EX. 10.1





 


 


LETTER OF INTENT


 


March 27, 2019


 


From:    Magnolia Colombia Ltd. (the “Company”)


 


This binding letter of intent (the “Letter
of Intent”) sets out the general terms and conditions of the proposed business combination between the Company and the
Target (as defined below) by way of a merger or share exchange agreement or other similar form of transaction (collectively, with
any related transactions, the “Transaction”) pursuant to which the Company will acquire all of the issued and
outstanding common shares in the capital of the Target (the “Target Shares”). The Transaction will likely be
a reverse take-over and be considered a “Qualifying Transaction” pursuant to the policies of the TSX Venture Exchange
(the “TSXV”) or the Canadian Securities Exchange (“CSE”), subject to the Target confirming
this structure is acceptable.


The acceptance of this Letter of Intent will
be followed by the good faith negotiation of definitive documentation (the “Transaction Documents”), including
a definitive merger, amalgamation, arrangement or share exchange agreement (the “Definitive Agreement”).


All dollar amounts herein
refer to Canadian dollars unless otherwise noted.


	1.		The
                                         principal terms of the Transaction are as follows:



 


	TARGET:	PCT LTD. (the “Target”), a holding company located in Little River, South Carolina who, through its wholly-owned operating subsidiary Paradigm Convergence Technologies Corporation (“PCT”) is focused on the commercial launch of its patented tracking system and environmentally safe, non-toxic antimicrobial solutions.
	 	 
	TRANSACTION:	
        The Company is listed on the TSXV, and the
        Target will enter into the Definitive Agreement to complete the Transaction.  Upon completion of the Transaction, the combined
        entity (the “Resulting Issuer”) will continue to carry on the business of the Target under its name and will
        list on the TSXV, the CSE or other Canadian stock exchange. The domicile and operations of PCT shall remain in the United
        States. The Target will have, as of the date of the execution of the Definitive Agreement approximately 47,159,238 Target Shares
        issued and outstanding. The Target also has US$2,500,000 of debt of which the Target will use best efforts to on or before the
        Closing Date (as defined below), arrange to convert a minimum of US$1.4 million of the debt at a price of no less than US$0.10
        per Target Shares (the “Debt Conversion”) and restructure such remaining debt to be long-term debt (the “Debt
        Restructuring”). It is anticipated that the 47,159,238 Target Shares plus the Target Shares issued pursuant to the Debt
        Conversion and all current convertible securities of the Target, will be exchanged for common shares or convertible securities
        of the Company at a ratio resulting in the shareholders of the Target owning 60% of the Resulting Issuer and the shareholders of
        the Company owning 40% of the Resulting Issuer on a pre-money on an undiluted basis (the “Exchange Ratio”).

         

        The Transaction may proceed by way of plan
        of arrangement, triangular merger, share exchange or other mechanism deemed to be the most effective, as determined by mutual agreement
        of the parties. The Definitive Agreement will, among other things, set out in sequence the steps agreed to in this Letter of Intent
        with the result that, upon completion of the Transaction, all Target and Company securities will have become securities of the
        Resulting Issuer.

	 	 
	THE COMPANY:

         

         
	
        The Company has no material
liabilities, approximately $1,800,000 in cash and 57,977,098 common shares issued and outstanding along with options and warrants
outstanding.

	 	 
	
        CONCURRENT FINANCING:
	
        Prior to the completion of the Transaction,
the Company and the Target will work together to complete an equity financing private placement of common shares or units with
warrants of subscription receipts (the “Subscription Receipts”) directly into the Company for gross proceeds of up
to C$3,000,000 (the “Private Placement”). All Subscription Receipts issued would be convertible, for no additional
consideration, into securities of the Resulting Issuer on closing of the Transaction.

