Document:

Exhibit 10.54

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (the “Agreement”) is made as of August 25, 2014 (“Effective Date”), by and among U.S. Dry Cleaning Services Corporation, a Delaware corporation (“Buyer”), Advent Cleaners, LLC, a Nevada limited liability company (“Seller”) and wholly-owned subsidiary of World Cleaners, LLC, a Delaware limited liability company (“World Cleaners”), and Steve S. Hong, the majority owner of World Cleaners (“Owner”).  World Cleaners is a party to this Agreement solely with regard to Sections 5.3 (Negotiation with Others) and Section 6.5 (Non-Competition, Non-Solicitation and Confidentiality).  Certain other capitalized terms used in this Agreement are defined in Exhibit A attached hereto.

 

R E C I T A L S

 

WHEREAS, Seller is engaged in the business of retail and commercial laundry and dry cleaning, uniform and linen rental and cleaning, alterations, shoe repair, and such other services conducted in and through the physical locations identified on Exhibit B attached hereto (the “Business”); and

 

WHEREAS, Buyer desires to purchase and Seller desires to sell to Buyer substantially all of the assets of the Business, subject to the terms and conditions of this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the terms, covenants, and conditions hereinafter set forth, the parties hereto agree as follows:

 

ARTICLE I

 

ASSETS BEING PURCHASED; ASSUMPTION OF LIABILITIES

 

1.1                               Purchased Assets.  Subject to the terms and conditions of this Agreement, Buyer hereby agrees to purchase from Seller, and Seller hereby agrees to sell, convey, transfer and assign to Buyer, on the Closing Date, all of Seller’s right, title and interest in and to the assets of Seller used in connection with the Business (collectively, the “Purchased Assets”), and except as provided herein, free and clear of all Encumbrances, as the same may exist as of the close of business on the Closing Date.  The Purchased Assets shall include, but not be limited to, the following:

 

(a)                                 All of Seller’s rights and obligations under all of the agreements of Seller relating exclusively to the Business (the “Business Contracts”), together with and including those identified on Schedule 1.1(a) attached hereto (collectively the “Assigned Contracts”);

 

(b)                                 All of the tangible personal property owned by Seller (excluding any personal property of employees and principals of Seller) and used exclusively in connection with the conduct of the Business, together with and including, but not limited to, all of the equipment and/or fixed assets set forth on Schedule 1.1(b) attached hereto.

 

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(c)                                  With the exception of personnel records regarding employees (except as may be waived in writing by employee) Seller’s books and records directly related to or used in connection with the conduct of the Business or directly pertaining to the Purchased Assets, regardless of the medium on which such information is stored or maintained including, without limitation, all customer and employment records, vendor information, business plans, strategies and marketing information (except that Seller may retain copies as required by law or as may be reasonably necessary or prudent business practice);

 

(d)                                 To the extent transferable, the Licenses and Permits required under all laws, rules and regulations material to the conduct of the Business, all of which are set forth on Schedule 1.1(d);

 

(e)                                  All leased real property and leasehold improvements identified in the real property schedule attached hereto as Schedule 1.1(e);

 

(f)                                   All inventory of Seller, including customer-owned goods (hanging inventory) in Seller’s care;

 

(g)                                  The Business Intellectual Property Rights of Seller listed on Schedule 3.6(a);

 

(h)                                 All advance payments, claims for refunds and deposits and other prepaid items relating to the Purchased Assets or the Assumed Obligations, existing on the Closing Date; and

 

(i)                                     The goodwill associated with the Purchased Assets and the Business.

 

1.2                               Excluded Assets.  Seller shall retain all of their respective right, title and interest in and to, and shall not, and shall not be deemed to, sell, transfer, assign, convey or deliver to the Buyer, and the Purchased Assets shall not, and shall not be deemed to, include, the following (collectively, the “Excluded Assets”):

 

(a)                                 any cash or cash equivalents, including any marketable securities or certificates of deposit, or any collected funds or accounts or items in the process of collection at the financial institutions of Seller through and including the Closing Date, and any cash security or other deposits, together with all accrued but unpaid interest thereon;

 

(b)                                 All of Seller’s accounts receivable or notes receivable , and all schedules, records and other documentation related to such accounts or notes receivable, including, without limitation, all notes, chattel paper or other documents or instruments evidencing the payment obligations of the account or note debtors;

 

(c)                                  any rights to indemnification, contribution or other reimbursement, or limitations on liability, under the Purchased Contracts for any period through and including the Closing Date, or any warranties and guarantees, in each case, from any third parties with respect to any Excluded Liabilities and/or Losses for which Seller and/or Owner has an indemnification obligation under Section 12 of this Agreement;

 

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(d)                                 any property, casualty or other insurance policy held by Seller and any rights of Seller under any such policy;

 

(e)                                  the corporate charter, qualification to conduct business, arrangements with registered agents relating to qualifications, taxpayer and other identification numbers, corporate seal, minute books, stock transfer books, blank stock certificates, books and records relating to Taxes, and any other documents relating to the governance, organization, maintenance and existence of the Seller or to the proposed sale of the Business;

 

(f)                                   any of the Benefit Plans and underlying assets or any rights of Seller under the Benefit Plans;

 

(g)                                  Any assets set forth on Schedule 1.2 hereto; and

 

(h)                                 All rights that accrue to Seller under this Agreement.

 

1.3                               Assumed Obligations.  Buyer hereby agrees to assume only (i) obligations arising after the Closing Date under the Lease Agreements and the Assigned Contracts and (ii) the specific accounts and obligations set forth on Schedule 1.3 hereto (collectively, the “Assumed Obligations”), which as of the date of this Agreement includes equipment financing of approximately $200,000.  The Assumed Obligations shall not include any obligations or liabilities arising out of any pre-Closing Date default of Seller under any Assumed Obligation, regardless of when such liability or obligation is asserted, and Buyer shall not be obligated to assume any Assumed Obligation which is in default as of the Closing Date.

 

1.4                               Liabilities Not Being Assumed.  Except for the Assumed Obligations, or to the extent caused by Buyer’s acts or omissions, Seller agrees that Buyer shall not be obligated to assume or perform and is not assuming or performing any liabilities or obligations of Seller, whether known or unknown, fixed or contingent, certain or uncertain, and regardless of when such liabilities or obligations may arise or may have arisen or when they are or were asserted (the “Retained Liabilities”), and Seller shall remain responsible for all Retained Liabilities, which shall include, without limitation, any and all of the following obligations or liabilities of Seller:

 

(a)                                 Any compensation or benefits payable to present or past employees of Seller arising in connection with their employment by Seller, including without limitation, any liabilities arising under any Benefit Plans (as defined in Section 3.16);

 

(b)                                 Except as otherwise provided in Section 6.4, all federal, state, local, foreign or other taxes (i) that have arisen prior to the Closing Date or may arise thereafter out of the conduct of the Business, other business or other operations, but only to the extent conducted by Seller either prior to or after the Closing Date or (ii) that are imposed in the form of sales tax on the Purchased Assets as a result of the consummation of the transactions set forth in this Agreement, other than the sales tax obligations assumed by Buyer under Section 6.4; provided, however, that the Retained Liabilities shall not include any taxes arising out of the conduct by Buyer, on or after the Closing Date, of the Business, or the ownership, on or after the Closing Date, of the Purchased Assets;

 

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(c)                                  All Encumbrances on any of the Purchased Assets and all obligations and liabilities secured thereby that are not Assumed Obligations or otherwise allocated to Buyer herein;

 

(d)                                 All accounts payable or notes payable obligations for borrowed money, all purchase money obligations, except as allocated to Buyer herein, and any other indebtedness or payment obligations of Seller (the “Retained Debt”);

 

(e)                                  Any claims, demands, actions, suits or legal proceedings that have been asserted or threatened prior to the Closing Date against Seller, the Business or the Purchased Assets or which may be asserted or threatened hereafter against the Purchased Assets, the Business or Buyer to the extent arising from or in connection with (i) Seller’s operation of the Business prior to the Closing Date, or (ii) any other business or non-business activities of Seller conducted prior hereto or hereafter, including, but not limited to, those legal actions or other proceedings set forth in Schedule 3.14 hereto; and

 

(f)                                   Any obligations under any employment, consulting or non-competition agreement to which Seller is a party, whether written or oral, and any liabilities or obligations arising out of the termination by Seller of any of its employees in anticipation or as a consequence of the consummation of the transactions contemplated hereby.

 

1.5                               Third Party Consents.  Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign or transfer any governmental approval, instrument, contract, lease, permit or other agreement or arrangement, including the Assigned Contracts, or any claim, right or benefit arising thereunder or resulting therefrom if an assignment or transfer or an attempt to make such an assignment or transfer without the consent of a third party would constitute a breach or violation thereof or affect adversely the rights of Buyer or Seller, thereunder; and any transfer or assignment to Buyer by Seller, as applicable, of any interest under any such instrument, contract, lease, permit or other agreement or arrangement that requires the consent of a third party shall be made subject to such consent or approval being obtained.  In the event that any such consent or approval is not obtained on or prior to the Closing Date, Seller and Owner shall continue to use their best efforts to obtain any such approval or consent after the Closing Date as promptly as possible, and, regardless of whether such approval or consent is ever obtained, Seller will cooperate with Buyer in any lawful and reasonable arrangement to provide that Buyer shall receive the interest of Seller in the benefits under (and Buyer shall perform the obligations under, except as specifically prohibited) any such instrument, contract, lease, or permit or other agreement or arrangement.

 

ARTICLE II

 

PURCHASE PRICE AND ALLOCATION OF PURCHASE PRICE

 

2.1                               Purchase Price.

 

(a)                                 On the Closing Date, as consideration for (i) the sale to Buyer of the Purchased Assets and (ii) Seller entering into the covenant not to compete set forth in Section 6.5 below, Buyer shall pay to Seller consideration of Four Million Dollars ($4,000,000) (the

 

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“Purchase Price”) consisting of the cash sum of Four Million Dollars ($4,000,000), subject to adjustment pursuant to Section 2.1(b) (the “Cash Payment”).  Concurrently with the closing of the Qualifying IPO, Buyer shall deliver the Cash Payment, subject to adjustment by reason of any applicable prorations and the allocation of closing costs described below, to the Escrow designated agent (the “Escrow Agent”) by cashier’s check, wire transfer of federal funds or another immediately available form.

 

(b)                                 If, during the six month period through June 30, 2014 (the “Calculation Period”), the Adjusted EBITDA for the Business for such six (6) month period (the “Actual Adjusted EBITDA”) is less than $360,000 or more than $440,000, the Purchase Price shall be reduced or increased, as applicable, by the amount of Actual Adjusted EBITDA that is less than $360,000 or more than $440,000, as applicable, multiplied by five (5.0X), unless disputed in accordance with Section 2.1(c).

 

(c)                                  As soon as practicable after June 30, 2014, Seller shall deliver to Buyer a schedule setting forth the Actual Adjusted EBITDA and the manner in which it was calculated (“Seller’s EBITDA Schedule”).  Buyer will have five (5) Business Days to review Seller’s EBITDA Schedule.  If Buyer disputes the Actual Adjusted EBITDA, Buyer will object by delivering notice to Seller of such objection, specifying in reasonable detail the basis for such objection.  Seller’s calculation of the Actual Adjusted EBITDA will be final and binding upon Buyer unless Buyer disputes the same in writing within such five (5) day period.  In the event Buyer so notifies Seller in writing within such five (5) day period of any such dispute, Seller and Buyer will attempt to resolve all such disputes in good faith.

 

2.2                               Allocation of Purchase Price.  Seller and Buyer agree that the Purchase Price shall be allocated among the Purchased Assets and for the covenant not to compete set forth in Section 6.5 below within one hundred twenty (120) days after the Closing Date, (the “Purchase Price Allocation”).  Each of the parties, when reporting the transactions consummated hereunder in their respective tax returns, shall allocate the Purchase Price paid or received, as the case may be, in a manner that is consistent with the Purchase Price Allocation.  Additionally, each of the parties will comply with, and furnish the information required by Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”), and any regulations thereunder.

 

2.3                               IPO Extension Fee.  If Buyer fails to consummate a Qualifying IPO on or prior to November 30, 2014 (the “IPO Deadline”), then Buyer may extend the IPO deadline by giving a written extension notice (the “IPO Notice”) stating that the IPO will be completed by February 28, 2015 or that Buyer’s investors have agreed to contribute sufficient funds to cover the Purchase Price. To be effective, the IPO Notice must be delivered by Buyer to Seller at least ten (10) days prior to the IPO Deadline, and Buyer must concurrently deposit into Escrow up to Fifty Thousand Dollars ($50,000) to cover Seller’s accounting fees incurred in preparation of the audited financial statements for Seller’s fiscal years ended December 31, 2012 and December 31, 2013 (the “Accounting Fees”) and legal fees directly related to the drafting of this Agreement and the transactions contemplated herein (the “Legal Fees”) (collectively, the “Expense Fees”) by certified check or wire transfer of federal funds or in other immediately available funds, which Extension Fees shall be nonrefundable.  Twelve Thousand Five Hundred Dollars ($12,500) of the Accounting Fees shall not be applied against the Purchase Price;

 

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however, all of the Legal Fees may be applied to the Purchase Price at Closing.  Upon delivery of the IPO Notice and delivery of the Expense Prepayment, Seller shall not have the right to terminate the Agreement pursuant to Section 11.1(d) until February 28, 2015.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Subject to the disclosures and exceptions set forth in the disclosure schedules attached hereto (the “Seller’s Disclosure Schedules”), each of Seller and Owner hereby jointly and severally make the representations and warranties set forth hereinafter in this Article III to Buyer:

 

3.1                               Authority and Binding Effect.  Seller has the full corporate power and authority to execute and deliver this Agreement and the Bill of Sale (as hereinafter defined).  This Agreement and the Bill of Sale and the consummation by Seller of its obligations contained herein and therein have been duly authorized by all necessary corporate actions of Seller, and such agreements have been duly executed and delivered by Seller.  This Agreement is a valid and binding agreement of Seller and Owner, enforceable against Seller and Owner in accordance with its terms, and, upon execution and delivery, the Bill of Sale will be a valid and binding agreement of Seller and shall be enforceable against it in accordance with its terms, except as enforceability of the obligations of Seller and Owner under this Agreement and the Bill of Sale may be limited by (i) bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally, and (ii) general principles of equity relating to the availability of equitable remedies (whether such agreements are sought to be enforced in a proceeding at law or a proceeding in equity).  Except as set forth on Schedule 3.1, and except for consents necessary for assignment of Assigned Contracts and Permits and Licenses, it is not necessary for Seller to take any action or to obtain any approval, consent or release by or from any third person, governmental agency or other agency, to enable Seller to enter into or perform its obligations under this Agreement and the Bill of Sale.

 

3.2                               Organization and Standing.  Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Nevada, and Seller is qualified to do business in each jurisdiction where such qualification is necessary and where the failure to be so qualified would have a Material Adverse Effect on Seller.  Seller has the requisite corporate power and authority to conduct its business as now conducted and to own or lease the Purchased Assets, and to use such Purchased Assets in the conduct of its business.

 

3.3                               Financial Statements.  Seller has delivered to Buyer financial statements of Seller consisting of audited balance sheets as of the end of, and the related statements of income and cash flows for, the fiscal years ended December 31, 2012 and 2013 and an unaudited balance sheet and related statements of income and cash flows for period ending March 31, 2014 (collectively, the “Financial Statements”).  True and correct copies of the Financial Statements are attached hereto as Schedule 3.3.  To the respective Knowledge of Seller and Owner, the Financial Statements were prepared in accordance with Seller’s normal accounting practices, and fairly and accurately reflect, on a cash basis, the results of its operations as of the relevant dates thereof and for the respective periods covered thereby.  To the respective Knowledge of Seller

 

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and Owner, Seller has no debts, obligations or liabilities, fixed or contingent, of a nature that would be required, in accordance with Seller’s normal accounting practices, to be shown on a balance sheet and that are not shown on the balance sheet as of March 31, 2014 (the “Balance Sheet”), other than liabilities incurred after March 31, 2014 in the ordinary course of Seller’s business and consistent with past practice.

 

3.4                               Absence of Certain Changes.  Except as set forth in Schedule 3.4, since January 1, 2013, there has not been:

 

(a)                                 except in the ordinary course of Seller’s business, any sale, transfer, or other disposition of, or the incurrence or imposition of any Encumbrance of any kind on or affecting, any of the Purchased Assets;

 

(b)                                 any material damage, destruction or loss, whether or not covered by insurance, of any of the Purchased Assets;

 

(c)                                  the entry or violation of any judgment, order, writ or decree that has had or could reasonably be expected to have a Material Adverse Effect on Seller;

 

(d)                                 any material default or breach by Seller or any amendment, termination or revocation or, to the respective Knowledge of Seller and Owner, any material default or breach by any party other than Seller, or any written threatened termination or revocation of, any of the Assigned Contracts;

 

(e)                                  any actual or threatened amendment, termination or revocation of any of the Licenses and Permits; or

 

(f)                                   to the respective Knowledge of Seller and Owner, the occurrence of any other event or circumstance which has or is likely to have a Material Adverse Effect on Seller.

 

3.5                               Title to and Condition of Purchased Assets.

 

(a)                                 Fixed Assets.  To the respective Knowledge of Seller and Owner the Fixed Assets are in good working order and condition, ordinary wear and tear excepted, have been properly maintained, are suitable for the uses for which they are being utilized in the Business, do not require more than regularly scheduled maintenance in the ordinary course, consistent with Seller’s established maintenance policies, to keep them in good operating condition and comply with all requirements under applicable laws, regulations and licenses which govern the use and operation thereof.

 

(b)                                 Title to and Adequacy of Purchased Assets.  Except as disclosed on Schedule 3.5(b) hereto, Seller has, and on the Closing Date will convey and transfer to Buyer, good, complete and marketable title to all of the Purchased Assets, free and clear of all Encumbrances of any nature whatsoever other than restrictions on transfer of Assigned Contracts.  Except as set forth on Schedule 3.5(b), all of the Purchased Assets are in the exclusive possession and control of Seller and Seller has the unencumbered right to use, and to sell to Buyer in accordance with the terms and provisions of this Agreement, all of the Purchased Assets without interference from and free of the rights and claims of others.  Except as to the

 

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Excluded Assets, the Purchased Assets constitute all of the assets, properties, rights, privileges and interest which Seller either owns or controls, or uses or holds for use in connection with the Business and, except as set forth on Schedule 3.5(b), the Purchased Assets constitute all of the assets, properties, rights and interests of Seller which are necessary for Buyer to own and operate the Business as currently conducted and as proposed to be conducted.

 

3.6                               Intellectual Property.

 

(a)                                 Set forth on Schedule 3.6(a) is a complete list of all Intellectual Property Rights, owned, licensed or used by Seller in connection with the Business (the “Business Intellectual Property Rights”).  Seller owns all right, title and interest in and to all Business Intellectual Property Rights free and clear of all Encumbrances.

 

(b)                                 To Seller’s and Owner’s respective Knowledge, no claims have been asserted or threatened against Seller by any person challenging Seller’s ownership, use or distribution of any Business Intellectual Property Rights or challenging or questioning the validity or effectiveness of any license or agreement relating thereto and Seller has never been a party to any action or proceeding that involves or involved any claim of infringement, misappropriation or other wrongful use or exploitation of the intellectual property or other proprietary rights of any other party.  To the respective Knowledge of Seller and Owner, the operation by Seller of its Business does not violate, and has not violated, any Intellectual Property Rights of any third party, including, without limitation, infringement, misappropriation or wrongful use or exploitation of intellectual property or other proprietary rights, and no third party has provided notice to Seller of a possible such violation.  Seller is not aware of any valid basis for any claim of the type specified in this Section 3.6(b).  To Seller’s and Owner’s respective Knowledge, no third party is violating, infringing, or misappropriating any Business Intellectual Property Right.

