AGREEMENT

 

AND

 

PLAN OF MERGER

 

BY AND AMONG

 

INCEPTION MINING INC.,

 

CLAVO RICO, LTD, AND

 

CR ACQUISITION CORPORATION

 

 

 

 

 

Table of Contents

 

ARTICLE 1 Merger   1 1.1 Effects of Merger   1 1.2 Effect on Company Capital
Stock and Merger Subsidiary Capital Stock   2 1.3 Rights of Holders of Company
Capital Stock   3 1.4 Procedure for Surrender and Exchange of Certificates   3
1.5 Dissenting Shares   4 1.6 Directors and Officers of the Surviving Company  
4 1.7 Tax Treatment   4         ARTICLE 2 Representations and Warranties of
Company   4 2.1 Organization and Good Standing   5 2.2 Company Structure   5 2.3
Authority and Authorization; Conflicts; Consents   6 2.4 Capitalization   6 2.5
Litigation   7 2.6 No Brokers or Finders   7 2.7 Tax Matters   8 2.8 Contracts
and Commitments   8 2.9 Affiliate Transactions   9 2.10 Compliance with Laws;
Permits   9 2.11 Financial Statements   9 2.12 No Undisclosed Liabilities   9
2.13 Books and Records   9 2.14 Real Property   10 2.15 Insurance   10 2.16
Absence of Certain Developments   10 2.17 Employee Benefit Plans   10 2.18
Employees   11 2.19 Proprietary Information and Inventions   11 2.20
Intellectual Property   11 2.21 Tax-Free Reorganization   11 2.22 Full
Disclosure   11         ARTICLE 3 Representations and Warranties of Parent and
Merger Subsidiary   11 3.1 Organization and Good Standing   11 3.2 Authority and
Authorization; Conflicts; Consents   12 3.3 Capitalization   12 3.4 Litigation  
13 3.5 No Brokers or Finders   13 3.6 Tax Matters   13 3.7 Contracts and
Commitments   15 3.8 Affiliate Transactions   15 3.9 Compliance with Laws;
Permits   15 3.10 Exchange Act Reports   16 3.11 No Undisclosed Liabilities   16
3.12 Books and Records   16 3.13 Real Property   16

 

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3.14 Insurance   17 3.15 Environmental Matters   17 3.16 Absence of Certain
Developments   17 3.17 Employee Benefit Plans   18 3.18 Employees   18 3.19
Proprietary Information and Inventions   19 3.20 Intellectual Property   19 3.21
Tax-Free Reorganization   19 3.22 Full Disclosure   19 3.23 Validity of Parent
Common Stock   19 3.24 Private Placement   19 3.25 Trading Matters   19 3.26
Shell Company Status   20 3.27 Prepaid Assets   20         ARTICLE 4 Conduct of
Business Pending the Merger   20 4.1 Conduct of Business by Parent   20 4.2
Conduct of Business by Company   20         ARTICLE 5 Additional Covenants and
Agreement   21 5.1 Governmental Filings   21 5.2 Expenses   21 5.3 Due
Diligence; Access to Information; Confidentiality   21 5.4 Tax Treatment   22
5.5 Press Releases   22 5.6 Securities Law Filings   22 5.7 Merger
Consideration; Securities Act Exemption   22 5.8 No Solicitation   23 5.9
Failure to Fulfill Conditions   23 5.10 Preparation of Periodic and Current
Reports   23 5.11 Notification of Certain Matters   23 5.12 Directors and
Officers of Company   23 5.13 Representation in Honduras   23         ARTICLE 6
Conditions   23 6.1 Conditions to Obligations of Each Party   23 6.2 Additional
Conditions to Obligations of Parent and Merger Subsidiary   24 6.3 Additional
Conditions to Obligations of Company   25         ARTICLE 7 Termination   27 7.1
Termination   27         ARTICLE 8 General Provisions   27 8.1 Notices   27 8.2
No Survival   28 8.3 Interpretation   28 8.4 Severability   28 8.5 Entire
Agreement; Amendment; Waiver   28 8.6 Counterparts; Delivery   28 8.7
Third-Party Beneficiaries   28 8.8 Governing Law   29 8.9 Jurisdiction; Service
of Process   29         ARTICLE 9 Certain Definitions   29

 

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AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger (this “Agreement”) is entered into effective
as of the 4th day of August, 2015 (the “Effective Date”), by and among Inception
Mining Inc., a Nevada corporation (“Parent”), Clavo Rico, LTD, a Turks and
Caicos corporation (“Company”), and CR Acquisition Corporation, a Nevada
corporation (“Merger Subsidiary”). Certain capitalized terms used in this
Agreement are defined in Article 9.

 

Background

 

  A. The respective Boards of Directors of the parties have (i) determined that
it is in the best interests of such corporations and their respective security
holders to consummate a merger of Merger Subsidiary with and into Company (the
“Merger”) and (ii) approved and declared advisable this Agreement, the Merger
and the other transactions contemplated by this Agreement;         B. Pursuant
to the Merger, among other things, the outstanding shares of capital stock of
Company will be converted into the right to receive upon Closing (as defined in
this Agreement) and thereafter, the Merger Consideration (as defined in this
Agreement);         C. The parties to this Agreement intend to adopt this
Agreement as a plan of reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations
promulgated thereunder, and intend that the Merger and the transactions
contemplated by this Agreement be undertaken pursuant to that plan. Accordingly,
the parties intend that the Merger qualify as a “reorganization,” within the
meaning of Code Section 368(a), and that, with respect to the Merger and within
the meaning of Code Section 368(b), each of Parent, Merger Subsidiary and
Company will be a “party to a reorganization;”

 

Agreement

 

In consideration of the foregoing, and the representations, warranties, and
covenants contained in this Agreement, each party hereby agrees as follows:

 

ARTICLE 1
Merger

 

At the Merger Time (as defined herein), and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of the Nevada Revised
Statute or any successor statute (the “NRS”), Merger Subsidiary will merge with
and into Company, the separate corporate existence of Merger Subsidiary will
cease, and Company will continue as the surviving corporation and as a wholly
owned subsidiary of Parent. Company, as the surviving corporation after the
Merger, is hereinafter referred to as the “Surviving Company.”

 

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1.1 Effects of Merger.

 

(a) From and after the Merger Time and until further altered or amended in
accordance with applicable law: (i) all of the rights, privileges, immunities,
powers, franchises and authority—both public and private—of Company and Merger
Subsidiary shall vest in the Surviving Company; (ii) all of the assets and
property of Company and Merger Subsidiary of every kind, nature and
description—real, personal and mixed, and both tangible and intangible—and every
interest therein, wheresoever located, including without limitation all debts or
other obligations belonging or due to Company or Merger Subsidiary, all claims
and all causes of action, shall be vested absolutely and unconditionally in the
Surviving Company; and (iii) all debts and obligations of Company and Merger
Subsidiary, all rights of creditors of Company or Merger Subsidiary and all
liens or security interests encumbering any of the property of Company or Merger
Subsidiary shall be vested in the Surviving Company and shall remain in full
force and effect without modification or impairment and shall be enforceable
against the Surviving Company and its assets and properties with the same full
force and effect as if such debts, obligations, liens or security interests had
been originally incurred or created by the Surviving Company in its own name and
for its own behalf. Without limiting the generality of the foregoing, the
Surviving Company specifically assumes all continuing obligations which Company
or Merger Subsidiary would otherwise have to indemnify its officers and
directors, to the fullest extent currently provided in the Surviving Company’s
certificate of incorporation, bylaws and pursuant to the NRS and the Companies
Ordinance and Subsidiary Legislation of the Turks and Caicos Islands, with
respect to any and all claims arising out of actions taken or omitted by
Company’s officers and directors prior to the Merger Time.

 

(b) Each of Parent, Company and Merger Subsidiary shall use its best efforts to
take all such action as may be necessary or appropriate to effectuate the Merger
in accordance with the NRS at the Merger Time. If, at any time after the Merger
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Company with full right, title and
possession to all properties, rights, privileges, immunities, powers and
franchises of either Company or Merger Subsidiary, the officers of Parent, and
the officers of Surviving Company on behalf of Company and Merger Subsidiary,
shall take all such lawful and necessary action.

 

(c) Subject to the provisions of Article 6 and Article 7, the closing of the
transactions contemplated hereby (the “Closing,” and the date of the Closing
will be referred to interchangeably as the “Closing Date,” as the case may be)
shall take place at such location, on such date and at such time as Company and
Parent mutually agree at the earliest practicable time after the satisfaction or
waiver of the conditions in Article 6, but in no event later than five business
days after all such conditions have been satisfied or waived, or on such other
date as may be mutually agreed by the parties hereto. On the Closing date, to
effect the Merger, the parties will cause the Certificate of Merger to be filed
with the Nevada Secretary of State in accordance with the NRS. The Merger shall
be effective upon the filing of the Certificate of Merger (the “Merger Time”).

 

1.2 Effect on Company Capital Stock and Merger Subsidiary Capital Stock. To
effectuate the Merger, and subject to the terms and conditions of this
Agreement, at the Merger Time:

 

(a) All outstanding shares of Company Common Stock issued and outstanding
immediately prior to the Merger Time (other than Dissenting Shares as defined in
Section 1.5 below) will be cancelled and extinguished and will automatically be
converted into the right to receive a total of 240,225,901 fully paid and
non-assessable shares of Parent Common Stock in the aggregate, to be delivered
pro rata to the holders of Company Common Stock. Parent will issue to each
holder of Company Common Stock (other than Dissenting Shares) certificates or
Book Entries evidencing the number of shares of Parent Common Stock determined
in accordance with the foregoing.

 

(b) Each share of common stock, $0.001 par value per share, of Merger Subsidiary
issued and outstanding immediately prior to the Merger Time will be
automatically converted into one validly issued, fully paid and nonassessable
share of common stock of the Surviving Company; and

 

(c) All shares of Parent Common Stock issued upon the surrender of and exchange
of Company Common Stock for shares in accordance with the terms and conditions
of this Section 1.2 will be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock.

 

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1.3 Rights of Holders of Company Capital Stock.

 

(a) From and after the Merger Time and until surrendered for exchange, each
outstanding stock certificate or Book Entry that, immediately prior to the
Merger Time, represented shares of Company Common Stock (except Dissenting
Shares) will be deemed for all purposes, to evidence ownership of and to
represent the number of whole shares of Parent Common Stock into which such
shares of Company Common Stock will have been converted pursuant to Section
1.2(a) above. The record holder of each such outstanding certificate or Book
Entry representing shares of Company Common Stock, will, immediately after the
Merger Time, be entitled to vote the shares of Parent Common Stock into which
such shares of Company Common Stock have been converted on any matters on which
the holders of record of the Parent Common Stock, as of any date subsequent to
the Merger Time, are entitled to vote. In any matters relating to such
certificates or Book Entries of Company Common Stock, Parent may rely
conclusively upon the record of stockholders maintained by Company containing
the names and addresses of the holders of record of Company Common Stock on the
Closing Date.

 

(b) At the Merger Time, Parent shall have reserved a sufficient number of
authorized but unissued shares of Parent Common Stock for issuance in connection
with the issuance of the Merger Consideration upon automatic conversion of
Company Common Stock into Parent Common Stock at the Merger Time and a
sufficient number of authorized but unissued shares of Parent Common Stock for
issuance in connection with the exercise of the Replacement Options, Replacement
Warrants and the Replacement Convertible Promissory Notes.

 

1.4 Procedure for Surrender and Exchange of Certificates.

 

(a) After the Merger Time, each record holder of outstanding shares of Company
Common Stock (except Dissenting Shares) will be entitled to receive certificates
or Book Entries representing the number of whole shares of Parent Common Stock
into which shares of Company Common Stock shall have been converted as provided
in Section 1.2 hereof. Parent shall not be obligated to deliver certificates
representing shares of Parent Common Stock, to which any holder of shares of
Company Common Stock is entitled, until such holder surrenders the
certificate(s), if any, representing such Company Common Stock. Upon surrender,
each certificate evidencing Company Common Stock shall be canceled. If there is
a transfer of Company Common Stock ownership that has not been registered in the
transfer records of Company, a certificate representing the proper number of
shares of Parent Common Stock may be issued to a Person other than the Person in
whose name the certificate so surrendered is registered if: (x) upon
presentation to the Secretary of Parent, such certificate, if any, shall be
properly endorsed or otherwise be in proper form for transfer, (y) the Person
requesting such transfer shall pay any transfer fees or other administrative
fees or taxes required by reason of the issuance of shares of or certificates,
if any, representing shares of Parent Common Stock to a Person other than the
registered holder of such shares or establish to the reasonable satisfaction of
Parent that such fee or assessment has been paid or is not applicable, and (z)
the issuance of such shares of or certificates, if any, representing shares of
Parent Common Stock shall not, in the sole discretion of Parent, violate the
requirements of Section 4(2) of the Securities Act with respect to the private
placement of Parent Common Stock that will result from the Merger.

 

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(b) Any shares of Parent Common Stock issued in the Merger will not be
transferable except (1) pursuant to an effective registration statement under
the Securities Act or (2) upon receipt by Parent of a written opinion of counsel
reasonably satisfactory in form and substance to Parent to the effect that the
proposed transfer is exempt from the registration requirements of the Securities
Act and relevant state securities laws. Restrictive legends will be placed on
all certificates representing shares of Parent Common Stock issued in the
Merger, substantially as follows:

 

NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND ALL APPLICABLE STATE
SECURITIES OR “BLUE SKY” LAWS (SUCH FEDERAL AND STATE LAWS, THE “SECURITIES
LAWS”) OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR
THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE REGISTRATION OR SIMILAR
REQUIREMENTS OF THE SECURITIES LAWS.

 

(c) Excluding any shares of Company Common Stock held in Book Entry, in the
event any certificate for shares of Company Common Stock shall have been lost,
stolen or destroyed, Parent shall issue in exchange for such lost, stolen or
destroyed certificate, upon the making of a sworn affidavit of that fact by the
holder thereof, one or more certificates representing such shares of Parent
Common Stock as provided herein; provided, however, that Parent, in its
discretion and as a condition precedent to the issuance of such certificates,
may require the holder of the shares represented by such lost, stolen or
destroyed certificate to deliver a bond in such sum as it may direct as
indemnity against any claim that may be made against Parent or any other party
with respect to the certificate alleged to have been lost, stolen or destroyed.

