, any tax filings of the Company which may reasonably be
expected to be raised in the future by such taxing authorities and to the
Company's and the Sellers’ knowledge, no facts exist or have existed which would
constitute grounds for the assessment of any further tax liabilities, which
individually or in the aggregate are material. The Company has made available to
the Buyer true and complete copies of all federal, state and local (United
States and foreign) income Tax Returns which it has filed for each of the past
three (3) fiscal years together with copies of all schedules, work papers,
elections, tax depreciation schedules and other documents which were used in the
preparation of each such Tax Return. There are no liens for taxes upon the
assets of the Company except for liens for taxes not yet due.
 
 (b)           
There is no tax sharing agreement, tax allocation agreement, tax indemnity
obligation or similar written or unwritten agreement, arrangement, understanding
or practice with respect to taxes (including any advance pricing agreement,
closing agreement or other arrangement relating to taxes) that will require any
payment by the Company. The Company (A) has not been a member of an affiliated
group within the meaning of Code Section 1504(a) (or any similar group defined
under a similar provision of state, local or foreign law) and (B) has no
liability for taxes of any person other than the Company under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor by contract or otherwise. The Company has
disclosed on its federal income tax returns all positions taken therein that
could give rise to a substantial understatement of federal income tax within the
meaning of Code Section 6662.
 
(c)           
As used herein, "taxes" means (a) all net income, gross income, gross receipts,
sales, use, transfer, franchise, profits, withholding, payroll, employment,
excise, severance, property or windfall profits taxes, or other taxes of any
kind whatsoever, together with any interest, penalties or additional amounts
imposed by any taxing authority (domestic or foreign).
 
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2.08.                      
Litigation. Except as otherwise disclosed on Section 2.08(a) of the Disclosure
Letter, there is no pending or, to the Company's or the Sellers’ knowledge,
threatened, investigation, action, claim, demand or proceeding against the
Company or its assets by or before any Governmental Entity, arbitrator, mediator
or other tribunal, and neither the Company nor the Sellers have any knowledge of
a reasonable basis for any such investigation, action, claim, demand or
proceeding. Section 2.08(b) of the Disclosure Letter sets forth a correct and
complete list of each investigation, action and proceeding (a) described in the
preceding sentence or (b) in which the Company is the plaintiff or initiating
party, together with the parties thereto, the alleged basis therefor, the relief
sought therein and the current status thereof.
 
2.09.                      
Absence of Certain Changes and Events. Since August 31, 2018, there has not been
any Material Adverse Effect. Except as otherwise disclosed on Section 2.09 of
the Disclosure Letter, since the Financial Statement Date:
 
(a)           
the Company has not borrowed any amount or incurred or become subject to any
material liabilities, except liabilities incurred in the ordinary course of
business, liabilities under contracts entered into in the ordinary course of
business and borrowings from banks (or similar financial institutions) necessary
to meet ordinary course working capital requirements;
 
(b)           
the Company has not mortgaged, pledged or subjected to any Lien, any portion of
its assets, except Liens for current property taxes not yet due and payable;
 
(c)           
the Company has not sold, leased, licensed, assigned or transferred any portion
of its properties or assets, or any interest therein;
 
(d)           
the Company has not written off as uncollectible any of the Receivables, or
written down the value of any of its assets or properties, except in each case
in the ordinary course of business and at a rate no greater than during the
12-month period ending on the Financial Statement Date;
 
(e)           
the Company has not suffered any material losses, waived any rights of material
value or permitted any such rights to lapse;
 
(f)           
the Company has not issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock or other
equity securities or warrants, options or other rights to acquire its capital
stock or other equity securities or any other Rights, or any bonds or debt
securities;
 
(g)           
Except for the Dividends or any distributions identified on Section 2.09 of the
Disclosure Letter, the Company has not declared or paid any dividends or made
any distributions on the Company's capital stock or other equity securities or
redeemed or purchased any shares of the Company's capital stock or other equity
securities;
 
(h)           
the Company has not made any capital expenditures or commitments exceeding
$50,000 per expenditure or commitment except in the ordinary course of business;
 
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(i)           
the Company has not entered into any material agreement, contract, lease, or
license outside the ordinary course of business;
 
(j)           
the Company has not had accelerated, terminated, made modifications to, or
cancelled any material agreement, contract, lease, or license involving more
than $50,000 individually to which the Company is a party or by which any of
them is bound;
 
(k)           
the Company has not made any capital investment in or any loan to any Person;
 
(l)           
the Company has not granted any license or material sublicense of any rights
under or with respect to any Intellectual Property except in the ordinary course
of business;
 
(m)           
the Company has not made or authorized any change in the charter or bylaws of
any of the Company;
 
(n)           
the Company has not made any loan to, or entered into any other transaction
with, any of its directors, officers, and employees outside the ordinary course
of business;
 
(o)           
the Company has not entered into any employment contract or collective
bargaining agreement, written or oral, or made any modification to the terms of
any existing such contract or agreement except in the ordinary course of
business;
 
(p)           
the Company has not granted any bonus to or increase in the base compensation of
any of its directors, officers, and employees outside the ordinary course of
business;
 
(q)           
the Company has not adopted, amended, made any modification to, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other employee benefit plan) except as
required under applicable law or in the ordinary course of business;
 
(r)           
the Company has not made any other material change in employment terms for any
of its directors, officers, and employees outside the ordinary course of
business;
 
(s)           
the Company has not cancelled, compromised, waived, or released any right or
claim (or series of related rights and claims) either involving more than
$50,000 individually or outside the ordinary course of business;
 
(t)           
the Company has not entered into any other material transaction, except in the
ordinary course of business;
 
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(u)           
the Company has not experienced or incurred any casualty, loss or damage with
respect to any of the Company's assets, whether or not covered by insurance;
 
(v)           
no executive officer or key employee of the Company has left his or her
employment or service with the Company;
 
(w)           
the Company has not introduced any material change with respect to its business,
including without limitation with respect to the products or services it sells,
the areas in which such products or services are sold, its methods of providing
such products or services, its marketing techniques or its accounting methods;
 
(x)           
the Company has not changed any of its accounting methods or practices
(including any change in depreciation or amortization policies or rates) nor
revalued any of its properties or assets other than depreciation or amortization
in accordance with modfied accrual principles consistently applied and reflected
in the Financial Statements; and
 
(y)           
neither the Company nor the Sellers has entered into any agreement (in writing
or otherwise) to take any actions referred to in subsections (a) through (x)
above.
 
2.10.                      
[Reserved].
 
2.11.                      
Constituent Documents and Governmental Rules. The Company is in compliance with
(a) its charter and bylaws (correct and complete copies of which have been
delivered to Buyer) and (b) all Governmental Rules applicable to the Company or
its business or assets.
 
2.12.                      
Governmental Orders. Section 2.12 of the Disclosure Letter sets forth a correct
and complete list of all Governmental Orders which name the Company or are
directed to the Company or any of its assets, together with the governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority,
agency, bureau, body or entity of the United States of America or any state,
country, municipality or other public subdivision located therein (each, a
"Governmental Entity") who issued the same and the subject matter thereof. The
Company is in compliance with all such Governmental Orders.
 
2.13.                      
Business Permits. Section 2.13 of the Disclosure Letter sets forth a correct and
complete list of all governmental permits, licenses, franchises, certificates,
authorizations, Consents and approvals which have been obtained by the Company
and are currently in effect (collectively, the "Business Permits") and indicates
for each whether any Consent or other action is required in order for the same
to remain in full force and effect following the Closing. Such Business Permits
have been validly acquired, are in full force and effect and represent all
governmental permits, licenses, franchises, certificates, authorizations,
Consents and approvals necessary under applicable Governmental Rules for the
Company to conduct its business as currently conducted and to own, occupy or use
its assets. No violations have been recorded against any such Business Permit,
no citation, notice or warning has been issued by any Governmental Entity with
respect to any such Business Permit, no investigation or hearing has been held
by or before any Governmental Entity with respect to any such Business Permit,
the Company has not received any notice from any Governmental Entity that it
intends to cancel, revoke, terminate, suspend or not renew any such Business
Permit and neither the Company nor the Sellers have any knowledge of any basis
for any of the foregoing. The Company is in compliance with all such Business
Permits, except for such non-compliance as, individually or in the aggregate, is
not likely to have a Material Adverse Effect.
 
 
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2.14.                      
[Reserved].
 
2.15.                      
Real Property.
 
(a)           
Section 2.15(a)(i) of the Disclosure Letter sets forth a correct and complete
list of all real property owned by the Company (collectively, the "Owned Real
Property"). Section 2.15(a)(ii) of the Disclosure Letter sets forth a correct
and complete list of all leases, subleases and other material agreements or
rights pursuant to which any Person has the right to occupy or use any Owned
Real Property.
 
(b)           
Section 2.15(b) of the Disclosure Letter sets forth a correct and complete list
of (i) all real property leased or licensed by the Company (collectively,
"Leased Real Property" and, together with Owned Real Property, the "Real
Property") and (ii) all leases, subleases and other material agreements or
rights pursuant to which the Company has the right to occupy or use any Leased
Real Property, together with the names of the lessors or other grantors
thereunder, the location of the property covered thereby, the annual rental or
other consideration payable thereunder and the duration thereof, including any
renewal options. All such leases are in full force and effect, are valid and
effective in accordance with their respective terms, and there is not under any
such leases, any existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default). The Company has a
valid leasehold interest in the Leased Real Property, free and clear of any
Liens, any enjoys peaceful and undisturbed possession thereof.
 
(c)           
Except as otherwise disclosed on Section 2.15(c) of the Disclosure Letter, all
buildings and other improvements located on the Real Property (including without
limitation all water, sewer, gas, electrical, information technology,
communications and HVAC systems servicing the same) are in good repair and
operating condition and are suitable for the purposes for which they are used.
 
(d)           
All buildings and other improvements located on the Real Property, and the use
of the Real Property by the Company and all Persons claiming under the Company,
comply in all material respects with all Governmental Rules relating to zoning
and land use and with all easements, covenants and other restrictions applicable
to the Real Property.
 
(e)           
The Real Property: (i) is adequately serviced by all utilities necessary for the
Company to conduct its business as currently conducted thereon; (ii) has
adequate means of ingress and egress, either directly or by means of perpetual
easements or rights-of-way which run with the Real Property; (iii) has adequate
parking that is sufficient to meet the needs of the Company’s employees and
business invitees and to comply with applicable Governmental Rules; and (iv) is
not located in whole or in part within an area identified as a flood hazard area
by any Governmental Entity.
 
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2.16.                      
Personal Property; Receivables.
 
(a)           
Section 2.16(a)(i) of the Disclosure Letter sets forth a correct and complete
list of all equipment, machinery, fixtures, vehicles, computer hardware,
furniture and other personal property owned, leased or used by the Company
(collectively, the "Equipment"). Section 2.16(a)(ii) of the Disclosure Letter
sets forth a correct and complete list of (i) all Equipment leased or licensed
by the Company (collectively, "Leased Equipment") and (ii) all leases, subleases
and other material agreements or rights pursuant to the Company has the right to
use such Leased Equipment, together with the names of the lessors thereunder,
the annual rental or other consideration payable thereunder and the duration
thereof, including any renewal options. All such leases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not under any such lease, any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default).
 
(b)           
Except as otherwise disclosed on Section 2.16(b) of the Disclosure Letter, the
Equipment is in good repair and operating condition and is suitable for the
purposes for which it is used. The Equipment constitutes all equipment,
machinery, fixtures, vehicles, computer hardware and furniture necessary for the
Company to conduct its business as currently conducted.
 
