EXHIBIT 10.1

 

STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “Agreement”), dated as of June 23, 2018, is
entered into between by and among COSMOFARM LTD, a pharmaceutical wholesalers
company based in Irakleous 39, Neos Kosmos, Athens, Greece, with Registration
Number: 1767501000, and Tax ID 095537452, (the “Company”), DEEPDAE HOLDING LTD
referred to as the “Seller”) and Cosmos Holdings Inc., a Nevada corporation
(“Buyer”).

 

RECITALS

 

WHEREAS, the Seller owns all of the issued and outstanding shares (the “Shares”)
of the Company; and

 

WHEREAS, the Seller wish to sell to Buyer, and Buyer wishes to purchase from the
Seller, the Shares, subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

ARTICLE I
DEFINITIONS

 

The following terms have the meanings specified or referred to in this Article
I:

 

“Accounting Referee” has the meaning set forth in Section 6.01(c).

 

“Acquisition Proposal” has the meaning set forth in Section 5.03(a).

 

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.

 

“Affiliate” of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

 

“Agreement” has the meaning set forth in the preamble.

 

“Audited Financial Statements” shall have the meaning set forth in Section 2.04
(c)

 

“Balance Sheet” has the meaning set forth in Section 3.06.

 

“Balance Sheet Date” has the meaning set forth in Section 3.06.

 

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“Benefit Plan” has the meaning set forth in Section 3.19(a).

 

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in New York, New York are authorized or required by Law
to be closed for business.

 

“Buyer” has the meaning set forth in the preamble.

 

“Buyer Indemnitees” has the meaning set forth in Section 8.02.

 

“Buyer’s Shares” means Buyer’s restricted common stock, par value $.001 per
share.

 

“Cause” shall mean with respect to Panagiotis Kozaris (“Kozaris”) in connection
with his post-closing engagement with the Company (i) any act of material fraud
or embezzlement adversely affecting the financial, market, reputation or other
interests of the Company or the Buyer, (ii) in the event of a conviction of or
plea of guilty or nolo contendere by Employee for any felony or crime involving
moral turpitude, or any knowing violation of any federal or state banking,
securities or tax law or regulation, and (iii) any refusal to perform or willful
misconduct or gross negligence in connection with Kozaris duties with the
Company and the Buyer, as determined by the Buyer’s remaining Board of
Directors, if such refusal or willful misconduct or gross negligence is not
cured within five (5) Business Days after written notice thereof.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

 

“Closing” has the meaning set forth in Section 2.04.

 

“Closing Date” has the meaning set forth in Section 2.04.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” has the meaning set forth in Section 3.03(a).

 

“Company” has the meaning set forth in the recitals.

 

“Company Intellectual Property” has the meaning set forth in Section 3.11(a).

 

“Contracts” means all contracts, leases, deeds, mortgages, licenses,
instruments, notes, commitments, undertakings, indentures, joint ventures and
all other agreements, commitments and legally binding arrangements, whether
written or oral.

 

“Direct Claim” has the meaning set forth in Section 8.04(c).

 

“Disclosure Schedules” means the Disclosure Schedules delivered by the Company
and Sellers and Buyer concurrently with the execution and delivery of this
Agreement.

 

“Dollars or $” means the lawful currency of the United States.

 

“Encumbrance” means any charge, claim, community property interest, pledge,
condition, equitable interest, lien (statutory or other), option, security
interest, mortgage, easement, encroachment, right of way, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership.

 

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“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty,
or, as to each, any settlement or judgment arising therefrom, by or from any
Person alleging liability of whatever kind or nature (including liability or
responsibility for the costs of enforcement proceedings, investigations,
cleanup, governmental response, removal or remediation, natural resources
damages, property damages, personal injuries, medical monitoring, penalties,
contribution, indemnification and injunctive relief) arising out of, based on or
resulting from: (a) the presence, Release of, or exposure to, any Hazardous
Materials; or (b) any actual or alleged non-compliance with any Environmental
Law or term or condition of any Environmental Permit.

 

“Environmental Law” means any applicable Law, and any Governmental Order or
binding agreement with any Governmental Authority: (a) relating to pollution (or
the cleanup thereof) or the protection of natural resources, endangered or
threatened species, human health or safety, or the environment (including
ambient air, soil, surface water or groundwater, or subsurface strata); or (b)
concerning the presence of, exposure to, or the management, manufacture, use,
containment, storage, recycling, reclamation, reuse, treatment, generation,
discharge, transportation, processing, production, disposal or remediation of
any Hazardous Materials.

 

“Environmental Notice” means any written directive, notice of violation or
infraction, or notice respecting any Environmental Claim relating to actual or
alleged non-compliance with any Environmental Law or any term or condition of
any Environmental Permit.

 

“Environmental Permit” means any Permit, letter, clearance, consent, waiver,
closure, exemption, decision or other action required under or issued, granted,
given, authorized by or made pursuant to Environmental Law.

 

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

 

“ERISA Affiliate” means, with respect to any Person, any other Person that,
together with such first Person, would be treated as a single employer within
the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

“Financial Statements” has the meaning set forth in Section 3.06.

 

“First Earn-out Period” means the period beginning on the Closing Date and
ending on first anniversary of the Closing Date.

 

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

 

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

 

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“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“Hazardous Materials” means: (a) any material, substance, chemical, waste,
product, derivative, compound, mixture, solid, liquid, mineral or gas, in each
case, whether naturally occurring or manmade, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect under
Environmental Laws; and (b) any petroleum or petroleum-derived products, radon,
radioactive materials or wastes, asbestos in any form, lead or lead-containing
materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

 

“Indebtedness of the Company” shall mean current debt of the Company (other than
trade payables incurred in the ordinary course of business, which trade payables
shall include all amounts outstanding under the Company’s credit cards as of the
Closing Date).

 

“Indemnified Party” has the meaning set forth in Section 8.04.

 

“Indemnifying Party” has the meaning set forth in Section 8.04.

 

“Insurance Policies” has the meaning set forth in Section 3.15.

 

“Intellectual Property” has the meaning set forth in Section 3.11(a).

 

“Intellectual Property Registrations” has the meaning set forth in Section
3.11(b).

 

“Knowledge” means the actual or constructive knowledge of Kozaris or any other
director or executive officer of the Company.

 

“Law” means any statute, law, ordinance, regulation, rule, code, order,
constitution, treaty, common law, judgment, decree, other requirement or rule of
law of any Governmental Authority.

 

“Liabilities” has the meaning set forth in Section 3.07.

 

“Licensed Intellectual Property” has the meaning set forth in Section 3.11(a).

 

“Losses” means losses, damages, liabilities, deficiencies, Actions, judgments,
interest, awards, penalties, fines, costs or expenses of whatever kind,
including reasonable attorneys’ fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance providers;
provided, however, that “Losses” shall not include punitive damages, except in
the case of fraud or to the extent actually awarded to a Governmental Authority
or other third party.

 

“Material Adverse Effect” means any event, occurrence, fact, condition or change
that is, or could reasonably be expected to become, individually or in the
aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise) or assets of the Company, or (b) the ability
of Sellers to consummate the transactions contemplated hereby on a timely basis.

 

“Material Contracts” has the meaning set forth in Section 3.09(a).

 

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“Material Customers” has the meaning set forth in Section 3.14.

 

“Multiemployer Plan” has the meaning set forth in Section 3.19(c).

 

“Permits” means all permits, licenses, franchises, approvals, authorizations,
registrations, certificates, variances and similar rights obtained, or required
to be obtained, from Governmental Authorities.

 

“Permitted Encumbrances” has the meaning set forth in Section 3.10(a).

 

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association or other entity.

 

“Post-Closing Tax Period” means any taxable period beginning after the Closing
Date and, with respect to any taxable period beginning before and ending after
the Closing Date, the portion of such taxable period beginning after the Closing
Date.

 

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date and, with respect to any taxable period beginning before and ending
after the Closing Date, the portion of such taxable period ending on and
including the Closing Date.

 

“Pre-Closing Taxes” means Taxes of the Company for any Pre-Closing Tax Period.

 

“Purchase Price” has the meaning set forth in Section 2.02.

 

“Qualified Benefit Plan” has the meaning set forth in Section 3.19(c).

 

“Real Property” means the real property owned, leased or subleased by the
Company, together with all buildings, structures and facilities located thereon.

 

“Release” means any actual or threatened release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, abandonment, disposing or allowing to escape or migrate into or through
the environment (including, without limitation, ambient air (indoor or outdoor),
surface water, groundwater, land surface or subsurface strata or within any
building, structure, facility or fixture).

 

“Representative” means, with respect to any Person, any and all directors,
officers, employees, consultants, financial advisors, counsel, accountants and
other agents of such Person.

 

“Seller” has the meaning set forth in the preamble.

 

“Seller Indemnitees” has the meaning set forth in Section 8.03.

 

“Sellers” has the meaning set forth in the preamble.

 

“Sellers’ Accountants” means the accountant of the Company

 

“Shares” has the meaning set forth in the recitals.

 

“Stock Consideration” has the meaning set forth in Section 2.02.

 

“Straddle Period” has the meaning set forth in Section 6.03.

 

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“Taxes” means all federal, state, local, foreign and other income, gross
receipts, sales, use, production, ad valorem, transfer, franchise, registration,
profits, license, lease, service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp, occupation,
premium, property (real or personal), real property gains, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.

 

“Tax Claim” has the meaning set forth in Section 6.05.

 

“Tax Return” means any return, declaration, report, claim for refund,
information return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.

 

“Territory” means the United States.

 

“Third Party Claim” has the meaning set forth in Section 8.04(a).

 

“Transaction Documents” means this Agreement and any other documents reasonably
required by the Buyer.

 

“Unaudited Financial Statements” has the meaning set forth in Section 3.06.

 

“Union” has the meaning set forth in Section 3.20(b).

 

ARTICLE II
PURCHASE AND SALE

 

Section 2.01 Purchase and Sale. Subject to the terms and conditions set forth
herein, at the Closing, Seller shall sell to Buyer, and Buyer shall purchase
from Seller, all the issued and outstanding Shares of Cosmofarm Ltd., free and
clear of all Encumbrances, for the consideration specified in Section 2.02.

 

Section 2.02 Purchase Price. The purchase price for the Shares purchased by
Buyer pursuant to Section 2.01 (the “Purchase Price”) for cash shall consist of
an aggregate amount of €700,000 Euros.

 

Section 2.03 Transactions to be Effected at the Closing.

 

(a) At the Closing, Buyer shall deliver to Seller:

 

(i) the Purchase Price, or proof of payment of the Purchase Price

 

(ii) the Transaction Documents and all other agreements, documents, instruments
or certificates required to be delivered by Buyer at or prior to the Closing
pursuant to Section 7.03 of this Agreement.

 

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(b) At the Closing, the Sellers shall deliver to Buyer:

 

(i) stock certificates evidencing the Shares, free and clear of all
Encumbrances, duly endorsed in blank or accompanied by stock powers or other
instruments of transfer duly executed in blank, with all required stock transfer
tax stamps affixed thereto; and

 

(ii) the Transaction Documents and all other agreements, documents, instruments
or certificates required to be delivered by Seller and the Company at or prior
to the Closing pursuant to Section 7.02 of this Agreement.

 

(iii) The Company shall furnish to the Buyer on or before the Closing Date true
and complete copies of the audited consolidated balance sheets of the Company as
of December 31, 2016 and December 31, 2017 and the related consolidated
statements of operations, statement of changes in member’s equity and cash flows
for the years then ended, together with the notes thereto, (the “Audited
Financial Statements”), setting forth in each case in comparative form the
corresponding figures for the corresponding dates and periods of the previous
fiscal year, together with reports of auditors thereon.