 

1.5 Dissenting Shares. There are no dissenters’ rights under Turks & Caicos Law.

 

1.6 Directors and Officers of the Surviving Company. The directors of Parent
immediately after the Merger Time will become the sole directors of the
Surviving Company. The Company shall have the right to appoint two additional
directors, who will be Reed Benson and Kay Briggs. As of the Merger Time, the
officers of Parent immediately prior to the Merger Time will become the sole
officers of the Surviving Company. Each such director and officer will hold such
office until their respective successors are duly appointed or such Persons are
removed from office in accordance with applicable law and the articles of
incorporation and bylaws of the Surviving Company.

 

1.7 Tax Treatment. It is intended by the parties hereto that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code.
Each of the parties hereto adopts this Agreement as a “plan of reorganization”
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations. Both prior to and after the Closing, each party’s books
and records shall be maintained, and all federal, state and local income tax
returns and schedules thereto shall be filed in a manner consistent with the
Merger being qualified as a tax-free reorganization under Section 368(a) of the
Code (and comparable provisions of any applicable state or local laws).

 

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ARTICLE 2
Representations and Warranties of Company

 

Company hereby represents and warrants to Parent as follows:

 

2.1 Organization and Good Standing. Company (a) is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction in
which it was organized and (b) has full corporate power and authority to own and
lease its properties and assets and conduct its business. The copies of the
certificate of incorporation and bylaws of Company that have been made available
to Parent are correct and complete copies of such documents as in effect as of
the Effective Date. Company is duly qualified and in good standing to do
business as a foreign corporation in each jurisdiction in which the ownership
and leasing of its properties and assets or the conduct of its business requires
such qualification, except where the failure to be so qualified or in good
standing will not have a Material Adverse Effect on the ability of Company to
consummate the transactions contemplated by this Agreement.

 

Company Structure. The Company has two Honduran subsidiaries: Compania Minera
Cerros del Sur S.A. and Minera Clavo Rico, S.A.

 

2.2 Authority and Authorization; Conflicts; Consents.

 

(a) Authority and Authorization. Company has the requisite corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by Company and the
consummation by Company of the transactions contemplated hereby have been duly
authorized by Company’s Board of Directors and, except for approval of this
Agreement and the Merger by the requisite approval of Company’s stockholders
(the “Required Company Stockholder Approval”), no other corporate proceedings on
the part of Company are necessary to authorize the execution and delivery of
this Agreement and the consummation of the Merger and all other transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Company and, assuming it is a valid and binding obligation of Parent and Merger
Subsidiary, constitutes a valid and binding obligation of Company enforceable in
accordance with its terms except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors’ rights and
remedies generally.

 

(b) Conflicts. Neither the execution or delivery by Company of this Agreement or
by Company of any Ancillary Document nor consummation by Company of the
transactions contemplated herein or therein does or will (with or without the
passage of time or giving of notice): (1) constitute a breach of, violate,
conflict with or give rise to or create any right or obligation under its
articles of incorporation or bylaws; (2) violate any applicable law or order; or
(3) constitute a breach or violation of or a default under, conflict with or
give rise to or create any right of any Person other than Company to accelerate,
increase, terminate, modify or cancel any right or obligation under, any
contract to which Company is a party, except where such breach, violation,
default, conflict or right described in clause (2) or (3) above will not have a
Material Adverse Effect on the ability of Company to consummate the transactions
contemplated herein.

 

(c) Consents. Except for (a) the Required Company Stockholder Approval, (b)
approvals under applicable state securities laws and (c) the filing of the
Certificate of Merger with the Secretary of State for the State of Nevada, no
consent or approval by, notification to or filing with any Person is required in
connection with the execution, delivery or performance by Company of this
Agreement or any Ancillary Document or consummation of the transactions
contemplated herein or therein by Company, except for any consent, approval,
notice or filing, the absence of which will not have a Material Adverse Effect
on the ability of Company to consummate the transactions contemplated herein.

 

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2.3 Capitalization.

 

(a) The authorized, issued and outstanding shares of capital stock of Company
are set forth on Schedule 2.3(a). The authorized capital stock of CLAVO RICO
consists solely of 250,000,000 shares of capital stock, par value $.01. As of
June 30, 2015, 65,000,000 shares of Clavo Rico common stock were issued and
outstanding. There has been no change in the number of issued and outstanding
shares of CLAVO RICO capital stock since such date. 100% of the issued and
outstanding shares of common stock are owned by the Shareholders. All of the
issued and outstanding shares of CLAVO RICO common stock are, duly authorized,
validly issued, fully paid, and nonassessable. Except pursuant to this Agreement
there are no outstanding subscriptions, options, warrants, rights (including
“phantom” stock rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion or exchange
under any outstanding security, instrument or agreement, obligating CLAVO RICO
to issue or sell any shares of capital stock, bonds, or other securities of
CLAVO RICO (collectively, “Options”) or to grant, extend or enter into any
option with respect thereto. There are no outstanding contractual obligations of
CLAVO RICO to repurchase, redeem, or otherwise acquire any shares of CLAVO RICO
common stock to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in, any subsidiary or any other person. The
authorized capital stock of each of the Subsidiaries consists solely of 500,000
shares of capital stock, no par value. As of June 30, 2015, 200,000 shares of
common stock were issued and outstanding, 199,800 of which are held by CLAVO
RICO and the remaining shares are held by Gerardo Flores. There has been no
change in the number of issued and outstanding shares of capital stock since
such date. All of the issued and outstanding shares of the Subsidiaries’ common
stock are, duly authorized, validly issued, fully paid, and nonassessable. There
are no outstanding Options obligating CLAVO RICO or either of the Subsidiaries
to issue or sell any shares of capital stock of a Subsidiary or to grant, extend
or enter into any option with respect thereto. Other than as described on
Schedule 2.3(a), Company has no other equity securities or securities containing
any equity features that are authorized, issued or outstanding. Except as set
forth in Schedule 2.3(a), there are no agreements or other rights or
arrangements existing which provide for the sale or issuance of capital stock by
Company and there are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or otherwise acquire
from Company any shares of capital stock or other securities of Company of any
kind. Except as set forth on Schedule 2.3(a), there are no agreements or other
obligations (contingent or otherwise) which may require Company to repurchase or
otherwise acquire any shares of its capital stock.

 

(b) Except as disclosed on Schedule 2.3(b), Company does not own, and is not
party to any contract to acquire, any equity securities or other securities of
any entity or any direct or indirect equity or ownership interest in any other
entity. To Company’s Knowledge, there exist no voting trusts, proxies, or other
contracts with respect to the voting of shares of capital stock of Company.

 

(c) Schedule 2.3(c) details those Persons to whom Company has granted
registration rights, if any, which rights will obligate Company and/or Parent to
file a registration statement (or include certain shares in a registration
statement filed with the SEC) covering the resale of shares of Parent Common
Stock constituting Merger Consideration.

 

2.4 Litigation. There is no claim whether or not commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Authority or
other Proceeding pending or, to the Knowledge of Company, threatened against
Company or to which Company is a party or that is reasonably expected to
adversely affect Company and (b) Company is not subject to any order, in each
case that will have a Material Adverse Effect on the ability of Company to
consummate the transactions contemplated herein.

 

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2.5 No Brokers or Finders. Company has no obligation or other liability to any
broker, finder or similar intermediary in connection with the transactions
contemplated herein that would cause any party to this Agreement to become
liable for payment of any fee or expense with respect thereto.

 

2.6 Tax Matters.

 

(a) For purposes of this Agreement, “Company Tax Returns” includes all Tax
Returns of Company relating to any Taxes with respect to any income, properties
or operations of Company or any of its Tax Affiliates. Except as disclosed on
Schedule 2.6(a): (i) Company and each of its Tax Affiliates has timely filed (or
has had timely filed on its behalf) all Company Tax Returns required to be filed
or sent by it in respect of any Taxes or required to be filed or sent by it to
any Tax Authority having jurisdiction; (ii) all such Company Tax Returns are
complete and accurate in all material respects; (iii) Company and each of its
Tax Affiliates has timely and properly paid (or has had paid on its behalf) all
Taxes required to be paid by it; (iv) Company has established on the Company
Balance Sheet, in accordance with GAAP, consistently applied, reserves that are
adequate for the payment of any Taxes not yet due and payable; and (v) Company
and each of its Tax Affiliates has complied with all applicable laws, rules and
regulations relating to the collection or withholding of Taxes from third
parties (including, without limitation, employees) and the payment thereof
(including, without limitation, withholding of Taxes under Code Sections 1441
and 1442, or similar provisions under any foreign laws).

 

(b) There are no material Liens for Taxes upon any assets of Company or any of
its Tax Affiliates, except statutory Liens for Taxes not yet due.

 

(c) No deficiency for any Taxes has been proposed, asserted or assessed against
Company or any of its Tax Affiliates that has not been resolved and paid in full
or is not being contested in good faith. No waiver, extension or comparable
consent given by Company or any of its Tax Affiliates regarding the application
of the statute of limitations with respect to any Taxes or Company Tax Returns
is outstanding, nor is any request for any such waiver or consent pending. There
has been no Tax audit or other Proceeding with regard to any Company Tax Returns
or Taxes relating to Company or any of its Tax Affiliates, nor is any such Tax
audit or other Proceeding pending, nor has there been any notice to Company by
any Tax Authority regarding any such Tax audit or other Proceeding, or, to the
Knowledge of Company, is any such Tax audit or other Proceeding threatened with
regard to any Company Tax Returns or Taxes or relating to Company or any of its
Tax Affiliates. Company does not expect the assessment of any additional Taxes
of Company for any period prior to the date hereof and has no Knowledge of any
unresolved questions, claims or disputes concerning the liability for Taxes
relating to Company or any of its Tax Affiliates that would exceed the estimated
reserves established on its books and records.

 

(d) Neither Company nor any of its Tax Affiliates is liable for Taxes of any
other Person nor is currently under any contractual obligation to indemnify any
Person with respect to Taxes, or a party to any Tax sharing agreement or any
other agreement providing for payments by Company with respect to Taxes. Neither
Company nor any of its Tax Affiliates has agreed and is not required, as a
result of a change in method of accounting or otherwise, to include any
adjustment under Code Section 481 (or any corresponding provision of state,
local or foreign law) in Taxable income. Schedule 2.6(d) contains a list of all
jurisdictions in which Company or any of its Tax Affiliates is required to file
any Company Return and no claim has been made by a Tax Authority in a
jurisdiction where Company or any of its Tax Affiliates does not currently file
Company Tax Returns, that Company or any of its Tax Affiliates is or may be
subject to Taxation by that jurisdiction. There are no advance rulings in
respect of any Tax pending or issued by any Tax Authority with respect to any
Taxes of or any of its Tax Affiliates. Neither Company nor any of its Tax
Affiliates has entered into any gain recognition agreements under Code Section
367 and the Treasury Regulations promulgated thereunder. Neither Company nor any
of its Tax Affiliates is liable with respect to any indebtedness the interest of
which is not deductible for applicable federal, foreign, state or local income
Tax purposes.

 

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(e) Company has been neither a “distributing corporation” nor a “controlled
corporation” (within the meaning of Code Section 355) in a distribution of stock
qualifying for Tax-free treatment under Code Section 355.

 

(f) Except as disclosed on Schedule 2.6(f), Company has not requested any
extension of time within which to file any Company Return, which return has not
since been filed.

 

(g) Neither Company nor any Tax Affiliate has, for the five (5) year period
preceding the Closing, been a United States real property holding corporation
within the meaning of Code Section 897(c)(2).

 

(h) There have been made available to Parent true and complete copies of all
Company Tax Returns with respect to Taxes based on net income; and any other
Company Tax Returns requested by Parent that may be relevant to Company or any
of its Tax Affiliates or their respective business, assets or operations for any
and all Taxable periods ending before the date hereof; and for any other Taxable
years that remain subject to audit or investigation by any Tax Authority.

 

(i) Company and each of its Tax Affiliates is a corporation or association
Taxable as a corporation for federal income Tax purposes.

 

(j) Neither Company nor any of its Tax Affiliates has made any election under
Code Section 1362(a) to be an S corporation.

 

2.7 Contracts and Commitments. Schedule 2.7 lists all material agreements,
whether oral or written, to which Company is a party, which are currently in
effect, and which relate to the operation of Company’s business. Company has
performed all obligations required to be performed by it under the contracts or
commitments required to be disclosed on Schedule 2.7 and is not in receipt of
any claim of default under any contract or commitment required to be disclosed
under such caption. Company has no present expectation or intention of not fully
performing any material obligation pursuant to any contract or commitment
required to be disclosed on Schedule 2.7; and Company has no Knowledge of any
breach or anticipated breach by any other party to any contract or commitment
required to be disclosed on such schedule.

 

2.8 Affiliate Transactions. Except as set forth in Schedule 2.8, and other than
pursuant to this Agreement, no officer, director or employee of Company, or any
member of the immediate family of any such officer, director or employee, or any
entity in which any of such Persons owns any beneficial interest in Company
(other than any publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than five percent
of the stock of which is beneficially owned by any of such Persons)
(collectively, the “Company Insiders”), has any agreement with Company (other
than normal employment arrangements) or any interest in any property, real,
personal or mixed, tangible or intangible, used in or pertaining to the business
of Company (other than ownership of capital stock of Company). Except as set
forth on Schedule 2.8, Company is not indebted to any Company Insider (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses) and no Company Insider is indebted to Company (except for
cash advances for ordinary business expenses). Except as set forth on Schedule
2.8, none of the Company Insiders has any direct or indirect interest in any
competitor, supplier or customer of Company or in any Person from whom or to
whom Company leases any property, or in any other Person with whom Company
transacts business of any nature. The officers, directors and employees of
Company have not, by virtue of their employment with or service to Company,
usurped any corporate opportunities of any third party to which such officer,
director and employee has, or could reasonably be considered to have, a
fiduciary duty under any applicable laws. For purposes of this Section 2.8 the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children and siblings of such officer, director
or employee.

 

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2.9 Compliance with Laws; Permits.

 

(a) Except for any noncompliance that would not reasonably be expected to have a
Material Adverse Effect on Company, Company and its officers, directors, agents
and employees have complied with all applicable laws, Environmental Laws,
regulations and other requirements, including, but not limited to, federal,
state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to equal employment opportunity, employee retirement,
affirmative action and other hiring practices, occupational safety and health,
workers’ compensation, unemployment and building and zoning codes, and no claims
have been filed against Company, and Company has not received any written
notice, alleging a violation of any such laws, Environmental Laws, regulations
or other requirements. Company is not relying on any exemption from or deferral
of any such applicable law, Environmental Laws, regulation or other requirement
that would not be available to Parent after it acquires the properties, assets
and business of Company.