(c)           
Except as otherwise disclosed on Section 2.16(c)(i) of the Disclosure Letter,
all accounts receivable of the Company (i) represent amounts receivable for
services actually provided (or, in the case of non-trade receivables, represent
amounts receivable in respect of other bona fide business transactions),
(ii) are valid and binding obligations due and owing to the Company in the
amounts invoiced by the Company and stated in its books and records, subject to
collection, (iii) are not subject to any material defenses, counterclaims or
rights of setoff, (iv) have been billed and are generally due and payable within
30 days after billing, and (v) are fully collectible in the ordinary course of
business except, in the case of receivables arising prior to the Financial
Statement Date, to the extent of the reserves set forth in the Current Financial
Statements and, in the case of receivables arising after such date, to the
extent of a reasonable allowance for bad debts. Section 2.16(c)(ii) of the
Disclosure Letter sets forth the total amount of accounts receivable of the
Company outstanding as of the Financial Statement Date, together with the aging
of such accounts receivable, from the due date thereof, based on the following
schedule: 0-30 days; 61-90 days; and over 90 days. The reserves against the
accounts receivable of the Company have been established in accordance with
principles consistently applied and based upon a review of such accounts
receivable, the Sellers reasonably believe such reserves to be adequate.
 
(d)           
Section 2.16(d) of the Disclosure Letter sets forth a correct and complete list
of the names and locations of all banks, trust companies, savings and loan
associations and other financial institutions at which the Company maintains
accounts of any nature, the type and number of all such accounts and the names
of all persons authorized to make withdrawals therefrom.
 
 
11

 
 
2.17.                      Intellectual Property.
 
(a)           Set forth in Section 2.17(a) of the Disclosure Letter is a true
and complete list and a brief description of all trade secrets (including
recipes), trademarks, trade names, copyrights, including any registrations,
applications, filings or the like relating thereto (collectively, "Intellectual
Property") to which the Company owns any right, title or interest ("Owned
Intellectual Property"). The Company does not license or possess any
Intellectual Property of any third party except for standard off-the-shelf
software licensed pursuant to shrinkwrap licenses, and the Company is not in
default of any such license and does not owe any license or maintenance fees
with respect to its current usage of such software except as set forth on
Section 2.17(a) of the Disclosure Letter. Except as disclosed in Section 2.17(a)
of the Disclosure Letter, no rights of the Company in or to the Owned
Intellectual Property conflict with or infringe upon the rights of any Person
and the Company nor has not received any claim or written notice from any Person
to such effect, nor does any Seller believe there is any reasonable basis for
any Person to make such a claim.
 
(b)           There are no royalties, honoraria, fees or other payments payable
by the Company or its subsidiaries to any person by reason of the ownership,
use, license, sale or disposition of the Owned Intellectual Property except as
set forth on Section 2.17(b) of the Disclosure Letter.
 
(c)           The Owned Intellectual Property and the Licensed Intellectual
Property constitutes all the Intellectual Property used or held or intended to
be used in the conduct of the businesses of the Company and its subsidiaries.
 
(d)           All personnel, including, but not limited to officers, employees,
agents, consultants and contractors, who have contributed to or participated in
the conception and development of the Owned Intellectual Property on behalf of
the Company either: (i) are or have been party to a "work-for-hire" arrangement
or agreement with the Company, in accordance with applicable federal and state
law, that has afforded the Company full, effective, exclusive and original
ownership of all tangible and intangible property thereby arising; or (ii) have
executed enforceable instruments of assignment in favor of the Company as
assignee that have conveyed to the Company full, effective and exclusive
ownership of all tangible and intangible property thereby arising.
 
2.18.                      
Title Matters. The Company has (a) good and marketable (and, in the case of any
owned Real Property, fee simple) title to all assets purported to be owned by it
and (b) good leasehold title to all assets purported to be leased by it, in each
case free and clear of all liens, claims, security interests, pledges, charges,
options, rights of first refusal, preemptive rights, mortgages, hypothecations,
prior assignments, use restrictions, imperfections in title or other
encumbrances of any nature whatsoever (collectively, "Liens").
 
On the First Closing Date, the Company's assets and the Company Shares will be
free and clear of all Liens, specifically:
 
12

 
 
(a) The Liens filed by Plumas Bank, Filing Number 16-7521545884, filed on April
25, 2016 (the "Financing Statement"), shall be cured or resolved concurrently
with the First Closing by and through Payment of the First Closing Purchase
Price as allocated in Schedule 1.2, payment of which shall be evidenced by a
UCC-3 Termination Statement or equivalent filing filed by Plumas Bank or its
Affiliate, within 15 days of the First Closing. If the Financing Statement is
not cured or resolved prior to 15 days from the First Closing, Buyer shall have
the right, in its sole discretion, to waive this requirement and deduct the
additional cost required to cure or resolve the Financing Statement from the
Second Closing Purchase Price.
 
 
2.19.                      
Pension and Welfare Plans.
 
(a)           Section 2.19(a) of the Disclosure Letter sets forth a correct and
complete list of all employee benefit plans (collectively, "Plans"). The Company
does not have any plan or commitment to establish any new Plans or to modify any
existing Plans.
 
(b)           
There are no actions, suits, claims, investigations or other proceedings pending
or, to the Company's or the Sellers’ knowledge, threatened against any Plan or
related trust or any fiduciary thereof (other than routine claims for benefits).
There are no outstanding Governmental Orders which name any Plan or related
trust or any fiduciary thereof or are directed to any Plan or related trust, any
fiduciary thereof or any assets thereof.
 
(c)           
Neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein, will (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Plan,
trust, employment agreement or other agreement to which the Company is a party
or by which the Assets are bound that will result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Person.
 
2.20.                      
Personnel Matters.
 
(a)           
Section 2.20(a) of the Disclosure Letter sets forth a correct and complete list
of (i) all directors and executive officers of the Company, (ii) all other
employees of or consultants or independent contractors to the Company including
"outside employees" (i.e. those employees who provide services directly at the
customers' site), (iii) the current job title or relationship to the Company of
each such Person described in clauses (i) and (ii) above, (iv) the amount of
compensation (including bonuses and commissions) paid to each such Person during
the Company's fiscal year ended December 31, 2017 and which each of them is
expected to receive in the Company's current fiscal year and (v) any employee
benefits or perquisites available to any such Person that are not generally
available to employees of the Company. To the knowledge of the Company, no
Persons identified pursuant to the previous sentence have threatened to
terminate his or her employment with the Company.
 
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(b)           
Except as otherwise disclosed on Section 2.20(b) of the Disclosure Letter, the
Company is not a party to any employment, consulting or similar agreement,
written or oral, with any Person.
 
(c)           
Except as otherwise disclosed on Section 2.20(c) of the Disclosure Letter,
(i) no employees of the Company are represented by any labor union or similar
organization, (ii) the Company is not party to any collective bargaining or
similar agreement covering any of its employees and (iii) no labor union or
similar organization or group of employees has made a demand for recognition,
filed a petition seeking a representation proceeding, given the Company notice
of any intention to hold an election of a collective bargaining representative
or engaged in any organizing activities at any time during the past three years.
 
(d)           
Except as otherwise disclosed on Section 2.20(d) of the Disclosure Letter,
(i) no strike, work stoppage, contract dispute or other labor disturbance
involving any employees of the Company currently exists or, to the Company's and
the Sellers’ knowledge, is threatened and (ii) no investigation, action or
proceeding by or before any Governmental Entity which relates to allegedly
unfair or discriminatory employment or labor practices by the Company or the
violation by the Company of any Governmental Rule relating to employment or
labor practices is pending or, to Company's or the Sellers’ knowledge,
threatened.
 
(e)           
Except as otherwise disclosed on Section 2.20(e) of the Disclosure Letter, the
Company: (i) has complied with, and is currently in compliance with, all
Governmental Rules regarding employment, including without limitation, the Equal
Pay Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of
1991, the Civil Rights Act of 1866, Executive Order 11246, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act of
1991, the Employee Retirement Income Security Act of 1974, the Family Medical
Leave Act, the Fair Labor Standards Act and the Uniformed Services Employment
and Reemployment Rights Act of 1994, including all amendments to any of the
aforementioned acts and any other federal, state, or municipal fair employment
and wage payment and collection statutes or laws, including but not limited to
any other Governmental Rule, (ii) has withheld and reported all amounts required
by law or by agreement to be withheld and reported with respect to wages,
salaries and other payments to its employees, (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with the
forgoing and (iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for its employees. To Company's and Sellers’ knowledge, there are
no unresolved claims alleging violations of such laws, regulations, rules or
ordinance or for wrongful, constructive, or unlawful discharge, unlawful
harassment, any claim for back pay, front pay, overtime pay, benefits,
attorneys’ fees, emotional distress, intentional infliction of emotional
distress, assault, battery, pain and suffering, punitive or exemplary.
 
2.21.                      
Insurance. Section 2.21 of the Disclosure Letter sets forth a correct and
complete list of all insurance policies of which the Company is the owner,
insured, loss payee or beneficiary and indicates for each such policy any
pending claims thereunder. Except as otherwise disclosed on Section 2.21 of the
Disclosure Letter: (a) there has been no failure to give any notice or present
any material claim under any such policy in a timely fashion or as otherwise
required by such policy; (b) all premiums under such policies which are due and
payable have been paid in full; (c) no such policy provides for retrospective or
retroactive premium adjustments; (d) the Company has not received notice of any
material increase in the premium under, cancellation or non-renewal of or
disallowance of any claim under any such policy; (e) the Company has not been
refused any insurance, nor has its coverage been limited by any carrier; and
(f) since 2015, the Company has maintained, or been the beneficiary of, general
liability and product liability policies reasonable, in both scope and amount,
in light of the risks attendant to its business and which provide coverage
comparable to coverage customarily maintained by others in similar lines of
business, and such policies have been "occurrence" policies and not "claims
made" policies.
 
14

 
 
2.22.                      
Business Agreements. Section 2.22 of the Disclosure Letter sets forth a correct
and complete list of all Business Agreements that involve annual payments to or
from the Company in an amount greater than $25,000. The Company has delivered to
Buyer accurate and complete copies of each Business Agreement listed on any
Schedule hereto, and each such Business Agreement (i) is in full force and
effect, (ii) constitutes a legal, valid and binding obligation of the Company
and (iii) is enforceable against the Company and, to the best of the Company's
and Sellers’ knowledge, the other parties thereto, in accordance with its terms.
The Company is in compliance with each such Business Agreement in all material
respects. To the Company's and Sellers’ knowledge, all other parties to such
Business Agreements are in compliance with the terms thereof in all material
respects. Except as otherwise disclosed on Section 2.22(b) of the Disclosure
Letter: (i) neither the Company nor, to the Company's or Sellers' knowledge, any
other Person thereto, has materially violated or materially breached, or
declared any default or committed any material default under, any Business
Agreement; (ii) no event has occurred, and no circumstance or condition exists,
that might (with or without notice or lapse of time), and the execution and
delivery of this Agreement and the consummation of the Transactions contemplated
herein will not, (A) result in a violation or breach of any of the provisions of
any Business Agreement by the Company nor, to the knowledge of the Company or
Sellers, any other Person thereto, (B) give to the Company, nor to the knowledge
of the Company or Sellers, any other Person thereto the right to declare or
exercise any remedy under any Business Agreement, (C) give to the Company, nor
to the knowledge of the Company or Sellers, any other Person thereto the right
to accelerate the maturity of performance of any Business Agreement, or (D) give
to the Company, nor to the knowledge of the Company or Sellers, any other Person
thereto the right to cancel, terminate or modify any Business Agreement; (iv)
neither the Company nor Sellers have received any notice or other communication
(in writing or otherwise) regarding any actual, alleged, possible or potential
violation or breach of, or default under, any Business Agreement; and (v) the
Company has not waived any material right under any Business Agreement. There is
no agreement (non-compete or otherwise) or Governmental Order to which either
the Company or Sellers or, as applicable, their respective officers, directors
or employees, is a party or otherwise binding upon the Company or Sellers or, as
applicable, their respective officers, directors or employees, that has or
reasonably could be expected to have an effect of prohibiting or impairing (i)
the acquisition of the Shares by Buyer, (ii) the performance of the Company or
any of the Sellers of their respective obligations under the Transaction
Agreements or (iii) the conduct of the Company's business following the Closing.
 