 

(iv) Each of the Company and the Seller hereby agree to deliver to Buyer within
60 days of the date hereof those due diligence items (“Due Diligence Items”)
requested by Buyer or set forth herein. Buyer shall have until the receipt of
all Due Diligence Items completion of the Audited Financial Statements and
thirty (30) days thereafter (“Due Diligence Period”) to review and to approve
the Due Diligence Items and any other information or documentation it acquires,
including, but not limited to the Audited Financial Statements. If Buyer, in its
sole discretion, does not approve any of the Due Diligence Items or any of the
information provided to Buyer pursuant to this section or any information or
documentation it otherwise acquires at any time prior to the expiration of the
Due Diligence Period, Buyer, at its option, may terminate this Agreement by
written notice to Sellers delivered at any time prior to the expiration of the
Due Diligence Period, whereupon this Agreement shall become null and void and of
no further force and effect and the parties hereto shall have no further
obligation to one another. However, in lieu of such immediate termination of
this Agreement, Buyer may at its option notify the Company and Seller in writing
of those matters as to which it has reasonable concerns and extend the Due
Diligence Period as to those items only for a period of an additional thirty
(30) days in order to give the parties the opportunity to resolve such concerns.
Buyer’s failure to terminate this Agreement pursuant to this Section 2.03 shall
not affect Buyer’s right to require the satisfaction of all conditions to
closing set forth in this Agreement.

 

(c) Post-closing Operation of the Company and the Buyer.

 

(i) Subject to the terms of this Agreement and the other Transaction Documents,
subsequent to the Closing, Buyer shall have sole discretion with regard to all
matters relating to the operation of the Company; provided, that the Buyer
hereby agrees that Kozaris shall be appointed a director and employed in an
at-will basis as the Chief Operating Officer of the Company.

 

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(ii) The Buyer shall have the right to appoint up to two additional seats on the
Company’s Board of Directors and shall have the exclusive right to amend any of
the Company’s organizational documents to increase the size of the Board of
Directors of the Company and fill any vacancies as a result of such increase.
Buyer and Seller hereby agree that upon closing Grigorios Siokas will
immediately become the new CEO of the Company. Buyer and Seller hereby agree
that in the event of a termination for Cause of Kozaris, Buyer shall be entitled
to immediately remove Kozaris from all positions with the Company.

 

Section 2.04 Closing. Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the “Closing”) shall
take place no later than two Business Days after the last of the conditions to
Closing set forth in Article VII have been satisfied or waived (other than
conditions which, by their nature, are to be satisfied on the Closing Date),
remotely by the electronic exchange of documents, or at such other time or on
such other date or at such other place as the parties may mutually agree upon in
writing (the day on which the Closing takes place being the “Closing Date”).

 

Section 2.05 Withholding Tax. To the extent required by law, Buyer and the
Company shall be entitled to deduct and withhold from the Purchase Price all
Taxes that Buyer and the Company may be required to deduct and withhold under
any provision of Tax Law. All such withheld amounts shall be treated as
delivered to the Seller hereunder.

 

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY

 

Except as set forth in the correspondingly numbered section of the Disclosure
Schedules, each of the Sellers and the Company jointly and severally represent
and warrant to Buyer that the statements contained in this Article III are true
and correct as of the date hereof.

 

Section 3.01 Authority of Seller. The Seller and the Company have full power and
authority to enter into this Agreement and the other Transaction Documents to
which the Seller is a party, to carry out their obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by the Seller of this Agreement and any other
Transaction Document to which Seller is a party, the performance by Seller of
its obligations hereunder and thereunder and the consummation by the Seller of
the transactions contemplated hereby and thereby have been duly authorized by
all requisite corporate action on the part of the Seller. This Agreement has
been duly executed and delivered by the Seller, and (assuming due authorization,
execution and delivery by Buyer) this Agreement constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in accordance
with its terms. When each other Transaction Document to which the Seller is or
will be a party has been duly executed and delivered by the applicable Seller
(assuming due authorization, execution and delivery by each other party
thereto), such Transaction Document will constitute a legal and binding
obligation of such Seller enforceable against it in accordance with its terms.
The Seller has the legal capacity to enter into this Agreement.

 

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Section 3.02 Organization, Authority and Qualification of the Company. The
Company is a Company duly organized, validly existing and in good standing under
the Laws of Greece and has full corporate power and authority to own, operate or
lease the properties and assets now owned, operated or leased by it and to carry
on its business as it has been and is currently conducted. Section 3.02 of the
Disclosure Schedules sets forth each jurisdiction in which the Company is
licensed or qualified to do business, and the Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business as
currently conducted makes such licensing or qualification necessary. The
execution and delivery by the Company of this Agreement and any other
Transaction Document to which the Company is a party, the performance by the
Company of its obligations hereunder and thereunder and the consummation by the
Company of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of the Company. This
Agreement has been duly executed and delivered by the Company, and (assuming due
authorization, execution and delivery by Buyer) this Agreement constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms. When each other Transaction Document to
which the Company is or will be a party has been duly executed and delivered by
the Company (assuming due authorization, execution and delivery by each other
party thereto), such Transaction Document will constitute a legal and binding
obligation of the Company enforceable against it in accordance with its terms.

 

Section 3.03 Capitalization.

 

(a) The capitalization of the Company is described on Schedule 3.03 hereto
setting forth the authorized and issued and outstanding classes of capital
stock. All of the Shares have been duly authorized, are validly issued, fully
paid and non-assessable, and are owned of record and beneficially by each
Seller, free and clear of all Encumbrances. Upon consummation of the
transactions contemplated by this Agreement, Buyer shall own all of the Shares,
free and clear of all Encumbrances.

 

(b) All of the Shares were issued in compliance with applicable Laws. None of
the Shares were issued in violation of any agreement, arrangement or commitment
to which the Sellers or the Company are a party or are subject to or in
violation of any preemptive or similar rights of any Person.

 

(c) There are no outstanding or authorized options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to the capital stock of the Company or obligating the Seller
or the Company to issue or sell any shares of capital stock of, or any other
interest in, the Company. The Company does not have outstanding or authorized
any stock appreciation, phantom stock, profit participation or similar rights.
There are no voting trusts, stockholder agreements, proxies or other agreements
or understandings in effect with respect to the voting or transfer of any of the
Shares.

 

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Section 3.04 No Subsidiaries. The Company, except as set forth in Schedule 3.04,
does not own, or have any interest in any shares or have an ownership interest
in any other Person.

 

Section 3.05 No Conflicts; Consents. Except as set forth on Schedule 3.05
hereof, the execution, delivery and performance by the Seller and the Company of
this Agreement and the other Transaction Documents to which they are a party,
and the consummation of the transactions contemplated hereby and thereby, do not
and will not: (a) conflict with or result in a violation or breach of, or
default under, any provision of the certificate of incorporation, by-laws or
other organizational documents of the Company; (b) conflict with or result in a
violation or breach of any provision of any Law or Governmental Order applicable
to Seller or the Company; (c) does not require the consent, notice or other
action by any Person under, conflict with, result in a violation or breach of,
constitute a default or an event that, with or without notice or lapse of time
or both, would constitute a default under, result in the acceleration of or
create in any party the right to accelerate, terminate, modify or cancel any
Contract to which Seller or the Company are a party or by which Seller or the
Company are bound or to which any of their respective properties and assets are
subject (including any Material Contract) or any Permit affecting the
properties, assets or business of the Company; or (d) result in the creation or
imposition of any Encumbrance other than Permitted Encumbrances on any
properties or assets of the Company. No consent, approval, Permit, Governmental
Order, declaration or filing with, or notice to, any Governmental Authority is
required by or with respect to Seller or the Company in connection with the
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, except
with respect to the Buyer’s filings with the Securities and Exchange Commission
(“SEC”).

 

Section 3.06 Financial Statements. Complete copies of the Company’s Unaudited
Financial Statements consisting of the balance sheet of the Company as of
December 31 in each of the years 2016 and 2017 and the related statements of
income and retained earnings, stockholders’ equity and cash flow for the years
then ended (the “Unaudited Financial Statements”), and Unaudited Financial
Statements consisting of the balance sheet of the Company as at December 31,
2017 and the related statements of income and retained earnings, stockholders’
equity and cash flow for the three-month period then ended (the “Interim
Financial Statements” and together with the Unaudited Financial Statements, the
“Financial Statements”) have been delivered to Buyer. The Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis
throughout the period involved, subject, in the case of the Interim Financial
Statements, to normal and recurring year-end adjustments (the effect of which
will not be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those presented in the Unaudited Financial
Statements). The Financial Statements are based on the books and records of the
Company, and fairly present in all material respects the financial condition of
the Company as of the respective dates they were prepared and the results of the
operations of the Company for the periods indicated. The balance sheet of the
Company as of December 31, 2017 is referred to herein as the “Balance Sheet” and
the date thereof as the “Balance Sheet Date.” The Company maintains a standard
system of accounting established and administered in accordance with GAAP.

 

Section 3.07 Undisclosed Liabilities. Except as set forth on Schedule 3.07, the
Company has no liabilities, obligations or commitments of any nature whatsoever,
asserted or unasserted, known or unknown, absolute or contingent, accrued or
unaccrued, matured or unmatured or otherwise (“Liabilities”), except (a) those
which are adequately reflected or reserved against in the Balance Sheet as of
the Balance Sheet Date, and (b) those which have been incurred in the ordinary
course of business consistent with past practice since the Balance Sheet Date
and which are not, individually or in the aggregate, material in amount.

 

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Section 3.08 Absence of Certain Changes, Events and Conditions. Since the
Balance Sheet Date, and other than in the ordinary course of business consistent
with past practice or as set forth on Schedule 3.08, there has not been, with
respect to the Company, any:

 

(a) event, occurrence or development that has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(b) amendment of the charter, by-laws or other organizational documents of the
Company;

 

(c) split, combination or reclassification of any shares of its capital stock;

 

(d) issuance, sale or other disposition of any of its capital stock, or grant of
any options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;

 

(e) declaration or payment of any dividends or distributions on or in respect of
any of its capital stock or redemption, purchase or acquisition of its capital
stock;

 

(f) material change in any method of accounting or accounting practice of the
Company, except as required by GAAP or as disclosed in the notes to the
Financial Statements;

 

(g) material change in the Company’s cash management practices and its policies,
practices and procedures with respect to collection of accounts receivable,
establishment of reserves for uncollectible accounts, accrual of accounts
receivable, inventory control, prepayment of expenses, payment of trade accounts
payable, accrual of other expenses, deferral of revenue and acceptance of
customer deposits;

 

(h) entry into any Contract that would constitute a Material Contract;

 

(i) incurrence, assumption or guarantee of any indebtedness for borrowed money
except unsecured current obligations and Liabilities incurred in the ordinary
course of business consistent with past practice;

 

(j) transfer, assignment, sale or other disposition of any of the assets shown
or reflected in the Balance Sheet since the Balance Sheet Date or cancellation
of any debts or entitlements;

 

(k) transfer, assignment or grant of any license or sublicense of any material
rights under or with respect to any Intellectual Property;

 

(l) material damage, destruction or loss (whether or not covered by insurance)
to its property;

 

(m) any capital investment in, or any loan to, any other Person;

 

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(n) acceleration, termination, material modification to or cancellation of any
material Contract (including, but not limited to, any Material Contract) to
which the Company is a party or by which it is bound;

 

(o) any material capital expenditures;

 

(p) imposition of any Encumbrance upon any of the Company properties, capital
stock or assets, tangible or intangible;

 

(q) (i) grant of any bonuses, whether monetary or otherwise, or increase in any
wages, salary, severance, pension or other compensation or benefits in respect
of its employees, officers, directors, independent contractors or consultants,
other than as provided for in any written agreements or required by applicable
Law, (ii) material change in the terms of employment for any employee or any
termination of any employees, or (iii) action to accelerate the vesting or
payment of any compensation or benefit for any employee, officer, director,
independent contractor or consultant;

 

(r) except with respect to Kozaris, the adoption, modification or termination of
any: (i) employment, severance, retention or other agreement with any current or
former employee, officer, director, independent contractor or consultant, (ii)
Benefit Plan or (iii) collective bargaining or other agreement with a Union, in
each case whether written or oral;

 

(s) any loan to (or forgiveness of any loan to), or entry into any other
transaction with, any of its stockholders, directors, officers and employees;

 

(t) entry into a new line of business or abandonment or discontinuance of
existing lines of business;

 

(u) adoption of any plan of merger, consolidation, reorganization, liquidation
or dissolution or filing of a petition in bankruptcy under any provisions of
federal or state bankruptcy Law or consent to the filing of any bankruptcy
petition against it under any similar Law;

 

(v) purchase, lease or other acquisition of the right to own, use or lease any
property or assets for an amount in excess of $10,000, individually (in the case
of a lease, per annum) or $25,000 in the aggregate (in the case of a lease, for
the entire term of the lease, not including any option term), except for
purchases of inventory or supplies in the ordinary course of business consistent
with past practice;

 

(w) acquisition by merger or consolidation with, or by purchase of a substantial
portion of the assets or stock of, or by any other manner, any business or any
Person or any division thereof;

 

(x) action by the Company to make, change or rescind any Tax election, amend any
Tax Return or take any position on any Tax Return, take any action, omit to take
any action or enter into any other transaction that would have the effect of
increasing the Tax liability or reducing any Tax asset of Buyer in respect of
any Post-Closing Tax Period; or

 

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(y) any Contract to do any of the foregoing, or any action or omission that
would result in any of the foregoing.

