Document:

toot_ex101.htm

Exhibit 10.1

 

 

 

SECURITIES PURCHASE AGREEMENT

 

Dated as of August 26, 2010

 

by and between

 

TOOTIE PIE COMPANY, INC.

 

and

 

DAWSON HOLDINGS, L.P.

 

 

 

 

 

 

  

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SECURITIES PURCHASE AGREEMENT

 

 

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), executed on August 26, 2010 and effective on August 1, 2010, by and among Tootie Pie Company, Inc., a Nevada corporation (the “Company”), and Dawson Holdings, L.P., a Texas limited partnership (the “Purchaser”).

 

WHEREAS, the Company and the Purchaser are executing and delivering this Agreement in reliance upon an exemption from securities registration afforded by the provisions of Section 4(2) and/or Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”); and

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Purchaser, as provided herein, and the Purchaser shall purchase, (i) 1,739,130 shares of the Company’s common stock, par value .0001 per share (the “Common Stock); (ii) “A” warrants to purchase up to 3,000,000 additional shares of Common Stock at an exercise price of $0.40, subject to adjustment; and (iii) “B” warrants to purchase up to 2,100,000 additional shares of Common Stock at an exercise price of $0.50, subject to adjustment (the “A” and B” warrants are collectively referred to as the “Warrants”).  The Warrants shall expire on December 31, 2012, subject to adjustment as further described in this Agreement and in the Warrants.  The Company will have a call feature on the Warrants should the stock price as traded in the open market and reflected by the Closing price exceeds $0.60 for the A Warrant and $0.75 for the B Warrant per share for five (5) consecutive days.  A Form of the A Warrant is attached to this Agreement as Exhibit A and a Form of the B Warrant is attached to this Agreement as Exhibit B and are incorporated herein by reference.  The Common Stock and the Warrants shall be referred to collectively as the “Securities.” The Securities shall be purchased for Four Hundred Thousand Dollars ($400,000) (the “Purchase Price”).  Throughout this Agreement, the term “Affiliate” is used.  The Company and Purchaser agree that the term “Affiliate” is defined to mean (i) with reference to the Company, a Person that directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Company and (ii) with reference to Purchaser, any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with any of the partners owning interests in Purchaser and shall be deemed to include, without limitation, with respect to each such partner (A) (1) any other partner of the entity,  (2) such partner’s spouse, lineal descendants, or step-children; (3) a trust or trusts created solely for the benefit of such partner or such partner’s spouse, lineal descendants or step-children, or (4) any business entities wholly owned by such partner, such partner’s spouse, lineal descendants or step-children or a by a trust or trusts created solely for the benefit of such partner or such partner’s spouse, lineal descendants or step-children; or (B) to the extent that any partner is not a natural person, any partner, member or shareholder of such partner or to persons or entities related to any such partner, member or shareholder of a partner of the nature described in clause (A)(2), (3) or (4). The Company agrees that the provisions of clause (B) are intended to include spouses, lineal descendants, or trusts or entities for the benefit of Vincent M. Dawson and Berkley V. Dawson.  For purposes of these definitions, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise

 

NOW, THEREFORE, in consideration of the mutual covenants and other agreements contained in this Agreement the Company and the Purchaser hereby agree as follows:

 

1.             Closing.   Subject to the satisfaction or waiver of the terms and conditions of this Agreement, on the Closing Date, the Purchaser shall purchase, and the Company shall sell to the Purchaser, the Securities.  The Closing Date shall be the date that Purchaser’s funds representing the net amount due to the Company from the Purchase Price are transmitted by wire transfer to an account designated by the Company, or otherwise to or for the benefit of the Company.  On the Closing Date, the Company shall deliver to the Purchaser the Securities by physical delivery of (i) the certificates representing the Common Stock and (ii) the Warrants purchased by such.  The consummation of the transactions contemplated herein shall take place at the offices of Trombly Business Law, 1320 Centre Street, Suite 202, Newton, Massachusetts 02459, upon the satisfaction of all conditions to Closing set forth in this Agreement (“Closing Date”).

 

2.             Purchaser Representations and Warranties.  The Purchaser hereby represents and warrants to and agrees with the Company that:

 

  

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(a)           Organization and Standing of the Purchaser.  If the Purchaser is an entity, such Purchaser is a corporation, partnership or other entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate power to own its assets and to carry on its business.

 

(b)           Authorization and Power.  The Purchaser has the requisite power and authority to enter into and perform this Agreement and to purchase the Securities being sold to it hereunder.  The execution, delivery and performance by such Purchaser of this Agreement and other agreements delivered with this Agreement or in connection herewith and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its Board of Directors, stockholders, partners, members, as the case may be, is required.  This Agreement has been duly authorized, executed and delivered by such Purchaser and constitutes, or shall constitute when executed and delivered, a valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with the terms thereof subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.

 

(c)           No Conflicts.  The execution, delivery and performance of this Agreement and the consummation by such Purchaser of the transactions contemplated hereby or relating hereto do not and will not (i) result in a violation of such Purchaser’s charter documents or bylaws or other organizational documents or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which such Purchaser is a party or by which its properties or assets are bound, or to the Purchaser’s knowledge, result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such Purchaser).  Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or to purchase Securities in accordance with the terms hereof, provided that for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant representations and agreements of the Company herein.

 

(d)           Information on Company.   The Purchaser has been furnished with or has had access at the EDGAR Website of the Commission to the Company’s Form 10-K for the year ended March 31, 2010 and all periodic reports filed with the Commission thereafter, but not later than five business days before the Closing Date (hereinafter referred to as the “Reports”).  In addition, the Purchaser has had an opportunity to talk with Management of the Company and has received in writing from the Company such other information concerning its operations, financial condition and other matters as the Purchaser has requested in writing to the extent required by Regulation D (such other information is collectively, the “Other Written Information”), and considered all factors the Purchaser deems material in deciding on the advisability of investing in the Securities.

 

(e)           Information on Purchaser.  The Purchaser is an “accredited investor”, as such term is defined in Regulation D promulgated by the Commission under the 1933 Act, is experienced in investments and business matters, has made investments of a speculative nature and has purchased securities of United States publicly-owned companies in private placements in the past and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable the Purchaser to utilize the information made available by the Company to evaluate the merits and risks of and to make an informed investment decision with respect to the proposed purchase of the Securities, which represents a speculative investment.  The Purchaser has the authority and is duly and legally qualified to purchase and own the Securities.  The Purchaser is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof.  The information set forth on the signature page hereto regarding the Purchaser is accurate.

 

(f)            Purchase of Securities.  On the Closing Date, the Purchaser will purchase Securities as principal for its own account for investment only and not with a view toward, or for resale in connection with, the public sale or any distribution thereof, but Purchaser does not agree to hold the Securities for any minimum amount of time.

 

  

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(g)           Compliance with Securities Act.  The Purchaser understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the accuracy of the representations and warranties of Purchaser contained herein), and that such Securities must be held indefinitely unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such registration.  Notwithstanding anything to the contrary contained in this Agreement, such Purchaser may transfer the Securities consistent with state and federal securities laws.

(h)           Securities Legend.  The Securities shall bear the following or similar legend:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL TO TOOTIE PIE COMPANY, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”

 

The Purchaser agrees that, in connection with any transfer of securities by it pursuant to an effective registration statement under the 1933 Act, it will comply with all prospectus delivery requirements of the 1933 Act.

 

 (i)           Communication of Offer.  The offer to sell the Securities was directly communicated to the Purchaser by the Company.  At no time was the Purchaser presented with or solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

 

 (j)           No Governmental Review.  Each Purchaser understands that no United States federal or state agency or any other governmental or state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(k)            Correctness of Representations.  Each Purchaser represents as to such Purchaser that the foregoing representations and warranties are true and correct as of the date hereof and, unless a Purchaser otherwise notifies the Company prior to the Closing Date, shall be true and correct as of the Closing Date.

 

(l)             Survival.  The foregoing representations and warranties shall survive the Closing Date until three years after the Closing Date.

 

(m)           No Short Sales.  For the period commencing on the Closing Date and ending on the last to occur of (i) the third anniversary of the Closing Date or (ii) the date on which a voting member of the Board of Directors sponsored by the Purchaser per section 8 below no longer serves in such capacity, Purchaser shall not effect any Short Sale (as hereafter defined) of the Company’s Common Stock.  As used herein, Short Sale means all short sales as defined in Rule 200 of Regulation SHO under the Securities Exchange Act of 1934.

(o)           Finders and Broker Dealers.  No finders or broker dealers or any other entity will receive compensation as a result of this transaction.

 

3.             Company Representations and Warranties.  The Company represents and warrants to Purchaser that:

 

(a)           Due Incorporation.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to own its properties and to carry on its business as disclosed in the Reports.  The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect.  For purpose of this Agreement, a “Material Adverse Effect” shall mean a material adverse effect on the financial condition, results of operations, properties or business of the Company taken individually, or in the aggregate, as a whole. 

 

  

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(b)           Common Stock. 

 

(i)           All outstanding Common Stock of the Company are, and all shares which may be issued (i) on the Closing Date, or (ii) exercise of the Warrants will be, when issued and upon delivery of the exercise price, if any, payable with respect thereto, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive or similar rights.

(ii)           Except as contemplated hereby or in the other Transaction Documents, there are no “poison pill” agreements, registration rights agreements,  voting agreements or trusts, proxies or other agreements or contractual obligations to which the Company is a party or bound, or which otherwise affect the voting or issuance of any Common Stock of the Company.

 

(c)           Authority; Enforceability.  This Agreement and any other agreements delivered together with this Agreement or in connection herewith (collectively “Transaction Documents”) have been duly authorized, executed and delivered by the Company and are valid and binding agreements enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights generally and to general principles of equity.  The Company has full corporate power and authority necessary to enter into and deliver the Transaction Documents and to perform its obligations thereunder.

 

(d)           Preemptive Rights.   There are no outstanding agreements or preemptive or similar rights affecting the Company’s common stock.

 

(e)           Consents.  No consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company, the Over-The-Counter Bulletin Board (the “Bulletin Board”) nor the Company’s shareholders is required for the execution by the Company of the Transaction Documents and compliance and performance by the Company of its obligations under the Transaction Documents, including, without limitation, the issuance and sale of the Securities.  The Transaction Documents and the Company’s performance of its obligations thereunder have been approved unanimously by the Company’s directors.

 

(f)            No Violation or Conflict.  Assuming the representations and warranties of the Purchaser in Section 2 are true and correct, neither the issuance and sale of the Securities nor the performance of the Company’s obligations under this Agreement and all other agreements entered into by the Company relating thereto by the Company will violate, conflict with, result in a breach of, or constitute a default (or an event which with the giving of notice or the lapse of time or both would be reasonably likely to constitute a default) under (A) the articles or certificate of incorporation, charter or bylaws of the Company, (B) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or over the properties or assets of the Company, (C) the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company is a party, by which the Company is bound, or to which any of the properties of the Company or any of its Affiliates is subject, or (D) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, or any of its Affiliates is a party except the violation, conflict, breach, or default of which would not have a Material Adverse Effect on the Company.

 

(g)           The Securities.  The Securities upon issuance:

 

(i)            are, or will be, free and clear of any security interests, liens, claims or other encumbrances, subject to restrictions upon transfer under the 1933 Act and any applicable state securities laws;

 

  

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(ii)           when issued as described in this Agreement, and, if registered pursuant to the 1933 Act and resold pursuant to an effective registration statement, will be free trading and unrestricted;

 

 

(iii)          will not have been issued or sold in violation of any preemptive or other similar rights of the holders of any securities of the Company;

 

(iv)          will not subject the Purchaser thereof to personal liability by reason of being such holder provided Purchaser’s representations herein are true and accurate and Purchaser takes no actions or fails to take any actions required for its purchase of the Securities to be in compliance with all applicable laws and regulations; and

 

(v)           will have been issued in reliance upon an exemption from the registration requirements of and will not result in a violation of Section 5 under the 1933 Act.

 

(h)           Litigation.  Other than as described in the Reports, there is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates that would affect the execution by the Company or the performance by the Company of its obligations under the Transaction Documents.  Except as disclosed in the Reports, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, or any of its Affiliates which litigation if adversely determined would have a Material Adverse Effect.

 

(i)             Reporting Company.  The Company is a publicly-held company subject to reporting obligations pursuant to Section 13 of the 1934 Act.  Pursuant to the provisions of the 1934 Act, including permissible extensions, the Company has timely filed all reports and other materials required to be filed thereunder with the Commission during the preceding thirty six months (the “Company SEC Documents”).

 

(j)             No Market Manipulation.  The Company has not taken, and will not take, directly or indirectly, any action designed to, or that might reasonably be expected to, cause or result in stabilization or manipulation of the price of the common stock of the Company to facilitate the sale or resale of the Securities or affect the price at which the Securities may be issued or resold.

 

(k)            Information Concerning Company.  The Company SEC Documents contain all material information relating to the Company and its operations and financial condition as of their respective dates and all the information required to be disclosed therein.   Since the last day of the fiscal year of the most recent audited financial statements included in the Company SEC Documents (“Latest Financial Date”), and except as modified in the Other Written Information, there has been no Material Adverse Event relating to the Company’s business, financial condition or affairs not disclosed in the Company SEC Documents.  As of their respective dates, the Company SEC Documents complied in all material respects with the requirements of the 1933 Act, or the 1934 Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to such Company SEC Documents, and none of the Company SEC Documents contained as of their respective dates any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made.

 

(l)             Stop Transfer.  The Securities, when issued, will be restricted securities.  The Company will not issue any stop transfer order or other order impeding the sale, resale or delivery of any of the Securities, except as may be required by any applicable federal or state securities laws and unless contemporaneous notice of such instruction is given to the Purchaser.