2.23.                      
Transactions with Related Parties. Except as otherwise disclosed on Section 2.23
of the Disclosure Letter: (a) none of the customers, suppliers, distributors or
sales representatives of the Company are Related Parties; (b) none of the
Company's assets are owned or used by or leased to any Related Parties; (c) no
Related Party is a party to any Business Agreement or informal arrangement with
the Company, including without limitation, any loan arrangements; and (d) no
Related Party provides any administrative, human resources, information
technology, legal, accounting or other services to the Company.
 
As used in this Agreement the following terms have the following meanings:
 
 
15

 
 
"Affiliate" of a Person means any other Person who controls, is controlled by or
is under common control with such Person, and "control" means, with respect to
any Person, the direct or indirect ability to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
 
"Related Party" means (i) any Seller, (ii) any Affiliate of the Company or any
Seller, (iii) any director, officer, equity holder or immediate family member of
the Company or any Seller or of any Affiliate of the Company or any Seller and
(iv) any Affiliate of any Person described in clause (iii) above.
 
2.24.                      
Brokers. Except for the brokers identified on Section 2.24 of the Disclosure
Letter, neither the Company nor any Seller has not employed or retained, and has
no liability to, any broker, agent or finder on account of this Agreement or any
of the other Transaction Documents or the transactions contemplated hereby or
thereby.
 
2.25.                      
Delivery of Documents; Accurate Disclosure. The Sellers or the Company have
previously delivered to Buyer correct and complete copies of each Business
Permit, each Business Agreement listed on Section 2.15 through Section 2.22 of
the Disclosure Letter and each additional agreement, document and instrument
which Buyer or any of its representatives has requested in writing. None of the
information furnished by the Sellers or the Company to Buyer or any of its
representatives in connection with this Agreement and the other Transaction
Documents, and none of the representations and warranties of the Company or the
Sellers set forth herein, in any other Transaction Document or in any
certificate delivered in connection herewith or therewith, (a) is false or
misleading in any material respect, (b) contains any untrue statement of a
material fact or (c) omits any statement of material fact necessary to make the
same not misleading. The Sellers acknowledge and agree that the results of any
due diligence investigation or examination conducted by the Buyer or its
representatives shall not relieve the Sellers of their obligations with respect
to the representations and warranties made by them in this Agreement or any of
the other Transaction Documents, or reduce the rights of the Buyer to pursue
such remedies at law or hereunder as it would otherwise have in the absence of
having conducted such investigation or examination.
 
2.26           
Updating Disclosure Letter. The Company and the Sellers may update the
Disclosure Letter prior to the First Closing and prior to the Second Closing to
reflect actions taken by Sellers or events occurring after the date of this
Agreement or to make any non-material corrections to items already appearing on
the Disclosure Letter, provided that (a) such updates shall relate only to
actions taken by Sellers that are permitted pursuant to this Agreement, and (b)
no such update shall be deemed to cure any breach which exists as of the date of
this Agreement.
 
 
16

 
 
ARTICLE II.B
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
 
Each Seller hereby represents and warrants on behalf of himself to Buyer as
follows as of the date of this Agreement and, as of the First Closing Date, and
as of the Second Closing Date:
 
2B.01. Execution and Enforceability. This Agreement has been, and on the
applicable Closing Date the other Transaction Documents to which he or she is a
party will be, duly and validly authorized by all necessary action on the part
of Seller. This Agreement has been, and on the applicable Closing Date the other
Transaction Documents to which he or she is a party will be, validly executed
and delivered by such Seller and constitute (or upon such execution and delivery
will constitute) legal, valid and binding obligations of such Seller,
enforceable against such Seller in accordance with their respective terms.
 
2B.02. Ownership and Control. Seller owns and has good and marketable title to
all the Shares opposite his name in Schedule 1.02, free and clear of any Liens,
unless otherwise set forth in Section 2B.02 of the Disclosure Letter
 
2B.03.                      
No Breach, Default, Violation or Consent. The execution, delivery and
performance by the Seller of the Transaction Documents to which he is a party do
not and will not:
 
(a)           
materially breach or result in a material default (or an event which, with the
giving of notice or the passage of time, or both, would constitute a default)
under, require any Consent under, result in the creation of any Lien on the
assets of the Company or such Seller under or give to others any rights of
termination, acceleration, suspension, revocation, cancellation or amendment of
any contract, agreement, lease, license, indenture, commitment, purchase order
or other legally binding business arrangement, whether written, oral or implied,
relating to the Company or such Seller or any of their respective assets
(collectively, the "Seller Business Agreements") or any material agreement to
which the Company or such Seller is a party or by which the Company or such
Seller or any of their respective assets is bound;
 
(b)           
breach or otherwise violate any Governmental Order which names the Company or
such Seller or is directed to the Company, such Seller or any of their
respective assets;
 
(d)           
violate any Governmental Rule; or
 
(c)           
require any Consent of, or exemption or other action by, any Person.
 
 
17

 
 
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
 
Buyer hereby represents and warrants to Sellers and the Company as follows as of
the Effective Date, as of the First Closing Date and as of the Second Closing
Date:
 
3.01.                      
Organization. Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. Buyer is duly qualified to do business
as a foreign corporation and is in good standing in all jurisdictions in which
the ownership of its properties or the nature of its business makes such
qualification necessary, except to the extent that the failure to be so
qualified, individually or in the aggregate, has not resulted in and is not
reasonably likely to result in a Buyer Material Adverse Effect. For purposes of
this Agreement, a "Buyer Material Adverse Effect" means a material adverse
effect on (a) the business, assets, operations, financial condition or prospects
of the Buyer or (b) the ability of the Buyer to perform its obligations under
the Transaction Documents; provided, however, that none of the following shall
be deemed, in themselves, either alone or in combination, to constitute a Buyer
Material Adverse Effect, and none of the following shall be taken into account
in determining whether there has been or shall be a Buyer Material Adverse
Effect: (i) any change in the market price or trading volume of the Buyer's
Common Stock after the date hereof; or (ii) any adverse circumstance, change or
effect resulting directly from conditions affecting the industries in which the
Buyer participates in their entirety, the U.S. economy as a whole, or foreign
economies as a whole in any countries where the Company or any of its
subsidiaries has material operations.
 
3.02.                      
Power and Authority. Buyer has the corporate power and authority to own its
properties and assets, to conduct its business as presently conducted and to
execute, deliver and perform the Transaction Documents to which it is a party.
 
3.03.                      
Execution and Enforceability. This Agreement has been, and on the applicable
Closing Date the other Transaction Documents to which Buyer is a party will be,
duly and validly authorized, executed and delivered by Buyer and constitute (or
upon such execution and delivery will constitute) legal, valid and binding
obligations of Buyer enforceable against Buyer in accordance with their
respective terms.
 
3.04.                      
No Breach, Default, Violation or Consent. The execution, delivery and
performance by Buyer of the Transaction Documents to which it is a party do not
and will not:
 
(a)           
violate Buyer's charter or bylaws;
 
(b)           
breach or result in a default (or an event which, with the giving of notice or
the passage of time, or both, would constitute a default) under, require any
Consent under, result in the creation of any Lien on any assets of Buyer under
or give to others any rights of termination, acceleration, suspension,
revocation, cancellation or amendment of any material agreement to which Buyer
is a party or by which Buyer or any of its assets is bound;
 
18

 
 
(c)           
breach or otherwise violate any Governmental Order which names Buyer or is
directed to Buyer or any of its assets;
 
(d)           
violate any Governmental Rule; or
 
(e)           
require any Consent, authorization, approval, exemption or other action by any
Person;
 
except in the case of clauses (b) through (e) above, for such matters as would
not, individually or in the aggregate, be likely to have a material adverse
effect on Buyer's ability to perform its obligations under the Transaction
Documents.
 
3.05.                      
Brokers. Except for the brokers identified on Section 3.05 of the Disclosure
Letter, Buyer has not employed or retained, and has no liability to, any broker,
agent or finder on account of this Agreement or any of the other Transaction
Documents or the transactions contemplated hereby or thereby.
 
3.06           
Stock Consideration. The all common stock to be issued as consideration ("Stock
Consideration") at the First Closing and Second Closing will, when issued and
delivered in accordance with this Agreement, be duly authorized, validly issued,
fully paid and non-assessable and issued in compliance with applicable
securities laws; provided, however, that the Stock Consideration to be issued
hereunder will be subject to restrictions on transfer (and restrictive legends)
under applicable federal and state securities laws. The Stock Consideration
shall bear a restrictive legend substantially in the following form:
 
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the “Securities Act”), and are
“restricted securities” within the meaning of Rule 144 promulgated under the
Securities Act. The securities have been acquired for investment and may not be
sold or transferred without complying with Rule 144 in the absence of an
effective registration or other compliance under the Securities Act.
 
3.07           
Sufficiency of Funds. At First Closing, Buyer shall have sufficient cash on hand
or other sources of immediately available funds to enable it to make payment of
the First Closing Purchase Price and consummate the transactions contemplated by
this Agreement
 
3.08           
Litigation. Other than as set forth in the Buyers public filings as filed with
the Securities Exchange Commission, there is no action, suit or proceeding of
any nature pending or to the Buyer's knowledge threatened against the Buyer, its
properties or any of its officers, director or employees, nor, to the knowledge
of the Buyer, is there any reasonable basis therefor the adverse result of which
would have a Buyer Material Adverse Effect.
 
3.9           
Disclosure Letter. Buyer may provide a Buyer Disclosure Letter prior to the
Closing to reflect actions taken by Buyer or events occurring after the date of
this Agreement or to make any non-material corrections to items already
appearing on the Disclosure Letter provided that (a) such updates shall relate
only to actions taken by Buyer that are permitted pursuant to this Agreement,
and (b) no such update shall be deemed to cure any breach which exists as of the
date of this Agreement.
 
 
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ARTICLE IV
Removed and Reserved.
 