 

(c)                                  No license or other agreements have been made by Seller relating to the Business Intellectual Property Rights.

 

(d)                                 No Seller employee or contractor or Owner, nor any of their respective affiliates, has any right, title or interest in or to any Business Intellectual Property Right (other than by virtue of any Owner’s ownership of its interest in Seller).

 

(e)                                  The Business Intellectual Property Rights and any common law rights that have accrued to Seller constitute all of the Intellectual Property Rights necessary for the conduct of the Business as presently conducted by Seller.

 

3.7                               Assigned Contracts and Other Agreements.  Schedule 3.7 hereto contains an accurate and complete list of each material contract, agreement, indenture, note, lease, or other instrument or commitment, written or oral, which relates to or affects or could be reasonably likely to materially affect any of the Purchased Assets, the Assumed Obligations or the consummation of the transactions contemplated by this Agreement (the “Material Contracts”).  Accurate and complete copies of all of the Material Contracts have been furnished by Seller to Buyer.  The Material Contracts include, without limitation, each of the Assigned Contracts.  Each of the Material Contracts is a valid and binding obligation of Seller and, to Seller’s

 

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Knowledge, the other parties thereto, enforceable in accordance with its terms, except as may be affected by bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights generally and general principles of equity relating to the availability of equitable remedies.  There have not been any defaults by Seller or, to the Knowledge of Seller, defaults or any claims of default or claims of non-enforceability by the other party or parties under or with respect or any of Material Contracts which, individually or in the aggregate, would have a Material Adverse Effect on Seller, and to the Knowledge of Seller, there are no facts or conditions that have occurred or, as to assignability, except for the transaction contemplated by this Agreement, that are anticipated to occur which, with the passage of time or the giving of notice, or both, would constitute a default by Seller, or to the Knowledge of Seller, by the other party or parties, under any of the Material Contracts or would cause a creation or imposition of any Encumbrance upon any of the Purchased Assets or otherwise would have a Material Adverse Effect on Seller.  Except as described on Schedule 3.7, none of the Assigned Contracts contains any provisions which, after the date hereof, would (i) hinder or prevent Buyer from continuing to use any of the assets or property, tangible or intangible, that are the subject of the Assigned Contracts in the manner in which they are currently used, or (ii) impose any additional costs (other than scheduled fee increases or similar provisions contained therein) or burdensome requirements as a condition to their continued use which are not currently in effect.

 

3.8                               Conflicts.  Neither the execution and delivery of nor the consummation of the transactions contemplated by this Agreement or the Bill of Sale will or to the respective Knowledge of Seller and Owner could result in any of the following:  (a) a default or an event that, with notice or lapse of time, or both, would be a default, breach or violation of the Articles of Organization, Operating Agreement or other governing instruments of Seller, or of any Assigned Contract, except any of the Assigned Contracts which require consent to assignment; (b) the creation or imposition of any Encumbrance on any of the Purchased Assets; (c) the violation or breach of any writ, injunction or decree that would become or is now applicable to or binding on any of the Purchased Assets; (d) except for any License or Permit that cannot be assigned or require third party consent, a loss or adverse modification of any license, franchise, permit or other authorization or right (contractual or other) to operate Seller’s Business or to own any of the Purchased Assets, granted to or otherwise held by Seller or used in its Business, which would have a Material Adverse Effect on the Business; (e) the right to cease or terminate any other business relationship or arrangement between Seller and any third party that would have a Material Adverse Effect on the Business; (f) the right to terminate any Assigned Contract, or the acceleration of the maturity of any indebtedness or other obligation of Seller which would have a Material Adverse Effect on the Business, or (g) any other consequence that would have a Material Adverse Effect on the Business.

 

3.9                               Payors.  Schedule 3.9 attached hereto sets forth a list of (a) each payor of Seller who accounted for more than five percent (5%) of the revenues of Seller for each of the fiscal years ended December 31, 2012 and December 31, 2013 and for the interim period ended March 31, 2014 (the “Payors”), and (b) the top ten (10) suppliers of Seller (based on the amount of payments made to such suppliers during the fiscal year ending December 31, 2013 and the interim period ended March 31, 2014 showing, with respect to each, the name and dollar volume involved (the “Suppliers”).  No Payor or Supplier of Seller has cancelled or otherwise terminated its relationship with Seller or has materially decreased its usage or purchase of the services or products of Seller, as applicable.  No Payor or Supplier has, to Seller’s or Owner’s

 

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respective Knowledge, any plan or intention to terminate, cancel or otherwise materially and adversely modify its relationship with Seller or to decrease materially or limit its usage, purchase or distribution of the services or products of Seller.

 

3.10                        Warranties and Liabilities.  Schedule 3.10 attached hereto sets forth the return policies (the “Return Policies”) of, and all Warranties (as hereinafter defined) given or made by, Seller relating to its Business.  “Warranties” shall mean all service, repair, replacement and other obligations based upon or arising out of express and implied warranties made or deemed made in connection with Seller’s Business.  Seller has not extended or granted any return rights or given or made any Warranties with respect to its Business, except for those set forth in Schedule 3.10.  Except as set forth in Schedule 3.10, Seller has not paid settled any customer claim for any return under Seller’s Return Policies or alleged or actual breach of any Warranties in excess of $1,000, individually or on an aggregate basis with regard to any customer.  Except as otherwise set forth in Schedule 3.10, Seller and Owner does not have any respective Knowledge of any present or future claim against Seller, whether or not fully covered by insurance, for liability on account of negligence or liability or on account of any Return Policies or Warranties which would have, individually or in the aggregate, a Material Adverse Effect on Seller, and adequate reserves have been set aside in the Financial Statements for claims relating to Warranties and returns.

 

3.11                        Compliance with Law/Permits.

 

(a)                                 To Seller’s and Owner’s respective Knowledge, Seller is in material compliance with all, and is not in violation of any, laws, ordinances, orders, decrees, rules or regulations of any governmental agency or authority.  No (i) charges of violations of laws or regulations relating to its Business have been made or, to Seller’s Owner’s respective Knowledge, threatened in writing, (ii) proceedings or investigations relating to its Business are pending or, to Seller’s and Owner’s respective Knowledge, have been threatened in writing, and (iii) citations or notices of deficiency have been issued or, to Seller’s and Owner’s respective Knowledge, have been threatened in writing , against Seller relating to or arising out of its Business by any governmental authorities, which has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Seller; and, to Seller’s and Owner’s respective Knowledge, there are no facts or circumstances upon which any such charges, proceedings, investigations, or citations or deficiency notices, reasonably may be instituted, issued or brought hereafter.

 

(b)                                 Schedule 3.11 contains a true, correct and complete list of all material governmental licenses, permits, authorizations, franchises, or certificates or rights (contractual or other) to operate Seller’s Business, that are held by Seller (collectively, “Licenses and Permits”).  To the respective Knowledge of Seller and Owner, all of such Licenses and Permits are in full force and effect at the date hereof.  There is no other license, permit, authorization, franchise, certificate or right to operate the absence of which has had a Material Adverse Effect on Seller.  Seller is in material compliance with the conditions and requirements imposed by or in connection with such Licenses and Permits.  Seller has not received any notice, nor does Seller or Owner have any respective Knowledge, that any governmental authority intends to cancel, terminate or modify any of such Licenses or Permits. Seller has not received any safety inspection and quality assurance reports, prepared by any employees or consultants of Seller or by any governmental authorities relating to its Business or the products licensed or sold or the services rendered by Seller in its Business.

 

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3.12                        Taxes and Tax Returns.  For purposes of this Agreement (a) the term “Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not; and (b) the term “Tax Return” means any return, declaration, report, claim for refund, or information return or statement (including, without limitation, information returns or reports related to back-up withholding and any payments to third parties) relating to any Taxes, including any schedule or attachment thereto, and including any amendment thereof.  All Tax Returns required to be filed with any taxing authority with respect to any taxable period ending on or before the date of this Agreement, or the Closing Date, as applicable, by or on behalf of Seller, have been or will be filed when due.  All such Tax Returns are or will be true, complete and correct in all material respects.  Buyer shall have no liability or obligation whatsoever, and shall not incur any loss, expense or cost, and none of the Purchased Assets, or any assets of Buyer, shall be subjected to any Encumbrance, by reason of any Taxes arising out of (x) Seller’s Business as conducted by Seller prior to the consummation of the sale hereunder of the Purchased Assets to Buyer, or (y) any other operations or activities of Seller whether conducted prior to the date hereof or hereafter.  Seller further represents and warrants that it is relying solely on its own accountants and advisors for advice as to the tax consequences to it of the transactions contemplated hereby.

 

3.13                        Litigation and Proceedings.  Except as set forth on Schedule 3.13, there is no action, suit, proceeding or investigation, or any counter or cross-claim in an action brought against, by or on behalf of Seller, whether at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or before any arbitrator of any kind, that is pending or, to Seller’s and Owner’s respective Knowledge, threatened, which (i) could reasonably be expected to affect adversely Seller’s ability to perform its obligations under this Agreement, or the Bill of Sale or complete any of the transactions contemplated hereby or thereby, or (ii)  which may become a claim, or liability against Buyer or the Purchased Assets.  To Seller’s and Owner’s respective Knowledge, there are no facts or circumstances that could reasonably be expected to give rise to any actions of the type set forth in this Section 3.13.  Seller is not subject to any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over Seller, any of the Purchased Assets or its Business that affects, involves or relates to the Purchased Assets.

 

3.14                        Environmental and Safety Matters.  To Seller’s and Owner’s respective Knowledge, (i) except as set forth in Schedule 3.14, no Hazardous Materials have been present at Seller’s business premises in violation of any Environmental Law, (ii) except as set forth in Schedule 3.14, no Release (as defined below) of any Hazardous Materials has occurred at, upon or under Seller’s business premises, (iii) Seller does not have any current contingent liability in connection with the Release of any Hazardous Materials into the indoor or outdoor environment

 

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(whether on-site or off-site), (iv) except as set forth in Schedule 3.14, Seller is not, nor will be, prior to the Closing Date, engaged in the generation, transportation, treatment, storage or disposal of Hazardous Materials in violation of any Environmental Law, (v) except as set forth in Schedule 3.14, Seller’s business premises do not now contain, nor during Seller’s possession contained, any perchloroethylene or related cleaning solvents or chemical agents, (vi) Seller is in material compliance with all Environmental Law (hereinafter defined) now in effect relating to Hazardous Materials and applicable to Seller’s business premises and their business operations, (vii) Seller has provided to Buyer all environmental-related audits, studies, reports, analyses, and results of investigations in their possession that have been performed by Seller with respect to Seller’s business premises and (viii) Seller has not received any notice of writs, injunctions, decrees, orders or judgments outstanding, or suits, claims, actions, proceedings or investigations instituted or threatened under any Environmental Law applicable to Seller’s business premises.

 

As used in this Section 3.14, the term “Environmental Law” means any federal, state or local statute, regulation, ordinance, or rule of common law in any way relating to the protection of human health and safety or the environment including, without limitation, (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. §9601 et seq.) (“CERCLA”), (ii) the Hazardous Materials Transportation Act (49 U.S.C. App. §1801 et seq.), (iii) the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), (iv) the Clean Water Act (33 U.S.C. §1251 et seq.), (v) the Clean Air Act (42 U.S.C. §7401 et seq.), (vi) the Toxic Substance Control Act (15 U.S.C. §2601 et seq.), (vii) the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §136 et seq.) and (viii) the Occupational Safety and Health Act (29 U.S.C. §651 et seq.), and the regulations promulgated pursuant thereto.

 

As used in this Section 3.14, the term “Hazardous Materials” means any substance, material or waste which is regulated by the United States, or any state or local governmental authority including, without limitation, perchloroethylene or related cleaning solvents or chemical agents, and any material or substance which is defined as a “hazardous waste,” “hazardous substance,” “hazardous material,” “restricted hazardous waste,” “industrial waste,” “solid waste,” “contaminant,” “pollutant,” “toxic waste” or “toxic substance” under any provision of Environmental Law.

 

As used in this Section 3.14, the term “Release” means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, or leaching into indoor or outdoor environment, or into or out of any property.

 

3.15                        Employee Benefit Plans.

 

(a)                                 Schedule 3.15 sets forth a list of all of Seller’s employee benefit plans, as defined in Section 3(3) of ERISA and a true and complete list of all other profit-sharing, deferred compensation (including a list of participants therein), bonus, stock option, stock purchase, stock bonus, phantom stock, vacation pay, holiday pay, severance, dependent care assistance, excess benefit, incentive compensation, salary continuation, medical, life or other insurance, employment, severance, termination, golden parachute, consulting, supplemental retirement plan or agreement, supplemental unemployment and other employee benefit plans, programs, agreements or arrangements, including all unwritten employee benefit plans, programs,

 

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agreements and arrangements, if any, maintained or contributed to by Seller for the benefit of its employees (or former employees) or independent contractors and/or their beneficiaries (the “Benefit Plans”).  Schedule 3.15 also contains written summaries of any such Benefit Plans that have not been reduced to writing.  An arrangement will not fail to be a Benefit Plan simply because it only covers one individual, or because obligations under the plan arise by reason of its being a “successor employer” under applicable law.

 

(b)                                 To the Seller’s and Owner’s respective Knowledge, all Benefit Plans are, and in administering such plans Seller is, in compliance in all material respects with the currently applicable provisions of ERISA and the Code and the regulations thereunder.  Schedule 3.15(b) lists each Benefit Plan pursuant to which any amount may become payable (whether currently or in the future), any of the benefits of which will be increased, or the vesting of the benefits under which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

 

(c)                                  To the Seller’s and Owner’s respective Knowledge, all costs of administering and contributions required to be made by Seller to each Benefit Plan under the terms of that Benefit Plan, ERISA, the Code or any other applicable law have been timely made.  All amounts properly accrued to date as liabilities of Seller under or with respect to each Benefit Plan (including administrative expenses and incurred but not reported claims) for the current plan year of the Benefit Plan have been recorded on the appropriate books, to the extent required by law or GAAP.

 

(d)                                 To the Seller’s and Owner’s respective Knowledge, each Benefit Plan has been maintained and operated in accordance with, and complies currently with, in all material respects, all applicable laws, including but not limited to ERISA and the Code.  Each Benefit Plan has been operated in all material respects in accordance with its terms.  Furthermore, the Internal Revenue Service has issued a favorable determination letter with respect to each Benefit Plan that is intended to qualify under Section 401(a) of the Code, which letter takes into account any amendment to each such Benefit Plan, and, no event has occurred (either before or after the date of the letter) that would disqualify the plan.

 

(e)                                  Seller does not maintain any plan that provides (or will provide) medical or death benefits to one or more, current or future former employees (including retirees) beyond their retirement or other termination of service, other than benefits that are required to be provided pursuant to Section 4980B of the Code or state law continuation coverage or conversion rights.

 

(f)                                   There are no proceedings or lawsuits, pending or, to Seller’s or Owner’s respective Knowledge, threatened, and, to Seller’s or Owner’s respective Knowledge, there are no investigations currently in progress relating to any Benefit Plan, by any administrative agency, whether local, state or federal or by any fiduciary, participant or beneficiary of such plan.

 

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3.16                        Collective Bargaining Arrangements.  Except as set forth on Schedule 3.16, Seller is not a party to or bound by any employee collective bargaining agreement, a party to or affected by or, to Seller’s or Owner’s respective Knowledge, threatened with, any dispute or controversy with a union or with respect to unionization or collective bargaining involving the employees of Seller.

 

3.17                        Employees, Directors and Officers.  Schedule 3.17 comprises a complete and correct list of all of Seller’s present employees who devote a significant portion of their time to the Business (“Employees”), including the direct compensation (including wages, salaries and actual or anticipated bonuses) to be paid in the current fiscal year to such persons.  Except as provided on Schedule 3.17: (a) no unpaid salary, other than for the immediately preceding pay period and other than pursuant to the existing deferred compensation plans of Seller, is now payable to any of such Employees; and (b) the employment of all employees of Seller is “at will” and may be terminated by Seller without payment of any severance or other compensation other than accrued compensation.  To Seller’s or Owner’s respective Knowledge, Seller (i) is in compliance in all material respects with all applicable foreign, federal, state and local laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, (ii) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to its employees, (iii) is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing, and (iv) is not liable for any payment to any trust or other fund or to any governmental entity with respect to unemployment compensation benefits, social security or other benefits or obligations for employees.

 

3.18                        Operational Restrictions.  Except as set forth on Schedule 3.18, Seller’s Business is not subject to (a) any restrictions under any applicable laws or regulations or (b) any charter or other corporate or contractual restriction or (c) any judgment, order, writ, injunction, decree or order, which has had or could reasonably be expected to have a Material Adverse Effect on Seller’s Business.

 

3.19                        Inventory.  To the Seller’s and Owner’s respective Knowledge, the supplies and other inventories of Seller materially, are in good and marketable condition and are useable in the ordinary course of business and all customer-owned goods have been maintained, and write-offs taken for unclaimed orders, consistent with practices customary to the dry cleaning industry.  Since the date of the Financial Statements, Seller has maintained inventory at levels consistent with Seller’s past practices in the ordinary course of business.

 

3.20                        No Broker.  Except for Rix Business Sales, Seller has not retained or used the services of an agent, finder or broker in connection with the transactions contemplated by this Agreement.  Seller shall pay, and shall indemnify, hold harmless and defend Buyer from and against, all commissions, finder’s and other fees and expenses charged or asserted by any agent, finder or broker, by reason of any such retention or use of the services of any such agent, finder or broker by Seller.

 

3.21                        Representations and Warranties of Seller and Owner.  The representations and warranties of Seller and Owner contained herein, and the disclosures contained in Seller’s Disclosure Schedule, do not contain any statement of a material fact that was untrue when made or omit any information necessary to make any such statement contained therein, in light of the circumstances under which such statement was made, not misleading.  To the Seller’s and

 

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Owner’s respective Knowledge, the copies of all documents furnished by Seller to Buyer pursuant to the terms of this Agreement are complete and accurate copies of the original documents.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer hereby makes the representations and warranties set forth in this Article IV to Seller:

 

4.1                               Authority and Binding Effect.  Buyer has the full corporate power and authority to execute and deliver this Agreement and the Bill of Sale (as hereinafter defined).  This Agreement and the Bill of Sale and the consummation by Buyer of its obligations contained herein and therein have been duly authorized by all necessary corporate actions of Buyer and such agreements have been duly executed and delivered by Buyer.  This Agreement is a valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms, and, upon execution and delivery, the Bill of Sale will be a valid and binding agreement of Buyer and shall be enforceable against it in accordance with its terms, except as enforceability of the obligations of Buyer under this Agreement and the Bill of Sale may be limited by (i) bankruptcy, insolvency, moratorium or other similar laws affecting creditors’ rights generally, and (ii) general principles of equity relating to the availability of equitable remedies (whether such agreements are sought to be enforced in a proceeding at law or a proceeding in equity).  It is not necessary for Buyer to take any action or to obtain any approval, consent or release by or from any third person, governmental or other entity, to enable Buyer to enter into or perform its obligations under this Agreement and the Bill of Sale.