 

(m)           Defaults.   The Company is not in violation of its Certificate of Incorporation or Bylaws.  The Company is (i) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect on the Company, (ii) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, or (iii) to its knowledge not in violation of any statute, rule or regulation of any governmental authority which violation would have a Material Adverse Effect on the Company.

 

  

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(n)            No Integrated Offering.  Neither the Company, nor any of its Affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offer of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the 1933 Act or any applicable stockholder approval provisions, including, without limitation, under the rules and regulations of the Bulletin Board.  Neither the Company nor any of its Affiliates will take any action or steps that would cause the offer or issuance of the Securities to be integrated with other offerings.  The Company will not conduct any offering other than the transactions contemplated hereby that will be integrated with the offer or issuance of the Securities.

 

(o)            No General Solicitation.  Neither the Company, nor any of its Affiliates, nor to its knowledge, any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933 Act) in connection with the offer or sale of the Securities.

 

(p)            Listing.  The Company’s common stock is quoted on the Over-The-Counter Bulletin Board under the symbol TOOT.OB.  The Company has not received any oral or written notice that its common stock is not eligible nor will become ineligible for quotation on the Bulletin Board nor that its common stock does not meet all requirements for the continuation of such quotation.  The Company satisfies all the requirements for the continued quotation of its common stock on the Bulletin Board.

 

(q)            No Undisclosed Liabilities.  The Company has no liabilities or obligations which are material, individually or in the aggregate, nor is it aware of any events, circumstances or facts which are not disclosed in the Company SEC Documents and Other Written Information, other than those incurred in the ordinary course of the Company’s businesses since  July 30, 2010 and which, individually or in the aggregate, (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to impair the ability of the Company to perform its obligations under any of the Transaction Documents in any material respect, or (iii) would reasonably be expected to delay in any material respect, or prevent the consummation of, any of the transactions contemplated by the Transaction Documents.

 

(r)             No Undisclosed Events or Circumstances.  Since July 30, 2010, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Reports.

 

 (s)           Dilution.   The Company’s executive officers and directors understand the nature of the Securities being sold hereby and recognize that the issuance of the Securities will have a potential dilutive effect on the equity holdings of other holders of the Company’s equity or rights to receive equity of the Company.  The board of directors of the Company has unanimously concluded, in its good faith business judgment that the issuance of the Securities is in the best interests of the Company.

 

(t)             No Disagreements with Accountants and Lawyers.  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers.

 

 (u)           Investment Company.   Neither the Company nor any Affiliate is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(v)            Intangible Property.  The Company possesses or has adequate rights to use all trademarks, trade names, patents, service marks, brand marks, brand names, computer programs, databases, industrial designs and copyrights necessary for the operation of the businesses of the Company (collectively, the “Intangible Property”), except where the failure to possess or have adequate rights to use such properties, individually or in the aggregate, has not had and could not reasonably be expected to have a Material Adverse Effect.  All of the Intangible Property is owned or licensed by the Company free and clear of any and all liens, except those that, individually or in the aggregate, have not had and could not reasonably be expected to have a Material Adverse Effect, and the Company has forfeited or otherwise relinquished any Intangible Property which forfeiture, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.  

 

  

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The use of the Intangible Property by the Company does not conflict with, infringe upon, violate or interfere with or constitute an appropriation of any right, title, interest or goodwill, including any trademark, patent, service mark, copyright or any pending application therefor of any other person and there have been no claims made and the Company has not received any notice of any claim or otherwise knows that any of the Intangible Property is invalid or conflicts with the asserted rights of any other person or has not been used or enforced or has failed to have been used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of any of the Intangible Property, except for any such conflict, infringement, violation, interference, claim, invalidity, abandonment, cancellation or unenforceability that, individually or in the aggregate, has not had and could not reasonably be expected to have a Material Adverse Effect.

(w)           No Brokers or Finders.  No agent, broker, finder or investment or commercial banker, or other person or firm engaged by or acting on behalf of the Company in connection with the negotiation, execution or performance of this Agreement is or will be entitled to any brokerage or finder’s or similar fee or other commission as a result of this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby, other than any such fees or commissions that have been disclosed to Purchasers in writing and as to which the Company shall have full responsibility.

(x)           Compliance with Applicable Laws.

(i)           The Company has in effect all approvals of all governmental entities necessary for the lawful conduct of its business, and there has occurred no default or violation under any such approval, except for failures to obtain, or for defaults or violations under, approvals which failures, defaults or violations, individually or in the aggregate, (A) could not reasonably be expected to have a Material Adverse Effect, (B) could not reasonably be expected to impair the ability of the Company to perform its obligations under any of the Transaction Documents in any material respect, and (C) could not reasonably be expected to delay in any material respect or prevent the consummation of any of the transactions contemplated by any of the Transaction Documents.

(ii)           Except as otherwise disclosed in the Company SEC Documents, the Company  are in compliance with all applicable laws and orders, except for possible noncompliance which, individually or in the aggregate, (A) could not reasonably be expected to have a Material Adverse Effect, (B) could not reasonably be expected to impair the ability of the Company to perform its obligations under any of the Transaction Documents in any material respect, and (C) could not reasonably be expected to delay in any material respect or prevent the consummation of any of the transactions contemplated by any of the Transaction Documents.

 

(y)            Correctness of Representations.  The Company represents that the foregoing representations and warranties are true and correct as of the date hereof in all material respects, and, unless the Company otherwise notifies the Purchaser prior to the Closing Date, shall be true and correct in all material respects as of the Closing Date.

 

(z)             Disclosure of Transaction.  The Company may issue a press release at the Company’s discretion describing the material terms of the transaction contemplated hereby (the “Press Release”).  The Company shall also file with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby in no event more than four (4) Trading Days following the Closing Date, which Press Release and Form 8-K shall be provided to the Purchaser prior to publication.  “Trading Day” means any day during which the Nasdaq Capital Market shall be open for trading.

 

4.             Regulation D Offering.  The offer and issuance of the Securities to the Purchaser is being made pursuant to the exemption from the registration provisions of the 1933 Act afforded by Section 4(2) of the 1933 Act and/or Rule 506 of Regulation D promulgated thereunder.  On the Closing Date, the Company will provide an opinion reasonably acceptable to Purchaser from the Company’s legal counsel opining on the availability of an exemption from registration under the 1933 Act as it relates to the offer and issuance of the Securities and other matters reasonably requested by the Purchaser.

 

  

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5.             Covenants of the Company.  The Company covenants and agrees with the Purchaser as follows:

 

(a)           Stop Orders.  The Company will advise the Purchaser, as soon as practicable but, in any event, within one business day after the Company receives notice of issuance by the Commission, any state securities commission or any other regulatory authority of any stop order or of any order preventing or suspending any offering of any securities of the Company, or of the suspension of the qualification of the common stock of the Company for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purpose.

 

(b)           Listing.   The Company shall maintain the listing of the Common Stock for trading on the Principal Market (as hereafter defined) for one year after Closing.  The Company will maintain the listing of its common stock on the American Stock Exchange, Nasdaq SmallCap Market, Nasdaq National Market System, Bulletin Board, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the common stock (the “Principal Market”)), and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Market, as applicable. The Company will promptly after receipt provide the Purchaser copies of all notices it receives notifying the Company of the threatened and actual delisting of the common stock from any Principal Market.  As of the date of this Agreement and the Closing Date, the Bulletin Board is and will be the Principal Market.

 

 (c)          Use of Proceeds.  The Purchase Price will be used for working capital.

 

(d)           Board Resolutions.  The board of directors of the Company have duly adopted the resolutions concerning the actions contemplated by the Transaction Documents. 

 

6.             Covenants of the Company and Purchaser Regarding Indemnification.

 

(a)           The Company agrees to indemnify, hold harmless, reimburse and defend the Purchaser, the Purchaser’s officers, directors, agents, Affiliates, counsel, control persons, and principal shareholders, against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Purchaser or any such person which results, arises out of or is based upon (i) any material misrepresentation by the Company or breach of any warranty by the Company in this Agreement, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by the Company of any covenant or undertaking to be performed by the Company hereunder, or any other agreement entered into by the Company and Purchaser relating hereto.

 

(b)           The Purchaser agrees to indemnify, hold harmless, reimburse and defend the Company and each of the Company’s officers, directors, agents, Affiliates, counsel, control persons against any claim, cost, expense, liability, obligation, loss or damage (including reasonable legal fees) of any nature, incurred by or imposed upon the Company or any such person which results, arises out of or is based upon (i) any material misrepresentation by such Purchaser in this Agreement, or other agreement delivered pursuant hereto; or (ii) after any applicable notice and/or cure periods, any breach or default in performance by such Purchaser of any covenant or undertaking to be performed by such Purchaser hereunder, or any other agreement entered into by the Company and Purchaser, relating hereto.

 

7.              Registration Rights.  No registration statement shall be required to be filed by the Company for the Securities issued pursuant to this Agreement, or for the shares of Common Stock or Warrants; or for the Common Stock into which the Warrants are exercisable.

 

8.              Board of Directors.  The Company shall take, or cause to be taken, such action as may be necessary or advisable to ensure that the Company’s board of directors shall consist of five (5) directors and that Vincent M. Dawson and James E. Dawson are appointed as directors on the board of directors immediately following the Closing.  The board of directors will appoint Vincent M. Dawson and James E. Dawson to the Class of Directors with the longest term, which for point of clarity and consistent with the Company’s by-laws, will not exceed three years.  If, (a) the Company holds an Annual Meeting in which the Class of Directors of which Vincent M. Dawson or James D. Dawson are a part will be reelected, and (b) Purchaser together with its Affiliates owns at least 10% of the Company’s issued and outstanding stock, then the Company agrees to nominate for reelection Vincent M. Dawson and James E. Dawson for an additional three year term consistent with the Company’s by-laws and applicable state and federal law then in effect subject to other requirements and limitations in this Section 8. The Company agrees that, in the event Vincent M. Dawson or James E. Dawson cannot or will not serve on the Board of Directors, then Berkley V. Dawson, may replace one of them on the board of directors.  If Berkley V. Dawson is unable or unwilling to serve on the board of directors, then such right to a board seat will be extinguished.

  

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Any nominations shall be consistent with the Company’s By-laws then in effect and applicable state laws to remain as directors, subject to stockholder approval.  The Company shall use its reasonable best efforts to cause such nominees to be elected to the board of directors similar to past practices and to its efforts in regards to other nominees.  The Company will not expand its Board to more than five members without the prior written consent of Purchaser, subject to the following sentence.  Should the Company list its common shares on an exchange which listing requirements require a majority of independent directors, the Company reserves the right to expand its Board as necessary to add a sufficient number of independent directors to meet the listing criteria of the exchange.  The Company will direct its counsel, at its expense, to make any regulatory filings necessary for the appointment to the Board of Directors.  Vincent M. Dawson and James E. Dawson will promptly provide any information reasonably necessary to make such filings at the Company’s request.  After serving on the Board for three years following execution of this Agreement, if Purchaser and its Affiliates own, in the aggregate, less than 2% of the issued and outstanding Common Stock of the Company then Vincent M. Dawson, James E. Dawson and/or Berkley V. Dawson will, after receipt of a request from the Chairman of the Board, tender resignations as directors to the Board regardless of whether or not their terms have expired or they have been reelected by shareholders.

9.             Right of First Refusal.  

(a)           For one year after execution of this Agreement, , the Company shall not incur any debt (other than ordinary course of business trade debt) over $100,000 without the prior written consent of Purchaser.  If, during such period, Purchaser consents to the incurrence of debt in a public or private offering of debt of more than $400,000 in net proceeds (a “Debt Placement Event”), the Purchaser may, but is not obligated to, require the Company to repurchase all common stock issued to the Purchaser at the Closing of this Agreement still held by the Purchaser at the time of the Debt Placement Event.  The Company will communicate such intention to make a public or private placement of such debt known to the Purchaser along with a reasonable description of such proposed terms and the Purchaser shall have three business days to notify the Company if it intends to require the Company to repurchase the common stock as described in the previous sentence.  If the Purchaser notifies the Company it does not intend to exercise its right as described in this Section 9(b), the Company may rely on such representation to complete the Debt Placement event and retain the proceeds from such Debt Placement Event.  For purposes of clarity, the Company will not, at any time, be obligated to purchase common stock it issued to the Purchaser upon exercise of Warrants.  The purchase price per share shall be $0.33 per share, subject to equitable adjustment in the event of a reclassification or split of the Company’s common stock.   If the Purchaser makes this election, the expiration date of the Warrants issued pursuant to this Agreement that remain unexercised and held by Purchaser, will be extended for two years.  All other terms of the Warrants will remain in full force and effect.  Additionally, if the Purchaser makes this election, Vincent M. Dawson and James E. Dawson will remain on the Board (subject to and as described in Section 8 above) until the extended expiration date of the warrants.

(b)           The Purchasers agree that they, together with their Affiliates will not exercise any Warrant issued pursuant to this Agreement if, as a result of the exercise of that Warrant, the Purchaser and its Affiliates in the aggregate would own in excess of 40% of the Common Stock (the “Maximum Percentage Ownership”) issued and outstanding for a minimum of five years following the date of the execution of this Agreement.

 

10.            Miscellaneous.

 

(a)           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be: (i) if to the Company, to: Tootie Pie Company, Inc. 129 Industrial Drive, Boerne, TX 78006, with a copy by telecopier only to: Amy Trombly, Esq., Trombly Business Law, 1320 Centre Street, Suite 202, Newton, MA 02459, Fax: (617) 243-0066, and (ii) if to the Purchaser, to: the address and telecopier number indicated on the signature page hereto, with a copy by telecopier or electronic mail to:  Drew R. Fuller, Jr., Hornberger Sheehan Fuller & Beiter Incorporated, 7373 Broadway, Suite 300, San Antonio, Texas  78209.