 
ARTICLE V
COVENANTS; TRANSACTIONS PRIOR TO CLOSING
 
5.01.                      
Conduct of Business Prior to Closing. Except otherwise contemplated by this
Agreement, or approved in writing by Buyer, between the date hereof and the
First Closing Date and then between the First Closing Date and the Second
Closing Date, Company will, and Sellers will cause the Company, to:
 
(a)           operate its business only in the ordinary course and consistent
with past practice;
 
(b)           use its best efforts to preserve its business intact, to keep
available the services of its present officers and employees and to preserve the
good will of customers, suppliers and others having business relations with the
Company;
 
(c)           maintain the Equipment in good repair and operating condition,
ordinary wear and tear excepted;
 
(d)           maintain in full force and effect all Business Permits and
insurance policies;
 
(e)           not enter into any contract or commitment except those made in the
ordinary course of business the terms of which are consistent with past practice
and reasonable in light of current conditions;
 
(f)           not terminate, cause the termination of, amend, renew or extend
any Business Agreement unless in each case such action is in the best interest
of the Company;
 
(g)           not waive or release any of its rights permit any of such rights
to lapse;
 
(h)           not sell, transfer or otherwise dispose of any of its assets or
any interest therein, or solicit offers in respect of or agree to do any of the
foregoing, except for sales of inventory in the ordinary course of business;
 
(i)           not (1) incur any indebtedness for borrowed money or (2) incur,
make, assume or suffer to exist any Lien, tenancy or other matter affecting
title to any of its assets;
 
(j)           comply with applicable Governmental Rules in all material
respects;
 
(k)           not merge or consolidate with or into, or otherwise combine with,
any other Person;
 
20

 
 
(l)           take no action, and use its best efforts to prevent the occurrence
of any event or the existence of any condition, which would result in any of
Sellers' representations and warranties herein not being true and correct;
 
(m)           not (1) issue, sell, exchange or deliver any shares of its capital
stock or issue or sell any securities convertible into, or options with respect
to, or warrants to purchase or rights to subscribe for, any shares of its
capital stock, (2) effect any recapitalization, reclassification, stock
dividend, stock split or like change in its capitalization, (3) amend its
articles of incorporation (or other charter documents) or bylaws, (4) declare or
pay any dividends or make any distributions with respect to the Company's
capital stock, or (5) make any redemption or purchase of any shares of the
Company's capital stock;
 
(n)           promptly inform Buyer of the occurrence of any event or the
existence of any condition which has had or is likely to have a Material Adverse
Effect;
 
(o)           not make, change or revoke any tax election or make any agreement
or settlement with any taxing authority; and
 
(p)           take no action, and use its best efforts to prevent the occurrence
of any event or the existence of any condition, which would result in any of the
representations and warranties of the Company or the Sellers herein not being
true and correct.
 
5.02.                      
No Negotiation. Neither the Company nor any of the Sellers, nor any officer,
director, Affiliate or agent on behalf of any of the foregoing, will, at any
time on and after the date hereof and prior to one year from closing, directly
or indirectly, (a) enter into, or participate in, any discussions or
negotiations, or solicit, entertain or encourage any inquiries or proposals,
which relate to the acquisition of the Shares or the Company, or the assets,
properties, business or securities of the Company (or any material portion
thereof), by way of merger, reorganization, sale of assets, stock sale or
exchange or otherwise by any Person (other than the Buyer) or (b) provide any
non-public information to, any Person (other than the Buyer) relating to any
such acquisition transaction. Promptly upon receiving any offer or inquiry from
a Person (other than the Buyer) to acquire the Shares or the Company or any of
its assets, properties or securities, the Sellers will notify Buyer of such
offer or inquiry, and, if requested, will provide the Buyer with all details
requested by the Buyer. The parties acknowledge and agree that there would be
irreparable damage in the event that any of the provisions of this Section 5.02
are not performed in accordance with their specific terms or are otherwise
breached. Accordingly, it is agreed that the non-breaching party shall be
entitled to an injunction or injunctions (or other appropriate equitable relief)
to prevent breaches of this Section, and each of the parties shall have the
right to specifically enforce this Section and the terms and provisions hereof
against the other party in addition to any other remedy to which they may be
entitled at law or in equity. Notwithstanding any of the foregoing, the Company
and the Sellers may take any of the actions otherwise prohibited by clauses (a)
and (b) above so long as they are limited to the transfer of Shares not being
sold to Buyer, in a manner that does not prevent or interfere with the sale of
the Shares to Buyer or the obligations of the Company or Sellers under this
Agreement.
 
21

 
 
5.03.                      
Access to Information. At all times prior to the applicable Closing Date Sellers
will furnish, or will cause the Company to furnish, to Buyer and its
representatives (a) full access during normal business hours to the properties,
books and records and personnel of the Company and (b) all such information
concerning the Company as any of them may reasonably request.
 
5.04.                      
Notification of Changes. If, at any time prior to the Closing, the Company, any
Seller or Buyer becomes aware that any of its or his representations or
warranties set forth herein is false or misleading in any material respect, it
or he will promptly notify the other party of the same. Unless otherwise
specifically agreed to by the parties in writing, no such disclosure will be
considered to be an amendment to this Agreement or the Schedules hereto or will
release such party from any liability arising out of such false or misleading
representation or warranty.
 
5.05.                      
Commercially Reasonable Efforts. The parties agree to use their commercially
reasonable efforts to take or cause to be taken and to do or cause to be done
all such actions and things as are necessary or advisable, or as may be
reasonably requested by the other party, in order to consummate the transactions
contemplated hereby and by the other Transaction Documents. Without limiting the
generality of the foregoing, the parties agree to take all commercially
reasonable actions necessary in order to obtain any Consent or approval of any
third party, including without limitation any Governmental Entity, which is
required in connection with this Agreement or the other Transaction Documents or
any of the transactions contemplated hereby or thereby.
 
5.06.                      Employee Matters; Employment Agreements.
 
 Concurrent with the First Closing Date, the Company will have executed and
delivered an employment contract for William “Billy” Blackburn that shall
respectively provide for: (i) a one (1) year employment term, renewable on a
monthly basis thereafter, (ii) a base gross salary of not less than Ten Thousand
Dollars ($10,000) per month, with such salaries payable in accordance with the
Company’s normal payroll practices. A form of such employment agreement is
attached hereto as Exhibit "A" and incorporated by reference herein (the
“Employment Agreement”).
 
5.07            Consultants; Consulting Agreement. Concurrent with the First
Closing Date, Company will have executed and delivered to Brad Mickelsen a
consulting agreement that shall respectively provide a base monthly consulting
fee of $10,000 per month, payable on a monthly basis in arrears, for(i) a
minimum term of six (6) months from the First Closing Date ("Minimum Term") ,
and thereafter for (ii) such term beyond the Minimum Term through the Second
Closing Date ("Extended Term") if the Second Closing Date occurs more than six
(6) months from the First Closing Date. A form of such consulting agreement is
attached hereto as Exhibit "B" and incorporated by reference herein (the
"Consulting Agreements" and, together with the Agreement and Employment
Agreement, the "Transaction Documents").
 
 
22

 
ARTICLE VI
CLOSING AND CLOSING CONDITIONS
 
6.01.                      
First and Second Closing. The initial closing of the transactions contemplated
hereby (the "First Closing") will take place as soon as practicable after the
satisfaction (or waiver) of all of the conditions set forth in Sections 6.02 and
6.03. The parties anticipate that the First Closing shall take place on or
before October 15, 2018. The date on which the First Closing occurs is referred
to herein as the "First Closing Date". The second closing of the transactions
contemplated hereby (the "Second Closing") will take place on or before the date
which is one year after the First Closing Date following the satisfaction (or
waiver) of all the conditions set forth in Sections 6.04 and 6.05. The date on
which the Second Closing occurs is referred to herein as the "Second Closing
Date". Both the First Closing Date and Second Closing Date may be extended by
the mutual written consent of the Parties.
 
6.02.                      
First Closing Conditions Precedent to Obligations of Buyer. Buyer's obligation
to proceed with the First Closing and consummate the transactions contemplated
by the Transaction Documents is subject to the satisfaction by the Company
and/or the Sellers and/or Sellers, as applicable, or the written waiver of Buyer
on or prior to the First Closing Date of each of the following conditions
precedent:
 
(a)           Accuracy of Representations and Warranties. The representations
and warranties of the Company and the Sellers, as applicable, set forth herein
will be true and correct on and as of the First Closing Date with the same force
and effect as though made on and as of such date (other than representations and
warranties made specifically with reference to a particular date, which shall
have been true and correct in all respects as of such date);
 
(b)           Performance and Compliance. The Company and Sellers will have
performed or complied with each covenant and agreement required to be performed
or complied with by it or them hereunder on or prior to the First Closing Date;
 
(c)           Consents and Approvals. Sellers or the Company, as applicable,
will have obtained or made each Consent, authorization, approval, exemption,
filing, registration or qualification, if any, listed on any Schedule hereto or
which are otherwise necessary (under applicable Governmental Rules or otherwise)
for Sellers to execute, deliver and perform the Transaction Documents;
 
(d)           Material Adverse Effect. No event will have occurred and no
condition will exist which has had, or is likely to have, a Material Adverse
Effect;
 
(e)           Consulting / Employment Agreements. Mr. Blackburn and Mr.
Mickelsen shall have executed and delivered to the Buyer the Employment
Agreement and Consulting Agreement, containing the terms set forth therein;
 
(f)           Buyer Financing. Buyer shall have secured the financing that it
deems reasonably necessary to effect the transactions contemplated herein; and
 
 
23

 
 
(g)           
Share Certificates. Mr. Mickelsen and Mr. Blackburn will have delivered to Buyer
the certificates evidencing the Initial Shares, together with stock powers duly
endorsed in blank.
 
6.03.                      
First Closing Conditions Precedent to Obligations of Sellers. Sellers'
obligation to proceed with the First Closing is subject to the satisfaction by
Buyer, or the written waiver, on or prior to the First Closing Date of each of
the following conditions precedent:
 
(a)           Accuracy of Representations and Warranties. The representations
and warranties of Buyer set forth herein will be true and correct on and as of
the First Closing Date with the same force and effect as though made on and as
of such date (other than representations and warranties made specifically with
reference to a particular date, which shall have been true and correct in all
respects as of such date);
 
(b)           Performance and Compliance. Buyer will have performed or complied
with each covenant and agreement to be performed or complied with by it
hereunder on or prior to the First Closing Date;
 
(c)           Consents and Approvals. Buyer will have obtained or made each
Consent, authorization, approval, exemption, filing, registration or
qualification, if any, necessary (under applicable Governmental Rules or
otherwise) for Buyer to execute, deliver and perform the Transaction Documents;
 
(d)           Transaction Documents. Buyer and any other parties thereto (other
than Sellers) will have executed and delivered to the Sellers each of the
Transaction Documents to which Buyer is a party.
 
(e)           
Payment of First Closing Purchase Price. Buyer will have delivered the First
Closing Purchase Price in the manner set forth in Sections 1.01 and 1.03.
 
(f)           
Delivery of Consulting and Employment Agreements. Buyer will have approved the
execution and delivery by the Company of the Consulting Agreement of Mr.
Mickelsen and Employment Agreement of Mr. Blackburn.
 
6.04.                      
Second Closing Conditions Precedent to Obligations of Buyer. Buyer's obligation
to proceed with the Second Closing and consummate the transactions contemplated
by the Transaction Documents is subject to the satisfaction by the Company
and/or the Sellers and/or Sellers, as applicable, or the written waiver of Buyer
on or prior to the Second Closing Date of each of the following conditions
precedent:
 
(a)           Accuracy of Representations and Warranties. The representations
and warranties of the Company, the Sellers and/or the Sellers, as applicable,
set forth herein will be true and correct on and as of the Second Closing Date
with the same force and effect as though made on and as of such date (other than
representations and warranties made specifically with reference to a particular
date, which shall have been true and correct in all respects as of such date);
 
24

 
 
(b)           Performance and Compliance. The Company and Sellers will have
performed or complied with each covenant and agreement required to be performed
or complied with by it or them hereunder on or prior to the Second Closing Date;
 
(c)           Consents and Approvals. Sellers or the Company, as applicable,
will have obtained or made each Consent, authorization, approval, exemption,
filing, registration or qualification, if any, listed on any Schedule hereto or
which are otherwise necessary (under applicable Governmental Rules or otherwise)
for Sellers to execute, deliver and perform the Transaction Documents;
 
(d)           Material Adverse Effect. No event will have occurred and no
condition will exist which has had, or is likely to have, a Material Adverse
Effect;
 
(e)           
Share Certificates. Sellers will have delivered to Buyer the certificates
evidencing the Second Closing Shares, together with stock powers duly endorsed
in blank.
 