 

4.2                               Organization and Standing.  Buyer is a corporation duly organized and validly existing under and is in good standing under the laws of the State of Delaware.  Buyer has requisite corporate power to own and operate its properties and assets, and to carry on its business as presently conducted.  Buyer is duly qualified to do business and is in good standing in each jurisdiction in which the character of the business conducted by it or the location of the properties owned or leased by it make such qualification necessary, except for jurisdictions in which the failure to so qualify would not have a Material Adverse Effect on Buyer.

 

4.3                               Compliance with Other Instruments.  The execution and delivery of this Agreement, the Bill of Sale and all other agreements to be entered into in connection herewith and the consummation of the transactions contemplated hereby and thereby will not conflict with or result in any violation of any law, rule, regulation, judgment, order, decree or ordinance applicable to Buyer or its properties or assets, or conflict with or result in any breach or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit, under any provision of the Certificate of Incorporation or bylaws of Buyer.

 

4.4                               Governmental Consent, etc..  No consent, approval, order or authorization of, or registration, declaration or filing with, any governmental entity is required by or with respect to Buyer in connection with the execution and delivery of this Agreement or the consummation by

 

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Buyer of the transactions contemplated hereby, except for such consents, approvals, orders, authorizations, registrations, declarations and filings which if not obtained or made would not have a Material Adverse Effect on Buyer.

 

4.5                               Litigation and Proceedings. There is no action, suit, proceeding or investigation, or any counter or cross-claim in an action brought against, by or on behalf of Buyer, whether at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, or before any arbitrator of any kind, that is pending or, to Buyer’s Knowledge, threatened, which could reasonably be expected to affect adversely Buyer’s ability to perform its obligations under this Agreement or the Bill of Sale or complete any of the transactions contemplated hereby or thereby.

 

4.6                               Broker Fees.  Buyer shall pay, and shall indemnify, hold harmless and defend Seller from and against, all commissions, finder’s and other fees and expenses charged or asserted by any agent, finder or broker, by reason of any such retention or use of the services of any such agent, finder or broker by Buyer.

 

4.7                               Sufficient Funds.  Buyer is currently working to complete a significant financing.  If successful, Buyer expects to have sufficient cash on hand, to pay the Purchase Price on the Closing Date.  In connection with such a financing Buyer is currently preparing a registration statement on Form S-1 to be filed with the Securities Exchange Commission (the “Registration Statement”).  Buyer further acknowledges that it has engaged (i) an investment bank to act as the lead managing underwriter and sole book running manager in connection with a Qualifying IPO and (ii) Independent Auditors to complete the audit of its financial statements to be included in its Registration Statement.

 

4.8                               Representations and Warranties of Buyer.  The representations and warranties of Buyer contained herein do not contain any statement of a material fact that was untrue when made or omits any information necessary to make any such statement contained therein, in light of the circumstances under which such statement was made, not misleading.  The copies of all documents furnished by Buyer to Seller pursuant to the terms of this Agreement are complete and accurate copies of the original documents.

 

4.9                               Limitations on Seller’s Representations and Warranties.  The Buyer hereby acknowledges and agrees that, except as expressly set forth in Article IV, Seller makes, and the Buyer is not relying on, any representation or warranty of any kind whatsoever, express or implied, at law or in equity, in connection with or with respect to any of the Purchased Assets, the Assumed Liabilities, the Business or otherwise, or with respect to any information provided to the Buyer, including with respect to any representations or warranties of merchantability, fitness for any particular purpose or use, title, or non-infringement and that all other representations and warranties are disclaimed by Seller.  The Buyer further acknowledges and agrees that, except as expressly set forth in Article IV, the Buyer is purchasing the Purchased Assets on an “as-is, where-is” basis.

 

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ARTICLE V

 

CONDUCT OF BUSINESS PENDING THE CLOSING

 

Between the date hereof and the Closing, and except as otherwise consented to by Buyer in writing, Seller covenants as follows:

 

5.1                               Access.  Except as may be prohibited by law, by the terms of any Contract or under any confidentiality agreement, or as may be required to preserve the confidentiality of privileged or otherwise protected information, Seller shall give to Buyer and its representatives, from and after the Effective Date, access during normal business hours to Kirby Schnebly and Stephen R. Mailloux (“Mr. Mailloux”), and such copies of Seller Financial Statements, books and records, and contracts and leases and other documentation, so as to enable Buyer to inspect and evaluate all aspects of the Business and operations, assets, operating results (including without limitation, revenues, cash flows and tax returns for the last three (3) years), condition (financial and otherwise), future prospects and projections, financial controls, current and contingent liabilities, employees and consultants, capitalization, ownership, and legal affairs relating to Seller’s Business.  Buyer agrees to conduct its review, and to cause its representatives to conduct their review, in a manner designed to minimize any disruption of Seller’s business and to not intentionally alert any of Seller’s employees of this pending transaction.

 

5.2                               Conduct of Seller’s Business.  Unless Buyer’s prior consent is obtained (which consent shall not be unreasonably withheld or delayed), from the Effective Date until the Closing or termination of this Agreement, whichever first occurs, Seller shall operate and conduct its business diligently and only in the ordinary course, consistent with past practices and not make any material change in its methods of accounting (except as required by GAAP or as required hereunder), management, marketing or operations.  In furtherance thereof, unless Buyer’s prior consent to do otherwise is obtained (which consent shall not be unreasonably withheld or delayed), Seller shall:

 

(a)                                 obtain approval from Buyer prior to undertaking any new material business opportunity outside the ordinary course of business;

 

(b)                                 confer at the request of Buyer with one or more designated representatives of Buyer to report material operational matters and to report the general status of ongoing business operations;

 

(c)                                  notify Buyer of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), adjudicatory proceedings or submissions involving any property or other assets of Seller;

 

(d)                                 except as contemplated by this Agreement, confer with Buyer prior to (i) entering into any employment, deferred compensation or other similar agreement (or any amendment to any such existing agreement) with any current or former director, officer or employee of Seller except as contemplated herein, (ii) increasing compensation, bonus or other benefits payable or otherwise made available to current or former directors, officers or employees of Seller (other than in the ordinary course of business salary increases for employees

 

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other than officers and directors), (iii) declaring or paying any bonuses or year-end payments to any current or former directors, officers or employees of Seller, or (iv) establishing, adopting, or amending (except as required by applicable law), any collective bargaining, bonus, profit sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any current or former director, officer or employee of Seller;

 

(e)                                  except in the ordinary course of business and consistent with past practices, not (i) create or incur any indebtedness, or (ii) release or create any Encumbrance of any nature whatsoever;

 

(f)                                   write-off or write-down any assets of Seller, other than in the normal course of business;

 

(g)                                  not make any changes in its accounting methods or practices or revalue its assets, except for (i) those changes required by GAAP, and (ii) changes in its tax accounting methods or practices that may be necessitated by changes in applicable Tax laws;

 

(h)                                 not sell or otherwise dispose of any material asset or make any material commitment relating to its assets other than in the ordinary course of business or enter into or terminate any lease of real property other than in the ordinary course of business;

 

(i)                                     not transfer or license to any Person or otherwise extend, amend or modify any rights to the Business Intellectual Property Rights of Seller, other than in the ordinary course of business consistent with past practice;

 

(j)                                    not (i) enter into any new Material Contract, other than in the ordinary course of business consistent with past practices, or (ii) except in the ordinary course of business or as contemplated by this Agreement, Materially modify, amend or terminate any Material Contract to which Seller is a party or waive, release, or assign any material rights or claims thereunder, in any such case in a manner that may cause a Material Adverse Effect on Buyer;

 

(k)                                 not enter into or propose to enter into an agreement providing for the possible acquisition by Seller or any of its subsidiaries (by way of merger, purchase of capital stock, purchase of assets or otherwise) of any material portion of the capital stock or assets of another entity;

 

(l)                                     not take any actions that could reasonably be expected to result in a Material Adverse Effect on the Business; or

 

(m)                             authorize any of, or commit or agree to take any of, the foregoing actions.

 

5.3                               Negotiation With Others.  From and after the date hereof until the earlier to occur of the Closing or the termination of this Agreement pursuant to Article XI, neither Seller, World Cleaners nor Owner shall, directly or indirectly, (i) solicit, conduct discussions with or engage in negotiations with any person, other than Buyer, relating to the possible acquisition of Seller or any of its subsidiaries (whether by way of merger, purchase of ownership interests, purchase of assets or otherwise) or any material portion of its or their ownership interests or

 

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assets (each an “Acquisition Proposal”), (ii) provide information with respect to Seller or any of its subsidiaries to any person, other than Buyer, relating to the possible acquisition of Seller or any of its subsidiaries (whether by way of merger, purchase of ownership interests, purchase of assets or otherwise) or any material portion of its or their ownership interests or assets, (iii) enter into an agreement with any person, other than Buyer, providing for the acquisition of Seller or any of its subsidiaries (whether by way of merger, purchase of ownership interests, purchase of assets or otherwise) or any material portion of its or their ownership interests or assets, or (iv) make or authorize any statement, recommendation or solicitation in support of any possible acquisition of Seller or any of its subsidiaries (whether by way of merger, purchase of ownership interests, purchase of assets or otherwise) or any material portion of its or their ownership interests or assets by any person, other than by Buyer.  Seller shall immediately terminate all discussions or negotiations, if any, with any third party with respect to, or any that could reasonably be expected to lead to, an Acquisition Proposal.

 

5.4                               Notification of Certain Matters.  Seller shall give prompt notice to Buyer of (i) the occurrence or non-occurrence, to Seller’s Knowledge, of any event the occurrence or non-occurrence of which would cause any representation or warranty of Seller contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Closing Date and (ii) any failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.4 shall not limit or otherwise affect the remedies available hereunder to Buyer.

 

ARTICLE VI

 

OBLIGATIONS SURVIVING THE CLOSING

 

6.1                               Payment of Secured Obligations and Termination of Liens and Encumbrances.  Seller hereby covenants that Seller shall have arranged to pay, at the Closing, all of the indebtedness or other obligations, other than Assumed Obligations, listed on Schedule 6.1 (the “Secured Obligations”) and for the holders of the Secured Obligations to deliver, in exchange for such payment, (i) UCC Termination Statements or such other instruments and documents as Buyer may reasonably request to effectuate the removal and termination of any Encumbrances affecting any of the Purchased Assets and evidence the release by such holders of any claims they may have against the Purchased Assets or Seller’s Business, and (ii) such documents as Buyer may reasonably request to evidence the payment of such Secured Obligations.  If it is determined at any time hereafter that Seller failed to remove or cause to be removed, without liability or cost or expense to Buyer and without the disposition or diminution in the value of any of the Purchased Assets, any Encumbrance on any of the Purchased Assets that was in existence on or prior to the Closing Date, or if any Encumbrance is imposed or placed on any of the Purchased Assets (or any replacements thereof) after the Closing Date as a result of any act or omission of Seller, occurring on, prior to or after the Closing Date, then, without limiting any other right or remedy Buyer may have, Seller shall cause such Encumbrance to be removed at no expense or liability to Buyer, and without any reduction or disposition of any of the Purchased Assets; provided, that in the first instance Buyer shall notify Seller of the Encumbrance and provide Seller with an opportunity to cause such Encumbrance to be removed.

 

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6.2                               Further Assurances.  Each party hereto shall execute and deliver after the date hereof and after Closing such instruments and take such other actions as the other party may reasonably request in order to carry out the terms, conditions and intent of this Agreement or to better evidence or effectuate the transactions contemplated herein.  Prior to the Closing, Buyer will offer employment to the Employees listed in Schedule 6.2, and Seller shall use good faith efforts to cause such employees to accept employment with Buyer.

 

6.3                               Expenses.  Unless otherwise specifically provided for herein, each party shall pay all of its respective costs and expenses incurred or to be incurred by it in negotiating and preparing this Agreement and the other agreements contemplated hereby, and in carrying out and closing the transactions contemplated by this Agreement whether or not this Agreement or the transactions contemplated hereby are ever consummated.  Notwithstanding the foregoing, if the transactions contemplated hereby are not consummated because this Agreement is terminated pursuant to Section 11.1(d) or Buyer fails to consummate a Qualifying IPO, Buyer agrees to pay Seller’s costs and expenses incurred by it in preparing the Audits, negotiating, preparing and performing under this Agreement, and the other agreements contemplated hereby, not to exceed One Hundred Thousand Dollars ($100,000), less any Expense Prepayment Fees previously delivered.

 

6.4                               Taxes.  Buyer shall pay all Taxes imposed in the form of sales tax arising from the sale of the Purchased Assets pursuant to this Agreement.  Seller shall pay all Taxes of any kind or nature arising from (i) the conduct or operation of the Business up to the Closing Date and the conduct or operation by Seller, prior to or after the Closing Date, of any other business or business activities operations, (ii) its sale of the Purchased Assets pursuant to this Agreement, other than the sales tax obligations assumed by Buyer under this Section 6.4, (iii) a proportionate share of Taxes attributable to the portion of any Straddle Period occurring on or before the Closing Date, and (iv) any liquidation, partial or whole, of Seller.  If any Taxes required under this Section 6.4 to be borne by Seller are assessed against Buyer or any of the Purchased Assets, Buyer shall notify Seller in writing promptly thereafter and Seller shall be entitled to contest, in good faith, such assessment or charge so long as such assessment does not cause a Material Adverse Effect on Buyer or the Purchased Assets or Buyer’s business.  Notwithstanding the foregoing, Buyer may after ten (10) days prior written notice to Seller (but shall not be obligated to) pay any such Taxes assessed against it, its business or any of the Purchased Assets, but which are payable by Seller pursuant hereto, if Buyer’s failure to do so, in the reasonable judgment of Buyer, could result in the immediate imposition of an Encumbrance on any of the Purchased Assets or any other assets of Buyer or if Seller fails to contest such assessment or charge diligently and in good faith.  If in accordance with the immediately preceding sentence, Buyer pays any Taxes which pursuant hereto are required to be borne by Seller, Buyer shall be entitled to reimbursement thereof from Seller in accordance with the indemnity provisions set forth in Article XII hereof.

 

6.5                               Non-Competition, Non-Solicitation and Confidentiality.

 

(a)                                 For purposes of this Section 6.5:

 

(i)                                     the term “Competitive Business” shall mean any business directly in competition with the Business and specifically does not include any business currently

 

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conducted by United Cleaners Supply, Inc. and/or United Cleaners Supply, LLC (collectively, “UCS”) and any of their successor or assigns whether by merger or sale of substantially all of their assets; and

 

(ii)                                  the term “Territory” shall mean the State of Nevada.

 

(b)                                 Noncompetition. Seller represents that Seller has no affiliates; provided, however, Owner owns UCS and other companies in a similar business.  Neither Seller, World Cleaners, Owner nor any affiliate of Owner shall, directly or indirectly, engage (whether as an owner, operator, manager, employee, officer, director, consultant, advisor, representative, or otherwise) in any Competitive Business in the Territory during the period beginning on the Closing Date and ending on the fifth (5th) anniversary of the Closing Date.  Nothing herein shall prevent or limit Seller’s or Owner’s ownership in any publicly traded company, provided that Seller’s and Owner’s collective ownership interest therein is less than two percent (2%) of the outstanding equity of such company.  The parties hereto agree that the covenants set forth in this Section 6.5 are reasonable with respect to their duration, geographical area, and scope.  If the final judgment of a court of competent jurisdiction declares that any term or provision of this Section 6.5 is invalid or unenforceable, the parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

 

(c)                                  Nonsolicitation.  Seller, World Cleaners and Owner agree that, during the period beginning on the Closing Date and ending on the fifth (5th) anniversary of the Closing Date (the “Nonsolicitation Period”), neither Seller, World Cleaners, Owner nor any of their respective affiliates shall (i) directly or indirectly contact, approach, or solicit for the purpose of offering employment to or hiring (whether as an employee, consultant, agent, independent contractor or otherwise) or actually hire any of the five (5) most highly compensated persons employed by Seller in the Business immediately prior to the Closing Date (or at any time within the twelve months preceding the Closing Date) without the prior written consent of Buyer, or (ii) induce or attempt to induce any payor or other business relation of Seller into any business relationship which might cause a Material Adverse Effect on Buyer.

 

(d)                                 Confidentiality. After the Closing Date, Seller, World Cleaners, and Owner shall and each shall cause their respective affiliates to treat and hold as confidential any information concerning the Business of Seller (including, without limitation, all Intellectual Property Rights included in the Purchased Assets) that is marked confidential or proprietary and not already generally available to the public (the “Confidential Information”), refrain from using any of the Confidential Information except in connection with this Agreement or as otherwise required to comply with applicable law, and at any time upon the reasonable request of Buyer deliver promptly to Buyer all tangible embodiments (and, except as may be required to comply with applicable law, all copies) of the Confidential Information which are included within the Purchased Assets and which are in its possession or under its control following the Closing Date.  In the event that after the Closing Date Seller, World Cleaners, Owner or any of 

 

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their respective affiliates, is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process or by any order of governmental entity) to disclose any Confidential Information, such disclosing party shall notify Buyer promptly of the request or requirement so that Buyer may seek an appropriate protective order or waive compliance with the provisions of this Section 6.5(d).  If, in the absence of a protective order or the receipt of a waiver hereunder, Seller, World Cleaners, Owner or any of their respective affiliates is on the advice of counsel, compelled to disclose any Confidential Information to any tribunal, Seller, World Cleaners, Owner and/or any of their respective affiliates may disclose the Confidential Information to the tribunal; provided that Seller, World Cleaners, Owner or any of their respective affiliates, as the case may be, shall use its or their commercially reasonable efforts to obtain, at the request and sole cost and expense of Buyer, an order or other assurance that confidential treatment shall be accorded to such portion of the Confidential Information required to be disclosed as Buyer shall designate.

 

6.6                               Supply Agreement.  For a period of five (5) years following the Closing Date, Buyer hereby agrees to purchase its dry cleaning and laundry supplies from UCS pursuant to the terms of the Supply Agreement, substantially in the form attached hereto as Exhibit C.

 

ARTICLE VII

 

SURVIVAL OF REPRESENTATIONS AND WARRANTIES

 

The representations and warranties of Buyer contained in this Agreement shall survive the Closing Date and of Seller shall survive until the first anniversary of the Closing Date, except for the representations and warranties in Sections 3.1 (Authority and Binding Effect), 3.5(b) (Title to and Adequacy of Purchased Assets) (but only the first sentence thereof), and 3.20 (Brokers), which shall survive indefinitely.  The covenants or agreements of the Parties contained in this Agreement that contemplate action to be taken or not taken or obligations in effect after the Closing shall survive in accordance with their terms. This Article VII shall not limit any covenant or agreement of the parties contained in this Agreement that by its terms contemplates performance after the Closing, and shall not extend the applicability of any covenant or agreement of the Parties contained in this Agreement that by its terms relates only to a period between the date of this Agreement and the Closing.

 

Notwithstanding anything to the contrary, no claim may be made with respect to any representations or warranties under this Agreement after the expiration of the applicable survival period set forth in this Article VII.  Written notice of a claim must be given by a party in accordance with the provisions of this Agreement prior to the expiration of the applicable representations and warranties.

 

ARTICLE VIII

 

CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER

 

The obligation of Buyer to consummate the purchase of the Purchased Assets from Seller is subject to the fulfillment, or the waiver by Buyer, at or prior to the Closing, of each of the following conditions precedent:

 

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8.1                               Representations and Warranties.  The representations and warranties made by Seller in Article III, shall be true and correct in all material respects, unless modified by materiality in the representation or warranty, in which case they shall be true and correct in all respects, on the date hereof and at and as of the Closing Date, with the same force and effect as if made again at and as of that time.

 

8.2                               Performance of Obligations.  Seller shall have performed and complied, in all material respects with all of the covenants required by this Agreement to have been performed prior to the Closing.