 

(b) Except as set forth on Schedule 2.9(b), Company has no licenses, permits,
Environmental Permits or certificates, from federal, state, local and foreign
authorities (including, without limitation, federal and state agencies
regulating occupational health and safety) necessary to permit it to conduct its
business and own and operate its properties.

 

2.10 Financial Statements. Company has made available to Parent audited
consolidated balance sheets of Company subsidiaries at December 31, 2013 and
2014, and the related audited consolidated statements of operations,
stockholders’ equity and cash flows of Company subsidiaries for the two annual
periods then ended, as well as an unaudited consolidated balance sheet of
Company as of June 30, 2015, and the related unaudited consolidated statements
of operations, stockholders’ equity and cash flows of Company for the
three-month period then ended (together, the “Company Financial Statements”).
The Company Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and fairly present the financial position of
Company as of the respective dates thereof and the results of its operations and
cash flows and stockholder equity for the periods indicated.

 

2.11 No Undisclosed Liabilities. Except as reflected in the balance sheet of
Company at June 30, 2015 (the “Latest Company Balance Sheet”), Company has no
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
except (i) liabilities which have arisen after the date of the Latest Company
Balance Sheet in the ordinary course of business, none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit, or (ii) as otherwise set forth on Schedule 2.11.

 

2.12 Books and Records. The books of account, minute books, stock record books,
and other similar records of Company, complete copies of which have been made
available to Parent, have been properly kept and contain no inaccuracies except
for inaccuracies that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Company.

 

2.13 Real Property. Schedule 2.13 lists all real property leased by Company.
Company does not own any real property. Company has good and valid title to all
of its leaseholds and other interests free and clear of all Liens, except for
such Liens which do not detract from the value or interfere with the present use
of the property subject thereto or affected thereby. The real property to which
such leaseholds and other interests pertain constitutes all of the real property
used in Company’s business.

 

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2.14 Insurance. The insurance policies obtained and maintained by Company that
are material to Company are in full force and effect, all premiums due and
payable thereon have been paid (other than retroactive or retrospective premium
adjustments that Company is not currently required, but may in the future be
required, to pay with respect to any period ending prior to the Effective Date),
and Company has received no written notice of cancellation or termination with
respect to any such policy that has not been replaced on substantially similar
terms prior to the date of such cancellation.

 

2.15 Absence of Certain Developments. Except as disclosed in the Company
Financial Statements or as otherwise contemplated by this Agreement, since
December 31, 2014, Company has owned and operated its assets, properties and
businesses consistent with past practice. Without limiting the generality of the
foregoing, except as listed in Schedule 2.15, since December 31, 2014, Company
has not:

 

(a) experienced any change that has had or could reasonably be expected to have
a Material Adverse Effect on Company; or

 

(b) suffered (i) any loss, damage, destruction or other property or casualty
(whether or not covered by insurance) or (ii) any loss of officers, employees,
dealers, distributors, independent contractors, customers or suppliers, which
had or may reasonably be expected to result in a Material Adverse Effect on
Company.

 

2.16 Employee Benefit Plans.

 

(a) Company does not have, and has never had, any employee benefit plan (within
the meaning of Section 3(3) of ERISA), or any other plan, arrangement, program
or payroll practice providing compensation, benefits or perquisites to any class
of employees, former employees or directors of Company other than statutory
retirement plans of the country of Honduras for employees working in Honduras
and the Agreements relating to the Options, the Warrants and the Convertible
Promissory Notes.

 

(b) Company does not have, and has never had, any agreement, plan or other
arrangement for the benefit of any independent contractor serving Company that
is or was treated as a nonqualified deferred compensation plan under Code
Section 409A.

 

(c) The consummation of the transactions contemplated by this Agreement will not
(i) cause any employee, former employee, director or independent contractor to
become entitled to any severance pay, unemployment compensation or other
payment; (ii) accelerate the time of payment or vesting of any benefit payable
to any such Person or (iii) increase the amount of compensation or benefits due
to any such Person.

 

2.17 Employees.

 

(a) Schedule 2.17(a) lists, as of the Effective Date, the name, position, base
compensation and, for calendar year 2015, total compensation for each employee
of Company.

 

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(b) Except as otherwise set forth in Schedule 2.17(b), or as contemplated by
this Agreement, to the Knowledge of Company, (i) neither any executive employee
of Company nor any group of the employees of Company has any plans to terminate
his, her or its employment; (ii) Company has no material labor relations problem
pending and its labor relations are satisfactory; (iii) there are no workers’
compensation claims pending against Company nor is Company aware of any facts
that would give rise to such a claim; (iv) no employee of Company is subject to
any secrecy or noncompetition agreement or any other agreement or restriction of
any kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of Company;
and (v) no employee or former employee of Company has any claim with respect to
any intellectual property rights of Company.

 

2.18 Proprietary Information and Inventions. Set forth on Schedule 2.18 is a
complete and accurate list of all current Company employees, consultants,
contractors or other Persons that are subject to a non-disclosure agreement or
an alternative employment agreement with Company containing comparable
non-disclosure provisions.

 

2.19 Intellectual Property. Set forth on Schedule 2.19 is a complete and
accurate list of all Intellectual Property owned or licensed by Company, and
accurately identifies all Persons from which or to which Company licenses all
such listed Intellectual Property. For purposes of this Agreement, the term
“Intellectual Property” means: (a) patents (including any registrations,
continuations, continuations in part, renewals and any applications for any of
the foregoing); (b) registered and unregistered copyrights and copyright
applications; and (c) registered and unregistered trademarks, service marks,
trade names, slogans, logos, designs and general intangibles of the like nature,
together with all registrations and applications therefor.

 

2.20 Tax-Free Reorganization. Company has not taken or agreed to take any action
that would prevent the Merger from qualifying as a reorganization under Section
368(a) of the Code. Company has confirmed with its legal counsel in Turks and
Caicos and in Honduras that this transaction is allowed as a tax-free
reorganization under all relevant laws.

 

2.21 Full Disclosure. The representations and warranties of Company contained in
this Agreement (and in any schedule, exhibit, certificate or other instrument to
be delivered under this Agreement) do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading. There is no fact of which
Company has Knowledge that has not been disclosed to Parent pursuant to this
Agreement, including the schedules hereto, all taken together as a whole, which
has had or would reasonably be expected to have a Material Adverse Effect on
Company or materially adversely affect the ability of Company to consummate in a
timely manner the transactions contemplated hereby.

 

ARTICLE 3
Representations and Warranties of Parent and Merger Subsidiary

 

Parent and Merger Subsidiary hereby jointly and severally represent and warrant
to Company as follows:

 

3.1 Organization and Good Standing. Each of Parent and Merger Subsidiary (a) is
a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction in which it was organized and (b) has full corporate
power and authority to own and lease its properties and assets and conduct its
business. The copies of the articles of incorporation and bylaws of each of
Parent and Merger Subsidiary that have been made available to Company are
correct and complete copies of such documents as in effect as of the Effective
Date. Parent is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction in which the ownership and leasing of its
properties and assets or the conduct of its business requires such
qualification, except where the failure to be so qualified or in good standing
will not have a Material Adverse Effect on the ability of Parent to consummate
the transactions contemplated by this Agreement. Parent has no subsidiaries
other than Merger Subsidiary and Parent Subsidiary.

 

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3.2 Authority and Authorization; Conflicts; Consents.

 

(a) Authority and Authorization. The execution, delivery and performance of this
Agreement and each Ancillary Document of Parent and Merger Subsidiary have been
duly authorized and approved by all necessary corporate action with respect to
Parent and Merger Subsidiary, and each such authorization and approval remains
in full force and effect. This Agreement has been duly executed and delivered by
Parent and Merger Subsidiary and, assuming it is a valid and binding obligation
of Company and constitutes a valid and binding obligation of Parent and Merger
Subsidiary enforceable in accordance with its terms except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors’ rights and remedies generally.

 

(b) Conflicts. Neither the execution or delivery by Parent and Merger Subsidiary
of this Agreement or any Ancillary Document nor consummation by Parent and
Merger Subsidiary of the transactions contemplated herein or therein does or
will (with or without the passage of time or giving of notice): (1) constitute a
breach of, violate, conflict with or give rise to or create any right or
obligation under its articles of incorporation or bylaws; (2) violate any
applicable law or order; or (3) constitute a breach or violation of or a default
under, conflict with or give rise to or create any right of any Person other
than Parent to accelerate, increase, terminate, modify or cancel any right or
obligation under, any contract to which Parent or Merger Subsidiary is a party,
except where such breach, violation, default, conflict or right described in
clause (2) or (3) above will not have a Material Adverse Effect on the ability
of Parent and Merger Subsidiary to consummate the transactions contemplated
herein.

 

(c) Consents. Except for (a) approvals under applicable state securities laws
and (b) the filing of the Certificate of Merger with the Secretary of State for
the State of Nevada, no consent or approval by, notification to or filing with
any Person is required in connection with the execution, delivery or performance
by Parent or Merger Subsidiary of this Agreement or any Ancillary Document or
Parent or Merger Subsidiary’s consummation of the transactions contemplated
herein or therein, except for any consent, approval, notice or filing, the
absence of which will not have a Material Adverse Effect on the ability of
Parent or Merger Subsidiary to consummate the transactions contemplated herein.

 

3.3 Capitalization.

 

(a) The authorized, issued and outstanding shares of capital stock of Parent as
of the date hereof are correctly set forth on Schedule 3.3(a). Parent’s
authorized capitalization consists of 10,000,000 shares of Preferred Shares,
$.00001 par value, none of which are issued and outstanding, and 500,000,000
shares of common stock, par value $.00001, of which 13,077,679 (following the
cancellation of certain shares as part of this Merger) shares are issued and
outstanding. The issued and outstanding shares of capital stock of Parent have
been duly authorized and validly issued, are fully paid and nonassessable, and
have not been issued in violation of any preemptive rights. Other than as
described on Schedule 3.3(a), Parent has no other equity securities or
securities containing any equity features that are authorized, issued or
outstanding. There are no agreements or other rights or arrangements existing
which provide for the sale or issuance of capital stock by Parent and there are
no rights, subscriptions, warrants, options, conversion rights or agreements of
any kind outstanding to purchase or otherwise acquire from Parent any shares of
capital stock or other securities of Parent of any kind. There are no agreements
or other obligations (contingent or otherwise) which may require Parent to
repurchase or otherwise acquire any shares of its capital stock. Other than as
described on Schedule 3.3(a), there are not currently any outstanding capital
stock, options, warrants or other rights to acquire any shares of Parent capital
stock.

 

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(b) There are registration rights and those shares that have registration rights
are described further in Schedule 3.3(b) attached hereto.

 

(c) The authorized capital stock of Merger Subsidiary consists of One Hundred
(100) shares of common stock, par value $0.001 per share, all of which are
issued and outstanding and held of record by Parent as of the date hereof. The
issued and outstanding shares of capital stock of Merger Subsidiary are duly
authorized, validly issued, fully paid and nonassessable and have not been
issued in violation of any preemptive rights. Except as disclosed on Schedule
3.3(c), there are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating Merger Subsidiary to issue,
sell, purchase or redeem any shares of its capital stock or securities or
obligations of any kind convertible into or exchangeable for any shares of its
capital stock

 

(d) The shares of Parent Common Stock representing the Merger Consideration will
be, when issued in accordance with the terms of this Agreement, duly authorized,
validly issued, fully paid and nonassessable.

 

3.4 Litigation. There is no claim whether or not commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Authority or
other Proceeding pending or, to the Knowledge of Parent, threatened against
Parent or to which Parent is a party or that is reasonably expected to adversely
affect Parent and (b) Parent is not subject to any order, in each case that will
have a Material Adverse Effect on the ability of Parent to consummate the
transactions contemplated herein.

 

3.5 No Brokers or Finders. Neither Parent nor Merger Subsidiary has any
obligation or other liability to any broker, finder or similar intermediary in
connection with the transactions contemplated herein that would cause any party
to this Agreement to become liable for payment of any fee or expense with
respect thereto.

 

3.6 Tax Matters.

 

(a) For purposes of this Agreement, “Parent Tax Returns” includes all Tax
Returns of Parent relating to any Taxes with respect to any income, properties
or operations of Parent or any of its Tax Affiliates. Except as disclosed on
Schedule 3.6(a): (i) Parent and each of its Tax Affiliates has timely filed (or
has had timely filed on its behalf) all Parent Tax Returns required to be filed
or sent by it in respect of any Taxes or required to be filed or sent by it to
any Tax Authority having jurisdiction; (ii) all such Parent Tax Returns are
complete and accurate in all material respects; (iii) Parent and each of its Tax
Affiliates has timely and properly paid (or has had paid on its behalf) all
Taxes required to be paid by it; (iv) Parent has established on the Parent
Balance Sheet, in accordance with GAAP, consistently applied, reserves that are
adequate for the payment of any Taxes not yet due and payable; and (v) Parent
and each of its Tax Affiliates has complied with all applicable laws, rules and
regulations relating to the collection or withholding of Taxes from third
parties (including, without limitation, employees) and the payment thereof
(including, without limitation, withholding of Taxes under Code Sections 1441
and 1442, or similar provisions under any foreign laws).

 

(b) There are no material Liens for Taxes upon any assets of Parent or any of
its Tax Affiliates, except statutory Liens for Taxes not yet due.

 

13

 

 

(c) No deficiency for any Taxes has been proposed, asserted or assessed against
Parent or any of its Tax Affiliates that has not been resolved and paid in full
or is not being contested in good faith. Except as disclosed in Schedule 3.6(c),
no waiver, extension or comparable consent given by Parent or any of its Tax
Affiliates regarding the application of the statute of limitations with respect
to any Taxes or Parent Tax Returns is outstanding, nor is any request for any
such waiver or consent pending. Except as disclosed in Schedule 3.6(c), there
has been no Tax audit or other Proceeding with regard to any Parent Tax Returns
or Taxes relating to Parent or any of its Tax Affiliates, nor is any such Tax
audit or other Proceeding pending, nor has there been any notice to Parent by
any Tax Authority regarding any such Tax audit or other Proceeding, or, to the
Knowledge of Parent, is any such Tax audit or other Proceeding threatened with
regard to any Parent Tax Returns or Taxes or relating to Parent or any of its
Tax Affiliates. Parent does not expect the assessment of any additional Taxes of
Parent for any period prior to the date hereof and has no Knowledge of any
unresolved questions, claims or disputes concerning the liability for Taxes
relating to Parent or any of its Tax Affiliates that would exceed the estimated
reserves established on its books and records.