 

  

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(b)           Entire Agreement; Assignment.  This Agreement and other documents delivered in connection herewith represent the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by both parties.  Neither the Company nor the Purchaser has relied on any representations not contained or referred to in this Agreement and the documents delivered herewith.  No right or obligation of the Company shall be assigned without prior notice to and the written consent of the Purchaser.

 

(c)           Counterparts/Execution.  This Agreement may be executed in any number of counterparts and by the different signatories hereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument.  This Agreement may be executed by facsimile signature and delivered by facsimile transmission.

 

(d)           Law Governing this Agreement.  This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Texas or in the federal courts located in the State of Texas.  The parties agree that such courts shall have jurisdiction of any such action and waive trial by jury.  In any action brought by a Party hereto to enforce the obligations of any other Party hereto, the prevailing Party shall be entitled to collect from the opposing Party to such action such Party's reasonable litigation costs and attorneys fees and expenses (including court costs, reasonable fees of accountants and experts, and other expenses incidental to the litigation).   In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.

 

(e)           Specific Enforcement, Consent to Jurisdiction.  The Company and Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.  Subject to Section 8(d) hereof, each of the Company and Purchaser each hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction in Texas of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Nothing in this Section shall affect or limit any right to serve process in any other manner permitted by law.

 

 (f)           Equal Treatment.   No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of the Transaction Documents unless the same consideration is also offered and paid to all the parties to the Transaction Documents.

 

(g)           Survival of Provisions.

(a)           The representations and warranties of the Company and Purchaser made herein or in any other Transaction Document shall remain operative and in full force and effect pursuant to their terms, until August 1, 2011; provided that such representations and warranties shall survive as to any claim or demand made prior to their termination date until such claim or demand is fully paid or otherwise resolved by the parties hereto in writing or otherwise.

  

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(b)           The covenants and agreements of the Company and Purchaser contained in this Agreement that, by their terms, are to be performed or complied with after the Closing Date will survive until the later of (i) August 1, 2011 and (ii) the period specified herein with respect to such covenant or agreement; and provided, further, that such covenants and agreements shall survive as to any claim or demand made prior to their termination date until such claim or demand is fully paid or otherwise resolved by the parties hereto in writing or otherwise.

(h)           No Waiver; Modification in Writing.  No failure or delay on the part of the Company or a Purchaser in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  Without limiting the rights that any party may have for fraud under common law, the remedies provided for herein are cumulative and are the exclusive remedies available to the Company or Purchaser at law or in equity.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company, on the one hand, and Purchaser or their permitted assigns, on the other hand, provided that notice of any such waiver shall be given to each party hereto as set forth below.  Any amendment, supplement or modification of or to any provision of this Agreement, or any waiver of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Agreement, no notice to or demand on any party hereto in any case shall entitle the other party to any other or further notice or demand in similar or other circumstances.

(i)            Severability.  If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of applicable law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated herein are not affected in any manner materially adverse to any party.  Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated herein are consummated as originally contemplated to the fullest extent possible.

(j)            Parties in Interest.  This Agreement shall be binding upon and, except as provided below, inure solely to the benefit of each party hereto and their successors and assigns, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement.

(k)            Public Announcements.  The Company, on the one hand, and Purchaser, on the other, shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby, except for statements required by law or by any listing agreements with or rules of any national securities exchange or FINRA or made in disclosures reasonably determined as required to be filed pursuant to the 1933 Act or the 1934 Act.

(l)            Headings.  The headings of this Agreement are for convenience of reference only and are not part of the substance of this Agreement.

 

  

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SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT

 

Please acknowledge your acceptance of the foregoing Securities Purchase Agreement by signing and returning a copy to the undersigned whereupon it shall become a binding agreement between us.

 

	  	  	  
	  	  	
TOOTIE PIE COMPANY, INC.

	  	  	
A Nevada corporation

	  	  	  
	  	  	  
	  	
By:   

	
  /s/ Don L. Merrill, Jr.

	  	
 

	
Name: Don L. Merrill, Jr.

	  	
 

	
Title: Chief Executive Officer

	  	  	  
	  	 	
Dated:  August 26, 2010

 

	  	  	  
	  	  	
DAWSON HOLDINGS, L.P.

	  	  	
A Texas limited liability company

	  	  	
  

 

	  	
By:   

	
Dawson Brothers, LLC,

a Texas limited liability company,

its General Partner

 

/s/ Berkley V. Dawson

	  	
By:   

	
Berkley V. Dawson

	  	
 

	
Title: President

	  	  	  
	  	
 

	
Dated: August 26, 2010

 

  

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Exhibit A

 

Form of Class “A” Warrants

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL OF THE ISSUER THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

TOOTIE PIE COMPANY, INC.

COMMON SHARE PURCHASE WARRANT

FOR VALUE RECEIVED, _________________ (the “Holder”), is entitled to purchase from Tootie Pie Company, Inc., a Nevada corporation (the “Company”), subject to the terms and conditions herein set forth, at any time before the Expiration Date, 3,000,000 shares of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock of the Company, par value $0.001 per share (the “Warrant Shares”), subject to adjustment of the number or kind of shares constituting the Warrant Shares as hereinafter provided.  The Holder is entitled to purchase the Warrant Shares for $0.40 per share, subject to adjustment as hereinafter provided (the “Exercise Price”), and is entitled also to exercise the other appurtenant rights, powers, and privileges hereinafter set forth.  The Holder may also have certain rights and obligations as described in that certain Securities Purchase Agreement between the Holder and the Company dated August 26, 2010 with an effective date of August 1, 2010 (the “Purchase Agreement”).  The Company may lower the Exercise Price or extend the Expiration Day at its sole discretion.

 

ARTICLE 1

DEFINITIONS

For all purposes of this Warrant, unless the context otherwise requires, the following terms have the following meanings:

 

1.1           “Affiliate”  of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity or any of its partners and shall be deemed to include, without limitation, with respect to a partner, (i) (A) any other partner of the entity,  (B) such partner’s spouse, lineal descendants, or step-children; (C) a trust or trusts created solely for the benefit of such partner or such partner’s spouse, lineal descendants or step-children, or (D) any business entities wholly owned by such partner, such partner’s spouse, lineal descendants or step-children or a by a trust or trusts created solely for the benefit of such partner or such partner’s spouse, lineal descendants or step-children; or (ii) to the extent that any partner is not a natural person, any partner, member or shareholder of such partner or to persons or entities related to any such partner, member or shareholder of a partner of the nature described in clause (i)(B), (C) or (D). The Company agrees that the provisions of clause (ii) of this Section 1.1 are intended to include spouses, lineal descendants, or trusts or entities for the benefit of Vincent M. Dawson and Berkley V. Dawson. For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

1.2           “Call Notice” means a written demand by the Company for the exercise of this Warrant in accordance with Section 5.1

 

1.3           “Common Stock” means the Company’s authorized common stock, par value $0.001 per share.

  

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1.4           “Company” means Tootie Pie Company, Inc., a corporation organized and existing under the laws of the State of Nevada, and any successor Person.

1.5           “Exercise Price” means the exercise price for the Warrant Shares established in accordance with Article 4.

1.6           “Expiration Date” means the earlier of (a) (i) either December 31, 2012 or (ii) December 31, 2014 in the event of a “Debt Placement Event” described in Section 9(B) of the Purchase Agreement pursuant to which the Company acquires the shares of Common Stock issued to Holder under the terms of the Purchase Agreement, and (b) 10 days after a Call Notice is issued by the Company in accordance with Section 5.1.

1.7           “Holder” means the holder of record of this Warrant as shown in the Company’s register for such purpose as described in Section 2.7 hereof.

1.8           “Person” means any natural person, sole proprietorship, general partnership, limited partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, private or governmental entity, or other party.

1.9           “Publicly Traded” has the meaning ascribed in Section 1.10.

1.10         “Trading Price” means , in the event such stock is traded on a national securities exchange or in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System (stock being so traded or reported being referred to herein as “Publicly Traded”), the average closing bid and asked price of such stock on the five (5) trading days immediately preceding the date as of which such value is to be determined, and in the event the Common Stock is not Publicly Traded, the value of such stock on a going-concern basis, as determined by the Board of Directors of the Company in good faith or, in the Company’s discretion, by an appraiser mutually agreeable to the Holder and to the Company, the determination of such appraiser to be final in the absence of fraud or bad faith

1.11         “Warrant” means this Warrant and any warrants issued on or in substitution for this Warrant, including warrants issued in exchange for this Warrant pursuant to Article 2 hereof.

1.12         “Warrant Shares” means the shares of Common Stock or other securities acquired or to be acquired upon the exercise of the Warrant.

ARTICLE 2

EXERCISE OF WARRANT

2.1           Partial Exercise.  This Warrant may be exercised in whole or in part at any time prior to the Expiration Date.  In the event of a partial exercise, the Company shall execute and deliver to the Holder (or to such other Person as shall be designated in the Subscription Notice) a new Warrant covering the unexercised portion of the Warrant Shares.  In no event may the Warrant be exercised for less than 1,000 shares unless approved by the Company in its sole discretion or the remaining balance of shares on this Warrant is less than 1,000 shares and in that circumstance, the Warrant must be exercised for its total balance.

2.2           Procedure.  To exercise this Warrant, the Holder shall deliver to the Company at its principal office:

  

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(a)           a written notice, in substantially the form of the Subscription Notice appearing at the end of this Warrant, of the Holder’s election to exercise this Warrant;

(b)           a check payable to the Company in the amount of the Exercise Price; and

(c)           this Warrant.

The Company shall as promptly as practicable, and in any event within ten business days after receipt of such notice, execute and deliver or cause to be executed and delivered one or more certificates representing the aggregate number of shares of Warrant Shares to which the Holder is entitled and, if this Warrant is exercised in part, a new Warrant as set forth in Section 2.1.

 

2.3           Name and Effective Date.  The stock certificate(s) so delivered shall be issued in the name of the Holder or such other name as shall be designated in the notice specified in Section 2.2.  Such certificate(s) shall be deemed to have been issued and such Holder or any other Person so designated to be named therein shall be deemed for all purposes to have become a Holder of record of such shares as of the date the Company actually receives the notice and payment as specified in Section 2.2, subject to Article 3 hereof.

2.4           Expenses. The Company shall pay all expenses payable in connection with the preparation, issuance, and delivery of such stock certificate(s), except that the Holder shall pay any applicable stock transfer taxes.

2.5           Legal Requirements.  The Warrant Shares issued upon the exercise of this Warrant shall be validly issued, fully paid, and nonassessable.

2.6           No Fractional Shares.  The Company shall not issue a stock certificate representing any fraction of a share upon partial exercise by a Holder of such Holder’s rights hereunder.

2.7           Registration.  The Company will keep at its principal office a register that will provide for the registration and transfer of this Warrant.

ARTICLE 3

TRANSFER

3.1           Permitted Transfers.  This Warrant shall be freely transferable to any Affiliate of Holder as long as such transfer is consistent with state and federal law and Holder has received a legal opinion reasonably acceptable to the Company to that effect, but shall not be transferable to any other Person except with the written consent of the Company and subject to the limitations set forth in Section 3.2 hereof.

3.2.           Securities Laws.  Notwithstanding anything to the contrary in this Article 3, neither this Warrant nor the Warrant Shares shall be transferable unless:

(a)           either a registration statement under the Securities Act of 1933, as amended (the “Act”), is in effect covering this Warrant or the Warrant Shares, as the case may be, or the Company has received an opinion from Company counsel to the effect that such registration is not required; and

 

(b)           the transfer complies with any applicable state securities laws.

 

  

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The Warrant Shares will bear a legend describing the restrictions on transfer set forth in this Section 3.2.  By acceptance of this Warrant, the Holder represents and warrants to the Company that this Warrant is acquired for the Holder’s own account, for investment and not with a view to distribution within the meaning of the Act and the Holder agrees that the Holder will not offer, distribute, sell, transfer or otherwise dispose of this Warrant or the Warrant Shares except as set forth herein.

 

3.3           Procedure.  The Holder may, subject to the limitations set forth in Section 3.1 and Section 3.2, in person or by duly authorized attorney, surrender the same for exchange at the principal office of the Company and, within a reasonable time thereafter receive in exchange therefor one or more duly executed Warrants each evidencing the right to receive one share of Common Stock of the Company or such other number of shares as may be designated by the Holder at the time of surrender.

The Company and any agent of the Company may treat the Person in whose name a Warrant is registered as the owner of the Warrant for all purposes hereunder, and neither the Company nor such agent shall be affected by notice to the contrary except in connection with the permitted transfers described in Section 3.1 or as otherwise indicated in the notice specified in Section 2.2.  The Company covenants and agrees to take and cause to be taken all action necessary to effect such registrations, transfers and exchanges.

 

ARTICLE 4

EXERCISE PRICE AND ADJUSTMENTS

 

4.1           Exercise Price.  The Exercise Price for the Warrant Shares shall be $0.40 per share, subject to adjustment as described in this Article 4.

 

4.2           Stock Splits, Stock Dividends and Reverse Stock Splits.  If at any time the Company shall subdivide (by reclassification, by the issuance of a Common Stock dividend on Common Stock, or otherwise) its outstanding shares of Common Stock into a greater number, the number of shares of Common Stock that may be purchased hereunder shall be increased proportionately and the Exercise Price per share of Common Stock shall be decreased proportionately as of the effective date of such action.  The effective date of a stock dividend shall be the record date for such dividend.  Issuance of a Common Stock dividend shall be treated as a subdivision of the whole number of shares of Common Stock outstanding immediately before the record date for such dividend into a number of shares equal to such whole number of shares so outstanding plus the number of shares issued as a stock dividend.  If at any time the Company shall combine (by reclassification or otherwise) its outstanding number of shares of Common Stock into a lesser number, the number of shares of Common Stock that may be purchased hereunder shall be reduced proportionately and the Exercise Price per share of Common Stock shall be increased proportionately as of the effective date of such action.