 
6.05.                      
Second Closing Conditions Precedent to Obligations of Sellers. Sellers'
obligation to proceed with the Second Closing is subject to the satisfaction by
Buyer, or the written waiver by the Seller, on or prior to the Second Closing
Date of each of the following conditions precedent:
 
(a)           Accuracy of Representations and Warranties. The representations
and warranties of Buyer set forth herein will be true and correct on and as of
the Second Closing Date with the same force and effect as though made on and as
of such date (other than representations and warranties made specifically with
reference to a particular date, which shall have been true and correct in all
respects as of such date);
 
(b)           Performance and Compliance. Buyer will have performed or complied
with each covenant and agreement to be performed or complied with by it
hereunder on or prior to the Second Closing Date;
 
(c)           Consents and Approvals. Buyer will have obtained or made each
Consent, authorization, approval, exemption, filing, registration or
qualification, if any, necessary (under applicable Governmental Rules or
otherwise) for Buyer to execute, deliver and perform the Transaction Documents;
 
(d) Payment of Second Closing Purchase Price. Buyer shall have delivered the
Second Closing Purchase Price in the manner set forth in Sections 1.02 and 1.03,
and Schedule 1.02.
 
 
25

 
 
ARTICLE VII
CERTAIN POST-CLOSING MATTERS
 
7.01.                      
Access to Information. After the Effective Date, the Company agrees to make
available to Buyer, for any proper purpose, any and all books and records of the
Company existing on the applicable Closing Date; provided, that such access will
be deemed the Company’s Confidential Information subject to Section 9.02, and
will be available upon reasonable prior notice, during normal business hours, at
Buyer's expense and conducted in a manner so as not to unreasonably interfere
with the Company's business.
 
7.02           
Further Assurances. From time to time, as and when requested by any party hereto
and at such party's expense, any other party shall execute and deliver, or cause
to be executed and delivered, all such documents and instruments and shall take,
or cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to evidence and effectuate the
transactions contemplated by this Agreement.
 
7.03.                      
Conduct of Business. Notwithstanding anything contained herein to the contrary,
after the First Closing and until the Second Closing, that Buyer (or its
affiliate) owns all of the issued and outstanding equity of the Company, the
Company shall operate the business consistent with the Company’s standard
operating procedures as of the date of the Agreement, unless otherwise agreed
between the Sellers and Buyer. Without limiting the generality of the foregoing,
each Seller with an Employment Agreement, (in each case until his death,
retirement, resignation or termination for Cause), shall continue to manage all
aspects of the business including, without limitation, (i) determining the fees
and prices charged by the Company, (ii) determining the compensation paid to
employees or independent contractors of the Company, (iii) determining whether
to discontinue or modify the Company’s business or any program related thereto,
(iv) making any decisions concerning the production, marketing, sales, capital
expenditures, expenses and related matters respecting the Company and (v) making
any decisions pertaining to the personnel, staffing and other resources of the
Company. Notwithstanding anything to the contrary, any material changes to the
Company’s business operations outside the standard operating procedures as of
the date of the Agreement shall be subject to Buyer’s approval, which approval
shall not be unreachably withheld. As used herein, Cause” means (i) an
intentional tort (excluding any tort relating to a motor vehicle) which causes
substantial loss, damage, or injury to the property or reputation of the Company
or its subsidiaries; (ii) any serious crime or intentional, material act of
fraud or dishonesty against the Company, (iii) the commission of a felony that
results in other than immaterial harm to the Company’s business or the
reputation of the Company, (iv) habitual neglect of one’s reasonable duties (for
reason other than illness or incapacity) which is not cured within ten days
after written notice thereof by the Board, (v) the disregard of written,
material policies of the Company which causes other than immaterial loss,
damage, or injury to the property or reputation of the Company which is not
cured within ten days after written notice thereof by the Board, and (vi) any
material breach of ongoing obligation not to disclose confidential information.
 
26

 
 
7.04.                      
Specific Accounting Election. This election is referred to as the "specific
accounting election" which is made in conjunction with the sale of more that
fifty percent (50%) of the sahres of the Company to Buyer. (It is also known as
the "election to use normal accounting rules" and the "election to treat the tax
year as if it consisted of two (2) tax years.") All shareholders affected by the
stock disposition must consent. The shareholders affected by the disposition
include all shareholders who disposed of shares and all shareholders who
acquired shares during the tax year. Where the shares were transferred to the
corporation, all shareholders who owned stock during the year are affected
shareholders [ IRC §1377(a)(2) ]. The parties do not intend to protect the S
Election in conjunction with this Agreement.
 
7.05           
Installment Sale Cooperation. The parties hereby acknowledge that Seller may
elect to effect a tax-deferred installment sale under Section 453 of the
Internal Revenue Code, but in such event Seller shall not on that account delay
the closing or cause additional expense to Buyer. Seller's rights under this
agreement, but not Seller's duties or obligations, may be assigned to a
qualified intermediary under Section 453, for the purposes of completing such an
installment sale. Buyer consents thereto and agrees to cooperate with Seller and
the intermediary to permit the installment sale to be completed. In the event of
such an installment sale and assignment, Seller shall nonetheless transfer the
shares directly to Buyer as provided in this agreement. In the event of such an
installment sale and assignment, Seller's duties and obligations, if any, under
this Agreement for performance after closing and Seller's representations and
warranties herein shall remain with Seller and not pass to, or be undertaken or
assumed by, the intermediary.
 
ARTICLE VIII
RESERVED
 
ARTICLE IX
GENERAL PROVISIONS
 
9.01.                      
Assignment. Neither this Agreement nor any right, interest or obligation
hereunder may be assigned, pledged or otherwise transferred by any party,
whether by operation of law or otherwise, without the prior consent of the other
party or parties; provided, that (a) Buyer may assign its rights hereunder to an
Affiliate so long as Buyer remains liable hereunder, and may collaterally assign
its rights hereunder to any lender.
 
27

 
 
9.02.                      
Confidentiality.
 
(a)           
As used in this Section the "Confidential Information" of a party means all
information concerning or related to the business, operations, financial
condition or prospects of such party or any of its Affiliates, regardless of the
form in which such information appears and whether or not such information has
been reduced to a tangible form, and specifically includes (i) all information
regarding the officers, directors, employees, equity holders, customers,
suppliers, distributors, sales representatives and licensees of such party and
its Affiliates, in each case whether present or prospective, (ii) all
inventions, discoveries, trade secrets, processes, techniques, methods,
formulae, ideas and know-how of such party and its Affiliates, and (iii) all
financial statements, audit reports, budgets and business plans or forecasts of
such party and its Affiliates; provided, that the Confidential Information of a
party does not include (A) information which is or becomes generally known to
the public through no act or omission of the other party and (B) information
which has been or hereafter is lawfully obtained by the other party from a
source other than the party to whom such Confidential Information belongs (or
any of its Affiliates or their respective officers, directors, employees, equity
holders or agents) so long as, in the case of information obtained from a third
party, such third party was or is not, directly or indirectly, subject to an
obligation of confidentiality owed to the party to whom such Confidential
Information belongs or any of its Affiliates at the time such Confidential
Information was or is disclosed to the other party.
 
(b)           
Except as otherwise permitted by subsection (c) below, each party agrees that it
will not, without the prior written consent of the other party, disclose or use
for its own benefit any Confidential Information of the other party.
 
(c)           
Notwithstanding subsection (b) above, each of the parties is permitted to:
 
(i)           
disclose Confidential Information of the other party to its officers, directors,
employees, equity holders, lenders, agents and Affiliates, but only to the
extent reasonably necessary in order for such party to perform its obligations
and exercise its rights and remedies under this Agreement, and such party will
take all such actions as are necessary or desirable in order to ensure that each
of such Persons maintains the confidentiality of any Confidential Information
that is so disclosed;
 
(ii)           
make additional disclosures of or use for its own benefit Confidential
Information of the other party, but only if and to the extent that such
disclosures or use are specifically contemplated by this Agreement;
 
(iii)           
disclose Confidential Information of the other party to the extent, but only to
the extent, required by Governmental Rules; provided, that prior to making any
disclosure pursuant to this subsection, the disclosing party will notify the
affected party of the same, and the affected party will have the right to
participate with the disclosing party in determining the amount and type of
Confidential Information of the affected party, if any, which must be disclosed
in order to comply with Governmental Rules; and
 
28

 
 
(iv)           
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated by the Transaction
Documents and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure; provided, that such disclosure may not be made (A) until the date of
the public announcement of such transactions or (B) to the extent of
restrictions on disclosure which are reasonably necessary to comply to any
applicable U.S. federal or state securities laws. For purposes of this
Agreement, the "tax treatment" of a transaction means the purported or claimed
U.S. federal income tax treatment of such transaction and the "tax structure" of
a transaction means any fact that may be relevant to understanding the purported
or claimed U.S. federal income tax treatment of such transaction.
 
9.03.                      
Expenses. Except as otherwise specifically provided herein or in any other
Transaction Document, each party is responsible for such expenses as it may
incur in connection with the negotiation, preparation, execution, delivery,
performance and enforcement of the Transaction Documents ("Transaction
Expenses"); provided, however, that Buyer shall be responsible for $20,000 for
the audit.
 
9.04.                      
Further Assurances. The parties will from time to time do and perform such
additional acts and execute and deliver such additional documents and
instruments as may be required by applicable Governmental Rules or reasonably
requested by any party to establish, maintain or protect its rights and remedies
or to effect the intents and purposes of this Agreement and the other
Transaction Documents. Without limiting the generality of the foregoing, each
party agrees to endorse (if necessary) and deliver to the other, promptly after
its receipt thereof, any payment or document which it receives after the
Effective Date and which is the property of the other.
 
9.05.                      
Notices. Unless otherwise specifically provided herein, all notices, consents,
requests, demands and other communications required or permitted hereunder:
(a) will be in writing; (b) will be sent by messenger, certified or registered
mail, a reliable express delivery service or telecopier (with a copy sent by one
of the foregoing means), charges prepaid as applicable, to the appropriate
address(es) or number(s) set forth below; and (c) will be deemed to have been
given on the date of receipt by the addressee (or, if the date of receipt is not
a business day, on the first business day after the date of receipt), as
evidenced by (i) a receipt executed by the addressee (or a responsible person in
his or her office), the records of the Person delivering such communication or a
notice to the effect that such addressee refused to claim or accept such
communication, if sent by messenger, mail or express delivery service, or (ii) a
receipt generated by the sender's telecopier showing that such communication was
sent to the appropriate number on a specified date, if sent by telecopier. All
such communications will be sent to the following addresses or numbers, or to
such other addresses or numbers as any party may inform the others by giving
five business days' prior notice:
 
29

 
 
If to the Company:
EZ Clone Enterprises, Inc.,
10170 Croydon Way, Suite G & B
Sacramento, CA 95827
 
If to Sellers:
 
Brad Mickelsen
_________________
_________________
Email: Brad Mickelsen <brad@ezclone.com>
 
William Blackburn
_________________
_________________
Email: Billy Blackburn <billy@ezclone.com>
 
If to Buyer:
GrowLife, Inc.
5400 Carillon Point
Kirkland, WA 98033
 
 
9.06.                      
Publicity. Neither party will make any press release or other public
announcement regarding this Agreement or the other Transaction Documents or any
transaction contemplated hereby or thereby until the text of such release or
announcement has been submitted to the other party and the other party has
approved the same; provided that either party may write a public announcement or
disclosure to the extent such party is advised by counsel advisable to comply
with applicable law or the rules, regulations or interpretations of the
applicable electronic quotation system.
 