 

(d) Neither Parent nor any of its Tax Affiliates is a party to any agreement,
contract or arrangement that would result, separately or in the aggregate, in
the payment of any “excess parachute payments” within the meaning of Code
Section 280G; and the consummation of the transactions contemplated by this
Agreement will not be a factor causing payments to be made by Parent or any of
its Tax Affiliates not to be deductible (in whole or in part) under Code Section
280G. Except as set forth on Schedule 3.6(d), neither Parent nor any of its Tax
Affiliates is liable for Taxes of any other Person nor is currently under any
contractual obligation to indemnify any Person with respect to Taxes, or a party
to any Tax sharing agreement or any other agreement providing for payments by
Parent with respect to Taxes. Except as set forth on Schedule 3.6(d), neither
Parent nor any of its Tax Affiliates is a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for federal income Tax purposes. Neither Parent nor any of its Tax
Affiliates has agreed and is not required, as a result of a change in method of
accounting or otherwise, to include any adjustment under Code Section 481 (or
any corresponding provision of state, local or foreign law) in Taxable income.
Schedule 3.6(d) contains a list of all jurisdictions in which Parent or any of
its Tax Affiliates is required to file any Parent Return and no claim has been
made by a Tax Authority in a jurisdiction where Parent or any of its Tax
Affiliates does not currently file Parent Tax Returns, that Parent or any of its
Tax Affiliates is or may be subject to Taxation by that jurisdiction. There are
no advance rulings in respect of any Tax pending or issued by any Tax Authority
with respect to any Taxes of or any of its Tax Affiliates. Neither Parent nor
any of its Tax Affiliates has entered into any gain recognition agreements under
Code Section 367 and the Treasury Regulations promulgated thereunder. Neither
Parent nor any of its Tax Affiliates is liable with respect to any indebtedness
the interest of which is not deductible for applicable federal, foreign, state
or local income Tax purposes.

 

(e) Parent has been neither a “distributing corporation” nor a “controlled
corporation” (within the meaning of Code Section 355) in a distribution of stock
qualifying for Tax-free treatment under Code Section 355.

 

(f) Except as set forth on Schedule 3.6(f), Parent has not requested any
extension of time within which to file any Parent Return, which return has not
since been filed.

 

(g) Neither Parent nor any Tax Affiliate has, for the five (5) year period
preceding the Closing, been a United States real property holding corporation
within the meaning of Code Section 897(c)(2).

 

(h) There have been delivered to Company true and complete copies of Parent Tax
Returns with respect to Taxes based on net income for the 2012, 2013, and 2014
tax years; and any other Parent Tax Returns requested by Company that may be
relevant to Parent or any of its Tax Affiliates or their respective business,
assets or operations for any and all Taxable periods ending before the date
hereof; and for any other Taxable years that remain subject to audit or
investigation by any Tax Authority.

 

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(i) Except as disclosed on Schedule 3.6(i), Parent and each of its Tax
Affiliates is, and at all times has been, a corporation or association Taxable
as a corporation for federal income Tax purposes.

 

(j) Neither Parent nor any of its Tax Affiliates has made any election under
Code Section 1362(a) to be an S corporation.

 

3.7 Contracts and Commitments.

 

(a) Except as set forth on Schedule 3.7(a), all material agreements of Parent
have been filed as an exhibit to the Parent SEC Filings (such material contracts
and any contracts described on Schedule 3.7(a), the “Parent Contracts”).

 

(b) To Parent’s Knowledge, Parent has performed, in all material respects, the
obligations required to be performed by it in connection with the Parent
Contracts and is not in receipt of any claim of default under any Parent
Contract; Parent has no present expectation or intention of not fully performing
any material obligation pursuant to any Parent Contract; and Parent has no
Knowledge of any breach or anticipated breach by any other party to any Parent
Contract. Schedule 3.7(b) lists the liabilities and obligations of Parent as of
the Closing.

 

3.8 Affiliate Transactions. Except as disclosed in the Parent SEC Filings, and
other than pursuant to this Agreement, no officer, director or employee of
Parent, or any member of the immediate family of any such officer, director or
employee, or any entity in which any of such Persons owns any beneficial
interest (other than any publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of such Persons)
(collectively, the “Parent Insiders”), has any agreement with Parent (other than
normal employment arrangements) or any interest in any property, real, personal
or mixed, tangible or intangible, used in or pertaining to the business of
Parent (other than ownership of capital stock of Parent). Parent is not indebted
to any Parent Insider (except for amounts due as normal salaries and bonuses and
in reimbursement of ordinary business expenses) and no Parent Insider is
indebted to Parent except for cash advances for ordinary business expenses).
None of the Parent Insiders has any direct or indirect interest in any
competitor, supplier or customer of Parent or in any Person from whom or to whom
Parent leases any property, or in any other Person with whom Parent transacts
business of any nature. For purposes of this Section 3.8, the members of the
immediate family of an officer, director or employee shall consist of the
spouse, parents, children and siblings of such officer, director or employee.

 

3.9 Compliance with Laws; Permits.

 

(a) Except for any noncompliance that would not reasonably be expected to have a
Material Adverse Effect on Parent, Parent and its officers, directors, agents
and employees have complied with all applicable laws, Environmental Laws,
regulations and other requirements, including, but not limited to, federal,
state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to equal employment opportunity, employee retirement,
affirmative action and other hiring practices, occupational safety and health,
workers’ compensation, unemployment and building and zoning codes, and no claims
have been filed against Parent, and Parent has not received any written notice,
alleging a violation of any such laws, Environmental Laws, regulations or other
requirements.

 

(b) Parent has no licenses, permits, Environmental Permits or certificates from
federal, state, local and foreign authorities (including, without limitation,
federal and state agencies regulating occupational health and safety) and no
such items are necessary to permit it to conduct its business and own and
operate its properties.

 

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3.10 Exchange Act Reports.

 

(a) The Parent Common Stock has been registered under Section 12 of the Exchange
Act and Parent is subject to the periodic reporting requirements of Section 13
of the Exchange Act.

 

(b) Except as set forth on Schedule 3.10(b), Parent has timely filed all forms,
reports and documents required to be filed with the SEC by applicable law since
the date it first became subject to the periodic reporting requirements of
Sections 13(a), 14(a), 14(c) and 15(d) of the Exchange Act. All such required
forms, reports and documents (including the financial statements, exhibits and
schedules thereto and those documents that Parent may file subsequent to the
date hereof) are collectively referred to herein as the “Parent SEC Filings.” As
of their respective dates, the Parent SEC Filings (i) were prepared in
accordance with the requirements of the Securities Act or Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such Parent SEC Filings, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the Effective Date, then on the date
of such filing) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.

 

(c) Each of the financial statements (including, in each case, any related notes
thereto) contained in the Parent SEC Filings, as of their respective dates, (i)
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, (ii) was prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act) and (iii) fairly presented the financial position of Parent at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not, or are not expected to be, material in amount. The balance sheet
of Parent as of December 31, 2014 is hereinafter referred to as the “Parent
Balance Sheet.” Except for those liabilities disclosed on Schedule 3.10(c) (the
“Permitted Liabilities”), as of the Merger Time Parent will not have any
liabilities of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP.

 

3.11 No Undisclosed Liabilities. Except as reflected in the unaudited balance
sheet of Parent at March 31, 2015 included in Parent’s quarterly report on Form
10-Q for such period (the “Latest Parent Balance Sheet”), Parent has no
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
except (i) liabilities which have arisen after the date of the Latest Parent
Balance Sheet in the ordinary course of business, none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit, or (ii) as otherwise set forth on Schedule 3.11.

 

3.12 Books and Records. The books of account, minute books, stock record books,
and other similar records of Parent, complete copies of which have been made
available to Company, have been properly kept and contain no inaccuracies except
for inaccuracies that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.

 

3.13 Real Property. Schedule 3.13 lists all real property leased or owned by
Parent. Parent has good and valid title to all of its leaseholds and other
interests free and clear of all Liens, except for such Liens which do not
detract from the value or interfere with the present use of the property subject
thereto or affected thereby. The real property to which such leaseholds and
other interests pertain constitutes all of the real property used in Parent’s
business.

 

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3.14 Insurance. The insurance policies obtained and maintained by Parent that
are material to Parent are in full force and effect, all premiums due and
payable thereon have been paid (other than retroactive or retrospective premium
adjustments that Parent is not currently required, but may in the future be
required, to pay with respect to any period ending prior to the Effective Date),
and Parent has received no written notice of cancellation or termination with
respect to any such policy that has not been replaced on substantially similar
terms prior to the date of such cancellation.

 

3.15 Environmental Matters.

 

(a) To its Knowledge, except as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on Parent, (i)
Parent has not transported, handled, treated, stored, used, manufactured,
distributed, disposed of, released or exposed its employees or others to any
Hazardous Materials in violation of any applicable law, and (ii) Parent has not
engaged in any Hazardous Materials Activities in violation of any applicable
law, rule, regulation, treaty or statute promulgated by any Governmental
Authority in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.

 

(b) There is no Environmental Claim pending or, to the Knowledge of Parent,
threatened as of the Effective Date against Parent that will have a Material
Adverse Effect on Parent or will have a Material Adverse Effect on the ability
of Parent to consummate the transactions contemplated herein.

 

(c) Parent has complied and is in compliance, in each case in all material
respects, with all applicable laws, rules, regulations, treaties and statutes
promulgated by any Governmental Authority in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Hazardous
Material Activity.

 

3.16 Absence of Certain Developments. Except as set forth on Schedule 3.16 or as
disclosed in the Parent SEC Filings or as otherwise contemplated by this
Agreement, since the Latest Parent Balance Sheet, Parent conducted its business
only in the ordinary course consistent with past practice and there has not
occurred:

 

(a) any event having a Material Adverse Effect on Parent or Merger Subsidiary;

 

(b) any event that would reasonably be expected to prevent or materially delay
the performance of Parent’s obligations pursuant to this Agreement;

 

(c) any material change by Parent in its accounting methods, principles or
practices;

 

(d) any declaration, setting aside or payment of any dividend or distribution in
respect of the shares of capital stock of Parent or Merger Subsidiary or any
redemption, purchase or other acquisition of any of Parent’s or Merger
Subsidiary’s securities;

 

(e) any increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred-compensation, pension, retirement,
profit-sharing, stock-option, stock-purchase or other employee-benefit plan of
Parent or Merger Subsidiary (including without limitation the granting of stock
options, stock-appreciation rights, performance awards or restricted stock
awards), or any other increase in the compensation payable or to become payable
to any employees, officers, consultants or directors of Parent or Merger
Subsidiary;

 

(f) any issuance, grants or sale of any stock, options, warrants, notes, bonds
or other securities, or entry into any agreement with respect thereto by Parent
or Merger Subsidiary;

 

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(g) any amendment to the Articles of Incorporation or bylaws of Parent or the
Certificate of Incorporation or bylaws, if any, of Merger Subsidiary;

 

(h) other than in the ordinary course of business consistent with past practice,
any (1) capital expenditures by Parent or Merger Subsidiary, (2) purchase, sale,
assignment or transfer of any material assets by Parent or Merger Subsidiary,
(3) mortgage, pledge or existence of any lien, encumbrance or charge on any
material assets or properties, tangible or intangible of Parent or Merger
Subsidiary, except for liens for taxes not yet due and such other liens,
encumbrances or charges which do not, individually or in the aggregate, have a
Material Adverse Effect on Parent, or (4) cancellation, compromise, release or
waiver by Parent or Merger Subsidiary of any rights of material value or any
material debts or claims;

 

(i) any incurrence by Parent or Merger Subsidiary of any material liability
(absolute or contingent), except for current liabilities and obligations
incurred in the ordinary course of business consistent with past practice;

 

(j) damage, destruction or similar loss, whether or not covered by insurance,
materially affecting the business or properties of Parent;

 

(k) entry by Parent or Merger Subsidiary into any agreement, contract, lease or
license other than in the ordinary course of business consistent with past
practice;

 

(l) any acceleration, termination, modification or cancellation of any
agreement, contract, lease or license to which Parent or Merger Subsidiary is a
party or by which any of them is bound;

 

(m) entry by Parent or Merger Subsidiary into any loan or other transaction with
any officers, directors or employees of Parent or Merger Subsidiary;

 

(n) any charitable or other capital contribution by Parent or Merger Subsidiary
or pledge therefor;

 

(o) entry by Parent or Merger Subsidiary into any transaction of a material
nature other than in the ordinary course of business consistent with past
practice; or

 

(p) any negotiation or agreement by the Parent or Merger Subsidiary to do any of
the things described in the preceding clauses (a) through (o).

 

3.17 Employee Benefit Plans.

 

(a) Parent has a 2013 Stock Option Plan with no current options issued and an
effective S-8 with 1,388,889 shares eligible to be issued. There are no other
“employee-benefit plans” within the meaning of ERISA Section 3(3), and Parent
has no other bonus, stock-option, stock-purchase, stock-appreciation right,
incentive, deferred-compensation, supplemental-retirement, severance, or
fringe-benefit plans, programs, policies or arrangements. No current or former
director, officer, employee or independent contractor of Parent will become
entitled to retirement, severance, unemployment compensation or similar benefits
or to enhanced or accelerated benefits (including any acceleration of vesting or
lapsing of restrictions with respect to equity-based awards and increases in the
amount of compensation or benefits due to any such Person) under any contract,
commitment or arrangement as a result of consummation of the transactions
contemplated by this Agreement.

 

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3.18 Employees.

 

(a) Schedule 3.18(a) lists, as of the Effective Date, the name, position, base
compensation and, for year-to-date calendar year 2015, total compensation for
each employee of Company.

 

(b) Except as otherwise set forth in Schedule 3.18(b), or as contemplated by
this Agreement, to the Knowledge of Parent, (i) neither any executive employee
of Parent nor any group of the employees of Parent has any plans to terminate
his, her or its employment; (ii) Parent has no material labor relations problem
pending and its labor relations are satisfactory; (iii) there are no workers’
compensation claims pending against Parent nor is Parent aware of any facts that
would give rise to such a claim; (iv) no employee of Parent is subject to any
secrecy or noncompetition agreement or any other agreement or restriction of any
kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of Parent;
and (v) no employee or former employee of Parent has any claim with respect to
any intellectual property rights of Parent.

 

3.19 Proprietary Information and Inventions. Set forth on Schedule 3.19 is a
complete and accurate list of all current Parent employees, consultants,
contractors or other Persons that are subject to a non-disclosure agreement or
an alternative employment agreement with Parent containing comparable
non-disclosure provisions.