4.3           Reorganization and Reclassification.  In case of any capital reorganization or any reclassification of the capital stock of the Company while this Warrant remains outstanding, the Holder of this Warrant shall thereafter be entitled to purchase pursuant to this Warrant (in lieu of the kind and number of shares of Common Stock comprising Warrant Shares that such Holder would have been entitled to purchase or acquire immediately before such reorganization or reclassification) the kind and number of shares of stock of any class or classes or other securities or property for or into which such shares of Common Stock would have been exchanged, converted or reclassified if the Warrant Shares had been purchased by the Holder immediately before such reorganization or reclassification.  In case of any such reorganization or reclassification, appropriate provision (as determined by resolution of the Board of Directors of the Company) shall be made with respect to the rights and interest thereafter of the Holder of this Warrant, to the end that all the provisions of this Warrant (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably practicable, in relation to such stock or other securities or property.

  

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ARTICLE 5

CALL  FEATURE OF WARRANTS

5.1           Call Rights of the Company.   If at any time prior to the expiration of this warrant the Company’s common stock reaches a Trading Price equal to or greater than 1.5x the Exercise Price then in effect for the Warrant Shares, the Company has the right but not the obligation, until the Expiration Date, to demand in writing the exercise of this warrant by issuing a Call Notice.  If such exercise would result in the Holders and their Affiliates owning more than 40% of the outstanding common stock of the Company, the Company has the right but not the obligation to suspend the Call Notice with respect to the number of warrants that would require the Holders and their Affiliates to exceed 40% ownership.  Such suspension will last as long as Holders and their Affiliates own up to 40% of the Company’s outstanding stock and may only be reactivated if the conditions in the first sentence of this Section 5.1 are met.  Upon delivery of a Call Notice to the Holder in written form, the Holder will have 10 days in which to exercise all or a portion of this warrant in accordance with Section 2.2.  Should the Holder not exercise in accordance with Section 2.2 within 10 days of receipt of the written Call Notice, then any unexercised portion of this warrant and all of its terms and provisions will be deemed to have expired immediately.

ARTICLE 6

COVENANTS OF THE COMPANY

The Company covenants and agrees that:

 

6.1           Reservation of Shares.  At all times, the Company will reserve and set apart and have, free from preemptive rights, a sufficient number of shares of authorized but unissued Common Stock or other securities, if applicable, to enable it at any time to fulfill all its obligations hereunder.

6.2           Adjustment of Par Value.  Before taking any action that would cause an adjustment reducing the Exercise Price per share below the then par value of the shares of Warrant Shares issuable upon exercise of this Warrant, the Company will take any corporate action that may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Warrant Shares at such adjusted price.

ARTICLE 7

LIMITATION OF LIABILITY

No provision of this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive dividends or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as stockholders of the Company.  In the absence of affirmative action by the Holder to purchase shares of Common Stock in accordance with the terms of this Warrant, no provision hereof shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

ARTICLE 8

MISCELLANEOUS

9.1           Governing Law.  The rights of the parties arising under this Warrant shall be construed and enforced under the laws of the State of Texas without giving effect to any choice of law or conflict of law rules.

9.2           Notices.  Any notice or other communication required or permitted to be given or delivered pursuant to this Warrant shall be in writing and shall be deemed effective as of the date of receipt if delivered personally or by facsimile transmission (if receipt is confirmed by the facsimile operator of the recipient), or delivered by overnight courier service or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address in the United States of America for a party as shall be specified by like notice; provided, however, that notices of change of address shall be effective only upon receipt thereof):

  

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(i)           to the Holder at the address set forth immediately below the Holder’s name on the signature pages to that certain Securities Purchase Agreement dated as of  August __, 2010 by and among the Company and the Purchaser named therein and to Drew R. Fuller, Jr., Hornberger Sheehan Fuller & Beiter Incorporated, 7373 Broadway, Suite 300, San Antonio, Texas  78209,  Facsimile Number:  (210) 271-1740.

(ii)           to the Company as follows:

Tootie Pie Company, Inc.

129 Industrial Dr.

Boerne, TX  78006

Facsimile Number:  830-816-6611

Attention:  Chief Executive Officer

9.3           Severability.  If any provision of this Warrant shall be held invalid, such invalidity shall not affect any other provision of this Warrant that can be given effect without the invalid provision, and to this end, the provisions hereof are separable.

9.4           Headings.  The headings in this Warrant are for reference purposes only and shall not affect in any way the meaning of interpretation of this Warrant.

9.5           Amendment.  This Warrant cannot be amended or modified except by a written agreement executed by the Company and the Holder.

9.6           Assignment.  This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns, except that no party may assign or transfer its rights or obligations under this Warrant except to the extent explicitly permitted herein.

9.7           Entire Agreement.  This Warrant, together with its attachments, contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by the officer named below.

 

Dated:  ______________, 2010.

TOOTIE PIE COMPANY, INC.

By:

 

Chief Executive Officer

  

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SUBSCRIPTION NOTICE

 

The undersigned, the Holder of a Common Stock Purchase Warrant issued by Tootie Pie Company, Inc., hereby elects to exercise purchase rights represented by such Warrant for, and to purchase thereunder, _______________ shares of the Common Stock covered by such Warrant and herewith makes payment in full therefor of ________________________ and requests that certificates for such shares (and any securities or the property issuable upon such exercise) be issued in the name of and delivered to _______________________________ whose address is ____________________________.

 

If said number of shares of Common Stock is less than the number of shares of Warrant Shares purchasable hereunder, the undersigned requests that a new Warrant representing the balance of the Warrant Shares be registered in the name of and issued and delivered to _________________whose address is_______________________________________________.

 

The undersigned hereby agrees to pay any transfer taxes on the transfer of all or any portion of the Warrant or Warrant Shares requested herein if the undersigned has requested stock certificate(s) to be registered in a name or names other than the name of the undersigned.

 

The undersigned agrees that, in the absence of an effective registration statement with respect to Common Stock issued upon this exercise, the undersigned is acquiring such Common Stock for investment and not with a view to distribution thereof and the certificate or certificates representing such Common Stock may bear a legend substantially as follows:  “The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred except as provided in Article 3 of the Warrant to purchase Common Stock of Tootie Pie Company, Inc., a copy of which is on file at the principal office of Tootie Pie Company, Inc.”

 

 

Signature guaranteed:

Dated:  _________________

  

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Exhibit B

Form of Class “B” Warrants

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS.  THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL OF THE ISSUER THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

 

TOOTIE PIE COMPANY, INC.

COMMON SHARE PURCHASE WARRANT

FOR VALUE RECEIVED, _________________ (the “Holder”), is entitled to purchase from Tootie Pie Company, Inc., a Nevada corporation (the “Company”), subject to the terms and conditions herein set forth, at any time before the Expiration Date, 2,100,000 shares of duly authorized, validly issued, fully paid and nonassessable shares of Common Stock of the Company, par value $0.001 per share (the “Warrant Shares”), subject to adjustment of the number or kind of shares constituting the Warrant Shares as hereinafter provided.  The Holder is entitled to purchase the Warrant Shares for $0.50 per share, subject to adjustment as hereinafter provided (the “Exercise Price”), and is entitled also to exercise the other appurtenant rights, powers, and privileges hereinafter set forth.  The Holder may also have certain rights and obligations as described in that certain Securities Purchase Agreement between the Holder and the Company dated August 26, 2010 with an effective date of August 1, 2010 (the “Purchase Agreement”).  The Company may lower the Exercise Price or extend the Expiration Day at its sole discretion.

 

ARTICLE 1

DEFINITIONS

For all purposes of this Warrant, unless the context otherwise requires, the following terms have the following meanings:

 

1.1           “Affiliate”  of any person or entity means any other person or entity directly or indirectly controlling, controlled by or under direct or indirect common control with such person or entity or any of its partners and shall be deemed to include, without limitation, with respect to a partner, (i) (A) any other partner of the entity,  (B) such partner’s spouse, lineal descendants, or step-children; (C) a trust or trusts created solely for the benefit of such partner or such partner’s spouse, lineal descendants or step-children, or (D) any business entities wholly owned by such partner, such partner’s spouse, lineal descendants or step-children or a by a trust or trusts created solely for the benefit of such partner or such partner’s spouse, lineal descendants or step-children; or (ii) to the extent that any partner is not a natural person, any partner, member or shareholder of such partner or to persons or entities related to any such partner, member or shareholder of a partner of the nature described in clause (i)(B), (C) or (D). The Company agrees that the provisions of clause (ii) of this Section 1.1 are intended to include spouses, lineal descendants, or trusts or entities for the benefit of Vincent M. Dawson and Berkley V. Dawson. For purposes of this definition, “control” means the power to direct the management and policies of such person or firm, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

 

1.2              “Call Notice” means a written demand by the Company for the exercise of this Warrant in accordance with Section 5.1

 

1.3           “Common Stock” means the Company’s authorized common stock, par value $0.001 per share.

  

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1.4           “Company” means Tootie Pie Company, Inc., a corporation organized and existing under the laws of the State of Nevada, and any successor Person.

1.5           “Exercise Price” means the exercise price for the Warrant Shares established in accordance with Article 4.

1.6           “Expiration Date” means the earlier of (a) (i) either December 31, 2012 or (ii) December 31, 2014 in the event of a “Debt Placement Event” described in Section 9(B) of the Purchase Agreement pursuant to which the Company acquires the shares of Common Stock issued to Holder under the terms of the Purchase Agreement, and (b) 10 days after a Call Notice is issued by the Company in accordance with Section 5.1.

1.7           “Holder” means the holder of record of this Warrant as shown in the Company’s register for such purpose as described in Section 2.7 hereof.

1.8           “Person” means any natural person, sole proprietorship, general partnership, limited partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, private or governmental entity, or other party.

1.9           “Publicly Traded” has the meaning ascribed in Section 1.10.

1.10           “Trading Price” means , in the event such stock is traded on a national securities exchange or in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System (stock being so traded or reported being referred to herein as “Publicly Traded”), the average closing bid and asked price of such stock on the five (5) trading days immediately preceding the date as of which such value is to be determined, and in the event the Common Stock is not Publicly Traded, the value of such stock on a going-concern basis, as determined by the Board of Directors of the Company in good faith or, in the Company’s discretion, by an appraiser mutually agreeable to the Holder and to the Company, the determination of such appraiser to be final in the absence of fraud or bad faith

1.11           “Warrant” means this Warrant and any warrants issued on or in substitution for this Warrant, including warrants issued in exchange for this Warrant pursuant to Article 2 hereof.

1.12           “Warrant Shares” means the shares of Common Stock or other securities acquired or to be acquired upon the exercise of the Warrant.

ARTICLE 2

EXERCISE OF WARRANT

2.1           Partial Exercise.  This Warrant may be exercised in whole or in part at any time prior to the Expiration Date.  In the event of a partial exercise, the Company shall execute and deliver to the Holder (or to such other Person as shall be designated in the Subscription Notice) a new Warrant covering the unexercised portion of the Warrant Shares.  In no event may the Warrant be exercised for less than 1,000 shares unless approved by the Company in its sole discretion or the remaining balance of shares on this Warrant is less than 1,000 shares and in that circumstance, the Warrant must be exercised for its total balance.

2.2           Procedure.  To exercise this Warrant, the Holder shall deliver to the Company at its principal office:

  

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(a)           a written notice, in substantially the form of the Subscription Notice appearing at the end of this Warrant, of the Holder’s election to exercise this Warrant;

(b)           a check payable to the Company in the amount of the Exercise Price; and

(c)           this Warrant.

The Company shall as promptly as practicable, and in any event within ten business days after receipt of such notice, execute and deliver or cause to be executed and delivered one or more certificates representing the aggregate number of shares of Warrant Shares to which the Holder is entitled and, if this Warrant is exercised in part, a new Warrant as set forth in Section 2.1.

 

2.3           Name and Effective Date.  The stock certificate(s) so delivered shall be issued in the name of the Holder or such other name as shall be designated in the notice specified in Section 2.2.  Such certificate(s) shall be deemed to have been issued and such Holder or any other Person so designated to be named therein shall be deemed for all purposes to have become a Holder of record of such shares as of the date the Company actually receives the notice and payment as specified in Section 2.2, subject to Article 3 hereof.

2.4           Expenses. The Company shall pay all expenses payable in connection with the preparation, issuance, and delivery of such stock certificate(s), except that the Holder shall pay any applicable stock transfer taxes.

2.5           Legal Requirements.  The Warrant Shares issued upon the exercise of this Warrant shall be validly issued, fully paid, and nonassessable.

2.6           No Fractional Shares.  The Company shall not issue a stock certificate representing any fraction of a share upon partial exercise by a Holder of such Holder’s rights hereunder.

2.7           Registration.  The Company will keep at its principal office a register that will provide for the registration and transfer of this Warrant.

ARTICLE 3

TRANSFER

3.1           Permitted Transfers.  This Warrant shall be freely transferable to any Affiliate of Holder as long as such transfer is consistent with state and federal law and Holder has received a legal opinion reasonably acceptable to the Company to that effect, but shall not be transferable to any other Person except with the written consent of the Company and subject to the limitations set forth in Section 3.2 hereof.

3.2.           Securities Laws.  Notwithstanding anything to the contrary in this Article 3, neither this Warrant nor the Warrant Shares shall be transferable unless:

(a)           either a registration statement under the Securities Act of 1933, as amended (the “Act”), is in effect covering this Warrant or the Warrant Shares, as the case may be, or the Company has received an opinion from Company counsel to the effect that such registration is not required; and

 

(b)           the transfer complies with any applicable state securities laws.