9.07.                      
Termination.
 
(a)           This Agreement may be terminated at any time prior to the First
Closing or the Second Closing, as applicable:
 
(i)           by mutual written agreement of Buyer and the Sellers;
 
(ii)           by Buyer if there has been a material misrepresentation by the
Company or Sellers hereunder, a material breach by Sellers of any of their
warranties or covenants set forth herein or if any of the conditions specified
in Section 6.02 and 6.04, as applicable, have not been fulfilled within the time
required and have not been waived in writing by Buyer;
 
30

 
 
(iii)           by the Company if there has been a material misrepresentation by
Buyer hereunder, a material breach by Buyer of any of its warranties or
covenants set forth herein or if any of the conditions specified in Section 6.03
and 6.05, as applicable, have not been fulfilled within the time required and
have not been waived in writing by the Company; or
 
(iv)           by Buyer or the Company if the First Closing has not occurred
prior to November 1, 2018.
 
9.08.                      Miscellaneous. This Agreement: (a) may be amended
only by a writing signed by Buyer, each Seller and the Company; (b) may be
executed in several counterparts, each of which is deemed an original but all of
which constitute one and the same instrument; (c) together with the other
Transaction Documents, contains the entire agreement of the parties with respect
to the transactions contemplated hereby and thereby and supersedes all prior
written and oral agreements, and all contemporaneous oral agreements, relating
to such transactions; (d) is governed by, and will be construed and enforced in
accordance with, the laws of the state of Delaware, (and in keeping with the
internal laws of California) without giving effect to any conflict of laws rules
of that or any other jurisdiction; and (f) is binding upon, and will inure to
the benefit of, the parties and their respective heirs, successors and permitted
assigns. The due performance or observance by a party of any of its obligations
under this Agreement may be waived only by a writing signed by the party against
whom enforcement of such waiver is sought, and any such waiver will be effective
only to the extent specifically set forth in such writing. The waiver by a party
of any breach or violation of any provision of this Agreement will not operate
as, or be construed to be, a waiver of any subsequent breach or violation
hereof. Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction will, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction. All references to dollar amounts herein shall mean United
States dollars.
 
[Remainder of page intentionally left blank; signatures appear on following
page]
 
 
31

 
 
SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
 
 
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock Purchase
Agreement as of the date first set forth above.
 
 
BUYER
 
GROWLIFE INC.
 
/s/ Marco Hegyi
By: Marco Hegyi
Title: President & CEO
 
COMPANY
 
EZ CLONE ENTERPRISES, INC.
 
 /s/ Billy Blackburn
By: William Blackburn
Title: President
 
SELLERS
 
/s/ Brad Michelsen
Brad Mickelsen
 
 
/s/ Billy Blackburn
William Blackburn
 
 
 
32

 

 
SCHEDULE 1.02
 
Allocation of Purchase Price
 
  Cash
 $1,500,000 
     
     
  Stock
  2,500,000 
    
    
Sale Price
 $4,000,000 
     
     
 
    
    
    
Stock Price
 $0.01300 
    
    
Total Shares
  192,307,692 
    
    
 
    
    
    

 
Tranches
 
Tranche-I
 
 
Tranche-II
 
 
Total
 
Cash
 $645,000 
 $855,000 
 $1,500,000 
Stock
  1,395,000 
  1,105,000 
  2,500,000 
Sale Price
 $2,040,000 
 $1,960,000 
 $4,000,000 
 
  51.0%
  49.0%
  100.0%
Stock Price
 $0.01300 
 $0.01300 
    
Total Shares = Stock divided by Stock Price
  107,307,692 
  85,000,000 
  192,307,692 

 
 
33

 
Exhibit A
CONSULTING AGREEMENT
 
 
This CONSULTING AGREEMENT (the “Agreement”) is entered into as of October 10,
2018, (the “Effective Date”) by and between William Blackburn (hereinafter be
referred to as “Consultant”), and EZ CLONE ENTERPRISES, INC., an California
corporation (the “Company”). Consultant and Company are occasionally referred to
herein individually as a “Party” and collectively as the “Parties.”
 
RECITALS
 
WHEREAS, the Company is in the business of hydroponic and indoor gardening,
including, but not limited to, the design, creation and manufacturing of a
commercial product line for commercial growers and large-scale agriculture
producers (the “Business”).
 
WHEREAS, concurrent with entry into this Agreement, the Consultant and Company
closed on the sale of a majority of the Company’s common stock to GrowLife,
Inc., pursuant to that certain Purchase and Sale Agreement, dated October 10,
2018, incorporated herein by reference (the “Purchase Agreement”).
 
WHEREAS, the Consultant has been an owner and operator of the Company since
inception and has extensive experience in providing services necessary for the
operation of the Business, as set forth in Schedule A attached hereto and
incorporated herein by reference (hereinafter collectively referred to as the
“Services”), and is willing and able to provide such Services to the Company;
 
WHEREAS, pursuant to the Purchase Agreement and this Agreement, the Company
desires to have Consultant furnish such Services to the Company on the terms and
conditions hereinafter set forth.
 
WHEREAS, the Parties mutually agree that this Agreement supersedes and replaces
any prior agreements, whether written or verbal, entered into by and between the
Consultant and the Company.
 
WHEREAS, any terms not herein defined shall have the same meaning as set forth
in the Purchase Agreement.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth,
the sufficiency of which are hereby acknowledged, Consultant and Company agree
as follows:
 
SECTION 1
SERVICES
 
Section 1.1
Scope of Services. Consultant agrees to provide the Services to the Company and
is free to enter into this Agreement. Consultant represents that the Services to
be provided pursuant to this Agreement are not in conflict with any other
contractual or other obligation to which Consultant is bound. The Company
acknowledges that the Consultant is in the business of providing Services of the
type contemplated by this Agreement. Consultant agrees that it will manage its
time accordingly so as to not limit or restrict the Company in the development
of its projects as a result of any other business Consultant may have ongoing.
Consultant agrees to provide the Services to the Company subject to the highest
professional standards of one skilled in the Consultant’s industry. Consultant
shall:
 
34

 
 
a.
Use best efforts to promote the interests of the Company;
 
b.
Perform duties that are commensurate and consistent with Consultant’s expertise;
 
c.
Provide timely reports of the nature and performance of the Services upon demand
by the Company; and
 
d.
Perform all such other duties as may be assigned from time to time by the
Company, which relate to the business of the Company and are reasonably
consistent with Consultant’s position and expertise.
 
 
Section 1.2
Independent Contractor Relationship Between the Parties. The Company and
Consultant agree and acknowledge that neither is an agent for the other and this
Agreement does not create any relationship of Partnership, Joint Venture, or
Tenancy in Common. Consultant is an independent contractor in the performance of
services under this Agreement and shall not be considered to be or permitted to
be an agent, employee, personnel, joint ventured or partner of the Company for
any purpose. All persons hired by or on behalf of the Consultant, are and shall
be considered the employees or agents of Consultant. Consultant assumes sole and
full responsibility for their acts. Consultant shall at all times during the
term of this Agreement maintain such supervision. In consideration of the
independent contractor relationship, the Parties warrant as follows:
 
a.
The Consultant is not required to perform work exclusively for the Company;
 
b.
The Company shall not provide the Consultant with any business registrations or
licenses required to perform the Services contemplated by this Agreement.
 
c.
The Company shall not pay the Consultant a salary or hourly rate, the Consulting
Fee shall be for a fixed amount.
 
d.
The Company shall not terminate the Consultant before the expiration of the
Term, unless the Consultant breaches this Agreement or violates the laws of the
State of California.
 
e.
The Company shall not provide tools to the Consultant.
 
f.
The Company shall not dictate the time of performance to the Consultant.
 
g.
The Company shall pay the Consultant in the name appearing above.
 
h.
The Company shall not combine business operations with the Consultant and shall
maintain these operations separately.
 
i.
Consultant expressly acknowledges and agrees that (i) Consultant will not be
entitled to or eligible for benefits or programs offered by Company to its
employees, (ii) Company will not withhold or pay any kind of employment and/or
payroll taxes on behalf of Consultant, and (iii) Consultant is solely
responsible for the payment of Consultant's own taxes. Consultant represents and
covenants that it shall pay all federal, state and/or local income or any other
taxes payable by Consultant by reason of the consideration given to Consultant
by Company in accordance with this Agreement.
 
Consultant agrees to indemnify Company and defend, protect, save and keep
Company harmless from and against any and all losses, actions, liabilities,
claims, damages, assessments, costs and/or expenses relating to and/or arising
from or in connection with the breach of the foregoing representations and
covenants, including any and all legal, accounting, and other professional fees.
 
35

 
 
Section 1.3

Approval and Changes in Scope of Services. Changes may be made from time to time
by the Company, in its sole discretion, to the duties and reporting
relationships of Consultant under this Agreement. Consultant shall obtain the
approval of the Company prior to the commencement of any new project undertaken
on behalf of the Company.
 
Section 1.4   

Ownership of Intellectual Property Arising from the Services. In rendering the
Services, Consultant may develop creative works for the Company, including but
not limited to business and financial models, inventions, discoveries,
improvements, developments, processes, drawings, computer software or other
intellectual property and other work which may be protectable by copyright,
patent or trade secrecy law. Consultant agrees that all such work shall be
considered to be "work for hire" and that all ownership and rights of copyright,
patent, or trade secrecy pertaining to such work shall become the property of
the Company. Consultant agrees to assign and does hereby assign all its rights
in and to the foregoing, whether or not patentable or copyrightable, to the
Company. Consultant agrees that all information disclosed to it about the
Company's products, processes and services are the sole property of the Company
and Consultant will not assert any rights to any confidential or proprietary
information or material, nor will Consultant directly or indirectly, except as
required in the conduct of its duties under this Agreement, disseminate or
disclose any such confidential information. Further, any social media content
and contacts, including “followers” or “friends,” that are acquired through
accounts used or created on behalf of the Company by Consultant, including but
not limited to email addresses, blogs, Twitter, Facebook, YouTube or other
social media networks, shall be the property of the Company.
 
SECTION 2
COMPENSATION AND OTHER CONSIDERATION
 
Section 2.1

Consulting Fee. As full consideration for the performance of the Services
described above, the Company shall pay Consultant $10,000 per month payable on a
monthly basis in arrears during the Term, as defined in Section 3.1.
 
Section 2.2
Consultant’s Expenses. Consultant shall be responsible for all expenses incurred
by Consultant in connection with this Agreement, except for pre-approved travel
or any other such reasonable out-of-pocket expenses as may be pre-authorized in
writing by the Company to be incurred (the “Expenses”).
 