 

Section 3.09 Material Contracts.

 

(a) Section 3.09(a) of the Disclosure Schedules lists each of the following
Contracts of the Company (such Contracts, together with all Contracts concerning
the occupancy, management or operation of any Real Property (including without
limitation, brokerage contracts) listed or otherwise disclosed in Section
3.10(b) of the Disclosure Schedules and all Contracts relating to Intellectual
Property set forth in Section 3.11(d) and Section 3.11(f) of the Disclosure
Schedules, being “Material Contracts”):

 

(i) each Contract of the Company involving aggregate consideration in excess of
$15,000 and which, in each case, cannot be cancelled by the Company without
penalty or without more than 90 days’ notice;

 

(ii) all Contracts that require the Company to purchase its total requirements
of any product or service from a third party or that contain “take or pay”
provisions;

 

(iii) all Contracts that provide for the indemnification by the Company of any
Person or the assumption of any Tax, environmental or other Liability of any
Person;

 

(iv) all Contracts that relate to the acquisition or disposition of any
business, a material amount of stock or assets of any other Person or any real
property (whether by merger, sale of stock, sale of assets or otherwise);

 

(v) all broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing consulting and advertising
Contracts to which the Company is a party;

 

(vi) all employment agreements and Contracts with independent contractors or
consultants (or similar arrangements) to which the Company is a party and which
are not cancellable without material penalty or without more than 90 days’
notice;

 

(vii) except for Contracts relating to trade receivables, all Contracts relating
to indebtedness (including, without limitation, guarantees) of the Company;

 

(viii) all Contracts with any Governmental Authority to which the Company is a
party;

 

(ix) all Contracts that limit or purport to limit the ability of the Company to
compete in any line of business or with any Person or in any geographic area or
during any period of time;

 

(x) any Contracts to which the Company is a party that provide for any joint
venture, partnership or similar arrangement by the Company;

 

(xi) all Contracts between or among the Company on the one hand and the Seller
or any Affiliate of the Seller (other than the Company) on the other hand;

 

  13

   

 

(xii) all collective bargaining agreements or Contracts with any Union to which
the Company is a party; and

 

(xiii) any other Contract that is material to the Company and not previously
disclosed pursuant to this Section 3.09.

 

(b) Each Material Contract is valid and binding on the Company in accordance
with its terms and is in full force and effect. None of the Company or, to
Seller’s Knowledge, any other party thereto is in breach of or default under (or
is alleged to be in breach of or default under) in any material respect, or has
provided or received any notice of any intention to terminate, any Material
Contract. No event or circumstance has occurred that, with notice or lapse of
time or both, would constitute an event of default under any Material Contract
or result in a termination thereof or would cause or permit the acceleration or
other changes of any right or obligation or the loss of any benefit thereunder.
Complete and correct copies of each Material Contract (including all
modifications, amendments and supplements thereto and waivers thereunder) have
been made available to Buyer.

 

Section 3.10 Title to Assets; Real Property.

 

(a) The Company has good and valid (and, in the case of owned Real Property,
good and marketable fee simple) title to, or a valid leasehold interest in, all
Real Property and personal property and other assets reflected in the Unaudited
Financial Statements or acquired after the Balance Sheet Date, other than
properties and assets sold or otherwise disposed of in the ordinary course of
business consistent with past practice since the Balance Sheet Date. All such
properties and assets (including leasehold interests) are free and clear of
Encumbrances except for the following (collectively referred to as “Permitted
Encumbrances”):

 

(i) those items set forth in Section 3.10(a) of the Disclosure Schedules;

 

(ii) liens for Taxes not yet due and payable or being contested in good faith by
appropriate procedures and for which there are adequate accruals or reserves on
the Balance Sheet;

 

(iii) mechanics, carriers’, workmen’s, repairmen’s or other like liens arising
or incurred in the ordinary course of business consistent with past practice or
amounts that are not delinquent and which are not, individually or in the
aggregate, material to the business of the Company;

 

(iv) easements, rights of way, zoning ordinances and other similar encumbrances
affecting Real Property which are not, individually or in the aggregate,
material to the business of the Company; or

 

(v) other than with respect to owned Real Property, liens arising under original
purchase price conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business consistent with past
practice which are not, individually or in the aggregate, material to the
business of the Company.

 

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(b) Section 3.10(b) of the Disclosure Schedules lists (i) the street address of
each parcel of Real Property; (ii) if such property is leased or subleased by
the Company, the landlord under the lease, the rental amount currently being
paid, and the expiration of the term of such lease or sublease for each leased
or subleased property; and (iii) the current use of such property. With respect
to owned Real Property, Kozaris has delivered or made available to Buyer true,
complete and correct copies of the deeds and other instruments (as recorded) by
which the Company acquired such Real Property, and copies of all title insurance
policies, opinions, abstracts and surveys in the possession of the Seller or the
Company and relating to the Real Property. With respect to leased Real Property,
Kozaris has delivered or made available to Buyer true, complete and correct
copies of any leases affecting the Real Property. The Company is not a sublessor
or grantor under any sublease or other instrument granting to any other Person
any right to the possession, lease, occupancy or enjoyment of any leased Real
Property. The use and operation of the Real Property in the conduct of the
Company’s business do not violate in any material respect any Law, covenant,
condition, restriction, easement, license, permit or agreement. No material
improvements constituting a part of the Real Property encroach on real property
owned or leased by a Person other than the Company. There are no Actions pending
nor, to the Seller’s Knowledge, threatened against or affecting the Real
Property or any portion thereof or interest therein in the nature or in lieu of
condemnation or eminent domain proceedings.

 

Section 3.11 Intellectual Property.

 

(a) “Company Intellectual Property” means all of the following intellectual
property that is owned by the Company and that in which the Company holds
exclusive or non-exclusive rights or interests granted by license from other
Persons, including the Seller (“Licensed Intellectual Property”):

 

(i) trademarks, service marks, trade names, brand names, logos, trade dress and
other proprietary indicia of goods and services, whether registered or
unregistered, and all registrations and applications for registration of such
trademarks, including intent-to-use applications, all issuances, extensions and
renewals of such registrations and applications and the goodwill connected with
the use of and symbolized by any of the foregoing;

 

(ii) internet domain names, whether or not trademarks, registered in any
top-level domain by any authorized private registrar or Governmental Authority;

 

(iii) original works of authorship in any medium of expression, whether or not
published, all copyrights (whether registered or unregistered), all
registrations and applications for registration of such copyrights, and all
issuances, extensions and renewals of such registrations and applications;

 

(iv) confidential information, formulas, designs, devices, technology, know-how,
research and development, inventions, methods, processes, compositions and other
trade secrets, whether or not patentable; and

 

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(v) patented and patentable designs and inventions, all design, plant and
utility patents, letters patent, utility models, pending patent applications and
provisional applications and all issuances, divisions, continuations,
continuations-in-part, reissues, extensions, reexaminations and renewals of such
patents and applications.

 

(b) Section 3.11(b) of the Disclosure Schedules lists all Company Intellectual
Property that is either (i) subject to any issuance, registration, application
or other filing by, to or with any Governmental Authority or authorized private
registrar in any jurisdiction (collectively, “Intellectual Property
Registrations”), including registered trademarks, domain names and copyrights,
issued and reissued patents and pending applications for any of the foregoing;
or (ii) used in or necessary for the Company’s current or planned business or
operations. All required filings and fees related to the Intellectual Property
Registrations of the Company have been timely filed with and paid to the
relevant Governmental Authorities and authorized registrars, and all
Intellectual Property Registrations of the Company are otherwise in good
standing. Seller has provided Buyer with true and complete copies of file
histories, documents, certificates, office actions, correspondence and other
materials related to all Intellectual Property Registrations of the Company.

 

(c) Except as set forth in Section 3.11(c) of the Disclosure Schedules, the
Company owns, exclusively or jointly with other Persons, all right, title and
interest in and to the Company Intellectual Property, free and clear of
Encumbrances. Without limiting the generality of the foregoing, the Company has
entered into binding, written agreements with every current and former employee
of the Company, and with every current and former independent contractor,
whereby such employees and independent contractors (i) assign to the Company any
ownership interest and right they may have in the Company Intellectual Property;
and (ii) acknowledge the Company’s exclusive ownership of all Company
Intellectual Property. Sellers have provided Buyer with true and complete copies
of all such agreements. The Company is in full compliance with all legal
requirements applicable to the Company Intellectual Property and the Company’s
ownership and use thereof.

 

(d) Section 3.11(d) of the Disclosure Schedules lists all licenses, sublicenses
and other agreements whereby the Company is granted rights, interests and
authority, whether on an exclusive or non-exclusive basis, with respect to any
Licensed Intellectual Property that is used in or necessary for the Company’s
current or planned business or operations. Seller has provided Buyer with true
and complete copies of all such agreements. All such agreements are valid,
binding and enforceable between the Company and the other parties thereto, and
the Company and such other parties are in full compliance with the terms and
conditions of such agreements.

 

(e) The Company Intellectual Property and Licensed Intellectual Property of the
Company as currently or formerly owned, licensed or used by the Company or
proposed to be used, and the Company’s conduct of its business as currently and
formerly conducted and proposed to be conducted have not, do not and will not
infringe, violate or misappropriate the Intellectual Property of any Person.
Neither Seller nor the Company has received any communication, and no Action has
been instituted, settled or, to Seller’s Knowledge, threatened that alleges any
such infringement, violation or misappropriation, and none of the Company
Intellectual Property are subject to any outstanding Governmental Order.

 

  16

   

 

(f) Section 3.11(f) of the Disclosure Schedules lists all licenses, sublicenses
and other agreements pursuant to which the Company grants rights or authority to
any Person with respect to any Company Intellectual Property or Licensed
Intellectual Property of the Company. Seller has provided Buyer with true and
complete copies of all such agreements. All such agreements are valid, binding
and enforceable between the Company and the other parties thereto, and the
Company and such other parties are in full compliance with the terms and
conditions of such agreements. No Person has infringed, violated or
misappropriated, or is infringing, violating or misappropriating, any Company
Intellectual Property.

 

(g) Notwithstanding the foregoing provisions of this Section 3.11, Section
3.11(g) of the Disclosure Schedules lists all intellectual property owned by the
Founders.

 

Section 3.12 Inventory. As of the date hereof the inventory of the Company
described in Schedule 3.12 at the location described therein at least three (3)
days prior closing, the Company shall provide an independently certified updated
inventory list to the Buyer.

 

Section 3.13 Accounts Receivable. The accounts receivable reflected on the
Interim Balance Sheet and the accounts receivable arising after the date thereof
(a) have arisen from bona fide transactions entered into by the Company
involving the sale of goods or the rendering of services in the ordinary course
of business consistent with past practice; (b) constitute only valid, undisputed
claims of the Company not subject to claims of set-off or other defenses or
counterclaims other than normal cash discounts accrued in the ordinary course of
business consistent with past practice; and (c) subject to a reserve for bad
debts shown on the Interim Balance Sheet or, with respect to accounts receivable
arising after the Interim Balance Sheet Date, on the accounting records of the
Company, are to the Seller’s Knowledge collectible in full. The reserve for bad
debts shown on the Interim Balance Sheet or, with respect to accounts receivable
arising after the Balance Sheet Date, on the accounting records of the Company
have been determined in accordance with GAAP, consistently applied, subject to
normal year-end adjustments and the absence of disclosures normally made in
footnotes.