 

  

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The Warrant Shares will bear a legend describing the restrictions on transfer set forth in this Section 3.2.  By acceptance of this Warrant, the Holder represents and warrants to the Company that this Warrant is acquired for the Holder’s own account, for investment and not with a view to distribution within the meaning of the Act and the Holder agrees that the Holder will not offer, distribute, sell, transfer or otherwise dispose of this Warrant or the Warrant Shares except as set forth herein.

 

3.3           Procedure.  The Holder may, subject to the limitations set forth in Section 3.1 and Section 3.2, in person or by duly authorized attorney, surrender the same for exchange at the principal office of the Company and, within a reasonable time thereafter receive in exchange therefor one or more duly executed Warrants each evidencing the right to receive one share of Common Stock of the Company or such other number of shares as may be designated by the Holder at the time of surrender.

The Company and any agent of the Company may treat the Person in whose name a Warrant is registered as the owner of the Warrant for all purposes hereunder, and neither the Company nor such agent shall be affected by notice to the contrary except in connection with the permitted transfers described in Section 3.1 or as otherwise indicated in the notice specified in Section 2.2.  The Company covenants and agrees to take and cause to be taken all action necessary to effect such registrations, transfers and exchanges.

 

ARTICLE 4

EXERCISE PRICE AND ADJUSTMENTS

 

4.1           Exercise Price.  The Exercise Price for the Warrant Shares shall be $0.40 per share, subject to adjustment as described in this Article 4.

 

4.2           Stock Splits, Stock Dividends and Reverse Stock Splits.  If at any time the Company shall subdivide (by reclassification, by the issuance of a Common Stock dividend on Common Stock, or otherwise) its outstanding shares of Common Stock into a greater number, the number of shares of Common Stock that may be purchased hereunder shall be increased proportionately and the Exercise Price per share of Common Stock shall be decreased proportionately as of the effective date of such action.  The effective date of a stock dividend shall be the record date for such dividend.  Issuance of a Common Stock dividend shall be treated as a subdivision of the whole number of shares of Common Stock outstanding immediately before the record date for such dividend into a number of shares equal to such whole number of shares so outstanding plus the number of shares issued as a stock dividend.  If at any time the Company shall combine (by reclassification or otherwise) its outstanding number of shares of Common Stock into a lesser number, the number of shares of Common Stock that may be purchased hereunder shall be reduced proportionately and the Exercise Price per share of Common Stock shall be increased proportionately as of the effective date of such action.

4.3           Reorganization and Reclassification.  In case of any capital reorganization or any reclassification of the capital stock of the Company while this Warrant remains outstanding, the Holder of this Warrant shall thereafter be entitled to purchase pursuant to this Warrant (in lieu of the kind and number of shares of Common Stock comprising Warrant Shares that such Holder would have been entitled to purchase or acquire immediately before such reorganization or reclassification) the kind and number of shares of stock of any class or classes or other securities or property for or into which such shares of Common Stock would have been exchanged, converted or reclassified if the Warrant Shares had been purchased by the Holder immediately before such reorganization or reclassification.  In case of any such reorganization or reclassification, appropriate provision (as determined by resolution of the Board of Directors of the Company) shall be made with respect to the rights and interest thereafter of the Holder of this Warrant, to the end that all the provisions of this Warrant (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably practicable, in relation to such stock or other securities or property.

  

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ARTICLE 5

CALL  FEATURE OF WARRANTS

5.1           Call Rights of the Company.   If at any time prior to the expiration of this warrant the Company’s common stock reaches a Trading Price equal to or greater than 1.5x the Exercise Price then in effect for the Warrant Shares, the Company has the right but not the obligation, until the Expiration Date, to demand in writing the exercise of this warrant by issuing a Call Notice.  If such exercise would result in the Holders and their Affiliates owning more than 40% of the outstanding common stock of the Company, the Company has the right but not the obligation to suspend the Call Notice with respect to the number of warrants that would require the Holders and their Affiliates to exceed 40% ownership.  Such suspension will last as long as Holders and their Affiliates own up to 40% of the Company’s outstanding stock and may only be reactivated if the conditions in the first sentence of this Section 5.1 are met.  Upon delivery of a Call Notice to the Holder in written form, the Holder will have 10 days in which to exercise all or a portion of this warrant in accordance with Section 2.2.  Should the Holder not exercise in accordance with Section 2.2 within 10 days of receipt of the written Call Notice, then any unexercised portion of this warrant and all of its terms and provisions will be deemed to have expired immediately.

ARTICLE 6

COVENANTS OF THE COMPANY

The Company covenants and agrees that:

 

6.1           Reservation of Shares.  At all times, the Company will reserve and set apart and have, free from preemptive rights, a sufficient number of shares of authorized but unissued Common Stock or other securities, if applicable, to enable it at any time to fulfill all its obligations hereunder.

6.2           Adjustment of Par Value.  Before taking any action that would cause an adjustment reducing the Exercise Price per share below the then par value of the shares of Warrant Shares issuable upon exercise of this Warrant, the Company will take any corporate action that may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of such Warrant Shares at such adjusted price.

ARTICLE 7

LIMITATION OF LIABILITY

No provision of this Warrant shall be construed as conferring upon the Holder the right to vote or to consent or to receive dividends or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matter whatsoever as stockholders of the Company.  In the absence of affirmative action by the Holder to purchase shares of Common Stock in accordance with the terms of this Warrant, no provision hereof shall give rise to any liability of such Holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

ARTICLE 8

MISCELLANEOUS

9.1           Governing Law.  The rights of the parties arising under this Warrant shall be construed and enforced under the laws of the State of Texas without giving effect to any choice of law or conflict of law rules.

9.2           Notices.  Any notice or other communication required or permitted to be given or delivered pursuant to this Warrant shall be in writing and shall be deemed effective as of the date of receipt if delivered personally or by facsimile transmission (if receipt is confirmed by the facsimile operator of the recipient), or delivered by overnight courier service or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address in the United States of America for a party as shall be specified by like notice; provided, however, that notices of change of address shall be effective only upon receipt thereof):

  

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(i)           to the Holder at the address set forth immediately below the Holder’s name on the signature pages to that certain Securities Purchase Agreement dated as of  August __, 2010 by and among the Company and the Purchaser named therein and to Drew R. Fuller, Jr., Hornberger Sheehan Fuller & Beiter Incorporated, 7373 Broadway, Suite 300, San Antonio, Texas  78209,  Facsimile Number:  (210) 271-1740.

(ii)           to the Company as follows:

Tootie Pie Company, Inc.

129 Industrial Dr.

Boerne, TX  78006

Facsimile Number:  830-816-6611

Attention:  Chief Executive Officer

 

9.3           Severability.  If any provision of this Warrant shall be held invalid, such invalidity shall not affect any other provision of this Warrant that can be given effect without the invalid provision, and to this end, the provisions hereof are separable.

9.4           Headings.  The headings in this Warrant are for reference purposes only and shall not affect in any way the meaning of interpretation of this Warrant.

9.5           Amendment.  This Warrant cannot be amended or modified except by a written agreement executed by the Company and the Holder.

9.6           Assignment.  This Warrant shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns, except that no party may assign or transfer its rights or obligations under this Warrant except to the extent explicitly permitted herein.

9.7           Entire Agreement.  This Warrant, together with its attachments, contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained.

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by the officer named below.

 

Dated:  ______________, 2010.

TOOTIE PIE COMPANY, INC.

By:

 

Chief Executive Officer

 

  

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SUBSCRIPTION NOTICE

 

The undersigned, the Holder of a Common Stock Purchase Warrant issued by Tootie Pie Company, Inc., hereby elects to exercise purchase rights represented by such Warrant for, and to purchase thereunder, _______________ shares of the Common Stock covered by such Warrant and herewith makes payment in full therefor of ________________________ and requests that certificates for such shares (and any securities or the property issuable upon such exercise) be issued in the name of and delivered to _______________________________ whose address is ____________________________.

 

If said number of shares of Common Stock is less than the number of shares of Warrant Shares purchasable hereunder, the undersigned requests that a new Warrant representing the balance of the Warrant Shares be registered in the name of and issued and delivered to _________________whose address is_______________________________________________.

 

The undersigned hereby agrees to pay any transfer taxes on the transfer of all or any portion of the Warrant or Warrant Shares requested herein if the undersigned has requested stock certificate(s) to be registered in a name or names other than the name of the undersigned.

 

The undersigned agrees that, in the absence of an effective registration statement with respect to Common Stock issued upon this exercise, the undersigned is acquiring such Common Stock for investment and not with a view to distribution thereof and the certificate or certificates representing such Common Stock may bear a legend substantially as follows:  “The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended, and may not be transferred except as provided in Article 3 of the Warrant to purchase Common Stock of Tootie Pie Company, Inc., a copy of which is on file at the principal office of Tootie Pie Company, Inc.”

 

 

Signature guaranteed:

Dated:  _________________

27gfsh_ex10-1.htm

Exhibit 10.1

 

 

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this “Agreement”), effective as of August 8, 2010 (the “Effective Date”), is made by and between Genesis Fluid Solutions Holdings, Inc., a Delaware corporation (the “Company”), Genesis Fluid Solutions, Ltd., a Colorado corporation (“GFS”), and each of the individuals listed under the heading “Buyers” on the signature pages hereto (collectively, “Buyers”).

RECITALS

A. Company owns 1,000 shares of common stock, no par value (the “Shares”), of GFS, which Shares constitute, as of the date hereof, all of the issued and outstanding capital stock of GFS.

B. Buyers hold _______________ shares of common stock, par value $0.001 per share, of Company (the “Company Shares”), which constitutes all of the Company Shares owned by each Buyer as identified on the attached Schedule A, and each Buyer has agreed to transfer and convey to Company such shares for cancellation (the “Cancellation”).

C. Buyers also hold various options and warrants to purchase shares of Company stock as identified on the attached Schedule B (the “Options” and “Warrants”), and each Buyer has agreed for such Options and Warrants to be cancelled in the transaction in exchange for the consideration as provided herein.

D. Company, Michael Hodges (“Hodges”) and Sichenzia Ross Friedman Ference LLP (“Escrow Agent”) are parties to that certain Escrow Agreement dated as of October 30, 2009 (the “Escrow Agreement”) under which 1,300,000 shares of common stock, par value $0.001 per share (the “Escrowed Shares”), of Company (the “Common Stock”) have been deposited to be held or disposed of pursuant to the terms and provision of such Escrow Agreement. Hodges shall be considered a Buyer for the purposes of this Agreement in regard to the cancellation of the Escrowed Shares.

E. In connection with the Cancellation, Buyers wish to acquire from Company, and Company wishes to transfer to Buyers, the Shares, upon the terms and subject to the conditions set forth herein.

Accordingly, the parties hereto agree as follows:

1. Purchase and Sale of Stock.

(a) Purchased Shares. Subject to the terms and conditions provided below, Company shall sell and transfer to Buyers and Buyers shall purchase from Company, on the Closing Date (as defined in Section 1(c)), all of the Shares in such amounts as are set forth on Schedule C, annexed hereto.

(b) (A) Purchase Price. The purchase price for the Shares shall be: (i) the irrevocable transfer and delivery by Buyers to Company of the Company Shares, deliverable as provided in Section 2(b); and (ii) subject to Section 7(c)(i), below, the agreement by GFS, and its

  

  

  

successors and assigns, to a royalty (the “Royalty Payment”) by GFS to Company, beginning August 8, 2010, equal to six (6%) percent of any and all gross revenues derived from: (i) dewatering operations (not including gross revenues which are then paid to subcontractors), and (ii) from any sale, lease or licensing arrangement of the Rapid Dewatering System (“RDS”) and/or of the dewatering boxes, of GFS and its affiliated entities (including their respective successors and assigns) (the “Gross Revenues”) until the Company shall have received $4,000,000; and a royalty of three (3%) of Gross Revenues thereafter; provided that the cumulative royalty to be paid by GFS to Seller under this Agreement shall not exceed the sum of Fifteen Million Dollars ($15,000,000), upon which time the Royalty Payment shall terminate. The Royalty payment shall begin to accrue from August 8, 2010, and subject to Section 7(c)(i), below, the first Royalty Payment shall be made on January 1, 2011, or as soon as administratively feasible within a reasonable time thereafter, not to exceed ten (10) days. Subsequent Royalty Payments required by this section shall, subject to Section 7(c)(i), below, be paid to the Company within thirty (30) days following the end of each calendar quarter, together with a report in sufficient detail to permit Company to determine the method and accuracy of all computations. All Royalty Payments shall be made in immediately available funds by wire transfer to the account designated for such purpose by Company, or by check.

(B) Option and Warrant Holders. Holders of Options and Warrants shall have those Options and Warrants cancelled upon closing and shall be issued substitute options or warrants upon or within a reasonable time after closing to purchase shares of GFS (“GFS Options” or “GFS Warrants” as the case may be) in proportion to the Options or Warrants held prior to closing. GFS shall have sole responsibility for the issuance and administration of all such option awards or warrants, and shall indemnify and hold Company harmless in regard to any Losses (as defined in Section 6(a) below) concerning the GFS Options or GFS Warrants. Any person receiving GFS Options or GFS Warrants in accordance with this paragraph hereby releases Company, its successors and assigns, from any claim, liability or obligation related to the GFS Options or GFS Warrants.