 

3.20 Intellectual Property. Set forth on Schedule 3.20 is a complete and
accurate list of all Intellectual Property (as defined in Section 2.20) owned or
licensed by Parent, and accurately identifies all Persons from which or to which
Parent licenses all such listed Intellectual Property.

 

3.21 Tax-Free Reorganization. Neither Parent nor, to Parent’s Knowledge, any of
its Affiliates has taken or agreed to take any action that would prevent the
Merger from qualifying as a reorganization under Section 368(a) of the Code.

 

3.22 Full Disclosure. The representations and warranties of each of Parent and
Merger Subsidiary contained in this Agreement (and in any schedule, exhibit,
certificate or other instrument to be delivered under this Agreement) do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained herein and therein, in
light of the circumstances under which such statements were made, not
misleading. There is no fact of which Parent or Merger Subsidiary has Knowledge
that has not been disclosed to Company in the Parent SEC Filings or pursuant to
this Agreement, including the schedules hereto, all taken together as a whole,
which has had or would reasonably be expected to have a Material Adverse Effect
on Parent or Merger Subsidiary, or materially adversely affect the ability of
Parent or Merger Subsidiary to consummate in a timely manner the transactions
contemplated hereby.

 

3.23 Validity of Parent Common Stock. The shares of Parent Common Stock to be
issued to holders of Company Common Stock pursuant to this Agreement will be,
when issued, duly authorized, validly issued, fully paid and non-assessable.

 

3.24 Private Placement. Parent has taken all necessary action on its part such
that the issuance of the Merger Consideration to Company security holders
constitutes a valid “private placement” that is exempt from the registration
requirements of the Securities Act and applicable state securities laws.

 

3.25 Trading Matters. At the date hereof (i) the Parent Common Stock is eligible
for quotation on the over-the-counter market, (ii) Parent has and shall have
performed or satisfied all of its undertakings to, and of its obligations and
requirements with, the SEC and FINRA, (iii) Parent has not taken, and shall not
have taken, any action that would preclude, or otherwise jeopardize, the
eligibility of the Parent Common Stock for quotation on the over-the-counter
markets and (iv) Parent does not have any reasonable basis to believe that the
Parent Common Stock is the subject of delisting or suspension of quotation or
eligibility for quotation on the over-the-counter markets (or hearings or any
similar process related thereto).

 

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3.26 Shell Company Status. At the date hereof and prior to the Closing, Parent
is not a “shell company” as such term is defined in Section 12b-2 of the
Exchange Act.

 

3.27 Prepaid Assets. Schedule 3.27 hereof lists all prepaid assets of Parent as
of the Closing Date.

 

ARTICLE 4
Conduct of Business Pending the Merger

 

4.1 Conduct of Business by Parent. From the Effective Date through the Merger
Time, unless Company shall otherwise agree in writing or as otherwise expressly
contemplated or permitted by other provisions of this Agreements, including but
not limited to this Section 4.2, Parent shall not, directly or indirectly, (a)
amend its Certificate of Incorporation or bylaws, (b) split, combine or
reclassify any outstanding shares of capital stock of Parent, (c) declare, set
aside, make or pay any dividend or distribution in cash, stock, property or
otherwise with respect to the capital stock of Parent, (d) default in its
obligations under any material debt, contract or commitment which default
results in the acceleration of obligations due thereunder, except for such
defaults arising out of Parent’s entry into this Agreement for which consents,
waivers or modifications are required to be obtained in accordance with Section
3.2(c), (e) conduct its business other than in the ordinary course on an
arms-length basis and in accordance in all material respects with all applicable
laws, rules and regulations and Parent’s past custom and practice, except as set
forth on Schedule 4.1, (f) issue or sell any additional shares of, or options,
warrants, conversions, privileges or rights of any kind to acquire any shares
of, any of its capital stock, (g) acquire (by merger, exchange, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets thereof,
or (h) make or change any material tax elections, settle or compromise any
material tax liability or file any amended tax return.

 

4.2 Conduct of Business by Company. From the Effective Date through the Merger
Time, unless Parent shall otherwise agree in writing or as otherwise expressly
contemplated or permitted by other provisions of this Agreement, including but
not limited to this Section 4.2, Company shall not, directly or indirectly, (a)
amend its Articles of Incorporation or bylaws, (b) split, combine or reclassify
any outstanding shares of capital stock of Company, (c) declare, set aside, make
or pay any dividend or distribution in cash, stock, property or otherwise with
respect to the capital stock of Company, (d) default in its obligations under
any material debt, contract or commitment which default results in the
acceleration of obligations due thereunder, except for such defaults arising out
of Company’s entry into this Agreement for which consents, waivers or
modifications are required to be obtained in accordance with Schedule 2.2(c),
(e) conduct its business other than in the ordinary course on an arms-length
basis and in accordance in all material respects with all applicable laws, rules
and regulations and Company’s past custom and practice, except as set forth on
Schedule 4.2, (f) issue or sell any additional shares of, or options, warrants,
conversions, privileges or rights of any kind to acquire any shares of, any of
its capital stock, except issuances or sales made in the Private Placement or in
connection with exercise or conversion into equity of Company debt securities
outstanding on the date of this Agreement, (g) acquire (by merger, exchange,
consolidation, acquisition of stock or assets or otherwise) any corporation,
partnership, joint venture or other business organization or division or
material assets thereof, or (h) make or change any material tax elections,
settle or compromise any material tax liability or file any amended tax return.

 

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ARTICLE 5
Additional Covenants and Agreement

 

5.1 Governmental Filings. Each party will use all reasonable efforts and will
cooperate with the other party in the preparation and filing, as soon as
practicable, of all filings, applications or other documents required under
applicable laws, including, but not limited to, the Exchange Act, to consummate
the transactions contemplated by this Agreement. Prior to submitting each
filing, application, registration statement or other document with the
applicable regulatory authority, each party will, to the extent practicable,
provide the other party with an opportunity to review and comment on each such
filing, application, registration statement or other document to the extent
permitted by applicable law. Each party will use all reasonable efforts and will
cooperate with the other party in taking any other actions necessary to obtain
such regulatory or other approvals and consents at the earliest practicable
time, including participating in any required hearings or Proceedings. Subject
to the terms and conditions herein provided, each party will use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable law and
regulations to consummate and make effective as promptly as practicable the
Merger and the other transactions contemplated by this Agreement.

 

5.2 Expenses. All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses.

 

5.3 Due Diligence; Access to Information; Confidentiality.

 

(a) Prior to the Merger Time, Company and Parent shall afford to the other party
and their authorized representatives the opportunity to conduct and complete a
due diligence investigation of the other party as described herein. Each party
shall permit the other party full access on reasonable notice and at reasonable
hours to its properties and shall disclose and make available (together with the
right to copy) to the other party and its officers, employees, attorneys,
accountants and other representatives, all books, papers and records relating to
the assets, stock, properties, operations, obligations and liabilities of such
party and its subsidiaries, including without limitation all books of account
(including without limitation the general ledger), tax records, minute books of
directors’ and stockholders’ meetings, organizational documents, bylaws,
contracts and agreements, filings with any regulatory authority, accountants’
work papers, litigation files (including without limitation legal research
memoranda), attorney’s audit response letters, documents relating to assets and
title thereto (including without limitation abstracts, title insurance policies,
surveys, environmental reports, opinions of title and other information relating
to the real and personal property), plans affecting employees,
securities-transfer records and security holder lists, and any books, papers and
records relating to other assets or business activities in which such party may
have a reasonable interest, and otherwise provide such assistance as is
reasonably requested in order that each party may have a full opportunity to
make such investigation and evaluation as it shall reasonably desire to make of
the business and affairs of the other party; provided, however, that the
foregoing rights granted to each party shall, whether or not and regardless of
the extent to which the same are exercised, in no way affect the nature or scope
of the representations, warranties and covenants of the respective party set
forth herein. In addition, each party and its officers and directors shall
cooperate fully (including providing introductions, where necessary) with such
other party to enable the party to contact third parties, including customers,
prospective customers, specified agencies or others as the party deems
reasonably necessary to complete its due diligence; provided further, that such
party agrees not to initiate such contacts without the prior approval of the
other party, which approval will not be unreasonably withheld.

 

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(b) Prior to Closing and if, for any reason, the transactions contemplated by
this Agreement are not consummated, neither Parent nor Company nor any of their
officers, employees, attorneys, accountants and other representatives shall
disclose to third parties or otherwise use any confidential information received
from the other party in the course of investigating, negotiating, and performing
the transactions contemplated by this Agreement; provided, however, that nothing
shall be deemed to be confidential information which:

 

(i) is known to the party receiving the information at the time of disclosure,
unless any individual who knows the information is under an obligation to keep
that information confidential;

 

(ii) becomes publicly known or available without the disclosure thereof by the
party receiving the information in violation of this Agreement; or

 

(iii) is received by the party receiving the information from a third party not
under an obligation to keep that information confidential.

 

This provision shall not prohibit the disclosure of information required to be
made under federal or state securities laws, rules and regulations or by order
of any federal, state or local regulatory agency or as otherwise required to be
disclosed under applicable law. If any disclosure is so required, the party
making such disclosure shall consult with the other party prior to making such
disclosure, and the parties shall use all reasonable efforts, acting in good
faith, to agree upon a text for such disclosure that is satisfactory to both
parties.

 

5.4 Tax Treatment. The Surviving Company shall not knowingly take any action
which could reasonably be expected to disqualify the Merger as a
“reorganization” within the meaning of Section 368(a) of the Code.

 

5.5 Press Releases. Company and Parent shall agree with each other as to the
form and substance of any press release or public announcement related to this
Agreement or the other transactions contemplated hereby; provided, however, that
nothing contained herein shall prohibit either party, following notification to
the other party, from making any disclosure which is required by law or
regulation. If any such press release or public announcement is so required, the
party making such disclosure shall consult with the other party prior to making
such disclosure, and the parties shall use all reasonable efforts, acting in
good faith, to agree upon a text for such disclosure which is satisfactory to
both parties.

 

5.6 Securities Law Filings.

 

(a) Parent agrees to provide to Company copies of all reports and other
documents that it proposes to file with the SEC under the Securities Act or
Exchange Act between the date hereof and the Merger Time at least two days prior
to the filing of such reports or documents.

 

(b) Promptly upon the execution of this Agreement, the parties hereto shall
cooperate in the preparation and filing of all filings required by applicable
securities laws, including, without limitation, current reports on Form 8-K
under the Exchange Act and information required by Rule 14f-1, if applicable,
under the Exchange Act.

 

5.7 Merger Consideration; Securities Act Exemption. Each of Company and Parent
shall take all necessary action on their part to cause the issuance of the
Merger Consideration to Company’s stockholders to constitute a valid private
placement exempt from the registration requirements of the Securities Act and
applicable state securities laws.

 

22

 

 

5.8 No Solicitation. Unless and until this Agreement shall have been terminated
pursuant to Section 7.1, neither Parent nor its officers, directors or agents
shall, directly or indirectly, encourage, solicit or initiate discussions or
negotiations with, or engage in negotiations or discussions with, or provide
non-public information to, any corporation, partnership, Person or other entity
or groups concerning any merger, sale of capital stock, sale of substantial
assets or other business combination; provided, however, that Parent may engage
in such discussion in response to an unsolicited proposal from an unrelated and
non-Affiliated party if Parent’s Board of Directors determines, in good faith
and after consultation with counsel, that the failure to engage in such
discussions may constitute a breach of the fiduciary or legal obligations of
Parent’s Board of Directors. Parent will promptly advise Company in writing if
it receives a proposal or inquiry with respect to the matters described above.

 

5.9 Failure to Fulfill Conditions. In the event that any of the parties hereto
determines that a condition to its respective obligations to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to the
termination date of this Agreement, it will promptly notify the other parties.

 

5.10 Preparation of Periodic and Current Reports. Prior to the Merger Time,
Parent shall prepare (but not file without making a reasonable effort to comply
with Section 5.6(a)) current reports on form 8-K, and any other subsequent
periodic reports, that are required to be filed prior to the Merger Time.

 

5.11 Notification of Certain Matters. On or prior to the Merger Time, each party
shall give prompt notice to the other party of (a) the occurrence or failure to
occur of any event or the discovery of any information, which occurrence,
failure or discovery would be likely to cause any representation or warranty on
its part contained in this Agreement to be untrue, inaccurate or incomplete
after the date hereof in any material respect or, in the case of any
representation or warranty given as of a specific date, would be likely to cause
any such representation or warranty on its part contained in this Agreement to
be untrue, inaccurate or incomplete in any material respect as of such specific
date, and (b) any material failure of such party to comply with or satisfy any
covenant or agreement to be complied with or satisfied by it hereunder.

 

5.12 Directors and Officers of Company.

 

(a) As of the Effective Date, all members of Company’s board of directors (the
“Board”) have tendered resignations as members of the Board to be effective as
of the Merger Time. The Board members of the Surviving Company shall be: Michael
Ahlin, Trent D’Ambrosio, Whit Cluff, Reed Benson and Kay Briggs.

 

(b) As of the Merger Time, the officers of Parent immediately prior to the
Merger Time will continue as the sole officers of Parent, each to hold office
until their respective successors are duly appointed or such Persons are removed
from office in accordance with applicable law and the articles of incorporation
and bylaws of Parent.

 

5.13 Representation in Honduras. Gerardo Flores shall remain as one of the
Company’s Legal Representatives in Honduras for at least six months from the
date of Closing.

 

ARTICLE 6
Conditions

 

6.1 Conditions to Obligations of Each Party. The respective obligations of each
party to effect the transactions contemplated hereby are subject to the
fulfillment or waiver at or prior to the Merger Time of the conditions set forth
in the paragraphs below:

 

23

 

 

(a) There shall have been no law, statute, rule or regulation, domestic or
foreign, enacted or promulgated which would prohibit or make illegal the
consummation of the transactions contemplated hereby.

 

(b) This Agreement and all of the transactions contemplated hereby shall have
been, and shall at the Merger Time remain, duly authorized by the Boards of
Directors of Company, Parent and Merger Subsidiary. Further, the Merger and this
Agreement shall have been approved by Parent, as the sole stockholder of Merger
Subsidiary, and by the approval of the stockholders of Company as required under
the NRS.