 

Section 3.14 Customers. Section 3.14 of the Disclosure Schedules sets forth (i)
each customer who has paid aggregate consideration to the Company for goods or
services rendered in an amount greater than or equal to $50,000 for each of the
two most recent fiscal years (collectively, the “Material Customers”); and (ii)
the amount of consideration paid by each Material Customer during such periods.
Except as set forth in Section 3.14 of the Disclosure Schedules, the Company has
not received any notice, and has no reason to believe, that any of its Material
Customers has ceased, or intends to cease after the Closing, to use its goods or
services or to otherwise terminate or materially reduce its relationship with
the Company.

 

  17

   

 

Section 3.15 Insurance. Section 3.15 of the Disclosure Schedules sets forth a
true and complete list of all current policies or binders of fire, liability,
product liability, umbrella liability, real and personal property, workers’
compensation, vehicular, directors’ and officers’ liability, fiduciary liability
and other casualty and property insurance maintained by Seller or its Affiliates
(including the Company) and relating to the assets, business, operations,
employees, officers and directors of the Company (collectively, the “Insurance
Policies”) and true and complete copies of such Insurance Policies have been
made available to Buyer. Such Insurance Policies are in full force and effect
and shall remain in full force and effect following the consummation of the
transactions contemplated by this Agreement. The Seller or any of his Affiliates
(including the Company) has not received any written notice of cancellation of,
premium increase with respect to, or alteration of coverage under, any of such
Insurance Policies. All premiums due on such Insurance Policies have either been
paid or, if due and payable prior to Closing, will be paid prior to Closing in
accordance with the payment terms of each Insurance Policy. The Insurance
Policies do not provide for any retrospective premium adjustment or other
experience-based liability on the part of the Company. All such Insurance
Policies (a) are valid and binding in accordance with their terms; (b) are
provided by carriers who are financially solvent; and (c) have not been subject
to any lapse in coverage. Except as set forth on Section 3.15 of the Disclosure
Schedules, there are no claims related to the business of the Company pending
under any such Insurance Policies as to which coverage has been questioned,
denied or disputed or in respect of which there is an outstanding reservation of
rights. The Seller, nor any of its Affiliates (including the Company) is in
default under, or has otherwise failed to comply with, in any material respect,
any provision contained in any such Insurance Policy. The Insurance Policies are
of the type and in the amounts customarily carried by Persons conducting a
business similar to the Company and are sufficient for compliance with all
applicable Laws and Contracts to which the Company is a party or by which it is
bound.

 

Section 3.16 Legal Proceedings; Governmental Orders.

 

(a) There are no Actions pending or, to Seller’s Knowledge, threatened (a)
against or by the Company affecting any of its properties or assets (or by or
against the Sellers or any Affiliate thereof and relating to the Company); or
(b) against or by the Company, the Seller or any Affiliate of Seller that
challenges or seeks to prevent, enjoin or otherwise delay the transactions
contemplated by this Agreement. No event has occurred or circumstances exist
that may give rise to, or serve as a basis for, any such Action.

 

(b) There are no outstanding Governmental Orders and no unsatisfied judgments,
penalties or awards against or affecting the Company or any of its properties or
assets.

 

Section 3.17 Compliance With Laws; Permits.  

 

(a) To the Seller’s Knowledge, subject to any filings required pursuant to the
transaction contemplated by this Agreement, the Company has complied, and is now
complying, with all Laws applicable to it or its business, properties or assets.

 

(b) All Permits required for the Company to conduct its business have been
obtained by it and are valid and in full force and effect. All fees and charges
with respect to such Permits as of the date hereof have been paid in full.
Section 3.17(b) of the Disclosure Schedules lists all current Permits issued to
the Company, including the names of the Permits and their respective dates of
issuance and expiration. No event has occurred that, with or without notice or
lapse of time or both, would reasonably be expected to result in the revocation,
suspension, lapse or limitation of any Permit set forth in Section 3.17(b) of
the Disclosure Schedules.

 

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Section 3.18 Environmental Matters.

 

(a) The Company is currently and has been in compliance with all Environmental
Laws and has not, and the Seller and the Company have not, received from any
Person any: (i) Environmental Notice or Environmental Claim; or (ii) written
request for information pursuant to Environmental Law, which, in each case,
either remains pending or unresolved, or is the source of ongoing obligations or
requirements as of the Closing Date.

 

(b) The Company has obtained and is in material compliance with all
Environmental Permits (each of which is disclosed in Section 3.18(b) of the
Disclosure Schedules) necessary for the ownership, lease, operation or use of
the business or assets of the Company and all such Environmental Permits are in
full force and effect and shall be maintained in full force and effect by the
Company through the Closing Date in accordance with Environmental Law, and
neither the Seller nor the Company is aware of any condition, event or
circumstance that might prevent or impede, after the Closing Date, the
ownership, lease, operation or use of the business or assets of the Company as
currently carried out. With respect to any such Environmental Permits, the
Seller and the Company have undertaken, or will undertake prior to the Closing
Date, all measures necessary to facilitate transferability of the same, and
neither the Company nor the Seller are aware of any condition, event or
circumstance that might prevent or impede the transferability of the same, nor
have they received any Environmental Notice or written communication regarding
any material adverse change in the status or terms and conditions of the same.

 

(c) Neither the Company nor the Seller have retained or assumed, by contract or
operation of Law, any liabilities or obligations of third parties under
Environmental Law.

 

Section 3.19 Employee Benefit Matters.

 

(a) Section 3.19(a) of the Disclosure Schedules contains a true and complete
list of each pension, benefit, retirement, compensation, profit-sharing,
deferred compensation, incentive, performance award, phantom equity, stock or
stock-based, change in control, retention, severance, vacation, paid time off,
fringe-benefit and other similar agreement, plan, policy, program or arrangement
(and any amendments thereto), in each case whether or not reduced to writing and
whether funded or unfunded, including each “employee benefit plan” within the
meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or
not subject to ERISA, which is or has been maintained, sponsored, contributed
to, or required to be contributed to by the Company for the benefit of any
current or former employee, officer, director, retiree, independent contractor
or consultant of the Company or any spouse or dependent of such individual, or
under which the Company has or may have any Liability, or with respect to which
Buyer or any of its Affiliates would reasonably be expected to have any
Liability, contingent or otherwise (as listed on Section 3.19(a) of the
Disclosure Schedules, each, a “Benefit Plan”).

 

  19

   

 

(b) With respect to each Benefit Plan, Seller has made available to Buyer
accurate, current and complete copies of each of the following: (i) where the
Benefit Plan has been reduced to writing, the plan document together with all
amendments; (ii) where the Benefit Plan has not been reduced to writing, a
written summary of all material plan terms; (iii) where applicable, copies of
any trust agreements or other funding arrangements, custodial agreements,
insurance policies and contracts, administration agreements and similar
agreements, and investment management or investment advisory agreements, now in
effect or required in the future as a result of the transactions contemplated by
this Agreement or otherwise; (iv) copies of any summary plan descriptions,
summaries of material modifications, employee handbooks and any other written
communications (or a description of any oral communications) relating to any
Benefit Plan; (v) in the case of any Benefit Plan that is intended to be
qualified under Section 401(a) of the Code, a copy of the most recent
determination, opinion or advisory letter from the Internal Revenue Service;
(vi) in the case of any Benefit Plan for which a Form 5500 is required to be
filed, a copy of the most recently filed Form 5500, with schedules attached;
(vii) actuarial valuations and reports related to any Benefit Plans with respect
to the two most recently completed plan years; and (viii) copies of material
notices, letters or other correspondence from the Internal Revenue Service,
Department of Labor or Pension Benefit Guaranty Corporation relating to the
Benefit Plan.

 

(c) Each Benefit Plan (other than any multiemployer plan within the meaning of
Section 3(37) of ERISA (each a “Multiemployer Plan”) has been established,
administered and maintained in accordance with its terms and in compliance with
all applicable Laws (including ERISA and the Code). Each Benefit Plan that is
intended to be qualified under Section 401(a) of the Code (a “Qualified Benefit
Plan”) is so qualified and has received a favorable and current determination
letter from the Internal Revenue Service, or with respect to a prototype plan,
can rely on an opinion letter from the Internal Revenue Service to the prototype
plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and
that the plan and the trust related thereto are exempt from federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, and nothing has
occurred that could reasonably be expected to cause the revocation of such
determination letter from the Internal Revenue Service or the unavailability of
reliance on such opinion letter from the Internal Revenue Service, as
applicable, nor has such revocation or unavailability been threatened. Nothing
has occurred with respect to any Benefit Plan that has subjected or could
reasonably be expected to subject the Company or, with respect to any period on
or after the Closing Date, Buyer or any of its Affiliates, to a penalty under
Section 502 of ERISA or to tax or penalty under Section 4975 of the Code. All
benefits, contributions and premiums relating to each Benefit Plan have been
timely paid in accordance with the terms of such Benefit Plan and all applicable
Laws and accounting principles, and all benefits accrued under any unfunded
Benefit Plan have been paid, accrued or otherwise adequately reserved to the
extent required by, and in accordance with, GAAP.

 

  20

   

 

(d) Neither the Company nor any of its ERISA Affiliates has (i) incurred or
reasonably expects to incur, either directly or indirectly, any material
Liability under Title I or Title IV of ERISA or related provisions of the Code
or foreign Law relating to employee benefit plans; (ii) failed to timely pay
premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn from any
Benefit Plan; or (iv) engaged in any transaction which would give rise to
liability under Section 4069 or Section 4212(c) of ERISA.

 

(e) With respect to each Benefit Plan (i) no such plan is a Multiemployer
Plan/except as set forth in Section 3.19(e) of the Disclosure Schedules, no such
plan is a Multiemployer Plan, and all contributions required to be paid by the
Company or its ERISA Affiliates have been timely paid to the applicable
Multiemployer Plan; (ii) no such plan is a “multiple employer plan” within the
meaning of Section 413(c) of the Code or a “multiple employer welfare
arrangement” (as defined in Section 3(40) of ERISA); (iii) no Action has been
initiated by the Pension Benefit Guaranty Corporation to terminate any such plan
or to appoint a trustee for any such plan; (iv) no such plan is subject to the
minimum funding standards of Section 302 of ERISA or Section 412 of the Code,
and no plan listed in Section 3.19(e) of the Disclosure Schedules has failed to
satisfy the minimum funding standards of Section 302 of ERISA or Section 412 of
the Code; and (v) no “reportable event,” as defined in Section 4043 of ERISA,
has occurred with respect to any such plan.

 

(f) Except as required by applicable Law, no provision of any Benefit Plan or
collective bargaining agreement could reasonably be expected to result in any
limitation on Buyer or any of its Affiliates from amending or terminating any
Benefit Plan. The Company has no commitment or obligation and has not made any
representations to any employee, officer, director, independent contractor or
consultant, whether or not legally binding, to adopt, amend or modify any
Benefit Plan or any collective bargaining agreement, in connection with the
consummation of the transactions contemplated by this Agreement or otherwise.

 

(g) Other than as required under Section 601 et. seq. of ERISA or other
applicable Law, no Benefit Plan provides post-termination or retiree welfare
benefits to any individual for any reason, and neither the Company nor any of
its ERISA Affiliates has any Liability to provide post-termination or retiree
welfare benefits to any individual or ever represented, promised or contracted
to any individual that such individual would be provided with post-termination
or retiree welfare benefits.

 

(h) There is no pending or, to Seller’s Knowledge, threatened Action relating to
a Benefit Plan (other than routine claims for benefits), and no Benefit Plan has
within the three years prior to the date hereof been the subject of an
examination or audit by a Governmental Authority or the subject of an
application or filing under or is a participant in, an amnesty, voluntary
compliance, self-correction or similar program sponsored by any Governmental
Authority.

 

(i) There has been no amendment to, announcement by Seller, the Company or any
of their Affiliates relating to, or change in employee participation or coverage
under, any Benefit Plan or collective bargaining agreement that would increase
the annual expense of maintaining such plan above the level of the expense
incurred for the most recently completed fiscal year with respect to any
director, officer, employee, independent contractor or consultant, as
applicable. Neither the Seller, the Company, nor any of their Affiliates has any
commitment or obligation or has made any representations to any director,
officer, employee, independent contractor or consultant, whether or not legally
binding, to adopt, amend or modify any Benefit Plan or any collective bargaining
agreement.