(C) Escrow Agreement Amendment. Hodges Escrowed Shares shall be redeemed and cancelled in exchange for Shares to be issued to Hodges individually and free of escrow, liens, or encumbrances, as provided in Section 1 (a) and (b), and as provided on the attached Schedule C. In consideration thereof, Hodges and GFS hereby release any and all claims in and to the Escrowed Shares (as defined in the Escrow Agreement), and the Company and Hodges and GFS agree that the disposition of the Escrowed Shares (including, without limitation, any Escrowed Cash (as defined in the Escrow Agreement)) shall be in the sole discretion of the Company. Hodges and GFS hereby forever release and disclaim any and all claims to the Escrowed Amount (as defined in the Escrow Agreement), and forever release and discharge the Escrow Agent (as defined in the Escrow Agreement) from any and all obligations to Hodges, GFS, his or their affiliates, successors and assigns. Escrow Agent shall hereafter be entitled and shall follow the sole instructions of Company provided to Escrow Agent in writing signed by the Chief Executive Officer or Chief Financial Officer of Company, in connection with any and all dispositions of the Escrowed Amount. Company, Hodges and GFS further acknowledge that Section 2(b) – (d), 3, 4, 5, 6, 7, 8, 9(a), and 11 of the Escrow Agreement are hereby deleted and of no further force and effect. Further, GFS shall be responsible, and shall indemnify and hold Company harmless, for any additional taxes, including penalties and interest,

  

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that may arise after the date of this agreement for activities of GFS prior to the merger with Company on October 30, 2009.

(c) Closing. The closing of the transactions contemplated in this Agreement (the “Closing”) are subject to following conditions (the “Closing Conditions”) being met (which closing conditions, except for condition (ii), below, may be waived solely by the Company):

(i) The receipt by Company of the certificates representing the Company Shares, Options, Warrants, and Escrowed Shares issued to the Buyers;

(ii) approval by the Board of Directors of the Company of this Agreement and the Closing.

The Closing shall take place at the offices of Lane Allen & Horst, LLC, Two Miranova Place, Suite 500, Columbus, Ohio 43215-7052 at 10:00 a.m. (C.S.T) on or before August 31, 2010 (the "Closing Date") or at such other date, time or location as may be mutually agreed upon in writing by the parties. All proceedings to be taken and all documents to be executed at the Closing, including this Agreement, shall be deemed to have been taken, delivered and executed simultaneously, and no proceeding shall be deemed taken nor documents deemed executed or delivered until all have been taken, delivered and executed. Except as otherwise provided in Section 7, hereof and the corresponding schedules thereto, any income or financing moneys received by GFS, and any expenses or debt incurred by GFS, on or after August 8, 2010, prior to Closing shall inure to and be the sole responsibility of GFS and not the Company, subject to accrual of the Royalty Payment as provided in Section 1(b), above. Any deposits previously received by GFS or received by GFS after August 8, 2010, for dewatering services to be provided after August 8, 2010, shall be the sole responsibility of GFS.

(d) Additional Actions. If at any time after the Closing, the parties shall consider or be advised that any assignments, or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Company or Buyers their right, title or interest in, to or under the Company Shares or Shares or otherwise carry out this Agreement, the officers and directors of the Company and GFS shall be authorized to execute and deliver, in the name and on behalf of the Company and GFS, all such assignments and to take and do, in the name and on behalf of the Company and GFS, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to or otherwise to carry out this Agreement.

2. Closing.

(a) Transfer of Shares. At the Closing, Company shall deliver to Buyers certificates representing the Shares, duly endorsed to Buyers or as directed by Buyers as set forth on Schedule C, which delivery shall vest Buyers with good and marketable title to all of the issued and outstanding shares of capital stock of GFS, free and clear of all liens and encumbrances.

(b) Payment of Purchase Price. At the Closing, each of the Buyers shall deliver to Company a certificate or certificates representing the Company Shares as set forth on Schedule A duly endorsed to Company, which delivery shall vest Company with good and marketable title

  

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to the Company Shares to be cancelled, free and clear of all liens and encumbrances. The Buyers hereby release any and all claims in and to the Company Shares. The secretary of the Company is hereby appointed with full power of attorney to record on the transfer books of the Company the transfer and cancellation of the Company Shares delivered to Company, at the Closing.

(c) Options and Warrants. At the Closing, the Options and Warrants held by Buyers as set forth in Schedule B shall be cancelled.

(d) At the Closing, each party to this Agreement shall deliver a copy of this Agreement executed by such person;

(e) At the Closing, letters of resignation of Michael Hodges from all positions he holds with the Company effective upon the Closing shall be delivered to the Company.

3. Representations and Warranties of Company. Company represents and warrants to Buyers as of the date hereof as follows:

(a) Corporate Authorization; Enforceability. The execution, delivery and performance by Company of this Agreement is within its corporate powers and has been duly authorized by all necessary corporate action on the part of Company, including authorization by its full Board of Directors. This Agreement has been duly executed and delivered by Company and constitutes the valid and binding obligation of Company, enforceable against Company in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.

(b) Governmental Authorization. The execution, delivery and performance by Company of this Agreement requires no consent, approval, Order, authorization or action by or in respect of, or filing with, any Governmental Authority.

(c) Non-Contravention; Consents. The execution, delivery and performance by Company of this Agreement and the consummation of the transactions contemplated hereby do not (i) violate the certificate of incorporation or bylaws of Company or (ii) violate any applicable Law or Order.

(d) Capitalization. As of the date hereof, Company owns the Shares, which shares represent 100% of the authorized, issued and outstanding capital stock of GFS. The Shares are duly authorized, validly issued, fully-paid, non-assessable and free and clear of any Liens.

(e) GFS Assets. Upon Closing, the assets of GFS shall consist of (i) all assets originally held by GFS (except for cash and cash equivalents) upon becoming a wholly owned subsidiary of the Company on October 30, 2009 (the “Purchase Date”), including without limitation all materials, inventory, buildings, machinery, equipment, furniture, fixtures, electronic media, insurance, patents and intellectual property (including those assigned to GFS by Michael Hodges and Larry Campbell on August 16, 2009, and September 30, 2009, and/or achieved or protected thereafter), and (ii) all assets acquired by GFS since October 30, 2009,

  

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through date of Closing. Company makes no representation or warranty concerning the condition or location of such assets, all of which are solely on an as is-where-is basis without any warranty or fitness or otherwise or assurance from Company, and subject to normal wear and tear, damage or waste since the Purchase Date.

(f) Liabilities. Company has not incurred or caused GFS to incur any liabilities or obligations (absolute, accrued, contingent or otherwise) except: (i) liabilities which are reflected as assumed by GFS in Section 7(a), of this Agreement; and (ii) liabilities incurred in the ordinary course of business and consistent with past practice since October 30, 2009.

(g) Company represents and warrants that the Company has taken or will take all actions necessary to consummate the transaction as described in this Agreement, which transaction and actions shall not be in violation of applicable SEC rules and regulations.

(h) Brokers and Finders. No agent, broker, investment banker, person, or firm acting on behalf of the Company is or will be entitled to a financial advisory fee, brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated hereby.

4. Representations and Warranties of Buyers. Buyers, jointly and severally, represent and warrant to Company as of the date hereof as follows:

(a) Enforceability. The execution, delivery and performance by Buyers of this Agreement and all other and all other agreements and instruments to be entered into in connection with this Agreement are within Buyers’ powers and authority, no other consent or joinder of any other person is required to consummate the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by Buyers and constitutes the valid and binding obligation of Buyers, enforceable against Buyers in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles.

(b) Governmental Authorization. Subject to Section 3(g), hereof the execution, delivery and performance by Buyers of this Agreement require no consent, approval, order, authorization or action by or in respect of, or filing with, any Governmental Authority.

(c) Non-Contravention. Subject to Section 3(g), hereof, the execution, delivery and performance by Buyers of this Agreement, and the consummation of the transactions contemplated hereby do not violate any applicable Law or Order.

(d) Purchase for Investment. Buyers are financially able to bear the economic risks of acquiring an interest in GFS and the other transactions contemplated hereby, and have no need for liquidity in this investment. Buyers have such knowledge and experience in financial and business matters in general, and with respect to businesses of a nature similar to the business of GFS, so as to be capable of evaluating the merits and risks of, and making an informed business decision with regard to, the acquisition of the Shares. Buyers are acquiring the Shares solely for their own account and not with a view to or for resale in connection with any distribution or public offering thereof, within the meaning of any applicable securities laws and

  

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regulations, unless such distribution or offering is registered under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration is available. Buyers have (i) received all the information they have deemed necessary to make an informed investment decision with respect to the acquisition of the Shares, (ii) had an opportunity to make such investigation as they have desired pertaining to GFS and the acquisition of an interest therein, and to verify the information which is, and has been, made available to them and (iii) had the opportunity to ask questions of Hodges concerning GFS. Buyers have received no public solicitation or advertisement with respect to the offer or sale of the Shares. With respect to the foregoing, Buyers represent and warrant that they have relied exclusively on Hodges, in his capacity as an officer of GFS and not as a representative of Company, for information concerning GFS and that Company has not provided and is not providing any information to Buyers with respect to business or affairs of GFS, nor its financial condition or prospects. Buyers agree to indemnify and hold harmless Company with respect to any breaches of any representations or warranties, or information provided to Buyers, concerning GFS, by Hodges or any other person. Except as specifically provided in Section 3(g), hereof, Buyers acknowledge that there has been no solicitation by Company, or any of its affiliates, officers, directors, employees, stockholders or agents or assigns, of Buyers in connection with the execution and delivery of this Agreement or the matters contemplated hereunder.

Buyers realize that the Shares are “restricted securities” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act, the resale of the Shares is restricted by federal and state securities laws and, accordingly, the Shares must be held indefinitely unless their resale is subsequently registered under the Securities Act or an exemption from such registration is available for their resale. Buyers understand that any resale of the Shares by them must be registered under the Securities Act (and any applicable state securities law) or be effected in circumstances that, in the opinion of counsel for GFS at the time, create an exemption or otherwise do not require registration under the Securities Act (or applicable state securities laws). Buyers acknowledge and consent that certificates now or hereafter issued for the Shares will bear a legend substantially as follows:

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES LAWS.

  

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Buyers understand that the Shares are being sold to them pursuant to the exemption from registration contained in Section 4(2) of the Securities Act and that Company is relying upon the representations made herein as one of the bases for claiming the Section 4(2) exemption.

(e) Ownership of Company Shares. The Buyers are the sole owners, beneficially and of record, of the Company Shares. The Company Shares are duly authorized, validly issued, fully paid and non-assessable. The Company Shares have not been pledged, mortgaged or otherwise encumbered in any way and there is no lien, mortgage, charge, claim, liability, security interest or encumbrance of any nature against the Company Shares. There are no options, warrants, rights of subscription or conversion, calls, commitments, agreements, arrangements, understandings, plans, contracts, proxies, voting trusts, voting agreements or instruments of any kind or character, oral or written, to which the Buyers are a party, or by which the Buyers are bound, relating to the issuance, voting or sale of the Company Shares or of any securities representing the right to purchase or otherwise receive Company Shares. There are no stockholders agreements, preemptive rights or other agreements, arrangements, groups, commitments or understandings, oral or written, that have not been disclosed to the Company, relating to the voting, issuance, acquisition or disposition of Company Shares. The Buyers have, and at the Closing shall have, good and marketable title to the Company Shares and full right to transfer title to the Company Shares, subject to any restrictions imposed by state or federal securities laws, free and clear of all liens, mortgages, charges, liabilities, claims, security interests or encumbrances of every type whatsoever. The sale, conveyance, transfer and delivery of the Company Shares by the Buyers to the Company pursuant to this Agreement will transfer full legal and equitable right, title and interest in the Company Shares, free and clear of all liens, mortgages, charges, claims, liabilities, security interests and encumbrances of any nature whatsoever.

(f) No Finder’s Fee. The Buyers have not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the this Agreement.

(g) Securities Law Restrictions. Buyers acknowledge that they are aware the federal securities laws restrict parties in possession of material non-public information to refrain from all transactions in the securities of such GFS until public announcement of such material non-public information. Accordingly, Buyers, on their own behalf and on behalf of their affiliates and others who will have knowledge of the terms of this Agreement, shall refrain from affecting any transactions in securities of Company.

5. Royalty Payment Report and Audit Right. GFS shall deliver to the Company at the time each Royalty payment is due, a reasonably detailed report signed by a duly authorized officer of GFS indicating GFS’s Gross Revenues for the prior period(s) in which any payment is due (even if no payment is then due) and a computation of the amount of such Royalty Payment. Such statement shall be furnished to the Company whether or not a Royalty Payment is payable hereunder for said period or whether GFS had any gross revenue during the period in which such statement is due. GFS shall prepare and maintain, in such manner as will allow its accountants to audit same, complete and accurate books of account and records (specifically including without limitation the originals or copies of documents supporting entries in the books of

  

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account) in which accurate entries will be made covering all transactions and detailing all Gross Revenue received by GFS and its affiliated entities (including their respective successors and assigns). The Company and its duly authorized representatives shall have the right during regular business hours and upon seven (7) business days advance notice, to audit said books of account and records and examine all other documents and material in the possession or under the control of GFS and its affiliated entities (including their respective successors and assigns) as is reasonably necessary with respect to the Gross Revenue of GFS and its affiliated entities (including their respective successors and assigns), including, without limitation, invoices, credits and shipping documents, and to make copies of any and all of the above. All such books of account, records, documents and materials shall be kept available by GFS for at least two (2) years after the end of the period to which they relate. If, as a result of any audit conducted by the Company, it is shown that GFS's payments were less than the amount which should have been paid by an amount equal to 1% or more of the payments actually made with respect to gross revenues occurring during the period in question, GFS shall reimburse Company for the cost of such audit and shall make all payments required to be made (along with accrued interest at the Prime Rate as published in the Wall Street Journal) to eliminate any discrepancy revealed by said audit within ten (10) days after the Company’s demand therefore.