 

8.3                               Absence of Material Litigation.  There shall be (a) no pending or overtly threatened litigation (other than litigation which is determined by the parties in good faith, after consulting their respective attorneys, to be without legal or factual substance or merit), whether brought against Seller or Buyer, that seeks to enjoin the consummation of any of the transactions contemplated by this Agreement, (b) no order that has been issued by any court or governmental agency having jurisdiction that restrains or prohibits the consummation of the purchase and sale of the Purchased Assets hereunder and no proceedings pending which are reasonably likely to result in the issuance of such an order; and (c) no pending or overtly threatened litigation, which has had or is reasonably expected to have a Material Adverse Effect on the Business.

 

8.4                               No Material Adverse Change.  Since the date of this Agreement, there shall not have been any change in or other event that has had or reasonably is expected to have a Material Adverse Effect on the Business.

 

8.5                               Certificates.  Buyer shall have received from Seller a certificate executed by the Manager or President of Seller, dated as of the Closing Date and reasonably satisfactory in form and substance to Buyer, certifying that (i) each of the representations and warranties of Seller contained in Article III is true and correct on and as of the Closing Date, and (ii) Seller has performed and complied, with all of their covenants required to have been performed or complied with by it pursuant hereto on or prior to the Closing Date.

 

8.6                               Delivery of Additional Instruments.  On the Closing Date, Seller shall deliver, or cause to be delivered to Escrow, the following documents and instruments, in the form required herein, unless waived in writing by Buyer:

 

(a)                                 The Bill of Sale and Assumption Agreement in substantially the form of Exhibit D hereto, duly executed by Seller (the “Bill of Sale”);

 

(b)                                 Evidence of the receipt of all required approvals of governmental authorities and all third party consents necessary to enable Seller to consummate the transactions contemplated herein, a list of which is attached hereto as Schedule 8.6(b);

 

(c)                                  UCC termination statements and such instruments and other documents as Buyer may reasonably request, from all persons holding any security interests or other Encumbrances or any other adverse interests in or on any of the Purchased Assets, terminating and discharging all of such security interests and Encumbrances.

 

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(d)                                 A good standing certificate, dated as of a date that is not more than ten (10) days prior to the Closing Date, from the Nevada Secretary of State, for Seller;

 

(e)                                  Such other documents and instruments as Buyer or Buyer’s counsel may reasonably request so as better to evidence or effectuate the transactions contemplated hereby.

 

8.7                               Employment Agreement.  Buyer shall have entered into an agreement for continued employment with Mr. Mailloux, effective as of the Closing Date.

 

8.8                               Leases.  As of the Closing Date, Seller shall be prepared to have existing leases in the name of Seller assigned to Buyer with the prior written consent and approval of the owner(s) of such property, or alternatively, if approved by the landlords and acceptable to Seller, at the election of Buyer, Buyer shall be prepared to enter into new lease agreements, with terms acceptable to Buyer, for the leased real properties set forth on Schedule 1.1(e) (the “Lease Agreements”).

 

8.9                               Audited Financial Statements.  Seller shall have delivered the Financial Statements for 2012 and 2013, audited by an Independent Accounting Firm.

 

8.10                        Closing of IPO.  Buyer shall have received the net proceeds from a Qualifying IPO.

 

8.11                        Due Diligence.  Buyer will have completed its remaining due diligence and will have found the results of such review and/or audit satisfactory in its sole discretion.

 

ARTICLE IX

 

CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER

 

The obligation of Seller to consummate the sale of the Purchased Assets to Buyer is subject to the fulfillment, or the waiver by Seller, at or prior to the Closing, of each of the following conditions precedent:

 

9.1                               Representations and Warranties.  The representations and warranties made by Buyer in Article IV shall be true and correct in all material respects, unless modified by materiality in the representation or warranty, in which case they shall be true and correct in all respects, on the date hereof and at and as of the Closing Date, with the same force and effect as if made again at and as of that time.

 

9.2                               Performance of Obligations.  Buyer shall have performed and complied in all material respects with all of its covenants required by this Agreement to have been performed by it at or prior to the Closing.

 

9.3                               Certificates.  Seller shall have received from Buyer a certificate executed by an executive officer of Buyer, dated as of the Closing Date and reasonably satisfactory in form and substance to Seller, certifying that (i) each of the representations and warranties of Buyer contained herein is true and correct on and as of the Closing Date, and (ii) Buyer has performed and complied, with all of its covenants required to have been performed or complied, with by it pursuant hereto on or prior to the Closing Date.

 

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9.4                               Deliverables.  On the Closing Date, Buyer shall deliver, or cause to be delivered to Escrow the Bill of Sale and Supply Agreement.

 

9.5                               Delivery of Consideration.  Concurrently with the closing of the Qualifying IPO, Buyer shall deliver to Escrow a cash payment in the amount of the portion of the Closing Consideration described in Section 2.1 hereof.

 

ARTICLE X

 

THE CLOSING

 

The consummation of the transactions contemplated hereby (the “Closing”) shall take place on the first business day following the satisfaction or waiver of the closing conditions set forth in Article VIII and Article IX above (the “Closing Date”) at the offices of Escrow or at such other date and place as the parties may agree and shall be deemed to occur at 12:00 p.m., local time, on such date.

 

10.1                        Closing Deliveries of Seller.  At the Closing, Escrow shall deliver, or cause to be delivered to Buyer, the documents and instruments set forth in Article VIII above, in form and substance reasonably satisfactory to Buyer and its counsel.

 

10.2                        Closing Deliveries of Buyer.  At the Closing, Escrow shall deliver, or cause to be delivered, the Purchase Price to Seller and the documents and instruments set forth in Article IX above, in form and substance reasonably satisfactory to Seller and its counsel.

 

ARTICLE XI

 

TERMINATION

 

11.1                        Termination.  Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Closing Date:

 

(a)                                 by mutual written agreement of Buyer and Seller;

 

(b)                                 by Buyer if any condition to the obligations of Buyer under this Agreement to be complied with or performed by Seller at or before the Closing shall not have been complied with or performed prior to November 30, 2014 and such noncompliance or nonperformance shall not have been waived by Buyer;

 

(c)                                  by either Buyer or Seller if any judgment, injunction, order or decree of a court or other governmental entity of competent jurisdiction enjoining Buyer or Seller from consummating the transactions contemplated by this Agreement shall have been entered and such judgment, injunction, order or decree shall have become final and non-appealable; or

 

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(d)                                 by Seller if any condition to the obligation of Seller under this Agreement to be complied with or performed by Buyer at or before the Closing shall not have been complied with or performed prior to November 30, 2014 and such noncompliance or nonperformance shall not have been waived by Seller.

 

11.2                        Procedure Upon Termination.  In the event of termination of this Agreement by Buyer or Seller or by both Buyer and Seller pursuant to Section 11.1 hereof, the transactions contemplated herein shall be abandoned with further action by Buyer.  In addition, if this Agreement is terminated as provided herein:

 

(a)                                 Each party will redeliver all documents, workpapers and other material (and all copies thereof) of or furnished by any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same.

 

(b)                                 Subject to Sections 2.3 and 6.3, the Escrow Agent shall return to the depositor thereof any funds and interest thereon accrued while in Escrow and materials previously placed in Escrow and remaining in Escrow; subject to Section 2.3 and 6.3, the Seller shall return to the Buyer any of the remaining Deposit to the extent that the sums are refundable and were released to the Seller.

 

(c)                                  All information of a confidential nature received by any party hereto with respect to the business of any other party (other than information which is a matter of public knowledge or which has heretofore been or is hereafter published in any publication for public distribution or filed as public information with any governmental authority) shall continue to be subject to the confidentiality obligations described in Section 6.5(d).

 

(d)                                 Upon any termination of this Agreement pursuant to this Article XI, each party will, in a timely and diligent manner, execute and deliver all documents and instruments and perform all acts necessary or reasonably requested by the other party to restore the parties to their relative rights and obligations as of immediately prior to the execution of this Agreement (such as reinstatement of governmental approvals, reassignment of assigned rights and obligations, etc.).  The provisions of this Section 11.2(c) will survive termination of this Agreement

 

ARTICLE XII

 

INDEMNIFICATION

 

12.1                        Obligations of Seller.  Seller and Owner hereby agree that they will jointly and severally indemnify, hold harmless and defend Buyer and each of Buyer’s directors, officers, members, employees and agents and the respective successors and assigns of Buyer and such persons (all of the foregoing, collectively, the “Indemnified Parties” or, individually, an “Indemnified Party”), from and against any and all Losses, to the extent arising from or in connection with the following prior to their expiration under Article VII (collectively, “Buyer Claims”):

 

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(a)                                 any breach of or inaccuracy in any of the representations or warranties of Seller and/or Owner contained in this Agreement or in Seller’s Disclosure Schedules or other documents contemplated hereby;

 

(b)                                 any breach or default by Seller or Owner of any of its covenants or agreements contained in this Agreement;

 

(c)                                  the failure by Seller or Owner to discharge when due any of the Retained Liabilities; and

 

(d)                                 the failure to have paid or to pay, when due, any Taxes that arose out of the operations of Seller prior to the Closing Date or the failure to have filed, when due, any Tax Returns related to any such Taxes for any period up to the Closing Date, whether or not such failure constitutes a breach of the representations or warranties of Seller contained in Section 3.13 or is disclosed in this Agreement or Seller’s Disclosure Schedule.

 

(e)                                  Seller’s operation of the Business prior to the Closing Date

 

12.2                        Limitations.

 

(a)                                 Notwithstanding anything contained herein to the contrary, the obligations of Seller and/or Owner pursuant to Section 12.1 shall: (i) not apply to any Buyer Claims until, and then only to the extent that, the Losses incurred by all Buyer Indemnified Parties exceeds five percent (5%) of the Purchase Price (the “Basket”); and (ii) be limited to, and shall not exceed, the aggregate amount of forty percent (40%) of the Purchase Price (the “Cap”).  Any payment under this Section 12 may at Seller’s option be deemed to be a reduction in the Purchase Price.

 

(b)                                 Notwithstanding anything contained herein to the contrary, no Buyer Indemnified Party shall be entitled to indemnification pursuant to Article XII to the extent the underlying claim for which indemnification is sought related to the inaccuracy or breach of a representation or warranty set forth in this Agreement of which a Buyer Indemnified Party had knowledge prior to the Closing.

 

12.3                        Limitations on Obligations of Seller and Owner.  In no event shall Seller nor Owner have any obligation to indemnify the Indemnified Parties for or in respect of any of the Assumed Obligations, and Buyer agrees to indemnify, hold harmless and defend Seller, its directors, officers, members, employees and agents and the respective successors and assigns of Seller and such persons and Owner (all of the foregoing, collectively, the “Seller Indemnified Parties”) (in the same manner and on the same terms and conditions that are applicable to Seller’s and Owner’s indemnification obligations under this Article XII), from any and all Losses, incurred by the Seller Indemnified Parties as a result of (a) any failure by Buyer to pay or otherwise discharge, and from any failure by Buyer to comply with the provisions of, any of the Assumed Obligations after the Closing Date, (b) any breach or default by Buyer of any of its covenants or agreements, or any representations or warranty hereunder, (c) the conduct of the Business or the use or ownership of the Purchased Assets, in each case from and after the Closing Date and (d) the breach by Buyer of any Lease Agreement upon which Owner has any continuing guaranty.

 

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12.4                        Claims Procedure.  Promptly after the receipt by any Indemnified Party of notice of, or threat of, the commencement of any action or proceeding against such Indemnified Party, such Indemnified Party shall, if a claim with respect thereto is or may be made against any indemnifying party (the “Indemnifying Party”) pursuant to this Article XII, give such Indemnifying Party written notice of the commencement of such action or proceeding and give such Indemnifying Party a copy of such claim and/or process (or threat thereof) and all legal pleadings in connection therewith.  The failure to give such notice shall not relieve any Indemnifying Party of any of its indemnification obligations contained in this Article XII, except where, and solely to the extent that, such failure actually and prejudices the rights of such Indemnifying Party.  Such Indemnifying Party shall have the right to defend, at his or its own expense and by his or its own counsel reasonably acceptable to the Indemnified Party, any such matter involving the asserted liability of the Indemnified Party; provided, however, that the Indemnified Party shall have the right to participate in the defense or such asserted liability at the Indemnified Party’s own expense.  In any event, the Indemnified Party, such Indemnifying Party and its counsel shall cooperate in the defense against, or compromise of, any such asserted liability, and in cases where the Indemnifying Party shall have assumed the defense, the Indemnified Party shall have the right to participate in the defense of such asserted liability at the Indemnified Party’s own expense.  In the event that such Indemnifying Party shall decline to participate in or assume the defense of such action, in accordance with the provisions hereof, or if the Indemnifying Party discontinues the diligent and timely conduct thereof, any of the Indemnified Parties may undertake such defense and the Indemnifying Party shall be responsible for reimbursing the Indemnified Parties for their reasonable legal fees and expenses in connection therewith as and when such fees and expenses are incurred by them.  If the Indemnifying Party is defending the claim as set forth above, the Indemnifying Party shall have the sole right to settle the claim, subject to obtaining the consent of the Indemnified Party; provided, however, that if the Indemnified Party shall fail to consent to the settlement of such a claim by the Indemnifying Party, which settlement (i) the claimant has indicated it will accept, and (ii) includes an unconditional release of the Indemnified Party and by the claimant and imposes no restrictions on the future activities of the Indemnified Party and its affiliates, the Indemnifying Party shall have no liability with respect to any payment required to be made to such claimant in respect of such claim.  If the Indemnified Party is defending the claim as set forth above, the Indemnified Party shall have the right to settle or compromise any claim against it after consultation with, but without the prior approval of, any Indemnifying Party, provided, however, that such settlement or compromise shall not, unless consented to in writing by such Indemnifying Party, which shall not be unreasonably withheld, be conclusive as to the liability of such Indemnifying Party to the Indemnified Party.

 

12.5                        Limitations on Liability; Exclusive Remedy.  Each of the parties hereto acknowledges and agrees that, from and after the Closing Date, Buyer’s sole and exclusive monetary remedy with respect to any and all claims relating to the subject matter of this Agreement shall be to make claims under this Article XII.  Notwithstanding anything herein to the contrary, no breach of any representation, warranty, covenant or agreement contained herein shall give rise to any right on the part of Buyer, after consummation of the transactions contemplated hereby, to rescind this Agreement or any of the transactions herein, provided that nothing in this Agreement shall be deemed to constitute a waiver of any injunctive or other equitable remedies or any tort claims for, or causes of action arising from, intentionally fraudulent misrepresentation, willful breach or deceit.

 

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ARTICLE XIII

 

MISCELLANEOUS

 

13.1                        Assignment.  Neither Seller nor Buyer may assign this Agreement, or assign its rights or delegate its duties hereunder, without the prior written consent of the other party hereto.  This Agreement will be binding upon, inure to the benefit of, and be enforceable by the parties and their respective successors and assigns.

 

13.2                        Severability.  Any provision of this Agreement which is illegal, invalid or unenforceable shall be ineffective to the extent of such illegality, invalidity or unenforceability, without affecting in any way the remaining provisions hereof.

 

13.3                        Governing Law.  This Agreement, its construction and the remedies for its enforcement or breach are to be applied pursuant to, and in accordance with, the laws of the State of Nevada, without regard to the principles of conflicts of law thereof.

 

13.4                        Entire Agreement; Amendment.  This Agreement and the Exhibits and Schedules hereto, and each additional agreement and document to be executed and delivered pursuant hereto, constitute all of the agreements of the parties with respect to, and supersede all prior agreements and understandings relating to the subject matter of, this Agreement or the transactions contemplated by this Agreement.  This Agreement may not be modified or amended except by a written instrument specifically referring to this Agreement signed by the parties hereto.

 

13.5                        Waiver.  No waiver by one party of the other party’s obligations, or of any breach or default hereunder by any other party, shall be valid or effective, unless such waiver is set forth in writing and is signed by the party giving such waiver; and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature or any other breach or default by such other party.

 

13.6                        Interpretation; Headings.  This Agreement is the result of arms’-length negotiations between the parties hereto and no provision hereof, because of any ambiguity found to be contained therein or otherwise, shall be construed against a party by reason of the fact that such party or its legal counsel was the draftsman of that provision.  The section, subsection and any paragraph headings contained herein are for the purpose of convenience only and are not intended to define or limit or affect, and shall not be considered in connection with, the interpretation of any of the terms or provisions of this Agreement.

 

13.7                        Counterparts.  This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

13.8                        Notices.  All notices, requests, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given to the person designated below (i) on the date of delivery if delivered in person; (ii) on the date of transmission by fax, provided that the successful transmission of the fax has been confirmed through a confirmation function sheet provided by the fax machine used for such transmission or by electronic mail at the e-mail 

 

29

 

address set forth; (iii) on the third business day following the deposit thereof in the United States Mail, provided it is mailed by certified mail, return receipt requested and postage prepaid and properly addressed; (iv) on the earlier of actual receipt or second business day after being sent by air courier or commercial delivery service; or (v) upon transmission, when sent by electronic mail or facsimile transmission.  Any party hereto may from time to time, by written notice to the other parties, designate a different address, which shall be substituted for the one specified below:

 

If to Seller:

 

Advent Cleaners, LLC

Attention: Steve S. Hong

1237 West Walnut Street

Compton, California 90220

Email: united-mrhong@hotmail.com

 

and

 

Advent Cleaners, LLC

Attention: Stephen R. Mailloux

3250 West Ali Baba Lane, Suite C

Las Vegas, Nevada 89118

Email: srmailloux@adventcleaners.com

 

With a copy to:

 

Lamb & Kawakami

Attention: Kevin J. Lamb, Esq.

333 South Grand Avenue, Suite 4200

Los Angeles, California 90071

Email: klamb@lamb-kawakami.com

 

If to Buyer:

 

U.S. Dry Cleaning Services Corporation

Attention:  Alex Bond

20250 SW Acacia St. #230

Newport Beach, California 92660

Fax:  (949) 734-7284

Email:  alex@usdrycleaning.com

 

13.9                        Public Announcements.  Neither Seller nor Buyer will make any public announcements concerning matters set forth in this Agreement or the negotiation thereof without the prior written consent of the other party unless such disclosure is required by law or rules and regulations of any governmental authority.  Any such disclosure shall be provided for review to the other party in advance of public release to the extent reasonably practical.

 

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13.10                 Attorneys’ Fees.  If any action or proceeding relating to this Agreement or the Bill of Sale, or the enforcement of any provision of this Agreement or the Bill of Sale is brought by a party hereto against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled).

 

13.11                 Survival Provisions.  All obligations of the parties that are, or may be, performed or performable after Closing shall survive the Closing.

 

13.12                 Escrow Instructions.  This Agreement shall constitute both an agreement between Seller and Buyer and escrow instructions for the Escrow Agent.  Seller and Buyer shall promptly execute and deliver to the Escrow Agent any additional escrow instructions requested by the Escrow Agent which are consistent with the terms of this Agreement.  Any additional instructions shall not modify or amend any provisions of this Agreement unless expressly agreed in writing by Seller and Buyer.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, each of Seller, Buyer, World Cleaners and Owner has caused its duly authorized representative to execute this Asset Purchase Agreement on the date first written above.