SECTION 3
TERM
 
Section 3.1
Term and Expiration. This Agreement shall commence on the Effective Date and
terminate on the Second Closing Date, as defined in the Purchase Agreement (the
“Term”), unless extended by mutual written consent of the Parties.
Notwithstanding anything to the contrary in this Agreement, Consultant may be
terminated by the Company on account of Cause (as defined below). Upon a
termination of this Agreement for Cause only the accrued but unpaid Consulting
Fee shall be paid to Consultant through the date of termination. “Cause” means
(i) an intentional tort (excluding any tort relating to a motor vehicle) which
causes substantial loss, damage, or injury to the property or reputation of the
Company or its subsidiaries; (ii) any serious crime or intentional, material act
of fraud or dishonesty against the Company, (iii) the commission of a felony
that results in other than immaterial harm to the Company’s business or the
reputation of the Company or Consultant, (iv) habitual neglect of Consultant’s
reasonable duties (for reason other than illness or incapacity) which is not
cured within ten days after written notice thereof by the Company to Consultant,
(v) the disregard of written, material policies of the Company which causes
other than immaterial loss, damage, or injury to the property or reputation of
the Company which is not cured within ten days after written notice thereof by
the Company to Consultant, and (vi) any material breach of Consultant’s ongoing
obligation not to disclose confidential information.
 
 
36

 
 
SECTION 4
CONFIDENTIALITY, PROPRIETARY RIGHTS, NON-CIRCUMVENTION AND NON-DISPARAGEMENT
 
Section 4.1
Confidential Information. As used in this Agreement, “Confidential Information”
shall mean and include all information provided by Company to Consultant,
including but not limited to business and financial models, inventions,
discoveries, improvements, developments, processes, drawings, computer software
or other intellectual property and other work which may be protectable by
copyright, patent or trade secrecy law. All Confidential Information disclosed
by Company to Consultant shall be maintained by the Consultant, its employees
and agents, with the same degree of care as the Consultant safeguards from
disclosure its own confidential or proprietary information, but in any event at
least reasonable care. The Consultant, its employees and agents, shall not
divulge, in whole or in part, any such Confidential Information to any third
party without the prior consent (written or verbal) of the Company, except such
Confidential Information as Consultant becomes legally compelled to disclose (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process, including regulatory
inquiries or otherwise). Under such circumstances, Consultant shall provide
Company with prompt written notice of such request and an opportunity to defend
and/or attempt to limit such production.
 
Section 4.2
Return of Confidential Information. Upon Company’s request, and in any event
upon cancellation of this Agreement, Consultant shall return the original and
any copies of the Confidential Information which it, or any of its employees or
agents, is holding under its possession or control in tangible form, written or
otherwise, to Company or shall certify in writing to Company that such
Confidential Information has been destroyed and/or purged from its own system
and files.
 
Section 4.3
Non-Disclosure. Except as may be required by law, the Consultant shall not
disclose any Confidential Information to persons not involved in the operation
of the Company without the express written consent of the Company.
 
Section 4.4
Proprietary Rights. The Parties stipulate that any information or work product
provided by Consultant to Company, whether on paper, communicated
electronically, orally, or in any other form, is “Confidential” and/or
“Proprietary”, and have independent economic value, and, as such, shall
constitute the “Confidential Property” of Company subject to the terms and
limitations set forth in this Agreement.
 
Section 4.5
Non-Circumvention. Consultant shall not: (i) utilize any Confidential
Information to circumvent or compete with the Company or to cause any detriment,
harm or injury to the Company or the business of the Company; or (ii) utilize
any and all information lawfully furnished or disclosed to Consultant by any
party to circumvent or compete with the Company or to cause any detriment, harm
or injury to the Company, to the business of the Company, or any affiliates of
the Company. Further, Consultant shall not engage in any activity which shall
cause any detriment, harm or injury to the Company, to the business of the
Company, or to the reputation of the Company or to permit any circumvention of
or competition with the Company or the business of the Company.
 
Section 4.6
Non-Disparagement. Consultant shall not, in any written or oral communications
with any party or through any medium, whether tangible, electronic, or
otherwise, criticize, ridicule or make any statement which, directly or
indirectly, disparages, causes harm to, or is derogatory of the Company or its
affiliates or any of their respective directors or senior officers. Consultant
shall not express any negative opinions of the Company, the Company’s business
or products, or any affiliates of the Company or their businesses or products.
The provision shall be construed broadly and shall govern any statement, express
or implied, made concerning the Company, the Company’s business and products, or
affiliates of the Company.
 
37

 
 
SECTION 5
MISCELLANEOUS
 
Section 5.1
Authority to Be Bound. The Parties to this Agreement represent they have the
authority to enter into this Agreement. The promises made herein shall be
binding upon all undersigned Parties, and are the joint and several obligations
of each of the undersigned. Each party will take responsible steps to insure
that their associates, affiliates, employees, agents, representatives and
officers abide by the provisions of this Agreement. The Parties hereto, and each
of them, further represent and declare that they have carefully read this
Agreement and know the contents thereof and sign the same freely and
voluntarily, and each of the Parties hereto have been given the opportunity to
confer with counsel.
 
Section 5.2
Delegation. Consultant shall not, without Company’s prior consent (which consent
Company may withhold in its sole discretion) subcontract or delegate, or enter
into, amend or modify any subcontract for the delegation or performance of, any
part of its obligations under this Agreement. Without limitation on the
foregoing, and notwithstanding any Company consent thereto, Consultant shall
remain fully responsible to Company for the performance of any services rendered
by any subcontractor personnel, as if such subcontractor or subcontractor
personnel were Consultant or Consultant personnel hereunder.
 
Section 5.3

Force Majeure. Both Parties shall be excused from performance under this
Agreement for any period to the extent that a party is prevented from performing
any obligation, in whole or in part, as a result of causes beyond its reasonable
control and without its negligent or willful misconduct, including without
limitation, acts of God, natural disasters, war or other hostilities, labor
disputes, civil disturbances, governmental acts, orders or regulations, third
party nonperformance, or failures or fluctuations in electrical power, heat,
light, air conditioning or telecommunications equipment.
 
Section 5.4  

Waiver. No delay in exercising, no course of dealing with respect to, or no
partial exercise of any right or remedy hereunder shall constitute a waiver of
any other right or remedy, or future exercise thereof.
 
Section 5.5
Severability. If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, all terms,
provisions, covenants, and conditions and all applications not held invalid,
void, or unenforceable will continue in full force and will in no way be
affected, impaired, or invalidated.
 
Section 5.6

Mediation; Governing Law; Venue. In the event of any dispute between the Company
and Consultant, including any Third Party, arising under or pursuant to the
terms of this Agreement, or any matter relating to the subject matter of the
Agreement, such dispute shall be settled only by mediation in Orange County,
California. The Parties agree that Orange County, California is the appropriate
venue for all disputes. This Agreement shall be construed and governed under the
laws of the State of California, without regard to its conflicts of law or
choice of law provisions.
 
Section 5.7
Entire Agreement; Amendment. This Agreement constitutes the entire Agreement
among the Parties with respect to the subject matter hereof and supersedes in
all respects all prior proposals, negotiations, conversations, discussions and
agreements between the Parties. This Agreement may not be modified or amended
except by express written amendment signed by authorized representatives of all
Parties.
 
Section 5.8 

Successors & Assigns. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, personal
representatives and successors and assigns.
 
 
38

 
 
Section 5.9

Headings. The headings and any table of contents contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
 
Section 5.10    

Rights Cumulative. The rights and remedies provided by this Agreement are
cumulative, and the exercise of any right or remedy by either Party hereto (or
by its successors), whether pursuant to this Agreement, to any other agreement,
or to law, shall not preclude or waive its right to exercise any or all other
rights and remedies.
 
Section 5.11

Facsimile Certification. A facsimile copy of this Agreement signed by any and/or
all Parties shall have the same binding and legal effect as an original of the
same.
 
Section 5.12

Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one in the same instrument. Regardless of whether this Agreement is executed in
one or more counterparts, each such counterpart may be executed by actual or
facsimile signature(s).
 
Section 5.13 

Notices: Any notice, request, demand, instruction or other document to be given
hereunder to any party shall be in writing and shall either be delivered
personally or by U.S. Mail, or by electronic means, to the persons and entities
listed at the addresses set forth below. Notice shall be deemed given when: (i)
personally served; or (ii) three (3) business days following deposit with the
United States Postal Service; or (iii) one (1) business day following
transmission by facsimile or electronic mail if such facsimile transmission or
electronic mail service provides a mechanism for recording the date and time of
transmission in the ordinary course.
 
 
 
39

 
 
SIGNATURE PAGE FOLLOWS
 
IN WITNESS WHEREOF, the Parties hereto, through their duly authorized officers,
have executed this Agreement, which shall be binding as of the Effective Date.
 
 
 
EZ CLONE ENTERPRISES, INC.
(“COMPANY”)
 
/s/ William Blackburn
 
By: William Blackburn
Title: Chief Executive Officer
 
CONSULTANT
WILLIAM BLACKBURN
 
/s/ William Blackburn
 
By: William Blackburn
 
 
Consultant Address for Notice:
________________________
________________________
 
 

 
 
 
40

 
SCHEDULE A
 
DESCRIPTION OF SERVICES
 
Consultant shall perform the following services as pursuant to the terms of this
Agreement and at all times in accordance with the guidance and direction of the
Company’s Board of Directors and Consultant’s direct report and other such
services as may be reasonably requested by the board of directors of the Company
from time to time.
 
Consultant shall:
1.
_________________;
2.
_________________; and,
3.
_________________.
 
Consultant’s Direct Report: Marco Hegyi
 
 
41

 
 
Exhibit B
 
EZ-CLONE CONSULTING AGREEMENT
 
THIS EZ–CLONE CONSULTING AGREEMENT (the "Agreement") is entered into as of
October 10, 2018, (the "Effective Date") by and between Brad Mickelsen
(hereinafter be referred to as "Consultant"), and EZ CLONE ENTERPRISES, INC., a
California corporation (the "Company"). Consultant and Company are occasionally
referred to herein individually as a "Party" and collectively as the "Parties."
 
RECITALS
 
WHEREAS, the Company is in the business of hydroponic and indoor gardening,
including, but not limited to, the design, creation and manufacturing of a
commercial product line for commercial growers and large-scale agriculture
producers (the "Business").
 
WHEREAS, concurrent herewith, the Consultant and Company close the sale of a
majority of the Company's common stock to GrowLife, Inc., pursuant to that
certain Purchase and Sale Agreement, dated October 15, 2018, incorporated herein
by reference (the "Purchase Agreement").
 
WHEREAS, the Consultant, having been an owner and operator of the Company since
inception and having extensive experience conducting the operations of the
Business, as set forth in the attached Schedule A, incorporated herein by
reference (collectively referred to as the "Services"), is willing and able to
perform such Services for the Company;
 
WHEREAS, in accordance with the Purchase Agreement and this Agreement, the
Company desires to have Consultant provide Services to the Company on the terms
and conditions set forth herein.
 
WHEREAS, the Parties mutually agree that this Agreement supersedes and replaces
any prior agreements, whether written or verbal, entered into by and between the
Consultant and the Company.
 
NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth,
the sufficiency of which are hereby acknowledged, Consultant and Company agree
as follows:
 
SECTION 1
SERVICES
 
1.1            
Scope of Services. Consultant agrees to Perform Services for the Company.
Consultant shall perform Services pursuant to this Agreement, which does not
conflict with any other contract or other obligation by which Consultant is
bound. The Company acknowledges that the Consultant is in the business of
providing Services contemplated by this Agreement. Consultant agrees to perform
Services for the Company subject to the highest professional standards of one
skilled (with like education, credentials, and experience) in the Consultant's
industry. Consultant shall:
 
e.
Use best efforts to promote the interests of the Company; and
 
f.
Answer operational questions from time-to-time drawing from Consultant's
operational experience and reasonably consistent with Consultant’s previous
position and expertise;
 
 
42

 
1.2            
Independent Contractor Relationship Between the Parties. The Parties acknowledge
and agree that this Agreement does not create any agency relationship nor any
Partnership, Joint Venture, or Tenancy in Common. Consultant is an independent
contractor with respect to the performance of Services and shall not be deemed
to be an agent, employee, personnel, joint ventured or partner of the Company
for any purpose. All persons hired by or on behalf of the Consultant, are and
shall be considered the employees or agents of Consultant. Consultant assumes
sole and full responsibility for their acts. Consultant shall at all times
during this Agreement maintain such supervision. In consideration of the
independent contractor relationship, the Parties warrant as follows:
 
j.
The Consultant is not required to perform work exclusively for the Company;
 
k.
The Company shall pay Consultant in the name appearing above; and
 
l.
The Company shall not
 
a.
provide Consultant with any business registrations or licenses required to
perform the Services contemplated by this Agreement.
 
b.
pay Consultant a salary or hourly rate, the Consulting Fee shall be for a fixed
amount.
 
c.
terminate Consultant before the expiration of the Term, unless the Consultant
breaches this Agreement or violates the laws of the State of California.
 
d.
provide tools to Consultant.
 
e.
dictate the time of performance to Consultant.
 
f.
combine business operations with Consultant and shall maintain these operations
separately.
 
Consultant expressly acknowledges and agrees that (i) Consultant will not be
entitled to or eligible for any employee benefit programs offered by Company,
(ii) Company will not withhold and remit any employment and/or payroll taxes on
behalf of Consultant, and (iii) Consultant is solely responsible for the payment
of all of Consultant's federal, state and/or local income or any other taxes
("Taxes"). Consultant represents and covenants that it shall Taxes payable by
Consultant in accordance with the consideration provided to Consultant under
this Agreement.
 
The Parties agree to indemnify defend, protect, save and keep each other
harmless from and against any and all losses, actions, liabilities, claims,
damages, assessments, costs and/or expenses relating to and/or arising from or
in connection with the breach of the representations and covenants of this
Agreement.
 
1.3            
Ownership of Intellectual Property Arising from the Services. The Parties
acknowledge and agree that all creative work (including but not limited to
business and financial models, inventions, discoveries, improvements,
developments, processes, drawings, computer software or other intellectual
property and other work which may be protectable by copyright, patent or trade
secrecy law)Consultant performs for the Company shall be considered to be "work
for hire" and that all ownership and rights to such "work for hire" shall become
the property of the Company. Consultant does hereby assign all its rights in and
to such "work for hire" to the Company. Consultant will not assert any rights to
any confidential or proprietary information or material, nor will Consultant
directly or indirectly, except as required in the performance of Services to the
Company, disseminate or disclose any such confidential or proprietary
information. Further, any social media content and contacts, including
"followers" or "friends, " acquired through accounts used or created on behalf
of the Company by Consultant, including but not limited to email addresses,
blogs, Twitter, Facebook, YouTube or other social media networks (collectively
"Digital Assets"), shall be the property of the Company.
 
 
 
43

 
SECTION 2
COMPENSATION AND OTHER CONSIDERATION
 
2.1            
Consulting Fee. As full consideration for the performance of the Services,
Company shall pay Consultant ten thousand even dollars ($10,000) per month
payable on a monthly basis in arrears during the Term of this Agreement.
 
2.2            
Consultant’s Expenses. Consultant shall be responsible for all expenses incurred
by Consultant in connection with this Agreement, except for reasonable travel
and other reasonable out-of-pocket expenses pre-approved in writing by the
Company to be incurred (the "Expenses").
 
SECTION 3
TERM
 
3.1            
Term and Expiration. This Agreement shall commence on the Effective Date for six
(6) months from the First Closing Date and shall terminate on the Second Closing
Date when delayed beyond six (6) months from the First Closing Date, as defined
in the Purchase Agreement (the "Term").
 
SECTION 4
CONFIDENTIALITY, PROPRIETARY RIGHTS, NON-CIRCUMVENTION AND NON-DISPARAGEMENT
 
4.1            
Non-Disclosure. Except as may be required by law, the Consultant shall not
disclose any Confidential Information to persons not involved in the operation
of the Company without the express written consent of the Company.
 
4.2            
Confidential Property. The Parties stipulate that any information or work
product provided by Consultant to Company or by Company to Consultant, whether
written, communicated electronically, orally, or in any other form, is
"Confidential" and/or "Proprietary", having independent economic value, and, as
such, shall constitute the "Confidential Property" of Company subject to the
terms and limitations set forth in this Agreement.
 
4.3            
Return of Confidential Property. Upon Company’s request at the expiration of
this Agreement, Consultant shall return all original and copies of Confidential
Property whether in tangible form, written or otherwise, to Company or shall
certify in writing to Company that such Confidential Property has been destroyed
and/or purged from Consultant’s system and files.
 
4.4            
Non-Circumvention. Consultant shall not: utilize any Confidential Information
and all other information lawfully furnished or disclosed to Consultant by any
Party to circumvent or compete with the Company or to cause any detriment, harm
or injury to the Company, to the business of the Company, or any affiliates of
the Company. Further, Consultant shall not engage in any activity which shall
cause any detriment, harm or injury to the Company, to the business of the
Company, or to the reputation of the Company or to permit any circumvention of
or competition with the Company or the business of the Company.
 
4.5            
Non-Disparagement. The Parties shall not, in any written or oral communications
with any party or through any medium, whether tangible, electronic, or
otherwise, criticize, ridicule or make any statement which, directly or
indirectly, disparages, causes harm to, or is derogatory of the other Party, its
affiliates or any of their respective directors or senior officers. Consultant
shall not express any negative opinions of the Company, the Company’s business
or products, or any affiliates of the Company or their businesses or products.
The provision shall be construed broadly and shall govern any statement, express
or implied, made concerning the Company, the Company’s business and products, or
affiliates of the Company.
 
 
44

 
SECTION 5
MISCELLANEOUS
 
5.1            
Authority to Be Bound. The Parties to this Agreement represent they have the
authority to enter into this Agreement. The promises made herein shall be
binding upon all undersigned Parties, and are the joint and several obligations
of the undersigned Parties. The Parties insure that their associates,
affiliates, employees, agents, representatives and officers will abide by the
provisions of this Agreement. Each of the Parties further represent and declare
that they have carefully read this Agreement, understand the contents hereof,
sign the same freely and voluntarily, and have been given the opportunity to
confer with counsel of their choice.
 
5.2            
Delegation. Consultant shall not, without Company's prior consent (which consent
Company may withhold in its sole discretion) subcontract, delegate, enter into,
amend, modify or subcontract for the delegation or performance of, any part of
its obligations under this Agreement. Without limiting the foregoing, and
notwithstanding Company's consent hereto, Consultant shall remain fully
responsible to Company for the performance of any Services rendered by any
subcontractor or subcontractor personnel, as if such subcontractor or
subcontractor personnel were Consultant or Consultant personnel hereunder.
 
5.3            
Force Majeure. The Performance of both Parties shall be excused to the extent
that any Party is prevented from performing any obligation, in whole or in part,
for any period by causes beyond its reasonable control and without its negligent
or willful misconduct, including without limitation, acts of God, natural
disasters, war or other hostilities, labor disputes, civil disturbances,
governmental acts, orders or regulations, third party nonperformance, or
failures or fluctuations in electrical power, heat, light, air conditioning or
telecommunications equipment.
 
5.4            
Waiver. No delay in exercising, no course of dealing with respect to, or no
partial exercise of any right or remedy hereunder shall constitute a waiver of
any other right or remedy, or future exercise thereof.
 
5.5            
Severability. If any term or provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void, or unenforceable, all terms,
provisions, covenants, and conditions and all applications not held invalid,
void, or unenforceable will continue in full force and will in no way be
affected, impaired, or invalidated.
 
5.6            
Mediation; Governing Law; Venue. In the event of any dispute between the Company
and Consultant, including any Third Party, arising under or pursuant to the
terms of this Agreement, or any matter relating to the subject matter of the
Agreement, such dispute shall be settled only by mediation in Orange County,
California. The Parties agree that Orange County, California is the appropriate
venue for all disputes. This Agreement shall be construed and governed under the
laws of the State of California, without regard to its conflicts of law or
choice of law provisions.
 
5.7            
Entire Agreement; Amendment. This constitutes the entire Agreement among the
Parties with respect to the subject matter hereof and supersedes in all respects
all prior proposals, negotiations, conversations, discussions and agreements
between the Parties. This Agreement may not be modified or amended except by
express written amendment signed by authorized representatives of all Parties.
 
5.8            
Successors & Assigns. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs, personal
representatives and successors and assigns.
 
5.9            
Headings. The headings and any table of contents contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
 
 
45

 
 
5.10            
Rights Cumulative. The rights and remedies provided by this Agreement are
cumulative, and the exercise of any right or remedy by either Party hereto (or
by its successors), whether pursuant to this Agreement, to any other agreement,
or to law, shall not preclude or waive its right to exercise any or all other
rights and remedies.
 
5.11            
Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one in the same instrument. Regardless of whether this Agreement is executed in
one or more counterparts, each such counterpart may be executed by actual or
facsimile signature(s). A facsimile copy of this Agreement signed by any and/or
all Parties shall have the same binding and legal effect as an original of the
same.
 
5.12            
Notices: Any notice, request, demand, instruction or other document to be given
hereunder to any party shall be in writing and shall either be delivered
personally or by U.S. Mail, or by electronic means, to the persons and entities
listed at the addresses set forth below. Notice shall be deemed given when: (i)
personally served; or (ii) three (3) business days following deposit with the
United States Postal Service; or (iii) one (1) business day following
transmission by facsimile or electronic mail if such facsimile transmission or
electronic mail service provides a mechanism for recording the date and time of
transmission in the ordinary course.
 
5.13            
Definitions. Any terms not herein defined shall have the same meaning as set
forth in the Purchase Agreement.
 
SIGNATURE PAGE FOLLOWS
 
 
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IN WITNESS WHEREOF, the Parties hereto, through their duly authorized officers,
have executed this Agreement, which shall be binding as of the Effective Date.
 
 
 
EZ CLONE ENTERPRISES, INC.
(“COMPANY”)
 
/s/ Billy Blackburn
 
By: William Blackburn
 
Title: Chief Executive Officer
 
CONSULTANT
BRAD MICKELSEN
 
/s/ Brad Michelsen 
 
By: Brad Mickelsen
 
 
Consultant Address for Notice:
 
________________________
 
________________________
 
 

 
 
 
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SCHEDULE A
DESCRIPTION OF SERVICES
 
Consultant shall perform the following services pursuant to the terms of this
Agreement and at all times in accordance with the guidance and direction of the
Company’s Board of Directors and Consultant’s direct report and other such
services as may be reasonably requested by the board of directors of the Company
from time to time:
 
Consultant is not expected to participate in the day-to-day operations of the
Company during the term of this agreement. Consultant’s specific duties under
this Agreement shall be limited to assisting the Company from time-to-time by
answering operational questions where Consultant’s knowledge and experience
would benefit the Company.
 
 
 
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