	 	 
	LOAN:	Subject to approval of the TSXV, the Company agrees to issue a secured loan of up to CAD$250,000 to the Target following the execution of this Letter of Intent, on mutually satisfactory terms to the Company and Target, which loan will convert into shares of the Resulting Issuer on closing of the Transaction.  Additionally, the Company agrees to arrange to have a third party issue a secured loan to the Target of up to CAD$400,000 to pay for liabilities and ongoing working capital requirements prior to closing the Transaction, with such loan converting on the closing of the Transaction.  
	 	 
	LOCK UP PERIOD:	
        The Company and Target agree that
officers, directors and certain shareholders of the Resulting Issuer may be compelled by the TSXV or the CSE to sign escrow or
lock-up agreements pursuant to which each of such individuals will agree not to sell, transfer, pledge, or otherwise dispose of
or transfer the economic consequences of any securities of the Target held by such individuals and may also be subject to such
escrow periods as may be imposed by any other applicable stock exchange in connection with the completion of the Transaction.

	 	 
	DEFINITIVE AGREEMENT:	In the Definitive Agreement, (i) Target shall, acting reasonably, make such representations and warranties and provide such covenants, conditions and indemnities to the Company, and (ii) the Company shall, acting reasonably, make such representations and warranties and provide such covenants, conditions and indemnities to Target and its stockholders (the “Target Stockholders”), in each case as are customary for transactions similar to the Transaction. For the avoidance of doubt, upon execution of the Definitive Agreement, the Definitive Agreement will supersede this Letter of Intent.  All documentation shall be in form and content satisfactory to each of the parties and their respective counsel.  The Transaction Documents shall also contain such other terms, conditions and agreements to which the parties hereto may reasonably request and agree in order to complete the transactions contemplated in this Letter of Intent.
	 	 
	CLOSING DATE:	The closing of the Transaction is subject to the execution of the Definitive Agreement incorporating the terms hereof on or before April 27, 2019 and the completion of all conditions thereto and closing to occur on or before July 15, 2019, or such other date as may be agreed upon by the Company and the Target (the “Closing Date”).
	 	 
	
        TIME OF ESSENCE:

         
	Each of the Company and Target shall use commercially diligent efforts to pursue all matters necessary to complete the Transaction, including, where necessary, obtaining necessary board approvals, shareholder approvals and to solicit proxies in favor of the Transaction.
	 	 
	
        DUE DILIGENCE:

         
	
        Prior to the execution and delivery
by the parties hereto of the Definitive Agreement, the Company and Target shall each be permitted, through their respective representatives
and advisors, to conduct customary due diligence investigations of all aspects of the business, property and affairs of the other
party. Each party shall make available to the other party, in a timely manner, all of their corporate records, including minute
books, share ledgers, financial statements, tax returns, material contracts and all records maintained in connection with their
business. The parties agree that due diligence will begin immediately upon execution of this Letter of Intent and shall be completed
by the parties prior to execution of the Definitive Agreement.

	 	 
	BOARD:	
        The board of directors of the Resulting
Issuer following the Transaction, subject to compliance with corporate laws and the receipt of all necessary regulatory approvals,
shall be comprised of six directors, with three directors nominated by the Company and three directors nominated by the Target,
with the Chairman being nominated by the Target and having a casting vote in the event of a deadlock.

	 	 
	MANAGEMENT SERVICES AGREEMENT:	Upon completion of the Transaction, the Resulting Issuer shall enter into consulting agreements (collectively, the “Consulting Agreements”) with members of the Forbes & Manhattan team to provide services as the Chief Financial Officer, Corporate Secretary, Controller, Legal Clerk and Investors Relations Manager, with monthly base fees under such Consulting Agreements not to exceed C$20,000.00 per month.  Draft copies of the Consulting Agreements will be provided to the Target during the Exclusivity Period (defined below).  The Resulting Issuer will enter into contracts with members of the management team of the Target, including specifically the contract for Jody Read (the “Read Contract”) on terms satisfactory to the Company, acting reasonably.  Draft copies of such management contracts will be provided to the Company during the Exclusivity Period (defined below).  The Company will use best efforts to reduce any obligations related to change of control, severance or similar type payments.
	 	 