 

  21

   

 

(j) Each Benefit Plan that is subject to Section 409A of the Code has been
operated in compliance with such section and all applicable regulatory guidance
(including notices, rulings and proposed and final regulations).

 

(k) Each individual who is classified by the Company as an independent
contractor has been properly classified for purposes of participation and
benefit accrual under each Benefit Plan.

 

(l) Neither the execution of this Agreement nor any of the transactions
contemplated by this Agreement will (either alone or upon the occurrence of any
additional or subsequent events): (i) entitle any current or former director,
officer, employee, independent contractor or consultant of the Company to
severance pay or any other payment; (ii) accelerate the time of payment, funding
or vesting, or increase the amount of compensation due to any such individual;
(iii) limit or restrict the right of the Company to merge, amend or terminate
any Benefit Plan; (iv) increase the amount payable under or result in any other
material obligation pursuant to any Benefit Plan; or (v) result in “excess
parachute payments” within the meaning of Section 280G(b) of the Code.

 

Section 3.20 Employment Matters.

 

(a) Section 3.20(a) of the Disclosure Schedules contains a list of all persons
who the Company reasonably believes shall be employees, independent contractors
or consultants of the Company as of the Closing Date, and sets forth for each
such individual the following: (i) name; (ii) title or position (including
whether full or part time); (iii) hire date; (iv) current annual base
compensation rate; (v) commission, bonus or other incentive-based compensation;
and (vi) a description of the fringe benefits provided to each such individual
as of the date hereof. As of the date hereof, all compensation, including wages,
commissions and bonuses, payable to employees, independent contractors or
consultants of the Company for services performed on or prior to the date hereof
have been paid in full (or accrued in full on the Balance Sheet) and there are
no outstanding agreements, understandings or commitments of the Company with
respect to any compensation, commissions or bonuses.

 

(b) The Company is not, and has never been, a party to, bound by, or negotiating
any collective bargaining agreement or other Contract with a union, works
council or labor organization (collectively, “Union”), and there is not, and has
never been, any Union representing or purporting to represent any employee of
the Company, and, no Union or group of employees is seeking or has sought to
organize employees for the purpose of collective bargaining. There has never
been, nor has there been any threat of, any strike, slowdown, work stoppage,
lockout, concerted refusal to work overtime or other similar labor disruption or
dispute affecting the Company or any of its employees. The Company has no duty
to bargain with any Union.

 

(c) The Company is and has been in compliance in all material respects with all
applicable Laws pertaining to employment and employment practices, including all
Laws relating to labor relations, equal employment opportunities, fair
employment practices, employment discrimination, harassment, retaliation,
reasonable accommodation, disability rights or benefits, immigration, wages,
hours, overtime compensation, child labor, hiring, promotion and termination of
employees, working conditions, meal and break periods, privacy, health and
safety, workers’ compensation, leaves of absence and unemployment insurance. All
individuals characterized and treated by the Company as independent contractors
or consultants are properly treated as independent contractors under all
applicable Laws. There are no Actions against the Company pending, or to the
Seller’s Knowledge, threatened to be brought or filed, by or with any
Governmental Authority or arbitrator in connection with the employment of any
current or former applicant, employee, consultant, volunteer, intern or
independent contractor of the Company, including, without limitation, any claim
relating to unfair labor practices, employment discrimination, harassment,
retaliation, equal pay, wage and hours or any other employment related matter
arising under applicable Laws.

 

  22

   

 

Section 3.21 Taxes. 

 

(a) All Tax Returns required to be filed on or before the Closing Date by the
Company have been, or will be, timely filed. Such Tax Returns are, or will be,
true, complete and correct in all respects. All Taxes due and owing by the
Company (whether or not shown on any Tax Return) have been, or will be, timely
paid.

 

(b) The Company has withheld and paid each Tax required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, customer, shareholder or other party, and complied with
all information reporting and backup withholding provisions of applicable Law.

 

(c) No claim has been made by any taxing authority in any jurisdiction where the
Company does not file Tax Returns that it is, or may be, subject to Tax by that
jurisdiction.

 

(d) No extensions or waivers of statutes of limitations have been given or
requested with respect to any Taxes of the Company.

 

(e) The amount of the Company’s Liability for unpaid Taxes for all periods
ending on or before December 31, 2017, does not, in the aggregate, exceed the
amount of accruals for Taxes (excluding reserves for deferred Taxes) reflected
on the Financial Statements. The amount of the Company’s Liability for unpaid
Taxes for all periods following the end of the recent period covered by the
Financial Statements shall not, in the aggregate, exceed the amount of accruals
for Taxes (excluding reserves for deferred Taxes) as adjusted for the passage of
time in accordance with the past custom and practice of the Company (and which
accruals shall not exceed comparable amounts incurred in similar periods in
prior years).

 

(f) Section 3.21(f) of the Disclosure Schedules sets forth:

 

(i) the taxable years of the Company as to which the applicable statutes of
limitations on the assessment and collection of Taxes have not expired;

 

  23

   

 

(ii) those years for which examinations by the taxing authorities have been
completed; and

 

(iii) those taxable years for which examinations by taxing authorities are
presently being conducted.

 

(g) All deficiencies asserted, or assessments made, against the Company as a
result of any examinations by any taxing authority have been fully paid.

 

(h) The Company is not a party to any Action by any taxing authority. There are
no pending or threatened Actions by any taxing authority.

 

(i) Seller has delivered to Buyer copies of all federal, state, local and
foreign income, franchise and similar Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by, the Company for
all Tax periods ending December 31, 2017.

 

(j) There are no Encumbrances for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company.

 

(k) The Company is not a party to, or bound by, any Tax indemnity, Tax-sharing
or Tax allocation agreement.

 

(l) The Company is not a party to, or bound by, any closing agreement or offer
in compromise with any taxing authority.

 

(m) No private letter rulings, technical advice memoranda or similar agreement
or rulings have been requested, entered into or issued by any taxing authority
with respect to the Company.

 

(n) The Company has not been a member of an affiliated, combined, consolidated
or unitary Tax group for Tax purposes. The Company has no Liability for Taxes of
any Person (other than the Company) under Treasury Regulations Section 1.1502-6
(or any corresponding provision of state, local or foreign Law), as transferee
or successor, by contract or otherwise.

 

(o) The Company has not agreed to make, nor is it required to make, any
adjustment under Sections 481(a) or 263A of the Code or any comparable provision
of state, local or foreign Tax Laws by reason of a change in accounting method
or otherwise. The Company has not taken any action that is not in accordance
with past practice that could defer a Liability for Taxes of the Company from
any Pre-Closing Tax Period to any Post-Closing Tax Period.

 

(p) The Company has not been a “distributing corporation” or a “controlled
corporation” in connection with a distribution described in Section 355 of the
Code.

 

(q) The Company is not, and has not been, a party to, or a promoter of, a
“reportable transaction” within the meaning of Section 6707A(c)(1) of the Code
and Treasury Regulations Section 1.6011 4(b).

 

(r) There is currently no limitation on the utilization of net operating losses,
capital losses, built-in losses, tax credits or similar items of the Company
under Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury
Regulations thereunder (and comparable provisions of state, local or foreign
Law).

 

  24

   

 

(s) Section 3.21(s) of the Disclosure Schedules sets forth all foreign
jurisdictions in which the Company is subject to Tax, is engaged in business or
has a permanent establishment. The Company has not entered into a gain
recognition agreement pursuant to Treasury Regulations Section 1.367(a)-8. The
Company has not transferred an intangible the transfer of which would be subject
to the rules of Section 367(d) of the Code.

 

(t) None of the assets of the Company is property that the Company is required
to treat as being owned by any other person pursuant to the so-called “safe
harbor lease” provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended.

 

Section 3.22 Books and Records. The minute books and stock record books of the
Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records of all
meetings, and actions taken by written consent of, the stockholders, the board
of directors and any committees of the board of directors of the Company, and no
meeting, or action taken by written consent, of any such stockholders, board of
directors or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Company.

 

Section 3.23 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction Document
based upon arrangements made by or on behalf of any Seller or the Company.

 

Section 3.24 Investment Representations.

 

(a) Seller is an “accredited investor” or with his purchaser representative, as
such term is defined in Rule 501(a) of Regulation D of the Securities Act,
satisfies the requirements of (b), (c) and (d) below.

 

(b) The Seller has substantial experience in evaluating and investing in
companies similar to the Buyer so that they are capable of evaluating the merits
and risks of its investment in the Buyer and have the capacity to protect their
own interests.

 

Section 3.25 Full Disclosure. No representation or warranty by the Seller or the
Company in this Agreement and no statement contained in the Disclosure Schedules
to this Agreement or any certificate or other document furnished or to be
furnished to Buyer pursuant to this Agreement contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statements contained therein, in light of the circumstances in which they are
made, not misleading. Notwithstanding anything to the contrary herein, the
Seller or the Company shall be entitled to update the disclosure schedule for
any material event or information occurs or Seller obtains knowledge of prior to
the Closing Date.

 

  25

   

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Sellers and the Company that the statements
contained in this Article IV are true and correct as of the date hereof.

 

Section 4.01 Organization, Authority and Qualification of Buyer. Buyer is a
corporation duly organized, validly existing and in good standing under the Laws
of the state of Nevada and has full corporate power and authority to own,
operate or lease the properties and assets now owned, operated or leased by it
and to carry on its business as it has been and is currently conducted. The
execution and delivery by Buyer of this Agreement and any other Transaction
Document to which Buyer is a party, the performance by Buyer of its obligations
hereunder and thereunder and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer, and (assuming due authorization, execution and delivery by
Buyer) this Agreement constitutes a legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms. When each other
Transaction Document to which Buyer is or will be a party has been duly executed
and delivered by Buyer (assuming due authorization, execution and delivery by
each other party thereto), such Transaction Document will constitute a legal and
binding obligation of Buyer enforceable against it in accordance with its terms.

 

ARTICLE V

COVENANTS

 

Section 5.01 Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as otherwise provided in this Agreement or consented
to in writing by Buyer (which consent shall not be unreasonably withheld or
delayed), Seller shall, and shall cause the Company to, (x) conduct the business
of the Company in the ordinary course of business consistent with past practice;
and (y) use reasonable best efforts to maintain and preserve intact the current
organization, business and franchise of the Company and to preserve the rights,
franchises, goodwill and relationships of its employees, customers, lenders,
suppliers, regulators and others having business relationships with the Company.
Without limiting the foregoing, from the date hereof until the Closing Date,
Seller shall:

 

(a) cause the Company to preserve and maintain all of its Permits;

 

(b) cause the Company to pay its debts, Taxes and other obligations when due;

 

(c) cause the Company to maintain the properties and assets owned, operated or
used by the Company in the same condition as they were on the date of this
Agreement, subject to reasonable wear and tear;

 

(d) cause the Company to continue in full force and effect without modification
all Insurance Policies, except as required by applicable Law;

 

  26

   

 

(e) cause the Company to defend and protect its properties and assets from
infringement or usurpation;

 

(f) cause the Company to perform all of its obligations under all Contracts
relating to or affecting its properties, assets or business;

 

(g) cause the Company to maintain its books and records in accordance with past
practice;

 

(h) cause the Company to comply in all material respects with all applicable
Laws; and

 

(i) cause the Company not to take or permit any action that would cause any of
the changes, events or conditions described in Section 3.08 to occur.

 

Section 5.02 Access to Information. From the date hereof until the Closing,
Seller shall, subject to any non-disclosure and confidentiality requirements,
cause the Company to, (a) afford Buyer and its Representatives reasonable and
free access to during regular business hours and the right to inspect all of the
Real Property, properties, assets, premises, books and records, Contracts and
other documents and data related to the Company; (b) furnish Buyer and its
Representatives with such financial, operating and other data and information
related to the Company as Buyer or any of its Representatives may reasonably
request; and (c) instruct Seller and the Company to cooperate with Buyer in its
investigation of the Company. Any investigation pursuant to this Section 5.02
shall be conducted in such manner as not to interfere unreasonably with the
conduct of the business of Seller or the Company. No investigation by Buyer or
other information received by Buyer shall operate as a waiver or otherwise
affect any representation, warranty or agreement given or made by Seller or the
Company in this Agreement.

 

Section 5.03 No Solicitation of Other Bids.