 

(c) There shall not be threatened, instituted or pending any action or
proceeding before any court or governmental authority or agency: (i) challenging
or seeking to make illegal, or to delay or otherwise directly or indirectly
restrain or prohibit, the consummation of the transactions contemplated hereby
or seeking to obtain material damages in connection with such transactions; (ii)
seeking to prohibit direct or indirect ownership or operation by Parent or
Merger Subsidiary of all or a material portion of the business or assets of
Company, or to compel Parent or Merger Subsidiary or any of their respective
subsidiaries or Company to dispose of or to hold separately all or a material
portion of the business or assets of Parent or Merger Subsidiary or of Company,
as a result of the transactions contemplated hereby; (iii) seeking to invalidate
or render unenforceable any material provision of this Agreement or any of the
other agreements attached as exhibits hereto or contemplated hereby, or (iv)
otherwise relating to and materially adversely affecting the transactions
contemplated hereby.

 

(d) There shall not be any action taken, or any statute, rule, regulation,
judgment, order or injunction proposed, enacted, entered, enforced, promulgated,
issued or deemed applicable to the transactions contemplated hereby, by any
federal, state or other court, government or governmental authority or agency,
that would reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in Section 6.1(c).

 

(e) There shall not have occurred any general suspension of quotation on the
over-the-counter markets or trading on any national exchange, or any general
bank moratorium or closing or any war, national emergency or other event
affecting the economy or securities trading markets generally that would make
completion of the Merger impractical, as determined in the reasonable discretion
of Company.

 

(f) There shall be available a good faith claim for exemptions from the
registration requirements of the Securities Act and all applicable blue sky laws
for the offer and issuance of the Merger Consideration.

 

6.2 Additional Conditions to Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to effect the transactions
contemplated hereby in accordance with the terms of this Agreement are also
subject to the fulfillment or waiver of the conditions set forth in the
paragraphs below:

 

(a) Since the Effective Date, Company shall have continued to conduct its
operations in accordance with the provisions of Section 4.2.

 

(b) The representations of Company contained in this Agreement shall be accurate
as of the Effective Date and as of the Merger Time, in all respects (in the case
of any representation containing any materiality qualification) or in all
material respects (in the case of any representation without any materiality
qualification). Company shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed and
complied with by it hereunder at or prior to the Merger Time.

 

24

 

 

(c) Company has obtained all consents and approvals necessary to consummate the
transactions contemplated by this Agreement in order that the transactions
contemplated herein shall not constitute a breach or violation of, or result in
a right of termination or acceleration of, or creation of any encumbrance on any
of Company’s assets pursuant to the provisions of, any agreement, arrangement or
undertaking of or affecting Company or any license, franchise or permit of or
affecting Company; including, but not limited to, waivers by each of the holders
of those certain 5% Convertible Promissory Notes held by such holders in
Company.

 

(d) Company shall have furnished to Parent a certificate of the Chief Executive
Officer and the Chief Financial Officer of Company, dated as of the Closing
Date, in which such officers shall certify that, to their best Knowledge, the
conditions set forth in Sections 6.2(a), (c) and (d) have been fulfilled.

 

(e) Company shall have furnished to Parent (i) copies of the resolutions of the
Board of Directors of Company approving this Agreement, the Certificate of
Merger and the transactions contemplated hereby, (ii) a copy of Company’s
Certificate of Incorporation, certified by the applicable governing body in
Turks and Caicos, (iii) an incumbency certificate dated as of the Closing Date
executed on behalf of Company by its corporate secretary certifying the
signature and office of each officer of Company executing this Agreement, the
Certificate of Merger or any other agreement, certificate or other instrument
executed pursuant hereto by Company and (iv) a certificate dated as of the
Closing Date executed on behalf of Company by its corporate secretary or one of
its assistant corporate secretaries certifying to Parent that the aforementioned
copies are true, correct and complete copies of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded, and
certifying that the certified copy of Company’s certificate of incorporation is
true, correct and complete as received from such governmental office.

 

6.3 Additional Conditions to Obligations of Company. The obligations of Company
to effect the transactions contemplated hereby in accordance with the terms of
this Agreement are also subject to the fulfillment or waiver of the conditions
set forth in the paragraphs below:

 

(a) Since the date of this Agreement, Parent shall have continued to conduct its
operations in accordance with the provisions of Section 4.1.

 

(b) The representations of Parent and Merger Subsidiary contained in this
Agreement shall be accurate as of the Effective Date and as of the Merger Time,
in all respects (in the case of any representation containing any materiality
qualification) or in all material respects (in the case of any representation
without any materiality qualification). Parent and Merger Subsidiary,
respectively, shall in all material respects have performed each obligation and
agreement and complied with each covenant to be performed and complied with by
it hereunder at or prior to the Merger Time.

 

(c) Parent and Merger Subsidiary have obtained all consents and approvals
necessary to consummate the transactions contemplated by this Agreement in order
that the transactions contemplated herein shall not constitute a breach or
violation of, or result in a right of termination or acceleration of, or
creation of any encumbrance on any of Parent’s or Merger Subsidiary’s assets
pursuant to the provisions of, any agreement, arrangement or undertaking of or
affecting Parent or any license, franchise or permit of or affecting Parent.

 

25

 

 

(d) Neither Parent nor Merger Subsidiary shall have any obligations or
liabilities other than those obligations or liabilities required by law or
specifically contemplated by this Agreement and represented to Company in
Article 3.

 

(e) Parent will have satisfied all of Parent’s payment obligations identified on
Schedule 3.7.

 

(f) There shall not have occurred any suspension of the obligation of Parent to
file reports and disclosure documentation with the SEC.

 

(g) There shall not have been any comment or other communication from the SEC to
Parent or any of its affiliates or representatives indicating that Parent has
been, is or may be, whether as a result of any of the transactions contemplated
by this Agreement or otherwise, a “shell company” for any duration of time.

 

(h) Parent shall have furnished to Company a certificate of the Chief Executive
Officer and the Chief Financial Officer of Parent, dated as of the Closing Date,
in which such officers shall certify that, to their best Knowledge, the
conditions set forth in Sections 6.3(a), (b), (c), (d) and (e) have been
fulfilled.

 

(i) Parent shall have furnished to Company (i) copies of the resolutions of the
Parent Board of Directors approving this Agreement and the Certificate of
Merger, the appointment of the directors to serve on Parent’s Board of Directors
as of and after the Merger Time, and the transactions contemplated hereby, (ii)
a copy of the Certificate of Incorporation of Parent, certified by the Secretary
of State of Nevada, and one or more certificates from the Secretary of State of
Nevada evidencing the good standing of Parent in such jurisdiction, (iii) an
incumbency certificate dated as of the Closing Date executed on behalf of Parent
by its corporate secretary certifying the signature and office of each officer
of Parent executing this Agreement, the Certificate of Merger or any other
agreement, certificate or other instrument executed pursuant hereto by Parent
and (iv) a certificate of the corporate secretary of Parent dated as of the
Closing Date certifying to Company that copies of the aforementioned resolutions
referred to in clause (i) above are true, correct and complete copies of such
resolutions and that such resolutions were duly adopted and have not been
amended or rescinded, and certifying that the certificates furnished pursuant to
clause (ii) above are true, correct and complete as received from such
governmental offices.

 

(j) As of the Closing Date, Company will have entered into the Indemnification
Agreement, indemnifying and holding harmless Parent against all losses sustained
by it in connection with any claim, action, suit, Proceeding or investigation,
whether civil, criminal, administrative or investigative, arising out of or
pertaining to any act or omission of Company prior to the Merger Time, as
further set forth in the Indemnification Agreement.

 

(k) Company shall have received assurance from Parent, satisfactory to Company,
(i) that the number of outstanding shares of capital stock of Parent immediately
prior to the Merger Time is not greater than 13,077,679 (following the
cancellation of certain shares as part of this Merger) shares of Parent Common
Stock and zero (0) shares of preferred stock of Parent, and (ii) that none of
Parent’s outstanding preferred stock or stock options have been converted or
exercised after the Effective Date.

 

(l) Parent shall have received resignations from all of the members of the
Company Board, to be effective as of the Merger Time.

 

(m) Company shall have received the Lock-up Agreements.

 

(n) The outstanding indebtedness of Parent shall be equal to or less than
$1,500,000, all of which is represented by the promissory notes identified on
Schedule 6.3(r) (collectively the “Carryover Notes”).

 

26

 

 

ARTICLE 7
Termination

 

7.1 Termination. This Agreement may be terminated prior to the Merger Time:

 

(a) by mutual consent of Company and Parent, if the Board of Directors of each
so determines by vote of a majority of the members of its entire board;

 

(b) by Parent, if Company shall have breached any of its representations or
failed to perform any of its covenants herein, which breach or failure to
perform (i) causes the condition set forth in Section 6.2(b) not to be
satisfied, and (ii) is incapable of being cured or has not been cured within 10
business days after the giving of written notice of such breach or failure to
perform; provided, however, that Parent may only terminate this Agreement
pursuant this Section 7.1(b) if the subject breach or failure to perform would
be reasonably likely to have a Material Adverse Effect on Parent and the
Surviving Company taken as a whole;

 

(c) by Company, if Parent or Merger Subsidiary shall have breached any of their
representations or failed to perform any of their covenants herein, which breach
or failure to perform (i) causes the condition set forth in Section 6.3(b) not
to be satisfied, and (ii) is incapable of being cured or has not been cured
within 10 business days after the giving of written notice of such breach or
failure to perform; provided, however, that Company may only terminate this
Agreement pursuant this Section 7.1(c) if the subject breach or failure to
perform would be reasonably likely to have a Material Adverse Effect on Company
and the Surviving Company taken as a whole;

 

(d) by either Company or Parent if the Merger Time has not occurred on or before
December 31, 2015, or such later date as Company and Parent may mutually agree
(unless the failure to consummate the Merger by such date shall be due to the
action or failure to act of the party seeking to terminate this Agreement in
breach of such party’s obligations under this Agreement).

 

Any party desiring to terminate this Agreement shall give prior written notice
of such termination and the reasons therefor to the other parties.

 

ARTICLE 8
General Provisions

 

8.1 Notices. All notices and other communications hereunder shall be in writing
and shall be sufficiently given if made by hand delivery, fax, overnight
delivery service, or registered or certified mail (postage prepaid and return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):

 

If to Company:   c/o Reed Benson     4049 South Highland Drive     Salt Lake
City, Utah 84124       If to Parent or Merger Subsidiary:   c/o Michael Ahlin  
  5320 South 900 East     Suite 260     Murray, Utah 84107

 

27

 

 

All such notices and other communications shall be deemed to have been duly
given as follows: when delivered by hand, if personally delivered, when
received; if delivered by registered or certified mail (postage prepaid and
return receipt requested), when receipt acknowledged; if faxed, on the day of
transmission or, if that day is not a business day, on the next business day;
and the next day delivery after being timely delivered to a recognized overnight
delivery service.

 

8.2 No Survival. The representations and warranties contained in this Agreement
and in any instrument delivered pursuant to this Agreement will survive the
Closing for a period of one (1) year. The covenants or agreements contained in
Article 1 and any other covenants or agreements contained in this Agreement
requiring performance or compliance after the Merger Time shall survive the
Merger Time indefinitely.

 

8.3 Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References to Sections, Articles, Exhibits or Schedules refer to
Sections of, Articles of, Exhibit to, or Schedule to, this Agreement unless
otherwise stated. Words such as “herein,” “hereinafter,” “hereof,” “hereto,”
“hereby” and “hereunder,” and words of like import, unless the context requires
otherwise, refer to this Agreement (including the Exhibits and Schedules
hereto). As used in this Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context requires.

 

8.4 Severability. If any term of this Agreement is determined by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced,
then all other terms of this Agreement will nevertheless remain in full force
and effect, and such term automatically will be amended so that it is valid,
legal and enforceable to the maximum extent permitted by applicable law, but as
close to the parties’ original intent as is permissible.

 

8.5 Entire Agreement; Amendment; Waiver. This Agreement, including the
Schedules, constitutes the entire Agreement between the parties pertaining to
the subject matter herein and supersedes any prior representations, warranties,
covenants, agreements and understandings of the parties regarding such subject
matter. No supplement, modification or amendment hereof will be binding unless
expressed as such and executed in writing by each party. No waiver of any term
hereof will be binding unless expressed as such in a document executed by the
party making such waiver. No waiver of any term hereof will be a waiver of any
other term hereof, whether or not similar, nor will any such waiver be a
continuing waiver beyond its stated terms. Failure to enforce strict compliance
with any term hereof will not be a waiver of, or estoppel with respect to, any
existing or subsequent failure to comply.

 

8.6 Counterparts; Delivery. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. In addition, executed counterparts may be delivered by means of
facsimile or other electronic transmission; and signatures so delivered shall be
fully and validly binding to the same extent as the delivery of original
signatures.

 

8.7 Third-Party Beneficiaries. Except as provided in the next following
sentence, each party hereto intends that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto; provided, however, that in the event that the Merger is
consummated, those Persons who shall have been holders of Company Common Stock
at the Merger Time shall be third-party beneficiaries under the provisions of
this Agreement giving them the right to the Merger Consideration as specified
herein.

 

28

 

 

8.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of Nevada, without regard to the conflicts
of law rules of such state.

 

8.9 Jurisdiction; Service of Process. Any Proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement must be
brought against any of the parties in the courts of the State of Minnesota,
Hennepin County, and each of the parties consents to the jurisdiction of those
courts (and of the appropriate appellate courts) in any such Proceeding and
waives any objection to venue laid therein. Process in any such Proceeding may
be served by sending or delivering a copy of the process to the party to be
served at the address and in the manner provided for the giving of notices in
Section 8.1. Nothing in this Section 8.9, however, affects the right of any
party to serve legal process in any other manner permitted by law.

 

ARTICLE 9
Certain Definitions

 

“Affiliate” means, with respect to any Person, any other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by or
is under common control with, such Person. For purposes of this definition,
“control,” “controlled by” and “under common control with,” as applied to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning ascribed thereto in the preamble to this Agreement.

 

“Ancillary Document” means, with respect to a Person, any document delivered by
or on behalf of such Person in connection with the execution and delivery of
this Agreement and the Closing, pursuant to this Agreement (but does not include
this Agreement).

 

“Board” has the meaning ascribed thereto in Section 5.12(a).

 

“Book Entry” means uncertificated shares of stock represented by book entry in
applicable entity’s records.

 

“Carryover Notes” has the meaning ascribed thereto in Section 6.3(r).

 

“Cash at Closing” means an amount in cash or cash equivalents equal to or
exceeding the total liabilities of Parent, on a consolidated basis, including
the assets and liabilities of all subsidiaries, except with regard to the
Carryover Notes, immediately preceding the Merger.

 

“Closing” has the meaning ascribed thereto in Section 1.1(d).

 

“Closing Date” has the meaning ascribed thereto in Section 1.1(d).