	CONDITIONS:	
        The closing of the Transaction is subject to
        the following conditions:

         

	The parties entering into the Definitive Agreement
        and receipt by each party of all required consents, approvals and other authorizations of any regulatory authorities, shareholders
        or third parties;



        

	Satisfactory due diligence review by the Company,
        in its sole discretion, of all of the relevant corporate documents, contracts, liabilities and material agreements relating to
        the Target;



        

	The Resulting Issuer entering into the Read
        Contract on terms satisfactory to the Company; and



        

	Completion of the Debt Conversion and Debt
        Restructuring on terms satisfactory to the Company.







	2.	(a)	From
                                         the date hereof until the Termination Date (defined below) (the “Exclusivity
                                         Period”) the Parties hereby agrees to negotiate exclusively with a view to
                                         executing the Transaction Documents as soon as possible. Each Party agrees that, except
                                         as required by law, during the Exclusivity Period, neither it, its affiliates nor any
                                         of its representatives, officers, directors, employees, advisors or agents will, directly
                                         or indirectly, make, solicit or initiate enquiries from, or the submission of proposals
                                         or offers from, any other party or participate in any discussions or negotiations regarding,
                                         or furnish to any other party any further information with respect to any transaction
                                         involving a recapitalization, restructuring, amalgamation, arrangement, merger, consolidation,
                                         business combination or joint venture that would in any such case result in a direct
                                         or indirect disposition of the shares or assets of either Party, or a material portion
                                         thereof or any similar transaction involving the Company, the Target or their respective
                                         subsidiaries, or otherwise co-operate in any way with, or assist or participate in or
                                         facilitate, any effort or attempt by any person to do or seek to do any of the foregoing.
                                         In the event of a breach of this provision by either Party (the “Defaulting
                                         Party”), the Defaulting Party shall pay the reasonable legal, accounting and
                                         other professional fees and expenses incurred by the other Party in respect of negotiating
                                         this Letter of Intent and other Transaction Documents and in preparing for the closing
                                         of the Transaction, with fees and costs capped at $100,000. 



		(b)	In the event that Target or any of its stockholders obtains a bona
fide offer from a third party relating to a transaction which would materially interfere with the Transaction and which Target
wishes to pursue at the instruction of its board of directors or a committee thereof, including without in any way limiting the
generality of the foregoing, any such arrangement or agreement resulting from an unsolicited offer or proposal (such offer, a “Target
Offer”), then Target shall provide forthwith a copy of the Target Offer to the Company (and in any event within one business
day following receipt thereof). 



		(c)	During
                                         the Exclusivity Period, the Company and Target also agree to use commercially reasonable
                                         efforts to provide whatever information is required to complete the Transaction, including,
                                         without limitation, the approval of the TSXV and/or CSE and completion of the information
                                         circular, listing statement or any other filing requirements in connection with the Transaction,
                                         including specifically two years of audited financial statements of the Target.



	3.		From
                                         the date of the acceptance of this Letter of Intent until the earlier of the Closing
                                         Date or the Termination Date, the Company and Target will operate their respective businesses
                                         in a prudent and business-like manner in the ordinary course and in a manner consistent
                                         with past practice. 



	4.		Each
                                         party shall be responsible for its own costs and charges incurred with respect to the
                                         transactions contemplated herein including, without limitation, all costs and charges
                                         incurred prior to the date of this Letter of Intent and all legal and accounting fees
                                         and disbursements relating to preparing the Transaction Documents or otherwise relating
                                         to the transactions contemplated herein.



	5.		Each
                                         party shall permit the other party and its counsel to participate fully in the preparation
                                         of all documentation to be used in connection with the approval of the Transaction.