 

	
BUYER
    	
 
    	
SELLER
    
	
 
    	
 
    	
 
    
	
U.S. Dry Cleaning Services Corporation,
    	
 
    	
Advent Cleaner, LLC,
    
	
a Delaware corporation
    	
 
    	
a Nevada limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Alex Bond
    	
 
    	
By
    	
/s/ Stephen R. Mailloux
    
	
 
    	
Alex Bond
    	
 
    	
 
    	
Stephen R. Mailloux
    
	
 
    	
Chief Executive Office
    	
 
    	
 
    	
Manager
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
OWNER
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/ Steve S. Hong
    	
 
    	
 
    
	
Steve S. Hong
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
WOLRD   CLEANERS
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
World Cleaners, LLC
    	
 
    	
 
    
	
a Nevada limited liability company
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By
    	
/s/ Stephen R. Mailloux
    	
 
    	
 
    
	
 
    	
Stephen R. Mailloux
    	
 
    	
 
    
	
 
    	
Manager
    	
 
    	
 
    

 

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EXHIBITS

 

Exhibit A                                                                                          Definitions

Exhibit B                                                                                          Premises Used in Business

Exhibit C                                                                                          Form of Supply Agreement

Exhibit D                                                                                          Form of Bill of Sale

 

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EXHIBIT A

 

Definitions

 

For the purposes of this Agreement, unless the context otherwise requires, the following terms shall have the respective meanings set forth below and grammatical variations of such terms shall have corresponding meanings:

 

“Adjusted EBITDA” means Seller’s the net income before interest, taxes, depreciation and amortization of the Business, each determined in accordance with GAAP and the amount so determined shall be adjusted by excluding therefrom the amount of compensation and benefit costs paid by Seller to Owner and any payments on Business Contracts not included within the Assigned Contracts and any non-reoccurring expenses directly related to the transactions contemplated by this Agreement (including Seller’s accounting fees incurred in preparation of the audited financial statements for Seller’s fiscal years ended December 31, 2012 and December 31, 2013 and legal fees directly related to the drafting of this Agreement and the transactions contemplated herein).

 

“Business Days” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of California are authorized or required by law or other governmental action to close.

 

“Business Intellectual Property Rights” means, collectively, all (i) U.S. and foreign, whether registered or unregistered, patents, trademarks, trade names, trade dress, service marks, copyrights, and applications therefor, (ii) computer software programs or applications (in both source code and object code form) not including out of the box programs, such as Word, (iii) industrial models, inventions, invention disclosures, author’s rights, designs, utility models, inventor rights, schematics, technology, (iv) trade secrets, know-how, and other tangible information or material, and (v) confidential information and any other proprietary data or information of any nature or form.

 

“Closing Date” means November 30, 2014, unless extended to February 28, 2015 pursuant to Section 2.3.

 

“Encumbrance” means any encumbrance, lien, charge, hypothecation, pledge, mortgage, title retention agreement, security interest of any nature, restriction (other than restriction or transfer), condition or any adverse interest of any nature, claim, exception, right of set-off, reservation, easement, right of occupation, any matter capable of registration against title, option, right of pre-emption, privilege, restriction, condition or any adverse interest of any nature, or any contract to create any of the foregoing.

 

“Escrow” shall be a mutually agreeable escrow company.

 

“Independent Accounting Firm” means a Certified Public Accountant having no financial or other interest in the client whose financial statements are being examined.

 

“Knowledge” of a party shall mean (i) if an individual, the actual knowledge of the individual and any knowledge that a reasonable person in such capacity should have after due inquiry, and (ii) if any entity, the actual knowledge of any executive officer or controller of such party.

 

A-1

 

“Losses” in respect of any matter means all claims, demands, proceedings, losses, damages, obligations, liabilities, deficiencies, costs and expenses (including all legal and other professional fees and disbursements, interest, penalties and amounts paid in settlement) arising, directly or indirectly, as a result of such matter (but excluding any consequential losses).

 

“Material Adverse Effect” means a material adverse effect on the business, results of operations or financial condition of the Business and the Purchased Assets taken as a whole; provided, however, that the term “Material Adverse Effect” does not, and shall not be deemed to, include any of the following: (i) changes or effects that generally affect the industry or industries in which the Business operates; (ii) changes in securities, financial or credit markets, interest rates or general economic, regulatory or political conditions, including acts of civil unrest, terrorism, cyber threats, or the commencement or escalation of any war, whether declared or undeclared, or other hostilities; (iii) any conditions resulting from natural disasters or weather developments, including earthquakes, hurricanes, tsunamis, typhoons, lightning, hail storms, blizzards, tornadoes, droughts, floods, cyclones, arctic frosts, mudslides and wildfires, manmade disasters or acts of God; (iv) changes or effects arising out of, or attributable to, the announcement of the execution of this Agreement or the identity of the Buyer, including with respect to the customers and employees of the Business, compliance by Seller with their obligations hereunder or the consummation of the transactions contemplated hereby; (v) changes or effects due to changes (or proposed or prospective changes) in any Laws affecting the Business or the Purchased Assets; (vi) changes in GAAP or other applicable accounting regulations and principles or the interpretation thereof; or (vii) the failure of the Business to meet any internal or analyst projections or forecasts.

 

“Qualifying IPO” a public offering of Buyer’s securities, whether in a bona fide firm commitment underwritten public offering or in a sale through retail brokers organized by an underwriter, with net proceeds to Buyer of at least $6,000,000.

 

“Straddle Period” shall mean a Tax period or year commencing prior to and ending after the Closing Date.

 

A-2EXHIBIT 10.69

AMENDED AND RESTSATED
INVESTMENT AGREEMENT

 

THIS
AMENDED AND RESTATED AGREEMENT dated as of the 27th day of August, 2014 (the “Agreement”) is by and between
Beaufort Capital Partners LLC (the “Investor”), and iHookup Social, Inc. (the “Company”).

WHEREAS,
the parties desired that, upon the terms and subject to the conditions contained in the investment agreement, by and between the
Investor and the Company, dated June 25, 2014 (the “Original Investment Agreement”), that the Company would
issue and sell to the Investor, from time to time as provided therein, and the Investor would purchase from the Company up to Two
Million Five Hundred Thousand Dollars ($2,500,000) of the Company’s fully registered, freely tradable common stock (the “Common
Stock”);

WHEREAS,
the parties agreed to increase the aggregate dollar amount of Common Stock that the Company would be capable of selling to the
Investor, from time to time, to up to Five Million Dollars ($5,000,000), by amending and restating the Agreement;

WHEREAS,
the parties now desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to
the Investor, from time to time as provided herein, and the Investor shall purchase from the Company up to Five Million Dollars
($5,000,000) of the Company’s Common Stock; and

WHEREAS,
such investments will be made in reliance upon the provisions of the Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the “Securities Act”), and or upon such other exemption from the registration requirements
of the Securities Act as may be available with respect to any or all of the investments to be made hereunder.

NOW, THEREFORE,
the parties hereto agree as follows:

ARTICLE I.

Certain Definitions

Section 1.1.
“Advance” shall mean the portion of the Commitment Amount requested by the Company in the Advance Notice.

Section 1.2.
“Advance Date” shall mean the fifth Trading Day after expiration of the applicable Pricing Period for each Advance.

Section 1.3.
“Advance Notice” shall mean a written notice in the form of Exhibit A attached hereto to the Investor
executed by an officer of the Company and setting forth the Advance amount that the Company requests from the Investor. An Advance
Notice cannot be sent if a prior Advance has not yet been completed. No Advance Notice can be delivered by the Company on a day
which is not a Trading Day.

Section 1.4.
[Intentionally Blank]

Section
1.5. “Advance Shares” shall mean the shares of Common Stock issued and sold to the Investor pursuant to an Advance
Notice under the terms and conditions hereof.

Section
1.6. “Average Daily Trading Volume” means the average trading volume of the Common Stock of the ten Trading
Days prior to the date of delivery of the Advance.

Section 1.7
Reserved.

    	 

    	 

    

Section 1.8.
“Closing Daily Price” means, as related to the Common Stock as of any date, the last closing price for such
security during normal trading on the OTCQB, or, if the OTCQB is not the principal securities exchange or trading market for such
security, the last closing bid price during normal trading of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by such principal securities exchange or trading market, or if the foregoing
do not apply, the last closing bid price during normal trading of such security in the over-the-counter market on the electronic
bulletin board for such security.

Section 1.9.
“Closing” shall mean one of the closings of a purchase and sale of Common Stock pursuant to Section 2.3.

Section 1.10.
“Commitment Amount” shall mean the aggregate amount of Five Million Dollars ($5,000,000) which the Investor
has agreed to provide to the Company in order to purchase the Common Stock pursuant to the terms and conditions of this Agreement.

Section 1.11.
“Commitment Period” shall mean the period commencing on the Effective Date, and expiring upon the termination
of this Agreement in accordance with Section 10.2.

Section 1.12.
“Common Stock” shall mean the Company’s freely tradable, fully registered and unencumbered common stock.

Section 1.13.
“Condition Satisfaction Date” shall have the meaning set forth in Section 7.2.

Section 1.14. “Damages”
shall mean any loss, claim, damage, liability, costs and expenses (including, without limitation, reasonable attorney’s
fees and disbursements and costs and expenses of expert witnesses and investigation).

Section 1.15.
“Effective Date” shall mean the date on which the SEC first declares effective a Registration Statement registering
the resale of the Registrable Securities as set forth in Section 7.2(a).

Section 1.16.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder.

Section 1.17.
“Environmental Laws” shall have the meaning set forth in Section 4.11.

Section 1.18. “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Section
1.19. “Evaluation Date” shall have the meaning set forth in Section 4.30.

Section
1.20. ”Event of Default” shall have the meaning set forth in Section 7.2.

Section
1.21. “Indemnified Liabilities” shall have the meaning set forth in Section 5.1(a).

Section
1.22. “Indemnified Party” and “Indemnifying Party” shall have the meaning set forth in Section
5.2.

Section
1.23. “Investor Indemnitees” shall have the meaning set forth in Section 5.1(a).

Section
1.24. “Losses” shall have the meaning set forth in Section 5.1(b).

Section 1.25.
“Material Adverse Effect” shall mean any condition, circumstance, or situation that may result in, or reasonably
be expected to result in (i) a material adverse effect on the legality, validity or enforceability of the Agreement, including
on the legal status of the Advance Shares as free trading, (ii) a material adverse effect on the results of operations, assets,
business or condition (financial or otherwise) of the Company, taken as a whole, (iii) a material adverse effect on the Company’s
ability to perform its obligations hereunder in any material respect on a timely basis its obligations under the Agreement, or
(iv) shares of the Company cease to be listed or trading of the Common Stock is suspended continuously for more than five (5)
trading days.

    	 

    	 

    

Section 1.26.
“Market Price” shall mean the average of the 3 lowest Closing Daily Prices of the Company’s Common Stock
during the Pricing Period.

Section 1.27.
“Maximum Advance Amount” The number of Advance Shares sold in each Advance shall not be greater than either
(i) two hundred percent (200%) of the Average Daily Trading Volume, or (ii) the number of shares of Common Stock which would cause
the aggregate holdings of the Investor’s shares of common stock of the Company to be greater than 4.99% of the issued and
outstanding shares of common stock of the Company (including Common Stock and shares of restricted common stock).

Section
1.28. “Maximum Common Stock Issuance” shall have the meaning set forth in Section 2.2.

Section
1.29. “Ownership Limitation” shall have the meaning set forth in Section 2.2.

Section 1.30.
“Person” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or instrumentality thereof.

Section 1.31.
“Pricing Period” shall mean the five (5) consecutive Trading Days prior to the Advance Date. 

Section 1.32.
“Principal Market” shall mean the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market, the American Stock Exchange, the OTCQB, or the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.

Section 1.33.
“Purchase Price” shall mean eighty percent (80%) of the Market Price during the Pricing Period.

Section 1.34.
“Registrable Securities” shall mean the Advance Shares to be issued hereunder (i) in respect of which
a Registration Statement has not been declared effective by the SEC, (ii) which have not been sold under circumstances meeting
all of the applicable conditions of Rule 144 or (iii) which have not been otherwise transferred to a holder who may trade
such Advance Shares without restriction under the Securities Act, and the Company has delivered a new certificate or other evidence
of ownership for such securities not bearing a restrictive legend.

Section
1.35. “Registration Limitation” shall have the meaning set forth in Section 2.2.

Section 1.36.
“Registration Rights Agreement” shall mean the Registration Rights Agreement dated the date hereof, regarding
the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company and the
Investor.

Section 1.37.
“Registration Statement” shall mean a registration statement on Form S-1 or Form S-3 (if use of such form is
then available to the Company pursuant to the rules of the SEC and, if not, on such other form promulgated by the SEC for which
the Company then qualifies and which counsel for the Company shall deem appropriate, and which form shall be available for the
resale of the Registrable Securities to be registered thereunder in accordance with the provisions of this Agreement and the Registration
Rights Agreement, and in accordance with the intended method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.

Section 1.38.
“Regulation D” shall mean Regulation D under the Securities Act.

Section
1.39. “Related Party” shall have the meaning set forth in Section 6.15.

Section
1.40. “Rule 144” shall mean Rule 144 (or any similar provision then in force) promulgated under the Securities
Act.

Section 1.41.
“SEC” shall mean the United States Securities and Exchange Commission.

Section 1.42.
“Securities Act” shall have the meaning set forth in the recitals.

Section
1.43. “Third Party Claim” shall have the meaning set forth in Section 5.2(b).

    	 

    	 

    

    Section 1.44.
“Trading Day” shall mean any day during which the New York Stock Exchange shall be open for business.

Section 1.45.
“Valuation Event” shall have the meaning set forth in Section 2.10.

Section 1.46.
“Trading Day” shall mean any day during which the New York Stock Exchange shall be open for business.

Section 1.47.
“VWAP” means, as of any date, the daily dollar volume-weighted average price for such security as reported by
Bloomberg, LP through its “Historical Price Table Screen (HP)” with Market: Weighted Average function selected (or
comparable financial news service (U.S market only)), or, if no dollar volume-weighted average price is reported for such security
by Bloomberg, LP (or comparable financial news service (U.S market only)), the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as reported on OTC Markets.

ARTICLE II.

Advances

Section 2.1.
Advances Subject to the terms and conditions of this Agreement (including, without limitation, the provisions of Article VII
hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and the Investor shall purchase from
the Company, Advance Shares, by the delivery, in the Company’s sole discretion, of Advance Notices. The aggregate maximum
amount of all Advances that the Investor shall be obligated to make under this Agreement shall not exceed the Commitment Amount.
Once an Advance Notice is received by the Investor, it shall not be terminated, withdrawn or otherwise revoked by the Company except
as set forth in this Agreement. Fifty precent (50%) of each Advance shall be immediately directed to the Investor to pay down any
and all remaining debt the Company has to the Investor, which was loaned by the Investor to the Company prior to the effectiveness
of the Registration Statement, as declared by the SEC, until such time as no such debt remains. In the Event the Company fails
to issue an Advance Notice within eighteen (18) months of the Registration Statement being decalred effective by the SEC, the Company
shall pay to the Investor an amount in cash equal to the Registration Fees (as defined in Section 12.4 below).

Section 2.2. Mechanics.

(a) 
Advance Notice. At any time during the Commitment Period, the Company may require the Investor to purchase Advance Shares
by delivering an Advance Notice to the Investor, subject to the conditions set forth in Article VII; provided, however, that (i)
the amount for each Advance as designated by the Company in the applicable Advance Notice shall not be more than the Maximum Advance
Amount , (ii) the aggregate amount of the Advances pursuant to this Agreement shall not exceed the Commitment Amount, (iii) in
no event shall the number of Advance Shares issuable to the Investor pursuant to an Advance cause the aggregate number of shares
of Common Stock beneficially owned by the Investor and its affiliates to exceed 4.99% of the then outstanding Common Stock (the
“Ownership Limitation”) (as of the date of this Agreement, Investor and its affiliates held zero (0%) percent
of the outstanding Common Stock), (iv) under no circumstances shall the aggregate offering price or number of Advance Shares, as
the case may be, exceed the aggregate offering price or number of shares of Common Stock available for issuance under a Registration
Statement (the “Registration Limitation”) and (v) the Common Stock must be DWAC eligible and sent to the Investor
in electronic form, instead of certificate form. In the event that the Investor sends written acceptance of accepting a physical
certificate, all fees and expenses for this certificate will be paid by the Company.

(b) 
Date of Delivery of Advance Notice. An Advance Notice shall be deemed delivered on (i) the Trading Day it is received
by email (to the address set forth in Section 11.1 herein) by the Investor if such notice is received prior to 5:00 pm Eastern
Time, or (ii) the immediately succeeding Trading Day if it is received by email after 5:00 pm Eastern Time on a Trading Day
or at any time on a day which is not a Trading Day. No Advance Notice may be deemed delivered on a day that is not a Trading Day.
The Company acknowledges and agrees that the Investor shall be entitled to treat any email it receives from officers whose email
addresses are identified by the Company purporting to be an Advance Notice as a duly executed and authorized Advance Notice from
the Company.

    	 

    	 

    

Section 2.3.
Closings.

(a)
On the Advance Date, the Company shall deliver to the Investor’s brokerage account in electronic form, such number of Advance
Shares of the DWAC eligible Common Stock registered in the name of the Investor in accordance with the Advance Notice and pursuant
to this Agreement. Once such Advance Shares have been accepted by the Investor, the Investor shall immediately deliver to the Company
the amount of the Advance by wire transfer of immediately available funds as determined by the Purchase Price. On or prior to the
Advance Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings required
to be delivered by either of them pursuant to Section 2.3(b) below in order to implement and effect the transactions contemplated
herein.

(b)
Obligations Upon Closing. The Investor agrees to advance the amount corresponding to the Advance Notice to the Company upon
completion of each of the following conditions:

(i) The
Company shall have delivered via electronic delivery to the Investor the Advance Shares applicable to the Advance in accordance
with Section 2.3(a).

(ii) A
Registration Statement filed pursuant to the Registration Rights Agreement shall be effective and available for the resale of all
applicable Advance Shares to be issued in connection with the Advance and any certificates evidencing such shares shall be free
of restrictive legends.

(iii) the
Company shall have obtained all material permits and qualifications required by any applicable state for the offer and sale of
the Registrable Securities, or shall have the availability of exemptions therefrom. The sale and issuance of the Registrable Securities
shall be legally permitted by all laws and regulations to which the Company is subject;

(iv) the
Company shall have filed with the SEC in a timely manner all reports, notices and other documents required of a “reporting
company” under the Exchange Act and applicable SEC regulations; and

(v) the
Company’s transfer agent shall be DWAC eligible.

Section 2.4.
[Intentionally Omitted]

Section 2.5.
Hardship. In the event the Investor sells shares of the Advance Shares after receipt of an Advance Notice and the Company
fails to perform the obligations mandated in Section 2.3, which are within the sole control of the Company, the Company agrees
that in addition to and in no way limiting the rights and obligations set forth in Article V hereto and in addition to any other
remedy to which the Investor is entitled at law or in equity, including, without limitation, specific performance, it will hold
the Investor harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred,
arising out of or in connection with such default by the Company and acknowledges that irreparable damage would occur in the event
of any such default.  It is accordingly agreed that the Investor shall be entitled to an injunction or injunctions to prevent
such breaches of this Agreement and to specifically enforce, without the posting of a bond or other security, the terms and provisions
of this Agreement.

Section
2.6. Removal of Restricted Legends. If either shares of restricted stock are released to the Investor upon a Break Event
(as described in Section 12.4 below) and the Company rejects the Investors request to direct the Company’s transfer agent
to remove the restricted legend from the Investor’s stock certificate five trading days after the Investor’s request
to remove such restricted legend, then the Company shall pay the Investor $1,000.00 for each day beyond the five trading days
the Company fails to remove such restricted legend. Company covenants that, except as set forth below, there shall be no justifiable
reason not to remove the restricted legend from the stock certificates and in the event that Company attempts to offer such justification,
the Company shall pay the Investor $$2,000.00 for each day beyond the five trading days the company fails to remove such restricted
legend. Notwithstanding the foregoing, the Company shall not be liable to pay the Investor either of the above fees if the Investor
is not in full compliance with the applicable rules and regulations used to remove any restricted legend or fails reasonably comply
with requests by the Company or its transfer agent related to the removal of the restricted legend or is otherwise in breach of
this Agreement.