 

(a) Seller shall not, and shall not authorize or permit any of their Affiliates
(including the Company) or any of its or their Representatives to, directly or
indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries
regarding an Acquisition Proposal; (ii) enter into discussions or negotiations
with, or provide any information to, any Person concerning a possible
Acquisition Proposal; or (iii) enter into any agreements or other instruments
(whether or not binding) regarding an Acquisition Proposal. Seller shall
immediately cease and cause to be terminated, and shall cause their Affiliates
(including the Company) and all of their Representatives to immediately cease
and cause to be terminated, all existing discussions or negotiations with any
Persons conducted heretofore with respect to, or that could lead to, an
Acquisition Proposal. For purposes hereof, “Acquisition Proposal” shall mean any
inquiry, proposal or offer from any Person (other than Buyer or any of its
Affiliates) concerning (i) a merger, consolidation, liquidation,
recapitalization, share exchange or other business combination transaction
involving the Company; (ii) the issuance or acquisition of shares of capital
stock or other equity securities of the Company; or (iii) the sale, lease,
exchange or other disposition of any significant portion of the Company’s
properties or assets.

 

  27

   

 

(b) In addition to the other obligations under this Section 5.03, Seller shall
promptly (and in any event within three Business Days after receipt thereof by
Seller or their Representatives) advise Buyer orally and in writing of any
Acquisition Proposal, any request for information with respect to any
Acquisition Proposal, or any inquiry with respect to or which could reasonably
be expected to result in an Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry, and the identity of
the Person making the same.

 

(c) Seller agree that the rights and remedies for noncompliance with this
Section 5.03 shall include having such provision specifically enforced by any
court having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach shall cause irreparable injury to Buyer and that
money damages would not provide an adequate remedy to Buyer.

 

Section 5.04 Notice of Certain Events.

 

(a) From the date hereof until the Closing, Seller shall promptly notify Buyer
in writing of:

 

(i) any fact, circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (B) has resulted in, or could
reasonably be expected to result in, any representation or warranty made by
Seller or the Company hereunder not being true and correct or (C) has resulted
in, or could reasonably be expected to result in, the failure of any of the
conditions set forth in Section 7.02 to be satisfied;

 

(ii) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

 

(iii) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; and

 

(iv) any Actions commenced or, to Seller’s Knowledge, threatened against,
relating to or involving or otherwise affecting Seller or the Company that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.16 or that relates to the consummation of the
transactions contemplated by this Agreement.

 

(b) Buyer’s receipt of information pursuant to this Section 5.04 shall not
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by Sellers or the Company in this Agreement and shall
not be deemed to amend or supplement the Disclosure Schedules.

 

  28

   

 

Section 5.05 Confidentiality. From and after the Closing, Seller shall, and
shall cause its Affiliates to, hold, and shall use its reasonable best efforts
to cause its or their respective Representatives to hold, in confidence any and
all information, whether written or oral, concerning the Company, except to the
extent that Seller can show that such information (a) is generally available to
and known by the public through no fault of Seller, any of their Affiliates or
their respective Representatives; or (b) is lawfully acquired by Seller, any of
their Affiliates or their respective Representatives from and after the Closing
from sources which are not prohibited from disclosing such information by a
legal, contractual or fiduciary obligation. If the Seller or any of their
Affiliates or their respective Representatives are compelled to disclose any
information by judicial or administrative process or by other requirements of
Law, Seller shall promptly notify Buyer in writing and shall disclose only that
portion of such information which Seller is advised by its counsel in writing is
legally required to be disclosed, provided that Seller shall use reasonable best
efforts to obtain an appropriate protective order or other reasonable assurance
that confidential treatment will be accorded such information.

 

Section 5.06 Governmental Approvals and Consents

 

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be
made, all filings and submissions required under any Law applicable to such
party or any of its Affiliates; and (ii) use reasonable best efforts to obtain,
or cause to be obtained, all consents, authorizations, orders and approvals from
all Governmental Authorities that may be or become necessary for its execution
and delivery of this Agreement and the performance of its obligations pursuant
to this Agreement and the other Transaction Documents. Each party shall
cooperate fully with the other party and its Affiliates in promptly seeking to
obtain all such consents, authorizations, orders and approvals. The parties
hereto shall not willfully take any action that will have the effect of
delaying, impairing or impeding the receipt of any required consents,
authorizations, orders and approvals.

 

(b) Seller, the Company, and Buyer shall use reasonable best efforts to give all
notices to, and obtain all consents from, all third parties that are described
in Section 3.05 of the Disclosure Schedules, if any.

 

(c) Without limiting the generality of the parties’ undertakings pursuant to
subsections (a) and (b) above, each of the parties hereto shall use all
reasonable best efforts to:

 

(i) respond to any inquiries by any Governmental Authority regarding antitrust
or other matters with respect to the transactions contemplated by this Agreement
or any agreement or document contemplated hereby;

 

(ii) avoid the imposition of any order or the taking of any action that would
restrain, alter or enjoin the transactions contemplated by this Agreement or any
agreement or document contemplated hereby; and

 

(iii) in the event any Governmental Order adversely affecting the ability of the
parties to consummate the transactions contemplated by this Agreement or any
agreement or document contemplated hereby has been issued, to have such
Governmental Order vacated or lifted.

 

  29

   

 

(d) All analyses, appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of either party
before any Governmental Authority or the staff or regulators of any Governmental
Authority, in connection with the transactions contemplated hereunder (but, for
the avoidance of doubt, not including any interactions between Seller or the
Company with Governmental Authorities in the ordinary course of business, any
disclosure which is not permitted by Law or any disclosure containing
confidential information) shall be disclosed to the other party hereunder in
advance of any filing, submission or attendance, it being the intent that the
parties will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any such analyses, appearances,
meetings, discussions, presentations, memoranda, briefs, filings, arguments, and
proposals. Each party shall give notice to the other party with respect to any
meeting, discussion, appearance or contact with any Governmental Authority or
the staff or regulators of any Governmental Authority, with such notice being
sufficient to provide the other party with the opportunity to attend and
participate in such meeting, discussion, appearance or contact.

 

(e) Notwithstanding the foregoing, nothing in this Section 5.05 shall require,
or be construed to require, Buyer or any of its Affiliates to agree to (i) sell,
hold, divest, discontinue or limit, before or after the Closing Date, any
assets, businesses or interests of Buyer or any of its respective Affiliates;
(ii) any conditions relating to, or changes or restrictions in, the operations
of any such assets, businesses or interests which, in either case, could
reasonably be expected to result in a Material Adverse Effect or materially and
adversely impact the economic or business benefits to Buyer of the transactions
contemplated by this Agreement; or (iii) any material modification or waiver of
the terms and conditions of this Agreement.

 

Section 5.07 Books and Records.

 

(a) In order to facilitate the resolution of any claims made against or incurred
by Seller prior to the Closing, or for any other reasonable purpose, for a
period of three (3) years after the Closing, Buyer shall retain the books and
records (including personnel files) of the Company relating to periods prior to
the Closing in a manner reasonably consistent with the prior practices of the
Company.

 

(b) In order to facilitate the resolution of any claims made by or against or
incurred by Buyer or the Company after the Closing, or for any other reasonable
purpose, for a period of three (3) years following the Closing, the Seller
shall:

 

(i) retain the books and records (including personnel files) of the Seller which
relate to the Company and its operations for periods prior to the Closing; and

 

(ii) upon reasonable notice, afford the Representatives of Buyer or the Company
reasonable access (including the right to make, at Buyer’s expense,
photocopies), during normal business hours, to such books and records;

 

provided, however, that any books and records related to Tax matters shall be
retained pursuant to the periods set forth in Article VI.

 

(c) Neither Buyer nor Seller shall be obligated to provide the other party with
access to any books or records (including personnel files) pursuant to this
Section 5.07 where such access would violate any Law.

 

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Section 5.08 Closing Conditions From the date hereof until the Closing, each
party hereto shall, and Seller shall cause the Company to, use reasonable best
efforts to take such actions as are necessary to expeditiously satisfy the
closing conditions set forth in Article VII hereof.

 

Section 5.09 Public Announcements. Unless otherwise required by applicable Law
(based upon the reasonable advice of counsel), no party to this Agreement shall
make any public announcements in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media without the
prior written consent of the other party (which consent shall not be
unreasonably withheld or delayed), and the parties shall cooperate as to the
timing and contents of any such announcement.

 

Section 5.10 Further Assurances. Following the Closing, each of the parties
hereto shall, and shall cause their respective Affiliates to, execute and
deliver such additional documents, instruments, conveyances and assurances and
take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this
Agreement.

 

ARTICLE VI

TAX MATTERS

 

Section 6.01 Tax Covenants.

 

(a) Without the prior written consent of Buyer, Seller (and, prior to the
Closing, the Company, its Affiliates and their respective Representatives) shall
not, to the extent it may affect, or relate to, the Company, make, change or
rescind any Tax election, amend any Tax Return or take any position on any Tax
Return, take any action, omit to take any action or enter into any other
transaction that would have the effect of increasing the Tax liability or
reducing any Tax asset of Buyer or the Company in respect of any Post-Closing
Tax Period. Sellers agree that Buyer is to have no liability for any Tax
resulting from any action of Seller, the Company, its Affiliates or any of their
respective Representatives, and agrees to indemnify and hold harmless Buyer
(and, after the Closing Date, the Company) against any such Tax or reduction of
any Tax asset.

 

(b) All transfer, documentary, sales, use, stamp, registration, value added and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement and the other Transaction Documents (including
any real property transfer Tax and any other similar Tax) shall be borne and
paid by Sellers when due. Sellers shall, at their own expense, timely file any
Tax Return or other document with respect to such Taxes or fees (and Buyer shall
cooperate with respect thereto as necessary).

 

(c) Buyer shall prepare, or cause to be prepared, all Tax Returns required to be
filed by the Company after the Closing Date with respect to a Pre-Closing Tax
Period. Any such Tax Return shall be prepared in a manner consistent with past
practice (unless otherwise required by Law) and without a change of any election
or any accounting method.

 

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Section 6.02 Termination of Existing Tax Sharing Agreements. Any and all
existing Tax sharing agreements (whether written or not) binding upon the
Company shall be terminated as of the Closing Date. After such date neither the
Company, Seller nor any of Seller’s Affiliates and their respective
Representatives shall have any further rights or liabilities thereunder.

 

Section 6.03 Tax Indemnification. Except in connection with Section 2.06, Seller
shall indemnify the Company, Buyer, and each Buyer Indemnitee and hold them
harmless from and against (a) any Loss attributable to any material breach of or
inaccuracy in any representation or warranty made in Article III; (b) any Loss
attributable to any breach or violation of, or failure to fully perform, any
covenant, agreement, undertaking or obligation in Article VI; (c) all Taxes of
the Company or relating to the business of the Company for all Pre-Closing Tax
Periods; (d) all Taxes of any member of an affiliated, consolidated, combined or
unitary group of which the Company (or any predecessor of the Company) is or was
a member on or prior to the Closing Date by reason of a liability under Treasury
Regulation Section 1.1502-6 or any comparable provisions of foreign, state or
local Law; and (e) any and all Taxes of any person imposed on the Company
arising under the principles of transferee or successor liability or by
contract, relating to an event or transaction occurring before the Closing Date.

 

Section 6.04 Straddle Period. In the case of Taxes that are payable with respect
to a taxable period that begins before and ends after the Closing Date (each
such period, a “Straddle Period”), the portion of any such Taxes that are
treated as Pre-Closing Taxes for purposes of this Agreement shall be:

 

(a) in the case of Taxes based upon, or related to, income or receipts, deemed
equal to the amount which would be payable if the taxable year ended with the
Closing Date; and

 

(b) in the case of other Taxes, deemed to be the amount of such Taxes for the
entire period multiplied by a fraction the numerator of which is the number of
days in the period ending on the Closing Date and the denominator of which is
the number of days in the entire period.