	6.	(a)	No
                                         disclosure or announcement, public or otherwise, in respect of this Letter of Intent
                                         or the transactions contemplated herein will be made by any party without the prior approval
                                         of the other party as to timing, content and method, hereto, provided that the obligations
                                         herein will not prevent any party from making, after consultation with the other party,
                                         such disclosure as its counsel advises is required by applicable law or the rules and
                                         policies of the TSXV or US Securities Laws. The parties agree that the Company will issue
                                         a press release following the execution of this Letter of Intent, which shall be approved
                                         by the Target prior to release, acting reasonably. 
	 	 	 
	 	(b)	All
                                         information discovered or acquired by each of the parties hereto (the “Confidential
                                         Information”), in any form whether written, electronic or verbal, as to financial
                                         condition, business, properties, title, assets and affairs (including any material contracts)
                                         as may reasonably be requested by the other party, will be kept confidential by each
                                         party hereto and not be utilized for any purpose except in connection with the Transaction,
                                         notwithstanding either the termination of this Letter of Intent or its completion, other
                                         than information that:






		(i)	was generally available to the public prior to the date of this Letter
of Intent or has become, other than due to the default of the other party, generally available to the public;



		(ii)	was available to a party on a non-confidential basis before the date
of this Letter of Intent;



		(iii)	has become available to a party on a non-confidential basis from a person who is not otherwise
bound by confidentiality obligations to the provider of such information or otherwise prohibited from transmitting the information
to the party; or



		(iv)	a party is legally required or compelled to disclose under applicable
law or in any governmental, administrative, or judicial process.



	 	(c)	No
                                         Confidential Information may be released to third parties other than legal counsel and
                                         other advisors to the parties without the prior consent of the provider thereof, except
                                         to the extent that such Confidential Information is compelled to be released by legal
                                         process or must be released to regulatory bodies, including the TSXV or included in public
                                         documents. Notwithstanding the generality of the foregoing, the parties hereto acknowledge
                                         and agree that the Definitive Agreement will be publicly filed by the Company under its
                                         profile on the SEDAR website at www.sedar.com and by the Target on www.sec.gov, as soon
                                         as practicable following execution.
	 	 	 
	 	(d)	All such Confidential
                                         Information in written form and documents will be returned to the party originally delivering
                                         them in the event that the Transaction is not consummated.






	7.		Subject
                                         to written agreement to extend this Letter of Intent, this Letter of Intent shall terminate
                                         with the parties having no obligations to each other, other than in respect of the expense
                                         payment and confidentiality provisions contained in paragraphs 4 and 6, respectively,
                                         on the day (the “Termination Date”) on which the earliest of the following
                                         events occurs:



		a.	written
                                         agreement of the parties to terminate this Letter of Intent;



		b.	the
                                         parties not entering into the Definitive Agreement on or before April 27, 2019; and



		c.	any
                                         applicable regulatory authority having notified in writing any of the parties that it
                                         will not permit the Transaction to proceed.



	8.		This
                                         Letter of Intent will constitute a legally binding agreement pending negotiation of the
                                         Transaction Documents and will inure to the benefit of and be enforceable by the parties
                                         hereto and their respective successors and permitted assigns. No assignment of this Letter
                                         of Intent will be permitted without the consent of the other party.



	9.		The
                                         binding obligation of this Letter of Intent, the Transaction Documents and other agreements
                                         contemplated herein and therein, if entered into, will be construed in all respects under
                                         and be subject to the laws of the Province of Ontario and the federal laws of Canada
                                         applicable therein which are applicable to agreements entered into and performed within
                                         the Province of Ontario.



	10.		All
                                         notices, requests, demands or other communications by the terms hereof required or permitted
                                         to be given by one party to another shall be given in writing by personal delivery, email
                                         transmission or by registered mail, postage prepaid, addressed to such other party or
                                         delivered to such other party as follows:
	 	 	 
	 	 	in
                                         the case of notice to be given to the Company, be addressed to:
	 	 	 
	 	 	Magnolia
                                         Colombia Ltd.