Section
2.7  [Intentionally Omitted]

    	 

    	 

    

Section
2.8 Reimbursement.    If (I) the Investor becomes a defendant in any capacity in any legal action or
proceeding brought by any shareholder of the Company, in connection with the alleged breach of duty by the officers or directors
of the Company or a material misstatement made by the Company in connection with its filings made with the SECThe reimbursement
obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any),
as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of
the Company, the Investor and any such affiliate and any such person. Any and all costs that Investor pays for relating to clearing
and processing stock certificates shall be deducted from any payment the Company receives from Investor.

Section 2.9 Overall
Limit on Issuable Common Stock. Notwithstanding anything contained herein to the contrary, if during the Commitment Period
the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder
approval, then the total number of Advance Shares issuable by the Company and purchasable by the Investor pursuant to this Agreement
shall not exceed that number of shares of Common Stock that may be issuable without shareholder approval (the “Maximum
Common Stock Issuance”).  If such issuance of Advance Shares could cause a delisting on the Principal Market, then
the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the
By-laws and Amended and Restated Articles of Incorporation of the Company. The parties understand and agree that the Company's
failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the
issuance and sale of Advance Shares in accordance with the terms and conditions hereof to the Investor or the Investor's obligation
in accordance with the terms and conditions hereof to purchase a number of Advance Shares in the aggregate up to the Maximum Common Stock Issuance limitation,
and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section
2.9.

 

Section 2.10. Valuation
Event. The Company agrees that it shall not take any action that would result in a Valuation Event occurring during a Pricing
Period. Valuation Event shall mean an event in which the Company at any time during a Pricing Period takes any of the following
actions: (i) subdivides or combines its Common Stock or (ii) pays a dividend in Ordinary Shares or makes any other purchase of
its Ordinary Shares.

 

 

ARTICLE III.

Representations of Investor

Investor
hereby represents and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof and
as of each Advance Date:

Section 3.1.
Organization and Authorization. The Investor is duly incorporated or organized and validly existing in the jurisdiction
of its incorporation or organization and has all requisite power and authority to purchase and hold the securities issuable hereunder.
The decision to invest and the execution and delivery of this Agreement by such Investor, the performance by such Investor of its
obligations hereunder and the consummation by such Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor. The undersigned has the right, power and authority to execute and deliver
this Agreement and all other instruments (including, without limitations, the Registration Rights Agreement), on behalf of the
Investor. This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against
the Investor in accordance with its terms.

Section 3.2.
Evaluation of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable
of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting
its interests in connection with this transaction. It recognizes that its investment in the Company involves a high degree of risk.

Section 3.3.
No Legal Advice from the Company. The Investor acknowledges that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal counsel and investment and tax advisors. The Investor is
relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives
or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement
or the securities laws of any jurisdiction.

    	 

    	 

    

Section 3.4.
Information. The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to
the business, finances and operations of the Company and information it deemed material to making an informed investment decision.
The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company and its management and
has either done so or has waived its opportunity to do so. Neither such inquiries nor any other due diligence investigations conducted
by such Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely
on the Company’s representations and warranties contained in this Agreement. The Investor understands that its investment
involves a high degree of risk. The Investor is in a position regarding the Company, which, based upon employment, family relationship
or economic bargaining power, enabled and enables such Investor to obtain information from the Company in order to evaluate the
merits and risks of this investment.

Section 3.5.
Receipt of Documents. The Investor and its counsel have received and read in their entirety: (i) this Agreement and
the Exhibits annexed hereto; (ii) all due diligence and other information necessary to verify the accuracy and completeness
of such representations, warranties and covenants; and (iii) answers to all questions the Investor submitted to the Company
regarding an investment in the Company; and the Investor has relied on the information contained therein and has not been furnished
any other documents, literature, memorandum or prospectus.

Section 3.6.
Not an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with the Company or any “Affiliate”
of the Company (as that term is defined in Rule 405 of the Securities Act).

Section 3.7.
Trading Activities. The Investor’s trading activities with respect to the Common Stock shall be in compliance with
all applicable securities laws, rules and regulations and the rules and regulations of the Principal Market on which the Common
Stock is listed or traded. Investor makes no representations or covenants that it will not engage in trading in the securities
of the Company, other than the Investor will not engage in any short sales of the Common Stock, or other similar activity that
profits on the decline in the price of Common Stock, at any time during the Agreement. Nothing contained in this Agreement shall
be deemed a representation or warranty by the Investor to hold any Stock for any period of time. The Company acknowledges and agrees
that transactions in its securities by the Investor may impact the market price of the Stock, including during periods when the
prices at which the Company may be required to issue Investor’s stock are determined.

 

ARTICLE
IV.

Representations
and Warranties of the Company

 

Except
as stated below, on the disclosure schedules attached hereto the Company hereby represents and warrants to, and covenants with,
the Investor that the following are true and correct as of the date hereof:

Section 4.1.
Organization and Qualification. The Company is duly incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite corporate power to own its properties and to carry on its business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be
in good standing would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

Section 4.2.
Authorization, Enforcement, Compliance with Other Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration Rights Agreement and any related agreements, in accordance
with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Registration Rights Agreement and
any related agreements by the Company and the consummation by it of the transactions contemplated hereby and thereby, have been
duly authorized by the Company’s Board of Directors and no further consent or authorization is required by the Company, its
Board of Directors or its stockholders, (iii) this Agreement, the Registration Rights Agreement and any related agreements
have been duly executed and delivered by the Company, (iv) this Agreement, the Registration Rights Agreement and assuming
the execution and delivery thereof and acceptance by the Investor and any related agreements constitute the valid and binding obligations
of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies.

    	 

    	 

    

Section 4.3.
Capitalization. The authorized capital stock of the Company consists of 10,000,000,000 shares of Common Stock, of which
48,064,622 shares of Common Stock are issued and outstanding, and 50,000,000 shares of authorized Preferred Stock, of which 2,500,000
shares are issued and outstanding All of such outstanding shares have been validly issued and are fully paid and nonassessable.
No shares of Common Stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company. Except as disclosed on Schedule 4.3, as of the date hereof, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its subsidiaries, or contracts, commitments, understandings
or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries,
(ii) there are no outstanding debt securities (iii) there are no outstanding registration statements; and (iv) there
are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the Registration Rights Agreement), except pursuant to the terms
of an agreement between the Company and the Investor. There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by this Agreement or any related agreement or the consummation of the transactions described
herein or therein. The Company has furnished to the Investor true and correct copies of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s
By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in respect thereto.

Section 4.4.
No Conflict. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby will not (i) result in a violation of the Certificate of Incorporation, any certificate
of designations of any outstanding series of preferred stock of the Company or By-laws 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 to which the Company or any of
its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and regulations of the Principal Market on which the Common Stock is quoted)
applicable to the Company or any of its subsidiaries or by which any material property or asset of the Company or any of its subsidiaries
is bound or affected and which would cause a Material Adverse Effect. Neither the Company nor its subsidiaries is in violation
of any term of or in default under its Articles of Incorporation or By-laws or their organizational charter or by-laws, respectively,
or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule
or regulation applicable to the Company or its subsidiaries. The business of the Company and its subsidiaries is not being conducted
in violation of any material law, ordinance, and regulation of any governmental entity. Except as specifically contemplated by
this Agreement and as required under the Securities Act and any applicable state securities laws, the Company 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 or contemplated by this Agreement or the Registration Rights
Agreement in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.
The Company and its subsidiaries are unaware of any fact or circumstance which might give rise to any of the foregoing.

Section 4.5.
SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act (all of the foregoing filed prior to the date hereof
or amended after the date hereof and all exhibits include therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to as the “SEC Documents”) on timely basis or
has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension.
The Company has delivered to the Investor or its representatives, or made available through the SEC’s website at http://www.sec.gov.,
true and complete copies of the SEC Documents. As of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements
of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).

Section 4.6.
No Misstatement or Omission.  Each part of the Registration Statement, when such part became or becomes effective,
and the related prospectus (“Prospectus”), on the date of filing thereof with the SEC and at each Advance Date and
Closing Date, conformed or will conform in all material respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder; each part of the Registration Statement, when such part became or becomes effective, did not
or will not contain an 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; and the Prospectus, on the date of filing thereof
with the SEC and at each Advance Date, did not or will not include an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; except
that the foregoing shall not apply to statements or omissions in any such document made in reliance on information furnished in
writing to the Company by the Investor expressly stating that such information is intended for use in the Registration Statement,
the Prospectus, or any amendment or supplement thereto.

Section 4.7.
No Default. The Company is not in default in the performance or observance of any material obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust or other material instrument or agreement to which it is a party
or by which it is or its property is bound and neither the execution, nor the delivery by the Company, nor the performance by the
Company of its obligations under this Agreement or any of the exhibits or attachments hereto will conflict with or result in the
breach or violation of any of the terms or provisions of, or constitute a default or result in the creation or imposition of any
lien or charge on any assets or properties of the Company under its Certificate of Incorporation, By-Laws, any material indenture,
mortgage, deed of trust or other material agreement applicable to the Company or instrument to which the Company is a party or
by which it is bound, or any statute, or any decree, judgment, order, rules or regulation of any court or governmental agency or
body having jurisdiction over the Company or its properties, in each case which default, lien or charge is likely to cause a Material
Adverse Effect on the Company’s business or financial condition.

Section 4.8.
Absence of Events of Default. No event of default, as defined in the respective agreement to which the Company is a party,
and no event which, with the giving of notice or the passage of time or both, would become an event of default (as so defined),
has occurred and is continuing, which would have a Material Adverse Effect on the Company’s business, properties, prospects,
financial condition or results of operations. The Company shall notify the Investor immediately upon any event of default, or anything
that is likely to detrimentally affect the ability of the Company to perform its obligations under this Agreement, occurring, or
becoming, to the Company’s knowledge, likely to occur, and include the specifics of such event of default or other event
in its notice. At the Investor’s request, the Company shall provide the Investor with a certificate signed by two (2) of
its directors or its Chief Executive Officer, which shall state whether an event of default has occurred or is continuing.

    	 

    	 

    

Section 4.9.
Intellectual Property Rights. The Company and its subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as
now conducted. The Company and its subsidiaries do not have any knowledge of any infringement by the Company or its subsidiaries
of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, and, to the knowledge of the Company, there is no claim, action
or proceeding being made or brought against, or to the Company’s knowledge, being threatened against, the Company or its
subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks,
service mark registrations, trade secret or other infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

Section 4.10.
Employee Relations. Neither the Company nor any of its subsidiaries is involved in any labor dispute nor, to the knowledge
of the Company or any of its subsidiaries, is any such dispute threatened. None of the Company’s or its subsidiaries’
employees is a member of a union and the Company and its subsidiaries believe that their relations with their employees are good.

Section 4.11.
Environmental Laws. The Company and its subsidiaries are (i) in compliance with any and all applicable material foreign,
federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all
permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such permit, license or approval.

Section 4.12.
Title. The Company has good and marketable title to its properties and material assets owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of
the Company. Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed
to be made of such property and buildings by the Company and its subsidiaries.

Section 4.13.
Insurance. Upon the Company generating revenue, the Company and each of its subsidiaries will become insured by insurers
of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such subsidiary has
any reason to believe that it will not be able to renew its existing liability insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings, business or operations of the Company and its subsidiaries,
taken as a whole.

Section 4.14.
Regulatory Permits. The Company and its subsidiaries possess all material certificates, authorizations and permits issued
by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses and neither
the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.

Section 4.15.
[Intentionally Omitted.]

Section 4.16.
No Material Adverse Breaches, etc. Neither the Company nor any of its subsidiaries is subject to any charter, corporate
or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers
has or is expected in the future to have a Material Adverse Effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries. Except as set forth in the SEC Documents, neither the Company
nor any of its subsidiaries is in breach of any contract or agreement which breach, in the judgment of the Company’s officers,
has or is expected to have a Material Adverse Effect on the business, properties, operations, financial condition, results of operations
or prospects of the Company or its subsidiaries.

    	 

    	 

    

Section 4.17.
Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending against or affecting the Company, the Common Stock or any of the
Company’s subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have a Material Adverse Effect
on the transactions contemplated hereby (ii) adversely affect the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, this Agreement or any of the documents contemplated herein, or (iii) have a Material
Adverse Effect on the business, operations, properties, financial condition or results of operation of the Company and its subsidiaries
taken as a whole.

Section 4.18.
Reserved.

Section 4.19.
Tax Status. The Company and each of its subsidiaries has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company
and each of its subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim.

Section 4.20.
Certain Transactions. None of the officers, directors, or employees of the Company is presently a party to any transaction
with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust
or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee
or partner.

Section 4.21.
Rights of First Refusal. The Company is not obligated to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to, current or former shareholders of the Company, underwriters,
brokers, agents or other third parties.

Section 4.22.
Use of Proceeds. The Company shall use the net proceeds from this offering for working capital and other general corporate
purposes including paying relevant fees and commissions incurred from this transaction. The Company will not provide any funding
to or purchase an interest in any person listed by the United States Department of the Treasury’s Office of Foreign Assets
Control as a Specially Designated National and Blocked Person.

Section 4.23.
[Intentionally Omitted]

Section 4.24.
Opinion of Counsel. Investor shall receive opinions from counsel to the Company on the date hereof substantially in the
form attached hereto as Exhibit B.

Section 4.25.
[Intentionally Omitted]

Section 4.26.
Dilutive Effect. The Company understands and acknowledges that the number of Advance Shares issuable upon purchases pursuant
to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the
trading price of the Common Stock declines during the Pricing Period. The Company’s executive officers and directors have
studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential
dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business
judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company
specifically acknowledges that, subject to such limitations as are expressly set forth in the Agreement, its obligation to issue
Advance Shares upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of the Company.

 

    	 

    	 

    
Section 4.27.
Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting
solely in the capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder.
The Company further acknowledges that the Investor is not acting as a financial advisor, partner or fiduciary of the Company or
any of its affiliates or subsidiaries (or in any similar capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the
transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Common Stock hereunder. The Company
is aware and acknowledges that it may not be able to request Advances under this Agreement if it cannot obtain an effective Registration
Statement or if any issuances of Common Stock pursuant to any Advances would violate any rules of the Principal Market.

 

Section 4.28.
No Advice from the Investor. The Company acknowledges that it has reviewed this Agreement and the transactions contemplated
by this Agreement with his or its own legal counsel and investment and tax advisors. The Company is relying solely on such counsel
and advisors and not on any statements or representations of the Investor or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of
any jurisdiction. The Company is not relying on any representation except for the representations of the Investor contained in
this Agreement.

 

Section
4.29. No Similar Transactions. Except as disclosed on Schedule 4.29, the Company has not entered into any transaction
similar in nature to the one described in this Agreement.

 

Section
4.30. [Intentionally Omitted]

Section
4.31 Other Transactions. If at any time during the Term of the Agreement, the Company enters into an equity line of credit,
whereby the Issuer may sell securities at a future determined price, the Company’s right to request Advances as set forth
in Section 2.1 shall terminate. If the Company enters into such an equity line of credit, the Company shall pay to the Investor
an amount in cash equal to the Registration Fees. The
Company confirms that except for certain Convertible Notes set forth in the attached Disclosre Schedule, it has not entered into
(A) any an agreement with any other fund or entity to effect any financing involving the sale of debt or equity securities that
are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of Common Stock at a price
that is based upon and/or varies with the trading prices of Company’s Common Stock at any time after the initial issuance
of such securities or is subject to reset upon the occurrence of specified or contingent events and (B) any agreement, including
but not limited to an equity line of credit, whereby the Issuer may sell securities at a future determined price

 Section
4.32 The Advance Shares.  The Advance Shares have been duly authorized and, when issued, delivered and paid for pursuant
to this Agreement, will be validly issued and fully paid and non-assessable, free and clear of all encumbrances and will be issued
in compliance with all applicable United States federal and state securities laws; the capital stock of the Company, including
the Common Stock, conforms in all material respects to the description thereof contained in the Registration Statement and the
Common Stock, including the Advance Shares, will conform to the description thereof contained in the Prospectus as amended or supplemented. 
Neither the stockholders of the Company, nor any other Person have any preemptive rights or rights of first refusal with respect
to the Advance Shares or other rights to purchase or receive any of the Advance Shares or any other securities or assets of the
Company, and no Person has the right, contractual or otherwise, to cause the Company to issue to it, or register pursuant to the
Securities Act, any shares of capital stock or other securities or assets of the Company upon the issuance or sale of the Advance
Shares.  The Company is not obligated to offer the Advance Shares on a right of first refusal basis or otherwise to any third
parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third
parties.

Section
4.33 [Intentionally Omitted]

Section
4.34 Blue Sky. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action
as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for,
sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or “Blue Sky” laws
of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so
taken to the Investor on or prior to the Closing Date.

Section
4.35 Reservation of Shares. The Company shall reserve thirty million (30,000,000) shares
of Stock for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that
it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance, the Company
shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder
approval for the authorization of such additional shares. 

    	 

    	 

    

Section
4.36 Payment Set Aside. To the extent that the Company makes a payment or payments to the Investor hereunder or under the
Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be invalid or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law
or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or
setoff had not occurred.

Section
4.37 Share Capital. There are no securities or instruments containing anti-dilution of similar provision that will be triggered
by the issuance of shares of Common Stock pursuant to this Agreement. The Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan or agreement and there is no dispute as to the class of any
shares of the Company.

ARTICLE
V.

Indemnification

The
Investor and the Company represent to the other the following with respect to itself:

Section 5.1.
Indemnification.

(a)
In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s
other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor, and all of
its officers, directors, partners, employees and agents (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Investor Indemnitees”) from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith
, and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred
by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement or the Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim brought or made against such Investor Indemnitee
not arising out of any action or inaction of an Investor Indemnitee., To the extent that the foregoing undertaking by the Company
may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities, which is permissible under applicable law. 

(b)
In consideration for the Company’s execution and delivery of this Agreement and in addition to Investor’s other obligations
hereunder, Investor shall defend, protect. indemnify and hold harmless the Investor, and all of its officers, directors, partners,
employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company Indemnitees”) from and against any and all Indemnificed Liabilities, incurred by
the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by Investor in this Agreement or or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or obligation of Investor contained in this Agreement or the
Registration Rights Agreement or any other certificate, instrument or document contemplated hereby or thereby, or (c) any
investigation or claim by the SEC of or against Investor.

    	 

    	 

    

 

(b)
Contribution.  In the event that the indemnity provided in Section 5.1 is unavailable to or insufficient to hold harmless
an indemnified party for any reason, the indemnifying party severally agrees to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending the same)
(collectively “Losses”) to which theindemnifying party may be subject in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand from transactions contemplated by this Agreement.
If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Investor severally
shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of
the Company on the one hand and of the Investor on the other in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.  Benefits received by the Company shall be deemed to be equal
to the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received
by it, and benefits received by the Investor shall be deemed to be equal to the total discounts received by the Investor. 
Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the
one hand or the Investor on the other, the intent of the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.  The Company and the Investor agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account
of the equitable considerations referred to above.  The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this section shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified Party in investigating, preparing or defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.  Notwithstanding the provisions of this section the Investor shall not be required
to contribute any amount in excess of the amount by which the Purchase Price for Shares actually purchased pursuant to this Agreement
exceeds the amount of any damages which the Investor has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  For purposes of this Article V, each person who controls the Investor within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and each director, officer, employee and
agent of the Investor shall have the same rights to contribution as the Investor, and each person who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the Company who shall
have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this section.