 

Section 6.05 Contests. Buyer agrees to give written notice to Seller of the
receipt of any written notice by the Company, Buyer or any of Buyer’s Affiliates
which involves the assertion of any claim, or the commencement of any Action, in
respect of which an indemnity may be sought by Buyer pursuant to this Article VI
(a “Tax Claim”); provided, that failure to comply with this provision shall not
affect Buyer’s right to indemnification hereunder. Buyer shall control the
contest or resolution of any Tax Claim; provided, however, that Buyer shall
obtain the prior written consent of Seller (which consent shall not be
unreasonably withheld or delayed) before entering into any settlement of a claim
or ceasing to defend such claim; and, provided further, that Seller shall be
entitled to participate in the defense of such claim and to employ counsel of
its choice for such purpose, the fees and expenses of which separate counsel
shall be borne solely by Seller.

 

  32

   

 

Section 6.06 Cooperation and Exchange of Information. Seller and Buyer shall
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return pursuant to this
Article VI or in connection with any audit or other proceeding in respect of
Taxes of the Company. Such cooperation and information shall include providing
copies of relevant Tax Returns or portions thereof, together with accompanying
schedules, related work papers and documents relating to rulings or other
determinations by tax authorities. The Buyer shall retain all Tax Returns,
schedules and work papers, records and other documents in its possession
relating to Tax matters of the Company for any taxable period beginning before
the Closing Date until the expiration of the statute of limitations of the
taxable periods to which such Tax Returns and other documents relate, without
regard to extensions except to the extent notified by the other party in writing
of such extensions for the respective Tax periods. Prior to transferring,
destroying or discarding any Tax Returns, schedules and work papers, records and
other documents in its possession relating to Tax matters of the Company for any
taxable period beginning before the Closing Date, Buyer (as the case may be)
shall provide the other party with reasonable written notice and offer the other
party the opportunity to take custody of such materials.

 

Section 6.07 Tax Treatment of Indemnification Payments. Any indemnification
payments pursuant to this Article VI shall be treated as an adjustment to the
Purchase Price by the parties for Tax purposes, unless otherwise required by
Law.

 

Section 6.08 Survival. Notwithstanding anything in this Agreement to the
contrary, the provisions of Section 3.21 and this Article VI shall survive for
the full period of all applicable statutes of limitations (giving effect to any
waiver, mitigation or extension thereof) plus 60 days.

 

Section 6.09 Overlap. To the extent that any obligation or responsibility
pursuant to Article VIII may overlap with an obligation or responsibility
pursuant to this Article VI, the provisions of this Article VI shall govern.

 

ARTICLE VII

CONDITIONS TO CLOSING

 

Section 7.01 Conditions to Obligations of All Parties. The obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:

 

(a) No Governmental Authority shall have enacted, issued, promulgated, enforced
or entered any Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal, otherwise
restraining or prohibiting consummation of such transactions or causing any of
the transactions contemplated hereunder to be rescinded following completion
thereof.

 

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Section 7.02 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the
following conditions:

 

(a) Other than the representations and warranties of Seller contained in Section
3.01, Section 3.02, Section 3.03, Section 3.06 and Section 3.23, the
representations and warranties of Seller and the Company contained in this
Agreement, the other Transaction Documents and any certificate or other writing
delivered pursuant hereto shall be true and correct in all respects (in the case
of any representation or warranty qualified by materiality or Material Adverse
Effect) or in all material respects (in the case of any representation or
warranty not qualified by materiality or Material Adverse Effect) on and as of
the date hereof and on and as of the Closing Date with the same effect as though
made at and as of such date (except those representations and warranties that
address matters only as of a specified date, the accuracy of which shall be
determined as of that specified date in all respects). The representations and
warranties of Seller and the Company contained in Section 3.01, Section 3.02,
Section 3.03, Section 3.06 and Section 3.23 shall be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date with the
same effect as though made at and as of such date (except those representations
and warranties that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all respects).

 

(b) Seller and the Company shall have duly performed and complied in all
material respects with all agreements, covenants and conditions required by this
Agreement and each of the other Transaction Documents to be performed or
complied with by them prior to or on the Closing Date, including, but not
limited to, delivery of the Audited Financial Statements and satisfaction of all
Due Diligence Items.

 

(c) No Action shall have been commenced against Buyer, Seller or the Company,
which would prevent the Closing. No injunction or restraining order shall have
been issued by any Governmental Authority, and be in effect, which restrains or
prohibits any transaction contemplated hereby.

 

(d) All approvals, consents and waivers that are listed on Section 3.05 of the
Disclosure Schedules shall have been received, and executed counterparts thereof
shall have been delivered to Buyer at or prior to the Closing.

 

(e) From the date of this Agreement, there shall not have occurred any Material
Adverse Effect, nor shall any event or events have occurred that, individually
or in the aggregate, with or without the lapse of time, could reasonably be
expected to result in a Material Adverse Effect.

 

(f) The Transaction Documents (other than this Agreement) shall have been
executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Buyer.

 

(g) Indebtedness of the Company shall be no more than $1,500,000.

 

(h) The Transaction Documents (other than this Agreement) shall have been
executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Buyer.

 

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(i) Buyer shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of the Company certifying (i) that attached
thereto are true and complete copies of the Company’s organizational documents;
(ii) that attached thereto are true and complete copies of the Certificate of
Good Standing for the Company certified; (iii) that attached thereto are true
and complete copies of all resolutions adopted by the board of directors of the
Company that attached thereto are true and complete copies of all resolutions
adopted by the board of directors of the Company authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, and that all such resolutions are in full
force and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby; (iv) the names and signatures of the officers
of the Company authorized to sign this Agreement.

 

(j) Seller shall have delivered, or caused to be delivered, to Buyer stock
certificates evidencing the Shares, free and clear of Encumbrances, duly
endorsed in blank or accompanied by stock powers or other instruments of
transfer duly executed in blank and with all required stock transfer tax stamps
affixed.

 

(k) Seller shall have delivered to Buyer such other documents or instruments as
Buyer reasonably requests and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

 

(l) Seller shall have delivered to Buyer evidence (in form and substance
reasonably satisfactory to Buyer) that the Company’s and the Seller’s legal
counsel, investment bankers and other agents and representatives have been paid
in full, and that the Company has no liability (including any indemnification
obligations) to any of the Company’s or the Seller’s legal counsel, investment
bankers, agents or representatives.

 

Section 7.03 Conditions to Obligations of Seller and the Company. The
obligations of Seller and the Company to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment of Seller’s
and the Company’s waiver, at or prior to the Closing, of each of the following
conditions:

 

(a) The representations and warranties of Buyer contained in this Agreement, the
other Transaction Documents and any certificate or other writing delivered
pursuant hereto shall be true and correct in all respects (in the case of any
representation or warranty qualified by materiality or Material Adverse Effect)
or in all material respects (in the case of any representation or warranty not
qualified by materiality or Material Adverse Effect) on and as of the date
hereof and on and as of the Closing Date with the same effect as though made at
and as of such date (except those representations and warranties that address
matters only as of a specified date, the accuracy of which shall be determined
as of that specified date in all respects). The representations and warranties
of Buyer contained in Section 4.01 shall be true and correct in all respects on
and as of the date hereof and on and as of the Closing Date with the same effect
as though made at and as of such date.

 

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(b) Buyer shall have duly performed and complied in all material respects with
all agreements, covenants and conditions required by this Agreement and each of
the other Transaction Documents to be performed or complied with by it prior to
or on the Closing Date; provided, that, with respect to agreements, covenants
and conditions that are qualified by materiality, Buyer shall have performed
such agreements, covenants and conditions, as so qualified, in all respects.

 

(c) No injunction or restraining order shall have been issued by any
Governmental Authority, and be in effect, which restrains or prohibits any
material transaction contemplated hereby.

 

(d) The Transaction Documents (other than this Agreement) shall have been
executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Sellers.

 

(e) Seller shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Buyer certifying that attached thereto are
true and complete copies of all resolutions adopted by the board of directors of
Buyer authorizing the execution, delivery and performance of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, and that all such resolutions are in full force
and effect and are all the resolutions adopted in connection with the
transactions contemplated hereby and thereby.

 

(f) Buyer shall have delivered to Seller the Purchase Price

 

(g) Buyer shall have delivered to Seller such other documents or instruments as
Seller reasonably requests and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

 

(h) Buyer shall have delivered such corporate resolutions of the shareholder of
the Buyer and the Company authorizing and approving the election of Kozaris to
the Board of Directors of the Company.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.01 Survival. Subject to the limitations and other provisions of this
Agreement, the representations and warranties contained herein (other than any
representations or warranties contained in Section 3.21 which are subject to
Article VI) shall survive the Closing and shall remain in full force and effect
until the date that is three (3) years from the Closing Date; provided, that the
representations and warranties in Section 3.01, Section 3.03, Section 3.18,
Section 3.23, shall survive indefinitely and the representations and warranties
in Section 3.19 shall survive for the full period of all applicable statutes of
limitations (giving effect to any waiver, mitigation or extension thereof). All
covenants and agreements of the parties contained herein (other than any
covenants or agreements contained in Article VI which are subject to Article VI)
shall survive the Closing indefinitely or for the period explicitly specified
therein. Notwithstanding the foregoing, any claims asserted in good faith with
reasonable specificity (to the extent known at such time) and in writing by
notice from the non-breaching party to the breaching party prior to the
expiration date of the applicable survival period shall not thereafter be barred
by the expiration of the relevant representation or warranty and such claims
shall survive until finally resolved.

 

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Section 8.02 Indemnification by Seller. Subject to the other terms and
conditions of this Article VIII, Seller shall indemnify, jointly and severally,
and defend each of Buyer and the Company (collectively, the “Buyer Indemnitees”)
against, and shall hold each of them harmless from and against, and shall pay
and reimburse each of them for, any and all Losses incurred or sustained by, or
imposed upon, the Buyer Indemnitees based upon, arising out of, with respect to
or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Seller or the Company contained in this Agreement or in any certificate or
instrument delivered by or on behalf of Seller or the Company pursuant to this
Agreement (other than in respect of Section 3.21, it being understood that the
sole remedy for any such inaccuracy in or breach thereof shall be pursuant to
Article VI), as of the date such representation or warranty was made or as if
such representation or warranty was made on and as of the Closing Date (except
for representations and warranties that expressly relate to a specified date,
the inaccuracy in or breach of which will be determined with reference to such
specified date); or

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Seller or the Company pursuant to this Agreement (other than any
breach or violation of, or failure to fully perform, any covenant, agreement,
undertaking or obligation in Article VI, it being understood that the sole
remedy for any such breach, violation or failure shall be pursuant to Article
VI).

 

Section 8.03 Indemnification By Buyer. Subject to the other terms and conditions
of this Article VIII, Buyer shall indemnify and defend Seller and its Affiliates
and their respective Representatives (collectively, the “Seller Indemnitees”)
against, and shall hold each of them harmless from and against, and shall pay
and reimburse each of them for, any and all Losses incurred or sustained by, or
imposed upon, the Seller Indemnitees based upon, arising out of, with respect to
or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Buyer contained in this Agreement or in any certificate or instrument delivered
by or on behalf of Buyer pursuant to this Agreement, as of the date such
representation or warranty was made or as if such representation or warranty was
made on and as of the Closing Date (except for representations and warranties
that expressly relate to a specified date, the inaccuracy in or breach of which
will be determined with reference to such specified date); or

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Buyer pursuant to this Agreement (other than Article VI, it being
understood that the sole remedy for any such breach thereof shall be pursuant to
Article VI).

 

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Section 8.04 Indemnification Procedures. The party making a claim under this
Article VIII is referred to as the “Indemnified Party”, and the party against
whom such claims are asserted under this Article VIII is referred to as the
“Indemnifying Party”.