 

“Code” has the meaning ascribed thereto in the background of this Agreement.

 

“Company” has the meaning ascribed thereto in the preamble to this Agreement.

 

“Company Common Stock” means the common stock, par value $0.01 per share, of
Company.

 

“Company Financial Statements” has the meaning ascribed thereto in Section 2.10.

 

“Company Insiders” has the meaning ascribed thereto in Section 2.8.

 

“Company Tax Returns” has the meaning ascribed thereto in Section 2.6(a).

 

“Convertible Promissory Notes” has the meaning ascribed thereto in Section
1.2(d).

 

“NRS” has the meaning ascribed thereto in the background of this Agreement.

 

“Dissenting Shares” has the meaning ascribed thereto in Section 1.5.

 

“Effective Date” means the date first set forth in the preamble to this
Agreement.

 

29

 

 

“Environmental Claim” means any written notice by a Governmental Authority
alleging potential liability (including potential liability for investigatory
cost, cleanup cost, governmental response cost, natural resources damage,
property damage, personal injury or penalty) arising out of or resulting from
(a) the presence, or release into the environment, of any material or form of
energy at any location, whether or not owned by any Acquired Company or (b) any
violation, or alleged violation, of any Environmental Law.

 

“Environmental Law” means any and all federal, state, local and foreign laws,
common laws, statutes, ordinances, rules, regulations or other legal requirement
relating to (i) the protection of the environment (including air, water vapor,
surface water, groundwater, drinking water supply, surface or subsurface land)
or (ii) the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, release or disposal of,
Hazardous Materials.

 

“Environmental Permit” means, with respect to any of the parties hereto, any
permit, license, certificate, approval or authorization issued by a Governmental
Authority that is required for the operation of such party’s business or the
holding of any of its material assets or properties.

 

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

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“GAAP” means generally accepted United States accounting principles as have been
consistently applied by the respective corporation.

 

“Governmental Authority” means any federal, state, municipal, foreign or other
government, governmental department, commission, board, bureau, agency or
instrumentality, or any private or public court or tribunal, whether domestic or
foreign.

 

“Hazardous Materials” means any pollutant, contaminant, hazardous substance,
hazardous waste or petroleum or fraction thereof, and any other chemical, waste,
substance or material listed in or regulated by or identified in any
Environmental Law.

 

“Indemnification Agreement” means that certain Indemnification Agreement by and
between Parent and Company, dated as of the Closing Date.

 

“Initial Parent Stockholders” means each Person who held Parent Common Stock
immediately before the Merger Time.

 

“Knowledge” means (a) an individual will have “Knowledge” of a particular fact
or other matter if such individual is actually consciously aware of such fact or
matter; and (b) a Person, other than an individual, will have “Knowledge” of a
particular fact or other matter if any individual who is serving as a director
or officer (or similar executive) of such Person currently has Knowledge, as
stated in clause (a), of such fact or other matter.

 

“Latest Parent Balance Sheet” has the meaning ascribed thereto in Section 3.11.

 

“Latest Company Balance Sheet” has the meaning ascribed thereto in Section 2.11.

 

“Liens” has the meaning ascribed thereto in Section 2.3(a).

 

“Lock-up Agreements” means those certain Lock-up Agreements in form and
substance acceptable to Company from all Parent Insiders and any holders of
greater than five percent (5%) of the outstanding Parent Common Stock and
certain Company shareholders.

 

“Material Adverse Effect” means, with respect to any entity, a material adverse
effect on the business, operations, results of operations or financial condition
of such entity taken as a whole, but shall exclude any effect resulting from or
relating to (i) general economic conditions or general effects on the industries
in which such entity operates, (ii) acts of terrorism or war (whether or not
threatened, pending or declared), or (iii) the public announcement of this
Agreement or the transactions contemplated hereby.

 

30

 

 

“Merger Time” has the meaning ascribed thereto in Section 1.1(d).

 

“Merger Consideration” means the shares of Parent Common Stock issuable in
connection with the Merger to the holders of Company Common Stock pursuant to
Section 1.2(a).

 

“Merger” has the meaning ascribed thereto in the background of this Agreement.

 

“Merger Subsidiary” has the meaning ascribed thereto in the preamble to this
Agreement.

 

“Options” has the meaning ascribed thereto in Section 1.2(b).

 

“Parent” has the meaning ascribed thereto in the preamble to this Agreement.

 

“Parent Balance Sheet” has the meaning ascribed thereto in Section 3.10(c).

 

“Parent Common Stock” means the common stock, par value $0.00001 per share, of
Parent.

 

“Parent Contracts” has the meaning ascribed thereto in Section 3.7(a).

 

“Parent Insiders” has the meaning ascribed thereto in Section 3.8.

 

“Parent Tax Returns” has the meaning ascribed thereto in Section 3.6(a).

 

“Parent SEC Filings” has the meaning ascribed thereto in Section 3.10(b).

 

“Parent Subsidiary” shall mean Cimarron Medical Software, Inc., a Nevada
Corporation.

 

“Permitted Liabilities” has the meaning ascribed thereto in Section 3.10(c).

 

“Person” means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company or
partnership, joint venture, estate, trust, proprietorship, association,
organization, labor union or Governmental Authority.

 

“Proceeding” means any action, arbitration, audit, claim, demand, grievance,
complaint, hearing, inquiry, investigation, litigation, proceeding or suit
(whether civil, criminal or administrative), in each case that is commenced,
brought, conducted or heard by or before, or otherwise involving, any
Governmental Authority or arbitrator.

 

“Required Company Stockholder Approval” has the meaning ascribed thereto in
Section 2.2(a).

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Surviving Company” has the meaning ascribed thereto in Article 1.

 

“Tax” (and with the corresponding meaning “Taxes” and “Taxable”) means (a) any
net income, alternative or add-on minimum, gross income, gross receipts, sales,
use, transfer, value added, ad valorem, franchise, capital stock, profits,
license, withholding, payroll, employment, social security, unemployment,
disability, workers’ compensation, employment-related insurance, excise,
environmental, severance, stamp, occupation, premium, real property, personal
property, or windfall profit tax, custom duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest and any penalty, addition to tax or additional amount, imposed by any
Governmental Authority, whether disputed or not; and (b) any liability for the
payment of any amount of the type described in clause (a) as a result of an
entity being a member of a consolidated, affiliated, combined or unitary group.

 

“Tax Affiliate” shall include each of the following entities, which
collectively, shall be “Tax Affiliates:” (A) a party to this Agreement; (B) each
of its subsidiaries and other Affiliates (if any); (C) each other member of any
consolidated, affiliated, combined or unitary group of which such party or any
such Affiliate is or was a member for purposes of any Taxes.

 

“Tax Returns” (and with corresponding meaning “Tax Return”) shall include all
returns, claims for refund, declarations, reports, estimates, elections and
information returns and statements (including any attached schedules and any
amendments thereto) required to be filed or sent by or relating to a party to
this Agreement or any of its Tax Affiliates and relating to any Taxes with
respect to any income, properties or operations of such party or any of such Tax
Affiliates.

 

“Tax Authority” shall mean the U.S. Internal Revenue Service and any other
federal, state, local or foreign Governmental Authority responsible for the
administration of any Tax.

 

“NRS” shall mean the Nevada Revised Statutes.

 

“Warrants” has the meaning ascribed thereto in Section 1.2(c).

 

[Signatures on Following Page]

 

31

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers on the date first written above.

 

  CLAVO RICO, LTD       By: /s/   Name: Reed L. Benson   Its: President and
Chairman         INCEPTION MINING INC.       By: /s/   Name: Michael Ahlin  
Its: Chief Executive Officer         CR ACQUISITION CORPORATION         By: /s/
  Name: Michael Ahlin   Its: Chief Executive Officer

 

[Signature Page to Agreement and Plan of Merger]

 

   

 

 

COMPANY DISCLOSURE SCHEDULE

 

TO

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

Inception Mining Inc.

 

Clavo Rico, Ltd.

and

CR Acquisition Corporation

 

Dated as of August 4, 2015

 

1

 

 

COMPANY DISCLOSURE SCHEDULE

 

This Disclosure Schedule (this “Disclosure Schedule”), which consists of this
cover page and all of the accompanying pages and attachments hereto, is made and
delivered by Clavo Rico, Ltd. pursuant to Article 2 that certain Agreement and
Plan of Merger, dated as of August 4, 2015 (the “Agreement”), by and among
Inception Mining, Inc., a Nevada corporation (“Parent”), CR Acquisition
Corporation, a Nevada corporation and a wholly-owned subsidiary of Parent
(“Merger Sub”) and Clavo Rico, Ltd. , a Turks and Caicos limited company (the
“Company”). Capitalized terms used but not defined in this Disclosure Schedule
shall have the same meanings given to them in the Agreement. This Disclosure
Schedule is arranged in sections and subsections corresponding to the numbered
and lettered sections and subsections contained in Article 2 of the Agreement.
The information in any section or subsection of this Disclosure Schedule
corresponding to any section or subsection of Article 2 of the Agreement
qualifies other sections and subsections in Article 2 of the Agreement only if
it is reasonably apparent on the face of such information (without further
inquiry) that such information is also applicable to such other sections or
subsections of this Disclosure Schedule, and in such situation, such information
shall be deemed to be included in such other sections or subsections of this
Disclosure Schedule. The headings contained in this Disclosure Schedule are
included for convenience only, and are not intended to expand the scope of the
information required to be disclosed in this Disclosure Schedule.

 

Nothing in this Disclosure Schedule shall broaden the scope of any
representation or warranty contained in the Agreement or create any covenant.
Inclusion of any item in this Disclosure Schedule (1) does not represent a
determination that such item is material or establish a standard of materiality,
(2) does not and shall not represent a determination that such item did not
arise in the ordinary and usual course of business, and (3) shall not
constitute, or be deemed to be, an admission to any third party concerning such
item or an admission of default or breach under any agreement or document. The
information contained in this Disclosure Schedule is provided solely for
purposes of making disclosures to the Parent under the Agreement. In disclosing
such information, Company does not waive any attorney-client privilege
associated with such information or any protection afforded by the work-product
doctrine with respect to any of the matters disclosed or discussed in this
Disclosure Schedule. This Disclosure Schedule includes brief descriptions or
summaries of certain agreements and instruments, and to the extent copies of
such agreements and instruments have been made available to the Company or its
counsel, such descriptions are qualified in their entirety by reference to the
text of such agreements and instruments.

 

Disclosure Schedules for Agreement and Plan of Merger

 

Schedule 2.3(a).

 

The Company has 500,000,000 shares of capital stock authorized and has issued
and outstanding 65,000,000 shares of capital stock.

 

The Company has no outstanding options, warrants, or other securities
convertible into capital stock of the Company.

 

The Company has no obligation (contingent or otherwise) that may require the
Company to repurchase or otherwise acquire any shares of its capital stock.

 

Capitalization.

 

The authorized, issued and outstanding shares of capital stock of Company are
set forth on Schedule 2.3(a). Other than as described on Schedule 2.3(a),
Company has no other equity securities or securities containing any equity
features that are authorized, issued or outstanding. Except as set forth in
Schedule 2.3(a), there are no agreements or other rights or arrangements
existing which provide for the sale or issuance of capital stock by Company and
there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire from Company
any shares of capital stock or other securities of Company of any kind. Except
as set forth on Schedule 2.3(a), there are no agreements or other obligations
(contingent or otherwise) which may require Company to repurchase or otherwise
acquire any shares of its capital stock.

 

2

 

 

Schedule 2.3(b).

 

Company does not own, and is not party to any contract to acquire, any equity
securities or other securities of any entity or any direct or indirect equity or
ownership interest in any other entity. To Company’s Knowledge, there exist no
voting trusts, proxies, or other contracts with respect to the voting of shares
of capital stock of Company.

 

(d) Except as disclosed on Schedule 2.3(b), Company does not own, and is not
party to any contract to acquire, any equity securities or other securities of
any entity or any direct or indirect equity or ownership interest in any other
entity. To Company’s Knowledge, there exist no voting trusts, proxies, or other
contracts with respect to the voting of shares of capital stock of Company.

 

Schedule 2.3(c)

 

Company has granted no registration rights to any shareholder.

 

Schedule 2.6(a):

 

Company has filed no tax returns in the Turks and Caicos Islands and does not
believe that it has had nor does it have any obligation to do so. Company
subsidiaries have filed all income tax and other related returns in Honduras.
Company believes that it and its subsidiaries are in full compliance with all
relevant taxing authorities.

 

on Schedule 2.6(a): (i) Company and each of its Tax Affiliates has timely filed
(or has had timely filed on its behalf) all Company Tax Returns required to be
filed or sent by it in respect of any Taxes or required to be filed or sent by
it to any Tax Authority having jurisdiction; (ii) all such Company Tax Returns
are complete and accurate in all material respects; (iii) Company and each of
its Tax Affiliates has timely and properly paid (or has had paid on its behalf)
all Taxes required to be paid by it; (iv) Company has established on the Company
Balance Sheet, in accordance with GAAP, consistently applied, reserves that are
adequate for the payment of any Taxes not yet due and payable; and (v) Company
and each of its Tax Affiliates has complied with all applicable laws, rules and
regulations relating to the collection or withholding of Taxes.

 

Schedule 2.6(d)

 

Company is a Turks and Caicos limited company and to the extent it may in the
future have a tax liability it would pay taxes to the Turks and Caicos Islands.

 

The Company’s two subsidiaries file tax returns in Honduras.

 

No other jurisdiction has ever contacted the Company nor its subsidiaries to
claim a reporting responsibility other than set forth above.