6. Indemnification and Release.

(a) Indemnification of the Company. Subject to Section 7(c), below, GFS (the “Indemnitor”) covenants and agrees to indemnify, defend, protect and hold harmless Company, and its officers, directors, employees, stockholders, agents, representatives and affiliates (collectively, together with Company, the “Company Indemnified Parties”) at all times from and after the Effective Date from and against all losses, liabilities, damages, claims, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys’ fees and expenses of investigation), whether or not involving a third party claim (collectively, “Losses”), incurred by any Company Indemnified Party as a result of or arising from (excepting from the following those claims and liabilities assumed by Company which are identified in Section 7(b), of this Agreement): (i) any breach of the representations and warranties of GFS or Buyers set forth herein or in certificates delivered in connection herewith, (ii) any breach or nonfulfillment of any covenant or agreement on the part of Buyers or GFS under this Agreement, (iii) any debt, liability or obligation of GFS or Buyers, whether incurred or arising prior to the date hereof or after, and (iv) the conduct and operations of the business of GFS whether before or after the Closing.

(b) Third Party Claims.

(i) If any claim or liability (a “Third-Party Claim”) should be asserted against any of the Company Indemnified Parties (the “Indemnitee”) by a third party after the Closing for which the Indemnitor has an indemnification obligation under the terms of Section 6(a), then the Indemnitee shall notify GFS within 10 days after the Third-Party Claim is asserted by a third party (said notification being referred to as a “Claim Notice”) and give the Indemnitor a reasonable opportunity to take part in any examination of the books and records of the Indemnitee relating to such Third-Party Claim and to assume the defense of such Third-Party Claim and in connection therewith and to conduct any proceedings or negotiations relating thereto and necessary or appropriate to defend the Indemnitee and/or settle the Third-Party

  

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Claim. The expenses (including reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits or settlements with respect to any Third-Party Claim shall be borne by the Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, through counsel reasonably satisfactory to Indemnitee, then the Indemnitor shall be entitled to control the conduct of such defense, and shall be responsible for any reasonable expenses of the Indemnitee in connection with the defense of such Third-Party Claim so long as the Indemnitor continues such defense until the final resolution of such Third-Party Claim. The Indemnitor shall be responsible for paying all settlements made or judgments entered with respect to any Third-Party Claim the defense of which has been assumed by the Indemnitor. Except as provided in this sentence and in subsection (ii) below, both the Indemnitor and the Indemnitee must approve any settlement of a Third-Party Claim, provided however, in the event that Indemnitor has assumed the defense of such Third-Party Claim and is solely liable for any for the payment and performance of any settlement then only the Indemnitor must approve any settlement of a Third-Party Claim. A failure by the Indemnitee to timely give the Claim Notice shall not excuse Indemnitor from any indemnification liability except only to the extent that the Indemnitor is materially and adversely prejudiced by such failure.

(ii) If the Indemnitor shall not agree to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, or shall fail to continue such defense until the final resolution of such Third-Party Claim, then the Indemnitee may defend against such Third-Party Claim in such manner as it may deem appropriate and the Indemnitee may settle such Third-Party Claim, in its sole discretion, on such terms as it may deem appropriate. The Indemnitor shall promptly reimburse the Indemnitee for the amount of all settlement payments and reasonable expenses, legal and otherwise, incurred by the Indemnitee in connection with the defense or settlement of such Third-Party Claim. If no settlement of such Third-Party Claim is made, then the Indemnitor shall satisfy any judgment rendered with respect to such Third-Party Claim before the Indemnitee is required to do so, and pay all reasonable expenses, legal or otherwise, incurred by the Indemnitee in the defense against such Third-Party Claim.

(c) Non-Third-Party Claims. Upon discovery of any claim for which the Indemnitor has an indemnification obligation under the terms of this Section 6 which does not involve a claim by a third party against the Indemnitee, the Indemnitee shall give prompt notice to GFS of such claim and, in any case, shall give GFS such notice within 20 days of such discovery. A failure by Indemnitee to timely give the foregoing notice to GFS shall not excuse Indemnitors from any indemnification liability except to the extent that Indemnitors are materially and adversely prejudiced by such failure.

(d) Indemnification of Buyers and GFS. Subject to Section 7(c), below, the Company covenants and agrees to indemnify, defend, protect and hold harmless Buyers and GFS, and its officers, directors, employees, stockholders, agents, representatives and affiliates (collectively, together with GFS, the “GFS Indemnified Parties”) at all times from and after the Effective Date from and against all losses, liabilities, damages, claims, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys’ fees and expenses of investigation), whether or not involving a third party claim of any GFS Indemnified Party (collectively, “GFS Losses”),

  

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incurred by any GFS Indemnified Party as a result of or arising from (excepting from the following those claims and liabilities assumed by GFS which are identified in Section 7(a), of this Agreement): (i) any breach of the representations and warranties of Company set forth herein or in certificates delivered in connection herewith (ii) any breach or nonfulfillment of any covenant or agreement on the part of Company under this Agreement, (iii) any debt, liability or obligation of Company unrelated to the business of GFS, whether incurred or arising prior to the date hereof or after, (iv) any claims against Company other than those related to the conduct and operations of the business of GFS.

(e) GFS Third Party Claims.

(i) If any claim or liability (a “GFS Third-Party Claim”) should be asserted against any of GFS Indemnified Parties (the “GFS Indemnitee”) by a third party after the Closing for which the Company has an indemnification obligation under the terms of Section 6(d), then GFS Indemnitee shall notify the Company within 10 days after GFS Third-Party Claim is asserted by a third party (said notification being referred to as a “Company Claim Notice”) and give the Company a reasonable opportunity to take part in any examination of the books and records of GFS Indemnitee relating to such Third-Party Claim and to assume the defense of such GFS Third-Party Claim and in connection therewith and to conduct any proceedings or negotiations relating thereto and necessary or appropriate to defend GFS Indemnitee and/or settle GFS Third-Party Claim. The expenses (including reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits or settlements with respect to any GFS Third-Party Claim shall be borne by the Company. If the Company agrees to assume the defense of any GFS Third-Party Claim in writing within 20 days after the Company Claim Notice of such GFS Third-Party Claim has been delivered, through counsel reasonably satisfactory to GFS Indemnitee, then the Company shall be entitled to control the conduct of such defense, and shall be responsible for any reasonable expenses of GFS Indemnitee in connection with the defense of such GFS Third-Party Claim so long as the Company continues such defense until the final resolution of such GFS Third-Party Claim. The Company shall be responsible for paying all settlements made or judgments entered with respect to any GFS Third-Party Claim the defense of which has been assumed by the Company. Except as provided in this Section and in subsection (ii) below, both the Company and the GFS Indemnitee must approve any settlement of a GFS Third-Party Claim, provided however, in the event that Company has assumed the defense of such Third-Party Claim and is solely liable for any for the payment and performance of any settlement then only the Company must approve any settlement of a GFS Third-Party Claim. A failure by GFS Indemnitee to timely give the Company Claim Notice shall not excuse Company from any indemnification liability except only to the extent that the Company is materially and adversely prejudiced by such failure.

(ii) If the Company shall not agree to assume the defense of any GFS Third-Party Claim in writing within 20 days after the Company Claim Notice of such GFS Third-Party Claim has been delivered, or shall fail to continue such defense until the final resolution of such GFS Third-Party Claim, then GFS may defend against such GFS Third-Party Claim in such manner as it may deem appropriate and GFS may settle such GFS Third-Party Claim, in its sole discretion, on such terms as it may deem appropriate. The Company shall promptly reimburse GFS Indemnitee for the amount of all settlement payments and reasonable expenses, legal and otherwise, incurred by GFS Indemnitee in connection with the defense or

  

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settlement of such GFS Third-Party Claim. If no settlement of such GFS Third-Party Claim is made, then the Company shall satisfy any judgment rendered with respect to such GFS Third-Party Claim before the Company is required to do so, and pay all reasonable expenses, legal or otherwise, incurred by the Company in the defense against such GFS Third-Party Claim.

(f) GFS Non-Third-Party Claims. Upon discovery of any claim for which the Company has an indemnification obligation under the terms of this Section 6, which does not involve a claim by a third party against GFS Indemnitee, GFS Indemnitee shall give prompt notice to the Company of such claim and, in any case, shall give the Company such notice within 20 days of such discovery. A failure by GFS Indemnitee to timely give the foregoing notice to the Company shall not excuse Company from any indemnification liability except to the extent that GFS Indemnitors are materially and adversely prejudiced by such failure.

(g) GFS Release. Subject to Section 7(c), below, GFS and Buyers, on behalf of themselves and their Related Parties, hereby release and forever discharge Company and its individual, joint or mutual, past and present representatives, Affiliates, officers, directors, employees, agents, attorneys, stockholders, controlling persons, subsidiaries, successors and assigns (individually, a “Company Releasee” and collectively, “ Company Releasees”) from any and all claims, demands, proceedings, causes of action, orders, obligations, contracts, agreements, debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, both at law and in equity, which GFS and/or Buyers or any of the Buyer Related Parties now have or have ever had against any Company Releasee, provided, however, that notwithstanding anything herein to the contrary, such release shall not be deemed to include any claims that may be asserted by any third parties other than GFS, Buyers, or any of their Related Parties. Subject to Section 7(c), GFS and Buyers hereby irrevocably covenant to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any proceeding of any kind against any Company Releasee, based upon any matter released hereby. “Buyer Related Parties” shall mean, with respect to Buyers, (i) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with Buyers, (ii) any Person in which Buyers hold a Material Interest or (iii) any Person with respect to which any Buyer serves as a general partner or a trustee (or in a similar capacity). Notwithstanding anything to the contrary herein, this release shall not release GFS and the Buyer from any obligations or agreements contained in this Agreement.

(h) Company Release. Subject to Section 7(c), below, the Company, on behalf of itself and its Related Parties, hereby releases and forever discharges Buyers and GFS and its individual, joint or mutual, past and present representatives, Affiliates, officers, directors, employees, agents, attorneys, stockholders, controlling persons, subsidiaries, successors and assigns (individually, a “GFS Releasee” and collectively, “GFS Releasees”) from any and all claims, demands, proceedings, causes of action, orders, obligations, contracts, agreements, debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, both at law and in equity, which the Company or any of the Company Related Parties now have or have ever had against any GFS Releasee, provided, however, that notwithstanding anything herein to the contrary, such release shall not be deemed to include any claims that may be asserted by any third parties other than the Company or any of its Related Parties. Subject to Section 7(c), Company hereby irrevocably covenants to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any proceeding of any kind

  

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against any GFS Releasee, based upon any matter released hereby. “Company Related Parties” shall mean, with respect to Company, (i) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with Company, and (ii) any Person which holds an interest in Company. Notwithstanding anything to the contrary herein, this release shall not release the Company from any obligations or agreements contained in this Agreement.

7. Assumption of Liabilities.

(a) Liabilities assumed by GFS. GFS hereby acknowledges it is solely liable for and agrees to pay for the liabilities identified on the attached Schedule D, including legal/defense costs and costs of settlement of the same.

(b) Liabilities Assumed by the Company. The Company hereby agrees to be solely liable for and pay for the following liabilities identified on the attached Schedule E, including legal/defense costs and costs of settlement of the same.

(c) Outstanding Liabilities. GFS and Company acknowledge potential conflict and dispute between them related to potential claims and/or liabilities arising from (i) claims of Eagle North America, Inc. (n/k/a Press Rentals, Inc.) under the settlement agreement in United States District Court Case No. C08, 02060 RMW, Eagle North America, Inc., v. Genesis Fluid Solutions, LTD, et al., (ii) claims of Michael Whaley against the Company and/or GFS in District Court (Denver) Case No. 10CV4098, and/or (iii) possible claims of Martin Hedley against the Company and/or GFS. The provisions of Section 6, including without limitation the division of liability, indemnification, and releases therein, shall not be applicable to such claims, and, notwithstanding the other provisions of this Agreement, the parties hereto hereby retain all rights, recourse, causes of action, and defenses related to such claims, including against each other, unless specifically agreed to in a separate agreement signed by such parties to this Agreement to which the claims apply. GFS and Company agree to make best efforts in good faith to resolve such claims before, at, or as soon as reasonably possible after Closing. To that end, as of the date of this Agreement, the parties have agreed in part to some of these items as follows;

(i) Claims of Michael Whaley. To the extent provided below, Company and GFS agree to satisfy any liability, judgment, or settlement resulting from the aforementioned as follows:

(A) As to Company: Company agrees to satisfy any resulting liability, judgment, or settlement to Michael Whaley up to an amount of $62,500, to be payable from and as an offset against the Royalty Payment to be paid by GFS to Company under Section 1(b), of this Agreement.

(B) As to GFS: GFS agrees to pay Michael Whaley to satisfy any resulting liability, judgment, or settlement, a proportionate amount of shares of GFS in connection with the transaction contemplated

  

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herein to adequately reflect Mr. Whaley's equity position in GFS as if he had received shares of Company pursuant to a severance agreement dated September 17, 2009.

(C) The foregoing paragraphs A and B, may be amended or superseded only by an instrument in writing signed by both Company and GFS. GFS and Company shall bear their own legal costs in connection with such items. Company and GFS shall only be bound as set forth in paragraphs (A) and (B), above, and to the extent there are liabilities in excess of the commitments of GFS and Company, the provisions of paragraph (c), of this Section 7, shall continue to apply.

8. Conditions and Obligations of Company.

Each and every obligation of the Company to consummate the transactions contemplated by this Agreement or to be performed on or before the Closing shall be subject to satisfaction, on or before the Closing, of each of the following conditions, unless waived in writing by the Company:

(a) Representations and Warranties True. The representations and warranties of the Buyers contained herein shall be in all material respects true and accurate as of the date when made and as of the Closing as though such representations and warranties were made at and as of such date, except for changes expressly permitted or contemplated by the terms of this Agreement, except to the extent such representations and warranties speak of an earlier date (in which case, as of such date).

(b) Performance. Buyer shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by Buyers on or prior to the Closing.