I 
The remedies provided for in this Article V are not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified person at law or in equity.  The obligations of the parties to indemnify or make contribution
under this Article V shall survive termination.

(d) 
Notwithstanding anything in this Agreement to the contrary, neither party to this Agreement shall be responsible or liable for
any indirect, special, punitive, or consequential damages actually or allegedly suffered or incurred by the other party to this
Agreement arising under, out of, or relating to this Agreement even if the other party has been advised or knew, or should have
known, of the possibility thereof.

Section
5.2 Notification of Claims for Indemnification. Each party entitled to indemnification under this Article V (an “Indemnified
Party”) shall, promptly after the receipt of notice of the commencement of any claim against such Indemnified Party in
respect of which indemnity may be sought from the party obligated to indemnify such Indemnified Party under this Article V (the
“Indemnifying Party”), notify the Indemnifying Party in writing of the commencement thereof. Any such notice
shall describe the claim in reasonable detail. The failure of any Indemnified Party to so notify the Indemnifying Party of any
such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other
than pursuant to this Article V or (b) under this Article V unless, and only to the extent that, such failure results in the
Indemnifying Party’s forfeiture of substantive rights or defenses or the Indemnifying Party is prejudiced by such delay.
The procedures listed below shall govern the procedures for the handling of indemnification claims.

(a)
Any claim for indemnification for Indemnified Liabilities that do not result from a Third Party Claim as defined in the following
paragraph, shall be asserted by written notice given by the Indemnified Party to the Indemnifying Party. Such Indemnifying Party
shall have a period of thirty (30) days after the receipt of such notice within which to respond thereto. If such Indemnifying
Party does not respond within such thirty (30) day period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment as set forth in Section 5.1. If such Indemnifying Party does not respond within such thirty
(30) day period or rejects such claim in whole or in part, the Indemnified Party shall be free to pursue such remedies as
specified in this Agreement.

    	 

    	 

    

(b)
If an Indemnified Party shall receive notice or otherwise learn of the assertion by a person or entity not a party to this Agreement
of any threatened legal action or claim (collectively a “Third Party Claim”), with respect to which an Indemnifying
Party may be obligated to provide indemnification, the Indemnified Party shall give such Indemnifying Party written notice thereof
within twenty (20) days after becoming aware of such Third Party Claim.

(c)
An Indemnifying Party may elect to defend (and, unless the Indemnifying Party has specified any reservations or exceptions, to
seek to settle or compromise) at such Indemnifying Party’s own expense and by such Indemnifying Party’s own counsel,
any Third Party Claim. Within thirty (30) days after the receipt of notice from an Indemnified Party (or sooner if the nature
of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnified Party whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election shall specify any reservations or exceptions. If
such Indemnifying Party does not respond within such thirty (30) day period or rejects such claim in whole or in part, the
Indemnified Party shall be free to pursue such remedies as specified in this Agreement. In case any such Third Party Claim shall
be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying
Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable
judgment; provided, however, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such
defense at its own expense. Notwithstanding the foregoing, in any Third Party Claim in which both the Indemnifying Party, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party
shall have the right to employ separate counsel and to control its own defense of such claim if, in the reasonable opinion of counsel
to such Indemnified Party, either (x) one or more significant defenses are available to the Indemnified Party that are not
available to the Indemnifying Party or (y) a conflict or potential conflict exists between the Indemnifying Party, on the
one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however,
that in such circumstances the Indemnifying Party (i) shall not be liable for the fees and expenses of more than one counsel
to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for such reasonable fees and expenses of such
counsel incurred in any such Third Party Claim, as such expenses are incurred, provided that the Indemnified Parties agree to repay
such amounts if it is ultimately determined that the Indemnifying Party was not obligated to provide indemnification under this
Article IX. The Indemnifying Party agrees that it shall not, without the prior written consent of the Indemnified Party, settle,
compromise or consent to the entry of any judgment in any pending or threatened claim relating to the matters contemplated hereby
(if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of such Indemnified Party from all liability arising or that may arise
out of such claim. The Indemnifying Party shall not be liable for any settlement of any claim effected against an Indemnified Party
without the Indemnifying Party’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed.
The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at
common law, by separate agreement or otherwise; provided, however, that notwithstanding the foregoing or anything to the contrary
contained in this Agreement, nothing in this Article V shall restrict or limit any rights that any Indemnified Party may have to
seek equitable relief.

 

ARTICLE
VI.

Covenants

Section 6.1.
Registration Rights. The Company shall cause the Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof. During the Commitment Period, the Company shall notify the
Investor promptly if (i) the Registration Statement shall cease to be effective under the Securities Act, (ii) the Common Stock
shall cease to be authorized for listing on the Principal Market, (iii) the Common Stock ceases to be registered under Section
12(g) of the Exchange Act or (iv) the Company fails to file in a timely manner all reports and other documents required of it as
a reporting company under the Exchange Act.

Section 6.2.
Quotation of Common Stock. The Company shall maintain the Common Stock’s authorization for quotation on the Principal
Market and use its best efforts to file within any mandatory timeframe all reports required to be filed by the Company.

Section 6.3.
Exchange Act Registration. The Company will cause its Common Stock to continue to be registered under Section 12(g) of the
Exchange Act, will file in a timely manner all reports and other documents required of it as a reporting company under the Exchange
Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing obligations under said Exchange Act.

    	 

    	 

    

Section 6.4.
Transfer Agent Instructions. On the Advance Date, the Company shall deliver instructions to its transfer agent to issue
shares of Common Stock to the Investor free of restrictive legends.

Section 6.5.
Corporate Existence. The Company will take all steps necessary to preserve and continue the corporate existence of the Company.

Section 6.6.
Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company shall not deliver to
the Investor any Advance Notice during the continuation of any of the following events: (i) receipt of any request for additional
information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the registration statement or related prospectus; (ii) the issuance by the SEC
or any other Federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement
or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration
Statement or related prospectus of any document incorporated or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the
case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus,
it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (v) the
Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and
the Company will promptly make available to the Investor any such supplement or amendment to the related prospectus..

Section 6.7.
Equity Credit Line Transactions. During the term of this Agreement, the Company shall not enter into any Prohibited Transaction
without the prior written consent of the Investor, which consent may be withheld at the sole discretion of the Investor. For the
purposes of this Agreement, the term “Prohibited Transaction” shall refer to the issuance by the Company of
any “future priced securities,” which shall mean the issuance of shares of Common Stock or securities of any type whatsoever
that are, or may become, convertible or exchangeable into shares of Common Stock pursuant to any equity line financing registered
with the SEC on Form S-1.

Section 6.8.
Consolidation; Merger; Subdivision of Stock. The Company shall not, at any time after the delivery of an Advance Notice
and before the Advance Date applicable to such Advance Notice, effect any merger or consolidation of the Company with or into,
or a transfer of all or substantially all the assets of the Company to another entity (a “Consolidation Event”)
unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver
to the Investor such shares of stock and/or securities as the Investor is entitled to receive pursuant to this Agreement.

Section 6.9.
[Intentionally Omitted].

Section 6.10.
[Intentionally Omitted].

Section
6.11. Listing of Shares.  The Company will use commercially reasonable efforts to cause the Shares to be listed
on the Principal Market and to qualify the Shares for sale under the securities laws of such jurisdictions as the Investor designates;
provided that the Company shall not be required in connection therewith to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction.

Section
6.12.  [Intentionally Omitted]

Section
6.13.  No General Solicitation. Neither the Company, nor any of its affiliates, nor any person acting on
its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection
with the offer or sale of the Common Stock to be offered as set forth in this Agreement.

Section 6.14. [Intentionally
Omitted]

    	 

    	 

    

 

Section
6.15. Transactions With Affiliates. The Company shall not, and shall cause each of its Subsidiaries not to, enter into,
amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during
the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual
related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a
5% or more beneficial interest (each a "Related Party"), except for (I) customary employment arrangements and benefit
programs on reasonable terms, (II) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a disinterested third party other than such Related Party, or (III)
any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company.
For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested
director with respect to any such agreement, transaction, commitment or arrangement. "Affiliate" for purposes hereof
means, with respect to any person or entity, another person or entity that, directly or indirectly, (I) has a 5% or more equity
interest in that person or entity, (II) has 5% or more common ownership with that person or entity, (III) controls that person
or entity, or (IV) is under common control with that person or entity. "Control" or "Controls" for purposes
hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person
or entity.

 

Section
6.16. Filing of Form 8-K. On or before the date which is four (4) Trading Days after the Execution Date, the Company shall
file a Current Report on Form 8-K with the SEC describing the terms of the transaction contemplated by the Equity Line Transaction
Documents in the form required by the 1934 Act, if such filing is required.

 

 

Section
6.17. Acknowledgement of Terms. The Company hereby represents and warrants to the Investor that: (i) it is voluntarily entering
into this Agreement of its own freewill, (ii) it is not entering this Agreement under economic duress, (iii) the terms of this
Agreement are reasonable and fair to the Company, and (iv) the Company has had independent legal counsel of its own choosing review
this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with this Agreement.

 

Section
6.18. [Intentionally Omitted]

 

 

Section
6.19. Conduct of Business. The Company shall, and shall cause all of its subsidiaries to carry on and conduct its business
and the business of each subsidiary in a proper and efficient manner in accordance with good commercial practice, and ensure that
while the Investor holds any of the Stock, that the voting any other rights attached to the Stock are not altered in a manner which,
in the opinion of the Investor, is materially prejudicial to the Investor.

 

Section
6.20. Miscellaneous Covenants. The Company shall not, and shall cause all of its subsidiaries not to, directly or indirectly,
without the Investor’s written approval: (a) dispose, in a single transaction, or in a series of transactions, of all or
any part of its assets unless such disposal is (i) in the ordinary course of business; (ii) for fair market value; and (iii) approved
by the board of directors of the Company; (b) reduce its used share capital or any uncalled liability in respect of its issued
capital, except by means of a purchase or redemption of the share capital that is permitted under law; (c) undertake any consolidation
of its share capital; (d) change the nature of its business or the nature of the business of any subsidiary; (e) transfer the jurisdiction
of incorporation of the Company or any of its Subsidiaries; (f) enter into any agreement with respect to any of the matters referred
to in this section.

 

Section
6.21. [Intentionally Omitted].

 

Section
6.22. [Intentionally Omitted].

 

Section
6.23. Illegality and Impossibility. Without limiting the generality of the Investor’s rights set out elsewhere in
this Agreement, if in the reasonable opinion of the Investor, at any time there exists a law which , or an official or reasonable
interpretation of which, makes it , or may make it illegal or impossible in practice of the Investor to undertake any of the Advances,
or render any of the contemplated Advances unenforceable, void or voidable, the Investor may, by giving a notice to the Company
suspend or cancel some or all of its obligations under this Agreement, or terminate this Agreement.

 

Section
6.24. Costs of Registration Statement. The Investor covenants to pay all costs and expenses of the Company associated with
the Registration Statement.

 

    	 

    	 

    

ARTICLE
VII.

Conditions for Advance and Conditions to Closing

Section 7.1.
Conditions Precedent to the Obligations of the Company. The obligation hereunder of the Company to issue and sell Advance
Shares to the Investor incident to each Closing is subject to the satisfaction, or waiver by the Investor in writing, at or before
each such Closing, of each of the conditions set forth below.

 

(a) 
Accuracy of the Investor’s Representations and Warranties. The representations and warranties of the Investor shall
be true and correct in all material respects.

(b) 
Performance by the Investor. The Investor shall have performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing. 

Section 7.2.
Conditions Precedent to the Right of the Company to Deliver an Advance Notice. The right of the Company to deliver an Advance
Notice is subject to the fulfillment by the Company, on such Advance Date (a “Condition Satisfaction Date”),
of each of the following conditions, any of which may be waived in writing by the Investor:

(a) 
Free Trading. Advance Shares to be issued with respect to the applicable Advance Notice will be freely trading.

(b) 
Authority. The Company shall have obtained all permits and qualifications required by any applicable state in accordance
with the Registration Rights Agreement for the offer and sale of Advance Shares, or shall have the availability of exemptions there-from.
The sale and issuance of Advance Shares shall be legally permitted by all laws and regulations to which the Company is subject.

(c) 
Fundamental Changes. There shall not exist any fundamental changes to the information set forth in a Registration Statement
which would require the Company to file a post-effective amendment to a Registration Statement.

 

(d) 
Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.

 

(e) 
No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly and adversely
affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions contemplated by this Agreement.

 

(f) 
No Suspension of Trading in or Delisting of Common Stock. The Common Stock is trading on the Principal Market. The trading
of Common Stock is not suspended by any government or the Principal Market. The issuance of Advance Shares with respect to the
applicable Advance Notice will not violate the shareholder approval requirements of the Principal Market. The Company shall not
have received any notice threatening the continued quotation of the Common Stock on the Principal Market and the Company shall
have no knowledge of any event which would be more likely than not to have the effect of causing the Common Stock to not be trading
or quoted on the Principal Market.

 

(g) 
Maximum Advance Amount In no event shall the Company issue such additional shares (i) in excess of the Maximum Advance Amount
or (ii) if such issuance would result in non-compliance with any securities laws. If any of the Company’s representations
in this Agreement are false, then no Advances shall be permitted. Any portion of an Advance that would cause the Investor to exceed
the Ownership Limitation shall automatically be withdrawn.

(h) 
No Knowledge. The Company has no knowledge of any event which would be more likely than not to have the effect of causing
the Advance Shares with respect to the applicable Advance Notice not to be freely tradable.

(i) 
Executed Advance Notice. The Investor shall have received the Advance Notice executed by an officer of the Company and
the representations contained in such Advance Notice shall be true and correct as of each Condition Satisfaction Date.

(j) Failure
to Deliver Shares. Company understands that a delay in the issuance of Common Stock could result in economic damage to the
Investor. If the Company fails to cause the delivery of the Shares when due, the Company shall pay to the Investor on demand in
cash by wire transfer of immediately available funds to an account designated by the Investor as liquidated damages for such failure
and not as a penalty, an amount equal to five percent (5%) of the payment required to be paid by the Investor on such Settlement
Date (i.e., the Advance Amount) for the initial 30 days following such date until the Shares have been delivered,
and an additional 5% for each additional 30-day period thereafter until the Shares have been delivered.

    	 

    	 

    

(k)
Fees Paid. The Company shall not be obligated to pay to Investor any fees and expenses related to this Agreement.

(l)
No Material Notices. None of the following events shall have occurred and be continuing:  (i) receipt by the Company
of any request for additional information from any federal or state governmental, administrative or self-regulatory authority during
the Commitment Period, the response to which would require any amendments or supplements to any filings; (ii) receipt by the Company
of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for
sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.

(m)
No Right of First Refusal. No person is entitled or purports to be entitled, to any right of first refusal, pre-emptive
right, right of participation, or any similar right, to participate in the transaction or otherwise with respect to any securities
of the Company.

(n)
No Security. The Company has not granted security with respected to any indebtedness or other equity of the Company.

(o)
No Adjustment. The issuance and sale of any of the Investor’s stock will not obligate the Company to issue Stock or
other securities to any other persona and will not result in the adjustment of the exercise, conversion, exchange, or reset price
of any outstanding security.

(p)
No Other Rights. There are no voting, buy-sell, outstanding or authorized stock appreciation, right of first purchase, phantom
stock, profit participation or equity based compensation agreements, options or arrangement, or like rights relating to the securities
of the Company or agreements of any kind among the Company and any person,

(q)
Valid Issuance. When issued pursuant to this Agreement, all Investor’s stock will be validly issued and fully paid,
and will be free and clear of any and all liens and restrictions, except for restrictions on transfer imposed by applicable laws.

(r)
Regulatory Issues. No stop order, trading halt, suspension of trading, cessation of quotation, or removal of the company
of the Stock from any exchange has been requested by the Company or imposed by any governmental authority or regulatory body. There
is no fact or circumstance that may cause the Company to request, or any governmental authority or regulatory body to impose any
stop order, trading halt, suspension of trading, cessation of quotation or removal of the Company or the Stock from any exchange.

(s)
No Additional Material Adverse Effect. There has been no event or condition that has had or may have a Material Adverse
Effect since the date of the Company’s latest audited financial statements:

(t)
No Liabilities. The Company has not incurred any liabilities (contingent or otherwise) other than: (a) trade payables and
accrued expenses incurred in the ordinary course of business consistent with past practice; and (b) liabilities not required to
be reflected in the Company’s financial statements pursuant to the financial standards pursuant to which such financial statements
are prepared, or required to be disclosed in the Company’s public filings;

(u)
No Change in Accounting. The Company has not altered its method of accounting; and

(v)
No Dividends. The Company has not declared or made any dividend or distribution of cash or other property to its shareholders,
or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock.

(w)
No Conflict, Breach, Violation or Default. The execution and delivery of, and the performance of the terms of, the Agreement
or any Advance Notice or Advance will not: (i) result in the creation of any lien in respect of any property of the Company or
any of its subsidiaries; or (ii) violate, conflict with, result in a breach of an provision of, require any notice or consent under,
constitutes a default under, resulting in the termination of, or in a right of termination or cancellation of, accelerate the performance
required by, result in the triggering of any payment or other material obligations pursuant to, ay of the terms, conditions or
provisions of: (a) the Company’s constitution as in effect on the date of this Agreement; or (b) any law , governmental authorization,
or order of any court, domestic or foreign, having jurisdiction over the Company, any subsidiary, or any of their respective assets
or properties; or (c) any material agreement or instrument to which the Company or any subsidiary is a party or by which the Company
or a subsidiary is bound or to which any their respective assets or properties is subject (or render any such agreement or instrument
voidable or without further effect).

    	 

    	 

    

(x)
Litigation. (i) There are no pending actions, suits or proceedings against or affecting the Company, its subsidiaries or
any of its or their properties, and to the Company’s knowledge, no such actions, suits or proceedings are threatened or contemplated;
(ii) Neither the Company nor any subsidiary, nor any director or officer is or has been the subject of any action, suit, proceeding,
or investigation involving a claim of violation of or liability under securities laws or a claim of breach of fiduciary duty; (iii)
There has not been, and to the knowledge of the Company there is no, pending or contemplated investigation by a governmental authority
involving the Company or any current or former director or officer of the Company; and (iv) No regulatory body has issued any stop
order or other order suspending the effectiveness of a Registration Statement or any related prospectus filed or lodged by the
Company.

(y)
Compliance. Neither the Company nor any subsidiary: (i) is in material default under, or in material violation of (and no
event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company
or any subsidiary under), nor has the Company or any subsidiary received notice of a claim that is in default under or that is
in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which
it or any of its properties is bound (whether or not such default or violation has been waived); (ii) is in violation of nay order
of any court, arbitrator or governmental authority or regulatory body; (iii) is or has been in violation of any law.

(z)
[Intentionally Omitted]

(aa)
[Intentionally Omitted]

(bb)
Solvency. The Company shall confirm in writing each of the following:

(i)
The Company and each of its subsidiaries is able, and is not aware of anything which would render the Company or any of its subsidiaries
unable, to pay all its debts as and when they become due and payable.

(ii)
No judicial order has been made or obtained against the Company or any of its subsidiaries which is unpaid or unsatisfied.