 

contains a list of all jurisdictions in which Company or any of its Tax
Affiliates is required to file any Company Return and no claim has been made by
a Tax Authority in a jurisdiction where Company or any of its Tax Affiliates
does not currently file Company Tax Returns, that Company or any of its

 

Schedule 2.6(f)

 

None

 

(l) Except as disclosed on Schedule 2.6(f), Company has not requested any
extension of time within which to file any Company Return, which return has not
since been file

 

3

 

 

Schedule 2.7

 

Concession Grants

Martinez Crushing Services Agreement

Equipment Rental Agreements-Tractomar

 

a. Contracts and Commitments. Schedule 2.7 lists all material agreements,
whether oral or written, to which Company is a party, which are currently in
effect, and which relate to the operation of Company’s business. Company has
performed all obligations required to be performed by it under the

 

Schedule 2.8

 

The attached schedule of shareholders and/or affiliates have made the loans
described herein to the Company;

 

Clavo Rico, Ltd

Schedule of Loans

For the year ended December 31, 2014

 

                    31-Dec-12       31-Dec-13     31-Dec-14 Entity     Date    
Amount       Acc’d Interest                                                  
Silverbrook     3/29/2011   $ 193,000     $ 60,795     $ 34,740   $ 34,740 (Dist
from Belmont)     1/3/2012   $ 175,000     $ 31,500     $ 31,500   $ 31,500
Silverbrook     5/4/2011   $ 700,000     $ 210,000     $ 126,000   $ 126,000    
  3/20/2012   $ 50,000     $ 6,750     $ 9,000   $ 9,000                        
            LWB Irrevocable Trust     3/29/2011   $ 108,000     $ 34,020     $
19,440   $ 19,440       4/27/2011   $ 103,000     $ 15,000     $ 18,540   $
18,540 Assigned from Zobrist     1/11/2013   $ 140,000             $ 25,200   $
25,200                                     Legends Capital Group     7/18/2012  
$ 50,000     $ 2,250     $ 9,000   $ 9,000 (Ballard)     8/7/2012   $ 100,000  
  $ 4,500     $ 18,000   $ 18,000       9/7/2012   $ 50,000     $ 2,250     $
9,000   $ 9,000       9/18/2012   $ 25,000     $ 1,125     $ 4,500   $ 4,500    
  9/24/2012   $ 25,000     $ 1,125     $ 4,500   $ 4,500 Repaid 4/15/2013    
9/27/2012           $ 4,500     $ 5,250   $ 0                                  
  GAIA     12/6/2011   $ 300,000     $ 58,500     $ 54,000   $ 54,000      
3/29/2012   $ 400,000     $ 54,000     $ 72,000   $ 72,000       4/26/2012   $
100,000     $ 12,000     $ 18,000   $ 18,000       5/11/2012   $ 50,000     $
6,000     $ 9,000   $ 9,000       6/4/2012   $ 100,000     $ 10,500     $ 18,000
  $ 18,000       6/20/2012   $ 100,000     $ 9,000     $ 18,000   $ 18,000      
10/10/2012   $ 100,000     $ 4,500     $ 18,000   $ 18,000                      
              Claymore Management     3/18/2011   $ 185,000     $ 58,275     $
33,300   $ 33,300                                                              
          LWB Irrevocable Trust     12/14/2010   $ 50,000     $ 18,000     $
9,000   $ 9,000       12/20/2010   $ 100,000     $ 36,000     $ 18,000   $
18,000       3/18/2011   $ 50,000     $ 15,750     $ 9,000   $ 9,000      
8/10/2011   $ 500,000     $ 127,500     $ 90,000   $ 90,000       2/20/2012   $
50,000     $ 7,500     $ 9,000   $ 9,000                                    
Legends Capital Group     10/20/2011   $ 200,000     $ 42,000     $ 36,000   $
36,000 (Assigned from BizVis)     11/8/2011   $ 150,000     $ 31,500     $
27,000   $ 27,000       2/16/2012   $ 100,000     $ 15,000     $ 18,000   $
18,000       3/5/2012   $ 30,000     $ 4,500     $ 5,400   $ 5,400      
3/28/2012   $ 35,000     $ 4,725     $ 6,300   $ 6,300                          
        Phil Zobrist     1/11/2013   $ 60,000             $ 10,800   $ 10,800  
                                  Silverbrook     2/28/2013   $ 100,000        
    $ 18,000   $ 18,000       3/21/2013   $ 100,000             $ 13,500   $
18,000       3/28/2013   $ 100,000             $ 13,500   $ 18,000      
5/2/2013   $ 100,000             $ 12,000   $ 18,000       12/13/2013   $ 50,000
            $ 325   $ 9,000       1/13/2014   $ 49,990                   $ 9,000
      2/7/2014   $ 50,000                   $ 8,250       2/20/2014   $ 50,000  
                $ 7,500       3/6/2014   $ 49,990                   $ 7,500    
  3/27/2014   $ 50,000                   $ 6,750       4/14/2014   $ 50,000    
              $ 6,375       4/24/2014   $ 50,000                   $ 6,000      
6/3/2014   $ 50,000                   $ 5,250       6/13/2014   $ 30,000        
          $ 2,925       6/13/2014   $ 30,000                   $ 2,925      
1/7/2015   $ 50,000                             1/22/2015   $ 50,000            
                2/9/2015   $ 50,000                             2/20/2015   $
50,000                                                           Total         $
5,488,980     $ 889,065     $ 850,795   $ 931,695

 

4

 

 

Clavo Rico, Inc., a Utah corporation, is owned by Company insiders and purchases
unrefined gold dore bars from the Company subsidiaries pursuant to invoices
generated by the subsidiaries, imports the dore’ bars to the US, refines the
gold and sells the refined product on the open market.

 

9.1 Affiliate Transactions. Except as set forth in Schedule 2.8, and other than
pursuant to this Agreement, no officer, director or employee of Company, or any
member of the immediate family of any such officer, director or employee, or any
entity in which any of such Persons owns any beneficial interest in Company
(other than any publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than five percent
of the stock of which is beneficially owned by any of such Persons)
(collectively, the “Company Insiders”), has any agreement with Company (other
than normal employment arrangements) or any interest in any property, real,
personal or mixed, tangible or intangible, used in or pertaining to the business
of Company (other than ownership of capital stock of Company). Except as set
forth on Schedule 2.8, Company is not indebted to any Company Insider (except
for amounts due as normal salaries and bonuses and in reimbursement of ordinary
business expenses) and no Company Insider is indebted to Company (except for
cash advances for ordinary business expenses). Except as set forth on Schedule
2.8, none of the Company Insiders has any direct or indirect interest in any
competitor, supplier or customer of Company or in any Person from whom or to
whom Company leases any property, or in any other Person with whom Company
transacts business of any nature. The officers, directors and employees of
Company have not, by virtue of their employment with or service to Company,
usurped any corporate opportunities of any third party to which such officer,
director and employee has, or could reasonably be considered to have, a
fiduciary duty under any applicable laws. For purposes of this Section 2.8 the
members of the immediate family of an officer, director or employee shall
consist of the spouse, parents, children and siblings of such officer, director
or employee.

 

5

 

 

Schedule 2.9(b)

 

Company currently operates under the Mining Law in Honduras, which requires
among other things constant supervision of the environmental authorities, the
mining ministry, central banking authorities and exporting agencies as well as
other governmental authorities. Formal licenses and permits have not been
required, but the Company believes that it could acquire them should they become
necessary.

 

Except as set forth on Schedule 2.9(b), Company has no licenses, permits,
Environmental Permits or certificates, from federal, state, local and foreign
authorities (including, without limitation, federal and state agencies
regulating occupational health and safety) necessary to permit it to conduct its
business and own and operate.

 

Schedule 2.11.

 

Amounts due under Honduran law to terminated or retiring employees for employees
retirement benefits estimated to be approximately $400,000.

 

9.5 No Undisclosed Liabilities. Except as reflected in the balance sheet of
Company at June 30, 2015 (the “Latest Company Balance Sheet”), Company has no
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
except (i) liabilities which have arisen after the date of the Latest Company
Balance Sheet in the ordinary course of business, none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit, or (ii) as otherwise set forth on Schedule 2.11.

 

Schedule 2.13

 

Twenty Hectres located in El Corpus, Honduras encompassing the current plant and
recovery fields.

 

9.9 Real Property. Schedule 2.13 lists all real property leased by Company.
Company does not own any real property. Company has good and valid title to all
of its leaseholds and other interests free and clear of all Liens, except for
such Liens which do not detract from the value or interfere with the present use
of the property subject thereto or affected thereby. The real property to which
such leaseholds and other interests pertain constitutes all of the real property
used in Company’s business.

 

Schedule 2.15

 

No Changes to business operations since December 31, 2014.

 

9.10 Absence of Certain Developments. Except as disclosed in the Company
Financial Statements or as otherwise contemplated by this Agreement, since
December 31, 2014, Company has owned and operated its assets, properties and
businesses consistent with past practice. Without limiting the generality of the
foregoing, except as listed in Schedule 2.15, since December 31, 2014, Company
has not:

 

Schedule 2.17(a)

 

9.11 Employees.

 

(c) Schedule 2.17(a) lists, as of the Effective Date, the name, position, base
compensation and, for calendar year 2015, total compensation for each employee
of Company.

 

6

 

 

Schedule 2.17(b)

 

(d) Except as otherwise set forth in Schedule 2.17(b), or as contemplated by
this Agreement, to the Knowledge of Company, (i) neither any executive employee
of Company nor any group of the employees of Company has any plans to terminate
his, her or its employment; (ii) Company has no material labor relations problem
pending and its labor relations are satisfactory; (iii) there are no workers’
compensation claims pending against Company nor is Company aware of any facts
that would give rise to such a claim; (iv) no employee of Company is subject to
any secrecy or noncompetition agreement or any other agreement or restriction of
any kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of Company;
and (v) no employee or former employee of Company has any claim with respect to
any intellectual property rights of Company.

 

Schedule 2.18

 

9.12 Proprietary Information and Inventions. Set forth on Schedule 2.18 is a
complete and accurate list of all current Company employees, consultants,
contractors or other Persons that are subject to a non-disclosure agreement or
an alternative employment agreement with Company containing comparable
non-disclosure provisions.

 

Schedule 2.19

 

9.13 Intellectual Property. Set forth on Schedule 2.19 is a complete and
accurate list of all Intellectual Property owned or licensed by Company, and
accurately identifies all Persons from which or to which Company licenses all
such listed Intellectual Property. For purposes of this Agreement, the term
“Intellectual Property” means: (a) patents (including any registrations,
continuations, continuations in part, renewals and any applications for any of
the foregoing); (b) registered and unregistered copyrights and copyright
applications; and (c) registered and unregistered trademarks, service marks,
trade names, slogans, logos, designs and general intangibles of the like nature,
together with all registrations and applications therefor.

 

7

 

 

PARENT DISCLOSURE SCHEDULE

 

TO

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

Inception Mining Inc.

 

Clavo Rico, Ltd.

and

CR Acquisition Corporation

 

1

 

 

Parent Disclosure Schedules for Agreement and Plan of Merger

 

Representations and Warranties of the Company

 

3.3 Capitalization.

 

(a) Parent’s authorized capitalization consists of 10,000,000 shares of
Preferred Shares, $.00001 par value, none of which are issued and outstanding,
and 500,000,000 shares of common stock, par value $.00001, of which 13,077,679
(following the cancellation of certain shares as part of this Merger) shares are
issued and outstanding. The issued and outstanding shares of capital stock of
Parent have been duly authorized and validly issued, are fully paid and
nonassessable, and have not been issued in violation of any preemptive rights.

 

(b) Registration Rights.

 

The Company has granted piggyback registration rights to certain PPM investors
and to Firstfire (if they convert into shares)

 

1.1 Piggy-Back Rights. If at any time on or after the date of the Closing the
Company proposes to file any Registration Statement under the 1933 Act (a
“Registration Statement”) with respect to any offering of equity securities, or
securities or other obligations exercisable or exchangeable for, or convertible
into, equity securities, by the Company for its own account or for shareholders
of the Company for their account (or by the Company and by shareholders of the
Company), other than a Registration Statement (i) filed in connection with any
employee stock option or other benefit plan on Form S-8, (ii) for a dividend
reinvestment plan or (iii) in connection with a merger or acquisition, then the
Company shall (x) give written notice of such proposed filing to the holders of
Registrable Securities appearing on the books and records of the Company as such
a holder as soon as practicable but in no event less than ten (10) days before
the anticipated filing date of the Registration Statement, which notice shall
describe the amount and type of securities to be included in such Registration
Statement, the intended method(s) of distribution, and the name of the proposed
managing underwriter or underwriters, if any, of the offering, and (y) offer to
the holders of Registrable Securities in such notice the opportunity to register
the sale of such number of Registrable Securities as such holders may request in
writing within five (5) days following receipt of such notice (a “Piggy-Back
Registration”). The Company shall cause such Registrable Securities to be
included in such registration and shall cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration on the same
terms and conditions as any similar securities of the Company and to permit the
sale or other disposition of such Registrable Securities in accordance with the
intended method(s) of distribution thereof. All holders of Registrable
Securities proposing to distribute their securities through a Piggy-Back
Registration that involves an underwriter or underwriters shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such Piggy-Back Registration.

 

(c) Merger Subsidiary Capitalization. The authorized capital stock of Merger
Subsidiary consists of One Hundred (100) shares of common stock, par value
$0.001 per share, all of which are issued and outstanding and held of record by
Parent as of the date hereof. The issued and outstanding shares of capital stock
of Merger Subsidiary are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive rights.

 

2

 

 

3. 6 Tax Matters. No Exceptions.

 

  (f)   No Exceptions.           (i)   No Exceptions.

 

3.7 Contracts and Commitments.

 

  (c)No Exceptions.         (d)Liabilities and obligations of Parent as of the
Closing.

 

Notes:

 

MDL Ventures, L.L.C./Trent D’Ambrosio  $1,093,791  Dave Wavrek  $70,000 
Firstfire LLC  $115,000  Typnex  $50,000  Iconic  $28,000 

 

Payables

 

PSI  $30,000.00  Fleming PLLC  $26,000.00  BJC  $7,500.00  Barkell Trucking 
$9,622.37  Westfall Excavation  $7,250.00  Rod Sperry  $4,500.00 

 

3.9 Compliance with Laws; Permits. None.

 

3. 10 Exchange Act Reports.

 

  (b)   No Exceptions.           (c)   Permitted Liabilities.

 

3

 

 

3.11 Undisclosed Liabilities. No Exceptions.

 

3.13 Real Property.

 

U.P. & Burlington Lode, Mineral Survey 1602, Eureka Mining District, Located in
Section 17, Township 22 North, Range 21 East Boise Meridian.

 

3.16 Absence of Certain Developments. No Exceptions.

 

3.18 Employees.

 

Michael Ahlin CEO – Effective 2/25/2013, Base Compensation for Calendar year
2015 was $0, Total Compensation for Calendar year 2015 was $0

 

Brian Brewer COO – Effective 2/25/2013, Resigned 2/16/2015, Base Compensation
for Calendar year 2015 was $0, Total Compensation for Calendar year 2015 was $0

 

Whit Cluff CFO - Effective 2/25/2013, Base Compensation for Calendar year 2015
was $0, Total Compensation for Calendar year 2015 was $0

 

(c) No Exceptions.

 

3.19 Proprietary Information and Inventions. None

 

3.20 Intellectual Property. None

 

3.27 Prepaid Assets. None.

 

4