(c) No Proceeding. No Proceeding shall have been instituted seeking to enjoin, restrain or prohibit the consummation of, or having the effect of making illegal or otherwise prohibiting, the transactions contemplated by this Agreement.

(d) Certificates. Buyers shall have furnished the Company with such certificates to evidence compliance with the conditions set forth in this Article 8 as may be reasonably requested by the Company, including a certificate to the effect that the conditions set forth in Section 8(a) and Section 8(b) have been met.

(e) Governmental Consents, Approvals and Waivers. Any consents, permits, approvals and waivers of any Governmental Authority required in order for the parties to complete the transactions contemplated hereby shall have been obtained.

(f) Deliveries. The deliveries specified in Section 2 shall have been made by the Buyers.

9. Conditions to Obligations of Buyers.

  

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Each and every obligation of Buyers to consummate the transactions contemplated by this Agreement or to be performed on or before the Closing shall be subject to the satisfaction, on or before the Closing, of each of the following conditions, unless waived in writing by Buyers:

(a) Representations and Warranties True. The representations and warranties of the Company contained herein shall be in all material respects true and accurate as of the date when made and at and as of the Closing Date as though such representations and warranties were made at and as of such date, except for changes expressly permitted or contemplated by the terms of this Agreement, except to the extent such representations and warranties speak of an earlier date (in which case, as of such date).

(b) Performance. The Company shall have performed and complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing.

(c) No Proceeding. No Proceeding shall have been instituted or threatened seeking to enjoin, restrain or prohibit the consummation of, or having the effect of making illegal or otherwise prohibiting, the transactions contemplated by this Agreement.

(d) Receipt of Third Party Consents. The Company shall have obtained all material required consents, permits, waivers or other approvals of, or have given any required notice to, any such third parties.

(e) Governmental Consents, Approvals and Waivers. The Company shall have received any consents, permits, approvals and waivers of any Governmental Authority required in order for it to complete the transactions contemplated hereby.

(f) Certificates. The Company shall have furnished Buyers with such certificates to evidence compliance with the conditions set forth in this Article 9 as may be reasonably requested by Buyers, including a certificate to the effect that the conditions set forth in Section 9(a) and Section 9(b) have been met.

(g) Deliveries. The deliveries specified in Section 2 shall have been made by the Company.

10. Survival of Representations and Warranties. All representations and warranties made by the Company or the Buyers in this Agreement, including without limitation all representations and warranties made in any Exhibit or Schedule hereto or certificate delivered hereunder, shall survive the Closing until the first anniversary of the Closing Date (the "Survival Date").

11. Covenants.

A. The Company hereby covenants and warrants as follows:

(a) Further Assurances. The Company hereby agrees that, from time to time at the reasonable request of the other party and without further consideration, they shall execute

  

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and deliver such additional instruments and take such other action as the other may reasonably require to convey, assign, transfer and deliver the Company Shares and Shares and otherwise to carry out the terms of this Agreement.

(b) Access to the Corporation: Confidentiality.

(i) Subsequent to the date hereof and prior to the Closing Date, the Company will continue to give to the Buyers, their counsel, accountants, and other representatives, full and free access to all properties, books, contracts, commitments and records of the Company and GFS so that the Buyers may have full opportunity to make such investigation as they shall desire.

(ii) From and after the date of this Agreement until the Closing or the termination of this Agreement, the Company and their representatives will maintain the confidentiality of all documents and information of a confidential nature disclosed by GFS and Buyers in the course of their negotiations and the Company’s due diligence review and will in no event use any confidential information for any purpose other than for the evaluation of the transactions contemplated herein and in the event of termination of this Agreement will destroy all copies of documentation which each party may have delivered to the other party and will not use any confidential information from the Buyers for their own benefit.

(c) Conduct of Business Pending Closing. From the date of this Agreement to the Closing Date, except as expressly disclosed, the Company shall conduct its operations as engaged in at the date of this Agreement according to its ordinary course of business, shall maintain its records and books of account in a manner that fairly and currently reflects its financial condition and results of operations and shall not engage in any transactions other than as contemplated by this Agreement.

(d) Closing Documents. The Company shall execute and deliver all instruments and documents required as a condition precedent to the Closing and take all action required to carry out the terms of this Agreement and to consummate the transactions contemplated hereby.

B. The Buyers hereby covenant and warrant as follows:

(a) Closing Documents. The Buyers shall execute and deliver all instruments and documents required as a condition precedent to Closing and take all actions required to carry out the terms of this Agreement and to consummate the transactions contemplated hereby.

(b) Noninterference. The Buyers shall not take or omit to take any action that (i) if taken or omitted on or before the date of this Agreement, would make untrue any of the representations and warranties contained in Article 4 of this Agreement, or (ii) would interfere with the Buyers’ ability to perform or would prevent performance of any of their obligations under this Agreement or any of the other agreements or instruments provided for herein.

(c) Confidentiality. From and after the date of this Agreement until the Closing or the termination of this Agreement, the Buyers and their representatives will maintain the confidentiality of all documents and information of a confidential nature disclosed by the

  

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Company in the course of their negotiations and the Buyers’ due diligence review, and will in no event use any confidential information for any purpose other than for the evaluation of the transactions contemplated herein and the financing of this transaction. In the event this Agreement is terminated, the Buyers will destroy all copies of documentation which they received from the Company and will not use any confidential information for their own benefit.

12. Confidential Information. The Company, on behalf of itself and its Related Parties, on the one hand, and GFS and Buyers, on the other hand, each agree to hold in confidence and not to reveal, report, publish, disclose or transfer, directly or indirectly, any of the Confidential Information of GFS or Company to any third party or use any of GFS’s or Company’s Confidential Information, including the terms and existence of this Agreement. Upon the request of the other party, each of the parties will promptly return all Confidential Information (in any media), including any copies as well as all materials (in any media) which contain or embody Confidential Information, and, with respect to abstracts or summaries of Confidential Information that Company may have made, Company and GFS will destroy such abstracts or summaries and will provide a written declaration from an authorized officer certifying that it has done so.

13. Non-Disparagement. The parties hereto agree that they will not make any disparaging or misleading comments about each other, and will not discuss each with any third-part in any negative light.

14. Future Cooperation. GFS agrees to provide reasonable cooperation with respect to Company with respect to providing the Company with information that may be needed in connection with the Company’s reporting obligations with the Securities and Exchange Commission. Prior to the Closing Date the tender of all Company Shares to Company by Buyers shall be irrevocable.

15. Definitions. As used in this Agreement:

(a) “Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with the first Person. For the purposes of this definition, “Control,” when used with respect to any Person, means the possession, directly or indirectly, of the power to (i) vote 10% or more of the securities having ordinary voting power for the election of directors (or comparable positions) of such Person or (ii) direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing;

(b) “Confidential Information” shall mean any information or materials in oral, written, pictorial, magnetic, graphic or maintained or transferred in any other media, which has been disclosed by GFS to the Company, or Company to GFS, or any Buyer, relating to technological and business information of GFS or Company or the design, development, know-how, patents, other intellectual property, formulae, manufacturing or marketing information of GFS’s or Company’s products, services, or operations. Confidential Information shall not include any information which (a) at the time of its disclosure or thereafter is generally available to and known to the public other than as a result of a disclosure by the Company, GFS or Buyer,

  

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or its representatives in breach of this Agreement (b) was or becomes available to the Company, GFS or Buyer on a non-confidential basis from a source other than GFS, Company, Buyer or its representatives, (c) is shown by written dated records (or any other documentary media) to have been independently acquired or developed by Company, GFS, or Buyer without breaching this Agreement, (d) is shown by written dated records (or any other documentary media) to have been lawfully in the possession of the Company prior to disclosure by GFS or GFS prior to disclosure by Company, or its representatives, or (e) if Company, GFS or Buyer is compelled by court or government action pursuant to applicable law to disclose such information, provided, however, that party gives prompt notice thereof so that GFS or the Company may seek a protective order or other appropriate remedy.

(c) “Governmental Authority” means any domestic or foreign governmental or regulatory authority;

(d) “Law” means any federal, state or local statute, law, rule, regulation, ordinance, code, Permit, license, policy or rule of common law;

(e) “Lien” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person will be deemed to own, subject to a Lien, any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset;

(f) “Material Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting securities or other voting interests representing at least ten percent (10%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least ten percent (10%) of the outstanding equity securities or equity interests in a Person.

(g) “Order” means any judgment, injunction, judicial or administrative order or decree;

(h) “Permit” means any government or regulatory license, authorization, permit, franchise, consent or approval; and

(i) “Person” means an individual, corporation, partnership, limited liability GFS, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

  

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16. Miscellaneous.

(a) Counterparts. This Agreement may be signed in any number of counterparts, each of which will be deemed an original but all of which together shall constitute one and the same instrument.

(b) Amendments and Waivers.

(i) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

(ii) No failure or delay by any party in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided will be cumulative and not exclusive of any rights or remedies provided by Law.

(c) Successors and Assigns. The provisions of this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer (including by operation of Law) any of its rights or obligations under this Agreement without the consent of each other party hereto.

(d) No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their permitted successors and assigns and nothing herein expressed or implied will give or be construed to give to any Person, other than the parties hereto, and such permitted successors and assigns, any legal or equitable rights hereunder.

(e) Taxes. Company and GFS have made no representations to Buyers regarding the tax consequences of the transactions contemplated under this Agreeement and each Buyer has had the opportunity to consult with an attorney or tax advisor regarding the income tax consequences therefrom, or if Buyer has not sought such advice, Buyer acknowledges that he or she has entered into the transaction after careful consideration. GFS and Company may amend this Agreement as necessary to qualify the transaction as a tax-free split-off under Section 355 of the Internal Revenue Code.

(f) Governing Law. This Agreement is governed by the laws of New York without regard to its conflict of law provisions, and shall inure to the benefit of and be binding upon the successors, assigns, heirs and personal representatives of the parties hereto. Each party hereto hereby irrevocable submits to the personal jurisdiction of the state and federal courts located within the City and State of New York with respect to any action, suit or proceeding relating to or arising from this Agreement. Each party hereto irrevocably waives (i) any claim or defense based upon improper venue or inconvenient forum with respect to any action, suit or proceeding brought in any such court and (ii) the right to trial by jury in any action, suit or proceeding relating to or arising under this Agreement. Each party waives personal service of process and consents to the service of process by the manner set forth in the Notices section,

  

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below, in addition to any other method of service of process permitted by applicable law. GFS, Hodges and Buyers agree that the remedy at law for any breach by them of the provisions of this Agreement will be inadequate and that the damages flowing from any such breach are not readily susceptible to being measured in monetary terms. Accordingly, upon breach of any legally enforceable provision of this Agreement the Company shall be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach. Nothing in this Agreement shall be deemed to limit the remedies at law or in equity available to the Company for any breach or failure to deliver the Company Shares.

(g) Headings. The headings in this Agreement are for convenience of reference only and will not control or affect the meaning or construction of any provisions hereof.

(h) Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter of this Agreement. This Agreement supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof of this Agreement.

(i) Severability. If any provision of this Agreement or the application of any such provision to any Person or circumstance is held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, the remainder of the provisions of this Agreement (or the application of such provision in other jurisdictions or to Persons or circumstances other than those to which it was held invalid, illegal or unenforceable) will in no way be affected, impaired or invalidated, and to the extent permitted by applicable Law, any such provision will be restricted in applicability or reformed to the minimum extent required for such provision to be enforceable. This provision will be interpreted and enforced to give effect to the original written intent of the parties prior to the determination of such invalidity or unenforceability.

(j) Notices. Any notice, request or other communication hereunder shall be given in writing and shall be served either personally, by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:

(a) If to Buyers or GFS:

Michael Hodges

______________

______________

With a copy to:

Lane Alton & Horst, LLC

Two Miranova Place Suite 500

Columbus OH 43215-7052

Attention: Todd A. Weber, Esq.

  

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(b) If to Company:

Genesis Fluid Solutions Holdings, Inc.

830 Tender Foot Hill Road, #301

Colorado Springs, CO 80906

Attention: Mary Losty, Chairwoman

With a copy to:

Phillips Nizer LLP

666 Fifth Avenue, 28th Flr.

New York, NY 10103

Attention: Elliot H. Lutzker

(k) Independent Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under this Agreement are several and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any other Buyer under this Agreement. The decision of each Buyer to acquire Shares pursuant to this Agreement has been made by such Buyer independently of any other Buyer. Nothing contained herein, and no action taken by any Buyer pursuant thereto, shall be deemed to constitute the Buyers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Buyers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein. Each Buyer acknowledges that no other Buyer has acted as agent for such Buyer in connection with making its investment hereunder and that no Stockholder will be acting as agent of such Buyer in connection with monitoring its investment in the Shares or enforcing its rights under this Agreement. Each Buyer shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement, and it shall not be necessary for any other Buyer to be joined as an additional party in any proceeding for such purpose. The Buyer hereby acknowledges that each of the Buyers has been provided with this same Agreement for the purpose of closing a transaction with multiple Buyers and not because it was required or requested to do so by any Stockholder.

(l) Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimiles of any such counterpart shall have the same force and effect as an original signature.

[Signature Page Follows]

  

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[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered, effective as of the date first above written.

“COMPANY”

GENESIS FLUID SOLUTIONS HOLDINGS, INC.

By: /s/ Michael Hodges

Name: Michael Hodges

Title: Interim CEO

 

By: /s/ Mary Losty

Name: Mary Losty

Title: Director

“GFS”

GENESIS FLUID SOLUTIONS, LTD.

By: /s/ Michael Hodges

Name: Michael Hodges

Title: Chief Executive Officer

/s/ Michael Hodges

Michael Hodges, Individually

“BUYERS”

____________________________________

Print Buyer’s Name

____________________________________

Buyer’s Signature

  

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