(iii)
No attachment in in the process of being levied or enforced against any asset of the Company or its subsidiaries.

(iv)
No administrator, liquidator, provisional liquidator, controller or receiver of, or in connection with, the Company or any of its
subsidiaries has been appointed, and the Company is not aware of such appointment pending, threatened, or being likely.

(v)
No person has entered into, proposed, sanctioned, approved, or commenced, legal action relating to a scheme of arrangement of the
affairs of the Company or any of its subsidiaries, or between any of those people and any of its shareholders or creditors.

(vi)
Neither the Company nor any of its subsidiaries is in default under any security interest over, or in relation to, any asset.

(vii)
The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving
effect to the contemplated transactions and Advances, does not anticipate or know of any basis upon which its auditors might issue
a qualified opinion in respect of its current fiscal year.

(cc)
[Intentionally Omitted.]

(dd)
Non-public information. Neither the Company nor any person acting on its behalf has provided the Investor or its agents,
representative or counsel with any information that constitutes inside information or material non-public information, and to the
Company’s knowledge, the Investor does not possess any inside information or material non-public information.

(ee)
Prohibited Transactions. The Company has not entered or agreed to enter into a Prohibited Transaction.

(gg)
No Breach. The Company is not in breach of this Agreement.

    	 

    	 

    

 

(hh)
Brokers and finders. No person will have, as a result of the contemplated transactions and Advances, any valid right, interest
or claim against or upon the Company, any subsidiary or an Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the Company.

(ii)
No Event of Default. No Event of Default has occurred, and no Event of Default would result from an Advance being effected.
Any of the following shall constitute an Event of Default:

(a)                 
Any of the representations, warranties, or covenants made by the Company or any of its agents, officers, directors, employees or
representatives in an document, materials or public filing are inaccurate, false or misleading in any material respect, as of the
date as of which it is made or deemed to be made, or any certificate or financial or other written statements furnished by or on
behalf of the Company to the Investor, any of its representatives, or the company’s shareholders, is inaccurate, false or
misleading, in any material respect, as of the date as of which it is made or deemed to be made, or on any Advance Date.

 

(b)                
The Company or any subsidiary of the Company is or becomes insolvent.

 

(c)                 
An administrator is appointed over all or any of the assets or undertaking of the Company or any subsidiary or any step preliminary
to the appointment to an administrator has been taken.

(d)                
A controller or similar officer is appointed to all or any of the assets or undertaking of the Company or any subsidiary.

(e)                 
An application or order is made, a proceeding is commenced, a resolution is passed or proposed, or an application to a court or
other steps are taken for the winding up or dissolution of the Company or any subsidiary , or for the Company or any subsidiary
to enter an arrangement, compromise or composition with, or assignment for the benefit of, its creditors, a class of them, or any
of them.

(f)                 
The Company or any of its subsidiaries ceases, suspends or threatens to cease or suspend, the conduct of all or a substantial part
of its business, or dispose of, or threaten to dispose of, a substantial part of its assets or to reduce its capital.

(g)                 
There exists a fact or circumstance that may cause the Company to request, or the Principal Market or any other governmental authority
or regulatory body to impose a stop order, trading halt, suspension of trading, cessation of quotation, or removal of the Company
or the Common Stock for the Principal Market.

(h)                
Any of the following has occurred: (i) trading in securities have been suspended or limited, (ii) minimum prices have been established
on the securities, (iii) a banking moratorium has been declared by the authorities in New York or the jurisdiction where the Company
is incorporated or where the Common Stock is trading, (iv) a material outbreak or escalation of hostilities or another national
or international calamity of such magnitude in its effect on, or adverse change in the markets in the United States or the market
where the Common Stock trades, makes it impracticable or inadvisable for the Investor to close on an Advance or accept an Advance
Notice.

 

(i)                  
The Company challenges, disputes or denies the right of the Investor to receive any shares of the Common Stock, or otherwise dishonors
or rejects any action taken, or document delivered, in furtherance of the Investor’s rights to receive any Common Stock.

(j)                  
A stop order, trading halt, suspension of trading, cessation of quotation, or removal of the Company or the Stock from an exchange
has been requested by the Company or imposed on the Company.

(k)                
A Material Adverse Effect, or an event, development or condition which, in the reasonable judgment of the Investor would be likely
to have a Material Adverse Effect occurs.

(l)                  
There exists a law which, or an official or reasonable interpretation of which, in the Investor’s reasonable opinion, makes
it, or is more likely than not to make it, illegal or impossible for the Investor or the Company to undertake any of the Advances
in accordance with this Agreement, or renders, or is more likely than not to render, consummation of any of the Advances in accordance
with this Agreement unenforceable, void, voidable
or unlawful, or contrary to or inconsistent with any law.

    	 

    	 

    

(m)               
If: (i) a change in an interpretation or administration of a law or a proposed law introduced or proposed to be introduced to any
governing body of law; (ii) compliance by the Investor or any of its Affiliates with a law or an interpretation or administration
of a law, has, or is more likely than not to have, in the reasonable opinion of the Investor, directly or indirectly, the effect
of (iv) varying the duties, obligation or liabilities of the Company or the Investor in connection with this Agreement or any Advance
so that the Investor’s rights, powers, benefits, remedies or economic burden (including any tax treatment in the hands of
the Investor) are adversely affected (including by way of delay or postponement); (v) otherwise adversely affecting rights, powers,
benefits, remedies or the economic burden of the Investor (including by way of delay or postponement); (vi) otherwise making it
impracticable for the Investor to undertake any of the Advances or contemplated Advances.

(n)                
A securities registrar or similar entity refuses to comply with a direction to issue, or record an issuance of securities to the
Investor.

(o)                
Any consent, permit, approval, registration or waiver necessary or appropriate for the consummation of an Advance that remains
to be consummated at the applicable time, has not been issued or received, or does not remain in full force or effect.

(p)                
 

(q)                
The Company fails to perform, comply with, or observe any other term, covenant, undertaking, obligation or agreement under this
Agreement.

(r)                 
A default judgment of an amount of $500,000 or greater is entered against the Company or any of its subsidiaries.

(s)                 
Any present or future liabilities, including contingent liabilities, of the Company or any of its subsidiaries for an amount or
amounts totaling more than $500,000 have not been satisfied on time, or have become prematurely payable.

 

7.3 Investor
Right to Investigate an Event of Default.

If in
the Investor’s reasonable opinion, an Event of Default has occurred, or is or may be continuing: (a) the Investor may investigate
such purported Event of Default; (b) the Company shall co-operate with the Investor in such investigation; and (c) the Company
shall comply with all reasonable requests made by the Investor of the Company in connection with any investigation by the Investor.

 

7.
4 Rights of the Investor upon Event of Default.

(a)
Upon the occurrence of existence of any Event of Default at any time during the continuance of such Event of Default, the Investor
may: (i) declare, by notice to the Company, effective immediately, that the break fee described in Section 12.4 under the Agreement
to be immediately due and payable in the shares held in escrow, as described below, without presentment, demand, protest or any
other notice of any kind (other than notice to the applicable escrow agent), all of which are expressly waived by the Company,
anything to the contrary contained in this Agreement; (ii) terminate this Agreement by notice to the Company, effective as of the
date set out in the Investor’s notice.

(b)
Where an Event of Default has occurred, the Investor shall have: (i) no obligation to accept an Advance Notice or to consummate
a closing under this Agreement; and (ii) the right to postpone the Advance accordingly.

(c)
In addition to the remedies set out elsewhere, upon the occurrence or existence of any Event of Default, the Investor may exercise
any other right, power or remedy granted to it by the Agreement or otherwise permitted by law, including any suit in equity and/or
by action at law.

 

    	 

    	 

    

ARTICLE
VIII.

Non-Disclosure of Non-Public Information

Section 8.1.
Non-Disclosure of Non-Public Information.

 (a) 
Subject to Section 6.6 and except as otherwise provided in this Agreement or the Registration Rights Agreement, the Company covenants
and agrees that it has not in the past and will refrain in the future from disclosing, and shall cause its officers, directors,
employees and agents to refrain from disclosing, any material non-public information to the Investor without also disseminating
such information to the public at the same time.

(b) Nothing
herein shall require the Company to disclose material, non-public information to the Investor or its advisors or representatives,
and the Company represents that it does not disseminate material, non-public information to any Investors who purchase stock in
the Company in a public offering, to money managers or to securities analysts in violation of Regulation FD of the Exchange Act,
provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided and subject
to compliance with Regulation FD, immediately notify the advisors and representatives of the Investor and, if any, underwriters,
of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which
it becomes aware, constituting material, non-public information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein
in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.1 shall be construed to mean that such persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may not obtain material, non-public information in the course
of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement
or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.

 ARTICLE
IX.

Choice of Law/Jurisdiction

Section 9.
Governing Law. This Agreement shall be governed by and interpreted solely in accordance with the laws of the State of New
York without regard to the principles of conflict of laws. Any dispute arising out of or in connection with this Agreement or otherwise
relating to the parties relationship shall be settled only by litigation and exclusively in the State of New York, City of New
York. The Company and the Investor further agree that no demand for punitive or exemplary damages shall be made. The parties hereby
waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect
of any matter arising out of or in connection with this Agreement. The parties agree that in the event of any action, litigation
or proceeding between the parties arising out of or in relation to this Agreement, the prevailing party in a final judgment after
the appeal period has passed shall be awarded, in addition to any damages, injunctions or other relief, such party’s costs
and expenses, including but not limited to all related costs and reasonable attorneys’, accountants’ and experts’
fees incurred in bringing such action, litigation or proceeding and/or enforcing any judgment or order granted therein. No party
to this Agreement will challenge the jurisdiction or venue provisions as provided in this section.  The section shall
survive termination of the Agreement.

 

ARTICLE
X.

Assignment; Termination

Section 10.1.
Assignment. Neither this Agreement nor any rights or obligations of the Company or the Investor hereunder may be assigned
to any other Person.

Section 10.2.
Termination.

(a) Unless
earlier terminated as provided hereunder, this Agreement shall terminate automatically on the earliest of (i) the first day
of the month next following the 36-month anniversary of the Effective Date, (ii) the date on which the Investor shall have
made payment of Advances pursuant to this Agreement in the aggregate amount of the Commitment Amount or (iii) the Registration
Statement is no longer effective.

    	 

    	 

    

(b) The
obligation of the Investor to make an Advance to the Company pursuant to this Agreement shall terminate permanently (including
with respect to an Advance Date that has not yet occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of fifty (50) Trading Days, during the Commitment Period,
or (ii) the Company shall at any time fail materially to comply with the requirements of Article VI and such failure
is not cured within thirty (30) days after receipt of written notice from the Investor, provided, however, that
this paragraph (c) shall not apply to any period commencing upon the filing of a post-effective amendment to such Registration
Statement and ending upon the date on which such post effective amendment is declared effective by the SEC. The Investor may terminate
this Agreement by sending email notice to the Company declaring a Material Adverse Effect.

(c) Nothing
in this Section 10.2 shall be deemed to release the Company or the Investor from any liability for any breach under this Agreement,
or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under
this Agreement. The indemnification provisions contained in Sections 5.1 and 5.2 shall survive termination hereunder.

ARTICLE
XI.

Notices

Section 11.1.
Notices. Any notices, consents, waivers, or other communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered upon being sent to the following email addresses:

If
to the Company: robert@ihookupsocial.com

If
to the Investor: rmarino@beaufortcp.com

Each
party shall provide five (5) days’ prior written notice to the other party of any change in email address.

ARTICLE
XII.

Miscellaneous

Section 12.1.
Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.

Section 12.2
Entire Agreement; Amendments. This Agreement supersedes all other prior agreements including the Original Investment Agreement,
negotiations or discussions both oral or written between the Investor, the Company, their affiliates and persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein and therein contain
the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement. The provisions of this Agreement shall be construed in favor of the Investor. Except
as specifically set out in this Agreement, neither the Company nor the Investor makes any representation, warranty, covenant or
undertaking with respect to any subject matter regarding this Agreement or otherwise.

Section 12.3.
Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.

    	 

    	 

    

Section 12.4.
Break Fee and Expenses. Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement. The Investor shall pay the legal fees associated
with the Registration Statement (the “Registration Fees”). In consideration for entering into this Agreement,
the Company is required to issue an initial 1,000,000 shares of common stock to an escrow agent mutually agreed upon by the parties
hereto. Upon effectiveness of the Registration Statement, such shares shall immediately be returned to the Company by the applicable
escrow agent. In the event (i) the Registration Statement is not declared effective within eighteen (18) months of the initial
filing thereof, or (ii) there is a breach by the Company of any material terms of this Agreement, the Registration Rights Agreement
or any related agreements, such shares shall be issued to the Investor by such escrow agent (each a “Break Event”).

Section 12.5.
[Intentionally Omitted].

Section
12.6 Publicity. Prior to issuing any public statements, the Company shall send to the Investor for approval any press releases
or public statement with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise
make any such public statement without the prior written consent of the other party. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of the Investor unless the Investor provides written approval to do so.

Section
12.7 Placement Agent. If so required by the SEC, the Company agrees to pay a registered broker dealer, to act as placement
agent, a percentage of the Put Amount on each draw toward the fee.  The Investor shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other persons or entities for fees of a type contemplated in
this Section that may be due in connection with the transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Investor, their employees, officers, directors, agents, and partners, and their respective affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses incurred in respect
of any such claimed or existing fees, as such fees and expenses are incurred.

Section 12.8
No Third Party Beneficiaries. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto any
rights, remedies, obligations or liabilities under or by reason of this Agreement, and no Person that is not a party to this Agreement
(including without limitation any partner, member, shareholder, director, officer, employee or other beneficial owner of any party
hereto, in its own capacity as such or in bringing a derivative action on behalf of a party hereto) shall have any standing as
third party beneficiary with respect to this Agreement or the transactions contemplated hereby.

Section 12.9
No Personal Liability of Directors, Officers, Owners, Etc. No director, officer, employee,
incorporator, shareholder, managing member, member, general partner, limited partner, principal or other agent of any of the Investor
or the Company shall have any liability for any obligations of the Investor or the Company under this Agreement or for any claim
based on, in respect of, or by reason of, the respective obligations of the Investor or the Company hereunder. Each party hereto
hereby waives and releases all such liability. This waiver and release is a material inducement to each party’s entry into
this Agreement. 

Section
12.10. Delay. The Investor shall not be obligated to perform and shall not be deemed to be in default hereunder, if the
performance of an obligation required hereunder is prevented by the occurrence of any of the following, acts of God, strikes, lock-outs,
other industrial disturbances, acts of a public enemy, war or war-like action (whether actual, impending or expected and whether
de jure or de facto), acts of terrorists, arrest or other restraint of government (civil or military), blockades, insurrections,
riots, epidemics, landslides, lightning, earthquakes, fires, hurricanes, storms, floods, washouts, sink holes, civil disturbances,
explosions, breakage or accident to equipment or machinery, confiscation or seizure by any government or public authority, nuclear
reaction or radiation, radioactive contamination or other causes, whether of the kind herein enumerated or otherwise, that are
not reasonably within the control of the party claiming the right to delay performance on account of such occurrence.

 

 

 

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IN
WITNESS WHEREOF, the parties hereto have caused this Investment Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.

	 	 	 	 	 
	 	 	COMPANY:
	 	 	iHookup Social, Inc.
	 	 	 	 	 
	 	 	By:	 	/s/ Robert Rositano, Jr.
	 	 	 	 	 
	 	 	Name: Robert Rositano Jr.
	 	 	Title: CEO
	 	 	 	 	 
	 	 	INVESTOR:
	 	 	Beaufort Capital Partners LLC
	 	 	 	 	 
	 	 	By:	 	/s/ Robert P. Marino
	 	 	 	 	 
	 	 	Name: Robert P. Marino
	 	 	Title: Managing Member

    	 

    	 

    

EXHIBIT A

ADVANCE NOTICE

iHookup
Social, Inc.. (the “Company”)

The
undersigned, __________________________hereby certifies, with respect to the sale of shares of Common Stock of the Company issuable
in connection with this Advance Notice, delivered pursuant to the Investment Agreement (the “Agreement”), as
follows:

1.
The undersigned is the duly elected Officer of the Company, its Chief Executive, President or Chief Financial Officer.

2. There
are no fundamental changes to (a) the covenants in Article IV of the Investment Financing Agreement and (b) the information set
forth in the Registration Statement which would require the Company to file a post effective amendment to the Registration Statement.

3. The
Company has performed in all material respects all covenants and agreements to be performed by the Company and has complied in
all material respects with all obligations and conditions contained in the Agreement on or prior to the Advance Date, and shall
continue to perform in all material respects all covenants and agreements to be performed by the Company through the applicable
Advance Date. All conditions to the delivery of this Advance Notice are satisfied as of the date hereof.

4. The
undersigned hereby represents, warrants and covenants that it has made all filings (“SEC Filings”) required
to be made by it pursuant to applicable securities laws (including, without limitation, all filings required under the Securities
Exchange Act of 1934, which include Forms 10-Q or, 10-K or, 8-K, etc.). All SEC Filings and other public disclosures made by the
Company, including, without limitation, all press releases, analysts meetings and calls, etc. (collectively, the “Public
Disclosures”), have been reviewed and approved for release by the Company’s attorneys and, if containing financial
information, the Company’s independent certified public accountants. None of the Company’s Public Disclosures contain,
as of their respective dates, any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

5. The Advance requested
is  ________________shares.

6. There are currently
_______________________ amount of shares outstanding on a fully diluted basis.

The undersigned has
executed this Certificate this  _____  day of  _____.

	 	 	 	 	 
	 	____________________________

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 	 	 	 	 	 	 

Please email this Advance Notice to: rmarino@beaufortcp.com

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

    	 

    	 

    

 

 

EXHIBIT B

FORM OF OPINION

 

1.        
The Company is a corporation validly existing and in good standing under the laws of the State of Nevada, with corporate power
and authority to own, lease and operate its properties and to conduct its business as described in the Company’s latest Form
10-K or 10-Q filed by the Company under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)
and the rules and regulations of the Commission thereunder (the “Public Filings”) and to enter into and perform
its obligations under the Investment Agreement.

2.        The
Company has the requisite corporate power and authority to enter into and perform its obligations under the Investment Agreement
and to issue the Common Shares in accordance with their terms.  The execution and delivery of the Investment Agreement by
the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Company or its Board of Directors or stockholders is required.  The
Investment Agreement has been duly executed and delivered and the Investment Agreement constitutes a valid and binding obligation
of the Company enforceable against the Company in accordance with its respective terms, except as my be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies.

3.        
The Common Shares are duly authorized and, upon issuance in accordance with the terms of the Investment Agreement, will be duly
and validly issued, fully paid and nonassessable, free of any liens, encumbrances and preemptive or similar rights contained, to
our knowledge, in any agreement filed by the Company as an exhibit to the Company’s Public Filings.

4.        
The execution, delivery and performance of the Investment Agreement by the Company (other than performance by the Company of its
obligations under the indemnification sections of such agreements, as to which no opinion need be rendered) will not (i) result
in a violation of the Company’s Articles of Incorporation or By-Laws; (ii) conflict with, or constitute a default (or an
event that 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 or, indenture filed by the Company as an exhibit to the Company’s Public Filings;
or (iii) to our knowledge, result in a violation of any federal or state law, rule or regulation, order, judgment or decree applicable
to the Company.

5.        
To our knowledge without independent investigation and other then as set forth in the Public Filings, there are no legal or governmental
proceedings pending to which the Company is a party or of which any property or assets of the Company is subject which is required
to be disclosed in any Public Filings.

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