                                                                                              65
                                         Queen Street West, 8th Floor

                                                                                              Toronto,
                                         Ontario M5H 2M5



	 	 	 
	 	 	Attention:Neil
                                         Said


Email:nsaid@fmresources.ca



	 	 	 
	 	 	and, in
                                         the case of notice to be given to Target, be addressed to:
	 	 	 
	 	 	PCT
                                         LTD.


4235
Commerce Street


Little
River, SC 29566



	 	 	 
	 	 	Attention:Jody
                                         Read


Email:
jread@para-con.com



	 	 	 
	 	 	With
                                         a copy to:


DeMint
Law, PLLC


3753
Howard Hughes Parkway


Second
Floor, Suite 314


Las
Vegas, Nevada 89169



	 	 	 
	 	 	Attention:Anthony
                                         N. DeMint, Esq.


Email:anthony@demintlaw.com



	 	 	 
	 	 	or at such
                                         other address as may be given by any of them to the others in writing from time to time
                                         and such notices, requests, demands or other communications shall be deemed to have been
                                         received, if sent by email, on the first business day after sending or, if sent by registered
                                         mail, on the fifth business day after mailing or, if delivered, upon the date of delivery.









	11.		This
                                         Letter of Intent constitutes the entire agreement, and supersedes all other prior agreements
                                         and undertakings, both written and oral, between the parties with respect to the subject
                                         matter hereof.



	12.		Each
                                         party will, at its own cost, execute and deliver any further agreements and documents
                                         and provide any further assurances as may be reasonably required by the other party to
                                         give effect to this Letter of Intent and, without limiting the generality of the foregoing,
                                         will do or cause to be done all acts and things, execute and deliver or cause to be executed
                                         and delivered all agreements and documents and provide any assurances, undertakings and
                                         information as may be required from time to time by all governmental authorities, the
                                         TSXV and/or CSE or as may be required from time to time under applicable securities legislation.



	13.		Each
                                         party represents and warrants to the other that all negotiations relating to this Letter
                                         of Intent and the transactions contemplated by this Letter of Intent have been carried
                                         on between them directly, without the intervention of any other person on behalf of any
                                         party in such manner as to give rise to any valid claim against either of Target or the
                                         Company for a brokerage commission, finder’s fee or other similar payment. 



	14.		No
                                         supplement, modification, amendment, waiver, discharge or termination of this Letter
                                         of Intent is binding unless it is executed in writing by the party to be bound. No waiver
                                         of, failure to exercise or delay in exercising, any provision of this Letter of Intent
                                         constitutes a waiver of any other provision (whether or not similar) nor does any waiver
                                         constitute a continuing waiver unless otherwise expressly provided.



	15.		Each
                                         provision of this Letter of Intent is distinct and severable. If any provision of this
                                         Letter of Intent, in whole or in part, is or becomes illegal, invalid or unenforceable
                                         in any jurisdiction, the illegality, invalidity or unenforceability of that provision
                                         will not affect the legality, validity or enforceability of the remaining provisions
                                         of this Letter of Intent, or the legality, validity or enforceability of that provision
                                         in any other jurisdiction.



	16.		This
                                         Letter of Intent may be executed in counterpart and evidenced by a facsimile or other
                                         electronic copy thereof and all such counterpart execution or facsimile copies shall
                                         constitute one document.



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In witness whereof the Company and Target
have executed this Letter of Intent effective as of the date first above written.


 


	MAGNOLIA COLOMBIA LTD.	 	 
	 	 	 
	 	 	 
	Per:	/s/ James S. Lanthier	 	 
	 	Name: James S. Lanthier	 	 
	 	Title: CEO	 	 
	 	 	 
	 	 	 
	PCT LTD	 	 
	 	 	 	 	 
	 	 	 	 	 
	Per:	/s/ F. Jody
    Read	 	 	 
	 	Name: F. Jody Read	 	 	 
	 	Title: CEO