 

(a) Third Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement or a
Representative of the foregoing (a “Third Party Claim”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall give the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than 30 calendar days after receipt of such notice of such Third Party
Claim. The failure to give such prompt written notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations, except and
only to the extent that the Indemnifying Party forfeits rights or defenses by
reason of such failure. Such notice by the Indemnified Party shall describe the
Third Party Claim in reasonable detail, shall include copies of all material
written evidence thereof and shall indicate the estimated amount, if reasonably
practicable, of the Loss that has been or may be sustained by the Indemnified
Party. The Indemnifying Party shall have the right to participate in, or by
giving written notice to the Indemnified Party, to assume the defense of any
Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying
Party’s own counsel, and the Indemnified Party shall cooperate in good faith in
such defense; provided, that if the Indemnifying Party is the Seller, such
Indemnifying Party shall not have the right to defend or direct the defense of
any such Third Party Claim that (x) is asserted directly by or on behalf of a
Person that is a supplier or customer of the Company, or (y) seeks an injunction
or other equitable relief against the Indemnified Party. In the event that the
Indemnifying Party assumes the defense of any Third Party Claim, subject to
Section 8.04(b), it shall have the right to take such action as it deems
necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to
any such Third Party Claim in the name and on behalf of the Indemnified Party.
The Indemnified Party shall have the right to participate in the defense of any
Third Party Claim with counsel selected by it subject to the Indemnifying
Party’s right to control the defense thereof. The fees and disbursements of such
counsel shall be at the expense of the Indemnified Party, provided, that if in
the reasonable opinion of counsel to the Indemnified Party, (A) there are legal
defenses available to an Indemnified Party that are different from or additional
to those available to the Indemnifying Party; or (B) there exists a conflict of
interest between the Indemnifying Party and the Indemnified Party that cannot be
waived, the Indemnifying Party shall be liable for the reasonable fees and
expenses of counsel to the Indemnified Party in each jurisdiction for which the
Indemnified Party determines counsel is required. If the Indemnifying Party
elects not to compromise or defend such Third Party Claim, fails to promptly
notify the Indemnified Party in writing of its election to defend as provided in
this Agreement, or fails to diligently prosecute the defense of such Third Party
Claim, the Indemnified Party may, subject to Section 8.04(b), pay, compromise,
defend such Third Party Claim and seek indemnification for any and all Losses
based upon, arising from or relating to such Third Party Claim. Seller and Buyer
shall cooperate with each other in all reasonable respects in connection with
the defense of any Third Party Claim, including making available (subject to the
provisions of Section 5.05) records relating to such Third Party Claim and
furnishing, without expense (other than reimbursement of actual out-of-pocket
expenses) to the defending party, management employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such
Third Party Claim.

 

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(b) Settlement of Third Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third Party Claim without the prior written consent of the Indemnified Party,
except as provided in this Section 8.04(b). If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnified Party and provides, in customary
form, for the unconditional release of each Indemnified Party from all
liabilities and obligations in connection with such Third Party Claim and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to that effect to the Indemnified Party. If the
Indemnified Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third Party Claim and in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim shall not exceed the amount of
such settlement offer. If the Indemnified Party fails to consent to such firm
offer and also fails to assume defense of such Third Party Claim, the
Indemnifying Party may settle the Third Party Claim upon the terms set forth in
such firm offer to settle such Third Party Claim. If the Indemnified Party has
assumed the defense pursuant to Section 8.04(a), it shall not agree to any
settlement without the written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld or delayed).

 

(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss which
does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than 30 days after the Indemnified
Party becomes aware of such Direct Claim. The failure to give such prompt
written notice shall not, however, relieve the Indemnifying Party of its
indemnification obligations, except and only to the extent that the Indemnifying
Party forfeits rights or defenses by reason of such failure. Such notice by the
Indemnified Party shall describe the Direct Claim in reasonable detail, shall
include copies of all material written evidence thereof and shall indicate the
estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. The Indemnifying Party shall have 30 days
after its receipt of such notice to respond in writing to such Direct Claim. The
Indemnified Party shall allow the Indemnifying Party and its professional
advisors to investigate the matter or circumstance alleged to give rise to the
Direct Claim, and whether and to what extent any amount is payable in respect of
the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s
investigation by giving such information and assistance (including access to the
Company’s premises and personnel and the right to examine and copy any accounts,
documents or records) as the Indemnifying Party or any of its professional
advisors may reasonably request. If the Indemnifying Party does not so respond
within such 30 day period, the Indemnifying Party shall be deemed to have
rejected such claim, in which case the Indemnified Party shall be free to pursue
such remedies as may be available to the Indemnified Party on the terms and
subject to the provisions of this Agreement.

 

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(d) Tax Claims. Notwithstanding any other provision of this Agreement, the
control of any claim, assertion, event or proceeding in respect of Taxes of the
Company (including, but not limited to, any such claim in respect of a breach of
the representations and warranties in Section 3.21 hereof or any breach or
violation of or failure to fully perform any covenant, agreement, undertaking or
obligation in Article VI) shall be governed exclusively by Article VI hereof.

 

Section 8.05 Payments. Once a Loss is agreed to by the Indemnifying Party or
finally adjudicated to be payable pursuant to this Article VIII, the
Indemnifying Party shall satisfy its obligations within 15 Business Days of such
final, non-appealable adjudication by wire transfer of immediately available
funds. The parties hereto agree that should an Indemnifying Party not make full
payment of any such obligations within such 15 Business Day period, any amount
payable shall accrue interest from and including the date of agreement of the
Indemnifying Party or final, non-appealable adjudication to but excluding the
date such payment has been made at a rate per annum equal to the prime rate as
published in the Wall Street Journal. Such interest shall be calculated daily on
the basis of a 365 day year and the actual number of days elapsed, without
compounding.

 

Section 8.06 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by
Law.

 

Section 8.07 Effect of Investigation. The representations, warranties and
covenants of the Indemnifying Party, and the Indemnified Party’s right to
indemnification with respect thereto, shall not be affected or deemed waived by
reason of any investigation made by or on behalf of the Indemnified Party
(including by any of its Representatives) or by reason of the fact that the
Indemnified Party or any of its Representatives knew or should have known that
any such representation or warranty is, was or might be inaccurate or by reason
of the Indemnified Party’s waiver of any condition set forth in Section 7.02 or
Section 7.03, as the case may be.

 

Section 8.08 Exclusive Remedies. Subject to this Article VIII and Section 10.11,
the parties acknowledge and agree that their sole and exclusive remedy with
respect to any and all claims (other than claims arising from fraud, criminal
activity or willful misconduct on the part of a party hereto in connection with
the transactions contemplated by this Agreement) for any breach of any
representation, warranty, covenant, agreement or obligation set forth herein or
otherwise relating to the subject matter of this Agreement, shall be pursuant to
the indemnification provisions set forth in Article VI and this Article VIII. In
furtherance of the foregoing, each party hereby waives, to the fullest extent
permitted under Law, any and all rights, claims and causes of action for any
breach of any representation, warranty, covenant, agreement or obligation set
forth herein or otherwise relating to the subject matter of this Agreement it
may have against the other parties hereto and their Affiliates and each of their
respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in Article VI and this Article VIII.
Nothing in this Section 8.08 shall limit any Person’s right to seek and obtain
any equitable relief to which any Person shall be entitled or to seek any remedy
on account of any party’s fraudulent, criminal or intentional misconduct.

 

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ARTICLE IX

TERMINATION

 

Section 9.01 Termination. This Agreement may be terminated at any time prior to
the Closing:

 

(a) by the mutual written consent of Seller and Buyer;

 

(b) by Buyer by written notice to Seller if:

 

(i) Buyer is not then in material breach of any provision of this Agreement and
there has been a material breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by Seller or the Company
pursuant to this Agreement that would give rise to the failure of any of the
conditions specified in Article VII and such breach, inaccuracy or failure has
not been cured by Seller or the Company within ten (10) days of Seller’s receipt
of written notice of such breach from Buyer; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.02 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled by September 30, 2018, unless such failure shall be due to the failure
of Buyer to perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by it prior to the Closing;

 

(iii) in the event any Due Diligence Item is not approved by the Buyer, or in
case that a PCAOB auditor cannot provide an approved opinion.

 

(c) by Sellers by written notice to Buyer if:

 

(i) Seller is not then in material breach of any provision of this Agreement and
there has been a breach, inaccuracy in or failure to perform any representation,
warranty, covenant or agreement made by Buyer pursuant to this Agreement that
would give rise to the failure of any of the conditions specified in Article VII
and such breach, inaccuracy or failure has not been cured by Buyer within ten
days of Buyer’s receipt of written notice of such breach from Seller; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.03 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled by September 30, 2017, unless such failure shall be due to the failure
of Sellers to perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by it prior to the Closing;
or

 

(d) by Buyer or Seller in the event that (i) there shall be any Law that makes
consummation of the transactions contemplated by this Agreement illegal or
otherwise prohibited or (ii) any Governmental Authority shall have issued a
Governmental Order restraining or enjoining the transactions contemplated by
this Agreement, and such Governmental Order shall have become final and
non-appealable.

 

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Section 9.02 Effect of Termination. In the event of the termination of this
Agreement in accordance with this Article, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except:

 

(a) as set forth in this Article IX and Section 5.05 and Article X hereof; and

 

(b) that nothing herein shall relieve any party hereto from liability for any
willful breach of any provision hereof.

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.

 

Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business Day if sent
after normal business hours of the recipient or (d) on the third day after the
date mailed, by certified or registered mail, return receipt requested, postage
prepaid. Such communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):

 

If to Buyer:

 

Cosmos Holdings Inc.

141 West Jackson Blvd.

Suite 4236

Chicago, IL 56064

Attn: Grigorios Siokas

 

 

with a copy to:

 

Davidoff Hutcher & Citron LLP

605 Third Avenue, 34th Floor

New York, New York 10158

Facsimile: 212-286-1884

Email: ehl@dhclegal.com

Attn: Elliot Lutzker

 

If to Seller:

 

Irakleous 39, Neos Kosmos, Athens, Greece.

Attn: Mr. Panagiotis Kozaris

 

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Section 10.03 Interpretation. For purposes of this Agreement, (a) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation”; (b) the word “or” is not exclusive; and (c) the
words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles
and Sections of, and Disclosure Schedules and Exhibits attached to, this
Agreement; (y) to an agreement, instrument or other document means such
agreement, instrument or other document as amended, supplemented and modified
from time to time to the extent permitted by the provisions thereof and (z) to a
statute means such statute as amended from time to time and includes any
successor legislation thereto and any regulations promulgated thereunder. This
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting an instrument or
causing any instrument to be drafted. The Disclosure Schedules and Exhibits
referred to herein shall be construed with, and as an integral part of, this
Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

 

Section 10.05 Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

Section 10.06 Entire Agreement. This Agreement and the other Transaction
Documents constitute the sole and entire agreement of the parties to this
Agreement with respect to the subject matter contained herein and therein, and
supersede all prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter. In the event of any
inconsistency between the statements in the body of this Agreement and those in
the other Transaction Documents, the Exhibits and Disclosure Schedules (other
than an exception expressly set forth as such in the Disclosure Schedules), the
statements in the body of this Agreement will control.

 

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Section 10.07 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither party may assign its rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed; provided, however, that prior to
the Closing Date, Buyer may, without the prior written consent of Seller, assign
all or any portion of its rights under this Agreement to one or more of its
direct or indirect wholly-owned subsidiaries. No assignment shall relieve the
assigning party of any of its obligations hereunder.

 

Section 10.08 No Third-party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person or entity any legal or equitable right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.

 

Section 10.09 Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an agreement in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the party so
waiving. No waiver by any party shall operate or be construed as a waiver in
respect of any failure, breach or default not expressly identified by such
written waiver, whether of a similar or different character, and whether
occurring before or after that waiver. No failure to exercise, or delay in
exercising, any right, remedy, power or privilege arising from this Agreement
shall operate or be construed as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.

 

Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of Alabama or any other
jurisdiction).

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE
CITY OF NEW YORK AND COUNTY OF NEW YORK, AND EACH PARTY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO
SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR
ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF
ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND
AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

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(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION,
(B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 10.10(c).

 

Section 10.11 Specific Performance. The parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy to which they
are entitled at law or in equity.

 

Section 10.12 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

 

Buyer:

COSMOS HOLDINGS INC., a Nevada corporation

 

 

 

 

 

 

By:

/s/ Grigorios Siokas

 

 

Name:

Grigorios Siokas

 

 

Title:

Director / CEO

 

 

 

 

 

 

Company:

COSMOFARM LTD, a Greek corporation

 

 

 

 

 

 

By:

/s/ Panagiotis Kozaris

 

 

Name:

Panagiotis Kozaris

 

 

Title:

Director / CEO

 

 

 

 

 

 

Seller:

 

DEEPDAE HOLDING LTD

 

 

 

 

 

 

By:

/s/ Panagiotis Kozaris

 

 

Name:

Panagiotis Kozaris

 

 

Title:

Company Representative

 

 

 

46